Posts Tagged ‘Chief Economist’
Nearly 50 percent leave Obama mortgage-aid program
Nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out. The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday’s report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say. More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year. “The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody’s Analytics. Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market. Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That’s about 48 percent of the ones who had enrolled since March 2009. And it is up from more than 40 percent through June. Another 421,804, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time. RealtyTrac reported that the number of U.S. homes lost to foreclosure surged in July to 92,858 properties, up 9 percent from June. The pace of repossessions has been increasing and the nation is now on track to having more than 1 million homes lost to foreclosure by the end of the year. That would eclipse the more than 900,000 homes repossessed in 2009, the firm says. Lenders have historically taken over about 100,000 homes a year, according to RealtyTrac. Zandi said the government effort will likely end up helping only about 500,000 homeowners lower their monthly payments on a permanent basis. That’s a small percentage of the number of people who have already lost their homes to foreclosure or distressed sales like short sales - when lenders let homeowners sell for less than they owe on their mortgages. Zandi predicts another 1.5 million foreclosures or short sales in 2011. “We still have a lot more foreclosures to come and further home price declines,” Zandi said. He said home prices, which have already fallen 30 percent since the peak of the housing boom, would drop by another 5 percent by next spring. Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork. The banking industry said borrowers weren’t sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out. Obama officials dispute that they pressured banks. They have defended the program, saying lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out. Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period. Those who have successfully navigated the program to reach permanent modifications have seen their monthly payments cut on average by about $500. Homeowners first receive temporary modifications and those are supposed to become permanent after borrowers make three payments on time and complete all the required paperwork. That includes proof of income and a letter explaining the reason for their troubles. But in practice, the process has taken far longer. The more than 100 participating mortgage companies get taxpayer incentives to reduce payments. As of mid-June only $490 million had been spent out of a potential $75 billion the government has made available to help stem the wave of foreclosures. Copyright © 2010 The Associated Press, Martin Crutsinger, AP economics writer.
Homeowner confidence in real estate market dips
Homeowners are more pessimistic about the short-term future of home values in their local market than they have been in the past three quarters, according to the Zillow second-quarter Homeowner Confidence Survey. One-third (33 percent) believe home values in their local housing market have not yet reached a bottom, while 38 percent believe they have already reached a bottom. When asked about local home values over the next six months, more than one-quarter (28 percent) of U.S. homeowners said home values would decrease, up from 20 percent in the first quarter. Additionally, less than one-third (30 percent) believes home values in their local market will increase, down from 42 percent in the first quarter. Despite the increasing pessimism, a large number of homeowners anxiously await the opportunity to sell. Five percent of U.S. homeowners say they are very likely to put their home on the market in the next six months if they see signs of a real estate market turnaround. This translates into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009. Looking backward, homeowners also became slightly more pessimistic about the performance of their own homes’ values in the past year. Less than a quarter (24 percent) of homeowners said their home had increased in value in the past year, compared to 27 percent in the first quarter. In reality, 34 percent of homes increased in value in the second quarter, according to the Zillow Q2 Real Estate Market Reports. “As homeowners have been inundated recently with news of declining home sales post-tax credit, it’s no surprise that they would become more pessimistic about the future of home values,” said Dr. Stan Humphries, chief economist at Zillow.com. “Homeowners have become much more responsive to current market conditions than they were just two years ago, when a more typical reaction was denial. “Given this sentiment, we’re surprised so many homeowners believe their market has already bottomed. Although our Q2 reports indicated signs of stabilization in 30 percent of markets we cover, we’re concerned that this was at least partly due to the homebuyer tax credits. We’re already seeing payback for the credits in the form of declining home sales, and this trend will push up inventory levels and exert downward pressure on home values. Add in the inventory from the millions of sidelined sellers and we’ll take more steps back. Our forecast remains largely unchanged: We’re in for an L-shaped recovery that will likely keep annualized home value appreciation very low for the next three to five years.” Homeowner perception by region Looking further into the future, the majority of homeowners believe their own homes’ values will either increase (27 percent) or stay the same (35 percent) in the next 12 months, while 12 percent expect a decrease and 26 percent don’t know. Of those who expect their home’s value to increase, the median expectation is a rise of 6 percent, although that varies by geography. Northeastern and Western homeowners who expect an increase anticipate a median rise of 10 percent, while Southern and Midwestern homeowners expect a median increase of 5 percent. Those who expect their home’s value to decrease in the next year anticipate a median decrease of 10 percent. © 2010 Florida Realtors®
Are housing tax breaks in jeopardy?
