Feb 3, 2014

Home Prices Flat in November after Long Climb

The S&P Case-Shiller house price index edged down a bit in the month of November but prices are up nearly 14% from a year ago.Despite the 0.1% decline in November, the Case-Shiller 20 cities index showed its “best November performance since 2005,” according to S&P’s index committee chairman David Blitzer.
House prices usually decline in November as winter approaches and home buying slows.

Nine of the 20 cities in the Case-Shiller HPI posted price declines in November. At the same time, five of the 20 cities posted consecutive monthly price declines in November and October. They are Atlanta, Chicago, Denver, Seattle and Washington. Chicago experienced the largest percentage drop as prices fell by 1.2% in November and 0.5% in October.

“Home prices may be leveling off,” Quicken Loans vice president Bill Banfield says. But the 14% increase in the prices over the past 12 months will encourage more homeowners to list their homes for sale this year, he says.

Auction.com executive vice president Rick Sharga noted the much of rebound in house prices in 2013 occurred in the hardest hit markets where investors bid up the prices of distressed properties. But that will change this year.
“With less distressed inventory coming to market, and being less discounted when it does come to market, that factor will play much less of a role in 2014 home prices, which suggests that we shouldn’t see nearly as much appreciation this year as we did in 2013," Sharga says.

This article can be reviewed at nationalmortgagenews dot com.

Jan 12, 2014

2014 - a new beginning

Wishing all our readers, customers, partners and associates a very happy new Year in 2014. Hope the year brings the best out of each and every one of you. 

The mortgage industry has been going through its ups and downs over the course of the past several months, and in typical fashion, the holiday season - from after Thanksgiving to January - has been slow. This is nothing new - and the contract processing business has experienced this slowdown every year. The big picture is however based on the following trends

* Interest rate hike: the fed has firmly decided to increase rates once unemployment hits 6.5%. 

* QE: Here again the fed has decided to scale back on its bond buying program from the current $85 B level in stages in anticipation of a better economy.

* The Mortgage Bankers association has predicted that the number of Purchases is set to increase as a percentage of all mortgages in the country and this is reflected in their projections (data upto Oct 2013)

Here's wishing that the new year brings new jobs and better employment prospects to those that already have them. We are here to support you all ! Visit www.privocorp.com for more information.

Dec 31, 2013

CFPB Launches Education Campaign Ahead of New Mortgage Rules

With new mortgage regulations due to be implemented in less than a month, the Consumer Financial Protection Bureau (CFPB) has released a set of materials designed to educate both homebuyers and homeowners about the new regulations and how they can be used to protect homeowners and ease the home buying process.  CFPB also released a manual summarizing the new regulations and designed to be used by housing counselors.

The materials, all available on the Bureau's website, explain what a Qualified Mortgage is, why the category was designed, what it does for consumers, and how to find one in the mortgage market.  Consumer rights under new rules effecting mortgage servicers are also explained, as are ways to gather information about an existing loan and to get help if the rules are violated.

The materials are in several formats:

Factsheets: There is a two-page factsheet with an overview of all of the new consumer protections in the Bureau's mortgage rules.  It explains what a WM mortgage is and why it protects the borrower including an explanation of its protections against steering and high fees.  It also lays out the consumer protections afforded borrowers under new servicing rules and explains how to file a complaint with CFPB for any violations of the rules.  A second factsheet is a summary of the new procedures to facilitate borrower's access to foreclosure avoidance options.

Tips:  There are separate tip sheets homebuyers looking for a mortgage, for homeowners on how to get the most out of their mortgage, and one for troubled homeowners facing foreclosure. 

Tools:  CFPB also has added questions and answers about the regulations to its interactive AskCFPB website tool and reminds consumers that its website also offers tools to find local housing counseling agencies to answer their questions or address their concerns. Consumers that have an issue with consumer financial products or services, such as a mortgage, can also submit a complaint on the site.
"Taking on a mortgage may be the largest financial obligation of a consumer's lifetime," said CFPB Director Richard Cordray. "We want to make sure that potential homebuyers have the information they need to make responsible decisions and that current borrowers know about their new protections."

 The Bureau says it is working with industry, housing counselors, and consumer groups to promote a smooth implementation of the new rules.  Most of the rules, including the new Qualified Mortgage regulation, go into effect on January 14. 

Nov 25, 2013

Foreclosure Inventory Falls to 5 year Low

Lender Processing Services (LPS) said today that the national foreclosure pre-sale inventory is at its lowest level since 2008.  The inventory, the number of loans that are in some stage of foreclosure, now represents 2.54 percent of mortgaged homes.  The rate dropped 3.23 percent from September to October and is nearly 30 percent below its level in October 2012.  There are now 1.276 million homes in the inventory.
The information was included in LPS' regular preview of its monthly Mortgage Monitor.  The Monitor presents loan-level information from the LPS database representing approximately 70 percent of the mortgage marketThe full report will be published by December 9.

LPS said in October there were 3.152 million mortgage loans that were 30 or more days past due but not yet in foreclosure, a delinquency rate of 6.28 percent.  This is a decrease of 2.80 percent since September and 10.69 percent year-over-year.   Of these delinquent loans, 1.283 million are seriously delinquent, that is 90 or more days past due but not yet in foreclosure. 


Including delinquent loans and loans in the foreclosure inventory there were 4.43 million distressed mortgages throughout the U.S. in October.  Mississippi has moved into first position among states with the highest percentage of non-current loans.  It is followed by Florida, New Jersey, New York and Louisiana. 

