Smaller down payments gaining popularity

Posted on August 15, 2017 by grim

From CNBC:

Homebuyers put less and less skin in the game, adding to the market’s overall risk

It feels like deja vu in mortgage land all over again.

Homebuyers are increasingly opting to put less money down when purchasing their homes, increasing their risk should the housing market, and specifically home prices, falter yet again. When home prices crashed in the last decade, millions of borrowers fell underwater on their home loans, prompting a foreclosure crisis of epic proportions. It all begs the question, could it happen again?

In the past 12 months, 1.5 million borrowers bought their homes with down payments of less than 10 percent, meaning they financed more than 90 percent. That marks a seven-year high, according to Black Knight Financial Services.

“The increase is primarily a function of the overall growth in purchase lending, but, after nearly four consecutive years of declines, low down payment loans have ticked upward in market share over the past 18 months as well,” said Ben Graboske, executive vice president at Black Knight Data & Analytics, in a recent note. “In fact, they now account for nearly 40 percent of all purchase lending.”

On the bright side, the bulk of the growth has not been at the lowest down payment level, that is, 3 percent or less. It is more in the 5 to 9 percent down payment arena. In addition, the low down payment loans of today are nothing like the ones the precipitated the last housing crash.

At that time half of all low down payment loans being made involved second loans, commonly known as “piggyback loans,” but today’s mortgages are largely single, first liens, Graboske noted.

The loans of the past were also far riskier – mostly adjustable-rate mortgages, which, according to the Black Knight report, are virtually nonexistent among low down payment mortgages today. Instead, most are fixed rate. Credit scores of borrowers taking out these loans today are also about 50 points higher than those between 2004 and 2007.

The growth in this sector is likely due to new programs offered by Fannie Mae and Freddie Mac that are actually gaining market share from the FHA, which was the only low down payment game in town during the recession. The government-sponsored enterprises brought back 3 percent down payment loans in late 2014, but as with the FHA, they also require borrowers pay for mortgage insurance.

Posted in Housing Bubble, National Real Estate, Risky Lending | 77 Comments

School are shrinking – why aren’t taxes dropping?

Posted on August 13, 2017 by grim

From RT40:

Mapping New Jersey’s Shrinking School Districts

More than half of New Jersey’s school districts have shrunk in the last six years, reflecting wider population moves toward urban areas as well as net migration from the state. School districts are shrinking at a rapid rate in the Northwest of the state, as well as in Southern shore communities such as Avalon, Margate and Ventnor.

The declining school populations in part reflect a wider trend of depopulation of the outer-ring suburbs that is playing out across New Jersey and the Northeastern United States, according to Professor James Hughes, a senior faculty fellow at the Edward J. Bloustein School of Planning and Public Policy at Rutgers. The suburbs, where millennials were born and grew up, provided economic opportunities for their parents but have little to offer today’s 20- and 30-year olds. There are fewer children today than six years ago in almost all of the districts in Hunterdon, Sussex and Warren counties, and those that grow up there don’t want to stay there.

Shrinking schools also reflect the fact that a generation of New Jerseyans is delaying starting a family. And millennials who are starting to have children still want to live close to where they work–the suburbs are no draw. “When they do start raising families it’s going to be in places that have a walkable downtown, a rail station, access to activities,” Hughes said. The map already shows that districts in the Hudson Valley and some towns around Philadelphia (Haddonfield, for example) have seen a pickup in enrollment.

Total enrollment across the state has been flat over the last few years at around 1.37 million students after dropping to 1.36 million in the immediate aftermath of the recession. The stagnant school enrollment casts doubt over the future economic health of New Jersey, since a young and growing population creates a workforce that draws investment and can help support older generations. If the trend continues, it will likely lead to pressure on some municipalities to consolidate school districts. Potential school mergers are being researched in Hunterdon and Warren counties and the issue has also been raised in some shore towns.
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“That’s a real issue I think going forward,” said Hughes. “New Jersey always exports a large number of high school graduates – they go to school out of state. The question is, assuming the number of high school graduates stays the same and we’re expanding the system, are we going to be able to counter that out-of-state movement?”

