Monthly Archives: June 2014

Existing Home Sales Rise Strongly in May

4.9% Gain Shows Buyers Are Adjusting to Modestly Higher Interest Rates


WASHINGTON—Sales of previously-owned homes rose strongly in May but remain shy of last year’s pace, a sign the housing market has tentatively regained its footing this spring.

Sales of existing homes increased 4.9% the past month to a seasonally adjusted annual rate of 4.89 million homes, the National Association of Realtors said Monday. The pace was the highest since October, the last month annualized sales topped the five-million mark.

Coupled with an improvement in April, the May figure points to a housing market that has bounced back from a dismal winter and shows buyers are adjusting to modestly higher interest rates compared with the spring of 2013.

Still, May sales were down 5% from the year-earlier level and the recent rebound could be slowed if interest rates on mortgage loans begin to increase, as many economist project. Because of the sluggish start to 2014, the Realtors group expects a 3% reduction in sales this year compared with 2013’s total of 5.09 million.

“It would be risky to assume this gain marks the start of a sustainable rebound,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. The recent sales gains are largely “a reversal of the winter hit,” and other reports do “not support the idea that demand is recovering,” he said.

After a strong start last year, the pace of home sales began to ease in August before perking up this spring.

The roller coaster coincides with interest rates that jumped a percentage point in the spring of 2013 but have moderated recently, touching a six-month low in May. The average interest rate on a 30-year fixed-rate mortgage stood at 4.17% last week, according to Freddie Mac 

Lower mortgage rates make home purchases more affordable for borrowers. But Realtors economist Lawrence Yun said he expects rates to start moving back up soon, reaching 5% by the first quarter of 2015.

Rates have edged lower this year even as the Federal Reserve scaled back its bond-buying program designed to push down long-term interest rates. That program is expected to end later this year, and then the Fed will contemplate increasing short-term rates from near zero.

A rate increase, which most Fed officials say will happen next year, likely would put upward pressure on mortgage rates.

Monday’s report showed the median sale price for a home in May was up 5.1% from a year earlier to $213,400. That was the slowest annual gain since March 2012.

The inventory of homes available for sale rose 6% from a year earlier. At the current pace, it would take 5.6 months to exhaust the supply, just below a typical level. The increased inventory drove May’s strong sales pace, said IHS Global Insight U.S. economist Stephanie Karol.

A larger inventory of homes could set up a virtuous cycle where the better selection draws buyers to the market, which sustains price gains, which then entice additional sellers to list. One weak link in that chain, however, could be first-time buyers. The share of first-time buyers fell in May even as sales rose.

“The market can only retain its strength for so long if move-up buyers cannot find a first-time buyer to purchase their starter homes,” Ms. Karol said.

Source: Eric Morath / The Wall Street Journal / June 23,  2014
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California May Home Sales

An estimated 37,734 new and resale houses and condos sold statewide in May. That was down 0.7 percent from 37,988 in April, and down 14.4 percent from 44,087 sales in May 2013, according to San Diego-based DataQuick.

May sales have varied from a low of 32,223 in 1995 to a high of 67,958 in 2004. Last month’s sales were 18.3 percent below the average of 46,214 sales for all the months of May since 1988, when DataQuick’s statistics begin. California sales haven’t been above average for any particular month in more than eight years.

The median price paid for a home in California last month was $386,000, up 0.8 percent from $383,000 in April and up 13.5 percent from $340,000 in May 2013. Last month’s median was the highest since December 2007, when it was $402,000. This May marked the 27th consecutive month in which the state’s median sale price has risen year-over-year.

In March/April/May 2007 the median peaked at $484,000. The post-peak trough was $221,000 in April 2009.

Of the existing homes sold last month, 6.0 percent were properties that had been foreclosed on during the past year. That was down from a revised 6.6 percent in April and down from 11.3 percent a year earlier. Foreclosure resales peaked at 58.8 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 6.9 percent of the homes that resold last month. That was up from an estimated 6.3 percent the month before and down from 15.0 percent a year earlier.

