Tag Archives: Housing Market

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Demand for Mortgages Falls as Rates Remain Unchanged

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By Reuters

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David Paul Morris/Bloomberg via Getty Images

By Leah Schnurr

Applications for U.S. home mortgages decreased last week with potential buyers shying away from the market as rates held steady just below their two-year highs.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, declined 3.7 percent in the week ended July 26. It was the seventh week in a row the index has been lower.

The MBA’s seasonally adjusted index of loan requests for home purchases, a leading indicator of home sales, fell 3.4 percent.

Fixed 30-year mortgage rates averaged 4.58 percent, unchanged from the week before and only 10 basis points below a two-year high hit earlier in July.

Rates have risen sharply since early May, pushed higher by the Federal Reserve’s plan to start slowing its economic stimulus later this year if the economy progresses as expected.

The Fed is currently buying $85 billion in bonds a month to keep borrowing costs low. The cheap mortgage rates have helped lure homebuyers and worries have emerged that higher costs could take some of the strength out of the housing market’s recovery.

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Still, most economists don’t expect it to derail housing’s growth altogether. Rates have risen about 1 percentage point since early May, but still remain low by historical standards.

Refinancing activity has been hit harder than purchases by the rise in rates, which makes refinancing less lucrative. The gauge of refinancing applications fell 3.8 percent.

The refinance share of total mortgage activity was unchanged at 63 percent of applications.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

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Home Prices Heat Up in May as Pace of Gains Cools

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By Reuters

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Nick Ut/AP

By Leah Schnurr

U.S. single-family home prices rose in May, though the pace of gains cooled compared to the month before, a closely watched survey showed Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 1 percent on a seasonally adjusted basis, shy of economists’ forecast for a 1.5 percent increase. That marked a slower pace from April’s 1.7 percent rise.

On a non-adjusted basis, prices rose 2.4 percent.

Compared to last May, prices also fell short of expectations, rising 12.2 percent from a year earlier. Still, it was the biggest annual gain since March 2006, matching a record set in April.

The report was unlikely to alter economists’ views that the housing sector continues to recover, making it a bright spot for the economy.

All 20 cities rose on a yearly basis, led by a 24.5 percent surge in San Francisco.

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Investors Eye Fed for Further Clues on Interest Rates

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By The Associated Press

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Manuel Balce Ceneta/APFederal Reserve Chairman Ben Bernanke

By MARTIN CRUTSINGER

WASHINGTON — When the Federal Reserve offers its latest word on interest rates this week, few think it will telegraph the one thing investors have been most eager to know: When it will slow its bond purchases, which have kept long-term borrowing rates low.

The Fed might choose to clarify a separate issue: When it may raise its key short-term rate. The Fed has kept that rate near zero since 2008. It’s said it plans to keep it there at least as long as unemployment remains above 6.5 percent and the inflation outlook below 2.5 percent.

Unemployment is now 7.6 percent; the inflation rate is roughly 1 percent.

Chairman Ben Bernanke has stressed that the Fed could decide to keep its short-term rate ultra-low even after unemployment reaches 6.5 percent. Testifying to Congress this month, Bernanke noted that a key reason unemployment has declined is that many Americans have stopped looking for jobs. When people stop looking for work, they’re no longer counted as unemployed.

If that trend continues, Bernanke said that lower unemployment could mask a still-weak job market and that the Fed might feel short-term rates should stay at record lows.

In the statement the Fed will issue when its two-day meeting ends Wednesday, it could specify an unemployment rate below 6.5 percent that would be needed before it might raise its benchmark short-term rate. It might also say that it won’t raise that rate if inflation fell below a specific level.

Investors would react to any such shift in the Fed’s guidance. Financial markets have been pivoting for months on speculation that the Fed will or won’t soon slow its $85-billion-a-month in Treasury and mortgage bond purchases. Those purchases have led more consumers and businesses to borrow, fueled a stock rally and supported an economy slowed by tax increases and federal spending cuts.

