WASHINGTON (AP) – Nov. 25, 2009 – Sales of new U.S. homes rose more than expected last month to the highest level in more than a year as the housing market shows stability after its historic collapse.
The Commerce Department says sales rose 6.2 percent to a seasonally adjusted annual rate of 430,000 from an upwardly revised 405,000 in September. Economists surveyed by Thomson Reuters had expected a pace of 410,000.
Home shoppers in October were acting before lawmakers decided to extend a tax credit for first-time buyers and expand it to existing homeowners. Nevertheless, sales were up 5.1 percent from a year ago, the first yearly increase since November 2005.
The median sales price of $212,200 was off 0.5 percent from $213,200 a year earlier, but up 0.7 percent from September’s level of $210,700.
Monday, December 14, 2009
Real estate market FAQs
NEW YORK – Nov. 24, 2009 – Do you have buyers and sellers with questions about where real estate is headed? Based on industry experts’ advice, here are informed answers to some of the most frequently asked questions about today’s housing market.
When will housing hit bottom?
There isn’t any single answer to this question. It depends on where you live. Home prices are rising again in the most convenient suburbs of such cities as New York and Washington, D.C. In other places that are in less demand, prices continue to fall.
How can I figure out the value of my home?
Talking to a real estate professional and/or hiring an appraiser is the best idea. But even after getting a professional opinion, it is hard to tell what a home will sell for until you put it on the market.
Is now a good time for a renter to buy a home?
It could be. Prices in many areas are down significantly from their peak a couple of years ago. Plus, Congress has extended the tax credit for first-time homebuyers and added a $6,500 credit for many previous owners of homes who sign a contract to buy by April 30, 2010.
Should I invest in foreclosed homes?
A foreclosure can be a risky buy, even for the most experienced real estate investors. Use caution.
When will housing hit bottom?
There isn’t any single answer to this question. It depends on where you live. Home prices are rising again in the most convenient suburbs of such cities as New York and Washington, D.C. In other places that are in less demand, prices continue to fall.
How can I figure out the value of my home?
Talking to a real estate professional and/or hiring an appraiser is the best idea. But even after getting a professional opinion, it is hard to tell what a home will sell for until you put it on the market.
Is now a good time for a renter to buy a home?
It could be. Prices in many areas are down significantly from their peak a couple of years ago. Plus, Congress has extended the tax credit for first-time homebuyers and added a $6,500 credit for many previous owners of homes who sign a contract to buy by April 30, 2010.
Should I invest in foreclosed homes?
A foreclosure can be a risky buy, even for the most experienced real estate investors. Use caution.
Rates on 30-year mortgages remain below 5 percent
McLEAN, Va. – Nov. 20, 2009 – Rates on 30-year mortgages stayed below 5 percent this week but remained above the record set earlier this year, Freddie Mac said Thursday.
The average rate for a 30-year fixed mortgage fell to 4.83 percent, down from 4.91 percent last week, the mortgage company said. Last year at this time, 30-year mortgages averaged 6.04 percent.
Rates hit a record low of 4.78 percent in the spring, and remain attractive for people looking to buy a home or refinance their existing mortgage. Still, credit standards remain tough, so the best rates usually are available only to borrowers with solid credit and a 20 percent downpayment.
The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to try to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.
Low fixed rates in the third quarter led to about $1.1 trillion in refinancing activity, saving borrowers about $10 billion in monthly payments over the first 12 months of their new loan, said Frank Nothaft, Freddie Mac’s chief economist.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.
The average rate on a 15-year fixed-rate mortgage fell to 4.32 percent from 4.36 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.25 percent, down from last week’s 4.29 percent. Rates on one-year, adjustable-rate mortgages declined to 4.35 percent from 4.46 percent.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans. The fee averaged 0.6 point for 15-year, five-year and one-year loans.
