37,000 completed foreclosures in April 2016
CoreLogic released its April 2016 National Foreclosure Report which shows the foreclosure inventory declined by 23.4% and completed foreclosures declined by 15.8% compared with April 2015. The number of completed foreclosures nationwide decreased year over year from 43,000 in April 2015 to 37,000 in April 2016, representing a decrease of 68.9% from the peak of 117,813 in September 2010. The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6.2 million completed foreclosures nationally, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 8.3 million homes lost to foreclosure. As of April 2016, the national foreclosure inventory included approximately 406,000, or 1.1%, of all homes with a mortgage compared with 530,000 homes, or 1.4%, in April 2015. The April 2016 foreclosure inventory rate is the lowest for any month since September 2007.
CoreLogic also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due including loans in foreclosure or REO) declined by 21.6% from April 2015 to April 2016, with 1.1 million mortgages, or 3%, in this category. The April 2016 serious delinquency rate is the lowest in more than eight years, since October 2007. “The recovery in home prices and improved labor market have contributed to the drop in seriously delinquent rates,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Over the 12 months through April, the CoreLogic Home Price Index for the US rose 6.2% and the labor market gained 2.6 million jobs. We also found that the seriously delinquent rate fell by about three-quarters of a percentage point.” “The number of homeowners who have negative equity has fallen by two-thirds since its 2010 peak, and the number of borrowers in foreclosure proceedings has also continued to drop,” said Anand Nallathambi, president and CEO of CoreLogic. “Despite this progress, about four million homeowners remained underwater at the end of the first quarter, and these borrowers are more vulnerable to foreclosure proceedings if they should fall delinquent.”
Additional April 2016 highlights:
- On a month-over-month basis, completed foreclosures increased by 0.3% to 37,000 in April 2016 from the 36,000 reported for March 2016.* As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.
- On a month-over-month basis, the foreclosure inventory was down 3% compared with March 2016.
- The five states with the highest number of completed foreclosures for the 12 months ending in March 2016 were Florida (69,000), Michigan (48,000), Texas (28,000), Georgia (23,000) and California (23,000).
These five states accounted for about 41% of all completed foreclosures nationally.
- Four states and the District of Columbia had the lowest number of completed foreclosures: The District of Columbia (128), North Dakota (317), West Virginia (482), Alaska (653) and Montana (695).
- Four states and the District of Columbia had the highest foreclosure inventory rate: New Jersey (3.7%), New York (3.2%), Hawaii (2.2%), the District of Columbia (2.1%) and Florida (2%).
- The five states with the lowest foreclosure inventory rate were Alaska (0.3%), Minnesota (0.3%), Utah (0.4%), Arizona (0.4%) and Colorado (0.4%).
Study: sharp increases in Obamacare premiums ahead
Premiums for popular low-cost medical plans under the federal health care law are expected to go up an average of 11% next year, said a study that reinforced reports of sharp increases around the country in election season. For consumers, the impact will depend on whether they get government subsidies for their premiums, as well as on their own willingness to switch plans to keep the increases more manageable, said the analysis released Wednesday by the nonpartisan Kaiser Family Foundation. The full picture on 2017 premiums will emerge later this summer as the presidential election heads into the home stretch. The health law's next sign-up season starts a week before Election Day. Democrat Hillary Clinton wants to build on President Barack Obama's health overhaul, which has reduced the uninsured rate to a historically low 9%. Republican Donald Trump wants to repeal it. The Kaiser study looked at 14 metro areas for which complete data on insurer premium requests is already available. It found that premiums for a level of insurance called the "lowest-cost silver plan" will go up in 12 of the areas, while decreasing in two. The changes range from a decrease of 14% in Providence, Rhode Island, to an increase of 26% in Portland, Oregon. Half of the cities will see increases of 10% or more. Last year, only two of the cities had double-digit increases. "Premiums are going up faster in 2017 than they have in past years," said Cynthia Cox, lead author of the analysis. Among the cities studied, the monthly premium for a 40-year-old nonsmoker in 2017 will range from $192 in Albuquerque, New Mexico, to $482 in Burlington, Vermont. Final rates may change if regulators push back on the requests from insurers. The foundation plans to analyze major cities in all states as more data becomes available.
