Report: Government Support Needed to Sustain Affordable Housing

Demand for rental housing is on the rise, but the federal government is reducing its role in the sector, according to a report from Harvard University’s Joint Center for Housing Studies (JCHS). As such, the Center expressed concern for the future availability of affordable housing.

“As policymakers take steps to reduce the role of the GSEs and FHA in multifamily lending, it is important to bear in mind the key role these institutions play in the affordable segment of the market, as well as in underserved and weaker markets where capital outside of government channels is scarce,” stated the JCHS report.

More than 1.1 million rental households took shape from 2011 to 2012, accounting for all net household growth over the year.

Rental households now make up 35 percent of all households in the United States, according to JCHS.

The demographics of renters are changing, with increased numbers of families and older individuals renting, but “[r]elative to owner households, renters are more likely to

be young, low-income, and minority, and are also more likely to be single-person households,” JCHS stated.

The median household income for a rental household is $31,200 as of 2011, which is about half the median household income for homeowners, according to JCHS.

As rental demand rises, prices rise in response. The median asking price for a vacant rental home in 2012 was $720, a record-high, according to JCHS.

Rents are rising at a faster pace than inflation. The yearly increase in the consumer price index for rental residences in April was 2.7 percent, well above the rise in inflation over the same time period – 1.1 percent. The index has risen for 34 consecutive months.

Amid these conditions, multifamily loans are performing better, with a decline in 90-day delinquency rate from 4 percent in 2009 to less than 2 percent last year.

Researchers at the Center are concerned that as the federal government decreases its activity in the multifamily market, affordable housing may become scarce.

The Federal Housing Finance Agency (FHA) has pledged to decrease the GSEs’ multifamily activity by 10 percent this year, and the FHA will also likely decrease its activity in the multifamily market.

“Scaling back the lending capacity of the GSEs and FHAraises concerns about future financing for affordable multifamily housing,” said JCHS in its report.

One solution, according to the researchers, is for the FHAto engage in risk-sharing with state and local governments. This format has already financed more than 100,000 affordable rental housing units with lower costs to the federal government than traditional GSE-backed or FHA-insured loans, according to JCHS.


OCC: 90% of Mortgages Current in Q1 as Foreclosure Efforts Continue

Mortgage performance improved in the first quarter of this year, with 90.2 percent of mortgages current and performing, the Office of the Comptroller of the Currency(OCC) reported Thursday.

The share is up from 89.4 percent in the previous quarter and 88.9 percent a year ago. The OCC’s report represents 55 percent of all mortgages and is based on data from seven national banks and a federal savings association with the largest mortgage-servicing portfolios.

For the most part, delinquencies and foreclosures were down across the board, with the exception of early delinquencies and newly initiated foreclosures.

The OCC found the percentage of loans 30 to 59 days past due showed a slight increase year-over-year after ending at 2.6 percent, up by 3 percent from a year ago, but still down by 9.3 percent compared to the previous quarter.

Loans past due by 60 to 89 days fell to 0.9 percent, down quarterly and yearly by 16.7 percent and 5.3 percent, respectively. Serious delinquencies (90 days or more past due) averaged 2.1 percent, down 7.5 percent from the previous quarter and 13.6 percent from last year.

Furthermore, the number of loans in foreclosure fell to 907,231, down 28.6 percent from a year ago and down by 1.9 percent from the previous quarter.

During the first quarter, servicers covered in the report foreclosed on 84,972 properties, down by 19.7 percent from the end of last year and down by 30.9 percent from a year ago.

As for foreclosure prevention solutions, servicers were able to complete 43,137 short sales in the first quarter, down 30.2 percent from a year ago, while deeds-in-lieu of foreclosure increased by 151.8 percent to 3,595 during the same time period.

Despite a near 14 percent quarterly increase in newly initiated foreclosures, home retention actions far outpaced new foreclosures in the first quarter.

During the first three months of this year, the OCCreported servicers implemented 348,733 home retention actions, which include loan modifications, trial-period plans, and payment plans, compared to 178,356, newly initiated foreclosures.

Data from the report also revealed loans modified through the Home Affordable Modification Program (HAMP) perform better compared to non-HAMP mods. For example, in the first quarter of 2012, 37,456 loans were modified through HAMP, of which 4.9 percent were 60 days or more past due three months after getting modified compared to 9.3 percent for non-HAMP mods. One year after receiving a HAMP modification, 12.9 percent of loans rolled into 60-day delinquency status compared to 25.4 percent for non-HAMP loan modifications.

The OCC also reported 3.02 million mortgages have been modified since the beginning of 2008 to the end of last year. As of the end of March, 49.5 percent of the loans were current or paid off, while 12.4 percent were seriously delinquent and 7.4 percent were lost to foreclosure.


Fixed Rates Skyrocket in Response to Fed Remarks

Mortgage rates shot up in the last week following remarks from the Federal Reserve that it may be tapering its bond purchases later this year.

According to Freddie Mac’s Primary Mortgage Market Survey, the average 30-year fixed-rate mortgage (FRM) rose to 4.46 percent (0.8 point) for the week ending June 27, an increase from only 3.93 percent last week and the highest figure since the week of July 28, 2011. The weekly increase is the largest since April 1987.