The Fed has signaled that it might slow its bond buying as soon as September — if the economy has strengthened as much as the Fed has forecast. If not, the Fed would likely maintain its stimulus.

On Wednesday, the government will report how fast the economy grew in the April-June quarter. Most economists predict an annual rate of barely 1 percent — far too weak to quickly reduce unemployment. Most think the growth is picking up in the second half of the year on the strength of a resurgent housing market, stronger auto sales, steady job gains and higher pay.

Many economists think the key goal of the Fed’s policy discussions Tuesday and Wednesday will be to stress that the Fed’s actions in coming months will hinge on how the economy fares, not on any timetable.

Some economists think the Fed will be mindful …read more

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Sales of New Homes Rise to 5-Year High as Prices Soar

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By Reuters

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Mike Groll/AP

By Lucia Mutikani

WASHINGTON — Sales of new U.S. single-family homes vaulted to a five-year high in June, showing little signs of slowing in the face of higher mortgage rates.

The Commerce Department said Wednesday sales increased 8.3 percent to a seasonally adjusted annual rate of 497,000 units, the highest level since May 2008.

Sales increased 1.3 percent in May.

Economists polled by Reuters had expected new home sales to rise to a 482,000-unit rate last month.

Compared with June last year, sales were up 38.1 percent, the largest increase since January 1992.

The third straight month of gains in new home sales, which are measured when contracts are signed, suggested the housing market was gaining more muscle and should allay concerns that higher mortgage rates could slow down momentum.

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Mortgage rates have spiked in anticipation of the U.S. Federal Reserve starting to taper its generous monetary stimulus later this year. Rates still remain low and Fed Chairman Ben Bernanke last week expressed optimism the housing market recovery would continue.

Last month, the inventory of new homes on the market increased 1.3 percent to 161,000, the highest since August 2011, as builders continue to ramp up production to meet the growing demand.

Still, supply remains tight, putting upward pressure on prices. The median new home price increased 7.4 percent from a year ago.

At June’s sales pace it would take 3.9 months to clear the houses on the market, down from 4.2 months in May. A supply of 6.0 months is normally considered as a healthy balance between supply and demand.

Sales last month rose in three regions, but fell in the Midwest.

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U.S. Banks Face Profit Lull as Mortgage Boom Slackens

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By Reuters

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Gene J. Puskar/AP

By Peter Rudegeair

Unexpectedly large quarterly profits at JPMorgan and Wells Fargo hide a more worrisome forecast for the rest of the year for many U.S. banks. Things could get worse before they get any better.

Wells Fargo’s (WFC) profit was buoyed in the second quarter by consumers rushing to refinance their mortgages and buy new homes, driven by record low interest rates and a recovering housing market. JPMorgan Chase’s (JPM) mortgage lending helped the bank for much of 2012, and second-quarter results this year were by some measures strong too — it made more loans, even if its pretax profits from lending fell 37 percent.

But mortgage lending is likely to be less of a support for banks going forward, as the U.S. Federal Reserve has started talking about tapering off its massive bond-buying program and borrowing rates for home loans have jumped. Thirty-year mortgage rates rose to 4.58 percent at the end of the second quarter, up 0.82 percentage point from the first quarter.

Executives from both banks, which between them make one in three U.S. home loans, said Friday that mortgage lending volumes would decline in the coming months and so profits from the business would fall. JPMorgan Chief Financial Officer Marianne Lake said rising mortgage rates could slash volume by 30 percent to 40 percent. That would result in a “dramatic reduction in profits” in the business, JPMorgan Chief Executive Officer Jamie Dimon said.

At the same time economic growth has not ramped up enough for the rest of these banks’ businesses — such as small business loans and credit cards — to make up for the loss of that income. There may be a lull between the drop-off in mortgage lending and the boost to other forms of revenue from an improving economy and higher long-term interest rates.

