Housing industry recovering faster than many economists expected

Home builders have boosted production of new homes nationally, and new foreclosures in California have fallen to their lowest level since early 2007.

October 17, 2012|By Alejandro Lazo and Jim Puzzanghera, Los Angeles Times

Housing is snapping back faster than many economists had expected, with home builders stepping up production of new homes nationally and fresh foreclosures in California falling to their lowest level since the early days of the bust.

Demand for housing has surged as interest rates have plummeted and home prices in many markets appear to have bottomed, particularly in states such as California where inventories of foreclosures and other lower-priced homes have sunk. The turnaround in prices and record-low supply of newly built homes also are luring builders back after six years of pain.

"The numbers are strong in September, and that is definitely a positive sign," said Celia Chen, a housing economist with Moody's Analytics. "It is confirmation that housing is lifting off the bottom."

Residential construction starts rose 15% nationally last month from August to their highest annual rate in more than four years. A separate report showed that the number of troubled California borrowers entering foreclosure hit its lowest level in the third quarter since the dawning of the mortgage meltdown.

If the gains in housing hold, they could give consumer confidence a boost and help the broader economy recover. Housing has played an important part in lifting the nation out of past downturns but was hampered this time by the severity of the Great Recession and the huge number of vacant and foreclosed homes dragging down the market for years.

Now rising prices are helping homeowners in properties that for several years have been underwater, in which the house wouldn't bring enough in a sale to pay off the mortgage. Rising values could play a role in lifting household finances if families feel more secure about the direction of the economy.

Any positive economic news presumably would be a boost for President Obama's reelection campaign, though both he and Republican challenger Mitt Romney have largely avoided a detailed debate on housing policy. Many on the left have said that Obama's tepid and patchwork response to the housing downturn resulted in a slower recovery while the right has decried his policies as interventionist failures.

Michael D. Larson, a housing and interest rate analyst for Weiss Research, said the Federal Reserve's policies to keep mortgage interest rates low and Obama's foreclosure prevention efforts have played some role in the recovery — but the improvements can mostly be attributed to natural market dynamics.

"It is certainly encouraging; housing has been this lead anchor around the economy's neck," he said. But "most of this is just the passage of time. I think if the Fed or the government had done absolutely nothing … we still would have seen some demand return."

Several recent trends have underscored improvement in housing. Nationally, home builder stocks are up, prices have begun a modest recovery, and sales of newly built and previously owned homes have risen.

The Commerce Department reported Wednesday that construction of houses and apartment buildings rose in September to a seasonally adjusted annual rate of 872,000, marking the third straight month of improvement. The figures surpassed economists' expectations of about a 770,000 annual rate.

September had the best monthly performance since July 2008, when housing starts were on an annual pace of 923,000. Compared with September 2011, new housing starts jumped 34.8%, the Commerce Department said.

Last month's growth was "surprisingly strong," said David Crowe, chief economist at the National Assn. of Home Builders. "As consumer confidence rises and jobs return, more local markets and more consumers will join the buyer market, and I expect housing construction to continue a modest but fairly steady rise throughout 2013 and into 2014."

The annual rate of new home groundbreaking still is far below the peak of more than 2.2 million units reached in early 2006 during the housing bubble. But the pace has picked up dramatically from the low of 478,000 in April 2009, and is up sharply from the 706,000 annual rate in May. Building permits for private housing construction, a sign of future activity, also jumped in September, up 11.6% from August and 45.1% from a year earlier. The annual rate in September was 894,000 building permits.

Patrick Newport, an economist with IHS Global Insight, said the increases were likely due to gains in household growth after years of people doubling or tripling up to wait out the worst of the downturn.

"What's kicking in right now is simply the demographics," Newport said. "We have been building at too low a rate for four years, and so demand has been suppressed because of the recession, and now it is starting to kick in."

On the other side of the housing pipeline, the shortage of cheaply priced homes in California appears poised to continue. The number of Californians entering foreclosure dropped in the third quarter to its lowest level since early 2007, according to a report from real estate firm DataQuick. Foreclosure filings have fallen as banks work toward completing more loan modifications and short sales. An improving economy and rising prices have also helped.

"Prices in most areas today are up significantly from their low point in early 2009," said John Walsh, president of DataQuick. "Additionally, during the past year, we've seen short sales overtake the foreclosure process as the procedure of choice to deal with homeowner distress."

Notices of default fell 10.2% from the prior quarter and 31.2% from the same period last year, DataQuick reported. A total of 49,026 notices of default — the first stage of foreclosure in California — were filed on homes in the Golden State last quarter.

That was the lowest number since the first quarter of 2007, and a 63% decline from the first quarter of 2009, when notice of default filings peaked in the state.

The number of homes lost to foreclosure rose 5% from the prior quarter and dropped 41% from a year earlier. A total of 22,949 homes were lost to foreclosure last quarter.

alejandro.lazo@latimes.com

jim.puzzanghera@latimes.com

Lazo reported from Los Angeles and Puzzanghera from Washington.

