RealtyTrac released its US Foreclosure Market Report for October 2015, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 115,134 US properties in October, an increase of 6% from the previous month but still down 6% from a year ago. The report also shows one in every 1,147 US housing units with a foreclosure filing during the month. The 6% monthly increase in overall foreclosure activity was caused primarily by a 12% monthly jump in foreclosure starts, with 48,605 properties starting the foreclosure process for the first time in October. The October monthly increase was the largest month-over-month increase since August 2011, when there was a 24% month-over-month increase. Despite the month-over-month increase, foreclosure starts in October were still down 14% from a year ago. “We’ve seen a seasonal increase in foreclosure starts in October for the past five consecutive years, so it’s not too surprising to see the monthly increase this October,” said Daren Blomquist, vice president at RealtyTrac. “However, the 12% increase this October is more than double the average 5% monthly increase in the past five Octobers, and the even more dramatic monthly increases in some states is certainly a concern. The upward trend in foreclosure starts in those states in some cases could be an indication of fissures in economic fundamentals driving more distress and in other cases is more likely an indication of long-term delinquencies finally entering the foreclosure pipeline.” October foreclosure starts increased from the previous month in 34 states, including California (up 21%), Florida (up 13%), New Jersey (up 15%), Illinois (up 20%), Maryland (up 300%), Washington (up 34%), and Michigan (up 37%).
There were a total of 36,582 properties repossessed by lenders (REOs) in October, down 9% from the previous month but up 31% from a year ago — the eighth consecutive month with a year-over-year increase in REOs. Despite the annual increase, REOs in October are about one-third of their peak of 102,134 in September 2010. Through the first 10 months of 2015 there have been 369,920 completed foreclosures, up 33% from 277,815 REOs during the same time period in 2014. REOs increased from a year ago in 36 states in October, including New York (up 320%), New Jersey (up 275%), Texas (up 119%), North Carolina (up 89%), Nevada (up 83%), and Illinois (up 62%). “Foreclosed properties are still up against the same circumstances that any other seller in this market faces which is fair market value and beyond,” said Al Detmer, broker associate at RE/MAX Alliance, covering the Greeley market in Colorado. “Bank owned property asset managers are still requesting top dollar and today’s market demand is responding in their favor. Diamond in the rough distressed properties are the find for the cash heavy buyer that can fulfill a fix and flip fantasy and be the chicken dinner buyer to secure the deal for the near future.” Those states that saw the most completed foreclosures for the month included Florida (5,760 REOs), California (2,697 REOs), Illinois (2,624 REOs), New Jersey (1,960 REOs) and Texas (1,776 REOs).
A total of 46,698 US properties were scheduled for foreclosure auction during the month, up 12% from the previous month but down 22% from a year ago. Scheduled foreclosure auctions — which can be foreclosure starts in some states — increased from a year ago in 17 states, including New York (up 47%), Massachusetts (up 45%), North Carolina (up 24%), New Jersey (up 17%), and Maryland (up 3%). “I’m not surprised to see that foreclosure activity in Seattle has dropped again. Home prices continue to rise and the economy is growing at a rate well above the national average. So, what’s a buyer to do if they’re looking for a good deal in Seattle’s hyper competitive market?” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market. “One of the best tips is to have your agent search for homes that have been on the market for more than 14 days. When a home doesn’t sell quickly buyers wonder what’s wrong with it and sellers become discouraged. And this can lead to finding that hidden gem that everyone else has overlooked.”
