All posts in "Real Estate"

Fannie Mae: Mortgage Serious Delinquency rate increased in September

 

Fannie Mae: Mortgage Serious Delinquency rate increased in September

by Bill McBride on 11/01/2017 02:42:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate increased to 1.01% in September, from 0.99% in August. The serious delinquency rate is down from 1.24% in September 2016.

The increase in September is probably due to the hurricanes.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

By vintage, for loans made in 2004 or earlier (4% of portfolio), 2.75% are seriously delinquent. For loans made in 2005 through 2008 (7% of portfolio), 5.83% are seriously delinquent, For recent loans, originated in 2009 through 2017 (89% of portfolio), only 0.33% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

In the short term – over the next several months – the delinquency rate will probably increase slightly due to the hurricanes.  After the hurricane bump, maybe the rate will decline another 0.3 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Freddie Mac reported earlier.

Read more at http://www.calculatedriskblog.com/2017/11/fannie-mae-mortgage-serious-delinquency.html#c2WvrRfX1PhZ3QM0.99

 

Published at Wed, 01 Nov 2017 18:42:00 +0000

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Are house prices a new bubble?

Are house prices a new bubble?

by Bill McBride on 10/30/2017 02:28:00 PM

On Friday, I posted five economic questions I’m frequently asked. I’ll post some thoughts on each of these topics over the next couple of weeks.

A common question is: Are house prices in a new bubble?  My short answer was: No.  Here is an explanation.

First, we need to define a bubble. Way back in April 2005, when I was very bearish on housing, I wrote: Housing: Speculation is the Key. From that post:

I have taken to calling the housing market a “bubble”. But how do I define a bubble?

A bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value, but the real key for detecting a bubble is speculation – the topic of this post. Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the “bubble” bursts.

First, on valuation: two key measures are house prices to income, and real house prices. The Census Bureau released the Income, Poverty and Health Insurance Coverage in the United States: 2016 in September. The report showed a significant increase in the real median household income:

The U.S. Census Bureau announced today that real median household income increased by 3.2 percent between 2015 and 2016 … Median household income in the United States in 2016 was $59,039, an increase in real terms of 3.2 percent from the 2015 median income of $57,230. This is the second consecutive annual increase in median household income.

The firs two graphs use annual averages of the Case-Shiller house price index – and the nominal median household income (and the mean for the fourth fifth income) through 2016.
 

House Prices and Median Household IncomeClick on graph for larger image.

This graph shows the ratio of house price indexes divided by the Median Household Income through 2016 (the HPI is first multiplied by 1000).

This uses the annual average National Case-Shiller index since 1976.

As of 2016, house prices were above the median historical ratio – but far below the bubble peak.

The second graph is similar but uses the mean of the fourth fifth household income (if we separate households into fifths, this is the second highest income group).
 

House Prices and WagesThese are key households since they are more likely to be homeowners (and home buyers).

Using this group, prices are well below the bubble peak.

By these measures, we could argue house prices are 15% to 20% too high, but this is a relatively small overvaluation compared to the 50%+ overpricing at the peak of the housing bubble.
 

Real House PricesThe third graph shows the monthly Case-Shiller National index SA, and the monthly Case-Shiller Composite 20 index SA (through July) in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

At first glance, this seems to suggest prices are 30% too high (and were maybe 50% to 60% too high during the bubble).  However there is an upward slope to real prices, see The upward slope of Real House Pricesand Lawler: On the upward trend in Real House Prices.

After adjusting for the historical upward slope in real prices, I’d estimate prices are about 15% too high.

On Speculation: Back in 2005, it was easy to identify excess speculation.  There is currently some flipping activity, but this is more the normal type of flipping (buy, improve and then sell).  Back in 2005, people were just buying homes are letting them sit vacant – and then selling without significant improvements.  Classic speculation.

And even more dangerous during the bubble was the excessive use of leverage (all those poor quality loans).  Currently lending standards are decent, and loan quality is excellent.

So prices may be a little overvalued, but there is little speculation – and I wouldn’t call house prices a bubble – and I don’t expect house prices to decline nationally like during the bust.

