Archive for July, 2013

Delinquency Rate Sees Abrupt Increase in June

BY: ESTHER CHO

After five months of declines, the national mortgage delinquency rate reversed course in June, according to data from Lender Processing Services (LPS).

From May to June, the delinquency rate shot up by 9.9 percent, ending at 6.7 percent, LPS reported. The increased delinquency rate represents the highest level since February of this year. However, prior to February, the delinquency rate is still at its lowest point in over four years.

Additionally, the delinquency rate still posted an annual decrease from last year. Compared to June 2012, the delinquency rate is down by 6.5 percent.

LPS also noted the spike in the delinquency rate is a seasonal phenomenon. Last June, the delinquency rate rose by 3.4 percent.

Foreclosures stayed on track in June, maintaiing both monthly and yedarly decreases. At 2.9 percent, the foreclosure pre-sale inventory rate fell 3.9 percent from May and was down by 28.4 percent from a year ago.

For June, about 4.78 million properties were 30 days or more past due or in foreclosure.

Of that total, 3.32 million were at least 30 days delinquent, but not in foreclosure, while 1.46 million were in foreclosure pre-sale inventory.
LPS’ report also included a ranking of the states with the highest and lowest share of non-current loans (delinquencies and foreclosures).

Florida led with the highest percentage of past due loans, following by Mississippi, New Jersey, New York, and Maine.

The states with the lowest share of unpaid loans were Wyoming, Montana, Alaska, South Dakota, and North Dakota.

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15 Cities Where House Flippers Are Making Tons Of Money

for sale sign flag america homeREUTERS/Jonathan Ernst

Real estate investors are getting back in the flipping game, netting an average gross profit of nearly $20,000 on single family home flips in the first half of 2013.

Home flips are up 19% from a year ago and 74% from the first half of 2011, according to a new report from Realtytrac.

“While flipping continues to be profitable in most markets, particularly those where the home price recovery is still nascent and a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount, home flipping is tapering off in markets where fewer of those distressed bargains are available,” Daren Blomquist, vice president at RealtyTrac, said in the statement.

“Flipping was on the rise in more than two-thirds of the markets, including New York, Washington, D.C., Chicago and several Florida metros,” he said.

The average flipper in the following 15 metro areas earned 10% to 82% flipping their homes.