The average rate for a 30-year fixed mortgage fell to 4.83 percent, down from 4.91 percent last week, the mortgage company said. Last year at this time, 30-year mortgages averaged 6.04 percent.
Rates hit a record low of 4.78 percent in the spring, and remain attractive for people looking to buy a home or refinance their existing mortgage. Still, credit standards remain tough, so the best rates usually are available only to borrowers with solid credit and a 20 percent downpayment.
The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to try to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.
Low fixed rates in the third quarter led to about $1.1 trillion in refinancing activity, saving borrowers about $10 billion in monthly payments over the first 12 months of their new loan, said Frank Nothaft, Freddie Mac’s chief economist.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.
The average rate on a 15-year fixed-rate mortgage fell to 4.32 percent from 4.36 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.25 percent, down from last week’s 4.29 percent. Rates on one-year, adjustable-rate mortgages declined to 4.35 percent from 4.46 percent.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans. The fee averaged 0.6 point for 15-year, five-year and one-year loans.
Q&A clears the air about homebuyer tax credits
McLEAN, Va. – Nov. 25, 2009 – If you’re in the market for a home, the world is your oyster. Interest rates are at record lows. Housing prices in many parts of the country are still depressed. And you may be eligible for a generous tax break, even if the home you buy isn’t your first.
On Nov. 6, President Obama signed legislation that provides a $6,500 tax credit for some current homeowners who buy another home. The law also extends the $8,000 tax credit for first-time homebuyers, scheduled to expire Nov. 30, until next spring.
A lot of people are interested in taking advantage of this tax break, but the expanded credit also has whipped up a lot of confusion. Here are some answers to frequently asked questions:
Q: How do I qualify for the $6,500 credit?
A: This credit is available for homebuyers who sign a binding contract on a new or existing home by April 30, 2010, and settle by July 1 (deadlines that also apply to the first-time homebuyer credit). You must have lived in your existing home for five consecutive years out of the last eight. The home you purchase must be your primary residence. However, the law doesn’t require you to sell your old home, says Bob Meighan, vice president at TurboTax, the tax software provider. You can use it as a second home or a rental and still claim the credit, he says.
Q: I sold a home I had lived in for more than five years and bought a new one in August. Do I qualify for a tax credit?
A: No. For existing homeowners, the $6,500 credit is limited to homes purchased after Nov. 6.
Q: Does the home I buy have to be more expensive than the one I own now?
A: No. While the real estate industry is hopeful that homeowners will use this credit to buy a nicer place, there’s no prohibition against using it to downsize, Meighan says. That makes this credit particularly useful for seniors who are interested in moving into a smaller home.
If you are planning to move up, keep in mind that you can’t claim the credit if the purchase price of the home exceeds $800,000. Unlike some other tax credits, this one doesn’t slowly phase out once you exceed the threshold, Meighan says. If you buy a home for more than $800,000 – and that refers to the purchase price, not the assessed value or the amount of your mortgage – you are ineligible for the credit, period.
The $800,000 cap also applies to first-time homebuyers, but only those who purchase a home after Nov. 6. First-time homebuyers who bought a home for more than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming they meet the other criteria, Meighan says.
Q: I’m an existing homeowner, and would like to build a new home. Can I claim the credit?
A: Yes, but make sure your builder is good at meeting deadlines. You can claim the credit as long as you have a binding contract in place by April 30 and close by July 1. In the case of a new home, the closing date is the day you move in, Meighan says. If your home isn’t habitable by June 30, you won’t be able to claim the credit, he says.
Q: I bought a home in 2008 and claimed the old $7,500 first-time homebuyers credit, which must be repaid over 15 years. Did the new law change that rule?
A: No. That credit, which was available for homes purchased between April 9, 2008, and Dec. 31, 2008, must still be repaid.
The $8,000 first-time homebuyer credit, available for homes purchased after Dec. 31, 2008, doesn’t have to be repaid as long as you remain in the home for at least three years. Existing homeowners who qualify for the $6,500 credit don’t have to repay that money, either, as long as they meet the three-year requirement.