Last year at this time, the 30-year fixed averaged 3.66 percent.

The 15-year FRM this week averaged 3.50 percent (0.8 point), up from 3.04 percent the previous week.

Adjustable rates also saw sizable increases, though they weren’t as dramatic. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.08 percent (0.7 point), up from 2.79 percent. The 1-year ARMaveraged 2.66 percent (0.5 point) compared to last week’s 2.57 percent.

“Following Fed chief Bernanke’s remarks on June 19th about the possible timing of reduced bond purchases, Treasury bond yields jumped over the week and mortgage rates followed. He indicated that the Fed may moderate the pace of its buying later this year and end the purchases around the middle of 2014,” said Frank Nothaft, VP and chief economist at Freddie Mac.

While the massive rate hike will certainly dampen some housing activity, Nothaft noted the effect “will be muted by the high level of buyer affordability, and home sales should remain strong.”

Meanwhile,’s weekly national survey showed the 30-year fixed rate rising to an average 4.61 percent. The 15-year fixed soared to 3.73 percent.

The 5/1 ARM climbed up to 3.45 percent, the highest in more than two years.

“Mortgage rates posted the biggest one week increase since the 2008 failure of Lehman Brothers that pushed the global financial system to the brink. This week, the catalyst was something far more benign,” Bankrate said, referring to Bernanke’s announcement.

Pending Home Sales Index Jumps in May

The Pending Home Sales Index (PHSI) rose 6.7 percent in May to 112.3, its highest level since December 2006, theNational Association of Realtors, which compiles the index, reported Thursday. Economists expected the index to improve 1.0 percent to 107.1 from April’s 106.0. In December 2006, the index was 112.8.

The May increase was larger than forecast in part because April’s index was revised downward to 105.2.

The improvement in the PHSI followed a series of favorable housing reports in the past two weeks: the National Association of Home Builders reported its Housing Market Index was positive (over 50) in June, the NAR reportedMay existing-home sales rose 4.2 percent in May, and new home sales rose 2.1 percent in May.

Earlier this week, Standard & Poor’s reported its Case-Shiller Home Price Index posted the strongest monthly increase on record in April.

The PHSI tracks contracts for sale as does the government’s new home sales report. The PHSI has increased in three of the five months this year—January, March, and May—while the new home sales report increased each month this year except in February.

The PHSI is up 12.1 percent over May 2012, the 25th straight month of year-over-year increases. New homes have been up year-over-year for 20 straight months and in 23 of the last 25 months.

The PHSI, the NAR said, is based on a sample of about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, the base year.

The improvement in the index was driven by a sharp gain in the West, where it jumped 16.0 percent to 109.7 and is 1.1 percent ahead of May 2012, the first year-over-year increase in the region since last October.

The PHSI increased 10.2 percent in the Midwest to 115.5 and is 22.2 percent ahead of 2012 in the region. The index improved 2.8 percent to 121.8 in the South, where it is up 12.3 percent over its year-earlier level. The index was unchanged in May in the Northeast at 92.3 but is up 14.3 percent year-over-year in the region.

A Growing Number of Markets Are ‘Fully Recovered’

The housing recovery is undeniable and widespread, according to’s Local Market Index and Rebound Reports, released this week by the Norfolk, Virginia-based online real estate source. The index detected rising prices in all the nation’s top 100 markets for the first time on record in April.

This is up markedly from the 75 markets reporting gains in February, according to

“With home prices posting the strongest gains in seven years, the Rebound Report is another indicator of a positive turn,” said Brock MacLean, EVP at

Not only is progress being made, but according to, 14 of the top 100 markets are “fully recovered,” and 35 markets are at least halfway to “recovered” status.

Over the month of April, five markets joined the list of “fully recovered” markets.

Fully recovered markets are those that have regained their full price declines lost during the recession.

Several markets—in fact, all of the top 10—have passed this milestone. Most of the markets that have surpassed “fully recovered” status are those that experienced the mildest recession-induced declines, and many are located in energy-producing states.

Six of the top 10 markets with the most significant rebounds are located in Texas, and four of these Texas markets are more than 200 percent above their price troughs.

San Antonio (233 percent), Houston (223 percent), Austin (220 percent), and Dallas (203 percent) claim the top four spots on’s top 10 list.

On the other hand, the lowest-performing markets on’s index tend to be those that experienced the deepest price troughs during the recession.

“Although the change is positive, the rebound is slow indicating higher inventories may exist in these areas,” reads the report.

So far, among the top 100 U.S. markets, none in the Northeast are fully recovered, and only one Western market in the index is fully recovered.
The highest concentration of fully recovered top 100 markets is in the South, where 10 markets are fully recovered.

Topping the list of lowest-performing markets on’s Rebound Report are New York-Northern New Jersey-Long Island, New York, New Jersey, Pennsylvania (12 percent); Bridgeport-Stamford-Norwalk, Connecticut (11 percent); Stockton, California (11 percent); and Palm Bay-Melbourne-Titusville, Florida (11 percent).

