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Robert Moreno
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Moreno Work Group Blog

Mortgage Rates Reach New All-Time Lows. Again

Interest rates for mortgage loans plunged to new lows Thursday, as debt crises in Europe continued to weigh heavily on investors.

Finance Web site Bankrate.com and mortgage company Freddie Mac released separate surveys signaling all-time lows for mortgage rates.

For Freddie, the 30-year fixed-rate loan fell to 3.88 percent, down from 3.89 percent last week. Bankrate.com revealed rates for the 30-year mortgage staying the same at 4.18 percent.

“There has been no progress toward resolving the European debt crisis, which is helping keep mortgage rates at record low

levels,” says Greg McBride, a senior financial analyst with Bankrate.com.

Ratings agency Standard & Poor’s recently downgraded several eurozone economies, including France, Italy, and Spain, citing concerns over their ability to avoid sovereign default and achieve growth.

The 15-year fixed-rate mortgage went up a percentage point for Freddie, reaching 3.17 percent, up from 3.16 percent last week. Bankrate.com reported rates for the 15-year loan likewise inching forward to 3.39 percent, up from 3.38 percent last week.

Adjustable-rate mortgages (ARMs) also stayed roughly the same for Freddie, which saw 5-year ARMs hover at 2.82 percent, unchanged from last week, and 2.74 percent, down from 2.76 percent last week.

Bankrate.com reported that 5-year and 1-year ARMs rose to 3.06 percent, up from 3.04 percent last week.

Frank Nothaft, VP and chief economist with Freddie, suggested in a statement that mortgage rates remain low even while certain elements of the economy showed signs of revival.

He cited a Reuters/University of Michigan consumer sentiment index that lifted in January to reach the highest reading since February last year.

Economy Picks Up Steam With 200K Jobs in December

The U.S. economy soldiered ahead by adding 200,000 jobs over December, lowering the unemployment rate to 8.5 percent as more employers picked up seasonal staff members for the holidays.

The Labor Department reported Friday that total private-sector employment reached 212,000 last month, alongside fewer jobs for local and state governments, marginal declines in real estate services, and a notable pickup in residential construction around the country.

The report follows a tide of higher expectations for job growth. ADP released estimates that the U.S. economy may have added more than 300,000 jobs.

Real estate, rental and leasing services lost jobs by 1.3 percent on average in December, while real estate as an industry slashed its employment figures by 1 percent.

Construction served up Friday’s biggest numbers, with a 17-percent surge overall last month. Residential construction job figures climbed by 2.5 percent, as specialty contractors added 17.3 percent on the whole.

“Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression,” Alan Krueger, chairman of the Council of Economic Advisers, said in a statement.

“It is critical that we continue the economic policies that are helping us to dig our way out of the deep hole that was caused by the recession that began at the end of 2007,” he added.

The other side of the aisle rebuffed any attribution of the improvement to the Obama administration.

“I think our economy is overcoming what Barack Obama is pushing in its place,” The Wall Street Journal quoted GOP presidential candidate and former Sen.

Rick Santorum (R-Pennsylvania) as saying in response to questions.

List of Improving Housing Markets Nearly Doubles in January

January 9, 2012 - The number of housing markets showing measurable improvement nearly doubled in January with the addition of 40 new metros to the National Association of Home Builders/First American Improving Markets Index (IMI), released today. The IMI now boasts 76 improving markets, up from 41 in December, with 31 states and the District of Columbia represented by at least one entry.

The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. New entrants to the list in January include the following (listed alphabetically by state):

Florence, AL
Tuscaloosa, AL
Fayetteville, AR
Denver, CO
Greeley, CO
Bridgeport, CT
New Haven, CT
Cape Coral, FL
Jacksonville, FL
Punta Gorda, FL
Honolulu, HI
Ames, IA
Des Moines, IA
Dubuque, IA
Elkhart, IN
Indianapolis, IN
Lafayette, IN
Lake Charles, LA
Worcester, MA
Grand Rapids, MI
Lansing, MI
Monroe, MI
Minneapolis, MN
Columbia, MO
Joplin, MO
Fargo, ND
Manchester, NH
Cincinnati, OH
Oklahoma City, OK
Tulsa, OK
Corvallis, OR
Erie, PA
Philadelphia, PA
Chattanooga, TN
Clarksville, TN
Nashville, TN
College Station, TX
Dallas, TX
Victoria, TX
Madison, WI

“The fact that the list of improving housing markets nearly doubled this month shows that a significant, positive trend is developing, and is even more relevant when you consider the expanding geographic distribution of the list – which now includes 31 states and the District of Columbia,” noted NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “This trend could be even stronger if not for the numerous impediments that continue to slow a housing and economic recovery, including overly restrictive lending policies and the growing inventory of distressed properties in certain markets.”

“While relatively small metropolitan areas continue to dominate the list of improving housing markets, it’s important to note that several major metros in diverse parts of the country have now joined the field as well – including such metros as Dallas, Denver, Honolulu, Indianapolis, Nashville and Philadelphia,” added NAHB Chief Economist David Crowe. “This is an encouraging sign that gradually strengthening economic conditions are starting to take hold across a broader swath of America.”

“The substantial gain in the number of improving housing markets in January shows that more consumers are looking favorably at a home purchase in light of today’s historically low interest rates and attractive prices, particularly in areas where job growth has picked up,” added Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.

Only five metropolitan areas dropped from the NAHB/First American Improving Markets Index in January. These included Anchorage, Alaska; Fort Wayne, Ind.; Canton, Ohio; Scranton, Pa.; and Charleston, W. Va. A complete list of all 76 metropolitan areas currently on the IMI is available at: www.nahb.org/imi.

Editor’s Note: The NAHB/First American Improving Markets Index (IMI) is released on the fourth business day of each month at 10:00 a.m., ET, unless that day falls on a Friday – in which case, the index will be released on the following Monday. A full calendar of future release dates can be found at www.nahb.org/imi.

2012 Housing Predictions: Is the Worst Over?

About 1.9 million homes entered the foreclosure process in 2011, the lowest level since 2007 when the recession began, according to a report Thursday by the foreclosure listing firm RealtyTrac.

That the decline does not necessarily indicate that the housing market is getting better, as many foreclosures have been delayed due to confusion over documentation and legal issues involved in the process.

Visit msnbc.com for breaking news, world news, and news about the economy

What went wrong with foreclosure aid programs?