Q: We have a rental home and would like to sell it to our son, who has never owned a home. Would he qualify for the first-time homebuyer credit?
A: No. The legislation specifically prohibits taxpayers from claiming the credit if the sale is between “related parties,” Meighan says. A home sale to a parent, grandparent, child or grandchild would fall into that category.
Q: I sold my home this year and have been renting since. If I buy a new home, do I qualify for the expanded credit?
A: Yes, as long as you meet all of the other requirements, says Mel Schwarz, partner with Grant Thornton in Washington, D.C. The eight-year period used to determine eligibility ends on the day you buy your new home, he says.
On Nov. 6, President Obama signed legislation that provides a $6,500 tax credit for some current homeowners who buy another home. The law also extends the $8,000 tax credit for first-time homebuyers, scheduled to expire Nov. 30, until next spring.
A lot of people are interested in taking advantage of this tax break, but the expanded credit also has whipped up a lot of confusion. Here are some answers to frequently asked questions:
Q: How do I qualify for the $6,500 credit?
A: This credit is available for homebuyers who sign a binding contract on a new or existing home by April 30, 2010, and settle by July 1 (deadlines that also apply to the first-time homebuyer credit). You must have lived in your existing home for five consecutive years out of the last eight. The home you purchase must be your primary residence. However, the law doesn’t require you to sell your old home, says Bob Meighan, vice president at TurboTax, the tax software provider. You can use it as a second home or a rental and still claim the credit, he says.
Q: I sold a home I had lived in for more than five years and bought a new one in August. Do I qualify for a tax credit?
A: No. For existing homeowners, the $6,500 credit is limited to homes purchased after Nov. 6.
Q: Does the home I buy have to be more expensive than the one I own now?
A: No. While the real estate industry is hopeful that homeowners will use this credit to buy a nicer place, there’s no prohibition against using it to downsize, Meighan says. That makes this credit particularly useful for seniors who are interested in moving into a smaller home.
If you are planning to move up, keep in mind that you can’t claim the credit if the purchase price of the home exceeds $800,000. Unlike some other tax credits, this one doesn’t slowly phase out once you exceed the threshold, Meighan says. If you buy a home for more than $800,000 – and that refers to the purchase price, not the assessed value or the amount of your mortgage – you are ineligible for the credit, period.
The $800,000 cap also applies to first-time homebuyers, but only those who purchase a home after Nov. 6. First-time homebuyers who bought a home for more than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming they meet the other criteria, Meighan says.
Q: I’m an existing homeowner, and would like to build a new home. Can I claim the credit?
A: Yes, but make sure your builder is good at meeting deadlines. You can claim the credit as long as you have a binding contract in place by April 30 and close by July 1. In the case of a new home, the closing date is the day you move in, Meighan says. If your home isn’t habitable by June 30, you won’t be able to claim the credit, he says.
Q: I bought a home in 2008 and claimed the old $7,500 first-time homebuyers credit, which must be repaid over 15 years. Did the new law change that rule?
A: No. That credit, which was available for homes purchased between April 9, 2008, and Dec. 31, 2008, must still be repaid.
The $8,000 first-time homebuyer credit, available for homes purchased after Dec. 31, 2008, doesn’t have to be repaid as long as you remain in the home for at least three years. Existing homeowners who qualify for the $6,500 credit don’t have to repay that money, either, as long as they meet the three-year requirement.
Q: We have a rental home and would like to sell it to our son, who has never owned a home. Would he qualify for the first-time homebuyer credit?
A: No. The legislation specifically prohibits taxpayers from claiming the credit if the sale is between “related parties,” Meighan says. A home sale to a parent, grandparent, child or grandchild would fall into that category.
Q: I sold my home this year and have been renting since. If I buy a new home, do I qualify for the expanded credit?