Read more at http://www.calculatedriskblog.com/2017/10/are-house-prices-new-bubble.html#s1Ad0QbTfSXXBctp.99

 

Published at Mon, 30 Oct 2017 18:28:00 +0000

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Short Sale (Real Estate)

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Short Sale (Real Estate)

What is ‘Short Sale (Real Estate)’

In real estate, a short sale occurs when a homeowner in financial distress sells his or her property for less than the amount due on the mortgage. The buyer of the property is a third party (not the bank), and all proceeds from the sale go to the lender. The lender either forgives the difference or gets a deficiency judgment against the borrower requiring him or her to pay the lender all or part of the difference between the sale price and the original value of the mortgage. In some states, this difference must legally be forgiven in a short sale. In some states, this difference must legally be forgiven in a short sale.

In investing, a short sale is a transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal number of shares at some point in the future.

BREAKING DOWN ‘Short Sale (Real Estate)’

The term short sale refers to the fact that the home is being sold for less than the balance remaining on the mortgage, for example, a person selling a home for $150,000 when there is still $175,000 remaining on the mortgage.

Before the process can begin, the lender that holds the mortgage must sign off on the decision to execute a short sale. Additionally, the lender, typically a bank, needs documentation that explains why a short sale makes sense; after all, the lending institution could lose a lot of money in the process. No short sale may occur without lender approval.

Short sales tend to be lengthy and paperwork-intensive transactions, sometimes taking up to a full year to process. However, short sales are not as detrimental to a homeowner’s credit rating as a foreclosure.

Differences Between a Short Sale and a Foreclosure

Short sales and foreclosures are two financial options available to homeowners who are behind on their mortgage payments, have a home that is underwater or both. In both cases, the owner is forced to part with the home, but the timeline and consequences are different in each situation.

A foreclosure is the act of the lender seizing the home after the borrower fails to make payments. It is the last option for the lender, since the home is used as collateral on the note. Unlike a short sale, foreclosures are initiated by lenders only. The lender moves against the delinquent borrowers to force the sale of a home, hoping to make good on its initial investment of the mortgage. Also, unlike most short sales, many foreclosures take place when the homeowner has abandoned the home. If the occupants have not yet left the home, they are evicted by the lender in the foreclosure process.

Once the lender has access to the home, it orders an appraisal and proceeds with trying to sell the home. Foreclosures do not normally take as long to complete as a short sale, because the lender is concerned with liquidating the asset quickly. Foreclosed homes may also be auctioned off at a trustee sale, where buyers bid on homes in a public process.

A homeowner who has gone through a short sale may, with certain restrictions, be eligible to purchase another home immediately. In most circumstances, homeowners who experience foreclosure need to wait a minimum of five years to purchase another home. A foreclosure is kept on a person’s credit report for seven years.

While a foreclosure essentially lets you walk away from your home, albeit with grave consequences for your financial future, such as having to declare bankruptcy and destroying your credit, completing a short sale is labor-intensive. However, the payoff for the extra work involved in a short sale may be worth it.

How to Go About the Short Sale Process

Before beginning the short sale process, the struggling homeowner should consider the likelihood that the lender will want to work with them on a short sale by understanding the lender’s perspective. The lender is not required to do a short sale; it will be allowed at the lender’s discretion. The source of the financial trouble should be new, such as a health problem, the loss of a job or a divorce, not something that was not disclosed when the homebuyer originally applied for the loan. The lender won’t be sympathetic to a dishonest borrower. However, if you feel you were a victim of predatory lending practices, you may be able to talk the lender into a short sale even if you have not had any major financial catastrophes since purchasing the home. (For related reading, see Saving Your Home From Foreclosure.)

Also, be aware of other circumstances that may prevent the lender from wanting to do a short sale. Unfortunately, if you are not actually in default on your mortgage payments yet, the lender probably won’t be willing to work with you. Also, if the lender thinks it can get more money from foreclosing on your home than from allowing a short sale, again, the lender may not allow you to exercise this option. Finally, if someone cosigned on the mortgage, the lender may want to hold that person responsible for payment rather than doing a short sale.