15) Orlando-Kissimmee, FL: 10% Gross Profit

Single Family Flips (first half 2013): 2,417

YoY change: 75%

Average purchase price: $141,192

Average gross profit: $14,394

Gross profit percentage: 10%

Source: Realtytrac

14) New York-Northern New Jersey-Long Island, NY-NJ-PA: 10% Gross Profit

Single Family Flips (first half 2013): 5,485

YoY change: 437%

Average purchase price: $376,224

Average gross profit: $39,458

Gross profit percentage: 10%

Source: Realtytrac

13) Cincinnati-Middletown, OH-KY-IN: 11% Gross Profit

Single Family Flips (first half 2013): 1,191

YoY change: 85%

Average purchase price: $123,938

Average gross profit: $13,996

Gross profit percentage: 11%

Source: Realtytrac

12) Washington-Arlington-Alexandria, DC-VA-MD-WV: 11% Gross Profit

12) Washington-Arlington-Alexandria, DC-VA-MD-WV: 11% Gross Profit

Alex Wong/Getty Images

Single Family Flips (first half 2013): 3,169

YoY change: 108%

Average purchase price: $403,441

Average gross profit: $46,205

Gross profit percentage: 11%

Source: Realtytrac

11) Chicago-Naperville-Joliet, IL-IN-WI: 12% Gross Profit

11) Chicago-Naperville-Joliet, IL-IN-WI: 12% Gross Profit

Shutterstock

Single Family Flips (first half 2013): 2,845

YoY change: 86%

Average purchase price: $195,360

Average gross profit: $23,099

Gross profit percentage: 12%

Source: Realtytrac

10) Virginia Beach-Norfolk-Newport News, VA-NC: 13% Gross Profit

Single Family Flips (first half 2013): 542

YoY change: 14%

Average purchase price: $206,765

Average gross profit: $26,565

Gross profit percentage: 13%

Source: Realtytrac

9) Charleston-North Charleston, SC: 13% Gross Profit

Single Family Flips (first half 2013): 551

YoY change: 97%

Average purchase price: $229,813

Average gross profit: $29,850

Gross profit percentage: 13%

Source: Realtytrac

8) Jacksonville, FL: 16% Gross Profit

Single Family Flips (first half 2013): 1,823

YoY change: 260%

Average purchase price: $133,968

Average gross profit: $21,326

Gross profit percentage: 16%

Source: Realtytrac

7) Cape Coral-Fort Myers, FL: 17% Gross Profit

Single Family Flips (first half 2013): 1,401

YoY change: 14%

Average purchase price: $134,644

Average gross profit: $22,524

Gross profit percentage: 17%

Source: Realtytrac

6) Port St. Lucie, FL: 17% Gross Profit

6) Port St. Lucie, FL: 17% Gross Profit

Single Family Flips (first half 2013): 1,001

YoY change: 105%

Average purchase price: $105,824

Average gross profit: $18,433

Gross profit percentage: 17%

Source: Realtytrac

5) Tampa-St. Petersburg-Clearwater, FL: 23% Gross Profit

Single Family Flips (first half 2013): 2,673

YoY change: 32%

Average purchase price: $102,193

Average gross profit: $23,446

Gross profit percentage: 23%

Source: Realtytrac

4) Pittsburgh, PA: 32% Gross Profit

Single Family Flips (first half 2013): 617

YoY change: 79%

Average purchase price: $114,355

Average gross profit: $36,537

Gross profit percentage: 32%

Source: Realtytrac

3) Palm Coast, FL: 34% Gross Profit

3) Palm Coast, FL: 34% Gross Profit

AP Photo/Chris O’Meara

Single Family Flips (first half 2013): 528

YoY change: 267%

Average purchase price: $127,896

Average gross profit: $43,721

Gross profit percentage: 34%

Source: Realtytrac

2) Omaha-Council Bluffs, NE-IA: 56% Gross Profit

2) Omaha-Council Bluffs, NE-IA: 56% Gross Profit

Single Family Flips (first half 2013): 2,662

YoY change: 329%

Average purchase price: $153,617

Average gross profit: $85,537

Gross profit percentage: 56%

Source: Realtytrac

1) Deltona-Daytona Beach-Ormond Beach, FL: 82% Gross Profit

1) Deltona-Daytona Beach-Ormond Beach, FL: 82% Gross Profit

Single Family Flips (first half 2013): 729

YoY change: 111%

Average purchase price: $62,826

Average gross profit: $51,657

Gross profit percentage: 82%

Source: Realtytrac

What about this struggling city?

What about this struggling city?

REUTERS

 

Survey: Current Homeowners Increase Purchases, Investors Exit Market

BY: ESTHER CHO

Current homeowners are playing a bigger role as housing market participants amid a sharp slowdown in investor activity, according to data from the Campbell/Inside Mortgage Finance HousingPulse Tracking survey.

Among three buyer types-current homeowner, first-time homebuyer, and investor-the survey showed current homeowners were the only group to see activity rise in June.

Last month, current homeowners represented 44.6 percent of the purchase market, up from 43.8 percent in May based on a three-month moving average.

At the same time, the share for first-time homebuyers fell to 35.7 percent from 36 percent month-over-month.

Even more notable was the decrease in investor purchases. As rising home prices discourage investors, HousePulse found home purchases from investors slipped to 19.7 percent, down significantly from 23.1 percent from February. The percentage also represents the lowest level since September 2012.

Falling in line with the decrease in investor activity was a drop in the supply of distressed properties.

