Posts Tagged ‘Investors’

By Krista Franks Brock

The percentage of homeowners who owe more on their mortgages than their homes are worth has declined to less than 12 percent as of the third quarter of this year, according toLender Processing Services’ Mortgage Monitor report. While the increasing number of homeowners rising above water is good news for the market, LPS detects some tumultuous seas ahead as a cloud of problem home equity loans forms on the horizon.

The negative equity rate at the beginning of the year was 19 percent, according to LPS. The company estimates it dropped to 11.6 percent by the end of October. LPS SVP Herb Blecher explained the company’s methodology for calculating the negative equity rate.

“As reports of estimated U.S. negative equity tend to vary widely, and to clarify our approach, we are applying a highly refined methodology to our calculations, accounting for not only the current combined loan amount of first and second liens using comprehensive loan and property data, but also the impact of distressed sale discounts on loans in serious delinquency and foreclosure,” Blecher said.

Close to half—about 48 percent—of today’s outstanding home equity lines of credit (HELOCs) were originated between 2004 and 2006, and more than 75 percent were originated between 2004 and 2009. According to LPS, “the vast majority” of these loans are set to amortize over the next few years.

Credit scores among borrowers with HELOCs originated since 2004 are declining, based on LPS’ data. For example, the average credit score for a borrower with a HELOC originated in 2007 was 744 at the time of origination. Those same borrowers today have an average credit score of 724.

This poses a threat to lenders who “are often on the hook for almost all of 2nd lien losses,” LPS explained. The average unpaid principal balance on these loans varies from $50,000 for loans originated in 2004 to $70,000 for loans originated in 2006 and 2007, according to LPS’ data.

LPS says “alarm bells shouldn’t be going off just yet,” but the company reasons, “if these trends continue— the next few years could present significant risk for defaults in the home equity market.”

Meanwhile, LPS reported that the national delinquency rate declined 2.8 percent in the third quarter, dropping to 6.28 percent; and as usual, things are a little worse in judicial states than non-judicial states.

Foreclosure starts in judicial states were up 12 percent over the month of October, while foreclosure starts in non-judicial states increased 5 percent.

However, the pipeline ratio in judicial states—while still higher than in non-judicial states—continues to improve. LPS says the pipeline in judicial states is now 47 months, down from a high of 118 months in 2011. The pipeline in non-judicial states is 39 months.

Overall, distressed sales made up 14.2 percent of September home sales in the United States, according to LPS’ report. The company says the last time the distressed sale share was this low was in 2007.

In its report, LPS also noted the sharp decline in the refinance share of the originations market. Refinance mortgages are down from 75 percent at the beginning of the year to about 50 percent in October.


While analysts across the industry are reporting waning price gains as we head toward winter, Clear Capital also points out another interesting – and perhaps counterintuitive – trend occurring in the housing market. Prior to the recovery, high saturations of distressed sales correlated with falling prices, but today’s market reveals a switch such that high levels of distressed sales are taking place alongside higher price gains.

Currently, distressed sales are more prevalent among higher-performing markets, according to Clear Capital’s Home Data Index Market Report released Monday.

The average annual price growth among the 15 top-performing markets is 19.2 percent, and distressed sales make up 24.5 percent of sales in these markets.

In contrast, prices in the lowest-performing markets average 4.9 percent over the year, and distressed sales make up a lower 17.2 percent of sales in these markets, according to Clear Capital.

This is part of what Clear Capital has termed the “First-In-First-Out” recovery, in which hard-hit markets have made the strongest and quickest comebacks in the housing recovery.

“The Phoenix MSA has embodied this behavior as one of the first markets to exhibit a sustained recovery alongside its high levels of distressed sale saturation,” Clear Capital said in its press release Monday.

“After significant gains, the market’s growth is now moderating with quarterly growth of 2.4%, less than half of the current annual rate of growth when annualized,” Clear Capital continued.

In fact, Phoenix, having spent close to a year at the top of Clear Capital’s highest-performing list, has slid off the list completely.

Nationally, price gains are starting to let up as well, according to Clear Capital.

National home prices increased 1.8 percent in the rolling quarter ending in November, almost half of the previous quarter’s 3.3 percent gain.

“Though some market observers may take this as a sign of a deflating bubble, we see this as a natural, and welcomed evolution on the horizon of the new housing landscape,” said Alex Villacorta, VP of research and analytics at Clear Capital.

“Understandably, many current homeowners would like to see hot gains continue for some time to come,” he added. “Market participants, however, are better served by a cooler and more sustainable recovery.”

On an annual basis, prices rose 10.8 percent year-over-year during the rolling quarter ending in November, according to Clear Capital. This is down from an 11 percent gain in the previous quarter.

REOs and short sales made up 21.6 percent of home sales during the three-month period ending in November, which according to Clear Capital is “substantially lower” than the 41 percent high reached in 2011.

On an annual basis, the Northeast and South posted single-digit price gains as opposed to the West and Midwest’s double-digit gains.

