Further Evidence of a Housing Recovery

Last week, I wrote a blog about the housing recovery and I cited expert opinion that indicates that we are in fact in a recovery. The blog entry was very well received. Of course there are negative fundamentals that detract from the positive news (such as shadow inventory, unemployment and lending guidelines). However, despite negative aspects on many market fronts in the wake of the fiscal cliff “resolution” (or lack thereof), the housing market recovery seems to be strong. In fact, the number of “improving markets” as identified by the National Association of Home Builders (NAHB) rose sharply this month to 242, up by 47 over December 2012. 47 new markets met the requirements of solid relative growth, employment improvement, housing permit application volume, and home price improvement to be added to the list. Only six markets fell off the list this month. “We created the improving markets list…to spotlight individual metros where – contrary to the national headlines – housing markets were on the mend,” said NAHB chairman Barry Rutenberg. “Today,” he observed, “242 out of 361 metros nationwide appear on that list. The story is no longer about exceptions to the rule but about the growing breadth of the housing recovery.” Rutenberg threw in a dig about “overly strict mortgage requirements hold[ing] back the pace of improvement,” but the NAHB’s tone is definitely one of optimism for 2013. So now we have further evidence of a strong housing recovery for 2013. Probably the strongest evidence of a housing recovery and rising prices is that I plan on buying a home in 2013!!! Of course the market goes up when I decide to buy another home!!! LOL All we need now is loosening of credit and the recovery will really take hold. It is also important to note that no market goes straight up and no market goes straight down so there will always be some variations and deviations. Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Senior Housing Sector Now Suffering from the Real Estate Bubble

Although most analysts agree that one of the most promising housing sectors for the near future is senior housing, the current housing slump is taking a toll on that very market. Rental and condo developments marketed to senior citizens are definitely attractive to the aging population because they require less upkeep and offer more amenities, but seniors are having trouble unloading their old homes in this market. And although according to Mike Pardoll, senior vice president of investments at Marcus & Millichamp, “the seniors housing sector has improved significantly from last year,” he adds that much of the improvement is due to the need for rehabilitative services and skilled nursing facilities, which could leave out many “active living” communities that simply hoped to attract the senior population with appealing activities and low maintenance homes.
As a result of the continued housing crawl toward recovery, some senior living homes are thinking creatively about how they fill rooms and suites. For example, some seniors are using “gap loans,” which are home equity loans the enable a homeowner to budget for having their house on the market for a year. One senior living community actually suggests and facilitates the use of these loans, since they can be used to pay apartment rental expenses. Other facilities are opting to rent out condos instead of only selling them in order to fill more vacancies.
This time last year, it seemed like senior living was about the only area of new construction in the market. It will also be interesting to see the effect of the discontinuation of reverse mortgages by Bank of America and Wells Fargo. This could help or hurt the active senior citizen market. We may not know the answer for some time to come, but it certainly will have an impact. The frightening thing is that there seems to be an acknowledgement in this market sector that seniors are having difficulty getting their current homes sold.

Wells Fargo Terminates Reverse Mortgage Program

Wells Fargo has announced that it will no longer originate reverse mortgages. The bank indicates that changed economic times no longer allow for the transaction that enables senior homeowners to use a portion of a home’s equity as collateral and repay the loan out of their estate upon death. Since the repayment of the loan is based on the estate’s ability to sell the property and pay off the balance, many lenders have expressed concern that reverse mortgages will actually go underwater, making them a loss for the lender who made the loan. However, Wells Fargo has cited its main concern as homeowners’ inability to make payments on taxes and insurance – usually the homeowners’ responsibility for the life of the homeowner and the reverse mortgage. “The reverse mortgage program was designed in a different time,” explained the lender in a public statement, adding that existing reverse mortgages will still be serviced and that the banks 1,000 reverse team members would still be able to apply for other positions within the bank’s operations.
Wells Fargo was the biggest originator of reverse home loans in the United States. These loans made up 2.2 percent of the lender’s consumer mortgage volume. The bank continued to lead the market up to the point when it decided to stop making the loans, with 25 percent of all reverse mortgage loans being made through Wells Fargo.
This certainly indicates a pessimistic view of the future housing market by the bank. The bank is concerned about future values and consequently and estate’s ability to sell a home for a balance sufficient to satisfy the obligation. It is disturbing to realize that the decision was made because the bank did not feel that current home owner’s with reverse mortgages will be able to pay the taxes and insurance! This was clearly a movie to limit future exposure for Wells Fargo and it may prove to be a prudent move. However, it is also a sign of troubling economic times ahead for real estate values.

