Fixed-Rate Mortgages Near Record Lows

Fixed-rate mortgages dropped slightly this week, nearing their average all-time lows and helping to lift home buyers’ purchasing power, Freddie Mac reports in its weekly mortgage market survey. For every week but one this year, the 30-year fixed-rate mortgage, the most popular choice among home buyers, has been below 4 percent. Here’s a closer look at average rates for the week ending April 26: 30-year fixed-rate mortgages averaged 3.88 percent, with an average 0.7 point, dropping from last week’s 3.90 percent average. A year ago at this time, 30-year rates averaged 4.78 percent. The record low for 30-year rates averaged 3.87 percent, a record reached in February. 15-year fixed-rate mortgage averaged 3.12 percent, with an average 0.6 point, dropping from last week’s 3.13 percent. Last year at this time, 15-year rates averaged 3.97 percent. The all-time record low for 15-year fixed-rate mortgages is 3.11 percent, a record reached recently during the week ending April 12. 5-year adjustable-rate mortgages averaged 2.85 percent this week, with an average 0.6 point, rising slightly from last week’s 2.78 percent average. Last year at this time, 5-year ARMs averaged 3.51 percent. 1-year ARMs averaged 2.74 percent, with an average 0.6 point, dropping from last week’s 2.81 percent average. A year ago at this time, 1-year ARMs averaged 3.15 percent. Source: Freddie Mac

Home Builders Report Big Gains in Sales Orders

Some of the country’s largest home builders are reporting increased sales and a rise in new orders, The Wall Street Journal reports. Builder stocks are also reflecting the increased optimism in the sector, rising 31 percent so far this year, according to the Dow Jones U.S. Home Construction index. "Builders say April's sales remain brisk, leaving the the companies optimistic that they will report even stronger quarterly results later this year and giving them enough confidence to raise prices in some markets, including those hit hard by the housing crash," The Wall Street Journal reports. Housing analysts say a big factor helping builders' recovery is the dropping inventory of existing homes. Also, many investors are buying up bargain-priced existing-homes in all-cash deals, which has made other home buyers start considering new home construction more. Several home builders have reported gains in sales orders recently, including Ryland Group, which cited a 46 percent increase in orders; Meritage Homes Corp. reports a 36 percent rise in new orders; D.R. Horton Inc. reports a 19 percent increase; and PulteGroup Inc. reports a 15 percent increase. "As buyers realize the market is tightening, we are seeing a greater sense of urgency than we have for quite some time," Steven J. Hilton, the chief executive of Meritage Homes Corp., said in a recent conference call. "The market has clearly turned in a more positive direction, and we are switching over to offense rather than defense.” Source: “Home Builders’ Health Improves,” The Wall Street Journal (April 26, 2012)

3 Housing Trends Emerging This Spring

What can home buyers expect to face this selling season? An improving housing market has made it a different picture in many areas compared to recent years, housing experts say. A recent article at Bankrate.com notes some of the following trends taking shape in the housing market this spring: 1. Fierce competition. Housing affordability is at record highs, due to falling home values and mortgage rates hovering near record lows. More buyers are taking notice and jumping off the sidelines. And mixed with sinking inventories of homes listed for sale, the competition is getting more fierce. Investors are snapping up bargain prices, often in all-cash deals, which means greater competition for traditional home buyers too. "Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest," says Jed Smith, managing director of quantitative research for the National Association of REALTORS®. Smith adds that first-time home buyers, in particular, may find increased competition from investors in trying to snag some of the best deals on the market. 2. More renters show desire to become home owners. Recent surveys have shown that buying a home nowadays is more affordable than renting. As such, more renters are finding home ownership more enticing. The signs are already starting to show: About 59.5 percent of tenants recently surveyed say they intend to renew their leases this year, which is the lowest rate since early 2009, according to a study by Kingsley Associates. 3. Mortgages may be a little pricier. Fannie Mae, Freddie Mac, and the Federal Housing Administration recently have raised their loan fees, which means home buyers can expect to pay a little more for their mortgage this spring. "Those who don't have credit scores in the high 600s to low 700s may be forced to go the FHA route," says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. "And they will be stuck with the higher fees." Buyers with smaller down payments can expect to pay more for FHA mortgage insurance premiums, which have risen to 1.75 percent of the loan total. Bankrate.com cites an example illustrating the higher fees: A borrower who takes out a $200,000 FHA loan will likely have to pay about $3,500 for mortgage insurance upfront. Prior to the increase taking effect, borrowers would pay about $2,000 for that same loan amount. Borrowers with higher mortgages can expect higher fees too. The FHA announced that in June it’ll increase its annual insurance for mortgages more than $625,500. "A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone," Bankrate.com reports. Read about more trends expected for the spring selling-season. Source: “5 Mortgage and Housing Trends in Spring 2012,” Bankrate.com (April 21, 2012)

