U.S. Negative Equity Falls To 17 Percent

One in six (17 percent) U.S. homeowners with mortgages – or 8.7 million – were still underwater on their mortgage in the second quarter of 2014, despite rising home values, according to the Zillow® Negative Equity Report. This is down from 18.8 percent in the first quarter of 2014, and down from 23.8 percent from last year (Q2 2013).

The effective negative equity rate, or the percentage of homeowners who have less than 20 percent equity in their home, fell to 34.8 percent in the second quarter, down from 36.9 percent from the first quarter of 2014, and down from 41.9 percent last year (Q2 2013). Homeowners with less than 20 percent equity in their current home may have a difficult time covering the costs on selling and purchasing a new property.

Looking ahead, the national negative equity rate is expected to fall to 14.9 percent of all homeowners with a mortgage by the end of the second quarter of 2015, according to the Zillow Negative Equity Forecast.

Of the 35 largest metros covered by Zillow, more than one-fourth of homeowners in Atlanta (28.9 percent), Las Vegas (27.4 percent) and Chicago (27.1 percent) were still underwater on their homes at the end of the second quarter. The lowest rates of negative equity were in San Jose, Calif. (4.6 percent), San Francisco (8.2 percent) and Austin, Tex. (8.3 percent).

Nationally, millennial homeowners held 19.6 percent of all underwater mortgages while Generation X held 18.7 percent and Baby Boomers held 10.9 percent.

 

U.S. Foreclosure Activity Increases 7 Percent in August but Overall Down from Last Year

RealtyTrac® recently released its U.S. Foreclosure Market Report™ for August 2014, which shows foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on 116,913 U.S. properties in August, an increase of 7 percent from the previous month but still down 9 percent from a year ago. The report also shows one in every 1,126 U.S. housing units with a foreclosure filing during the month.

A total of 51,192 U.S. properties were scheduled for foreclosure auction during the month, down 1 percent from the previous month but up 1 percent from a year ago—the first annual increase in scheduled foreclosure auctions following 44 consecutive months of annual decreases. Scheduled foreclosure auctions in judicial foreclosure states, where foreclosures are processed through the court system, increased 5 percent from a year ago.

“The August foreclosure numbers demonstrate that although the foreclosure crisis is well behind us, the messy business of cleaning up the distress lingering from the housing bust continues in many markets,” said Daren Blomquist, vice president at RealtyTrac. “The annual increase in foreclosure auctions—the first since the robo-signing controversy rocked the foreclosure industry back in late 2010—indicates mortgage servicers are finally adjusting to the new paradigms for proper foreclosure that have been implemented in many states, whether by legislation or litigation or both.”

Scheduled foreclosure auctions increased from a year ago in 24 states, including Colorado (up 160 percent), Oregon (up 117 percent), Connecticut (up 81 percent), New York (up 81 percent), Oklahoma (up 72 percent), New Jersey (up 71 percent), Illinois (up 25 percent), South Carolina (up 21 percent) and Maryland (up 17 percent).

Other high-level findings from the report:

  • More than 55,000 U.S. properties started the foreclosure process in August, up 12 percent from previous month and flat from year ago. It was the second consecutive month where U.S. foreclosure starts have increased on a month-over-month basis.
  • Foreclosure starts, which in some states are the scheduled foreclosure auctions, increased from a year ago in 19 states, including Oklahoma (up 147 percent), Indiana (up 136 percent), New Jersey (up 115 percent), Massachusetts (up 55 percent), Florida (up 24 percent) and Maryland (up 20 percent).
  • Lenders repossessed 26,343 U.S. properties via foreclosure (REO) in August, up 2 percent from the previous month but down 33 percent from a year ago. It was the 21st consecutive month where REO activity declined on a year-over-year basis nationally.

· REOs increased from a year ago in seven states, included Georgia (up 146 percent), Hawaii (up 42 percent), Oregon (up 20 percent), Pennsylvania (up 12 percent) and Connecticut (up 10 percent).

  • Six of the nation’s 20 largest metro areas posted year-over-year increases in foreclosure activity: Washington, D.C. (up 18 percent); New York (up 18 percent); Baltimore (up 12 percent); Atlanta (up 11 percent); Philadelphia (up 11 percent); and San Francisco (up 2 percent).
  • Among the nation’s 20 largest metros, those with the five highest foreclosure rates were Miami (one in every 359 housing units with a foreclosure filing); Tampa (one in every 407 housing units); Baltimore (one in every 514 housing units); Riverside-San Bernardino in Southern California (one in every 612 housing units); and Chicago (one in every 662 housing units).

