Real estate housing and economic news round up for 4-3-2012!
Not going to lie and say I have never pointed out the NAR Home Affordability Index. Yes it does show a very basic way for buyers to look at current market conditions and compare to the past. Yet it does not mean that because the Affordability Index reaches a certain level that you should rush out and buy a home now:
Regardless of the fact that homes are off 35% from their peaks, and mortgage interest rates at record lows, buyers have an insurmountable hurdle. For most potential home buyers, the NAR Home Affordability Index is a meaningless data point. Lacking any down payment and having restricted access to available mortgage credit, homes may be theoretically affordable — just not to them
Which should help to explain why anyone thinking about buying a home get pre-approved before they start looking at homes. Just because mortgage rates are super low and homes are cheaper than they were just a few years ago does NOT mean everyone can get a mortgage. Or more importantly, that everyone should buy a home. Please read Home Affordability Reality Check
And somewhat related: Is Buying A House A Good Investment Now?
Feeling More Confident?
It is always good news for the economy and the real estate market when consumer confidence goes up. Not too many people are willing to buy a home if they are not confident. Lets all rejoice that Economic Confidence at Highest Level Since January 2008
February 2012 Foreclosure Starts & Sales Down
LPS just released their Mortgage Monitor Report for February 2012 and they are reporting that both foreclosure starts and sales were down. How much?
- Foreclosure starts were down 15% from January 2012
- Sales of foreclosed homes in February 2012 were down 19% from January 2012
- The number of delinquent mortgages is down 8.8% from the February 2011 level
It is good that there were fewer foreclosures starts because that means there will be fewer foreclosed homes hitting the market and dragging home prices down. But fewer sales is not a good sign because we must some how get rid of the excess inventory…
Scary Yet Deceptive Headline
Consider this headline that sounds like it was written by one of the spammers that send me several hundred emails a day:
Home Prices Seen Dropping 10% in U.S. on Foreclosures: Mortgages
Sounds scary and sadly, many will read the headline and maybe scan the article quickly which means they come away thinking that this means ALL home prices are going to fall 10% in 2012. But if you take the time to read and decipher the article, you will see they are saying the price of foreclosed homes will drop 10% because of the crummy condition they are in.
Another jewel in this article is the 25% increase in the sales numbers for foreclosed homes according to Moody’s Analytics. Which is good news after reading the report from LPS above…
However they are also saying there are 1.25 million foreclosures getting ready to hit the market. It will take more than a 25% increase in sales to eat up that much excess inventory…
Ask and You Shall Receive
There is no doubt that we need some way to get all the foreclosed homes sold. So maybe it is good news that Investors Are Looking to Buy Homes by the Thousands
The Center for American Progress is proposing principal reductions as a solution to the many underwater home owners. Check out their solution:
To maximize returns to Fannie and Freddie, we propose a pilot program that reduces principal—often by as little as 5 percent or 10 percent—without creating skewed incentives for borrowers. Through so-called “shared appreciation” modifications, Fannie or Freddie agrees to write down a portion of the principal on deeply underwater loans in exchange for a portion of the future appreciation on the home. The borrower has a reason to keep paying, while the lender benefits when home prices eventually stabilize and rebound.
I am not a big fan of principal reductions. But at least they are thinking of possible solutions to the many under water homes. What do you think?
More Real Estate News & Links
It appears more banks to be let off the hook for foreclosure fraud: Foreclosure reforms to widen
Not like it used to be: U.S. Standard of Living Has Fallen More Than 50%
Just letting you know: Rents Rising But consider the source…
Because the average American has not given enough money to the big banks: Another Gift to Big Banks Hidden in Obama’s Principal Reduction Strategy
Dodged a bullet: No Push for QE3
Did NOT Dodge a bullet: Fed targets Morgan Stanley over home loans