With the easy money gone, agents leave the business

Posted on May 3, 2011 by grim

From the Press of Atlantic City:

Cape May County realtors deciding to leave industry as housing economy is slow to recover

Leigh Ann Austin is putting her real estate career on hold after 30 years in the business.

Austin, of Cape May, has specialized in new Cape May County construction, but she became discouraged with the southern New Jersey market as it steadily lost real estate jobs following the housing-market collapse of 2007.

“I love real estate. I like the one-on-one with people,” the former professional singer and stage actress said. “It’s like getting a standing ovation when someone loves the house I show them and they buy it.”

Austin said she is going on a sabbatical until the market recovers: “It wasn’t that difficult a decision. I was just burnt out,” she said. “I could see the handwriting on the wall: It’s going to be a while before the market recovers. I’ll just wait it out and see what happens.”

Austin is hardly alone in her decision.

Ocean City’s Board of Realtors lost about a third of its members in the past four years. The board, once 800 strong, now has about 535 members, with another 19 out-of-state members.

The lucrative real estate industry that props up much of the Cape May County economy has seen drastic cutbacks.

“We are hearing that all over,” said Diane Wieland, director of tourism in Cape May County. “A lot of Realtors we worked with to get statistics are no longer with their firms. Real estate agents have changed jobs. It’s all part of that tourism picture. The economy really hit that industry hard.”
…
Membership rolls at the New Jersey Association of Realtors climbed from 47,000 in 2004 to as high as 57,000 at the peak of the real estate boom in 2006 before falling to 46,000 today, its website shows, representing a membership drop of 20 percent.

Posted in Economics, New Jersey Real Estate | 92 Comments

Needs work? Buyers say no way.

Posted on May 2, 2011 by grim

From the Record:

Home buyers shun ‘fixer-uppers’

In the overheated housing market of five years ago, buyers often felt they had to accept homes in woeful condition. But these days, most look at “as-is” properties and say, “No thanks.”

“I try to stay away from things that need a lot of work,” said Michael Lisa of Chestnut Ridge, N.Y., who is searching for a home in northern Bergen County, N.J.

“Buyers will tolerate nothing,” said Maria Rini, a Re/Max agent in Oradell, N.J. A recent Coldwell banker survey found that 87 percent of first-time buyers said a move-in-ready home is important to them.

“This is absolutely the story of this market. It seems buyers will pay a premium, engage in a bidding war and even overpay just to avoid buying a ‘project’ house,” said Beth Freed of Terrie O’Connor Realtors in Ridgewood, N.J.

As a result, real estate agents strongly advise sellers to fix up their homes for quicker and more profitable sales.

For example, when Kate Conover recently listed a Franklin Lakes, N.J., colonial, she encouraged the seller to replace the roof and driveway, repair ceilings, rip up carpets and paint interiors.

Paying contractors to do the work cost almost $40,000, but Conover estimated it added well over $100,000 to the asking price.

“There is no question homes that have been spruced up for the market sell quicker,” said Conover, a Re/Max agent in Saddle River, N.J.

But she recommended against major renovations — such as replacing the kitchen and baths — in the Franklin Lakes home. Most agents agree with that philosophy, saying sellers shouldn’t risk spending more than they’ll get back in the sale price. That’s especially true with major kitchen and bath renovations because they’re so much a matter of taste.

“No matter what you do, it may not be the buyer’s choice anyway,” said Antoinette Gangi, a Re/Max agent in Woodcliff Lake, N.J.

On the other hand, agents say that major maintenance and safety issues — such as underground oil tanks and leaky roofs — must be dealt with before the home goes on the market, because buyers are unwilling to take them on.
…
This, in turn, can offer an opportunity for buyers who are willing to give up the search for HGTV-ready homes and look at properties that need “some love,” in the words of Tom Mikalouskas, a Re/Max agent in Montvale, N.J.

“I tell my buyers to look for the best bones or the best bang for your buck,” he said. “Basically, if you are able to get the worst home in a great neighborhood, you can only improve on your investment. You simply have to focus on potential in a down market like this.”

“Buyers who can look beyond the cosmetic issues usually can find treasures in this market,” Falco agreed.

