Pending Home Sales Index Falters in June

Responding to higher mortgage rates, the National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) slipped 0.4 percent in June to 110.9, the groupreported Monday.

Economists had expected the index to drop to 110.7, which would have been a 1.4 percent decline from May’s originally reported 112.3. The May index was revised down to 111.3.

With the revision, the May index, originally reported as the highest in six years, matched the level of April 2010.

The index covered the same month in which new home sales, reported last week by the Census Bureau and HUD, surged to a five year high. New home sales are tracked when buyers sign contracts, just as the pending home sales index is compiled for contracts on existing single-family homes. New home sales rose as prices slipped; prices of existing single-family homes have been increasing even as mortgage rates have also been rising.

Indeed, the higher mortgage rates were seen as one factor in the increase in new home sales as potential purchasers rushed to lock in loans before mortgage rates rose further. That appeared to not be the case with existing homes.

The dip in the June index continued a monthly pattern of alternating increases and decreases in the PHSI, which has increased in odd-numbered months and decreased in even-numbered months since last December, though it also fell in November.

The PHSI is considered an indicator of home sales (closings) reported by the NAR. Existing-home sales fell in June as the PHSI for April dropped. The index rose in March, and home sales increased in May.

Even with the monthly decline, the PHSI was up 10.9 percent over June 2012, the 26th straight month of year-over-year increases. New home sales have been up on a yearly basis for 21 straight months and in 24 of the last 25 months.

The index improved in June in only one of the four Census regions, increasing 3.3 percent in the West to 114.2 on the heels of a 16.8 percent spike in May. The index in the West is up 4.4 percent in the last year.

The index was flat at 87.2 in the Northeast, up 12.2 percent in the last 12 months. The index fell 2.1 percent to 118.3 in the South—up 9.5 percent since June 2012—and dropped 1.0 percent to 114.3 in the Midwest, 19.5 percent ahead of a year ago.

The PHSI 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.

Largest States, Metros Post Monthly Improvements in May

From April to May, home prices rose 1.3 percent, with Nevada leading month-over-month growth, according toLender Processing Services (LPS).

The improvement in May marks the third straight month prices have grown on a monthly basis in the 20 largest states tracked by LPS.

The data provider also reported a 7.9 percent year-over-year increase in May as prices for non-distressed properties stood at $266,000 for the month. Despite the gains, prices are still 16.3 percent below the June 2006 peak.

When calculating distressed sales, LPS data revealed short sales sold for a discount of 25 percent compared to non-distressed sales, while REOs were reduced by 26 percent. The discounts varied by state, with REOs in Nevada averaging a discount of 8 percent compared to 37 percent in New York.

Nevada showed the strongest gains with a 3 percent increase over the last month, followed by California (+1.8 percent), Arizona (+1.8 percent), North Dakota (+1.7 percent), and Washington D.C. (+1.7 percent).

LPS also found all 40 of the largest metro areas analyzed experienced monthly increases, with metro areas located West dominating May’s list for monthly growth.

Las Vegas came out ahead with the biggest monthly and yearly gains at 3.2 percent and 26.5 percent, respectively. San Francisco, Reno, and Sacramento took the next three spots, with each growing 2.5 percent over the last month.

LPS’ Home Price Index expanded its coverage by 25 percent and now includes nearly 1,900 counties and more than 18,500 ZIP codes.

Report: GSE Reform Won’t Take Shape for Another Few Years

Although policymakers have been busy introducing legislation to diminish the role of the GSEs, analysts at Moody’s Investors Service “believe GSE reform will not take place for at least a few more years.”

In June, Senators Bob Corker (R-Tennessee) and Mark Warner (D-Virginia) led efforts to introduce legislation to wind down Fannie Mae and Freddie Mac in five years.

The Senate bill proposes to replace the GSEs with a federal agency called the Federal Mortgage Insurance Corporation (FMIC) that would provide an explicit government guarantee on mortgage securities. Though, not all loans will receive the government guarantee, and companies that do must take at least a first loss position on 10 percent of the security to be eligible.

Then came the Protecting American Taxpayers and Homeowners Act (PATH) from the House of Representatives Financial Services Committee in July.

The act also aims to dissolve the GSEs in five years while creating a housing finance system that is supported by the private sector. The act passed the House Financial Services Committee last week.

Unlike the bill from Corker and Warner, PATH would not have a federal agency replace the GSEs, but instead create a non-government nonprofit called the National Mortgage Market Utility (NMMU). The utility would develop “best practices” for the origination, servicing, pooling and securitization of residential loans. The utility would not originate, service, or guarantee any MBS. The utility will also take over the single mortgage securitization platform that the GSEs and the FHFA are developing, Moody’s explained in its most recent ResiLandscape report.