Federal housing policy offers the wealthiest Americans billions in tax breaks without delivering much bang for the buck in increased homeownership, critics told government policymakers Tuesday. “We aren’t getting our money’s worth,” Mark Zandi, chief economist of Moody’s Analytics, said at a government conference on reforming housing policy. The government spent $230 billion last year to promote homeownership through tax breaks and spending programs. The biggest chunk – $80 billion – went toward the mortgage interest deduction, according to the Congressional Budget Office. Michael Stegman, housing policy specialist at the MacArthur Foundation, said the mortgage tax break goes primarily to the wealthiest households. A study this year by the Tax Policy Center of the Brookings Institution and the Urban Institute noted that the mortgage deduction was worth just $91 a year to families earning less than $40,000 – and $5,459 a year to those making more than $250,000. The government, seeking to overhaul the housing market after the collapse of mortgage giants Fannie Mae and Freddie Mac, is unlikely to touch the politically sacrosanct deduction anytime soon. But analysts suggested that the government’s debt – $8.8 trillion and growing – meant that housing subsidies might one day face the knife. “We can’t afford it,” Zandi said. The U.S. homeownership rate (66.9 percent) is about the same as Canada’s and is lower than Australia, Ireland, Spain and Britain’s even though “these countries provide far less government support for homeownership,” Michael Lea of San Diego State University wrote this year. For now, the government is neck-deep in housing. Private money has fled the market in the wake of a housing-market meltdown. Fannie, Freddie and other government agencies have filled the gap, guaranteeing more than 90 percent of new mortgages. “Without government guarantees, mortgage rates would be hundreds of basis points higher, resulting in a moribund housing market,” said William Gross, managing director of bond fund Pimco. “We don’t want government in the housing market, but it’s a necessity.” Treasury Secretary Timothy Geithner told the conference “there’s no clear consensus yet” on reforming the way mortgages are financed. He promised “fundamental change” in the way Fannie and Freddie do business: They used an implicit government guarantee to borrow cheap money and make big bets in the housing market. When their gamble went bad, taxpayers picked up the tab. Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Paul Wiseman.
Mortgage rates hit 4.44%
Growing pessimism over the weak economic recovery pushed mortgage rates to the lowest level in decades for the seventh time in eight weeks. The average rate on a 30-year fixed mortgage hit 4.44 percent this week, mortgage buyer Freddie Mac said Thursday. And some brokers say homeowners looking to refinance have even managed to do so for as low as 4 percent. Still, cheap rates have done little to boost the struggling housing market. Instead, they are highlighting investors’ fears that the rebound is stalling and the country could be slipping back into a recession. Investors are shifting their money away from stocks and into safer Treasury bonds. That is sending Treasury yields lower. Mortgage rates track those yields. And the Federal Reserve is pushing those yields down even further. The central bank said Tuesday it would buy Treasurys to help aid the recovery, using the proceeds from debt and mortgage-backed securities it bought from Fannie Mae and Freddie Mac. That move alone is unlikely to push average rates down to 4 percent, said Bob Walters, chief economist at Quicken Loans. But average rates that low are still a possibility if the economic outlook worsens even further. “The silver lining to a bad economy is that interest rates fall,” Walters said. “If you can lower your debt burden by refinancing, that’s great.” Up to now, low rates have failed to spark a struggling housing market. Slow job growth, a 9.5 percent unemployment rate and tight credit standards have kept people from buying homes. Applications to refinance have grown but remain well short of a massive boom. Overall home loan applications rose only 0.6 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday. For those homeowners with solid finances, the opportunity to refinance below 4 percent is persuading some to consider 15-year fixed loans. Those average rates dropped to 3.92 percent, down from 3.95 percent last week and the lowest in decades. More homeowners are choosing that option because it allows them to save money in the long run, though it costs more in monthly payments. Freddie Mac says nearly a third of borrowers refinancing 30-year loans in the April-to-June picked loans with 15-year or 20-year terms. Still, savvy consumers can already find 30-year fixed rates at or near 4 percent if they are willing to pay a little more upfront. Chik