Wednesday, January 27, 2010
New Home Sales Drop
On the heels of the S&P/Case-Shiller report yesterday, the Commerce Department said sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined. Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November's previously reported 355,000 units. New home sales for the whole of 2009 fell 22.9 percent to a record low 374,000 units, but despite the slump in sales there were a few bright spots in today's report. The median sale price for a new home rose 5.2 percent last month from November to $221,300, the highest in seven months and the biggest rise since April 2009. Compared to December 2008, the median sale price fell 3.6 percent. The number of new homes on the market last month dropped 1.7 percent to 231,000 units, the lowest level since April 1971. However, December's weak sales pace left the supply of homes available for sale at 8.1 months' worth, the highest since June 2009, from 7.6 months in November.
Tuesday, January 19, 2010
Long-Term Rates at 6% by Year-End
According to the latest Housing & Mortgage Market Review published by the PMI Group, Inc., mortgage interest rates for 30-year fixed loans are projected to hit 6.00% by the end of 2010. Long-term interest rates have generally headed higher since the end of November, probably in response to signs of economic recovery, PMI noted. The California-based company expects this trend to continue, with a notable increase coming in Q2, influenced largely by the Federal Reserve’s withdrawal from the secondary mortgage market. Another government housing stimulus program – the federal home buyer tax credit – is also expected to leave a significant mark on housing conditions.
The first-time home buyer tax credit pulled sales forward into the months before it expired in November, PMI explained. Even with the extension and expansion of the credit, the company’s report says it’s likely that there will be a payback period from the original tax credit. Looking ahead, PMI says sales should climb more strongly in 2010, once the payback period from 2009’s tax credit comes full circle. As the job market finally starts to improve and credit markets function better, existing sales should climb by 7.7% and new home sales by 35.5%, PMI said in its report. The continued oversupply of homes on the market still weighs on house prices, although the pickup in sales has tempered this, the company said. Following a projected decline in existing home prices of 12.7% for 2009, PMI says prices should fall by another 5.0% this spring. However, stronger sales and reduced inventory should allow prices to remain relatively flat over the course of 2010, the company concluded.
The first-time home buyer tax credit pulled sales forward into the months before it expired in November, PMI explained. Even with the extension and expansion of the credit, the company’s report says it’s likely that there will be a payback period from the original tax credit. Looking ahead, PMI says sales should climb more strongly in 2010, once the payback period from 2009’s tax credit comes full circle. As the job market finally starts to improve and credit markets function better, existing sales should climb by 7.7% and new home sales by 35.5%, PMI said in its report. The continued oversupply of homes on the market still weighs on house prices, although the pickup in sales has tempered this, the company said. Following a projected decline in existing home prices of 12.7% for 2009, PMI says prices should fall by another 5.0% this spring. However, stronger sales and reduced inventory should allow prices to remain relatively flat over the course of 2010, the company concluded.
Monday, January 18, 2010
More foreclosures coming
The number of long-term adjustments completed under the president's foreclosure prevention plan rose to 66,465 at the end of December, or 7.4% of all trial modifications started, up from 31,382 a month earlier. Another 46,056 modifications are pending borrowers' final signatures, according to Treasury statistics released Friday. Another 48,924 were denied permanent modifications, mainly because they did not make their trial payments on time, did not hand in the needed paperwork or did not meet the program's criteria. Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier.
Housing experts remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released last Thursday. A lot of borrowers are too far underwater or don't have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed. Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn't think there's anything the government can do to keep these borrowers in their homes. "As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices," said Chen, who expects home prices to fall another 10% by the third quarter of this year.
President and Democrats trying to whip up populism in Massachusetts
The Democrats and the White House are scrambling to salvage the special U.S. Senate election in Massachusetts by trying to whip up a populist furor over banks. Amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks' role in the economic crisis, Senate candidate Martha Coakley (D), Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and Republican Scott Brown (R) as coddling them. This sort of anti-bank populism was popular in the 1930s by demagogues like Father Coughlin, but rarely has a president engaged in this sort of bare knuckle politics to save his agenda. Polls show declining voter enthusiasm for Mr. Obama's health-care plan, and Brown has campaigned on a promise to provide the 41st GOP vote to secure a Senate filibuster to scuttle a health-care bill.
