Home Equity Increasing

The Mortgage Corner

Home Equity Increasing

CoreLogic, a real estate analytics firm, today released new analysis showing approximately 791,000 more residential properties returned to a state of positive equity during the third quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 42.6 million.

This is helping November home sales in the South Coast, with closed transactions holding strong and huge price increases year-over-year, reports Gary Woods for MLS. 

“Year over year sales are up just slightly from 2012 with the median sales price up to about $940,000 for approximately a 19 percent rise. The average sales price is also up going from about $1.36 million in 2012 to approximately $1.43 million in 2013 for a 5 percent rise while the numbers of escrows are down with 1,203 in ’12 to 1,168 in ‘13 with the median list price on those escrows up about 15 percent to approximately $960,000.

The CoreLogic analysis indicates that nearly 6.4 million homes, or 13 percent of all residential properties with a mortgage, were still in negative equity at the end of the third quarter of 2013. This figure is down from 7.2 million homes, or 14.7 percent of all residential properties with a mortgage, at the end of the second quarter of 2013.

Graph: Calculated Risk

This is a result of the sharp rise in housing values this year.  Of the 42.6 million residential properties with positive equity, 10 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints.

Under-equitied mortgages accounted for 20.4 percent of all residential properties with a mortgage nationwide in the third quarter of 2013, with more than 1.5 million residential properties at less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are considered at risk should home prices fall.

“Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013,” said Mark Fleming, chief economist for CoreLogic. “Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve.”

California has the twelfth worst negative equity with 13.2 percent of those homes holding mortgages.  Nevada had the highest percentage of mortgaged properties in negative equity at 32.2 percent, followed by Florida (28.8 percent), Arizona (22.5 percent), Ohio (18.0 percent) and Georgia (17.8 percent). These top five states combined accounted for 36.4 percent of negative equity in the U.S.

 

Harlan Green © 2013

Fannie Economists Project 1.8M Borrowers Could Regain Equity in 2013

The broadening housing recovery has firmed up home prices around the country, with the potential to restore many underwater mortgages to a position of positive equity, according to Fannie Mae’s Economic and Strategic Research (ESR) group.

Citing data from CoreLogic, Orawin Velz, Fannie Mae’s director of economic and strategic research, notes that 1.7 million properties moved from negative to positive equity last year. Provided the home price gains seen so far this year continue, Velz anticipates another 1.8 million properties will rise out of their underwater positions by the end of 2013.

In a new commentary piece entitled “Down But Not Out: Many Underwater Borrowers Will Likely Regain Buoyancy This Year,” Velz examines the extent to which home price appreciation can lift underwater properties into positive equity positions and the anticipated recovery time for transitioning the nation’s housing markets toward “normal” activity.

“The first annual rise in home prices on a national basis in six years has contributed to a positive feedback loop for the housing market by helping many underwater homeowners … regain their positive equity positions,” Velz said. “This improving trend should help spur mobility and housing turnover….The broader economy also should benefit.”

Main measures of home prices showed continued robust gains through the first part of 2013, thanks to an improving labor market, low mortgage rates, and very lean inventory—which Velz contends has been the principal driver of price gains so far.

She says rising home prices should help some homeowners who have involuntarily remained on the sidelines to put their homes on the market. According to CoreLogic’s data, the number of underwater residential properties peaked in the fourth quarter of 2011 at 12.1 million and declined in each quarter of 2012, with 10.4 million properties remaining in negative equity by year-end.

About 3.7 percent of those—or 1.8 million—were in a slightly negative position, which Velz defined as those with loan-to-value (LTV) ratios of 100 to less than 105 percent. She says these properties may switch to positive equity positions this year assuming home prices continue their upward trend. Based onCoreLogic’s latest negative equity report, the share of properties with a slightly negative equity position varied across the country, ranging from 1.3 percent in North Dakota to 5.4 percent in Georgia.

Velz concludes that all but about 10 percent of properties currently underwater will be back in positive territory within three and a half years. Most analysts expect home prices to trend up this year. Zillow polled more than 100 economists, housing analysts, and other industry experts in March. The consensus for median appreciation in 2013 was 4.8 percent, with only two respondents out of 117 indicating a decline.