Steven and Lisa Maultsby lost their Mississippi home to foreclosure this year.At the time, they thought they were being reviewed for a loan modification through the U.S. government's foreclosure-prevention program.

A Realtor knocking on their door to tell them to vacate told them otherwise.

"I'm bitter," says Steven Maultsby, 51, who works with undersea robots in the oil industry. "We did everything they told us to do."

The Maultsbys are angry not only at their mortgage company, but also at the government, and they're two voices among a discontented chorus.

The Obama administration's initial foreclosure-prevention programs, launched in early 2009, were intended to help 7 million to 9 million people. So far, they've aided about 2 million, and not all of those are out of foreclosure danger.

Programs begun later have also faltered. One intended to help at least 500,000 has helped just a few hundred a year after its launch. Another initiative to extend $1 billion to help the jobless or underemployed avoid foreclosure ended in September, obligating less than half of its funds. The unused money went back to the U.S. Treasury.

As of Nov. 30, the government had spent just $2.8 billion of the $46 billion war chest it had in 2009 to devote to the housing crisis, the Treasury Department says. More has been committed, but only $13 billion will ultimately be spent, the non-partisan Congressional Budget Office estimated in March.

Meanwhile, 2.5 million homes have been lost to foreclosure since 2009, an additional 4 million are in the foreclosure process or seriously delinquent, and home prices are still falling in much of the U.S., shrinking household wealth for millions of Americans.

"Every program has fallen far short of goals. I can't think of one that's been largely successful," says John Dodds, director of the Philadelphia Unemployment Project, a non-profit that's been involved in foreclosure prevention for decades.

The administration's programs were hampered by design flaws, their reliance on a mortgage industry overwhelmed by the fallout from a historic collapse in home prices, and a brutal extended housing downturn. Nor could they always overcome the conflicting interests of borrowers with too much debt, mortgage investors unwilling to surrender profits and mortgage servicers with sometimes greater financial incentives to foreclose on loans than to permanently modify them, say housing and government policy analysts, consumer advocates and former administration officials.

Critics also say the administration failed to entice banks and mortgage-finance giants Freddie Mac and Fannie Mae to take bolder steps to address the crisis even though the institutions received billions in government bailout funds.

"There was nowhere near the effort to help Main Street as there was to help the banks," says former senator Ted Kaufman, D-Del., who chaired a congressional oversight panel that oversaw $475 billion in Troubled Asset Relief Program (TARP) funds. Most of that went to banks and the auto industry, but $46 billion in TARP money also funded foreclosure-prevention efforts.

Administration officials defend their response. They say the scope of the problem was unprecedented — and so were their actions. Federal programs prevented many foreclosures even if they didn't help as many people as expected, officials say. They say the administration's efforts will save homeowners billions in mortgage costs.

They also say the initiatives helped millions of other homeowners by driving service improvements in the mortgage industry and preventing an even worse collapse in home prices. Since the peak of the housing market in 2006, $3 trillion in home equity has been lost, researcher LPS Applied Analytics estimates.

"It's too easy to underestimate the scale and complexity of these issues," Shaun Donovan, secretary of Housing and Urban Development, said in a recent interview, while acknowledging that some administration programs "haven't reached as many people as we originally targeted."

Those shortfalls are most evident in the:

•Home Affordable Modification Program (HAMP). Through October, the biggest foreclosure-prevention effort has resulted in 883,076 homeowners getting permanent loan modifications that made their loans more affordable and improved their ability to avoid foreclosure.

But HAMP was targeted to help 3 million to 4 million homeowners, President Obama said when he announced it in 2009. When it expires next December, it will have prevented fewer than 800,000 foreclosures, Kaufman's congressional oversight panel estimated in December 2010.

HAMP "has been a failure," Neil Barofsky, the former special inspector general for TARP, told a congressional committee in October.

•Home Affordable Refinance Program (HARP). Through September, it's helped 928,570 homeowners get lower-interest loans even though they lacked the amount of equity usually needed for a new loan.

HARP was intended to help 4 million to 5 million homeowners. While it was recently overhauled to encourage more refinancings, federal officials now say it will help fewer than 2 million borrowers by the end of 2013, when it expires.

So far, those getting HARP refis also tend to be people who aren't deeply underwater — those who owe more on their homes than they're worth. HARP refis have gone largely to homeowners with some equity or who were only slightly underwater, government data show. It's unclear whether the recent revamping will significantly change that, says Alan White, law professor and mortgage lending expert at the Valparaiso University School of Law.

More than 11 million homeowners — more than a fifth of homeowners with mortgages — are underwater, says market researcher CoreLogic. Many are unable to take advantage of today's historically low interest rates and wring some relief from the ravages of the recession and weak economic recovery.

Rep. Dennis Cardoza, D-Calif., whose district encompasses Stockton, one of the nation's worst foreclosure hot spots, says more needs to be done and that the changes to HARP are "too little, too late."

•Federal Housing Administration Short Refinance program. Intended to help 500,000 to 1.5 million homeowners refinance into loans with a lower interest rate, the FHA program did fewer than 400 deals through September, a year after the effort's launch, government data show.

The program requires mortgage owners to forgive at least 10% of a borrower's unpaid principal before that loan can be refinanced into an FHA loan at a lower interest rate.

But mortgage owners have been reluctant to forgive principal, fearing that doing so for some would create a "moral hazard," leading other borrowers to default to get help, says James Parrott, a senior adviser to the White House's National Economic Council.

"The moral hazard concern was stronger than we realized," Parrott says.

One big bank says it warned of the program's limitations.

Bank of America, which services 12 million mortgages, gave federal officials data showing the program would benefit only 10,000 to 15,000 customers because of its design and the degree of support from investors who owned loans, says spokesman Dan Frahm.

Almost 1 million modifications

Administration officials say the programs' statistics alone don't fully reflect what's been accomplished. "You have to look at the ripple effect," Donovan says.

HAMP, which most often lowers mortgage payments through interest rate reductions, is approaching 1 million permanent loan modifications.

That is "not a negligible sum," Parrott says.

HAMP also "significantly changed the market," says Michael Barr, former assistant secretary at Treasury who worked on mortgage issues while in the Obama administration.

Before HAMP, mortgage servicers had no standard approach to modify loans. HAMP created one and streamlined the process, says Barr, who now teaches at the University of Michigan Law School.