Housing Prices Drop for the 57th Consecutive Month...

Zillow announced last week that home values have fallen for a 57th straight month. This is clearly not good news for anyone but, it has hit beneficiaries of the $8,000 tax credit for first-time home buyers particularly hard. The Wall Street Journal, announced that the first time home buyers (that purchased as a result of the Obama tax credits) have “lost twice as much to falling house prices as they gained from the incentive”. The initiative began as an incentive for first-time buyers, then was expanded to include a $6,500 credit for existing homeowners who made a new purchase. The program ran from January 2009 until September of 2010 and, arguably artificially and temporarily improved the housing market at the cost of a faster recovery. Typical homes bought during that period have lost about $20,000 in value since that time.
To make matters worse, the IRS recently reported that it paid $26 billion in home buyer credits during the running time of the program. However, it believes that “at least $513 million went to fraudulent claims. Common incidences of fraud included claimants that did not buy houses, claimants that filed twice and individuals who were underage or incarcerated

THIS is Why We Need Real Estate Investors

While many families struggle to find the funds to purchase their own home in today’s market where the deals abound but credit is tight, real estate investors are making the market work by buying in bulk. According to the National Association of Realtors, real estate investors represented 17 percent of all home sales nationwide in 2010. And that number is likely to grow as conventional funding continues to be difficult to obtain and the ability to spot and make a creative deal becomes more and more valuable.

As foreclosures continue to drag home prices downward, more and more real estate investors who may have exited the market prior to or during the housing bust are now re-entering as home prices become too much of a bargain to resist. And while historically investors have been demonized for everything from driving prices up to keeping them down, today many markets are relying on them to keep the entire machine from grinding to a standstill. For example, in Florida 17 percent of all homes are currently vacant. Without investors buying up homes, rehabbing them and selling them – probably still at a steep discount – those properties will drag home prices down in their areas indefinitely. “If Florida is going to have a comeback anytime soon, investors are going to have to play a role,” explained RealtyTrac vice president Rick Sharga. “There are just too many properties for traditional homebuyers to absorb,” he said.

In fact, while Moody’s Investor Services predicts that nationwide, home prices will stabilize by the end of 2011, distressed areas of the country might not stabilize until 2012 or later. Without investors, this process could be literally interminable

Shadow Inventory Portends Slow Housing Market Recovery

The shadow market is coming out of the shadows, and the numbers are staggering. According to a report released yesterday by LPS (Lender Processing Services), “foreclosure inventory levels [stand] at 30 times monthly foreclosure sales volume.” As a result of this massive backlog, real estate analysts expect more downward pressure on U.S. home values as most of these homes are likely to reenter the market as REO properties rather than being sold in another more profitable manner. The statistics on the foreclosure backlog are also staggering, with LPS reporting that the average U.S. loan currently in foreclosure has been delinquent for 537 days, and 30 percent of loans in foreclosure have not made payments in more than two years.

Thanks to slower processing times on foreclosures, it is unlikely that this backlog will disperse any time soon. In fact, although total U.S. loan delinquency has fallen nearly two percentage points over last year and foreclosure starts are down 14 percent from last year, the actual foreclosure rate is up as banks struggle to keep their books in order and intact. With the “non-current inventory” logging in at nearly 7 million, the backlog is likely here to stay.

Many analysts have been predicting that 2011 will be the beginning of a recovery for many sectors of the real estate market, though most agree that the residential market has a long way to go. With news such as this it is hard to see the beginning of a recovery.