New Jersey Real Estate Report

From the NY Times:

Great Time to Buy (Famous Last Words)

“IT’S a great time to buy a home.”

Real estate agents were saying that in 2001, as home prices were rising. They also said it when home prices peaked in 2005 — in fact, David Lereah, former chief economist of the National Association of Realtors, published a book that year titled “Are You Missing the Real Estate Boom?”

And many real estate agents said it was time to buy as prices began to drop — and continued to say it over the past several years as prices fell by an average of 33 percent in America’s 20 largest cities.

Mr. Lereah would acknowledge that he had gotten it wrong. But from the perspective of many real estate agents, it is always a good time to buy.

“What they are really saying is that it is a good time to be involved in a transaction that generates a commission,” says Barry Ritholtz, C.E.O. and director of equity research at FusionIQ, a quantitative research firm. He’s also author of “The Big Picture,” an irreverent blog on markets.

If agents are always motivated to make a deal, buyers are often asking an impossible question: “Will the price of this house go up?”

Although the National Association of Realtors said for many years that home prices historically don’t fall, actually they do, and sometimes quite sharply. The housing market is complicated, and the future unknowable. Still, for clues to the overall direction of prices, Mr. Ritholtz advises buyers to look at three metrics: the ratio of median income to median home prices, which suggests whether people can afford a house; the cost of ownership versus renting; and the value of the national housing stock as a percentage of gross domestic product.

All those measures were aberrationally inflated during the housing bubble. And they still aren’t back to historical norms. We can get back to the norm in either of two ways, Mr. Ritholtz says: home prices can either drop an additional 15 percent or go sideways for seven years or so, while G.D.P. and income presumably grow.
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Then there are property taxes.

In California, taxes alone can be $5,000 a year on that $300,000 house. In New Jersey, where property taxes are the highest in the nation, the extra cost can be even more. (The Star-Ledger of Newark calculated that, on average, residents in the town of Lodi pay 10 percent of their income in property taxes.) But who would have guessed that property taxes in that state would keep climbing, doubling over the course of seven years in some cases, even as home values stopped appreciating?

Mr. LLosa thinks that many people — including him — would be better off renting. People ought to buy a house for what he calls “warm and fuzzy feelings,” but they shouldn’t try to predict home prices. Nor should real estate agents, who aren’t much wiser.

“I don’t think real estate professionals should be in the business of telling people when it is a great time to buy,” he said.

From the Wall Street Journal:

New Home Sales Plunge to ‘63 Levels

Sales of new single-family homes plunged last month, underscoring the fragility in the housing market.

Sales dropped 11.2% in January from a month earlier to a seasonally adjusted annual rate of 309,000, the Commerce Department said Wednesday. The decline brought sales to their lowest level since the government began tracking the numbers in 1963. Sales were 6.1% lower than in January 2009.

This gauge of new-home sales is particularly volatile because it is based on a very small sample size and carries a wide margin of error. Still, the sharp decline is an indication that the housing market remains feeble, despite improvements in the past year fueled by low mortgage rates, reduced home prices and a government tax credit for home buyers.

The tax credit, which was expanded and extended, is set to expire April 30. It could lead to an upturn in sales in the next couple of months as buyers rush to take advantage of it, analysts say.
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The drop in sales in January triggered an increase in the backlog of unsold new homes on the market, pushing it up to the equivalent of what would normally be sold in 9.1 months versus eight months in December. And the abundance of homes on the market continued to bring prices down. The median sales price for new homes fell 2.4% to $203,500 in January, compared with a year ago.

Faltering demand in the housing market also led to a drop in mortgage applications for both new and existing homes. The Mortgage Bankers Association’s seasonally adjusted purchase index fell 7.3% for the week ended Feb. 19 from the prior week, the advocacy group that represents the real-estate finance industry said Wednesday. It is the index’s lowest level since 1997.

From the Star Ledger:

Home prices still fall in the N.Y. region

Housing prices in the New York metropolitan area dropped for the fourth consecutive month in December, according to data released today.

