RealtyTrac, released its year-end and fourth quarter 2013 Home Flipping Report, which shows 156,862 single family home flips — where a home is purchased and subsequently sold again within six months — in 2013, up 16% from 2012 and up 114% from 2011.
Profits are strong in flipping right now. The average gross profit for a home flip — the difference between the flipped price and the price the flipper purchased the property for — was $58,081 for all U.S. homes flipped in 2013, up from an average gross profit of $45,759 in 2012. The average gross profit for homes flipped in the fourth quarter was $62,761, up from $52,746 in the fourth quarter of 2012.
It looks like the market for flips is slowing, which could portend ill for housing in general. Flips accounted for 3.8% of all sales in the fourth quarter, down slightly from 3.9% of all sales in the third quarter and down from 7.1% of all sales in the fourth quarter of 2012.
"Strong home price appreciation in many markets boosted profits for flippers in 2013 despite a shrinking inventory of lower-priced foreclosure homes to purchase," said Daren Blomquist, vice president of RealtyTrac. "For the year 21% of all properties flipped were purchased out of foreclosure, but that is down from 27% in 2012 and 32% in 2011. Meanwhile flipped homes were still purchased at an average discount of 13% below market value in 2013, the same average discount as 2012, indicating that investors are finding discounted buying opportunities outside of the public foreclosure process — particularly in those markets with the biggest increases in flipping for the year."
RealtyTrac, one of the nation’s leading sources for comprehensive housing data, reported that homes flipped in 2013 accounted for 4.6% of all U.S. single-family home sales during the year, up from 4.2% in 2012 and up from 2.6% in 2011.
Who is flipping? People with lots of extra cash. The report shows the biggest increases in flipping nationwide occurred on homes with a flipped price of $400,000 or more. Although flipping increased across all price ranges, flips on homes with a flipped sale price above $400,000 increased 36% from 2012, while flips on homes with a flipped sale price at or below $400,000 increased 17% from 2012.
Major metro areas with big increases in home flipping in 2013 compared to 2012 included Virginia Beach (up 141%), Jacksonville, Fla., (up 92%), Baltimore, Md. (up 88%), Atlanta (up 79%), Richmond, Va., (up 57%), Washington, D.C. (up 52%) and Detroit (up 51%).
Major markets with big decreases in home flipping in 2013 compared to 2012 included Philadelphia (down 43%), Phoenix (down 32%), Tampa (down 17%), Houston (down 17%), Denver (down 15%), Minneapolis (down 9%), and Sacramento (down 5%).
Friday, January 31, 2014
Monday, January 27, 2014
New Home Sales Expected to End 2013 on a Flat Note- When all else fails, just be optimistic
New home sales are expected to be flat in December due to seasonal factors and severe weather, according to economists at Wells Fargo Securities.
They expect the Census Bureau report slated to be released Monday morning will show December new home sales to come in at a 463,000 seasonally adjusted annual rate, compared to a 464,000 rate in November.
The WFS economists remain optimistic about the outlook for housing and they are forecasting that new home sales will hit 520,000 in 2014, up 20% from last year.
WFS senior economist Anika Khan noted that builders remain optimistic. She noted, however, that builders are catering more to move-up buyers and building fewer homes priced below $150,000.
“I am most concerned about first-time homebuyers,” she said. Even when it comes to existing home sales, the percentage of first-time buyers is low.
She blames this on tight credit conditions. “It continues to be very difficult for these folks to get into the housing market,” Khan said.
They expect the Census Bureau report slated to be released Monday morning will show December new home sales to come in at a 463,000 seasonally adjusted annual rate, compared to a 464,000 rate in November.
The WFS economists remain optimistic about the outlook for housing and they are forecasting that new home sales will hit 520,000 in 2014, up 20% from last year.
WFS senior economist Anika Khan noted that builders remain optimistic. She noted, however, that builders are catering more to move-up buyers and building fewer homes priced below $150,000.
“I am most concerned about first-time homebuyers,” she said. Even when it comes to existing home sales, the percentage of first-time buyers is low.
