Category Archives: Housing

Employment Picture Improving And Pressured MBS

Posted by Michael McDevitt on
United States mean duration of unemployment 19...

While unemployment levels will continue to be a major concern and a drag on our economy, several reports showed some improvement last week. The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

“This is the single biggest factor in housing. Regardless of interest rates – people simply don’t purchase homes when they are unemployed or are concerned about their employment picture. This is why the following data is welcome news for the housing industry.”

The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

Non-farm Payrolls jumped up to 103K in September, from the revised previous month’s result of 57K, the U.S. Department of Labor reported. The results considerably exceeded forecasts of 73K growth. The change in total non-farm Payroll employment for July was also revised upward from 85K to 127K.

Average Hourly Earnings increased to 0.2% in September, following a 0.2% drop in August. On an annual basis Average Hourly Earnings remained flat at 1.9% for the second consecutive month in September.

Average Weekly Hours increased to 34.3 in September from 34.2 in August, despite forecasts of remaining at the same level.

In a separate report, the ADP Private Payroll data which measures U.S. non-farm private business sector hirings increased by 91K in September, after rising 89K in August. This was higher than market forecasts of only a 75K increase.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -130 basis points from last Friday to the prior Friday which moved mortgage rates upward. This was in reaction to a slew of much better than expected U.S. economic data.

“One of the main reasons that mortgage rates are so low (we hit our historical low on 09/22/11) is due to concern over a perceived weak economic recovery. So, when the market sees data that is better than expected (and even shows economic growth), MBS sell off which causes mortgage rates to rise.”

We received much better than expected news out of both the manufacturing and servicing sectors with strong ISM data. The improvement in the non-farm and private payroll data also pressured MBS.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date Economic Event
9-Oct Columbus Day
11-Oct IBD/TIPP Economic Optimism (MoM)
11-Oct FOMC Minutes
12-Oct MBA Mortgage Applications
13-Oct Continuing Jobless Claims
13-Oct Initial Jobless Claims
13-Oct Trade Balance
13-Oct EIA Crude Oil Stocks change
13-Oct Monthly Budget Statement
14-Oct Export Price Index (MoM)
14-Oct Import Price Index (MoM)
14-Oct Import Price Index (YoY)
14-Oct Retail Sales (MoM)
14-Oct Retail Sales ex Autos (MoM)
14-Oct Reuters/MI Consumer Sentiment
14-Oct Business Inventories

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities that are the only thing government and conventional mortgage rates are based upon.

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Pending Home Sales up 13%:

Posted by Michael McDevitt on
The NAR building and the U.S. Capitol in the b...

NAR 'DC'

Pending Home Sales are homes that have a purchase contract in place but have not yet closed. The National Association of Realtors released their data for August and it showed a year-over-year annual improvement of 13.1%.
When comparing August to July, pending home sales slipped but less than market forecasts. Economists expected Pending Home Sales to decrease month-over-month by -1.8%. The actual number was a little better at -1.2%. Hurricane Irene, which battered the Northeast at the end of the month, was likely a factor in the decline.

 

Three of four regions throughout the United States saw declines in the number of contracts to purchase previously owned homes. The Northeast region experienced the largest loss of 5.8 percent as a result of significant disruption by Hurricane Irene, according to NAR chief economist Lawrence Yun. Meanwhile, sales in Midwest and West also fell 3.7 percent and 2.4 percent, respectively. In contrast, a 2.6 percent gain in the South helped reduce the total loss of pending home sales in the month.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) were unchanged from last Friday to the prior Friday but we stilled closed down -100  basis points from our best pricing levels in history on 09/22/11.

We had a very volatile week where mortgage rates escalated Monday through Wednesday and then rebounded by Friday.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date Economic Event Cons. Previous
3-Oct ISM Manufacturing Index 50.50% 50.60%
3-Oct Construction Spending -0.06% -1.30%
3-Oct Fed’s Lackert Speaks
4-Oct Factory Orders -0.10% 2.40%
4-Oct Bernake Speaks
5-Oct Challenger Job Cuts 47%
5-Oct ADP Private Payroll Report 48K 91K
5-Oct ISM Servicing Index 53 53.3
6-Oct Initial Jobless Claims 401K 391K
6-Oct Continuing Jobless Claims 3.7M 3.729M
7-Oct Non-Farm Payrolls 63K 0K
7-Oct Unemployment Rate 9.10% 9.10%
7-Oct Wholesale Inventories 0.60% 0.80%
7-Oct Consumer Credit 7.0B 12.0B

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

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HOPE Now Nears 5 million Loan Modification Mark

Posted by Michael McDevitt on
Logo of the Federal Housing Administration.

