Pending Home Sales Decline in August but Remain Above a Year Ago

We Can’t Ignore Housing AnymoreBy Neal Lipschutz

Bernanke: Housing Still Weighs on Economy
Federal Reserve Chair Ben Bernanke said that the economy continues to recover at a very modest pace, but real estate continues to lag.

Many households have little confidence in the durability of the economic recovery and about their income prospects, Bernanke said in delivering his semiannual monetary policy testimony to the House Financial Services Committee on Wednesday.

Residential construction activity remains extremely low, Bernanke said.

“The demand for homes has been depressed by many of the same factors that have held down consumer spending more generally, including the slowness of the recovery in jobs and income as well as poor consumer sentiment,” Bernanke said. “Mortgage interest rates are near record lows, but access to mortgage credit continues to be constrained.

"Also, many potential home buyers remain concerned about buying into a falling market, as weak demand for homes, the substantial backlog of vacant properties for sale, and the high proportion of distressed sales are keeping downward pressure on house prices.”

However, Bernanke added that household debt burdens are declining. "Delinquency rates on credit card and auto loans are down significantly, and the number of home owners missing a mortgage payment for the first time is decreasing,” Bernanke said. “The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending in the medium run.“

Source: “Fed’s Bernanke Monetary Policy Testimony to House Financial Services Committee,” Market News International (July 13, 2011)

States With Largest Drop in Children Population
The U.S. population is getting older as the number of people who are under 15 years of age has shrunk in the past decade, and in some areas very dramatically.

Experts are blaming it on the down economy.

William Frey, senior fellow at the Brookings Institution and a demography expert, says that many states have an alarmingly high number of older residents. “This is because many states in the middle of the country have experienced a long-term economic slide — losing young adult migrants, and not attracting many immigrants,” Frey says.

According to Frey, “in the longer term, the country may be ‘splitting apart’ between a more youthful, racially diverse set of Sunbelt states, and a more stagnant, aging set of northern and Midwest states — a division which will impact the politics and economies of each.”

The following is a list of the states with the largest drop in the percentage of their population who were under 15 between 2001 and 2009.

1. Alaska
Relative Decrease In Population Under 15 (2001-2009): -15.36%
Percentage of the Population Under 15 in 2001: 25.7%
Percentage of the Population Under 15 in 2009: 21.75%
Median Age 2001: 32.6
Median Age 2009: 33.3

2. Maryland
Relative Decrease In Population Under 15 (2001-2009): -12.91%
Percentage of the Population Under 15 in 2001: 22.42%
Percentage of the Population Under 15 in 2009: 19.52%
Median Age 2001: 36.2
Median Age 2009: 39.2

3. California
Relative Decrease In Population Under 15 (2001-2009): -12.68%
Percentage of the Population Under 15 in 2001: 24.25%
Percentage of the Population Under 15 in 2009: 21.18%
Median Age 2001: 33
Median Age 2009: 36.1

4. Rhode Island
Relative Decrease In Population Under 15 (2001-2009): -12.68%
Percentage of the Population Under 15 in 2001: 20.11%
Percentage of the Population Under 15 in 2009: 17.56%
Median Age 2001: 37.5
Median Age 2009: 41

5. Hawaii
Relative Decrease In Population Under 15 (2001-2009): -12.32%
Percentage of the Population Under 15 in 2001: 21.36%
Percentage of the Population Under 15 in 2009: 18.72%
Median Age 2001: 36.7
Median Age 2009: 39.8

Find out which other states had dramatic decreases in its children population.

Source: “The 10 States That Are Losing Children the Fastest,” MSNBC.com (July 13, 2011)

What Does the Future Hold for Jumbo Loans?
The private market is ready to fill the void when conforming limits on government-backed mortgages at Fannie Mae, Freddie Mac, and the Federal Housing Administration expire at the end of September 2011, Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee on Wednesday.

On Oct. 1, the maximum mortgage amount in high-cost areas is set to drop from $729,750 to $625,500.

"As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher-priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis," Bernanke told the House committee. "I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost."

The National Association of Home Builders has said that it fears more than 17 million homes nationwide will become ineligible for more affordable federal funding when the loan limit expires.

While Bernanke acknowledges that jumbo loans will likely come "at a higher cost," he said that needs to be kept in perspective.

“Mortgage rates on conforming loans are already near historic lows, hovering around 4.5 percent on the 30-year fixed,” he said.

Source: “Bernanke: Private Sector Ready for Conforming Loan Limit Drop,” HousingWire (July 13, 2011) and “Lower Mortgage Limits Are a ‘Trade-Off’ Bernanke Says,” CNBC (July 13, 2011)

1 Million Foreclosures Delayed Until 2012
An estimated 1 million foreclosure-related notices for defaults, auctions, and home repossessions that should be filed by lenders this year will be pushed back until next year, according to the latest report by RealtyTrac.

While the delays could give home owners more time to catch up on their payments and try to avoid foreclosure, housing experts warn this means the looming shadow inventory of distressed properties likely will continue to plague the real estate market even longer.

"The best-case scenario is we don't get back to normal levels of foreclosure activity until 2015, which means the housing market recovery gets delayed by at least a year," says Rick Sharga, a senior vice president at RealtyTrac.