Since HAMP's launch, lenders have independently offered more than 2.5 million loan modifications outside of HAMP, staving off foreclosures for many.

"The overall impact of the (HAMP) program has gone unnoticed," says Teri Schrettenbrunner, senior vice president of communications for Wells Fargo Home Mortgage.

HAMP was announced just weeks after Obama took office and at a time when home prices had fallen for 30 months in a row.

Given the short time the administration took to launch HAMP and HARP, "We knew they wouldn't be perfect. We knew they'd be as good as they could be given the time we had," Barr says.

He says a prime reason that government programs haven't reached more people is that mortgage servicers "were really bad at doing their jobs."

Servicers collect home loan payments for investor-owners. Big banks, such as Bank of America, Wells Fargo and JPMorgan Chase, are among the largest ones.

The servicers lacked adequate processes and enough employees to meet the crush of distressed borrowers, Barr says. They took too long to beef up staff. They couldn't do "basic blocking and tackling" in communicating with borrowers, he says.

The Government Accountability Office documented problems when it surveyed housing counselors who work with borrowers seeking HAMP modifications. Almost 60% complained that servicers lost documents, 54% said trial modifications took too long, and 42% said borrowers felt that they were wrongly denied modifications, according to the GAO's report in March.

The Maultsbys weren't the only ones who lost a house to foreclosure while thinking help was on the way. Others did, too, said Treasury official Darius Kingsley in congressional testimony in October. He called such situations egregious.

The administration casts much of the blame on the industry, but others blame the government.

Barofsky says Treasury had to have known that servicers were "totally unequipped" to handle HAMP when it launched. Still, it rushed out a "poorly designed program," he says.

Servicers say changing program guidelines made it tough to implement the government programs.

In a three-month period, Treasury made 100 changes to HAMP, making it "physically impossible" for servicers to keep up, said Barbara Desoer, president of Bank of America Home Loans, in a recent speech to community leaders in San Francisco.

HAMP provides financial incentives — generally about $4,000 a loan — to servicers to modify loans.

The goal is to make it more economical for servicers to modify a loan than to foreclose.

But the incentives weren't big enough to draw broader servicer participation, says Jared Bernstein, former economic policy adviser to Vice President Biden.

What's more, the government made HAMP a voluntary program for servicers, then failed to make sure that participating servicers followed HAMP's rules, consumer advocates say.

HAMP ran for two years before financial incentives were withheld from any uncompliant servicer, even though abuses were "widespread," Barofsky says.

"There's been no enforcement or accountability," says Diane Thompson of the National Consumer Law Center.

The $1 billion Emergency Homeowner Loan Program was open to homeowners in 32 states who were ineligible for aid from a $7.6 billion fund for homeowners in 18 states hardest hit by the recession and falling home prices.

HUD took too long to launch the program, which didn't leave enough time to get applicants through an onerous application process, consumer advocates say.

Instead of helping 30,000 homeowners as first intended, the program is on track to help fewer than 12,000, HUD's preliminary data show.

That "is an absolute disgrace," says Ira Rheingold, executive director of the National Association of Consumer Advocates.

HUD officials say it took time to identify contractors to run the program, set up fiscal controls and ensure the program was run fairly.

"We, too, are disappointed," Carol Galante, a senior HUD housing official, testified at a congressional hearing in October.

More but smaller plans to come

New efforts are underway, but none appear to have the scope of previous plans.

State attorneys general and federal officials are negotiating a multibillion-dollar settlement with major mortgage servicers to help more homeowners.

If a deal is struck, it will include principal forgiveness on more home loans, Donovan says. That may show loan owners that forgiving principal really does lead to fewer defaults, Rheingold says, and encourage more of it.

Most of the $7.6 billion in Hardest Hit Funds, too, have yet to reach the market. States have through 2017 to use those funds.

The Treasury Department also says there are still 1 million homeowners who could be eligible for HAMP.

"We're going to keep fighting to fix this housing market," Donovan says.

Foreclosure Filing Rates in California drop for month of November by 13% for the year 10%.

The Foreclosure Report - November 2011

Foreclosure Sales Slow for the Holidays, While Lenders Prepare for 2012

12/12/2011

It is not unusual to see foreclosures slow for the holidays, and the this year is no exception. Foreclosure starts were up slightly in Nevada and Washington, but the increases were insignificant given the recent declines in those states due to legislative changes and legal challenges. Foreclosure Sales rose only in Arizona, but that increase simply offset the drop seen in October and is still well below average monthly sales for the year there.

Notice of Trustee Sale filings rose 34.7 percent from October to November in California. The increase came primarily from filings by Bank of America, up 52 percent, and Wells Fargo, up 23 percent. It is not unusual to see an increase in foreclosure sales each January, and these filings would be necessary in preparation for that.

Sales to 3rd parties, typically investors, have increased significantly year-over-year. The largest increases we're seen in Arizona and Nevada at 101.6 and 79.9 percent respectively. Other states saw increases as well: California 29.4 percent and Washington at 6.7 percent.

"It's great to see the banks slow down foreclosures and evictions for the holidays." stated Sean O'Toole, Founder and CEO of ForclosureRadar. "We expect that the numbers will drop even further in December. Come January, it will be back to business with at least a small surge as banks play catch up after the delays."

www.foreclosureradar.com/california/san-mateo-county-foreclosures

www.foreclosureradar.com/california/contra-costa-county-foreclosures

www.foreclosureradar.com/california/alameda-county-foreclosures

www.foreclosureradar.com/california-foreclosures

October Pending Home Sales Up Significantly

On November 30, 2011, in Breaking News, Economics, Mortgage Financing, by Robert Freedman

In what might finally be a sign that home sales are poised for a turnaround, NAR’s forward-looking pending home sales index jumped 10.4 percent in October from the previous month and is also up significantly on a year-over-year basis. Although it’s too soon to tell whether the gain will be sustained, there are trends berewing in the market that suggest it will be.

For one thing, rental rates are increasing. Historically, there’s typically been a strong correlation between rising rental rates and rising home prices. That relationship has broken down in the past few years because of the severity of the downturn in the housing market. But with rental rates now well into long-term gains, pressure is mounting for renters to jump to home ownership if only because it’s becoming cheaper to buy than to rent in a lot of markets and at a lot of price points. Of course, the hurdles to obtaining financing remain a big stumbling block, and in fact that might be a good part of the reason there’s been so much divergence between NAR’s pending sales index and actual closings.