According to HousingPulse, the share of foreclosure or short sales transactions plummeted year-over-year, falling to 28.2 percent from 40.3 percent in June 2012. The percentage represents the lowest level in at least three and half years.

The HousingPulse survey also revealed investor traffic decreased for the fourth straight month in June.

Agents across the United States also offered insight into investor activity, with one Arizona agent stating, “Investors have left our market with rising house prices,”

In California, one agent reported, “Values have increased by 20% since January and investors are backing away.”

The survey includes about 2,000 real estate agents nationwide.

The Market’s Cooling

The boom came on so fast and so strong this year that it was scary. Buyers this spring were like a bear that had hibernated for six years and finally woke up famished, eating everything in sight. Prices shot up at unsustainable rates.

Median Price per Square Foot

That has begun to change. In the last 60 days, mortgage rates jumped from 3.4% to 4.5%. By the end of June, prices had risen 18.7% over last year, which really can’t happen two years in a row. Rising prices and rising rates combined to increase the mortgage payment for a home by 33%.

Interest Rate Graph

And this has now given buyers a moment of pause. The market may keep rising but it will be at a more modest pace than we saw this spring; in some places prices will go up and down this winter.

The number of homes for sale has been increasing since April, which is also when bidding wars began to ease. Over the last seven days, the number of Redfin customers signing offers has declined by 25% from the average weekly rate in June. At the same time, 9% more people contacted us for the first time, so the changing market is still drawing buyers into the market, not just scaring them away.

Tales of Joy and Woe

How fast has the market shifted in buyers favor? Well here are a few examples:

  • In Washington DC, listing agents at other brokerages called last week to sayour agents forgot to include an escalator clause in the offer, promising more money in a bidding war. We said no, we didn’t forget: this is our final offer.
  • In LA, Redfin agent John Venti won three straight offers last weekend with no counter-offers or competition. “That hasn’t happened,” he said, “since December 2011.”

But not everything has changed. Almost 70% of sales are still a bidding war.

  • In Boston, when Redfin agent Sandy Rosen lost out on a bidding war for a $600,000 Sudbury home, we stayed in touch with the listing agent. After negotiations over repairs stalled, the listing agent called us back and we snatched the deal away from the initial buyer.
  • In the Bay Area, where homes are selling for hundreds of thousands above the asking price, we’ve been winning deals not with the highest bid, but by promising the seller we’ve got enough cash to make up for any shortfall in the appraisal. Redfin’s Jess Williams just beat out 28 other offers using this tactic on a $700,000 San Francisco listing.

The Return to Normalcy

Are we worried that the market is cooling? No. We were worried back in April, whenwe warned against a frothy market:

And there’s one change that is about to come: rates will rise. In our survey of 1,100 home-buyers, 58% cited “low interest rates” as a primary reason for buying now, but mortgage bankers now expect rates to rise from 3.5% to 4.5% over the next year. When that happens, the frothiest markets could be in for a setback.

Buyers are still out in force, with inventory down 19% from last year, rates still 2 points below historical norms, and prices 26% south of their 2006 peak.

What has happened after six years of depression, and six months of manic bubbliness, is that we have returned at last to a normal market: you’ll pay more now than you would have at the absolute bottom in late 2012, but there will be more — and better — homes to choose from, and a better chance of buying one.

That sounds like a good deal to us. What’s your take on the market? Just leave a comment on our blog or on Facebook.

Best, Glenn

Glenn Kelman | CEO, Redfin

  • WALL STREET JOURNAL
  • July 11, 2013, 7:41 p.m. ET

Return of the Sight-Unseen Market

Spurred by tight inventory, developers in cities like New York and Miami are demanding, and getting, millions for homes that have yet to be built 

Presales of luxury condos all but disappeared after the housing market went bust, but now many luxury developments are selling out just months after putting a spade in the ground. To persuade people to buy a home sight unseen, developers are getting creative. Photo: Williams New York.