Pending home sales in California decline

By Alejandro Lazo

July 24, 2012, 12:17 p.m.

Contracts signed for previously owned California homes took a dip in June, indicating that the decline in foreclosures is slowing the Golden State sales recovery.

The California Assn. of Realtors said Tuesday that its index for pending homes fell 3.8% from the prior month. The index posted a 4.7% increase from the same month a year prior.

Contracts are an early indicator of where sales are headed. Sales often close six to eight weeks after contracts are signed so a decline in June could mean weakness when July and August sales statistics are reported.

In a healing market, sales should be accelerating as buyers gain confidence that their investments won’t be worth less in the future than what they pay today.

But as The Times previously reported, a lack of inventory has become a critical dynamic of the market. And perhaps more important than the sales statistics released Tuesday are the figures from the association showing a decline in the number of foreclosed homes selling.

Bank-owned homes helped fuel the sales market earlier this year as big and small investors stormed into California’s market.

Last month, foreclosed homes made up just 20.2% of all pending sales last month, a decline of 22.6% from May and 29.2% in June 2011. There were similar declines for foreclosures in closed sales, as The Times reported last week.

The California Assn. of Realtors blamed the drop in pending sales in part on the slowing economy. But as Times staff writer Ricardo Lopez reported last week, California’s economy appears to be accelerating. Nevertheless, fears of a sluggish economy and tight credit also probably play some role in the summer sales slowdown.

Home prices decline for a third straight month

The Standard & Poor's/Case-Shiller index of 20 large U.S. cities fell 1.3% in November from October as foreclosures continue to drag down the housing market. 

By Alejandro Lazo, Los Angeles Times

February 1, 2012

Three straight months of home-price declines in the biggest U.S. cities showed that foreclosures remain a significant drag on a housing market that is entering its fifth year of deterioration.

Nineteen of the 20 metropolitan areas tracked by the Standard & Poor's/Case-Shiller index fell in November — the second consecutive month that every metro area other than Phoenix was down and the third consecutive month that the overall index has declined. The index fell 1.3% from October to November and 3.7% from November 2010.

Home prices typically fall during the winter, when investors looking for lower-priced homes make up a larger share of the market. In addition, most home-buying is done in the spring and summer. Nevertheless, economists viewed the continued home-price weakness as a sign that any recovery this year would be anemic.

"We have more house-price declines coming," said Mark Zandi, chief economist at Moody's Analytics. "I'm more optimistic about improvement in sales and construction figures, but I think prices will fall further this year, largely because we still have to work through the mountain of foreclosed properties."

Karl E. Case, a Wellesley College professor and co-creator of the index, said the nation's housing market could be approaching a "rocky bottom," meaning the big drops in home values characteristic of earlier in the crisis are perhaps over, but any improvements would come in fits and starts. The huge percentage of American homeowners who owe more on their properties than those homes are worth remains the biggest barrier to recovery, Case said.

About 1 in 5 borrowers are underwater, according to the most recent data from Santa Ana firm CoreLogic. That slice of the market is important because these property owners will continue to enter the market and put downward pressure on prices whenever demand for homes picks up, Case said.

"There are still going to be problems getting people out of these negative-equity positions," Case said. "We won't know the effect until it's over; it could drag out."

The Case-Shiller index, created by economists Case and Robert J. Shiller, is widely considered the most reliable read on home values. The housing index compares the latest sales of detached houses with previous sales and accounts for factors such as remodeling that might affect a house's sale price over time.

U.S. home prices are back to their mid-2003 levels, according to the 20-city index. They are down 32.9% from their peak, in July 2006.

Values hit bottom in April 2009 during the depths of the financial crisis and briefly dipped below that threshold in March. Prices began gaining ground again last year as the spring and summer selling season picked up.

With three consecutive months of decline, prices are again poised to dip below that post-crisis low, with the 20-city index hovering only 0.6% above the "double-dip" territory as defined by S&P/Case-Shiller.

"We will probably see some decline in nationwide prices, not a plunge, but maybe 4%," said Dean Baker, co-director of the Center for Economic and Policy Research. "There will be a lot of regional variation, but I think the overall trend is still downward."

Atlanta continued to show the poorest price performance, posting a new index low in November. That city was down 2.5% after dropping 5% in October, 5.9% in September and 2.4% in August. Las Vegas, Seattle and Tampa, Fla., also all reached new lows in November.

In Los Angeles, prices were down 1% in November after falling 1.5% the month before. Year over year, L.A. prices were down 5.4.%.The index does not track prices in California's Central Valley or the Inland Empire, where housing is still weak and the foreclosure rates of many cities are among the nation's highest.

The share of distressed properties for sale in each area tracked by the index appears to be playing a significant role in how those markets are doing.