Posted in New Jersey Real Estate | 189 Comments

Mr Bednar Builds His Dream House

Posted on April 29, 2011 by grim

Open topic for discussion this weekend:

Grim buys a house, closing is at 1.

Has jb lost his mind?

Jumped too soon?

Timed the bottom?

Screaming deal?

What does it mean when the most hated person in NJ real estate actually jumps head first into the market?

Am I the contrarian play?

What say you?

Posted in Economics, Housing Bubble, New Jersey Real Estate | 217 Comments

NJ voters reject cap busting tax increases

Posted on April 28, 2011 by grim

From the Star Ledger:

All but two N.J. towns vote to reject raising property taxes over Gov. Christie’s 2 percent cap

Voters rejected property-tax increases in 12 municipalities today, while two towns approved special ballots to exceed the new 2 percent municipal property-tax cap.
…
Today was the first time in New Jersey that localities asked voters for permission to raise taxes, a provision of the Christie administration’s 2 percent cap on property tax collections. Previously, towns appealed to the state if they wanted to exceed a 4 percent cap.

The day marked the culmination of months of anticipation by municipal experts and governing bodies. Officials in the 14 towns holding property-tax votes held public meetings and circulated letters telling residents what was at stake — in most cases jobs and services.

Posted in New Jersey Real Estate, Property Taxes | 173 Comments

Homeownership back to pre-boom levels

Posted on April 27, 2011 by grim

From the WSJ:

Home Ownership Rate Drops to 1998 Level

The housing market’s woes continue forcing people into rentals, further depressing the home ownership rate in a nation that now has fewer homeowners than were created during the housing boom.

In the first quarter, 66.5% of Americans owned homes, down from 67.2% a year earlier, the Census Bureau reported. The rate last hit this level in 1998.

During the boom, when easy credit made mortgages available with less regard for income or ability to pay, the ownership rate surged to a record 69.2% in 2004′s second and fourth quarters and stayed near that level until the recession deepened.

Now, some industry watchers expect the rate to slip below 65%. Housing experts say each 1% decline in the home ownership rate represents the movement of one million households to rentals. Some people can’t buy homes, while others just don’t want to.

“The further decline … provides yet more evidence that Americans are now less able and less willing to buy a home,” wrote Paul Dales, senior U.S. economist with Captial Economics, in a client note. “But it also seems likely that there has been a reduction in the desire to own a home now it’s clear that housing is not a one way bet.”

Posted in Economics, Housing Bubble, National Real Estate | 39 Comments

“There is very little, if any, good news about housing”

Posted on April 26, 2011 by grim

From Bloomberg:

Home Prices in 20 U.S. Cities Drop Most in More Than Year on Foreclosures

Residential real-estate prices dropped in the 12 months to February by the most in more than a year, putting the market on the verge of eclipsing the nadir reached during the U.S. recession.

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent from February 2010, the biggest year-over-year decline since November 2009, the group said today in New York. At 139.27, the gauge was just shy of the six-year low of 139.26 in April 2009, two months before the economic slump ended.

Values will probably keep falling as foreclosures swell the supply of unsold homes, which means the construction industry will take time to recover. Another report showed consumer confidence climbed more than forecast this month, making it more likely that spending will keep growing as the economic expansion creates jobs and stock prices advance.

“Housing will continue to lag the recovery until foreclosures abate,” said Sal Guatieri, a senior economist at BMO Capital Markets Inc. in Toronto. At the same time, “the negative wealth effect from home price declines seems to be more than offset by stock market gains,” and “the economy is moving in the right direction.”

From the WSJ:

Home Prices Near Recession Low

A closely watched gauge of home prices fell in February for the eighth month in a row, as the real-estate market continued to sink toward a low hit during the recession.

The S&P/Case-Shiller 10-city and 20-city indexes both fell 1.1% in February from a month earlier, not adjusted for seasonality. Prices in the index following 10 major metropolitan areas were down 2.6% from a year ago, while the 20-city index was 3.3% below the level recorded in February 2010.

