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Foreclosure Starts Rise For Second Straight Month

Foreclosure changes June 2012

The number of U.S. homes receiving foreclosure notices topped one million through the first six months of 2012, according to RealtyTrac.

There were 1.046 million foreclosure filings between January – June 2012, says the foreclosure-tracking firm in its Midyear 2012 Foreclosure Market Report. The tally represents a 2 percent increase from the immediate six months prior.

A “foreclosure filing” includes all of the following foreclosure-related actions : (1) Default notices, (2) Scheduled auctions, and (3) Bank repossessions.

One notable fact from within the report is that, even as the number of repossessed homes dropped nationwide, the number of homeowners receiving a Notice of Default or lis pendens rose. These notices are the first step in the foreclosure process which means that we should expect the national foreclosure pipeline to fill later this year.

It’s no coincidence that foreclosure starts are rising now, either.

Earlier this year, a $25 billion mortgage servicing settlement provided banks with the necessary framework and rules by which they can foreclose upon a home. Prior to the this settlement, fearing legal liability, some banks chose to slow — or halt — foreclosure starts entirely. Since the settlement’s announcement, though, foreclosure activity has resumed.

For today’s Mesa home buyers, the foreclosure market represents an interesting opportunity. Homes purchased while in the various stages of foreclosure can often be purchased for a lower price than homes which are not in foreclosure; one reason why foreclosed homes account for 25 percent of all home resales.

However, be careful that you don’t confuse “less expensive“ with “less costly“.

Foreclosed homes are often sold as-is and may be in various stages of disrepair at the time of purchase. Spending money to repair a foreclosed home in order to make it habitable could wipe out the money saved on its sales price. Your best real estate “deal”, therefore, may be a non-distressed home in sound, move-in ready condition.

If you’re buying foreclosures — or even considering it — be sure to talk with a real estate agent. The process of buying a foreclosed property is different from buying a “regular” home. You’ll want somebody experienced on your team.

84 U.S. Markets Improving In July

Improving Market Index July 2012

Where economic growth goes, housing growth often follows.

That’s why it’s good news for homeowners that 84 U.S. metropolitan areas are showing “measurable and sustained growth” this month, according to the National Association of Homebuilders’ Improving Market Index.

The Improving Market Index is a derivative report, based on the results of three separate data series which examine a city’s local economy.

The data series used in the IMI are :

Employment data from the Bureau of Labor Statistics
Home price data from Freddie Mac
One-unit building permits from the Census Bureau

The NAHB compiles this data monthly, assigning a given metropolitan area the label “improving” if the following two conditions are met. First, all three data series above must show growth or expansion in the current month.

Second, at least six months must have passed since any of the above that area’s most recent economic “bottom”.

Because of this second clause, the IMI is focused on long-term trends in city growth, singling out only those markets in which sustained economic growth is occurring. The six-month requirement causes “blips” of growth remain ignored, and uncounted.

The July IMI showed 84 improving markets nationwide, a 4-city increase over June 2012. 11 new cities were added to the index including Jackson, Michigan; Springfield, Massachusetts; and, Houston, Texas. Seven cities fell off the list.

32 states are represented in this month’s IMI, and the District of Columbia, too.

For CA home buyers, there isn’t much actionable information in the Improving Market Index. We don’t see how many homes were sold in the month prior, for example. Nor do we see how quickly homes are selling in a particular ZIP code. But what the IMI can provide is a broad look at whether a local economy has found its footing.

When economies are strong, it can create competition for homes which can drive up home sales prices.

The complete Improving Markets Index is available for download at the NAHB website. But, for a better feel of what’s happening in Mesa on a local level, talk to a real estate agent.

Pending Home Sales Index Hits A 2-Year High

Pending Home Sales Index Homes are going under contract at a quickening pace.

In May, for the second time in 3 months, the Pending Home Sales Index crossed the 100 barrier, stretching to 101.1. A “pending home sale” is a home under contract to sell, but not yet sold.

Statistically, the Pending Home Sales Index reading is significant for two reasons.

First, the index’s reading is at its highest since April 2010. From this, we infer that today’s pace of home buying in Arizona and nationwide is approaching the “stimulated” levels of two years ago — but without the federal stimulus.

This is a positive signal for the housing market.

Second, because the Pending Home Sales Index is a relative index; and, because it was assigned a value of 100 upon its inception in 2001, readings higher than 100 imply that the housing market is performing better than it did during the index’s first year.

2001 happened to be a strong year for housing. 2012, it seems, is shaping up to be a better one.

