Friday, December 28, 2012

2013 Is Looking Good For the Housing Market

All Signs Point To Continuing Recovery

Lower inventory = higher prices

US News reports that the “supply of homes for sale across the nation has fallen 43 percent,” allowing sellers to raise prices and causing bidding wars among buyers. With pricing corrections underway, home inventories will need to expand again in 2013 to support the continuing recovery.
In Trulia’s “Housing in 2013: What’s In, What’s Out,” worry over home prices finding a bottom is so 2012 — in 2013, the hot topic is when will housing inventories bottom out?

Reparation replaced with prevention

If 2012 was the year of fixing what went wrong with the mortgage industry, 2013 is anticipated to be the year of implementing policy to ensure it never happens again. New mortgage rules are to be announced by the Consumer Financial Protection Bureau in January that are intended to motivate lenders to expand mortgage credit, while preventing a recurrence of the abundance of high-risk loans that precipitated the housing market crisis. Expanded credit is needed to expand the pool of hopeful buyers who qualify for mortgages.

Housing affordability begins to shrink

The record low mortgage rates along with depressed home prices contributed to housing affordability being near all time highs. With 2013 expected to see mortgage rates rise, housing inventory levels drop and home prices increase, housing affordability next year may be a shrinking opportunity.
For more predictions about the housing market in 2013, check out these resources:

Thursday, December 20, 2012

Why Your Mortgage Interest Deduction May Go Off the Cliff

Congress Contemplates Making Changes To Major Homeowner Benefit

Happy Centennial to mortgage interest deduction!

Nearly 100 years ago, in 1913, Congress amended the Constitution to allow for the country’s first income tax — and agreed to make all interest payments deductible from this new obligation. A few decades later as the country began to emerge from the Great Depression and the Second World War, more and more Americans were buying homes and the tax deductibility of mortgage interest payments became a significant element of promoting home ownership.

Mortgage interest deduction costs $100 billion a year

As the “fiscal cliff” and huge budget deficit hang heavy on the minds and desks of policymakers in Washington, the mortgage interest deduction is thought to be close to the top of the list of possible solutions to reducing the deficit. The mortgage deduction is both “one of the most cherished in the U.S. tax code… and on eof the most expensive, estimated to cost the federal government $100 billion this fiscal year.” (Los Angeles Times)

Likely to be “adjusted” but not “eliminated”

Experts agree that it is unlikely that a wholesale elimination of the mortgage interest deduction will be approved. It is more likely that the code will be refined to reduce the benefit for high-income households and borrowers. The president of the National Association of Realtors (NAR), Gary Thomas, commented that it has always been the N.A.R.’s position that the mortgage interest deduction is vital to the stability of the American housing market and economy, and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.” (The New York Times)

Changing the deduction has bi-partisan support

In a time when there seems to be little upon which Democrats and Republicans can agree, changing the mortgage interest tax deduction seems to be striking the right bi-partisan note. Both President Obama and the former Republican presidential nominee, Mitt Romney, have come out in support of capping the deduction.

Via The American Prospect, The Los Angeles Times, The New York Times.

Tuesday, December 11, 2012

Will Rising Home Prices Slow Recovery?

The Housing Market Can’t Win For Losing

Home prices have been rising — the S&P/Case Shiller index showed an annual increase of 3.0 percent from last year; Phoenix, AZ showed a whopping 20 percent annual increase in average home prices.

Some experts have begun to express concern that home prices are being driven by investors snapping up good deals to turn them into rentals, which are offering a good return on investment. Paradoxically, as the investors drive home prices up, the anticipated returns on the investment property shrink — meaning the demand from investors will also drop.

Phoenix, with its 20 percent jump in average home prices, is a perfect example — droves of investors swooped in to take advantage of dramatically depressed prices last year, ultimately creating bidding wars and significantly shrinking inventories and driving the double digit price gains.

Nationally, the housing market recovery has been remarkably uneven — on the one hand there is Phoenix, gaining 20 percent, on the other there is Chicago, where the average home price dropped 1.5 percent from last year.