After being hit hard by foreclosures earlier in the crisis, Phoenix has posted home-price gains in recent months as investors snapped up low-priced properties and the job market showed some improvement. Foreclosures in Phoenix accounted for 38.5% of all resale homes in November, the lowest share of the market since May 2008, according to San Diego real estate information firm DataQuick.

On the other end of the spectrum, Atlanta had the largest number of foreclosed properties for sale by government-controlled mortgage giants Fannie Mae and Freddie Mac in November, Patrick Newport, U.S. economist for IHS Global Insight, noted Tuesday, citing a Federal Reserve white paper sent to Congress last month pushing for more urgent action on housing.

Given the continued malaise in housing, the Obama administration has taken new measures to right the property market. Last week, the government announced the expansion of its signature foreclosure relief program, a new refinancing plan for borrowers and a new investigative unit that will further probe the mortgage-related abuses that caused the housing collapse.

News of the latest housing value declines came as consumer confidence in the economy turned negative in January after improving in December, according to the Conference Board's consumer confidence index. The index had increased in December but fell 3.7 points.

alejandro.lazo@latimes.com

Copyright © 2012, Los Angeles Times

 

Home sales improve nationally in December

Home sales rose nationally in December, marking the third consecutive month that the market has shown improvement.

Previously owned homes were sold at a seasonally adjusted annual rate of 4.61 million units, up 5.0% from November and 3.6% from December a year prior, according to the National Assn. of Realtors.

“The market for single-family homes picked up in the second half of 2011, after being stuck near the bottom for nearly three years,” Patrick Newport, an economist with IHS Global Insight, wrote in a note. “This pickup is real, but the road to recovery will be a slow one.”

About one in three homes sold last month was a so-called distressed sale, either a foreclosure or a short sale, the latter involving a bank allowing a home to be sold for less than the outstanding debt on the property. Roughly one in three homes was purchased in cash.

The nation’s housing inventory dropped 9.2% from the prior month, to 2.38 million homes available for sale. That represents a supply of six months and a little less than a week. Economists consider about six months of supply to be a stable market.

By Alejandro Lazo

January 20, 2012, 10:49 a.m.

Click here for the article in the LA Times

Scheduled foreclosure auctions soar in California

Banks set the clock for forced sales of more than 26,000 homes in the state in November, a 63% increase from October. Overall foreclosure notices nationwide fell last month.

By Alejandro Lazo, Los Angeles Times

December 15, 2011

Banks in November scheduled more than 26,000 homes to be sold at California foreclosure auctions, a 63% increase from October and a sign that a surge in discounted, bank-owned properties is on track to hit the market next year.

The uptick in scheduled auctions follows an increase last summer in homes entering the foreclosure process by receiving default notices and was largely driven by Bank of America. It appears that many of those homes are now quickly working their way through the process, said Daren Blomquist, a spokesman for RealtyTrac of Irvine, a data tracker that published the November data.

The increase played out nationally, hitting a nine-month high, even as overall foreclosure notices declined last month. Among the states, California had the biggest month-over-month increase in scheduled auctions, followed by Washington, 56%; Ohio, 53%; New Jersey, 44%; and New York, 38%.

"November's numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as [foreclosures] or short sales sometime early next year," said James Saccacio, co-founder and chief executive of RealtyTrac.

Nationally, overall foreclosure filings on U.S. properties — default notices, scheduled auctions and bank repossessions — totaled 224,394 in November, down 3% from October and off 14% from November 2010. About 1 in 579 homes received a foreclosure filing last month, by RealtyTrac's tally.

Celia Chen, a housing economist with Moody's Analytics, said she expected the number of foreclosures on banks' books to rise next year and for the number of discounted foreclosures on the market to remain elevated. That will continue to put pressure on home prices.

"The pace of sales will remain very slow, so the share of distressed sales is going to rise most likely through the middle of next year, and this will cause home prices to fall," Chen said. "Job growth is still weak, and then it is still a bit difficult to get those low rates. Lenders, in general, are still being pretty careful about who they write a mortgage for."

The West's Foreclosure Belt continued to be the hardest hit region in the nation. Nevada posted the highest foreclosure rate in the nation for the 59th month in a row, despite a decline in foreclosure activity because of a new law cracking down on those doing the foreclosing. California had the second-highest rate and Arizona the third in November.

California cities accounted for nine of the 10 metro areas with the highest foreclosure rates. Las Vegas was the only city outside of California in the top 10, coming in at No. 6. Stockton posted the nation's highest foreclosure rate for the second month in a row, followed by Modesto and Fresno.

In California, total foreclosure activity was up 15% from October and up 11% from November 2010. The number of homes entering foreclosure continued at an elevated level last month, down just 1% from October and up 12% from November 2010. Notices of trustee sales, or scheduled auctions, jumped 63% month over month and 14% over November 2010. Bank repossessions declined 15% from the previous month and were up 1% from the same month last year.

The uptick in California filings was driven by the auction notices. When such a notice is filed at a county recorder's office, a home can be sold within 21 days.