Blog

Black Knight – “First Look” at March 2016

Black Knight – “First Look” at March 2016    

 

The Data and Analytics division of Black Knight Financial Services (NYSE: BKFS) reports the following “first look” at March 2016 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.

–  National delinquency rate fell 8% in March; at 4.08%, it is at its lowest point since March 2007

–  At just under 2%, the rate of 30-day delinquencies is at lowest level in over 15 years

–  Spurred by declining interest rates, prepayment speeds (historically a good indicator of refinance activity) were up 46% from one month ago

–  Foreclosure starts were down 14% from February; still driven primarily by repeat foreclosure activity

 

US jobless claims fall to 4-decade low

A proxy for layoffs across the US pointed to one of the healthiest labor markets in decades, as the number of US workers who applied for new unemployment benefits declined to the lowest level since the early 1970s.  Initial jobless claims fell by 6,000 to a seasonally adjusted 247,000 in the week ended April 16, the Labor Department said Thursday. That was the lowest level for jobless claims since the week of Nov. 24, 1973.  That also marked the 59th straight week that initial jobless claims remained below 300,000, the longest such streak in more than four decades.  Recent claims data are “astonishingly low,” said Timothy Hopper, chief economist at TIAA Global Asset Management. “The fact that the numbers continue to ratchet down suggests that labor demand is strong and a sign the labor market should continue to improve.”  Yet while the numbers point to a stable labor market, they don’t foretell an economic acceleration. In fact, last time jobless claims were this low, an oil-shock recession had just begun.  The direction of the layoff proxy is a key difference between the latest readings and those in 1973. Jobless claims entered 2016 near these historic lows but have fallen slightly. In contrast, by November 1973, when the National Bureau of Economic Research pegs the start of a recession that stretched into the early part of 1975, jobless claims had been modestly climbing for nine months.

 

 

Federal Reserve officials will likely consider the relative health of the labor market at next week’s policy meeting. But recently, central bankers have indicated they are concerned about weakness in the global economy and are watching inflation readings and wage gains closely. A large majority of economists surveyed by The Wall Street Journal expect the Fed to hold its benchmark interest rate steady at the meeting.  A low level of layoffs typically coincides with solid hiring. Employers added 215,000 jobs in March, a healthy increase. The unemployment rate ticked up to 5%, but the increase in part reflected more workers entering the labor force.  Jobless claims have trended near the four-decade low much of this spring. But that comes with a caveat. The Easter holiday, which moves on the calendar each year, can distort seasonal adjustments to the data during March and April. The four-week moving average, which smooths out volatility, fell by 4,500 last week to 260,500. That level has stayed fairly consistent since early March.  Still, there was one other historical point of strength in the latest reading. A measure of the number of people on unemployment rolls, which are reported with a one-week lag, fell by 39,000 in the week ended April 9 to the lowest level recorded since 2000.

 

 

NAHB – remodeling market index dips in first quarter of 2016

 

The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 54 in the first quarter of 2016, dipping four points below the previous quarter but remaining in positive territory above 50.  An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.  “Remodelers were solidly booked for jobs in the first quarter of 2016 but calls and appointments for work slowed down in comparison to the end of 2015,” said 2016 NAHB Remodelers Chair Tim Shigley, CAPS, CGP, GMB, GMR, a remodeler from Wichita, Kan. “Volatility in the financial markets during the first quarter may have impacted consumers’ readiness to commit to projects.”  The RMI’s current market conditions index stands at 55, decreasing by a single point from the previous quarter. Among its components, major additions and alterations continued gains from the previous quarter, rising to 55 from 54. The smaller remodeling projects component decreased two points to 54, and the home maintenance and repair component of the RMI decreased two points to 56.  At 53, the RMI’s future market conditions index decreased six points from the previous quarter. Among its four components, calls for bids decreased to 51 from 58, the amount of work committed fell to 52 from 57 and appointments for proposals dropped to 52 from 60. Meanwhile, the backlog of remodeling jobs decreased only three points to 58 from the previous quarter’s reading and high-water mark of 61.

 

SunEdison files for bankruptcy protection

 

SunEdison, once the fastest-growing US renewable energy company, filed for Chapter 11 bankruptcy protection on Thursday as years of debt-fueled acquisitions proved unsustainable.  In its bankruptcy filing, the company said it had assets of $20.7 billion and liabilities of $16.1 billion as of Sept. 30.  The company said its two publicly traded subsidiaries, TerraForm Power and TerraForm Global, were not part of the bankruptcy.  The company said it secured up to $300 million in new financing from its first-lien and second-lien lenders, which is subject to court approval. The money will be used to support SunEdison’s operations during its bankruptcy, such as paying wages and vendors, and proceeding with ongoing projects.  “Our decision to initiate a court-supervised restructuring was a difficult but important step to address our immediate liquidity issues,” said Ahmad Chatila, SunEdison chief executive officer.  He said the company planned to use Chapter 11 to reduce debt, shed non-core operations and take steps to get the most value out of its technology and intellectual property.

 

Zillow – Q1 2016 market report: tight inventory, rapid price growth represent real headwinds for the market’s core

–  There are 5.9% fewer homes for sale in the US than there were a year ago.

–  There are 10.4% fewer entry-level homes for sale in the US than there were a year ago.

–  Low supply is driving up home prices among entry-level homes, which are often sought after by first-time buyers.

 

Faced with rapidly appreciating home values and a dwindling inventory of homes for sale in the critical entry-level and mid-market home segments, first-time and move-up home buyers – typically the housing market’s bread-and-butter – are likely in store for a tough spring home shopping season.  Nationwide, median home values rose 4.8% year-over-year in March and 1.1% over the course of the first quarter, to a Zillow Home Value Index of $186,200, according to the first quarter Zillow Real Estate Market Report. And while overall US home values continue to grow at a modest (though slowly accelerating) clip, home values are rising the fastest among entry-level and mid-market homes in a large majority of the nation’s biggest housing markets.  A number of factors are driving this growth, and many are positive, including strengthening household formation, continued growth in jobs and wages, and general confidence and optimism in the overall value of homeownership, especially among younger generations. But the likeliest contributor to this rapid growth in the bottom and middle is worrisome: There is a real lack of homes to buy in these segments.

 

Overall, there were 5.9% fewer homes available for sale nationwide at the end of the first quarter than there were a year ago. But the number of homes for sale in the bottom and middle thirds of the US market each fell by 10.4%, compared to a relatively scant decline of just 1.9% in the top third of the market.  This is leading to a situation in which the majority of homes for sale in many markets are more expensive homes not typically sought by budget-conscious entry-level and younger buyers. In all 35 of the nation’s largest markets and the US as a whole, more homes are available for sale in the top-third of the market than in either of the other segments. In nine of those large metros, top-tier homes make up more than half of all homes available for sale.  And strong demand for more-affordable homes, driven in part by those healthy fundamentals noted earlier, can’t help but push prices up more quickly for those budget-friendly homes that are available. Home values in the bottom tier are growing faster than the other two tiers in 18 of the nation’s 35 largest metro housing markets, and middle-tier growth is outpacing bottom and top-tier growth in another eleven. That leaves just six of the country’s 35 largest markets in which home value growth in the top tier is outpacing the bottom and middle.  And in some cases, the growth rates between top and bottom tiers aren’t particularly close. In the fast-growing Denver metro, for example, bottom-tier home values grew at a 20.3% annual pace in March, fastest among markets in which bottom-tier values are growing the most, and almost double local top-tier annual growth of “just” 10.6%. Similar trends can be found in Phoenix, where bottom-tier home values are growing at almost triple the annual pace of top-tier values (11.2% at the bottom vs. 4.2% at the top) and Riverside (10% vs. 2.7%).

 

 

This rapid home value appreciation and limited inventory in the bottom two-thirds of the market undoubtedly puts a majority of would-be home buyers in a tough spot. But the flip side is that those better-heeled buyers in search of a top-tier home are swimming in much smoother waters.  Annual home value growth among top-tier homes in 20 of the nation’s top 35 markets is slower than the overall national pace of 4.8%. Additionally, the most expensive homes on the market are also more likely to have a price cut. The share of top-tier listings nationwide with a price cut has increased 1.6 percentage points over the past year, compared to just 0.4 percentage points in the middle tier and 0.5 percentage points at the bottom.  In other words, buyers looking for the most expensive homes will find somewhat softening prices, a relatively larger selection of homes to choose from and more limited competition this spring. At the same time, entry-level and mid-market buyers are likely to face much stiffer competition, rapidly rising prices and very limited inventory.  Yet another reminder that it pays to be wealthy.

 

 

In March, the median US home value rose 0.4% from February, according to the Zillow Home Value Index. US home values have grown on a year-over-year basis for 45 straight months.  But while home values have been growing consistently for going on four years, lately, the pace of growth has picked up after a yearlong cooling-off period from spring 2014 through spring 2015. The post-bottom pace of annual home value growth peaked at 7.9% in April 2014, then slowed in each of the subsequent 12 months, reaching a low of 2.7% in April 2015. Annual home value growth has since been higher than the month before in 10 of the past 11 months, before falling somewhat in March to a 4.8% pace, from 4.9% in February.  While annual growth in this range is largely sustainable and not much to worry about on its own, this uptick in growth bears watching as the spring home shopping season heats up – especially in light of the rapid growth and limited inventory issues noted earlier. If home values begin growing too much, too fast, many more buyers risk getting priced out of the market, which has a number of trickle-down effects. One of these impacts could be felt in the rental market, as would-be buyers are stuck renting for longer, keeping apartments occupied that may otherwise go to newly formed renter households and contributing to upward pressure on rents themselves. Another impact could be continued deterioration in home affordability overall if growth in home values outpaces income growth.  Home values in 25 of the nation’s 35 largest metro markets grew faster year-over-year than the nation’s 4.8% annual pace in March. Home values grew by more than 10% per year in seven of those large metro markets: Denver (up 15.7% year-over-year), Portland (14.8%), Dallas (13%), San Jose (12.6%), Seattle (11.7%), San Francisco (11.5%) and Miami (10.5%). None of the nation’s largest metros experienced annual home value declines in March.

 

 

The US median rent in March was $1,389 per month, up 0.5% from February and 2.6% from March 2015, according to the Zillow Rent Index. US rents have grown year-over-year for 43 consecutive months. March was the fifth straight month in which median US home values grew faster year-over-year than median rents.  Similar to home value growth, annual growth in rents in this range is normal and nothing to worry much about. However, between August 2015 and February, monthly rents in each of those seven months hovered between $1,380 and $1,382, before rising to the current $1,389 this month. This $7 per month bump isn’t huge by any means, but does represent a bit of a departure from recent trends, and could be an early signal that rental growth is picking up again, potentially as a result of tightness in the rental market caused by renters unable to find a home to buy in their budget. This also bears watching.  Median rents in all but one of the nation’s 35 largest metro markets grew year-over-year to some extent, with only Cleveland experiencing an annual decline (-1.2% from March 2015). Rents grew fastest year-over-year in the San Francisco (up 9.9% from March 2015), Portland (up 8.6%) and San Jose (up 8%) metros.

 

 

Looking ahead, Zillow expects national home values to continue growing, rising another 2.7% through March 2017 to a Zillow Home Value Index of $191,257. US rents are also expected to keep growing over the next year, at a 2.7% pace through March 2017 to a Zillow Rent Index of $1,426.  Existing home sales activity in March was fairly strong, a somewhat promising sign for the upcoming spring season after a disappointing February. But existing home sales have been very volatile lately, and have failed to string together more than a couple months in a row of increases before stumbling again. It will take several solid months this spring to break the two-steps-forward, one-step-back routine the market has been stuck in for a while – and it’s hard to meaningfully increase sales activity when the number of homes for sale keeps dropping.  Which means the market could be setting up to be pretty tough for potential buyers this spring, especially for first-time buyers and those looking to move up from their first home and into a slightly more expensive place. Competition will be fierce, and buyers’ patience will be tested. In order to stand out in a competitive market, buyers should get pre-approved for a loan, find an agent who has experience with bidding wars and be prepared to come in at the asking price, so the seller knows they’re serious.

NAR- Existing-Home sales spring ahead in March

NAR – Existing-Home sales spring ahead in March

 

 

Bolstered by big gains in the Northeast and Midwest, existing-home sales bounced back in March and remained slightly up from a year ago, according to the National Association of Realtors (NAR). Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 5.1% to a seasonally adjusted annual rate of 5.33 million in March from a downwardly revised 5.07 million in February. Sales rose in all four major regions last month and are up modestly (1.5%) from March 2015. The median existing-home price for all housing types in March was $222,700, up 5.7% from March 2015 ($210,700). March’s price increase marks the 49th consecutive month of year-over-year gains.  Total housing inventory at the end of March increased 5.9% to 1.98 million existing homes available for sale, but is still 1.5% lower than a year ago (2.01 million). Unsold inventory is at a 4.5-month supply at the current sales pace, up from 4.4 months in February.  Matching the lowest share since August 2015, properties typically stayed on the market for 47 days in March, a decrease from 59 days in February and below the 52 days in March 2015. Short sales were on the market the longest at a median of 120 days in March, while foreclosures sold in 50 days and non-distressed homes took 46 days. Forty-two% of homes sold in March were on the market for less than a month – the highest since July 2015 (43%).  The share of first-time buyers was 30% in March, unchanged both from February and a year ago. First-time buyers in all of 2015 also represented an average of 30%.

 

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage ticked up from 3.66% in February to 3.69% in March,

 

Remained below 4% for the eighth straight month. The average commitment rate for all of 2015 was 3.85%.  NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida, says despite modest improvements, mortgage credit is still difficult to come by for many first-time buyers and middle-income households. “Reducing the Federal Housing Administration’s annual mortgage insurance premium rate and repealing its life-of-loan policy requirement would certainly expand options for more of these buyers,” he said. “These changes would save consumers money and further strengthen the FHA’s program by enticing more creditworthy borrowers to seek out FHA-insured loans.”  All-cash sales were 25% of transactions in March (unchanged from February) and are up from 24% a year ago. Individual investors, who account for many cash sales, purchased 14% of homes in March, down from 18% in February and unchanged from a year ago. Sixty-six% of investors paid cash in March.  Distressed sales – foreclosures and short sales – fell to 8% in March, down from 10% both last month and a year ago. Seven% of March sales were foreclosures and 1% were short sales. Foreclosures sold for an average discount of 16% below market value in March (17% in February), while short sales were discounted 10% (16% in February).

