Ahh, to be young again

Posted on June 7, 2014 by grim

From the NYT:

Young and in Debt in New York City

For young people, moving to New York City hasn’t made much mathematical sense for decades. The jobs don’t pay enough, the internships don’t pay at all, and the rents are prohibitive by any sane standard.

But now add a new economic fact of life to that list: soaring student loan debt. More students are taking out bigger loans than ever before, and in the last 10 years alone, education debt tripled, reaching over $1 trillion. A record number of college students are graduating knee deep in a financial hole before they begin their adult lives.

Still, new research suggests that college is working, economically. Four years on campus nets the average graduate almost twice as much in wages as someone without a degree. Those odds may be comforting in the long run, but not when you’re young, deeply in debt and trying to nest in New York City.

For many people in college and recently out of it, the pressure of debt seems to be colliding in new ways with the problem of finding a place to live in the city, adding a layer of complication to something that was already plenty complicated.
…
Data released by the Federal Reserve Bank of New York suggests that the relationship between student loan debt and the housing market has turned ugly fast. People with student debt used to buy homes at higher rates than peers who had not taken out loans, partly because going to college meant earning more money, according to the report.

But in 2012, the New York Fed reported that for the first time in at least a decade, 30-year-old student borrowers were less likely to take out home mortgages than other young people. Among people around 30 years old, homeownership was plunging fastest for student debtors.

Economists are worried. Last month, former Treasury Secretary Lawrence Summers said that student loan debt was taking the life out of the housing recovery, and the Nobel laureate Joseph Stiglitz called the rising debt “an educational crisis” that is “affecting our potential future growth.”

Posted in Demographics, Economics, Employment, Housing Recovery | 30 Comments

Trulia: Asking prices begin to slow

Posted on June 6, 2014 by grim

From HousingWire:

The home price explosion has stopped

Everyone loves it when home prices go up, right? Higher asking prices mean that homeowners will get more out of their existing homes, which makes them more likely to sell and upgrade to a larger home. Larger home means larger mortgages. And that’s a win-win for everyone in this business, right?

But exploding home prices aren’t necessarily a good thing. “Extreme price increases create unrealistic expectations, encourage flipping, and might discourage some owners from selling if they expect big increases to continue,” said Trulia’s chief economist Jed Kolko.

However, here’s the good news. The asking prices for homes are still increasing, but prices are beginning to stabilize. According to Trulia’s Price Monitor report for May, none of the 100 largest metros had a year-over-year price gain of more than 20%. That’s the first time that’s happened since July 2012.

Kolko said that’s a very good thing.

“Today, with no markets seeing price gains of more than 20% and only four markets seeing price declines, home price changes are looking more balanced, sustainable and widespread than at any point since the price recovery began,” Kolko said.
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The four markets where asking prices are on the decline are El Paso, Texas; Hartford, Connecticut; Albany, New York; and Little Rock, Arkansas.

Posted in Economics, Housing Recovery, National Real Estate | 103 Comments

June Beige Book

Posted on June 5, 2014 by grim

From the Federal Reserve:

Beige Book – June 4, 2014 – New York

Economic activity in the Second District has continued to grow at a moderate pace since the last report. Prices of finished goods and services remained generally stable, and businesses report modest upward pressure on input prices. Manufacturers report that business activity has picked up considerably in recent weeks, while service sector firms indicate a mixed performance. Labor market conditions have shown signs of firming across a broad range of industries, with scattered reports of labor shortages. Both general merchandise retailers and auto dealers report that sales have been steady to stronger since the last report. Tourism activity has strengthened, no longer held back by harsh weather. Housing markets showed further signs of improvement, while commercial real estate markets were generally steady. Finally, banks report fairly widespread increases in demand for loans–especially mortgages; credit standards are little changed, while delinquency rates are steady to down modestly.
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Economic activity in the Second District has continued to grow at a moderate pace since the last report. Prices of finished goods and services remained generally stable, and businesses report modest upward pressure on input prices. Manufacturers report that business activity has picked up considerably in recent weeks, while service sector firms indicate a mixed performance. Labor market conditions have shown signs of firming across a broad range of industries, with scattered reports of labor shortages. Both general merchandise retailers and auto dealers report that sales have been steady to stronger since the last report. Tourism activity has strengthened, no longer held back by harsh weather. Housing markets showed further signs of improvement, while commercial real estate markets were generally steady. Finally, banks report fairly widespread increases in demand for loans–especially mortgages; credit standards are little changed, while delinquency rates are steady to down modestly.
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The labor market has strengthened further since the last report. A growing proportion of both manufacturers and service-sector firms say they have added workers in recent weeks, and considerably more business contacts plan to expand than reduce employment in the months ahead. Separately, two major New York City employment agencies report that hiring activity has continued to pick up, driven in part by the financial sector. One contact says hiring is stronger than it has been in six years. There continues to be a shortage of IT workers, while companies are also having increased difficulty finding other workers whose skills closely match the job description. While salary increases remain subdued, one employment agency contact notes that many candidates are getting multiple offers and that this may be starting to put some upward pressure on salaries.

Posted in Economics, Employment, Housing Recovery, North Jersey Real Estate | 118 Comments

Most exciting places in Jersey? Discuss.

Posted on June 4, 2014 by grim

From Movoto:

These Are The 10 Most Exciting Places In New Jersey

If you’re in New Jersey and you’re bored, you’re obviously doing something wrong. Just look around—this state is absolutely full of awesome places to be and awesome things to do. Festivals, bars, theme parks, beaches, the list goes on and on.

So, who tops the list as the most exciting place in the state?
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1. City of Hoboken
2. Borough of Palisades Park
3. City of Long Branch
4. Atlantic City
5. City of Trenton
6. City of New Brunswick
7. City of Hackensack
8. City of Clifton
9. Union City
10. Jersey City
…
How We Got Excited About Getting These Results

First off, we made a list of the 50 most populated places in New Jersey, based on the 2010 U.S. Census. There were a few places we couldn’t find any data for, so if your city is missing, that’s why. We then used the Census and business listings to gather info in eight different criteria:

Nightlife per capita (bars, clubs, comedy, etc.)
Live music venues per capita
Active life options per capita (parks, outdoor activities, etc.)
Arts and Entertainment per capita (movie theaters, festivals, galleries, theaters, etc.)
Fast Food restaurants per capita (the fewer the better)
Percentage of restaurants that are not fast food (the higher the better)
Percentage of young residents ages 18 to 34 (the higher the better)
Population density (the higher the better)

Posted in Humor, New Jersey Real Estate | 123 Comments

Housing recovery for the one percenters

Posted on June 3, 2014 by grim

From Forbes:

Are The One Percent Making The Housing Recovery Look Stronger Than It Actually Is?
(Click for Graphs)

Like nearly every economist on the planet, I am reading Thomas Piketty’s Capital in the 21st Century. I am still getting my head around his theoretical argument, but his empirical analysis strikes me as quite strong, and it is grounded in remarkable scholarship (aka detective work).

One of the reasons I Piketty’s findings about growing wealth inequality easy to believe is the dynamics of the high-end real estate market around the world. Manhattan, Kensington in London, The Peak in Hong Kong, Altamont Road in Mumbai, etc. have stratospheric price levels, owing to the fact there is a limited supply of such places and that the people who want them have increasing wealth to purchase them.
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What does this have to do with measuring the housing recovery? The most commonly cited index, the Case-Shiller Index, is a value weighted index: million dollar houses have more weight in the index than $200,000 houses. So let’s do a simply example: suppose that two houses sell in 2013 and 2014. The first sells for $200,000 in both years; the second sells for $1,000,000 in the first year and $1,500,000 in the second year. If we were using a transaction weighted index, the average prince increase would be 25 percent (0 percent for the first house and 50 percent for the second). But with a value weighted index, we put together a “portfolio” of houses and see that the total value increased from $1,200,000 to $1,700,000, or a shade under 42 percent.
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Notice that while there has been substantial recovery from the trough, prices in the lowest tier have not gotten back to the pre-crash peak–in fact, they are still down 1/3 from their all time highs.
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The level is just below the all time peak. So the housing market at the top is doing much better than the housing market at the bottom (it is doing better than the middle, too). Even if all sectors of the housing market were weighted equally, a single index number of house prices in San Francisco will overstate the strength of the recovery for most people; with a value weighted index, that strength is overstated even more.