Nationwide, prices in the 20 cities that are tracked by Standard & Poor’s/Case-Shiller housing index dropped 3.1 percent in December from the previous year.

“The housing market is definitely in better shape than it was this time last year,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, in a statement.

In the New York-area, which includes 14 New Jersey counties, the index dropped 6.3 percent from the same period last year.

From the WSJ:

Case-Shiller Adds to Confusion on Housing Market

Tuesday’s latest home-price reading shows that momentum slowed at the end of 2009 for the housing market, adding to the confusion about where prices are headed from here.

The S&P/Case-Shiller 20-city composite index in December fell 0.2% from November, but after adjusting for seasonal factors, home prices were up 0.3%. That was the same change that the index showed in November.

Fifteen of 20 markets tracked by the index showed monthly declines, though the battered Southwest fared well. Las Vegas had its first monthly gain in more than three years (and today’s story helps to explain why conditions there have improved), while Los Angeles led the nation with a 1% monthly increase.
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Robert Shiller, the Yale University economist who co-founded the index that bears his name, called the home-price rebound during the second half of the year “the most dramatic turnaround” since he began charting home prices in 1987. Home prices fell by 11% for six months ending in April 2009, before rising by around 5% over the following six months. The last time home prices swung so sharply was in April 1991, when a more modest 5% decline over six months was followed by a 2% rally.

What followed? “Nothing,” says Mr. Shiller. “The home market was absolutely dead for the better part of a decade after that.” But he says today’s volatility in prices and the massive amount of federal stimulus has made the home-price outlook far more uncertain. “The market has shown a lot of momentum,” he said. “What trend are we seeing now? It’s very ambiguous.”
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“What worries me right now is the default rate on mortgages,” says Mr. Shiller. “It might go up because of a change in our sense of responsibility to pay mortgages. People are angry and upset.”

From the NY Times:

Dry Your Eyes and Lower the Price

NEVER in all his 17 years selling real estate has Mark Seiden gone through as many boxes of tissues as he has in the past 12 months.

It’s not he who is crying, but some of his customers — as they come to grips with the reality that their houses are worth far less in today’s market than what they had hoped, said Mr. Seiden, who owns Mark J. Seiden Real Estate in Briarcliff Manor.

But the sooner a seller faces reality on prices, he said, the sooner a sale can occur. As evidence, he cited Susan and Robert Whiting of Ossining, whose six-bedroom three-bath 1950s Cape had languished six months at $499,000 before they hired him. “At that price, nothing happened,” said Mrs. Whiting, a day care provider. “We didn’t even have one reasonable offer.”

The first thing Mr. Seiden did was brandish the tissues and recommend a listing price of $60,000 less. “At first I was in shock,” Mrs. Whiting said. “But then I decided if we wanted to sell, this is what we better do.” A bidding war ensued, and some weeks later the house went into contract at $10,000 over the list price.
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In the Ossining/Briarcliff market in 2009, homeowners received about 94 percent of their asking prices, according to Mr. Seiden. But he said the actual percentage was probably even lower, as the official one was calculated using the most recent listing price — very likely reduced from the original.
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Mr. Nadler cited another Larchmont example: a three-bedroom two-bath prewar condo listed at $1.2 million whose owners “needed to be convinced” to drop the price. After generating only weak interest and unacceptable offers, they finally agreed to lower the price to $999,000 and then to $985,000. At that point, Mr. Nadler said, “the floodgates opened.” It sold for close to the final asking price, he said.
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The first impression also still counts, which is why Richard and Marilyn Wishnie of Briarcliff Manor employed a home stager to help market their four-bedroom two-and-a-half-bath 1960s colonial.