A total of 5,126 Maryland properties had a foreclosure filing in October, up 100% from the previous month, but still down 14% from a year ago. After dropping out of the top five state foreclosure rates in September for the first time in 2015, Maryland’s foreclosure rate jumped to No. 1 in October thanks to the surge in foreclosure starts. One in every 466 Maryland housing units had a foreclosure filing in October, more than 2.5 times the national foreclosure rate. The state of New Jersey accounted for 7,559 properties receiving a foreclosure filing in October, a foreclosure rate of one in every 471 housing units — second highest among the states after New Jersey’s foreclosure rate ranked No. 1 in September. New Jersey foreclosure activity in October decreased 4% from the previous month, but was still up 87% from a year ago — the eighth consecutive month with a year-over-year increase in New Jersey foreclosure activity. One in every 579 Florida housing units received a foreclosure filing in October, the nation’s third highest state foreclosure rate. Florida’s foreclosure rate has ranked in the Top 5 each month in 2015. Florida foreclosure activity increased 8% from the previous month but was still down 23% from a year ago. Nevada foreclosure activity decreased 6% from the previous month, but increased 1% from a year ago, giving the state the nation’s fourth highest state foreclosure rate: one in every 593 housing units with a foreclosure filing. Illinois foreclosure activity increased 21% from the previous month, and the state posted the nation’s fifth highest foreclosure rate: one in every 680 housing units with a foreclosure filing. “Coupled with increases in home equity, and an increasing job market, the level of foreclosures continue to decline across much of Ohio for the month of October,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “New job sectors involving banking, education, and healthcare are creating added employment opportunities that are increasing the demand and need for housing across the state.” Other states with foreclosure rates among the nation’s 10 highest in October were South Carolina at No. 6 (one in every 751 housing units with a foreclosure filing); North Carolina at No. 7 (one in every 901 housing units); Ohio at No. 8 (one in every 968 housing units); New Mexico at No. 9 (one in every 1,020 housing units); and Washington at No. 10 (one in every 1,102 housing units).
October marked the 4th consecutive month where the Atlantic City, New Jersey metro remained in the No. 1 spot for having the highest foreclosure rate among metropolitan statistical areas with a population of 200,000 or more. One in every 257 Atlantic City housing units had a foreclosure filing in October, more than four times the national average. Atlantic City foreclosure activity in October increased 14% from previous month — driven by a 26% monthly spike in foreclosure starts — and increased 134% increase from a year ago. Foreclosure activity in October increased 177% from a year ago in Columbia, South Carolina, and the metro area posted the nation’s second highest foreclosure rate: one in every 333 housing units with a foreclosure filing. Foreclosure activity increased 118% from a year ago in Trenton, New Jersey, and the metro area posted the nation’s third highest metro foreclosure rate: one in every 390 housing units with a foreclosure filing). “We continue to see the year-over-year decline of our South Florida distressed real estate market,” said Mike Pappas, CEO and president of the Keyes Company, covering the South Florida market. “Any new bank owned inventory is quickly digested, as our under $300,000 priced inventory is at the lowest level in years.” Other metro areas with foreclosure rates in the top 10 highest were Baltimore, Maryland at No. 4 (one in every 429 housing units with a foreclosure filing); Fayetteville, North Carolina at No. 5 (one in every 460 housing units); Jacksonville, Florida at No. 6 (one in every 465 housing units); Miami, Florida at No. 7 (one in every 480 housing units); Rockford, Illinois at No. 8 (one in every 486 housing units); Palm Bay-Melbourne-Titusville, Florida at No. 9 (one in every 514 housing units); and Tampa, Florida coming in at No. 10 (one in every 543 housing units).
WSJ – Volkswagen sales fall in October amid emissions scandal
Volkswagen AG’s sales of VW brand vehicles fell 5.3% in October, the first full month of trading since revelations that the German automotive giant had cheated on emissions tests in the US Volkswagen said on Friday that deliveries of new vehicles fell to 490,000 units in October for its namesake brand, down from 517,400 in the same month last year. Deliveries of VW brand vehicles fell 4.7% to 4.84 million in the 10 months to end-October from the same period last year, underscoring the pressure on the brand’s performance even before the emissions scandal struck. “The Volkswagen passenger cars brand is experiencing challenging times,” said Jürgen Stackmann, a VW sales executive. “We not only face the diesel and [carbon-dioxide emissions] issues but also tense situations on world markets,” Mr. Stackmann said. Volkswagen plunged into crisis in September after US regulators said it installed software in nearly 500,000 diesel vehicles in the US that helped them evade pollution standards. Volkswagen has since acknowledged installing the software in millions of vehicles world-wide, with the US authorities also claiming the car maker has understated CO2 emissions. Volkswagen is under investigation in much of Europe and parts of Asia. “The entire company is working to restore the trust of our customers,“ Mr. Stackmann said. Volkswagen would ”take care of each individual customer who is affected,” he said.