Applying the Zillow survey’s consensus expectation for home prices—a cumulative gain of 17.5 percent between 2013 and 2016—and assuming continued amortization, Velz says most of the underwater properties at the end of 2012 would likely regain their positive equity positions by 2016—all except the most severely underwater, meaning those with LTVs of 120 percent or higher.

Underwater properties remain concentrated in a few states with those in the worst five states—Nevada, Florida, Arizona, Georgia, and Michigan—accounting for nearly a third of total underwater properties, according to CoreLogic’s assessment. Velz stresses the speed of the transition of underwater loans to positive equity positions is expected to vary regionally.

Nevada and Arizona are among the states with the highest share of negative equity properties, yet these states witnessed very robust home price gains over the past year, Velz points out. On the other hand, Michigan’s negative equity share is the lowest among the five worst states, but its home price appreciation has been the most modest.

Fannie Mae’s economic and research director also noted strong home price appreciation bodes well for California, which was consistently among the five worst underwater states until the second quarter of 2011. Since then, California has moved out of the worst five states, as its home prices troughed in the first quarter of 2011—much sooner than trends have demonstrated in other severely underwater states and much earlier than national prices, which didn’t witness a trough until 2012.

According to Velz, that rate at which underwater borrowers are elevated above the break-even surface will depend on the severity of their underwater conditions—or their LTV ratios—and the pace of home price gains in specific markets.

BY: CARRIE BAY

Housing Prices, Mortgage Applications, Surging

CoreLogic reported that home prices nationwide, including distressed sales, increased on a year-over-year basis by 9.7 percent in January 2013 compared to January 2012. This change represents the biggest increase since April 2006 and the 11th consecutive monthly increase in home prices nationally. Excluding distressed sales, home prices increased on a year-over-year basis by 9.0 percent in January 2013 compared to January 2012. On a month-over-month basis excluding distressed sales, home prices increased 1.8 percent in January 2013 compared to December 2012. The five states with the highest home price appreciation, including distressed sales, were: Arizona (+ 20.1 percent), Nevada (+17.4 percent), Idaho (+14.9 percent), California (+14.1 percent) and Hawaii (+14.0 percent).

This is a huge increase, and means borrowers and buyers see interest rates rising later this year, as some Federal Reserve Governors are objecting to the sustained purchase of QE3 securities until the unemployment rate drops to 6.5 percent from its current 7.8 percent. A major reason for the price increases is increased mortgage activity due to a drop in interest rates to previous lows. The Mortgage Bankers Association reported both the Refinance and Purchase Indexes increased 15 percent from the previous week and were at the highest levels since mid-January.

The 30-year fixed conforming rate has fallen to 3.375 percent for a 1 point origination fee, and the high-balance fixed rate is now 3.625 percent for 0 points origination. Another reason for such rising prices is the decline in mortgage delinquency and foreclosure rates. The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 7.09 percent of all loans outstanding at the end of the fourth quarter of 2012, the lowest level since 2008, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 3.74 percent, the lowest level since the fourth quarter of 2008, down 33 basis points from the third quarter and 64 basis points lower than one year ago.

-Harlan Green © 2013

Home Prices Rise in 81% of U.S. Cities as Markets Recover

By Prashant Gopal - Nov 7, 2012 8:20 AM PT

Prices for single-family homes rose in 81 percent of U.S. cities as the property market extends a recovery from the worst crash since the 1930s.

The median sales price increased in the third quarter from a year earlier in 120 of 149 metropolitan areas measured, the National Association of Realtors said in a report today. In the second quarter, 110 areas had gains.

Values are climbing after a six-year slump as buyers compete for a shrinking supply of properties listed for sale. U.S. home prices jumped 5 percent in September from a year earlier, the biggest 12-month increase since July 2006, CoreLogic Inc., anIrvine, California-based real estate data provider, said yesterday.

“The housing recovery still faces a number of potential headwinds,” Paul Diggle, property economist for Capital Economics Ltd. in London, said in a note to clients after CoreLogic’s report was released. “But our central case is that tight supply conditions will mean that house prices will continue to rise steadily next year.”