Foreclosure Notices Drop, Threat Still Looms
Overall, the number of homes repossessed by lenders in the first half of this year dropped 30 percent compared to the same period in 2010. But foreclosure processing delays — with lenders taking longer to take action against delinquent borrowers — is stalling the housing recovery, experts note.

About 1.2 million homes received a foreclosure-related notice in the first six months of this year — in other words, one in every 111 U.S. households, RealtyTrac reports.

Nevada continues to face the most foreclosures; one in every 21 households in that state received a foreclosure notice in the first half of the year.

The foreclosure process continues to lengthen too. From April and June, homes took 318 days on average to go from the first stage of foreclosure to ultimately where it was repossessed by the lender — that’s up from 298 days in the first three months of the year. (In New York, the foreclosure process took the longest at an average of 966 days or 2.6 years; Texas boasted the shortest at 92 days.)

Source: “Delays in Bank Processing Push Likely U.S. Foreclosures Until 2012, Stalling Recovery,” Associated Press (July 14, 2011)

Loan Modification Scams Soar
More home owners who are desperate to avoid foreclosure are finding themselves victims to loan-modification scams.

In the latest to grip headlines, attorneys in California — where these scams are particularly rampant — filed the state’s first class-action lawsuit against an alleged loan modification scam, part of RewireMyLoan.com. In the lawsuit, prosecutors charge that the company collected nearly $5,000 each from at least 90 victims, promising to do loan modifications and offering a 100 percent money-back guarantee. The victims say the company never did the loan modification or refunded their payments.

The majority of the victims in the lawsuit are Spanish-speaking, and while the advertising and discussions they had with the company were in Spanish, they say the contracts they signed were in English. The home owners say they were also told to not contact their bank directly or their contracts would be voided. (Read: How to Spot Foreclosure-Prevention Scams)

Scam Prevention Network
The Lawyers' Committee for Civil Rights, government housing agencies, and other nonprofits have created the Loan Modification Scam Prevention Network to compile complaints about such fraud. From February 2010 to June 1, the network gathered nearly 15,000 complaints involving $37 million in lost money. California accounted for the majority of the losses, with 3,105 complaints filed and $11 million in losses from these scams.

For home owners who believe they were a victim of a loan-modification scam, the Loan Modification Scam Prevention Network encourages them to visit www.preventloanscams.org to file a complaint.

Source: “Lawsuit Goes After Loan-Modification Fraud," The San Francisco Chronicle (July 1, 2011)

Foreign Buyers Target U.S. Vacation Hotspots
Foreign home buyers have their eye on U.S. vacation areas — especially in southern Florida — and are helping to give a lift to some of these battered housing markets.

More than 30 percent of Florida’s home sales in the 12 months ending in March were to foreign buyers (compared to 10 percent in 2007), according to National Association of REALTORS® housing data. In Miami alone, about 40 percent of buyers are international, says Ronald Shuffield, president of Esslinger-Wooten-Maxwell REALTORS® in Coral Gables, Fla.

“International buyers have been the fuel for the Miami recovery," Shuffield told the USA Today.

Three of the most popular areas foreigners are searching for real estate: Miami-Fort Lauderdale, Phoenix, and Los Angeles, according to Trulia’s Web site.

And where are these foreign buyers most coming from? Canadians are mostly dominating the market share, with 23 percent of the foreign buyers coming from that country, followed by 9 percent from China, according to NAR data.

Source: “Foreign Buyers Lifting U.S. Home Sales,” USA Today (July 6, 2011)

Which Banks Are Pursuing the Most Short Sales?
JPMorgan Chase and Wells Fargo accounted for 60 percent of the some 17,781 short sale and deed-in-lieu agreements loan servicers completed through May under the Home Affordable Foreclosure Alternatives program, reports Inman News in its analysis of the latest figures provided by the Treasury Department.

The two banks emerged as the front-runners in completing short sales and deed-in-lieu of foreclosure agreements when compared up against other loan servicers, all participating in the HAFA program.

On the other hand, Bank of America entered into less than half as many HAFA short sales or deed-in-lieu of foreclosure agreements than either JPMorgan Chase or Wells Fargo.

The government’s HAFA program provides incentives for completing short sales. For example, home owners participating in a HAFA short sale receive $3,000 in relocation assistance.

Source: “Chase, Wells Fargo Lead in HAFA Short Sales,” Inman News (July 5, 2011) [Log-in required.]

Study: Real Estate Is at a 'Historic Turning Point'
Nearly two-thirds of economists and real estate experts recently polled say the U.S. housing market is at a historic turning point. More than half say they expect national home prices to reach bottom this year and remain stable — with a modest 2 percent average annual growth — through 2015, according to MacroMarkets LLC’s June Home Price Expectations Survey.

MacroMarkets polled more than 100 housing experts, including Lawrence Yun, chief economist of the National Association of REALTORS®; Frank Nothaft, Freddie Mac’s chief economist; and others.

Most of the experts polled said they believe the bottom for housing prices occurred in the first quarter of 2011 or will arrive sometime before the end of the year.

While predictions varied somewhat, on average, panelists predict a 3.52 percent decrease in home prices in the fourth-quarter of 2011 compared to the same period in 2010. They predict then small increases every year through the fourth-quarter of 2015, when prices are expected to rise 3.47 percent on an annual basis.