HOPE Now, which was the first program initiated to deal with the mounting foreclosure problem in 2007, has reached a level of 4.86 million loan modifications. HOPE is a voluntary private sector alliance of mortgage servicers, investors, private mortgage insurers and non-profit housing and debt counselors.

HOPE reports there were 56,000 permanent modifications of proprietary loans during August,  unchanged from the July rate. This brings the total of proprietary modifications since 2007 to 4.06 million. An additional 791,399 modifications were completed up to the end of July through the Home Affordable Modification Program (HAMP), a joint initiative of the Departments of the Treasury and Housing and Urban Development.

To date this year HOPE has completed 690,000 permanent loan modifications.  An estimated 478,000 of these were proprietary and 211,749 were completed under HAMP with August HAMP totals not yet tabulated.

Completed foreclosure sales increased in August from 65,000 to 68,000 (+5 percent) and foreclosure starts increased 18 percent from 185,000 in July to 218,000 in August. Sixty plus day delinquencies were up only slight from July figures at 2.81 million.

Reduced principal and interest payments accounted for approximately 83 percent of modifications in August and 38,000 loans were modified with reductions in principal and interest payments of more than 10 percent.  Eight-three percent of proprietary modifications in August were fixed-rate with initial periods of five years or more.

Faith Schwartz, Executive Director, reports, “HOPE NOW’s servicing partners continue to complete permanent loan modifications at a rate consistent with past months – in spite of tremendous negative impact of the continued housing and unemployment crisis. And, in cases where modifications are not possible, the industry is working hard to educate at-risk homeowners about the options available to them.”

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Weekly Rate Watch & Housing Update: Existing Home Sales Up Strongly

Posted by Michael McDevitt on

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the National Association of Realtors®. Monthly gains were seen in all regions.

Total Existing Home Sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

Mortgage backed securities (MBS) gained 178 basis points last week which helped to move mortgage rates much lower from last Friday to the prior Friday. Mortgage rates moved lower in response to the Fed‘s announcement that they would move from purchasing shorter term Treasuries to buying longer term Treasuries. They also announced that they would purchase more mortgage backed securities with the principal that they are receiving on their current mortgage backed security holdings. The best interest rates were on Thursday afternoon.  On Friday, mortgage rates started to climb back up from their lows.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date        Time Economic Event
26-Sep 10:00 New Home Sales (MoM)
26-Sep 10:00 S&P/Case-Shiller Home Price Indices (YoY)
27-Sep 9:00 Consumer Confidence
27-Sep 10:00 Richmond Fed Manufacturing Index
27-Sep 10:00 Fed’s Lockhart speech
27-Sep 12:30 MBA Mortgage Applications
28-Sep 7:00 Durable Goods Orders
28-Sep 8:30 Durable Goods Orders ex Transportation
28-Sep 8:30 EIA Crude Oil Stocks change
28-Sep 10:30 Continuing Jobless Claims
29-Sep 8:30 Gross Domestic Product Annualized
29-Sep 8:30 GDP Price Index
29-Sep 8:30 Initial Jobless Claims
29-Sep 8:30 Real Pers. Consumption Exp. (QoQ)
29-Sep 8:30 Pending Home Sales (MoM)
29-Sep 10:00 Core Pers. Expenditure – Price Index (MoM)
30-Sep 8:30 Core Pers. Expenditure – Prices Index (YoY)
30-Sep 8:30 Pers. Consumption Exp – Price Index (YoY)
30-Sep 8:30 Pers. Consumption Expenditures (MoM)
30-Sep 8:30 Personal Income (MoM)
30-Sep 8:30 Chicago Purchasing Managers’ Index
30-Sep 9:45 Reuters/MI Consumer Sentiment Index
30-Sep 9:55 Fed’s Bullard speech

