Home Prices on the Rise

While home purchases have slowed in the past few months, it appears that prices continue to rise

Black Knight Financial Services released a report showing that the national Home Price Index (HPI) improved in general throughout the month of May across 18,500 examined zip codes in the United States. Home prices are now just 11 percent off of their 2006 peak. The HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.

The HPI rose a total of 0.9 percent in May to $239, which is a $14 increase year-over-year. However, indicative of the slowdown analysts have also been tracking since the beginning of the year, the HPI has only risen by $3 since the beginning of 2014.

The rising housing prices are a catch 22 proposition. On one hand the rise in prices allow sellers to regain some of the equity lost in the wake of the financial crisis. On the other hand, the beginning of 2014 has seen a considerable slowdown in the home sales and rising prices do little to reverse that trend.

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Mortgage Rates Fall Again!

Nearly a year after shooting up past 4 percent, the 30-year average fixed mortgage rate is now coming back down toward the same mark, reports show.

Freddie Mac’s weekly Primary Mortgage Market Survey, released Thursday, shows the average rate for a 30-year fixed-rate mortgage (FRM) falling to 4.14 percent (0.5 point) for the week ending June 26, a continued slide from 4.17 percent last week.

A year ago, the 30-year fixed average was 4.46 percent, an increase of more than half a percentage point over the week prior.
The 15-year FRM came down to 3.22 percent (0.5 point), meanwhile, from 3.30 percent previously.

The declines follow Wednesday’s report on gross domestic product in the first quarter, which surprised most analysts with news of a 2.9 percent contraction in the nation’s economy.

Adjustable rates also slipped this week. According to Freddie Mac, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.98 percent (0.3 point) in the latest report, down from 3.00 percent in last week’s survey. At the same time, the 1-year ARM averaged 2.40 percent (0.4 point), just down from 2.41 percent previously. (FM/DSN)

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Fire Sale on Foreclosures!

RealtyStore, a provider of a broad variety of real estate listings, recently released a report outlining average selling prices for bank foreclosures. The company found the median price of bank foreclosures for sale in six select states list at an average of nearly 50 percent below recent median existing-home sale prices.

Additionally, overall foreclosure inventory fell in May:

Black Knight Financial Services released its “First Look” at May Mortgage data, which found that foreclosure inventory declined to its lowest level since July 2008. As a percentage of total inventory, foreclosure pre-sale inventory is 1.91 percent, down 5.56 percent month-over month.

The percentage of total U.S. foreclosure pre-sale inventory is down 37.23 percent year-over-year.

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Existing Homes Sales UP 4.9% in May

Existing-home sales rose in May at their highest monthly growth rate in years as inventory continued to expand, the National Association of Realtors (NAR) reported.

According to NAR, total existing-home sales—representing completed transactions of single-family homes, townhomes, condominiums, and co-ops—jumped 4.9 percent last month to a seasonally adjusted annual rate of 4.89 million. It was the biggest month-over-month boost since August 2011, when sales picked up 5.5 percent, the group reported.

Isolating just single-family transactions, sales numbers increased 5.7 percent to an adjusted rate of 4.30 million.

“Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” said NAR chief economist Lawrence Yun. “Moreover, sales were helped by the improving job market and the temporary but slight decline in mortgage rates.” (NAR/DSN)

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Freddie Mac: Mortgage Rates Fall to 4.27 Percent

Average fixed mortgage rates fall for the second straight week, bringing them to a six-week low—and easing affordability conditions slightly as the homebuying season gets under way.

Per Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed rate mortgage (FRM) this week averaged a rate of 4.27 percent (0.7 point), down from 4.34 percent last week. A year ago, the 30-year FRM sat at 3.41 percent.

At the same time, the 15-year FRM averaged 3.33 percent (0.6 point), down from an average 3.38 percent.

Bankrate.com also saw a drop in its weekly national survey, recording the 30-year fixed at 4.43 percent and the 15-year fixed at 3.48 percent.

“Mortgage rates fall for the second week in a row amid mixed economic news abroad and in the United States,” said Polyana da Costa, senior mortgage analyst for the finance site. “Despite some recent economic news, the United States is still perceived by investors as one of the safest places to park their money.” (DSN)

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Foreclosure Inventory Drops by One-Third

Foreclosure inventory in January was down by one-third over the year, although completed foreclosures ticked up over the month, according to CoreLogic’s National Foreclosure Report released Thursday.

Demonstrating an 11.8 percent increase over the month, completed foreclosures totaled 48,000 in January. However, despite the monthly increase, foreclosures were down 19 percent over the year. January’s total remains elevated compared to a historical norm of 21,000 foreclosures per month by CoreLogic’s standard.

About 2 percent of all mortgaged homes were part of the foreclosure inventory in January, according to CoreLogic’s data, while Black Knight Financial Services reported the rate at 2.37 percent in its foreclosure inventory report released the same day as CoreLogic’s.

“We expect to see continued progress in the months ahead, but the judicial foreclosure states (South Carolina IS a Judicial State) will continue to lag the rest of the country in working down their backlogs of foreclosed properties,” said Anand Nallathambi, president and CEO of CoreLogic.

In non-judicial states, there are 954 mortgages per foreclosure, while in judicial states, the ratio stands at 896 mortgages per foreclosure, according to CoreLogic chief economist Mark Fleming, who points out, “Although this is a big improvement relative to the height of the foreclosure crisis, a healthier ratio would be one in every 2000.”

