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

Coming Next: The Landlord’s Rental Market, by A.D. Pruitt, Wall Street Journal


Apartment landlords appear to be among the only commercial property owners able to sign new tenants amid the sluggish economy.

But the strength of the multifamily sector is itself related to the troubled economy. There has been an “abnormal slowdown in household formation in recent years,” Lawrence Yun, chief economist for the National Association of Realtors, says in a new report. “Many young people, who normally would have struck out on their own from 2008 to 2010, had been doubling up with roommates or moving back into their parents’ homes.”

NAR, using U.S. Census data, says that household formation was only 357,000 last year, compared with 398,000 in 2009. That’s way below 1.6 million in 2007. But Mr. Yun said young people have been entering the rental market as new households in stronger numbers this year.

NAR expects vacancy rates in multifamily housing will drop from 5.5% to 4.6% in the third quarter of 2012. Vacancies below 5% generally are considered a landlord’s market, the trade group noted.

Minneapolis has the lowest multifamily vacancy rate at 2.5% followed by 2.8% in New York City and 2.9% in Portland, Ore.

But conditions aren’t as rosy in the rest of the commercial property market with the tepid economy poised to slow demand for space, according to the report.

For the office market, the vacancy rate is forecasted to fall from 16.6% in the third quarter of this year to 16.3% in the third quarter of 2012.  The markets with the lowest office vacancy rates include Washington, D.C. at 8.6%, New York City at 10.1% and Long Island, N.Y at 13%.

Retail vacancy rates are projected to decline from 12.9% in the third quarter this year to 12.2% in the third quarter of 2012. San Francisco led with the lowest vacancy rate of 3.8% followed by Northern New Jersey at 6.1%. Los Angeles; Long Island, N.Y.; and San Jose, Calif tied for third place at 6.4% each.

Wells Fargo closed nearly 500,000 Loans in 3rd Quarter, Thetruthaboutmortgage.com


I recently noted that Wells Fargo was the top residential mortgage lender based on volume for the fourth consecutive quarter, ending in the third quarter, according to data fromMortgagestats.com.

Well, as you may have suspected, the San Francisco-based bank and mortgage lender was also tops with respect to total number of loans closed.

During the third quarter, the company closed 469,914 home loans, up five percent from the 446,403 loans closed a year earlier.

In the second quarter, the bank closed less than 400,000 loans, but closed a staggering 581,961 in the second quarter of 2009, when the refinance boom got its legs, thanks to those record low mortgage rates.

That, along with the reduced staff, may explain why it took so long to get an underwritingdecision on your loan.

Gone are the days of same-day or 24-hour underwriting – now it’s a couple of weeks, if you’re lucky.

Of course, loan origination volume is expected to slow this year, so maybe it’ll be easier to get that decision from the bank a little quicker.

Check out the rest of the leaders in total residential home loans closed, along with their market share and year-over-year change.

Quicken Loans was the biggest gainer (+65%), while Bank of America saw a more than 25 percent decline, but still held on to the second spot.

Wells Fargo Top Mortgage Lender for the Fourth Consecutive Quarter, Thetruthaboutmortgage.com


Wells Fargo's corporate headquarters in San Fr...

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Wells Fargo was the top residential mortgage lender for the fourth consecutive quarter, according to MortgageStats.com.

The San Francisco-based bank and mortgage lender grabbed nearly a quarter (23.13 percent) of total market share with $102.8 billion in loan origination volume during the third quarter.

The company bested its year-ago total of $97.9 billion and crushed the $83 billion originated in the second quarter, thanks in part to the record low mortgage rates on offer, which sparkedrefinance demand.

Bank of America came in a distant second with $74 billion and 16.66 percent market share – Chase originated about half of that, with $42.7 billion and 9.60 percent market share.

Their volume was nearly identical to the volume seen a quarter earlier, but 25 percent lower than that seen a year ago.

Rounding out the top five were CitiMortgage and Ally Bank/Residential Capital (GMAC) with $20.3 billion and $20.2 billion, respectively.

The pair saw market share of just over nine percent combined.

So the five largest mortgage lenders accounted for nearly 60 percent of all loan origination volume.

Quicken Loans was the biggest gainer in the top 10, with an 88 percent increase seen from the third quarter of 2009.

SunTrust Bank was the biggest loser year-over-year, chalking a 34 percent decline.

Take a look at the top 10 mortgage lenders in the third quarter of 2010: