Housing Bottom Now Expected in 2013, Recovery Looks Weaker, by Colin Robertson, Thetruthaboutmortgage.com


There’s been a lot of interesting housing-related news over the past week, with some good and some bad.

The first bit is that economists finally believe the national housing bottom is near.

Yes, we’ve heard that before, several times, but per Zillow, the economists surveyed are all “largely” on-board this time.

So that’s good news. The bad news is that more than half of the same respondents believe the homeownership rate will continue to fall from the 65.4% level seen in the first quarter.

In fact, one in five think homeownership will be at or below 63% in coming years, which will test the all-time low established in 1965.

For the record, some areas of the nation have already appeared to bottom, and are actually up quite a bit.

In hard-hit Phoenix, home prices are already up 12% from their bottom. In San Francisco, prices are up 10% from bottom.

But New York, Atlanta, and Chicago are still waiting for the bounce.

Housing Recovery Not Looking Too Hot

Meanwhile, future home appreciation isn’t looking as good as it once was.

Back in June 2010, Zillow-surveyed economists expected cumulative appreciation of 10.3% from 2012 to 2014.

Now, the experts only see home prices appreciating a paltry 3.5% for the same period.

That’s $1.25 trillion less in housing wealth than previously expected. Yikes.

So expect an “L” shaped recovery…in other words, a steep decline, followed by many, many flat years. Sure, it may a be “squiggly L” with little ups and downs, but an “L” nonetheless.

That said, make sure you actually like the place you buy, don’t just buy it because you think you’re going to make a killing off it as an investment.

The good news is mortgage rates continue to be absurdly low, with the 30-year fixed matching a record low 3.48% this week, per Zillow.

I didn’t see rates falling that low, so I’ll start eating my hat now.

But I still think the low rates could be a major artificial stimulus, which has led to homeowners listing the worst properties out there of late.

Why the Housing Recovery Will Take Time

If you’re wondering why the housing market won’t bounce back immediately, you merely need to consider all the ineligible buyers.

Let’s start with the millions of underwater homeowners, who won’t be able to move unless they’re rich enough to buy a new house and short sell or bail on their current property.

There aren’t many people this lucky, especially now that lenders actually document income.

Then there are those who still haven’t gone through foreclosure yet, but are hanging on by a thread.

There are plenty who still haven’t been displaced, but will be in the next several years. So there’s a ton of shadowy shadow inventory yet to materialize.

Even those who received loan modifications are in serious trouble. A recent study released by credit bureauTransUnion found that a scary 60% of those who received loan mods re-defaulted just 18 months later.

So there’s a lot of bad news that just isn’t making it to the presses, largely because we are riding the “good news train” right now in the housing world.

All of these former homeowners will also have difficulty qualifying for a mortgage in the future, so they’re essentially out of the mix.

Let’s not forget the millions that are unemployed…they obviously won’t be able to buy a home either, so this explains the dip in homeownership as well.

And it doesn’t bode well for home prices going forward. Consider that as home prices rise, more would-be home sellers will list their properties. This should keep downward pressure on prices for a long time.

It also makes one question if the bottom is really as close as some think, or even for real. We saw misleading upticks with the homebuyer tax credit too, so it’ll be interesting to see if this latest rally has legs

The Truth About Mortgage

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CoreLogic: 11.1 Million U.S. Properties with Negative Equity in Q4, Calculatedriskblog.com


CoreLogic released the Q4 2011 negative equity report today.

CoreLogic … today released negative equity data showing that 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011. An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.8 percent of all residential properties with a mortgage nationwide in the fourth quarter, up from 27.1 in the previous quarter. Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth quarter.

“Due to the seasonal declines in home prices and slowing foreclosure pipeline which is depressing home prices, the negative equity share rose in late 2011. The negative equity share is back to the same level as Q3 2009, which is when we began reporting negative equity using this methodology. The high level of negative equity and the inability to pay is the ‘double trigger’ of default, and the reason we have such a significant foreclosure pipeline. While the economic recovery will reduce the propensity of the inability to pay trigger, negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures.” said Mark Fleming, chief economist with CoreLogic.

Here are a couple of graphs from the report:

CoreLogic, Negative Equity by StateClick on graph for larger image.

This graph shows the break down of negative equity by state. Note: Data not available for some states. From CoreLogic:

Nevada had the highest negative equity percentage with 61 percent of all of its mortgaged properties underwater, followed by Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent). This is the second consecutive quarter that Georgia was in the top five, surpassing California (29 percent) which previously had been in the top five since tracking began in 2009. The top five states combined have an average negative equity share of 44.3 percent, while the remaining states have a combined average negative equity share of 15.3 percent.”