Home prices are now only slightly above the recession low hit in April 2009. With the price for new and occupied homes still burdened by foreclosures going for cut-rate prices and a large stock of other unsold homes, many economists expect prices to continue falling, if at a slower rate, through much of 2011.

Year-over-year prices were up in only one market: Washington, D.C. Meanwhile, 10 markets including Atlanta, Chicago and Seattle hit their lowest point of the recession and post-recession period.

“There is very little, if any, good news about housing,” said David M. Blitzer, chairman of S&P’s index committee.

Posted in Economics, Housing Bubble, National Real Estate | 93 Comments

Just where the hell is this market going?

Posted on April 25, 2011 by grim

From the WSJ:

New Home Sales Up From Record Low

Sales of new homes increased in March from a record low a month earlier, a small boost for a struggling part of the U.S. economy.

Sales grew 11.1% on a monthly basis to a seasonally adjusted annual rate of 300,000 in March, the Commerce Department said Monday. Results for the previous two months were revised upward, but February remained the worst month on the government’s records, which go back to 1963.

Economists cautioned against concluding that the new-homes market is on the rebound.

“Even with this improvement, the data on new home sales has remained in a very depressed range,” over the past year, wrote J.P. Morgan economist Daniel Silver. While sales of previously occupied homes have shown modest improvement over the past year, the market for new homes is faring far worse, he noted.

“It is not hard to have a large percentage increase in sales when you are coming off the lowest level since records started being kept,” wrote Joel Naroff, president of Naroff Economic Advisors, in a note to clients. “We need to more than double the March sales pace to reach decent sales levels.”

Economists surveyed by Dow Jones Newswires had predicted the March sales rate would rise 14.8% to an annual rate of 287,000. Sales, however, were down 21.9% from March 2010.

Coming off the worst year for new home sales on record in 2010, the housing market continues to struggle to recover from a painful bust.

With demand soft, prices have been weak. The median sales price for a new home sold last month was $213,800, up 2.9% from $207,700 a month earlier, but down 4.9% from the same month last year.

From Reuters:

U.S. new home sales up, market still seen weak

Sales of new U.S. homes
rose in March and the number of properties on the market was
its lowest since the 1960s, but further gains will be hampered
by stiff competition from a glut of previously owned houses.

Single-family home sales rose 11.1 percent to a seasonally
adjusted 300,000 unit annual rate, the Commerce Department said
on Monday, up from 270,000 in February. Economists had expected
a 280,000-unit pace.

Despite last month’s rise, new home sales are just bouncing
along the bottom.

The market for new homes is being squeezed by competition
from previously owned homes and a deluge of foreclosed
properties, even though inventories in March fell to 183,000
units — the lowest since August 1967.

“The rebound in new home sales was encouraging, but the
March sales pace merely brings us back to the underlying trend
and indicates that housing continues to bounce around
historical lows,” said Omair Sharif, an economist at RBS in
Stamford Connecticut.

From Time:

New Home Sales: Slightly Better Than Horrible

It is interesting what registers as good news these days in the housing market.

People are making a big deal out of today’s new homes sales number as perhaps finally the sign that the housing sector is rebounding. On Monday, the Census reported that new housing sales rose 11% in March. This was greeted as generally good news. Nationwide, 29,000 new homes were sold and it puts the market on pace to clear 300,000 homes in 2011. It’s the first month that new home sales have jumped, and they were up in the double digits. So this is good news, no? Not really.

The March numbers were up from February. But February’s sales pace of 270,000 was the lowest on record since the Census began tracking the number in 1961. So beating that number is a little clearing the first round in whatever is the opposite of limbo. What’s more, on a year over year basis, March sales were actually down 22% from a year ago. And that might be the more important number. Despite the fact that the Census says it seasonally adjusts the number, new housing sales seem to always jump in March, perhaps because of the better weather. Perhaps because people are often looking to move in during the summer. New home sales even jumped in March in 2008, which was an all-round horrible year for housing and the economy. Based on that, last month’s jump, which was smaller that others, isn’t that meaningful.

