– 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.
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.