She blames this on tight credit conditions. “It continues to be very difficult for these folks to get into the housing market,” Khan said.
Friday, January 24, 2014
Fifth Third sets aside $69 million to pay lawyers- just goes to show that more issues are coming
Depending on who you believe, the fourth-quarter results at Fifth Third (FITB) came in either as expected or as beating expectations.
Nonetheless, the bank did manage to pull off a profit despite a huge settlement with Freddie Mac and even added capital to its litigation reserve fund.
In the fourth quarter, the bank reported net income of $383 million, or $0.43 per diluted common share.
Results included the mortgage repurchase provision of $28 million primarily related to Fifth Third’s settlement with Freddie Mac and expectations for future repurchase requests. The bank also recored $69 million in charges to increase its litigation reserves.
Fifth Third entered into a settlement for $25 million with Freddie Mac to resolve certain repurchase claims associated with mortgage loans originated and sold prior to 2009.
This was charged against the representation and warranty reserve.
A big driver of profit is the bank's stake in Vantiv, one of the nation's top payment processors and a strategic business partner of Fifth Third.
Additionally, overall credit improved at the bank.
Allowance for loan and lease losses decreased $95 million. Nonperforming assets declined $39 million and the bank changed its policy on home equity nonaccruals, which added another $46 million.
Nonetheless, the bank did manage to pull off a profit despite a huge settlement with Freddie Mac and even added capital to its litigation reserve fund.
In the fourth quarter, the bank reported net income of $383 million, or $0.43 per diluted common share.
Results included the mortgage repurchase provision of $28 million primarily related to Fifth Third’s settlement with Freddie Mac and expectations for future repurchase requests. The bank also recored $69 million in charges to increase its litigation reserves.
Fifth Third entered into a settlement for $25 million with Freddie Mac to resolve certain repurchase claims associated with mortgage loans originated and sold prior to 2009.
This was charged against the representation and warranty reserve.
A big driver of profit is the bank's stake in Vantiv, one of the nation's top payment processors and a strategic business partner of Fifth Third.
Additionally, overall credit improved at the bank.
Allowance for loan and lease losses decreased $95 million. Nonperforming assets declined $39 million and the bank changed its policy on home equity nonaccruals, which added another $46 million.
Thursday, January 23, 2014
Foreclosures, short sales increased 1% in Dec.
Foreclosures and short sales remained relatively frozen in December, with U.S. residential properties, including single-family homes, condominiums and townhomes, selling at an estimated annual pace of 5.16 million in December, a less than 1% increase from November and a 10% increase from a year ago, the latest RealtyTrac report found.
Annualized sales volume dropped from a year ago in 18 of the nation’s 50 largest metropolitan statistical areas and was down in five states: California, Arizona, Nevada, Rhode Island and Oregon.
In addition, the national sales price of U.S. residential properties, including both distressed and non-distressed, hit $168,391 in December, virtually unchanged from November and up 2% from December 2012.
The median price of a distressed residential property—in foreclosure or bank owned—was $108,494 in December, 38% below the median price of $174, 401 for a non-distressed residential property.
Furthermore, short sales and foreclosure-related sales — including both sales to third-party buyers at the public foreclosure auction and sales of bank-owned properties — made up 16.2% of all residential sales in 2013, up from 14.5% of all sales in 2012 and 15.2% of all sales in 2011.
"It may surprise some to see distressed sales rising in 2013 given that new foreclosure activity dropped to a seven-year low for the year," said Daren Blomquist, vice president of RealtyTrac.
"And while short sales did trend lower in the second half of the year, there are still more than 1.2 million properties in the foreclosure process or bank-owned, providing a sizable pool of inventory that the housing market is in the process of absorbing," Blomquist said. "Meanwhile, non-distressed sellers have not listed their homes for sale in droves, helping to keep the distressed share of sales at a stubbornly high level."
Annualized sales volume dropped from a year ago in 18 of the nation’s 50 largest metropolitan statistical areas and was down in five states: California, Arizona, Nevada, Rhode Island and Oregon.
In addition, the national sales price of U.S. residential properties, including both distressed and non-distressed, hit $168,391 in December, virtually unchanged from November and up 2% from December 2012.
