CoreLogic released its June 2016 National Foreclosure Report which shows the foreclosure inventory declined by 25.9% and completed foreclosures declined by 4.9% compared with June 2015. The number of completed foreclosures nationwide decreased year over year from 40,000 in June 2015 to 38,000 in June 2016, representing a decrease of 67.5% from the peak of 117,835 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 6.3 million completed foreclosures nationally, and since home ownership rates peaked in the second quarter of 2004, there have been approximately 8.4 million homes lost to foreclosure.
As of June 2016, the national foreclosure inventory included approximately 375,000, or 1.0%, of all homes with a mortgage compared with 507,000 homes, or 1.3%, in June 2015. The June 2016 foreclosure inventory rate is the lowest for any month since August 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 21.3% from June 2015 to June 2016, with 1.1 million mortgages, or 2.8%, in this category.
The June 2016 serious delinquency rate is the lowest in nearly nine years, since September 2007. “Mortgage loan performance depends on the economic health of local markets, with varied differences even within a state,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Within Texas, the serious delinquency rate in the Dallas metropolitan area has fallen by 0.5% from a year earlier, as home prices and employment have continued to rise.
The rate in the Midland area, on the other hand, has jumped 0.5%, reflecting the weakness in oil production and job loss over the past year.” “The impact of the inexorable reduction over the past several years in both foreclosure trends and serious delinquencies is driving the long-awaited return to more historic norms for the US housing market,” said Anand Nallathambi, president and CEO of CoreLogic.
“We expect the combination of continued home price appreciation of more than 5% and rising employment levels in the year ahead will help cement the gains we have had and perhaps accelerate them.”
Additional June 2016 highlights:
– On a month-over-month basis, completed foreclosures increased by 5.1% to 38,000 in June 2016 from the 36,000 reported for May 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 3.6% compared with May 2016.
– The five states with the highest number of completed foreclosures in the 12 months ending in June 2016 were Florida (60,000), Michigan (47,000), Texas (27,000), Ohio (23,000) and California (22,000). These five states account for almost 40% of all completed foreclosures nationally.
– Four states and the District of Columbia had the lowest number of completed foreclosures: The District of Columbia (179), North Dakota (321), West Virginia (487), Alaska (639) and Montana (675).
– Four states and the District of Columbia had the highest foreclosure inventory rate: New Jersey (3.4%), New York (3.1%), the District of Columbia (2%), Hawaii (2%) and Maine (1.9%).
– The five states with the lowest foreclosure inventory rate were Colorado (0.3%), Michigan (0.3%), Minnesota (0.3%), Nebraska (0.3%) and Utah (0.3%).
US budget deficit little changed in July
The US budget deficit was little changed in July as growth in both revenue and spending slowed. Over the past year, the deficit totaled $487 billion, down 0.3% from a year earlier, the Treasury Department said in a monthly update Wednesday.
The past year has seen a decline in corporate tax revenue. Personal income taxes have been on the rise so far this year, thanks to steady job growth. But corporate taxes haven’t kept pace as corporate profits suffered due in part to low productivity growth and a tight job market that has firms paying out a larger share of revenues in wages.
The government posted a deficit for the month of July, as outlays exceeded revenues by $113 billion. That was a smaller deficit than the $149 billion monthly shortfall posted in July 2015. The higher figure from last July was partly due to an acceleration of $42 billion of August benefit payments that were pushed forward into July.
In the 12 months through July, the deficit represented 2.6% of the nation’s economic output, or gross domestic product. That was down from 2.8% of GDP in the 12 months through June. The longer-term trends show a rising deficit. Revenues over the past year climbed just 1.2% compared with the 12 months through July 2015, the lowest annual rate in nearly six years.
Earlier in the current economic expansion, revenues routinely grew by 6% or more year-over-year. By contrast, government outlays have been steadily rising partly as a result of increased spending on Social Security and Medicare as the country’s population ages. Overall outlays rose 1.0% in the past 12 months compared with the year through July 2015, the slowest pace in more than two years.
NAR – home-price gains unfettered in most metro areas during second quarter
Home prices maintained their robust, upward trajectory in a vast majority of metro areas during the second quarter, causing affordability to slightly decline despite mortgage rates hovering at lows not seen in over three years, according to the latest quarterly report by the National Association of Realtors (NAR).
The report also revealed that for the first time ever, a metro area – San Jose, California – had a median single-family home price above $1 million. The median existing single-family home price increased in 83% of measured markets, with 148 out of 178 metropolitan statistical areas (MSAs) showing gains based on closed sales in the second quarter compared with the second quarter of 2015.
Twenty-nine areas (16%) recorded lower median prices from a year earlier. There were slightly fewer rising markets in the second quarter compared to the first three months of this year, when price gains were recorded in 87% of metro areas.
