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Home prices posted their strongest monthly gains on record in April, according to the Case-Shiller Home Price Indices released Tuesday. The monthly 20-city index rose 2.5 percent in April, and the companion 10-city index increased 2.6 percent.
Economists had expected the 20-city index to increase 1.1 percent from March.
Year-over-year, the 10-city index was up 12.1 percent, and the 20-city index was up 11.6 percent--in each case the strongest year-over-year gain since March 2006.
The national delinquency rate moved against the seasonal trend and declined from the third to fourth quarter, while foreclosure starts and the foreclosure inventory rate made history with their decreases, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
In the fourth quarter of 2012, the national delinquency rate fell to 7.09 percent, a quarterly and yearly drop of 31 and 49 basis points, respectively, the MBA reported Thursday.
The delinquency rate is seasonally adjusted and includes one-to-four-unit residential properties. The MBA noted delinquency rates typically display an increase from Q3 to Q4, but even the non-seasonally adjusted rate dropped, falling 13 basis points to 7.51 percent.
The serious delinquency rate, which includes 90-plus delinquencies and loans in foreclosure, stood at 6.78 percent after shedding 25 basis points from Q3 and 95 basis points from the Q4 2011.
Foreclosure starts were down to the lowest level since the second quarter of 2007 after representing just 0.70 percent of loans in Q4, a decrease from 0.90 percent in Q3 and 0.99 in Q4 2011.
The foreclosure inventory rate also shrunk, falling below 4 percent to 3.74 percent. Compared to a year ago, the rate is 64 basis points lower and down 33 basis points from Q3.
“The foreclosure starts rate decreased by the largest amount ever in the MBA survey and now stands at half of its peak in 2009. Similarly, the 33 basis point drop in the foreclosure inventory rate is also the largest in the history of the survey,” said Jay Brinkmann, MBA’s chief economist and SVP of research.
The MBA also reported the combined percentage of loans at least one payment past due or in foreclosure was down to 11.25 percent on a non-seasonally adjusted basis, which is a quarterly and yearly decrease of 46 basis points and 128 basis points, respectively. Amid the positive developments, Brinkmann noted one cause for concern.
“One cautionary note is that the 90+ delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years. While we normally see an increase in this rate in individual states when they change their foreclosure laws, 38 states had increases in the percentage of loans three payments or more past due, indicating that we could see a modest increase in foreclosure starts in subsequent quarters,” Brinkmann said.
On a non-seasonally adjusted basis, the 90-plus delinquency rate was 3.04 percent in Q4.
The survey also examined mortgage performance for FHA loans, which were mixed across the board. “While the foreclosure starts and foreclosure inventory percentages both fell, the delinquency percentages generally remained flat or increased slightly, particularly the percentage of loans 90 days or more past due,” Brinkmann said. “However, 44 percent of the FHA loans that are seriously delinquent were made in the years 2008 and 2009, while loans made in those years represent a smaller share of FHA’s overall book of business.”
Brinkmann also noted Florida and the judicial process in some states continued to be problem areas for foreclosure inventory. MBA data shows foreclosure inventory is 6.22 percent in judicial states compared to 2.13 percent in non-judicial states. “In those cases, the ultimate reduction in the number of loans in foreclosure will have less to do with the recovery of the economy and the housing market than with the return to reasonable foreclosure timelines,” Brinkmann explained.
In addition, Florida’s high foreclosure inventory rate of 12 percent is also impacting the national rate, according to the MBA. The next three states with the highest foreclosure inventory rate were also judicial: New Jersey (9 percent), New York (6 percent), and Illinois (6 percent).
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Foreclosure inventory continues to decline but remains more than eight times what it was in the decade prior to the housing crisis, according to the latest report from Lender Processing Services (LPS).
Noncurrent loans make up 10.9 percent of all loans as of August, demonstrating a year-over-year change of -7.6 percent, according to LPS.
As of August, the delinquency rate stands at 6.9 percent, and the foreclosure rate is 4.0 percent. There remains a large gap in the foreclosure rate between judicial states and non-judicial states. In fact, in judicial states the rate remains near an all-time high of 6.49 percent, while the foreclosure rate in non-judicial states is 2.28 percent.
The amount of loans 90 or more days delinquent is near half of its January 2010 peak. The majority of these loans are more than nine months delinquent. About 43 percent are at least 12 months delinquent.