“The stager said to us, ‘Come with me to the front door and look at your house the way a buyer might,’ ” recalled Mr. Wishnie, a former county legislator. They did, and subsequently spent $2,500 to remove old wallpaper in the kitchen, replace carpeting in one bedroom and retile the floor in the front entrance.
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But it was pricing that may ultimately have turned the tide in their favor. They listed the house at about $619,000 — far less than they had originally hoped — but it sold quickly, for $10,000 over asking. “We knew this was the worst possible time to try and sell a house, but it all worked out,” Mr. Wishnie said.
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That a well-priced property will sell more quickly is not a new concept. “That’s true in boom years, too,” Mr. Mercurio said, “although that applies more than ever now.”

From Default Servicing News:

Company Proposes Paying Homeowners Not to Walk Away

With tumbling property values leaving nearly a quarter of borrowers owing more on their mortgage than the home is worth, some may find it tempting to walk away even if they are financially able to keep making payments – either to get out from under the debt completely or to force the servicer’s hand for a modification. This idea of “strategic default” has become a universal concern within the industry, but one New Jersey company says it has a plan to counter such calculated flights of exodus.

According to the Loan Value Group LLC (LVG), it’s time to pay current borrowers to stay that way. The company introduced a new program this week that helps lenders and servicers identify borrowers at risk of walking away and implement an incentive program in which the homeowner receives a monetary “reward” if they remain current on their payments without changing the terms of the original mortgage note or reducing principal.

The Responsible Homeowner Reward (RH Reward) program was developed on a foundation of behavioral economics and employs patent-pending technology developed by LVG. The firm evaluates each individual borrower’s propensity to strategically default (as distinct from the risk of affordability default) based on a dozen criteria, including negative equity, income, and geography, and then determines the optimal size of each “reward.”

From the WSJ:

Citi Pushes Foreclosure Alternative

Mortgage lenders are trying to arrange smoother departures for distressed homeowners who can’t be saved by loan modifications–and discourage them from trashing the homes on their way out.

CitiMortgage, a unit of Citigroup Inc. (C), announced Wednesday a pilot project that will let some delinquent borrowers remain in their homes without making mortgage payments for six months if they voluntarily transfer ownership to the bank.

Over the past two years, millions of foreclosures have been delayed by state and federal programs requiring lenders to try to keep borrowers in their homes by easing their monthly payments. But the moment of truth is approaching for hundreds of thousands of households that sought help under the Obama administration’s Home Affordable Modification Program, or HAMP, launched a year ago, as well as borrowers who have sought help through other programs.

“We are concerned that if there is a foreclosure glut at some point in the cycle it would have to have a negative impact on house prices,” and Citi’s pilot program should help prevent a build-up in foreclosed homes, said Sanjiv Das, the chief executive of CitiMortgage in an interview.
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The CitiMortgage pilot program provides incentives for more borrowers to use a procedure known as a “deed in lieu of foreclosure,” in which the borrower voluntarily transfers ownership of the home to the lender, which then cancels the mortgage debt. Aside from letting such people stay in the homes for six months, CitiMortgage says it will give them at least $1,000 to cover relocation costs, an incentive sometimes dubbed “cash for keys.”

Mr. Das said, “Something formally needs to be done in addition to the modifications. We are in a different stage of the housing cycle. Restructuring mortgage payments was part one of the cycle, making sure that foreclosure glut doesn’t hit the industry is part two of the cycle. Citi is trying to stay ahead of it.”

The pilot program is available for certain people whose mortgages are owned by CitiMortgage in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. The bank should benefit by avoiding legal costs and reducing the time homes are left vacant and exposed to vandalism. Participants will be required to “maintain the property in its current condition,” the bank said. It plans to expand the program if the pilot is successful.

From the Washington Post:

Mortgage officials try exits softer than foreclosures

Seeking alternatives to the nation’s struggling foreclosure prevention efforts, federal and mortgage industry officials increasingly are looking for ways to get distressed borrowers to leave their homes voluntarily, without going through the expensive foreclosure process or a messy eviction.

