Case-Shiller Indices Show Fastest Gain in 6 Years

Home prices rose at their fastest pace since July 2006, according to Standard and Poor’s Case-Shiller 10- and 20-city Home Price Indices. At the same time, the Case-Shiller national index, reported quarterly, registered its strongest gain since Q2 2006.

The 10- and 20-city indices each rose 0.2 percent in December, reversing declines in November. Year-over-year, the 10-city index was up 5.9 percent, and the 20-city index rose 6.8 percent. The national index was up 7.3 percent year-over-year.

The yearly gain in the 20-city index matched the consensus forecast.

The gain in the overall 20-city index was tempered by drops in prices in 11 cities with no distinct pattern. Prices fell month-over-month in four Midwest cities (Chicago, Cleveland, Detroit, and Minneapolis), three cities in the West (Denver, Portland, and Seattle) and two cities in each of the South (Charlotte and Dallas) and the Northeast (New York and Washington, D.C.).

Prices rose in 19 of the 20 cities on a year-over-year basis, falling only in New York.

The month-over-month price gains were led by Las Vegas (up 1.8 percent), Los Angeles (up 1.1 percent), Phoenix (up 0.9 percent), Miami (up 0.8 percent), and San Francisco (up 0.7 percent). Of the nine cities that registered price gains, five were in the West, three were in the South, and one was in the Northeast.

The monthly price declines were led by Chicago (-0.7 percent), followed by Detroit (-0.6 percent), and Portland and Seattle (-0.5 percent each).

Year-over-year, prices registered double-digit percentage improvements in Phoenix (23.0 percent), San Francisco (14.4 percent), Detroit (13.6 percent), Las Vegas (12.9 percent), and Minneapolis (12.2 percent).

The annual price drop in New York City was 0.5 percent.

Year-over-year price improvements in Phoenix have been over 20 percent for four straight months, but prices there are still down 44.9 percent from their June 2006 peak.

Indeed, prices in every city in survey remain below their historic highs, led by Las Vegas, where prices are off 56.4 percent from their August 2006 high.

At 158.49, the 10-city index is down 30.0 percent from its June 2006 high of 226.29, and the 20-city index—at 145.95—is off 29.3 percent from its July 2006 peak of 206.52.

The quarterly index fell in the fourth quarter for the first time since the first quarter of 2012 but was up year-over-year for the third straight quarter.

Barclays: Why Repeat Mods Have Been Making a Comeback

The pace of modifications is slowing compared to the 2010 peak, but repeat modifications are on the rise, according to a recent research report from Barclays. Not only are mods returning for seconds, but researchers from Barclays also found remodifications perform more poorly than first-time mods.

In the report, Barclays revealed about 40 percent of recent subprime and 10-20 percent of other sector modifications are remods.

Barclays gave three reasons for the rise in repeat mods: first-time mods did not reduce payments enough, leading to higher re-defaults; servicers are taking advantage ofHAMP principal reduction alternatives; and servicing transfers are leading to an increase in remodifications.

The report explained that many early mods redefaulted in 2011, with some having very small or no payment reductions when first modified.

However, even loans with significant payment reductions were in need of a second mod.

“Somewhat surprisingly, we find that a quarter of the remods are offered on loans that have already been offered a payment reduction of more than 40% in their prior modification,” the report stated.

The report also revealed about 75 percent of remods occur after 18 months of the previous modification, and about a quarter of those remods were given to borrowers who were current.

Barclays also stated nonbank servicers such as Ocwen Financial and Nationstar Mortgage tend to have about twice the share of remods compared to bank servicers. Banks, on the other hand, are more likely to pursue a short sale, according to the report.

Thus, as more loans get transferred to nonbank servicers, Barclays expects the rate of remodifcations to increase.

The report also noted repeat mods actually perform more poorly than initial mods, with the remod re-default rate at about 55 percent 18 months after the previous modification compared to a first-time mod re-default rate of about 40-45 percent.

“This is an indication that remodification is a negative signal on the borrower’s equity and/or ability to pay,” Barclays explained.

The report added servicers who are likely to remodify may also be less selective when offering mods.

 

Redfin: New Short Sale Listings Down 54% from 2012

In a blog post Friday, Redfin revealed new conventional listings have actually gone up 2 percent compared to last year, while listings for distressed properties have been reduced in half.

Redfin conducted an analysis of new property listings in the first five weeks of 2013 (January 1 to February 11) compared to the same period in 2012.

The Seattle-based brokerage found short sale listings decreased 54 percent from 2012, while REO listings are down by 46 percent. Overall, new listings declined 18 percent from 2012.