A: Yes, as long as you meet all of the other requirements, says Mel Schwarz, partner with Grant Thornton in Washington, D.C. The eight-year period used to determine eligibility ends on the day you buy your new home, he says.
Tax credit gives home sales best boost in decade
WASHINGTON (AP) – Nov. 24, 2009 – First-time buyers taking advantage of a special tax credit gave sales of existing homes in October their biggest surge in a decade, raising hopes for a turnaround in the housing market and pleasing Wall Street.
While rising foreclosures and disappearing jobs still threaten the comeback, there are now bidding wars for houses in some cities, and home sales are nearly 36 percent above their low point in January.
The National Association of Realtors said resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from 5.5 million in September. It was the biggest monthly increase in a decade and far better than what economists expected, according to Thomson Reuters.
Analysts said the gains mainly reflected the tax credit of up to $8,000 for new homeowners, which was due to expire this month before Congress extended it until spring — and expanded it to more buyers.
The sales figures released Monday provided the juice for a rally on Wall Street. The Dow Jones industrial average, also lifted by a weak dollar, rose more than 130 points.
The extension of the homebuyer tax credit should help sustain the housing market next year, economists said. Yet the overall economy will probably benefit only slightly from higher home sales.
There are still too many factors weighing down the recovery. Foreclosures are rising. Job creation is slow. People remain reluctant to spend. And construction of new homes — as opposed to sales of existing ones — plunged in October.
The biggest contribution the housing industry makes to economic growth is from home building. Commissions and fees generated from home sales also help, but far less than construction.
“I wouldn’t want to bet the house on housing, really, in terms of the strength of the U.S. economy going forward,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.”
That’s partly because shoppers seem in no mood to spend. In fact, 93 percent say they’ll spend less or about the same as last year, according to an Associated Press-GfK poll. Half of all those polled say they’re suffering at least some debt-related stress.
Next year is likely to bring only slight improvement, given high unemployment and tight credit, according to the National Association for Business Economics. Consumer spending will rise a lackluster 2 percent next year, restraining the recovery, NABE forecasters said.
For now, the housing market is feeding on the homebuyer tax credit, along with falling home prices and low mortgage rates. Average rates on 30-year mortgages have hovered around 5 percent this fall.
At the current sales pace, there’s a modest seven-month supply of previously occupied homes on the market. Sales are still running 16 percent below their peak in 2005, but real estate agents say the pace has definitely picked up.
“People who are looking, they are serious,” said Harrison Tulloss, an agent with ZipRealty Inc. in the Raleigh-Durham area of North Carolina. “They’re not riding around with me if they need to go shopping or buy a turkey.”
Joey Wilson and her husband made unsuccessful offers on 20 Las Vegas homes starting in midsummer before they closed on a four-bedroom, $136,000 home this month.
“It’s insane,” said Wilson, who relocated from Kentucky. “I’ve never seen a market like this before.”
Reduced home prices and federal programs to lower mortgage rates have brought more buyers into the market. The median sales price was $173,100 in October, down 7 percent from a year earlier and 25 percent below the peak.
Many experts predict prices will hit a new low next spring, perhaps falling 5 to 10 percent further as more foreclosures spill into the market. The government has tried to counter that trend by offering the tax credit and keeping mortgage rates low.
Without the deadline looming for the tax credit, home sales are likely to fall over the winter as buyers hibernate for a few months. Analysts say the new deadline — buyers have to sign a purchase agreement by April 30 — means sales will surge next spring, before dropping back again later in 2010.
What happens after that is anyone’s guess.
“When we do kick those crutches out from under the housing market, will it be able to stand on its own?” said Mark Fleming, chief economist with First American CoreLogic. “It’s really hard to tell.”
The government has also helped the housing market by acting to lower mortgage rates. The Federal Reserve, for example, has pumped $1.25 trillion into mortgage-backed securities to try to lower mortgage rates and loosen credit. That program is scheduled to end by March.
