Flash! Hard to afford a big house on a big lot in Jersey

Posted on July 7, 2011 by grim

Affordability is a little bit of a sticky topic. Realize that a house doesn’t need to be affordable by the median income to be saleable, it just needs to be affordable for it’s single buyer. But this leads to a bit of a catch-22, how can these new homes be “unaffordable” if they have clearly all been sold and are currently occupied. They certainly must have been affordable by someone. Less affordable to the median buyer? Sure, but does that really matter at all? Crux of the problem is that in all of this is the assumption that the median buyer should be able to afford a home. Says who, and why? Restricting development through larger lot sizes and environmental restriction will constrain supply, and with that cause rising prices. From a development perspective, it’s building that first square foot which is the most expensive, after which the marginal cost per square foot falls off dramatically. It pays for builders to build very large houses, as long as they’ve got buyers (which they do).

So again, what is affordability? Are we talking about an economic issue here or a moral one (right to the American Dream)?

From the Record:

Big homes, big lots making N.J. even more unaffordable

New Jersey’s problem with suburban sprawl is getting worse, according to a new report.

Development of big homes on big lots and zoning that favors businesses have made it tougher for lower-income residents to afford to live in higher-income suburban towns today than it was in 1970, a study by Rowan University found.

All this occurs despite the long effort to push towns to add affordable housing and adhere to “smart growth” initiatives and zoning rules, the report says.

“Municipalities are making it almost impossible to build apartments and town houses that are affordable to middle-class New Jerseyans,” said Adam Gordon, spokesman for Fair Share Housing Center, which paid for the study. “Middle-class families cannot afford a 3-acre home.”
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The report says development of large suburban lots holding just one or two homes an acre dominated the state since 1986, while the construction of more affordable apartments, town houses and smaller single-family developments tapered.

Before 1986, 58 percent of residential development was in cities and already built-up suburbs. Since then, two-thirds occurred in rural and less compact areas, the report says.

The report also says municipalities have focused on industrial and commercial development, which pays tax dividends, rather than multi-unit apartments and town houses that bring in more school-age children.

“Municipalities want as few households as possible on any given piece of land,” said Tim Evans, research director for New Jersey Future, a non-partisan research group that helped produce the report.

Posted in Economics, New Development, New Jersey Real Estate | 151 Comments

Home prices ex. distressed home sales? Of course the math works, but does it make sense?

Posted on July 6, 2011 by grim

Applying the same logic to the boom would mean we should have been removing any overly optimistic prices, or sales involving bidding wars, because their high pricing was not illustrative or indicative of the overall market. Why was nobody suggesting this at the time?

From the Philly Inquirer:

Housing price drop is far less if distressed properties aren’t counted

In the five-plus years since the housing bubble burst nationwide, home values have dropped precipitously, dragged down by record numbers of foreclosures.

In the hardest-hit areas of the country, prices have dropped 50 percent or more, and continue to decline, sales data show. Even in this region, with relatively fewer foreclosures, prices are down 15 percent since August 2007.

Remove sales of distressed properties from the mix, however, and the drop in home prices is much less precipitous, the data show.

In the city of Philadelphia, for example, median prices for single-family houses fell 3.2 percent in May from the same month of 2010, according to CoreLogic, which provides real estate data to businesses and government.

Subtract lower-price bank repossessions and short sales, and the year-over-year city decline was just 1.2 percent, the data show.

Short sales are those in which the lender accepts a sale price that is lower than the balance of the seller’s mortgage, usually as an alternative to foreclosure.

In some parts of the country, eliminating distressed sales turns price losses into gains. In the Washington, D.C., area, for example, CoreLogic says, a 1.5 percent decline became a 3.9 percent year-over-year increase.

Why factor in distressed sales at all? some in the housing industry have asked.