Prices in the Northeast increased 6 percent over the year. In the South prices were up 8.7 percent.

In the West and Midwest, prices rose 19.3 percent and 10 percent, respectively.

On a more local level, Clear Capital found eight of the 15 highest performing major metro markets over the quarter were located in California with San Francisco, Riverside, and Sacramento topping the list.

The lowest performing metro, and the only one to post a quarterly decline, was the Houston, Texas, metro, which experienced a 1.4 percent price decline over the quarter.

Birmingham, Alabama, and Honolulu followed with price gains of 0.3 percent and 0.4 percent, respectively.

Shadow Inventory Falls to Lowest Level Since August 2008


Overall residential shadow inventory, as of July 2013, was 1.9 million homes, according to CoreLogic. That’s the lowest shadow inventory tally reported since August 2008.

The industry’s current shadow inventory carries a value of $293 billion by CoreLogic’s assessment, down from $380 billion in July 2012.

It represents 3.7 months’ of supply and accounts for 85 percent of the 2.2 million properties that were seriously delinquent, in foreclosure, or bank-owned at July month-end.

Of the fewer than 2 million properties in the shadow inventory, 874,000 properties were seriously delinquent

(1.8 months’ supply), 661,000 were in some stage of foreclosure (1.3 months’ supply), and 318,000 were already in REO (0.6 months’ supply).

July’s count of homes lurking in the shadows was down 22 percent from a year earlier, when CoreLogic says shadow inventory stood at 2.4 million homes. Shadow inventory reached a peak of 3 million homes in 2010. As of July, it’s fallen 38 percent from that point.

“Over the past year, the value of the U.S. shadow inventory dropped by $87 billion-a sign of increased normalcy in the housing market,” said Anand Nallathambi, president and CEOof CoreLogic. “With a year-over-year decrease of 22 percent in July, the shadow inventory has now declined steadily for 10 consecutive months.”

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of properties that are seriously delinquent, in foreclosure, or held as REO by mortgage servicers but not currently listed on multiple listing services (MLSs).

Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed unlisted properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in CoreLogic’s estimate of the current shadow inventory.

Clear Capital Report Shows New Top Markets


San Francisco and Detroit led the housing market rebound according to the September Home Data Index released Tuesday by Clear Capital.

San Francisco led metro price performance in September, with 4.4 percent quarterly growth and 28.3 percent yearly growth. Detroit home prices saw 4.3 percent and 23.3 percent in quarterly and yearly growth, respectively.

National home price gains in September picked up to 10.9 percent year-over-year, which Clear Capital attributed to residual summer buying activity.

“While national and regional rates showed more of the same in September, an interesting dichotomy is unfolding beneath the surface,” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital.

“Strong performances in San Francisco and Detroit remind us that in a dynamic market, the only constant is change. For about a year and a half now, we’ve been focused on First-In, First-Out recoveries characterized by hard hit markets attracting investor interest, like Miami, Phoenix and Las Vegas. Now as the recovery matures, we see home buyers re-engaging in markets that haven’t fit the typical investor profile.”

San Francisco median home prices stood at $600,000 in September according to the report, while the median price in Detroit was $107,500. The national median home price was $215,000.

“San Francisco REO saturation remains low, at 6.3 percent, yet Detroit REO saturation remains relatively high and much improved, at 31.7 percent,” the report noted. “Yet over the last four years, REO saturation in Detroit has been cut in half. Just over the last six months, REO saturation fell by 11.5 percentage points.”

“Detroit was arguably one of the hardest hit in the country and is finally seeing a recovery with 23.3% growth over the year. Detroit’s struggle with relatively high REO saturation over the last several years delayed recovery,” Villacorta said. “Now, low price points and recent improvements in REO saturation, a key precursor to recovery, are driving gains. On the other hand, San Francisco’s median home price at $600,000 suggests non-investor home buyer demand is materializing, supported by its relatively strong local economy.”

Distressed Inventory Fading Fast as Housing Market Strengthens

08/29/2013BY: ESTHER CHO

As the housing market heals, foreclosure inventory is depleting quickly, CoreLogic reported Thursday.

In July, about 949,000 homes were in some stage of foreclosure, down 32 percent from 1.4 million a year ago. Foreclosure inventory also showed a 4.4 percent decline from June. Year-to-date, foreclosure inventory is down by 20 percent.

Currently, about 2.4 percent of homes with a mortgage are in foreclosure inventory, the lowest level since March 2009.

In addition to shrinking foreclosure inventory, CoreLogic also reported steep declines in completed foreclosures and serious delinquencies.

According to the data provider’s estimate, about 49,000 properties were lost to foreclosure in July, down 25 percent from 65,000 in July 2012.

From June to July, completed foreclosures fell by 8.6 percent from 53,000 in the prior month.

At 5.4 percent, the serious delinquency rate decreased to the lowest level since December 2008, according to CoreLogic. The rate represents fewer than 2.2 million mortgages.