If rates go up without the government help, homes would be less affordable, which could dampen demand.
A disquieting report last week from the Mortgage Bankers Association said more fixed-rate home loans made to people with good credit were sinking into foreclosure as layoffs go on. A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September.
In areas where foreclosures have hit hard, housing remains depressed, despite low prices, low mortgage rates and the tax credit. Yet for homebuyers with cash and access to credit, falling prices and low mortgage rates have proved irresistible.
The Realtors’ report on October home sales reflects offers made before buyers knew the credit would be extended.
In Raleigh, N.C., first-time buyer Louise Brunson snapped up a three-bedroom town house for $235,000. She and her husband had planned to buy a year and a half ago but decided to wait until prices fell further. The tax credit was a big plus, too.
“We suspected that it might be extended,” said Brunson, a paralegal. “But we did want to go ahead and get it done to be on the safe side.”
While rising foreclosures and disappearing jobs still threaten the comeback, there are now bidding wars for houses in some cities, and home sales are nearly 36 percent above their low point in January.
The National Association of Realtors said resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from 5.5 million in September. It was the biggest monthly increase in a decade and far better than what economists expected, according to Thomson Reuters.
Analysts said the gains mainly reflected the tax credit of up to $8,000 for new homeowners, which was due to expire this month before Congress extended it until spring — and expanded it to more buyers.
The sales figures released Monday provided the juice for a rally on Wall Street. The Dow Jones industrial average, also lifted by a weak dollar, rose more than 130 points.
The extension of the homebuyer tax credit should help sustain the housing market next year, economists said. Yet the overall economy will probably benefit only slightly from higher home sales.
There are still too many factors weighing down the recovery. Foreclosures are rising. Job creation is slow. People remain reluctant to spend. And construction of new homes — as opposed to sales of existing ones — plunged in October.
The biggest contribution the housing industry makes to economic growth is from home building. Commissions and fees generated from home sales also help, but far less than construction.
“I wouldn’t want to bet the house on housing, really, in terms of the strength of the U.S. economy going forward,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.”
That’s partly because shoppers seem in no mood to spend. In fact, 93 percent say they’ll spend less or about the same as last year, according to an Associated Press-GfK poll. Half of all those polled say they’re suffering at least some debt-related stress.
Next year is likely to bring only slight improvement, given high unemployment and tight credit, according to the National Association for Business Economics. Consumer spending will rise a lackluster 2 percent next year, restraining the recovery, NABE forecasters said.
For now, the housing market is feeding on the homebuyer tax credit, along with falling home prices and low mortgage rates. Average rates on 30-year mortgages have hovered around 5 percent this fall.
At the current sales pace, there’s a modest seven-month supply of previously occupied homes on the market. Sales are still running 16 percent below their peak in 2005, but real estate agents say the pace has definitely picked up.
“People who are looking, they are serious,” said Harrison Tulloss, an agent with ZipRealty Inc. in the Raleigh-Durham area of North Carolina. “They’re not riding around with me if they need to go shopping or buy a turkey.”
Joey Wilson and her husband made unsuccessful offers on 20 Las Vegas homes starting in midsummer before they closed on a four-bedroom, $136,000 home this month.
“It’s insane,” said Wilson, who relocated from Kentucky. “I’ve never seen a market like this before.”
Reduced home prices and federal programs to lower mortgage rates have brought more buyers into the market. The median sales price was $173,100 in October, down 7 percent from a year earlier and 25 percent below the peak.
Many experts predict prices will hit a new low next spring, perhaps falling 5 to 10 percent further as more foreclosures spill into the market. The government has tried to counter that trend by offering the tax credit and keeping mortgage rates low.
Without the deadline looming for the tax credit, home sales are likely to fall over the winter as buyers hibernate for a few months. Analysts say the new deadline — buyers have to sign a purchase agreement by April 30 — means sales will surge next spring, before dropping back again later in 2010.
What happens after that is anyone’s guess.