In a recent discussion of his company’s quarterly results, Robert I. Toll, executive chairman of the Horsham-based luxury-home builder Toll Bros., said: “We believe that averaging distressed and non-distressed sales data provides a misleading picture to the public regarding home-price direction.”

By contrast, Toll said in his statement, “we are experiencing flat to slightly increasing pricing in most markets.”

CoreLogic’s data bear out Toll’s contention. Nationally, May median home prices were down 7.4 percent from the same month in 2010. When distressed sales are removed, the decline is 0.4 percent, just about flat.
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Excluding distressed transactions, which account for about one-third of all sales, would shut out a very large part of the current housing market, said Mark Zandi, chief economist at Moody’s Analytics in West Chester.

Such properties compete with other houses on the market, Zandi said, “and as long as they account for such a large share of home sales, they will weigh on all house prices.”
…
Zandi said it was “an encouraging sign” that non-distressed house prices were holding up so well.

“This suggests that once the distressed share begins to decline, house prices will rise, even if the share remains high.”

Posted in Economics, Housing Bubble, National Real Estate | 118 Comments

NJ takes aim at foreclosure rescue scams

Posted on July 5, 2011 by grim

From the Star Ledger:

N.J. Legislature bill would regulate foreclosure rescue fraud, offer relief to distressed homeowners

They call themselves “foreclosure rescue” companies, but in many cases they end up enriching themselves while destroying whatever credit-worthiness a distressed homeowner has.

A bill to regulate the industry overwhelmingly passed both the state Senate and Assembly last week and housing and foreclosure experts said it will at least bring some relief to the already daunting task of helping people stay in their homes.

“It’s some of the most egregious kind of predatory lending, the foreclosure rescues,” said Peggy Jurow, who leads the Foreclosure Defense Initiative at Legal Services of New Jersey. She said it can take years to help victims sort through the complicated mass of subsequent lawsuits and paperwork, even if the consultant has been jailed.

“People want to believe that they can get help and they get this card in the mail and it says, ‘I can help you save your home,’” she added. “It’s literally a swindle. This regulates it and puts some bright lines into this practice, which is important.”

There are currently more than 118,000 houses in some stage of foreclosure in New Jersey, and another 55,200 properties that are more than 90 days delinquent on the mortgage, according to LPS Applied Analytics, a real estate data firm.
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Last year, Attorney General Paula Dow obtained $17 million in legal settlements through rescue fraud prosecutions, including Hope Now Financial Services and Hope Now Modifications of Cherry Hill, New Hope Modification of Bellmawr, and New Day Financial Solutions of Somerset County, said spokesman Lee Moore. The office continues to investigate similar consumer complaints.

The U.S. Attorney’s Office in New Jersey has also prosecuted several foreclosure rescue fraud cases, and in May U.S. Attorney Paul Fishman announced the guilty plea of Ronald Harris, of Piscataway, who admitted to his role in a scheme that defrauded mortgage lenders of over $10 million, $1.15 million of which Harris personally received.

Posted in Economics, Foreclosures, New Jersey Real Estate | 163 Comments

America Loves Houses

Posted on July 1, 2011 by grim

From the NY Times:

Despite Fears, Owning Home Retains Allure, Poll Shows

Owning a house remains central to Americans’ sense of well-being, even as many doubt their home is a good investment after a punishing recession.

Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll. And they are keen on making sure it stays that way, for themselves and everyone else.

Support for helping people in financial distress over housing is higher than support for helping those without a job for many months.

Forty-five percent of the respondents say the government should be doing more to improve the housing market, while 16 percent say it should be doing less. On the politically contentious issue of direct financial assistance to those having trouble paying their mortgages, slightly more than half of those polled, 53 percent, say the government should help. And almost no one favors discontinuing the mortgage tax deduction, a prized middle-class benefit that has been featured on some budget-cutting proposals.