Democratic strategists concede Mr. Obama's support in the past for a Wall Street bailout has fueled voter anger, particularly among conservatives and supporters of the anti-establishment Tea Party movement who are pouring money and volunteer hours into Mr. Brown's race. With the bank tax, "we can take populism back to our side," a Democratic Party strategist said. Mr. Brown he opposed the tax because it would most likely be passed on to consumers through ATM fees, among other things. He said banks would have to pay a hefty tax rather than use the money to extend much-needed loans to small businesses. "If you're having an uphill battle selling health care in a blue state like Massachusetts, that should send shivers down the spine of Democrats looking at races across the country," said Brian Walsh, a spokesman for the National Republican Senatorial Committee. A new Suffolk University poll finds Republican Scott Brown leading Democrat Martha Coakley, 50% to 46%. If Brown wins , ObamaCare dies. He would be the 41st vote to prevent any compromise legislation from coming to the floor of the Senate.
Chris McLaughlin; Loss Mitigation Institute
Housing experts remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released last Thursday. A lot of borrowers are too far underwater or don't have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed. Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn't think there's anything the government can do to keep these borrowers in their homes. "As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices," said Chen, who expects home prices to fall another 10% by the third quarter of this year.
President and Democrats trying to whip up populism in Massachusetts
The Democrats and the White House are scrambling to salvage the special U.S. Senate election in Massachusetts by trying to whip up a populist furor over banks. Amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks' role in the economic crisis, Senate candidate Martha Coakley (D), Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and Republican Scott Brown (R) as coddling them. This sort of anti-bank populism was popular in the 1930s by demagogues like Father Coughlin, but rarely has a president engaged in this sort of bare knuckle politics to save his agenda. Polls show declining voter enthusiasm for Mr. Obama's health-care plan, and Brown has campaigned on a promise to provide the 41st GOP vote to secure a Senate filibuster to scuttle a health-care bill.
Democratic strategists concede Mr. Obama's support in the past for a Wall Street bailout has fueled voter anger, particularly among conservatives and supporters of the anti-establishment Tea Party movement who are pouring money and volunteer hours into Mr. Brown's race. With the bank tax, "we can take populism back to our side," a Democratic Party strategist said. Mr. Brown he opposed the tax because it would most likely be passed on to consumers through ATM fees, among other things. He said banks would have to pay a hefty tax rather than use the money to extend much-needed loans to small businesses. "If you're having an uphill battle selling health care in a blue state like Massachusetts, that should send shivers down the spine of Democrats looking at races across the country," said Brian Walsh, a spokesman for the National Republican Senatorial Committee. A new Suffolk University poll finds Republican Scott Brown leading Democrat Martha Coakley, 50% to 46%. If Brown wins , ObamaCare dies. He would be the 41st vote to prevent any compromise legislation from coming to the floor of the Senate.
Chris McLaughlin; Loss Mitigation Institute
Thursday, January 14, 2010
What caused the housing bubble?
In a monthly survey of business economists by the Wall Street Journal, 42 said low interest rates were partly to blame for the housing boom while 12 sided with Mr. Bernanke, who said they weren't. Academic economists who specialize in monetary policy were split in a separate survey: 13 said low interest rates helped cause the housing bubble; 14 said they didn't. Mr. Bernanke laid out his defense of Fed policy in a speech to the American Economic Association last week, acknowledging that interest rates were very low but adding that policy "does not appear to have been inappropriate." Other factors -- notably an explosion of exotic mortgages and a flood of cash coming into the U.S. from abroad -- were the crucial drivers of the housing bubble, he said. "Regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices," he said. The "basic problem" was "the mistake" of raising short-term interest rates too slowly from 2004 through 2006, said Miles Kimball of the University of Michigan. "Going up quicker would have been better."
