Foreclosures at 49 month low in December
An annual report of foreclosure activity in the US found the
number of properties subject to default notices, scheduled
auctions or bank repossessions in 2011 dropped 34% from the
previous year, according to a RealtyTrac report released today.
In addition to the overall decline in foreclosures, the report
found that December activity was at the lowest level since August
2007. However, the report cautions 2012 could likely see an
upswing in activity. For the fifth straight year, Nevada
recorded the most foreclosure activity of any state in the
nation. While 1.45% of housing units nationwide had at least one
foreclosure filing in 2011, the Nevada rate was 6%. That
translates into foreclosure filings for 1 in 16 housing units in
the state. Despite having the distinction of the country's
highest foreclosure rate, the situation in Nevada has improved
significantly from years past. Foreclosure activity in 2011 was
down 31% from that of 2010. Default notice filings dropped 70% in
the fourth quarter compared to the third quarter. However, that
decrease may be largely attributed to a change in Nevada state
law that requires an additional affidavit before beginning the
foreclosure process.
Other states with an above-average percentage of homes with at
least one foreclosure filing in 2011 represent almost every
region except New England:
- Arizona - 4.14%
- California - 3.19%
- Georgia - 2.71%
- Michigan - 2.21%
- Florida - 2.06%
- Illinois - 1.95%
- Colorado - 1.78%
- Idaho - 1.77%
BOA rebounds
Bank of America (BOA) matched profit expectations and exceeded
revenue estimates for quarterly earnings, sending shares that had
been trading below $5 just a month ago spiking higher in
premarket trading. BOA posted fourth-quarter earnings excluding
items of 15 cents per share, up from 4 cents in the year-earlier
period. Net income was $2 billion, compared to a loss of $1.2
billion in the same period a year ago. Analysts had expected the
company to report earnings excluding items of 15 cents. After
the earnings announcement, the company's shares jumped 6.4% in
pre-market trading. After struggling along the way to deal with
regulatory requirements and blowback from the European debt
crisis, BOA posted a full-year profit of $1.4 billion against a
loss of $2.2 billion in 2010. The company has been busy shedding
non-care assets, moves that resulted in a 43% cut in credit
losses and $34 billion in proceeds. In particular, BOA said it
made $2 billion in the fourth quarter by selling its stake in a
Chinese bank and selling debt. That offset losses and higher
legal expenses in its mortgage business.
A million homeowners may get writedowns
About one million American homeowners would get writedowns in the
size of their mortgages under a proposed deal with banks over
shady foreclosure practices, US Housing and Urban Development
Secretary Shaun Donovan said yesterday. The deal, which could be
struck within weeks, would mark the largest cut in the mortgage
load since the start of the credit crisis. "We're very close to
a settlement that would both fix the servicing problems, but also
help over a million families around the country stay in their
homes and get help," Donovan said at a US Conference of Mayors
meeting in Washington. Talks involving federal officials, state
attorneys general and major banks to resolve allegations of
"robo-signing" and other misconduct in foreclosures have dragged
into their second year. Donovan's announcement came the same day
that two big regional US banks disclosed they had set aside funds
related to mortgage servicing matters, a sign that lenders beyond
the five largest mortgage servicers may join the expected
settlement. In exchange for between $20 billion to $25 billion
in relief to distressed homeowners, the banks — Bank of
America, Wells Fargo, JPMorgan Chase, Citigroup and Ally
Financial — will put behind them potential government lawsuits
about improper foreclosures and abuses in originating and
servicing the loans. Using Donovan's estimate, the settlement
could provide roughly a $20,000 reduction each for the one
million borrowers.
Unemployment down
The number of people seeking unemployment benefits plummeted last
week to 352,000, the fewest since April 2008. The decline added
to evidence that the job market is strengthening. Weekly
applications fell 50,000, the biggest drop in the seasonally
adjusted figure in more than six years, the Labor Department said
Thursday. The four-week average, which smooths out fluctuations,
dropped to 379,000. That's the second-lowest such figure in more
than three years. A department spokesman cautioned that
volatility at this time of year is common. Applications had
jumped two weeks ago, largely because companies laid off
thousands of temporary workers hired for the holidays. When
weekly applications fall consistently below 375,000, it usually
signals that hiring is strong enough to push down the
unemployment rate.