If you think your situation is ripe for a short sale, talk to a decision-maker at the bank about the possibility of engaging in this type of transaction. Don’t just talk to a customer service representative, who is often more like a spokesperson and has no real authority. To work your way up the phone ladder, immediately ask to speak with the lender’s loss mitigation department. If you don’t like what the first decision-maker says, try talking to another one on another day and see if you get a different answer. If the lender is willing to consider a short sale, you’re ready to move forward with creating the short sale proposal and finding a buyer.

At this point, you should consult an attorney, a tax professional and a real estate agent. While these are high-priced professional services, if you make a mistake by trying to handle a complex short sale transaction yourself, you may find yourself in even bigger financial trouble. You may be able to pay for these service fees out of the sale proceeds from your home. Professionals accustomed to dealing with short sale transactions will be able to give you guidance on how to pay them.

To put yourself in a more convincing position to complete a short sale, stop purchasing non-necessities. You don’t want to look irresponsible to the lender when it reviews your short sale proposal.

When setting an asking price, make sure to factor the cost of selling the property into the total amount of money you need to get out of the situation. Of course, you want to sell the home for as close to the value of your mortgage as possible, but in a down market, there is bound to be a shortfall. In some states, even after a short sale, the bank will expect you to pay back all or part of that shortfall.

Gather all the documents you’ll need to prove your financial hardship to the lender. These may include bank statements, medical bills, pay stubs, a termination notice from your former job or a divorce decree. It is up to you to come up with the short sale proposal. Be aware that the lender ultimately must approve a short sale after receiving all the details because the lender is the recipient of the proceeds. Your job is to find a buyer for your home.

Once you have a buyer and the necessary paperwork, you are ready to submit the buyer’s offer and your proposal to the bank. Along with the documentation of your distressed financial status, your proposal should include a hardship letter explaining the circumstances that are preventing you from making your mortgage payments. You want to make it as convincing as possible and protect your interests while also appealing to the bank. Be careful about submitting your financial information to a lender because if it does not approve the short sale, it may use your financial information to try to get money out of you in foreclosure proceedings. If you still have cash assets, you may be expected to use them to continue making mortgage payments or to make up some of the shortfall between the sale price and the mortgage amount. An attorney experienced in completing short sales can help you navigate the details.

Because short sales can take longer than regular home sales due to the need for lender approval, they often fall through. The buyer may find another property while waiting for an answer from you. Be prepared for this possibility. If the short sale transaction goes through, consult with the IRS to see if you will have to pay taxes on the shortfall.

Also, be aware that a short sale can still affect your credit score in the sense that the months of mortgage payments you missed prior to the short sale can show up as delinquent payments on your credit report. It is up to the bank to decide what to report, so it’s in your best interest to try to convince the bank not to report your defaulted payments. Your bank may be more likely to be generous in this regard if you brought up your hardship before you were significantly behind. For credit purposes, while this is somewhat damaging, it is certainly less damaging than a foreclosure.

Alternatives to a Short Sale

Before resigning yourself to a short sale, talk to your lender about the possibility of a revised payment plan or loan modification. One of these options might allow you to stay in your home and get back on your feet. Another possible option for staying in your home arises if you have private mortgage insurance (PMI). Many homeowners who purchased homes with less than 20% down were required to purchase PMI with their homes. If the PMI company thinks you have a chance at recovering from your current financial situation, it may advance funds to your lender to bring your payments up to date. Eventually, you’ll have to repay the advance. (For more information on your housing payments, read Understanding Your Mortgage.)

Short Sale Strategies for Buyers and Investors

Short sales can also provide excellent opportunities for buyers to get into houses at a reduced price. Here are some tips to help you make smart decisions when considering a short sale property.

Prepare to Hurry Up and Wait

Realize in advance that short sales are complicated and time-consuming transactions. It can take weeks or months for the lender to approve a short sale, and many buyers who submit an offer end up canceling because the short sale process is taking too long. Buyers have to be ready to wait for the bank’s short sale approval. Rules for short sale transactions vary from state to state, but the steps normally include:

Short sale package: The borrower has to prove financial hardship by submitting a financial package to his or her lender. The package includes financial statements, a letter describing the seller’s hardship(s), and financial records, including tax returns, W-2s, payroll stubs and bank statements.

