1.2 Million Borrowers Regained Equity in 2014

CoreLogic, a leading global property information, analytics and data-enabled services provider, today released new analysis showing 1.2 million borrowers regained equity in 2014, bringing the total number of mortgaged residential properties with equity at the end of Q4 2014 to approximately 44.5 million or 89 percent of all mortgaged properties. Nationwide, borrower equity increased year over year by $656 billion in Q4 2014. The CoreLogic analysis also indicates approximately 172,000 U.S. homes slipped into negative equity in the fourth quarter of 2014 from the third quarter 2014, increasing the total number of mortgaged residential properties with negative equity to 5.4 million, or 10.8 percent of all mortgaged properties. This compares to 5.2 million homes, or 10.4 percent, that were reported with negative equity in Q3 2014*, a quarter-over-quarter increase of 3.3 percent. Compared to 6.6 million homes, or 13.4 percent, reported for Q4 2013, the number of underwater homes has decreased year over year by 1.2 million or 18.9 percent.


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Consumer Home Buying Confidence Up Ten Percent Year Over Year.

Home buying confidence and mortgage experiences in the U.S. have improved over the last year, according to TD Bank's third annual Mortgage Service Index. The survey reveals that 30 percent of Americans consider now to be a very good time to purchase a home, compared with just 20 percent in 2014, and 29 percent of consumers are likely to purchase a home this year, compared with 21 percent in 2014. The Mortgage Service Index, a national survey of more than 1,450 consumers who purchased a home within the last 10 years, examines consumers' home buying experiences and mortgage behaviors. While the number of consumers who have purchased homes within the past two years has increased by five percent since 2014, Americans still face obstacles in the home buying process. According to the Index, two in five consumers feel there is a lack of inventory in their price range and 44 percent are not familiar with home affordability programs. "The Mortgage Service Index found that only 28 percent of consumers are successfully using mortgage affordability programs, which demonstrates that a significant number of potential buyers may be missing the opportunity to purchase a home," said Malcolm Hollensteiner, Director of Retail Lending Sales and Production, TD Bank. "In our current housing market, a critical first step for buyers is to educate themselves on the financing process by speaking with multiple lenders and learning about the loan options available to them. Lenders today should be working with borrowers on a case-by-case basis in order to find the loan option that best meets their needs and budget."

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Inaccurate Zillow 'Zestimates' a source of conflict over home prices

When "CBS This Morning" co-host Norah O'Donnell asked the chief executive of Zillow recently about the accuracy of the website's automated property value estimates — known as Zestimates — she touched on one of the most sensitive perception gaps in American real estate. Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter the address or general location in a database of millions of homes and probably pull up key information — square footage, lot size, number of bedrooms and baths, photos, taxes — plus a Zestimate. Shoppers, sellers and buyers routinely quote Zestimates to realty agents — and to one another — as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers' list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000. ​​ Disparities like these are daily occurrences and, in the words of one realty agent who posted on the industry blog ActiveRain, they are "the bane of my existence." Consumers often take Zestimates "as gospel," said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village. If either the buyer or the seller won't budge off Zillow's estimated value, he told me, "that will kill a deal." Back to the question posed by O'Donnell: Are Zestimates accurate? And if they're off the mark, how far off? Zillow CEO Spencer Rascoff answered that they're "a good starting point" but that nationwide Zestimates have a "median error rate" of about 8%. Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity — a lot of money on the table — and could create problems. But here's something Rascoff was not asked about: Localized median error rates on Zestimates sometimes far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it's not prominently featured on the website, at the bottom of Zillow's home page in small type is the word "Zestimates." This section provides helpful background information along with valuation error rates by state and county — some of which are stunners. For example, in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it's 12.9%. In Somerset County, Md., the rate is an astounding 42%. In some rural counties in California, error rates range as high as 26%. In San Francisco it's 11.6%. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093. Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets. Last July, Robert Earl, an agent with Choice Homes Team in the Charlottesville, Va., area, examined selling prices and Zestimates of all 21 homes sold that month in the nearby community of Lake Monticello. On 17 sales Zillow overestimated values, including two houses that sold for 61% below the Zestimate. In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP Codes. He found that Zestimates came in below the selling price 70% of the time, with disparities ranging as high as $70,000. In 25% of the sales, Zestimates were higher than the contract price. In 95% of the cases, he said, "Zestimates were wrong. That does not inspire a lot of confidence, at least not for me." In a second ZIP Code, Dowler found that 100% of Zestimates were inaccurate and that disparities were as large as $190,000. So what do you do now that you've got the scoop on Zestimate accuracy? Most important, take Rascoff's advice: Look at them as no more than starting points in pricing discussions with the real authorities on local real estate values — experienced agents and appraisers. Zestimates are hardly gospel — often far from it.