Despite efforts from legislators, Moody’s does not foreseeGSE reform happening within the next few years, stating “catalysts for near-term reform are not very strong, especially now that the GSEs have returned to profitability.”

Moody’s analysts also noted broad political support for an alternative is lacking, while the GSEs’ mission to provide stability and affordability to the mortgage market does receive support.

“Furthermore, the alternative approaches have focused on re-shaping the $10 trillion residential mortgage market, which will be difficult given its size and importance to the US economy,” Moody’s stated.

 

Case-Shiller Indices Near Five-Year High

Home prices rose to their highest levels in almost five years in May, increasing by a non-seasonally adjusted 2.5 percent, according to the Case-Shiller Home Price Indicesreleased Tuesday.

The 20-city index was up 12.2 percent from a year earlier, and the companion 10-city index was up 11.8 percent. For the month, the 10-city index rose 2.5 percent and the 20-city index was up 2.4 percent. The two surveys have improved month-over-month and year-over-year for 12 consecutive months.

The 10-city index rose to its highest level since September 2008, and the 20-city index to its highest level since October 2008.

All 20 cities included in the survey improved both month-to-month and year-to-year.

The home values found in the Case-Shiller report continued to shrug off discounts in the sales of distressed properties. According to the National Association of Realtors (NAR), distressed properties—foreclosures and short sales—accounted for 18 percent of home sales transactions in May (11 percent foreclosures and seven percent short sales). Foreclosures, NAR said, sold for an average discount of 15 percent below market value, while short sales were discounted 12 percent.

The home values also improved despite higher mortgage rates, which could have both a positive and negative impact: Rising rates themselves might bring prices down as buyers look for affordable monthly payments, but they may also increase demand as buyers try to lock in rates before further increases. The increased demand against weak inventories would send prices up.

NAR reported the median price of an existing single-family home rose 5.9 percent in May, an annual gain of 12.6 percent. The monthly Case-Shiller Home Price Indices use the “repeat sales method” of index calculation, which includes data on properties that have sold at least twice in order to capture the appreciated value of each specific sales unit, according to the description of the index on the S&P website.

While good news for home sellers, the continued sharp increases—the indices have shown double-digit year-year increases for three months in a row—are likely to revive concerns of a growing housing bubble.

The Case Shiller indices have gone up for six straight months and 12 times in the last 14 months; each index dipped last October and November.

Overall, the 10-city index rose to 169.69—its highest level since September 2008, when it was 173.35—while the 20-city index improved to 156.14, the highest level since October 2008, when it was 158.09. The index values in fall 2008, though, were continuing to decline, while the indices reported Tuesday reflect a market on the rise.

Monthly increases were led by San Francisco, where prices rose 4.3 percent, marking the 15th straight month of price increases in that city. Prices rose more than 3 percent in May in four other cities: Chicago, up 3.7 percent; Atlanta, up 3.4 percent; and San Diego and Seattle, where prices rose 3.1 percent.

Prices have improved for 20 straight months in Phoenix, 15 straight months in Los Angeles, and 14 straight months in Las Vegas.

Year-over-year the price gains were led by San Francisco, where prices rose 24.5 percent since May 2012, followed by Las Vegas (up 23.2 percent), Phoenix (up 20.6 percent), and Atlanta (up 20.1 percent). Eight other cities—Detroit, Los Angeles, Miami, Minneapolis, Portland, San Diego, Seattle and Tampa—recorded double-digit year-year price gains.

Despite the May improvement, the 10-city index was down 25.0 percent from its June 2006 high of 226.29, and the 20-city index was off 24.4 percent from its July 2006 peak of 206.52.

Survey Reveals ‘Aggressive’ Tactics Worried Buyers Are Willing to Use

Low inventory coupled with rising mortgage rates and home prices are leading prospective buyers to consider using “aggressive” tactics such as overbidding to obtain a home, according to recent survey from Trulia.

In order to secure the desired home, 25 percent of prospective buyers in the survey said they were willing to bid 1 to 5 percent above the seller’s asking prices.

“Although buying a home is still much cheaper than renting, it’s a stressful time to be a homebuyer,” said Jed Kolko, Trulia’s chief economist. “Consumers are worried that mortgage rates and prices will keep rising before they buy, and many are willing to fight over the limited number of homes for sale”

When it came to overbidding, younger buyers (aged 18 to 34) are more likely to use the strategy.

