Archive for February, 2012

Home Sales Slip, but Data Show Stronger Quarter

Friday, February 24th, 2012

New single-family home sales in the United States fell in January, but an upward revision to the prior months’ data and a drop in the supply of properties on the market added to growing signs of a budding recovery in the housing sector.

In another report released Friday, a survey reported an uptick in consumer sentiment, surpassing analysts’ expectations.

The Commerce Department said home sales slipped 0.9 percent to a seasonally adjusted 321,000-unit annual rate. December’s sales pace was revised up to 324,000 units, the highest in a year, from the previously reported 307,000 units.

October and November sales also were revised higher. Although sales fell last month, they were higher than economists’ expectations for a 315,000-unit rate. Compared to January last year, new-home sales were up 3.5 percent.

Despite the weak sales last month, details of the report offered further fresh signs of green shoots in the housing market, with the months’ supply of homes on the market falling to 5.6 months the lowest since January 2006.

That compared to 5.7 months in December. A six-month supply is generally considered ideal.

The median price for a new home rose 0.3 percent to $217,100, the highest level since October. Compared to January last year, the median price was down 9.6 percent. The inventory of new homes on the market was the lowest on record.

“The report shows traction for a housing industry anxious to ascend from the bottom,” said Mitchell Hochberg, principal at Madden Real Estate Ventures in New York. “To climb back, the foreclosure overhang needs to clear, prospective home buyers must find it less difficult to qualify for a mortgage and consumer confidence must improve.”

Demand for housing could get a boost from the strengthening economy, especially the labor market, which is helping to lift confidence among Americans.

The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment edged up to 75.3 in February, the highest in a year, from 75.0 in January.

Consumer sentiment improved a tad in February to rack up a 12-month high as Americans became more confident about the economy’s resilience, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading of the overall index on consumer sentiment came in at 75.3, edging up from 75.0 the month before. It was the highest level since February 2011.

It surpassed economists’ expectations of 73.0 and recovered from a decline to 72.5 in February’s preliminary reading.

“It is not that surging oil prices, instability in the Mideast, the European crisis or uncertainties about future tax and spending policies could not ultimately derail the recovery, but that consumers expect the pace of overall economic growth to continue to slowly restore lost jobs despite these potential problems,” the survey director, Richard Curtin, said in a statement.

The survey’s barometer of current economic conditions eased to 83.0 from 84.2 but its gauge of consumer expectations rose to its highest in a year, at 70.3 from 69.1.

The market for new homes faces stiff competition from previously owned homes, many of which are selling at a huge discount because of foreclosures.

But economists say house prices may be close to a bottom, citing recent declines in the supply of unsold previously owned homes and the homeowner vacancy rate.

The months’ supply of previously owned homes on the market fell to a near 6-year low of 6.1 months in January.

The homeowner vacancy rate, which is closely correlated to the month’s supply, fell to 2.3 percent in the fourth quarter of 2011 from 2.4 percent in the prior three months. The rate peaked in 2008.

“While still elevated, their current levels are again consistent with stable or even slightly rising house prices,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. “This, in turn, would imply that one important drag on the economy will cease to exist.”

Data this week showed home resales rose to a 1-1/2 year-high in January. Confidence among homebuilders this month approached a five-year high and builders are undertaking more residential projects, mirroring the economy’s generally upbeat tone.

Still, both sales and home construction remain far below their 2005 levels.

The Federal Reserve has suggested a number of ways other policy makers could step in to help the beaten-up market and is considering purchasing more mortgage-backed securities to drive mortgages rates even lower.

New-home sales last month rose in two of the four regions, but fell sharply in the Midwest and the West.

Posted in Mitchell Hochberg, Real Estate Development, Real Estate Finance | No Comments »

Obama pressures Congress to take up refi

Wednesday, February 1st, 2012

WASHINGTON (MarketWatch) — President Barack Obama on Wednesday urged Congress to act on his plan to give homeowners a chance to refinance at historically low interest rates and released details of his proposal.