Hiring improved in the second half of 2011. In December,
employers added 200,000 jobs. That marked the sixth straight
month in which the economy added at least 100,000 jobs. And the
unemployment rate fell to 8.5%, a three-year low. For all of
2011, the economy added 1.6 million jobs. That was up sharply
from 940,000 in 2010. Economists say they expect roughly 1.9
million more jobs to be added this year, according to a survey by
The Associated Press. Still, the job market has a long way to
go before it fully recovers from the damage of the Great
Recession, which wiped out 8.7 million jobs. More than 13 million
people remain unemployed. Millions more have given up looking for
work and so are no longer counted as unemployed. The
manufacturing sector remains a bright spot. Factory output jumped
0.9% in December, the Federal Reserve said this week. That was
the sharpest monthly gain in a year. Manufacturing gained 225,000
jobs last year, the most since 1997. The economy likely grew at
an annual rate of about 3% in the final three months of last
year, economists estimate. That would be a sharp improvement
over the 1.8% annual growth rate in the July-September quarter.
Rising consumer spending is thought to be fueling much of the
gain in the current quarter. Even so, economists worry that
growth could slow in the first half of 2012. Europe is almost
certain to fall into recession because of its financial troubles.
And wages failed to keep pace with inflation last year. Without
more jobs and higher pay, consumers might have to cut back on
spending. That would weigh down growth next year. Consumer
spending accounts for about 70% of the economy.
Olick - do apartments face a bubble?
"A huge surge in rental demand and comparatively little apartment
supply created a boom in multi-family construction in the last
year, but with the single family housing market slowly beginning
to show signs of life, the concern among banks and investors is
that all that supply will hit the market just as rental demand
drops off. Based on preliminary estimates of Q4 '11 activity,
multi-family loan origination volume increased to $82 billion in
2011, up from $50 billion in 2010, according to Chandan
Economics. Understandably, some lenders and investors are
starting to ask questions. 'While 2012 should be another good
year for apartment REITs, there is concern amongst some investors
and managements that market expectations may be hard to beat,'
say analysts at Sandler O'Neill. 'Based on discussions with
managements, revenue growth should match sentiment but expense
growth may be the wildcard.'
Rents have been rising steadily as apartment vacancies drop and
'rental nation' pervades consumer sentiment, but 2012 will likely
not see as robust rent growth as 2011; housing affordability
continues to improve and renting is becoming ever more expensive
than owning. 'A stretched consumer is beginning to push back
harder against rental increases, and new supply and a slowly
healing single-family market will begin to equalize what has been
a lopsided, renter-dominated housing market for over 5 years,'
say analysts at Green Street Advisors. Mortgage applications
surged 23% last week, according to the Mortgage Bankers
association, although most of that was refinances. Another
positive came from the NAHB's home builder sentiment index, which
saw big gains in builder confidence, citing improved sales and
buyer traffic. So is there real cause for concern about apartment
demand? 'Only in some markets,' says Sam Chandan of Chandan
Economics. 'Austin is a case in point. The supply response has
been unusually strong there. Apart from specific cases like that,
we do not anticipate a strong reversal in the rental bias until
jobs accelerate markedly.'
Since 2004, when homeownership rates peaked, the population of
20-34-year-olds grew by 2.8 million, according to researchers at
CoStar Group, a commercial real estate information company. But
the number of households shrunk by 300,000. In other words,
younger Americans were doubling up with roommates or moving back
in with their parents. 'This suggests big pent up demand - as
much as 1.4 million new households within this prime renting
cohort,' says CoStar's Suzanne Mulvee. We also have to remember
that many Americans now have either damaged credit or not enough
of a downpayment to qualify for today's low interest rate
mortgages. That could keep them as renters for many more years,
as credit standards aren't likely to loosen any time soon.
Pent-up demand will, like everything else in real estate, vary
from market to market. In Washington, DC, for example, investors
in multi-family are still very bullish, as home prices are
strengthening and apartment supply is still limited. In other
areas, like Las Vegas, where distressed homes are selling at big
discounts, rental demand may wane more quickly for apartments, as
those unwilling to buy choose to rent single family homes.
Another headwind to the multi-family sector could be more
investors buying foreclosed single-family homes in bulk to rent.
With federal regulators and the Obama administration seriously
considering a program to sell bulk foreclosures owned by Fannie
Mae and Freddie Mac, there could suddenly be a large supply of
single family rentals competing against multi-family buildings.
Again, that would largely be in the sand states, as there are far
fewer foreclosed homes in major cities where apartments are and
will likely continue to see big gains."