We’ve been seeing that divergence for the last couple of years. Pending home sales will go up but actual closings won’t follow suit as closely as they have in the past. We can’t know all the reasons for this, but NAR surveys of its members have suggested that agents are seeing a lot of closings collapse because buyers can’t get financing.

In the 4-minute video above, NAR Chief Economist Lawrence Yun talks about the latest pending sales figures and what might be coming down the road, in part because of rising rental rates.

15 Cities Where Listing Prices Are Rebounding

Daily Real Estate News | Friday, September 23, 2011

Prices are rising in Florida: Florida cities have had the largest year-over-year increases in average list prices, according to the latest real estate data from Realtor.com. Florida cities make up 9 of the top 10 places for highest year-over-year list price spikes, based off of August data of 2.2 million listings in 146 markets.

Nationwide, the average list price is $320,325, up 2.36 percent year-over-year.

Here are the top 15 cities boasting the highest percentage of year-over-year increases in average list prices.

1. Miami
Average list price: $640,332
Year-over-year increase: 27.4%

2. Fort Myers-Cape Coral, Fla.
Average list price: $443,570
Year-over-year increase: 26.27%

3. Central-Fla.-RSA
Average list price: $405,809
Year-over-year increase: 19.41%

4. Punta Gorda, Fla.
Average list price: $267,066
Year-over-year increase: 16.37%

5. Macon, Ga.
Average list price: $193,520
Year-over-year increase: 15.98%

6. Sarasota-Bradenton, Fla.
Average list price: $466,785
Year-over-year increase: 15.86%

7. Naples, Fla.
Average list price: $713,087
Year-over-year increase: 15.13%

8. West Palm Beach-Boca Raton, Fla.
Average list price: $591,895
Year-over-year increase: 14.68%

9. Ocala, Fla.
Average list price: $193,360
Year-over-year increase: 12.07%

10. Lakeland-Winter Haven, Fla.
Average list price: $181,409
Year-over-year increase: 11.48%

11. Oralndo, Fla.
Average list price: $319,419
Year-over-year increase: 10.56%

12. Portland-Vancouver, Ore.-Wash.
Average list price: $314,537
Year-over-year increase: 10.52%

13. Boise City, Idaho
Average list price: $212,588
Year-over-year increase: 10.43%

14. Springfield, Illinois
Average list price: $174,537
Year-over-year increase: 9.12%

15. Shreveport-Bossier City, La.
Average list price: $211,414
Year-over-year increase: 8.34%

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

6 States With Soaring Home Prices

Daily Real Estate News | Tuesday, October 11, 2011

Several states are posting year-over-year gains in home values, according to a newly released index for August by CoreLogic, which tracks price changes in repeat sales of homes.

According to CoreLogic, here are the states with the largest year-over-year gains in single-family home prices:

West Virginia: 8.6%
Wyoming: 3.6%
North Dakota: 3.5%
New York: 3.2%
Alaska: 2.2%
South Dakota: 1.5%

Nationally, single-family home prices were down 4.4 percent year-over-year in August, according to the index. Nevada posted the largest drop, falling 12.4 percent year-over-year.

August Existing-Home Sales Leap Despite Headwinds

Daily Real Estate News | Wednesday, September 21, 2011

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the NATIONAL ASSOCIATION OF REALTORS®. Monthly gains were seen in all regions.

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Lawrence Yun, NAR chief economist, said there are some positive market fundamentals. “Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations,” he said. “Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

“We had some disruptions from Hurricane Irene in the closing weekend of August, when many sales normally are finalized, along the Eastern seaboard and in New England,” Yun said. “As a result, the Northeast saw the smallest sales gain in August, and some general impact is expected in September with widespread flooding from Tropical Storm Lee. Aberrations in housing data are possible over the next couple months as markets recover from disrupted closings and storm damage.”

Yun said an extremely important issue currently is the renewal and availability of the National Flood Insurance Program, scheduled to expire at the end of this month. “About one out of 10 homes in this country need flood insurance to get a mortgage, and we would see significant negative market impacts without it,” he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.27 percent in August, down from 4.55 percent in July; the rate was 4.43 percent in August 2010. Last week, Freddie Mac reported the 30-year fixed rate fell to a record low 4.09 percent.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the market is remarkably affordable for people with secure jobs, good credit and long-term plans. “All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation,” he said.

“The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price. Buyers may be able to find more favorable credit terms with community and small regional banks, and Realtors® can often give buyers advice to help them overcome some of the financing obstacles,” Phipps said.

Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were reported by 18 percent of NAR members in August, up from 16 percent July and 9 percent in August 2010.

The national median existing-home price for all housing types was $168,300 in August, which is 5.1 percent below August 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 31 percent of sales in August, compared with 29 percent in July and 34 percent in August 2010.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

Single-family home sales rose 8.5 percent to a seasonally adjusted annual rate of 4.47 million in August from 4.12 million in July, and are 20.2 percent above the 3.72 million pace in August 2010.

The median existing single-family home price was $168,400 in August, which is 5.4 percent below a year ago.

Existing condominium and co-op sales increased 1.8 percent a seasonally adjusted annual rate of 560,000 in August from 550,000 in July, and are 8.3 percent higher than the 517,000-unit level one year ago. The median existing condo price was $167,500 in August, down 3.3 percent from August 2010.

Regionally, existing-home sales in the Northeast increased 2.7 percent to an annual pace of 770,000 in August and are 10.0 percent above a year ago. The median price in the Northeast was $244,100, which is 5.1 percent below August 2010.

Existing-home sales in the Midwest rose 3.8 percent in August to a level of 1.09 million and are 26.7 percent above August 2010. The median price in the Midwest was $141,700, down 3.5 percent from a year ago.

In the South, existing-home sales increased 5.4 percent to an annual pace of 1.94 million in August and are 16.9 percent higher than a year ago. The median price in the South was $151,000, which is 0.8 percent below August 2010.

Existing-home sales in the West jumped 18.3 percent to an annual pace of 1.23 million in August and are 20.6 percent higher than August 2010. The median price in the West was $189,400, down 13.0 percent from a year ago.

Source: NAR

Top 10 U.S. areas with rising real estate prices

Home prices increased in 12 states and Washington, D.C., on a year-over-year basis in August, according to a home-price report released this week by property data firm CoreLogic.