MBA - mortgage applications decrease
Mortgage applications decreased 2.4% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending June 10, 2016. The previous week's results included an adjustment for the Memorial Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.4% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 21% compared with the previous week. The Refinance Index decreased 1% from the previous week. The seasonally adjusted Purchase Index decreased 5% from one week earlier. The unadjusted Purchase Index increased 17% compared with the previous week and was 16% higher than the same week one year ago. The refinance share of mortgage activity increased to 55.3% of total applications from 53.8% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.3% of total applications. The FHA share of total applications decreased to 11.8% from 13.0% the week prior. The VA share of total applications decreased to 11.1% from 11.5% the week prior. The USDA share of total applications decreased to 0.6% from 0.7% the week prior.
US producer price index up 0.4% in May vs. 0.3% increase expected
US producer prices rose for a second straight month in May as the cost of energy products and services increased, but the lingering effects of a strong dollar and lower energy prices will likely keep inflation tame for a while. The Labor Department said on Wednesday its producer price index for final demand increased 0.4% last month after rising 0.2% in April. In the 12 months through May, the PPI slipped 0.1% after being unchanged in April. Economists polled by Reuters had forecast the PPI gaining 0.3% last month and slipping 0.1% from a year ago. A surge in the dollar and the plunge in oil prices between June 2014 and December 2015 have dampened price pressures, keeping inflation below the Federal Reserve's 2% target. Although the dollar has dropped 1.5% against the currencies of the United States' main trading partners this year and oil prices are near $50 per barrel, underlying inflation remains benign. Last month, energy prices jumped 2.8% after increasing 0.2% in April. Energy prices accounted for two-thirds of the 0.7% rise in the cost of goods last month. Prices for services rose 0.2% after inching up 0.1% in April. The increase reflected an increase in margins received by wholesalers and retailers.
A key measure of underlying producer price pressures that excludes food, energy and trade services dipped 0.1% last month after rising 0.3% in April. The so-called core PPI was up 0.8% in the 12 months through May. The core PPI increased 0.9% in April. A separate report showed factory activity in New York expanded in June, rebounding from a May decline as manufacturer orders and shipments rose. The Federal Reserve Bank of New York says that its Empire State manufacturing index rose to 6 in June, after slumping to minus 9 the previous month. Any reading above zero points to expansion. The figures indicate that New York factories are seeing slight improvements in their outlook, although the employment gauge of the index shows that hiring has been flat. Factory output nationwide has been weak this year as sluggish economic growth worldwide has hurt demand for US exports. A measure of new orders rose to 10.9, from minus 5.5 the previous month. And a gauge of shipments also turned positive at 9.32, up from minus 1.9.
MBA - applications for new home purchases decrease in May
The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for May 2016 shows mortgage applications for new home purchases decreased by 6% relative to the previous month. This change does not include any adjustment for typical seasonal patterns. "Despite applications being down in May, each month this year has seen positive year over year growth in mortgage applications for new homes, and we expect modest growth in housing starts to be reported later this week as the spring building season continues, " said Lynn Fisher, MBA's Vice President of Research and Economics. "While mortgage applications for new homes have declined almost 17% on an unadjusted basis from their peak in March of this year, applications in May remain eight% above their level from the same time one year ago." By product type, conventional loans composed 68.4% of loan applications, FHA loans composed 17.6%, RHS/USDA loans composed 0.6% and VA loans composed 13.4%. The average loan size of new homes increased from $325,233 in April to $328,032 in May. The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 488,000 units in May 2016, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally adjusted estimate for May is a decrease of 3% from the April pace of 503,000 units. On an unadjusted basis, the MBA estimates that there were 47,000 new home sales in May 2016, a decrease of 2.1% from 48,000 new home sales in April.