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Related articles:

5 Tips For Real Estate Pro’s To Get To Icon Status

Posted by Michael McDevitt on
Real Estate = Big Money

As you can tell this post is geared towards those already in the field and I wanted to cover something that is asked time and time again by employees, affiliates and colleagues. As a real estate agent, you may not automatically think of yourself as an entrepreneur, but really, that’s what you are!  You’re building your brand, clientele and entire livelihood from the ground up.  While your business is similar to others in the real estate field, it’s up to you to establish yourself as a legit business and bring growth and success; and that’s a large task!

So, what are some of the key steps you can take to really set yourself up as a solid business, a real estate expert or even an icon in the field?

Now, you may think, “Okay, I can see myself as an entrepreneur, but an icon?  I’m not so sure…”  We’re all aware that to have a dynamic business means to constantly be pushing yourself to continual growth; so aiming for the status of icon in your real estate market or even on a national level can be just the thing to urge you to constantly strive for more.

Does this seem overwhelming yet?  Well, take a deep breath.  Becoming an icon doesn’t happen overnight and will take consistency and a daily committment to provide the best and most innovative service to your clients.

Recently, entrepreneur.com gave five great tips that will help boost you to that iconic level.  Of course, I’ve modified them to make them real estate specific, so take a few minutes to review how you can take your business to the next level!

1. Start blogging- Blogging is a great way to establish yourself as an expert.  You can easily provide pertinent information about your real estate market, your listings, home buying or selling tips and even community events.  Giving people the information they want about the real estate market, their home and the community will keep them coming back for more.  The more you blog on a consistent basis, the more people will begin to see you as a trusted expert in your field and in your community.

2. Market yourself- In being your own brand, marketing is key to your success.  While you may not feel comfortable with self-promotion; it’s really the only way to market your business since you are your business.  Marketing your services, your field of expertise, even your awards or recognitions allows others to get to know you, your values and what you will be able to do for them.  This is just another way to establish yourself as an expert and give an open door to becoming an icon.  Exposure brings recognition, which breeds familiarity and establishes trust.  It’s just how our minds work!

A great way for real estate agents to do this is through a one sheet marketing approach.  We’ve created this for a few of our clients and its been a huge success!  A one sheet is simply a sheet of paper that gives a brief synopsis of who you are, your certifications, area of service, expertise or anything else you want to highlight about you and your business.  They’re perfect for leaving at an open house, giving to potential clients and handing out with your marketing presentation.

3. Create Compelling Content- Whether you’re blogging, writing a buyer or seller page for your website or creating your print marketing material; your content should be compelling.  That means sentence structure and grammar should be impeccable and the topics or advice you are presenting should be up to date and interesting.  Visitors to your website or blog will know when something’s just been thrown on a page, and that will send the message that you are okay with doing the minimum just to get it done.  Why not show how much you care about your business and your customer service ethics through great content?  It will help set the tone for your entire business.

4. Create Products- Did you know that real estate agents can have products too?  While you’re not trying to sell them to make a profit, having products or tools to provide for your clients can help set you apart. Giving your client or potential clients something extra is unexpected, sets you apart and establishes yourself even more as an expert.

5. Take it to the Next Level- Now that you’re seen as an expert in your community, boost yourself to icon by taking it up a notch.  If you’re passionate about selling homes or helping people avoid foreclosure; do all you can to grow in your area of expertise.  Begin to register yourself as an expert on real estate sites or other marketing avenues and network, network, network! Credibility is a key component to being viewed as a leader and expert. Real estate conventions are always looking for speakers in a specific field and the more you put yourself out there, the more likely you are to have opportunities on a national level. Imagine how sought after you’ll be in your community after receiving national recognition!

I know this may seem like a lot to take in and a lot of hard work; and it is!  Reaching your goals will take time, dedication and a focus on the end results.  Remember, taking it a day at a time is key!  You won’t become an icon, or even seen as a real estate expert overnight, but you’ll be encouraged by those daily “wins” and as you see your business begin to grow.

