Monday, December 26, 2011

Housing Market: What’s Behind and What’s Ahead


The housing market in 2011 was a year that saw changing trends and breaking records.

Mortgage Rates

15- and 30-year fixed mortgages hit record lows during 2011. via

Freddie Mac’s Primary Mortgage Market Survey showed the interest rate for a 30-year fixed-rate loan averaging 3.91% last week, the lowest in the 40 years of the survey’s history. The average interest rate for a 15-year fixed-rate mortgage was 3.21% — also a record low.

Mortgage rates are expected to remain low well into 2012.

Greg McBride, a senior financial analyst at, commented that “for well-qualified buyers interest rates should be no impediment to home buying in 2012.”

Foreclosures & Loans

There were 14% fewer foreclosure notices served in November year-over-year. via Business Week

The  rate of foreclosure filings slowed considerably in 2011, as banks and servicers responded to the documentation and processing challenges from 2010.

The foreclosure liquidation rate is anticipated to rise next year. via

With the settlement between the states’ attorneys general coalition and the major lenders and servicers coming to a head, Zillow sees an increase “either in conjunction with a settlement… or, alternatively, in the aftermath of the settlement effort falling apart.”

Home Values

The slide in home values since 2008 slowed in 2011. via International Business Times

Zillow projects that home values will fall 35% less this year than in 2010; and the Case-Shiller Home Prices indices show that the rate of decline slowed from the second quarter of this year to the third quarter (from 5.8% to 3.9%).

Home values will likely fall a bit more to finally bottom out in 2012.

Jonathon Miller, president and CEP of Miller Samuel, predicts that the decline will be considerably less than this year.

Home Sales & Starts

In 2011, new single-family home sales are on pace to hit a record low of 301,000. via Business Week

On the flip side, however, existing home sales rose to 4.42 million this fall, the highest in 10 months.

Total home starts (houses and apartments) jumped 9.3% month-over-month. via Internation Business Times

This rise from October to November represents the fastest pace in more than 18 months. Although single-family home construction remains stalled, Fitch Ratings projects a 6.7% gain in residential housing starts next year.


The Housing Market Index rose to 21 from last month’s 19. via Mortgage News Daily

The National Association of Home Builders (NAHB) surveys its members monthly to compile the index. Although not huge, 20 is the highest the index has been since May 2010.





Monday, December 19, 2011

Are Home Values Finally Stabilizing?

Zillow Real Estate’s latest market report says maybe

On a year-over-year basis, the Zillow® Home Value index declined 5.1 percent. Zillow reports that “the rate of monthly depreciation has stabilized around -0.2 to -0.3 percent over the last few months.”

Of the 156 metropolitan statistical areas covered by Zillow, while 95 showed monthly depreciation in home values, 39 areas actually saw an increase in monthly home value this past October. Twenty-two (22) areas remained flat.

The nine markets that saw the largest year-over-year home value increases from October 2010 to October 2011?

  • Tulsa, OK— one-year price gain of 6.2%
  • Oklahoma City, OK — one year price gain of 3.1%
  • Lincoln, NE — one year price gain of 2.7%
  • Madison, WI — one year price gain of 1.3%
  • Honolulu, HI — one year price gain of 1.3%
  • Fort Collins, CO — one year price gain of 1.3%
  • Fort Myers, FL — one year price gain of 0.4%
  • Pittsburgh, PA — one year price gain of 0.4%
  • Boulder, CO — one year price gain of 0.2%

Another sign of stabilization is the decline in the foreclosure liquidation rate — at 8.1 out of every 10,000 homes being liquidated as of October, 2011 — down from the all-time high of 10.7 out of every 10,000 homes in October, 2010. That’s a drop of nearly 25 percent.

For more details on the Zillow Home Value Index and the latest Zillow Real Estate Market Report, check out these articles:

Monday, December 12, 2011

The Housing Market One or Two?

Analysts disagree over definition and future of the market

Last week, while some real estate analysts offered a somewhat rosy outlook regarding “stabilizing home prices for non-distressed property,” several industry experts from news sources argued that you cannot simply split the market in two pieces — distressed and non-distressed to paint the picture you want.

So what’s the bottom line? Is the market flat, dropping or rising?

Month over month, CoreLogic report that home prices overall fell 3.9 percent in October, and the S&P/Case-Shiller home price index was down 3.9 percent in September (which represents a three month running average of both distressed and non-distressed sales).

Removing the distressed sales(foreclosures and short sales) from CoreLogic’s analysis, however, home prices fell just 0.5 percent in October.

The Wall Street Journal noted that for the first nine months of 2011, non-distressed property prices were relatively stable, with only a two to three percent decline year over year. A real estate analyst from Barclays, a proponent of looking at the two market segments separately, feels that if the pricing trend continues (distressed pricing dropping while non-distressed pricing stabilizes), it could have the effect of “stabilizing something else: home-buyer confidence.” Only time will tell.

For more details, see:

Monday, December 5, 2011

More and More Experts Say Principal Reduction Is the Answer

Why does the head of Fannie Mae and Freddie Mac refuse to consider it?

Last week, a group of Democrats from the House sent a letter to Edward DeMarco (who currently heads up the agency (FHFA) that oversees Fannie Mae and Freddie Mac) asking for a better answer as to why he refuses to implement a principal reduction program at Fannie and Freddie.

The letter cites industry experts, all of whom advocate principal reduction as necessary to bring the housing market and economy out of the dumps, including:

  • Chairman of the Fed, Ben Bernanke
  • a former Chairman of the Council of Economic Advisers
  • a former Vice Chairman of the Fed
  • a former Special Inspector General for the Troubled Asset Relief Program

Even Greg Lippman, the former Deutsche Bank AG trader who made a fortune betting against subprime mortgages, has weighed in on the side of mortgage reduction. Now chief investment officer for a New York-based hedge fund, Lippman wrote a letter to investors saying “principal reductions are necessary to help ameliorate the housing crisis.” (For more on Lippman’s perspective and additional expert opinions, read this Bloomberg News article.)

DeMarco claimed in a Nov. 16th hearing that his agency has “concluded that the use of principal reduction within the context of a loan modification is not going to be the least-cost approach for the taxpayer.” (For a great summary of DeMarco’s exchange with Rep. John Tierney (D-MA), read this post on Fire Dog Lake.)

According to the Democrats behind the letter, DeMarco has too long been spouting “superficial excuses about why principal reduction programs are not feasible at Fannie Mae and Freddie Mac, despite a growing chorus of economists and other experts who believe these programs serve the long-term interests of taxpayers.”

Felix Salmon, an award winning financial journalist, boils the likely real reasoning behind DeMarco’s stance down to the following:

If we [the FHFA]do principal reductions, the accounting conventions finally grow some teeth, and we’re forced to take a write-down. Since we don’t want to recognize reality and take that write-down, we’re simply going to avoid doing principal reductions instead.” (read Salmon’s full post on “Ed DeMarco’s Obstructionism” here)

The Democrats’ letter calls for DeMarco to provide documentation that proves there are statutory provisions preventing FHFA from letting Fannie Mae and Freddie Mac reduce mortgage principal. In addition, they asked DeMarco for an analysis that compares the financial implications of foreclosures with the cost of debt reduction. DeMarco’s deadline to provide these documents is December 9th