Half of U.S. Metros See Pick up in Foreclosures

Housing analysts have warned that a foreclosure wave is coming, and the signs are starting to show. After several months of declining numbers in foreclosures nationwide, more U.S. metros are seeing a reversal as foreclosure activity begins to increase. Fifty-four percent of U.S. metros posted increases in foreclosure activity in the first quarter over the previous quarter, RealtyTrac reports. The metro areas reporting the highest percentage of increases in the first quarter are: Pittsburgh: Foreclosure activity is up 49% Indianapolis: Up 37% Philadelphia: Up 30% New York: Up 24% Raleigh, N.C.: Up 23% Virginia Beach, Va.: Up 22% While foreclosure activity has increased in several metros, overall foreclosure activity still remains down from a year ago in the majority of metros, according to RealtyTrac’s latest report. Also, some areas are still seeing foreclosure activity continue to fall. Foreclosure activity during the first quarter declined the most in the following areas: Portland, Ore.: Down 28% Las Vegas: Down 26% Providence, R.I.: Down 24% Salt Lake City: Down 22% Boston: Down 21% San Jose, Calif.: Down 21% “First quarter metro foreclosure trends were a mixed bag,” says Brandon Moore, RealtyTrac’s CEO. “While the majority of metro areas continued to show foreclosure activity down from a year ago, more than half reported increasing foreclosure activity from the previous quarter — an early sign that long-dormant foreclosures are coming out of hibernation in many local markets.” Source: RealtyTrac

Fed Renews Vow to Keep Interest Rates Low

The Fed voted this week to continue its near-zero interest rate policy for the next quarter and likely much longer. The move will keep mortgage rates low in the coming months, if not years. In recent weeks, mortgage rates have hovered around record lows, which has helped increase home buyer purchasing power as well as helped refinancers trim their monthly mortgage payments. Last summer, the Fed made a rare move in vowing to keep the key rate near zero through late 2014. The move has been criticized by some who say it will cause inflation and awards spenders, not savers. Critics have pushed the Fed to reverse its policy. However, the Fed says the subdued outlook for inflation has not warranted a change in its policies. Federal Reserve Chairman Ben Bernanke, following the Fed’s policy-making committee meeting this week, affirmed the Fed’s intention to continue keeping short-term interest rates down until late 2014—and possibly even longer. The Fed has kept short-term interest rates near zero since late 2008. The Fed has also acted to reduce long-term rates by purchasing Treasury securities and mortgage bonds. The Fed’s policy-making committee also released its economic forecast, projecting moderate economic growth in the coming months before a steady pick up, as well as a gradual drop in unemployment. The committee also projects for inflation to remain under control, despite the recent rise in oil prices. “If there’s a substantial change in the economic outlook in either direction, then there would be a change in the outlook,” Bernanke said. “But for now, I think the committee is comfortable.” Source: “Fed to Keep Interest Rate Near Zero for Extended Period,” HousingWire (April 25, 2012) and “Fed Cuts U.S. Growth Forecast for 2013 and 2014,” The New York Times (April 25, 2012)

Has the Housing Market Finally Reached Bottom?