The Mortgage Corner - Mortgage Applications Increase Incredible 49 percent in January

Mortgage applications increased 49.1 percent from one week earlier, said the just released Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending January 9, 2015.  It was the largest increase since 2008, at the start of the Great Recession, mostly due to record-low interest rates, now down to 3.25% for fixed rate conforming loans.  Much of it may also be because rental rates are soaring, making renting more expensive than paying for a mortgage in many areas with low interest rates.

The Refinance Index increased 66 percent from the previous week to the highest level since July 2013. The seasonally adjusted Purchase Index increased 24 percent from one week earlier to the highest level since September 2013.

“The US economy and job market continued to show signs of strength, but weakness abroad and tumbling oil prices have led to further declines in longer-term interest rates,” said Mike Fratantoni, MBA’s chief economist.

Graph: Calculated Risk

This is while the 30-yr conforming fixed rate dropped ¼ percent in one day to 3.25 percent for a 1.25 pt. origination cost. “Mortgage rates reached their lowest level since May of 2013, and refinance application volume soared, more than doubling on an unadjusted basis, and up 66 percent after adjusting for the fact that the previous week included the New Year’s holiday,” said Fratantoni.

Applications for larger refinance loans increased more than 4 times relative to the previous week. The average conventional refinance application increased to $298,700 from $233,500 the prior week. Although there was a somewhat smaller increase for government refinance volume, VA refinance applications increased by 50 percent. VA loans tend to be larger than FHA and USDA loans, and hence are more responsive to a given rate change.

Graph: Marketwatch

And the price to keep a roof over millennials’ heads rushed ahead of overall consumer inflation in 2014 as rents spiked up, according to just released data.  The U.S. Labor Department’s gauge of prices for shelter—a broad category that includes items such as apartment rent and hotel stays—showed inflation of 2.9 percent in 2014, the fastest calendar-year result since 2007. Rent inflation reached 3.4 percent, the largest calendar-year growth since 2008.

“In addition to the drop in rates, and news of improvement in the job market, there was additional positive news for prospective homebuyers with evidence that credit availability has increased somewhat, and with FHA’s announcement of a decrease in their mortgage insurance premiums,” Fratantoni said.

Purchase application volume increased by almost 24 percent, with stronger growth for conventional applications than for government loans. Purchase application volume was at its highest level since September 2013, increased on a year over year basis in the aggregate, and notably increased across most loan size categories, particularly for the conforming, middle of the market loan segments that had been weak for much of the past year. FHA purchase application volume was up by 17 percent for the week on a seasonally adjusted basis.

-Harlan Green © 2014

Pending Home Sales Soar Nationwide in May, Biggest Jump Since 2010

Pending home sales surged more than expected in May, the latest sign a sluggish housing recovery is picking up steam.

Signed contracts for previously owned homes jumped 6.1% from April, the National Assn. of Realtors said Monday. It was the largest pop since April 2010. Then, families rushed to lock in a first-time home buyer tax credit before it expired.

After slowing last summer, the housing market appears to be turning a corner. More homes on the market, slowing price appreciation and lower mortgage rates have lured buyers off the sidelines, economists say.

May's pending sales data beat expectations.The median forecast for economists polled by Bloomberg News was for a 1.5% rise.

And buyers closed deals on 4.9% more previously owned homes in May than April. Meanwhile, new home sales jumped 18.6% in May.

“An improvement in sales is likely to continue for a least a few more months, a welcomed reprieve after a significantly slow start to the year,” Sterne Agee chief economist Lindsey Piegza said in a statement.