“If the economy is getting stronger, it’s not manifesting itself in terms of balance sheet growth of the banks,” said Christopher Mutascio, a banking analyst at Keefe, Bruyette & Woods. “Mortgage headwinds are a bit more instantaneous, and the pick-up in the other business lines may take some time.”

A more complete outlook for the banking industry will emerge next week when both Citigroup Inc and Bank of America report their earnings.

‘No Growth’ in The Mortgage Business

The looming problem isn’t lost on the banks and could lead to further cost cutting as they try to bridge the gap.

JPMorgan’s Lake said depending on market conditions the bank could accelerate its previously announced cost-cutting targets. In February, the largest U.S. bank had said it planned to cut 17,000 jobs by the end of 2014, or roughly 6.6 percent of its workforce. The job cuts were largely targeted at areas such as mortgage …read more

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Report Shows Americans Gloomy About the Economy

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By Reuters

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Gene J. Puskar/AP

NEW YORK — U.S. consumer sentiment tumbled to a nine-month low in April, with Americans especially gloomy about the long-term health of the economy, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index of consumer sentiment fell to 72.3 in April, a level last seen in July, 2012, and below economists’ forecasts of 78.5. The index stood at 78.6 last month.

The barometer of current economic conditions fell to 84.8 this month from 90.7, while the gauge of consumer expectations hit 64.2, down from 70.8.

Americans’ long-term outlook was even more gloomy, with many anticipating a higher unemployment rate and lower after-tax income in the year ahead, Richard Curtin, the survey’s director, said in a statement.

But more immediate plans for buying homes and vehicles were positive, Curtin said, while rising home and stock values were expected to support spending this year.

Economists have worried that higher payroll taxes and government belt-tightening could cause consumers to keep a closer watch on their wallets as the year goes on.

Consumer pessimism this month did suppress inflation expectations, with the one-year outlook dipping to 3 percent, the lowest in the past year, from 3.2 percent in March. The survey’s five-to-10-year inflation outlook held at 2.8 percent.

The Federal Reserve has repeatedly pointed to tame inflation expectations and a still fragile labor market as reason to press ahead with its aggressive monetary stimulus.

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From: http://www.dailyfinance.com/2013/04/12/report-shows-americans-gloomy-about-economy/

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Home Foreclosures Fall to Lowest Level in 5-Plus Years

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By The Associated Press

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Paul Sakuma/AP

By ALEX VEIGA

LOS ANGELES — The number of U.S. homes repossessed by lenders last month fell to the lowest level in more than five years, the latest evidence that the nation’s foreclosure crisis is abating amid an improving housing market.

While some states still saw increases in homes taken back by banks, nationally home repossessions fell 3 percent in March from the previous month and were down 21 percent from a year earlier, foreclosure listing firm RealtyTrac Inc. said Thursday.

Thirty-four states posted annual declines in completed foreclosures. Among those bucking that trend: Arkansas, Maryland, Washington and Pennsylvania.

All told, lenders repossessed 43,597 homes last month, the lowest level since September 2007.

At the current monthly pace, completed foreclosures will total roughly 550,000 this year, down from 671,000 last year, RealtyTrac said.

An uptick in homes that entered the foreclosure process last month, however, may end up pushing that total to 600,000, said Daren Blomquist, a vice president at RealtyTrac.

Several factors are contributing to the decline in completed foreclosures: Steady job growth and ultra-low mortgage rates are helping the once-battered housing market recover, driving demand for homes and prices upward.

Higher home values help restore equity to homeowners, which can help those at risk of foreclosure by improving their chances of refinancing their mortgage to a lower payment or place them in a better position to sell their home.

Meanwhile, states like California, Nevada and others have passed laws to increase homeowners’ protections from foreclosure. Those laws have effectively delayed the pace of homes entering the foreclosure process, which has helped to thin the pipeline of completed foreclosures in those states.

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Even so, the number of foreclosure starts, or homes that entered the foreclosure process, edged higher for the second month in a row in March.