President Obama, who has been criticized for both doing too much to help the housing market and for not doing enough, was given poor marks. Only 36 percent of those polled approve of what Mr. Obama has done, while 45 percent disapprove.
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In assessing blame for the housing crash, people are increasingly seeing financial institutions as the central culprit. Amid the swirl of recent disclosures about banks following improper and illegal procedures in pursuing foreclosures, 42 percent blame lenders, while 29 percent blame regulators. When the question was asked in early 2008, as the crisis was still building, the numbers were reversed, with 40 percent blaming regulators and 28 percent blaming lenders. Only a handful of respondents at either moment blamed the borrowers themselves for taking loans they could not afford.
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Making an offer for a house, something often done in past generations with little apprehension, is now riddled with worry. Only 49 percent call it a safe investment, while 45 percent feel it is risky. In a market where prices are consistently dropping, there is no easy exit.
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As the housing market slumped over the last few years with a speed and magnitude not seen since the Great Depression, aspects of homeownership have been debated as never before. There are tough questions about the role the government should take. These include how much of a down payment lenders should demand, whether lenders should be restrictive or expansive in granting new loans, how much assistance to give those on the verge of foreclosure, and whether real estate will ever again be the retirement savings vehicle it once was.

While the debate has been loud, there was little evidence of people’s views that went beyond the anecdotal. This poll offers a window onto widespread opinions at a critical juncture.

Before the crash, housing was widely deemed one of the safest possible investments. Few experts thought there was the possibility of a nationwide downturn. But after it happened, the effects were widespread and painful.

Posted in National Real Estate | 366 Comments

Pending home sales surprise in May

Posted on June 30, 2011 by grim

From Bloomberg:

Pending Sales of U.S. Existing Homes Rise by 8.2%, Almost Triple Forecasts

The number of contracts to buy previously owned U.S. homes rose almost three times as much as forecast as falling prices made properties more affordable.

The surprising 8.2 percent increase in the index of pending home resales from April followed a revised 11 percent drop the prior month, the National Association of Realtors said today in Washington. Economists forecast a 3 percent gain, according to the median estimate in a Bloomberg News survey.

While the measure of contract signings has been volatile this year, last month’s index level is 0.1 point lower than the January figure, indicating residential real estate has made little headway. Foreclosures, unemployment at 9.1 percent and stringent loan terms are holding back demand even as a decline in home prices attract some buyers.

“The market for existing homes is still extremely weak,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “Existing-home sales will probably improve in June based on this reading, but probably not a lot.”

From the WSJ:

Pending Home Sales Up 8.2% in May

The number of people who signed contracts to buy previously occupied homes in the U.S. rose last month, but was still low from a historical perspective, as the housing market remained a weak sector of the economy.

The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes increased 8.2% on a monthly basis to a reading of 88.8, the industry group said Wednesday. It was the strongest monthly gain since last November.

Economists surveyed by Dow Jones Newswires had expected pending home sales would rise by 10.0% in May from an original April reading of 81.9. That month’s reading was revised up to 82.1.

The pending sales index for May was 13.4% above its level in May 2010, a month in which sales fell dramatically after the expiration of a federal tax credit.
…
The index was up 12.9% in the West on a monthly basis and 10.5% in the Midwest. It rose 7.3% in the Northeast and 4.1% in the South.

Posted in Economics, National Real Estate | 200 Comments

Prices Up! No Down! No Up! More Declines! Recovery! Arrrrggghhh!

Posted on June 28, 2011 by grim

From CNBC:

Home Price Headlines Hide the True Picture

How do I loathe home price day?

Let me count the ways.

The rash generalizations, the seasonal vs. non-seasonal adjustment confusion, the month-to-month vs. year-over-year, the contention among all the varied home price reports from the various and varied entities that track them.
…
This month is particularly frustrating, because the big headline from S&P/Case Shiller was that home prices rose for the first time in eight months. Okay, yes, from March to April, with no seasonal adjustments, home prices rose barely, less than one percent, in the nation’s top 20 housing markets. When you seasonally adjust those numbers, the prices fall. Why?