There are certain actions that can be taken and if interested, contact me, I recently launched a mentorship program limited to only a handful of individuals and I can guarantee recognition in basically any syndication including FOX, CNBC, ABC, MarketWatch, The Wall Street Journal, Newsweek, and the list goes on. Credibility is a key component to being viewed as a leader and expert. As in doing anything, there is a process to it. Just like there is a process to become a doctor or lawyer. This will give you a head start, but I can show you exactly how to be one of the leading experts in your area, guaranteed. Just contact me for details. Be blessed and make it a productive day!

Mortgage Rates Rise Slightly Heading Into The Weekend

Posted by Michael McDevitt on

After two days of significant improvements, Mortgage Rates took a measured step back today.  Best-Execution rates rose about an eighth of a point, but in some cases, your rate may not have changed at all today-merely your closing cost quote (temporary caveat that we’ll probably repeat a few more times):

Please keep in mind that lenders simply cannot move mortgage rates lower at the same pace as a rapid rally in Benchmark Treasuries.  Although you might hear talking heads on TV or read articles saying that mortgage rates are tied to Treasuries, THEY ARE NOT, and you’ll be perennially frustrated if you expect them to be.  We explained that in greater detail earlier in the month:(Why aren’t rates getting lower as fast as Treasuries). 

Today’s Rates:  The current market is in a state of flux at the moment and mortgage rates moving up and down around ALL TIME LOWS.  BestExecution 30yr Fixed rates were mostly near 3.875% today, with a higher than normal degree of variation around there.  FHA/VA deals are in a bit of a predicament that’s keeping them blocked off below 3.75% (there’s no secondary market for rates any lower than that right now!).  For similar reasons, 15 year fixed conventional loans may be stuck at 3.25%.  5 year ARMS remain near 3.125%, but with variations from lender to lender.

GUIDANCE:  Yesterday’s guidance was really excellent.  As feared, we saw plenty of “pipeline control” price changes among lenders, and that was exacerbated today by weakness in the bond market.  Strategically (longer term, bigger picture), locking when the Best-Execution rate is 3.875% makes a ton of sense.  Even on a shorter term outlook, the broader shift that’s taken place behind the scenes in the secondary mortgage market suggests a range of rates between 3.75 and 4.125.  So right now it’s leaning slightly to the more aggressive side.  If there was any better time in history to lock a loan than today, it was yesterday.  We don’t know what sort of opportunities will be available next week, and although we think rates will be relatively low for a while, we’re not sure it’s worth the risk to float for marginal gains when we’re only an eighth or two away from some of the most aggressive offers yesterday (and consequently, of all-time).

Fannie Mae: September Economics and Mortgage Market Analysis

Posted by Michael McDevitt on

Leading indicators for home sales point to subdued housing demand. Respondents to the Fannie Mae National Housing Survey indicate a continued shift of sentiment toward renting and away from ownership, at least in the near term. In the second quarter, 26 percent of Americans were worried about their job stability. When combined with the 9 percent of unemployed households, more than a third of the potential workforce was worried about their employment status – hardly a strong support for housing demand.

After rising for two consecutive months, pending home sales (contract signings of existing homes) fell in July, which bodes poorly for existing home sales in August and September. Pending home sales generally lead the existing home sales data by one or two months. However, the link between contract signings and closings has weakened lately such that the gains in pending home sales in recent months have not materialized into contract signings. Low appraisals compared to contract prices and concerns about the economy may have led to contract cancellations and delays. Also, some contracts have had to be cancelled because the potential buyers could not sell their current homes.

September Economic Developments
September Economic Forecast
September Housing Forecast

Housing Market Update: Consumer Confidence Rises

Posted by Michael McDevitt on
Measure of Consumer Confidence Index

Confidence among U.S. consumers rose in September from the lowest level since November 2008 as Americans’ views of current economic conditions improved.The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 57.8 this month from 55.7 in August. The median estimate of economists surveyed by Bloomberg News called for a reading of 57. The group’s measure of consumer expectations six months from now dropped to the lowest level since May 1980.

The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, increased to 74.5 from 68.7 the prior month.

This is very important to the housing industry because it it not interest rates but the consumer’s outlook on the economy that drives demand for housing.