Short sale offer: Once a seller accepts an offer from a potential buyer, the listing agent sends the lender the listing agreement, an executed purchase offer, the buyer’s pre-approval letter, a copy of the earnest money check and the seller’s short sale package. If the package is missing anything — either because a document wasn’t submitted or due to a filing error on the bank’s part (e.g., the bank lost it) — the process will be delayed.

Bank processing: The bank’s review of the offer can take several weeks to months. In the end, it will approve or deny it. It’s important to note that just because the seller accepts an offer doesn’t mean the bank will agree to the price. If the bank thinks it can make more money through foreclosure proceedings, it will reject the offer.

Finding Short-Sale Properties

Most short sale properties are listed by real estate agents and on real estate websites. Some listings may not come out and say “short sale,” so you might have to look for clues within the listing, such as “subject to bank approval” or “give the bank time to respond.”

An experienced real estate agent can make a big difference in terms of both finding and closing short sale properties. Agents who specialize in short sales may hold a Short Sales and Foreclosure Resource (SFR) certification, a designation offered by the National Association of Realtors. Holders of this certification have received specialized training in short sales and foreclosures, qualifying sellers for short sales, negotiating with lenders and protecting buyers. It’s important to note that the certification doesn’t guarantee an agent will have the type of experience you are looking for, nor does a lack of certification preclude it. Either way, you’ll want to vet any potential real estate agents to ensure their short sale expertise. (For more information, see Find Short Sale Listings.)

Know the Numbers

In real estate investing, it is said that the money is made “in the buy,” meaning that a good purchase price is often the key to a successful deal. If you can get a property for a good price, you increase the odds of coming out ahead when it comes time to sell. If the purchase price is on the high end, on the other hand, you’ll likely watch your profit margin erode.

You should be able to buy the property, put it in great condition and sell at a price where you can still make a profit. Investors need to be able to turn around and sell the house quickly — typically at below market — and a good purchase price makes this possible.

The purchase price is only one important number, however. You’ll have to make some other calculations as well, including:

Costs of repairs and renovations: These costs will vary depending on the property’s condition and your plans for it. It pays to put in the time and effort to develop a realistic budget since this is one of the figures you’ll need to determine if the investment can make money. Costs to consider include material, labor, permits, inspection fees, trash removal, storage costs and dumpster rentals. A good inspection (before making the purchase) can alert you to any large expenses, such as a cracked foundation, faulty wiring or extensive termite damage.

After Repair Value (ARV): ARV is an estimate of the property’s fair market value after any repairs and renovations are made. (See Cheap Home Renovations That Pay Off.) Investors look at this number to determine whether a property has profit potential. The best way to evaluate a property’s ARV is to look at comparables (“comps”), i.e., homes that have recently sold in the area (typically up to a mile away from the subject property) that have similar features in terms of square footage, number of bedrooms/bathrooms, etc.

Carrying costs:Carrying costs are your expenses for holding onto the property. The longer you own the property, the more you will spend in carrying costs, which include:

  • Mortgage payment (including interest)
  • Property taxes
  • Insurance
  • Condo and association fees
  • Utilities (electric, gas, water, sewer, trash)

Determine Profitability

In order for an investment to be profitable, the sum of your costs (the purchase price, repair and renovation costs and carrying costs) must be lower than the ARV. If your costs are close to or higher than the ARV, it will be difficult or impossible to make a profit. You can determine the potential profit by subtracting the purchase price, repair and renovation (R&R) costs and carrying costs from the ARV:

Profit = ARV ˗ Purchase Price ˗ R&R Costs ˗ Carrying Costs

Real estate investors might expect to earn at least a 20% profit on a property, and some use guidelines to evaluate properties in different housing markets. Under these guidelines, total investment (purchase price, repairs and renovations and carrying costs) should not exceed:

  • 80% of ARV in a market where home values are rising
  • 70%-75% of ARV in a flat market
  • 60%-65% of ARV in a market where home values are decreasing

If the ARV of a property is $200,000, for example, your total investment should be limited to about $160,000 in a rising market, $140,000 in a flat market and $120,000 in a market with falling values. The various investment levels are used to reduce risk in changing market conditions. You can risk more in a rising market since you are more likely to get your ARV or better when you sell. In a falling market, you are less likely to get your ARV, so your investment should be smaller.