Because in different seasons, different types of buyers buy different types of homes.

The Spring market is historically replete with families; these are move-up buyers, purchasing larger, more expensive homes. That skews the overall prices higher. They buy in the Spring because they want to move over the summer, when school is out. You tend to see more single and first-time buyers in the fall.

(jb’s note – This is incorrect, the repeat sales methodology used by Case Shiller will correct for this seasonal skew)

This is why I judge prices year over year, because you are comparing apples to apples. Prices are down in 19 out of the top 20 markets year-over-year, with six markets hitting new lows on the S&P/Case Shiller Home Price Index.

From the WSJ Developments Blog:

Don’t Jump at Case-Shiller Bounce

There’s a good reason not to get too excited about Tuesday’s report from Standard & Poor’s on the Case-Shiller home price index: As sure as the sun comes up in the morning, home prices will rise in April.

The latest Case-Shiller report said that home prices on a non-seasonally adjusted basis gained for the first time in eight months. On a monthly basis, it did the same in 2009 and 2010 — and both times it raised hopes that home prices would hit bottom “later this year.”

After accounting for seasonal factors (more homes tend to sell in April versus March), the index was virtually unchanged from April.

That’s less exciting, but it’s still good news. It means that home price declines are moderating. Consider: Prices fell by 0.1% in April; 0.3% in March, February and January; 0.4% in December; 0.5% in November; a nearly 1% in October. In addition to normal seasonal factors, such as warmer weather, home price indexes such as Case-Shiller, which measure repeat transactions of existing homes, can be skewed by the share of distressed home sales.
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What Tuesday’s report suggests is that “some of the declines we saw in the winter were overstated. We’re now going to see a bounce,” says Thomas Lawler, an independent housing economist in Leesburg, Va.

“There’s no evidence yet that we’re in any material rebound,” he says, before making a bold prediction: “We will be in one next year.”
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Mr. Newport expects prices to fall by another 5% over the next year, but he says “you could quite possibly argue that [prices] are nearing a bottom, and that they may not drop another 5%.”

Posted in Economics, Housing Bubble, National Real Estate | 148 Comments

Incoming!

Posted on June 27, 2011 by grim

From the Star Ledger:

Housing experts fear deluge when foreclosure filings start again

In the past six months, an eerie feeling has settled in the offices of housing counselors and attorneys who confront the foreclosure crisis head-on and help distressed homeowners in New Jersey. The phone hasn’t been ringing any less than it did at the height of the storm, but what is about to hit may be greater than anything the group has seen so far.

Foreclosure filings are down 86 percent so far this year from last, owing in part to a December crackdown by the state’s chief justice that effectively halted proceedings by the country’s biggest mortgage lenders and service companies, according to court data. But lenders are waiting to file an estimated 28,500 foreclosures, and another 55,000 mortgage loans are currently more than 90 days delinquent, according to LPS Applied Analytics, a real estate data firm that tracks mortgage performance. At the current rate, it would take 49 years for banks to clear the logjam of mortgage loans that are currently in the foreclosure process or are more than 90 days delinquent, LPS found.

Those figures are a sign of what is to come when lenders are able to begin filing again, and the pipeline speeds up.

“It’s what keeps me awake at night,” said Peggy Jurow, who leads Legal Service of New Jersey’s Foreclosure Defense Initiative. “It’s what keeps my colleagues and me strategizing all the time.”

“What are we going to do,” she asked, when these cases get filed?
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The foreclosure process came to a halt on Dec. 20, when Chief Justice Stuart Rabner announced an initiative to address fears homeowners were unnecessarily put into foreclosure and judges had inadvertently “rubber-stamped” files that had inaccurate or inadequate paperwork.