“Prices have gone up enough to stem the tide of short sales and bank-owned homes, but not enough to bring out the pent-up supply of would-be home sellers who have been sitting out the declining market,” Redfin explained.

In addition, expansions to the Home Affordable RefinanceProgram (HARP) have allowed more underwater borrowers to stay in their home by broadening eligibility for refinancing, according to Redfin.

Certain metros far exceeded the national average in their reduction for new distressed property listings. In San Jose, bank-owned listings fell 69.6 percent and short sale listings plummeted 81.7 percent. San Francisco has seen new REO listings dropped 69 percent and short sales listings decrease 73.8 percent. Meanwhile, Phoenix has seen new listings for REOs and short sales drop by 62.2 percent and 61.2 percent, respectively.

Though, non-distressed new listings surged 35 percent in Phoenix during the same time period.

California Inventory Continues to Diminish as Foreclosure Activity Falls

Foreclosure activity was somewhat mixed in the five Western states—Arizona, California, Nevada, Oregon, and Washington—observed by ForeclosureRadar over the month of January.

Notably, California foreclosure sales were down in January, despite a past trend of an uptick in the month following a decline in December. However, this January, both notices of default and notices of foreclosure saledeclined in January—down 60.5 percent and 34.83 percent, respectively, over the month.

Foreclosure sales declined 65.65 percent since January 2012, while notices of default fell 77.66 percent.

California processed 5,447 foreclosure sales in January after 5,908 in December.

“While the alphabet soup of Federal programs has successfully prolonged, or catapulted delinquent homeowners out of the foreclosure process, the unintended consequence is now an acute lack of available housing inventory for sale,” according to ForeclosureRadar.

Adequate inventory is necessary for a recovery to take place, but is lacking in much of the state, according to the analytics firm.

Arizona’s foreclosure sales were also down over the month, down 6.37 percent from December and posting a decline of 40.61 percent from January 2012. ForeclosureRadar did not release numbers for notices of default in Arizona.

Washington’s notices of foreclosure sale declined 3.99 percent from December but up 155.8 percent year-over-year. ForeclosureRadar’s January data did not include data on notices of default in Washington.

Notices of default increased, however in both Nevada and Oregon.

In Nevada, notices of default increased 16.68 percent over the month in January and were up 84.51 percent year-over-year. Foreclosure sales decreased slightly, 1.68 percent, over the month and were down 56.57 percent year-over-year.

Oregon’s notices of foreclosure sale increased 88.24 percent over the month but were down 92.73 percent over the year.

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RealtyTrac: Foreclosure Starts Slow to 79-Month Low

Foreclosure activity slowed in January with an especially notable drop in foreclosure starts, which hit a 79-month low, according to a recent foreclosure reportfrom RealtyTrac.

Foreclosure filings—default notices, scheduled auctions, and bank repossessions—were reported on 150,864 U.S. properties, representing a monthly and yearly decrease of 7 percent and 28 percent, respectively.

Data from RealtyTrac also revealed a steep drop in foreclosure starts as starts fell 11 percent from the December and 28 percent from January 2012. Foreclosure starts are now at the lowest level since June 2006.

Bank repossessions, or REOs, were down to the lowest level since February 2008 after decreasing 5 percent month-over-month and 24 percent year-over-year.

Although starts and bank repossessions decreased, scheduled foreclosure auctions displayed month-over-month increases in 26 states and the District of Columbia.

The overall decrease in foreclosure starts was influenced by the significant drop in notices of default in California, where starts fell 62 percent from December and 75 percent from a year ago.

California’s decrease follows the adoption of theHomeowner Bill of Rights, which took effect January 1, 2013.

“Dubbed the Homeowners Bill of Rights, this legislation extends many of the principles in the national mortgage settlement – including a prohibition on so-called dual tracking and requiring a single point of contact for borrowers facing foreclosure – to all mortgage servicers operating in California,” said Daren Blomquist, VP at RealtyTrac. “In addition the new law imposes fines of up to $7,500 per loan for filing of multiple unverified foreclosure documents. As a result, the downward foreclosure trend in California accelerated into hyper speed in January, decisively shifting the balance of power when it comes to the nation’s foreclosure activity.”

One shift, for example, is Florida’s new lead as the state with the highest number of foreclosure filings, a first in 6 years.

“For the first time since January 2007 California did not have the most properties with foreclosure filings of any state. Instead that dubious distinction went to Florida, where January foreclosure activity increased on an annual basis for the 11th time in the last 13 months,” Blomquist said.

For the fifth straight month, Florida also held its position as the state with the highest foreclosure rate, with one in every 300 housing units receiving a foreclosure filing in January. The national average is one in every 869.