Oct 31, 2013

More People Will Buy Homes if Prices go Up - nice theory by Fed senior economists

According to the Mortgage News Daily, sale inventories have been slow to rebound from the Great Recession even though home prices have increased steadily since 2012. Two Federal Reserve Bank of San Francisco senior economists, William Hedberg and John Krainer theorize that prices are still not high enough to entice many sellers.  For some this is because the value of their home is still below the outstanding balance on their mortgage (also known as a negative amortization in mortgage parlance), meaning that sellers would have to bring cash to the closing.  For others it may be that their equity is not back to a level that motivates them to sell.

Economic theory suggests that all homes are for sale if the price is right, but at any point in time, the price may not be right. Sellers have their own ideas about what is "right" and must also consider that selling a house can be costly because of brokerage fees, and necessary or cosmetic changes to the house.  For these reasons and others the active listing a home is viewed by economists as a strong signal of an intent to sell and they measure the short-run supply of homes for sale, the inventory, by the listing numbers.

Good times or bad, there is always some level of inventory in the housing market.  Some owners sell to move up, others to downsize, other move for employment reasons, or to free up cash.  These are life-cycles motives not necessarily tied to the business cycle and produce a general level of churning in the market.  Nevertheless the authors say there is a distinct cyclical pattern to inventories which rise in good times and fall in bad times. 

Credit conditions, which are also cyclical, can account for some of this.  Risk premiums charged by lenders and their willingness to lend, tend to ease during good economic times, allowing more potential buyers to enter the market. But it is the level of house prices which is by far the variable that most influences the inventory of homes for sale.

Even though not all listed homes are vacant Census Bureau data on the numbers and price level of vacant homes have a long history of indicating the relationship between inflation-adjusted house prices and for-sale inventory.  As Figure 1 shows, inventories generally move with prices and changes in house prices have a causal effect on inventories.  The two series are tied together in a long-run relationship and the authors say this makes sense as rising house prices should encourage home owners to sell and thus inventories to rise.
Vacancies for sale over the years

Inventories do not instantly react to house price changes and other economics can disrupt the price/inventory relationship as is evident in the most recent time period in the figure above.  House prices have been recovering broadly since 2012 but inventories have been declining.  Only recently have they begun to rise.

The relationship between inventory and prices may have broken down for an extended period as the market rebounded in 2012 because of fallout from the housing boom and bust.   The boom saw an unprecedented rise in homeownership rates with younger households more willing to buy and eased lending allowing in less qualified borrows.  When those trends reversed the inventory shifted from homes for sale to homes for rent with the later rising steadily during the recession and the for-sale inventory dropping and only recently stabilizing.

The authors say the data does not go back far enough to show if this is a typical reaction but some Census Bureau data suggest it is unprecedented since the 1960s.  The phenomenon is widespread and cannot be accounted for solely by the surge in foreclosures.  The inventory of homes in foreclosure has recently been falling in most markets but the ratio of owner occupied and renter occupied units has remained down. Thus, either preference for home ownership has shifted or, more likely, credit constraints have affected household home purchase decisions.

The changes in for-sale and for-rent inventories are seen most dramatically in markets like Las Vegas, Phoenix and Miami where foreclosures were high and investors have been buying large numbers of the foreclosed properties.  In these market the total inventory of homes for rent is approaching that of homes for sale, a remarkable shift that has continued throughout the recovery.  But, in addition to the investor-effect the decline in homes for sale is very closely linked with the large downward shift in the home ownership rate in these markets. It is impossible to say though whether declining sales are pushing down home ownership rates or falling home ownership is pushing down sales, or both are interacting with each other in a complicated feedback process.


Tight credit conditions may be affecting both the ownership decisions of young buyers and the supply side of the market.  In theory, falling house prices alone may keep some home owners from selling. It may seem logical that decisions to sell should be based only on information about current and future market conditions and the authors point to research that shows home owners take more time to sell if home prices have fallen since the original purchase. That is, two similar home owners experiencing similar housing market conditions will behave differently if one of those home owners has an unrealized loss on his or her house.
Falling prices may hold down home sales for several reasons. An underwater home owner may be unwilling or unable to make up the difference between sale proceeds and mortgage balance and chose to delay selling.  Even if there is equity, it may be reduced enough that no cash is available for the down payment on another home.

Since early 2008, homes for sale and homes underwater have been negatively correlated.  Counties with a high share of underwater mortgages have tended to have smaller for-sale inventories.  The authors say that while this relationship is significant, its strength diminished as the recovery got under way. Underwater borrowers may have been locked into their houses in a way that impaired the normal functioning of the housing market. But that effect seems to be waning.


Another explanation for this breakdown is that home owners may be taking a longer view of the market.  In the housing cycle price changes are persistent, that is both price rises and price drops are likely to be followed by more of the same.  Home owners who can be flexible on timing a sale can take advantage of this persistence, waiting and gambling that increases will continue and they can sell at a higher price.
Figure 4 confirms on a county level the negative relationship between prices and inventories shown at the aggregate level in Figure 1. Where counties experienced relatively large price increases they also saw for-sale inventories decline.


The authors say it turns out that that variables such as recent house price appreciation and changes in employment are the most robust predictors of recent changes in housing inventory. Once these are accounted for other variables, such as changes in the for-rent inventory, the underwater share, or local price-rent ratios, do little to explain the inventory of houses for sale. "Thus, current home owners may be making a rational choice to postpone selling in the hope that prices will rise further. However, this behaviour tends to be short run. In the longer run, the link between the level of house prices and for-sale inventories is strong. If prices continue to rise, inventories for sale should eventually rise too."

Conclusion of the article:

History shows a long-run relationship between house prices and the number of houses available for sale. Thus, current inventories of homes for sale are low given more than a year of house price appreciation. County-level data suggest that many home owners are waiting for prices to rise further in their markets. Markets that have seen the strongest house price appreciation and job growth are the ones where for-sale inventories have declined the most.