 

Single-family home sales increased 5.5% to a seasonally adjusted annual rate of 4.76 million in March from 4.51 million in February, and are now 2.6% higher than the 4.64 million pace a year ago. The median existing single-family home price was $224,300 in March, up 5.8% from March 2015.  Existing condominium and co-op sales rose 1.8% to a seasonally adjusted annual rate of 570,000 units in March from 560,000 in February, but are still 6.6% below March 2015 (610,000 units). The median existing condo price was $209,600 in March, which is 4.6% above a year ago.  March existing-home sales in the Northeast ascended 11.1% to an annual rate of 700,000, and are now 7.7% above a year ago. The median price in the Northeast was $254,100, which is 5.8% above March 2015.  In the Midwest, existing-home sales jumped 9.8% to an annual rate of 1.23 million in March, and are now 0.8% above March 2015. The median price in the Midwest was $174,800, up 7.0% from a year ago.  Existing-home sales in the South rose 2.7% to an annual rate of 2.25 million in March, and are 2.3% above March 2015. The median price in the South was $194,400, up 4.6% from a year ago.  Existing-home sales in the West climbed 1.8% to an annual rate of 1.15 million in March, but are 2.5% lower than a year ago. The median price in the West was $320,800, which is 5.9% above March 2015.

 

WSJ – US housing starts fell to lowest level since October

 

The pace of home building in the US fell in March to its lowest level since October, another sign momentum in the housing market is slowing after a strong 2015.  The monthly fallback retraces some of February’s gains, leaving the overall trend for the first quarter largely flat compared to the previous year’s pace.  Housing starts fell 8.8% from a month earlier to a seasonally adjusted annual rate of 1.089 million in March, the Commerce Department said Tuesday.  Economists were divided on whether the downward tick was part of a broader first-quarter economic slowdown, which in recent years has been followed by a second-quarter rebound, or whether this month’s figures were a sign the housing market is losing steam.  Much of the slowdown was concentrated in the Midwest, while groundbreaking on new homes picked up in the Northeast, suggesting that some of March’s mixed performance was weather-driven. Several economists noted that the timing of Easter, which came in March this year, could have dampened the numbers.  Starts on single-family homes, which account for roughly two-thirds of the market, fell 9.2% in March to 764,000 from an upwardly revised February rate that represented a multiyear high.  Starts on multifamily buildings with five or more units, which include apartments and condominiums, fell 8.5% to a rate of 312,000 in March from the prior month.  Single-family homes have been driving much of the increase in recent months, with one-unit starts holding well above 700,000 for the past nine months. Figures for multifamily housing have been more volatile and trending somewhat lower.  New applications for building permits, a bellwether for forthcoming construction, fell 7.7% to 1.086 million, from a revised February rate of 1.177 million.

 

Demand for housing has been strong over the past year, with home prices up in many markets amid a shortage of inventory. Buyers could turn to new homes, which only make up about 10% of the overall housing market, as the supply of existing homes shrink.  Despite this past month’s slide from February, figures for March still showed improvement from the prior year. Housing starts in March were 14.2% higher than in March last year, and permits were up 4.6% from a year before. For the first three months of the year, housing starts are up 14.5% compared with the year-earlier period.  Housing starts in structures with five or more apartments rose 0.3% in March compared with March 2015. Single-family housing starts were up 22.6% in March from a year earlier.  Some builders said while growth in the housing market hasn’t been spectacular over the last year, it has been reliable. Bobby Julien, chief executive of Kolter Group, a real-estate investment firm and builder based in Florida, said he has become accustomed to a housing market that is more “in balance.”  Housing was a bright spot in the US economy in 2015, contributing more than a quarter of a percentage point to gross domestic product growth over the year. Historically low-interest rates and ongoing job creation could continue to lend it support, but home builders are reporting shortages of land and labor, leading to delays in projects’ completion. Those delays often serve to push prices up so the builder can recoup costs. Construction levels for new homes remain historically low relative to the levels in the 1990s and 2000s, before the last decade’s housing bubble.

 

CoreLogic – national supply of homes for sale rises to 6.8 months in January 2016

 

As the US housing market strengthened last year the inventory of homes for sale fell to a post-housing-crisis low. So how is the inventory shaping up early this year? Nationally, the number of homes for-sale equated to a 6.8-month supply in January 2016, up from a 6.5-month supply in January 2015.  There are four price tiers: low price (0-75% of the median list price), low-to-middle price (75-100% of the median list price), middle-to-moderate price (100-125% of the median list price) and high price (125% or more of the median list price). Usually the high-price tier has the largest supply and the low-to–middle price tier has the lowest supply. The differences in the months of supply among the four price tiers were greatest during 2007-2009 crisis period, when the high price tier peaked at 21.2 months while the other tiers remained under 15 months. Here’s how each price tier’s months of supply in January 2016 compares with history:

–  The low-price tier had a 7.2-month supply in January, up from 6.8 months in January 2015 and about half of its peak in January 2008.

–  The low-to–middle price tier had a 5.9-month supply in January, down from 6.2 months in January 2015. The January supply was about 60% lower than its January 2009 peak.

–  The middle-to–moderate price tier had a 6.2-month supply in January, down from 6.5 months in January 2015. The January supply was about 60% lower than its January 2008 peak.

–  The high-price tier had a 9.3-month supply in January, which was a month more than it was in January 2015. The January supply was less than half of its January 2009 peak and almost double its June 2000 trough.

 

With demand strong and supply tight, many homes didn’t spend long on the market in 2015. But trends are starting to change now. Figure 2 shows that over the past two years the share of homes selling within 30 days of the initial list date[2] has been at the highest level since 2000. In January 2016, the share selling within 30 days was 16.3%, which was almost as high as the 2015 peak and was significantly higher than the pre-crisis peak of 14% in October 2005, as well as about twice the April 2011 trough. Figure 3 shows the share of the for-sale inventory that was on the market for more than 180 days. In January 2016, that share was 23.1%, which was up from the 2015 average of 22.4% but still down from the June 2009 peak of 32.1%.  Nationwide, the inventory didn’t change much over the past year, with the supply at 6.8 months in January 2016 compared with 6.5 months in January 2015. However, some oil markets were impacted by low oil prices. The supply in Houma, La., and Oklahoma City, Okla., increased 2.5 and 1.3 months respectively in January 2016 compared to a year earlier. The months of supply in the Houston metro area increased from 5.9 months in January 2015 to 7.1 months in January 2016. Denver and San Francisco had the lowest months of supplies of 1.7 months and 2.6 months, respectively.

 

MBA – Mortgage applications down

 

Mortgage applications increased 1.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 15, 2016.  The Market Composite Index, a measure of mortgage loan application volume, increased 1.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2% compared with the previous week. The Refinance Index increased 3% from the previous week. The seasonally adjusted Purchase Index decreased 1% from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week and was 17% higher than the same week one year ago.  The refinance share of mortgage activity increased to 55.4% of total applications from 54.9% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.0% of total applications.  The FHA share of total applications decreased to 10.6% from 10.8% the week prior. The VA share of total applications increased to 12.6% from 11.9% the week prior. The USDA share of total applications remained unchanged at 0.8% the week prior.

 

RealtyTrac – US home sellers in March 2016 realized highest home price gains since December 2007

 

RealtyTrac released its March and Q1 2016 US Home Sales report, which shows that US home sellers in March on average sold for $30,500 more than they purchases for, a 17% average gain in price — the highest average price gain for home sellers in any month since December 2007 at the onset of the Great Recession.  The RealtyTrac Home Sales report is based on publicly recorded sales deeds collected and licensed by RealtyTrac in more than 900 counties nationwide accounting for more than 80% of the US population.  Among 125 metropolitan statistical areas with at least 300 sales in March, home sellers realized the biggest average gains compared to purchase price in San Francisco (72% average gain); San Jose, California (60%); Boulder, Colorado (53%); Prescott, Arizona (51%); and Los Angeles (48%).  Other markets with average seller gains more than twice the national average in March were Denver (42%); Portland (40%); Austin, Texas (40%); Seattle (38%); Baltimore (38%); Riverside-San Bernardino, California (37%); San Diego (36%); and Sacramento (35%). There were still 19 markets (15%) where home sellers in March on average sold for less than what they purchased for, led by Rockford, Illinois (11% average loss compared to purchase price); Winston-Salem, North Carolina (10% average loss); Cleveland, Ohio (8% average loss); Columbia, South Carolina (7% average loss); and Wilmington, North Carolina (5% average loss).  Other markets with average seller losses in March included Memphis (4% average loss); Milwaukee (4% average loss); Chicago (3% average loss); Cincinnati (3% average loss); Birmingham, Alabama (2% average loss); and Flint, Michigan (1% average loss).  Home sellers who sold in March on average had owned for 7.67 years, up 4% from an average of 7.37 years for home sellers who sold in March 2015.

 

 

The median sales price of single family homes and condos in March was $210,000, up 9% from the previous month and up 11% from a year ago. March was the 49th consecutive month with a year-over-year increase in the US median home price, which is still 8% below its previous peak of $228,000 in July 2005.  Among metro areas analyzed in the report, 36% have reached new all-time home price peaks since January 2015, including seven markets that reached new price peaks in March 2016: Boulder, Colorado; Denver; Portland; Fort Collins, Colorado; Austin, Texas; Greeley, Colorado; and Cincinnati, Ohio.  “With low available listing inventories, coupled with investors continuing to realize higher rental returns, many are anticipating continued sales price increases through the remainder of the year,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “Due to this high demand, many home buyers are finding themselves in multiple-offer situations, and often times paying higher than list price.”  Counter to the national trend, 17% of markets analyzed posted a year-over-year decrease in median home sales price in March, including Washington, D.C. (down 7%); San Francisco (down 2% following 47 consecutive months of increases); Baltimore, Maryland (down 6%); Pittsburgh (down 4% following 21 consecutive months of increases); Virginia Beach (down 2%); Birmingham, Alabama (down 5%); and Tulsa, Oklahoma (down 1%).  Markets with the biggest annual increase in median home price were Philadelphia (up 29%); Rockford, Illinois (up 22%); Jacksonville, Florida (up 22%); Cincinnati, Ohio (up 19%); and Deltona-Daytona Beach-Ormond Beach, Florida (up 18%)

.

 

Distressed sales, including bank-owned sales, in-foreclosure sales and short sales, accounted for 18.2% of all single family and condo sales in the first quarter, up from 17.2% in the previous quarter — the second consecutive quarter with an increase — but still down from 20.8% in the first quarter of 2015. The distressed sales share peaked nationwide at 44.0% in the first quarter of 2009.  Among 110 metro areas with at least 1,000 single family and condo sales in the first quarter, those with the highest share of distressed sales were Chicago, Illinois (31.0%); Flint, Michigan (29.9%); Baltimore, Maryland (28.8%); Tallahassee, Florida (28.1%); and Jacksonville, Florida (27.6%).  Metros with the biggest year-over-year increase in share of distressed sales were Little Rock, Arkansas (up 45%); Buffalo, New York (up 30%); Pittsburgh, Pennsylvania (up 16%), Milwaukee, Wisconsin (up 14%); and Greeley, Colorado (up 12%).  Among the nation’s 20 largest metro areas, three reported a year-over-year increase in the share of distressed sales: New York (up 3%); Washington, D.C. (up 4%); and Boston (up 5%).

 

 

The median sales price of a bank-owned (REO) home nationwide in March was $125,000, 40% below the median sales price of all homes — up from a 39% discount in both the previous month and a year ago.  Markets with the biggest bank-owned price discount were Canton, Ohio (83%), Dayton, Ohio (68%), Little Rock, Arkansas (66%), Birmingham, Alabama (64%), and Akron, Ohio (63%).  Other markets with a bank-owned price discount of more than 50% in March included Pittsburgh, Pennsylvania (61% discount), Cleveland, Ohio (57% discount), Columbus, Ohio (57%), Baltimore, Maryland (53%), and New York (53%).  Bank-owned homes nationwide in March sold for a median price of $81 per square foot, 34% below the median $123 per square foot for all homes. That was up from a price-per-square foot REO discount of 33% in both the previous month and a year ago.  All-cash sales represented 31.8% of all US single family and condo sales in the first quarter, down from 32.8% in the previous quarter and down from 35.4% a year ago — the 12th consecutive quarter with an annual decrease.  Among 110 metro areas with at least 1,000 single family and condo sales in the first quarter, those with the top five highest share of all-cash buyers were all in Florida: Naples, (57.1%); Miami (53.9%); North Port-Sarasota-Bradenton (53.4%); Palm Bay-Melbourne-Titusville (52.7%); and Ocala (51.6%).  Metro areas outside of Florida with an above-average share of cash sales in the first quarter included Flint, Michigan (48.4%); Knoxville, Tennessee (46.2%); Detroit (45.2%); Birmingham, Alabama (45.2%); Memphis (44.7%); Raleigh, North Carolina (41.6%); Tulsa, Oklahoma (40.6%); and New York (39.6%).  Buyers using loans backed by the Federal Housing Administration (FHA)  — typically first-time buyers or boomerang buyers with a low down payment — accounted for 15.2% of all single family and condo sales in the first quarter, up from 14.8% in the previous quarter and up from 13.5% a year ago.  Among 110 metro areas with at least 1,000 single family and condo sales in the first quarter, those with the highest share of FHA buyers were Provo, Utah (13.8%); Ogden, Utah (12.4%); Salt Lake City (12.3%); Greeley, Colorado (11.9%); and Boise, Idaho (11.9%).

 

RealtyTrac – Q1 2016 foreclosure activity below pre-recession levels in 36% of US housing markets

RealtyTrac – Q1 2016 foreclosure activity below pre-recession levels in 36% of US housing markets

RealtyTrac released its Q1 and March 2016 US Foreclosure Market Report™, which shows first quarter foreclosure activity was below pre-recession levels in 78 out of 216 US metropolitan statistical areas (36%) analyzed in the report. Nationwide, the report shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 289,116 US properties in the first quarter of 2016, down 4% from the previous quarter and down 8% from the first quarter of 2015 to the lowest quarterly total since the fourth quarter of 2006, a more than nine-year low. “Despite a seasonal bump higher in March, foreclosure activity in most markets continues to trend lower and back toward more healthy, stable levels,” said Daren Blomquist, senior vice president at RealtyTrac. “More than one-third of the 216 local markets we analyzed were below their pre-recession foreclosure activity averages in the first quarter, and we would expect a growing number of markets to move below that milestone the rest of this year — while the number of markets with a lingering low-grade fever of foreclosure activity continues to shrink.”

Nationwide, the 289,116 properties with foreclosure filings in the first quarter was still 4% higher than the pre-recession quarterly average of 278,912 properties with foreclosure filings from Q1 2006 through Q3 2007. Among 216 metropolitan statistical areas with a population of at least 200,000, a total of 78 (36%) posted Q1 2016 foreclosure activity below pre-recession average levels, including Los Angeles (27% below pre-recession average); Dallas (65% below pre-recession average); Houston (64% below pre-recession average); Miami (19% below pre-recession average); and Atlanta (57% below pre-recession average). There were still 138 of the 216 major metro areas (64%) with Q1 2016 foreclosure activity above pre-recession average levels, including New York (80% above pre-recession average); Chicago (17% above pre-recession average); Philadelphia (97% above pre-recession average); Washington, D.C. metro (134% above pre-recession average); and Boston (46% above pre-recession average). Nationwide the 289,116 properties with foreclosure filings in the first quarter of 2016 was 69% below the quarterly peak of 937,840 properties with foreclosure filings in the second quarter of 2009. Among the 216 major metro areas analyzed for the report, 210 (97%) were below peak foreclosure activity levels in the first quarter of 2016. Markets furthest below the previous peak were Merced, California (95% below peak), followed by six markets all with Q1 2016 foreclosure activity 93% below peak levels: Boulder, Colorado; Fayetteville, Arkansas; Cape Coral-Fort Myers, Florida; Stockton, California; Denver, Colorado; and Phoenix, Arizona. “The Seattle housing market has benefitted from a robust economy, which when combined with the growth of home prices, has led to a slowdown in foreclosure activity,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where Q1 2016 foreclosure activity was down 14% year-over-year and down 74% from the peak in Q3 2010. “Given the stringent process to qualify for a mortgage, as well as the greater down payment requirements, there is very little risk of an increase in foreclosure activity in the near term.”