The median price of a distressed residential property—in foreclosure or bank owned—was $108,494 in December, 38% below the median price of $174, 401 for a non-distressed residential property.
Furthermore, short sales and foreclosure-related sales — including both sales to third-party buyers at the public foreclosure auction and sales of bank-owned properties — made up 16.2% of all residential sales in 2013, up from 14.5% of all sales in 2012 and 15.2% of all sales in 2011.
"It may surprise some to see distressed sales rising in 2013 given that new foreclosure activity dropped to a seven-year low for the year," said Daren Blomquist, vice president of RealtyTrac.
"And while short sales did trend lower in the second half of the year, there are still more than 1.2 million properties in the foreclosure process or bank-owned, providing a sizable pool of inventory that the housing market is in the process of absorbing," Blomquist said. "Meanwhile, non-distressed sellers have not listed their homes for sale in droves, helping to keep the distressed share of sales at a stubbornly high level."
Wednesday, January 22, 2014
Mortgage applications rise 4.7%-Refinance share increases 10%
Mortgage applications continue to climb, rising 4.7% for the week ending Jan. 17, the latest report from the Mortgage Bankers Association said.
The refinance index also reported a 10% jump from last week, compared to the purchase index, which fell 4% from a week ago.
Overall, the refinance share of mortgage activity edged higher to 64% of total applications.
The 30-year, fixed-rate mortgage with a conforming loan limit decreased to 4.57%: the lowest level since November 2013.
In addition, the 30-year, FRM with a jumbo loan balance dipped to 4.57% from 4.58%, while the 30-year, FHA rate also dropped to 4.24% from 4.29%.
All three 30-year mortgage rates reached their lowest levels since November 2013, with the 15-year FRM decreasing to 3.68% from 3.72% a week earlier.
Meanwhile, the average contract interest rate for a 5/1 ARM fell to 3.23% from 3.28%.
The refinance index also reported a 10% jump from last week, compared to the purchase index, which fell 4% from a week ago.
Overall, the refinance share of mortgage activity edged higher to 64% of total applications.
The 30-year, fixed-rate mortgage with a conforming loan limit decreased to 4.57%: the lowest level since November 2013.
In addition, the 30-year, FRM with a jumbo loan balance dipped to 4.57% from 4.58%, while the 30-year, FHA rate also dropped to 4.24% from 4.29%.
All three 30-year mortgage rates reached their lowest levels since November 2013, with the 15-year FRM decreasing to 3.68% from 3.72% a week earlier.
Meanwhile, the average contract interest rate for a 5/1 ARM fell to 3.23% from 3.28%.
Tuesday, January 21, 2014
The most overvalued housing market in America
Housing markets resting on the laurels of juiced up home prices may be at risk in 2014 if those dramatic price swings are not supported by economic fundamentals.
And while Fitch Ratings expects most of the U.S. to experience modest and slow home price appreciation in 2014, a few markets have the research firm's bubble radar going off, according to Rui Pereira, managing director of structured finance for the ratings giant.
The Fitch Sustainable Home Price Model shows national prices overall overvalued by 15% in real terms. But when looking at individual local markets, prices in many cases are in line with economic fundamentals.
It’s when looking at California markets that much of the risk comes in.
One of the state’s riskiest zones – San Francisco – also captured the attention of HousingWire this past week.
In the West Coast city, price-to-rent and price-to-income ratios have risen nearly 25% since the start of 2012, Fitch points out. In fact, both metrics are now nearing all-time highs.
As DataQuick recently reported, the median price for a "Bay Area" home hit $548,500 in December, which is slightly down from November, but still up 23.9% from $442,750 a year earlier, the research firm said.
San Francisco prices are getting closer to levels reached in the 2006-2007 bubble when the median Bay Area price hit the $665,000-mark.
"Fitch believes most of the U.S. will see continued home price growth reflecting market momentum, the effects of inflation, the improving economy, and a return of buyers attracted by signs of stabilization," Pereira said.
