The Data and Analytics division of Black Knight Financial Services (NYSE: BKFS) reports the following “first look” at October 2015 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.
– Foreclosure Starts Down More Than 8%; Delinquencies Fall After Two Consecutive Monthly Increases
– Total foreclosure starts dropped 8.4% to 73,200; down 11.3% year-over-year
– Delinquency rate improved by 1.9% from September; down nearly 12% from last year
– At 721,000, inventory of loans in active foreclosure is lowest since December 2007
– Prepayment activity (historically a good indicator of refinance activity) up slightly for the month
Average US gasoline prices resume slide
The average price of gasoline in the United States resumed its slide over the past two weeks, dropping 11 cents to $2.14 a gallon, the lowest since late January, according to a Lundberg survey released on Sunday. The 5% decline in gasoline prices came as oil refiners and gasoline wholesalers and retailers passed along lower oil-buying prices to consumers, said survey publisher Trilby Lundberg in emailed comments. Current retail gas prices were 70 cents below the year-ago period and at the lowest level since Jan. 23, when the average price was $2.07 per gallon. Benchmark crude oil prices were under pressure from hefty supplies and a strong US dollar, the report said. “The pump price may well continue dropping during the rest of November and into December,” the report said, citing pressure from “abundant” supplies and higher run-rates at US refineries at the end of the seasonal maintenance period. Lower costs have been passed along the supply chain, and refiners were also “sacrificing some of their gasoline margin,” Lundberg added. In the panel of cities in the lower 48 states, the low average was Indianapolis at $1.79 and the high average was Los Angeles at $2.76 a gallon. Prices had been up in the previous two-week period, snapping a 19-week slide.
NAR – existing-home sales dial back in October
With mortgage rates remaining below 4% for the third straight month, existing-home sales in October were at a healthy pace but failed to keep up with September’s jump, according to the National Association of Realtors (NAR). All four major regions saw no gains in sales in October. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4% to a seasonally adjusted annual rate of 5.36 million in October from 5.55 million in September. Despite last month’s decline, sales are still 3.9% above a year ago (5.16 million). The median existing-home price for all housing types in October was $219,600, which is 5.8% above October 2014 ($207,500). October’s price increase marks the 44th consecutive month of year-over-year gains. Total housing inventory at the end of October decreased 2.3% to 2.14 million existing homes available for sale, and is now 4.5% lower than a year ago (2.24 million). Unsold inventory is at a 4.8-month supply at the current sales pace, up from 4.7 months in September. The% share of first-time buyers increased to 31% in October, up from 29% both in September and a year ago. NAR’s annual Profile of Home Buyers and Sellers – released earlier this month4 – revealed that the annual share of first-time buyers fell to its second-lowest level since the survey began in 1981.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage stayed below 4% for the third consecutive month, declining in October to 3.80 from 3.89% in September. A year ago, the average commitment rate was 4.04%. All-cash sales were 24% of transactions in October (unchanged from September) and are down from 27% a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in October, unchanged from September but down from 15% a year ago. Sixty-two% of investors paid cash in October. Distressed sales – foreclosures and short sales – declined to 6% in October, which is the lowest since NAR began tracking in October 2008; they were 9% a year ago. Five% of October sales were foreclosures and 1% were short sales. Foreclosures sold for an average discount of 18% below market value in October (17% in September), while short sales were discounted 8% (19% in September).
NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida, says Realtors overwhelmingly applaud the Federal Housing Administration’s announced changes to begin simplifying some of its overly-restrictive condo certification procedures. “With first-time buyers held back in several markets, affordable FHA financing needs to be a viable option in helping them achieve homeownership,” he said. “The new changes to FHA’s condo policy, including improving owner-occupancy requirements, streamlining the recertification process, and addressing restrictions on eligible property insurance for condos will go a long way in improving the ability for these young households to purchase a condo.” Properties typically stayed on the market for 57 days in October, an increase from 49 days in September but below the 63 days in October 2014. Short sales were on the market the longest at a median of 90 days in October, while foreclosures sold in 67 days and non-distressed homes took 57 days. One-third of homes sold in October were on the market for less than a month.