NAR – home prices sustain steady growth in most metro areas in third quarter
The encouraging lift–off in existing–home sales amidst ongoing inventory shortages kept home prices rising in most of the country during the third quarter, but overall price appreciation slowed to a healthier pace, 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 areas (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2014. Twenty–four areas (13%) recorded lower median prices from a year earlier. There were slightly fewer rising markets in the third quarter compared to the second quarter, when price gains were recorded in 93% of metro areas. Twenty–one metro areas in the third quarter (12%) experienced double–digit increases, a decline from the 34 metro areas in the second quarter. Sixteen metro areas (9%) experienced double–digit increases in the third quarter of 2014. The national median existing single–family home price in the third quarter was $229,000, up 5.5% from the third quarter of 2014 ($217,100). The median price during the second quarter of this year increased 8.2% from a year earlier.
Total existing–home sales, including single family and condo, increased 3.4% to a seasonally adjusted annual rate of 5.48 million in the third quarter from 5.30 million in the second quarter, and are 8.3% higher than the 5.06 million pace during the third quarter of 2014. The five most expensive housing markets in the third quarter were the San Jose, Calif., metro area, where the median existing single–family price was $965,000; San Francisco, $809,400; Anaheim–Santa Ana, Calif., $715,300; Honolulu, $714,000; and San Diego, $554,400. The five lowest–cost metro areas in the third quarter were Cumberland, Md., where the median single–family home price was $82,400; Youngstown–Warren–Boardman, Ohio, $90,700; Decatur, Ill., $101,400; Rockford, Ill., $102,800; and Elmira, N.Y., $108,800. Metro area condominium and cooperative prices — covering changes in 62 metro areas — showed the national median existing–condo price was $215,200 in the third quarter, up 2.0% from the third quarter of 2014 ($211,000). Forty–four metro areas (71%) showed gains in their median condo price from a year ago; 18 areas had declines. At the end of the third quarter, there were 2.21 million existing homes available for sale3, which is below the 2.28 million homes for sale at the end of the third quarter in 2014. The average supply during the third quarter was 4.9 months — down from 5.5 months a year ago.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says the overall pool of potential buyers still outweighs what’s available for sale in several markets this fall. “Realtors® are still reporting that many homes are going under contract more quickly than what’s typical this time of year,” he said. “While this is certainly beneficial to homeowners looking to sell, some are still reluctant to list out of concerns they’ll have limited time and choices during their own home search.” Rising home prices, despite an increase in the national family median income ($67,723)4, slightly decreased affordability in the third quarter compared to the third 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 $50,324, a 10% down payment would require an income of $47,675, and $42,378 would be needed for a 20% down payment.
Total existing–home sales in the Northeast jumped 6.4% in the third quarter and are 9.1% above the third quarter of 2014. The median existing single–family home price in the Northeast was $269,400 in the third quarter, up 3.5% from a year ago. In the Midwest, existing–home sales rose 2.1% in the third quarter and are 9.0% higher than a year ago. The median existing single–family home price in the Midwest increased 4.8% to $181,100 in the third quarter from the same quarter a year ago. Existing–home sales in the South climbed 3.0% in the third quarter and are 6.9% above the third quarter of 2014. The median existing single–family home price in the South was $200,700 in the third quarter, 6.0% above a year earlier. In the West, existing–home sales increased 3.9% in the third quarter and are 9.7% above a year ago. The median existing single–family home price in the West increased 7.3% to $324,300 in the third quarter from the third quarter of 2014.
MBA – applications for new home purchases decreased in October
The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for October 2015 shows mortgage applications for new home purchases decreased by 8% relative to the previous month. This change does not include any adjustment for typical seasonal patterns. “On top of normal seasonal slowdown, the October decline in mortgage applications to builder affiliates was likely amplified by some applications being pulled forward into September ahead of the implementation of the Know Before You Owe Rule on October 3,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “Despite the decrease, our estimate of new single-family housing sales for October was up more than 7% from a year ago.” By product type, conventional loans composed 67.2% of loan applications, FHA loans composed 19.2%, RHS/USDA loans composed 1.0% and VA loans composed 12.7%. The average loan size of new homes decreased from $324,884 in September to $320,881 in October. The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 495,000 units in October 2015, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally adjusted estimate for October is a decrease of 9.7% from the September pace of 548,000 units. On an unadjusted basis, the MBA estimates that there were 39,000 new home sales in October 2015, a decrease of 7.1% from 42,000 new home sales in September.