A short sale property can provide an excellent opportunity to purchase a house for less money. In many cases, short sale homes are in reasonable condition, and while the purchase price might be higher than a foreclosure, the costs of making the home marketable (repairs and renovations) can be much lower. But, because of the lengthy process, buyers must be willing to wait. An experienced real estate agent can help you determine a fair offer and negotiate with the bank.

While many investors purchase short sale properties and quickly resell them for a profit, others choose to maintain ownership and use the property for income by collecting rent. In either case, each property must be carefully evaluated prior to purchase to determine if it has profit potential. (For more information, see Purchasing a Short-Sale Property.)

Note: Because tax laws are complicated and can change from time to time, it is always recommended that you consult with a CPA who knows about real estate investing and related tax laws to give you comprehensive and up-to-date information. It can mean the difference between making a profit and taking a loss on an investment.

 

Published at Tue, 17 Oct 2017 19:03:00 +0000

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Freddie Mac: Mortgage Serious Delinquency rate declined in August, Lowest since April 2008

 

Freddie Mac: Mortgage Serious Delinquency rate declined in August, Lowest since April 2008

by Bill McBride on 9/27/2017 12:18:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in August was at 0.84%, down from 0.85% in July.  Freddie’s rate is down from 1.03% in August 2016.

Freddie’s serious delinquency rate peaked in February 2010 at 4.20%.

This is the lowest serious delinquency rate since April 2008.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is still generally declining, the rate of decline has slowed.

In the short term – over the next several months – the rate will probably increase slightly due to the hurricanes.

After the hurricane bump, maybe the rate will decline another 0.2 to 0.3 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report for August soon.

Read more at http://www.calculatedriskblog.com/2017/09/freddie-mac-mortgage-serious.html#HFtQQ1DxYXhemLSg.99

 

Published at Wed, 27 Sep 2017 16:18:00 +0000

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Black Knight: Hurricane Harvey Could Result in 300,000 New Mortgage Delinquencies

by WikiImages from Pixabay

Black Knight: Hurricane Harvey Could Result in 300,000 New Mortgage Delinquencies

by Bill McBride on 9/08/2017 09:28:00 AM

From Black Knight: Black Knight: Hurricane Harvey Could Result in 300,000 New Mortgage Delinquencies, with 160,000 Borrowers Becoming Seriously Past Due

• FEMA-designated disaster areas related to Hurricane Harvey are home to 1.18 million mortgaged properties

• Harvey-related disaster areas contain over twice as many mortgaged properties as those connected to Hurricane Katrina in 2005, carrying nearly four times the unpaid principal balance

• Post-Katrina mortgage delinquencies in Louisiana and Mississippi FEMA-designated disaster areas soared 25 percentage points, peaking at over 34 percent

• A similar impact to Harvey-related disaster areas would equate to 300,000 borrowers missing at least one mortgage payment, and 160,000 becoming 90 or more days past due

Today, the Data & Analytics division of Black Knight Financial Services, Inc. released an updated assessment of the potential mortgage-related impact from Hurricane Harvey. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, using post-Katrina Louisiana and Mississippi as benchmarks presents the possibility for significant rises in both early and long-term delinquencies.

“Although the situation around Hurricane Harvey continues to evolve, millions of American lives have already been impacted by the storm and immense flooding,” said Graboske. “For many, their struggles are just beginning. Using post-Hurricane Katrina as a model, Black Knight has found that as many as 300,000 homeowners with mortgages in FEMA-designated Harvey disaster areas could become past due over the next few months. Post-Katrina, delinquencies spiked in Louisiana and Mississippi disaster areas, jumping 25 percent to peak at 34 percent of all mortgaged properties being past due. The serious delinquency rate – tracking mortgages 90 or more days past due, but not yet in foreclosure – rose to more than 16 percent. New Orleans was hardest hit, with its delinquency jumping by 46 percentage points to nearly 55 percent, and the serious delinquency rate increasing by 24 percent

Published at Fri, 08 Sep 2017 13:28:00 +0000

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Update: Framing Lumber Prices Up Year-over-year

 

Update: Framing Lumber Prices Up Year-over-year

by Bill McBride on 9/07/2017 11:36:00 AM

Here is another update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs – and prices are once again near the bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn’t increase as much early in 2014 (more supply, smaller “surge” in demand).