What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost -68 basis points last week which helped to move mortgage rates higher from last Friday to the prior Friday.  Mortgage rates were pressured due to some inflationary economic news.  Both the Producer Price Index and the Consumer Price Index showed increases which is inflationary and mortgage rates do not react well to any inflationary data.  We also saw better than expected Consumer Sentiment which is also usually bad for mortgage rates.

The following are the major economic reports that will hit the market this week.  They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.  I will be watching these reports closely for you and let you know if there are any big surprises:

Date Time Economic Release
19-Sep 10:00 NAHB Housing Market Index
19-Sep 10:30 Barack Obama Press Conference
20-Sep 8:30 Building Permits (MoM)
20-Sep 8:30 Housing Starts (MoM)
21-Sep 7:00 MBA Mortgage Applications
21-Sep 10:00 Existing Home Sales (MoM)
21-Sep 10:00 Existing Home Sales Change
21-Sep 10:30 EIA Crude Oil Stocks change
21-Sep 14:15 Fed Interest Rate Decision
21-Sep 14:15 Fed’s Press Conference
22-Sep 8:30 Continuing Jobless Claims
22-Sep 8:30 Initial Jobless Claims
22-Sep 10:00 Housing Price Index (MoM)
22-Sep 10:00 Leading Indicators (MoM)

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Freddie Mac Finalizes New Modification Option

Posted by Michael McDevitt on
Freddie Mac

Freddie Mac finalized requirements for a new modification option that will be made available to qualified borrowers on Oct. 1.

Mortgage servicers must evaluate borrowers deemed ineligible for the larger Home Affordable Modification Program for the new “Standard Modification” beginning in January. Trial period plans can begin in October. Through the new program the borrower‘s principal and interest payments drop at least 10%, according to Freddie.

Since March 2009, servicers granted roughly 791,000 permanent HAMP modifications and extended more than 1.6 million trials through the national program. But servicers canceled more than 763,000 trials because of redefault, not enough documentation or the borrower did not meet the requirements.

In order for a borrower to qualify for a standard modification, he or she must be at least 60 days delinquent. If they’ve missed fewer payments or are current, he or she must be an owner-occupant, in imminent default and provide a hardship document.

The borrower must have already been evaluated for HAMP within 12 months of the Standard Modification. Mortgages on homes without an owner-occupant can be eligible, even vacant homes that cannot be condemned.

The loan-to-value ratio of the mortgage must also be greater than 80%.

Servicers will receive $1,600 for each modification completed before the loan slips into 120-day delinquency. They get $1,200 for a modified mortgage between 120- and 210-days behind. For standard modifications completed after 210 days of missed payments, the servicer gets $400 from Freddie.

The standard modification program will fall under the joint servicing alignment initiative launched in April.

Home prices seen picking up in 2012:

Posted by Michael McDevitt on
Change of the Case-Shiller Home Price Index re...

Home prices are seen ticking up modestly in 2012, according to a Reuters poll released on Friday.

Existing home sales are expected to improve modestly. The forecasts from the poll are consistent with expectations the housing sector will continue to limp along in a weakened state for years to come.

A recovery in the housing market is dependent on improvement in the labor market and broader economy, analysts said.

“One of the big concerns is you’ve got a lot of homes where the mortgage holder is still underwater and most of those homeowners will continue to make payments,” said Brown.

“It gets to be a problem, however, if somebody loses their job, somebody gets sick, there’s a divorce or something where the home has to be sold.”

U.S. home prices — as measured by Standard & Poor’s/Case-Shiller 20-City Composite Home Price Index — will fall 3.8 percent for the year, before stabilizing and gaining 0.8 percent in 2012, according to the median forecast of 22 economists in the Reuters poll taken over the past week.

The expectations were improved from the previous Reuters housing poll in June, which forecast prices would fall 5.0 percent this year and rise just 0.5 percent next year.

The forecasts for the changes in the home price index for this year had a wide range, from a decline of 14.0 percent to a gain of 0.1 percent. The forecasts for 2012 had a smaller gap, from a decline of 6.0 percent to a gain of 4.0 percent.