MBA - commercial/multifamily mortgage debt outstanding continues strong growth
The level of commercial/multifamily mortgage debt outstanding increased by $35.3 billion in the first quarter of 2016, as three of the four major investor groups increased their holdings. That is a 1.2% increase over the fourth quarter of 2015. Total commercial/multifamily debt outstanding rose to $2.86 trillion at the end of the first quarter. Multifamily mortgage debt outstanding rose to $1.07 trillion, an increase of $18.2 billion, or 1.7%, from the fourth quarter of 2015. "The amount of commercial and multifamily mortgage debt outstanding continues to grow at a strong clip," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "Bank holdings and multifamily loans backed by Fannie Mae and Freddie Mac drove growth during the quarter. However, the balance of loans held in commercial mortgage-backed securities continues to decline and has now fallen by one third since it peaked in 2007, as more CMBS loans are paid-off and paid down than are originated." The four major investor groups are: bank and thrift; commercial mortgage backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues; federal agency and government sponsored enterprise (GSE) portfolios and mortgage backed securities (MBS); and life insurance companies. Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.1 trillion, or 39% of the total. CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $504 billion, or 18% of the total. Agency and GSE portfolios and MBS hold $472 billion, or 17% of the total, and life insurance companies hold $398 billion, or 14% of the total. Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues. These loans appear in the "CMBS, CDO and other ABS" category.
Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $472 billion, or 44% of the total multifamily debt outstanding. They are followed by banks and thrifts with $352 billion, or 33% of the total. State and local government hold $94 billion, or 9% of the total; life insurance companies hold $62 billion, or 6% of the total; CMBS, CDO and other ABS issues hold $57 billion, or 5% of the total, and nonfarm noncorporate business holds $13 billion, or one% of the total. In the first quarter of 2016, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $26.4 billion, or 2.5%. Agency and GSE portfolios and MBS increased their holdings by $11.3 billion, or 2.5%, and life insurance companies increased their holdings by $5.0 billion, or 1.3%. CMBS, CDO and other ABS issues saw the largest decrease at $11.7 billion, or down 2.3%. In percentage terms, other insurance companies saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 8%. CMBS, CDO and other ABS issues saw their holdings decrease 2.3%.
The $18.2 billion increase in multifamily mortgage debt outstanding between the fourth quarter of 2015 and first quarter of 2016 represents a 1.7% increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt, an increase of $11.3 billion, or 2.5%. Commercial banks increased their holdings of multifamily mortgage debt by $8.0 billion, or 2.3%. State and local government increased by $2.7 billion, or 2.9%. CMBS, CDO and other ABS issues saw the largest decline in their holdings of multifamily mortgage debt, by $5.7 billion, or down 9.2%. In percentage terms, REITs recorded the largest increase in holdings of multifamily mortgages, at 6%. CMBS, CDO and other ABS issues saw the biggest decrease at 9%.
Zillow - Q1 2016 breakeven horizon: buying looks increasingly attractive as both rents and home values tick up
The US Breakeven Horizon was 1 year and 8 months in Q1 2016, three months shorter than the previous quarter. Home buyers break even on a home purchase, compared to renting the same house, in less than two years in 72 of the 100 largest markets. In general, the country’s strongest job markets have longer Breakeven Horizons. Among the largest 35 markets, the longest Breakeven Horizons are in San Diego and Washington, D.C. at 3 years and 6 months. The shortest is Memphis, at 1 year.
Rising rents, low interest rates and strong expected home value growth make buying a home instead of renting it an increasingly attractive financial option for those who can afford to do so. In more than 80% of metro markets nationwide, and 72 of the largest 100, home buyers end up financially ahead after buying a home in less than two years. Among the nation’s largest 50 metro markets, those with the longest Breakeven Horizon as of Q1 2016 were San Diego, Washington, D.C. (3 years and 7 months each), Los Angeles (3 years and 6 months) and San Jose (3 years and 4 months). Top 50 markets with the shortest Breakeven Horizons included Memphis (1 year), Indianapolis (1 year and 2 months) and Dallas-Fort Worth (1 year and 3 months).