Among the 216 metro areas analyzed for the report, six (3%) reached new foreclosure activity peak levels in the first quarter of 2016: Syracuse, New York; Kingsport, Tennessee; Utica-Rome, New York; Binghamton, New York; College Station, Texas; and Tuscaloosa, Alabama. One in every 459 US housing units had a foreclosure filing in the first quarter of 2016. States with the top five highest foreclosure rates were Maryland (one in every 194 housing units with a foreclosure filing); New Jersey (one in every 216 housing units); Nevada (one in every 236 housing units); Delaware (one in every 240 housing units); and Florida (one in every 274 housing units. Other states posting top 10 foreclosure rates in the first quarter of 2016 were Illinois, Ohio, South Carolina, Indiana, and Pennsylvania. Among the 216 metropolitan statistical areas with a population of at least 200,000, those with the five highest foreclosure rates in the first quarter of 2016 were Atlantic City, New Jersey (one in every 106 housing units with a foreclosure filing); Trenton, New Jersey (one in every 168 housing units); Baltimore, Maryland (one in every 183 housing units); Lakeland-Winter Haven, Florida (one in every 196 housing units); and Rockford, Illinois (one in every 211 housing units). Other metro areas posting top 10 foreclosure rates in the first quarter of 2016 were Las Vegas, Tampa, Fayetteville, North Carolina, Philadelphia, and Jacksonville, Florida. Despite the nationwide decrease in foreclosure activity in the first quarter, 103 of the 216 metro areas analyzed in the report (48%) posted a year-over-year increase in foreclosure activity. Among the nation’s 20 largest metro areas, those with the biggest annual increase in foreclosure activity were Boston (up 49%); Philadelphia (up 18%); Phoenix (up 10%); Baltimore (up 9%); and New York (up 7%).

There were a total of 108,970 US properties with foreclosure filings in March, an 11% increase from February to the highest monthly level since October 2015 — but still down 11% from a year ago. The monthly increase in March was driven by a jump in pre-foreclosure notices: foreclosure starts and scheduled foreclosure auctions. Foreclosure starts — the first public notice starting the foreclosure process — increased 21% from the previous month but were still down 11% from a year ago. March foreclosure starts increased from a year ago in 20 states, including Connecticut (up 169%), Arizona (up 125%), Delaware (up 78%), Iowa (up 64%), and Massachusetts (up 51%). “While overall foreclosures closed across Ohio remain on the decline, showing positive housing and job growth in the state, there was a modest increase in foreclosure starts during first quarter of 2016 that could likely relate to many homeowners not recognizing the increased value and appreciation they have earned in many communities across Ohio,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio, where foreclosure starts increased 18% year-over-year statewide in March. “If a homeowner finds themselves falling behind in mortgage payments due to health, divorce, or job loss, consulting a Realtor should be their first discussion in learning options available to assist them in potentially avoiding a foreclosure action.”

Scheduled foreclosure auctions — which in some states act as the foreclosure start — increased 25% month-over-month nationwide, but were still down 15% from a year ago. Scheduled foreclosure auctions increased 18% month-over-month in non-judicial foreclosure states and increased 17% in judicial states. March scheduled foreclosure auctions increased from a year ago in 23 states, including Massachusetts (up 211%), New York (up 92%), Pennsylvania (up 49%), Maryland (up 43%), and South Carolina (up 37%). “Over the last 10 years, US foreclosure activity on average has increased 6% from February to March, and the 11% increase this year was not far off that typical seasonal bump,” noted Blomquist. “February is of course a shorter month, and banks often ramp up foreclosure filings in March to take advantage of the spring selling season — which should prove particularly favorable to banks this year given low inventory levels of homes for sale and continued strong demand from buyers regaining confidence in the housing market. Properties foreclosed on during the first quarter of 2016 were in the foreclosure process an average of 625 days, down 1% from 629 days in the previous quarter, but still up 1% from 620 days in the first quarter of 2015. The 1% quarter-over-quarter decline in the average time to foreclose in Q1 2016 was the second consecutive quarterly decline nationwide. There were six states with an average time to foreclose of more than 1,000 days in the first quarter of 2016: New Jersey (1,234); Hawaii (1,110); New York (1,061); Utah (1,059); Florida (1,018); and Connecticut (1,007). States with the shortest average time to foreclose in the first quarter of 2016 were Virginia (195 days); Mississippi (261 days); Wyoming (268 days); Tennessee (269 days); and Texas (272 days).

US industrial production fell 0.6% in March vs. 0.1% drop expected
US industrial production fell more than expected in March as output declined broadly, the latest indication that economic growth braked sharply in the first quarter. Industrial output decreased 0.6% last month after a downwardly revised 0.6% drop in February, the Federal Reserve said on Friday. Industrial production has declined in six of the last seven months. Economists polled by Reuters had forecast industrial production slipping 0.1% last month after a previously reported 0.5% drop in February. Industrial production fell at an annual rate of 2.2% in the first quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in suggesting that economic growth slowed to crawl at the turn of the year. Growth estimates for the first quarter are as low as a 0.2% annualized rate. The economy grew at a 1.4% rate in the fourth quarter. But given a buoyant labor market, the ebb in growth is likely to be temporary. The industrial sector has been undermined by a slowing global economy and robust dollar, which have eroded demand for US manufactured goods. It is also being weighed down by lower oil prices that have undercut capital investment in the energy sector, as well as an inventory correction.

FHFA – principal reduction is coming
A day that many in the housing industry thought would never come is finally and actually here, as the Federal Housing Finance Agency is making official what was first reported several weeks ago – widespread principal reduction is coming. In what it is calling a “final crisis-era modification program,” the FHFA announced Thursday that it will be launching a principal reduction program for some borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. But the program is not quite as widespread as was first reported. Initial reports in the Wall Street Journal suggested that the FHFA’s principal reduction program may make fewer than 50,000 “underwater” borrowers eligible for principal reduction, but what wasn’t known until Thursday was the exact number of borrowers the FHFA’s program could affect. The FHFA said Thursday that it expects approximately 33,000 borrowers to eligible to participate in the principal reduction program due to very specific eligibility requirements. According to the FHFA, principal reductions will be available to owner-occupant borrowers who are 90 days or more delinquent as of March 1, 2016, meaning that borrowers will not able to “strategically default” in able to receive principal reduction. Additionally, the program will only apply to borrowers whose mortgages have an outstanding unpaid principal balance of $250,000 or less, and whose mark-to-market loan-to-value ratios are more than 115%.

For years, the leadership of the FHFA, Fannie, and Freddie claimed this day would never happen. They all said the GSEs were in conservatorship, not receivership, and so a reduction in asset values would be counterintuitive to that status. Just last month, FHFA Director Mel Watt gave a speech at a public policy luncheon hosted by the Women in Housing and Finance, in which he said that the issue of principal reduction has been the “most challenging” that the FHFA has faced in his two years there. Watt also said that his objective for any principal reduction plan was to achieve a “win-win” situation for borrowers and the GSEs alike. “Many have asked why it has taken so long to reach a conclusion,” Watt said at the time. “The direct answer is that making this determination involves consideration of an extremely complicated set of factors.” But Watt said Thursday that he believes this plan is that proverbial “win-win” for borrowers and the government-sponsored enterprises alike. “This plan will no doubt be viewed by some as too small and too late and viewed by others as too large and unnecessary,” Watt said. “However, the plan is consistent with FHFA’s statutory obligation to ‘maximize assistance for homeowners’ by providing some borrowers what could well be their final opportunity to avoid foreclosure,” Watt continued. “It is also consistent with our statutory obligation to provide this assistance in ways that we reasonably expect will not have adverse economic consequences for the Enterprises,” Watt said. “By meeting both of these statutory obligations, the program satisfies my commitment to implement a principal reduction plan only if we could structure one that would be a ‘win-win’ for both borrowers and the Enterprises.”

According to the FHFA, this program will give seriously delinquent, underwater borrowers “last chance” to avoid foreclosure by providing principal reduction in a straightforward and timely manner. “FHFA believes that this final crisis-era modification program will provide seriously delinquent borrowers a last opportunity to address negative equity and to avoid foreclosure and will also help to improve the stability of neighborhoods that have not yet recovered from the foreclosure crisis,” the FHFA said in prepared materials. According to the FHFA, the eligible loans are heavily concentrated in Florida, New Jersey, New York, Illinois, Ohio, Pennsylvania, Nevada and in” hardest hit communities.” The principal reduction requirements and stipulations are different than the GSEs currently streamlined modification programs, the FHFA said. Here’s how, courtesy of the FHFA:

“In existing Streamlined Modifications, servicers capitalize outstanding arrearages into the loan’s principal balance; set the loan’s interest rate to the current market rate; extend the loan’s term to 40 years; and, if a borrower has a MTMLTV ratio greater than 115%, forbear principal to 115% of the MTMLTV ratio or 30% of the unpaid principal balance (UPB), whichever is less. Principal forbearance defers payments on a portion of outstanding principal until the end of the loan and makes it non-interest-bearing. This reduces a borrower’s monthly payment but, unlike principal forgiveness, does not reduce a borrower’s overall indebtedness. Under the Principal Reduction Modification, servicers will follow the same modification steps they currently follow for Streamlined Modifications, except that principal reduction will be used instead of principal forbearance. Consequently, the amount of principal and/or capitalized arrearages that would have been forborne under a Streamlined Modification will be forgiven instead. This will reduce the borrower’s debt burden. Additionally, this will result in the same loan modification payment for borrowers as they would have received under a Streamlined Modification.”

According to the FHFA, the modification terms include capitalization of outstanding arrearages, an interest rate reduction down to the current market rate, an extension of the loan term to 40 years, and forbearance of principal and/or arrearages up to a certain amount to be converted later to forgiveness. While 33,000 borrowers are eligible for the principal reduction program, the FHFA believes that far fewer borrowers will actually take advantage of the program. According to the FHFA’s documentation, only 9.5% of eligible borrowers take advantage of the streamlined modification program, which forbears but does not forgive principal, and if the same percentage of eligible borrowers elect to participate in the principal reduction program, only 3,155 borrowers will see their principal cut. The FHFA notes that there are “reasonable grounds” to expect that more borrowers will participate in the principal reduction program than in the streamlined modification program, due to the fact that the GSEs will be offering principal reduction modifications to borrowers for the first time, which is expected to persuade some borrowers who have not responded to modification solicitations in the past to take advantage of this program. Additionally, the FHFA notes that the public interest in a principal reduction modification program has remained high throughout and since the financial crisis, and continuing strong support from “outside organizations” increases the likelihood of higher participation rates for the principal reduction modification compared to the streamlined modification.

New York manufacturing expanded in April
Manufacturing activity in New York state unexpectedly surged in April, a New York Federal Reserve survey showed on Friday. Factory activity in New York expanded in April at the fastest pace in more than a year, a sign manufacturing may be picking up after a tough 2015. The New York Federal Reserve’s Empire State manufacturing index jumped to 9.56 in April from 0.62 in the previous month. It was only the second positive reading since July. Any reading above zero indicates growth. Economists polled by Reuters had expected the index to rise to 2.21 in the month. A reading above zero indicates expansion. A gauge of new orders rose to 11.1 from 9.6 in the previous month, suggesting output may rise again next month. A measure of shipment slipped. The results suggest that US factories are improving after getting hammered for months by weak overseas growth and a strong dollar.

Mortgage interest rates fall to lowest level in nearly three years
Mortgage interest rates continued their downward trend in the last week, falling again to the lowest level of the year and the lowest level in nearly three years, Freddie Mac’s latest Primary Mortgage Market Survey showed. This marks the second week in a row that mortgage rates dipped to a new yearly low. Last week, Freddie Mac’s report showed that the 30-year mortgage rate fell 12 basis points to 3.59%, which was the lowest since February 2015. But rates went even lower in the last week, with the average interest rate for a 30-year fixed-rate mortgage falling by one basis point to 3.58%. One year ago at this time, the 30-year fixed-rate mortgage averaged 3.67%. This week’s new low of 3.58% is the lowest level that interest rates have reached since May 2013. “Demand for Treasuries remained high this week, driving yields to their lowest point since February,” Freddie Mac’s chief economist, Sean Becketti said. “In response, the 30-year mortgage rate fell 1 basis point to 3.58%. This rate represents yet another low for 2016 and the lowest mark since May 2013.” Also falling was the 15-year FRM, which this week averaged 2.86%, down two basis points from last week, when it average 2.88%. One year ago at this time, the 15-year FRM averaged 2.94%. Additionally, the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.84% this week, up slightly from the week before, when the 5-year Treasury-indexed hybrid ARM averaged 2.82%. A year ago, the 5-year ARM averaged 2.88%.

Wells Fargo reaches largest settlement in FHA history

Wells Fargo reaches largest settlement in FHA history

 

Wells Fargo officially finalized its agreement with the federal government to pay $1.2 billion, in what is now the largest recovery for loan origination violations in FHA’s history.  The settlement resolves claims related to Wells Fargo’s Federal Housing Administration mortgage insurance lending program for the time period between 2001-2010.  According to a press release from the Department of Justice, Wells Fargo admitted, acknowledged and accepted responsibility for, among other things, certifying to the Department of Housing and Urban Development, during the period from May 2001 through December 2008, that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when some of those loans defaulted.  Wells Fargo originally tried to dismiss the series of statutory claims filed by the US government back in October 2012 but was denied by a judge.  The claims accuse Wells Fargo of misleading HUD into believing its loans qualified for insurance from HUD’s FHA. The government sought damages and civil penalties under the False Claims Act.

 

The settlement hit a roadblock back in November 2014 when both sides’ talks of negotiating a settlement started to slow down, with both parties no longer as optimistic as they once were.  While the details of the settlement were brought to light in a filing with the Securities and Exchange Commission earlier this year, there was no assurance that the two parties would agree on the final documentation of the settlement.  When those details came out, Wells Fargo said in a 10-K filing with the SEC that the bank was also under investigation by a number of agencies over the mortgage operations of both Wells Fargo and its “predecessor institutions.”  The final agreement with the government on Friday addressed this stating:  “The agreement resolves the United States’ civil claims in its lawsuit in the Southern District of New York, as well as an investigation conducted by the US Attorney’s Office for the Southern District of New York regarding Wells Fargo’s FHA origination and underwriting practices subsequent to the claims in its lawsuit and an investigation conducted by the US Attorney’s Office for the Northern District of California into whether American Mortgage Network (AMNET), a mortgage lender acquired by Wells Fargo in 2009, falsely certified and submitted ineligible residential mortgage loans for FHA insurance.”