Posted in Housing Bubble, National Real Estate, New Development | 108 Comments

Best borrowers take the biggest hits

Posted on April 24, 2011 by grim

From the NYT:

Fallout From a Poor Credit Score

IF you want to see how quickly you can ruin a great credit score, just skip a mortgage payment.
…
Missed mortgage payments, serious loan delinquencies, loan modifications, short sales, foreclosures and bankruptcies all drag down credit scores. Because a mortgage is such a big slice of anyone’s credit profile, it carries more weight than other loans. Both FICO and VantageScore have studied and quantified those impacts.

They reached similar conclusions: for people with near-perfect records, a single mortgage payment that’s 30 days late reduces a credit score enough to hurt. For anyone, a short sale — selling a home for less than the amount owed — can be almost as destructive as a foreclosure.

In contrast, a loan modification — when the lender approves new loan terms — can have a “very, very minimal” effect, said Sarah Davies, the senior vice president for analytics at VantageScore. In some cases, the borrower’s score might drop 10 or 15 points.

With a loan modification, said Joanne Gaskin, the director of global scoring solutions at FICO, “the consumer does not have to go delinquent to get assistance.”

Modification horror stories abound; some borrowers have been told they can’t be helped unless they’ve already missed payments. That doesn’t have to be the case, said Josh Zinner, the co-director of the Neighborhood Economic Development Advocacy Project, a New York City nonprofit company active in foreclosure prevention.
…
In a study last month, FICO looked at how choices would affect three hypothetical mortgage holders: One with a spotless 780 score; another with a good 720, who may have missed a couple of credit card payments three years ago; a third with a not-great, not-toxic 680, who has sometimes fallen seriously behind on credit cards or a car loan. (Most lenders consider poor credit about 650 and below, Ms. Gaskin said.)

-30 days late: The gold-plated 780 drops to 670-690, the middling 720 becomes 630-650, and 680 is now 600-620. Effects are most significant for the strongest borrower. “A continued progression is going to have less and less impact on a score,” Ms. Gaskin said.

-90 days late: This is seriously delinquent, and brings the onetime best borrower down to 650-670, the midlevel one to 610-630, and the weakest to 600-620.

-Short sale, deed in lieu of foreclosure, or settlement, assuming the balance has been wiped out: The result is just a bit less serious. The 780 score deteriorates to 655-675; 720 to 605-625; 680 to 610-630.

-Foreclosure, or short sale with a deficiency balance owed: For either, 780 is 620-640; 720 is 570-590; and 680 is 575-595.

Posted in Foreclosures, National Real Estate, Risky Lending | 140 Comments

“In this market it’s not even worth trying to sell…we won’t get our investment back”

Posted on April 22, 2011 by grim

From the NY Times:

In a Slow Economy, Rentals Zoom

THE uncertain economy, combined with a depressed housing market and tight credit standards, has fostered an increase in residential leasing in Westchester and nearby counties — a trend so pronounced that at least one agency, Better Homes and Gardens Rand, recently introduced a rentals-only Web site for its clients.

“In some ways, renters have become the new buyers,” said Joseph Rand, a managing partner for the agency, which has offices in Westchester, Dutchess, Orange and Rockland Counties.

Indeed Westchester is the fifth-tightest market for rental apartments in the nation, with a 3.5 percent vacancy rate at the end of the first quarter of this year, according to Brad Doremus, an economic analyst for REIS, a real estate research firm in Manhattan. Because New York City, at 2.8 percent, has the lowest vacancy rate in the nation, renters have sought alternatives in the suburbs, Mr. Doremus explained, noting that Long Island and central New Jersey follow Westchester, in sixth and seventh place respectively.
…
Jacqualine Rubbo is 25 and single. A writer for a financial firm in Lower Manhattan, she is looking for a one-bedroom rental in Scarsdale, Tuckahoe or Hartsdale, close to a Metro-North train station.

“My parents tell me to buy something,” Ms. Rubbo said. “But with the state of economy and no job security these days, it’s kind of scary to invest capital in such a volatile market. My mother’s generation married early, settled in, bought a house with a picket fence, had three kids and got a dog.

“But my generation doesn’t know where our jobs are going to take us. It could be California or Connecticut. The last thing we want to worry about is having to sell a house.”
…
Jesse and Nicole Harris are also searching for a rental, but for a different reason. Unable to sell their four-bedroom three-bath colonial in Stony Point for anywhere near the $700,000 they paid for it in 2005, they have no choice but to enter into a short-sale agreement with the lender. The house is listed at $539,000.