"The appreciation of house prices was but one of many indicators which called for a somewhat more restrictive interest-rate policy" in 2004 and 2005, said Marvin Goodfriend of Carnegie Mellon's Tepper School of Business. Many economists met Mr. Bernanke halfway -- arguing that low rates played a role in fueling the housing boom, though they may not have been the key force. Some noted that low rates encouraged banks to write the riskier loans that Mr. Bernanke puts at the center of the crisis. "There is plenty of blame to go all around," said Martin Eichenbaum of Northwestern University, expressing a commonly expressed view. "Loose monetary policy certainly contributed to easy financing, which was one element of the bubble."
Chris McLaughlin
"The appreciation of house prices was but one of many indicators which called for a somewhat more restrictive interest-rate policy" in 2004 and 2005, said Marvin Goodfriend of Carnegie Mellon's Tepper School of Business. Many economists met Mr. Bernanke halfway -- arguing that low rates played a role in fueling the housing boom, though they may not have been the key force. Some noted that low rates encouraged banks to write the riskier loans that Mr. Bernanke puts at the center of the crisis. "There is plenty of blame to go all around," said Martin Eichenbaum of Northwestern University, expressing a commonly expressed view. "Loose monetary policy certainly contributed to easy financing, which was one element of the bubble."
Chris McLaughlin
Wednesday, January 13, 2010
Option ARMs feeding foreclosures
There are no specific numbers on how many option ARM loans there are. But analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone. Many of those option ARM loans have already re-adjusted to higher payments, but more are on the way. Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings. "It's going to kill off housing," warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. "We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet."
As the terms of those mortgages now readjust, homeowners are facing much higher mortgage payments at a time when the value of their house has plummeted and many are out of work. In some cases, homeowners who chose a very low starting interest rate have actually seen the overall amount of their mortgage increase—known as negative amoritization—putting them even deeper in debt. "Option ARMs have been a disaster from day one and a lot of them have already defaulted," says Greg McBride, senior financial analyst with Bankrate.com. "This is a very big issue because interest rates are rising."
And there's more misery. If the Fed increases rates in the months ahead to fight inflation, rates tied to option ARM indexes will rise further—causing more payments to adjust up even sooner. And while Option ARM borrowers might want to re-finance, they often can't because of falling home values and tighter credit restrictions. "I don’t see how the option ARM problem is not a huge issue," says Sylvia Alayon, vice president and director of operations for the Consumer Mortgage Audit Center, which provides auditing services to advocacy groups. "This is a major hit for housing. It will continue to feed the excess supply of housing with more foreclosures."
Chris McLaughlin
There are no specific numbers on how many option ARM loans there are. But analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone. Many of those option ARM loans have already re-adjusted to higher payments, but more are on the way. Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings. "It's going to kill off housing," warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. "We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet."
As the terms of those mortgages now readjust, homeowners are facing much higher mortgage payments at a time when the value of their house has plummeted and many are out of work. In some cases, homeowners who chose a very low starting interest rate have actually seen the overall amount of their mortgage increase—known as negative amoritization—putting them even deeper in debt. "Option ARMs have been a disaster from day one and a lot of them have already defaulted," says Greg McBride, senior financial analyst with Bankrate.com. "This is a very big issue because interest rates are rising."
And there's more misery. If the Fed increases rates in the months ahead to fight inflation, rates tied to option ARM indexes will rise further—causing more payments to adjust up even sooner. And while Option ARM borrowers might want to re-finance, they often can't because of falling home values and tighter credit restrictions. "I don’t see how the option ARM problem is not a huge issue," says Sylvia Alayon, vice president and director of operations for the Consumer Mortgage Audit Center, which provides auditing services to advocacy groups. "This is a major hit for housing. It will continue to feed the excess supply of housing with more foreclosures."
Chris McLaughlin
Tuesday, January 12, 2010
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This is a service provided by Kevin Cross, owner of Cross and Associates of Keller Williams and Adam Heafner of First Rate Financial.
Our Goal is to provide a safe haven for real estate investors to network with like minded individuals for the purpose developing, expanding and protecting their real estate investment goals.
Our Goal is to provide a safe haven for real estate investors to network with like minded individuals for the purpose developing, expanding and protecting their real estate investment goals.
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