 

Now nearly four years later, US District Judge Jesse Furman for the Southern District of New York finally approved a settlement late Friday afternoon.  “Today’s court filing details a previously announced agreement in principle that resolves not only the pending lawsuit filed by the US Attorney for the Southern District of New York, but also a number of other potential claims going back as far as 15 years in some cases,” said Franklin Codel, president of Wells Fargo Home Lending. “It allows us to put the legal process behind us, and to focus our resources and energy on what we do best—serving the needs of the nation’s homeowners.”  “We are dedicated to providing access to credit to a broad range of customers through offerings that exist today as well as new products and programs on the horizon,” added Codel. “Wells Fargo has helped millions of people buy homes and we will continue to meet the financing needs of the customers and communities the FHA program is intended to serve.”  “This Administration remains committed to holding lenders accountable for their lending practices,” said Secretary Julián Castro for HUD.  “The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations in FHA’s history.  Yet, this monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practices.”

 

US banks’ dismal 1Q may spell trouble for 2016

Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week.  Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth.  Analysts forecast a 20% decline on average in earnings from the six biggest US banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs, are expected to report the worst results in over ten years.  This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year.  “What’s concerning people is they’re saying, ‘Is this going to spill over into other quarters?'” Goldman’s lead banking analyst Richard Ramsden said in an interview. “If you do have a significant decline in revenues, there is a limit to how much you can cut costs to keep things in equilibrium.”  Investors will get some insight on Wednesday, when earnings season kicks off with JPMorgan Chase, the country’s largest bank. That will be followed by Bank of America and Wells Fargo & Co on Thursday, Citigroup on Friday, and Morgan Stanley and Goldman Sachs on Monday and Tuesday, respectively, in the following week.

 

Banks have been struggling to generate more revenue for years, while adapting to a panoply of new regulations that have raised the cost of doing business substantially.  The biggest challenge has been fixed-income trading, where heavy capital requirements, new derivatives rules, and restrictions on proprietary trading have made it less profitable, leading most banks to simply shrink the business.  Bank executives have already warned investors to expect major declines across other areas as well.  Citigroup CFO John Gerspach said to expect trading revenue more broadly to drop 15% versus the first quarter of last year. JPMorgan Chase Daniel Pinto said to expect a 25% decline in investment banking. Several bank executives have warned about declining quality of energy sector loans.  Global investment banking fees for completed merger and acquisitions, and stock and bond underwriting, totaled $15.6 billion in the first quarter, a 28% decline for the year-ago period, according to Thomson Reuters data.  Volatility in stock prices and plunging commodities prices caused trading volume to dry up during most of the quarter. Trading activity picked up slightly in March but was not strong enough to offset declines during the first two months of the year.  Analysts have been lowering first-quarter estimates over the last month in light of business pressures. They now expect JPMorgan to report adjusted earnings of $1.30 per share, Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Morgan Stanley to report 63 cents per share. Goldman is expected to report $3.00 per share, the lowest first-quarter earnings since before the financial crisis.

 

WSJ – housing bust lingers for Generation X

The group of Americans known as Generation X has suffered more than any other age cohort from the housing bust, according to an analysis of federal data, suggesting homeownership rates for that group could remain depressed for years to come.  The data show an enormous swing in the fortunes of people born between 1965 and 1984, the group defined by the Harvard Joint Center for Housing Studies as Generation X.  Compared with previous generations, Generation X went from the most successful in terms of homeownership rates in 2004 to the least successful by 2015, according to the data, which date to the early 1980s.  The culprit: a historic bull market for housing, fueled in part by easy-to-get mortgages, that encouraged record levels of home buying until the financial system cracked and the housing market collapsed. Earlier generations such as baby boomers, who entered the market before the frenzy of the early 2000s, have fared better.  In 2004, people then-aged 25 to 34, the core of Generation X, had a homeownership rate of 49.5%, the highest for that age group since the US Census Bureau started regularly collecting such data in the early 1980s.  Last year, by contrast, the homeownership rate for 35-to-44-year-olds was at a more than three-decade low of 58.5%, down from an average of 65.8% for that age group. The upshot: Generation X experienced a much smaller increase in homeownership rates than previous generations as they hit middle age.

 

Much of the discussion of the future of the housing market centers on millennials, the group born between 1985 and 2004, according to the Harvard Center. Their tendency to live at home with parents and delay getting married has raised concerns about long-term homeownership trends.  But Generation X’s travails promise to disrupt traditional real-estate patterns as well. The housing market can be viewed as a progression through time: younger people start out renting, save enough to buy houses, build equity and then trade up to more desirable homes.  Now that trajectory has been interrupted, with fewer middle-aged buyers trading up, which would open up the inventory of smaller homes for younger buyers.  The challenge is compounded because the population of Generation X, roughly 83 million, is smaller than the roughly 87 million millennials. By 2025, millennials are expected to grow to 93 million, mainly due to immigration, while the size of Generation X will remain steady.  There are now three million more renters in their 30s and 40s today than 10 years ago, even though the number of households in that age bracket declined, according to data from the Harvard Joint Center.  “We need them to be buying houses and pushing the market,” said Dowell Myers, a professor of urban planning and demography at the University of Southern California. “But they’re not. They’re not moving. The whole system is gridlocked.”

 

US crude dips after hitting $40 per barrel overnight

Global oil prices softened Monday as investors retraced from a recent rally, concerned about the factors, including US inventory data, that drove the price up.  Global benchmark Brent was down 0.74% at $41.63 for June cargoes while West Texas Intermediate dipped 0.81% on the New York Mercantile Exchange at $39.40 a barrel for May deliveries.  Oil prices staged a strong rally over the weekend, building on Friday’s 6% rise. The oil price began to slip again on Monday as analysts questioned recent positive US inventory data and raised renewed doubts a potential output-freeze agreement among some of the world’s biggest oil producers.  Members of the Organization of the Petroleum Exporting Countries and Russia are scheduled to meet in Doha on Sunday to discuss capping oil production at January or February levels. Market participants, though, remain skeptical that an agreement will whittle down the persistent oversupply that has dragged prices lower for nearly two years.  “We do not expect the meeting to deliver a bullish surprise as we believe production cuts make little sense given it has taken 18 months for the rebalancing to finally start,” Goldman Sachs said in a note.  Commerzbank warned of a price correction if the Doha meeting doesn’t produce a viable plan for freezing production.

CoreLogic – distressed sales accounted for 11% of homes sold nationally in January 2016

fCoreLogic – distressed sales accounted for 11% of homes sold nationally in January 2016

 

–  Of total sales in January 2016, distressed sales accounted for 11.2% and real estate-owned (REO) sales accounted for 7.8%

–  The REO sales share was 20.2 percentage points lower than it was at its peak of 27.9% in January 2009

–  Only two of the nation’s largest 25 Core Based Statistical Areas (CBSAs) showed year-over-year increases in their distressed sales shares in January 2016

 

Distressed sales, which include REOs and short sales, accounted for 11.2% of total home sales nationally in January 2016, down 3.3 percentage points from January 2015 and up 0.6 percentage points from December 2015.  Within the distressed category, REO sales accounted for 7.8% and short sales accounted for 3.4% of total home sales in January 2016. The REO sales share was 2.9 percentage points below the January 2015 share and is the lowest for the month of January since 2007. The short sales share fell below 4% in mid-2014 and has remained in the 3-4% range since then. At its peak in January 2009, distressed sales totaled 32.4% of all sales, with REO sales representing 27.9% of that share. While distressed sales play an important role in clearing the housing market of foreclosed properties, they sell at a discount to non-distressed sales, and when the share of distressed sales is high, it can pull down the prices of non-distressed sales. There will always be some level of distress in the housing market, and by comparison, the pre-crisis share of distressed sales was traditionally about 2%. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2-percent mark in mid-2018.

 

All but eight states recorded lower distressed sales shares in January 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 19.9%[1] in January 2016, followed by Connecticut (19.1%), Florida (18%), Michigan (18%) and Illinois (17.4%). North Dakota had the smallest distressed sales share at 2.5%. Nevada had a 5.1 percentage point drop in its distressed sales share from a year earlier, the largest decline of any state. California had the largest improvement of any state from its peak distressed sales share, falling 59.6 percentage points from its January 2009 peak of 67.4%. While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels (each within one percentage point).  Of the 25 largest CBSAs based on mortgage loan count, Baltimore-Columbia-Towson, Md. had the largest share of distressed sales at 20%, followed by Chicago-Naperville-Arlington Heights, Ill. (19.8%), Orlando-Kissimmee-Sanford, Fla. (19.8%), Tampa-St. Petersburg-Clearwater, Fla. (19.7%) and Las Vegas-Henderson-Paradise, Nev. (14.2%). Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share among this group of the country’s largest CBSAs at 2.8%. Only two of the largest 25 CBSAs had year-over-year increases in their distressed sales share: Baltimore-Columbia-Towson, Md. was up by 1.1 percentage point, and Nassau County-Suffolk County, N.Y. was up by 0.7 percentage points. Las Vegas-Henderson-Paradise, Nev. had the largest year-over-year drop in its distressed sales share, falling by 5.4 percentage points from 19.5% in January 2015 to 14.2% in January 2016. Riverside-San Bernardino-Ontario, Calif. had the largest overall improvement in its distressed sales share from its peak value, dropping from 76.3% in February 2009 to 10.5% in January 2016.

 

Cyber fraudsters reap $2.3 billion through email wire-transfer scams

Businesses have lost billions of dollars to fast-growing scams where fraudsters impersonate company executives in emails that order staff to transfer to accounts controlled by criminals, according to the US Federal Bureau of Investigation.  Losses from these scams, which are known as “business email compromise,” totaled more than $2.3 billion from October 2013 through February of this year, the FBI said in an alert issued this week, citing reports to law enforcement agencies around the globe.  The cases involved some 17,642 businesses of all sizes scattered across at least 79 countries, according to the FBI alert posted on the website of the agency’s Phoenix bureau.  Law enforcement and cyber security experts have been warning that business email compromise was on the rise, but the extent of losses has not previously been disclosed.  Cyber security experts say they expect losses to grow as the high profits will attract more criminals.  “It’s a low-risk, high-reward crime. It’s going to continue to get worse before it gets better,” said Tom Brown, a former federal prosecutor in Manhattan.

 

The FBI’s alert said that fraudsters go to great lengths to spoof company email accounts and use other methods to trick employees into believing that they are receiving money-transfer requests from CEOs, corporate attorneys or trusted vendors.  “They research employees who manage money and use language specific to the company they are targeting, then they request a wire fraud transfer using dollar amounts that lend legitimacy,” the alert said.  It said they often target businesses that work with foreign suppliers or regularly perform wire transfers.  The size of the losses vary widely from case to case.  Austrian aircraft parts FACC said in January that it lost about 50 million euros ($55 million) through such a scam. In Arizona, the average loss ranges from $25,000 to $75,000, according to the FBI.  The FBI said in its alert, which was dated Monday, that it has seen a 270% increase in identified victims and exposed loss since January 2015.  Brown, who now runs the cyber investigations unit with Berkeley Research Group, said that the potential consequences of the breach of an email account are sometimes not immediately apparent to victims.  “This shows that even the hack of an email account can cause significant financial loss,” Brown said.

 

MBA – mortgage credit availability slightly decreases in March

Mortgage credit availability slightly decreased in March according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) which analyzes data from Ellie Mae’s AllRegs Market Clarity business information tool.  The MCAI decreased 0.2% to 123.5 in March.  A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.  The index was benchmarked to 100 in March 2012. Of the four component indices, the Government MCAI saw the greatest loosening (up 0.9%) over the month while the Conventional MCAI saw the most tightening (down 1.6%). The Jumbo MCAI decreased 0.2%, while the Conforming MCAI decreased 0.4% over the month.  “On net mortgage credit availability tightened very slightly in March. Administrative changes drove declines in the availability of conventional and super conforming loan programs, and those were partially offset by slightly relaxed lending standards on government lending programs which includes FHA, VA, and RHS,” said Lynn Fisher, MBA’s Vice President of Research and Economics.

 

Obama readies a wave of rules

The Obama administration is racing to make final a flurry of regulations affecting broad swaths of the economy, further riling US businesses in an election season that has already been tough on corporate interests.  Planned moves — across labor, health, finance and the environment — range from overtime pay for white-collar workers to more obscure matters such as requiring food makers to disclose added sugar on cartons of flavored milk.  The expected burst of regulation follows an intense few weeks in which the administration has targeted corporate tax inversions, imposed new rules on brokers and advanced restrictions on company relations with union organizers.  The moves have drawn sharp reactions from business groups. After the tax rules, a top US Chamber of Commerce official lamented “politicians bullying America’s job creators.” The head of the Business Roundtable, which represents big-company CEOs, criticized “unilateral action” by the administration.   The rush reflects President Barack Obama’s aim to use his final months in office to cement a progressive domestic-policy legacy using executive powers despite fierce opposition from a Republican-controlled Congress.  Business uncertainty from Washington may not change anytime soon. Presidential front-runners in both parties have shown greater hostility toward business in some ways, with Democrats promising stiffer regulation and Republicans calling for new tariffs or an end to subsidies.

 

In his first seven years, Mr. Obama issued 392 regulations deemed “major, ” meaning each carries an expected economic effect exceeding $100 million annually. Forty-seven more sat on the drawing board for this year. The tally issued already tops the totals during the eight-year tenures of George W. Bush, at 358, and Bill Clinton, at 361, according to an analysis by George Washington University’s Regulatory Studies Center.  Raw tallies can be imprecise because they obscure particularly consequential regulations. The Environmental Protection Agency’s clean power plant rules issued last year, for example, would require a 32% cut in power plant carbon dioxide emissions by 2030 from 2005 levels. Such a bid to address climate change aims to reshape how energy is produced in America. In February, the Supreme Court granted a temporary order blocking the regulation until courts resolve legal challenges.  Although Mr. Obama has until his term ends in January to make regulations final, a deadline looms this spring. Congress can vote to stop any regulation within 60 legislative days of its completion. The president can veto such resolutions.