Hughes noted that to date, high school graduate numbers are still rising in New Jersey. But he cautioned, “When the number of high school graduates starts to decline…which is conceivable, we could have overcapacity in higher education.”

Posted in Demographics, Economics, New Jersey Real Estate, Property Taxes | 51 Comments

Wise up NJ, or get left behind.

Posted on August 11, 2017 by grim

From the Record:

New Jersey’s suburban economy’s existential crisis

A new study suggests that New Jersey could expand its economy by $150 billion and create a quarter-million new jobs over the next decade by making a number of policy changes regarding business operations in the state. The report by consulting firm McKinsey says that the state needs to nurture young businesses, improve roads and mass transit options and better tailor incentives to promote growth.

This is correct as far as it goes, but the report barely scratches the surface on why New Jersey is struggling to gain younger businesses and misses a looming economic crisis. The why is best explained by Rutgers professors James Hughes and Joseph Seneca. They write about how New Jersey successfully evolved from an urban manufacturing-based economy to one that made the state an economic success story based on suburbanized information and research-driven employment.

“The baby boom will soon be yesterday’s workforce. Tomorrow’s workforce will be dominated by a new, expansive generation… such young creatives… currently do not find the car-culture suburbs in which they grew up an attractive place to live, work and play,” according to Hughes and Seneca.

“Suddenly, New Jersey’s greatest core advantage in the late twentieth century — a suburban-dominated, automobile dependent economy and lifestyle — is now regarded as a disadvantage,” they add.

New Jersey is the most densely populated state in the nation. It’s also the most suburban U.S. state, which means plenty of malls and office parks. Not too long ago these properties helped make New Jersey the most prosperous of the 50 states.

That is no longer the case today.

In fact, too many New Jersey suburban towns – most of New Jersey – are facing a perfect storm that could lead to significant property tax increases unless mayors and state leaders take action soon.

Here’s the reality: Suburban office parks are going the way of dinosaurs unless they are reimagined. Left unchanged, each of these formerly hefty taxpayers are going to be a drain resulting in tax reductions that will have to be absorbed by homeowners.

In Bergen County, many towns are struggling with the best way to replace these office park dinosaurs. Too often, municipal leaders have chosen to hope the these office parks will again fill with white-collar employees whose property owners pay significant taxes and demand little in the way of local services. That time has come and gone and local leaders cannot wish the current trends away.

On top of that is the lack of affordability of suburban housing for the middle-skilled worker the McKinsey report describes. More than a quarter-million residents left New Jersey in 2015 as our state ranked last in income growth and had the highest property taxes. Simply stated, to remain an economically strong state New Jersey must make housing more within reach of all worker, especially the middle-skilled ones.

Posted in Demographics, Economics, New Development, New Jersey Real Estate | 49 Comments

Not iffy, recovering, but slowly

Posted on August 10, 2017 by grim

From NJ101.5:

The bright side of NJ’s iffy housing market

Featuring a worst-in-the-nation foreclosure rate and a significant inventory shortage, New Jersey’s housing market is far from perfect and still reeling from the economic downturn of late last decade.

But, sales are on the rise in the Garden State — up 7.7 percent from June 2016 to June 2017, according to New Jersey Realtors — proving that the allure of homeownership is still alive and well.

The median sales price of homes in New Jersey registered an uptick as well.

“The median sales price for the total market did remain strong at $275,000 for the first two quarters of 2017. That’s an increase of 1.9 percent over the same period last year,” New Jersey Realtors President Bob Oppenheimer told New Jersey 101.5.

Oppenheimer noted, though, the price/inventory/sales situation can’t be described by one statistic in such a diverse state as New Jersey. Three segments of the market are performing quite differently from one another.

Posted in Economics, New Jersey Real Estate | 68 Comments

New York – Highest Foreclosure Rate in the Nation

Posted on August 9, 2017 by grim

CoreLogic released their monthly delinquency data yesterday, deep in there was an important little stat on the overall foreclosure rate, which NJ has been at the top of the charts for the last two years. For at least the last year, NJ has been resolving foreclosures at a faster rate than our neighbor, and we’ve finally given up our #1 position to NY – which is now takes the illustrious position of having the highest foreclosure rate in the nation. We should see the NJ fall below NY for delinquency as well in the next few months.