If home buyers or home owners are waiting for the housing market to hit bottom before acting, they may have already missed it. “The crash is over,” Mark Zandi, chief economist for Moody’s Analytics Inc., told Bloomberg about the real estate market. “Home sales—both new and existing—and housing starts are now off the bottom.” Several economists are saying the bottom of the housing market has already been reached, and the market has been showing several signs of progress, including home prices stabilizing and demand increasing. The economists say they’re optimistic about a recovery in the housing market, despite threats of a foreclosure wave coming. One of the biggest signs that a sustainable housing market recovery is taking shape: Consumer confidence is up. "Today's consumer confidence shows labor markets recovering and that confidence is going to allow consumers to go out and buy homes," Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi in New York, told Bloomberg. Indeed, real estate professionals have been reporting increased activity among home shoppers this spring, too. "This year's selling season is shaping up to be the strongest we've seen in years," says Margaret Kelly, RE/MAX's chief executive officer. "Although we don't expect home prices to rise in every market at the same rate, the worst is definitely behind us, and a slow, steady recovery is taking hold." Source: “Housing Declared Bottoming in U.S.,” Bloomberg News (April 25, 2012)

March Pending Home Sales Rise, Market Recovering

Pending home sales increased in March and are well above a year ago, another signal the housing market is recovering, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 4.1 percent to 101.4 in March from an upwardly revised 97.4 in February and is 12.8 percent above March 2011 when it was 89.9. The data reflects contracts but not closings. The index is now at the highest level since April 2010 when it reached 111.3. Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said. “The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun said. Pending Home Sales Index by Region: Northeast: slipped 0.8 percent to 78.2 in March but is 21.1 percent above March 2011. Midwest: declined 0.9 percent to 93.3 but is 16.9 percent higher than a year ago. South: rose 5.9 percent to an index of 114.1 in March and are 10.6 percent above March 2011. West: increased 8.7 percent in March to 108.0 and is 9.0 percent above a year ago. Source: NAR

3 Hidden Costs of the Foreclosure Crisis

Although U.S. foreclosure activity may be declining, the problem is far from over. There have been 5 million foreclosures since 2007, reports the Center for Responsible Lending, which estimates that between 3 million and 5 million more will occur over the next couple of years. In 2003, one in 38 U.S. home owners were seriously delinquent on their mortgage payments or in foreclosure, but today those numbers are one in 10. Some of the consequences of foreclosures are obvious: family displacements, crime in vacant properties, ruined credit, and the loss of equity. Other, less obvious consequences have emerged as well. About 8 million children could be affected, including kids of home owners and renters who were evicted due to a foreclosure. Julia Isaacs of the Brookings Institution calls these children the "invisible victims" of the foreclosure crisis, as foreclosures not only can cause emotional trauma, but also interfere with a child’s educational development. Researchers also have found a connection between rising foreclosures and an increase in medical visits for mental health, such as anxiety, or preventable conditions such as high blood pressure. And many communities are strapped because of a loss of property tax revenue caused by foreclosures, which can lead to cuts in services — including swimming pools, senior centers, and local law enforcement. Source: "Three Hidden Costs of the Foreclosure Crisis," MarketWatch (April 24, 2012)

Good, Bad Reflected in New-Home Sales Data

Sales of new single-family homes dropped to their lowest level in March since November 2011, but analysts say there were glimmers of hope behind the Census Department’s data released Tuesday, which showed a much stronger winter selling-season than originally reported. New-home sales were at a 328,000 seasonally adjusted annual rate in March, a drop of 7.1 percent compared to February. Still, new-home sales were up 7.5 percent in March compared to a year earlier. The Census Department also on Tuesday announced that it had revised its figures for the three months prior, showing new-home sales were much better during that time than originally thought. The government originally reported that new homes sold in February at an annual rate of 313,000. That figure was revised to 353,000, which marked new-home sales strongest pace since April 2010. New-home sales increased 7.3 percent in February from January. Originally, the government had reported new-home sales had fallen in that period 1.6 percent. The Census Department also revised new-home sales in December and January to higher numbers. Source: “New Home Sales Down 7.1% in March, but February Totals Revised,” The Los Angeles Times (April 24, 2012)

Where Sellers Are Most Unrealistic With List Prices

House prices have fallen in many areas of the country during the last five years, forcing sellers to get more realistic. But some sellers still are hoping to get more for their home, despite market conditions. SmartMoney, in using housing data from the National Association of REALTORS®, found which metro areas appear to be the least realistic with their asking prices. They based their analysis on the gap between the median list price and median sales price in March housing data. The least realistic cities for asking prices, according to SmartMoney, are: Atlanta: a 40 percent gap between the median list price ($150,000) and median sales price ($90,600). Jacksonville, Fla.: a 34 percent gap between the median list price ($184,775) and median sales price ($121,600) Washington, D.C.: a 13 percent gap between the median list price ($359,900) and the median sales price ($313,300) Meanwhile, sellers seem to be the most realistic with their list prices in Las Vegas, according to the SmartMoney analysis. In Las Vegas, the median sales price is $121,800, which is slightly above the median list price of $120,000. SmartMoney includes a disclaimer in its analysis, reminding readers that the study was based on median prices, where half the homes are below that price and half are above. Source: “Cities Where Sellers Are the Least Realistic,” MSN Real Estate (April 24, 2012)

