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RealtyTrac – US foreclosure activity decreases 7% in April 2016

RealtyTrac released its April 2016 US Foreclosure Activity data this week, which shows that 100,932 US properties with foreclosure filings during the month, down 7% from the previous month and down 20% from a year ago — the ninth consecutive month with a year-over-year decrease. Below are some high-level highlights from the data, which is available in more granular detail upon request to pr@realtytrac.com.

–  Overall foreclosure activity back to 2006 levels, not yet at 2005 levels. The 100,932 properties with foreclosure filings in April was below 2006 levels when the average was 104,000 a month, but still not quite back to 2005 levels when the average was 75,000 a month.

–  Bank repossessions specifically (REO) were down annually for second consecutive month following 12 consecutive months of annual increases that ended in February. RealtyTrac had previously predicted that the REO surge would be temporary as banks cleared out some of the last of their lingering foreclosure inventory from the housing crisis, and that appears to be the case.

–  Bank repossessions increased from a year ago in 23 states, counter to the national trend, including Massachusetts (up 132%), Alabama (up 46%), South Carolina (up 36%), Minnesota (up 24%), Maryland (up 21%), Texas (up 18%), and New York (up 6%).

–  Foreclosure starts decreased annually by 15%, the 10th consecutive month where US foreclosure starts have decreased on a year-over-year basis.

–  Foreclosure starts increased from a year ago in 20 states, counter to the national trend, including Connecticut (up 142%), Arizona (up 63%), Virginia (up 14%), Maryland (up 11%), and Massachusetts (up 9%).

–  Top state foreclosure rates were Maryland, New Jersey, Delaware, Florida and Nevada. All but Nevada are judicial states.

–  Counter to the national trend, foreclosure activity did increase from a year ago in 17 states, including Connecticut (up 61%), Massachusetts (up 43%), Virginia (up 16%), Maryland (up 10%), and New Jersey (up 5%).

–  Top metro foreclosure rates were Atlantic City, New Jersey; Trenton, New Jersey; Lakeland-Winter Haven, Florida; Reading, Pennsylvania; and Baltimore, Maryland (among metropolitan statistical areas with a population of 200,000 or more).

–  Three of the nation’s 20 largest metro areas posted a year-over-year increase in foreclosure activity: Boston (up 33%); Washington, D.C. (up 19%); and Phoenix (up 2%).

 

Oil prices fall as global supply glut persists

Oil futures dropped Monday, on track to fall for a second straight session, as concerns surrounding recent disruptions to crude production eased, renewing expectations that global supplies will continue to outpace demand. West Texas Intermediate crude for delivery in July CLN6, -0.60%  traded at $48.08 a barrel, down 33 cents, or 0.7%, on the New York Mercantile Exchange. July Brent crude LCON6, -1.09%  on London’s ICE Futures exchange fell 56 cents, or 1.2%, to $48.16 a barrel.

Prices appear “overbought in the short term and the impact of temporary supply factors could end at any time,” said Fawad Razaqzada, technical analyst at Forex.com and City Index.  The wildfires in Canada appear to be under control now thanks to cooler temperatures and rainfall in recent days,” he said. “The evacuation orders have been lifted and oil workers can return.” But “It could still take a number of weeks to return crude outages of more than 1 million [barrels per day] back to normal levels, meaning the supply deficit from Canada will likely be in place for a while yet,” said Razaqzada.

Supply outages in North America and Africa have been largely responsible for the recent rise in oil prices. WTI oil prices gained 3.3% last week, but finished Friday’s session lower as some supply disruptions subsided. Prices were also retreating after oil-field services firm Baker Hughes Inc. BHI, -0.30%  reported Friday that the number of rigs drilling for oil in the US was unchanged last week. Analysts said the uptrend in prices may entice some US shale producers to start new projects.

 

WSJ – why more luxury homes are being sold at auctions

Once associated with foreclosures, auctions have become more popular among luxury homeowners in recent years as some business executives and celebrities, who often owe no money on their properties, choose to forgo the traditional list-and-wait method.

“Just like auctions of the world’s finest art, cars and antiques, real estate auctions continually prove to be the smart way to buy and sell luxury properties,” says Laura Brady, president of Concierge Auctions. The auction house, which specializes in luxury homes, has sold 22 properties in the first quarter of this year alone. Previously, it successfully auctioned houses owned by the singer and actress Cher, the former Arizona Cardinals quarterback Kurt Warner and the head football coach at the University of Alabama, Nick Saban.

One of the reasons that luxury homeowners opt for auction, Ms. Brady points out, is that “the property is one of a kind, so it is very hard to put a value on it.” Through auction, it can start at a relatively low price to attract more potential buyers. Properties auctioned off by Concierge Auctions have five to ten bidders on average.

