Posted by Douglas Lenski on Mon, Jan 23, 2012 @ 10:53 AM
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A Chart on Home Sales
Posted by Douglas Lenski on Thu, Jan 05, 2012 @ 11:14 AM
This from a very interesting article in US News.
Home prices bottom out. Nationally, home prices have plummeted almost 24 percent off of their peak, and most economists expect prices to continue to decline as much as 4 or 5 percent before leveling out in late 2012.
While experts don't expect a rapid conclusion to the saga of ever-declining home prices, "the trend of eroding expectations for the housing market recovery has come to a halt," said Terry Loebs, founder of Pulsenomics, in a release.
Nationally, prices could start seeing a modest bump in 2013, but some markets are already recovering. "[T]hese national indexes mask the sizable variation in local house-price performance," Frank Nothaft, chief economist at Freddie Mac, wrote in a recent report. "Some markets have appreciated over the past year and are likely to gain further in 2012, while those markets with higher vacancy rates and relatively large distressed sales will continue to see downward price pressure over the next year."
Foreclosure filings have edged downward over the past few months, suggesting improvement in clearing the gigantic inventory of distressed properties in the United States. But according to a recent report from Realty Trac, a new wave of foreclosures could hit the market in early 2012.
Low mortgage rates. Rock-bottom low mortgage rates are likely here to stay, at least through the first half of 2012, in large part due to the Fed's commitment to keep interest rates low to spur borrowing.
All bets are off, though, if politicians come to a decision on the qualified residential mortgage measure included in the Dodd-Frank financial reform act. "One of the most substantial things that will impact the market will be the definition of the qualified residential mortgage," says Cameron Findlay, chief economist at LendingTree. "That has the potential of entirely changing the way mortgage rates are offered to consumers and it has the risk of raising rates by about 1.25 percent."
As it stands now, the qualified residential mortgage (QRM), could require prospective homebuyers to have at least a 20 percent down payment and face more stringent debt-to-income ratio standards to qualify for mortgages with the best interest rates.
The Milwaukee Housing market could be in for another bumpy ride this year. Milwaukee Mortgage rates for first time homebuyers could rise along with downpayments. This could put a strangle hold on the Milwaukee Real Estate market in 2012.
Posted by Douglas Lenski on Wed, Dec 14, 2011 @ 12:58 PM
Peering Into 2012
With the New Year fast approaching, ‘tis the season to assess the 2012 outlook for the macroeconomy and housing market. Here are five items from our crystal ball. First, economic growth will likely strengthen to about 2.5 percent in 2012.
U.S. economic growth appears to have accelerated in the waning months of 2011, with fourthquarter growth expected to come in around 2.5 to 3.0 percent, annualized, by most forecasters .Evidence to support the pick-up were stronger retail sales, low inventory levels, and a 477,000 three-month gain in private non-farm payroll employment from August through November. Given the anemic 1.2 percent annualized growth over the first three quarters of the year, the final quarter could provide some needed momentum as we head into 2012.Residential fixed investment, which has been lackluster over the past couple of years, will likely contribute modestly to 2012 growth. New construction, including additions and alterations to the existing housing stock, is the main component of residential investment, and there are signs it may (finally) be turning up, albeit gradually. Single-family housing starts will likely remain weak, but new multifamily starts have already gained and will help drive residential investment expenditures in the New Year.
Second, the U.S. unemployment rate will decline but likely remain above 8 percent. The drop in the unemployment rate from 9.0 percent to 8.6 percent in November was welcome news, although roughly one-half of the decline appears to have been discouraged workers who quit the labor force. Broader measures of labor underutilization, which include discouraged workers and part-timers who want full-time work, also moved lower in November but remain very high, at 15.6 percent. Over the twelve months ending in November, the unemployment rate dropped 1.2 percentage points--more of a drop than would have been inferred from payroll job gains that averaged only 130,000 per month. Part of the reason that relatively modest payroll job gains have, nonetheless, pushed the unemployment rate lower has to do with sluggish labor force growth. Discouraged workers are one part of this equation, and they will likely come back into the labor market if economic growth strengthens and firms hire at a more brisk pace. This scenario means stronger job growth in 2012, which appears likely, though it may not put much of a dent in the nation’s unemployment rate. The path over the year may have a couple upticks in the reported unemployment rate before modest declines bring it lower in the latter half of next year, ending 2012 below November 2011’s level but still uncomfortably above 8 percent.
