Posts Tagged ‘Real Estate’

U.S. Mortgage Foreclosures Rise as Owners `Give Up’ (Update3)

Thursday, March 6th, 2008

By Kathleen M. Howley

March 6 (Bloomberg) — U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.

“We’re seeing people give up even before they get to the reset because they couldn’t afford the home in the first place,” said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.

The Bush administration is urging lenders to avert foreclosures by modifying mortgage terms amid the worst housing slump in a quarter century. The Federal Reserve has slashed its benchmark interest rate twice this year to try to avert the first recession since 2001. The central bank yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.

The share of all home loans with payments more than 30 days late, both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, the bankers’ group said in today’s report.

Buyers `Overstretched’

About 40 percent of all foreclosures are homeowners with prime or subprime loans who couldn’t make their payments before the reset, Brinkmann estimated in an interview. Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default, he said

Forty-two percent of new foreclosures in the fourth quarter were people with adjustable-rate subprime mortgages, given to borrowers with limited or tainted credit records, according to the report. Those types of loans accounted for about 7 percent of all mortgages, the report said.

“It comes down to an overstretching of buyers to get into homes they couldn’t afford and an overextending of credit by lenders who were more willing to take risk,” Brinkmann said.

Another 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans, according to the report.

Late Payments Data

Twenty percent of adjustable-rate subprime loans had late payments in the fourth quarter, a number that excludes the one of every eight mortgages already in foreclosure, the bankers group said in their report.

The share of late payments for adjustable prime loans was 5.51 percent, from 3.39 percent a year earlier, and the foreclosure inventory rose to 2.59 percent, almost tripling from a year earlier.

The Mortgage Bankers survey examines 46 million residential home loans, about 80 percent of the market. The study gives percentages without providing the number of loans they represent.

Homebuilding executives, economists and securities analysts predict the housing market won’t begin to recover until at least 2009. U.S. sales of new and existing homes probably will fall to 5 million this year, a drop of 33 percent from the all-time high of 7.46 million in 2005, before rising to 5.23 million in 2009, Freddie Mac said in a March 3 forecast.

Freddie Mac and Fannie Mae, the biggest U.S. mortgage finance companies, have posted their largest-ever losses as rising defaults boosted credit costs. Fannie Mae had a $3.55 billion loss in the fourth quarter, the Washington-based company said Feb. 27. Freddie Mac reported $2.45 billion fourth-quarter loss the following day.

The Mortgage Bankers survey came on the same day that the National Association of Realtors reported that the number of Americans signing contracts to buy previously owned homes was unchanged in January.

The Realtors’ index of signed purchase agreements held at 85.9, higher than forecast and the second-lowest level since the Chicago-based group began keeping records in 2001.

Florida, California push foreclosure starts

Thursday, March 6th, 2008

Florida and California make up a disproportionate part of foreclosure starts in the U.S. and helped push the national number to new highs, the Mortgage Bankers Association said.

California and Florida together represent 21 percent of all loans outstanding, but accounted for 30 percent of foreclosure starts in the country, the report said. They also accounted for 39 percent of all prime adjustable-rate mortgages outstanding and 47 percent of prime ARM foreclosure starts.

Together, the make up 29 percent of all subprime ARMs and 36 percent of subprime ARM foreclosure starts.

In Florida, the percentage of loans on which a foreclosure was started during the quarter rose to 1.46 percent from 1.09 percent in the third quarter. The percentage of loans in the foreclosure process at the end of the quarter climbed to 3.22 percent from 2.19 percent.

The delinquency rate for mortgage loans on one- to four-unit residential properties, which does not include loans in the process of foreclosures, for the state was up to 7.47 percent, up from 6.47 percent in the third quarter.

The delinquency rate for prime loans increased to 4.57 percent from 3.9 percent. Subprime loans had a much higher delinquency rate, up to 19.76 percent from 17.2 percent.

Nationally, the delinquency rate was 5.82 percent, up from 5.79 percent in the third quarter.