Florida, Nevada, Maryland, New Jersey, Georgia post highest state foreclosure rates

A total of 6,468 Florida properties started the foreclosure process in August, a 74 percent jump from the previous month and up 24 percent from a year ago, the first year-over-year increase in foreclosure starts after 17 consecutive months of year-over-year decreases. The rise in foreclosure starts helped Florida post the nation’s highest state foreclosure rate for the 11th consecutive month. One in every 400 Florida housing units had a foreclosure filing in August, nearly three times the national average.

The Nevada foreclosure rate of one in every 524 housing units with a foreclosure filing ranked second highest among the states, up from a No. 3 ranking in the previous month thanks to a 36 percent month-over-month increase in foreclosure starts, bringing monthly foreclosure starts to the highest level since October 2013.

Recovery Will Continue: A Perspective Of The U.S. Residential Housing Market

As the Existing Home Sales numbers for the month of July reported by the National Association of Realtors (NAR) Thursday suggest, we are seeing a continuation of the housing market recovery, with spring sales volumes finally being realized.

While the fourth quarter of 2013 and the first half of 2014 saw a lag in activity, largely attributed to the harsh winter, lack of job growth and negative consumer confidence, we are experiencing a relatively continuous uptick in sales. We anticipate a robust second half of 2014 as housing inventories—which were dangerously low at the beginning of 2014 at less than two months of inventory—are now at five months of inventory. A healthy residential real estate market has six-to-eight months of available inventory.

Key Influencers

A number of encouraging factors are helping to drive this more traditional buying and selling cycle. Consumer confidence, now at a six-year high, is a key influencer of the home-buying and selling cycle. We are also noting a resurgence of consumers who are buying homes as their primary or even secondary residences, versus solely for investment. As well, more and more homeowners are the sellers of properties, as opposed to investors or banks dealing with distressed inventories.

Initially, the real estate recovery was fueled primarily by private equity and investors. And while that removed large blocks of distressed properties from the market, it was not a sustainable long-term model. The more traditional cycle we are currently seeing is not only encouraging, but an appropriate recovery tract.

Segmented Recovery

The latest analysis of the nation’s housing industry has also put a spotlight on the various segments of the market and how each is fairing through the course of the recovery. While the luxury market has had strong sales recorded throughout most geographic regions, the mid-market continues to work through lower-than-peak values.

Still, prices across the nation are increasing, so in many markets negative equity is giving way to positive equity, meaning that fewer people are ‘underwater’ and enabling more people to sell their homes. At the height of the downturn, for example, we saw approximately 15 million mortgages nationwide with negative equity out of approximately 55 million total mortgages. Today, that figure has been reduced to between six to seven million mortgages, a more manageable volume.

First-time homebuyers continue to track at around 28% of home sales versus the historical average of 40%. A number of factors are impacting this market; among them, limited inventory, stringent credit standards, dramatic increase in student debt, the spike in FHA mortgage insurance premiums, and stiff competition from cash buyers.

Yet, while underwriting standards are more rigorous, we are seeing a positive trend as buyers are increasingly able to secure financing, particularly through the assistance of quality loan officers who understand and specialize in working through the loan process. We also note that beginning the search for a home already mortgage pre-qualified is more important than ever been before.

The Value of Homeownership

Areas of the country that suffered the most in the downturn, particularly Las Vegas, Arizona, South Florida, have seen a resurgence in sales fueled by international buyers from a variety of destinations including China, Canada, parts of Latin America and Europe, as the United States’ residential real estate market continues to be viewed as a prudent investment.

With the uptick in consumer confidence, increasing home values and other positive economic factors, the intrinsic value of homeownership continues its resurgence.

While a full recovery is potentially two to three years away, the trend-line is positive. Job creation and overall economic growth are necessary to continue fueling the market, which, as current activity indicates, we anticipate seeing more of in the year ahead.

