Home Prices Have Been Rising for Three Months: Report

Standard & Poor’s reported Tuesday that it’s closely watched Case-Shiller index declined in January for the fifth straight month, with both the 10-city and 20-city composite readings slipping 0.8 percent from December.

But according to John Burns Real Estate Consulting (JBREC), that’s stale news and doesn’t reflect what’s actually happening in the market right now. In fact, the independent research company says home prices are rising.

JBREC conducted its own analysis of home prices in 97 markets and found that over the January-to-March period prices are up in 90 of them. The average price increase over the last three months is 1.1 percent, or a 4.5 percent annual rate, according to data issued by JBREC just before S&P’s Case-Shiller release.

The company also found that home prices have been trending up nationally since January, and even more markets have turned positive recently, with 93 of the 97 markets it analyzed showing appreciation over the last month.

So why are other industry indices still painting a picture of the doom and gloom of freefalling home prices? Wayne Yamano, VP and director of research for JBREC, says it’s because most price indices are on a three-month lag.

Yamano explains that after hundreds of hours of research vetting 23 data sources and running calculation after calculation, JBREC developed the Burns Home Value Index (BHVI), which calculates home values based on prices that are set at the time purchase contracts are negotiated and signed.

Nearly all other indices are based on when the purchase transaction closes, he says, which is typically two months after the purchase contracts were negotiated. Then, it takes one to two months for the closing price data to be compiled and reported, according to Yamano.

He contends that the BHVI is a better assessment of current changes in home prices and precedes median price data from the National Association of Realtors by three months and the S&P/Case-Shiller index by four to six months.

“It is current because it uses what is happening in MLS databases all over the country, as well as some leading indicators we have determined are reliable,” Yamano explained. “We call it a Home Value index because it is partially based on an ‘electronic appraisal’ of every home in the market, rather than just the small sample of homes that are actually transacting.”

JBREC has calculated BHVI index values for the United States and 97 major metro areas, with history going back to January 2000.

“The slow housing market recovery is underway, and it can accelerate or turn down quickly,” said Yamano. “The future is uncertain, and it is even more uncertain when you are using data that is three months old.”

 

Source DsNews.com By : Carrie Bay 03/27/12

Foreclosure Market Trends Report - March 2012

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FHA to raise insurance premiums in April

 

The Federal Housing Administration will raise mortgage insurance premiums this April in order to repair the health of its emergency fund.

The FHA upfront mortgage insurance premium will increase to 1.75% from 1% of the base home loan amount. This will apply regardless of the term or loan-to-value ratio beginning in April.

The annual mortgage insurance premium will increase by 10 basis points for loans under the $625,500 limit beginning April 1 and by 35 bps for home loans above that amount starting in June, the FHA said Monday. Authority for these raises come under the payroll tax cut extension agreed to last fall.

The FHA said the changes will boost the Mutual Mortgage Insurance Fund by $1 billion.

The UFMIP can still be financed into the mortgage. The increase to the upfront premium will cost new borrowers roughly $5 more per month.

Reverse mortgages and borrowers in special loan programs would be exempt from the changes, according to the FHA.

Last week at the Mortgage Bankers Association servcing conference in Orlando, FHA Commissioner Carol Galante said there would be upcoming insurance premium changes for the streamline refinance program. An FHA spokesman said these changes would be included in a letter to lenders due soon.

The MMI fund slipped below the Congressionally mandated 2% threshold in 2008, and in slipped to 0.2% last year. According to an analysis of President Obama's budget, the fund could have declined further in 2013 and possibly needed a bailout from the Treasury Department. Nearly $1 billion in revenue from settlements with mortgage servicers announced in the last few weeks will also keep the fund from needing assistance, according to FHA.

"After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market," Galante said. "These modest increases are one of several measures we are taking towards meeting the congressionally mandated 2% reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers."

Source : HousingWire

By Jon Prior

• February 27, 2012 • 6:05pm

 

FHA to deny mortgage backing for credit disputes above $1,000

 

Beginning April 1, potential borrowers with ongoing credit disputes totaling more than $1,000 will not be able to get a mortgage insured by the Federal Housing Administration.

The rule marks a significant belt-tightening at the FHA whereas the adminstration earlier held no such requirement that disputed credit accounts needed to be paid off. Before this rule, a direct endorsement underwriter could determine if any of the borrower's outstanding debts should impact the approval of the FHA-backed mortgage.

After April 1, the borrower must either pay off the outstanding balance on these collections accounts or document a payment arrangement that the lender must then submit to the FHA before closing. The payment arrangement will be counted into the debt-to-income ratio for the new home loan.

Jeremy Radack, a real estate attorney who helps builders in Houston get buyers financed, expects between a 33% and a 50% reduction in FHA originations this year because so many borrowers in the 650 to 680 FICO score range have a past due collections account.

"Take the 750 borrower with a medical collection outstanding from five years ago when they were in college for $5,000. Is that really a bad loan? I don't think FHA looked at how much of their performing borrowers have collections accounts," Radack said. "There are so many other things they could do to mitigate risks to the fund."

The rule excludes disputed accounts from more than two years ago, along with those related to theft. But the lender must document an identity theft or police report on the fraudulent charges.

The unintentional consequences could be severe for those still originating mortgages.

"We expect this revision will certainly kick some buyers out of the marketplace, and we’re in ongoing efforts to quantify how extreme the impact will be," said Lisa Jackson, senior vice president of research at John Burns Real Estate Consulting. "We did a quick sample of some of our builder clients focused on the entry level. They cited impact to varying degrees, with one reporting the new rule would disqualify 60% to 84% of his buyers currently under contract at specific communities."