At the end of the third quarter, 2.32 million existing homes were available for sale, 20 percent fewer than a year earlier, according to the Chicago-based Realtors group.

Short Sales

The national median price for an existing single-family home was $186,100 in the third quarter, up 7.6 percent from the same period last year, the Realtors said. Foreclosures and short sales, in which the price is less than the mortgage balance, accounted for 23 percent of third-quarter deals, down from 30 percent a year earlier.

The share of all-cash home purchases fell to 27 percent in the third quarter from 29 percent a year earlier. Investors, who make up the bulk of cash purchasers and compete with first-time buyers, accounted for 17 percent of all transactions, down from 20 percent a year earlier.

The best-performing metro area was Phoenix, where prices increased 35 percent from a year earlier. Prices rose 28 percent in the Cape Coral, Florida, area, and 27 percent in Akron, Ohio.

The Raleigh, North Carolina, area had the biggest decline, with the median selling price falling 16 percent in the quarter. It was followed by York, Pennsylvania, with an 9.4 percent decrease; and Binghamton, New York, with a 6.6 percent drop.

A survey by Fannie Mae, the nation’s biggest mortgage- finance company, showed Americans expect home prices to increase an average of 1.7 percent in the next 12 months. The share of respondents who said they expect home prices to decrease fell to 10 percent last month, down 13 percentage points from a year earlier and the lowest level since the monthly survey began in June 2010, Washington-based Fannie Mae said today.

Shadow Housing Inventory, Foreclosure Fall

The Mortgage Corner

Shadow Housing Inventory, Foreclosures Fall

 

CoreLogic reported the current residential shadow inventory as of July 2012 fell to 2.3 million units, representing a supply of six months. This was a 10.2 percent drop from July 2011, when shadow inventory stood at 2.6 million units, which is approximately the same level the country was experiencing in March 2009. Currently, the flow of new seriously delinquent (90 days or more) loans into the shadow inventory has been roughly offset by the equal volume of distressed (short and real estate owned) sales.

“The decline in shadow inventory has recently moderated reflecting the lower outflow of distressed sales over the past year,” said Mark Fleming, chief economist for CoreLogic. “While a lower outflow of distressed sales helps alleviate downward home price pressure, long foreclosure timelines in some parts of the country causes these pools of shadow inventory to remain in limbo for an extended period of time.”

Data Highlights as of July 2012:

• As of July 2012, shadow inventory fell to 2.3 million units or six-months’ supply and represented just over three-fourths of the 2.7 million properties currently seriously delinquent, in foreclosure or in REO.
• Of the 2.3 million properties currently in the shadow inventory, 1 million units are seriously delinquent (2.9 months’ supply), 900,000 are in some stage of foreclosure (2.5-months’ supply) and 345,000 are already in REO (1.0-months’ supply).
• The dollar volume of shadow inventory was $382 billion as of July 2012, down from $397 billion a year ago and $385 billion last month.
• Serious delinquencies, which are the main driver of the shadow inventory, declined the most from April 2012 to July 2012 in Arizona (3.2 percent), Pennsylvania (2.8 percent), New Jersey (2.3 percent), Delaware (2.2 percent) and Maine (2.2 percent).
• As of July 2012, Florida, California, Illinois, New York and New Jersey make up 45 percent of all distressed properties in the country.

CoreLogic also released its latest National Foreclosure Report which provides monthly data on completed foreclosures, foreclosure inventory and 90+ delinquency rates.

• The five states with the highest number of completed foreclosures for the 12 months ending in August 2012 were: California (110,000), Florida (92,000), Michigan (62,000), Texas (58,000) and Georgia (55,000). These five states account for 48.1 percent of all completed foreclosures nationally.
• The five states with the lowest number of completed foreclosures for the 12 months ending in August 2012 were: South Dakota (25), District of Columbia (113), Hawaii (435), North Dakota (564) and Maine (612).
• The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: Florida (11.0 percent), New Jersey (6.5 percent), New York (5.2 percent), Illinois (4.8 percent) and Nevada (4.6 percent).
• The five states with the lowest foreclosure inventory as a percentage of all mortgaged homes were: Wyoming (0.5 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (0.9 percent) and South Dakota (1.1 percent).