Of 28 economists polled, 14 said that prices had either already hit bottom this year or would by the fourth quarter. Twelve respondents said prices won’t reach a trough until 2012, while one forecast 2013 and one expected it would take until 2014.

In the third quarter, the pace of existing home sales is expected to come in at a 4.78 million annualized rate and will edge up to 4.95 million in the fourth quarter. Sales of previously owned homes were at an annual rate of 4.67 million units in July, according to data from the National Association of Realtors.

Economists saw the rate of home sales coming in at 5.1 million for both the first and second quarter of next year.

“New foreclosures peaked in 2009, but the inventory of foreclosed homes will decline only slowly,” said David Berson, chief economist at mortgage insurer PMI Group.

Spring buying pushed home prices up for a third straight month in most major U.S. cities in June.

The Standard & Poor’s/Case-Shiller home-price index showed Tuesday that prices increased in June from May in 19 of the 20 cities tracked. Prices rose 3.6 percent in the April-June quarter from the previous quarter. Neither of those numbers is adjusted for seasonal factors.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +15 basis points last week which helped to move mortgage rates slightly lower from last Friday to the prior Friday.  Mortgage rates were pressured mid-week as the Trade Balance and Wholesale Inventory data was better than expected but we rebounded on Friday as the stock market had another triple digit loss amid continued concerns over a potential default by Greece and other European countries.

To Build Or Not To Build? How A Strategic Return To The Sector Could Yield Huge Returns For The Savvy Investor.

Posted by Michael McDevitt on
Construction works at a prefabricated house

. . . . a tough question in light of today’s stubborn economic recovery.  Even though we’ve spotted a few bright spots on the economic horizon (a shrinking foreclosure rate, a growing cash-investor class taking advantage of bargain distressed property prices, rising values of existing commercial properties), tepid job growth and an inventory of unsold REOs seem to negate any optimism. Arguably, the building industry has suffered as much as any other sector. Construction of new homes, one key indicator of economic health, posted its largest decline in the past few decades and finds itself struggling with rising material costs in an environment not conducive to raising prices to cover costs. While conventional wisdom suggests that investors should distance themselves from the building and construction industry, first impressions could be misleading. A strategic return to the sector could yield great returns for the smart investor. The secret lies in pinpointing specific demand and if enough demand exists to drive growth. UCLA’s Anderson School of Business’ recent findings echo findings from a number of other sources indicating a consumer “shift” is occurring to affordable rental units from the traditional single family home. Higher down payment requirements, tight credit and other factors make renting a more practical choice for current homeowners and the growing segment of “Echo Boomers” – defined as children of Baby Boomers born between 1975 and 2000. Fannie Mae estimates that the currently available 15.2 million rental units will not meet the growing demand for affordable housing for this group in the future. Similarly, on retail and office market fronts, analysts predict shortages in retail office spaces as businesses expand. While the fate of the traditional single-family home may be unclear at the present time, the need for affordable apartments and commercial square footage is increasing. Demand exists. The economic downturn crippled the construction industry. The credit vacuum created by the voluntary exit of lenders and the FDIC shutdown of banks with non-performing construction loans brought building to a virtual halt. New project starts diminished and ongoing developments that lost financing stalled. These factors combined to stymie the supply of units brought to market. Now that demand is showing signs of returning, some mothballed projects may begin to make sense at today’s prices. The initial infrastructure work leading up to construction (permits, environmental studies, plans, etc.) that comprise the up-front costs and take years to complete, new investors can now obtain for pennies on the dollar. Private equity funds and large banks are once again injecting new capital into projects. Activity is increasing at construction sites nationwide to meet projected demand, providing much-needed jobs to their immediate communities. We recently completed a development project that was able to sell at attractive current levels based on the fact that we saved on both the land cost as well as benefited from existing infrastructure. This in addition to the short time frame from investment to repayment, made the difference. The key factor is to begin in the areas that were located within good markets and avoid those areas that were on the outer rim of the growth pattern.  If the project is well located it should achieve a fair return using very conservative projections. Is it time to build again? The answer depends on finding the right location at the right price at the right time when land is cheap and the up-front costs have already been absorbed by previous investors. The heavily discounted infrastructure and approvals, in my opinion, are the key elements.

