Multifamily Sector Shows Positive Movement

While the homeownership rate falls, rental demand rises bringing rental rates up and apartment vacancies down – all of which has led Freddie Mac’s chief economist to label the multifamily sector “a positive signal for the U.S. housing industry.” “[T]he improvement in the economics of apartment management has prompted an increase in structure values, property sales, and new construction for larger buildings,” states Freddie Mac’s chief economist Frank Nothaft in his October U.S. Economic and Housing Market Outlook. After a 32 percent drop from 2008 to 2009, the’ U.S. apartment values rose 18 percent in the first quarter of this year, Nothaft reports, referencing the National Council of Real Estate Investment Fiduciaries apartment value index. This rise is a result of the fact that many newly-formed households are choosing to rent rather than own in the current, unstable economy, according to Nothaft. From June 2010 to June 2011, the number of households renting rose 4 percent with an additional 1.4 million households moving into rental units, according to the Census Bureau. At the same time, the homeownership rate fell by 1.5 percent to 65.9 percent, according to the Bureau. Freddie Mac notes the decline in homeownership has been greatest amongst the under-30 population. Compared to the national average of 1.5 percent, homeownership amongst those under 25 years of age has declined by 4.4 percent, and by 7 percent amongst those between 25 and 29 years of age, according to Nothaft. This decline in homeownership has translated to a decline in apartment vacancy. Nothaft points out the Census Bureau’s recent finding that in buildings with at least five units, vacancy rates have fallen to 10 percent during the second quarter of this year. This is the lowest vacancy rate among these properties in more than five years. Additionally, a survey by A Reis Inc., found the vacancy rate among professionally managed buildings in metropolitan areas was 5.9 percent as of the second quarter of this year. This is the lowest vacancy rate for these properties since 2007. As demand for apartments increases, so do prices. “Apartment rents, which have been flat to falling in many projects during the 2008-2009 recession, have begun to rise, albeit slowly,” Nothaft states in his outlook. According to Nothaft, rental property sales and multifamily lending are both increasing, and there has even been a rise in construction in this segment. Measured in dollars, rental property sales volume reached its highest level since 2007, according to Red Capital Analytics. Nothaft attributes the rise in originations among multifamily properties to low mortgage rates as well as the return of traditional lenders to the market. In fact, The American Council of Life Insurers reported 165 apartment loan commitments for the second quarter of this year. This is the largest multifamily commitment by a single insurer in 39 years, according to Nothaft’s outlook.

States and Servicers Consider New Proposal for Aiding Those Underwater

Help for underwater homeowners has moved from principal writedowns to refinancing in the settlement negotiations between state attorneys general and the nation’s five largest mortgage servicers. According to a widely circulated Wall Street Journal report, the proposal was put on the table at a meeting last week between representatives from both sides. DSNews.com has received confirmation from a source involved in the negotiations that the parties are indeed considering a proposal to incorporate refinancing for underwater homeowners into an agreement to settle allegations of robo-signing and improper foreclosure practices. While the Journal concedes that discussions are ongoing and “any final outcome is uncertain,” reporters Nick Timiraos, Ruth Simon, and Dan Fitzpatrick lay out the framework for who would qualify for such assistance. Borrowers who are current on their mortgage payments but unable to take out a new loan due to the equity constraints of a typical refinance would fit the bill. The main caveat is that the borrower’s loan must be owned directly by one of the five banks involved in the

Fannie Mae and Freddie Mac to Do Away With Attorney Networks

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to transition away from their current foreclosure attorney network programs, and move to a system where mortgage servicers will select law firms based on minimum qualifications and uniform criteria. Currently, each GSE designates eligible law firms for individual states. Servicers then choose a firm from these lists to handle their foreclosure work. FHFA says the new approach is in line with the Servicing Alignment Initiative that has been rolled out by Fannie and Freddie, which is intended to standardize procedures for handling past-due mortgages and processing foreclosures. “FHFA believes these efforts will lead to greater transparency and benefit delinquent borrowers who become subject to the foreclosure process,” the GSEs’ conservator said in a statement. “Further, the change will be supportive of the Consent Orders entered into by financial regulators and servicers.” Fannie Mae’s Retained Attorney Network currently consists of 247 law firms that are pre-selected by the GSE to handle foreclosure-related matters for its loans in specified states. Freddie Mac’s Designated Counsel Program includes 92 pre-approved firms for certain states. FHFA has instructed Fannie and Freddie to work together to develop and implement consistent requirements, policies, and processes for managing default and foreclosure-related legal services. As part of this effort, the GSEs are to “pursue an eventual restructuring” of their respective attorney networks, Freddie Mac explained in a bulletin to servicers Tuesday. That includes discontinuing the practice of maintaining a network of designated law firms for servicers, the company said. FHFA says the dismantling of the networks will occur after a transition period in which the agency will seek input from servicers, regulators, lawyers, and other market participants. During this period, existing contracts remain in place and in effect. In a report released earlier this month, FHFA’s inspector general disclosed the results of an investigation prompted by “widespread allegations of abuse by … law firms hired to process foreclosures” for the GSEs. The inspector general said “FHFA had not previously considered risks associated with foreclosure processing to be significant,” and as a result, “lacks assurance that law firms with histories of performance deficiencies do not jeopardize the safety and soundness” of the nation’s two largest mortgage financiers.