Citigroup, for instance, plans to announce a pilot program on Thursday that would allow delinquent borrowers who don’t qualify for or decline mortgage relief the opportunity to stay in their homes without making payments for up to six months before turning over the keys, in return for keeping the property in good condition. The bank estimates that up to 20,000 borrowers in Texas, Florida, Illinois, Michigan, New Jersey and Ohio could be eligible.
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Moody’s Economy.com has forecast that the number of short sales and transactions in which borrowers surrender their deed in lieu of foreclosure will increase more than 50 percent, to about 490,000, this year. That is just a fraction of the 1.9 million homeowners Moody’s has forecast will lose their homes to foreclosure this year, up from 1.7 million last year.

From the Star Ledger:

CitiMortgage offers option for N.J. homeowners in default

The fourth-largest mortgage servicer in the country is offering homeowners in New Jersey who are 90-days late on their payments a chance to walk away with cash.

CitiMortgage, a unit of Citigroup, will announce today a trial program that lets borrowers remain in their homes for six months after signing a deed-in-lieu of foreclosure contract — so called because owners agree to hand over their homes to the lender.

These borrowers also will receive at least $1,000 in relocation expenses.

“Basically, the lenders are giving defaulted owners cash for their keys,” said James Bednar, who writes a real estate blog at njrereport.com.

He said some participants could eventually end up saving as much as $20,000 after relocation expenses and mortgage payments.
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Real estate agents also said the program could have an adverse effect on New Jersey’s already troubled housing market by driving down prices.

“They’re going to have to be at a lower price than everyone else,” said Sal Poliandro, a Saddle River-based real estate agent, of the homes that will eventually go up for sale. “Not only are they going to have these houses on the market, they are going to be encouraged to sell them quickly.”

From HousingWire:

Fitch Says Prime Jumbo RMBS Near 10% Delinquent

The performance of US prime jumbo loan performance within residential mortgage-backed securities (RMBS) slipped again in January as serious delinquencies (60+ days past due) rose for the 32nd consecutive month and edged closer to 10%, according to the latest market commentary from Fitch Ratings.

Prime jumbo loan delinquencies began to rise in Q207 but accelerated since then. In 2009, the rate of delinquency nearly tripled during the year. The serious delinquencies rose to 9.6% in January from 9.2% in December.

“The new year has brought no relief from declining jumbo loan performance,” said Fitch managing director Vincent Barberio. “The trend line for delinquencies indicates the 10% level could be reached as early as next month.”
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California spearheaded the rising delinquencies, jumping to 11.3% in January from 10.8% a month earlier. The state represents 44% of the $381bn prime jumbo RMBS market.

Four other states rounded out the top five in terms of highest volume of prime jumbo loans outstanding. New York, which represents 7% of the market, saw delinquencies rise to 6.1% from 5.8% the month before. Florida, representing 6% of the market, rose to 16.6% delinquent, from 16%. Virginia, representing 5% of the market, jumped to 5.6% delinquent from 5.4%. And New Jersey, representing 4% of the market, grew to 7.4% delinquent, from 7.1%.

From the LA Times:

Prime jumbo loan delinquencies still rising, report shows

People who hold jumbo loans on pricey U.S. properties continued to struggle in January as more Americans lose their jobs and property values have plummeted, according to a report released Monday.
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“The deterioration in performance is really the combination of two things going on: rising unemployment that took place throughout 2009 as well as our estimate that about a third of all jumbo loans that are current are underwater in terms of the value, so [borrowers] owe more on their properties than they are worth,” Fitch managing director Vincent Barberio said. “As more of these loans become delinquent, they ultimately will come into foreclosure.”
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Prime jumbo loan delinquencies began to rise in the second quarter of 2007, but accelerated in 2009 and nearly tripled over the course of the year, Fitch said. The five states with the highest volume of prime jumbo loans outstanding are California, New York, Florida, Virginia and New Jersey.

