Friday Open Discussion and Legal Review

Posted on June 29, 2012 by grim

From Bloomberg:

Eminent Domain Is Bad Ploy for Underwater Mortgages

Officials in San Bernardino County, California, believe they have figured out a clever way to solve the county’s, and possibly the nation’s, housing problems.

Detailed by a Cornell University professor, and pitched by influential San Francisco investors who stand to make a fortune from it, this new idea is based on one of the oldest concepts: the taking of other people’s property.

County officials, joined by the cities of Ontario and Fontana, are considering using an expansive interpretation of eminent domain — typically used to acquire real property to build public works — to seize the mortgages, not the real property, of those homeowners who owe more than their homes are worth.

The funds would be provided by private investors, who would pay the holders of the mortgages “fair market value” and then write new ones for the homeowners based on much lower principal amounts, reflecting the new depressed values of the homes. The firm behind this complex plan, Mortgage Resolution Partners, may be in the running to acquire vast numbers of mortgages at discounted rates. Local officials would have, theoretically, solved their local housing problems. Homeowners would stay in their homes and have much lower mortgages.

Advocates tout it as a win-win solution, but the holders of the mortgages must give up their assets and accept whatever value the governmental authority assigns to their notes.
…
The “fair market value” probably wouldn’t be based on an expected sales price of the home, but on a wholesale value that would be at least 20 percent lower than that, said Mark Dowling, the chief executive officer of the Inland Valleys Association of Realtors. (The value would probably be based on the fair market value of the mortgage — the home price minus many transaction costs — and thus far lower than the fair market value of the home itself.)
…
There would surely be unintended consequences. Grabbing private mortgages could lead to a widespread reluctance by private firms to lend money in the county — or at least an increase in the cost of lending in that area. That would be a particular problem given that an obstacle to a revived housing market, especially in low-income, high-unemployment areas, is the inability of homebuyers to qualify for mortgages.

As Gideon Kanner, professor emeritus at Loyola Law School, argues, “If you make a reduction in loan balance available, whether by eminent domain or otherwise, these people will be provided with a powerful incentive to stop making payments on their mortgages, hoping to get bailed out by the government.”
…
However it shakes out, the plan would create perverse incentives. Mainly, it seems like a way for big players to muscle out the smaller investors who now are competing for short sales and foreclosures.

Posted in Economics, Foreclosures, Housing Recovery, Mortgages, Politics | 204 Comments

Spring strength continues into May

Posted on June 28, 2012 by grim

From MarketWatch:

Pending home sales surge 5.9% in May to 2-yr high

Pending home sales climbed 5.9% in May to match a two-year high, a trade group said Wednesday. The National Association of Realtors said its pending-home-sales index rose to 101.1 in May from 95.5 in April. The index is 13.3% above May 2011 levels. May marked the highest level since the scheduled expiration of the home buyer tax credit in April 2010. A sale is listed as pending when the contract has been signed but the transaction has not closed. An index of 100 is equal to the average level of contract activity during 2001.

From the WSJ:

Housing’s Boost: Time to Stop Blaming Weather?

Maybe it wasn’t the weather.

For months, economists have mused over whether the surprisingly strong start to the spring housing market has come from an unseasonably warm winter that simply led buyers back into the market earlier than usual.

But Wednesday’s report on pending home sales shows that housing demand hasn’t eased heading into the traditional peak buying season, despite an early start to the spring, the economic storm clouds in Europe and a slower rate of job growth at home.

An index that measures the number of contracts signed to purchase previously owned homes rose in May to match its March level, the highest in nearly two years. Pending sales were up by 13.3% from last year, and up by 5.9% from April, according to the National Association of Realtors.

Contract activity hasn’t been a perfect indicator of future sales activity. Many buyers are unable to secure deals due to difficulties with loan approvals or low home appraisals. Also, many contracts are subject to bank approval because the home seller owes more than the home is worth.

As a result, someone who went under contract in March, only to see the deal fall apart, might have gone under contract on a separate home in May.

Still, May’s reading shows broad strength, helped by mortgage rates that continue to plumb record lows. Pending sales were up in every part of the country, up by 19.8% in the Northeast and 22.1% in the Midwest, compared with one year ago. Activity was up by 11.9% in the South and 4.8% in the West.

Right now, all the signs point to a housing market that “has hit bottom and started an upswing,” wrote Dean Baker, the housing economist who has long maintained a bearish outlook for housing, on Tuesday.