Third, mortgage rates will likely remain very low, at least through mid-2012. Thirty-year fixed-rate conforming mortgages have hovered around 4.0 percent (or lower) during the fourth quarter to-date thanks in large part to the Federal Reserve’s Maturity Extension Program and its stated intent to push and keep long-term rates low. The Program (a.k.a. "Operation Twist" by the popular press) is expected to last until mid 2012. This should keep fixed-rates for 15- through 30-year product relatively low during the first half of the year, with rates edging up during the second half. Further, the Federal Reserve’s August announcement that it was likely to maintain its current federal funds target through mid-2013 assures that initialperiod interest rates for one-year and various hybrid ARMs will remain extraordinarily low throughout 2012.
Fourth, housing activity will be better in 2012, but not robust. A full-fledged recovery in the housing sector will likely elude the U.S. in 2012, but newconstruction and home sales are expected to be greater than in 2011. The rental market appears to be leading the housing recovery, as rents have risen in most markets, vacancies are down, and property values for professionally managed complexes are up in most neighborhoods. Good rental market fundamentals and a dearth of new apartment completions should translate into more starts of rental buildings with five or more units, pushing total housing starts up slightly more than 10 percent in 2012. Single-family starts may inch higher too, but no significant bounce back in single-family construction is likely in coming quarters. A strong headwind holding back new home sales is the very affordable competition from existing homes. Low mortgage rates and existing house prices could lead to a bump-up in sales by three- to five-percent in 2012 over the past year’s level. While encouraging, sales volume is still low given the affordability of housing. And ample distressed sales and sluggish homebuying demand will continue to keep prices soft in many markets: We expect U.S. house price indexes to move lower before bottoming out in 2012, with modest appreciation forestalled until 2013. Still, these national indexes mask the sizable variation in local house-price performance.
Some markets have appreciated over the past year and are likely to gain further in 2012, while those markets with higher vacancy rates and relatively large distressed sales will continue to see downward price pressure over the next year.
Fifth, expect less single-family originations but more multifamily lending in 2012. While single-family refinance volume is currently strong, many borrowers have already locked in relatively low rates, or are constrained (because of being underwater or having late payments) thus reducing refinance activity over time. Further, somewhat higher mortgage rates in the second half of 2012 (after the expiration of ‘Operation Twist’) will reduce financial incentives to refinance. Enhancements to HARP are expected to add more than $100 billion to 2012 refinance originations, but overall refinance volume will likely be less than in 2011, so much so that it will more than offset a small incremental amount of purchase-money lending, leaving overall single-family originations lower in 2012. The better fundamentals in the rental market and pent-up demand for refinance of multifamily loans should translate into higher lending volumes in that portion of the market, driven by both more refinance and more sales transactions.
Best wishes for a healthy and profitable 2012!
Frank E. Nothaft
Chief Economist
December 14, 2011
Posted by Douglas Lenski on Mon, Oct 24, 2011 @ 11:02 AM
FHFA, Fannie Mae and Freddie Mac Announce HARP Changes to Reach More Borrowers
Washington, DC –
The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the Enterprises), today announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who can benefit from refinancing their home mortgage. The program enhancements were developed at FHFA’s direction with input from lenders, mortgage insurers and other industry participants.
"We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach," said FHFA Acting Director Edward J. DeMarco. "Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises. Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets."
Fannie Mae and Freddie Mac have helped approximately 9 million families refinance into a lower cost or more sustainable mortgage product, approximately 10 percent of those via HARP.
HARP is unique in that it is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. This program will continue to be available to borrowers with loans sold to the Enterprises on or before May 31, 2009 with current loan-t0-value (LTV) ratios above 80 percent.
The new program enhancements address several other key aspects of HARP including:
Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.
An important element of these changes is the encouragement, through elimination of certain risk-based fees, for borrowers to utilize HARP to refinance into shorter-term mortgages. Borrowers who owe more on their house than the house is worth will be able to reduce the balance owed much faster if they take advantage of today’s low interest rates by shortening the term of their mortgage.