From Fitch:

Fitch: New Year, No Improvement as U.S. Prime Jumbo RMBS Delinquencies Approach 10%

The five states with the highest volume of prime jumbo loans outstanding (California, New York, Florida, Virginia, and New Jersey) comprise approximately two-thirds of the loans in question. Prime jumbo RMBS 60+ days delinquencies for these states at January 2010 compared to December 2009, and their approximate share of the $381 billion market, are as follows:

–California: 11.3%, up from 10.8% (44% share of the market);

–New York: 6.1%, up from 5.8% (7% share);

–Florida: 16.6%, up from 16% (6% share);

–Virginia: 5.6%, up from 5.4% (5% share);

–New Jersey: 7.4%, up from 7.1% (4% share).

From the Philly Inquirer:

Homebuyers rushing to get tax credit before it’s gone

Liv Mansfield is racing the clock, hoping to find and settle, or at least sign a purchase agreement, on a townhouse before the $6,500 tax credit for qualified repeat home buyers expires April 30.

While the credit is not as important as staying in the Wallingford school district, where her younger daughter will enter sixth grade next fall, Mansfield says it will help make expenses associated with the move “a wash.”

“It will help with moving costs, and with getting this house ready for sale,” said Mansfield, who has lived in the five-bedroom split-level Colonial she bought with her former husband nine years ago.

The house, which she says is far larger than what “two people and a small dog need,” will list for under $525,000 and heads for the market Feb. 15.
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It seems less is known about the repeat-buyer credit. This incentive was added when the original $8,000 tax credit for qualified first-time buyers, which expired Nov. 30, was extended.
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Moody’s Economy.com chief economist Mark Zandi says the credit will boost sales “modestly,” however, by 300,000, with one-third trade-up buyers.

“I don’t expect the credit to be extended again,” Zandi said. “Each time it is extended, it becomes less effective and thus more costly.”
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Builder Bruce Paparone of Bruce Paparone Inc. in Stratford, N.J., said a better understanding of the credit would result in more sales for him.

Still, “the incentive has definitely affected the buying decision of at least five of our last seven sales,” he said.

From HousingWire:

TransUnion Sees More People Paying Plastic Before Property

More borrowers than ever before are choosing to pay down credit card debt over making mortgage payments.

The share of borrowers who are delinquent on their mortgages but current on their credit cards rose to 6.6% as of Q309 (from 4.3% in Q108), according to national credit bureau TransUnion.

At the same time, the share of borrowers that are delinquent on credit cards but current on their mortgages slipped to 3.6% from 4.1%.

This switch first appeared in early 2008, when TransUnion reported the share of borrowers current on credit cards and delinquent on mortgages surpassed the share of borrowers current on mortgage payments and behind on credit cards. Since then, the shift of borrower behavior in paying down debt is growing.

“Conventional wisdom has always been that, when faced with a financial crisis, consumers will pay their secured obligations first, specifically their mortgages,” said Sean Reardon, author of the TransUnion study on the changing payment hierarchy from Q208 through Q309.
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“The implosion of the mortgage industry over the last 24 months, the resetting of adjustable-rate mortgages and the weak job market have all come together to redefine how consumers are managing their finances and meeting (or not meeting) their credit obligations,” said Ezra Becker, director of consulting and strategy in the TransUnion financial services business unit.
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Another national credit bureau, Equifax, recently released analysis that indicates home equity lines of credit (HELOCs) represent a significant portion of borrowers’ revolving debt and, thus, a huge driver of default.

From HousingWire:

Treasury Changes Guidelines for Getting Borrowers into HAMP

The U.S. Treasury Department and the Department of Housing and Urban Development (HUD) changed guidelines on how servicers introduce borrowers into the Home Affordable Modification Program (HAMP) to go into effect June 1, 2010.
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Servicers began ramping up efforts to gather more documents after the November HAMP numbers revealed a little more than 31,000 permanent modifications. Herb Allison, the assistant secretary for the Treasury said that at the program’s outset, the goal was to reach as many people as possible and obtain documentation during the trial period.
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Effective for all trial period plans with effective dates on or after June 1, 2010, a servicer can only evaluate a borrower for HAMP after receiving an initial package that includes a request for modification and affidavit (RMA) form; the Internal Revenue Service (IRS) 4506T-EZ form, which gives servicers the ability to pull the borrower’s tax return; and two pay stubs from the borrower for proof of income.