Posted in Economics, Housing Recovery | 236 Comments

NY Metro prices continue to show year over year losses

Posted on June 27, 2012 by grim

From the Record:

Home prices down 3.8 percent in region

Despite indications that the national real estate market may be stabilizing, the region’s home prices continue to slide, the Standard & Poor’s/Case-Shiller index said Tuesday. Home values in the New York metropolitan area, including North Jersey, dropped 3.8 percent from April 2011 to April 2012, according to the index.

Nationally, home prices declined 1.9 percent in that period. However, prices increased 1.3 percent nationally from March to April — suggesting the troubled real estate market may be finding a bottom. In this region, prices rose 0.1 percent from March to April.

“We were hoping to see some improvement in April,” said David Blitzer, head of the index committee at Standard & Poor’s. “Changes in home prices are very seasonal, with the spring and early summer being the most active buying months.”

Home prices in the region are down 27 percent from their peak in mid-2006, and have returned to the levels of September 2003. Nationally, home prices have declined 34 percent from their peaks in 2006, and have returned to early 2003 levels.
…
Home prices were a median $379,500 in Bergen County in April, down 6 percent from a year earlier. The number of sales rose 4 percent. In Passaic County, home prices declined 8 percent to a median $247,424, while the number of sales rose 4.6 percent. These numbers are from the New Jersey and Garden State multiple listing services. Case-Shiller does not break down price data by county.

Posted in Housing Recovery, National Real Estate, New Jersey Real Estate | 141 Comments

Case Shiller too laggy to be useful any more?

Posted on June 26, 2012 by grim

From Business Insider:


Deutsche Bank Hammers Another Nail Into The Case-Shiller Coffin

Tuesday morning, we get the April Case-Shiller home price index. Economists estimate that the 20-city index climbed 0.4 percent month-over-month. But prices are also expected be down by 2.3 percent year-over-year.

However, we’ve heard a number of experts question the quality of the index.

Kevin Caron, strategist for Stifel Nicolaus, told Business Insider that the lag in home price data may be much greater than advertised:

The data doesn’t hit the database until the public filing after closing. But the closing may be months after the agreement between buyer and seller (and the banks that provide financing). Ultimately, the lag can be a long time (maybe six months) between when a price is agreed upon, the mortgage is secured, the closing occurs, and the sale is recorded and available for public use.

Bill McBride of Calculated Risk estimates that the lag could be as high as seven months.

According to a new note to clients, Deutsche Bank Chief U.S. Economist Joe LaVorgna fully expects tomorrow’s Case-Shiller number to give an inaccurate read on U.S. home prices.

“[W]e believe C-S is understating recent home price appreciation, as a broad array of other home price metrics is showing a more significant improvement in pricing behavior,” wrote LaVorgna.

He cites four competing home price measures that all show home prices increasing year-over-year, which conflicts with the decline in the Case-Shiller number. For example, the CoreLogic home price series, arguably the broadest measure of home prices in the US, has increased four months in a row at a +11.8% annualized rate. This is the fastest rate since the four months ending November 2005 (+11.7%). Over the past year, the CoreLogic series is up +1.1% (See chart below). Importantly, the FHFA home price figures have shown similar price appreciation; the series is up three months in a row at a +11.3% annualized pace. Over the last 12 months, FHFA prices have increased +3.0%.

Additionally, the improvement in the year-over-year growth rates is corroborated by both the median existing and new home price data, where the gains are +7.9% and +5.6%, respectively. Hence, we have four different home price metrics that are showing much more substantial home prices improvement than C-S, leading us to downplay the significance of the latter.

Posted in Economics, Housing Recovery, National Real Estate | 132 Comments

NAHB: Fix housing or the kids get it

Posted on June 25, 2012 by grim

From HousingWire:

NAHB: Housing slump linked to student debt

The dramatic rise in student loan debt stems from the fact that parents of college-aged students are financially strapped and no longer able to help with tuition after losing thousands of dollars in household wealth, the National Association of Home Builders said.

“As more and more parents face tighter budget restraints as a result of lower home values, this is forcing an increasing number of students to take out loans for tuition, essentially shifting some of the burden of paying for college from parents to students,” said Barry Rutenberg, chairman of the National Association of Home Builders said.

Federal Reserve data shows household wealth plunging 40% from 2007 to 2010 as values dropped.