Single-family and Condo/Co-op Sales
Single-family home sales fell 3.7% to a seasonally adjusted annual rate of 4.75 million in October from 4.93 million in September, but are still 4.6% above the 4.54 million pace a year ago. The median existing single-family home price was $221,200 in October, up 6.3% from October 2014. Existing condominium and co-op sales declined 1.6% to a seasonally adjusted annual rate of 610,000 units in October from 620,000 in September, and are now down 1.6% from October 2014 (620,000 units). The median existing condo price was $207,100 in October, which is 1.6% above a year ago.
October existing-home sales in the Northeast were at an annual rate of 760,000, unchanged from September and 8.6% above a year ago. The median price in the Northeast was $248,900, which is 1.3% above October 2014. In the Midwest, existing-home sales declined 0.8% to an annual rate of 1.30 million in October, but are 8.3% above October 2014. The median price in the Midwest was $172,300, up 5.7% from a year ago. Existing-home sales in the South decreased 3.2% to an annual rate of 2.14 million in October, but are still 0.5% above October 2014. The median price in the South was $188,800, up 6.2% from a year ago. Existing-home sales in the West fell 8.7% to an annual rate of 1.16 million in October, but are still 2.7% above a year ago. The median price in the West was $319,000, which is 8.0% above October 2014.
UAW leaders ratify new GM labor agreement
Leaders of the United Auto Workers union ratified a four-year labor agreement with General Motors on Friday, two weeks after most rank-and-file GM workers voted in favor of the new contract. Ratification, announced by the union, was delayed two weeks because skilled trades workers, who are fewer than general production workers at GM’s US auto plants, had voted it down. UAW leaders quizzed skilled trades workers on the reasons for their rejection and then went back to the negotiating table with GM seeking changes. Skilled trades workers in general maintain machines at auto plants, and include electricians, pipefitters, tool makers and millwrights. The new contract goes into effect on Monday. It calls for raises for all workers and the end of the two-tiered pay system, although it will take a newly hired worker eight years to reach top pay rather than the three years it used to take before 2007. Workers hired after 2007 have made less than those hired before that year. The average labor costs, of which pay is nearly half, for GM workers will be $60 per hour by 2019, up from $55 an hour now, according to a new study by labor analysts released on Friday. In a statement, GM said ratification of the contract was “good for employees and the business.”
The UAW said its leadership ratified the deal after GM and union negotiators worked through objections of the skilled trades workers, which included “core trades classifications and seniority rights.” GM and the two other Detroit automakers, Ford Motor and Fiat Chrysler Automobiles, have worked for years to lessen the number of classifications of skilled trades workers. The UAW defended the ability of a minority of its members to hold up ratification even if the majority has voted for a proposed contract. “Since its inception, the UAW has put in place a process to ensure that minority groups have a voice,” the union said. Meanwhile, Ford’s new four-year contract was still being voted on by UAW members on Friday, with the prospects for passage bleak. On Wednesday, UAW leaders said that with three-fourths of the vote counted, 52% of workers were against the new pact. That was before a big auto plant in Chicago voted 68% against the contract. The UAW may go back to the negotiating table if the Ford contract fails, and it could take workers out on strike.
WSJ – Fed sets deadline for claiming checks under foreclosure agreement
Hoping to bring its foreclosure review process to an end, the Federal Reserve is giving borrowers in the program until next year to cash the checks they are entitled to under a 2013 agreement. Uncashed funds will be divvied up and sent to those borrowers who deposited their checks, the central bank announced Thursday. The Fed said borrowers had until the end of March 2016 to deposit the checks they would have received from one of six mortgage servicers overseen by the Fed. They have until Dec. 31 to ask for replacement checks if they have lost the original. With Thursday’s announcement, the Fed anticipates bringing an end next year to the foreclosure review process it adopted in 2013. Under the agreement, Fed-regulated lenders agreed to compensate borrowers whose homes may have been improperly foreclosed on. As of mid-October, about $798 million of the $878 million agreement had been deposited. A broader program, involving lenders overseen by both the Fed and the Office of the Comptroller of the Currency has provided $3.9 billion for borrowers, of which $3.5 billion had been claimed by borrowers. The six Fed-regulated lenders involved in the agreement are GMAC Mortgage, SunTrust, Goldman Sachs’ servicing operation, Morgan Stanley’s servicing operation, HSBC and J.P. Morgan Chase.