In 2015, even with the pickup in U.S. housing starts, prices were down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.  This decline in 2015 was also probably related to weakness in China.

Lumcber PricesClick on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through early Sept 2017 (via NAHB), and 2) CME framing futures.

Prices in 2017 are up solidly year-over-year and might approach or exceed the housing bubble highs in the Spring of 2018.

Right now Random Lengths prices are up 15% from a year ago, and CME futures are up about 25% year-over-year.

There is a seasonal pattern for lumber prices. Prices frequently peak around May, and bottom around October or November – although there is quite a bit of seasonal variability.

 

Published at Thu, 07 Sep 2017 15:36:00 +0000

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Mortgage Rates at 2017 Lows

 

Mortgage Rates at 2017 Lows

by Bill McBride on 9/07/2017 07:06:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Little-Changed at 2017 Lows

Mortgage rates didn’t move much today, despite plenty of strength in underlying bond markets.  This would normally coincide with lower rates, so what’s the deal?

The main issue is timing.  Bond markets weakened yesterday afternoon.  This would imply higher rates, but most lenders never went to the trouble of adjusting rate sheets intraday.  As I said yesterday, those lenders would begin today at a disadvantage.  Indeed they did, and that disadvantage was generally erased by the improvement in bond markets.  Thus, lenders who didn’t move rates higher yesterday were able to keep today’s rates relatively unchanged, thanks to bond market gains.  Lenders who DID raise rates yesterday were able to offer slightly lower rates today.

All in all, the average lender is quoting the lowest rates of 2017, with more than a few lenders at 3.75% on a top tier conventional 30yr fixed scenario.  Most lenders are able to quote 3.875% now, though a few remain at 4.0%.
emphasis added

Published at Thu, 07 Sep 2017 23:06:00 +0000

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Fannie Mae: Mortgage Serious Delinquency rate declined in July, Lowest since December 2007

File photo: A stands outside Fannie Mae headquarters in Washington February 21, 2014. REUTERS/Kevin Lamarque

 

Fannie Mae: Mortgage Serious Delinquency rate declined in July, Lowest since December 2007

by Bill McBride on 8/31/2017 05:09:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.00% in July, from 1.01% in June. The serious delinquency rate is down from 1.30% in July 2016.

This is the lowest serious delinquency rate since December 2007.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the “normal” serious delinquency rate is somewhat under 1%.

The Fannie Mae serious delinquency rate has fallen 0.30 percentage points over the last year, and at that rate of improvement, the serious delinquency rate should be below 1% next month.

By vintage, for loans made in 2004 or earlier (4% of portfolio), 2.63% are seriously delinquent. For loans made in 2005 through 2008 (7% of portfolio), 5.71% are seriously delinquent, For recent loans, originated in 2009 through 2017 (89% of portfolio), only 0.32% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

Note: Freddie Mac reported earlier.

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These REITs Look Techinically Strong

 

These REITs Look Techinically Strong

By Cory Mitchell | August 23, 2017 — 1:00 PM EDT

Real estate investment trusts, or REITs, are a way to add some dividend income to a portfolio, but that doesn’t mean giving up capital gains. The following REITs have been in strong uptrends throughout the year, and recent pullbacks (which look to have ended) may provide an opportunity to get in for another rally.