Still, the market isn’t humming like last year. Higher prices and fewer foreclosures have investors and families less likely to strike a deal. Pending sales last month were 5.2% below May 2013 levels.

The Realtors pending sales index, adjusted for seasonal swings, tracks signed, but not closed contracts for previously owned homes. Deals usually close within one or two months.

Pending sales rose in all regions from April. In the West, they climbed 7.6%.  

Further gains, Piegza said, will rely on “sustained improvement in income and job creation.”

Copyright © 2014, Los Angeles Times

January New-Home Sales Soaring

Financial FAQs

January New-Home Sales Soaring

The Polar Vortexes haven’t stopped everything.  It looks like new-home sales have picked, a sign that existing-home inventories are too low in spite of the Ice Age conditions. Sales of new single-family houses in January 2014 were at a seasonally adjusted annual rate of 468,000, according to estimates released jointly today by the U.S. Census Bureau and HUD. This is 9.6 percent above the revised December rate of 427,000 and is 2.2 percent above the January 2013 estimate of 458,000.

Graph: Calculated Risk

It was the highest sales rate since 2008, the end of the housing bubble. But inventories are still too low, which means new-home sales will continue to increase as more housing construction comes on line, with close to 1 million units already in the construction pipeline. The months of supply decreased in January to 4.7 months from 5.2 months in December.

Graph: Calculated Risk

The problem is obvious from this graph. Inventories have returned to levels that prevailed from 1997 to 2005, a prolonged period of pent up demand for housing that, along with prolonged easy credit conditions, caused the housing bubble.

January's data show a big 10.4 percent gain in the South which is by far the largest region for new home sales. The West, which is a distant second behind the South, shows an 11.0 percent gain.

A plus for sales has been recent price concessions as the median price is down 2.2 percent to $260,100. The year-on-year sales gain, which spent most of last year in the double digits, is now modest, at 3.4 percent and in line with the 2.2 year-on-year gain for sales.

This is while total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 5.1 percent to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December, and are 5.1 percent below the 4.87 million-unit pace in January 2013.

So new-home sales are surging, and will continue to surge, as long as existing inventories are so low. Last month’s existing-home activity was the slowest since July 2012, when it stood at 4.59 million, and signals the effect of low inventories and rising interest rates that have cut mortgage applications to their lowest level in a year.

Harlan Green © 2014

2013 Record Home Sales

The Mortgage Corner

Home Sales Highest Since 2006

            The National Association of Realtors (NAR) just reported that for all of 2013, there were 5.09 million sales, which is 9.1 percent higher than 2012. It was the strongest performance since 2006 when sales reached an unsustainably high 6.48 million at the close of the housing boom, and is now back to the 2000 sales rate at the beginning of the housing bubble.

Graph: Calculated Risk

Lawrence Yun, NAR chief economist, said housing has experienced a healthy recovery over the past two years. “Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market,” he said. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

But for sale inventories have declined and are putting upward pressure home prices.  The national median existing-home price for all of 2013 was $197,100, which is 11.5 percent above the 2012 median of $176,800, and was the strongest gain since 2005 when it rose 12.4 percent.

The is in large part because total housing inventory at the end of December fell 9.3 percent to 1.86 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace, down from 5.1 months in November. Unsold inventory is 1.6 percent above a year ago, when there was a 4.5-month supply.

The median existing-home price for all housing types in December was $198,000, up 9.9 percent from December 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of December sales, unchanged from November; they were 24 percent in December 2012. The shrinking share of distressed sales accounts for some of the price growth.

Ten percent of December sales were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in December, while short sales were discounted 13 percent.

Interest rates will play a big part on home sales this year, needless to say, but will probably not rise much above current rates, even with higher economic growth.  This is because of the tremendous cash hoard of businesses that obviates their need to borrow, as well as consumers that are borrowing much less than in the past.   The 30-year conforming fixed rate is averaging 4.0 percent in California for a 0.5 point origination fee, and high-balance 30-year conforming is averaging 4.125 percent for a 1 point origination fee.

Harlan Green © 2013