One real estate developer hired a drone; another displayed life-size sculptures of polar bears. A third charged potential buyers $100,000 just to take a peek at the floor plans. The common goal: selling something that doesn’t exist.

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Williams New York

A rendering of 35XV, a high-end condo in Manhattan is shown. The 24-floor project is only about halfway built, but 50% of the units are already under contract.

Spurred by tight inventory and plenty of interest from foreign buyers, real-estate developers in cities such as New York and Miami are reviving the boom-era practice of pitching new buildings months—and even years—ahead of completion. Miami’s Faena House, a planned 18-story tower, is still pouring concrete at the condo’s basement level. Yet the project, part of a newly developed strip that will include a five-star hotel and an arts center by Rem Koolhaas’s OMA design firm, already has 50% of its 47 units under contract, according to Alicia Goldstein of Faena Group. Buyers are required to put down a 50% cash deposit on the apartments, which range from $2.5 million for a one-bedroom to $50 million for the full-floor duplex penthouse.

At 56 Leonard in downtown Manhattan, which is being designed by Pritzker Prize-winning firm Herzog & de Meuron, 80% of the 145 units were under contract since presales launched in March. According to co-developer Izak Senbahar, a penthouse has gone to contract for $47 million, a record for downtown Manhattan if the deal closes. One57, one of the most expensive projects in Manhattan, won’t be completed until 2014, but 70% of its 92 units are already taken, and total sales are expected to exceed $2 billion.

“Today we see presales as early as two to three years away from completion,” says Kelly Kennedy Mack, president of New York-based Corcoran Sunshine Marketing Group, which runs marketing and sales for projects similar to 56 Leonard.

It is a contrast to the first years after the housing bust, when would-be buyers grew leery of presale offerings after some high-profile developments stalled during construction, leaving early buyers in the lurch. In Manhattan, the practice of selling out buildings on plans alone had all but disappeared three years ago, says Jonathan Miller, president of appraisal firm Miller Samuel.

But now that buyers are returning to the market, they are confronting historically low inventory levels, making presale offerings an increasingly attractive option. In the second quarter of this year, there were 4,795 units for sale in Manhattan, the lowest second quarter on record in at least 13 years, Mr. Miller says. Sales volume, on the other hand, has risen almost 19% compared with the same period last year. In a rising market, buyers are less fearful of a building going bust—and can look to presales as a way to “lock in” a lower price point.

At the same time, New York developers are contending with stricter criteria for securing loans. Lenders typically now require that a building sell at least 50% of its units or some comparable benchmark before a construction loan is completed, according to Frances Katzen, a managing director at Douglas Elliman. In South Florida, where few of the proposed towers have traditional lender financing because banks and big investors are still spooked from the bust, presales are even more critical. The large cash down-payments demanded of buyers are used to fund most of the development’s construction.

Claudio Papapietro for The Wall Street Journal

In March, developer Michael Namer’s pop-up art gallery in Chelsea hosted artist Oscar Dotter’s ‘Nordic Pop’ exhibition, which included paintings and two life-size sculptures of polar bears.

That is where the marketing comes in. Michael Namer, the CEO of New York-based Alfa Development and the developer of Village Green West, takes a showman’s approach. In March, his pop-up art gallery in Chelsea hosted artist Oscar Dotter’s “Nordic Pop” exhibition, which included paintings and two life-size sculptures of polar bears. Mr. Namer says the goal was twofold: to raise awareness for the plight of the polar bear, and to showcase Chelsea Green, a 14-story, 51-unit green-energy building that he is developing. It is slated to open later this year, but was nearly sold out by the time of the exhibit. (Mr. Dotter, the artist, says he bought a two-bedroom unit in Chelsea Green for $2.1 million and says it would now list for $800,000 more than he paid for it.)