Quintans, assistant sales manager with Atlas Mortgage in Seattle, said he was able to get two clients into mortgages with a 4 percent interest rate and a fee of 1 percent of the total mortgage amount on Wednesday. But rates have inched up since then. “Every day’s different,” Quintans said. “Sometimes people have to ruminate, and then the opportunity’s gone.” Refinancing could pick up significantly if rates fall further. An average rate below 4.375 percent could be enough of a drop so that many people who refinanced last year could shave a half of a percentage point of their mortgage rates, said Scott Buchta, chief mortgage strategist with Braver Stern Securities. Lenders could find themselves in a bind if traffic picks up, Buchta said. Many have laid off thousands of workers over the past three years and don’t have enough staff to handle a crush of new applications. Mortgage rates often fluctuate significantly, even within a given day. To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from about 125 banks, thrifts and credit unions around the country in a voluntary survey. Rate quotes from parts of the country with more lending activity – such as the West and Northeast – are given more weight in creating the average. Rates on five-year adjustable-rate mortgages averaged 3.56 percent, down from 3.63 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.53 percent from 3.55 percent. The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for all loans except for 15-year mortgages, which averaged 0.6 of a point. Copyright © 2010 The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
South Florida home values see nation’s biggest drop in a year
South Florida home values suffered the worst decline of 25 large metropolitan areas in the second quarter of this year, falling 15 percent compared with 2009, according to a national real estate report. The data, released Monday by analysts at Zillow, found that the median home value in Palm Beach, Broward and Miami-Dade counties fell to $146,500, down nearly 7 percent from the beginning of this year and a whopping 52 percent from housing’s peak values in 2006. Nationally, median home value, including townhomes and condominiums, dipped 3.2 percent from the same time in 2009. Zillow’s chief economist, Stan Humphries, called Monday’s study a “mixed bag,” with several areas in California seeing a continued increase in values. In Los Angeles, home values jumped 5 percent compared with 2009. San Diego homes saw a 7 percent increase. “Markets in other parts of the country, like Miami and Phoenix, are not yet showing signs of reaching a bottom in home values,” Humphries said. “High supply continues to be a challenge in states like Florida and Arizona.” A separate report released Monday by analysts at Miami-based Condo Vultures showed a 4.6 percent increase in housing inventory in South Florida since May, with 68,254 single-family houses, condos and townhomes on the market. Humphries predicts home values will bottom out nationally during the latter half of this year. “But we continue to be cautious about the impact of declining home sales,” Humphries said. The Phoenix area showed a 12 percent decline in median home value compared with last year, while Detroit values plummeted 14 percent. The Zillow Home Value Index measures the median value of all homes, not just sales. In Palm Beach County, values for single-family homes showed only a 1 percent decline, while Martin and St. Lucie had declines of 5 percent and 4 percent, respectively. South Florida’s homes are treading water in one measurement, managing so far this year not to sink further into negative equity. Zillow found that 44 percent of South Florida single-family homes with mortgages are underwater – real estate slang for owing more on a loan than the home is worth. That’s about the same percentage as the beginning of the year and just below the second quarter of 2009, when 47 percent of homes were underwater. In the Treasure Coast, 55 percent of homes with mortgages were underwater during the second quarter of this year, compared with 56 percent earlier in 2010. Nationally, 21.5 percent of homes with mortgages had negative equity in the second quarter. Humphries said foreclosures and bank takeovers help clean out the inventory of negative equity homes, but the typically lower sale prices of those homes also continues to weigh down values of neighboring properties. Peter Zalewski, a principal for Condo Vultures, is more optimistic about Florida’s market turning around even with rising inventories. He believes financing opportunities are increasing, meaning more people will be able to buy. “I think that 2009 will be the year most people realize was the bottom,” he said. “I would be surprised if there was another big increase in underwater homes.” Copyright © 2010 The Palm Beach Post, Fla., Kimberly Miller. Distributed by McClatchy-Tribune Information Services.