While the investors may be spurring the housing market recovery now, long term recovery will rest on the re-emergence of first-time home buyers. Home owners with steady incomes and long-term home ownership plans will support and stabilize not only the market, but also the neighborhoods where they buy.

Via CBS News, NBC News, US News, and the Chicago Business Journal.

Monday, November 26, 2012

FHA Upcoming Policy Changes

The FHA plans to accelerate its recovery

In the same report, issued by the Housing Administration last week, that showed a negative economic value for its capital reserve fund for the first time in its history last week, the FHA outlined an “Action Plan” to strengthen the fund and speed its economic recovery in the next few years.

The FHA projects that, if no policy changes or other operating changes were to be made, its fund will be positive in 2014 and reach the mandated ratio of 2.0 percent by 2017. With new policies and programs in place, the FHA is expecting the fund will be positive within the year and reach the mandated capital reserve ration by 2014.

Upcoming policy changes outlined by the FHA

  • Strengthen assistance programs for delinquent homeowners — the FHA is aiming for payment reductions of at least 20% for FHA-HAMP modifications
  • Streamline FHA short-sale process — and reduce the number of traditional FHA REO foreclosures, which are significantly more costly
  • Change the FHA premium cancellation policy — premiums will be required to be paid for the life of the loan, a change from the current policy which allows homeowners to let the policy lapse after the home had achieved 22% equity
  • Increase the mortgage insurance premium by 0.1 percent
  • Accelerate asset disposal programs to sell up to 10,000 distressed mortgages each quarter
  • Revise the HECM (reverse mortgage) program to lessen its negative impact on the fund — projected changes include reducing the initial amount borrowers are allowed to draw at loan orgination and reducing the maximum amount of funds available to the borrower throughout the program

Read the FHA’s full report here.

Monday, November 19, 2012

FHAs Annual Report Is In

Reserve Fund Is Low — Will the Treasury Need To Help?

Negative capital reserve does NOT indicate operating deficit

The U.S. Department of Housing issued its Annual Report to Congress on the financial status of the Federal Housing Administration’s Mutual Mortgage Insurance (MMI) Fund for the fiscal year 2012 last week. Most notably, the report reveals that the fund currently has a negative economic value of $16.3 billion. 

It is important to note that the fund’s negative value does not mean that the FHA is unable to pay insurance claims or is running a current operating budget.

FHA unlikely to petition Treasury support

Although the FHA could petition for a Treasury draw, the decision as to whether that’s necessary doesn’t rest on the projections outlined in the report, but on the President’s budget proposal, which will be released in February — even then, the final determination won’t be made until September of next year. The report’s estimate of this year’s deficit also does not include $11 billion of expected capital accumulation from the FHA’s current “book of business.” 

The FHA, which was created in 1934 to revive the country’s housing market after the Great Depression, has never had to call upon the Treasury for financial support.

Capital reserve fund down from 2011

The Congress mandates that the FHA’s capital reserve fund be no less than 2 percent of the FHA’s “insurance-in-force” — with $1.13 trillion of insurance-in-force for FY 2012, the current capital reserve fund ratio is about -1.44 percent, down from 0.24 percent in 2011 (when the fund had an economic value of $2.6 billion).

Fund predicted to be in the black within 2 years or less

The FHA predicts that — without any policy changes or other operating changes that might impact the FHA’s recovery — the fund will be positive in 2014 and reach the mandated ratio of 2.2 percent by 2017.


Read the FHA’s full report here.


Monday, November 12, 2012

New Mortgage Applications Up, ReFi’s Down

Mortgage Rates Stay Fairly Steady (And Low)

Refi applications drop 4 weeks in a row

The last week in October saw a 6 percent drop in refi applications from the prior week, marking the fourth straight week of decreases. Interestingly, just a month earlier, in September, refinance applications reached their highest level in three years.

Mortgage rates continue to hover near all-time lows

Mortgage rates have been holding fairly steady at nearly record lows, which may partly explain the drop in applications for refinancing. As a senior economist at Wells Fargo Securities put it, “People who are not underwater have already refinanced. People who want to refinance but couldn’t are already underwater.”  (via Medill Reports)

Refinancing activity drop predicted to continue next year

At the Mortgage Bankers Association’s annual convention earlier this month, consensus seemed to be that mortgage originations would go up next year, but refinancing would drop in the second part of the year.