CoreLogic – CoreLogic reports 55,000 completed foreclosures in September CoreLogic released its September 2015 National Foreclosure Report which shows the foreclosure inventory declined by 24.3% and completed foreclosures declined by 17.6% compared with September 2014. The number of foreclosures nationwide decreased year over year from 67,000 in September 2014 to 55,000 in September 2015. The number of completed foreclosures in September 2015 is a decrease of 52.8% from the peak of 117,438 in September 2010. Completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6 million completed foreclosures across the country, and since homeownership rates peaked in the second quarter of 2004, there have been about 8 million homes lost to foreclosure. As of September 2015, the national foreclosure inventory included approximately 470,000, or 1.2%, of all homes with a mortgage compared with 621,000 homes, or 1.6%, in September 2014.
CoreLogic also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due, including those loans in foreclosure or REO) declined by 21.2% from September 2014 to September 2015 with 1.3 million mortgages, or 3.4%, in this category. This is the lowest serious delinquency rate since December 2007. The foreclosure rate (defined as the share of all loans in the foreclosure process) was at 1.2% as of September 2015, which is back to the December 2007 level. “The largest improvements in the foreclosure inventory continue to be in judicial states on the East Coast such as Florida and New Jersey,” said Sam Khater, deputy chief economist for CoreLogic. “While the overwhelming majority of states are experiencing declines in their foreclosure rates, four states experienced small increases compared with a year ago.” “The rate of delinquencies continues to drop back closer to historic norms powered by improved economic conditions and tighter post-recession underwriting standards,” said Anand Nallathambi, president and CEO of CoreLogic. “As we head into 2016, based on almost every major metric, the fundamentals underpinning the housing market are healthier than any time since 2007.”
Additional highlights as of September 2015:
– On a month-over-month basis, completed foreclosures increased by 49.5% to 55,000 from the 37,000 reported in August 2015.* The one-month surge in foreclosures was partially the result of an annual public auctioning of thousands of tax-foreclosed properties in Wayne County, Mich., of which Detroit is the county seat. 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.
– The five states with the highest number of completed foreclosures for the 12 months ending in September 2015 were: Florida (91,000), Michigan (45,000), Texas (32,000), Georgia (26,000) and California (26,000).These five states accounted for almost half of all completed foreclosures nationally.
– The four states and the District of Columbia had the lowest number of completed foreclosures for the 12 months ending in September 2015 were: District of Columbia (69), North Dakota (310), Wyoming (498), West Virginia (593) and Hawaii (690).
– Four states and the District of Columbia had the highest foreclosure inventory rate in September 2015: New Jersey (4.6%), New York (3.7%), Florida (2.6%), Hawaii (2.5%) and the District of Columbia (2.4%).
– The five states with the lowest foreclosure inventory rate in September 2015 were: Alaska (0.3%), Minnesota (0.4%), Nebraska (0.4%), Arizona (0.4%) and North Dakota (0.4%).
CoreLogic – demographic bulge to drive long-term home sale and rental markets
Demographic forces will power housing demand in coming years as the millennial cohorts come into prime ages for forming households and buying first or second homes. The housing market has begun to feel the effects of this trend and the aging of the second largest cohort—the baby boomers. Census Bureau data shows that during 2014, the largest single-age group of younger Americans was 23, with ages 22 and 24 right behind them, all clustered in the 4.5 million range. The average age for a first-time homebuyer is 31. So in six to eight years, this bulge will become prime candidates for home sales and mortgages. But that’s not the only demographic driver at work. The average age of a “move-up” or “repeat” homebuyer is 39. Right now there are about 3.9 million people in this age group. Eight years from now, there will be 4.2 million potential repeat candidates in the sweet spot. There may even be a third wave, as the largest cohorts of baby boomers (those born in 1956 through 1958) hit retirement age and start looking for retirement homes, second homes, or empty-nest condos. Millennials’ high student debt ratios and antipathy to buying homes is the stuff of legend. But that is likely to change as they advance in their working careers and plan families. Surveys of millennials indicate that they have a similar desire for homeownership as their parents’ cohort, but recognize that they plan to transition into ownership at a later age. Six to eight years from now, it’s a good bet they will look more like the home-buying cohorts of the past. Household formations have doubled in 2015 (1.6 million) over 2014 (700,000), as an improving economy has allowed young people to get into the labor force and out of their family’s basement. For now, those household formations likely will be rentals. But in a few years, they likely will be looking to buy homes.