From USA Today:

Want a loan modification? Bring documents

Homeowners applying for mortgage modifications will soon have to provide paperwork upfront showing that they qualify.

The new documentation process is aimed at getting homeowners more rapidly into permanent modifications with lower monthly payments.
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To accept homeowners into the program, many lenders accepted borrowers by taking proof of income over the phone. Getting the documentation needed to get into a permanent modification then took time, lengthening the process.

Under the change, homeowners will provide the documentation upfront.

“Were there some struggles with documentation? Absolutely. Are we learning from those lessons? Absolutely,” says Phyllis Caldwell, who heads the Treasury’s Homeownership Preservation Office.
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Wage earners will need:

•Two pay stubs.

•An electronic form that allows a servicer to pull up a tax return online.

•A request for modification that includes a hardship affidavit.

From the WSJ:

Paperwork Eased in Loan-Modification Program

The Obama administration is trying to simplify the paperwork for people seeking lower home-mortgage payments in an effort to avert more foreclosures.

The Treasury outlined new guidelines Thursday aimed at streamlining requirements for mortgage relief under the administration’s Home Affordable Modification Program launched a year ago.

The guidelines specify that borrowers must provide three items to loan servicers, the companies that collect mortgage payments: a form requesting a loan modification, authorization for the servicer to seek tax information from the Internal Revenue Service and evidence of income, such as two recent pay stubs. Previously, some servicers have asked borrowers to fax in copies of their tax returns. Borrowers sometimes couldn’t find the needed tax forms or complained that servicers repeatedly lost material faxed to them.

The previous documentation requirements were “somewhat overwhelming” for some borrowers, says Morgan McCarty, head of mortgage servicing at Regions Financial Corp., a banking company based in Birmingham, Ala.

From the WSJ:

December Chilled New-Home Sales

Demand for new homes in December fell, as cold weather and continuing joblessness put a chill on hopes for a housing-market recovery.

Single-family home sales fell 7.6% from November to a seasonally adjusted annual rate of 342,000, the Commerce Department said Wednesday, though it noted the drop was within the margin of error. December’s reported drop followed a 9.3% plunge in November. Meanwhile, on a positive note, home inventories fell last year, compared with 2008, but prices fell, too.

“The new-home market continued to wilt late in 2009,” Mike Larson, an analyst at Weiss Research Inc., wrote clients. “The buyers who are willing and able to buy are flocking to cheaper, distressed, ‘used’ homes.”

Home sales for all of 2009 dropped sharply, by 22.9% to an unadjusted 374,000, from 2008’s 485,000, as the industry struggled after collapsing from its multiyear boom.
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“Overall, the housing-market recovery remains fragile,” BNP Paribas’s Anna Piretti wrote to clients. “Tight credit conditions, ongoing deleveraging, a likely increase in mortgage rates and a 10% unemployment rate all point to sluggish housing demand after the tax-credit program expires.”
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Regionally, December new-home sales were mixed, rising 42.9% in the Northeast and 5.2% in the West, falling 41.1% in the Midwest and 7.3% in the South.

From the Courier Post:

Home sales drop beyond expectation

Sales of existing homes, plumped up by government incentives in November, melted 16.7 percent in December, the largest month-to-month drop in 40 years. The steep decline, reported Monday by the National Association of Realtors, was worse than the 10 percent drop predicted by economists.

Overall, prices fell dramatically in 2009, declining 12.4 percent nationwide to a median of $173,500, the largest decline since the Great Depression.
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But the most recent numbers for New Jersey — for sales in the third quarter — indicate prices are still softening.

“The good news is that homes are still moving, even if the price points are lower,” said Allan Dechert, president-elect of the NJAR and co-owner of Ferguson-Dechert Real Estate in Avalon.

In Burlington County, the median sales price for an existing, single-family home slid 7.4 percent compared to the same quarter a year ago, from $247,000 to $228,000.