 

If Republicans win the White House and maintain control of Congress, any rule issued by Mr. Obama within 60 legislative days of the end of his term could be overturned. That is because a Democratic president wouldn’t be there to veto a congressional vote to block the regulation.  To issue regulations and still leave 60 legislative days before Mr. Obama’s term ends, he has to issue them by mid-May.  Executive orders aren’t subject to such a review, though Congress could pass laws to constrain or undo them. On Tuesday, Mr. Obama said the Treasury’s latest action to deter corporate inversions stemmed from the failure of Congress to overhaul international tax laws. “My hope is that they start getting serious about it,” he said.  Democratic front-runner Hillary Clinton promises to defend Mr. Obama’s executive actions and go even further on inversions. “This is not only about fairness. This is about patriotism,” she said in December when she promised to stop inversions along the same lines as this week’s actions.  GOP candidates pledge to use the same powers to undo Mr. Obama’s agenda, blaming regulations in part for an economic expansion that has been slow to lift incomes. At the same time, Republican front-runner Donald Trump has repeatedly castigated Washington for failing to stem the tide of corporate inversions and other candidates pledge to roll back corporate welfare.

 

Some regulatory expansion stems from legislation. The health-care and financial regulatory laws passed in 2010 instructed regulators to fill in specifics later. The Affordable Care Act is responsible for around one in four major regulations issued in the Obama administration, according to the George Washington University tally.  That count doesn’t include many others, such as those created by the Dodd-Frank Act, because they are enforced mainly by agencies outside the executive branch, like the Consumer Financial Protection Bureau.   For workers, the administration has proposed doubling the salary threshold that generally determines which workers are eligible for overtime pay — raising it from its current level of $23,660, last updated in 2004, to $50,440. Hourly workers who earn salaries below the threshold would become eligible for overtime pay if they work more than 40 hours a week.  The Food and Drug Administration is preparing rules to update nutrition labeling on packaged foods and beverages to disclose added sugar. The labels would set the recommended intake of added sugar at no more than 10% of calorie intake.  All the rules face questions of how they will fare after Mr. Obama leaves. A court challenge offers opponents the best shot at directly stopping them, say analysts, but that takes time. Congress could curtail some through spending bills.

 

RealtyTrac – FHFA shuts door on renters

On Jan. 11, 2016, the Federal Housing Finance Agency (FHFA) released a new rule amending its regulation on membership in the Federal Home Loan Banking system. As the regulator for the Federal Home Loan Banks, FHFA decides which institutions are eligible to get the benefits of FHLBank membership, which include low cost financing for lenders in the housing sector.  By eliminating “captive insurers” from the definition of insurance company, FHFA has prohibited many private lending institutions, including mortgage REITs, from being able to compete on equal footing with member banks and insurance companies that make residential mortgage loans. Unfortunately, very few, if any, FHLBanks are active in lending to investor owners of single-family rental properties. Instead, these institutions focus their lending programs on owner-occupied properties. Therefore, the FHFA is creating another financial incentive for homeownership over renting.  The problem is that 43 million households in the United States are renters. By lowering the cost debt for owner-occupied homes, those who can afford to purchase a home get, indirectly, a financial windfall. Renters, on the other hand, get no such federal assistance.  The good news is that mortgage financing for landlords is now readily available from a number of private lenders, and on a much more limited scale from local banks and agency lenders. However, the cost of such financing remains higher than mortgage loans for owner occupied properties.  Let’s hope that Congress, which attempted to stop the new regulation in December, can pass legislation that may benefit the ever growing number of rental households; many of which can use the help.

 

MBA – mortgage bankers’ commercial/multifamily originations rise to near-record $504 billion in 2015

Commercial and multifamily mortgage bankers closed $503.8 billion of loans in 2015 according to the Mortgage Bankers Association’s (MBA) 2015 Commercial Real Estate/Multifamily Finance Annual Origination Volume Summation.  “Commercial real estate borrowing and lending in 2015 came within a whisker of the record high level of 2007,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.  “The volume was driven by improving property fundamentals, strong property values and very low interest rates.  Despite some credit market disruptions to start off this year and regulatory and other hurdles still ahead, many of those positive factors remain in place.” Commercial bank portfolios were the leading capital source in 2015, responsible for $138.6 billion of the total.  Commercial mortgage-backed securities (CMBS) saw the second highest volume, $99.4 billion, and were followed by life insurance companies and pension funds; Freddie Mac; Fannie Mae; and REITS, mortgage REITS and investment funds.  In terms of property types, multifamily properties saw the highest origination volume, $201.7 billion, followed by office buildings, retail properties, hotel/motel, industrial and health care.  First liens accounted for 97% of the total dollar volume closed.  The reported dollar volume of commercial and multifamily mortgages closed in 2015 was 26% higher than the volume reported in 2014.  Among repeat participants in the survey, the dollar volume of closed loans rose by 17%.

 

WSJ – US apartment market shows signs of losing steam

The apartment-rental market cooled in the first quarter, according to reports from three research companies, suggesting a six-year boom that has pushed the cost of housing to unaffordable heights in many US cities might be coming to an end.  The national vacancy rate, which has risen for three consecutive quarters, hit 4.5% in the first three months of the year, up from a recent low of 4.2% in the second quarter of 2015, according to market research firm Reis Inc.  Average rents, meanwhile, increased by 4.1% to $1,248 in the first quarter from a year earlier, compared with the 2015 first quarter’s 5% increase, according to Axiometrics Inc., an apartment research company.  Potentially most alarming to housing economists: Demand for new apartments in the first quarter was about half its typical level. The number of occupied new apartments across the country climbed by just over 20,000 units in the first quarter, compared with the five-year average of about 40,000 for the quarter, according to apartment tracker MPF Research. The firm’s analysts said they aren’t sure if the unexpectedly sharp drop will turn into a long-term trend.  The data suggest the bull market for apartments, which began in 2010, is on its last legs. “The past few years everything you touched was gold in the apartment industry, and that’s not going to be the case” this year, said Jay Parsons, vice president for MPF Research.  That’s partly because, over the next three years, developers are expected to build almost one million apartments in the US, more than the nearly 900,000 constructed during the previous three, according to Axiometrics.  “We can’t keep building and building and building and not see weakness enter the market,” said Ryan Severino, senior economist at REIS.

 

To be sure, in most markets across the US, rent growth is merely coming down from 15-year highs and vacancy rates are easing up from their lowest levels in as many years. Some developers and analysts predict 2016 will mark a return to a more normal market rather than a deep downturn.  The reports also tend to reflect larger, more expensive buildings owned by national apartment companies. For middle-class renters, the pain of rising rents is unlikely to ease soon because fewer apartments are being built in that price range.  Nonetheless, many of the country’s largest and hottest rental markets already are struggling. New York, San Francisco, Denver and Houston are all softening due to a flood of new construction and renters balking at prices that have risen sharply in recent years.  Developers in those markets are offering concessions such as a month or more of free rent to lure renters. In New York, the share of Manhattan rentals offering such concessions rose to nearly 14% from about 5% a year earlier, according to the Elliman Report by real-estate appraiser Jonathan Miller. The median rental price declined by 2.8% to $3,300, bringing an end to 24 consecutive months of rent increases, the report said.  Downtown rental buildings in the US could struggle the most as supply swells and vacancies climb. In Houston, rent growth has slowed for 13 of the past 14 months, according to Axiometrics. Rents inched up 0.7% in February, the firm said. Vacancies climbed to 6.6% from 5.8% in the same month last year.  Museum Tower, a 14-year-old building near downtown Houston, is offering new tenants between one and three months’ rent free in a few cases. With concessions, the monthly rent of a typical one-bedroom unit drops to $2,400 for the first year from $3,100. While concessions are common for brand-new buildings, they are much less common for older ones.  “At this point we’re overwhelmed with new product,” said Delaney Taylor, who manages the building.

 

In San Francisco, the market has pulled back from the nation’s second hottest to the middle of the pack. In the first quarter, the city dropped to No. 20, with rent growth of just over 5%, according to Axiometrics. In the 2015 first quarter, rents posted an annual growth of nearly 13%.  At the MB360, a new building in San Francisco’s Mission Bay, a longtime industrial neighborhood that is rapidly becoming a sea of boxy, midrise apartments, the developer is advertising one month of free rent plus free parking until the end of the year on some apartments, a $6,500 savings.  Oz Erickson, chairman of Emerald Fund, a San Francisco property-development fund, said he is offering a month of free rent at his new building, the Civic, where one-bedrooms start at about $3,300 a month. Last year, he said, concessions were scarce because there had been so little new construction.  In all, developers in San Francisco are expected to build 5,000 new apartment units this year, compared with about 2,500 last year, Reis said.  Mr. Erickson acknowledged the spike in construction but said continued strong job growth will ensure they get leased.  “There may be the python digesting the pig but the number o jobs is the key thing,” he said.

Black Knight – February mortgage monitor: negative equity rates improve, but lowest-priced homes continue to struggle

Black Knight – February mortgage monitor: negative equity rates improve, but lowest-priced homes continue to struggle

–  ​​Underwater borrower population fell by 31% in 2015 to 6.5% of all homeowners with a mortgage

–  Over half of underwater homes are in the bottom 20% of homes by price in their respective markets

–  Negative equity rate among lowest price tier is 16.2% and improving at a slower pace than all other tiers

–  Rate/term refinances on mortgages held for less than two years jumped by 800% from Q1 2014 to Q1 2015; and dropped by two-thirds from Q1 2015 to Q4 2015

–  37% of rate/term refinances in Q4 2015 included a term reduction.

 

The Data and Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of February 2016. This month, in light of its recent reports on rising equity levels nationwide, Black Knight looked at those on the other end of the spectrum and found that as of the end of 2015, there were still 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first and second lien housing debt. While negative equity rates continue to improve on the national level, the recovery is decidedly imbalanced in terms of both home price levels and geography. As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, borrowers whose homes are in the lowest tier of home prices continue to struggle with high negative equity rates.  “Throughout 2015, the negative equity population in the US decreased by over 30%, bringing another 1.5 million homeowners out from underwater on their mortgages,” said Graboske. “However, even after four years of improvement, the recovery has not reached all corners. When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20% of their respective markets. That’s the highest share on record. In fact, while the national negative equity rate is now 6.5%, for homes in the lowest price tier, it’s over 16%. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels – roughly two-and-a-half years longer than homes in the top 20%.”

 

The data also showed variation in negative equity improvement at the geographic level. In Nevada, where the Black Knight Home Price Index shows home prices still 34% below their peak, over 14% of borrowers are still underwater on their mortgages, the largest share in the nation. By volume, Florida leads the country with just under 500,000 underwater borrowers. Missouri was the only state to see its underwater population actually rise in 2015, due to falling home prices in the state.  This month, Black Knight also looked at recent refinance originations, finding that so-called “serial refinancers” played a large role in the rise and fall of refinance volumes throughout 2015 driven by interest rate fluctuations. Rate/term refinances from borrowers who had held their prior mortgages for less than two years jumped by 800% from Q1 2014 to Q1 2015 as interest rates dropped. Likewise, when rates rose toward the end of the year, this population dropped by nearly 65%, resulting in two-thirds of rate/term refinances in Q4 2015 stemming from borrowers who held their prior mortgages for more than four years. In addition, Black Knight found that term reductions have become an increasingly popular part of refinance transactions, with 37% of rate/term refinances in Q4 2015 including a term reduction. These two trends are linked, as term reductions are more popular among loans of a greater age, as those borrowers are understandably more hesitant to restart the clock on their mortgages. Finally, the data showed that $68 billion in equity was extracted via cash-out refinance transactions in 2015 – the most since 2009 and a 53% increase over 2014. Cash-out refinance borrowers continue to represent a relatively low risk profile for lenders; the average post-cash-out LTV is 67%, with an average credit score of just under 750.

 

As was reported in Black Knight’s most recent First Look release, other key results include:

​-  Total US loan delinquency rate:  4.45%

​-  Month-over-month change in delinquency rate:  -12.57%

​-  Total US foreclosure pre-sale inventory rate:  1.30%

​-  Month-over-month change in foreclosure pre-sale inventory rate:  -0.64%

​-  States with highest percentage of non-current loans:  MS, NJ, LA, NY, ME

​-  States with the lowest percentage of non-current loans:   AK, SD, MN, CO, ND

​-  States with highest percentage of seriously delinquent loans:  MS, LA, AL, AR, ME

 

Factory orders down 1.7% in February

New orders for US factory goods fell in February and business spending on capital goods was much weaker than initially thought, the latest indications that economic growth remained sluggish in the first quarter.  The Commerce Department said on Monday new orders for manufactured goods declined 1.7% as demand fell broadly, reversing January’s downwardly revised 1.2% increase. Orders have declined in 14 of the last 19 months.  February’s drop in factory orders was in line with economists’ expectations. Orders were previously reported to have increased 1.6% in January.  The report added to weak consumer spending and trade data in suggesting economic growth failed to pick up at the turn of the year after slowing to a 1.4% annualized pace in the fourth quarter.

 

WSJ – FHA provision limits bank liability on mortgage errors

A federal housing agency on Tuesday said it would make it easier for banks to avoid steep penalties for some errors committed during the mortgage process, in a bid to spark lending to less-creditworthy borrowers.  The Federal Housing Administration on Tuesday unveiled a new certification that lenders must attest to when making an FHA-backed mortgage.  The new provision limits banks’ liabilities for some loan errors. That could mean mortgages become easier to get for borrowers who qualify for government backing but have low credit scores or high debt.  The FHA doesn’t make loans. Instead it sells insurance that makes investors whole when a loan defaults. The FHA backs loans to home buyers or mortgage refinancers with a down payment of as little as 3.5% and a credit score of as low as 580 on a scale of 300 to 850.  Ed Golding, who heads the FHA, said the agency hopes the changes will make more loans available to borrowers with credit scores below 680, a group that in recent years has struggled to find lenders willing to make loans.  The certification is, in effect, a promise to the government. Under the current version of the certification, lenders promise that loan files contain no errors, a standard that some bank officials have said is difficult to uphold in complicated loan files. When government officials have found problems, they have used the certification to pursue lenders for triple damages under the False Claims Act, a Civil War-era law designed to punish vendors for defrauding the government.  The new certification attempts to limit those punishments to errors that result in the FHA backing a mortgage that shouldn’t have qualified. Under the old certification, for example, lenders believed that misstating a borrower’s income by one dollar could open them up to big liabilities.

US retail sales dip in Feb.; Barclays slashes GDP view

US retail sales fell less than expected in February, but a sharp downward revision to January’s sales could reignite concerns about the economy’s growth prospects.  The Commerce Department said on Tuesday retail sales dipped 0.1% last month as automobile purchases slowed and cheaper gasoline undercut receipts at service stations.  January’s sales were revised to show a 0.4% decline instead of the previously reported 0.2% increase. Economists polled by Reuters had forecast retail sales slipping 0.2% in February.  Following the data release, Barclays cut its US GDP forecast to 1.9% from 2.4%.  Retail sales excluding automobiles, gasoline, building materials and food services were unchanged after a downwardly revised 0.2% increase in January. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have risen 0.6% in January.  Last month’s weak reading, together with January’s modest gain, suggest that consumer spending will probably remain tepid in the first quarter after growing at a 2.0% annualized rate in the fourth quarter.