The typical monthly mortgage payment that California buyers committed themselves to paying last month was $1,508, down from $1,523 the month before and up from $1,227 a year earlier. Adjusted for inflation, last month’s payment was 35.8 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 47.9 percent below the current cycle’s peak in June 2006. It was 61.1 percent above the January 2012 bottom of the current cycle.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick was acquired in March by Irvine-based property information company CoreLogic.

Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and peak levels reached in the last six years. Financing with multiple mortgages is low, while down payment sizes are stable, DataQuick reported.

Link to article.


Bottom falls out as mortgage applications plunge 9.2%

Steep drop reverses last week’s gains, revives downward momentum

A week after unexpectedly jumping 10.3% last week, mortgage applications returned to their declining trend despite near year-low interest rates.

Applications dropped 9.2% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending June 13, 2014.

The Market Composite Index, a measure of mortgage loan application volume, decreased 9.2% on a seasonally adjusted basis from one week earlier.

The Refinance Index decreased 13% from the previous week.  The seasonally adjusted Purchase Index decreased 5% from one week earlier.

“Interest rates increased relative to the previous week, as incoming economic data continues to suggest a pickup in the pace of growth,” said Mike Fratantoni, MBA’s Chief Economist.  “Although the average rate for the week was up only a few basis points, the increase was matched by a large drop in refinance volume, and purchase application volume also declined.  Some lenders continue to report that they have pre-approved borrowers who have been unable to find a property given the tight inventory in certain markets.”

The refinance share of mortgage activity decreased to 52% of total applications from 54% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 8% of total applications.

“While the recent uptick in rates may have a little to do with a drop in mortgage application volume, purchase activity in many areas nationwide continues to suffer from a lack of inventory and confidence,” Quicken Loans vice president Bill Banfield said. “Many consumers are very content with keeping their homes off the market, especially during the summer.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.36% from 4.34%, with points increasing to 0.24 from  0.16 (including the origination fee) for 80% loan-to-value ratio loans.  The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.32% from 4.27%, with points decreasing to 0.09 from 0.12 (including the origination fee) for 80% LTV loans.  The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.07% from 4.06%, with points decreasing to -0.39 from -0.03 (including the origination fee) for 80% LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.50% from 3.43%, with points decreasing to 0.16 from 0.22 (including the origination fee) for 80% LTV loans.  The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs increased to 3.20% from 3.18%, with points decreasing to 0.27 from 0.35 (including the origination fee) for 80% LTV loans.  The effective rate remained unchanged from last week.

Source: Trey Garrison / / June 18, 2014
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Foreclosures continued decline in May

Foreclosures and default notices in San Diego County continued their downward trend in May, as rising home prices continued to give people enough equity to get out of bad loans.

Last month, banks foreclosed on 141 properties in San Diego County, real-estate tracker DataQuick reported Tuesday. That was down from 162 last month and 175 in May 2013. Foreclosures are well below the peak of 2,004 properties repossessed in July 2008, the middle of the Great Recession.

Default notices, which banks file to trigger the foreclosure process, fell to 419 in May, down from 462 in April. In May 2013, lenders filed 642 default notices, which peaked at 3,832 in March 2009.

DataQuick analyst Andrew LePage noted that for the first five months of the year, foreclosures are at an eight year low and default notices are at a nine-year low.

“This is a continuation of the mop up stage of the foreclosure crisis,” he said. “That’s not to say a single month or quarter couldn’t shoot up a bit, because we’re at low enough numbers now where just a handful of lenders changing their policies on processing distressed loans could move those numbers up significantly.”

Borrowers who were previously unable to pay their loans have benefited from large appreciation in the last year, as well as economic growth and a falling unemployment rate, LePage said.

In May, the median home sale price in the county was $440,000, a seven-year high, according to DataQuick. While appreciation has slowed since 20-plus percent annual gains in 2013, it still gives many who can’t pay their mortgages the opportunity to sell their house or refinance to avoid a foreclosure.

“They’re going to do everything possible to keep the home and avoid foreclosure if they have reason to believe prices are rising,” LePage said. “It wasnt so long ago people weren’t sure whether there was hope or not.”