“Together, these findings should serve as an urgent wake-up call for policymakers to do their part to ensure a full-fledged housing recovery moves forward to restore the balance sheets of tens of millions of home owning families, create jobs and spur economic growth,” said Rutenberg.

Posted in Economics, Housing Bubble | 86 Comments

Best Spring Market in Years?

Posted on June 24, 2012 by grim

From the Record:

Lower prices attract buyers, boosting spring market

Tired of renting, Charles Carozza and his fiancée, Christina Trause, recently bought a Fair Lawn Cape Cod for $305,000 — well below the $400,000 they think the house would have fetched at the market peak.

“If you can, now is totally the time to buy,” said Carozza, who recruits doctors to do exams in legal cases.

A lot of buyers apparently agree with him. This year’s spring market in North Jersey was the most active in several years, suggesting that a recovery in housing may finally be taking hold. The number of single-family sales rose 12.2 percent in Bergen County and 7.9 percent in Passaic County from January through May, compared with the period last year. The trend is stronger in Bergen because its proximity to New York and its highly regarded school systems make it a more desirable location, experts say.

But activity remains well below levels during the housing boom, with Bergen County sales volume down almost 20 percent from 2006, according to the New Jersey Multiple Listing Service. And prices continued to slide — 6 percent in Bergen and 2.8 percent in Passaic, compared with the first five months of 2011.

“The volume of transactions is way up,” said real estate agent Marilyn Nuber of Keller Williams Village Square Realty in Ridgewood. “Prices are not way up, though.”
…
“It’s the lower prices, really,” said Arlene Cabrera, an agent with Whitley Real Estate in New Milford. “We haven’t seen prices this low in a very long time.”

Home values have come down 27 percent in the New York metropolitan area, compared with their peaks in 2006, according to the Standard & Poor’s/Case-Shiller home price index. (New Jersey MLS numbers show a similar drop for Bergen County.)
…
But a number of North Jersey real estate agents say they saw more multiple bids this spring than they have in several years.

“I have taken three listings in the last month, and they all have experienced bidding wars,” said Kathleen Falco, a Re/Max agent in Franklin Lakes.
…
Andrew and Sheila Guarino have accepted that reality. The couple bought their five-bedroom Ridgewood colonial at the market’s peak in 2007, paying $2.56 million and putting in another $600,000 of renovations. Now that two of their three children have gone off to college, they want to downsize and cut their home maintenance costs, as well as property taxes of more than $49,000.

They have the house on the market for $2.5 million, and are resigned to taking a loss.

“It’s difficult, but you have to make a practical decision,” said Andrew Guarino, who owns a fire alarm service company in New York City. “We just don’t need all that space. … We wanted to have our dream house, we’ve had it, and now we realize what that entails.”

The Guarinos aren’t tempted to hold on till prices rebound, since they figure that could take several years. “I don’t believe in playing the market in real estate,” Andrew Guarino said.

Jeffrey Otteau, an East Brunswick appraiser who tracks the housing market statewide, agreed that despite the uptick in activity, sellers must keep their prices competitive to attract buyers “because there are no lenders that will allow you to buy more house than you can afford.”

Posted in Economics, Housing Recovery, New Jersey Real Estate | 61 Comments

The ‘burbs ain’t dead yet

Posted on June 23, 2012 by grim

From the NYT:

Old Neighborhood, New Life

EMILY De NICOLO has lived in Manhattan for the last 14 years. But as she and her husband, Jay Della Monica, prepare for the arrival of their first child, in August, city life is looking more and more like a thing of the past. In fact, the couple are anticipating a future in Port Washington, Ms. De Nicolo’s childhood home.

They will soon be closing on a five-bedroom three-bath split-level ranch, at the other end of the block from the house she grew up in, a custom contemporary for which her parents paid $76,000 in 1976. “You can add a zero to that,” she said of the price she and Mr. Della Monica are paying as a result of a bidding war with three other couples. “Port Washington is a little more diverse than other towns, and it is an ideal commute to the city,” she said. “It is more favorable for young families, and you have a great school district, especially with a baby on the way.”
…
Ms. De Nicolo, 37, and Mr. Della Monica, 42, are part of a small number of young adults who are moving back to the Island after spending their post-college years in the city. Notwithstanding the contentions of local planners and elected officials that a tide of young adults is moving away, some are bucking that trend, though perhaps after a longer hiatus than in previous generations who married, had children and moved to the suburbs sooner.

