Pending home sales rose strongly in May with all regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of REALTORS®.
The Pending Home Sales Index rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
This is the first time since April 2010 that contract activity was above year-ago levels, and the monthly gain was the strongest increase since last November when the index rose 10.6 percent.
Lawrence Yun, NAR chief economist, said the improvement bodes well for home prices. “Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said.
“Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn., Indianapolis, Minneapolis, Houston, and Seattle,” Yun added.
Pending home sales have trended up unevenly since bottoming last June, rising in seven of the past 11 months. “Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal, sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”
“In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price,” Yun added.
Regional Performance
▪ The PHSI in the Northeast rose 7.3 percent to 69.2 in May and is 4.4 percent above a year ago.
▪ In the Midwest, the index jumped 10.5 percent to 82.8 and is 17.2 percent higher than May 2010.
▪ Pending home sales in the South increased 4.1 percent to an index of 95.0 in May and are 14.6 percent higher than a year ago.
▪ In the West, the index surged 12.9 percent to 100.6 and is 13.5 percent above May 2010.
Yun cautioned that healthy job creation is necessary to ensure a solid recovery in both housing and the overall economy. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” he said.
Source: NAR
Wednesday, June 29, 2011
Freddie Mac: Better Days Ahead in Housing
Freddie Mac’s chief economist is optimistic that the housing market and economy will improve in the second half of 2011.
Freddie Mac Chief Economist Frank Nothaft said mortgage rates will likely remain historical lows of between 4.5 percent and 5 percent for the remainder of the year. Also, he expects more buyers to stop waiting on the sidelines as recent price drops in home prices have improved affordability.
Nothaft said consumers’ uncertainty about the economy has caused them to delay home purchases and other “big-ticket items.”
"Some potential buyers who have the means to buy are awaiting clearer signs that home values have firmed," Nothaft says.
But Nothaft says they should be getting their signs in the second half of the year, with projected job gains, and a growing, improved economy.
"Even though near-term concerns over income and sales growth are restraining consumer spending, business hiring, and new building, a number of positive signs in the economy indicate that growth will continue and is likely to accelerate in the second half of this year," Nothaft said. "Look for a gradual improvement in housing activity in the coming year.”
Source: “Freddie Mac Economist Sees Sunny Economy in Second Half,” HousingWire (June 27, 2011)
Freddie Mac Chief Economist Frank Nothaft said mortgage rates will likely remain historical lows of between 4.5 percent and 5 percent for the remainder of the year. Also, he expects more buyers to stop waiting on the sidelines as recent price drops in home prices have improved affordability.
Nothaft said consumers’ uncertainty about the economy has caused them to delay home purchases and other “big-ticket items.”
"Some potential buyers who have the means to buy are awaiting clearer signs that home values have firmed," Nothaft says.
But Nothaft says they should be getting their signs in the second half of the year, with projected job gains, and a growing, improved economy.
"Even though near-term concerns over income and sales growth are restraining consumer spending, business hiring, and new building, a number of positive signs in the economy indicate that growth will continue and is likely to accelerate in the second half of this year," Nothaft said. "Look for a gradual improvement in housing activity in the coming year.”
Source: “Freddie Mac Economist Sees Sunny Economy in Second Half,” HousingWire (June 27, 2011)
Monday, June 27, 2011
Green Buildings Net Higher Profits, Group Says
Green commercial buildings are more profitable, nabbing higher rates, boasting higher occupancies, and attracting more investors, according to Capital Markets Partnership, a nonprofit coalition of investment banks, investors, and governments.
As such, CMG plans to jump-start a secondary market to buy and sell green building securities for all types of buildings, Forbes reports. The group has created underwriting standards that have been tested by some of the biggest banks.
“Green buildings are complicated, and if you don’t define standards, you could devalue collateral” says Mike Italiano, CEO of Capital Markets Partnership and a founder the U.S. Green Building Council. “And coming off the largest devaluation of collateral in history, we need to avoid that."
Italiano maintains “there’s a 20-year business model here which has been calculated to create a trillion dollar economic stimulus, 8 million new jobs, and $400 billion in new wages.”
President Obama also is recently promoting the value of green building through the Better Buildings Initiative. The initiative, which offers tax incentives, aims to make existing commercial and multifamily buildings more energy efficient.
Source: “Green Building Financing Offers More Profits, Fewer Risks,” Forbes (June 14, 2011)
As such, CMG plans to jump-start a secondary market to buy and sell green building securities for all types of buildings, Forbes reports. The group has created underwriting standards that have been tested by some of the biggest banks.