According to Kolko, Millennials are “more willing than their parents’ generation to outbid, borrow, or make a personal plea to get the house they want.”

For example, another 9 percent of respondents said they were willing to bid 6 to 10 percent over the asking prices, while 12 percent of younger respondents said the same.

Just 4 percent said they were willing to go 10 percent above the asking prices, while 7 percent of younger respondents were willing to go to that length.

Twenty-five percent of respondents also said they were willing to pay for the seller’s closing costs to get the home they want, though for Millennials, the share was 30 percent.

Additionally, the survey showed 17 percent of buyers would write a personal letter to the seller, while 23 percent of Millennials said the same.

The survey, conducted by Harris Interactive, also examined top worries and found rising mortgage rates weighed on the minds of 41 percent of potential buyers.

Another 37 percent cited rising home prices as the top concern, while 36 percent said they were worried about not finding a home for sale they would like.

Other worries in the top five were concerns of not qualifying for a mortgage (30 percent) and competing with many other buyers (27 percent).

Eight in 10 Americans Say Owning Is a Good Financial Decision

Americans hold a more positive view of the housing market, while an increasing share of renters plan to own, according to the 2013 National Housing Pulse Surveyfrom the National Association of Realtors (NAR).

Of those surveyed, 80 percent said they believe buying a home is a good financial decision, up by 8 points from 2011.

Over the last two years, the market has also seen an increase in renters who are interested in owning.

In the recent survey, 36 percent of renters said they are thinking about buying, up from 25 percent in 2011, while 51 percent of renters also said that owning in the future is one of their highest personal priorities. Overall, 79 percent of renters said owning is a priority in general.

Meanwhile, the percentage of those who say they prefer to rent over buying dropped 6 points since 2011 to 25 percent.

Americans also perceive their market as being stronger, with 38 percent stating they believe activity in their local market has increased in the past year, up sharply from 11 percent in 2011.
Another 49 percent believe prices in their neighborhood are more expensive than they were a year ago.

This view was especially strong in the West, with 62 percent of respondent in the Pacific West stating this and 60 percent in the Mountain West region.

Not only are attitudes toward housing improving, but Americans are also less concerned when it comes to job security.

The share of respondents who expressed concern over job layoffs and unemployment decreased from 61 percent in 2011 to 48 percent in the most recent survey.

Concern over home foreclosures eased as well. In 2013, 29 percent said foreclosures are a “very” or “fairly” big problem, down from 47 percent in 2011.

However, Americans did express concern over the direction of nation, with 58 percent stating the country is on the wrong track, barely changed from 57 percent two years ago. According to the survey, the numbers were influenced by partisanship, with 84 percent of Republicans holding the view compared to 36 percent of Democrats.

Nearly two thirds (64 percent) of respondents also shared concerns over the high prices for homes and rent, little changed from 62 percent in 2011.

Also, 69 percent said they are concerned about people in their area falling behind on their
mortgages.

Despite the increase in prices the housing market has recently witnessed, respondents were completely invulnerable.

More than half (58 percent) of said they are very or somewhat concerned about the drop in overall home values, though the concern has decreased from 70 percent in 2011.
Also, 44 percent of homeowners said they do not think they could sell their house for what they paid for it.

The survey was conducted by American Strategies and Myers Research & Strategic Services.

GMAC to Pay $230M in Foreclosure Settlement Deal

The Federal Reserve Board announced Friday a settlement with GMAC Mortgage that will end the complex and costly foreclosure reviews required through prior enforcement actions.

GMAC will pay about $230 million in cash payments to mortgage borrowers as part of the foreclosure deal.

GMAC joins 13 other servicers who reached their own settlements with the Fed and Office of the Comptroller of the Currency (OCC) in January 2013.

According to a statement from the Fed, over 232,000GMAC borrowers whose homes were in any stage of foreclosure in 2009 and 2010 will receive payment relief.

The deals with the servicers stem from enforcement actions issued by federal regulators over “deficient” servicing and foreclosure processing practices.

The addition of GMAC brings the total number of borrowers receiving cash compensation to 4.4 million borrowers, and raises the total amount of cash compensation to $3.8 billion, the Fed stated.

According to the latest update, more than 3.9 million checks valued at more than $3.4 billion have been sent to eligible borrowers, and about 2.9 million of those checks have been cashed or deposited as of July 11.

The Fed advised borrowers to call the Rust Consulting, the paying agent, at 1-888-952-9105 to have their questions answered or to update contact information if they expect to receive a check.