That is where the marketing comes in. Michael Namer, the CEO of New York-based Alfa Development and the developer of Village Green West, takes a showman’s approach. In March, his pop-up art gallery in Chelsea hosted artist Oscar Dotter’s “Nordic Pop” exhibition, which included paintings and two life-size sculptures of polar bears. Mr. Namer says the goal was twofold: to raise awareness for the plight of the polar bear, and to showcase Chelsea Green, a 14-story, 51-unit green-energy building that he is developing. It is slated to open later this year, but was nearly sold out by the time of the exhibit. (Mr. Dotter, the artist, says he bought a two-bedroom unit in Chelsea Green for $2.1 million and says it would now list for $800,000 more than he paid for it.)

At 35XV, a condo to be built in New York’s Flatiron district, the pitch includes a view from the top. While the 24-floor project is only built about halfway up, so a “little baby helicopter” was commissioned to snap photos of the city skyline from different levels of the planned tower, says Kenneth Horn of Alchemy Properties. The images are compiled into a video package played on loop at the off-site sales office, he says, where a model kitchen and bathroom also await prospective buyers.

The building is about 50% under contract, and Mr. Horn says it has already raised prices twice, with prices for one-bedrooms now starting at over $2.2 million, up from around $1.5 million. He says his firm expects the building to sell out before it opens in August 2014.

Marketers of the Porsche Design Tower in Miami, which is scheduled to open in early 2016, created an aura of secrecy. There was so much interest in the building’s planned car elevator, which lifts tenants’ cars directly to their units, that Dezer Development charged interested parties a $100,000 refundable deposit just to see the floor plans. (The ploy got them about 33 buyer commitments before the presale office even opened, says owner Gil Dezer.)

World Red Eye

One of the mini models of an apartment unit in the sales center for the Porsche Design Tower in Miami. The combined cost of the miniatures was $250,000, according to the developer.

Once the off-site sales office opened, though, the company felt it needed a better way to help buyers visualize their apartments, which range from $4.8 million for a 4,800-square-foot unit to $32.5 million for a 17,000-square-foot penthouse. “When you start showing duplexes on floor plans, people get confused,” Mr. Dezer says. So they made four replicas of different apartments and the lobby encased in four-by-six-foot glass boxes at a cost of $250,000. The décor and furniture was designed by Michael Wolk Design Associates and was crafted in miniature by MYP Maquetas, a Mexico-based model-making company. Currently 89 of the building’s 132 units have been sold for a total of $535 million, Mr. Dezer says.

The Porsche Design Tower required a 30% down payment, which is lower than usual for Miami. This is because the developer plans to secure lender financing, taking some of the onus off buyers. While buyers can usually finance the balance of their purchase once their unit is completed, veterans say the vast majority of luxury presale buyers pay for their units in cash. The stiff cash requirements means buyers are betting, heavily, that their units will be completed to their liking—and that the development will be a success.

According to Jack McCabe, CEO of McCabe Research & Consulting, an independent real-estate analysis company in South Florida, buyers are only entitled to a fraction of their down payment if the project sours. Litigation can be onerous; many lawsuits from the last housing bust are still pending. The vast majority of new condo buildings after the bust saw individual or class action lawsuits from contract holders trying to recoup their losses, Mr. McCabe says.

Peter Zalewski, founder of the real-estate consultancy Condo Vultures, notes that foreign investors are more used to large cash deposits than U.S. buyers, so the large down-payment requirements are better tolerated. “Right now, it feels like 2003 in South Florida,” he says, recalling the boom years.

Not all developers are on board with such an early presales strategy. “A lot of developers leave money on the table if they sell too soon,” said Shaun Osher, CEO of CORE, a brokerage in New York. Mr. Osher says his company will only market a building a year out from completion, otherwise it risks underpricing the units. And should the still-fragile market take another drop, he warns that overly optimistic developers could end up with another bust-era dilemma. “Buyers would sooner lose their deposit than close on a devalued unit,” he says.

REX NUTTING 

July 12, 2013, 6:02 a.m. EDT

Has Fed killed housing, and with it, the economy?