Twenty-five metro areas in the second quarter (14%) experienced double-digit increases – a small decrease from the 28 metro areas in the first quarter. A year ago, 34 metro areas (19%) experienced double-digit price gains.
The national median existing single-family home price in the second quarter was $240,700, up 4.9% from the second quarter of 2015 ($229,400), which was previously the peak quarterly median sales price. The median price during the first quarter of this year increased 6.1% from the first quarter of 2015.
Total existing-home sales, including single family and condos, rose 3.8% to a seasonally adjusted annual rate of 5.50 million in the second quarter from 5.30 million in the first quarter of this year, and are 4.2% higher than the 5.28 million pace during the second quarter of 2015.
At the end of the second quarter, there were 2.12 million existing homes available for sale 3, which was below the 2.25 million homes for sale at the end of the second quarter in 2015. The average supply during the second quarter was 4.7 months – down from 5.1 months a year ago.
Despite falling mortgage rates and a small increase in the national family median income ($68,774)6, swiftly rising home prices caused affordability to decline in the second quarter compared to a year ago. To purchase a single-family home at the national median price, a buyer making a 5% down payment would need an income of $52,255, a 10% down payment would require an income of $49,504, and $44,004 would be needed for a 20% down payment.
The five most expensive housing markets in the second quarter were the San Jose, California, metro area, where the median existing single-family price was $1,085,000; San Francisco, $885,600; Anaheim-Santa Ana, California, $742,200; urban Honolulu, $725,200; and San Diego, $589,900.
The five lowest-cost metro areas in the second quarter were Youngstown-Warren-Boardman, Ohio, $85,400; Cumberland, Maryland, $94,900; Decatur, Illinois, $95,600; Binghamton, New York, $105,500; and Rockford, Illinois, $109,000.
Metro area condominium and cooperative prices – covering changes in 59 metro areas – showed the national median existing-condo price was $227,200 in the second quarter, up 4.8% from the second quarter of 2015 ($216,700). Forty-four metro areas (75%) showed gains in their median condo price from a year ago; 14 areas had declines.
Total existing-home sales in the Northeast jumped 7.6% in the second quarter and are 11.3% above the second quarter of 2015. The median existing single-family home price in the Northeast was $273,600 in the second quarter, up 1.6% from a year ago. In the Midwest, existing-home sales leaped 10.4% in the second quarter and are 6.6% higher than a year ago.
The median existing single-family home price in the Midwest increased 5.1% to $191,300 in the second quarter from the same quarter a year ago. Existing-home sales in the South inched forward 0.3% in the second quarter and are 4.2% higher than the second quarter of 2015. The median existing single-family home price in the South was $214,900 in the second quarter, 5.9% above a year earlier.
In the West, existing-home sales climbed 1.4% in the second quarter but are 2.2% below a year ago. The median existing single-family home price in the West increased 6.5% to $346,500 in the second quarter from the second quarter of 2015.
Oil futures gain after EIA reports declines in US gasoline, distillate supplies
Oil futures gained on Wednesday after the US Energy Information Administration reported Opens a New Window. that domestic crude supplies climbed, but inventories of gasoline and distillates, which include heating oil and diesel, declined in the week ended Aug. 5.
Crude supplies rose 1.1 million barrels. That was contrary to the 1.75 million-barrel fall expected by analysts polled by S&P Global Platts, but the American Petroleum Institute late Tuesday reported a larger climb of 2.1 million barrels, according to sources.
Gasoline supplies fell 2.8 million barrels, while distillate stockpiles declined by 2 million barrels last week, according to the EIA. September crude tacked on 51 cents, or 1.2%, from Tuesday’s settlement to trade at $43.28 a barrel on the New York Mercantile Exchange. Prices traded at $42.98 before the data.
MBA – mortgage applications increase
Mortgage applications increased 7.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 5, 2016. The Market Composite Index, a measure of mortgage loan application volume, increased 7.1% on a seasonally adjusted basis from one week earlier.
On an unadjusted basis, the Index increased 7% compared with the previous week. The Refinance Index increased 10% from the previous week. The Government Refinance index was up 27% and the Conventional Refinance Index was up 6% from one week earlier. The seasonally adjusted Purchase Index increased 3% from one week earlier.
The nonadjustable Purchase Index increased 2% compared with the previous week and was 13% higher than the same week one year ago. The refinance share of mortgage activity increased to 62.4% of total applications from 60.7% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.7% of total applications.
The FHA share of total applications increased to 10.0% from 9.4% the week prior. The VA share of total applications increased to 13.0% from 12.1% the week prior. The USDA share of total applications decreased to 0.6% from 0.7% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.65% from 3.67%, with points increasing to 0.34 from 0.30 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
Zillow – new job growth expected to drive migration back to middle America
Panelists surveyed by Zillow said they expected home values to end 2016 up 4.5% year-over-year, on average, and for the median US home value to exceed its pre-recession peak by November 2017. A majority of panelists with an opinion said markets in the middle of the country were likely to regain popularity compared to coastal markets in coming years as cost-conscious employers start creating more jobs in Middle America.