Posted in Foreclosures, New Jersey Real Estate | 66 Comments

Oops, NYC dials back pricing

Posted on August 8, 2017 by grim

From Bloomberg:

In Manhattan and Brooklyn, Home Sellers Get a Reality Check

If New York home sellers had big dreams when they listed their properties, now they’re adjusting to reality.

In most Manhattan neighborhoods, at least 25 percent of homes on the market in the second quarter had their prices cut. The share was smaller only at the borough’s northernmost tip, in Inwood and Marble Hill. In prime areas such as the West Village and Chelsea, about half of listings had their prices trimmed.

Even in high-demand Brooklyn, owners realized they’d gotten too ambitious. Forty-one percent of Williamsburg listings saw a reduction in asking price, while in Bushwick, the share was 48 percent. The waterfront area that includes Red Hook had the biggest share of cuts, at 59 percent.

The whittling shows “that even in these areas that are really hot, it’s possible for sellers to be out of sync with the market, and that there is a limit to how high prices can go,” said Grant Long, senior economist with StreetEasy, which provided the data.

Posted in NYC, Price Reduced | 27 Comments

Philly burbs on the verge of recovery?

Posted on August 7, 2017 by grim

From the Philly Inquirer:

Suburbs boast best real estate market since recession, but don’t get too excited yet

In a suburban real estate market described for years as sluggish, it might seem as if, finally, the region is experiencing the recovery it needs.

From April to June, all but one suburban county in the region experienced a rise in property values over the previous year. Several zip codes had increases of more than 50 percent in median home prices. Municipalities that just last year had only a handful of sales nearly doubled their numbers this spring and early summer, and one almost tripled them. The region as a whole recorded 15,636 sales in the three-month second quarter, the most on record in more than a dozen years.

It’s a kind of house-hunting frenzy that some experts say they have never seen before: The number of homes for sale is at record-low levels, and buyers are becoming increasingly desperate to secure the home they want. No longer is it unusual for homes to sell just one or two days after going on the market, and real estate agents say open houses are flooded all day with shoppers.

“They want the home that is in truly move-in condition and they’ll pay a premium for it,” said Kathleen Hartnett, a Narberth-based real estate agent with Duffy Real Estate.

The result has been bidding wars, offers well above asking price, and buyers willing to take the risk to waive their standard protections, such as mortgage and appraisal contingencies, to beat their competitors. All the while, it presents a strain on millennials and middle-income buyers, who are finding a dwindling supply of starter homes for sale in the seven-county suburban region, as builders have focused on more expensive homes amid high land and labor costs and tight lending standards in order to turn a profit.

If the shot of energy flowing through the suburbs seems too good to be true, rest assured that it just might be. In both individual municipalities and the suburban region as a whole, the housing recovery is complicated and fickle — the spring and early summer months are typically the hottest times in the market — and there’s no guarantee the rush will last.

“The numbers clearly indicate that Philadelphia’s housing market had its best quarter since the recent housing-driven recession,” said Kevin Gillen, a senior research fellow at Drexel University’s Lindy Institute for Urban Innovation, who gave the Inquirer an analysis of home sales from the Trend Multiple Listing Service and Houwzer. But, he continued: “We’ve been here before. … There have been other recent quarters where [the numbers have spiked] as well, only to subsequently slump again.”

Despite sizable gains this quarter, the suburbs still have room to grow: According to Gillen’s data, home values across most counties in the region — Delaware, Bucks, and Montgomery in Pennsylvania, and Gloucester, Camden, and Burlington in New Jersey — still remain below their pre-recession peaks (Chester County is nearly even with 2007’s home value). South Jersey in particular has struggled — in Camden and Burlington Counties, for example, home values, on average, linger 25 percent lower than they were in 2007. In Philadelphia, meanwhile, home values have surged 17 percent higher than their former peak, making the suburban slump even more jarring.