Posted in Demographics, Economics, Housing Recovery | 123 Comments

Celebrity Deathmatch: City vs Suburb

Posted on May 31, 2014 by grim

From the Commercial Observer:

The City vs. The Suburbs

You can feel it when you walk around Manhattan these days. The city seems more vibrant, more active than ever before. In fact, this is more than a feeling; it’s the verified truth.

Earlier this year the U.S. Census Bureau reported that the population of New York City reached a record high in 2013 of 8.405 million people. In addition, the number of people working in New York City–many of whom come in from the suburbs every day–is also at a record high. This growth reflects a national trend toward re-urbanization that is being led by the “millennial generation”. Millennials form the generation born between the early 1980s and the early 2000s. This age group is now in the process of entering the workforce in significant numbers. They are the largest population cohort to enter the labor force since the baby boom generation born in the 1950s and 1960s.

One characteristic of the millennial generation is that they prefer to live and work in cities. According to a recent survey by Nielsen, millenials “are currently living in these urban areas at a higher rate than any other generation, and 40 percent say they would like to live in an urban area in the future.” As this generation is entering the workforce, they are changing the way companies look at where they locate. One consequence has been a shift in job growth away from suburbs to cities.

In New York, where we can look at employment trends in both the city and the suburbs, the trend has been remarkable. From 1992 to 2004 employment in the New York metropolitan area (the city plus the suburbs of Long Island, Northern New Jersey and Westchester, Putnam and Rockland counties) increased by roughly 830,000 jobs. Approximately 215,000 of those jobs were in New York City and 615,000 were in the suburbs. Since 2004, the trend has completely reversed. From 2004 to 2014 there have been an additional 500,000 jobs created in the metropolitan area. Approximately 495,000 of them were in New York City, with only 5,000 jobs created in the suburbs over the past decade.

Posted in Demographics, Economics, Employment, National Real Estate | 128 Comments

April foreclosure highlights

Posted on May 30, 2014 by grim

From the WSJ/Corelogic:

CoreLogic Reports 46,000 Completed Foreclosures in April

Highlights as of April 2014:

— Every state, excluding New York and the District of Columbia, posted double-digit year-over-year declines in foreclosures.

— Thirty-seven states show declines in year-over-year foreclosure inventory of greater than 30 percent with Arizona, Utah, Minnesota and California and experiencing declines greater than 50 percent.

— The five states with the highest number of completed foreclosures for the 12 months ending in April 2014 were: Florida (121,000), Michigan (46,000), Texas (38,000), California (33,000) and Georgia (32,000).These five states account for almost half of all completed foreclosures nationally.

— The five states (including the District of Columbia) with the lowest number of completed foreclosures for the 12 months ending in April 2014 were: the District of Columbia (68), North Dakota (352), West Virginia (517), Wyoming (718) and Alaska (844).

— The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: New Jersey (6.0 percent), Florida (5.4 percent), New York (4.6 percent), Hawaii (3.1 percent) and Maine (3.0 percent).

— The five states with the lowest foreclosure inventory as a percentage of all mortgaged homes were: Alaska (0.4 percent), Wyoming (0.4 percent), North Dakota (0.5 percent), Nebraska (0.5 percent) and Minnesota (0.5 percent).

Posted in Foreclosures, National Real Estate | 116 Comments

HARP falls short of hitting goals

Posted on May 29, 2014 by grim

From HousingWire:

Did HARP fail 8 million homeowners?