An annual report of foreclosure activity in the US found the
number of properties subject to default notices, scheduled
auctions or bank repossessions in 2011 dropped 34% from the
previous year, according to a RealtyTrac report released today.
In addition to the overall decline in foreclosures, the report
found that December activity was at the lowest level since August
2007. However, the report cautions 2012 could likely see an
upswing in activity. For the fifth straight year, Nevada
recorded the most foreclosure activity of any state in the
nation. While 1.45% of housing units nationwide had at least one
foreclosure filing in 2011, the Nevada rate was 6%. That
translates into foreclosure filings for 1 in 16 housing units in
the state. Despite having the distinction of the country's
highest foreclosure rate, the situation in Nevada has improved
significantly from years past. Foreclosure activity in 2011 was
down 31% from that of 2010. Default notice filings dropped 70% in
the fourth quarter compared to the third quarter. However, that
decrease may be largely attributed to a change in Nevada state
law that requires an additional affidavit before beginning the
foreclosure process.
Other states with an above-average percentage of homes with at
least one foreclosure filing in 2011 represent almost every
region except New England:
- Arizona - 4.14%
- California - 3.19%
- Georgia - 2.71%
- Michigan - 2.21%
- Florida - 2.06%
- Illinois - 1.95%
- Colorado - 1.78%
- Idaho - 1.77%
BOA rebounds
Bank of America (BOA) matched profit expectations and exceeded
revenue estimates for quarterly earnings, sending shares that had
been trading below $5 just a month ago spiking higher in
premarket trading. BOA posted fourth-quarter earnings excluding
items of 15 cents per share, up from 4 cents in the year-earlier
period. Net income was $2 billion, compared to a loss of $1.2
billion in the same period a year ago. Analysts had expected the
company to report earnings excluding items of 15 cents. After
the earnings announcement, the company's shares jumped 6.4% in
pre-market trading. After struggling along the way to deal with
regulatory requirements and blowback from the European debt
crisis, BOA posted a full-year profit of $1.4 billion against a
loss of $2.2 billion in 2010. The company has been busy shedding
non-care assets, moves that resulted in a 43% cut in credit
losses and $34 billion in proceeds. In particular, BOA said it
made $2 billion in the fourth quarter by selling its stake in a
Chinese bank and selling debt. That offset losses and higher
legal expenses in its mortgage business.
A million homeowners may get writedowns
About one million American homeowners would get writedowns in the
size of their mortgages under a proposed deal with banks over
shady foreclosure practices, US Housing and Urban Development
Secretary Shaun Donovan said yesterday. The deal, which could be
struck within weeks, would mark the largest cut in the mortgage
load since the start of the credit crisis. "We're very close to
a settlement that would both fix the servicing problems, but also
help over a million families around the country stay in their
homes and get help," Donovan said at a US Conference of Mayors
meeting in Washington. Talks involving federal officials, state
attorneys general and major banks to resolve allegations of
"robo-signing" and other misconduct in foreclosures have dragged
into their second year. Donovan's announcement came the same day
that two big regional US banks disclosed they had set aside funds
related to mortgage servicing matters, a sign that lenders beyond
the five largest mortgage servicers may join the expected
settlement. In exchange for between $20 billion to $25 billion
in relief to distressed homeowners, the banks — Bank of
America, Wells Fargo, JPMorgan Chase, Citigroup and Ally
Financial — will put behind them potential government lawsuits
about improper foreclosures and abuses in originating and
servicing the loans. Using Donovan's estimate, the settlement
could provide roughly a $20,000 reduction each for the one
million borrowers.
Unemployment down
The number of people seeking unemployment benefits plummeted last
week to 352,000, the fewest since April 2008. The decline added
to evidence that the job market is strengthening. Weekly
applications fell 50,000, the biggest drop in the seasonally
adjusted figure in more than six years, the Labor Department said
Thursday. The four-week average, which smooths out fluctuations,
dropped to 379,000. That's the second-lowest such figure in more
than three years. A department spokesman cautioned that
volatility at this time of year is common. Applications had
jumped two weeks ago, largely because companies laid off
thousands of temporary workers hired for the holidays. When
weekly applications fall consistently below 375,000, it usually
signals that hiring is strong enough to push down the
unemployment rate.