Ryan Patrick Donnelly II, the president and managing partner of the Donnelly Group, a real estate firm in Garden City, said, “Pretty much 50 percent of the buyers coming into town either grew up here or have friends here.” Most moved to Manhattan after college, stayed for about a decade, married and started a family.

“They either move back right after the children are born or when the kids are nursery-school age,” he said, citing the high nursery-school tuition in the city as a motivating factor. And there is another important one: Instead of nannies, most people in the suburbs “have the grandparents to take care of the kids.”

Many would stay in the city if they could afford apartments large enough to accommodate their families, Mr. Donnelly said, “but rents are so high in Manhattan they are being forced out. With salary increases not keeping pace with rent hikes and interest rates so low, it makes sense” to return to the Island.

They aren’t, however, relying on the Bank of Mom and Dad to finance their purchase. The buying couples are in their mid- to late 30s and are “pretty much all self-sufficient,” Mr. Donnelly said. “They have been saving and living in small apartments” to be able to buy homes in the $600,000-to-$800,000 range.
…
Even their English bulldog “is exponentially happier out here than in the city.” Come October they will be renting a four-bedroom carriage house in Mill Neck for about $3,000 a month, with the possibility of improving the home and grounds in lieu of rent. Among their friends, Mr. DiPietro said, “we are a little ahead of the charge, but the ones who grew up out here seem envious of our move.”

Posted in Economics, General | 36 Comments

Home Sales Rise 13.6% in May

Posted on June 22, 2012 by grim

Why all the downers around existing home sales? Existing Home Sales, unadjusted, year over year, were up 13.6% in May nationally and up 16.7% in the Northeast.

From Bloomberg:

Sales of Existing U.S. Homes Fell in May to 4.55 Million

Sales of previously owned U.S. homes declined in May, showing an uneven recovery in residential real estate.

Purchases of existing properties dropped 1.5 percent to a 4.55 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 4.57 million pace.
…
Estimates in the Bloomberg survey of 74 economists ranged from 4.40 million to 4.73 million.
…
Existing-home sales, which are tabulated when a contract closes, have climbed since reaching a low of 3.39 million at an annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.

The median price of an existing home climbed 7.9 percent to $182,600 in May, the highest since June 2010, from $169,300 in May 2011, today’s report showed. The increase in May reflected more sales of higher-priced properties, according to Lawrence Yun, chief economist of the Realtors group.

The number of previously owned homes on the market decreased 0.4 percent to 2.49 million in May from a month earlier. At the current pace, it would take 6.6 months to sell existing inventory, compared with 6.5 months at the end of the prior period.
…
Sales of single-family homes decreased 1 percent to an annual rate of 4.05 million, while condominiums and co-op transactions fell 5.7 percent to a 500,000 pace.

Three of four regions showed sales declines, led by a 4.8 percent drop in Northeast. Purchases also fell in the West and South.

Of all purchases, cash transactions accounted for about 28 percent, down from 29 percent in April. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 25 percent of the total last month, the lowest since the group began tracking the data in 2008, down from 28 percent in April.

Investors accounted for 17 percent of purchases in May, a decrease from 20 percent in April. First-time buyers accounted for 34 percent of the market in May.
…
“First-time buyers are really not stepping up,” Yun said. Typically, first-time buyers make up 40 percent to 45 percent of the purchases, he said. Instead, most sales were homeowners who were trading up, he said.

Posted in Economics, Housing Recovery, National Real Estate | 139 Comments

May Existing Home Sales

Posted on June 21, 2012 by grim

From Bloomberg:

Sales of Previously Owned U.S. Homes Probably Declined in May

Sales of previously owned U.S. homes probably fell in May, showing an uneven recovery in residential real estate, economists said a report may show today.

Purchases dropped 1.1 percent to a 4.57 million annual rate last month, according to the median forecast of 74 economists surveyed by Bloomberg News. Jobless claims last week were little changed, other data may show.
…
“The housing market is recovering very slowly,” said Yelena Shulyatyeva, U.S. economist at BNP Paribas in New York. “I do see a pickup in demand throughout the year but it’s going to be very gradual. What we need to see probably is continued low mortgage rates. That will gradually continue to improve housing demand.”

The report from the National Association of Realtors is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 4.4 million to 4.73 million.