According to the Federal Housing Finance Agency, the volume of mortgage refinance under the Home Affordable Refinance Program is continuing to decline. And in an environment of rising mortgage rates, this is a trend unlikely to reverse.

HARP, which started in 2009 and is scheduled to end after 2015, will likely close far short of its envisioned potential. HARP was revised once to allow for higher loan-to-value homeowners. The president later asked for more — much more.

In his 2012 State of the Union address, President Barack Obama hinted at expanding HARP to include non-Freddie Mac and Fannie Mae loans. The plan, which became referred to as HARP 3.0, could help more than 11.4 million borrowers refinance and save an average $3,000 a year on mortgage payments.
…
Several bills were introduced to try to make this, and other mortgage programs, a reality. They all failed.

In the first quarter of 2014 the number of mortgages refinanced through HARP was 76,930. In total, only 3.1 million mortgages have been refinanced through HARP — 8 million less than the potential number of refinances.

HARP only represents 21% of all refinances, the FHFA notes.

In total, the level of refinance activity is now closer to 2008 levels.

Posted in Foreclosures, Housing Recovery, Mortgages, Politics | 188 Comments

Home prices take a breather

Posted on May 28, 2014 by grim

From the NYT:

Home Prices Start Easing, to the Relief of Experts

A steep gain in home prices in many markets that helped lift millions of Americans out of the red on their mortgages is now markedly slowing, with new data from the Standard & Poor’s/Case-Shiller national home price index on Tuesday showing that the annual growth in prices had eased in March to 10.3 percent, from the previous year’s increase of 11.4 percent.

But analysts said that the softening of price gains, rather than a worrisome trend, may actually be welcome news. Double-digit increases cannot go on forever, and many economists are using words like “sustainable” and “stable” to describe the slowdown, saying the market is becoming healthier.

Foreclosures make up a smaller percentage of sales, and the higher prices have caused investors to back off, leaving the bigger question of whether housing is affordable and mortgages are accessible to average families that want to buy. First-time home buyers still make up less than 30 percent of the market, according to the National Association of Realtors, while the number of all-cash buyers — not just investors, but older people who are downsizing after the sale of a larger home — has remained elevated.
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Of the 20 cities that Case-Shiller tracks individually, all had double-digit price increases in that time period except Boston, Charlotte, Cleveland, Denver, New York and Washington, which had single-digit increases. In some cases, the cities hit hardest in the housing bust had the biggest gains. Las Vegas, where home prices rose 21 percent, led the list. Cities where demand has accelerated and housing supply is sharply limited by geography and other factors, like San Francisco, also posted large gains. Prices soared there by 21 percent, according to the measure.

Eighteen cities are still below their peak prices during the housing bubble; only two — Denver and Dallas — have returned to the previous levels.

But analysts say that the prices at the height of a bubble should not be considered a benchmark. Compared with March 2004, a decade ago, home prices in 14 of 20 cities are now higher. That trend was good news for the four million families who regained some equity in their homes last year, according to CoreLogic. But for the 6.5 million families who still owe more than their home is worth, many of whom bought or refinanced at the height of the market, the current slowdown is likely to delay the point at which their homes will be above water.

Month-to-month price changes are much more volatile than year-over-year changes, so economists were skeptical when Case-Shiller showed a much larger-than-expected gain between February and March. Nineteen of 20 cities showed higher prices, while prices in New York actually contracted 0.3 percent. “The Case-Shiller numbers contradict all the other housing market numbers we follow, which show activity and home prices slowing or falling outright since mortgage rates surged last spring,” Ian Shepherdson of Pantheon Macroeconomics wrote.
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Analysts at Capital Economics also forecast positive effects from the slowdown.

“Slowing house price appreciation should not be seen as a sign that the housing recovery is hitting the buffers. In fact, it will have the opposite effect,” they wrote. “A slowdown in price gains closer to the rate of income growth will prevent housing becoming overvalued, and therefore support a further rise in home sales and housing starts.”