Report: High LTVs and Their Impact on Prices

Mortgages with higher loan-to-value (LTV) ratios are not only riskier in terms of the likelihood to default, but they can also impact markets by triggering greater losses in home values, according to the most recent Home Value Forecast report from Pro Teck Valuation Services andCollateral Analytics.

“During the housing bubble (2004-2006), it has been well documented that higher loan-to-value (LTV) ratios led to riskier mortgages, but there has been much less research showing the correlation between high LTVs leading to greater price declines,” wrote Tom O’Grady, CEO of Pro Teck, and Michael Sklarz, president of Collateral Analytics.

“We have found that as home prices decline, homeowners with high LTVs are much less inclined to stay in their homes since they have little or no equity to protect. This leads to more price declines, which has a cascading effect on other high LTV owners and a further depreciation in home values,” the authors explained.

To illustrate their findings, the authors used Palmdale, California, as an example, where the LTV ratio was about 94 percent from 2000 to 2012. From the area’s 2006 peak to 2012, prices declined by more than 60 percent. During the crisis, second mortgages were also more commonly used, leading to an even greater increase in LTVs, according to the report.

During the same period in Arcadia, California, the average LTV stayed well-below 70 percent, and home values also experienced much smaller declines during the bubble period and now stand at all-time highs.

The report also included a ranking of the top 10 best and 10 worst performing metros out of 200 Core Based Statistical Areas (CBSAs). The areas are measured based on factors related to sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio, and foreclosure and REOactivity.

Among the best performers for the June report, the top three were Texas towns.

Sklarz also noted Chicago and St. Louis were added as new entrants, “which suggest the sharp recovery in the coastal U.S. markets of the past nine months is now beginning to reach some of the important interior U.S. markets.”

For the worst performing metros, many were smaller markets.

“We know that one of the catalysts behind the current real estate market recovery has been large investment funds purchasing distressed single family homes to rent out. As they have been focusing on larger and more visible metros, the smaller markets, such as the ones in the Bottom 10 list have been overlooked,” Sklarz commented.

Top 10 CBSAs

  1. Austin-Round Rock-San Marcos, Texas
  2. Houston-Sugar Land-Baytown, Texas
  3. Dallas-Plano-Irving, Texas
  4. Salt Lake City, Utah
  5. Nashville-Davidson-Murfreesboro-Franklin, Tennessee
  6. Charlotte-Gastonia-Rock Hill, North Carolina-South Carolina
  7. St. Louis, Missouri-Illinois
  8. Tampa-St. Petersburg-Clearwater, Florida
  9. Chicago-Joliet-Naperville, Illinois
  10. North Port-Bradenton-Sarasota, Florida

Bottom 10 CBSAs

  1. Huntsville, Alabama
  2. Beaumont-Port Arthur, Texas
  3. Montgomery, Alabama
  4. El Paso, Texas
  5. Shreveport-Bossier City, Louisiana
  6. Charlottesville, Virginia
  7. Little Rock-North Little Rock-Conway, Arkansas
  8. Spokane, Washington
  9. Jacksonville, North Carolina
  10. Peoria, Illinois

What’s Happening Beyond ‘Recovery’ Headlines?

Industry indicators such as rising prices, increases in construction, and declines in the number of underwater homeowners tell a story of a broad housing recovery, butHarvard’s Joint Center for Housing Studies (JCHS) sheds light on a less popular story in a report released Wednesday.

“With rising home prices helping to revive household balance sheets and expanding residential construction adding to job growth, the housing sector is finally providing a much needed boost to the economy,” says Eric S. Belsky, managing director of JCHS.

“But long-term vacancies are at elevated levels in a number of places, millions of owners are still struggling to make their mortgage payments, and credit conditions for homebuyers remain extremely tight. It will take time for these problems to subside,” he said.

Homeownership is down, and consumer spending on housing as a portion of income is up.

Thirty-seven percent of households were spending more

than 30 percent of their pre-tax income on housing in 2011, according to the Center’s report.

Furthermore, 17.9 percent of the nation’s households were spending more than 50 percent of their pre-tax incomes on housing. These households, which the Center considers “severely burdened,” have increased 49 percent since 2001.

Market conditions are pushing more households into rentals, even those in categories that used to maintain high homeownership rates, such as couples with children, high-income households, and white households, the report states.

“For each 10-year age group between 25 and 54, the share of households owning homes is now at its lowest point since recordkeeping began in 1976,” the Center states.

Additionally, while foreclosures and delinquencies are declining, they remain at historically elevated levels.

The delinquency rate fell from its peak of 10.1 percent in the first quarter of 2010 to 7.3 percent in the first quarter of this year.

“Still, more than 1.4 million homes were in foreclosure, representing 3.6 percent of all mortgages in service,” the report states, adding that this equates to more than four times the average rate between 1974 and 1999.

Amid this still-bleak environment, the federal budget sequestration will reduce rental housing assistance.

“Given the profoundly positive impact that decent and affordable housing can have on the lives of individuals, families, and entire communities, efforts to address these urgent concerns as well as longstanding housing affordability challenges should be among the nation’s highest priorities,” Belsky said.