Foreclosure Inventory Down 31% in 2013, Slow Progress Expected in 2014

Author: Krista Franks-Brock January 29, 2014 0

 
Foreclosure Inventory Down 31% in 2013, Slow Progress Expected in 2014

National foreclosure inventory fell 31 percent year-over-year in December, with 2.1 percent of all homes with a mortgage in some stage of foreclosure, according to CoreLogic’s December National Foreclosure Report.

Completed foreclosures also declined year-over-year in December, though at a somewhat lower rate of 14 percent, according to CoreLogic.

Despite declines, foreclosures remain elevated compared to historical norms. From 2000 through 2006, about 21,000 foreclosures were completed each month.

In December 45,000 foreclosures were completed, down from 47,000 in November and 52,000 in December 2012.

“Clearly, 2013 was a transitional year for residential property in the United States,” said Anand Nallathambi, president and CEO of CoreLogic.

“Higher home prices and lower shadow inventory levels, together with a slowly improving economy, are hopeful signals that we are turning a long-awaited corner,” Nallathambi said.

However, he anticipates “progress to remain very slow” this year.

Five states accounted for nearly half of all completed foreclosures in 2013. Those states included Florida with 119,000 foreclosures, Michigan with 53,000 foreclosures, California with 39,000 foreclosures, Texas with 39,000 foreclosures, and Georgia with 35,000 foreclosures completed over the year.

At the other end of the spectrum, the five states with the fewest foreclosures completed in 2013 were the District of Columbia with 63 foreclosures, North Dakota with 417 foreclosures, Hawaii with 493 foreclosures, West Virginia with 505 foreclosures, and Wyoming with 759 foreclosures.

The states ranking highest for the percentage of foreclosure inventory as of year-end is not consistent with the list of states with the highest numbers of completed foreclosures over the year, except that Florida ranked highest in both categories.

In Florida, 6.7 percent of all homes with a mortgage are in some stage of foreclosure.

Florida is followed by New Jersey (6.5 percent), New York (4.9 percent), Connecticut (3.6 percent), and Maine (3.6 percent).

States with the smallest foreclosure inventory rates in December were Wyoming (0.4 percent), Alaska (0.5 percent), North Dakota (0.6 percent), Colorado (0.6 percent), and Nebraska (0.6 percent).

In total, 4.8 million foreclosures have been completed since the start of the housing crisis in September 2008, according to CoreLogic.

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That 2012 Bundle Of Joy Will Cost You $241,080 To Raise

The United States Department of Agriculture has crunched the numbers and it concludes today that if you had a child in 2012, it’ll cost you $241,080 to raise him or her for next 17 years.

If you adjust it for inflation, that number soars to $301,970.

This represents a 2.6 percent increase from 2011. The USDA reports:

“Expenses for child care, education, health care, and clothing saw the largest percentage increases related to child rearing from 2011. However, there were smaller increases in housing, food, transportation, and miscellaneous expenses during the same period. The 2.6 percent increase from 2011 to 2012 is also lower than the average annual increase of 4.4 percent since 1960.”

CNN reports that despite that bit of good news, wages aren’t keeping up with the increases.

“The country’s median annual household income has fallen by more than $4,000 since 2000, after adjusting for inflation, and many of the jobs lost during the recent recession have been replaced with lower-wage positions,” CNN reports.

We’ll leave you with a cool graphic put together by the USDA:

 Image

A graphic put together by the USDA.

Home prices continue their upward trajectory

 

 

ImageHome prices in June rose for the 16th consecutive month, rising 1.9% from May and jumping 11.9% from year earlier levels, research and analytics firm CoreLogic (CLGX) said Tuesday.

Those numbers include distressed properties – namely short sales and real-estate owned transactions. This is the first time in 36 years that prices have risen at this fast a pace, the research firm suggested.

When CoreLogic excludes distressed sales from its calculation, home prices month-over-month increased 1.8% and grew 11% from June 2012 levels.

“In the first six months of 2013, the U.S. housing market appreciated a remarkable 10%,” said Dr. Mark Fleming, chief economist for CoreLogic. “This trend in home price gains is moving at the fastest pace since 1977.”

The first half of the year brought “robust price appreciation,” Anand Nallathambi, president of CoreLogic said. The firm accurately predicted double-digit growth during the first six months of the year.

