Housing market faces long, cold winter: Altos
Low interest rates and a glut of inventory failed to
substantially stimulate a weak housing market this summer,
according to Altos Research. Based on summer statistics and shaky
economic indicators, Altos is predicting a "long, cold winter"
with nothing on the horizon to suggest improved housing market
activity through the fall and winter. Home prices in July rose in
14 of the 20 metro areas surveyed for the Altos Research
Mid-Cities Report and inventory increased in 12 of the markets.
"The housing market in the United States is in a constant state
of flux. Volatility is the norm and the rules of yesterday's
market no longer apply," Altos said. Eight of the 20 markets saw
their housing inventory levels decline, while six of 20 markets
noted a drop in median prices. The Federal Reserve Bank of Dallas
recently said it expects home prices to bottom out by early 2012,
with market volatility somewhat limited to certain hard-hit
areas, such as Arizona, California and Nevada. The Fed said
markets like Texas, where jobs have been created during the
recession, could see the tide shift by the early part of 2012.
Stocks take a dip again
As renewed concerns about global economy did the rounds again,
turmoil returned to US stock markets, plunging major indexes and
pushing gold to a new record high. Investors were working through
bad news on various fronts, including a dismal forecast from
Morgan Stanley for global economic growth, and two U.S.
government-issued reports on inflation and the job market. The
investment bank slashed its global growth outlook for 2011 and
2012, adding that the United States and Europe are "hovering
dangerously close to a recession." Morgan Stanley cut GDP
forecasts to 3.9% in 2011 and 3.8% in 2012, down from 4.2% and
4.5%, respectively. Growth will be particularly sluggish in
developed nations, with GDP averaging an increase of 1.5%
Investors received an unpleasant surprise, when the Labor
Department reported that weekly jobless claims were worse than
expected. The government reported that jobless claims rose by
9,000 to 408,000 in the week ended Aug. 13.
Diana Olick: Wells Fargo Lowers Conforming Loan Limits
The deadline for ending temporarily higher loan limits at Fannie
Mae, Freddie Mac and the FHA is October 1st, but they are
effectively ended now. A Wells Fargo spokesman confirms, "August
15th was the deadline for applications and rate locks for FHA and
conventional conforming loans with balances above the limits we
expect will be in place after September 30th." The loan limits
were raised by Congress in 2008 temporarily from $417,000 to
$729,000 in the highest priced markets in order to help bring
much-needed liquidity to the mortgage market after the sub-prime
meltdown that sent investors fleeing. Even though the rule goes
into effect on October 1st, all loans have to be funded, sold and
shipped to the GSE's by then. Refi volume has been so high lately
that it can take 45 days to do a loan, so lenders have to cut off
in time. What does that mean on the street? A check of Wells
Fargo's website shows it offering the 30-yr fixed conforming at
4.25 percent, and jumbos at 4.625 percent. Obviously the rate
changes will affect only the highest priced markets, largely on
the coasts.
This from mortgage expert Mark Hanson: "The realists note that
within certain mid-to-high end communities, which can underpin an
entire county's economy, the majority of houses and borrowers
could be impacted, again weakening the macro economic foundation.
Bottom line: The loss of high leverage GSE and FHA loans to $729k
will negatively impact mid-to-high end housing. To what extent, I
am not sure yet. However, I don't think it will be trivial. But
what I am sure of is that mid-to-high end housing is the segment
most at-risk for step-down in sales volume and prices...just look
at CA house sales over $500 in July for an example of how
volatile this market segment is." Wells Fargo is the first to
confirm the change, but other banks either will or have followed
suit. They have to, simply because of the timing.
Shadow inventory levels improve: S&P
Standard & Poor's analysts estimate it would take 47 months for
the housing market to work through the shadow inventory,
according to their second quarter research note. They revised
that down from 52 months in the first quarter, the first decline
since the middle of 2009. The amount of time it would take for
the housing market to move through properties lingering in the
foreclosure system is finally improving. S&P analyzed loan-level
private-label residential mortgage-backed securities data from
CoreLogic to calculate its estimates. It defines the shadow
inventory as a collection of properties in 90-day delinquency or
worse, foreclosure and REO. The unpaid principal balance on these
properties remains high at $405 billion, but it is a 6.4% drop
from the previous quarter and represents less than one-third of
the outstanding private-label RMBS market. "In conjunction with
stable liquidation rates, we believe these are positive signs
that the amount of time it will take to clear this 'shadow
inventory' should continue to decline over the next year,"
analysts said.
Debate on Housing finance reform stirs secondary mortgage market
Hours after The Washington Post published a story Tuesday
detailing the Obama administration's alleged plan to extend the
government's role in the mortgage market, the Treasury Department
quickly rejected the notion and stressed continued devotion to
installing private capital dominance in mortgage financing once
again. "The article made some waves, which helped bring the
denials, with the thought a new direction in policy — perhaps
after the 2012 elections — could perhaps preserve Fannie Mae
and Freddie Mac under different names and a different set of
capital requirements," Jim Vogel of FTN Financial said in a note
Wednesday. So far, Fannie and Freddie owe the Treasury $142.2
billion in still compiling rescue funds. Vogel pointed out that
even if the Obama administration issued such a proposal, it would
have a difficult time winding through a policy gridlock in
Washington, leaving the only window for such action after the
2012 election.