“When we do kick those crutches out from under the housing market, will it be able to stand on its own?” said Mark Fleming, chief economist with First American CoreLogic. “It’s really hard to tell.”
The government has also helped the housing market by acting to lower mortgage rates. The Federal Reserve, for example, has pumped $1.25 trillion into mortgage-backed securities to try to lower mortgage rates and loosen credit. That program is scheduled to end by March.
If rates go up without the government help, homes would be less affordable, which could dampen demand.
A disquieting report last week from the Mortgage Bankers Association said more fixed-rate home loans made to people with good credit were sinking into foreclosure as layoffs go on. A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September.
In areas where foreclosures have hit hard, housing remains depressed, despite low prices, low mortgage rates and the tax credit. Yet for homebuyers with cash and access to credit, falling prices and low mortgage rates have proved irresistible.
The Realtors’ report on October home sales reflects offers made before buyers knew the credit would be extended.
In Raleigh, N.C., first-time buyer Louise Brunson snapped up a three-bedroom town house for $235,000. She and her husband had planned to buy a year and a half ago but decided to wait until prices fell further. The tax credit was a big plus, too.
“We suspected that it might be extended,” said Brunson, a paralegal. “But we did want to go ahead and get it done to be on the safe side.”
Foreclosures hitting more people with good credit
WASHINGTON – Nov. 20, 2009 – The foreclosure crisis likely will persist well into next year as high unemployment pushes more people out of homes, pulls down housing prices and raises concerns about the broader economic recovery.
The latest evidence was a report Thursday that a rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure. That’s a shift from last year, when riskier subprime loans drove the housing crisis.
The report from the Mortgage Bankers Association also found that 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.
The data suggest the housing market and the broader recovery will remain under pressure from the surge in home-loan defaults, especially as unemployment keeps rising. Lost jobs are the main reason homeowners are falling behind on their mortgages.
After three years of plunging prices, the housing market started to rebound this summer. That lifted hopes for the overall economy. But analysts say there are too many foreclosed homes that have yet to be dumped on the market and expect further price declines.
Among states, the worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.
One in four mortgages in Florida were either past due or in foreclosure, the most in the U.S. Nevada was close behind at 23 percent.
“There’s no indication in this data that foreclosures are going to abate anytime soon,” said Mark Zandi, chief economist at Moody’s Economy.com, who projects that nationwide home prices will fall up to 10 percent before bottoming next fall.
Driven by rising unemployment, prime fixed-rate loans to borrowers with good credit accounted for nearly 33 percent of new foreclosures last quarter. That compares with 21 percent a year ago.
Many laid-off homeowners might be able to survive on their savings for a while, but “the longer the economic situation stays in place, the less likely they are to hold on,” said Jay Brinkmann, chief economist at the Mortgage Bankers Association.
In markets where foreclosures already are high and still rising, prices likely will remain soft. That will cause developers to keep their bulldozers idle and prevent the industry from making a big contribution to the economy’s recovery.
“Builders only start homes when they can make money,” said John Burns, an Irvine, Calif.-based real estate consultant. “In a lot of areas, until prices go back up, construction doesn’t make any sense.”
The crisis has struck people like Betty Wilson of San Diego. She was laid off a year ago from her job at an insurance company.
Since then, Wilson has managed to pay her $1,090 mortgage bill from collecting unemployment benefits, renting out a room and dipping into savings. But money is running low. She fears she won’t make her payment for December.
Wilson, 56, said she has tried to get her mortgage company, GMAC Mortgage, to lower her 6.25 percent interest rate or give her a temporary break from payments. Many mortgage companies will let a borrower skip up to six months of payments, though they require that the money be paid back eventually.
After The Associated Press inquired about her case, a GMAC spokeswoman said Thursday that the company would offer Wilson reduced payments for four months, “while we continue to review her financials for a permanent solution.”