Tuesday, November 6, 2012

New Home Sales Continue to Rise

Highest Sales Level In More Than 2 Years

Month to month improvement nearly 6%

The Census Bureau reports that sales of new single-family homes rose 5.7 percent from August 2012 to September. The seasonally adjusted annual rate in September was 389,000 — up from August’s 368,000. The new home sales rate in July of this year was 374,000 — a two-year high.

Annual increase more than 25%

September 2012 saw a 27.1 percent increase in new home sales over September of last year. The median sales price of a new home in September was $242,000 — up nearly 12 percent over the same time last year.

Housing market recovery seems solid

Bloomberg interviewed an economist with RBS Securities in Connecticut who said that

“All the things that were really holding back housing are finally starting to lift. It really is tough to find any bad signs here. Inventories are very, very lean. Assuming the economy remains on track, housing should continue to improve for the rest of the year and into 2013.”

Gathered from

·       Home Sales Rising to Two-Year High Spur U.S. Growth: Economy (Bloomberg)

·       New-home sales up 27 percent from a year ago (Inman News)

·       New home sales jump to two-year high (NBC Bottomline)

Monday, October 29, 2012

Mortgage Rates Expected To Creep Higher

Record Low Rates May Be Behind Us

Mortgage applications slow as rates rise

Mortgage applications fell in mid-October to their lowest level since August. At the same time, Zillow’s Mortgage Marketplace reported a slight increase in the rate for a 30-year fixed mortgage — up 2 basis points from 3.26 percent to 3.28 percent.

MBA sees Fed policy supporting slow rise in rates

The Mortgage Bankers Association (MBA) is predicting an average rate of 3.8 percent for 30-year fixed mortgages in the fourth quarter, rising to 3.9 percent in the first quarter of 2013 — with a steady, slow rise to land around 4.4 percent by the fourth quarter of 2013.  Jay Brinkmann, the MBA’s chief economist, thinks “continuing purchases of mortgage-backed securities through the Federal Reserve’s QE3 program will likely keep the 30-year fixed-rate mortgage below 4% through the middle of 2013.”

International economy impacted rates more than expected

According to Brinkmann, factors economists normally expect to drive interest rates, such as inflation, were less significant than other factors —

“it was uncertainty in European economies and actions taken by the Federal Reserve that moved rates so low this year.”

Gathered from

Monday, October 22, 2012

Foreclosures Hit a 5-Year Low

Filings Down 16% Year-Over-Year


Lowest foreclosure activity level since 2007

RealtyTrac recently reported that September’s foreclosure filings (just over 180,000) were the fewest monthly filings recorded since July 2007.

Month to month

Total foreclosure filings fell 7 percent from August 2012 to September 2012 — the second consecutive month of declining filings.

Foreclosure starts also down

Foreclosure starts (homes entering the foreclosure process) dropped from the prior month by 12 percent and from September of 2011 by 15 percent. August 2012 was also down from the previous month, the first drop in monthly foreclosure starts after three consecutive months of increases.

State by state, the news is either very good or very bad

The national decrease in foreclosure activity was driven mainly by declining activity in the non-judicial states (states where foreclosure proceedings do not go through the courts). Nevada, Oregon and Utah — all non-judicial states — saw foreclosure activity rate drops of more than 60 percent. Of the 24 non-judicial states, 20 saw a decline in foreclosure activity.

Judicial states, however, are not faring as well. In 14 of the 26 judicial states, foreclosure activity increased year-over-year. New Jersey saw a 130 percent increase in activity in the third quarter, New York experienced a 53 percent increase, and activity in Pennsylvania, Connecticut and Illinois jumped 31 to 36 percent.

For more on recent foreclosure activity, read RealtyTrac’s complete report here.