Another advantage of an auction is that it’s “time definite,” says Pam McKissick, CEO of Williams and Williams, a 110-year-old real estate auction firm headquartered in Tulsa, Okla. The firm, through its subsidiary Luxury Group Auction, auctions one luxury home every couple of weeks.

A large number of its clients are seniors who live in the northeast and want to move to high-end luxury facilities. “Often times there is a waiting list for luxury nursing homes, and once they get accepted, they have a time frame to sell their homes,” adds Ms. McKissick.  Furthermore, auctions can be streamed online, allowing buyers all over the world to bid on a property, says Ms. McKissick. More bidders almost always push the price higher.

 

RealtyTrac – vacant “zombie” foreclosures decrease 30% in second quarter 2016 compared to a year ago

 

–  Top States for Zombie Foreclosures are New Jersey, New York, Florida, Illinois, Ohio;

–  1.4 Million Overall Vacant US Residential Properties Up 2.7% From Previous Quarter

–  Investment Properties Account for 75% of all Vacant Properties Nationwide

 

RealtyTrac released its Q2 2016 US Residential Property Vacancy and Zombie Foreclosure Report13, which shows nearly 1.4 million (1,398,046) US residential properties (1 to 4 units) representing 1.6% of all residential properties were vacant as of May 2016. The number of vacant properties increased 2.7% from the previous quarter when 1,361,628 US residential properties were vacant. The report also shows that 19,187 US residential properties actively in the foreclosure process were vacant (zombie foreclosures), representing 4.7% of all residential properties in foreclosure — down 3.1% from the previous quarter and down 30.1% from a year ago.

 

The analysis used RealtyTrac’s publicly recorded real estate data — including foreclosure status, and owner-occupancy status — matched against monthly updated vacancy data from the US Postal Service. “Lenders have been taking advantage of the strong seller’s market to dispose of lingering foreclosure inventory over the past year, evidenced by 12 consecutive months of increasing bank repossessions ending in February and now evidenced by these numbers showing a sharp drop in vacant zombie foreclosures compared to a year ago,” said Daren Blomquist, senior vice president at RealtyTrac. “As these zombie foreclosures hit the market for sale they are providing a modicum of relief for the pressure cooker of escalating prices and deteriorating affordability that have defined the US housing market in recent years.”

States with the most vacant “zombie” foreclosures were New Jersey (4,003), New York (3,352), Florida (2,467), Illinois (1,074), and Ohio (1,064). “While overall foreclosure activity has declined from last year, we have experienced a slight increase in vacancies of residential properties facing foreclosure,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “As market supply and availability has remained low in many areas of the state, loan servicing companies have stepped up efforts of addressing homeowners delinquent on their mortgages, and have accelerated the process of filing for foreclosure. Feeling the pressure of loan servicers, many homeowners give up hope early, thus creating the vacancy event.

“Among states with at least 100 zombie foreclosures, those with the highest zombie foreclosure rate (percentage of properties in foreclosure that are vacant) were Oregon (11.8%); Indiana (9.5%); Kentucky (8.0%); Maryland (7.2%); and Washington (6.6%). “Thanks to the Seattle area’s robust economy and strong housing market, the level of vacant properties has been growing smaller and smaller each month. So too has the level of zombie foreclosures which banks continue to release to the market,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where the zombie foreclosure rate in Q2 2016 was 6.1%, down 3.8% from the previous quarter. “In its own small way, these zombie properties are actually helping to supplement the depleted inventory levels in Seattle. I expect this trend to continue as Seattle’s foreclosure activity closes in on its long-term average.”

 

Among metropolitan statistical areas with at least 100,000 residential properties, those with the most zombie foreclosures were New York (3,526); Philadelphia (1,744); Chicago (857); Miami (651); and Tampa (627). Metro areas with at least 100 zombie foreclosures that posted the highest zombie foreclosure rate (percent of foreclosure properties that are vacant) were St. Louis, Missouri (10.6%); Indianapolis, Indiana (10.2%); Albany, New York (9.8%); Baltimore, Maryland (9.7%); and Portland, Oregon (9.7%).  A total of 43,602 US bank-owned (REO) residential properties were vacant as of May 2016, representing 15.9% of all REO residential properties — down 5.0% from the previous quarter when there were 45,897 vacant bank-owned properties. States with the highest percentage of REO properties that were vacant were Oregon (29.8%); Indiana (29.7%); Delaware (28.3%); Michigan (27.0%); and Ohio (25.0%).

Among metropolitan statistical areas with at least 100,000 residential properties, those with the most vacant REOs were Detroit (3,982); Chicago (1,967); Miami (1,765); Atlanta (1,470); and Baltimore (1,434).  Metro areas with the highest REO vacancy rates (percentage of REOs that were vacant) were Flint, Michigan (44.7%); Akron, Ohio (37.6%); Cleveland, Ohio (33.8%); Peoria, Illinois (33.2%); and Fort Wayne, Indiana (33.1%).