And, there’s another reason why the Pending Home Sales Index matters so much to buyer and sellers of Scottsdale — the Pending Home Sales Index is among the few “forward-looking” housing market indicators.

Rather than report on how the housing market looked 30-60 days in the past, as the Case-Shiller Index does; or the Existing Home Sales report, the Pending Home Sales Index looks 30-60 days to the future.

80% of homes under contract sell within 2 months so, as the Pending Home Sales Index goes, so goes housing. Based on May’s data, therefore, we can assume that home sale figures will rise through the summer.

If you’re shopping for homes right now, consider going under contract while the market remains somewhat soft. Mortgage rates are low and so are home prices. It makes for good home-buying conditions.

FHFA : Home Values Up 3% Since Last Year

HPI from April 2007 peak

The Federal Home Finance Agency’s Home Price Index shows home values up 0.8% in April on a monthly, seasonally-adjusted basis.

April marks the third consecutive month during which home values increased and the index is now up 3 percent from last year at this time.

As a home buyer in Mesa , it’s easy to look at the Home Price Index and believe that its recent, sustained climb is proof of a broader housing market recovery. Ultimately, that may prove true. However, we cannot base our buy-or-sell decisions on the HPI because, like the private-sector Case-Shiller Index, the Home Price Index is flawed.

There are three main flaws in the FHFA’s Home Price Index. They cannot be ignored.

First, the FHFA Home Price Index’s sample set is limited to homes with mortgages backed by Fannie Mae or Freddie Mac. By definition, therefore, the index excludes homes with mortgages insured by the FHA.

5 years ago, this wasn’t such an issue because the FHA insured just 4 percent of mortgage. Today, however, the FHA’s market share is estimated to exceed 30 percent. This means this the HPI excludes more than 30% of U.S. homes from its calculations right from the start.

The index also excludes homes backed by the VA; jumbo mortgages not securitized through the government; and, portfolio loans held by individual banks.

Second, the FHFA Home Price Index is based on the change in price of a home on consecutive home sales. Therefore, it’s sample set cannot include sales of new home sales, nor can it account for purchases made with cash because cash purchases require no mortgage.

Cash purchases were 29% of the home resale market in April.

Third, the Home Price Index is on a 60-day delay.

The report that home values are up 0.8% accounts for homes that closed two months ago, and with contracts from 30-75 days prior to that. In other words, the Home Price Index is measuring housing market activity from as far back as January.

Reports such as the Home Price Index are helpful in spotting long-term trends in housing but data from January is of little help to today’s Arizona home buyers and sellers. It’s real-time data that matters most and the best place to get real-time housing market data isn’t from a national home valuation report — it’s from a local real estate agent.

Existing Home Sales Slip 2% In May

Existing Home Sales Home resales slipped last month; a slight setback for the nation’s housing market’s recovery.

According to the National Association of REALTORS®, Existing Home Sales fell to 4.55 million units in May 2012 on a seasonally-adjusted annualized basis, representing a 2 percent drop from April.

An “existing home” is a home that’s been previously owned or occupied, and cannot be categorized as new construction.

Despite May’s retreat, however, as compared to last year at this time, Existing Home Sales by units are higher by 10 percent. In other words, like everything else in housing, the long-term statistical trend has been a positive one.

The housing market has seen its bottom and is finding balance.

Other data from the Existing Home Sales report includes :

First-time buyers accounted for 34% of all purchasers, down from 35% in April
Real estate investors accounted for 17% of all purchasers, down from 20% in April
Cash buyers accounted for 28% of all purchasers, down from 29% in April

In addition, distressed sales accounted for 25% of all sales in May, down from 28% in April.

“Distressed sales” include the sale of homes in various stages of foreclosure, and of short sales. This is the smallest percentage of homes sold in a “distressed” status since the real estate trade group began tracking the data in 2008.

And, lastly, home supplies rose by 0.1 months to 6.6 months nationwide in May. This means that, at the current pace of sales, the complete U.S. home resale inventory would be sold out before the end of 2012. A 6-month supply is widely believed to represent a market in balance between buyers and sellers.

There are now 2.49 million homes for sale — a 20% reduction from May 2011.

Home resales may have slipped last months but volume remains brisk nationwide. All-time low mortgage rates and high home affordability are keeping buyers in the market. Home prices are rising in many U.S. cities as the housing market continues its slow, steady recovery.

Housing Starts Up 26% In Last 12 Months

Sometimes, the housing data headlines tell just half the tale. The stories on May’s Housing Starts figures are proving to be a terrific illustration.