Posted in Housing Recovery, Philly, South Jersey Real Estate | 32 Comments

Sellers at the high end get real … and sell

Posted on August 4, 2017 by grim

From CNBC:

Luxury home prices soar as sellers come back down to earth

The slump in the swankiest sector of the housing market appears to be over, and, ironically, it may be due to a dose of reality among sellers.

Sale prices of luxury homes in the second quarter of this year were up 7.5 percent from a year ago, the first time luxury gains have outpaced the rest of the market since 2014, according to Redfin, a real estate brokerage which defines luxury as the top 5 percent of the most expensive homes sold in each city in each quarter.

While some point to the recent runup in the stock market, the real reason for the luxury recovery may be a shift in the mind of sellers. They were asking too much, and now that they’re asking less, there is more action in the market, in turn boosting prices again.

“There have been several years of a large disconnect between luxury sellers and market conditions, and what we’ve noted in all our research is that sellers are now much more willing to travel farther to meet the buyers,” said Jonathan Miller, president and CEO of Miller Samuel, a real estate appraisal and consulting firm that compiles market reports for Douglas Elliman, a real estate brokerage.

Miller points to a recent $15 million sale of a Brooklyn, New York, home. While the closing price was high, it sold at a 40 percent discount to its original list price, and the home took seven years to sell.

Luxury home sales have been rising steadily, causing the supply of those homes for sale to drop. Sales of homes priced above $1 million jumped 19 percent in June compared with a year ago, according to the National Association of Realtors. That was a much larger sales gain than in any of the lower price points.

The sales surge has caused a decline in the supply of luxury homes. Listings at or above $1 million fell 9.4 percent compared with the same period last year, according to Redfin. Those priced at or above $5 million were down about the same. This after five consecutive quarters of double-digit inventory growth.

“The housing shortage is now affecting the top of the housing market,” said Redfin’s chief economist, Nela Richardson. “Yet despite the strong uptick in prices, the luxury market is not nearly as competitive as the rest of the market. Only 1 in 50 luxury homes sold above list price in the second quarter, compared to more than 1 in 4 homes in the bottom 95 percent.”

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 54 Comments

Ready for another bubble?

Posted on August 2, 2017 by grim

From CNBC:

Home price gains are accelerating again, and in some cities those values are overheating.

Four of the nation’s largest cities are now considered overvalued, according to CoreLogic. Home prices in Denver, Houston, Miami and the Washington, D.C., metropolitan area now exceed sustainable levels.

To determine if a market is overvalued, CoreLogic compares current prices to their long-run, sustainable levels, which are supported by local economic fundamentals like disposable income. An overvalued market is one in which home prices are at least 10 percent higher than that level. The rest of the top 10 markets are considered “at value,” but none are undervalued, as prices are higher in all of them compared with a year ago.

“With no end to the escalation in sight, affordability is rapidly deteriorating nationally,” said Frank Martell, president and CEO of CoreLogic. “While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”

Home prices rose 6.7 percent nationally in June compared with June 2016. That is a slightly higher annual gain than May. Prices are now up nearly 50 percent from the trough of the housing crash in March 2011.

The soaring gains now are due to a historically short supply of affordable homes for sale. The number of homes for sale in June was 11 percent lower than a year ago, according to Realtor.com.

“As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years,” said Frank Nothaft, chief economist at CoreLogic.

While the price gains are widespread, all real estate is still local, and some previously hot markets are actually cooling off. San Francisco is considered at value, with prices up just 5.3 percent, compared with an 8.7 percent annual gain in Denver. The New York City metropolitan area is seeing values up just over 3 percent annually and is considered at a sustainable level, but Houston, while seeing the same price gain is overvalued based on its economy.

Posted in Housing Bubble, National Real Estate | 104 Comments

Housing continuing to recover as investors step aside

Posted on August 1, 2017 by grim

From Bloomberg:

Gain in U.S. Pending Home Sales Shows Market Is Stabilizing

A rebound in contract signings for the purchase of previously owned U.S. homes shows housing demand is stabilizing after a three-month downturn, National Association of Realtors figures released Monday showed.

The increase puts the group’s gauge in line with its average since the start of 2016 and shows growth in the residential real estate market is being sustained while contributing little to the economy. Housing remains driven by trade-up purchasers who have taken advantage of low mortgage rates and are taking in stride higher asking prices. Limited choices of cheaper properties, however, are hindering entry-level buyers.