WSJ – Why the housing rebound hasn’t lifted the US economy much
American homeowners are finally digging out of the hole created by the housing crisis. But their housing wealth is playing a much smaller role in the overall economy than it did before the downturn. Home equity has roughly doubled to $12.1 trillion since house prices hit bottom in 2011, according to the Federal Reserve. As a result, a key gauge of housing wealth—homeowners’ equity as a share of real-estate values—is nearing the point seen a decade ago, before the downturn. Such a level once would have offered a double-barreled boost to the economy by providing owners with more money to tap and making them feel more flush and likely to spend. But today, that newfound wealth has had little effect on behavior. While the traditional ways Americans tap their home equity—home-equity loans, lines of credit and cash-out refinances—are higher than last year, they are still depressed. In the first half of the year, owners borrowed $43.5 billion against their homes with home-equity loans and lines of credit, according to trade publication Inside Mortgage Finance. That was 45% higher than in the first half of 2014, but scarcely a quarter of the amount seen when equity was last as high in 2007.
Meanwhile, cash-out refinances, which let homeowners take out a new mortgage and tap some of the home’s value at the same time, were up 48% in the three months ended in August from the year-earlier period, according to Black Knight Financial Services. But they remain below the level seen in the summer of 2013. The average cash-out refinance in the three months ended in August left the borrower with mortgage debt of about 68% of the home’s value—not a risky level by any stretch. Home equity’s effect on consumer spending is at its lowest ebb since the early 1990s, according to Moody’s Analytics. The research firm estimates that every $1 rise in home equity in the fourth quarter of 2014 would translate to about two cents of extra consumer spending over the next 1 to 1½ years. That was a third of the impact home equity had before the bust, Moody’s said. The impact is more muted now despite the fact that home equity per homeowner has roughly doubled. At the end of the second quarter, the figure was about $156,700, up from $81,100 in the second quarter of 2011, according to Moody’s Analytics chief economist Mark Zandi. Though the homeownership rate has fallen, the total number of households has increased, meaning the number of households that own hasn’t changed much since the housing bubble burst in 2006, Mr. Zandi said.
Why aren’t homeowners feeling flush again? For one thing, since rising home prices over the past few years largely have made up for ground lost during the recession, many owners might not even realize they have equity to tap. The percentage of homeowners who were underwater, or owing more on their mortgage than the home’s value, dropped to 8.7% by mid-2015 from 21% at the end of 2011, according to CoreLogic. Yet the percentage of homeowners who thought they were underwater fell by merely one percentage point to 27%, according to housing-finance company Fannie Mae. The bust looms large and home equity is seen as more fleeting than it used to be, said Fannie Mae chief economist Doug Duncan. Consumers are definitely more conservative financially than they were 10 years ago. They’ve seen that house prices can be volatile,” Mr. Duncan said. Mortgage lenders also aren’t giving owners access to as much equity as they used to. While it was common during the boom to see loans that took out 100% or even more of a home’s value, now few will let an owner take out more than 80%. Finally, other kinds of loans are cheaper, removing one incentive to tap home equity. Six years ago, for example, the average five-year new-car loan had an interest rate of 6.83%, versus 5.56% for a $30,000 home-equity credit line. But in the week ended Nov. 11, the average interest rate for a five-year new-car loan was 4.3%, according to Bankrate.com, versus 4.74% for the HELOC.
Home equity as a share of real-estate values at the end of the second quarter was 56%, according to the Federal Reserve, not quite back to the level of 60% seen in the boom. That means Americans’ mortgage debt is still elevated relative to home values, which could be another factor affecting the decision of whether or not to cash out equity. Could home equity start to flex its muscle sometime soon? Some economists think it might. One reason: In many metro areas, home prices have overtaken or are about to overtake their boom-era peak. About 38% of metro areas had prices above their pre-2009 peak at the end of the third quarter, up from a 30% level last year, according to Moody’s Analytics and CoreLogic. A further 13% of metros are within 5% of their prebust peak. That’s important, because it means new home equity is being created rather than merely making up for lost ground. It also means fewer homeowners are underwater, freeing them up for a home sale and potential move-up purchase while also making home improvements and renovations seem less like throwing good money after bad. “We’re at an inflection point,” Mr. Zandi said. “Since the crash, it’s all been about repairing homeowners’ equity but now that house prices are returning to prerecession levels, we will see homeowners’ equity driving consumer spending, home improvements and economic activity.”