Affordability Approaches Pre-2004 Norm As Prices Firm

Housing affordability dipped slightly in the second quarter of 2014 as several markets saw a firming of home prices, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI). Nationwide, the second quarter HOI was 62.6—i.e., 62.6 percent of new and existing homes sold during the quarter were affordable to a family earning the U.S. median income of $63,900—down about three percentage points from the first quarter reading of 65.5.

The latest readings reflect a slow but steady march toward historically normal appreciation and interest rates, producing an HOI typical of the period before the mid-2000s boom. In the second quarter of 2014, the average mortgage interest rate declined to 4.44 percent (from 4.57 in the first quarter), while the national median home price increased from $195,000 to $214,000. (The HOI, of course, uses the full range of home sale prices, not just the median.)

Among individual metros, Youngstown-Warren-Boardman, Ohio-Pa. claimed the title of the nation’s most affordable major housing market, as 90.4 percent of all new and existing homes sold in this year’s second quarter were affordable to a family earning the area’s median income of $52,700. Cumberland, Md.-W.Va. was the most affordable smaller market, with 97.2 percent of homes sold affordable to a family earning the area median income of $54,100.

Other major markets at the top of the affordability chart were Indianapolis-Carmel, Ind.; Syracuse, N.Y.; Harrisburg-Carlisle, Pa.; and Scranton-Wilkes-Barre, Pa. Smaller markets joining Cumberland at the top of the affordability chart were Kokomo, Ind.; Davenport-Moline-Rock Island, Iowa-Ill.; Battle Creek, Mich.; and Lima, Ohio.

For a seventh consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major market, with only 11.1 percent of homes sold in the second quarter affordable to a family earning the area’s median income of $100,400. Other major metros at the bottom of the affordability chart were Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; and New York-White Plains-Wayne, N.Y.-N.J.

All five of the nation’s least affordable small housing markets were located in California: Santa Cruz-Watsonville, Napa, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles.

For additional detail, including the complete set of HOI tables and historic data, please visit nahb.org/hoi.

This post was originally published on the NAHB blog, Eye on Housing.

Existing Home Sales Rise, Foreclosures Trickle Down

The U.S. Department of Housing and Urban Development (HUD) recently released the July edition of the Obama Administration’s Housing Scorecard—a comprehensive report on the nation’s housing market. The latest data show progress among key indicators, including rebound in the sale of existing homes and the continuing downward trend of foreclosure starts and completions.

This month’s Housing Scorecard also features a spotlight on the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metropolitan Statistical Area (Philadelphia MSA). While this scorecard notes positive overall trends in the housing market, officials caution that more work needs to be done as the economy recovers from the Great Recession. The full Housing Scorecard is available online.

“The market indicators for the housing market recovery were mixed in July as foreclosure filings continue to improve, but home sales, particularly for new homes, showed unexpected weakness,” says HUD Assistant Secretary for Policy Development and Research Katherine O’Regan. “Home prices, while still increasing, are doing so at slower rates. Indications are that continued improvements in the economy, such as the July employment report which marked the sixth straight month that more than 200,000 jobs have been added, along with slowly easing mortgage credit, will keep the U.S. housing market on the path to recovery.”

The July Housing Scorecard features key data on the health of the housing market and the impact of the Administration’s foreclosure prevention programs, including:

Sales of previously owned (existing) homes rose for the third consecutive month in June after a lackluster performance in the previous two quarters.The National Association of REALTORS® (NAR) reported that existing homes—including single-family homes, townhomes, condominiums, and cooperatives—sold at a pace of 5.04 million (SAAR) in June, up 2.6 percent from May but remain 2.3 percent below the 5.16 million pace a year earlier. Sales are at their highest pace since October 2013 (5.13 million).

Foreclosure starts and completions continue their downward trend. Lenders started the public foreclosure process on 47,243 U.S. properties in June, down 4 percent from the previous month and down 18 percent from one year ago to the lowest level since November 2005—more than an 8½ year low. Lenders completed the foreclosure process (bank repossessions or REOs) on 26,889 U.S. properties in June, down 5 percent from the previous month and down 24 percent from one year ago to the lowest level since June 2007—a 7 year low. (Note however that foreclosure starts and completions were up from a year ago in about 15 states).