Source: Jonathan Horn / SD Union Tribune / June 17, 2014
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Mortgage default rates continue to trend down

Default rates hit lowest level since May 2006

Mortgage default rates witnessed the biggest decline in May when compared to bank cards and auto loans, with the first mortgage default rate continuing its downward trend from 1.30% in October 2013 to .92% in May 2014.

However, David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices, cautioned, “Although historically low default rates are welcome, some home buyers may have difficulty qualifying for mortgages. Last year saw a surge in home prices but we are seeing signs of slowing gains this year. One question is whether banks are willing to make mortgage loans as home prices rise faster than incomes.”

According to the S&P/Experian Consumer Credit Default Indices, Consumer credit decreased to the lowest default rate since May 2006, falling to 1.01 from 1.11 in April and 1.42 in May 2013.

“Consumer credit default rates decreased for their seventh consecutive month,” Blitzer said. “The national composite is now only one basis point above its historic low.”

At the metropolitan level, New York was the only city to see its default rate increase but it showed the largest drop-off from one year ago, increasing to 1.23 from 1.19 in April, but significantly down from 2.04 in May 2013.

Meanwhile, Dallas recorded a new historic low of 0.77% while Chicago, Los Angeles and Miami are at their lowest default rates since the start of the last recession, Blitzer explained.

“Miami continues to maintain the highest default rate of 1.74% while Dallas maintains the lowest rate of 0.77%,” Blitzer said. “All five cities – Chicago, Dallas, Los Angeles, Miami and New York – remain below default rates seen a year ago.”

Source: Brenda Swanson / / June 17, 2014
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May Inventory Up; Home Sales Down

The housing market took an unexpected dip in May, with home sales dropping year-over-year despite a surge in new listings.

A report published by Redfin’s Research Center indicated that home inventory was up 9.1 percent in May. That number represents the highest number of new listings to come onto the market in the last four years. The biggest increases in new listings were in Ventura, West Palm Beach, and Baltimore.

At the same time, the actual number of homes sold dropped 10 percent. The drop in actual sales surprised analysts, who had been predicting a flood of new home purchases once inventory was in greater supply.

The drop in actual sales creates questions about whether potential buyers are as interested in getting into the market as they were once perceived.

“Housing is at an inflection point, where traditional buyers are needed to fill the gap in demand left by waning investors who dominated the market last year,” said Redfin chief economist Nela Richardson. “Low wage growth has stunted demand in some metros; others have been plagued by persistently low inventory. Metros that are reversing these trends, with rebounding job growth and inventory increases, will see the resurgence of traditional buyers necessary for stable housing markets.”

The report notes that real estate agents are seeing the balance of power shifting back in the buyers’ direction as higher inventory gives them more choices and more negotiating power.

“The past two years have been extremely challenging for buyers,” remarked Los Angeles-based agent John Venti. “For example, last spring it wasn’t uncommon for homes to have upwards of 20 to 30 offers. This year, I’ve seen the market shift in buyers’ favor; they are now having a much easier time finding homes and getting their offers accepted.

“Demand is still high, but the inventory crunch is easing as more listings hit the market,” he finished.

Source: Derek Templeton / / June 16, 2014
Link to article.

Homebuilder confidence perks up in June

Home builders have a sunnier disposition these days, though they’re not quite fully confident in the housing market just yet.

A key index of confidence in the housing construction industry climbed four points in June as builders said they expect to see more sales now and over the next six months.

That’s according to the National Assn. of Home Builders, which surveys its members on their market outlook each month. Their Housing Market Index measured at 49 in June, up four points from May and one point shy of the threshold of 50 considered to be “good” building conditions.

“After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “However, builders are facing strong headwinds, including the limited availability of labor.”

The index had been above 50 for much of last year, then tumbled in February as the spring housing market softened. Climbing back to 49 is a good sign, said NAHB chief economist David Crowe, but it’s clear that worries about the broader economy remain.

“Consumers are still hesitant and are waiting for clear signals of full-fledged economic recovery before making a home purchase,” said Crowe. “Builders are reacting accordingly.”