In March, six of the country’s biggest financial institutions — Bank of America, JP Morgan Chase, GMAC Mortgage, Citibank, OneWest Bank and Wells Fargo — agreed to submit extensive documentation of their foreclosure processes and outline any revisions they have made. A court-appointed special master, retired Superior Court Judge Richard Williams, is reviewing the material and will report on whether the banks have satisfied a number of changes.
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Bankers in New Jersey have told John McWeeney Jr., president and CEO of the New Jersey Bankers Association, that the time it now takes to complete a foreclosure has stretched to nearly three years.

“The reaction of the Supreme Court certainly delayed a large volume of foreclosures that otherwise would have been put in process, so I would expect that that will eventually hit and increase the number of foreclosure filings,” McWeeney said.
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When the foreclosure filings start winding their way through courts again, the influx will affect everyone in the industry.

“There are going to be very substantial numbers of foreclosures that are going to hit the market, all of which is problematic and obviously has a negative impact on housing values,” said Robert Levy, executive director of the Mortgage Bankers Association of New Jersey.

Posted in Foreclosures, Housing Bubble, Mortgages | 171 Comments

The Next Big Issue ™

Posted on June 27, 2011 by grim

From HousingWire:

Suits allege Fannie, Freddie owe millions in real estate transfer taxes in Michigan

Fannie Mae and Freddie Mac are using tax-exempt status to escape county fees levied during the recording of foreclosure property transfers, two Michigan county leaders said in lawsuits this week.

Andrew Meisner, treasurer of Michigan’s Oakland County, and Oakland County Executive L. Brooks Patterson sued Fannie and Freddie in the U.S. District Court on behalf of taxpayers in their county.

Oakland County claims the GSEs owe area taxpayers more than $12 million in unpaid real estate transfer taxes on the sale of foreclosed properties, according to a press release from Meisner. Meisner told HousingWire he believes this is one of the first cases challenging the GSEs’ ability to claim exemption from fees on the grounds that they’re government agents.

In a statement, Meisner wrote, “Fannie and Freddie you quack like a duck (or a private corporate entity), so you better pay up.”

He added, “In this case, Fannie and Freddie walk, fly and quack like private companies, right down to the multimillion-dollar salaries for their CEOs. That means that they are not entitled to exemptions made for government entities.”

The Oakland County plaintiffs contend Fannie and Freddie are not exempt from Michigan’s real estate transfer tax, which requires parties transferring properties to pay $1.10 per every $1,000 in value to the counties, while the state receives $7.50 per every $1,000 per transaction.

In the suit, the Oakland County treasurer is trying to reclaim fees tied to 200 real estate transactions that occurred over a period of six years.

In the same state, the Ingham County Register of Deeds Curtis Hertel Jr. filed suit against the two GSEs, Bank of America (BAC: 10.52 0.00%), Wells Fargo (WFC: 27.26 0.00%), Countrywide Home Loans Servicing, and the law firms of Orlans Associates and Trott & Trott P.C.

Hertel claims the defendants tried to escape a transfer tax by moving the assignment of the mortgage. “What you see is literally within one or two months before a foreclosure is filed, they transfer assignment of the mortgage to Fannie and Freddie,” Hertel said. “Why would they do that right before the foreclosure is about to happen … obviously it is to avoid fees.”

Posted in Foreclosures, National Real Estate, Property Taxes | 159 Comments

Yearning for the days of easy money

Posted on June 25, 2011 by grim

From the WSJ:

Tighter Lending Crimps Housing

The percentage of mortgage applications rejected by the nation’s largest lenders increased last year, spotlighting how banks’ cautious lending practices are hampering the nascent housing market recovery.

In all, the nation’s 10 largest mortgage lenders denied 26.8% of loan applications in 2010, an increase from 23.5% in 2009, according to an analysis by The Wall Street Journal of mortgage data filed with banking regulators.

Although lenders were expected to pull back from the freewheeling conditions that helped inflate the housing bubble, some economists argue they are now too conservative, and say that with the U.S. economy still wobbly, mortgages need to be easier to obtain for qualified borrowers, not harder.