Existing-home sales, which are tabulated when a contract closes, have climbed since reaching a low of 3.39 million at an annual rate in July 2010. In the buildup to the subprime lending collapse and recession, purchases reached a peak of 7.25 million in September 2005.
…
“There are some good signs in housing, but nevertheless we are not getting the size of the boost, the amount of help in the recovery we would normally get from a housing recovery,” Bernanke said yesterday at a press conference in Washington after the Fed announced it would extend a program aimed at bolstering the economy.

“Access to credit is a major issue” for some Americans wanting to buy a home, Bernanke said. “Mortgage access is much tighter than it has been for a long time. What that does, to some extent, is it mutes the impact of the Fed’s actions.”

Posted in Economics, Housing Recovery, National Real Estate | 140 Comments

Zip Matters (But we already knew that)

Posted on June 20, 2012 by grim

I’d take this one step further and say that it isn’t location that matters, it is those incurable defects that impact the property that matter, location being one of those. The concept is easy, there are things you can fix, and things you can’t. Terrible paint colors – Curable. Being next to a highway – Incurable. During the middle and tail end of the boom, buyers began to disregard incurable defects and prices weren’t discounted accordingly. These properties are facing the biggest price declines today, as the next generation of buyers aren’t so quick to overlook those incurable defects, and are looking for discounts in-line with the severity of that defect.

From the Wall Street Journal:

Housing Prices Rise, but Not for Everyone

As more U.S. housing markets improve, an adage about what matters in real estate is proving true: location, location, location.

While property markets across the country rose together during the housing boom and fell together during the crash, new data analyzed by real-estate firm Zillow Inc. for The Wall Street Journal show that markets are exiting the downturn at different speeds.

The findings come amid fresh evidence Tuesday of the housing recovery’s tentative progress. May single-family housing starts rose by 3.2% from April on a seasonally adjusted annual basis, while building permits increased 7.9%, according to the Commerce Department. Sales of existing homes in May—a benchmark of the health of the critical spring sales season—are due Thursday, and early reports suggest many markets are notching increases from the weak levels of one year ago.

That fitful recovery is reflected in the Zillow analysis. Homes in sought-after neighborhoods, including those near transportation corridors and with top-notch public schools, are finding buyers. But others in neighborhoods just a few miles away, including so-called exurbs or areas that never fully gentrified, are languishing.

Zillow tracked price changes by ZIP Codes for dozens of metropolitan areas in April compared with three months earlier. The company uses a proprietary model, considering factors such as sales and appraisals, to determine the value of all homes in a given area. The data paint a picture of an uneven housing recovery that is lifting some neighborhoods while bypassing others just a few blocks or miles away. “You can actually see the seeds of the recovery starting to spread at the ZIP Code level,” said Stan Humphries, Zillow’s chief economist.

Posted in Economics, Housing Recovery, National Real Estate | 137 Comments

Tax cuts increases in our future

Posted on June 19, 2012 by grim

From the Star Ledger:

A remarkable thing happened in Trenton last week: Democrats outmaneuvered Gov. Chris Christie for the first time ever, effectively killing his crazy plan to cut taxes.

And then another remarkable thing happened: The most voluble and entertaining governor in world history was at a loss for words. It was another first, as if he had been whapped in the head and stunned into silence.

If you didn’t realize that the tax cut was dead, you can be forgiven. No one is saying that.
But the dance steps are painted on the floor now. You only need to follow the sequence to see where it all ends.

Democrats, in the first move, agreed to put enough money into next year’s budget to cover the costs of a tax cut. How can Christie veto that?

The trick is that a tax cut requires a separate bill that spells out the lower rates. And Democrats said they won’t consider that until December, and only if Christie’s magical predictions about an economic boom prove true.

“We’re not denying him his tax cut,” says Sen. Paul Sarlo (D-Bergen), chairman of the budget committee. “But it’s like with a kid. We’re putting the cookies on the table and saying, ‘Be good and you can have it later.’ ”

Which brings us to the meat of this issue: Can New Jersey really afford a tax cut?
And this is where the debate in Trenton veers into the absurd. Because no one wants to face the fiscal tsunami that is screaming toward the state and will hit in the next few years.

The charts on this page tell the sad story in hard numbers. Over and over, and with both parties to blame, Trenton has pushed big costs into the future. Huge increases are now baked into budgets over the next several years.

Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 179 Comments

That was quick

Posted on June 18, 2012 by grim

From HousingWire:

Rancho Financial brings back stated-income mortgages

Preparing for the return of the jumbo lending market and the days when Fannie Mae and Freddie Mac are no longer mortgage finance behemoths, Rancho Financial is wading back into offering stated-income mortgages.

