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  • Home Prices Up and Not Coming Down Anytime Soon

    The CoreLogic Home Price Index (HPI) and HPI Forecast for April 2017 was released Tuesday showing home prices up both in year-over-year and month-over-month. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from forecasts from a state-level by weighting indices according to the number of owner-occupied households from each state.

    According to the CoreLogic HPI, prices nationwide, including distressed sales, increased by 6.9 percent year-over-year. Month-over-month sales increased by 1.6 percent in April 2017 compared to March 2017.

    “Mortgage rates in April dipped back to their lowest level since November of last year, spurring home-buying activity,” said Dr. Frank Nothaft, Chief Economist for CoreLogic. “In some metro areas, there has been a bidding frenzy as multiple contracts are placed on a single home. This has led home-price growth to outpace rent gains. Nationally, home prices were up 6.9 percent over the last year, while rent growth for single-family rental homes recorded a 3 percent rise through April, according to the CoreLogic Single-Family Rental Index.”

    Home prices are predicted to increase by 5.1 percent on a year-over-year basis from April 2017 to April 2018 according to the forecast. On a month-over-month basis, home prices are expected to increase by 0.7 percent from April 2017 to May 2017.

    “Interest rates on fixed-rate mortgages are down by one-fourth of a percentage point since mid-March, just in time to support the spring home-buying season,” said Frank Martell, President and CEO of CoreLogic. “Some metro areas have low for-sale inventory, short time-on-market trends and homes that sell above the list price. Geographically, gains were strongest in the West with Washington and Utah posting double-digit gains.” 

    Washington had the largest change in home prices, coming in at 12 percent HPI change year-over-year. At -3.9 percent, Wyoming’s home prices went down in the month of April.

    DSNEWS Author: Brianna Gilpin

  • Equity Gains Fuel Rise in Housing Market Value

    The aggregate value of the U.S. housing market is climbing due to the ongoing rise in home equity, according to the Urban Institute’s Housing Finance at a Glance Monthly Chartbook for January 2017.

    The share of homes in the U.S. with negative equity is 6.3 percent (3.2 million homes) as of the end of the third quarter last year, according to CoreLogic’s latest data, which is a fraction of the peak negative equity rate of higher than 30 percent in 2012.

    The result in the consistent rise in home equity over the last four-plus years has been an increase in the aggregate value of the housing market across the country, up to $23.9 trillion as of the end of Q3, according to Urban Institute. Total debt and mortgages made up $10.2 trillion of that $23.9 trillion, while home equity accounted for $13.7 trillion of it. Another 1.6 percent of residential properties were in near negative equity, or those with LTV ratios between 95 and 100, as of the end of Q3, according to CoreLogic.

    According to Urban Institute, “Agency MBS make up 58.2 percent of the total mortgage market, private-label securities make up 5.8 percent, and unsecuritized first liens at the GSEs, commercial banks, savings institutions, and credit unions make up 29.8 percent. Second liens comprise the remaining 6.2 percent of the total.”

    While negative equity continues to decline, so also does the percentage of mortgage loans in serious delinquency (90 days or more overdue or in foreclosure). This percentage, which nearly reached 10 percent at the height of the foreclosure crisis in 2010, was at 3 percent as of the end of Q3, according to Urban Institute (down from 3.6 percent from a year earlier). Approximately 1.6 percent of loans were 90 days or more delinquent, while about 1.4 percent were in foreclosure.

    Click here to view the complete January 2017 chartbook from Urban Institute.

    UI graph

    Author - Brian Honea of DSNEWS 

  • The Fluctuating Trend with First-Time Homebuyers

    First-time homebuyers made up more than a third of national home sales in 2016, but still saw a greater share of deals for homes fall through than experienced buyers, according to a new report on the frequency of failed deals by Trulia.

