Thursday, March 11, 2010

Foreclosures Drop for 2nd Consecutive Month

U.S. mortgage foreclosure filings dropped for a second straight month in February, and notched the smallest annual increase in four years as housing-rescue efforts contained activity. According to real estate data firm RealtyTrac, foreclosure filings – including mortgage default notices, house auctions and home repossessions by banks – were reported on 308,524 properties in February, down 2% from January, but still up 6% from the year-ago month.

* One in every 418 U.S. housing units received a foreclosure filing in February.
* More than 300,000 properties received foreclosure filings for a 12th straight month.
* Real estate-owned properties nationwide were down 10% from the previous month, but up 6% from February 2009.
* Default notices were up 3% from January, but down 3% from February 2009.
* Scheduled foreclosure auctions were down 1% from January, but still up 16% from February 2009.

Nevada remained highest for the 38th straight month. One in every 102 Nevada housing units received a foreclosure filing during the month of February – more than four times the national average. Arizona and Florida documented nearly identical foreclosure rates, with one in every 163 housing units receiving a foreclosure filing in February. Florida increased nearly 15% in February from January. The foreclosure rate in California ranked fourth with one in every 195 housing units receiving a foreclosure filing. Michigan's foreclosure rate ranked fifth highest with one in every 226 housing units receiving a foreclosure filing in February. Other states with February foreclosure rates among the nation's top 10 were Utah, Idaho, Illinois, Georgia and Maryland, the report showed.

Critics charge that foreclosure-prevention programs have failed to adequately address the trend's current drivers, and are merely capping monthly foreclosure activity. Other criticisms include the shortfall of the government's Home Affordable Modification Program to adequately address negative equity mortgages, leaving many unqualified for refinancing and preventing some from selling their homes.

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Monday, March 1, 2010

Housing’s Crystal Ball

HOME buyers heading into real estate’s busy spring season face a tricky question: should they buy soon, before mortgage rates increase, or wait a few months, when housing prices are finally expected to hit rock bottom?

Of course, the assumptions at the core of that question could easily fall through. But rarely in recent years have economists from the mortgage and housing industries been so closely aligned in their short-term nationwide forecasts as they seem to be now.

Economists are generally predicting that mortgage rates will begin to edge up in late March, settling at about 5.5 percent, possibly as high as 6 percent, for a 30-year fixed-rate loan. The rate today is around 5 percent. They also expect that the inventory of foreclosed homes will grow through the summer, saturating the market with cheap properties and keeping overall prices low.

“I wouldn’t rush,” said Mark Zandi, the chief economist at Moody’s Economy.com, “but if I found a house I was excited about, I wouldn’t wait. You might not be buying at the very bottom, but you’ll still get a great rate, and if you stay for more than a few years, you’ll be rewarded.”

By that time, he added, home values will have appreciated.

Two factors could push rates higher, economists say. First, the Federal Reserve is set to stop subsidizing the mortgage market sometime next month, when it exhausts the roughly $1.25 trillion earmarked for mortgage-backed securities sold by Fannie Mae and Freddie Mac. The government stepped in as a buyer during the mortgage market crisis, when most investors had rejected these securities. Economists expect investors to re-enter the market, but only if rates on the securities become more attractive.

Mortgage rates also typically move in lockstep with the long-term economic outlook. Economists generally believe that the nation is in the early stages of a slow recovery, and that as the recovery proceeds, interest rates will go up.

Mr. Zandi and Jay Brinkmann, the chief economist for the Mortgage Bankers Association in Washington, are both predicting that rates will not exceed 5.5 percent this year. If they rose beyond that level, Mr. Brinkann said, the federal government would very likely resume its subsidies rather than risk damaging the real estate market.

But Cameron Findlay, the chief economist for LendingTree.com, predicted that rates could go as high as 6 percent without any government intervention.

Mr. Findlay also studied the mortgage burden of households across the nation, as a guide to how quickly particular states could recover from the recession.

In New York state, for instance, the average mortgage payment is $1,326, or about 34 percent of the average household’s income ($47,349), Mr. Findlay said. The state’s unemployment rate is 9 percent, which is slightly lower than the national average of 9.7 percent. Mr. Findlay’s data did not separate New York City from the rest of the state.

Connecticut’s ratio of mortgage debt to income is lower, at 24 percent, and the unemployment rate is also lower, at 8.9 percent, which he says means people are generally better positioned to buy homes than in New York.

New Jersey’s mortgage debt-to-income ratio is also lower than New York’s, Mr. Findlay said, at 26 percent. But the state’s unemployment rate is 10.1 percent, he added, and that means its housing recovery will probably trail New York’s.

Mr. Zandi of Economy.com said he expected the nation’s housing prices to fall another 8 percent during 2010 and bottom out by the end of the year, 34 percent lower than they were at the market’s peak in the spring of 2006.

Housing prices will increase once foreclosures start to fall. “It will be a number of years before prices really start to rise in a normal way,” Mr. Zandi said.



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