The report came as Federal Reserve officials prepared to gather for a two-day policy meeting. The US central bank is expected to leave interest rates unchanged as policymakers monitor developments on global financial markets, domestic inflation and the labor market.  The Fed hiked its benchmark overnight interest rate in December for the first time in nearly a decade.  A 4.4% drop in the value of sales at service stations weighed on retail sales last month. Gasoline prices dropped 9% in February, according to the US Energy Information Administration, as oil prices fell further.  Retail sales were also hurt by a 0.2% fall in sales at auto dealerships. Auto sales declined 0.2% in January.  Clothing store sales rose 0.9% last month. Receipts at building materials and garden equipment stores gained 1.6%, while sales at furniture stores fell 0.5%.  Sales at sporting goods and hobby stores rose 1.2% and sales at restaurants and bars increased 1.0%. Receipts at electronics and appliance stores slipped 0.1%. Online store sales dropped 0.2%

NAHB – builder confidence holds steady in March

Builder confidence in the market for newly-built single-family homes was unchanged in March at a level of 58 on the National Association of Home Builders(NAHB)/Wells Fargo Housing Market Index (HMI).  “Confidence levels are hovering above the 50-point mid-range, indicating that the single-family market continues to make slow but steady progress,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.  “However, builders continue to report problems regarding a shortage of lots and labor.”  “While builder sentiment has been relatively flat for the last few months, the March HMI reading correlates with NAHB’s forecast of a steady firming of the single-family sector in 2016,” said NAHB Chief Economist David Crowe. “Solid job growth, low mortgage rates and improving mortgage availability will help keep the housing market on a gradual upward trajectory in the coming months.”  The HMI component gauging current sales conditions held steady at 65 in March while the index measuring sales expectations in the next six months fell three points to 61. The component charting buyer traffic rose four points to 43.  Looking at the three-month moving averages for regional HMI scores, the Midwest posted a one-point gain to 58 while the South was unchanged at 59. The West registered a three-point decline to 69 while the Northeast fell one point to 46.

US Producer Price Index down 0.2% in Feb, in line with expections

US producers  prices fell in February on lower energy and food costs, but prices were unchanged from a year ago, suggesting the downward trend was near an end.  The Labor Department said on Tuesday its producer price index dropped 0.2% last month after edging up 0.1% in January. In the 12 months through February, the PPI was unchanged after falling 0.2% in January.  Get the market reaction here.  It was the first time since January 2015 that the year-on-year PPI did not decline. Economists polled by Reuters had forecast the PPI dipping 0.2% last month and gaining 0.1% from a year ago.  With the dollar losing some momentum after gaining 20% against the currencies of the United States’ main trading partners between June 2014 and December 2015, imported deflation is starting to wane. That could curb further declines in producer prices.  But oil prices, which tumbled by as much as 4% on Monday on concerns that a six-week market recovery has gone beyond fundamentals, remain a wild card. So far this year, the dollar has gained about 0.9% on a trade-weighted basis.  Prices for services were unchanged in February after rising for three straight months.  A key measure of underlying producer price pressures that excludes food, energy and trade services rose 0.1% last month after advancing 0.2% in January. The so-called core PPI was up 0.9% in the 12 months through February. That was the largest gain since July 2015 and followed a 0.8% increase in January.

MBA – refinance applications continue to drop

Mortgage applications decreased 3.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 11, 2016.  The Market Composite Index, a measure of mortgage loan application volume, decreased 3.3% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 3% compared with the previous week.  The Refinance Index decreased 6% from the previous week.  The seasonally adjusted Purchase Index increased 0.3% to its highest level since January 2016. The unadjusted Purchase Index increased 1% compared with the previous week and was 33% higher than the same week one year ago.  The refinance share of mortgage activity decreased to its lowest level since August 2015, 55.0% of total applications from 56.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.9% of total applications.  The FHA share of total applications decreased to 11.7% from 12.0% the week prior. The VA share of total applications decreased to 12.3% from 12.6% the week prior. The USDA share of total applications remained unchanged from 0.8% the week prior.

US housing starts rebound as single-family projects soar

US housing starts rebounded more than expected in February, hitting their highest level in five months, as builders ramped up the construction of single-family homes in a sign of confidence in the economy.  Groundbreaking increased 5.2% to a seasonally adjusted annual pace of 1.18 million units, the highest level since September, the Commerce Department said on Wednesday. January’s starts were revised up to a 1.12 million-unit rate from the previously reported 1.099 million-unit pace.  Economists polled by Reuters had forecast housing starts rising to a 1.15 million-unit pace last month.  The rebound in groundbreaking activity could lift first-quarter gross domestic product growth estimates, which were cut on Tuesday following February’s weak retail sales report. The housing sector is being supported by a firming labor market, which is encouraging young adults to leave their parents’ homes.

The increase in household formation has largely benefited the multi-family segment of the housing market as many young adults have student debts and little savings to purchase a home.  Labor and land shortages, however, remain a challenge for builders, a survey showed on Tuesday.  Last month, groundbreaking on single-family housing projects, the largest segment of the market, surged 7.2% to an 822,000-unit pace, the highest since November 2007.  Single-family starts in the West rose to their highest level since September 2007. In the South, where most home building takes place, single-family starts were unchanged.  Single-family starts soared 18.6% in the Midwest. Groundbreaking on single-family housing projects tumbled 12.5% in the Northeast, likely as ground remained too wet after a major snowstorm in January.  Housing starts for the volatile multi-family segment rose 0.8% to a 356,000-unit pace.  Building permits fell 3.1% to a 1.17 million-unit rate last month. Permits for the construction of single-family homes rose 0.4% last month, while multi-family building permits dropped 8.4%.

NAR – need for more single-family home construction

Over three-quarters of surveyed households would purchase a single-family home if they were to buy in the next six months, and 79% of renters would choose to buy outside of an urban area, according to the second installment of the National Association of Realtors® new quarterly consumer survey. The survey also found that confidence about now being a good time to buy is waning amongst renters, particularly in the West – where prices have solidly risen.  In NAR’s first quarter Housing Opportunities and Market Experience (HOME) survey, respondents were asked about their confidence in the US economy and various questions about their housing expectations and preferences, including a question on if they were to purchase a house in the next six months, what type of home and in what area would they choose to buy.  The survey data reveals an overwhelming consumer preference for single-family homes in suburban areas. Most current homeowners (85%) and 75% of renters said they would purchase a single-family home, while only 15% of homeowners and 21% of renters said that would buy in an urban area.

Heading into the spring buying season, NAR’s survey found that compared to the December 2015 survey the same share of homeowners (82%) but fewer renters (62% versus 68% last quarter) believe that now is a good time to buy.  Overall, respondents over the age of 65, those living in the Midwest and those with incomes over $100,000 were the most optimistic about buying now.  Among current homeowners, fewer (56%) believe it is a good time to sell compared to the fourth quarter of 2015 (61%). Amidst steep price increases and tight supply, respondents in the West were the most likely to think now is a good time to sell, while also being the least likely to think now is a good time to buy.  Among all households in the survey, less than half believe the economy is improving (48%), down from 50% in last quarter’s survey. Renters, those living in urban areas and respondents with lower incomes were the most optimistic. The HOME survey’s monthly Personal Financial Outlook Index of all households has slightly dipped (to 58.1) since December (59.6), but is mostly unchanged from March 2015 – reflecting stable confidence that respondents’ financial situation will be better in six months. Currently, renters, younger and lower income households and those living in urban areas are more optimistic about their future financial situation.

Across all age groups, when asked about their future buying preferences, survey responses were closely tied to each generation’s typical lifestyle, with younger buyers being more likely to consider buying a single-family home. Not surprisingly, renters and younger buyers would for the most part purchase larger homes, whereas older buyers would purchase similar or smaller sized homes.  Highlighting the apparent appetite for some older households to downsize and live in the city, respondents over the age of 65 were the most likely to consider a condo and nearly as likely as respondents under the age of 35 to consider purchasing in an urban area.  Most respondents indicated their preference to stay in a similar area to their current living situation if they were to buy in the next six months. Over two-thirds of those living in rural areas and 75% of those living in suburban areas would buy in a similar area. Only those living in an urban area would be more likely to move elsewhere, with a suburban area within 20 miles of the city being the most frequent choice of urban buyers moving to another type of area.

 

 

Blackstone to sell Strategic Hotels & Resorts to Anbang

Blackstone Group has agreed to sell Strategic Hotels & Resorts to a Chinese firm for $6.5 billion, CNBC has confirmed.  The agreement with China’s Anbang Insurance Group comes about three months since the private equity firm completed its acquisition of the luxury hotel operator.  Blackstone completed its acquisition of Strategic Hotels in December. That deal was valued at $3.93 billion, or about $6 billion, including debt.  A spokeswoman for Blackstone declined to comment Saturday. An email to a media representative at Anbang was not immediately returned.  Beijing-based Anbang has been investing in luxury US hotel properties, including its acquisition of the Waldorf Astoria in New York last year for $1.95 billion.  Buying Strategic Hotels gives Anbang a host of high-end hotels and resorts in a single move.  Strategic Hotels’ portfolio is comprised of 16 properties with 7,532 rooms as well as meeting and banquet space. Among the properties are Ritz-Carlton locations in California, the Fairmont Scottsdale in Arizona, and the Four Seasons Resort in Jackson Hole, Wyoming.

2 Million Across South Brace for Devastating Flooding

Around 2 million people across the South braced for more devastating flooding and hail on Monday after days of relentless rain and violent thunderstorms left six dead and triggered evacuations.  Flash-flood warnings were issued in Louisiana, Missouri and Tennessee overnight and into the morning, according to the National Weather Service.  Parts of Kentucky, Tennessee, Arkansas, Mississippi, Alabama, Louisiana and Texas were also under flood or river warnings as of around 5 a.m. on Monday, Weather Channel meteorologist Kevin Roth said.  Some 12 tornadoes or possible tornadoes were reported in Arkansas Sunday and overnight, Roth added. No injuries or deaths were reported.  The ongoing storm was aggravating flooding in major rivers, especially along the Louisiana-Texas border, with some 3,300 residents having been evacuated in Louisiana alone, The Associated Press reported. President Barack Obama signed an order declaring the flooding in Louisiana a major disaster on Sunday.  Emergency responders had conducted more than 60 water rescues by around 11 p.m. Sunday (midnight ET), the department announced. Flood warnings would remain in effect until 7 a.m. (8 a.m. ET).  The flooding has already proved deadly. A 78-year-old man drowned Saturday night near Clarence, Louisiana, while trying to get to his home in an aluminum boat to retrieve personal items, the Natchitoches Parish Sheriff’s Office said.

Oil back below $40 as Iran dashes hopes for quick deal on output

Oil fell around 3% on Monday after Iran dashed hopes of a coordinated production freeze any time soon, returning bearish sentiment to the market over a supply glut that has sent prices crashing.  Global benchmark Brent crude futures fell back below $40 a barrel, trading at $39.28, down $1.08 on Friday’s close. Brent hit a 12-year low of $27.10 in January.  US crude was down 95 cents at $37.54 a barrel.  Iran’s oil exports are due to reach 2 million bpd in the Iranian month that ends on March 19, up from 1.75 million in the previous month, he said.  Worries about demand fundamentals moved back into the spotlight as investment bank Morgan Stanley warned that a slowing global economy and high production would prevent any sharp rises in oil prices.  In a sign that investors are growing more skeptical about a rebound in oil prices, ICE data showed on Monday that speculators had cut net long Brent crude positions by 9,500 contracts in the week ending March 8.

CoreLogic – 1 Million US Borrowers Regained Equity in 2015

CoreLogic released a new analysis showing 1 million borrowers regained equity in 2015, bringing the total number of mortgaged residential properties with equity at the end of Q4 2015 to approximately 46.3 million, or 91.5% of all mortgaged properties. Nationwide, borrower equity increased year over year by $682 billion in Q4 2015. The CoreLogic analysis also indicates approximately 120,000 properties lost equity in the fourth quarter of 2015 compared to the third quarter of 2015.  The total number of mortgaged residential properties with negative equity stood at 4.3 million, or 8.5%, in Q4 2015. This is an increase of 2.9% quarter over quarter from 4.2 million homes, or 8.3%, in Q3 2015* and a decrease of 19.1% year over year from 5.3 million homes, or 10.7%, compared with Q4 2014.  Negative equity, often referred to as “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or a combination of both.  For the homes in negative equity status, the national aggregate value of negative equity was $311 billion at the end of Q4 2015, increasing approximately $5.5 billion, or 1.8%, from $305.5 billion in Q3 2015. On a year-over-year basis, the value of negative equity declined overall from $348 billion in Q4 2014, representing a decrease of 10.7% in 12 months.

Of the more than 50 million residential properties with a mortgage, approximately 9.5 million, or 18.9%, have less than 20% equity (referred to as “under-equitied”) and 1.2 million, or 2.3%, have less than 5% equity (referred to as near-negative equity). Borrowers who are under-equitied may have a difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall.  “In Q4 of last year home equity increased by $680 billion or 11.5%, the 13th consecutive quarter of double digit growth,” said Frank Nothaft, chief economist for CoreLogic. “The improvement in equity reflects positive home prices and continued deleveraging of mortgage balances by households.” “The number of homeowners with more than 20% equity is rising rapidly,” said Anand Nallathambi, president and CEO of CoreLogic. “Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation and ultralow interest rates are also factors. Looking ahead in 2016, we expect home equity levels to continue to build, which is a good thing for the long-term health of the US economy.”

Highlights as of Q4 2015:

–  Nevada had the highest percentage of mortgaged residential properties in negative equity at 18.7%, followed by Florida (17.1%), Illinois (14.6%), Arizona (14%), and Rhode Island (13.5%). These top five states combined account for 30.8% of negative equity in the US, but only 16.5% of outstanding mortgages.

–  Texas had the highest percentage of mortgaged residential properties in positive equity at 98%, followed by Alaska (97.6%), Hawaii (97.6%), Montana (97.3%) and Colorado (97.1%).

–  Of the selected 10 metropolitan areas, Miami-Miami Beach-Kendall, FL had the highest percentage of mortgaged properties in negative equity at 22%, followed by Las Vegas-Henderson-Paradise, NV (21.3%), Chicago-Naperville-Arlington Heights, IL (16.7%), Washington-Arlington-Alexandria, DC-VA-MD-WV (11%) and Boston, MA (6.3%).

–  Of the same 10 metropolitan areas, San Francisco-Redwood City-South San Francisco, CA had the highest percentage of mortgaged properties in a positive equity position at 99.3%, followed by Houston-The Woodlands-Sugar Land, TX (98.1%), Denver-Aurora-Lakewood, CO (98%), Los Angeles-Long Beach-Glendale, CA (95.5%) and New York-Jersey City-White Plains, NY-NJ (93.8%).

–  Of the total $311 billion in negative equity nationally, first liens without home equity loans accounted for $171 billion, or 55%, in aggregate negative equity, while first liens with home equity loans accounted for $140 billion, or 45%.