House prices appreciate in May while year-over-year gains continue to slow. The Federal Housing Finance Agency (FHFA) seasonally adjusted purchase-only house price index showed home values appreciated by 0.4 percent over the prior month and 5.5-percent over the previous year, marking the fifth straight month of more modest annual growth in home prices. The FHFA index shows that U.S. home values are on par with prices in mid-2005.The S&P/Case-Shiller 20-City Home Price Index (not seasonally adjusted) posted month-over-month returns for May of 1.1 percent and gains of 9.3 percent over the past 12 months. The Case-Shiller index shows annual rates of gain in home prices slowing over the last six months; home values are at September-2004 levels. (The Case-Shiller and FHFA price indices are released with a two-month lag.)

Sales of new homes fell in June and sales in May were revised sharply downward. New home sales declined 8.1 percent to a seasonally adjusted annual rate (SAAR) of 406,000 in June, following sales of 442,000 in May that were 12.3 percent lower than estimated last month. Sales were at their lowest level since March and down 11.5 percent from one year ago. The weakness in sales reflects strict bank lending standards, less favorable housing affordability, and low inventory. (Source: HUD and Census Bureau).

The Administration’s foreclosure mitigation programs continue to provide relief for millions of homeowners as the recovery from the housing crisis continues. In all, more than 8.5 million mortgage modification and other forms of mortgage assistance arrangements were completed between April 2009 and the end of June 2014. Nearly 2.1 million homeowner assistance actions have taken place through the Making Home Affordable Program, including nearly 1.4 million permanent modifications through the Home Affordable Modification Program (HAMP), while the Federal Housing Administration (FHA) has offered more than 2.3 million loss mitigation and early delinquency interventions through June. The Administration’s programs continue to encourage improved standards and processes in the industry, with HOPE Now lenders offering families and individuals more than 4.1 million proprietary modifications through May (HOPE Now data are reported with a 2-month lag).

This month’s Housing Scorecard also features a regional spotlight on market strength in the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metropolitan Statistical Area (Philadelphia MSA).Like many areas across the country, the economic and housing market conditions in the Philadelphia area are improving, but the housing crisis and peak of foreclosures hit this area later than the rest of the country and the subsequent recovery has been progressing more slowly. The Administration’s broad approach to stabilize the housing market has been provided help to homeowners throughout the Philadelphia MSA.

The housing market in Philadelphia MSA is showing important signs of improvement.As with similar areas along the East Coast, the initial downturn from the foreclosure crisis in the Philadelphia MSA was less severe than in some areas of the nation but the recovery from the crisis and subsequent recession has been slower. The share of mortgages at risk of foreclosure (those 90 or more days delinquent or in the foreclosure process) did not peak in Philadelphia until the beginning of 2013—three years later than for the nation—and at a much higher rate, although the share of distressed mortgages was higher going into the crisis.

Contributing to the current high share of distressed mortgages is a longer than average foreclosure processing time in Pennsylvania and New Jersey, which keeps homes in the foreclosure pipeline longer. The share of mortgages at risk of foreclosure has now begun to decline in Philadelphia—the result of four years of modest job growth, fairly stable gains in home prices, and local legislation in 2008 that sharply curtailed foreclosure activity.

Administration programs are providing much needed relief
to Philadelphia MSA.From the launch of the Administration’s assistance programs in April 2009 through the end of May 2014, more than 151,800 homeowners have received mortgage assistance in the Philadelphia MSA. Nearly 89,000 interventions were completed through the HAMP and FHA loss mitigation intervention programs. An additional 62,800 proprietary mortgage modifications have been made through HOPE Now Alliance servicers. While some homeowners may have received help from more than one program, the number of times assistance has been provided in the Philadelphia metropolitan area is more than four times the number of foreclosures completed during this period (37,300). In addition, the landmark National Mortgage Servicing Settlement in February 2012 has benefitted more 9,418 Pennsylvania homeowners as of June 30, 2013.

HUD’s Neighborhood Stabilization Program is funding community improvements.
The Neighborhood Stabilization Program helps localities work with non-profits and community development corporations to turn abandoned and foreclosed homes that lower property values into homeownership opportunities and the affordable rental housing that communities need. In the Philadelphia MSA, $86.8 million in NSP funds have been awarded to local communities along with an additional $22.4 million which the State of Delaware has sub-allocated to communities in the MSA. The scorecard spotlight describes some of the NSP investments made by the City of Philadelphia.

For more information, visit www.hud.gov.