Home builder confidence is important for a housing market that’s still wrestling with tight inventory, which is driving up prices. It’s also important for the job market in California. About one in eight jobs created in the state since the start of 2013 have been in construction, according to a report last week by UCLA’s Anderson Forecast, and any pullback in the sector could weaken job growth here.

Builders were most optimistic on the longer-term outlook, with confidence for sales over the next six months measuring at 59. Their current sales index climbed six points to 54. Traffic of prospective buyers climbed three points but remained relatively low at 36.

Source: Tim Logan / LA Times / June 16, 2014
Link to article.

How to win a bidding war on a home

In many hot housing markets, bidding wars have been breaking out on a regular basis — and some house hunters are getting beaten out time and again.

But it’s not always about who has the most money. Sellers will accept lower offers if it means less hassle.

“What sellers really don’t want to do is waste time,” said John Walsh, president of Connecticut-based lender, Total Mortgage.

That means getting pre-approved for a mortgage and having all your paperwork — your pre-approval, proof of income, work history and bank statements — in hand. It also helps to have your lender at the ready so you can act fast.

But first you have to beat out all of those other bidders.

Here’s how you can win over a seller and get the house you want:

Pay with cash. The best way to get a seller’s attention is with cold hard cash. That is, if you can afford it.

In fact, all-cash sales have become extremely common, representing more than 40% of recent sales.

Ever since the housing meltdown, getting a mortgage has become a longer and more arduous process. Securing a loan can take weeks– and there is always the chance it will fall through.

With all-cash offers, sellers are sure the buyer is qualified, said Walsh. And they won’t have to wait through a long, drawn-out loan approval process.

Depending on the market and the seller’s situation, they may even accept a lower offer just because it’s in all cash.

Get your mortgage ready in advance. Don’t have a ton of cash to put on the table? Try pre-underwriting a mortgage instead.

With pre-underwriting, lenders take the pre-approval process a step further by reviewing all of the income and asset documentation that they would typically need to approve a mortgage.

Housing market newbies beware

Sellers look favorably on pre-underwritten offers because they don’t have to worry that the buyer’s mortgage application will be rejected. All that needs to be done after the contract is signed is to complete an appraisal.

Some lenders even offer a guarantee that if they can’t complete the transaction because they made a mistake or if lending rules have changed, they will refund the buyer’s deposit.

Be flexible (but not foolish) with contingencies. Contingencies are clauses that allow buyers to back out of deals if specified conditions are not met. A bidder will sign a contract to buy a home contingent on the appraisal coming in at or over the selling price, for example.

Another common contingency clause is the right to back out if you can’t find a buyer for your home. In hot markets, buyers often waive this right because they figure it should be easy to sell their old home quickly. In less heated markets, you could get stuck paying two mortgages.

One contingency you should think twice about before waiving is the home inspection. Should the inspector discover a major problem, such as widespread termite damage or a badly cracked foundation, it could cost far too much to fix. You want to know that before making a commitment you can’t back out of, said Nicholas.

Be first. See the home as soon as it comes on the market. That way, you can get your bid in early and preempt later offers.

Real estate website, Zillow, has a new service that can help. Its “coming soon,” tool enables real estate agents to signal that they’re about to put a home up for sale. Homebuyers can find these potential properties by neighborhood or city.

Agree to outbid everyone. Do you really want the place? You can outmatch every other bidder by creating a contract with a so-called “escalation clause.”

The clause basically states that you will pay $1,000 or $10,000 more than whatever the highest bidder offers.

So if the seller gets an offer for $200,000, your bid will automatically jump to $201,000 if you have an escalation clause.

The danger with escalation clauses is twofold. “You never really know if the other offer is real,” said Wei Min Tan, an agent with Rutenberg Realty in New York. “Sellers can ask someone to submit an offer just to get the buyer to raise their bid.”

The second problem is that the final home price may be a lot higher than the appraised value of the home. That could jeopardize the mortgage or force you to come up with a lot of cash to make up for the shortfall.

One way to prevent that from happening is to place a cap on the bid, offering to pay no more than 10% or 20% above the original asking price.

Using a cap means, however, that you may not end up with the home in the end.

Source: Les Christie, CNN Money, June 13, 2014
Link to article.