In Camden County, the median price inched down 3.3 percent, from $203,200 to $196,400. In Gloucester County, the median price shed 10.8 percent, from $232,100 to $207,100.

From the Philly Inquirer:

Philadelphia-area existing-home sales down in December

The end of the first housing tax credit, as expected, took its toll on sales of existing homes in December, national and regional data show.

Sales fell about 35 percent in December from November in the eight-county Philadelphia region, according to a Prudential Fox & Roach HomExpert report.

Nationally, the month-to-month drop was 16.7 percent, according to the National Association of Realtors.
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Some economists question whether the extended credit will jump-start the real estate market as much as the first one did.

“So far, the second credit appears to be having a minimal effect,” said IHS Global Insight economist Patrick Newport.

“Mortgage applications to purchase homes [the four-week moving average] are near their lowest level since 1997,” he said. “Applications are down despite the fact that mortgage rates, which are at historically low levels, are likely to go up during 2010.”

Newport said he believed sales would be weaker in 2010 than in 2009.

Prices fell 3.2 percent year-over-year in the eight-county Philadelphia region, but that reflects the continued presence of first-time buyers in the market, with or without the tax credit, snapping up lower-priced homes.

From the WSJ:

Existing-Home Sales Plunge

Home sales plunged in December, raising fresh concerns over the housing market’s ability to recover when government support winds down.

Sales of previously owned homes fell 16.7% from November to a 5.45 million annual rate, the National Association of Realtors said Monday, after a looming tax-credit deadline pushed buying decisions into previous months. The drop brought the pace of sales down to the lowest level since August.

The government’s first-time home-buyer tax credit was initially scheduled to end Nov. 30, and there was a race to finish deals before it expired. But the tax credit was eventually extended until spring, complemented by an additional tax break for repeat buyers.

For all of 2009, there were 5.16 million home sales, up 4.9% from 4.91 million in 2008. It was the first annual sales gain since 2005.

Although economists expected Monday’s report to show declining December home sales, few thought they would fall so sharply. The decline called into question the sector’s ability to bounce back.

“We have a very fragile housing system,” said Michael Carey, an economist with Calyon Securities in New York. He worried that as the government withdraws support from the housing market, prices could begin slipping again. That would put more homeowners into the position of owing more on their mortgage than their home is worth and could lead to another wave of foreclosures.
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Regionally, December sales fell 19.5% in the Northeast, 25.8% in the Midwest, 16.3% in the South and 4.8% in the West.

From the WSJ:

Tishman Venture Abandons Stuyvesant

A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom.

The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006—the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments.

The property’s owners signaled they would be unable to reach a deal with lenders and instead decided to allow creditors to proceed with what amounts to an orderly deed-in-lieu of foreclosure, which means a borrower voluntarily gives the property back to lenders to avoid a foreclosure proceeding.

From the NYT:

Huge Housing Complex in N.Y. Returned to Creditors

The owners of Stuyvesant Town and Peter Cooper Village, the iconic middle-class housing complexes overlooking the East River in Manhattan, have decided to turn over the properties to creditors, officials said Monday morning.

The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes’ 110 buildings and 11,227 apartments in what was the most expensive real estate deal of its kind in American history.

The surrender of the properties, first reported by the Wall Street Journal, ends a tortured real estate saga that saw the partnership make expensive improvements to the complex and then try to rent the apartments at higher market rates in a real estate boom. But a real estate downturn and the city’s strong rent protections hindered those efforts, leaving the buyers scrambling to make payments on loans due for the properties, which have been a comfortable harbor for the city’s middle class since they opened in the late 1940s.

From the WSJ:

FHA to Lift Mortgage Insurance Fees

The Federal Housing Administration will announce more-stringent lending requirements and higher borrower fees on Wednesday to cushion against rising defaults and stave off the need for a taxpayer bailout of the agency.

The FHA, which has taken on a major role in the housing market during the economic downturn, doesn’t lend money to home buyers, but insures lenders against default on loans that meet FHA criteria. In exchange for that backing, borrowers who take out FHA-backed loans must pay an upfront insurance premium, currently set at 1.75% of the total loan amount. The premium can be rolled into the loan.