Friday, October 19, 2012

6 Straight Months of Rising Home Prices

Year-Over-Year Home Prices Continue To Improve


Prices increasing both year-over-year and month-over-month

CoreLogic — one of the largest real estate data sources in the country — posted its latest Home Price Index Report recently, showing a 4.6 percent rise in national home prices from August 2011 to August 2012. That’s the largest annual increase in home prices in more than six years. From July, August home prices showed a 0.3 percent increase.

Biggest price gains are in Arizona, Idaho and Utah

CoreLogic analyzes the data both including and excluding “distressed sales,” which it defines as “short sales and real estate owned (REO) transactions.” Arizona, Idaho and Utah were all in the top five states in annual home price appreciation, both with and without distressed sales.

·        Arizona tops the list of largest price gain both with and without distressed sales — showing an 18.2% increase in price across all sales and a 13% price increase when distressed sales are excluded.

·        Utah home prices went up 8.9% across the board and 10% when distressed sales are excluded

·        Idaho saw home prices increase 10.4% annually when looking at all sales, and 8.6% when distressed sales were excluded

States with falling prices include Rhode Island, New Jersey and Alabama

When distressed sales were factored out of the analysis, only three states posted a drop in home prices from August 2011 to August 2012 — Rhode Island, New Jersey and Alabama.

·        Rhode Island home prices decreased 1.7% excluding distressed sales — when distressed sales are included, RI home prices showed an annual 2.6% drop

·        New Jersey saw a 1.4% drop in annual prices both with and without including distressed sales

·        Alabama showed home prices falling just 0.2% if distressed sales are factored out — even including distressed sales, at 0.7% Alabama showed almost the smallest drop in home prices in the country

Continued home price gains in September

According to the report, CoreLogic is predicting a seventh month of annual home price increases in September of 5 percent, albeit with a small drop month-to-month from August of 0.3 percent:

The CoreLogic Pending HPI indicates that September 2012 home prices, including distressed sales, are expected to rise by 5 percent on a year-over-year basis from September 2011 and fall by 0.3 percent on a month-over-month basis from August 2012 as the summer buying season closes out. Excluding distressed sales, September 2012 house prices are poised to rise 6.3 percent year-over-year from September 2011 and by 0.6 percent month-over-month from August 2012.



For the complete CoreLogic Home Price Index Report, click here (PDF).

Tuesday, October 16, 2012

Housing a Bright Spot In Economic Recovery

Federal Reserve Releases Latest Beige Book

Not the facts, Ma’am

The Federal Reserve’s Beige Book is updated eight times a year, two weeks before the Fed’s policymaking meetings in Washington, DC.
Interestingly, there are no numbers or statistics cited in the Beige Book — staffers at each of the 12 regional banks gather information via phone, email and questionnaires from experts and business leaders to summarize commentary and opinion regarding the state of consumer spending, manufacturing, real estate and other regionally significant economic sectors such as tourism and farming. (from How the Fed compiles the Beige Book, at a glance in Businessweek)

Modest economic growth

Since the last Beige Book update, the Fed is reporting modest growth in all but two of the 12 districts — the New York District reported level activity, while Kansas City noted some slowing down.
USA Today points to how “ordinary” the economic recovery, a relief after dire predictions about how the country would recover from a recession:
Six years after the housing bubble peaked, the beige book paints a picture of a recovery led by the classically cyclical factors of improving housing markets, better car sales and stronger credit quality.

Housing market leading the way

According to the Fed’s report, the housing market is showing “widespread improvement.” Home sales are up in all 12 financial districts, even “substantially” higher in some areas. Home prices are reported to be “steady to increasing, with declining inventories” putting upward pressure on prices in five districts (Boston, Atlanta, Minneapolis, Dallas and San Francisco).
 “New home construction and sales were more mixed but still mostly improved,” with increases in construction and/or new home sales seen in the Atlanta, Chicago, St. Louis, Kansas City, Dallas and San Francisco Districts.

Wednesday, October 3, 2012

Protect Your Nest Egg

Protecting your home’s value is always a top priority, and the Mortgage Interest Tax Deduction is an important part of making homeownership a good investment. A resolution is pending in the House of Representatives to keep the deduction in its current form. Americans overwhelmingly oppose any action by Congress to scale back or eliminate the deduction. The consequences could be devastating for homeowners, the housing market and the nation’s economy. To learn more about this issue, go to

If you need a dedicated expert in Real Estate to help with this or anything related to lowering the cost of homeownership, call today. Let’s talk.