Breakeven horizons tend to be longer in the nation’s strongest labor markets. Four of the nation’s six metros with breakeven horizons over 2.9 years have had above-average employment growth, and eight of the nation’s 10 metros with annual employment growth of 3.5% or more have above-average Breakeven Horizons. Ranking large metros based short Breakeven Horizons and recent employment and income growth, metros in which buying a home pays off very quickly relative to renting and that have strong labor markets include San Antonio, Nashville, Tampa, Jacksonville and Raleigh.[2] San Antonio had the sixth-shortest Breakeven Horizon, the fifth-strongest income growth and the 18th strongest employment growth in early 2016 among all metros analyzed. At the other extreme, markets including New Orleans, Washington, D.C., St. Louis and Buffalo are low on these rankings. In the case of New Orleans, St. Louis, and Buffalo, they have mediocre Breakeven Horizons and weak labor markets. Washington, D.C. has both a weak labor market and a long Breakeven Horizon. San Jose, in the heart of Silicon Valley, ranks relatively low – despite strong employment growth – because of a very long local Breakeven Horizon. Over the most recent quarter, Breakeven Horizons have shortened across much of the country, driven by the combination of falling price-to-rent ratios and an uptick in expected home value appreciation over the next year (figure 3). In most large metros, rent appreciation outpaced home value appreciation, pushing price-to-rent ratios downward – particularly in the Northeast. At the same time, home value appreciation has accelerated in some metros – especially those where inventory of for-sale homes is tight – helping homeowners accumulate equity more quickly and also shortening Breakeven Horizons. Local market dynamics, including the pace of rental and home value growth, have an important impact on the Breakeven Horizon and within a given metro market, the breakeven horizon can differ substantially across zip codes.
WSJ - lagging demand for luxury homes may mean deals for buyers
A surplus of high-end homes for sale is giving more bargaining power to buyers. In the US, the inventory of homes priced from $500,000 to $750,000 rose 15.9% in March compared with the same period last year, according to the National Association of Realtors. The inventory of homes over $1 million rose 12.6% year over year. Inventories dropped in April, likely due to the seasonal pattern of spring sales and perhaps some buyers taking advantage of deals, but real-estate agents say they are still seeing more expensive homes sit longer than midrange and lower priced homes. Behind slowing sales at the upper level: Stock-market volatility has made wealthy buyers more cautious, and there are fewer foreign buyers than last year due to the dollar strengthening and other economic issues overseas, says Lawrence Yun, NAR’s chief economist. “The stock market has come back up, but we don’t know yet if that means the upper-end home buying market will begin to return,” Mr. Yun says. What also could be happening is simply a “normalizing” of the home market, says Brad Blackwell, executive vice president and portfolio business manager for Wells Fargo Home Mortgage. That’s good for jumbo borrowers, who now have a wider choice of homes and won’t have to bend to sellers’ demands that waive financing and inspection contingencies to compete with cash buyers.
However, the thresholds for looser inventory differ widely by location as different market forces come into play. Hartford Connecticut is a good example of how local conditions impact the upper end of home sales. A number of big companies, including General Electric, are moving their headquarters from the area. That may create a glut in inventory, but other affluent, less geographically driven buyers, such as doctors, may swoop in for bargains in family friendly neighborhoods. In Portland, Ore., homes priced from $300,000 to $600,000 sell in five days with 10 to 20 offers, but listings start to sit on the market at $750,000 and get really challenged above $1 million. For example, a grand 1920s Tudor-style home with five fireplaces and a marble-floored ballroom was first listed at $1.6 million, but sat for five months and is finally set to close in June for $1.425 million. One of the biggest hurdles is changing the mind-set of homeowners attuned to quick sales and bidding wars. One recent $840,000 listing had four counteroffers starting at $770,000 before buyer and seller agreed on $815,000.
Here are a few things to consider when financing a more expensive home:
- Low interest rates. A bigger mortgage costs less now than it may in the future. Jumbo mortgage average interest rates are still near record lows—3.72% for the 30-year fixed rate and 2.87% for a five-year, adjustable-rate mortgage on the week ending June 10.
- More cash on hand. Lenders require higher down payments and more cash reserves as borrowers reach higher loan amounts, or “tiers.” For example, Wells Fargo will lend up to 89.9% on amounts up to $1 million, 80% on amounts between $1 million to $2 million, 75% on loans between $2 million and 2.5 million, and so on.
- Budget for all costs. Home buyers who are trading up should make sure they can also afford higher property taxes, homeowners’ insurance, and maintenance, Mr. Blackwell says. “It’s also always important for buyers of luxury houses to factor in the increased cost of furnishing that home,” he adds.
Chris McLaughlin
Keller Williams
Keller Williams
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