    Thirty-five percent of sales last year were by first-time homebuyers‒‒up from 32 percent in 2015‒‒and this is just among successful transactions, according to the National Association of Realtors, but first-timers’ unfamiliarity with the process and the lack of equity more often doomed potential sales. This trend has been building over the past few years. Trulia reported that fails for starter homes increased from 2.4 percent to 7 percent between the beginning of 2014 and the end of 2016.

    Nevertheless, older homes were most likely to see deals fall through. As of Q4 2016, homes that were around 50 years old had the highest failed sale rates. One reason, Trulia surmised, was that premium home listings make up more than 70 percent of all listings that were built after 2000, and less than 40 percent of homes built before 1980.  Very old homes, however, built around 1900, were among the least likely to fail at the table.

    “Since premium homes have the lowest fail rate regardless of year built, their dominance drives down the fail rate in more recently built homes, and their smaller role pushes up the fail rate in older homes,” the report stated.

    Another factor causing failed deals for first-timers is sheer affordability. Even if first-time buyers can find a home, they may not be able to afford it, as households typically will need to spend nearly 39 percent of their monthly income to purchase a home, Trulia reported. Trade-up and premium homes, by contrast, remain relatively affordable, requiring 25.5 percent and 14 percent of monthly income to purchase, respectively.

    Overall, rates of failed sales increased in Q4 compared to a year earlier.

    Eight of the top 10 metro areas for failed sales last year were in the West, predominantly California. Atlanta and Chicago were the only markets not in the West to crack the top 10. In Q4 alone, seven of the top ten cities for failed sales were in the West, four of them being in California.

    During the last two years, Las Vegas saw the highest percentage of failed sales, at 7.6. During Q4, Tucson saw the highest rate of failed deals, 14 percent.

    Author - Scott Morgan of DSNEWS 

  • Survey: Misconceptions Holding Back Homebuying

    While nearly seven in 10 Americans agree that now is a good time to become a homeowner, a large number remain reluctant due to their own misguided understanding of the financing process, according to survey results released Monday.

    In a poll of more than 2,000 consumers, Wells Fargo found 68 percent feel that now is a good time to buy a home, and 95 percent want to own if they don't already.

    The results jibe with Fannie Mae's latest consumer housing survey, in which 64 percent of Americans said now is a good time to buy (matching the survey's record low).

    "Although the homebuying process has changed in many ways in recent years ,our survey found Americans still view homeownership as an achievement to be proud of and many believe that now is a good time to buy a home," said Franklin Codel, head of Wells Fargo Home Mortgage Production.

    On the other hand, while nearly three-quarters of respondents in Wells Fargo's survey said they "know and understand" the financial process involved in buying a home, large numbers also expressed doubt or misguided notions about homebuying requirements. For example, Wells Fargo reported, 30 percent of respondents expressed belief that only people with high incomes can obtain a mortgage at this point, and 64 percent said they believe only those with a "very good"” credit score can buy a home right now.

    While 64 percent of respondents said they have an understanding about how much of a down payment is needed to purchase a home, nearly half said 20 percent is required. Forty-four percent also said they know little or nothing about closing costs.

    While most lenders report that lending requirements at the moment are still high as a result of enhanced regulations and reluctance to take risks, Codel says lenders would be well served to work on educating homebuyers about all programs available to them—especially the millennial crowd, most of which pointed to lack of down payment funds as one of their biggest hurdles to homeownership.

    "It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA [Federal Housing Administration] or VA [Veterans Affairs] loans for veterans," he said. "Informing prospective homebuyers about their options is the first step toward helping them realize their goals."

    On the other hand, the survey also found most Americans are confident in managing their personal finances, with 82 percent saying they know how to save, invest, and work within a budget. In addition, 63 percent said they have a "rainy day fund," including more than half of millennial-aged respondents.

    With so many Americans focused on keeping their financial houses in order, Codel says there's a decent opportunity to turn those consumers into responsible homeowners with an educational push.

    "Wilted Flowere have an opportunity as lenders, nonprofit agencies and real estate agents to better inform Americans about credit ratings, mortgage costs and housing affordability," he said. "This would help demystify the homebuying experience for many consumers."