Obama rejected arguments that only time would heal the housing market. Data released Tuesday showed house prices have dropped by nearly a third from their peak. See story on house prices.

“It is wrong for anybody to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom,” Obama said in a speech in a Washington, D.C., suburb.

Some Americans with good credit and clean payment histories are rejected for refinancing because their mortgages are bigger than the current prices of their homes, a term called being “under water.” Obama said more than 10 million homeowners have underwater mortgages.

Last week in his State of the Union address to the nation and members of Congress, Obama said the new refinance program would result in “no more red tape, no more runaround from the banks.” Read ‘Obama calls for economy built to last”

Almost as soon as Obama finished his speech to Congress last week, analysts expressed scepticism that the plan could pass Congress. Read ‘Obama refi plan has bumpy road ahead’

The White House has already set up a plan, called the Home Affordable Refinance Program, to help borrowers refinance whose loans are backed by Fannie Mae and Freddie Mac.

But so far, the programs “have not worked on the scale we had hoped — not as many people have taken advantage of it as we wanted,” Obama said.

Yelena Shulyatyeva, an economist with BNP Paribas, said Obama’s plan “would potentially have a significant impact” and estimated that more than 1 million homeowners would be eligible.

But Shulyatyeva said, “Overall we think it is not a game-changer” because Republicans in Congress are unlikely to go along with it.

Rep. Scott Garrett, a Republican from New Jersey who is chairman of the House subcommittee that oversees Fannie Mae and Freddie Mac, rejected Obama’s proposal as government intrusion in markets.

“Until the president gives up his crusade to increase the government’s interference in the housing market, home foreclosures will continue to rise, our economy will falter and every American’s share of the national debt will continue to grow,” Garrett said.

Obama said the new plan is not designed to help irresponsible borrowers or speculators.

The new program would focus on borrowers whose loans are not owned by Fannie Mae or Freddie Mac and operate through the Federal Housing Administration.

Garrett said the FHA is “already on a collision course with bankruptcy” and the Obama plan will only make that “disastrous situation worse.”

To qualify, borrowers would need to be current on loans for the past six months and have missed no more than one payment in the prior six months.

Borrowers would need a minimum credit score of 580. The White House said that nine out of 10 borrowers have a credit score adequate to meet that requirement.

The mortgages to be refinanced must be for an owner-occupied principal residence.

The loans could not be larger than current FHA conforming loan limits that range as high as $729,750 in high cost areas.

Borrowers would not have to submit a new appraisal or tax return. A lender would only have to confirm that the borrower is employed. Some unemployed homeowners might also qualify, the White House said.

The cost of the program is estimated between $5 and $10 billion, to be financed by a fee on large financial firms, the White House said. Congressional Republicans have said they will oppose any such fee.

The administration is also asking Congress to streamline refinancing to all borrowers with Fannie Mae and Freddie Mac loans.

The White House expressed frustration with the Federal Housing Finance Agency, which at the moment is being run by Ed DeMarco.

While the White House argues that the government-sponsored giants could have acted, “the GSE’s have not acted, so the White House is calling on Congress to do what is in the taxpayer’s interest,” the statement said.

The steps include eliminating appraisal costs for all borrowers, increasing competition so borrowers can get the best possible deal and extending streamlined refinancing for all GSE borrowers.

Mitchell Hochberg, managing principal of Madden Real Estate Ventures, a real estate firm in New York, said that in the final analysis, Obama’s refinance proposal was simply “window dressing in an election year.”

“What they’ve done is very interesting in my opinion, but at the end of the day it doesn’t address the heart of the matter, which is the economy,” he said.

“Unless the economy is fixed, the housing market is not going to recover,” he said.

In a separate release, the FHFA asked investors to contact the agencv if they are interested in participating in a foreclosure to rental program.

Shulyatyeva said she was disappointed with the lack of detail in the FHFA release.

Posted in Uncategorized | No Comments »