–  Approximately 2.6 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $240,000 and the average underwater amount is $65,000.

–  Approximately 1.7 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $304,000 and the average underwater amount is $82,000.

–  The bulk of positive equity for mortgaged residential properties is concentrated at the high end of the housing market. For example, 95% of homes valued at $200,000 or more have equity compared with 87% of homes valued at less than $200,000.

US import prices fell 0.3% in Feb vs 0.6% drop expected

US import prices fell in February for an eighth straight month, weighed down by declining costs for petroleum and a range of other goods, but the pace of decline is slowing as the dollar’s rally fades and oil prices stabilize.  The Labor Department said on Friday import prices slipped 0.3% last month after a revised 1.0% decrease in January. Import prices have decreased in 18 of the last 20 months, reflecting a robust dollar and plunging oil prices.  They were down 6.1% in the 12 months through February. That was the smallest year-on-year drop since December 2014.  Economists polled by Reuters had forecast import prices slipping 0.6% last month after a previously reported 1.1% fall in January.  Last month, imported petroleum prices fell 4.0% after plummeting 14.3% in January. Import prices excluding petroleum dipped 0.1% after being unchanged in January.  Imported food prices fell 2.0% last month, the largest drop since February 2012, while prices for industrial supplies and materials excluding petroleum slipped 0.3%. Prices for imported capital goods were unchanged and the cost of imported automobiles fell 0.1%.  The report also showed export prices fell 0.4% in February after sliding 0.8% in January. Export prices were down 6.0% from a year ago.

MBA – applications for new home purchases increased in February

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for February 2016 shows mortgage applications for new home purchases increased by 24% relative to the previous month. This change does not include any adjustment for typical seasonal patterns.  “Mortgage applications to homebuilder affiliates increased across the board in our survey for February as continued low interest rates and fairly mild weather helped to kick off the spring buying season. Our estimate of new single family home sales for February comes in at 544,000 on a seasonally adjusted basis, nearly 12% above February a year ago,” said Lynn Fisher, MBA’s Vice President of Research and Economics.  By product type, conventional loans composed 67.7% of loan applications, FHA loans composed 18.7%, RHS/USDA loans composed 0.8% and VA loans composed 12.8%. The average loan size of new homes increased from $325,806 in January to $328,370 in February.

The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 544,000 units in February 2016, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.  The seasonally adjusted estimate for February is an increase of 9% from the January pace of 499,000 units. On an unadjusted basis, the MBA estimates that there were 47,000 new home sales in February 2016, an increase of 23.7% from 38,000 new home sales in January.  MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.

Trump may be proven right on China tariffs: Chang

If Donald Trump were to become president, he would not be able to start a trade war with China, said Gordon Chang, author of “The Coming Collapse of China.” That’s because the Chinese have already been targeting American businesses, he said Friday.  In Thursday night’s Republican presidential debate, Trump clarified his call for a 45% tariff on Chinese goods. “The 45% is a threat that if they don’t behave, if they don’t follow the rules and regulations so that we can have it equal on both sides, we will tax you.”  Republican presidential candidate Donald Trump speaks at a campaign rally at the Crown Center Coliseum in Fayetteville, N.C.  “People say [Trump] would start a trade war. Well, no matter what The Donald does he can’t start a trade war because we’re already in a trade war with China. But only they are waging it,” Chang told CNBC. “The question is how do we end it on terms not only advantageous to the United States but also to the international community.”  “China is [also] stealing intellectual property from the United States,” he said, pointing to the 2013 IP Commission Report. “The dimension of that is somewhere maybe $200 billion to $300 billion a year. That is a war in a sense.”  Trump called Beijing “the grandmaster of all” when it comes to currency manipulation and free trade cheating. Trump also told “Squawk Box” that global currency devaluation efforts are hurting the US and costing American jobs.  Chang said Trump’s assertion that China is devaluing the yuan is incorrect because Chinese policymakers are actually intervening to boost the currency to prevent capital flight. China’s central bank on Friday guided the yuan higher against the dollar by the fastest pace this year.  If this trend continues, a higher Chinese currency would actually be “helping American exporters,” making US goods sold there cheaper, Chang said.

WSJ – this spring, expect higher home prices

As winter draws to a close, homeowners coming out of hibernation are looking for new homes. And those who sleep too late can expect to pay top dollar for the house they want.  Buyers are anticipated to outnumber sellers this spring, creating a shortfall in inventory that is driving up asking prices, says Lawrence Yun, chief economist for the National Association of Realtors, or NAR.  “Given that prices are rising, more people will be pushed on the borderline of conventional mortgage limits and may need a large down payment or a jumbo mortgage,” Mr. Yun says. Jumbo mortgages have limits higher than conforming loan limits of $417,000 and up to $625,500 in some high-priced areas.  The nationwide median price for an existing single-family home was $213,800 in January, up 8.2% from this time a year ago, according to NAR. Price appreciation was at the highest rate since April 2015 and part of a 47-month upward trend of gains. ( News Corp, which owns The Wall Street Journal, also owns Realtor.com, NAR’s listing website.)  Lenders also are predicting a busy borrowing season. “There’s a decade of pent-up demand,” says Bob Walters, chief economist of Quicken Loans. With loans volume for home purchases at its highest level in four months, and low interest rates fueling a mini-refinance boom, buyers seeking the best mortgage deals should ask lenders how long closings are taking, Mr. Walters says.

Borrowers got a sweet surprise when mortgage rates fell earlier this year—despite the Federal Reserve’s short-term rates increase in December. The average interest rate for a 30-year, fixed-rate jumbo mortgage was 3.75% for the week ending March 4, according to mortgage rate website HSH.com.  Rates aren’t expected to rise above 4% before May, says Keith Gumbinger, vice president of HSH.com. With a softened economy, the Fed isn’t predicted to raise short-term rates at its March meeting, with the next opportunity being June, he adds.  To avoid traffic jams that could delay closings, get into the market sooner, advises Paul Anastos, president of the Walpole, Mass.-based Mortgage Master, a division of Foothill Ranch, Calif.-based loanDepot. He compares it to morning traffic gridlock: “Every minute later you leave costs you 10 minutes,” he adds. “Every day, the audience looking for houses increases exponentially.”  Mr. Anastos also advises borrowers to skip prequalification, which is based on stated income and assets, and go to the full step of preapproval, which requires submitting full documentation to an underwriter, Mr. Anastos says. b Preapproval can save as much as seven to 10 days in the closing period, Mr. Anastos says. “If you find a home this weekend, you look highly competitive.” he adds.  One silver lining of rising home prices is greater lender confidence in jumbo mortgages, leading to looser credit qualification, Mr. Walters says. Borrowers typically need a credit score of 740 or more to secure the best interest rates, but now most lenders will accept a 700 score, and some will take a 680 or occasionally even lower, he adds. And while a 20% down payment remains the industry standard for jumbos, more lenders are also offering lower down payment jumbos (15% or even 10% down), Mr. Walters says.

Here are a few more tips for jumbo borrowers:

–  Appraisals may come in low. Sales are contingent on a home appraisal, and if the home doesn’t appraise at the price offered, the borrower may have to come up with more cash, says Norman T. Koenigsberg, president and CEO of East Brunswick, N.J.-based First Choice Loan Services. About 10% of First Choice applicants’ homes have been appraising under market prices. Until spring sales begin to close, appraisers may be comparing prices of homes sold as far back as October with current prices, he adds.

–  Save money on shorter stay. Most jumbo borrowers are locking in fixed-rate loans, but those who expect to relocate within five to 10 years can still get the lowest rates with adjustable-rate mortgages, Mr. Koenigsberg says. Average rates for the five-year ARM on March 4 were 2.84%, according to HSH.com.

–  Longer lock-ins. The typical rate lock is 45 days, but if a borrower is preapproved and still looking, many lenders will lock longer for a slight premium, usually one-eighth to one-half a percentage point, Mr. Walters says.

CoreLogic – 38,000 completed foreclosures in January 2016

CoreLogic released its January 2016 National Foreclosure Report which shows the foreclosure inventory declined by 21.7% and completed foreclosures declined by 16.2% compared with January 2015. The number of completed foreclosures nationwide decreased year over year from 46,000 in January 2015 to 38,000 in January 2016. The number of completed foreclosures in January 2016 was down 67.6% from the peak of 117,743 in September 2010.  The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6.1 million completed foreclosures across the country, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 8.2 million homes lost to foreclosure.  As of January 2016, the national foreclosure inventory included approximately 456,000, or 1.2%, of all homes with a mortgage compared with 583,000 homes, or 1.5%, in January 2015. The January 2016 foreclosure inventory rate has been steady at 1.2% since October of 2015 and is the lowest for any month since November 2007.

CoreLogic also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due, including loans in foreclosure or REO) declined by 22.5% from January 2015 to January 2016, with 1.2 million mortgages, or 3.2%, in this category. The January 2016 serious delinquency rate is the lowest in eight years, since November 2007.  “In January, the national foreclosure rate was 1.2%, down to one-third the peak from exactly five years earlier in January 2011, a remarkable improvement,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The months’ supply of foreclosure fell to 12 months, which is modestly above the nine-month rate seen 10 years earlier and indicates the market’s ability to clear the stock of foreclosures is close to normal.”  “The improvement in distressed properties continues across the country in every state which is contributing to the lack of stock of available homes and resulting price escalation in many markets,” said Anand Nallathambi, president and CEO of CoreLogic. “So far the trend toward lower delinquency and foreclosures has been immune from shocks from such things as the collapse in oil prices attesting to the durability of the housing recovery.”

Additional January 2016 highlights:

–  On a month-over-month basis, completed foreclosures increased by 16.4% to 38,000 in January 2016 from the 33,000 reported in December 2015.

–  As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.

–  On a month-over-month basis, the foreclosure inventory was down 1.6% in January 2016 compared to December 2015.

–  The five states with the highest number of completed foreclosures for the 12 months ending in January 2016 were Florida (74,000), Michigan (49,000), Texas (29,000), California (25,000) and Ohio (24,000). These five states accounted for almost half of all completed foreclosures nationally.

–  Four states and the District of Columbia had the lowest number of completed foreclosures for the 12 months ending in January 2016: the District of Columbia (97), North Dakota (298), Wyoming (551), West Virginia (589) and Alaska (707).

–  Four states and the District of Columbia had the highest foreclosure inventory rates in January 2016: New Jersey (4.3%), New York (3.5%), Hawaii (2.4%), Florida (2.3%) and the District of Columbia (2.3%).

–  The five states with the lowest foreclosure inventory rate in January 2016 were Alaska (0.3%), Minnesota (0.4%), Colorado (0.4%), Arizona (0.4%) and Utah (0.4%).

US wholesale inventories unexpectedly rise on weak sales

US wholesale inventories unexpectedly rose in January as sales tumbled, suggesting that efforts by businesses to reduce an inventory overhang could persist well into 2016 and restrain economic growth.  The Commerce Department said on Wednesday wholesale inventories increased 0.3% in January. December inventories were revised up to show them unchanged instead of the previously reported 0.1% dip.  Economists polled by Reuters had forecast inventories falling 0.2% in January.  Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP —wholesale stocks excluding autos — edged up 0.1% in January.  Government data last week showed businesses had made less progress than initially thought reducing the inventory bloat in the fourth quarter. Inventories subtracted just over one-tenth of a percentage point from fourth-quarter GDP growth.  Businesses accumulated record inventory in the first half of 2015, which outpaced demand. Though the pace of accumulation slowed, inventories remained high in the second half of the year, posing a downside risk to 2016 GDP growth.  A report last week showed inventories at factories fell in January for a seventh straight month.  In January, sales at wholesalers declined 1.3% after sliding 0.6% in December. At January’s sales pace it would take 1.35 months to clear shelves, the highest ratio since April 2009, compared with 1.33 months in December.  That high ratio suggests the so-called inventory correction at wholesalers could continue for a while and hurt manufacturing and overall economic growth.

MBA – purchase apps up

Mortgage applications increased 0.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 4, 2016.  The Market Composite Index, a measure of mortgage loan application volume, increased 0.2% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 1% compared with the previous week.  The Refinance Index decreased 2% from the previous week.  The seasonally adjusted Purchase Index increased 4% to the highest level since January 2016. The unadjusted Purchase Index increased 6% compared with the previous week and was 30% higher than the same week one year ago.  The refinance share of mortgage activity decreased to 56.7% of total applications from 58.6% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.2% of total applications.  The FHA share of total applications remained unchanged at 12.0% from the week prior. The VA share of total applications increased to 12.6% from 12.1% the week prior. The USDA share of total applications increased to 0.8% from 0.7% the week prior.

Student debt load growing, so are delinquencies

As student loan debt piles up, defaults rates are accelerating and posing a threat to future economic growth, according to Federal Reserve experts.  The explosion of student loan debt over more than a decade, and particularly since the Great Recession, has been a worry spot for economists as the trend has accelerated. A paper this month from Don E. Schlagenhauf and Lowell R. Ricketts at the St. Louis Fed’s Center for Household Financial Stability crystallizes the problem.  As the financial crisis and accompanying recession hit, consumers retreated on debt. Where household levels grew at an annualized rate of close to 10% before the recession, they’ve been rising at less than 1% since, according to Fed data.  And since growth rates in debt began to accelerate around 2012, some 90% of new debt has come in auto and student loans, according to Schlagenhauf and Ricketts. However, while auto debt balances have merely returned to around where they were in 2003, student loan debt has accelerated dramatically — up about 58% during the same period to an average of $25,000 per borrower. That’s more than double the average auto balance of $12,200.  As the two researchers summarized:  “Student loan debt was largely immune to post-recession deleveraging and is growing faster than any other type of debt. Much of the new student loan debt is being accumulated by younger age groups. Also, the serious delinquency rate for student loan borrowers has increased steadily since before the recession. Thus, rising delinquency rates imply that many young borrowers will find their access to credit and ability to save diminished at the outset of their economic lives. This may present a significant headwind for the aggregate economy.”

NAR – generational survey: millennials increasingly buying in suburban areas

A growing share of homebuyers are millennials, and more of them are purchasing single-family homes outside of urban areas, according to the 2016 National Association of Realtors (NAR) Home Buyer and Seller Generational Trends study, which evaluates the generational differences1 of recent home buyers and sellers. The survey additionally found that although student loan debt is more prevalent among millennial buyers, they aren’t the generation with the largest student debt balances.  The share of millennials buying in an urban or central city area decreased to 17% (21% a year ago) in this year’s survey, and fewer of them (10%) purchased a multifamily home compared to a year ago (15%). Overall, the majority of buyers in all generations continue to purchase a single-family home in a suburban area, and the younger the buyer, the older the home they purchased.  For the third straight year, the largest group of recent buyers were millennials, who composed 35% of all buyers (32% in 2014), more than the combined amount of younger and older boomers (31%). Generation X were 26% of buyers, and the Silent Generation made up 9%.