 

States with the highest vacancy rate overall (not just properties in foreclosure) were Michigan (3.4%), Indiana (3.1%), Mississippi (2.8%), Alabama (2.6%), and Oklahoma (2.6%).  Among 146 metropolitan statistical areas with at least 100,000 residential properties, those with the highest vacancy rates were Flint, Michigan (7.2%); Youngstown, Ohio (4.7%); Detroit, Michigan (4.4%); Beaumont-Port Arthur, Texas (3.9%); and Mobile, Alabama (3.7%).  Metro areas with the lowest vacancy rates were San Jose, California (0.2%); Fort Collins, Colorado (0.2%); Manchester, New Hampshire (0.3%); Provo, Utah (0.3%); and Lancaster, Pennsylvania (0.3%).

A total of 1.1 million (1,055,725) US residential investment properties were vacant as of May 2016, 75% of the all vacant properties nationwide and representing 4.4% of all investment properties.  States with the highest residential investment property vacancy rate were Michigan (11.0%); Indiana (10.3%); Alabama (7.1%); Ohio (6.8%); and Mississippi (6.7%).  Metro areas with the highest residential investment property vacancy rate were Flint, Michigan (27.6%); Detroit (13.5%); South Bend, Indiana (12.8%); Youngstown, Ohio (12.5%); and Fort Wayne, Indiana (12.0%).

 

WSJ – balance due: credit-card debt nears $1 trillion as banks push plastic

US credit-card balances are on track to hit $1 trillion this year, as banks aggressively push their plastic and consumers grow more comfortable carrying debt. That sum would come close to the all-time peak of $1.02 trillion set in July 2008, just before the financial crisis intensified, and could signal an easing of frugal habits ingrained by the recession. The boom has been driven by steady economic conditions and an improving job market that have made creditworthy consumers less reluctant to take on debt. In addition, lenders have signed up millions of subprime consumers who previously weren’t able to get credit.  Consumers are taking on other forms of debt, too.

Auto-loan balances surpassed $1 trillion in the first quarter, a record for the industry, according to a report Thursday from credit bureau Experian.  Credit cards are one of the few business lines working for banks right now. Low interest rates have hurt margins on ordinary lending, and a combination of tougher regulation and volatile markets has crimped profits in trading. But banks’ card operations are benefiting from low delinquency rates and could become even more profitable if interest rates rise.  Card issuers are trying to capitalize on the good times by raising customers’ credit limits, giving out more cards and pumping up perks.  “We’ll continue to take this opportunity as far as it will take us,” Richard Fairbank, chief executive at Capital One Financial Corp., said in a recent conference call with investors.  Capital One, the nation’s fourth-largest credit-card issuer, said credit-card sales jumped 14% in the first quarter from a year earlier. The company’s strategy to boost card usage by raising spending limits and giving out more cards is also paying off: Capital One customers spent 20% more on their cards during the first three months of the year than they did a year ago.

 

At Citigroup Inc., average credit-card balances in the first quarter posted the first year-over-year increase since 2008. Such balances also grew at Discover Financial Services Inc. and J.P. Morgan Chase & Co., the nation’s largest lender.  Even American Express Co., which historically has focused on customers who pay their bills off every month, is now concentrating on lending money to consumers who keep a balance.

Outstanding balances reached nearly $952 billion in the first quarter, up 6% from a year earlier, and the highest level since August 2009, according to the Federal Reserve. “You could see $1 trillion this year,” said David Blitzer, managing director and chairman of the S&P Dow Jones index committee, which tracks consumer-loan performance.  Overall consumer-spending trends remain uneven. Retail sales were stronger than expected in April, although there are signs that consumers are cutting back on nonessential purchases. Because many creditworthy consumers are still cautious about spending, lenders are turning more aggressively to subprime borrowers.

Lenders issued some 10.6 million general-purpose credit cards to subprime borrowers last year, up 25% from 2014 and the highest level since 2007, according to Equifax. Citigroup and Discover, which typically focus on prime customers, have rolled out cards aimed at less creditworthy borrowers that carry a lower risk for issuers if those customers can’t pay their bills. Known as “secured” cards, they require subprime borrowers to make a deposit that equals their card’s spending limits. Many issuers are now lending to borrowers with a broader range of credit scores, said Wayne Best, chief economist at Visa Inc. That includes “some of the areas that have not been as fully explored or serviced before, such as near-prime and subprime.”Overall, lenders gave out more than 104 million general-purpose and store credit cards in 2015, up 6.5% from a year earlier and up 47% from the bottom in 2010, according to Equifax.