"However, gains are expected to slow compared to prior years due to rising mortgage rates and more inventory becoming available. Mortgage volumes are expected to decline as rising rates further curtail refinancing."
And while Fitch Ratings expects most of the U.S. to experience modest and slow home price appreciation in 2014, a few markets have the research firm's bubble radar going off, according to Rui Pereira, managing director of structured finance for the ratings giant.
The Fitch Sustainable Home Price Model shows national prices overall overvalued by 15% in real terms. But when looking at individual local markets, prices in many cases are in line with economic fundamentals.
It’s when looking at California markets that much of the risk comes in.
One of the state’s riskiest zones – San Francisco – also captured the attention of HousingWire this past week.
In the West Coast city, price-to-rent and price-to-income ratios have risen nearly 25% since the start of 2012, Fitch points out. In fact, both metrics are now nearing all-time highs.
As DataQuick recently reported, the median price for a "Bay Area" home hit $548,500 in December, which is slightly down from November, but still up 23.9% from $442,750 a year earlier, the research firm said.
San Francisco prices are getting closer to levels reached in the 2006-2007 bubble when the median Bay Area price hit the $665,000-mark.
"Fitch believes most of the U.S. will see continued home price growth reflecting market momentum, the effects of inflation, the improving economy, and a return of buyers attracted by signs of stabilization," Pereira said.
"However, gains are expected to slow compared to prior years due to rising mortgage rates and more inventory becoming available. Mortgage volumes are expected to decline as rising rates further curtail refinancing."
Monday, January 20, 2014
A "recovery" that needs life support-What happens when they pull the plug?
What happens when they pull the plug?
A new report from the brain trust at Capital Economics asks a question that stopped us short in the HousingWire newsroom.
Paul Diggle, property economist at Capital Economics, looked at several months worth of existing and new home sales, and made a simple but bracing observation:
"Given that existing home sales make up more than 90% of all home sales, a key question is whether the current slump will prove temporary or permanent."
Diggle goes on to consider various factors that could hurt sales. Most are well known but one no one looks enough at is housing prices. Combined with slowly rising rates, inflated home prices have reduced mortgage availability.
"The share of respondents to Fannie Mae’s monthly housing survey who think that now is a good time to buy a home dropped from 76% in May to 64% in November, while NAR’s index of buyer traffic declined from 72 to 53 between April and October," Diggle reports.
Whether housing is in a bubble depends on how a bubble is defined, of course, but there are some startling disparities in home prices and incomes.
The current spike in prices is not being driven by first-time homebuyers entering the market.
Homes are best priced relative to incomes, and that relationship is approaching 2007 bubble levels.
The median income today is about $51,000, while the median home price is $328,000. As noted in a post by Phoenix Capital Management, that means the average price is 6.4 times more than median incomes.
In 2007, when the bubble was its fattest, homes cost 6.8 times median incomes.
And while home prices have been rising (to the delight of real estate agents), incomes have been stagnant or declining. Median income today is close to levels seen in 1987.
Anthony Sanders, distinguished professor of real estate finance at George Mason University, has been sounding the alarm about this for a while.
"After decades of “affordable” housing policies from HUD and the Federal government, U.S. housing is now the most unaffordable that it even has been," he writes. "Note the decline in real median household income since peaking in 1999 and is now $5,000 lower (or 9% lower). Average U.S. house prices are, on the other hand, 68.4% higher today than in December 1999."
As Kerri Panchuk notes, it’s really hitting younger, would-be first-time buyers. They are either living at home with their parents, or else choosing to live in multifamily much longer than previous generations. It’s not because they want to but because they are priced out of home ownership.
The big driver of rising home prices has not been incomes or sales, but rather institutional investors buying up swathes of vacant properties which they turn into rentals.
That, along with an all-stops policy on the part of the Federal Reserve to keep liquidity in the market and interest rates suppressed have fueled what recovery we've seen.
"The simple reality is that there has really been very little actual recovery in housing. With five years of economic recovery now in the rear view mirror, it is clear that the average American is really not recovering as evidenced by the lowest level of home ownership since 1980," says Lance Roberts, at STA Wealth Management. "As I stated previously, the optimism over the housing recovery has gotten well ahead of the underlying fundamentals."