The most recent rally in AGNC Investment Corp. (AGNC) has been in play since December. The price has pulled back from the June high of $22.34, yet the overall uptrend remains intact. In late July and early August, the price tested the rising trendline near $21. After staying in that region for three weeks, the price pushed higher in mid-August, indicating that the $21 area is still acting as support and that the next moves higher may be under way. Since this is an uptrend, the expectation is that the price will rally above the prior higher of $22.34. Traders could consider a price target near $23 for a swing trade. Longer-term traders may wish to hold the shares longer to take advantage of the dividend, but they should be wary of a decline below $20.75. Based on the $21.55 close on Aug. 22, the dividend yield for AGNC is 10%. (See also: AGNC Investment’s Earnings Surpass Estimates in Q2.)

Technical chart showing AGNC Investment Corp. (AGNC) near a trendline during an uptrend

UDR, Inc. (UDR) has been riding a rising trendline higher since November. July and August have seen the price repeatedly touch the trendline as it edges higher. While the price of a REIT can move quickly, it will often oscillate as UDR done throughout August. Those oscillations, if they continue, could provide an opportunity to get an entry point closer to the trendline between $39 and $38.50. Based on the uptrend, the price is expected to make a new high above $40.71. For swing trading, a target could be near $41.50. Once gain, longer-term traders may wish to hold UDR for longer but should be wary of a decline back below $37.35. UDR’s dividend yield is 3%. (For more, see: UDR Q2 FFO In Line With Expectations, Revenues Increase.)

Technical chart showing United Dominion Realty Trust (UDR) near a trendline in an uptrend

Two Harbors Investment Corp. (TWO) had a rather steep decline in late June and early July, but the price stabilized near support at $9.60. It has since rallied back above $10. A good entry point would be $9.80 to $9.90 if the price pulls back slightly from the $10.17 Aug. 22 close. Traders should be wary of declines below $9.55. Stop-loss orders can be placed just below that level. The swing trade target is $10.75. With a 10% dividend yield, some investors may wish to hold for longer, keeping in mind that the uptrend is drawn into question on a decline below $9.55. (See also: REIT Q2 Earnings: ETFs in Focus.)

Technical chart showing Two Harbors Investment Corp. (TWO) near a trendline in an uptrend

The Bottom Line

These REITs are in strong uptrends and have not shown signs of letting up just yet. All three recently tested a support level or trendline and responded by rallying. This indicates that the pullbacks could be over and that another move up is under way. REITs typically are not huge movers, but the dividend combined with capital gains can produce some solid trades, both for short-term and longer-term traders. Trends change, so if the price drops back below support, traders should consider exiting. Also, it is recommended that traders risk only a small percentage of account capital on any single trade. (For additional reading, check out: 5 Types of REITs and How to Invest in Them.)

Charts courtesy of StockCharts.com. Disclosure: The author does not have positions in the REITs mentioned.

 

Published at Wed, 23 Aug 2017 17:00:00 +0000

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Housing Starts increased to 1.215 Million Annual Rate in June

Housing Starts increased to 1.215 Million Annual Rate in June

by Bill McBride on 7/19/2017 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,215,000. This is 8.3 percent above the revised May estimate of 1,122,000 and is 2.1 percent above the June 2016 rate of 1,190,000. Single-family housing starts in June were at a rate of 849,000; this is 6.3 percent above the revised May figure of 799,000. The June rate for units in buildings with five units or more was 359,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,254,000. This is 7.4 percent above the revised May rate of 1,168,000 and is 5.1 percent above the June 2016 rate of 1,193,000. Single-family authorizations in June were at a rate of 811,000; this is 4.1 percent above the revised May figure of 779,000. Authorizations of units in buildings with five units or more were at a rate of 409,000 in June.
emphasis added

Total Housing Starts and Single Family Housing StartsClick on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) increased in June compared to May.  Multi-family starts are down 13% year-over-year.

Multi-family is volatile month-to-month, but has been mostly moving sideways over the last couple of years.

Single-family starts (blue) increased in May, and are up 10.3% year-over-year.

Total Housing Starts and Single Family Housing Starts
The second graph shows total and single unit starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then – after moving sideways for a couple of years – housing is now recovering (but still historically low),

Total housing starts in June were above expectations, and starts for May were revised up.    This was a solid report.  I’ll have more later …

Published at Wed, 19 Jul 2017 12:39:00 +0000

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MBA: Mortgage Applications Increase in Latest Weekly Survey

MBA: Mortgage Applications Increase in Latest Weekly Survey

by Bill McBride on 7/19/2017 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 6.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 14, 2017. Last week’s results included an adjustment for the Fourth of July holiday.