    Author- Tony Barringer - DSNews 

  • Survey: Buyers, Sellers 'Not on the Same Page'

    Home buyers and sellers are “not on the same page” when it comes to the state of the housing market, according to a new Redfin survey of 707 of its agents and partner agents across 35 U.S. markets. Buyers and sellers are taking a more aggressive stance in the market, with some sellers overpricing their homes and more buyers refusing to get in bidding wars, the survey found. 

    “In May, 40 percent of sellers surveyed by Redfin said that they planned to list their homes above market value, even though home sales had dropped by 9 percent since the year before,” says Nela Richardson, Redfin’s chief economist. “Typically, it takes sellers six to nine months to adjust to a price change, but this latest shift is longer. Prices have moved down and then up so much over the past five years that it’s even more difficult for sellers to have a realistic baseline for what their homes are worth in the current market.”

    Fifty-eight percent of Redfin agents say that sellers are holding unrealistic expectations about the value of their homes, up from 49 percent in the previous quarter. Meanwhile, buyers are showing less willingness to chase after a home, as they face affordability and financing hurdles, the survey found.

    “Buyers who have been searching for a long time may still try to win deals with aggressive offers,” Richardson says. “However, new buyers in the market are much less willing to chase an escalating sale price to compete with multiple bids. The demand side of real estate is moving from ‘please take my offer’ to ‘take it or leave it as you please.’ Home buyers’ willingness to walk away from a deal that’s a bad fit is good for them and is ultimately healthier for the housing market.”

    So is it a seller’s market or a buyer’s market? It depends on who you ask. Twenty-four percent of Redfin agents surveyed say that “sellers have all the power,” a drop from 35 percent three months ago.

    Rising inventories have been beneficial for buyers who are less willing to participate in a bidding war, but they are facing other challenges, such as access to credit and affordability, the survey finds. The top challenges Redfin agents identified as growing problems for buyers are: lack of affordability; qualifying for a mortgage; saving enough for a down payment; and worries about the economy.

    Source- Redfin  

  • Clear Capital: Best Home Deals in ‘Mid-Tier’

    Clear Capital recently released its Home Data Index Market Report, which found the best deals in the housing market now reside in the middle-tier of available homes. The group found that following more than two years of recovery, low-tier homes are no longer the best value for homebuyers.

    Mid-tier homes are homes selling between $95,000 and $310,000, nationally.

    The company reported that low-tier homes experienced 32.3 percent growth from the trough in 2011. Mid-tier homes are still 30.6 percent off of peak values, while the low-tier price sectors remained just 21.5 percent below peak values. Top-tier homes, on average, are just 18.2 percent off of peak values.

    "Very interesting dynamics are at play as we head into spring. Though our April data suggests the spring buying season is off to a slow start, we aren't concerned about the sustainability of the recovery," said Dr. Alex Villacorta, VP of research and analytics at Clear Capital.

    Villacorta continued, "To be clear, there are lots of adjustments taking place in housing markets across the country. Everything from lender regulation, consumer confidence, investors tapering purchases, local economics, and rising home prices have forced participants to continually adjust to a market that has been anything but stable."

    The company found that quarterly rates of growth for the nation and three of four regions remain virtually unchanged.

    Nationally, housing markets experienced a 0.9 percent growth quarter-over-quarter. The largest gains were in the West, which experienced a 1.8 percent increase from the previous quarters. The South was next at 0.8 percent growth, followed closely by the Midwest (0.7 percent) and the Northeast (0.6 percent).

    "Generally speaking, we see price growth stabilizing throughout 2014, which should help boost the confidence and purchase activity from buyers on the fence," Villacorta said.

    Villacorta continued, "The days of double digit price gains are behind us, and the market will continue to calibrate to the new reality of annual growth rates between 3% and 5%. A strong spring buying season might be a casualty of the major adjustments underway, but it's no reason to ring the alarm bells quite yet."