“As the noose on credit availability tightens, credit is being choked off at a time when the housing market is extremely fragile,” says Laurie Goodman, senior managing director at Amherst Securities Group LP.

Christopher Thornberg, a housing economist at Beacon Economics in Los Angeles, counters that “banks are doing what they need to do” to change lending standards in the wake of a “crazy bubble. ”

He adds, “You had decades where credit standards were tougher than they are even now.”

Among the would-be borrowers having a harder time are those who have seen their incomes fall or interrupted by a period of unemployment, scenarios that have become increasingly common in recent years. Some self-employed applicants are also hitting barriers to loans—hurdles they didn’t face in the past.

Lending standards are still tight in part because government entities Fannie Mae, Freddie Mac, and the Federal Housing Administration, which collectively account for more than nine in 10 loans being made today, are under heavy pressure to avoid any losses.

Those firms don’t make loans directly but instead purchase or guarantee mortgages that meet their standards, and so have significant influence over which loans banks are willing to approve.
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The mortgage data analyzed by The Wall Street Journal included loan applications filed by consumers who wanted to refinance existing mortgages as well as those planning to buy a home. Among home-purchase applications, lenders denied 19.9% of applications, up from 18.2% in the previous year, while 27.2% of refinance applications were denied, up from 24.4%.

Recent surveys by regulators show no sign of credit easing so far this year. Nearly four in 10 banks reported tighter mortgage lending conditions for the 12-months ended in February, according to a survey published this week by the government’s Office of the Comptroller of the Currency. Just 8% said that standards had loosened.
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The Journal analysis found that insufficient collateral was the most common denial code flagged by lenders when they rejected loan applications.

Other top denial reasons included inadequate debt-to-income ratios and poor credit histories.

Posted in National Real Estate, Risky Lending | 80 Comments

Radar Logic: April price jump not large enough to trump yearly decline

Posted on June 24, 2011 by grim

From HousingWire:

Home prices, sales still stagnant in April: RadarLogic

Prospects in the housing market remain glum as the weaker then expected spring buying season pushes prices and transaction counts down.

In April, home prices deteriorated 5.1% compared the same month of 2010 when the first-time homebuyer tax credit was in place, according to RadarLogic’s RPX Housing Market Report released Thursday. RadarLogic reported price declines in all 25 metropolitan statistical areas that it tracks, with Boston experiencing the largest drop of 21.8% compared to April 2010.

The data tracking firm did note that prices increased 2% between March and April, a “large gain” compared to years past. And most of the major MSAs under RadarLogic’s watch reported price gains on a monthly basis. However, the good news is short lived, as the year-to-date change in home price was negative for only the third time in the last 10 years.

“The decline in the composite price from January to March was so large that the large seasonal bounce in April was not enough to bring the year-to-date change into positive territory,” RadarLogic said.

The changes in the RPX composite price index were consistent with the data released by the Federal Housing Finance Agency Wednesday, which found a scant 0.8% increase in home price between March and April.

Posted in Economics, Housing Bubble, National Real Estate | 114 Comments

Wealth Effect Ball and Chain Effect

Posted on June 23, 2011 by grim

From HousingWire:

American home equity cut by one-third

The head of global securitized products research at Citi Global Markets said that home equity held by American households is down from 60% to 39%.

Mary Kane, speaking at an American Securitization Forum session about consumer trends and the state of the housing market, said residential mortgage comprised the largest proportion of debt held by families.

The massive decline in home prices in the last few years is hitting those household investments hard, especially if families don’t invest in other ways, such as with stocks and bonds. If families are not in the stock market, then recent rallies in those markets aren’t helping them.

In regards to falling home equity, Kane said it is important to keep perspective on the statistic.

“When looking at this number, it’s a very bifurcated number,” Kane said. “One-third of homeowners don’t have a mortgage, and another 20% are underwater.”