Tuesday, the Census Bureau released its monthly Housing Starts report. A “housing start” is a home on which construction has started.

The report is separated by property type with a separate count for single family homes such as detached residences and town homes; for multiple-unit homes such as 2-unit, 3-unit and 4-unit structures; and, for buildings of 5-units of more such as new condominiums.

In May, Housing Starts fell 4.8 percent nationwide. This runs contrary to recent housing market statistics and home builder confidence data which both have suggested a recovery. The press picked up the story and ran the following headlines :

Housing Starts In U.S. Fall 4.8% In May (BusinessWeek)
Housing Starts Plunge, But Permits Surge In Mixed Market (CNBC)
Housing Starts Slump In May (US News)

Although factually correct, these headlines are somewhat misleading.

Housing Starts did slip 4.8 percent last month but that figure accounts for all Housing Starts. It fails isolate the single-family starts that matter to today’s buyers and sellers throughout CA. Homeowners rarely buy multi-unit homes or entire apartment buildings.

If we remove the report’s tally of 2-4 unit homes and apartment buildings, we find that, in May, single-family housing starts rose for the 4th straight month, registering 516,000 homes started on a seasonally-adjusted, annualized basis. This is the highest tally since April 2010, the last month of that year’s frderal home buyer tax credit.

Single-family housing starts are up 26% as compared to last year.

The housing starts report, therefore — headlines aside — is the latest in a series of housing market data that points to a sustained recovery nationwide. If you’re planning to buy a home in 2012, consider buying in between now and September because after that point, home prices and mortgage rates are likely to be higher.

Georgia Takes Top Foreclosure Spot For First Time Since 2006

Foreclosure concentration June 2012

According to foreclosure data firm RealtyTrac, the number of foreclosure filings nationwide rose 9 percent in May as compared to April 2012. Filing topped 200,000 units for the first time in 3 months.

The term “foreclosure filing” is a catch-all term comprising default notices, scheduled auctions, and bank repossessions. On average, 1 in every 639 U.S. homes receiving a foreclosure filing in May.

As in most months, foreclosure activity was concentrated by state. Just 6 states accounted for more than half of the nation’s total filings.

Those six states were :

California : 13.6% of all repossessions
Florida : 11.0% of all repossessions
Georgia : 9.8% of all repossessions
Illinois : 6.6% of all repossessions
Michigan : 6.5% of all repossessions
Arizona : 6.3% of all repossessions

An interesting note, though, is that for the first time since February 2006, Georgia was the country’s most foreclosure-heavy state, displacing Nevada, which has dominated the foreclosure landscape for the last 5 years.

1 in 300 Georgia homes received a foreclosure filing in May. The national average last month was 1 in 639 homes.

At the other end of the foreclosure spectrum is Vermont. There was just 1 foreclosure filing for every 15,539 homes in The Green Mountain State last month.

Meanwhile, distressed homes remain in high demand with today’s home buyers, accounting for 28 percent of April’s overall existing home sales based on data from the National Association of REALTORS®. However, if your home purchase plans call for buying a foreclosed or bank-owned home, make sure you do your research first.

Buying bank-owned property is a different process as compared to buying a non-distressed home. The purchase contracts are different, the buyer-seller negotiations are different, and the homes are sometimes sold with defects. This can make it difficult to get a mortgage — or even impossible.

Before buying “distressed”, therefore, be sure to with a real estate agent. It’s good to have an experienced agent on your side to coach you through the process.

31 States Represented In June’s Improving Market Index

Improving Markets Index June 2012 The number of U.S. housing markets showing “measurable and sustained growth” slipped by 20 in June, according to the National Association of Homebuilders.

The Improving Market Index is meant to identify housing markets in which economic growth is occurring as a whole — not just in the real estate space.

By using three separate, independently-collected data series, each tied to local economic conditions, the Improving Market Index takes a broader view of the housing market than other housing market indicators — the Case-Shiller Index, for example — which are often singularly tied to housing contracts.

The Improving Market Index tracks three distinct data series :

From the Bureau of Labor Statistics : Employment statistics
From Freddie Mac : Home price growth
From the Census Bureau : Single-family housing growth

A given metropolitan area is categorized as “improving” by the National Association of Homebuilders if all three data series indicate growth at least six months after that area’s most recent economic trough.

In other words, the Improving Market Index looks past head-fakes of recovery, instead in search of long-term, sustainable growth.