West Virginia led all states with an 8.6 percent rise in home prices, followed by Wyoming at 3.6 percent, and North Dakota at 3.5 percent. The CoreLogic Home Price Index tracks price changes in repeat sales of homes.

CoreLogic August Home Price Index (year-over-year change)

State/district
All single-family
Excluding distressed sales
West Virginia
8.6%
10.7%
Wyoming
3.6%
2.4%
North Dakota
3.5%
4.2%
New York
3.2%
3.6%
Alaska
2.2%
3.1%
South Dakota
1.5%
0.6%
Washington, D.C.
1.3%
1%
Nebraska
1.1%
1.1%
Kansas
1%
3.7%
Indiana
0.8%
2.2%

Source: CoreLogic August Home Price Index.

30-Year Fixed Mortgage Rate Drops 10 Basis Points, Remains Slightly Above All-Time Low

October 4, 2011

Mortgage rates for 30-year fixed mortgages fell this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 3.76 percent, down from 3.86 percent at this same time last week. On Sept. 22, the 30-year fixed mortgage rates dropped to 3.74 percent – the lowest recorded rate since Zillow Mortgage Marketplace launched in April 2008.

The 30-year fixed mortgage stayed below 3.9 percent for the entire week, hovering between 3.79 percent and 3.82 percent over the weekend. The rate then dropped to 3.74 percent yesterday before rising to the current rate early this morning.

“Concerns that Europe’s debt crisis will worsen by spreading beyond Greece to other euro zone countries, paired with the overarching depression of the financial markets, have kept mortgage rates at historically low levels as of late,” said Erin Lantz, Director of Zillow Mortgage Marketplace. “Although the launch of Operation Twist and the Fed’s new mortgage-backed securities buying efforts should be stabilizing factors, I expect volatility in the coming weeks related to either positive or negative news on the potential for Greek default.”

Additionally, the 15-year fixed mortgage rate this morning was 3.18 percent and for 5/1 ARMs, the rate was 2.7 percent.

Zillow Chief Economist Testimony on “Glut” of Foreclosures

By: Katie Curnutte, | September 20th, 2011 | Category: Blog, Foreclosures

This morning, Zillow Chief Economist Dr. Stan Humphries testified before the Senate Subcommittee on Housing, Transportation and Community Development at a hearing called “New ideas to address the glut of foreclosed properties.”

His full written testimony is below, and an archived webcast of the hearing can be viewed here.

Written Testimony of Dr. Stan Humphries, Chief Economist, Zillow
Before the United States Subcommittee on Housing, Transportation, and Community Development of the Senate Committee on Banking, Housing, and Urban Affairs
Hearing on “New Ideas to Address the Glut of Foreclosed Properties”
Tuesday, September 20, 2011

Introduction
Thank you Chairman Menendez, Ranking Member DeMint, and Members of the Subcommittee, for the invitation to speak today. I am the chief economist of Zillow, the leading real estate information marketplace, where I closely follow and report on the state of the housing market.

I’d like to preface my statements by noting the perspective with which Zillow approaches analysis of the housing market. We launched our website in 2006 with the goal of creating more transparency of real estate information for consumers. As a media-supported business, we have no vested interest in the outcome of this debate, other than the hope that whatever is decided will best address the needs of consumers (by which I mean sellers, buyers and homeowners with no intent of moving).

Today I’ll make three points about the housing market and about how to address foreclosures.

First, don’t underestimate the market’s ability to fix itself. This is, in fact, already happening. We may not like the timetable, but economic recovery can’t always happen overnight.

Second, many policies addressing foreclosures are simply addressing symptoms, not fundamental drivers of a healthy housing market. Yes, declining values have led to foreclosures, which have created an excess supply of housing. But eliminating this excess supply can’t easily be achieved via policy. But policy can help the demand side, chiefly when targeted at decreasing unemployment.

Third, in trying to speed up the recovery of the housing market, the first priority of the government should be to do no harm. The federal homebuyer tax credits of 2009 and 2010, while they stimulated sales in the short term, did not materially change the trajectory of the housing market in the long term. In fact, it is arguable that they delayed the ultimate market bottom. We should be sure not to make similar mistakes in the future which are incredibly costly to taxpayers but net very few positive long-term results.

How the housing market is fixing itself
Regarding my first point about the ability of the housing market to fix itself, there are several reasons I believe this is already happening. It is true that there is a large pool of previously foreclosed properties owned by banks, and by entities like Fannie Mae and Freddie Mac. Estimates suggest that there are more than a half million real-estate owned properties held by lenders and government-sponsored enterprises, about 2.2 million more homes in the foreclosure process, and still another 1.9 million homes with mortgages that are delinquent more than ninety days. These homes are flooding the marketplace with abundant, cheap inventory which pushes prices down near-term and will keep a firm lid of price appreciation in the long-term even after the bottom in home values has been reached.

But, while we often focus on the dismal state of the purchase side of the housing market, the other side of this same coin is a booming rental market. With the foreclosure epidemic converting many homeowners into renters, rental supply is reportedly as tight now as it was prior to the recession, and effective rents are estimated to rise 4 percent this year. The homeownership rate crested in 2004 at 69.2%, fueled by easy lending, low rates, and a positive feedback loop of appreciation and irrational expectations. During the housing recession, this rate has fallen to 65.9% currently, still not even in line with the longer term historical average of 64%.

Investors smell a distinct opportunity in this situation: The chance to buy an asset cheaply and rent it out dearly. In fact, close to one-third of the purchases of existing homes this year have gone to all-cash buyers, the bulk of whom are real estate investors.

The private market is stepping in briskly to buy up distressed homes and convert them to rentals (or, in some cases, fix them up and sell them on to other buyers). Additionally, thanks in part to these investors, the inventory of foreclosed homes owned by Fannie Mae, Freddie Mac and the FHA declined at the end of the first quarter. This market-clearing is sometimes hard to watch. It’s a slow process of healing, but one that plays out when natural dynamics are not disrupted.
Addressing the continuing problem of foreclosures

Regarding the second point I outlined, the two fundamental factors that will affect housing over the next several years are negative equity and unemployment. Negative equity—estimated by Zillow as 26.8% of single-family homes with mortgages—contributes to foreclosures and also suppresses housing demand. Unemployment affects household formation and consumer confidence. Unfortunately, negative equity is a difficult problem to influence via policy and it will only recede slowly over time.