The overall delinquency rate declined 2.3 percent in August.
States ranking highest for non-current loans include Florida, Mississippi, New Jersey, Nevada, and New York.
States with the lowest percentages of non-current loans include Montana, Alaska, South Dakota, Wyoming, and North Dakota.
LPS noted prepayment activity was up “significantly” in August, nearing levels last reported in 2005.
The annualized prepayment rate at the end of August was almost 25 percent, according to LPS’ findings. Prepayment was highest among loans with higher combined loan-to-value ratios (CLTVs). For example, among loans with more than 120 percent CLTV, prepayment increased more than 65 percent year to date.
According to LPS, this trend is significant because prepayments are an indicator of refinance activity. In August, 2011 vintage loans experienced a 23 percent increase in prepayments over the month.
Loans with vintages from 2007 and earlier experienced a prepayment increase of just 9 percent, which LPS interprets as signs of a “refi burn out.”
“[I]t is also becoming evident that loans originated in 2007 and earlier have diminished prospects for conventional refinancing opportunities,” stated Herb Blecher, SVP of applied analytics at LPS.
“Fewer than 30 percent of these vintages remain both active and current, and on average, they are marked by larger negative equity positions and lower credit scores,” Blecher explained.
Major metro areas such as Phoenix and Atlanta aren’t the only places where investments opportunities abound.
Small towns with populations between 200,000 and 500,000 have plenty to offer investors despite their smaller size, according to a quarterly report from Local Market Monitor (LMM) and HomeVestors of America, Inc., (known as the “We Buy Ugly Houses” company). “Many of these markets not only have unemployment rates well below the national average, but they show strong job growth and housing prices have bottomed out,” said Ingo Winzer, president and founder of LMM.
Winzer added that smaller markets are “great places to rent out single-family homes because strong economic growth can quickly absorb the existing housing options.”
LMN and HomeVestors ranked Lafayette, Louisiana as the top smaller market, followed by Fort Wayne, Indiana; Erie, Pennsylvania; Corpus Christi, Texas; Houma, Louisiana; Fayetteville, Arkansas; Tyler, Texas; Longview, Texas; Lincoln, Nebraska; and Ann Arbor, Michigan.
The smaller markets named were described as low “risk premiums” and as safer investments. On the other hand, the top 20 larger markets should be approached with caution, Winzer said. “Even though the higher risk premiums mean investors may be able to get a higher return relative to their investment, 18 of these markets are in California, Florida, Nevada or Michigan, all areas that have suffered from an overabundance of housing, a poor local economy, or both,” Winzer added.
HomeVestors’ co-president, David Hicks, said smaller markets are the best-kept secret of investing. Using the examples of Fort Wayne, Indiana; Lincoln, Nebraska, or Ann Arbor, Michigan, Hicks noted, “Many of these smaller markets offer a consistent demand for rental properties. Investors can discover for themselves that the big city isn’t the only place with a great deal for investors.”
A report released Monday from John Burns Real Estate Consulting revealed that the real homeownership rate-measured as the percentage of households that own a home and are not seriously delinquent on their mortgage-has fallen to 62.1 percent, the lowest level in almost half a century. The firm said that the Census Bureau's 65.5 percent homeownership estimate was a vast overestimate, as it includes 3.8 million homeowners who are 90 or more days delinquent.
Existing homes sale rose to an annual rate 4.47 million in July, the National Association of Realtors reported Wednesday. Economists had expected the sales pace to be 4.51 million.
The increase – 100,000 – was less than half of the 250,000 drop in the sales pace registered for June. The 2.3 percent month-over-month increase was also less than the 5.4 percent increase in the pending home sales index for May, suggesting borrowers who entered into contracts in May (which would have closed in July) cancelled agreements to buy.
The nation added 80,000 jobs in June, the Labor Department reported Friday. This makes job growth in the second quarter 225,000, the weakest quarterly gain in jobs since the third quarter of 2010 when the economy lost 136,000 jobs. The closely watched unemployment rate remained at 8.2 percent, unchanged from May.
Economists surveyed by Bloomberg expected payrolls to grow by 90,000 and for the unemployment rate to remain at 8.2 percent.
Average weekly hours ticked up to 34.5 from 34.4, and average hourly earnings rose.
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