Commentary: Higher home prices have been most positive development

Higher home prices have helped the economy by increasing the wealth of the middle class.

WASHINGTON (MarketWatch) — Has the Federal Reserve strangled the recovery by hinting that it would soon ease back on the throttle?


Reuters

Federal Reserve Chairman Ben Bernanke said Wednesday that the Fed won’t let higher interest rates strangle the economy.

Will higher mortgage rates stop the housing market in its tracks?

Or is the economy now steady enough that the Fed can take off the training wheels by tapering its bond purchases?

How the economy — and particularly the housing market — handles the spike ininterest rates will be a key factor in the timing and pace of the reduction in bond buying by the Fed, which could begin as early as September.

Fed Chairman Ben Bernanke said Wednesday that one of the biggest risks facing the economy right now is that higher interest rates could stop the housing recovery in its tracks. Housing is now the brightest sector of the economy, and if it stumbles badly, you can expect the Fed to reverse the taper and buy more bonds.

The rebound in housing certainly looks robust enough to cope with somewhat higher rates, but no one can know in advance how lenders and would-be borrowers will react to the news that the rate on a 30-year fixed mortgage has risen from 3.45% in April to 4.51% today. Rates are up compared with last month and last year, but in historical context, they’ve rarely been lower.

Luxury renters pour thousands into upgrades

Luxury renters in the country’s hottest real-estate markets are spending tens or even hundreds of thousands of dollars on renovations – even though they may have to return the space to same condition it was leased.

It might be September before we’ll begin to know with any confidence if housing is beginning to weaken.

To decide when they should taper the number of bonds they buy, Fed officials will be focused most intently on the jobs data. Steady job growth of around 200,000 per month may be telling them to go ahead in September, but they’ll want some confirmation from the financial markets and the housing market before they do it.

So far, financial markets have passed the test. Although long-term interest rates have soared, there has been very little disruption in the markets. Equities have been volatile, but the record level of the S&P 500 SPX -0.13%  on Thursday suggests that investors, at least, don’t think higher interest rates will hurt economic growth, profits or market sentiment. Specialized indicators of financial stress are also encouraging the Fed to take the next step.

But what about housing? After six years as an anchor pulling the economy down, housing is finally contributing to growth, employment and household balance sheets.

New home construction is up 34% in the past year, construction employment is up by 190,000, and home sales are rising steadily.

But most importantly, home prices are up. Higher house prices have all kinds of beneficial effects on the economy (as long as they don’t get too bubbly, of course).

The increase in home prices over the past year is the best economic news the middle class has had in years. Contrary to what my colleague David Weidner wrote earlier this week, the housing recovery has been good for the bottom 99%, or at least the 66% who own a home.

Fixed Rates Surge on Strong Employment Report

07/11/2013BY: TORY BARRINGER

Mortgage rates continued to trend higher this week following last week’s release of the June employment report.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 4.51 percent (0.8 point) for the week ending July 11, up from 4.29 percent last week and almost a full percentage point higher than the same week last year (3.56 percent).

The 15-year FRM averaged 3.53 percent (0.8 point), up from 3.39 percent previously.

Certain adjustable rates saw increases, too. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.26 percent (0.7 point) this week, up from 3.10 percent in the last survey. The 1-year ARM averaged 2.66 percent (0.5 point), unchanged from last week.

“June’s strong employment led to more market speculation that the Federal Reserve will reduce future bond purchases causing bond yields to rise and mortgage rates followed,” explained Frank Nothaft, VP and chief economist at Freddie Mac. “However, the minutes of the June 18th and 19th Federal Reserve’s monetary policy committee meeting, released July 10th, stated that many members indicated further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of bond purchases.”

Meanwhile, Bankrate.com’s weekly national survey saw mortgage rates rising to their highest level in the last two years. The 30-year fixed averaged 4.66 percent this week, while the 15-year fixed averaged 3.75 percent. The 5/1 ARM climbed to 3.63 percent.