“Green buildings are complicated, and if you don’t define standards, you could devalue collateral” says Mike Italiano, CEO of Capital Markets Partnership and a founder the U.S. Green Building Council. “And coming off the largest devaluation of collateral in history, we need to avoid that."
Italiano maintains “there’s a 20-year business model here which has been calculated to create a trillion dollar economic stimulus, 8 million new jobs, and $400 billion in new wages.”
President Obama also is recently promoting the value of green building through the Better Buildings Initiative. The initiative, which offers tax incentives, aims to make existing commercial and multifamily buildings more energy efficient.
Source: “Green Building Financing Offers More Profits, Fewer Risks,” Forbes (June 14, 2011)
Tuesday, June 21, 2011
More Lawmakers Fight 20% Down Payment
A proposed 20 percent down payment rule for qualified residential mortgages is too high, argues a growing group of lawmakers in the House of Representatives.
Late last week, about 240 lawmakers in the House sent a second letter to federal regulators urging them to lower the down payment rule on QRMs. Last month, about 150 lawmakers had signed a letter urging the same.
"The resultant reduction in demand for housing, due to an overly burdensome government dictate, would only add to the challenges the housing market faces, and could threaten a full-fledged economic recovery from years to come," the most recent letter reads.
The 20 percent down payment rule arises from an effort of several federal agencies that have been trying to urge more responsible lending and borrowing. The agencies created a proposed risk-retention regulation under the Dodd-Frank Wall Street reform law, which requires lenders that securitize mortgage loans to retain 5 percent of the credit risk unless the mortgage is considered a safe mortgage or a “qualified residential mortgage.” (FHA and VA mortgages would be exempt.)
QRMs would be exempt from the 5 percent credit requirement but would have to meet certain guidelines, such as the proposed 20 percent down payment requirement. Borrowers with less than 20 percent down could then be forced to pay higher fees and interest rates.
A 20 percent down payment requirement would cause more first-time buyers to flee from the already fragile housing market, analysts at Capital Economics say.
The National Association of REALTORS® also has been an outspoken critic of the proposal, saying that a 20 percent down payment requirement would jeopardize a housing recovery.
Late last week, about 240 lawmakers in the House sent a second letter to federal regulators urging them to lower the down payment rule on QRMs. Last month, about 150 lawmakers had signed a letter urging the same.
"The resultant reduction in demand for housing, due to an overly burdensome government dictate, would only add to the challenges the housing market faces, and could threaten a full-fledged economic recovery from years to come," the most recent letter reads.
The 20 percent down payment rule arises from an effort of several federal agencies that have been trying to urge more responsible lending and borrowing. The agencies created a proposed risk-retention regulation under the Dodd-Frank Wall Street reform law, which requires lenders that securitize mortgage loans to retain 5 percent of the credit risk unless the mortgage is considered a safe mortgage or a “qualified residential mortgage.” (FHA and VA mortgages would be exempt.)
QRMs would be exempt from the 5 percent credit requirement but would have to meet certain guidelines, such as the proposed 20 percent down payment requirement. Borrowers with less than 20 percent down could then be forced to pay higher fees and interest rates.
A 20 percent down payment requirement would cause more first-time buyers to flee from the already fragile housing market, analysts at Capital Economics say.
The National Association of REALTORS® also has been an outspoken critic of the proposal, saying that a 20 percent down payment requirement would jeopardize a housing recovery.
Existing-Home Sales Drop with Market Constraints
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 3.8 percent to a seasonally adjusted annual rate of 4.81 million in May from a downwardly revised 5 million in April, and are 15.3 percent below a 5.68 million pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.
Lawrence Yun, NAR chief economist, said temporary factors held back the market in May, as implied from prior data on contract signings.
“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” he said. “Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward. The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.”
Yun said the market also is being constrained by the lending community. “Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards,” he said. “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”
There were notable regional differences in home sales. “A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity,” Yun explained.
The national median existing-home price for all housing types was $166,500 in May, down 4.6 percent from May 2010. Distressed homes – typically sold at a discount of about 20 percent – accounted for 31 percent of sales in May, down from 37 percent in April; they were 31 percent in May 2010.
“The price decline could be diminishing, as buyers recognize great bargain prices and the highest affordability conditions in 40 years; this will help mitigate further price drops,” Yun said.
“Home prices are rising or very stable in local markets with improved employment conditions, such as in North Dakota, Alaska, Washington, D.C., and many parts of Texas,” Yun noted.