House Committee Approves Bill to Repeal Dodd-Frank Bailout Fund

The House Financial Services Committee signed off on legislation Wednesday that would repeal bailout funds under the Dodd-Frank Act and more than half the Consumer Financial Protection Bureau’s (CFPB) budget.

Clearing the legislation by a party-line vote, committee members billed it as a way to slash $35 billion from the national deficit.

“Our nation is in a spending-driven debt crisis. The solution isn’t to tax Americans more, it’s for Washington to spend less,” Rep. Spencer Bachus (R-Alabama), who chairs the committee, said in a statement.

The committee said it rejected an amendment offered by Rep. Barney Frank (D-Massachusetts) to replenish bailout funds for systemically important institutions in the event of another financial crisis.

Just what would the bill accomplish?

According to the nonpartisan Congressional Budget Office, it would save taxpayers $10 billion over the next decade by slashing revenue for federal programs and agencies like the Home Affordable Modification Program (HAMP) and CFPB.

The bill proposed doing away with bailout mechanisms under Dodd-Frank, appropriating only $200 million for the CFPB – which has a current budget of $547 million – for the next fiscal year, and undoing HAMP entirely.

HAMP remains an embattled program. The special inspector general for the Troubled Asset Relief Program – under which lawmakers established it in 2009 – found in a recent report that 782,609 permanent loan modifications fell short of the 3 to 4 million homeowners that administration officials said it would help.

News that it disbursed only $2.54 billion of an available $30 billion to homeowners in distress continues to give ammunition to more conservative lawmakers with a desire to do away with it.

Sources tell us that it is unlikely the bill will become law this year. The House will need to take up the bill for a full-chamber vote and the Democratic Senate will need to conference it with similar legislation


By: Ryan Schuette

Lenders that Sell Short Sales Faster and for Less, According to RealtyTrac

Pursuing a short sale is often thought of as a painstaking process, and it’s not uncommon to hear of complaints about slow responses from servicers and last minute rejections on offers. Fortunately, not all lenders/servicers are the same when it comes to dealing with short sales, and RealtyTrac compiled a list of data revealing which institutions tend to move through the process quicker and for less.

Fannie Mae, Freddie Mac, and FHA had the shortest timelines at 193 days in January 2012, a decrease compared to a year ago in January 2011, when short sales averaged 248 days. Ally Financial came in second at 321 days, reducing its timeline as well from 393 days a year ago.

PNC Financial Group was third, taking 353 days, though the bank takes longer than it did a year ago when the it took 206 days. Wells Fargo came in fourth (385 days). Bank of New York Mellon took the fifth longest (402 days), followed by Bank of America (403 days) and Sun Trust (404 days). The short sale timeline includes the time a property starts the foreclosure process to the time it’s sold as a pre-foreclosure property.

Recently, Fannie Mae and Freddie Mac announced new guidelines to take effect in June requiring servicers to respond within 30 days after receiving a short sale offer or a borrower application. Bank of America recently announced that its providing a decision on a short sale offer in 20 days.

In terms of pricing, Fannie Mae, Freddie Mac, and FHA sold homes for the least amount in January 2012, averaging $128,642, a drop from year ago prices in January 2011 when they averaged $160,982. Deutsche Bank’s average price was $132,996, followed by Sun Trust Banks ($144,024), and CitiGroup ($148,411), and PNC Financial Group Inc ($149,332). Bank of America Wells Fargo were the bottom two on the top 10 list, averaging $158,632 and $167,371, respectively, for January 2012.

As for the number of short sales, Bank of America completed the most in January 2012, with 5,276, followed by Chase (2,967), Wells Fargo (2,788), MERS (1,429), and Bank of New York Mellon (1,401).



By: Esther Cho