When including distressed sales, the states experiencing the steepest home price climbs included Nevada, with prices up 26.5%; California (21.4%), Wyoming (16.7%); Arizona (16.2%) and Georgia (14.3%).

Home prices in Mississippi and Delaware saw prices fall 2.1% and 1.1%, respectively.

Rising rates have no effect on housing thus far

By Megan Hopkins

 • July 10, 2013 • 12:10pm

Compared to the 1980s, when mortgage rates hovered above 10%, today’s rates remain relatively low. In early May, the 30-year, fixed-rate shot up to 4.46%, before settling back to 4.29% last week, according to Freddie Mac

However, the recent pace at which they’ve been climbing has many potential homebuyers hesitant to buy a home. 

At the end of June, right after rates rose sharply, Trulia($33.12 -0.2%) surveyed more than 2,000 people to see what their biggest worry would be if they were to buy a home this year. 

Of all the consumers surveyed, 41% said their top fear is that mortgage rates would rise before they could actually buy a house. Second to rates, 37% of consumers said they were worried prices would rise before they could buy, and 36% said they wouldn’t find a home for sale that they like. 

So how high will rates have to get before consumers become too discouraged to buy a home? Among consumers who intend to buy a home someday, 13% said that mortgage rates of 4% were already too high for them to consider buying a home. Rates had already climbed to 4% at the time of the survey. 

Another 20% of consumers surveyed said they’d be discouraged from buying a home if rates reach 5%, while another 22% said they’d be discouraged from buying a home if rates reach 6%. Combining these groups, 56% of consumers who plan to buy a home someday would be discouraged from doing so if rates reach 6%. 

But are consumers right to worry about the effect of mortgage rates on housing costs? According to Trulia, yes. Higher rates will raise the monthly mortgage payment for a loan.

For example, with rates at 3.35%, the monthly payment on a $200,000, 30-year FRM is $881. However, once rates hit 4.46%, that payment jumps to $1009 — a jump of 14% in the monthly mortgage payment.

“This means a consumer can afford less house for a fixed monthly payment, which – all else equal – should reduce housing demand and home prices in the long term. In the short term, however, if consumers expect rates to rise further, some might rush to buy, which could boost sales and home prices temporarily,” said Jed Kolko, chief economist at Trulia, in a report. 

Surprisingly, the recent run-up in rates has not greatly affected prices or home-purchase mortgage applications as of yet. According to the Trulia Price Monitor, asking prices only rose 1.5% month-over-month in June. Additionally, the Mortgage Bankers Association index for home-purchase mortgage applications in June rose 2% month-over-month. 

“With price gains still going strong, there are few signs that the rise in rates will derail the housing recovery,” said analysts atCapital Economics

So why has the effect of rising rates on the housing market been limited thus far? Mortgage rates are rising alongside a strengthening economy, which is subsequently boosting housing demand. And while demand is on the rise, a tight inventory is forcing many would-be buyers to wait to buy. 

Additionally, rising rates could lead to expanded mortgage credit, as refinancing demand dries up. Banks might look to expand their home-purchase lending to replace the refinance activity they have lost.  

Barry Habib, chief strategist with Residential Finance, said he’s never experienced anything like what is seen here.

“In fact, it’s the largest percentage rise in interest rates and as rapid a period as we’ve seen in 53 years.”

Habib said he’s seen purchase activity drop slowly. When we see a normal lull is in July’s numbers. September’s numbers will be more telling, he said.

But demographics remain strong. The case for buying a home has never been stronger, with rent rising and affordability near its all-time best.

“You can make a strong case that housing should be strong moving forward,” he said. Habib noted that affordability is still 1% below the average for the past 10 years and 2% below what it’s been for 20 years.

Matt Weaver, senior mortgage banker at WCS Lending, told HousingWire that the main effect he’s seeing from the rise in rates is an increased sense of urgency. 

“The interest rate increase hasn’t affected any homebuyer that I’m dealing with at this point in time,” said Weaver. “Has it affected their amount of monthly payments? Certainly. But it hasn’t taken them out of the game.”

He added, “Because it happened so fast, it almost didn’t even allow enough time to think about ‘should I pull back and not look for a home?'”

Weaver said May 22 marked the start of the rate volatility. In fact, the mortgage banker said for the first two weeks in June, if he had a client come in to make a mortgage application in the morning, he would have to increase the interest rate on the application by the time the process was finished nearly an hour later.