 

Leading indicators up 0.6% in April, vs. expectations for 0.4% gain

A key economic measure increased in April, reflecting strength in housing and manufacturing, according to new data released by The Conference Board Thursday.  The Leading Economic Index rose to 0.6% in April, following no change in March, and a 0.1% increase in February.  “The US LEI picked up sharply in April, with all components except consumer expectations contributing to the rebound from an essentially flat first quarter,” Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, said in a statement. “Despite a slow start in 2016, labor market and financial indicators, and housing permits all point to a moderate growth trend continuing in 2016.”  The LEI has 10 components including manufacturer’ new orders, stock prices, and average weekly initial claims for unemployment insurance.

 

NAR – existing-home sales rise in April for second straight month

Despite ongoing inventory shortages and faster price growth, existing-home sales sustained their recent momentum and moved higher for the second consecutive month, according to the National Association of Realtors(NAR). A surge in sales in the Midwest and a decent increase in the Northeast offset smaller declines in the South and West.  Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7% to a seasonally adjusted annual rate of 5.45 million in April from an upwardly revised 5.36 million in March. After last month’s gain, sales are now up 6.0% from April 2015.

The median existing-home price for all housing types in April was $232,500, up 6.3% from April 2015 ($218,700). April’s price increase marks the 50th consecutive month of year-over-year gains.  Total housing inventory at the end of April increased 9.2% to 2.14 million existing homes available for sale, but is still 3.6% lower than a year ago (2.22 million). Unsold inventory is at a 4.7-month supply at the current sales pace, up from 4.4 months in March.

According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage fell from 3.69% in March to 3.61% in April, which is the lowest since May 2013 (3.54%). The average commitment rate for all of 2015 was 3.85%. Properties typically stayed on the market for 39 days in April (47 days in March), which is unchanged from a year ago but the shortest duration since June 2015 (34 days). Short sales were on the market the longest at a median of 120 days in April, while foreclosures sold in 51 days and non-distressed homes took 37 days. Forty-five% of homes sold in April were on the market for less than a month — the highest since June 2015 (47%).  The share of first-time buyers was 32% in April, up from 30% both in March and a year ago. First-time buyers in all of 2015 also represented an average of 30%.

 

At last week’s 2016 REALTORS Legislative Meetings & Trade Expo, US Housing and Urban Development Secretary Julian Castro announced beneficial changes to FHA condo rules, which could help many first-time buyers, are moving forward and are currently at the Office of Management and Budget for review.  “Secretary Castro’s update that the condo rule changes are in their final stages before implementation received great applause from Realtors both at the forum and throughout the country,” said NAR President Tom Salomone. “To ensure that purchasing a condo increasingly becomes a viable and affordable option for first-time buyers, NAR supports the ongoing efforts to eliminate unnecessary barriers holding back condo sales.

We hope that progress on this condo rule means we’ll see some much-needed changes in the near future.”  All-cash sales were 24% of transactions in April, down from 25% in March and unchanged from a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in April (matching the lowest share since October 2015), down from 14% in both in March and a year ago. Sixty-nine% of investors paid cash in April.

 

Distressed sales — foreclosures and short sales — declined for the second straight month to 7% in April, down from 8% last month and 10% a year ago. Five% of April sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 17% below market value in April (16% in March), while short sales were discounted 10% (unchanged from March).  Single-family and Condo/Co-op Sales

Single-family home sales inched forward 0.6% to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March, and are now 6.2% higher than the 4.53 million pace a year ago. The median existing single-family home price was $233,700 in April, up 6.2% from April 2015.  Existing condominium and co-op sales jumped 10.3% to a seasonally adjusted annual rate of 640,000 units in April from 580,000 in March, and are now 4.9% above April 2015 (610,000 units). The median existing condo price was $223,300 in April, which is 6.8% above a year ago.

 

Regional Breakdown

April existing-home sales in the Northeast climbed 2.8% to an annual rate of 740,000, and are now 17.5% above a year ago. The median price in the Northeast was $263,600, which is 4.1% above April 2015.  In the Midwest, existing-home sales soared 12.1% to an annual rate of 1.39 million in April, and are now 12.1% above April 2015.

The median price in the Midwest was $184,200, up 7.7% from a year ago.  Existing-home sales in the South declined 2.7% to an annual rate of 2.19 million in April, but are still 4.3% above April 2015. The median price in the South was $202,800, up 6.5% from a year ago.  Existing-home sales in the West decreased 1.7% to an annual rate of 1.13 million in April, and are 3.4% lower than a year ago. The median price in the West was $335,000, which is 6.5% above April 2015.