An estimated 14 million homeowners have negative equity, according to the ASF.

Kane added that total U.S. debt is on a 10-year climb. The debt held by U.S. households in the fourth quarter of 2010 was 77% greater than in 4Q 2000, when including the effect of taxpayer exposure to the federal deficit.

“I think it’s extremely important that lenders and families take responsibility for taking on debt responsibly,” Kane said, in an appeal to lenders to take a more proactive view of mortgages.

Posted in Economics, Housing Bubble | 133 Comments

2011 Spring Market = Bust!

Posted on June 22, 2011 by grim

From the NY Times:

Sales of Existing Homes Hit Six-Month Low in May

Sales of previously owned homes hit a six-month low in May and the supply rose, pointing to a housing market still struggling to regain its footing.

The National Association of Realtors said on Tuesday that sales slipped 3.8 percent month over month to an annual rate of 4.81 million units, the lowest since November.

It was the second straight month of declines. The drop was smaller than economists had expected, but the April sales figure was revised lower, leaving a report that was largely in line with expectations in financial markets.

While the fall in sales last month was partly a result of tornadoes and flooding, with sales in the Midwest and South hit the hardest, it underscored fundamental weakness.

“It’s indicative of the depressed housing demand that we have been seeing for some time, and that’s a function of the slow economic recovery and tight credit markets,” said Michelle Meyer, an economist at Bank of America Merrill Lynch in New York.

At May’s weak sales pace, it would take 9.3 months to clear the inventory of previously owned homes on the market. That is up from a nine-month supply in April.

The report was the latest to confirm a sustained weakness in the economy through the second quarter, which has been marked by a sharp slowdown in regional factory activity, soft retail sales and anemic employment growth.

But the smaller-than-expected decline in sales was yet another hopeful sign that the economy was set to regain momentum in the second half of the year.

In the 12 months to May, home resales were down 15.3 percent.

From CNBC:

Existing Home Sales Fall Less Than Expected

Sales of existing homes fell 3.8 percent in May, not as deep a drop as some had forecast, to a seasonally adjusted annual rate of 4.81 million units.

April’s figure was revised down to 5 million.

Potential homebuyers continue to be held back by tough credit standards and poor confidence. Sales activity was 15.3 percent below the pace set in May of 2010, when buyers were rushing to take advantage of the home buyer tax credit.

“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” said Lawrence Yun, chief economist for the National Association of Realtors.

The national median existing-home price for all housing types was $166,500 in May, down 4.6 percent from May 2010. Home prices continue to be pressured by the large supply of distressed properties, which typically sold at a discount of about 20 percent in May. Foreclosures and short sales, where the home is sold for less than the value of the mortgage, accounted for 31 percent of sales in May, down from 37 percent in April.

“The price decline could be diminishing, as buyers recognize great bargain prices and the highest affordability conditions in 40 years; this will help mitigate further price drops,” Yun said. Distressed sales vary market to market, with some of the hardest hit areas of the housing crash seeing far higher shares of these purchases. That may be a factor in regional sales differences.

Regionally, existing-home sales in the Northeast declined 2.5 percent, in the Midwest dropped 6.4 percent and were down 5.1 percent in the South. Sales, however, were unchanged in the West, where distressed sales are a far higher percentage of the market, and where investors are out in force.

Posted in Economics, Housing Bubble, National Real Estate | 228 Comments

Zandi: “We’re still in the housing crash”

Posted on June 21, 2011 by grim

From Reuters:

Zandi sees earliest U.S. home price rise end: 2012

Economist Mark Zandi says the United States is “nowhere near” a housing market recovery, but he can nonetheless see a light at the end of the tunnel.

Zandi, the chief economist of Moody’s Analytics, sees home prices rising at the earliest at the end of 2012, when buyers snapping up cut-rate foreclosures and short sales will have cleared the market to the point that the percentage of distressed sales starts to fall.