A division of Calabasas, Calif.-based Skyline Financial, Rancho only six weeks ago began originating stated-income loans—where a borrower’s personal income is not verified. Rancho is currently processing about 100 applications with an average request of $500,000, the company said, and is receiving 10 calls a day for a program that has a $1.5 million loan limit and requires loans above $1 million to have a second appraisal.

Borrowers’ bank statements are examined, but not their tax returns or pay stubs. And while stated-income loans have borne their share of blame for the destruction of the nation’s housing economy, unlike earlier lending programs that offered stated-income mortgages to high-risk borrowers, the Rancho product is only for the affluent homeowner.

“In the late 1990s and 2000s, no one was regulating anything and you had these loans that were made and sold on Wall Street, and they became known as ‘liar loans,'” says Rancho mortgage banker Craig Brock. “We’re staying clear of that. If someone has several hundred thousand in assets, chances are they do have the money. We’re trying to target smart people who have financial advisers, who have certified public accountants.”

But the concern that this product could again be abused permeates the mortgage-lending arena. “Yes, they can be abused, but that doesn’t mean the potential for abuse means [stated-income mortgages] should be taken out of the market place for everyone. That doesn’t seem to be an appropriate response,” says Rich Andreano, a partner at the Washington, D.C., law firm Ballard Spahr.
…
Rancho won’t hold the stated income loans on its books. Instead, it sells them to a single portfolio investor (a confidentiality agreement prevents Brock from identifying the investor) who apparently is more comfortable buying these types of loans than the rest of the market.

“They found an investor. Well, they’re lucky,” says Ballard Spahr’s Andreano, remarking on the loan program. “For the right investor there is a marketplace for it. If you find the lender to do this correctly, these are good products to have. They won’t be large in number, it’s just they won’t be standard. The typical investor’s only going want the mainstream vanilla-type loans.”

And Fannie Mae and Freddie Mac aren’t taking them. A spokesperson at Freddie said products with alternative stated income provisions were eliminated from the agency’s guide years ago.

“There’s only one source (taking the loans). Until (PIMCO founder) Bill Gross, until Goldman Sachs start purchasing these loans again, it’s going to be slim pickings. Until they start buying these things, we won’t see any huge volume,” says Brock, who projects originating $50 to $75 million in stated income loans in the program’s first 12 months.

Posted in Mortgages, Risky Lending | 77 Comments

Are homes affordable yet?

Posted on June 17, 2012 by grim

From the Huffington Post:

Buying A House Costs As Much As It Did During 2007 Housing Boom, Study Says

In spite of falling housing prices, it still is as unaffordable to buy a house as it was during the height of the housing boom, according to a new study.

Even though housing prices and mortgage interest rates have hit record lows, buying a house still is as expensive as it was in 2007 — when housing prices were astronomical — because banks are requiring heftier down payments and have stopped letting borrowers make low initial payments, according to a recent study by Andrew Davidson and Alexander Levin of Andrew Davidson & Co., a financial research firm. (H/t the Wall Street Journal.)

Among non-agency loans, the total cost of buying a house (as a percentage of property value) has barely fallen since peaking in 2008 because the “equity cost” — that is, the down payment — has spiked since 2006 and stayed elevated, according to the study. Among non-agency loans, the “equity cost” of buying a house (as a percentage of property value) cost more between 2009 and 2011 than at any other time since the new millennium. The “equity cost” for all borrowers has more than doubled since 2006, according to the study.

So much for housing affordability.

This study demonstrates that the reality of the housing market is more complicated than it seems. Previous studies have found that homeownership now is cheaper than renting — if you can afford it. Renting cost 15 percent more than homeownership at the end of last year, according to recent research by Deutsche Bank cited by the Wall Street Journal. Buying a house is also cheaper than renting in 98 of the 100 largest metropolitan areas, according to research by Trulia, a real estate website.

The 30-year mortgage interest rate hit record lows in May, according to Freddie Mac. That is largely thanks to efforts by the Federal Reserve to bring down interest rates to boost the economy. Housing prices also have continued to fall across the country, according to the S&P/Case-Shiller Home Price Indices. But homeownership still is a distant dream for many.

