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New Home Sales Skyrocketed in April, Probably…

New home sales surged in April after a disappointing report in March.  The Census Bureau and the Department of Housing and Urban Development said today that sales were at a seasonally adjusted annual rate of 619,000, an increase of 16.6 percent from the previous month and 23.8 percent higher than in April 2015.  That said, it should be noted that this report has a notoriously high margin of error, with this month's ringing in at 15.4 percent.

Sales in March were also higher than earlier reported.  Last month's report had those sales down from February by 1.5 percent to a seasonally an annual rate of 511,000.  That number has now been revised to 531,000.

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Are Some Borrowers “Self-Sidelining”?

CoreLogic has looked at an apparent contradiction in purchase loan originations that has emerged since the housing bubble burst.  Why, CoreLogic economist Archana Pradhan asks in an article in the company's Market Trends blog, if credit standards have tightened do we also see a drop in loan denial rates?

Single-family purchase loan applications numbered 4.6 million in 2014.  While this is up from the 3.6 million that set a decade-long low in 2011, it is down 60 percent from the 11.7 million applications submitted in 2005.  Similarly, there were 7.4 million single-family purchase loans originated in 2005 and that dropped to 3.2 million by 2014. The denial rate for purchase applications, peaked at 18.7 percent in 2007 but was at 13.2 percent in 2014.  If credit standards are relatively tight today, Pradham asks, shouldn't the denial rate be higher than it was in 2005 and 2006?   Or is the industry seeing fewer applications from riskier borrowers?

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Mortgage Rates Continue Sideways for 3rd Straight Day

Mortgage rates were relatively steady again, marking the third straight business day with almost no rate movement following last week's quick spike higher.  That spike was all about financial markets quickly coming to terms with a higher probability of a Fed rate hike.  Given that there hasn't been any movement since then, we can increasingly assume that markets took care of this business by Wednesday afternoon. While it's reassuring that we haven't seen any additional move higher in rates, neither have we seen any meaningful move lower.  That leaves the average conventional 30yr fixed rate quote at 3.75%, but there are still quite a few lenders quoting 3.625%.  

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Foreclosures Hit Ironic Milestone

Apparently the foreclosure crisis is no longer particularly newsworthy.  We conclude that because, for the first time in recent memory, RealtyTrac, the Irvine California company that has tracked the phenomena from its earliest stages, did not issue a press release regarding the previous month's foreclosure activity.  Still the data was available in tabular form on request so we report it here.

In April, there were a total of 100, 932 foreclosure filings of all types in the U.S.  This was a filing for every 1,315 housing units in the country or a rate of 0.08 percent.  For comparison, in August 2010, the month before the robo-signing news broke, lenders and servicers reacted with a temporary moratorium on foreclosures there were 338,836 properties that received a filing, one in every 381 U.S. households.

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Slow Start for 2016 Cash Sales

A decrease in cash sales in February put 2016 on track to have the lowest share of such transactions in eight years. CoreLogic said that all cash purchases accounted for 35.7 percent of all home sales in February, a decline of 2.5 percentage points compared to February 2015 and down 0.1 point from January 2016. 

For the first two months of 2016, the cash sales share averaged 35.6 percent, the lowest start for any year since 2008.  Cash sales hit a high of 46.6 percent in January 2011 when distressed sales were also at historic levels.  Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25 percent. CoreLogic predicts that, if the cash sales continue to fall at the same rate as in February, the share should return to that level by mid-2018.

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Mortgage Rates Hold Eerily Steady

Mortgage rates held mostly steady today, as some lenders were just barely higher and others slightly lower than yesterday's latest levels.  With that, the damage seen on Wednesday is still very much intact, meaning that almost any scenario is now being quoted an eighth of a point higher in rate on the average conventional 30yr fixed loan compared to the beginning of the week.

In terms of the outlook, two straight days of indecision in bond markets makes for a cloudy magic 8-ball.  We certainly know that Wednesday was an important day with fairly serious negative implications for the near term rate outlook.  It forced markets to reevaluate the likelihood of a June/July Fed rate hike.  What we don't know is whether or not that reevaluation is complete.  History suggests far bigger moves are in store, but it could take weeks for those moves to start taking shape.  Between now and then, the incentive to float one's rate is limited.

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Condo Sales Stoke Existing Home Numbers

The National Association of Realtors® (NAR) said today that existing home sales sustained their recent momentum into April and rose 1.7 percent compared to March.  Completed transactions that include single-family homes, townhomes, condominiums and co-ops, sold at a seasonally adjusted annual rate of 5.45 million compared to 5.36 million in March.  The March number was revised upward from 5.330 million giving sales two solid months of gains. Sales are now running 6.0 percent ahead of April 2015.

The level of sales was at the upper range of analysts' expectation, 5.350 million to 5.460 million.  The consensus as reported by Econoday was 5.400 million.

It was condo and co-op sales that drive the monthly increase; single-family home sales increased only slightly, up 0.6 percent to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March.  Those sales are now 6.2 percent higher than the 4.53 million pace a year ago.  Condo/co-op sales surged 10.3 percent to a seasonally adjusted annual rate of 640,000 units in April from 580,000 in March, and are now 4.9 percent above April 2015 (610,000 units).

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Mortgage Rates Recover Somewhat, But Not Out of Woods

Mortgage rates bounced back today, to some extent, after rising at the fastest pace in more than 3 months yesterday.  Most of yesterday's damage remains, however, and most lenders are still quoting conventional 30yr fixed rates that are an eighth of a point (.125%) higher than those seen on Tuesday.  

This flies completely in the face of this week's Freddie Mac rate survey, which noted very little change in last week's "3-year lows."  True, rates were near 3-year lows last week and earlier this week, but that changed abruptly yesterday.  At least half of the change occurred after the Fed's 2pm release of its "Minutes" (from the late April Fed meeting).  Freddie Mac is essentially done counting survey responses by then, so all of the dramatic movement happened just late enough to miss being included in this week's survey.  

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Zombie Foreclosures Down Sharply, Overall Vacancies Rise

Zombie foreclosures, those in which the properties become vacant before the legal process is complete, are down 36 percent in the current quarter compared to the same period in 2015.  RealtyTrac's Q2 2016 U.S. Residential Property Vacancy and Zombie Foreclosure Report says there were 19,187 properties in the process of foreclosure that had been vacated by owners or tenants.  This is 4.7 percent of the foreclosure inventory, down from a rate of 30.1 percent in the second quarter of 2015.

The so-called zombies have presented a problem throughout the housing crisis.  The condition of these vacant properties tend to deteriorate quickly from lack of maintenance, bringing down property values of entire neighborhoods.  They are also targets for vandalism and can increase the incidence of other illegal activities.

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Post-TRID Closing Times Hold Steady; Purchases Pick Up

Loan closing timelines in April remained at the recent low levels established the previous month according to Ellie Mae's new Origination Insight Report although refinancing times increased. The time necessary to close residential transactions jumped to an average of 50 days in the months following the October implementation of new Truth-in Lending Disclosure (TRID) rules but began to retreat to normal levels in February.

The time to close all loans remained steady at 44 days in April with purchase loans taking 45 days, unchanged from March, and refi loans increased by three days to 44.

Purchase loans made up 59 percent of loans originated during the reporting period, up from 55 percent in March.  It was the highest share for purchase mortgages since last August.

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