Foreclosure starts rose 2 percent from February to 73,113. That’s still down 28 percent from March last year, the firm said.

Twelve states, including New York, Maryland and Washington saw annual increases in foreclosure starts last month.

During the housing downturn, about half of the homes that entered the foreclosure process ended up as bank-owned homes that could potentially to be sold at a sharp discount, hurting the value of nearby homes.

But with the housing market apparently on a sustained, if gradual, turnaround path, it’s more likely that a home entering the foreclosure process now will be able to avoid being lost to foreclosure, Blomquist said.

“A lot of these won’t end up as vacant bank-owned homes, dragging down the market,” he said. “These foreclosures are happening in the context of a housing market that’s recovering. They’re not a sign that the housing market is going downhill again.”

As of end of March there were about 1.5 million

From: http://www.dailyfinance.com/2013/04/11/realtytrac-home-foreclosures/

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U.S. Banks to Send Checks for $3.6 Billion in Foreclosure Settlement

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By The Associated Press

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The nation’s largest banks will begin sending payments this week to millions of Americans who may have been wrongfully foreclosed on during the housing crisis.

A total of $3.6 billion in cash will be distributed to 4.2 million borrowers who lost their homes or were at risk of foreclosure, the Federal Reserve and the U.S. Comptroller of the Currency said Tuesday. Payments will range from $300 to $125,000. About 90 percent of borrowers whose mortgages were serviced by 11 of the banks will receive payments by the end of April, the agencies said.

The last group of payments is expected in mid-July.

A large share of those receiving payments, about 3 million borrowers, will each get only $300 or $400, according to data issued by the two agencies. Around 80 percent of them will receive $1,000 or less.

At the other end of the scale, $125,000 payments will go to 1,082 military personnel, who were foreclosed upon in violation of a law prohibiting foreclosures on active-duty service members, and to 53 borrowers who weren’t in default on their mortgages but still lost their homes.

Generally homeowners who were wrongly denied a loan modification are entitled to relatively small payments. By contrast borrowers whose homes were deemed to be unfairly seized are eligible for the biggest payments.

The amounts apply to borrowers whose mortgages were serviced by the 11 banks. Details for the other two, Goldman Sachs and Morgan Stanley, will be announced in the near future, the agencies said.

The 13 banks, which include Bank of America, JPMorgan Chase, Wells Fargo and Citigroup, reached a settlement with the federal agencies in January. They agreed to pay a total $9.3 billion in cash and in reductions of mortgage balances.

The banks settled the regulators’ complaints that they wrongfully foreclosed on borrowers with abuses such as “robo-signing,” or automatically signing off on foreclosures without properly reviewing documents.

The settlement covers borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010. It ended an independent review of loan files that the two agencies ordered in 2011.

Banks and consumer advocates had complained that the loan-by-loan reviews were time-consuming and costly and didn’t reach many affected borrowers. Some questioned the independence of the consultants who performed the reviews, who often ruled against borrowers.

Consumer advocates have criticized the deal, saying the regulators settled for too low a price by letting banks avoid full responsibility for wrongful foreclosures.

The other banks in the settlement are HSBC, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank, Aurora, Morgan Stanley and Goldman Sachs.

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Uneven Recovery Leaves Job, Housing Markets Behind

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By The Associated Press

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Richard Drew/AP

By CHRISTOPHER S. RUGABER

WASHINGTON — From household wealth to spending at stores, many of the U.S. economy’s vital signs have recovered from the damage done by the Great Recession.

Home foreclosures and layoffs have dropped to pre-recession levels. Economic output has rebounded. And the Dow Jones industrial average is in record territory.

So is the economy back to full health? Not quite.

Not with unemployment at 7.7 percent and with 3 million fewer jobs than when the recession began. And while the housing market is improving, that engine of economic growth and job creation still has far to go before it can be declared healthy.

