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