But employment is more easily addressable by policy action. Make no mistake, the quickest and best way to improve the housing market is to grow jobs faster. Just last week, we were reminded where so much housing demand has gone during the recession when the Census Bureau reported that almost 22 million households are currently doubled up. Grow jobs and these households can start to uncompress and occupy additional housing units. A jobs plan is a housing plan.

There have been numerous proposals to more directly stem the tide of foreclosures, many of which we have already tried, but which have unfortunately yielded more limited results than we hoped. I greet with great optimism each new idea about how to help prevent more foreclosures because the aggregate numbers defining this crisis mask such terrible suffering for millions of individual homeowners who experience foreclosure.
But the reality is that most proposals to fix this issue become problematic or infeasible because targeting only the people who truly need and can benefit from help is exceedingly difficult. With respect to foreclosure risk, there are essentially three categories of homeowners: 1) those who don’t need our help; 2) those who need more help than we can possibly give them because they are facing a fundamental change in their household financial situation; and 3) those for whom modest assistance like principal reduction, reduction in mortgage rate, or unemployment forbearance can make a difference in outcomes.

Helping this third group, which is the smallest, without spilling over into the much larger first and second groups, where our money is wasted because they don’t need it or because it won’t fundamentally help them, is extremely challenging. And ineffective targeting of any policy balloons the cost and creates substantial unintended consequences, usually involving moral hazard in which people will avail themselves of the remedy even when they do not truly need it. I believe that the need to thread the eye of the needle so closely here is why we’ve seen such lower than expected outcomes for programs like the Home Affordable Modification and Refinance Programs.

Assuring government policy does no harm
Finally, let me return to my third point about government policy doing no harm. One idea being explored is that of Fannie and Freddie getting into the rental market in some fashion. I’ve already discussed how private investors are soaking up distressed inventory and transforming many of these homes into rentals. The government should be very careful about trying to interfere with this natural process. Investors have been and currently are betting that more foreclosures will create more renters, and they are moving to serve that market. Any plan that may upset this balance – such as Fannie and Freddie getting into the rental market and creating competition – will have a chilling effect on private investment in the one segment of the housing market that is performing well. Yes, Fannie and Freddie becoming landlords could decrease the number of foreclosed homes coming into the market, but at the expense of further decreasing demand because investors will no longer buy properties for conversion and buyers may choose to rent instead of buy.

Our recent experience with the federal homebuyer tax credits should tell us something about the limits of policy in shifting long-term market dynamics. Yes, we were successful in stimulating more housing demand during the period of the tax credits. Unfortunately, this demand was largely stolen from future months, resulting in a decline in sales after the tax credit expiration which was commensurate with the increase during the credits. We should be cautious about similar proposals that, like the tax credits, would stimulate the market only in the short-term, when what we really need is long-term recovery.

In summary, forces in the housing market are at play that will lead to long-term stabilization. But it’s a delicate balance that should be well-understood before the government steps in to help it along.

Thank you again for the opportunity to appear before this committee.

Sales of U.S. Existing Homes Increase

Sept. 21 (Bloomberg) -- Sales of previously owned U.S. homes rose more than anticipated in August as investors used cash to buy distressed properties. Purchases of existing houses, which are tabulated when a contract closes, increased 7.7 percent to a five-month high 5.03 million annual rate, figures from the National Association of Realtors showed today in Washington. Michael McKee reports on Bloomberg Television's "InBusiness with Margaret Brennan."(Source: Bloomberg)

View the New Housing Market Update!

Home sales were up 18% in August from a year ago keeping in mind of course August 2010 was the drop off from the end of the home buyer’s tax credit. The inventory of homes for sale dropped for the 14^th consecutive month. Total inventory remains 19% below 2010. Las Vegas lodgings continue to recover. The pace of booking demand was up 11% in August. While a healthy growth rate, it is deceleration from July’s pricing demand. Price on the strip is growing that has analysts bullish and the FHA is ramping up sales of foreclosed homes. New acting commissioner telling a congressional panel monthly sales were as slow as 2007 and December 2010 but rose to an all time high of over 13,000 in June of 2011.

Robert Shiller on U.S. Housing, Economy, Stimulus

Aug. 30 (Bloomberg) -- Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller home-price index, talks about the U.S. housing market and economy, and his prescription for government action to boost growth and employment. Property values in 20 cities fell 4.5 percent in the year ended in June, after a 4.6 percent drop in the 12 months ended in May that was the biggest since 2009, according to the Case-Shiller index. Shiller speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

One of the most common questions we are asked is…what are our 2012 housing predictions.

Your best way at predicting the future is looking at the present. Specifically, what is happening with housing now.

Lets review the facts:

* Foreclosures made up roughly one-third of all home sales this spring. While that’s a smaller share of sales from the previous quarter, it’s six times the percentage of foreclosures in a healthy housing market.

* Foreclosure sales, which include homes purchased after they received a notice of default or that were repossessed by lenders, accounted for 31 percent of the market in the April-June quarter, foreclosure listing firm RealtyTrac Inc. The share of the market would likely have been larger this spring if not for a state and federal investigation into faulty paperwork by banks and servicers. The probe has led many banks to delay foreclosure sales. Once that is complete, foreclosures will likely surge later this year.

* As a slice of all home purchases, foreclosure sales peak two years ago at 37.4 percent. In the second quarter, they declined from 36 percent in the January-March period. Its important to understand that the number of foreclosure sales occurring isn’t due to an overall decrease in distressed property. Fewer foreclosure sales nationally is a direct result of the before mentioned foreclosure fraud, robo-signing issues.

* In all, 265,087 homes in some stage of foreclosure or owned by banks were sold in the second quarter, down 11 percent from the same period a year ago. Sales of all other types of homes also declined, according to RealtyTrac’s figures, which differ from other home-sales estimates.

* Bank-owned home accounted for nearly 19 percent of all sales. That’s unchanged from the previous quarter.

* Distressed properties, often in need of repair, typically sell at big discounts and weaken prices for neighboring homes.

* A bank-owned home this spring sold for 40 less than the average price of other homes, according to RealtyTrac. That’s up from 36 percent in the previous quarter and 34 percent from the same quarter one year ago.

* Sales of homes in the foreclosure process or short sales went for 21 percent less than the average home sold, the firm said. That’s up from an average of 17 percent in the first quarter and 14 percent in the second quarter of 2010.