     Author: Colin Robins 

  • The 2014 Housing Market: Still on the Road to Recovery

    We can expect to see the U.S. housing market cool off as we move into 2014 for a number of reasons–some economic, some specific to the housing market itself. And the implications are significant for companies in the default services industry.

    First, demand is relatively weak:

    • The recovery is too weak to stimulate demand from traditional homebuyers–labor force participation rates are too low (the unemployment numbers are a mirage), too many workers are in low paying and/or part time jobs to be able to afford to buy a home, and wages have been stagnant, and falling, in the middle class.
    • The first time homebuyer market, which fuels the whole ecosystem, is at historically low numbers–the 25-35-year-old cohort is staying home with mom and dad in record numbers and their unemployment rates are stubbornly high; many can't afford to buy, many can't meet the new requirements for loans; some have just decided not to buy right now.
    • Institutional investor activity, which drove a lot of the 2013 price increases, is beginning to weaken a little bit, and the focus has shifted into lower-priced markets, where investors can buy properties in the $85,000 - $150,000 range in order to rent them out profitably.

    Second, credit is tight:

    • The new regulations that went in place on January 10, 2014 will make it more difficult for the average borrower to get a loan. Even the Consumer Financial Protection Bureau (CFPB) acknowledges that 8 percent of the loans issued in 2013 wouldn't qualify this year–that works out to between 300,000 to 400,000 fewer eligible borrowers. And it's likely that lenders will tighten up further until they're comfortable operating within the new rules. Eventually, non-bank lenders will re-enter the market with non-agency loans, opening up lending to a wider audience. But this won't happen until private capital comes back to the secondary market.
    • Fannie and Freddie are likely to drop their loan limits sometime this year, which will mean borrowers in higher priced markets will have to qualify for jumbo loans; they're available, but the down payment requirements and qualifications are going to be too steep for many borrowers.
    • Loans are more expensive–FHA raised its premiums, which has a huge impact on the first time homebuyer segment, and interest rates will continue to go up this year, which makes affordability an issue.

    Third, a lot of the price increases we saw in 2013 were due to circumstances that won't be repeated:

    • Investors accelerated home price appreciation, particularly in hard-hit markets, by gobbling up most of the available inventory of foreclosed and distressed homes. This segment had the highest increase in prices last year, and probably inflated the overall numbers (said another way–non-distressed home prices didn't go up nearly as dramatically as distressed home prices did). There's fewer of these properties coming to market, and the ones that do come to market will have last year's price increases built in, so we won't see as big an increase as last year.
    • We've probably seen most of the "rebound" effect that we're likely to see: Markets that had the biggest price increases in 2013 were the markets that had the biggest price decreases in the bust; most of them have recovered to where they're more or less at "normal" levels now.
    • Much of the price increase in 2013 was due to extremely limited inventory in all three categories of homes (new homes, existing homes and distressed homes); inventory levels, while still somewhat lower than normal, are all starting to tick up a bit, which will take some of the pressure off.

    So 2013 was clearly a seller's market, and probably the last time we'll see the combination of historically low interest rates and lower-than-normal home prices for a while. In 2014, we'll probably see about the same volume of sales (about 4.9 to 5 million existing homes, and between 400,000 to 450,000 new homes) and much more moderate price increases–probably somewhere between 3-5 percent.

    In the meanwhile, on a positive note for the housing market (but a mixed blessing for companies in the default services industry), delinquency and default rates continue to decline. Foreclosure starts are at the lowest levels since 2007. And most of the loans entering foreclosure are seriously delinquent—with borrowers often not having made a payment in two years or more.

    With about 340,000 REO properties, slightly under 1 million homes in foreclosure, and another 1.5 million to 2 million loans seriously delinquent—but virtually no loans from the last three years going into default—it will take another 18-24 months to work through the backlog of distressed loans and get back to more or less normal levels.

    Considering all of this, it's incumbent upon servicers, asset managers and the professional service firms that support them need to re-think their value propositions and business models, and prepare to shift their focus as the housing market makes its way down the long, slow road to recovery.

     Author: Rick Sharga