“We’re still in the housing crash,” he said.

Presently, about a third of home sales are of distressed property. That percentage will increase in the near-term as the foreclosure pipeline, temporarily slowed by flawed processing and related lawsuits, starts to flow again.

Additional price declines will be painful, but necessary for the market to bottom and finally rebound.

“I’m expecting the process to reaccelerate as we work through the foreclosure issues, and we work through some of these legal actions,” he said.
…
Meanwhile, the housing market is already starting to show early signs of healing and the economy is slowly getting stronger.

In some markets, home prices are holding firm. The percentage of homeowners who are 30 days late on their mortgages is falling, Zandi pointed out. And the spread between the discount on foreclosed and other properties is narrowing.

What’s more, he sees stable, significant job growth. The economy has created about 2 million private sector jobs since early 2010.

Businesses are strong enough to do more and will, when they have more confidence in the future.

The question of confidence, however, is a sticky one, Zandi acknowledges, and represents valid challenges to his relatively optimistic view of the housing market over the next few years.

Posted in Economics, Housing Bubble, National Real Estate | 152 Comments

If Gen Xers are too risk averse to buy the Boomers homes, who will?

Posted on June 20, 2011 by grim

From the WSJ:

Come On Gen X, Take Some Chances

Many of Andy Tilp’s Generation X and Y clients live for the adrenaline rush they get from outdoor sports like snowboarding and white-water rafting.

When it comes to their money though, many of those younger clients—roughly age 45 and below—aren’t seeking any thrills. They’re opting for what they see as safe investments, such as certificates of deposit and savings accounts.

Among those who do venture into some of the more traditional portfolio assets—stocks, bonds, real estate and commodities—many are shying away from equities and are more concerned about protecting their principal than growing their money.

“They’re leaning toward really conservative portfolios—similar to some retirees,” says Mr. Tilp, a financial planner based in Portland, Ore.

Such risk aversion is understandable, given the two nasty bear markets already this century and the current depressed job market. Many Generation X and Y investors have watched plunging financial markets destroy their parents’ retirement plans.

But many advisers are concerned that the low risk tolerance of some of these investors may ruin their retirements too, by leaving them short of funds when they get there. These advisers are encouraging young investors to rethink their views.
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A recent survey by Bank of America Merrill Lynch found that 59% of affluent investors ages 18 to 34 who responded sought relatively low risk when choosing investment strategies, and that a higher percentage were risk-averse than in all other age groups, including investors their grandparents’ age.

Investors of all ages may have been spooked by the most recent market downturn in particular. “When you’ve been burned and there is great uncertainty, it’s a natural inclination to withdraw,” says Yuval Bar-Or, an expert on decision-making and an adjunct professor of finance at Johns Hopkins University’s Carey Business School.

But that inclination may be tempered among investors who have weathered previous bear markets—a perspective that many younger investors don’t have. If investors haven’t been in the market long enough, Mr. Bar-Or says, they may not see the “wisdom” of investing for the long term and therefore may shy away from what they perceive as higher-risk investments.
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The stock market isn’t the only thing that’s making these young investors jittery. After seeing friends get laid off or getting fired themselves, some Generation X and Y investors may be keeping more cash on hand in case of an extended period of unemployment.

“Generation X and Y see their careers as more tenuous than their boomer parents,” says Rand Spero, a Lexington, Mass.-based certified financial planner.

Posted in Economics, National Real Estate | 153 Comments

Is there really a foreclosure problem if foreclosures aren’t happening?

Posted on June 19, 2011 by grim

From the NY Times:

Backlog of Cases Gives a Reprieve on Foreclosures

Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places.

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.

“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.”

When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.

But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.

New foreclosure cases and repossessions are down nationally by about a third since last fall, LPS said. In New York, foreclosure filings are down 85 percent since September, according to the New York State Unified Court System.

Posted in Foreclosures, National Real Estate | 40 Comments