June saw a decline in sales to investors and those paying cash, according to the NAR. Less competition from investors may help alleviate the tight supply issue, which is good news for first-time buyers.

“Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria,” Lawrence Yun, NAR’s chief economist, said in a statement. “Low supply is an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1 percent lower than a year ago.”

Posted in Economics, Housing Recovery, National Real Estate | 79 Comments

Good Times on Wall Street

Posted on July 30, 2017 by grim

From Bloomberg:

Hamptons Home Prices Soar to Record $1.07 Million

The stock market is up. Must be time to splurge on a mansion in the Hamptons.

Buyers in the Long Island resort towns opted for more-expensive properties in the second quarter, sending the median sale price for a single-family house to a record $1.07 million, up 7.5 percent from a year earlier, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Forty-eight homes priced at $5 million or higher changed hands in the three months through June, the most for any quarter since the end of 2015.

The Hamptons, a second-home market whose health is tied to the fortunes of New York’s financial industry, is benefiting from stocks at record highs and a Wall Street bonus pool that’s climbed for the first time in three years. Sales of single-family houses jumped 26 percent in the quarter from a year earlier to 674, Miller Samuel and Douglas Elliman said. The number of listings fell 4.1 percent as eager buyers depleted inventory — and fast. At the current pace of deals, it would take 6.1 months to sell all the homes on the market, compared with 8 months in the second quarter of 2016.

“The stars all lined up,” said Judi Desiderio, chief executive officer of brokerage Town & Country Real Estate, which earlier this month released a report on the Hamptons showing a jump in high-end sales and a 10 percent increase in the overall median price for the second quarter. “The stock market’s doing well, people feel a sense of safety, and they pulled profits out of the market.”

Buyers still demanded a deal, however. Eighty-six percent of purchases of houses and condos in the quarter were for less than what the seller sought, said Jonathan Miller, president of Miller Samuel. The average discount was 12 percent from the last asking price.
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“Even when the numbers make sense, buyers will still say, ‘I don’t want to pay full ask,’” said Raymond Lord, a local broker with Douglas Elliman. “They always want to negotiate.”

Posted in Economics, Housing Recovery, NYC | 85 Comments

Millennials increase homebuying

Posted on July 28, 2017 by grim

From HousingWire:

Millennials drive up homeownership rate in Q2

The national homeownership rate increased slightly from last year, but was not statistically different from last quarter, according to the latest release from the U.S. Census Bureau.

The homeownership rate in the second quarter came in at 63.7%, up 0.8 percentage points from last year’s 62.9% but only 0.1 percentage points from the first quarter’s 63.6%.

Last year’s 62.9% represented the lowest rate for homeownership since 1965. Since then, the homeownership rate hovered close to this 50-year low.

The Census Bureau report also showed that national vacancy rates for rental housing increased in the second quarter to 7.3%. This is up 0.6 percentage points from 6.7% last year and up 0.3 percentage points from last quarter’s 7%.

On the other hand, the homeowner vacancy rate decreased 0.2 percentage points from the second quarter 2016 and the first quarter this year to 1.5%, which is the lowest level since the first quarter of 2001.

The homeownership vacancy rate inside principal cities rests even lower at 1.4%, the lowest level since the fourth quarter of 1980, when the rate also sat at 1.4%.
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Surprisingly, despite being the most affected by rapidly rising home prices and fierce competition in the housing market, Millennials were the only generation to see an increase in their homeownership rate from last quarter.

The homeownership rate for those under 35 years of age increased a full percentage point from last quarter’s 34.3% to 35.3% in the second quarter, which is the highest level since the third quarter of 2015.

Posted in Housing Recovery, National Real Estate | 94 Comments

Want to live in a spy house?

Posted on July 27, 2017 by grim

From the Record:

Russian spy home in Montclair to be sold and renovated

Marquette Road is a quiet, sleepy block in the northern part of Montclair near the town’s border with Clifton. The kind of block where Russian spies could live without much notice.

Now, a home on the street, infamous for its former owners, will be getting a makeover.