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Perhaps the best way to think about the U.S. economy is this: After five painful years, it’s nearly back to where it started when the recession began. What’s different now is that the trends are much healthier. Gone are the fears that the economy could fall into another recession.

“We’ve made a lot of progress,” says Michael Gapen, senior U.S. economist at Barclays Capital.

The recession officially began in December 2007. It ended in June 2009. Here’s a look at ways in which the economy has returned to pre-recession levels and ways it hasn’t:

What’s Back:

  • Household Wealth: Americans lost $16 trillion in wealth during the recession, mainly because home values and stock prices sank. Those losses have now been reversed. Household “net worth” reached $66.1 trillion in the final three months of 2012, according to the Federal Reserve. That was just 2 percent below the peak reached in the fall of 2007. And steady increases in stock prices and home values so far this year have allowed Americans as a whole to regain all their lost wealth, though many individual families have yet to recover. Increased net worth is vital to the economy because it typically drives more spending. Net worth equals the value of homes, investments, bank accounts and other assets, minus debts such as mortgages, student loans and credit card balances.
  • Retail Sales. Just as household wealth has recovered, so has consumers’ willingness to spend more to shop, eat out or go on vacation. That trend has spurred job growth at retailers and restaurants. Retail sales totaled $421.4 billion in February. Adjusted for inflation, that was nearly 18 percent above the recession low and just 0.7 percent below the record level in November 2007.
  • Layoffs. The job market remains weak by some measures. But consider this: If you have a job, you’re less likely to lose it than at any other point in at least 12 years. That marks a sharp turnaround from the depths of the recession, when layoffs soared – from 1.8 million in December 2007 to 2.6 million in January 2009. In January this year, employers cut 1.5 million jobs – the lowest monthly total in …read more

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Fed Seen Maintaining Stance on Record Low Interest Rates

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By The Associated Press

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Richard Drew/AP Federal Reserve Chairman Ben Bernanke is seen on a monitor on the floor of the New York Stock Exchange on Tuesday, the same day Bernanke told Congress maintaining low interest is necessary in an economy is still burdened by high unemployment.

By MARTIN CRUTSINGER

WASHINGTON — The Federal Reserve on Wednesday is expected to maintain its resolve to keep borrowing costs at record lows despite growing signs that the economy is strengthening.

The Fed will end a two-day meeting with a policy statement and updated economic forecasts. Afterward, Chairman Ben Bernanke will hold a news conference. Most analysts think policymakers will acknowledge the economy’s improvements but leave the Fed’s stimulative policies unchanged.

Bernanke has said in recent weeks that the job market, in particular, has a long way to go to full health and still needs the Fed’s extraordinary support.

The unemployment rate, at 7.7 percent, remains well above the 5 percent to 6 percent range associated with a healthy economy. The Fed has said it plans to keep short-term rates at record lows at least until unemployment falls to 6.5 percent, as long as the inflation outlook remains mild. And it foresees unemployment staying above 6.5 percent until at least the end of 2015.

Economists think Bernanke will take note of the economy’s gains. But most foresee no pullback in the Fed’s strategy of keeping short-term rates at record lows and of buying $85 billion a month in Treasurys and mortgage bonds to keep long-term loan rates down.

“Even though the economy has improved, it has not improved enough to switch course,” says Diane Swonk, chief economist Mesirow Financial. “We don’t have unemployment low enough yet.”

The economy slowed to an annual growth rate of just 0.1 percent in the October-December quarter, a near-stall that was due mainly to temporary factors that have largely faded. Economists think growth has rebounded in the January-March quarter to an annual rate around 2 percent or more. The most recent data support that view.

Americans spent more at retailers in February despite higher Social Security taxes that shrank most workers’ paychecks. Manufacturing gained solidly in February. And employers have gone on a four-month hiring spree, adding an average of 205,000 jobs a month. In February, the unemployment rate, though still high, reached its lowest point in more than four years.

The brighter news has prompted speculation that the Fed might be preparing to dial back its easy-money policies. Such thinking has been fed by concerns voiced by a few Fed regional bank presidents about the low-rate policies.