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National Home Price Index Rises:

Posted by Michael McDevitt on
Seal of the United States Federal Housing Fina...

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.

According to FHFA, their national Housing Price Index for purchases rose 0.9% and is the third consecutive month of home price increases and shows that the housing market does have some real fundamental “bright spots”.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -40 basis points last week which helped to move mortgage rates higher from last Friday to the prior Friday.  We had enjoyed a string of four consecutive weeks of mortgage rate declines until last week.  Mortgage backed securities pulled back from their highs in reaction to a very good week for the stock market and lower than average demand for our country’s debt in the form of Treasury bond sales.

Fed: Risk of Recession “Quite Low”

Posted by Michael McDevitt on
Modern-day meeting of the Federal Open Market ...

According to William Dudley, the president of the Federal Reserve Bank of New York, the risk of a double-dip recession is still quite low.

Dudley said that only some of the the restraints on growth, such as high oil prices and Japan‘s earthquake in the first half of the year, can be considered temporary.

“The risks have risen a little bit, but I think we very much still expect the economy to recover. We expect … growth to be significantly firmer than it was during the first half of the year,” he said. “But obviously there is some concern.

The central bank‘s policy-setting Federal Open Market Committee (FOMC) took the unprecedented step last week of promising to keep interest rates near zero for a set period of time—at least until mid-2013. The Fed also said it was weighing other options to help strengthen a weak recovery.

Dudley said that market interest rates fell after the announcement, “which should help provide some additional support for economic activity and jobs.” The president of the New York Fed has a permanent voting position on the FOMC and plays a prominent role within the U.S. central bank.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) gained +21 basis points last week which helped to move mortgage rates lower from last Friday to the prior Friday.  We did pull back from our our best levels of 2011 which occurred in the middle of the week.  The gains were primarily due to much weaker than expected economic news as well as continued concern over weakness in Europe.

HomeSteps Provides Condominium Buyers with Limited Time Offer

Posted by Michael McDevitt on

HomeSteps, the real estate sales unit of Freddie Mac, is now offering a special limited time offer of $1,500 to help condominium buyers pay for future associates dues.

The “condo cash” offer is available to buyers who submit offers on a property between Aug. 15 and Nov. 15. Escrows have to be closed on or before Dec. 30 to be eligible for this offer.

HomeSteps’ condo cash offer can only be used on HomeSteps homes that have been on the market for at least 120 days and sold to owner-occupant buyers. The offer is not valid on HomeSteps condominiums purchased through auction, sealed bids, bulk sales or in areas where such offers are prohibited by law.

Some of the condominiums will come with a two-year home protection warranty that covers electrical, plumbing, air conditioning, heating and other major systems and appliances. Home Protect also provides discounts of up to 30% on the purchase of appliances.

Mortgage Fraud Down, But Still At Elevated Risk

Posted by Michael McDevitt on

National mortgage fraud risk is down 2.3% from a year ago and is 1% lower than the previous quarter, but is still at an elevated risk, Interthinx said in its latest Mortgage Fraud Risk Report.

According to the Agoura Hills, Calif.-based firm, the changes coincide with lender reports that borrower quality has greatly improved.

For the fifth consecutive quarter, Nevada and Arizona are the two most risky states for fraud. California, which contains five of the ten most risky MSAs, is now the third highest state for fraud risk after holding the fifth spot last quarter. Florida and Colorado, which jumped eight spots in the report, round out the top five states.

The ten states with the lowest fraud risk include West Virginia, Kansas, Iowa, Maine, Kentucky, New Mexico, Nebraska, Wyoming, Mississippi and Montana.

The report also found a shift in fraud risk for local zip codes. Two zip codes in Chicago had the highest fraud risk for the last four quarters, but as of this report, the Chicago area does not appear in any of the top 20 fraud indices—identity, occupancy, property valuation and employment/income—the firm tracks.

The recent decrease in mortgage fraud risk in the Chicago zip codes was as dramatic as it was sudden as the city has been drawing attention for a year,” said Kevin Coop, president of Interthinx. “It suggests that when the industry has actionable intelligence and increases its scrutiny of an area, word gets out and the fraudsters move on.”