… The Refinance Index increased 13 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 27 percent compared with the previous week and was 7 percent higher than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.22 percent, with points decreasing to 0.31 from 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall well below 4%.

Mortgage Purchase Index
The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year.

Published at Wed, 19 Jul 2017 11:00:00 +0000

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Fannie Mae: Mortgage Serious Delinquency rate declined in May, Lowest since December 2007

 

Fannie Mae: Mortgage Serious Delinquency rate declined in May, Lowest since December 2007

by Bill McBride on 6/29/2017 04:17:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.04% in May, from 1.07% in April. The serious delinquency rate is down from 1.38% in May 2016.

This is the lowest serious delinquency rate since December 2007.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the “normal” serious delinquency rate is under 1%.

The Fannie Mae serious delinquency rate has fallen 0.34 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will below 1% this Summer.

Note: Freddie Mac reported earlier.

Published at Thu, 29 Jun 2017 20:17:00 +0000

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MBA: Mortgage Applications Increase in Latest Weekly Survey

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MBA: Mortgage Applications Increase in Latest Weekly Survey

by Bill McBride on 6/07/2017 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 7.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 2, 2017. This week’s results included an adjustment for the Memorial Day holiday.

… The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 10 percent from one week earlier to its highest level since May 2010. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 6 percent higher than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17 percent, with points decreasing to 0.32 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not increase significantly unless rates fall sharply.

Mortgage Purchase Index
The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 6% year-over-year.

Published at Wed, 07 Jun 2017 11:00:00 +0000

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MBA: Mortgage Applications Decrease in Latest Weekly Survey

MBA: Mortgage Applications Decrease in Latest Weekly Survey

by Bill McBride on 5/31/2017 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 3.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 26, 2017.

… The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 7 percent higher than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17 percent, with points decreasing to 0.32 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not increase significantly unless rates fall sharply.

Mortgage Purchase Index
The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 7% year-over-year.

Published at Wed, 31 May 2017 11:00:00 +0000

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Case-Shiller: National House Price Index increased 5.8% year-over-year in March

by image4you from Pixabay

Case-Shiller: National House Price Index increased 5.8% year-over-year in March

by Bill McBride on 5/30/2017 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for March (“March” is a 3 month average of January, February and March prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Seattle, Portland, Dallas and Denver Lead Gains in S&P Corelogic Case-Shiller Home Price Indices

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.8% annual gain in March, up from 5.7% last month and setting a 33-month high. The 10-City Composite and the 20-City Composite indices came in at 5.2% and 5.9% annual increases, respectively, unchanged from last month.

Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. In March, Seattle led the way with a 12.3% year-over-year price increase, followed by Portland with 9.2%, and Dallas with an 8.6% increase. Ten cities reported higher price increases in the year ending March 2017 than in the year ending February 2017.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.8% in March. The 10-City Composite posted a 0.9% increase and the 20-City Composite reported a 1.0% increase. After seasonal adjustment, the National Index recorded a 0.3% month-over-month increase. Both the 10-City Composite and the 20-City Composite indices posted a 0.9% month-over-month increase after seasonal adjustment. Eighteen of the 20 cities reported increases in March before seasonal adjustment; after seasonal adjustment, 17 cities saw prices rise.
emphasis added

Case-Shiller House Prices IndicesClick on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 6.4% from the peak, and up 0.8% in March (SA).

The Composite 20 index is off 3.9% from the peak, and up 0.9% (SA) in March.

The National index is 2.4% above the bubble peak (SA), and up 0.3% (SA) in March.  The National index is up 38.4% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 5.2% compared to March 2016.  The Composite 20 SA is up 5.9% year-over-year.

The National index SA is up 5.8% year-over-year.

Note: According to the data, prices increased in 18 of 20 cities month-over-month seasonally adjusted.

I’ll have more later.

(Why?)
Published at Tue, 30 May 2017 13:12:00 +0000

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