However, in January, non-judicial states dominated the top five list of states with the highest numbers of completed foreclosures over the year. (DSN/CoreLogic)

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2014: The Decline of Housing Inventory

Housing inventory declined more than 9 percent over the month of January. The decline marks the fourth consecutive monthly drop in inventory. “A year ago, we didn’t think inventory could go any lower, yet we’re beginning 2014 with another disappointment,” Redfin stated in its January report.

Sellers say they believe they will receive better offers during spring home buying season, and they believe when they do list their homes, they will sell easily and quickly.

The report also indicates the market is in somewhat of a catch-22: Sellers are reluctant to list their homes for sale while inventory is so low, as they are unsure they will be able to find and afford a new home, according to Redfin.

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Home Flippers Win BIG!

RealtyTrac released on Thursday its Year-End and Q4 2013 Home Flipping Report, which shows single-family home flips—in which a home is purchase and sold again within six months—totaled 156,862 last year, up 16 percent from 2012 and 114 percent from 2011.

According to the company, home flips accounted for 4.6 percent of all single-family home sales in 2013, up from 4.2 percent the prior year and 2.6 percent in 2011. In the fourth quarter alone, flips made up 3.8 percent of sales, a decline from 3.9 percent in Q3 2013 and 7.1 percent in Q4 2012.

The average gross profit for a home flip last year was $58,081, up nearly $13,000 from the 2012 average.

“Strong home price appreciation in many markets boosted profits for flippers in 2013 despite a shrinking inventory of lower-priced foreclosure homes to purchase,” said RealtyTrac VP Daren Blomquist.

According to Blomquist, 21 percent of all properties flipped last year were purchased out of foreclosure, down from 27 percent in 2012.

“Meanwhile flipped homes were still purchased at an average discount of 13 percent below market value in 2013, the same average discount as 2012, indicating that investors are finding discounted buying opportunities outside of the public foreclosure process—particularly in those markets with the biggest increases in flipping for the year,” he added. (DSN)

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Un-Listed Sales Soar!

Many in the real estate industry believe there is a listing shortage, but a close look at the numbers suggests buyers in most markets are purchasing homes in increasingly larger volumes—even if some of those sales involve off-market homes not listed for sale.

In July there was a 5.1-month supply of unsold existing homes, unchanged from June but down from a 6.3-month supply in July 2012, according to the

National Association of Realtors(NAR). But despite the lower inventory, the volume of home sales continues to increase.

“Existing-home sales,” NAR reported, “have stayed well above year-ago levels for the past two years, while the median price shows seven straight months of double-digit year-over-year increases.”

…In real estate, sales have been increasing month after month for nearly two years and prices are 11 percent higher than a year ago.

“The robust housing market recovery is occurring in spite of tight access to credit and limited inventory,” said NAR Chief Economist Lawrence Yun back in May of the April numbers. “Without these frictions, existing-home sales easily would be well above the 5-million unit pace.”

But it’s not just off-market foreclosure auctions that account for the rise in sales despite a lack of listing inventory. Buyers and their real estate brokers are getting creative in buying off-market inventory in other ways as well. These creative buyers and brokers are contacting distressed homeowners and other potentially motivated sellers to see if they want to sell even if they have not yet listed for sale. They’re finding homeowners who are about to list through word of mouth or social media, and they’re persistently reaching out to banks—the most success comes when dealing with smaller local banks—that have foreclosure inventory not yet listed for sale.

Many of these REOs are not listed for sale yet and are being listed at a painstakingly slow pace from the perspective of buyers who are hungry for more inventory to purchase. Still, the presence of this unlisted REO inventory should give buyers hope that they will find a property (or properties) to purchase, provided they are willing to be creative and patient in their search.

1 in 5 Foreclosures Vacated by Owner

As the foreclosure process drags on in certain states, sometimes the homeowner will beat the lender and leave before a foreclosure sale date is set.

According to RealtyTrac’s estimate, 167,680 properties in foreclosure have been abandoned by their owner. The total represents 20 percent of all foreclosures.

Adding to this total are the more than 540,000 banked-owned properties still waiting to be sold to a third party.

“Somewhat ironically, efforts to slow the slide of the housing market in previous years are now hampering a smooth recovery by holding back inventory of homes that almost certainly must sell in the future but are not yet listed for sale,” explained Daren Blomquist, VP atRealtyTrac.

“Efforts to prevent unnecessary foreclosures and mitigate their impact on home values have resulted in a foreclosure process that takes an average of 477 days nationwide, and more than two years in some states – which is holding many of these must-sell properties off the market,” Blomquist said.

In this current low-inventory environment, the release of these vacant foreclosures should not cause prices to plummet, according to RealtyTrac.

“Even if all these homes flooded the market simultaneously they would likely not cause the once-feared double dip in prices given supply constraints from non-distressed sellers and stronger demand,” Blomquist said. “Given these market dynamics, it’s not surprising to see that Florida, Illinois and New Jersey – states with three of the four longest foreclosure timelines – have all had laws take effect in the last six months that speed up the foreclosure process on vacant properties. These laws should help provide some extra supply and possibly help reduce the threat of another housing price bubble forming in these markets.” (RealtyTrac/DSN)

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