“My credit is shot,” said Mr. Harris, 36, whose home health care business in Tarrytown failed. He is now selling real estate. Along with his wife and their daughters, 4 and 6, he hopes to move into a four-bedroom ranch in New City, in Rockland County. It is being offered at $3,500 a month by a homeowner who was unable to sell.

In Cortlandt Manor, Nina and Neil deLuca did not even bother to put their house up for sale. After Ms. deLuca lost her job as a medical receptionist, and the couple had to rely solely on Mr. deLuca’s earnings as a musician for TV and film, they decided to rent out their three-bedroom colonial and move to a family home near Great Barrington, Mass. They’re asking $2,800 a month for the colonial to cover the mortgage and taxes; on the house in the Berkshires, the mortgage is paid off.

“In this market it’s not even worth trying to sell because we know we won’t get our investment back,” Ms. deLuca said. “Maybe when the economy improves, we’ll be able to move back. We love this house. We’ve put a lot into it. At least, that’s our dream.”

Posted in Economics, Housing Bubble, National Real Estate | 264 Comments

March Home Sales – Recovery or not?

Posted on April 21, 2011 by grim

From the WSJ:

US March Existing-Home Sales Up 3.7% From February

Sales of previously occupied homes in the U.S. rose slightly in March at the start of the crucial spring selling season, but prices were weak, suggesting that any recovery in the struggling sector will be slow and modest.

Existing-home sales increased 3.7% from a month earlier to a seasonally adjusted annual rate of 5.10 million, the National Association of Realtors said Wednesday. The results were slightly better than expected. Economists surveyed by Dow Jones Newswires had expected home sales to rise by 2.5% to an annual rate of 5.0 million.

“While the increase is encouraging, we still do not see the gain as the start of a genuine recovery,” wrote Wells Fargo & Co. economist Anika Khan. She noted that February’s results were likely artificially depressed due to bad weather.

About 40% of existing homes bought last month were distressed properties–including foreclosures and sales in which the lender agrees to sell the home for less than the total mortgage amount. That was the highest percentage since April 2009.

Some analysts expect the housing market to improve later this year as unemployment drops. But they don’t expect a dramatic rebound. “The underlying trend for existing home sales is improving, but only at a gradual pace,” wrote Michael Gapen, senior U.S. economist with Barclays Capital.

The median sales price for an existing home was $159,600, down 5.9% from the year-ago median price of $169,600.

Meanwhile, the inventory of previously owned homes listed for sale climbed at the end of March to 3.55 million available for sale. That represented a 8.4-month supply at the current sales pace, compared with a revised 8.5-month supply in February.

The housing market has continued to struggle even as other segments of the U.S. economy show steady improvement. Last year was the worst year for sales of previously occupied homes since 1997, with about 4.9 million homes sold, according to the Realtors group.

Lawrence Yun, the Realtors chief economist, called the results “a decent figure, not a great figure.” All-cash sales are particularly strong, representing about 35% of all transactions, Yun said. That is likely an all-time high.

Still, many signs point to continued troubles.

From CNN/Money:

‘Uneven’ housing recovery continues

Sales of existing homes increased in March, “continuing an uneven recovery” in real estate, an industry group said Wednesday.

Home sales rose at an annual rate of 5.1 million in March, up 3.7% from February, the National Association of Realtors said Wednesday. However, sales were 6.3% lower than in March 2010.
…
hose reports are not bad, but not great either. Despite slight upticks in home sales and construction, the housing sector is still in the doldrums as supply continues to far outweigh demand for homes.

“Even as buyers scoop up deals of a lifetime, the river of foreclosed properties continues to flow,” Douglas Porter, deputy chief economist at BMO Capital Markets, said in a note to investors Wednesday morning.

The median home price slipped 5.9% to $159,600, compared to a year earlier.