A company that buys and “flips” homes has purchased the house at 31 Marquette Rd. and intends to renovate it before it goes back on the market.

The home’s former occupants were arrested in 2010 by the FBI, as part of a Russian spy ring that authorities said had operated for years in the U.S.

The case reportedly inspired the FX TV spy drama, “The Americans.”

The couple accused of bring Russian spies, who went by the aliases of Richard and Cynthia Murphy, purchased the home in 2008 for $481,000, according to tax records. Records show the home was bought for $100 by a mortgage association in 2015 and then a bank acquired it for $1 the following year, before being bought by North N.J. House Buyers in May.

Sandy Sorkin, a regular at Township Council meetings, has lived on the block since 1978. Sorkin said he was happy to see the house under new ownership.

“It would be nice to see it occupied, be nice to see something there. It would nice to have it back on the tax rolls,” Sorkin said. “This is a very nice neighborhood, lots of nice people, and I’m sure another nice family will move in there.”

Posted in New Development, New Jersey Real Estate, Politics | 51 Comments

The Future of America – Boarding Houses

Posted on July 24, 2017 by grim

From Quartz:

Are the empty bedrooms in baby boomer homes a solution to the millennial US housing crunch?

One American generation is struggling to find affordable housing. A second is sitting at home with a lots of empty bedrooms. Real estate site Trulia argues it’s a match made in housing-market heaven.

Sky-high rents and house prices keep squeezing American’s finances. Home-ownership rates are well below (pdf) pre-recession levels, while the share of US income spent on rent has spiked from 21% to more than 25% in the last five years. As 90% of retirement-age older Americans say they want to stay in their homes, and millennial renters are desperate for cheaper rents, Trulia thinks “boom-mates” are an answer.

To get a handle on its potential, Trulia used US Census data to calculate the number of vacant bedrooms in households headed by people born no later than 1964 (the last year of the baby boomer generation). By identifying the total number of bedrooms, then subtracting the the number of inhabitants and one additional bedroom to account for alternate uses such as a home office, Trulia says there are 3.6 million bedrooms vacant in the 100 largest US metro areas. Top markets had an average of 4.2 bedrooms per household and 2.6 household members.

The most available bedrooms were in New York (177,734), Atlanta (141,462), Washington (133,685), and Los Angeles (114,731), where about 3% to 5% of homes have spare capacity. Landlords in those cities could earn an estimated $11,000 per year by renting out rooms. In San Francisco, despite having relatively few available bedrooms (22,003), the highest returns were on offer: $21,780. On the other side of the coin, renters in Boston, New York, and the Bay Area could save the most, about $11,000 per year, by renting rooms from boomers rather than getting their own one-bedroom apartments in those cities.

Posted in Demographics, Economics, New Development | 122 Comments

Philly best local showing in the last decade

Posted on July 22, 2017 by grim

From the Philly Business Journal:

Philadelphia posts solid, post-recession gain in home values

Since the real estate bubble burst during the Great Recession of 2007-2009, housing markets across the country have struggled to regain their footing. Philadelphia and its Pennsylvania suburbs have bounced back much stronger than other markets in the area, ranking inside the top 40 markets with the top gains in average home prices across the country.

FHFA converts each market’s home sales prices to a quarterly index, which is pegged to a 1991 value of 100 points. Any rise in the index corresponds to an overall increase in local prices. Any drop indicates that values are declining.

Our sister publication Buffalo Business First calculated 10-year changes for the nation’s 100 biggest markets. The Philadelphia market gained 22.54 points from the first quarter of 2007 to the corresponding period this year, yielding a gain of 9.5 percent in the value of a typical home.

Roughly a third of the top 100 markets (37, to be precise) are still underwater, with average house prices that are lower today than before the recession.
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The nine metros with the strongest growth rates for home values are all located in rapidly expanding states in the South and West. Pittsburgh rounds out the top 10.

Other local areas haven’t bounced back nearly as well as the Philadelphia market, with the Wilmington market sliding down 11.8 percent, and the Camden market falling 21.7 percent in the same measurement period.

Posted in Economics, Housing Recovery | 28 Comments