A marked shift in fortunes between coastal America and Middle America since the housing recovery began – rapid growth in the former, stagnation in the latter – is likely to eventually reverse as cost-conscious companies look for cheaper places to grow, according to a panel of more than 100 experts.
The Q3 Zillow Home Price Expectations Survey, sponsored by Zillow and administered by Pulsenomics LLC, asked a panel of 113 economic and real estate experts nationwide to offer their expectations for home value growth through 2020. The survey also asked the experts to share their views and expectations on changing dynamics in the middle of the country versus the coasts and in urban versus suburban communities.
Since the housing boom and bust gave way to recovery, the US housing market has seemingly split into two unequal parts: Middle America, and coastal America. Home values are growing rapidly in markets on both coasts as hot job markets help keep demand for housing high, and more slowly in the Midwest and Heartland – where negative equity is still pervasive and job growth scant.
As a result, Americans – especially younger millennials – are moving away from Middle America and to the coasts in large numbers, whether for jobs, lifestyle preferences or both. But more than half of those experts with an opinion (56%) said they believed this trend has either already begun to reverse or will reverse in coming years.
Another 11% said this trend was actually an illusion, and that coastal markets are no more or less popular now than they’ve always been relative to Middle America. Just 25% of experts with an opinion said the coastal/Middle America split was likely to be permanent.
Of those experts who said the trend was likely to reverse, a majority (56%) said job growth in the middle of the country – driven by companies looking for cheaper alternatives to the coasts in which to expand – would eventually lure residents back to the Heartland.
Similarly, almost a quarter (24%) said Americans would migrate inland in search of more affordable housing and 13% said Americans will start to seek the more traditional lifestyle that the middle of the country has to offer. Only 2% said climate change is likely to force residents away from the coasts.
In addition to the coastal/inland divide, the US housing market has also experienced a notable shift between urban and suburban communities. The suburban home – long a symbol of success, stability and the American Dream – appears to be losing some of its luster as urban homes grow in value more quickly.
Panelists were asked if they believed this swing was permanent, temporary or overstated. A majority of those with an opinion (57%) said the shift was temporary and that suburbs were already regaining popularity or were likely to in coming years. The same portion of respondents (22%) said the shift was permanent as those that said the trend was overstated.
On average, panelists said they expected home values to end 2016 up 4.5% year-over-year, a bump in expectations from 4% annual growth for this year the last time the survey was conducted. Looking farther ahead, panelists on average said they expected the annual pace of home value appreciation to slow to 3.6% in 2017, 3.2% in 2018, 3.1% in 2019 and to 2.9% in 2020.
Despite predictions for a slowdown in home value growth through the end of the decade, panelists’ expected five-year average annual growth rate for home values actually rose slightly for the first time in three years. When divided into more optimistic and more pessimistic camps, panelists’ expectations diverged markedly.
The most optimistic quartile of panelists said they expected US home values to rise 5.2% through the end of this year. The most pessimistic 25% of panelists said they expected home values to rise just 3.7% year-over-year through 2016. Looking farther out, the most optimistic panelists said they expected home values to grow at an average annual rate of 4.8% over the next five years.
Pessimists predicted a much slower 2.1% annual rate of growth over the next five years. Median US home values peaked at $196,600 in April 2007. On average, panelists said they expected the median US home value to surpass this peak by November 2017 – more than a decade after pre-recession peaks.
WSJ – lopsided housing rebound leaves millions of people out in the cold
The housing recovery that began in 2012 has lifted the overall market but left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans.
Home prices rose in 83% of the nation’s 178 major real-estate markets in the second quarter, according to figures released Wednesday by the National Association of Realtors. Overall prices are now just 2% below the peak reached in July 2006, according to S&P CoreLogic Case-Shiller Indices. But most of the price gains, economists said, stem from a lack of fresh supply rather than a surge of buyers.
The pace of new home construction remains at levels typically associated with recessions, while the home ownership rate in the second quarter was at its lowest point since the Census Bureau began tracking quarterly data in 1965 and the share of first-time home purchases remains mired near three-decade lows.
The lopsided recovery has shut out millions of aspiring homeowners who have been forced to rent because of damaged credit, swelling student loans, tough credit standards and a dearth of affordable homes, economists said.
In all, some 200,000 to 300,000 fewer US households are purchasing a new home each year than would during normal market conditions, estimates Ken Rosen, chairman of the Fisher Center of Real Estate and Urban Economics at the University of California at Berkeley.