 

CoreLogic – far fewer low credit score applicants than before housing crisis

Compared with a decade ago, single-family home-purchase originations have declined significantly. There were 11.7 million loan applications for single-family home-purchase mortgages in 2005, which plunged to 3.6 million in 2011 (lowest in the decade), and rose to 4.6 million in 2014. The decline in number of applications from 2005’s peak to 2014 represents an overall drop of 60%. Similarly, the number of loan originations to purchase a single-family home dropped from 7.4 million in 2005 to 3.2 million in 2014.

During this period the denial-rate for home-purchase loan applications dropped to 13.2% in 2014 and was 8.1 percentage points lower than its peak of 18.7% in 2007. Could this be the result of a decline in applications from riskier applicants?v  Our previous blog on CoreLogic’s Housing Credit Index illustrated that mortgage credit availability today, based on an analysis of six factors, is still far less than during 2001-2002.  But if credit standards are relatively ‘tight’ today, shouldn’t the denial rate be higher than it was in 2005 and 2006?  One of the key factors used in mortgage underwriting as well as in our Housing Credit Index is the credit score.

The average borrower credit score for home-purchase originations has increased from roughly 700 in 2005 to almost 750 in 2015. In 2005, the credit score for the first%ile ranged from 520 to 540 and showed a dramatic rise during the Great Recession, and is currently running in a range of 620 to 630. By just gazing at the borrowers’ credit scores, one could conclude that mortgage originations were constrained as a result of tight underwriting standards. But how has loan demand changed, particularly for the borrowers with relatively low credit scores? The origination volume is the end result of an interplay between loan applicants’ demand and lenders’ risk tolerances. Is there a way to disentangle mortgage credit supply conditions from mortgage demand?

 

Credit score distributions have shifted from 2005 to 2015 for both applications and originations. The share of applications and originations with less than a pristine credit score has declined. The difference is more pronounced for applications than for originations. The share of credit scores below 700 for applications has declined and has been offset by a greater share of credit scores above 740. From a credit space perspective, the similarity of the two density distributions for 2015 suggests that lenders are largely meeting the demand of borrowers applying for a loan.

Thus, the observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity. Consumers are cautious more than they have been in the past and thus self-sidelining of cautious/discouraged consumers makes it appear as if credit is tightening. The policy prescriptions are quite different if the drop in originations is attributable to a lack of demand more than to tight underwriting. For example, more consumer education such as counseling and financial literacy programs could be as or more successful in raising origination levels than introducing new lending products with lower credit standards.

 

NAHB – builder confidence holds stable in May

Builder confidence in the market for newly-built single-family homes remained unchanged in May at a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  “Builder confidence has held steady at 58 for four straight months, which indicates that the single-family housing sector remains in positive territory,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.  “However, builders are facing an increasing number of regulations and lot supply constraints.”  The HMI components measuring sales expectations in the next six months increased three points to 65, while the component charting current sales conditions and the index gauging buyer traffic both held steady at 63 and 44, respectively.  “The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” said NAHB Chief Economist Robert Dietz. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.”   Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.  Looking at the three-month moving averages for regional HMI scores, the South and Midwest both registered one-point gains to 59 and 58, respectively. The West remained unchanged at 67 and the Northeast fell three points to 41.

Empire State manufacturing plunges into contraction in May

Factory activity across New York state unexpectedly contracted in May after climbing for two consecutive months, the latest sign that headwinds remain for the manufacturing sector.  The Empire State’s business conditions index tumbled to -9.0 this month from 9.6 in April. Results below zero represent contraction.  The gauge had reflected contracting activity for seven straight months before improving in March, and then picked up steam to hit the best level in a year last month.  Economists surveyed by The Wall Street Journal expected the index to give up ground in May but remain in positive territory at 5.0.  The New York area report is the first in a string of manufacturing surveys conducted by regional Federal Reserve Banks, looked to by economists and traders for clues about the health of the national economy.  American factory activity has been pinned down by weaker global demand, a strong dollar that makes US goods less competitive abroad and an energy price rout that has prompted budget cuts across the oil space. Signs of renewed demand emerged in March, and producers in April signaled further — albeit modest — improvement.  But many economists and factory owners have said that while a break in the dollar’s climb and stabilization in oil and the Chinese economy have helped conditions in recent months, the sector isn’t out of the woods.  A drop in demand pulled the New York index lower this month. New orders fell 17 points, from the best level in about a year and a half, to -5.54. Shipments also fell back below the expansion threshold, dropping 12 points to -1.94. Meanwhile, producers reported lower selling prices, sending a subindex of prices received down by six points to -3.13. Head counts held steady, but employees worked fewer hours during the month.