Posted in Economics, Housing Recovery, Mortgages | 46 Comments

Shadows get a little brighter

Posted on June 15, 2012 by grim

From Bloomberg:

Shrinking ‘Shadow Inventory’ Eases Threat to U.S. Housing

The overhang of pending foreclosures that threatened to flood the U.S. housing market and depress prices is dissipating as banks sell off distressed properties and let borrowers sell homes for less than they owe.

The so-called shadow inventory of homes that are seriously delinquent, in the foreclosure process or owned by banks and not listed for sale tumbled in April to the lowest level in more than three years, CoreLogic Inc. (CLGX) said today. Home seizures plunged 18 percent from a year earlier even as initial notices of foreclosure increased, a sign that banks are turning to repossession alternatives, RealtyTrac Inc. said today.
…
“In some ways, the shadow inventory was aptly named because shadows can sometimes appear larger than the actual problem,” Daren Blomquist, a RealtyTrac vice president, said in an interview. “The uncertainty of how much distressed inventory would end up on the market was more of a problem than what the actual numbers are turning out to be.”

The shadow inventory fell 15 percent from a year earlier to about 1.5 million homes and is at the lowest since October 2008, the Santa Ana, California-based real estate information company CoreLogic said in a statement today. That represents a supply of about four months, down from six months in April 2011.
…
The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices,” Mark Fleming, chief economist for CoreLogic, said in a statement today. “This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases.”

Serious mortgage delinquencies also are down, with the share of payments 90 days late dropping to a three-year low of 6.86 percent in April, according to data compiled by Bloomberg. Arizona had a 37 percent decline in serious delinquencies, more than any other state, followed by California, Nevada, Michigan and Minnesota, CoreLogic said today.

Posted in Foreclosures, Housing Recovery, National Real Estate | 180 Comments

Tax Showdown Approaches

Posted on June 14, 2012 by grim

From the Star Ledger:

North Dakota’s no-property-tax dream is infectious

As New Jersey homeowners fall asleep tonight, maybe they’ll dream of North Dakota. It’s possible that the folks in Fargo will wake up this morning as the first state to abolish the dreaded property tax. Pinch me, they’ll say.

The average property tax bill in North Dakota is $2,600, chicken scratch compared with New Jersey’s, which was more than $7,500 in 2011. That’s up 20 percent from 2009, and nearly 12 percent of a family’s annual income.

Big numbers are one reason to hate the property tax. Here’s more:

• Middle-class mauler: It’s a flat tax, hitting the one-bedroom bungalow at the same percentage as the mansion next door, taking a larger chunk of the middle-class taxpayer’s paycheck.

• Pockets of poverty: Taxing private property creates hopeless pockets in cities, where there is precious little property to tax. In Newark, a third of the real estate is occupied by tax-exempt properties such as churches, schools and government buildings.

• Suburban sprawl: For municipalities that need extra income, it’s tempting to approve new development — if only to create a new stream of property taxes. Need money? Say yes to the strip mall.

• Pay up: If your pay is cut, your income tax rate drops, too. But you pay your full property tax bill no matter what happens to your income. For many, the only way to get property tax relief in tough times is to sell.

• Anti-ownership: One of the loudest criticisms in North Dakota’s anti-property tax campaign was that it’s the only tax that can cost a family its home. In the words of one critic: “It means all of us are renters — none of us are homeowners.”

From the Record:

Christie says he won’t negotiate N.J. budget with Legislature until taxes are cut

A few days after his administration started preparations for a possible government shutdown at the end of the month, Governor Christie said Wednesday that he “will not negotiate a budget with the state Legislature until they cut your taxes.”

Democrats from both the Senate and Assembly are scheduled to meet Thursday in Trenton to go over the parameters of an agreement that Democratic leaders say they have reached – with their own version of tax relief, not Christie’s, still on the table.

But Christie’s comments at an event in Galloway on Wednesday were some of his strongest yet on the budget as the deadline for a new spending plan draws closer.

Christie and the Democrats who control the Legislature did not negotiate a budget last year. But there was no government shutdown because Democrats sent the governor a budget bill by the constitution’s June 30 deadline. Christie used his line-item veto power a day later to enact a spending plan with the changes he wanted.

This year, Democrats say they are also planning to again propose their own version of the budget and send it to Christie’s desk by the constitutional deadline. The question that remains unanswered, however, is whether the Democrats’ bill will sacrifice revenue to tax relief –something Christie has been calling for since the beginning of the year — even with tax collections not meeting the governor’s own budget projections.

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