“I don’t think we are in a normal housing market,” said Lawrence Yun, chief economist at the National Association of Realtors. “The losers are clearly the rising rental population that isn’t able to participate in this housing equity appreciation. They are missing out on [a big] source of middle-class wealth.”
Anxiety about missed economic opportunities is a key driver of the anti-incumbent anger on both sides of the political spectrum that has shaken up the 2016 election season, helping fuel the insurgent presidential campaigns of Donald Trump and Bernie Sanders.
“You have these people who can’t get housing, and it’s turning into this rage,” said Kevin Finkel, executive vice president at Philadelphia-based Resource Real Estate, which owns or manages 25,550 apartments around the US While economists expected the home ownership rate to begin edging up this year, the rate fell to a 51-year low of 62.9% in the second quarter from 63.4% in the same quarter last year.
The rate could fall to 58% or lower by 2050, according to a recent prediction by housing experts Arthur Acolin of the University of Southern California, Laurie Goodman of the Urban Institute and Susan Wachter of the Wharton School at the University of Pennsylvania.
Long-term declines could erase gains made by middle-class Americans since World War II. Owning a home provides protection against rising rents and has been a key component of retirement saving and wealth creation. “The default savings mechanism for American households has been home ownership,” Ms. Wachter said. “Today we have historic lows for young households in terms of ownership so they’re not getting on this path.” That, in turn, can ripple throughout the economy.
Homeowners often use home equity to pay for college tuition, vacations or home renovations, all of which help boost consumer spending. The mere knowledge that home values are rising can make consumers comfortable spending money other places, a process known as the wealth effect. “We’re seeing a divide between the wealth of homeowners and the wealth of renters,” said Nela Richardson, chief economist at real-estate brokerage firm Redfin.
After peaking in July 2006, the Case-Shiller index plunged 27% over the next six years. Since then the recovery has been swift, particularly in markets with strong job growth and limited supply, creating problems for entry-level buyers in particular.
Across the country the recovery has been divided between strong West Coast markets and Texas, which have rebounded swiftly beyond their 2006 peaks, while prices from the Rust Belt to southern Florida may not return to those levels for decades. Prices in the Boulder, Colo., metro area are 45% above their prior peak, while those in Dallas are 26% above their boom-time highs, according to data provider CoreLogic Inc.
Meanwhile, prices in the Saginaw, Mich., area remain nearly 40% below their peak levels and those in Atlantic City are still 38% lower. In Sacramento, prices have jumped 64% since the beginning of 2012, according to CoreLogic. The main reason for falling home ownership, economists say: mortgage availability.
Lenders chastened by the financial crisis have been fearful of making loans to borrowers with dings on their credit, student debt or credit-card bills, or younger buyers with shorter credit histories. “I’m not sure that we’ll see some of those conditions change in any material way in the foreseeable future,” said Tim Mayopoulos, the president and chief executive officer of mortgage giant Fannie Mae, in an interview last week. “Right now our mortgage finance system is still not working well for lower- and middle-income households and first-time buyers,” added Mr. Rosen.
A dearth of home construction, especially at the lower end, is taking a toll. Nationally, the inventory of homes for sale has dropped more than 37% since 2011, according to Zillow, a real estate information firm. Some of that reflects the clearing away of distressed inventory, but economists said the pendulum has swung toward a housing shortage.
An estimated 1 million new households were formed last year, but only 620,000 new housing units were built, according to the Urban Institute. An analysis of census data by the Urban Institute showed that all of the net new households formed between 2006 and 2014 were renters rather than owners.
In 2006 home builders produced 40% more single-family homes than the 30-year long-run average. Last year, by contrast, single-family home construction was still 30% below that mark, according to Census Bureau data. “We went so many years without building there are in many places in the country a shortage of housing,” said Richard Green, the Lusk Chair in Real Estate at the University of Southern California. “I think that overshadows everything else in terms of normalcy.”
In the early years of the recovery only top earners could afford to buy homes, as new buyers struggled with joblessness or tarnished credit histories, so builders focused almost exclusively on the high-end. “The entry-level buyer, up until recently, has not been that involved in buying houses,” said Dale Francescon, co-chief executive of Century Communities, a publicly traded builder that operates in four states. “That’s historically where a significant amount of the volume has come from.”
Even as first-time buyers have started returning to the market, many builders have been slow to respond. Building lower-priced homes means finding cheaper land, and that tends to be farther away from job centers on the suburban fringes. Those areas were the hardest hit during the housing bust, and many investors have been hesitant to encourage builders to return.
As a result, builders have tended to focus on ever-dwindling and increasingly expensive land in core areas, pushing up the prices. Tom Farrell, director of business development for Landmark Capital Advisors, which counsels investors on real-estate projects, said risk appetite is low, particularly outside core markets. “We’re often saying ’You all want to be in the same spot, and you’re tripping over each other,” he said. “It’s just difficult to get people out to those secondary markets.”