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a number of proposals being considered in Washington could further jeopardize the housing recovery. “We’re concerned about the flow of available capital, including a possible rule that would effectively raise minimum downpayment requirements to 20 percent,” he said. “We don’t need to throw the baby out with the bath water – increasing downpayment requirements would effective shut many qualified families out of the market. What we critically need is a return to the basics of providing safe mortgages to creditworthy buyers willing to stay well within their budget.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.64 percent in May, down from 4.84 percent in April; the rate was 4.89 percent in May 2010. “Although low mortgage interest rates are welcome, they are less meaningful compared to the tightness of loan underwriting standards,” Yun noted.
Total housing inventory at the end of May fell 1 percent to 3.72 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, up from a 9-month supply in April.
All-cash transactions stood at 30 percent in May, down from 31 percent in April; they were 25 percent in May 2010; investors account for the bulk of cash purchases.
First-time buyers purchased 35 percent of homes in May, down from 36 percent in April; they were 46 percent in May 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in May compared with 20 percent in April; they were 14 percent in May 2010.
Single-family home sales declined 3.2 percent to a seasonally adjusted annual rate of 4.24 million in May from 4.38 million in April, and are 15.4 percent below a surge to 5.01 million one year ago. The median existing single-family home price was $166,700 in May, down 4.5 percent from May 2010.
Existing condominium and co-op sales fell 8.1 percent to a seasonally adjusted annual rate of 570,000 in May from 620,000 in April, and are 14.7 percent below the 668,000-unit pace in May 2010. The median existing condo price was $165,400 in May, which is 5.8 percent below a year ago.
Existing-home sales by region:
Northeast - declined 2.5 percent to an annual level of 770,000 in May and are 13.5 percent below May 2010. The median price in the Northeast was $241,500, up 6.1 percent from a year ago.
Midwest - existing-home sales dropped 6.4 percent in May to a pace of 1.02 million and are 22.7 percent below a year ago. The median price in the Midwest was $136,400, which is 8.5 percent below May 2010.
South - existing-home sales fell 5.1 percent to an annual level of 1.85 million in May and are 14.4 percent below May 2010. The median price in the South was $149,200, down 3.1 percent from a year ago.
West - unchanged at an annual pace of 1.17 million in May but are 10 percent lower than a year ago. The median price in the West was $192,300, which is 12.6 percent below May 2010.
Source: NAR
Lawrence Yun, NAR chief economist, said temporary factors held back the market in May, as implied from prior data on contract signings.
“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” he said. “Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward. The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.”
Yun said the market also is being constrained by the lending community. “Even with recent economic softness, this is a disappointing performance with home sales being held back by overly restrictive loan underwriting standards,” he said. “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”
There were notable regional differences in home sales. “A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity,” Yun explained.
The national median existing-home price for all housing types was $166,500 in May, down 4.6 percent from May 2010. Distressed homes – typically sold at a discount of about 20 percent – accounted for 31 percent of sales in May, down from 37 percent in April; they were 31 percent in May 2010.
“The price decline could be diminishing, as buyers recognize great bargain prices and the highest affordability conditions in 40 years; this will help mitigate further price drops,” Yun said.
“Home prices are rising or very stable in local markets with improved employment conditions, such as in North Dakota, Alaska, Washington, D.C., and many parts of Texas,” Yun noted.
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a number of proposals being considered in Washington could further jeopardize the housing recovery. “We’re concerned about the flow of available capital, including a possible rule that would effectively raise minimum downpayment requirements to 20 percent,” he said. “We don’t need to throw the baby out with the bath water – increasing downpayment requirements would effective shut many qualified families out of the market. What we critically need is a return to the basics of providing safe mortgages to creditworthy buyers willing to stay well within their budget.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.64 percent in May, down from 4.84 percent in April; the rate was 4.89 percent in May 2010. “Although low mortgage interest rates are welcome, they are less meaningful compared to the tightness of loan underwriting standards,” Yun noted.
Total housing inventory at the end of May fell 1 percent to 3.72 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, up from a 9-month supply in April.
All-cash transactions stood at 30 percent in May, down from 31 percent in April; they were 25 percent in May 2010; investors account for the bulk of cash purchases.
First-time buyers purchased 35 percent of homes in May, down from 36 percent in April; they were 46 percent in May 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in May compared with 20 percent in April; they were 14 percent in May 2010.
Single-family home sales declined 3.2 percent to a seasonally adjusted annual rate of 4.24 million in May from 4.38 million in April, and are 15.4 percent below a surge to 5.01 million one year ago. The median existing single-family home price was $166,700 in May, down 4.5 percent from May 2010.