Meanwhile, some buyers are still finding it tough to get a mortgage, Lawrence Yun, chief economist for the National Association of Realtors, said in a release. The average credit score to get a conventional mortgage has risen to 760 from 720 in 2007.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago — before the loose lending practices that created the unprecedented boom and bust cycle,” he said.
…
First-time buyers purchased 33% of homes in March, down from 44% in March 2010. Investors accounted for 22% of sales, up from 19% a year ago.

From CNBC:

Investors drove home sales up 3.7 pct. in March

Investors drove up U.S. home sales last month, plunking down cash to grab cheap homes at risk of foreclosure. But first-time homebuyers, who are crucial to a housing recovery, stayed away.

Sales of previously occupied homes rose last month to a seasonally adjusted annual rate of 5.1 million, the National Association of Realtors said Wednesday. That’s up 3.7 percent from 4.92 million in February. The pace is far below the 6 million homes a year that economists say represents a healthy market.
…
Many of those purchases are being made by investors, who are targeting cheap properties in areas hit hardest by foreclosures: Phoenix, Las Vegas and Tampa.

The evidence of their activity: sales of homes priced under $100,000 have risen 10 percent from a year ago. In that same period, sales of mid-priced homes, between $100,000 and $500,000, have fallen by more than 14 percent.

A big reason for that is fewer first-time homebuyers, the types of people who set down roots and raise families, are entering the market. Sales among that group fell to 33 percent in March. A more healthy percentage of first-time buyers is 40 percent, according to the trade group.
…
For March, sales rose 8.2 percent in the South, 3.9 percent in the Northeast and 1 percent in the Midwest. Sales fell 0.8 percent in the West.

Posted in Economics | 136 Comments

Mortgage delinquencies fall – Jersey near top

Posted on April 20, 2011 by grim

From HousingWire:

National delinquency rate drops again in March: LPS

The national delinquency rate continued to fall in March, according to the “First Look” report from Lender Processing Services, down to 7.8%.

The report provides month-end mortgage performance statistics from LPS’ loan-level database of nearly 40 million mortgages. The Jacksonville, Fla.-based firm will release more detailed reporting in its upcoming “Mortgage Monitor” report, which comes out at the end of this month.

The delinquency rate has consistently decreased throughout all of 2011.

March’s figure is down 11.6% compared to February and down 19.4% compared to March 2010. This still accounts for an estimated 4.1 million homes that are 30-plus days delinquent, LPS reported. Approximately 2 million of those are seriously delinquent, meaning 90-plus days delinquent but not in foreclosure.
…
Florida posted the highest percentage of noncurrent loans statewide in January, followed by Nevada, Mississippi, New Jersey and Georgia.

Posted in Foreclosures, National Real Estate, Risky Lending | 221 Comments

If you are a contrarian, is it time to buy?

Posted on April 19, 2011 by grim

From Bloomberg:

Americans Shun Most Affordable Homes in Generation as Owning Loses Appeal

Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.

In the end, she decided it wasn’t worth it.

“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”

The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership. At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent.

“The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said Michael Lea, a finance professor at San Diego State University. “Even as the economy improves, there are some who will never buy a home because their confidence in real estate is gone.”
…
“If we’ve learned anything from this mess, it’s that housing is not a risk-free investment,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “Everyone knows someone underwater in their mortgage or struggling to sell a home.”
…
The share of Americans who said they plan to purchase a home in the next six months tumbled 23 percent in March, according to the Conference Board research firm in New York. The National Association of Realtors probably will say tomorrow that existing-home sales were at a 5 million annual rate in March, up 2.5 percent after a 9.6 percent plunge in February, according to the median estimate of 74 economists surveyed by Bloomberg.

Posted in Economics, Housing Bubble, National Real Estate | 222 Comments

QRM – Kicking the market when it is down?

Posted on April 18, 2011 by grim

From HousingWire:

Risk retention will produce higher quality mortgages, depress housing: S&P

The new risk-retention rule will produce higher quality originations, as intended, but will also constrict lending and further depress the housing market, according to Standard & Poor’s.

The research firm released a report Friday analyzing the effects of the risk-retention rule and its accompanying exemption standard, the qualified residential mortgage.