"While the belief was that the Government, and Fed's interventions would ignite the housing market creating a self-perpetuating recovery in the economy - it did not turn out that way. Instead, it led to a speculative rush into buying rental properties creating a temporary, and artificial, inventory suppression," Roberts says. "Despite the Federal Reserve flooding the system with liquidity, suppressing interest rates and the current Administration's efforts to bailout banks and homeowners, owner occupied housing remains near its lows."
With no wage growth in the rearview mirror or ahead, interest rates ticking up, prices being artificially pumped up, and tepid job creation, it seems obvious that the only growth we’ve seen in housing has been illusory.
The housing "recovery" is on life support. What happens to the housing market when the plug gets pulled and all those programs end?
A new report from the brain trust at Capital Economics asks a question that stopped us short in the HousingWire newsroom.
Paul Diggle, property economist at Capital Economics, looked at several months worth of existing and new home sales, and made a simple but bracing observation:
"Given that existing home sales make up more than 90% of all home sales, a key question is whether the current slump will prove temporary or permanent."
Diggle goes on to consider various factors that could hurt sales. Most are well known but one no one looks enough at is housing prices. Combined with slowly rising rates, inflated home prices have reduced mortgage availability.
"The share of respondents to Fannie Mae’s monthly housing survey who think that now is a good time to buy a home dropped from 76% in May to 64% in November, while NAR’s index of buyer traffic declined from 72 to 53 between April and October," Diggle reports.
Whether housing is in a bubble depends on how a bubble is defined, of course, but there are some startling disparities in home prices and incomes.
The current spike in prices is not being driven by first-time homebuyers entering the market.
Homes are best priced relative to incomes, and that relationship is approaching 2007 bubble levels.
The median income today is about $51,000, while the median home price is $328,000. As noted in a post by Phoenix Capital Management, that means the average price is 6.4 times more than median incomes.
In 2007, when the bubble was its fattest, homes cost 6.8 times median incomes.
And while home prices have been rising (to the delight of real estate agents), incomes have been stagnant or declining. Median income today is close to levels seen in 1987.
Anthony Sanders, distinguished professor of real estate finance at George Mason University, has been sounding the alarm about this for a while.
"After decades of “affordable” housing policies from HUD and the Federal government, U.S. housing is now the most unaffordable that it even has been," he writes. "Note the decline in real median household income since peaking in 1999 and is now $5,000 lower (or 9% lower). Average U.S. house prices are, on the other hand, 68.4% higher today than in December 1999."
As Kerri Panchuk notes, it’s really hitting younger, would-be first-time buyers. They are either living at home with their parents, or else choosing to live in multifamily much longer than previous generations. It’s not because they want to but because they are priced out of home ownership.
The big driver of rising home prices has not been incomes or sales, but rather institutional investors buying up swathes of vacant properties which they turn into rentals.
That, along with an all-stops policy on the part of the Federal Reserve to keep liquidity in the market and interest rates suppressed have fueled what recovery we've seen.
"The simple reality is that there has really been very little actual recovery in housing. With five years of economic recovery now in the rear view mirror, it is clear that the average American is really not recovering as evidenced by the lowest level of home ownership since 1980," says Lance Roberts, at STA Wealth Management. "As I stated previously, the optimism over the housing recovery has gotten well ahead of the underlying fundamentals."
"While the belief was that the Government, and Fed's interventions would ignite the housing market creating a self-perpetuating recovery in the economy - it did not turn out that way. Instead, it led to a speculative rush into buying rental properties creating a temporary, and artificial, inventory suppression," Roberts says. "Despite the Federal Reserve flooding the system with liquidity, suppressing interest rates and the current Administration's efforts to bailout banks and homeowners, owner occupied housing remains near its lows."
With no wage growth in the rearview mirror or ahead, interest rates ticking up, prices being artificially pumped up, and tepid job creation, it seems obvious that the only growth we’ve seen in housing has been illusory.
The housing "recovery" is on life support. What happens to the housing market when the plug gets pulled and all those programs end?
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