Inflation Fears

These include fears that the Fed has pumped so much money into the economy that it could eventually ignite inflation, fuel speculative asset bubbles or destabilize markets once the Fed has to start raising rates or …read more
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Housing Starts Rise to Highest Level in Nearly 5 Years

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By The Associated Press

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By CHRISTOPHER S. RUGABER

WASHINGTON — U.S. builders started more houses and apartments in February and obtained permits for future construction at the fastest pace in 4 &frac12; years. The increases point to a housing recovery that is gaining strength.

The Commerce Department said Tuesday that builders broke ground on homes last month at a seasonally adjusted annual rate of 917,000. That’s up from 910,000 in January. And it’s the second-fastest pace since June 2008, behind December’s rate of 982,000.

Single-family home construction increased to an annual rate of 618,000, the most in 4 &frac12; years. Apartment construction also ticked up, to 285,000. The gains are likely to grow even faster in the coming months. Building permits, a sign of future construction, increased 4.6 percent to 946,000. That was also the most since June 2008, just a few months into the Great Recession.

And the figures for January and December were also revised higher. Overall housing starts have risen 28 percent higher over the past 12 months.

“The road ahead for housing is still, so far, looking promising,” Jennifer Lee, an economist at BMO Capital Markets, said in a note to clients. Housing starts jumped in the Northeast and Midwest, while they fell in the South and West. Permits rose in the South, West and Midwest, falling only in the Northeast.

The U.S. housing market is recovering after stagnating for roughly five years. Steady job gains and near-record-low mortgage rates have encouraged more people to buy. In addition, more people are seeking their own homes after doubling up with friends and relatives in the recession. That’s leading to greater demand for apartments and single-family homes to rent.

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Still, the supply of available homes for sale remains low. That has helped push up home prices. They rose nearly 10 percent in January compared with 12 months earlier, according to CoreLogic, the biggest increase in nearly seven years.

The number of previously occupied homes for sale has fallen to its lowest level in 13 years. And the pace of foreclosures, while still rising in some states, has slowed sharply on a national basis. That means fewer low-priced foreclosed homes are being dumped on the market.

Those trends, and the likelihood of further price gains, have led builders to step up construction. Last year, builders broke ground on the most homes in four years.

Homebuilders have become much more confident over the past year. But in March, a measure of home builder confidence fell for the second straight month over concerns that demand for new homes is exceeding supplies of land, building materials and workers. In the short term, that could slow sales.

Still, the survey noted that the outlook for sales over the next six months rose to its highest level in more …read more
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If Fed Ends Quantitative Easing Now, It'll Hurt More Than Just Housing

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By John Grgurich

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Just as we hear that previously occupied home sales hit their second-highest level in three years, we also hear that the Federal Reserve is having second thoughts on its latest round of quantitative easing, also known as QE3.

This is potentially a perfect storm of economic news.

QE3 is the Fed’s asset-purchase program: The central bank has committed to use it to buy $40 billion worth of mortgage-backed securities every month. These massive securities purchases by the Fed are designed to drive…

If Fed Ends Quantitative Easing Now, It’ll Hurt More Than Just Housing originally appeared on DailyFinance.com on 2013-02-21T15:21:00Z.

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Rental-Backed Securites: Wall Street's Clever Plan for Foreclosed Homes?

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By John Grgurich

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It feels like this country went from a housing glut to a housing boom almost overnight. One day, all you’re hearing about is how much extra housing capacity there is, and the next you’re reading headlines about record home starts.

But before the housing-market resurgence, the other thing you heard about was how no one knew what to do with all that extra housing.

Well, Wall Street is trying to figure out what to do with it, and their idea doesn’t bode well for either individual neighborhoods…

Rental-Backed Securites: Wall Street’s Clever Plan for Foreclosed Homes? originally appeared on DailyFinance.com on 2013-02-20T13:27:00Z.

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