New York lenders subpoenaed over seller-financed mortgage alternatives

Financial regulators in New York are scrutinizing a revival in seller-financed deals for marketing inexpensive homes to lower-income people who cannot get a mortgage.  The New York State Department of Financial Services on Friday subpoenaed four investment firms that either are involved with seller-financed deals or provide financing for such deals, said a person with direct knowledge of the matter but spoke on the condition of anonymity because the investigation is preliminary.  The firms receiving subpoenas from New York regulators are Battery Point Financial, New York Mortgage Trust, Apollo Residential Mortgage and an affiliated entity of Apollo Global Management, the person said. All four are in Manhattan.  The nation’s top consumer regulator, the Consumer Financial Protection Bureau, recently began an informal inquiry into seller-financing arrangements, which are commonly referred to as contracts for deeds. The bureau has assigned two enforcement lawyers to research the seller-financing market and determine whether the terms of some deals violate federal truth-in-lending laws.  Contracts for deeds and other forms of seller financing have been in resurgence after the financial crisis, which created a large supply of cheap foreclosed homes for investors to buy and left many potential homeowners unable to qualify for a mortgage. The high-interest, long-term contracts have proliferated because banks have retreated from lending to low-income families. Private investment firms have stepped in to fill the void.

Proponents contend that a contract for deed can provide an alternative route for lower-income borrowers to buy a home. But the market has a long history of abuse, and contracts often favor the seller.  Under a contract for deed, the title to a home does not pass officially to the buyer until the final payment is made. Homes are often sold “as is” and in need of repairs.  The person with direct knowledge of the matter said the subpoenas from New York regulators were sent only to firms with close ties to New York to avoid any jurisdictional issues.  Battery Point Financial confirmed that it had received a subpoena. The firm, which is backed by the private equity firm Kohlberg Kravis Roberts & Company, is buying rundown homes in several states and renovating them before selling them to borrowers through 20-year contracts with monthly installment payments.  Apollo Residential, a publicly traded company, is providing financing to a firm in Louisiana that offers a variant of a contract for deed, called a bond for title.  New York Mortgage Trust recently purchased some homes with contracts for deeds in place from a Dallas investment firm, Harbour Portfolio Advisors, which has been selling off some of its large portfolio of homes and contracts.  The spokesman for Apollo Residential confirmed the subpoenas to both firms and said they “intend to cooperate fully.” Representatives for New York Mortgage Trust did not return a request for comment.

The subpoenas, which were reported earlier by Reuters, are seeking information from the firms about any deals they have to sell homes through contracts for deeds, bonds for titles, rent-to-own arrangements or other seller financing. The subpoenas seek copies of contracts, among other items.  Battery Point and Harbour Portfolio were featured in a front-page article in The New York Times in February.  Battery Point’s founder, Jeremy Healey, has sought to differentiate his firm from other big players in the market, saying that unlike them, Battery Point has structured its 20-year contracts to comply with new federal guidelines for high-interest mortgages.  Battery Point recently entered the contract-for-deed market, and has bought more than 300 homes in 16 states with the intention to resell the properties for around $72,000 apiece, according to an interview with Mr. Healey earlier this year. It does not own any properties in the state of New York, the company said on Friday.  “We look forward to addressing our residential installment contract with the department, as it is designed to solve a number of longstanding regulatory and consumer issues with the traditional contract for deed,” Mr. Healey said in a statement on Friday. “We support improving awareness of how nonmortgage financing products can create opportunities for consumers who are shut out of the mortgage market.”

Google faces record three billion euro EU antitrust fine

Google faces a record antitrust fine of around 3 billion euros ($3.4 billion) from the European Commission in the coming weeks, British newspaper The Sunday Telegraph said.  The European Union has accused Google of promoting its shopping service in Internet searches at the expense of rival services in a case that has dragged on since late 2010.  Several people familiar with the matter told Reuters last month they believed that after three failed attempts at a compromise in the past six years Google now had no plans to try to settle the allegations unless the EU watchdog changed its stance.  The Telegraph cited sources close to the situation as saying officials planned to announce the fine as early as next month, but that the bill had not yet been finalised.  Google will also be banned from continuing to manipulate search results to favour itself and harm rivals, the newspaper said.  The Commission can fine firms up to 10% of their annual sales, which in Google’s case would be a maximum possible sanction of more than 6 billion euros. The biggest antitrust fine to date was a 1.1 billion-euro fine imposed on chip-maker Intel in 2009.  The Commission and Google both declined to comment.