CoreLogic, Distribution of EquityThe second graph shows the distribution of equity by state- black is Loan-to-value (LTV) of less than 80%, blue is 80% to 100%, red is a LTV of greater than 100% (or negative equity). Note: This only includes homeowners with a mortgage – about 31% of homeowners nationwide do not have a mortgage.

Some states – like New York – have a large percentage of borrowers with more than 20% equity, and Nevada, Arizona and Florida have the fewest borrowers with more than 20% equity.

Some interesting data on borrowers with and without home equity loans from CoreLogic: “Of the 11.1 million upside-down borrowers, there are 6.7 million first liens without home equity loans. This group of borrowers has an average mortgage balance of $219,000 and is underwater by an average of $51,000 or an LTV ratio of 130 percent.

The remaining 4.4 million upside-down borrowers had both first and second liens. Their average mortgage balance was $306,000 and they were upside down by an average of $84,000 or a combined LTV of 138 percent.”

 

Are you ready to take out your first mortgage loan?, By Melissa Gates


Whether you’re looking to buy a home in New Jersey, New York, Carolina, Texas or anywhere in the United States of America, you have to inevitably take out a mortgage loan to finance the property. Apart from the ultra-rich people, no one is able to finance their own property with their funds as this requires a huge amount of money. For all the laymen who come from mediocre families, taking out a mortgage loan is the only option left. If you’re a first-time homebuyer, you must not be aware of the basics of taking out a home mortgage loan. If you don’t choose a loan within your affordability, it is most likely that you have to take out a  loan in the near future after paying all the closing costs and other fees. Its better you take the required steps before. Read on to know some basic facts that are taken into consideration by your lender while lending you a loan.

 

1. Your credit score: The most vital fact that is taken into consideration by the mortgage lenders is your credit score. You’re entitled to take out a free copy of your credit report from any of the three credit reporting agencies and by doing this you can easily take the steps to boost your score before applying for a home mortgage loan. With an exceptionally good credit score, you can grab the best mortgage loan in the market and thereby save your hard-earned dollars.

 

2. The amount of loan you can afford: This point is to be taken into consideration by you so that you don’t overstretch yourself while getting yourself a mortgage loan. Take out a loan within your affordability so that you don’t have to burn a hole in your pocket while repaying the loan. Consider all the other factors needed to determine the amount of loan that you can afford.

 

3. The total income earned by you in a month: The gross monthly income that you earn in a month is another important document that is checked by the lender so that he can determine whether or not you can repay the loan on time after managing all your other debt obligations that you owe. If you want to secure a lower interest rate on the home mortgage loan, you should boost your income in a month and then apply for the loan.

 

Apart from the above mentioned factors, the mortgage lenders take the debt to income ratio into account as they also need to see whether or not the borrower can make timely payments on the home mortgage loan. Manage your personal finances so that you don’t have to opt for refinance in the future.

 

The New Homestead Act: Update, by Dr. Ed’s Blog


President Barack Obama recently promised that he has a plan to create jobs, which will be disclosed in September, after he takes 10 days off in Martha’s Vineyard. I certainly hope he comes up with a good plan. If he needs one, how about the one that Carl Goldsmith and I proposed at the beginning of August? [1] I met with my congressman, Gary Ackerman, last Tuesday to pitch the plan. He liked it well enough to issue a press release on Wednesday of this week endorsing it and promising to introduce the “Homestead: Act 2” when Congress returns from its August recess.[2]

The Act aims to reduce the huge overhang of unsold homes by offering a matching down payment subsidy of up to $20,000 for homebuyers, who do not currently own a home, and exempting newly acquired rental properties from taxation for 10 years. The cost of these incentives would be offset by the tax revenues collected by lowering the corporate tax rate on repatriated earnings to 10%. 

Congressman Gary Ackerman is presently serving his fifteenth term in the US House of Representatives. He represents the Fifth Congressional District of New York, which encompasses parts of the New York City Borough of Queens and the North Shore of Long Island, including west and northeast Queens and northern Nassau County. Ackerman serves on the powerful Financial Services Committee, where he sits on two Subcommittees: Financial Institutions and Consumer Credit as well as Capital Markets and Government-Sponsored Enterprises (of which he is the former Vice Chairman). The stock market rose sharply after March 12, 2009, when Mr. Ackerman, during a congressional hearing, leaned on Robert Herz, the head of FASB, to suspend the mark-to-market rule. FASB did so on April 2. I had brought this issue to the congressman’s attention in a meeting we had during November 2008.

 

Dr. Ed’s Blog
http://blog.yardeni.com/

 

 

U.S. Real Estate Delinquencies Top 10% for First Time, Morgan Stanley Says, By Sarah Mulholland , Bloomberg.com


Delinquencies on commercial mortgages packaged and sold as bonds surpassed 10 percent for the first time last month, according to Morgan Stanley.