Federal agencies are proposing banks keep “skin in the game” — retaining 5% of the risk for all loans that don’t qualify as a QRM. A qualified residential mortgage is one with a maximum 80% loan to value, on a property that is owner-occupied and has a 30-year amortization period with full documentation. A borrower must have a track record clear of 60-day delinquencies. This excludes interest-only loans and loans with premium penalties.

Lawmakers recently voted in favor of a 20% down payment in addition to the tighter underwriting standards.

“We believe these proposed underwriting standards will likely reduce the amount of available residential mortgages and push back the recovery of the nonagency RMBS market,” said Erkan Erturk, research analyst with S&P. “Fewer borrowers will meet these underwriting standards, which will reduce demand for housing and depress home prices even further.”

Erturk has little doubt, however, that the proposed underwriting guidelines will improve future credit performance of loans that are securitized and will have a positive impact in the long-term.

Posted in Economics, Mortgages, National Real Estate | 105 Comments

Does everyone on the low-end want to sell, or does nobody want to buy?

Posted on April 17, 2011 by grim

From the NY Times:

Lower-Priced Homes Lagging

The supply of unsold inventory with asking prices under $400,000 was 26 percent greater than at this time last year, according to a new report by the Otteau Valuation Group, which analyzes multiple listing statistics. The time it would take to sell these properties remains, in relative terms, shorter than for the more expensive homes. Yet in absolute terms, the wait for sellers of homes under $400,000 has done nothing but increase.

As for homes priced from $400,000 to $600,000, the supply of unsold inventory was 17 percent greater than at this time last year, according to the report.

At higher price levels, the market situation is mostly better than, or about equivalent to, last year’s: The picture is virtually unchanged for homes priced from $600,000 to $1 million, with an inventory that would take about 16 months to sell at the current pace.

For homes priced from $1 million to $2.5 million the inventory has decreased, but it is still 20 months worth.

The inventory of homes priced over $2.5 million amounted to slightly under five years worth last year at this time; now it is slightly over five years.

In general, it still takes less time to sell lower-priced homes than more expensive ones, said Jeffrey G. Otteau, the president of the New Brunswick-based company that did the research.

The inventory of homes on the market for under $400,000 a total of 44,288 houses, condominiums and co-ops in that category as of March 1 would take an estimated 13.6 months to sell if no additional homes were to be listed, according to the Otteau report.

This is vastly less time than it would take to sell the 3,442 houses with asking prices of $1 million or more.

But the sales picture for lower-priced homes has worsened significantly in the last year. Part of that shift can be ascribed to the vanished tax credit, part to the now-prevalent mortgage lenders requirement of a 20 percent down payment a hurdle that many first-time buyers cannot leap.

At the same point in 2010, there was a 10.9-month supply of lower-priced homes on the market, and sales were 13 percent higher than they are now.

Mr. Otteau described the overall market as having a faint pulse, sapped by weakness in the entry-level housing category the largest price category by far, and the most important factor in a healthy market since it generates move-up buyers in other categories.

For houses ranging from $400,000 to $599,999, the report showed, the situation has also deteriorated since last year. Supply has increased 17 percent statewide, to 14.9 months worth. In some parts of the state, this price category fared even worse in comparison to last year than did the price niche below it.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 107 Comments

Casting a shadow on the recovery

Posted on April 15, 2011 by grim

From HousingWire:

New York shadow inventory extends past ten years


(click to enlarge)

The shadow inventory in the state of New York — properties with mortgage borrowers more than 90 days delinquent — will take around 154 months to clear.

That’s nearly 13 years of unsold property supply.

In the case of shadow inventory, a meaningfully strong housing market will not grow to vibrancy unless homes where the borrower is not likely to amortize are resold.

The number of such homes in New York greatly outweighs the national average of 49 months, according to a Standard & Poor’s research note released this week.

S&P says the Empire State is slow to expedite liquidations. New York is one of 21 judicial states, where courts hear foreclosure cases, which means it should take longer than usual. However, a foreclosure mediation program from 2008 is also partially to blame, though the analysts says this still isn’t enough to explain the statewide phenomenon.

Posted in Economics, Foreclosures, National Real Estate, New Jersey Real Estate | 339 Comments