The percentage of loans on which a foreclosure was started increased to .83 of a percent from .78 of a percent, and the percentage of loans in the foreclosure process at the end of the quarter was 2.04 percent, up from 1.69 percent.


U.S. Economy: Home Resales Fall to Nine-Year Low (Update1)

Monday, February 25th, 2008

By Courtney Schlisserman

Feb. 25 (Bloomberg) — Sales of existing homes in the U.S. fell in January to the lowest level since records began nine years ago and prices slid for the sixth time in seven months, posing a threat to consumer spending, the largest part of the economy.

Resales declined 0.4 percent, less than forecast, to an annual rate of 4.89 million from a revised 4.91 million in December that was higher than previously reported, the National Association of Realtors said today in Washington.

The figures indicate declines in home prices so far aren’t sufficient to entice more buyers. Former Federal Reserve Chairman Alan Greenspan said today that the deepening rout in housing is having a “broader effect” on spending, and that a recession this year may be deeper than previous downturns.

“The Federal Reserve’s efforts to restore the mortgage market so credit is available so people can buy houses has largely failed,” Peter Morici, an economics professor at the University of Maryland, said in a Bloomberg Radio interview. “There really isn’t a lot of hope that things are going to turn around soon.”

Economists had forecast home resales would fall 1.8 percent to an annual rate of 4.8 million, according to the median of 63 estimates in a Bloomberg News survey. Estimates ranged from 4.65 million to 5 million.

The Standard & Poor’s Supercomposite Homebuilding Index, which had fallen earlier in the day, rose following the report. The measure was up 2.2 percent to close at 347.38. Treasuries fell, with 10-year note yields rising to 3.90 percent at 4:18 p.m. in New York, from 3.81 percent on Feb. 22.

Unsold Properties

Mounting foreclosures are adding to a glut of unsold homes that is driving down property values. The number of homes for sale at the end of January rose 5.5 percent to 4.2 million. At the reported sales pace, that represents 10.3 months’ supply, compared with 9.7 months in December.

“The past five months’ sales activity has been very soft, but stable,” said Lawrence Yun, the real-estate agents group’s chief economist. A fiscal stimulus that included tax cuts and relaxed restrictions on so-called jumbo mortgage loans may lead to better sales late this year, he said.

Elevated inventories are driving down prices and causing some potential buyers to stay on the sideline to see if prices will go down further.

Prices Fall

The median sales price fell 4.6 percent to $201,100 from January 2007. The median cost of a single-family home decreased 5.1 percent to $198,700, while that of condominiums and co-ops fell 1 percent to $220,400.

“The general trend is down, especially in home sales,” Anirvan Banerji, director of research for the Economic Cycle Research Institute in New York, said in a Bloomberg Television interview. “There is quite a bit of overhang in inventory.”

“There is more adjustment that is required” in housing, Greenspan told a conference in Abu Dhabi, United Arab Emirates, today. “There is a broader effect on consumer expenditures.”

Resales fell in three of four regions, led by a 3.6 percent drop in the Northeast. They declined 2.1 percent in the West and 0.5 percent in the South. Sales were 3.4 percent higher in the Midwest.

Sales of single-family homes increased 0.5 percent to a 4.34 million pace from a 10-year low in December, according to today’s report. Sales of condos and co-ops fell 6.5 percent to an annual rate of 550,000.

Inventory Glut

Housing “is going to be subdued” until inventories are reduced, Federal Reserve Bank of Minneapolis President Gary Stern told reporters Feb. 19 after a speech in Golden Valley, Minnesota.

The effects of the worst housing recession in 25 years have spread into other areas of the economy. The Fed Bank of Philadelphia’s general economic index fell this month to minus 24, the weakest reading in seven years.

Economists surveyed by Bloomberg News earlier this month put the chance of the U.S. entering a recession at 50-50, up from 40 percent odds a month earlier.