This year’s survey underlined the challenges debt had on some buyers’ ability to purchase a home. While debt delayed saving for a down payment for a median of four years for all buyers, the number of years postponed increased from three years for millennials to six years for older boomers.  Among the share of buyers who said saving for a down payment was the most difficult task, millennials were most likely to cite student debt (53%) as the debt that delayed saving, while credit card debt was indicated more by Gen X (44%) and younger boomers (36%).  Student debt is likely impacting more than just the millennial generation’s ability to buy a home.  This year’s study found that 86% of all buyers in the past year financed their purchase (88% a year ago). Younger buyers who financed their home purchase most often relied on savings for their down payment, whereas older buyers were more likely to use proceeds from the sale of a primary residence.  Overall, the median downpayment ranged from 7% for millennial buyers to 21% for older boomers and the Silent Generation. Nearly a quarter (23%) of millennials cited a gift from a relative or friend – typically their parents – as a source of their down payment.

The median income of millennial homebuyers in this year’s survey was $77,400 ($76,900 in 2014), and they typically bought a 1,720-square foot home costing $187,400 ($180,900 a year ago). The typical Gen X buyer was 42 years old, had a median income of $104,700 ($104,600 a year ago) and typically purchased the largest home compared to other generations (2,200-square feet), costing $263,200 ($250,000 last year).  Generation X buyers (71%) were the most likely to be married, younger boomers had the highest share of single female buyers (20%), and 12% of millennial buyers were an unmarried couple.  This year’s survey found that the millennial generation’s desire to own a home of their own as the primary reason for their purchase is increasing, up to 48% (39% a year ago). The desire for a larger home was the highest among Gen X buyers (16%), and older boomers (at 20%) were the most likely to buy because of retirement.  Nearly all buyers predominantly used the Internet and a real estate agent during the home search process. Eighty-seven% of millennials and Gen X buyers used an agent, and they were also the most likely to use mobile or tablet applications and mobile or tablet search engines during their search. Gen X buyers were the most likely to visit an open house.  NAR President Tom Salomone says buyers of all ages continue to seek the advice and guidance of Realtors. “Supply shortages, strong competition and rising home prices in today’s market can make buying a home very stressful,” he said. “While the Internet is the initial go-to destination to search for available listings, consumers want the expertise and insights of a Realtor® to help them find the right home within their budget.”

Gen X buyers represented the largest share of single-family homebuyers at 89% (85% a year ago), and younger boomers were the most likely to purchase a townhouse or row house (9%). A combined 3% of millennial buyers bought an apartment, condo or duplex in a building with two or more units (7% a year ago).  Among the biggest factors influencing neighborhood choice, millennials were most influenced by the quality of the neighborhood (63%) and convenience to jobs (60%); convenience to schools was most desired by Gen X buyers, and proximity to friends and family by the Silent Generation.  Those more likely to be trading up (Gen X homeowners) or trading down (older boomers) represented the largest share of sellers in the past year, at 25% and 24%, respectively. Millennials – also likely to be move-up buyers – stayed in their home the shortest amount of time before selling (five years).  Even though younger sellers were more likely to need a larger home or move because of job relocation, older boomers were far more likely to move further away. Sellers overall moved a median distance of 20 miles, with older boomers traveling the furthest at 75 miles.  Across every generation at 88% or above, sellers overwhelmingly used a real estate agent or broker to sell their home. When asked what sellers wanted most from their real estate agent, younger sellers were more likely to want their agent to help price their home competitively or sell within a specific timeframe, whereas help finding a buyer was desired more by younger and older boomers.

Zillow – Q4 2015 negative equity: when abnormal is the new normal

–  More than 6 million homeowners were underwater in the fourth quarter of 2015, down from a peak of almost 16 million in the first quarter of 2012.

–  The Q4 negative equity rate dropped 0.3 percentage points from Q3, to 13.1%, the slowest pace in a year.

–  More than 20% of homeowners in Las Vegas and Chicago were underwater in Q4.

It’s no secret that high levels of negative equity cause housing markets to act abnormally. But that doesn’t mean that some amount of negative equity isn’t normal, or that persistently elevated rates of negative equity aren’t rapidly becoming the new normal in dozens of markets nationwide. The US negative equity rate – the share of mortgaged homeowners that are underwater, owing more on their home than it is worth – fell to 13.1% in the fourth quarter, from 13.4% in Q3 and 16.9% a year ago. The national negative equity rate has fallen or stayed flat for 15 straight quarters after peaking in the first quarter of 2012 at 31.4%, though fell at its lowest rate in a year in the fourth quarter. Roughly 6.3 million American homeowners with a mortgage were underwater in the fourth quarter, down from about 8.7 million a year ago.  We’ve written extensively about the many de-stabilizing effects of high negative equity – including its impact on inventory, on days on market for those homes that are for sale and how it elevates the risk of foreclosure for deeply underwater homeowners. And it’s worth repeating that despite steady improvement nationally and in most markets, negative equity looks set to impact the market for many years to come.  But it’s also important to remember that some negative equity is normal in any housing market, and that a 0% negative equity rate is virtually impossible, even in the hottest and/or healthiest housing markets. And this is because of a simple fact that is easy to forget when things are going well: some homes always lose value, for any number of reasons. And when homes lose enough value, negative equity rears its ugly head.

There are only a handful of ways to get rid of negative equity. An underwater homeowner can fall into foreclosure, and when their home is re-possessed, all debt associated with that home is erased and the slate is wiped clean. An underwater homeowner can also try to negotiate a short sale with their lender, persuading their bank to accept less in a home sale than the outstanding balance on a mortgage. Similarly, if the lender refuses to accept a short sale, a seller can bring their own money to the closing table to make up the gap between the sale price and the amount left on their mortgage.  All three of these things happen every day, in virtually every market, and do have some impact on overall negative equity rates. But by far the most efficient way of reducing negative equity is to simply wait for a home’s value to grow to a point where its value exceeds the balance on the homeowner’s mortgage.  Nationwide, home values have grown on a year-over-year basis for 43 straight months, contributing mightily to the 15-quarter streak of falling or flat negative equity noted above. Moreover, the pace of US home value growth has picked up lately, growing at a faster or equal annual rate from the prior month in each of the past 10 months.  But home value growth in the aggregate doesn’t mean that every individual home is growing in value. Far from it. In January, the value of the typical US home grew by 4.2% year-over-year. But at the same time, more than a quarter of all individual US homes (27.6%) lost value over the past year. In other words, a rising tide doesn’t lift all boats.  And even the nation’s fastest-growing markets can’t escape negative equity and the fact that some homes will always lose value, pretty much no matter what. Take San Jose, for example, the epicenter of Silicon Valley and one of the country’s fastest-growing housing markets for the past few years. In January, the median home value in San Jose grew by 12.9% year-over-year, a rate roughly triple the national average that nevertheless represents a slowdown from recent months. But even in this super-hot market, 8.4% of local homes lost value year-over-year in January, and negative equity remains – 2.8% of homeowners with a mortgage in San Jose were underwater at the end of the fourth quarter.

Homes lose value for a lot of reasons. Maybe the city or county where they’re located has fallen on tough times, and local homes aren’t as desirable as they used to be. Maybe the home itself is in a far-flung or undesirable location, or has fallen into disrepair. Maybe a homeowner needs to sell their home in a rush, and is willing to sell it for less than he otherwise might if given more time. Maybe a seller simply can’t find a buyer willing to pay what she paid for the home, or even one willing to pay off what remains of her mortgage. No matter the cause – be it a simple matter of circumstance or an indicator of larger economic problems – home values can and will fall.  So, what does all this mean for negative equity? It means that at 13.1%, negative equity is still at higher levels than we’d see in more normal times. It also means there’s substantial room for continued slow improvement like we’ve been seeing for the past few quarters. But it does not mean negative equity will one day fully disappear from the market if we only wait long enough. And, sadly, it may mean that some deeply underwater homeowners – particularly those roughly 820,000 Americans that owe more than twice on their mortgage than what their home is worth – may realistically never get out of negative equity without going into foreclosure or trying to arrange a short sale. The best they may be able to hope for is to pay off their mortgage over time or somehow all at once, and at least break even.  For the rest, negative equity will be a part of their lives and their local market for many years to come, becoming an unwanted but undeniable part of their new normal.

Nationwide, negative equity remains concentrated largely in the Southwest and Midwest. Of the 35 largest metro areas covered by Zillow, the negative equity rate was highest in Las Vegas (20.9%), Chicago (20.5%) and Atlanta (17.6%). Large metros where negative equity was the lowest in the fourth quarter were San Jose (2.8%), San Francisco (4.4%) and Denver (5.5%).  Among the 35 largest markets covered, 18 had a negative equity rate lower than the national average of 13.1% in the fourth quarter, and 17 had a higher rate of negative equity.  Technical negative equity is easy to define: If the balance on your mortgage exceeds the value of your home, you’re underwater. But even if you have some positive equity, you could still be trapped in the no-man’s land of “effective” negative equity. These homeowners may have some equity in their home, but likely not enough to sell it and use the proceeds to comfortably afford the down payment and other costs associated with buying a new home. Markets with high effective negative equity, even if their official negative equity rate is relatively low, can still experience many of the same challenges presented by negative equity. Including those homeowners with less than 20% equity in their home, the US effective negative equity rate jumps to 29.6% of homeowners with a mortgage (figure 3). Areas with the highest effective negative equity rates include Las Vegas (40.7%), Chicago (37.8%) and Kansas City (37.7%).

Outlook

Even though the number of underwater homeowners has fallen significantly since the peak of the housing crisis, negative equity persists in many markets as it fell at its slowest pace in a year. Things are moving in the right direction, but some owners are still deeply underwater. As we move into the home shopping season, inventory is already low, and negative equity is keeping potential additional stock from becoming available.

WSJ – now coming to the commercial-property market: defaults

For nearly a decade, the 14-story Houston office building called Northborough Tower proved a reliable investment for fund manager Behringer Harvard, staying fully leased and generating millions in profit.  But now the gleaming building is being surrendered to creditors. Its $21 million mortgage came due in January, and Behringer Harvard wasn’t able to find buyers willing to pay more than that. At the same time, its only tenant is leaving and the Houston office market is reeling from low oil prices.  New signs of weakness are surfacing in the commercial-property market, ending a half-decade run of improvement with steadily climbing values. Amid global shifts like the sluggish Chinese economy and a new era of low oil prices, defaults on loans are popping up in areas that were considered overheated, occurring in small numbers for now, but stoking fears that more could be on the way.  This comes as there is a growing view that the best days are in the past for this property cycle, which benefited strongly from low interest rates and demand by global investors from regions like China and oil-dependent economies in the Middle East.  “We’re at the top of the market,” said Kenneth Riggs, president of Situs RERC, a real-estate research firm that advises investors on property values and market direction. “There’s going to be a market correction.”

If there is a downturn, few expect it to be severe because the economy is still creating a healthy level of jobs and lending has been far less aggressive than in past booms like 2007, when highly leveraged developers defaulted as the market slowed. Developers back then were routinely able to secure debt for more than 90% of the value of a building, compared with less than 80% today.  Any correction now, Mr. Riggs said, will be “let’s call it, manageable.”  Still, there are several pockets of concern.  The Northborough Tower is one of numerous office buildings in which debt is coming due in the Houston area, where the amount of office space vacant or soon to be available for lease was 23% at the end of 2015, up from 17.8% a year earlier, according to real-estate services firm Savills Studley. With vacancy expected to rise further still, investors are staying away from the area and lenders have grown particularly wary.  Worse yet are the oil-drilling boomtowns in west Texas and North Dakota, where apartment rents have plunged thanks to a growing level of new supply hitting the market at the same time that low oil prices have sapped demand.  A similar effect can be seen in New York, where the condominium market aimed at the superrich has slowed just as a wave of towers are hitting the market.  “The for-sale condo business has dramatically slowed at all price points and in all neighborhoods,” said Steven Roth, chief executive of Vornado Realty Trust, during an earnings call last month. The company is building a 950-foot condo tower on Central Park South.

In turn, lenders have eschewed the sector, leaving developers who paid high prices for land unable to pay off their debts.  Such is the case for the Bauhaus Group, a developer that had planned a slim, tall condo tower on Manhattan’s East Side but is now fighting in court with lenders seeking to foreclose after the owner didn’t repay $147 million in debt.  Another developer, Ian Bruce Eichner, is facing a similar attempt to seize his site in Harlem, where he had planned a 680-apartment rental project.  A spokesman for Mr. Eichner has previously said the capital markets have retrenched and the timing is unfortunate. The developer has been seen as something of a canary in the coal mine. He was among the early, high-profile defaults in 2008, when he lost control of a $4 billion Las Vegas casino project.  Meanwhile, loans are becoming harder to secure even for safe investments such as well-leased buildings. That is because broader market volatility has caused lenders who sell off their loans via bonds known as commercial mortgage-backed securities to grow wary. While the segment made about $100 billion in loans last year, it has come to a virtual halt today, lending executives said. If that continues, it will become more difficult for landlords who took out 10-year loans in 2006 to refinance today.  The pullback might bring back business for so-called workout specialists, who help landlords escape foreclosure by modifying their debt.  With more debt coming due and other conditions, defaults are bound to increase, said Robert Verrone, a veteran lender whose Iron Hound Management Co. also helps borrowers modify troubled mortgages.  “The amount of inbound phone calls has definitely increased,” he said.

Brooklyn Supreme Court faces backlog of nearly 12,000 foreclosure cases in the hands of just three judges

Nearly a decade after the start of America’s historic housing crash, the nightmare continues for forgotten homeowners behind in their mortgage.  The list of pending home foreclosures before Brooklyn Supreme Court Justice Noach Dear on Tuesday morning was enough to take your breath away.  There was Bank of America vs. Vazquez, Bank of New York vs. Antigone, Citi Mortgage vs. Green, Deutsche Bank vs. Paz, Federal National vs. Castro, HSBC Bank vs. Ambrose, JPMorganChase vs. Roberts, PennyMac vs. Acevedo, Wells Fargo vs. Hamilton —more than 65 in all.  In January, Lawrence Knipel, the administrative judge for Kings County’s civil division, suddenly consolidated the borough’s enormous backlog of nearly 12,000 foreclosure cases in the hands of just three judges. Previously, those cases had been spread among more than 25 judges who also heard other kinds of cases.  The old way wasn’t working,” Knipel told the Daily News.  That’s because foreclosures have mushroomed into more than a third of all civil cases in New York state courts. More than 41,000 new ones were filed statewide last year. That’s not a whole lot less than the 47,000 filed at the height of the housing collapse in 2009.  And more the 60% of the state’s foreclosure cases are concentrated in four downstate counties, including Brooklyn and Queens. Under the old system, Knipel noted, some judges were allowing cases to drag on for years.  “Nobody likes to foreclose on people’s homes, so things don’t get done,” Knipel said. “The most efficient way to handle this matter is to do it by dedicated parts.” “I’ll soon be adding a fourth judge,” he said, and acknowledged he might make other changes to the new approach.

Next Page »