The FHA is set to raise that fee to 2.25%, the second increase in the past two years, according to people familiar with the matter. The value of the FHA’s reserves to cover losses has fallen to $3.6 billion, about 0.5% of the $685 billion in loans outstanding, down from 3% a year earlier. Congress requires the agency to maintain a 2% capital-reserve ratio. If the larger upfront fee had been in place last year, the FHA would have boosted its reserves by more than $1 billion.
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The FHA, which backs as many as half of all new loans in certain housing markets, has come under fire for insuring loans with little or no money down as home prices have plunged over the past three years. With its reserves falling, the agency has been forced to walk a tightrope between protecting taxpayer dollars and helping to facilitate the housing recovery.

The FHA will keep minimum down payments at the current 3.5% level for most borrowers. But the agency will require riskier borrowers with credit scores below 580 to make a minimum 10% down payment. While the FHA doesn’t have a credit-score cutoff, most lenders require a minimum 620 score.

Some housing analysts have pushed for higher down payments on FHA-backed loans, and a bill in Congress would raise down payments to 5%, from the current 3.5%.

Instead, the FHA will reduce the amount of money that sellers can kick in for closing costs to 3% of the sale price, down from the current level of 6%. The higher cap led to abuses where sellers “heavily marked up the purchase price,” says Lou Barnes, a mortgage banker in Boulder, Colo.

From the NY Times:

F.H.A. to Raise Standards for Mortgage Insurance

The Federal Housing Administration, which is supporting the housing market by insuring thousands of new mortgages every day, is expected to announce on Wednesday that it is tightening standards.

Borrowers who get an F.H.A.-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent.

Starting this summer, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.
…
For years, the F.H.A. operated largely out of the public view. But it has become a subject of controversy recently even as it has ballooned in size. Some of the agency’s critics want it to tamp down risk by insuring fewer loans; others think it should help the market by insuring even more.

As of December, the F.H.A. was insuring 5.8 million single-family residences that had a total loan balance of $750 billion. More than half a million of the loans were seriously delinquent and heading toward foreclosure.

Many of these troubled loans were made in 2007 and 2008 as the market was plunging.

From Bloomberg:

Loan Modification Recipients Fall Short, Drop Out

About 25 percent of homeowners who received trial loan modifications through President Barack Obama’s main foreclosure prevention plan are failing to keep up with their new reduced payments, the Treasury Department said.

At least 196,000 borrowers have missed some or all of their required payments, according to comments Treasury officials made on a conference call today and calculations from government data. An additional 115,000 homeowners who started trial repayment plans last year have either dropped out or been kicked out of Obama’s Home Affordable Modification Program, the officials said.

“None of these programs have really been a success,” said Vivek Sriram, a mortgage strategist for RBC Capital Markets in New York. “With the high unemployment rate, it’s tough to solve the problem because these people will redefault even if their loan terms are fixed.”

The U.S. has shed 7.2 million jobs since the recession began in December 2007, with almost half those losses occurring after Obama took office in January 2009. The mortgage program, which Obama said would target as many as 4 million Americans struggling to hold onto their homes, has successfully modified 66,465 loans as of Dec. 31, according to data released today by the Treasury.

From UPI:

Mortgage modification numbers still small

Only a few U.S. homeowners enrolled in a federal foreclosure prevention program have achieved permanent loan modifications, statistics indicate.

Data released Friday by the U.S. Treasury Department showed that only 7 percent of those in the Obama administration’s Making Home Affordable program have moved from its trial phase into a permanent loan modification — about 66,000 of the 850,000 homeowners enrolled, The Washington Post reported.

Government and industry officials have said the main reason is that many of the homeowners in the program’s trial phase have been unable to provide enough documentation to prove they qualify and are at risk, but housing advocates counter that in some cases, homeowners have indeed provided the necessary paperwork but are in limbo while waiting for their lenders to act, the Post said.