An FHA spokesman said the rule was designed as another protection for the FHA emergency fund. The fund levels slipped to 0.2% of at-risk insurance last year, well below the 2% mandated by Congress. The FHA will raise insurance premiums on April 1 as well to boost the fund by $1 billion.

"When performing loan-level reviews of FHA loans, we found that many borrowers with mortgage payment delinquencies had prior credit deficiencies including unpaid collections and unresolved disputed accounts prior to the approval of their loan," the spokesman said. "This change was made to eliminate this layer of risk to FHA-insured loans and help protect our insurance fund."

Because of the FHA insurance premium raises to 1.75%, Radack expects the more qualified borrowers to go to Fannie Mae or Freddie Mac loans, which have smaller charges for private market insurance premiums.

"FHA is not going to be in my vocabulary," Radack said.

Source HousingWire, March 26, 2012 ,By Jon Prior

 

 

Survey Suggests More Homeowners Are Open to Strategic Default

 

An alarming number of homeowners see strategic default as a viable option should their home continue to depreciate. Almost half of the homeowners participating in an online poll from Housing Predictor say they will walk away from their mortgage obligation if falling home values persist.

Five years into the housing downturn, and Housing Predictor found that 47 percent of those surveyed would intentionally stop making their mortgage payments even if they could afford to in order to get out from under the sinking investment of home-sweet-home.

The number of mortgage borrowers open to strategic default has risen sharply since Housing Predictor last surveyed public opinion on the issue roughly a year-and-a-half ago. In October 2010, 36 percent of homeowners participating in the poll said they would throw in the towel should housing prices continue to drop.

Housing Predictor says the foreclosure crisis, falling home prices, and lingering doubts that the value of homes will increase over most homeowners’ lifetimes are contributing to the increase in mortgage holders who say they will walk away.

Housing Predictor’s results are based on responses provided by 1,000 visitors to the company’s website.

A recent study commissioned by the Mortgage Bankers Association called attention to the fact that the vast amount of media coverage dedicated to the financial crisis and the persistent woes of the housing market has made homeowners take note of their equity position.

For those who owe a great deal more on the mortgage than the home is now worth, the idea of simply walking away before the situation worsens has its allure. A market report issued by Moody’s Analytics last July warned of the growing risk of strategic default among loans that have always performed, meaning the borrower has remained current since taking out the loan.

Moody’s analysts explained that as home prices fell over the previous year, the loan-to-value ratios (LTVs) of these always-performing loans began to approach, and in many cases surpass, average LTVs for loans that have defaulted since 2009. They point out that this is a departure from what they’d seen up until the middle of 2010, during which LTVs for always-performing loans had stayed flat or even decreased slightly.

Back in July, Moody’s analysts identified between 12 percent and 24 percent (depending on the asset type) of always-performing loans with LTVs that were higher and had risen more steeply than those of defaulted loans.

“Rapid rates of LTV increases may themselves be a factor in a borrower’s decision to strategically default, since they may quickly erode any remaining confidence in borrowers that they could ever restore positive equity in their property,” Moody’s said in its report.

FICO estimates strategic defaults to be more than a $20 billion problem annually.

Source : DsNews, by Carrie Bay 03/21/12

Existing-Home Sales Dip in February as Prices Rise, Inventories Increase

 

Existing-home sales fell in February from an upwardly revised January sales pace, the National Association of Realtors (NAR) reported Wednesday.

February sales – completed transactions – were down 0.9 percent from January to a seasonally adjusted annual rate of 4.59 million. January’s total was revised up to 4.63 million from 4.57 million. The February 2012 sales pace was up 8.8 percent from February 2011.

The median price of an existing home in February was $156,600, up 0.1 percent from the previous month and up 0.3 percent from February 2011. The month-over-month price increase was the first since last June. After appearing to stabilize at low levels in the first half of 2011, prices are dipping again.

The slip in sales came despite an increase in the pending home sales index which as improved 9.5 percent in the last quarter of 2011and another 2 percent in January while homes sales have not improved at the same pace.

According to the NAR, distressed homes – foreclosures and short sales sold at deep discounts – accounted for 34 percent of February sales (20 percent were foreclosures and 14 percent were short sales), down from 35 percent in January and 39 percent in February 2011.

Total housing inventory at the end of February rose 4.3 percent to 2.43 million existing homes available for sale, a 6.4-month supply at the current sales pace, up from a 6.0-month supply in January, but down from an 8.6-month supply a year ago and still well below the July 2010 cyclical peak of 12.4 which had been the highest level since 1982. Inventories are 19.3 below their year ago level. Anecdotal evidence though suggests there is still a large “shadow” inventory of homes available for sale, especially bank-owned properties.

Although inventories seem to have declined to close to their “normal” level, the large number of distressed properties combined with a substantial shadow inventory of unsold homes continues downward pressure on home prices. Though the data seems to imply that there is a relative balance between buyers and sellers, the level distressed properties remains a stumbling block.

Regionally, existing-home sales fell in February in the Northeast and the West, 20,000 and 40,000 (seasonally adjusted annual rate) respectively, while improving in the Midwest (10,000) and South (10,000). The sales pace in all four regions though is ahead of the pace a year ago.

The median price of an existing home rose in three of the four regions month-month, falling only in the Midwest. Prices are down year-over-year in the Northeast and Midwest, but up year-over-year in the South and West, according to NAR data.

“The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” offered Lawrence Yun, the NAR’s chief economist. “Although relatively unusual, there will be rising demand for both rental space and homeownership this year. The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy.”

Source DsNews, By Mark Lieberman, Five Star Institute Economist 03/21/12