The Fed last week said it lowered its growth forecast and now expects the economy to expand 1.3 percent to 2 percent in the fourth quarter from the same period of 2007, compared with the 1.8 percent to 2.5 percent it projected in October.

The Commerce Department is scheduled to release the January report on new home sales on Feb. 27. While economists forecast a decline, some measures indicate demand for new homes may be near the bottom.

Builder Confidence

For example, confidence among U.S. homebuilders rose for a second straight month in February and companies said there were more prospective buyers touring properties, the National Association of Homebuilders said on Feb. 19. In addition, the Reuters/University of Michigan index of consumer sentiment showed a record number of Americans said lower home prices made home buying conditions favorable.

“We’re seeing prices now that are basically back to ‘02, ‘03 levels,” Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said in a Bloomberg Television interview on Feb. 21. “That begins to get compelling for customers.”

Even so, the housing market “continues to be in a very difficult position right now,” and weaker sales are cutting into builders’ profits, Hovnanian said.

Lowe’s Cos., the world’s second-largest home-improvement retailer, forecast full-year earnings less than analysts’ projections after reporting a drop in sales and profits in the fourth quarter.

To contact the reporter on this story: Courtney Schlisserman in Washington at


Surprise! Home Sales Spark Hope

Monday, February 25th, 2008

Investors found a sliver of hope to line the dark clouds of the housing slump on Monday.

Investors latched onto the National Association of Realtors’ upbeat tone Monday, sending the U.S. stock market higher in direct contrast to the stark data in the report, which said that sales of single-family homes and condominiums dropped by 0.4% in January to a seasonally-adjusted annual rate of 4.89 million units, the slowest pace on record since 1999. Despite this dire news investors seemed optimistic that the housing market may be bottoming out and that the increase in loan limits could lead to a rally in home sales toward the end of 2008.

The yield on the 10-year Treasury note jumped to 3.89% on Monday from 3.79% on Friday, as investors moved from the safety of bonds into equities, creating what has become a rarity in recent months–a boost in confidence in the equities market. The Dow Jones Industrial Average was also up to 12,486, a 106 point, or .85%, jump. The median price of a home sold in January slid to $201,100, a drop of 4.6% from a year ago, the fifth consecutive decline in home prices.

Existing-home sales in the Midwest rose 3.4%, but the median price of a home in the Midwest was $154,200, down 4.0% from a year ago. Existing-home sales in the Northeast fell 3.6%, although median home prices rose 3.1% from January 2007 to $270,800.

Investors found a knight in shining armor in Lawrence Yun, the NAR’s chief economist, who said there are still many potential buyers on the sidelines. “Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales,” he said.

Yun said he expects demand for homes to rebound later in the year as caps on the size of loans that can be backed by Fannie Mae (nyse: FNM - news - people ), Freddie Mac (nyse: FRE - news - people ), and the Federal Housing Administration are raised as part of the economic stimulus bill passed by Congress. But the problem of a housing glut still remains as inventories continue to build, putting downward pressure on prices. Total housing inventory rose 5.5% at the end of January to 4.2 million existing homes available for sale, representing a 10.3-month supply at the current sales pace, up from a 9.7-month supply in December.

But Global Insight U.S. economist Patrick Newport wasn’t so optimistic. “We think the credit crunch is hurting all corners of the mortgage market, and partly accounts for the 10% decline in sales in the past five months,” Newport said.

Newport said falling home prices may be the greatest hindrance to a recovery, but they are ultimately the solution as well. “In cities with falling home prices, homebuyers must weigh whether to buy an asset that is depreciating or rent instead,” he said. “We think that a growing share will choose to rent and wait things out. Over time, shifts in demand will cause rents to rise, house prices to drop, and home sales to turn around.”

But Newport thinks that turnaround is still months away.

Meanwhile, Lowe’s, the second biggest home retailer in the U.S., reported a 33.4% drop in profit, a result of the weakness in the U.S. housing market. But investors were expecting worse. As a result Lowe’s shares rose 4.1%, or 96 cents, to $24.55 at the close.