CoreLogic reports 36,000 completed foreclosures in March 2016

CoreLogic released its March 2016 National Foreclosure Report which shows the foreclosure inventory declined by 23.2% and completed foreclosures declined by 14.9% compared with March 2015. The number of completed foreclosures nationwide decreased year over year from 42,000 in March 2015 to 36,000 in March 2016, representing a decrease of 69.7% from the peak of 117,782 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 6.2 million completed foreclosures nationally, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 8.2 million homes lost to foreclosure.  As of March 2016, the national foreclosure inventory included approximately 427,000, or 1.1%, of all homes with a mortgage compared with 556,000 homes, or 1.4%, in March 2015. The March 2016 foreclosure inventory rate is the lowest for any month since October 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 19.1% from March 2015 to March 2016, with 1.2 million mortgages, or 3.1%, in this category. The March 2016 serious delinquency rate is the lowest in more than eight years, since November 2007.  “Nationally, the economy added 609,000 jobs during the first three months of 2016, and average weekly earnings grew 2% over the past year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Job and earnings growth have helped bring serious delinquency rates down in nearly every state. However, serious delinquency rates increased in North Dakota and West Virginia, two states affected by the drop in demand for the fuel each produces.”  “Delinquencies and foreclosure rates are now at pre-crash levels as the benefits of higher home prices, improving economic fundamentals and years of cautious underwriting are being felt across the country,” said Anand Nallathambi, president and CEO of CoreLogic. “Longer term, as loans made since 2009 account for a larger share of outstanding debt, we anticipate that the serious delinquency rate will have further substantive declines.”

Additional March 2016 highlights:

–  On a month-over-month basis, completed foreclosures increased by 9.3% to 36,000 in March 2016 from the 33,000 reported for February 2016.

–   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 2.2% in March 2016 compared with February 2016.

–  The five states with the highest number of completed foreclosures for the 12 months ending in March 2016 were Florida (69,000), Michigan (48,000), Texas (28,000), Georgia (23,000) and California (23,000). These five states accounted for about 41% 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 March 2016: The District of Columbia (114), North Dakota (311), West Virginia (541), Wyoming (634) and Alaska (644).

–  Four states and the District of Columbia had the highest foreclosure inventory as a percentage of all mortgaged homes in March 2016: New Jersey (4.0%), New York (3.3%), Hawaii (2.3%), the District of Columbia (2.2%) and Florida (2.1%).

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

US stocks open lower as earnings disappoint, oil stumbles

US stocks opened lower on Wednesday, as disappointing earnings reports by companies like Walt Disney Co., Macy’s Inc. and Staples Inc. weighed on the broader market. A retreat in crude oil prices added to the selling pressures in the equity market, a day after the S&P and the Dow logged their largest daily gain in about two months. The S&P 500 was down 5 points, or 0.2%, to 2,079. The Dow Jones Industrial Average lost 69 points, or 0.4%, to 17,858 at the open. Meanwhile, the Nasdaq Composite began the session down 13 points, or 0.3%, at 4,797.

NAR – metro home prices maintain steadfast growth in first quarter

An uptick in sales activity amidst meager supply levels upheld the trend of unwavering price gains in an overwhelming majority of metro areas during the first quarter of the year, according to the latest quarterly report by the National Association of Realtors (NAR).  The median existing single-family home price increased in 87% of measured markets, with 154 out of 178 metropolitan statistical areas1 (MSAs) showing gains based on closed sales in the first quarter compared with the first quarter of 2015. Twenty-four areas (13%) recorded lower median prices from a year earlier.  There were more rising markets in the first quarter compared to the fourth quarter of 2015, when price gains were recorded in 81% of metro areas. Twenty-eight metro areas in the first quarter (16%) experienced double-digit increases – a slight decrease from the 30 metro areas in the fourth quarter of 2015; fifty-one metro areas (28%) experienced double-digit increases in the first quarter of last year.  The national median existing single-family home price in the first quarter was $217,600, up 6.3% from the first quarter of 2015 ($204,700). The median price during the fourth quarter of 2015 increased 6.7% from the fourth quarter of 2014.

Total existing-home sales, including single family and condo, rose 1.7% to a seasonally adjusted annual rate of 5.29 million in the first quarter from 5.20 million in the fourth quarter of 2015, and are 4.8% higher than the 5.05 million pace during the first quarter of 2015.  At the end of the first quarter, there were 1.98 million existing homes available for sale3, which was below the 2.01 million homes for sale at the end of the first quarter in 2015. The average supply during the first quarter was 4.3 months – down from 4.6 months a year ago.  Despite a small increase in the national family median income ($68,431)4, climbing home prices and slightly higher mortgage rates caused affordability to decline in the first quarter compared to the first quarter of last year. To purchase a single-family home at the national median price, a buyer making a 5% down payment would need an income of $47,819, a 10% down payment would require an income of $45,302, and $40,268 would be needed for a 20% down payment.  The five most expensive housing markets in the first quarter were the San Jose, Calif., metro area, where the median existing single-family price was $970,000; San Francisco, $770,300; Honolulu, $721,400; Anaheim-Santa Ana, Calif., $713,700; and San Diego, $554,300.  The five lowest-cost metro areas in the first quarter were Cumberland, Md., $67,400; Youngstown-Warren-Boardman, Ohio, $77,500; Decatur, Ill., $83,300; Wichita Falls, Texas, $95,200, and Rockford, Ill., $95,800.