Low interest rates and a glut of inventory failed to
substantially stimulate a weak housing market this summer,
according to Altos Research. Based on summer statistics and shaky
economic indicators, Altos is predicting a "long, cold winter"
with nothing on the horizon to suggest improved housing market
activity through the fall and winter. Home prices in July rose in
14 of the 20 metro areas surveyed for the Altos Research
Mid-Cities Report and inventory increased in 12 of the markets.
"The housing market in the United States is in a constant state
of flux. Volatility is the norm and the rules of yesterday's
market no longer apply," Altos said. Eight of the 20 markets saw
their housing inventory levels decline, while six of 20 markets
noted a drop in median prices. The Federal Reserve Bank of Dallas
recently said it expects home prices to bottom out by early 2012,
with market volatility somewhat limited to certain hard-hit
areas, such as Arizona, California and Nevada. The Fed said
markets like Texas, where jobs have been created during the
recession, could see the tide shift by the early part of 2012.
Stocks take a dip again
As renewed concerns about global economy did the rounds again,
turmoil returned to US stock markets, plunging major indexes and
pushing gold to a new record high. Investors were working through
bad news on various fronts, including a dismal forecast from
Morgan Stanley for global economic growth, and two U.S.
government-issued reports on inflation and the job market. The
investment bank slashed its global growth outlook for 2011 and
2012, adding that the United States and Europe are "hovering
dangerously close to a recession." Morgan Stanley cut GDP
forecasts to 3.9% in 2011 and 3.8% in 2012, down from 4.2% and
4.5%, respectively. Growth will be particularly sluggish in
developed nations, with GDP averaging an increase of 1.5%
Investors received an unpleasant surprise, when the Labor
Department reported that weekly jobless claims were worse than
expected. The government reported that jobless claims rose by
9,000 to 408,000 in the week ended Aug. 13.
Diana Olick: Wells Fargo Lowers Conforming Loan Limits
The deadline for ending temporarily higher loan limits at Fannie
Mae, Freddie Mac and the FHA is October 1st, but they are
effectively ended now. A Wells Fargo spokesman confirms, "August
15th was the deadline for applications and rate locks for FHA and
conventional conforming loans with balances above the limits we
expect will be in place after September 30th." The loan limits
were raised by Congress in 2008 temporarily from $417,000 to
$729,000 in the highest priced markets in order to help bring
much-needed liquidity to the mortgage market after the sub-prime
meltdown that sent investors fleeing. Even though the rule goes
into effect on October 1st, all loans have to be funded, sold and
shipped to the GSE's by then. Refi volume has been so high lately
that it can take 45 days to do a loan, so lenders have to cut off
in time. What does that mean on the street? A check of Wells
Fargo's website shows it offering the 30-yr fixed conforming at
4.25 percent, and jumbos at 4.625 percent. Obviously the rate
changes will affect only the highest priced markets, largely on
the coasts.
This from mortgage expert Mark Hanson: "The realists note that
within certain mid-to-high end communities, which can underpin an
entire county's economy, the majority of houses and borrowers
could be impacted, again weakening the macro economic foundation.
Bottom line: The loss of high leverage GSE and FHA loans to $729k
will negatively impact mid-to-high end housing. To what extent, I
am not sure yet. However, I don't think it will be trivial. But
what I am sure of is that mid-to-high end housing is the segment
most at-risk for step-down in sales volume and prices...just look
at CA house sales over $500 in July for an example of how
volatile this market segment is." Wells Fargo is the first to
confirm the change, but other banks either will or have followed
suit. They have to, simply because of the timing.
Shadow inventory levels improve: S&P
Standard & Poor's analysts estimate it would take 47 months for
the housing market to work through the shadow inventory,
according to their second quarter research note. They revised
that down from 52 months in the first quarter, the first decline
since the middle of 2009. The amount of time it would take for
the housing market to move through properties lingering in the
foreclosure system is finally improving. S&P analyzed loan-level
private-label residential mortgage-backed securities data from
CoreLogic to calculate its estimates. It defines the shadow
inventory as a collection of properties in 90-day delinquency or
worse, foreclosure and REO. The unpaid principal balance on these
properties remains high at $405 billion, but it is a 6.4% drop
from the previous quarter and represents less than one-third of
the outstanding private-label RMBS market. "In conjunction with
stable liquidation rates, we believe these are positive signs
that the amount of time it will take to clear this 'shadow
inventory' should continue to decline over the next year,"
analysts said.
Debate on Housing finance reform stirs secondary mortgage market
Hours after The Washington Post published a story Tuesday
detailing the Obama administration's alleged plan to extend the
government's role in the mortgage market, the Treasury Department
quickly rejected the notion and stressed continued devotion to
installing private capital dominance in mortgage financing once
again. "The article made some waves, which helped bring the
denials, with the thought a new direction in policy — perhaps
after the 2012 elections — could perhaps preserve Fannie Mae
and Freddie Mac under different names and a different set of
capital requirements," Jim Vogel of FTN Financial said in a note
Wednesday. So far, Fannie and Freddie owe the Treasury $142.2
billion in still compiling rescue funds. Vogel pointed out that
even if the Obama administration issued such a proposal, it would
have a difficult time winding through a policy gridlock in
Washington, leaving the only window for such action after the
2012 election.
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