* The average sales price of a foreclosure property was $164,217, down less than 1 percent from the January-March quarter and nearly 5 percent from the April-June quarter in 2010, the firm said.

* Our home state, Nevada led all states with foreclosure sales, accounting for 65 percent of all home sales, RealtyTrac said.

* In Arizona, foreclosure sales represented 57 percent of all home sales for the quarter, up 16 percent from a year ago.

* In California, foreclosure sales accounted for 51 percent of all home sales in the second quarter, virtually unchanged from last year.

* Several other states had foreclosure sales that accounted for at least one third of all home sales in the first quarter: Michigan, Colorado, Florida, Illinois and Oregon.

Based on those facts….are predictions are no housing market recovery of any significance and and increase in distressed sales.

Double Dip?

Written on August 21, 2011 by Phyllis in economic news, Phyllis' Blog

The press is full of news talking about a 2nd recession. Is this the tail wagging the dog or the dog wagging the tail?

The press has the power to distort facts, create emotion and to create a self fulfilling prophsy.

Even the stock market is playing into people’s fears. The usual thought is that it is foretelling the state of the economy by 6 months and is a leading indicator of what’s to come.

The fact that it is whipsawing all over the place creates even more fear. Forget the fact that fundamentals play a small part in stock market activity today. There are so many huge computer programs and hedging programs that controll the market and can change things on a dime and create further gyrations. People are forgetting that major corp have a fantastic amount of cash in their hoards and many are doing better than they have in years.

Our world of instant news makes news less reliable. You should not pay attention to hype. Do you homework whether investing in the stock market or in real estate. There are bargains in each area.

Remember, the best time to invest is when the blood is in the streets. I forget who said that. Do you remember?

US Zillow Home Value Index

US Home Values - Interactive chart

What Goes Up, Must Come Down: Comparing Price-to-Income Ratios Across Markets

Svenja Gudell August 17th, 2011

In today’s volatile real estate market, it can be difficult to gauge where current home values stand in relation to their historic norms. The price-to-income ratio is a useful metric when gauging this, and when comparing the affordability of housing across different cities in the United States. The ratio compares the median price of a house to the median level of household income in a given area. Specifically, we used the metro-level Zillow Home Value Index, which is a measure of home values for a given metro, as well as median household income for that metro. Median household income is only available through 2009. After that year we calculated the median household income by estimating it via Bureau of Labor Statistics wage growth rates. In this research brief we consider 130 metros and the United States as a whole. Compared to their historical averages, measured from the first quarter of 1985 to the fourth quarter of 1999, 42 metros are below their historical average, while 85 metros and the United States as a whole are above their historical average. Three of the metros are exactly at their historical mean. The United States currently has a price-to-income ratio that is equal to 3.3, which puts it at 14 percent over its historical average. Sixty-two metros are still more than 10 percent over their historic average. Fourteen metros have overshot their historical average by more than 10%. In terms of over-correction, Manchester, NH (-19%), Las Vegas (-25%) and Detroit (-35%) are extreme outliers. We don’t necessarily expect these to return to historical levels as there may have been a regime shift in these housing markets meaning that price-to-income ratios may not return to historical levels because of fundamental changes in local housing demand. This holds especially true for Detroit. Manchester has experienced noticeable regime shifts in the past and it is now close to the price-to-income ratio low point in 1998. On the other end of the price-to-income spectrum, there are many more markets that are still very high compared to their historical averages. Fifteen metros are 15% to 49% over their historic averages, with Knoxville (40%), Eugene (40%), Richmond (42%), Boulder (43%), Charleston (46%), Honolulu (47%), and Virginia Beach (49%) all 40% above their historical price-to-income levels. Both Boulder and Eugene already showed signs of a higher price-to-income ratio early in the 1990s. Interpreting price-to-income ratios is part art and part science. The price-to-income ratio is useful in visualizing the historical anomaly of the real estate bubble that occurred in many markets between 2000 and 2006. Generally, for markets which have had some stability in price-to-income ratios, deviations from long-term trends tend to be followed by a return to historical levels. This has clearly occurred in all markets that experienced a pronounced housing bubble. As we’ve seen, this correction can also go too far for a variety of reasons, leaving price-to-income levels below historical norms. In this case, it does suggest that home values in such markets represent a compelling value relative to the amount of income that residents have typically spent on housing. This, in turn, might suggest that demand for housing in these markets will increase as buyers take advantage of this value proposition, thus producing a stabilization in home values near-term and, longer term, the potential for price appreciation. Conversely, markets in which the price-to-income level is still substantially above historical levels may see further declines in home values before stabilizing. Or, instead of home values falling in order to reach equilibrium with income levels, home values in these markets may stabilize sooner but stay flat for a longer period of time until future income growth brings the price-to-income ratio back into alignment with historical levels.

30 YEAR FIXED MORTGAGE RATES FALLS BELOW 4 PERCENT ; NEW ALL TIME LOW

10 August 2011

With this week’s Fannie/Freddie downgrade, stock market tumble, and the Fed’s promise to keep interest rates low until 2013, many have been left wondering what the impact will be on the housing market and, more specifically, how mortgage rates will change.

As it shows today’s 30-year fixed mortgage rate has taken a fall from Tuesday’s 9-month low of 4.14 percent to a new all-time low of 3.92 percent. This rate represents the first time the rate has dropped below 4 percent as well as the lowest rate recorded April 2008. Prior to today, the lowest rate recorded since Nov. 9, 2010 was 4.07 percent.

With the home prices so low and interest rates complimenting this trend it is disappointing that only investors are taking advantage of this. Few personal home buyers are savvy enough to see this as an opportunity. Most are scared off by the ‘Chicken Little” predictions by the news media. Rents are comparable for the purchase of a home and in some areas one could buy much more home than what they rent for less. Not only are they paying more in rent but they miss out on the tax write off that the landlord is able to deduct now.

Housing Market Looking Up in Q2, but Bumpy Road Will Continue

August 8, 2011

The housing market gave off plenty of positive signs in the second quarter, with national home values falling at the slowest rate we’ve seen in four years, and with home values increasing in about two-thirds of the markets covered by Zillow.

To be precise, the national (ZHVI), which measures the median value of all homes, fell 0.4% from the first to the second quarter, and the ZHVI increased in 94 of the 154 markets tracked by Zillow, according to our Q2 Real Estate Market Reports.

