May 10, 2013 | Housing Analysis
RealtyTrac recently reported that national foreclosure filings are down while foreclosure filings are seeing marked increases in some states.
There are two systems for foreclosing residential real estate in the United States; judicial and non-judicial foreclosure. The states individually decide which foreclosure process will be followed in their state.
Click Here To Download An Overview Of The Foreclosure Process
Judicial foreclosure requires action by the courts because the mortgage is not written including a “power of sale clause”. Judicial foreclosure proceedings generally take longer than non-judicial processes due to this court involvement.
A log-jam of delayed judicial foreclosures are beginning to move through backlogged courts with the result of higher numbers of foreclosures started, foreclosure auctions scheduled, and properties either sold to third parties at foreclosure auctions or repossessed by mortgage lenders.
In states allowing non-judicial foreclosure, the matter may be handled outside of the judicial system as the mortgage is written with the power of sale clause which allows the lender to take control of the mortgaged property to satisfy the outstanding lien.
Here are highlights of April’s foreclosure report:
Nationally, 144,790 foreclosure filings were made in April, a decrease of 5 percent compared to March and representing an annual decrease of 23 percent year-over-year.
Overall, April’s residential foreclosure activity was at its lowest since February 2007. About one of every 905 U.S. housing units had a foreclosure filing during April.
Due to the aforementioned backlog of judicial foreclosures, scheduled foreclosure auctions hit a 30-month high in April rising by 22 percent between March and April. (more…)
May 8, 2013 | Housing Analysis
The Bureau of Labor Statistics released its monthly Non-farm Payrolls and National Unemployment Rate for April last Friday. These two reports are collectively called the Jobs Report.
165,000 jobs were added in April, while the unemployment rate dropped from 7.60 percent in March to 7.50 percent in April. 673,000 jobs have been added since January. Jobs were added in employment sectors including business and professional, health care and eating and drinking establishments.
The main impact of the jobs report on home sales and mortgage lending is the ability of would-be home buyers to qualify for mortgage loans.
Long term unemployment and under-employment has worked against consumers wanting to buy homes when interest rates and home prices hit significant lows.
Falling Long Term Unemployment Numbers Help New Home Buyers Buy Homes
Long-term unemployment (workers unemployed for 27 weeks or more) fell by 258,000 workers to 4.4 million in April. The share of long term workers among all unemployed fell by 2.2 percent to 37.4 percent of unemployed workers.
Since January, the number of long-term unemployed has decreased by 687,000 workers and 3.1 percent. Gaining employment is a plus for the economy and for households facing financial stress due to unemployment.
Another significant data set in terms of U.S. jobs measures workers who are working part-time, but who want to work full time. This sector increased by 278,000 in April to 7.9 million.
February and March 2013 Non-farm Payrolls numbers were revised upward. In February, jobs added were changed from 268,000 to 332,000. In March, jobs added were revised from 88,000 to 138,000. This adjusts the number of jobs added for February to March by an additional 114,000 new jobs.
Federal Reserve Bond Purchase Point To Continued Low Mortgage Rates
The Federal Reserve is continuing its program of quantitative easing (QE) by buying $85 billion in bonds and mortgage backed securities (MBS) monthly.
Reducing or eliminating QE would lessen the demand for bonds and MBS; when bond and MBS prices fall, mortgage rates usually rise. Lower mortgage rates can help offset rising home prices and allow more consumers to buy homes.
While home prices are gradually increasing, mortgage rates are still low. This helps moderate-income home buyers with affordability, but these conditions won’t last indefinitely.
In some regions, such as the West, available homes and land are in short supply, which is driving up home prices. This trend is helping home owners, and potentially home sellers, gain higher sales prices for their real estate. Overall, increasing the number of jobs is positive for the economy.
Contact your trusted mortgage lender for a personalized mortgage interest rate quote and to learn more about affordable home loan options.
May 6, 2013 | Mortgage Rates
Mortgage rates fell last week and approached or reached record low levels.
According to Freddie Mac, the average rate for a 30-year fixed rate mortgage (FRM) fell from 3.40 percent to 3.35 percent. Average rates for a 15-year FRM moved from 2.61percent to 2.56 percent.
Average rates for a 5/1 adjustable rate mortgage (ARM) fell to 2.56 from last week’s average of 2.58 percent Discount points for last week’s mortgage rates ranged from 0.7percent for 30 and 15 year FRM loans to 0.5 percent for a 5/1 ARM.
Rock-bottom mortgage rates can offset the impact of rising home prices.
Last Week Was A Strong Showing For The US Economy
Last week’s economic news provided further indications of economic recovery, with housing related reports contributing to overall confidence in a stronger economy.
Highlights of last week’s news include:
Monday: Pending home sales moved up to 1.50 percent in March from February’s -1.07 percent. This reading also surpassed Wall Street’s forecast of 0.90 percent for March.
Tuesday: The Case-Shiller Home Price Index for February reported that the national average home price had increased by 9.3 percent year-over-year between February 2012 and February 2013. By comparison, the average national home price between January 2012 and January 2013 increased by 8.1 percent year-over-year. Rising home prices are contributing to the economic recovery, but in some areas demand for homes exceeds supply, which also contributes to rising home prices.
Wednesday: The Federal Open Market Committee (FOMC) issued its scheduled statement after its meeting concluded. Committee members noted signs of an improving economy, and cited housing markets as a leading contributor to the recovery. The FOMC statement also indicated that economic conditions were not sufficiently improved for the FOMC to change or cease the Federal Reserve’s quantitative easing policy. The Fed’s goal for its current quantitative easing program is keeping long-term interest rates including mortgage rates low.