                Corelogic said that home prices nationwide, including distressed sales, increased on a year-over-year basis by 4.6 percent in August 2012 compared to August 2011. This change represents the biggest year-over-year increase since July 2006. On a month-over-month basis, including distressed sales, home prices increased by 0.3 percent in August 2012 compared to July 2012.

                So we see the Federal Reserve’s commitment to keep interest rates at historic lows for as long as it takes to revive the housing market, and bring down the unemployment rate to more acceptable levels, is already showing results.

 

Harlan Green © 2012

Foreclosures Down to 69,000 in March, Inventory Also Down

BY: ESTHER CHO

Year-over-year, the number of completed foreclosures decreased about 19 percent to 69,000 in March 2012 compared to 85,000 in March 2011, according to CoreLogic’s National Foreclosure Report for March. Month-over-month, with the number of completed foreclosures in February 2012 at 66,000, foreclosures increased about 4.5 percent in March 2012.

On a quarterly basis, foreclosures decreased to 198,000 in the first quarter of 2012 compared to 232,000 through the same quarter a year ago.

Overall, since the start of the financial crisis in September 2008, there have been approximately 3.5 million completed foreclosures.

In addition to the yearly and quarterly decreases in completed foreclosures, the number of loans in the foreclosure inventory decreased by nearly 6 percent, or 100,000, in March 2012 compared to the year before.

“Since the foreclosure inventory is also coming down, this suggests that loan modifications, short sales, deeds-in-lieu are increasingly being used as an alternative to foreclosures to clear distressed assets in our communities. This is what was envisioned with the recent National Foreclosure Settlement, and can often be a better outcome for both borrowers and investors,” said Anand Nallathambi, CEO of CoreLogic.

Out of all homes with a mortgage, approximately 1.4 million homes, or 3.4 percent were in the national foreclosure inventory as of March 2012 compared to 1.5 million, or 3.5 percent, the same month a year ago, and 1.4 million, or 3.4 percent, in the prior month of February.

Delinquencies are also down, with the share of borrowers nationally that were more than 90 days late on their mortgage payment, including homes in foreclosure and real estate owned (REO) assets, dropping to 7 percent in March 2012 from 7.5 percent a year ago, and remained unchanged compared to the prior month.

“The overall delinquency level was unchanged in March, remaining at its lowest point since July 2009,” said Mark Fleming, CoreLogic’s chief economist.

The distressed clearing ratio for March was up at 0.81 compared to 0.76 in February 2012. A higher ratio indicates a faster pace of REO sales relative to the pace of completed foreclosures.

As for individual states, strides were more notably made with non-judicial states.

“Non-judicial foreclosure markets like Nevada, Arizona, and California are experiencing significant improvements in their shares of delinquent borrowers. Some judicial foreclosure states are also improving, like Florida, but not to the extent of non-judicial markets,” said Fleming.

Year-over-year, the percentage of 90-plus delinquencies in Nevada decreased 3.7, while in Arizona the drop was 3.2 percent and in California 2.2 percent. Judicial state Florida saw a 1 percent decrease in its percentage of delinquent borrowers.

Highest % of Foreclosure Inventory

1. Florida (12.1 percent)
2. New Jersey (6.6 percent)
3. Illinois (5.4 percent)
4. Nevada (4.9 percent)
5. New York (4.9 percent)

Lowest % of Foreclosure Inventory

1. Wyoming (0.7 percent)
2. Alaska (0.8 percent)
3. North Dakota (0.8 percent)
4. Nebraska (1.1 percent)
5. South Dakota (1.4 percent)

Five States with the Most Foreclosures
(Over 12 months ending in March 2012)

1. California (150,000)
2. Florida (92,000)
3. Michigan (62,000)
4. Arizona (58,000)
5. Texas (57,000)

The five states account for 49.1 percent of all completed foreclosures nationally.

CoreLogic is a provider of consumer, financial and property information, analytics, and services to businesses and the government.