Study: Economic Woes Cause Birth Rate to Fall

The sour economy is being blamed on a sharp decline in births in the country. An analysis by Pew Research Center found that since a 2007 record of 4,316,233 births in the U.S., fertility rates have been steadily falling--even though the nation’s population continues to grow. In reviewing preliminary data from 2009, Pew found that births dropped to 4,131,018 in 2009--which is the lowest number since 2004--and that births were even lower in 2010 at 4,007,000. In all states, Pew found fertility declines occurred within one to two years of the beginning of economic declines. States facing the greatest economic hardships were found to have the largest drop in fertility rates, while states that had only minor economic declines were found to have smaller declines in fertility rates, according to Pew. By race and ethnicity, Pew found that Hispanics had the largest drop in fertility rates. Hispanics also have been one of the hardest hit racial groups in the recession with sinking employment levels and household wealth. Birth rates dropped by 5.9 percent among Hispanic women from 2008 to 2009 compared to dropping 2.4 percent among black women and only 1.6 percent among white women. Source: “In a Down Economy, Fewer Births,” Pew Research Center (Oct. 12, 2011)

Improved Job Report Sends Mortgage Rates Higher

After posting record lows the last few weeks, mortgage rates inched higher this week, Freddie Mac reports in its weekly mortgage market survey. Yet, rates still remain near 60-year lows. “An employment report that was better than market expectations helped to lift long-term Treasury bond yields and mortgage rates as well,” Frank Nothaft, Freddie Mac’s chief economist, notes. In September, the economy added 103,000 workers; however, the unemployment rate still remained high at 9.1 percent. Here’s a closer look at rates for the week ending Oct. 13. 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.8 point, moving up from last week’s record-hitting 3.94 percent average. A year ago at this time, 30-year rates averaged 4.19 percent. 15-year fixed-rate mortgages: averaged 3.37 percent with an average 0.8 point--that’s up slightly from last week’s low of 3.26 percent average. Last year at this time, 15-year rates averaged 3.62 percent. 5-year adjustable-rate mortgages: averaged 3.06 percent, with an average 0.6 point, and inching up from last week’s 2.96 percent. Last year at this time, the 5-year ARM averaged 3.47 percent. 1-year ARMs: averaged 2.90 percent with an average 0.6 point, a drop from last week’s 2.95 average. A year ago, 1-year ARMs averaged 3.43 percent. Source: Freddie Mac

5 States With the Highest Home Ownership Rates

Where is home ownership the highest? Home ownership rates tended to be highest in states that are less populated and with low home prices, according to a review of recently released 2010 Census Data by 24/7 Wall St. On the other hand, states with the lowest home ownership rates tend to have more pricey homes and be in large cities. The following are the states with the highest percentage of homes occupied by their owners. 1. West Virginia Home ownership rate: 73.4% Median home value: $94,500 2. Minnesota Home ownership rate: 73% Median home value: $200,400 3. Michigan Home ownership rate: 72.1% Median home value: $132,200 4. Iowa Home ownership rate: 72.1% Median home value: $122,000 5. Delaware Home ownership rate: 72.1% Median home value: $294,400 The state with the lowest home ownership rate? New York, which has a home ownership rate of 53.3 percent. Source: U.S. Census Bureau and “States With the Highest (and Lowest) Homeownership,” 247WallSt.com (Oct. 12, 2011)

Thirty-Year Rate Jumps Back Up Above 4% Mark in One Week's Time

The run for below-four-percent 30-year mortgage rates was short-lived. After a history-making drop to 3.94 percent last week, Freddie Mac has recorded an 18 basis point jump in the average interest rate on a conventional fixed-rate mortgage with a 30-year term. The GSE says the 30-year fixed-rate mortgage averaged 4.12 percent (0.8 point) for the week ending October 13, coming off last week’s record low in which the 30-year rate dipped below the 4 percent mark for the first time ever. The 30-year rate is not too far off of levels since last year at this time, when it was averaging 4.19 percent. The 15-year rate also leapt higher. Freddie’s study puts the average 15-year fixed-rate mortgage at 3.37 percent (0.8 point) this week, up from 3.26 percent last week. A year ago at this time, the 15-year rate was averaging 3.62 percent. The 5-year adjustable-rate mortgage (ARM) is now averaging 3.06 percent (0.6 point). That’s up from 2.96 percent last week. Roll the clock back 12 months, and the average rate for a 5-year ARM was 3.47 percent. The 1-year ARM, which is tied to shorter-term Treasuries as opposed to the longer-term 10-year Treasury yields that influence fixed-rate movement, headed lower this week. Freddie reports the average rate for the 1-year ARM came in at 2.90 percent (0.6 point) this week, down from 2.95 percent last week. At this time last year, the 1-year ARM averaged 3.43 percent. Save for the 1-year ARM, mortgage rates across the board rose sharply this week from the previous week’s record-setting lows. Freddie Mac attributes the sudden upward movement to the better-than-expected employment report last Friday, but the GSE stressed that even with the increases, mortgage rates remain near their 60-year lows. Freddie Mac’s weekly rate survey is based on data collected from about 125 lenders across the country.