Hiring improved in the second half of 2011. In December,
employers added 200,000 jobs. That marked the sixth straight
month in which the economy added at least 100,000 jobs. And the
unemployment rate fell to 8.5%, a three-year low. For all of
2011, the economy added 1.6 million jobs. That was up sharply
from 940,000 in 2010. Economists say they expect roughly 1.9
million more jobs to be added this year, according to a survey by
The Associated Press. Still, the job market has a long way to
go before it fully recovers from the damage of the Great
Recession, which wiped out 8.7 million jobs. More than 13 million
people remain unemployed. Millions more have given up looking for
work and so are no longer counted as unemployed. The
manufacturing sector remains a bright spot. Factory output jumped
0.9% in December, the Federal Reserve said this week. That was
the sharpest monthly gain in a year. Manufacturing gained 225,000
jobs last year, the most since 1997. The economy likely grew at
an annual rate of about 3% in the final three months of last
year, economists estimate. That would be a sharp improvement
over the 1.8% annual growth rate in the July-September quarter.
Rising consumer spending is thought to be fueling much of the
gain in the current quarter. Even so, economists worry that
growth could slow in the first half of 2012. Europe is almost
certain to fall into recession because of its financial troubles.
And wages failed to keep pace with inflation last year. Without
more jobs and higher pay, consumers might have to cut back on
spending. That would weigh down growth next year. Consumer
spending accounts for about 70% of the economy.
Olick - do apartments face a bubble?
"A huge surge in rental demand and comparatively little apartment
supply created a boom in multi-family construction in the last
year, but with the single family housing market slowly beginning
to show signs of life, the concern among banks and investors is
that all that supply will hit the market just as rental demand
drops off. Based on preliminary estimates of Q4 '11 activity,
multi-family loan origination volume increased to $82 billion in
2011, up from $50 billion in 2010, according to Chandan
Economics. Understandably, some lenders and investors are
starting to ask questions. 'While 2012 should be another good
year for apartment REITs, there is concern amongst some investors
and managements that market expectations may be hard to beat,'
say analysts at Sandler O'Neill. 'Based on discussions with
managements, revenue growth should match sentiment but expense
growth may be the wildcard.'
Rents have been rising steadily as apartment vacancies drop and
'rental nation' pervades consumer sentiment, but 2012 will likely
not see as robust rent growth as 2011; housing affordability
continues to improve and renting is becoming ever more expensive
than owning. 'A stretched consumer is beginning to push back
harder against rental increases, and new supply and a slowly
healing single-family market will begin to equalize what has been
a lopsided, renter-dominated housing market for over 5 years,'
say analysts at Green Street Advisors. Mortgage applications
surged 23% last week, according to the Mortgage Bankers
association, although most of that was refinances. Another
positive came from the NAHB's home builder sentiment index, which
saw big gains in builder confidence, citing improved sales and
buyer traffic. So is there real cause for concern about apartment
demand? 'Only in some markets,' says Sam Chandan of Chandan
Economics. 'Austin is a case in point. The supply response has
been unusually strong there. Apart from specific cases like that,
we do not anticipate a strong reversal in the rental bias until
jobs accelerate markedly.'
Since 2004, when homeownership rates peaked, the population of
20-34-year-olds grew by 2.8 million, according to researchers at
CoStar Group, a commercial real estate information company. But
the number of households shrunk by 300,000. In other words,
younger Americans were doubling up with roommates or moving back
in with their parents. 'This suggests big pent up demand - as
much as 1.4 million new households within this prime renting
cohort,' says CoStar's Suzanne Mulvee. We also have to remember
that many Americans now have either damaged credit or not enough
of a downpayment to qualify for today's low interest rate
mortgages. That could keep them as renters for many more years,
as credit standards aren't likely to loosen any time soon.
Pent-up demand will, like everything else in real estate, vary
from market to market. In Washington, DC, for example, investors
in multi-family are still very bullish, as home prices are
strengthening and apartment supply is still limited. In other
areas, like Las Vegas, where distressed homes are selling at big
discounts, rental demand may wane more quickly for apartments, as
those unwilling to buy choose to rent single family homes.
Another headwind to the multi-family sector could be more
investors buying foreclosed single-family homes in bulk to rent.
With federal regulators and the Obama administration seriously
considering a program to sell bulk foreclosures owned by Fannie
Mae and Freddie Mac, there could suddenly be a large supply of
single family rentals competing against multi-family buildings.
Again, that would largely be in the sand states, as there are far
fewer foreclosed homes in major cities where apartments are and
will likely continue to see big gains."
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