That’s great news that many have been waiting to hear, but it’s important to look at the big picture and take these improvements as a positive sign, but not a definitive sign that we’ve reached bottom or are in recovery.

Zillow Chief Economist Dr. Stan Humphries:

“In short, people are anxious for a recovery, and they’re likely to look at the near-term results because they are positive, but it’s important to look at the whole picture. We can’t be short-sighted. This quarter’s performance is encouraging certainly, but one positive quarter does not a recovery make. There are a lot of factors playing into the market right now – a still weak job market, a full foreclosure pipeline, fragile consumer sentiment, and signs of renewed weakness in overall economic output. In contrast to prior economic recoveries, housing will be less a catalyst for healing and more a product of these various other factors.”

That all said, this quarter’s results are certainly encouraging, especially because they came without the aid of homebuyer tax credits, like those that propped up the market during much of last year. We’ll continue to watch closely.

60 Minutes: The Next Housing Shock | 587 Days, Average Time Of Home In Foreclosure

60 Minutes is running their great in depth story about the never ending foreclosure crisis (video of the story follows)

Since this 60 minute news story originally ran the housing mess has only gotten…messier. New delinquencies rose 2.4 percent in June. This as the foreclosure pipeline is still so clogged that foreclosure timelines continue to rise. The average loan in foreclosure in June was delinquent a record 587 days, and more than 40 percent of 90+-day delinquencies have not made a payment in more than a year. For loans in foreclosure, 35 percent have been delinquent for more than two years, according to LPS.

Homeownership Rates Are Lower Than You Think

August 2, 2011

PLEASE READ THIS ARTICLE... makes one think of what is really happening with this bill when you take into consideration all the movement of large corporations to buy up the "SHADOW INVENTORY" which the banks have been sitting on all this time. Default Resources' REO Management branch has signed a deal with Georgia based United Bank,meanwhile HomeLand Security Capital Corp moved into a space by aquiring Default servicing LLC. Another lender, Stewart Lender services aquired PMH Financial which manages about $2.5 billion in properties, and First American Financial Corp. is finalizing development of a REO asset management firm. These are large billion dollar companies making these moves within the last month or two.

Seems like a smart thing to do ....to control the housing so they can rent it all out. Is this what the banks have been looking to do by garnering control of the real estate industry? Eviction is easier than foreclosure and less costly. This would be a lifetime mortgage payment with control over the total asset all the time. No longer will home ownership be a possibility unless you can afford the 20-30% down which they are also pushing for.

Maybe I am just being paranoid...you make up your own mind...everyone scoffed when I said oil would eventually go up to $70 a barrell back in 1999.

nuff said

Homeownership Rates Are Lower Than You Think

August 2, 2011

Guest Contributor, Sean O’Toole. CEO ForeclosureRadar.com

This morning a headline in my inbox caught my eye: Homeownership Rate Drops to 13 Year Low. Seems the Census Bureau has tallied the homeownership rate to be 65.9 percent, down from nearly 70 percent at the peak of the bubble. Despite the drop, I believe this stat significantly over-estimates the real rate of homeownership today. With another 9.6 percent of homeowners with a mortgage currently not making their payments, I’d argue that its time to realize the real rate of homeownership is getting close to being in the high 50′s – which is closer to a 50 year low. Sure the policies of extend and pretend will keep the Census Bureau from reporting this reality for months or even years to come, but we all need to be thinking about the implications now.

For example, should the government and banks really be in the rental business? House representative Gary Miller (R-CA), introduced a bill with bipartisan support to authorize FDIC insured banks as well as Fannie and Freddie into entering 5 year lease agreements on REO properties rather than sell them. He says “Something must be done to reduce the inventory of available homes and stop the further decline in home prices,” so he obviously hasn’t spoken with Realtors or investors in the area he represents or he’d realize that inventories throughout California are low and that homebuyers and investors are having a hard time finding decent properties to buy. Plus unlike banks, investors fix properties up by hiring local contractors, use local property managers, and spend their income locally, all of which create much needed jobs. His bill, if it passes, is likely to hurt the CA economy more than it will help… at least in the near term.

Rather than massive government intervention, like Miller’s bill, I believe the better answer is to deal with the decline in homeownership by re-igniting real estate investing. In an environment of zero interest rate policy ,with baby boomers nearing retirement, this change in homeownership rate may provide just the opportunity boomers need to get decent returns on their retirement savings. The only problem with this vision is that it’s bad for banks and Wall St who can’t afford to have investors move assets out from under their management. As such, expect more policies that help banks and GSE’s keep homes off the market, further frustrating both homebuyers and investors.

Today’s housing market is a confusing one. Six years ago, everyone understood what was happening: Home values were rising, and fast. Two years ago, it was the opposite; values were falling in most markets across the country, with few exceptions.

But now we’re seeing an extreme mix of conditions. According to our Q2 Real Estate Market Reports, values rose in 94 of the 154 markets we covered. Nationally, values were still falling. Today, “volatile” is probably the best way to describe the market.

So how to tell what’s going to happen in different markets? In the absence of market-level forecasts, one way to explore this is by looking at price-to-income ratio. It’s not an end-all, be-all way to forecast a market, but it’s a good way to gauge how home values have changed compared to their historic norms and, more often then not, home values will eventually come back in line with incomes, according to the historic norms of that market.

So our team of economists sat down to examine price-to-income levels in 130 markets across the country. We shared our findings with The Wall Street Journal. A story on the subject appeared in today’s paper.

Where have values fallen below their historic norms? That was the case in one-third of the markets we studied, and Las Vegas (25% below the market’s historic price-to-income level), Detroit (35% below) and Modesto, CA (18% below) had some of the most dramatic numbers. Does that mean Vegas home values need to rise by 25% for Vegas to regain normalcy? Not necessarily – there have surely been significant changes in the area’s economy since the housing recession began – but it means there’s a good chance that home values there have over-corrected, and may have some room to rise again before the market reaches equilibrium.

On the other side of the coin were markets like Virginia Beach, Honolulu, and Charleston. These cities would need to fall by at least 50% to reconnect with traditional income levels. That doesn’t mean values will fall by 50% in those markets, but it could signal either a significant change in their economies, or that home values do have somewhat farther to fall.

Where does your market fall? For a more in depth explanation of the research as well as a look at interactive charts of the data used for this analysis call us at the Moreno work Group Inc. 650-532-5348.

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