Posted in Economics, Housing Recovery, National Real Estate | 109 Comments

No quick end to NJ’s foreclosure crisis

Posted on May 27, 2014 by grim

From the Press of Atlantic City:

New Jersey leads nation in foreclosures

New Jersey now leads the nation with the highest percentage of loans in foreclosure, the Mortgage Bankers Association says.
South Jersey is also mired in the problem.

Sheriff’s sales on mortgage foreclosures in Atlantic County have nearly doubled from a year ago, said Pam Hoerter, a fiscal officer for the Sheriff’s Office.

“There are more. A lot more,” she said.

The public property auctions, held every Thursday, average about 20 to 35 a week now, compared with about 10 to 15 weekly a year ago, she said.
Atlantic and Cumberland counties saw the second and third highest rates of foreclosure activity in the state in April, according to California-based market data firm RealtyTrac.

An abundance of distressed homes weighs on overall home values.

And the region’s weak job market has done little to lift housing demand, said Richard Perniciaro, director of Atlantic Cape Community College’s Center for Regional and Business Research.

“Getting out of this mess is going to take a long time,” he said.

The state’s current second wave of foreclosure activity — which includes initial filings, notices of sale and bank repossessions — has gradually built up over the past two years, said Daren Blomquist, vice president of RealtyTrac.

This counters a national trend that has seen the number of distressed properties declining.

Part of this is because foreclosures in New Jersey can take a very long time.

The processing of distressed properties that happened in much of the U.S. from 2009 to 2011 is now occurring here, Blomquist said.

“It’s almost as if in New Jersey there was a time capsule, and this got pushed down,” he said. “The foreclosures got put in a time capsule, they’ve been dug up again and they’re happening.”

…

Posted in Economics, Foreclosures, Housing Bubble, Mortgages, New Jersey Real Estate | 84 Comments

“Everything that I like is over my price range right now”

Posted on May 24, 2014 by grim

From the WSJ:

Housing Recovery’s Missing Link: First-Time Buyers

Economists, real-estate agents and many home builders expected first-time and entry-level buyers to begin returning to the market this year, jump-starting the sputtering housing recovery. So far, that hasn’t happened.

Less buying at the market’s lower end by first-time buyers has contributed to limiting sales of existing homes so far this year to a pace of roughly 88% of their 10-year average. It’s also a factor in stunting sales of newly built homes to a pace of roughly 60% of their annual average since 2000.

Some economists now predict that tight lending standards, high prices and the sluggish economic recovery will keep first-timers from returning in full force for several years. That likely means a slower pace for the housing recovery, already a drag on the broader economy in the past year.

“We likely have hit the bottom in the past six months or so regarding the lack of participation of first-time buyers,” said Lawrence Yun, chief economist for the National Association of Realtors. “It may take three years to return to normal first-time-buyer participation.”
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Myriad other factors have dogged first-time buyers in recent years. According to Census data, Americans from 25 to 34 years of age experienced the biggest decline in income—9%—of any age group from 2007 to 2012 other than people younger than 25. Many also are grappling with student debt that crimps their cash flow.

What’s more, there are fewer affordable homes available for first-timers to purchase. Nationally, the median price of an existing home has increased by 5.2% in the past year to $201,700. The median price of a newly built home registered $275,800 in April, down 1% from a year earlier.
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The surest route to normalcy for the housing market is for first-time and entry-level buyers to rebound, economists say.

First-time buyers now account for about 16% of new-home purchases, down from a range of 25% to 28% between 2001 and 2007, according to the National Association of Home Builders. In the existing-home market, first-timers accounted for 29% of purchases in April, according to the Realtors association. That’s down from their monthly share exceeding 40%, and occasionally surpassing 50%, in 2009 and 2010 when a federal tax credit for first-time buyers was offered.
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The dynamics could stunt the entry-level market and broader economy for years to come. Economists believe younger Americans now are much more likely to rent for longer periods than did earlier generations—due not only to the rising home prices and high credit standards but also the high student debt levels and elevated levels of underemployment.