After a typical recession, foreclosures peak about six months after the unemployment rate does. But the process could take longer this time, in part because loan-modification programs and new state laws have prolonged the process. Unemployment, now at 10.2 percent, isn’t expected to peak until next spring or summer.
Another unknown is the effectiveness of the Obama administration plan to attack the foreclosure crisis. As of last month, about 20 percent of eligible borrowers, or more than 650,000 people, had signed up. But most of those enrolled have been chosen for trials lasting up to five months.
About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if some of them manage to stay in their homes, the market is likely to absorb a wave of new foreclosures. Those properties are concentrated in states like Florida and other already beleaguered areas.
Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures, from 35 percent a year earlier. Loans backed by the Federal Housing Administration also show rising signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure.
The Mortgage Bankers Association’s quarterly survey of 44.6 million loans is considered the most authoritative report on mortgage delinquencies. A separate report, issued monthly by foreclosure listing service RealtyTrac Inc., is based on courthouse filings.
The latest evidence was a report Thursday that a rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure. That’s a shift from last year, when riskier subprime loans drove the housing crisis.
The report from the Mortgage Bankers Association also found that 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.
The data suggest the housing market and the broader recovery will remain under pressure from the surge in home-loan defaults, especially as unemployment keeps rising. Lost jobs are the main reason homeowners are falling behind on their mortgages.
After three years of plunging prices, the housing market started to rebound this summer. That lifted hopes for the overall economy. But analysts say there are too many foreclosed homes that have yet to be dumped on the market and expect further price declines.
Among states, the worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.
One in four mortgages in Florida were either past due or in foreclosure, the most in the U.S. Nevada was close behind at 23 percent.
“There’s no indication in this data that foreclosures are going to abate anytime soon,” said Mark Zandi, chief economist at Moody’s Economy.com, who projects that nationwide home prices will fall up to 10 percent before bottoming next fall.
Driven by rising unemployment, prime fixed-rate loans to borrowers with good credit accounted for nearly 33 percent of new foreclosures last quarter. That compares with 21 percent a year ago.
Many laid-off homeowners might be able to survive on their savings for a while, but “the longer the economic situation stays in place, the less likely they are to hold on,” said Jay Brinkmann, chief economist at the Mortgage Bankers Association.
In markets where foreclosures already are high and still rising, prices likely will remain soft. That will cause developers to keep their bulldozers idle and prevent the industry from making a big contribution to the economy’s recovery.
“Builders only start homes when they can make money,” said John Burns, an Irvine, Calif.-based real estate consultant. “In a lot of areas, until prices go back up, construction doesn’t make any sense.”
The crisis has struck people like Betty Wilson of San Diego. She was laid off a year ago from her job at an insurance company.
Since then, Wilson has managed to pay her $1,090 mortgage bill from collecting unemployment benefits, renting out a room and dipping into savings. But money is running low. She fears she won’t make her payment for December.
Wilson, 56, said she has tried to get her mortgage company, GMAC Mortgage, to lower her 6.25 percent interest rate or give her a temporary break from payments. Many mortgage companies will let a borrower skip up to six months of payments, though they require that the money be paid back eventually.
After The Associated Press inquired about her case, a GMAC spokeswoman said Thursday that the company would offer Wilson reduced payments for four months, “while we continue to review her financials for a permanent solution.”
After a typical recession, foreclosures peak about six months after the unemployment rate does. But the process could take longer this time, in part because loan-modification programs and new state laws have prolonged the process. Unemployment, now at 10.2 percent, isn’t expected to peak until next spring or summer.
Another unknown is the effectiveness of the Obama administration plan to attack the foreclosure crisis. As of last month, about 20 percent of eligible borrowers, or more than 650,000 people, had signed up. But most of those enrolled have been chosen for trials lasting up to five months.
About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if some of them manage to stay in their homes, the market is likely to absorb a wave of new foreclosures. Those properties are concentrated in states like Florida and other already beleaguered areas.
Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures, from 35 percent a year earlier. Loans backed by the Federal Housing Administration also show rising signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure.
The Mortgage Bankers Association’s quarterly survey of 44.6 million loans is considered the most authoritative report on mortgage delinquencies. A separate report, issued monthly by foreclosure listing service RealtyTrac Inc., is based on courthouse filings.
Next wave of foreclosures looms
WASHINGTON – Nov. 19, 2009 – A second wave of foreclosures is poised to hit the market, potentially undermining housing recovery efforts as more homes add to the glut of inventory and drive down prices.
These homes largely represent loans that are delinquent but have not yet resulted in foreclosure sales.
About 7 million properties are destined to go into foreclosure, according to a September study by Amherst Securities Group, compared with 1.27 million properties in early 2005.
“There’s a huge supply out there,” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “The foreclosure process can take a long time. When it comes to (the housing recovery), we’re not home free.”
There is often a long lag time between a borrower going delinquent and the bank taking the home. Here’s why:
• Moratoriums. New state laws imposing short-term moratoriums have slowed the timeline from delinquency to foreclosure.
• Overwhelmed lenders. Banks dealing with a surge in refinancing, mortgage modifications and defaults are overwhelmed with demand, so it can take longer to initiate a foreclosure sale.
• Modifications. Many loans now are first examined to see if they might qualify for a modification. This drags out the timeline and means it is taking longer for homes to go into foreclosure.
• Asset write-downs. Banks may in part be waiting to liquidate homes through foreclosure because they don’t want to write down the value of the asset. Lenders can keep homes on the books at a higher value until they are sold at foreclosure.
“There is a lot of foreclosed property in the pipeline that will hit the market and depress prices,” says Mark Zandi at Moody’s Economy.com. Foreclosed homes often sell at prices below those on the market and can therefore drag down overall home values.
The shadow market of foreclosed homes eclipses the number of homes lost this year. Zandi anticipates there will be about 2.4 million homes lost next year through foreclosure, short sales and deeds in lieu of foreclosure. That compares with 2 million homes lost in 2009.
Jumana Bauwens, a spokeswoman at Bank of America, says the bank is projecting an increase in foreclosures in part because customers will not be qualifying for existing loan-modification programs.
These homes largely represent loans that are delinquent but have not yet resulted in foreclosure sales.
About 7 million properties are destined to go into foreclosure, according to a September study by Amherst Securities Group, compared with 1.27 million properties in early 2005.
“There’s a huge supply out there,” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “The foreclosure process can take a long time. When it comes to (the housing recovery), we’re not home free.”
There is often a long lag time between a borrower going delinquent and the bank taking the home. Here’s why:
• Moratoriums. New state laws imposing short-term moratoriums have slowed the timeline from delinquency to foreclosure.
• Overwhelmed lenders. Banks dealing with a surge in refinancing, mortgage modifications and defaults are overwhelmed with demand, so it can take longer to initiate a foreclosure sale.
• Modifications. Many loans now are first examined to see if they might qualify for a modification. This drags out the timeline and means it is taking longer for homes to go into foreclosure.
• Asset write-downs. Banks may in part be waiting to liquidate homes through foreclosure because they don’t want to write down the value of the asset. Lenders can keep homes on the books at a higher value until they are sold at foreclosure.
“There is a lot of foreclosed property in the pipeline that will hit the market and depress prices,” says Mark Zandi at Moody’s Economy.com. Foreclosed homes often sell at prices below those on the market and can therefore drag down overall home values.
The shadow market of foreclosed homes eclipses the number of homes lost this year. Zandi anticipates there will be about 2.4 million homes lost next year through foreclosure, short sales and deeds in lieu of foreclosure. That compares with 2 million homes lost in 2009.
Jumana Bauwens, a spokeswoman at Bank of America, says the bank is projecting an increase in foreclosures in part because customers will not be qualifying for existing loan-modification programs.
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