Thursday: The weekly Jobless Claims Report brought better-than-expected news with new jobless claims coming in at 324,000, less than the expected reading of 345,000 new jobless claims and also higher than the previous report’s reading of 342,000 new jobless claims.
Friday: The Bureau of Labor Statistics issued its monthly “Jobs Report,” which consists of the Non-farm Payrolls Report and the national Unemployment Rate. Again new jobs added exceeded expectations for April with 165,000 jobs added against expectations of 135,000 new jobs added. April’s reading also surpassed the March reading of 138,000 new jobs.
The unemployment rate dropped to 7.5 percent as compared to a consensus of 7.6 percent and last month’s reading of 7.6 percent. To put this reading in perspective, the FOMC has targeted an unemployment rate of 6.5 percent as a benchmark for adjusting its current policies including quantitative easing.
What To Look For This Week
This week’s economic events include latest Jobless Claims report on Thursday. It will be interesting to see if this week’s reading will be lower than last week’s reading of 324,000 new jobless claims.
On Friday, the Federal Budget will be released; this could influence financial markets depending on what programs and services are cut or reduced.
May 2, 2013 | Federal Reserve
Wednesday’s Federal Open Market Committee (FOMC) statement indicates the Federal Reserve’s commitment to keeping long term interest rates and inflation under control.
The Fed will continue monitoring inflation, but does not expect inflation to rise more than 0.50 percent above its target rate of 2.00 percent over the next one to two years.
Ongoing monitoring of inflation and unemployment, as well as developing economic news, will guide the Fed in its future determinations concerning policy for its present iteration of quantitative easing (QE3).
Currently, the Fed purchases $85 billion of treasury securities and mortgage –backed securities each month with the goal of keeping long-term interest rates lower.
This includes mortgage rates, which can assist homebuyers with qualifying for mortgage loans in an environment of increasing home prices. Other goals include stabilizing the labor market, and limiting inflation.
Job Growth To Be Determining Factor On Fed Interest Rate Action
The statement also noted that the Fed will keep its interest rates between 0.00 and 0.25 percent, until the Fed sees the national unemployment rate fall below 6.50 percent.
While noting that the housing sector is improving, the Fed stated concerns about ongoing high unemployment rates. Jobs are a key aspect to supporting the economy, as 70 percent of the U.S. economy involves the purchase of goods and services by consumers.
The Fed also repeated its position to evaluate the efficacy of its quantitative easing program; if the agency finds that the program is not achieving their desired objectives, changes to the program can be expected.
While a clear majority of FOMC members voted to keep current policies intact, one member voted against this course of action citing the potential for continued quantitative easing at current levels to fuel inflation.
The bottom line for today’s statement is that the Fed continues its “wait and see” position concerning quantitative easing and low federal interest rates.The committee also re-asserted its intention to gradually reduce quantitative easing when it’s time for a change.
In addition, the Fed is committed to monitoring a wide range of economic data with an eye toward adjusting its policies in the best interest of economic recovery.
May 1, 2013 | Housing Analysis
Housing markets continue to improve according to the S&P Case Shiller Home Price Indices released April 30 for February’s data.
The Indices consist of a 10-City Composite Index and a 20-City Composite Index with housing markets for each city reported based on a three-month rolling average of home prices.
Case Shiller Posts Highest Growth Rates Since 2006
The data released yesterday comprised the Indices’ highest growth rates since May 2006.
For the 12 months between February 2012 and February 2013, the 10-City Composite Index reports that average home prices posted a gain of 8.6 percent and average home prices for the 20-City Composite Index grew by 9.3 percent on a non-seasonally adjusted basis.
All 20 cities posted a year-over-year gain for at least two consecutive months.
The 10-City Composite Index grew by 0.4 percent between January and February, while the 20-City Composite Index grew by 0.3 percent for the same time period.
16 of the 20 cities reported rising annual growth rates for home sales between January and February 2013, while four cities including Detroit, Miami, Minneapolis and Phoenix saw decreases between -0.1 and -0.4 percent in annual home prices between January and February 2013 readings.
Longer-term readings provide a more positive light, as with the example for Phoenix, Arizona.
The month-to-month reading of annual home prices indicated a decrease, but the reading for Phoenix year over year indicates a + 23.0 percent increase in average home prices.
Ten Metro Areas Gain Double Digits Over Past Year
10 cities posted double-digit year-over-year growth rates; they include Atlanta, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, Phoenix, San Diego, San Francisco and Tampa.
San Diego and Tampa have joined the double-digit cities in February with average home prices increasing for each city of just over 10 percent.
Phoenix, San Francisco, Las Vegas and Atlanta posted the highest year-over-year gains in average home prices.
Three older cities, New York, Boston and Chicago posted the lowest year-over-year rates in average home price readings.
Atlanta and Dallas achieved the highest annual growth rates since the inception of the 10-City Composite (1991) and the 20-City Composite (2001).
Improving Housing Markets Seen As Beacon Of Economic Recovery
Improving housing markets are considered a leading indicator of overall economic recovery as home ownership typically increases wealth and leads to more spending.
Economists note that while current news for housing markets is good, average home prices remain at 2003 levels, which can be very good for new home buyers.
Shortages of available homes in some areas and news that apartment construction is increasing can impact availability and ultimately, the sale of single-family homes.