Source: National Association of Home Builders

Tuesday, September 18, 2012

Chipping Away At Mortgage Debt

Total National Mortgage Debt Drops


According to a news release from the Federal Reserve, the national outstanding mortgage debt has dropped nearly $1 trillion dollars since 2008 — the total debt on one-to-four family residences now stands at $10.178 trillion, down from $11.075 trillion in 2008.


Peter Miller, editor of the HSH blog, considers dropping home prices, record low mortgage rates, refinancing and loan modifications to significant contributing factors.

  • Lower home prices mean smaller mortgages. As home prices fall, new loans are simply smaller for the same property than they would have been when the housing market was booming — the Fed estimates that from 2005 to the first quarter of this year, the housing market has lost more than $5.5 trillion, or about 25% of its total value.
  • Lower mortgage rates mean less debt.Low mortgage rates mean less debt for a loan and smaller monthly payments.
  • Refinanced mortgages mean less debt. Refinancing has lowered homeowners’ current debt and monthly payments — Wells Fargo recently announced that between March and June of this year, it had helped more than 8,500 customers refinance their loans, saving the borrowers an average of $4,560 annually in interest payments.
  • Modified loans mean less debt. Loan modifications have also lowered the debt for borrowers struggling with their loan — according to the Fed, more than one million borrowers have been helped by the Making Home Affordable Program, reducing their monthly mortgage payments by an average of $536.


Miller summed up the positive ramifications of national debt reduction quite simply:

  1. Homeowners spending less on their home loan will spend more in the marketplace
  2. As debt decreases, so does risk — meaning lenders may ease their credit constraints

Monday, August 20, 2012

Stricter Appraisals on Risky Mortgages

Proposed regulation would apply to “high-risk” mortgages only

Last week, federal regulators proposed rules that would require an actual physical inspection of the property before an appraisal could be submitted. This would prevent appraisals made on the fly purely on a cursory inspection of the home’s exterior and coming in too high.

Regulators ready to crack down on fraudulent home flipping

Although recent consumer consensus seems to be that appraisals are coming in too low and impeding home sales, the new regulation is aimed primarily at preventing fraudulent home flipping. By making higher-rate (“high-risk”) mortgages subject to an additional appraisal, regulators hope to minimize home-flipping cases where the appraisal of the property after improvements is too high and allows the flipper to sell at an unfounded price.

High-risk mortgage defined as 1.5 percentage points or more above average

The proposed regulations would apply only to loans where the interest rate is at least one and half percentage points more than the market average. While the regulations seem restrictive, they in fact apply only to a very small portion of the mortgage market. In 2010, loans meeting this criteria comprised just 3.2% of the mortgages written.

From The Wall Street Journal: Developments and CBS Money Watch.

Monday, August 13, 2012

Momentum Slows as Pending Home Sales Drop

Pending home sales down 1.4%

Month over month, contracts to purchase existing homes declined 1.4%, the second month-over-month drop in three months. The year-over-year trend, however, is in its fourteenth month of consecutive gains — demonstrated by the 80 metropolitan areas that made this month’s “Improving Markets Index,” which is compiled by the National Association of Homebuilders and First American.

Limited listings may be behind the decline

The chief economist of the National Association of Realtors (NAR), Lawrence Yun, commented that “buyer interest remains strong but fewer home listings mean fewer contract signing opportunities.” Single-family homes on the market in June went down 3% from their levels in May and a whopping 24% from June of last year, the biggest year-over-year decrease in more than 30 years. Slow processing of distressed properties along with homeowners unwilling to sell their home when the current value is so much less than what they paid are the primary causes.

Supply and demand pressures helping stabilize the market

As inventories go down, the low home prices and record-breaking low mortgage rates continue to drive demand, which means that many listings — those priced appropriately for the current market condition — are receiving multiple offers, allowing sellers more choice picking a buyer and the terms of the sale.

Via Realty Times and Greenwich Post and NAHB.