Metro area condominium and cooperative prices – covering changes in 60 metro areas – showed the national median existing-condo price was $204,700 in the first quarter, up 5.8% from the first quarter of 2015 ($193,500). Forty-four metro areas (73%) showed gains in their median condo price from a year ago; 16 areas had declines.  Total existing-home sales in the Northeast decreased 4.1% in the first quarter but are 11.2% above the first quarter of 2015. The median existing single-family home price in the Northeast was $249,400 in the first quarter, up 1.8% from a year ago.  In the Midwest, existing-home sales were unchanged in the first quarter (compared to the fourth quarter) but are 6.1% higher than a year ago. The median existing single-family home price in the Midwest increased 7.3% to $167,900 in the first quarter from the same quarter a year ago.  Existing-home sales in the South rose 5.2% in the first quarter and are 3.6% higher than the first quarter of 2015. The median existing single-family home price in the South was $192,100 in the first quarter, 5.8% above a year earlier.  In the West, existing-home sales climbed 0.9% in the first quarter and are 2.1% above a year ago. The median existing single-family home price in the West increased 7.1% to $315,900 in the first quarter from the first quarter of 2015.

Parties join forces to recover losses from $81M cyber heist

The three parties directly affected by one of the biggest-ever cyber heists said they agreed on Tuesday to work together to recover $81 million that was stolen, track down the criminals involved and protect the global financial system from other breaches.  Federal Reserve Bank of New York President William Dudley, Bangladesh Bank Governor Fazle Kabir and representatives from global messaging network SWIFT met in Basel, Switzerland on Tuesday to discuss the early-February heist.  “All parties stated their concern over this event and their continued commitment to work together to normalize operations,” they said in a joint statement. “The parties also agreed to pursue jointly certain common goals: to recover the entire proceeds of the fraud and bring the perpetrators to justice, and protect the global financial system from these types of attacks.”

MBA – mortgage applications slightly increase in latest MBA weekly survey

Mortgage applications increased 0.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 6, 2016.  The Market Composite Index, a measure of mortgage loan application volume, increased 0.4% 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 increased 0.5% from the previous week. The seasonally adjusted Purchase Index increased 0.4% from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week and was 14% higher than the same week one year ago.  The refinance share of mortgage activity decreased to 52.8% of total applications from 52.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.7% of total applications.  The FHA share of total applications decreased to 13.0% from 13.5% the week prior. The VA share of total applications increased to 11.7% from 11.5% the week prior. The USDA share of total applications remained unchanged from 0.7% the week prior.

CoreLogic – US economic outlook: May 2016

The single-family housing market has taken a long time to fully recover from the Great Recession. While projections for this year show further gains in single-family volume, when will the market get back to “normal,” and what does that “normal” look like?  Let’s start with interest rates. Today’s rates have gone retro. We have now had more than eight years with mortgage rates well below 6%, and most forecasts have rates remaining below this level as far as the eye can see. Our nation has not had such a lengthy period of low mortgage rates since bumper stickers read “I like Ike.”  Even though mortgage rates are projected to remain relatively low, they are also projected to rise from today’s very low levels. A rise in interest rates, combined with the large amount of refinancing that has already taken place, will reduce future refinance activity. Instead of the 70/30 refinance-to-purchase mix that has been the norm since 2000, the “new normal” may turn that on its head and transport us back to a future that is predominantly purchase originations. And those households who will want to convert some of their home equity into cash will increasingly seek out home equity loans rather than refinance their low-rate first mortgage.

And what pace of home sales might we see in the “new normal”? Home sales in 2016 are projected to be at the highest level since 2007, but are still expected to remain below the pace prior to the housing boom-and-bust. If we look at the level of home-sales turnover, in other words, home sales measured relative to the housing stock, sales this year are projected to remain more than 10% below the sales pace in each year from 2000 through 2003. Sales turnover may have evolved to a “new normal” with a slower pace.  The causes of a slower sales turnover are varied. Changes in technology and the modern office may have contributed to lessened labor mobility. The peak birth cohorts of the Baby Boom generation are now aged in their late 50s – often an age when household mobility is less. Senior households are living longer and prefer to age in place. Over four million households remain underwater and are reluctant to sell at a loss, and many others have had their adult children move back in with them. These and other factors may translate into a normal sales turnover pace that is slower than before the housing boom-and-bust.  In coming years, the “new normal” in the housing market may well feature these three elements: continuing low levels of mortgage rates (albeit higher than today); a lending market dominated by purchase-money and with a growing amount of home-equity loans; and a sales-turnover pace that is lower than the industry had been accustomed to.

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%)

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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.

 

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