This is one reason why its list of included cities is so fluid. It’s difficult for a metropolitan area to meet the Improving Market Index’s inclusion requirements month-after-month in a post-recession economy.

The Improving Market Index dropped to 80 in June, says the home builder trade group.

The list includes 28 new entrants, with forty-eight markets removed as compared to May. 31 states are represented nationwide.

For home buyers in AZ , the Improving Markets Index is a non-actionable report but it does do a good job of highlighting the local nature of real estate. For example, Columbus, Indiana was added as an Improving Market in June. Yet, Indianapolis, Indiana — located just 46 miles away — was downgraded from the same list.

Economies vary by locale.

The complete Improving Markets Index is available for download at the NAHB website. For a better gauge of what’s happening on the local level in Scottsdale , though, talk to a local real estate agent.

Phoenix Leads Annual Home Price Gains, According To Case-Shiller Index

Case-Shiller Index

Standard & Poors released its March 2012 Case-Shiller Index last week. The index is meant to measure changes in home prices from month-to-month, and from year-to-year, in select U.S. cities.

According to the report, home values rose in 12 of the Case-Shiller Index’s 20 tracked markets, and one market remained unchanged.

Of the Case-Shiller markets, Phoenix, Arizona posted the largest one-year gain, climbing 6.1 percent. Atlanta, Georgia posted the largest one-year loss. Values falling more than seventeen percent there year-over-year.

Overall, the Case-Shiller Index was relatively unchanged in March as compared to the month prior, but down nearly 3 percent on an annual basis. Nationwide, says Standard & Poor’s, home values are back to the levels of late-2002.

Don’t be overly concerned, however. Though widely-cited, the Case-Shiller Index is a flawed and misleading metric. It’s methodology almost guarantees it.

The first flaw in the Case-Shiller Index is its limited geography. Despite there being more than 3,100 municipalities nationwide, the Case-Shiller Index tracks just 20 of them. They’re not the 20 largest ones, either. Houston, Philadelphia, San Antonio, San Jose are specifically excluded from the Case-Shiller Index and each is among the Top 10 Most Populous Cities in the United States.

Minneapolis (#48) and Tampa (#55), by contrast, are included.

The Case-Shiller Index’s second flaw is that only tracks the sales of single-family, detached homes. Sales of condominiums and multi-unit homes carry no weight in the index whatsoever — even in cities such as Chicago and New York in which condos can account for a large percentage of the overall real estate market.

And, lastly, when the Case-Shiller Index is published, it’s published on a two-month delay. Buyers and sellers in Phoenix don’t need housing data from two months ago — they need data from today. The Case-Shiller Index tells us what housing was, in other words. It doesn’t tell us how housing is.

Buyers and sellers need real-time, actionable information. You can’t get that from the flawed Case-Shiller Index. For more accurate, relevant real estate data, talk to your real estate professional instead.

Pending Home Sales Slip In May

Pending Home Sales Index The housing market took a breather in April.

After forging past its benchmark value of 100 in March, April’s Pending Home Sales Index dropped back to 95.5, its lowest reading of the year. The data suggests fewer home resales throughout CA and nationwide in the months ahead.

A “pending home” is a home under contract to sell, but not yet closed. The Pending Home Sales Index is tracked and published monthly by the National Association of REALTORS®.

As a housing market indicator, the Pending Home Sales Index is fundamentally different from other housing metrics which often make headline news.

Unlike the Existing Home Sales report, for example; or the New Home Sales report, the Pending Home Sales Index is purported to be predictor of future housing market performance. It measures the number of homes newly under contract in a given month and, because we know that 80% of homes under contract close within 60 days, the Pending Home Sales Index can foreshadow what’s next for housing.

Other housing market metrics report on events which have already occurred.

Based on April Pending Home Sales Index, therefore, buyers and sellers should expect to see a pull-back in closed home sales through May and June. However, like everything in real estate, home sales remain a local market.

Even by region, performance varied :

Northeast Region : +0.9% from March 2012
Midwest Region : -0.3% from March 2012
South Region : -6.8% from March 2012
West Region : -12.0% from March 2012

Despite three regions posting losses, it’s worth noting that, on an annual basis, all four regions showed gains, led by the Midwest at 23 percent.

If you’re shopping for homes right now, the Pending Home Sales Index suggests that the current market may be “soft”, a scenario which can create ideal home-buying conditions. With mortgage rates low, home affordability has never been higher.

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Archive for the ‘Housing Analysis’ Category

Foreclosure Starts Rise For Second Straight Month

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