Florida also held six of the top 10 metros with the highest foreclosure rates. Ocala ranked No. 1, where one in every 223 housing units received a foreclosure filing in last month.

Other Florida metros in the top 10 list were Miami (No. 2), Orlando (No. 3), Jacksonville (No. 8), Tampa (No. 9), and Lakeland (No. 10).
Metros outside of the Florida included Rockford, Illinois (No. 4); Stockton, California (No. 5); Las Vegas (No. 6); and Chicago (No. 7).

 

Freddie Mac: Housing Still Has ‘Substantial’ Room to Grow

Housing may not be where it used to be, but on the upside, Freddie Mac suggested this indicates there’s still plenty of room for the industry to grow.

“[T]he level of housing activity is still near historic lows. This means that there is still room for substantial growth in housing and housing-related industries before we return to a more normal environment,” Freddie Mac stated in its latest economic and housing outlook.

This optimistic viewpoint was reflected in the GSE’s forecast for housing in 2013, especially for housing starts.

Freddie Mac is projecting housing starts in 2013 to increase to 950,000 units or to be about 22 percent higher than 2012 levels. For 2014, the GSE expects another 26 percent increase in annual starts, bringing the total to about 1.2 million.

“Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales. As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates,” said Frank Nothaft, Freddie Mac VP and chief economist.

Freddie Mac is also expecting home prices to increase 3 percent in 2013 and 2014. The report gave particular attention to price trends in metros where there were substantial increases through 2006, followed by even more severe declines in home values. According to the report, it’s in many of these metros where there is much room for growth as the markets return to a more normal state.

As home prices recovery, sales should also stand to benefit.

“The effect on sales should be accelerated as house price recovery allows homeowners who have been forced on the sidelines by negative equity to get back into the market,” the report stated.

Home sales are projected to rise to an annual rate of 5.45 million in 2013 and 5.80 million in 2014.

Overall, the housing market is also “showing some love” through its positive contributions to GDP growth, a first since 2005, Freddie Mac said. In 2012, residential fixedinvestment added 0.3 percent to GDP growth. Furthermore, Freddie Mac says housing may perhaps addclose to 0.5 percentage points to GDP growth in 2013.

 

‘Life Rafts’ Keep Underwater Mortgages in San Bernardino Afloat: Fed

In a recent blog post from the Federal Reserve Bank of New York, three Fed researchers shared their findings on mortgages that would have been targeted by a controversial use of eminent domain proposed in San Bernardino County.

Although mortgages in San Bernardino County are plagued with negative equity, the researchers still found good news to keep in mind when considering eminent domain to address underwater mortgages.

Mortgage Resolution Partners first proposed the controversial use of eminent domain to county officials, but the idea was recently rejected by the Joint Powers Authority (JPA), which was created last year to consider proposals addressing the issue of negative equity in the area.

The proposed use of eminent domain involved seizing underwater mortgages at fair market value. The mortgages would then be refinanced with new terms based on the property’s current value.

For their analysis, the authors—Andreas Fuster, Caitlin Gorback, and Paul Willen—used loan data from CoreLogic containing loan-level information on nearly all privately issued mortgage securitizations.

In San Bernardino County, the researchers located about 456,000 first-lien mortgages, of which about 280,000 would be considered subprime loans, 142,000 Alt-A loans, and 34,00 prime jumbo loans. The overwhelming majority—70 percent—were adjustable-rate mortgages(ARMs).

As of August 2012, about 68,000 (15 percent) were still open, 275,000 (60 percent) were prepaid voluntarily, and 112,000 (25 percent) were foreclosed on or are currently in foreclosure proceedings.

Out of the loans that were still open, 51,500 (76 percent) were current, 5,000 (7 percent) were thirty days delinquent (an early-stage delinquency often reversed in the subsequent month), and 11,500 (17 percent) were sixty or more days delinquent.

The researchers just focused on the loans that were still open and found only 11 percent of the open loans were not underwater. Despite the depressing state of the loans, the researchers found the first lien payments on the mortgages have fallen “dramatically,” with about one-third of ARM borrowers seeing a 40 percent reduction compared to five years ago.

In addition to the decreased payments, prices in the area have been on the rise since February 2012 after falling by more than half from peak to trough, according to the researchers. In eight months through October, prices have risen 9 percent or at an annualized growth rate of more than 13 percent, the blog post noted.

“Overall, the situation in San Bernardino County appears to be improving. While a large fraction of borrowers remain dramatically underwater, a number of life rafts in the form of low interest rates, loan modifications, and recently increasing house prices have kept many from drowning,” the authors wrote.

The authors concluded by advising that such facts “should be important considerations in the cost-benefit analysis of the eminent-domain idea or related proposals.”