An important difference between millennials and older cohorts is their greater racial and ethnic diversity. Forty-five% of millennials are minorities, compared with 28% of baby boomers. Minority-headed households are projected to make up approximately three-fourths of the net households formed over the next decade.1 Historically, minority-headed households have had a lower homeownership rate than non-Hispanic whites. During the first three quarters of 2015, the homeownership rate for non-Hispanic whites was 72%, compared with 47% for minority-headed households.2 Whether the homeownership gap by race/ethnicity narrows or not over time depends on many factors outside of the housing industry, such as quality of workforce skills, labor-force opportunities, and access to credit. Nonetheless, the demographic bulge represented by the millennials will boost home sales in the future and is likely to boost rental demand as well.
Olick – why did foreclosures spike in October?
It is possibly the nastiest consequence of the holiday season. Foreclosures rise now, as banks try to get ahead of the traditional December moratoriums, when they suspend all foreclosures due to the holidays. No lender wants to take a house back during the holidays, but it appears to be particularly bad now for a number of reasons. Newly started foreclosures rose 12% in October from September, according to a new report from RealtyTrac, a foreclosure listing company. That is the largest monthly increase since August 2011, and more than twice the gain from September to October in the last five years. Just over 48,000 properties started the process in October, still 14% less than a year ago.
Foreclosures have been declining steadily for the past several years, with more than 6 million homes lost since 2008. Part of the annual increase this year could be due to already troubled loans that were modified but are now re-defaulting. More than half (57%) of new foreclosures in August were re-defaults, according to Black Knight Financial Services, the largest share of repeat foreclosures on record. That is likely continuing into October’s numbers. “The 12% increase this October is more than double the average 5% monthly increase in the past five Octobers, and the even more dramatic monthly increases in some states is certainly a concern,” wrote RealtyTrac’s Daren Blomquist in the report. “The upward trend in foreclosure starts in those states in some cases could be an indication of fissures in economic fundamentals driving more distress and in other cases is more likely an indication of long-term delinquencies finally entering the foreclosure pipeline.”
In addition, bank repossessions, the final stage of foreclosure, jumped 31% in October compared with a year ago. Part of this may be due to fewer investors at the courthouse steps and/or fewer foreclosed homes that are desirable to investors. If a home is not sold to an investor, it goes back to whoever owned the loan, either the bank or the investor who purchased the distressed mortgage. It is then called “REO” or real estate owned. “We’re going to sell more REOs this year than last year, so we know more are going back to the bank,” said Rick Sharga, vice president at Auction.com, a company that auctions properties for banks and investors. “We are seeing a lot of FHA inventory that is becoming REO and being sold that way.” Slow foreclosure processing in states that require a judge, like Illinois, New Jersey and Florida have had the effect of leaving homes abandoned and in decay. Some of these houses have sat empty for years. “A representative of one of the major banks told me that many of the properties they are taking back are highly distressed in terms of condition and in neighborhoods with virtually no buyers, so they are having trouble even giving some of those properties away to land banks etc.,” said Blomquist. The cost of rehabilitating these properties to sellable condition is, in some cases, more than the resulting value, due to the rough neighborhoods. Homes with good value and in reasonable condition would have sold at auction to investors and never gone back to the bank as REO. The share of institutional investor purchases has been dropping steadily, as they turn to regular listings to find homes now. There just aren’t enough distressed properties worth buying. That tale is being told in these numbers. The foreclosure crisis is most definitely winding down. What we are seeing now is really the worst of the worst. Homes that are worthless and borrowers who couldn’t afford their homes even with loan modifications.