Payments more than 30 days late jumped 26 basis points to 10.15 percent in April, Morgan Stanley analysts said in a report yesterday. While the pace of increase has slowed since the middle of last year, that’s partly because delinquencies are being offset as troubled loans are resolved. The rate of borrowers missing payments for the first time has been constant for the past four months, the analysts wrote.

“The bottom line is that loan performance is not yet exhibiting significant improvement,” according to the analysts led by Richard Parkus in New York. “Many market participants have come to believe that credit deterioration is more or less over, and were caught off guard by April’s rise.”

Delinquency rates for loans bundled into securities during the bubble years, when property values peaked amid lax underwriting, have reached 10.37 percent for 2006 deals and 13.26 percent for those in 2007, according to Morgan Stanley.

Borrowers with maturing debt taken out during the boom are still struggling to retire loans, according to the report. About 63 percent of commercial mortgages in bonds scheduled to mature in April paid off on time. That rate dropped to 33 percent for loans taken out from 2005 through 2008, the analysts said.

Sales of commercial-mortgage backed securities are rising after plummeting to $3.4 billion in 2009 from a record $234 billion in 2007, according to data compiled by Bloomberg. Wall Streethas sold $8.6 billion of the debt in 2011, compared with $11.5 billion in all of last year, the data show. Sales may reach $35 billion this year, according to Standard and Poor’s.

Property Values Down

New bond offerings provide financing to borrowers with maturing loans. Still, property values are down 44.6 percent from October 2007, according to Moody’s Investors Service, making it difficult for property owners to come up with the difference when repaying the debt.

Loans originated after 2005 had weaker loan characteristics,” Parkus said in a telephone interview. “On top of that, they were done at the peak of the cycle so they didn’t benefit from any price appreciation prior to the crisis.”

To contact the reporter on this story: Sarah Mulholland in New York atsmulholland3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

U.S. Homeowners in Foreclosure Process Were 507 Days Late Paying, by John Gittelsohn, Bloomberg.com


U.S. homeowners in the foreclosure process were an average of 507 days late on payments at the end of last year as lenders handled a record rate of mortgage delinquencies, Lender Processing Services Inc. said today.

The average grew 25 percent from 406 days at the end of 2009, according to the Jacksonville, Florida-based mortgage processing and default management company.

“The sheer volume of loans going through the system is going to extend those timelines,” said Herb Blecher, senior vice president for analytics at Lender Processing. Foreclosure processing also was slowed by “an abundance of caution” in the last three months of 2010 after lenders were accused of using faulty documentation and procedures to seize homes, he said.

A national jobless rate of 9 percent is increasing loan defaults and weighing down prices as foreclosed properties sell at a discount. Homeowners with 6.87 million loans — 13 percent of all mortgages — were at least 30 days behind on their payments as of Dec. 31, Lender Processing said.

Florida led the nation with a 23 percent delinquency rate, followed by Nevada at 21 percent, Mississippi at 19 percent, and Georgia and New Jersey at 15 percent, the loan processor said.

California homeowners who didn’t make their mortgage payments had the longest average wait before receiving a notice of default at 379 days, followed by Florida at 349 days, Maryland at 345 days, New York at 344 days, and Rhode Island and Washington, D.C., at 341 days.

Delinquent homeowners held onto their properties for the longest in Vermont, where it took an average 754 days to lose their homes, followed by 697 days in New York, 695 days in Maine, 688 days in Florida and 682 days in New Jersey.

The number of U.S. homes receiving a foreclosure filings may climb 20 percent this year, reaching a peak of the housing crisis, as banks step up the pace of seizures, RealtyTrac Inc. said Jan. 13. A record 2.87 million properties received notices of default, auction or repossession last year, according to the Irvine, California-based data provider.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

Ladd Tower sold for $79 million, by Wendy Culverwell, Portland Business Journal


Ladd Tower in Portland, Oregon, USA

Image via Wikipedia

Ladd Tower sold for $79.35 million to a Dallas-based institutional investor in November, marking the largest apartment sale of the year.

CoStar Group and the Daily Journal of Commerce first reported the news.

Invesco Institutional acquired the 332-unit tower from U.S. Bank. The bank took over Ladd Tower, 1300 S.W. Park Ave., in August from developer Opus Northwest in lieu of foreclosing on an $82 million construction loan.

Ladd Tower is one of the last local projects completed by Opus Northwest, once one of the region’s most prolific developers with 17 million square feet developed in the metro area.

Also in November, Opus sold its 101-unit Park 19 project, 550 N.W. 19th St., or $28.8 million to TIAA-CREF, a New York investment giant.


@wendyculverwell | wculverwell@bizjournals.com | 503-219-3415

Read more: Ladd Tower sold for $79 million | Portland Business Journal