“Continued strength in the housing market will contribute to our outlook for ongoing improvement in the stock of distressed assets through the end of this year,” said Mark Fleming, chief economist for CoreLogic.

According to CoreLogic, the decreases were apparent across the country, with every state reporting an annual decline in foreclosures.

“Not surprisingly, non-judicial states have come the farthest the fastest in reducing shadow inventory and lowering delinquency rates,” noted Anand Nallathambi, president and CEO of CoreLogic.

Florida took the lead again as the state with the highest number of completed foreclosures. Over the last 12 months, about 110,000 homes were lost to foreclosure in Florida. California followed with 65,000 completed foreclosures. Other states in the top five were Michigan (61,000), Texas (45,000), and Georgia (41,000).

Florida also held the highest percentage of homes in foreclosure inventory, at 8.1 percent. New Jersey’s foreclosure inventory rate of 5.9 percent put it at second, with New York (4.7 percent), Connecticut (4.0 percent), and Maine (4.0 percent) filling out the top five.

However, in 36 states, foreclosure inventory sits below the national rate of 2.4 percent.

Home Sales Stage a Comeback in July


After observing a slowdown in sales throughout June—typically the peak selling month for the year—online brokerageRedfin reported a rebound in July, though other market indicators continue to cool.

According to Redfin’s data, “this July saw a healthy jump in homes sold throughout most of the 19 markets covered in this report,” improving 3 percent month-over-month and 17.6 percent year-over-year from a rather disappointing July 2012.

In fact, according to the Seattle-based brokerage, July 2013 saw the highest number of homes sold in the past four years, with the 19 markets together seeing about 94,000 sales.

“July’s numbers are probably the result of buyers shaking off the impact of mortgage interest rate increases, and opting to lock in rates before they rise further,” explained analyst Tommy Unger. “Chicago led the nation with

nearly 12,000 homes sold, up a strong 5.7 percent in July, and 36.9 percent year over year.”

While sales numbers picked up, Redfin believes the gains won’t last.

“With less inventory, higher interest rates and continued buyer fatigue, August won’t see the same 7 percent month-over-month sales increase as in 2011 and 2012,” Unger said. “In fact, based on current closed and pending sales, we expect a slight month-over-month drop in home sales for next month.”

At the same time, reports on home price growth and inventory were less positive in July.

Nationally, home prices per square foot were up 1.1 percent from June and 19.3 percent from July 2012, Redfin reported. However, a closer examination shows four of the 19 areas tracked posting monthly price decreases: Austin (-2.6 percent); Washington, D.C. (-2.5 percent); Philadelphia (-1.5 percent); and Boston (-0.9 percent).

Meanwhile, the number of homes for sale in July fell 4.6 percent month-over-month, outdoing the 4 percent drop recorded at the same time last year. Year-over-year, inventory fell 30.6 percent. With the exception of San Jose (which reported a 7.1 percent monthly increase in for-sale homes), inventory was down on a monthly basis in all tracked markets.

“The slight increase in inventory from May to June was partially attributable to the lower sales volume,” Unger said. “Now, it looks like inventory is back on its seasonal decline heading into fall.”

California Dominates Turnaround Towns List; Detroit Claims Spot


California markets dominate’s list of Turnaround Towns for the second quarter of this year, claiming the top four spots on the list and six of the top 10.

While California may take the most spots on the top 10 list, says Detroit’s presence on the list is “most noteworthy.”

“Though the city recently filed for bankruptcy, the market nonetheless posted strong improvement in the second quarter,” according to

In fact, Detroit may soon be “one of the most balanced markets in the nation,” according to Steve Berkowitz, CEO of Move, an online real estate network.

The top 10 “Turnaround Towns” are determined by an algorithm that relies on data including inventory levels, median list prices, median number of days on market, and search and listing activity on

Detroit claimed the No. 7 spot on the list after its inventory age fell to the second-lowest in the nation at 45 days on market. The city’s list price increased 37.8 percent from the second quarter of last year to the second quarter of this year, and its inventory declined 26.5 percent.

The No. 1 spot went to Oakland, California, where the median number of days a home spends on the market is just 15—the lowest in the nation.

Oakland also claimed the greatest increase in list price across the nation in the second quarter on an annual basis. The median list price in the second quarter of this year was $479,000, up from $339,000 in the same quarter last year.

Oakland’s inventory declined more than 34 percent over the same period.

Orange County, California, took the No. 2 spot on the list, while also staking claim to the country’s greatest decline in inventory over the year ending in the second quarter of this year – a 36.6 percent decline.

Orange County’s home prices were up 29.4 percent, and the median number of days a home spent on the market in the second quarter was 51.

The third and fourth spots on the list went to Santa Barbara-Santa Maria-Lompoc, California, and San Jose, California, respectively.

Santa Barbara’s median list price rose 34.3 percent to a notable $685,000 over the year.

Seattle, Washington; Los Angeles, Calfornia; Portland, Oregon; San Diego, California; and Reno Nevada also made it onto the second quarter list of top 10 “Turnaround Towns.”