Mark Zandi, chief economist at Moody’s Analytics, expects a “slow build” in first-time and entry-level home purchases starting this year. But “there are several headwinds,” he said, pointing to elevated levels of unemployment among younger workers and high levels of student-loan debt. “They’ve had a tough financial time.…I’m sure they’re psychologically scarred by the economic roller-coaster of the last 10 years.”

On the bright side, housing-market observers note that U.S. job growth is improving, mortgage-lending standards are loosening ever so slightly and many young adults likely are getting weary of living with roommates or their parents.

Posted in Demographics, Economics, Employment, Housing Recovery | 55 Comments

Spring Market Late? Or Last Hurrah?

Posted on May 23, 2014 by grim

From Bloomberg:

Gain in Existing U.S. Home Sales Lifts Spring Prospects

Previously owned U.S. home purchases increased in April as a bigger supply of properties lured buyers and raised prospects for a stronger spring buying season.

The 1.3 percent gain, the first this year, pushed sales to a 4.65 million annualized rate, National Association of Realtors data showed today. The number of available properties climbed to an almost two-year high, helping slow the pace of price appreciation.

A pickup in real-estate listings that improves affordability will help bring homeownership within reach of more Americans, increasing the odds the industry will recover from a yearlong slowdown. A gain in home construction last month showed builders are responding to limited inventory at the same time mortgage rates retreat and lure prospective buyers.

“The improvement in availability suggests stronger sales activity in the months ahead,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. Price is the second-best forecaster of existing home sales in the last two years, according to data compiled by Bloomberg. Still, “we need to see more building activity.”
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“There’s not that many first-time buyers who are getting into the market,” said Stephanie Karol, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. “We see a turnaround happening slowly.”
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The report from the Realtors group showed the number of previously owned homes on the market rose 16.8 percent to 2.29 million, the highest since August 2012. At the current sales pace, it would take 5.9 months to sell those houses. Less than a five months’ supply is considered a tight market, the NAR has said.

The sales increase in April “is welcoming,” Lawrence Yun, NAR’s chief economist, told reporters as the figures were released. “I feel optimistic you would trend higher generally. Now with more inventory, I think there will be more buyers entering the market.”
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Investors accounted for 18 percent of the home purchases last month, up from 17 percent a month earlier. Seven of 10 investors paid cash. All-cash transactions accounted for about 32 percent, about the same share as the last year, the report showed. First-time buyers represented 29 percent of all transactions.

Sales of single-family homes increased 0.5 percent to an annual rate of 4.06 million. Purchases of multifamily properties — including condominiums and townhouses — jumped 7.3 percent to a 590,000 pace.

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 53 Comments

Christie Axes Property Tax Rebate

Posted on May 22, 2014 by grim

From the Record:

Christie puts off property-tax rebates to ease budget problems

Senior citizens, disabled residents and other homeowners who are among the more than a million people enrolled in New Jersey’s Homestead program will not get their property tax relief this year.

That relief — in the form of a credit on annual property tax bills — is again being delayed by Governor Christie and his administration, who blame another bad budget year.

The latest delay means people won’t see this benefit until May 2015 — nearly two years since the last time the tax-relief credit was available.

“When you’re running out of money, you’ve got to manage your cash carefully,” Christie said on Wednesday, defending the decision to delay the credit as part of a plan to reduce his proposed budget by $1.7 billion. “You’ve got to prioritize your bills and decide which ones you absolutely must pay.”

Christie has now postponed the Homestead program three times since taking office in early 2010. Property taxes in New Jersey are still rising, but not by as much as they had when Christie took office and before he pushed for a 2 percent cap on increases. But they are still growing, to a record high statewide average of $7,988 last year.

What people get as a tax relief credit, however, has not changed much since 2010.