Existing condominium and co-op sales fell 8.1 percent to a seasonally adjusted annual rate of 570,000 in May from 620,000 in April, and are 14.7 percent below the 668,000-unit pace in May 2010. The median existing condo price was $165,400 in May, which is 5.8 percent below a year ago.
Existing-home sales by region:
Northeast - declined 2.5 percent to an annual level of 770,000 in May and are 13.5 percent below May 2010. The median price in the Northeast was $241,500, up 6.1 percent from a year ago.
Midwest - existing-home sales dropped 6.4 percent in May to a pace of 1.02 million and are 22.7 percent below a year ago. The median price in the Midwest was $136,400, which is 8.5 percent below May 2010.
South - existing-home sales fell 5.1 percent to an annual level of 1.85 million in May and are 14.4 percent below May 2010. The median price in the South was $149,200, down 3.1 percent from a year ago.
West - unchanged at an annual pace of 1.17 million in May but are 10 percent lower than a year ago. The median price in the West was $192,300, which is 12.6 percent below May 2010.
Source: NAR
Monday, June 20, 2011
Wells Fargo Stops Reverse Mortgage Loans
Wells Fargo Home Mortgage announced that it will stop taking applications for new reverse mortgage loans by the end of the month due to the unpredictable nature of home values.
Reverse mortgages generally are sold to those over age 62 who want to tap into their home equity to pay for personal expenses like medical bills. Reverse mortgages don’t have to be repaid until the home owner sells the property or passes away, which is how it differs from home equity loans.
The company will continue to service customers who already have existing reverse mortgages, but will no longer take new applications as of June 30.
Wells Fargo joins a growing number of banks that are getting out of the reverse mortgage origination business due to the sluggish real estate market, which has made it more difficult for banks to determine home values and how much they should lend in the reverse mortgages. Bank of America announced in February that it also would stop processing new reverse mortgage loans.
Reverse mortgages generally are sold to those over age 62 who want to tap into their home equity to pay for personal expenses like medical bills. Reverse mortgages don’t have to be repaid until the home owner sells the property or passes away, which is how it differs from home equity loans.
The company will continue to service customers who already have existing reverse mortgages, but will no longer take new applications as of June 30.
Wells Fargo joins a growing number of banks that are getting out of the reverse mortgage origination business due to the sluggish real estate market, which has made it more difficult for banks to determine home values and how much they should lend in the reverse mortgages. Bank of America announced in February that it also would stop processing new reverse mortgage loans.
30-Year Rates Inch Up Slightly for the Week
After eight weeks of declines, the average 30-year fixed-rate mortgage, a popular choice among home buyers, edged up this week but still remains low by historical standards. Meanwhile, the 15-year mortgage continued to reach new lows for the year, Freddie Mac reports in its weekly mortgage market survey.
Here’s a closer look at how rates fared for the week.
30-year fixed-rate mortgage averaged 4.50 percent, up just slightly from last week’s 4.49 percent. Last year at this time, the 30-year rate mortgage averaged 4.75 percent.
15-year fixed-rate mortgage averaged 3.67 percent for the week, which is down from last week’s 3.68 percent. That marks its lowest level since November 2010. Last year at this time, the 15-year rate mortgage averaged 4.20 percent.
5-year adjustable-rate mortgage averaged 3.27 percent, down from last week’s 3.28 percent average. A year ago at this time, the 5-year ARM averaged 3.89 percent.
Overall, "mortgage rates were little changed this week as financial market participants shrugged off the recent inflation reports,” says Frank Nothaft, chief economist of Freddie Mac.
Source: “Mortgage Rates Mixed; 30-Year Fixed Ticks Up to 4.50 Percent,” Freddie Mac (June 16, 2011)
Here’s a closer look at how rates fared for the week.
30-year fixed-rate mortgage averaged 4.50 percent, up just slightly from last week’s 4.49 percent. Last year at this time, the 30-year rate mortgage averaged 4.75 percent.
15-year fixed-rate mortgage averaged 3.67 percent for the week, which is down from last week’s 3.68 percent. That marks its lowest level since November 2010. Last year at this time, the 15-year rate mortgage averaged 4.20 percent.
5-year adjustable-rate mortgage averaged 3.27 percent, down from last week’s 3.28 percent average. A year ago at this time, the 5-year ARM averaged 3.89 percent.
Overall, "mortgage rates were little changed this week as financial market participants shrugged off the recent inflation reports,” says Frank Nothaft, chief economist of Freddie Mac.
Source: “Mortgage Rates Mixed; 30-Year Fixed Ticks Up to 4.50 Percent,” Freddie Mac (June 16, 2011)
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