Luckily, Weaver said he had not seen a transaction as of yet to where an interest rate stood in the way of making the purchase. 

“Going forward, from some of the studies that I read, I think that rates are going to take a much more gradual approach as opposed to this erratic behavior we’ve been seeing,” he said. 

mhopkins@housingwire.com

CoreLogic: Housing recovery is durable, but not bulletproof

By Megan Hopkins

 • June 19, 2013 • 9:51am

The trend of rising home prices continues and is expected to carry on, but don’t expect double-digit gains as a norm, analysts say.

Home prices rose 12.1% in April, making it the 14th consecutive month of year-over-year increases, according to the latest CoreLogic Home Price Index. This is the largest annual gain since February 2006, a clear sign of a market in recovery mode.

However, double-digit gains are also cause for some concern, say experts who recall the unsustainable home price increases before the last housing downturn. 

“While our recent projected CoreLogic HPI indicates continued home price gains, bolstered by still-tight supply and strong demand, we expect recent double-digit gains to moderate as markets normalize,” said CoreLogic.

But has the damage already been done?

With some early post-recession investors in distressed single-family properties saying the market overheated and they’re pulling back, it appears a sudden shift is taking place in the market. 

Although home prices have risen significantly these past few months, the housing market is still more than 20% below the April 2006 peak and several important factors could moderate rising prices.

Although rising home prices have created fear of another bubble, they have also helped 2.4 million underwater borrowers since the last quarter of 2011.

“Regaining equity creates options for those who might now consider selling their homes because they can close a transaction with enough cash to make a down payment on the next home,” said CoreLogic. “Higher prices also attract the interest of builders who see opportunity in increased demand. In both cases, a broader supply brings inventory more in balance with demand.”

The current January to April year-to-date increase in the supply of existing homes is the third highest in nearly 30 years, indicating a lessening in the inventory crunch.

“The increase in the supply in context of current tight underwriting standards should deflate the risk of any bubbles,” said CoreLogic.

mhopkins@housingwire.com

Buying Cheaper Than Renting Til Mortgage Rates Hit 10.5%

Nationally, at today’s prices and rents, buying would be cheaper than renting until the 30-year fixed rate reaches 10.5%. San Jose has the lowest mortgage rate “tipping point” at 5.2%, followed by San Francisco and Honolulu.

The recent rise in mortgage rates has made buying a house a little more expensive: the increase in the 30-year fixed rate over the past month from 3.4% to 3.9% (Freddie Mac) raised the monthly payment on a $200,000 mortgage by $56, or 6%. However, because mortgage rates are still near long-term lows, and because prices fell so much after the housing bubble burst and remain low relative to rents even after recent price increases, buying is still much cheaper thanrenting. That means that the recent jump in rates doesn’t change the rent-versus-buy math much.

Rates are likely to keep rising, but how far must rates rise before buying a home starts to look expensive relative to renting? To answer this, we updated our Rent vs. Buy analysis with the latest asking prices and rents from March, April, and May 2013. Following our standard approach, we calculated the cost of buying and renting for identical sets of properties, including maintenance, insurance, taxes, closing costs, down payment, sales proceeds, and, of course, the monthly mortgage payment on a 30-year fixed-rate loan with 20% down and monthly rent. We assume people will stay in their homes for 7 years, deduct their mortgage interest and property tax payments at the 25% tax bracket, and get modest home price appreciation (see the detailed methodology and example here). Here’s what we found:

Buying remains cheaper than renting so long as mortgage rates are below 10.5%. At 3.9%, the current 30-year fixed rate according to Freddie Mac, buying is 41% cheaper than renting nationally. With a 5% mortgage rate, buying is still 34% cheaper than renting nationally. Mortgage rates would have to rise a huge amount – to 10.5% – to tip the math in favor of renting, which isn’t impossible. Rates were that high throughout the 1980s, but have been consistently below 10.5% since May 1990.

Each local market, of course, has its own mortgage rate “tipping point” when renting becomes cheaper than buying a home. At 3.9%, buying is cheaper than renting in all of the 100 largest metros, which means the tipping point is above 3.9% everywhere. The tipping point is lowest in San Jose, which would tip in favor of renting if rates reach 5.2%. It’s between 5% and 6% in San Francisco and Honolulu, and between 6% and 7% in New York and Orange County, CA.

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