Seniors and disabled residents see an average of $516, for those earning under $150,000. Homeowners earning less than $75,000 see a benefit of $402.
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The Homestead credit costs the state roughly $375 million. An estimated 1.6 million New Jersey homeowners qualify for the current version of the program. Christie converted the Homestead program from a direct rebate check to a credit on property tax bills after he took office in 2010.

State Treasurer Andrew Sidamon-Eristoff disclosed the latest plan to delay the property tax relief on Wednesday during an Assembly Budget Committee meeting. He said it gives the Christie administration “flexibility to handle any adverse cash results” as the state deals with its latest budget woes.

“It’s, I think, appropriate from a cash-management standpoint,” Sidamon-Eristoff said.

Posted in Economics, New Jersey Real Estate, Property Taxes | 106 Comments

Surprise! GSEs to stick around, and lend more.

Posted on May 21, 2014 by grim

From MarketWatch:

Fannie, and Freddie aren’t going away, Watt says

One of the country’s biggest political footballs, housing finance reform, took some funny bounces over the past week.

Most notable were the first public appearances by the government’s new point man for running Fannie Mae and Freddie Mac, former North Carolina Congressman Mel Watt, who took office as director of the Federal Housing Finance Agency in January and was nominated more than a year ago.

Watt surprised a number of people in a speech at the Brookings Institution and a long interview with C-Span last week when he said he wasn’t wasting any time figuring out the future of housing finance or staying awake at night worrying about investors in Fannie and Freddie shares.

Nope. His job is to keep housing finance humming along right now. If that means expanding the “footprint” of the two lending groups, which guarantee the bulk of U.S. mortgages — because private lenders aren’t ready to take up the slack — then so be it.

Watt reversed the plan of his predecessor, Edward DeMarco, who hung on as acting director of the FHFA much longer than many people wanted, to lower the principal amounts for “conforming” loans that Fannie and Freddie are willing to guarantee.

In other steps to increase access to credit, Watt relaxed the terms for Fannie and Freddie to force lenders to take back loans and eased some requirements for down payments. He also moved to improve liquidity in the market by increasing the portion of non-guaranteed credits investors could acquire.

As for reforming housing finance, not his job. He is not going to think about it, not going to talk about it, and, said this 10-term congressman, he is not even going to read the legislative proposals for Fannie and Freddie’s future.

The latest such proposal, which calls for winding down the two entities and providing government guarantees to mortgages from private lenders, was approved last week by the Senate Banking Committee, but with such tepid support it is virtually certain to remain a dead letter in an election year.

Posted in Economics, Housing Recovery, Mortgages, National Real Estate, Politics | 92 Comments

The house you want? Sorry, underwater.

Posted on May 20, 2014 by grim

From HousingWire:

How does negative equity create a big obstacle for first-time buyers?

First-time buyers know owning is a better investment than renting, but the type of homes first-time buyers are looking for are being kept off the market in part because nationally, those homes are almost three times more likely to be stuck underwater than more expensive homes.

That’s the finding of the Zillow (Z) negative equity report for the first quarter.

The national negative equity rate fell to 18.8% in the first quarter, with almost 9.7 million American homeowners with a mortgage underwater, owing more on their mortgage than their home is worth.

Specific to the challenges of first-time buyers in terms of affordability, among all homes with a mortgage nationwide, roughly one in three (30.2%) priced within the bottom third of home values were underwater in the first quarter, compared to 18.1% of homes in the middle third and 10.7% of homes in the top third.

It is very difficult for an underwater homeowner to list their home for sale without engaging in a short sale or bringing cash to the closing table, which is a major contributor to inventory shortages across much of the country, even as negative equity slowly recedes.
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“The unfortunate reality is that housing markets look to be swimming with underwater borrowers for years to come,” said Zillow chief economist Stan Humphries. “It’s hard to overstate just how much of a drag on the housing market negative equity really is, especially at the lower end of the market, which represents those homes typically most affordable for first-time buyers. Negative equity constrains inventory, which helps drive home values higher, which in turn makes those homes that are available that much less affordable.”

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 145 Comments