The Enterprises plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by November 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.
Posted by Douglas Lenski on Mon, Oct 10, 2011 @ 09:39 AM
This weekend Anglea Merkel of Germany and Nicolas Sarkozy of France met and said they plan on having a plan. Last week the markets rallied on the news they were meeting. Today the markets are rallying because they said a plan should be ready in November. The problem in the Eurozone has been going on for months. Merkel ans Sarkozy have made similar pledges in the past. There is no substance in their plan.
We saw the same sort of pledge in the US regarding the debt ceiling debate. Both sides said for days that they were working on a plan. We all know now that the greatest Democracy and one government with 2 parties could not agree. Now we have to get 17 countries to join together. That will be no small feat.
My wife and I make homemade soup and being from Wisconsin, cheese soup is a favorite. My wife and I love the soup for its richness and smooth creamy texture. My son however, stopped eating the soup with us. He says that it tastes good but has no substance and leaves him wanting something different. That is what is shaping up in the European and US markets. The talk is creamy and rich but in the end it is all talk.
Earnings season starts on Tuesday after the bell. Analysts have said that this will be a good earnings season because companies have not warned of bad results. That is untrue. There have been a few companies that have warned and been taken to the wood shed and beaten. A company may hope on the day that it downgrades its outlook more companies may do the same. One chip maker saying that it will miss earnings could drop a stock 20 percent. The chip sector announcing a slow down might drop the sector 10 percent. If I am a CEO, I will not put a big spotlight on my company and say I am going to miss. I will go on stage with 30 other companies and hope someone trips and falls to takes the pressure off me. I heard this morning on CNBC from David Faber that companies are hiring people to help spin earnings misses.
The stock markets are rallying on hope. Hope is not an investment strategy. Europe has had months to figure out the solution to their problems. If it was as easy as stating we have a plan they would have implemented it already. The US has a new Jobs Bill or Economy saving measure up for debate all year. The problem is they are not easy fixes. There are still political position at stake here. The parties still believe they are correct. It will take a collapse of epic proportion to get the political will to solve our problems.
Real unemployment is at 16%. Poverty is as high as it was during the Great Depression. 25% of all homeowners are underwater on their mortgages. This does not account for the homes that are already foreclosed and sit vacant. Commodity prices are rising with the expansion of the World's population. The World is in a very bad place and the politicians are blind to it all.
The last time the politicians acted in a bi partisan way was when the banks started to collapse. That is when they got calls from their friends to do something as they were losing millions in the markets. The S&P hit 666 and is now close to 1200 just 3 years later. It will take that sort of meltdown to regain the political will to get the tough choices made. That is why I am thinking that a 30%-40% fall in the markets is needed and will happen.
Chairman Ben Bernanke said that they are seeing slow growth and rough economic signals ahead. That is a road map for lower markets. It is the Chairman's job to be a cheerleader for the markets. When the head cheerleader losses the team spirit, things are dire.
This all continues to keep interest rates low.
Posted by Douglas Lenski on Mon, Oct 03, 2011 @ 10:51 AM
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ISM Numbers were better than expected.
Posted by Douglas Lenski on Wed, Sep 28, 2011 @ 10:58 AM
Volatility is high in the last 2 months. This will continue until we get a better picture of the Euro bailout plans. Investors will get back in the markets and go long under 20. You can see that does not look like that will happen any time soon.
Posted by Douglas Lenski on Wed, Aug 31, 2011 @ 10:46 AM
Bank of America is exiting the correspondent mortgage business. They had previously exiting the broker channel twice in the 5 years. Exiting the correspondent side will increase borrowing costs to homeowners.
Bank of America was the largest purchaser of loans originated by third parties in the country. The reason they purchased Countrywide in the first place was to obtain Countrywide"s correspondent business and third party origination platform. They also obtained Countrywide's foot print that had been created in most major markets for retail. BoA exiting means all of those loan origination's must go to other lenders. The problem is the lenders borrowing costs are higher. BoA offered the best pricing to their correspodents and that was passed to the consumer.
It was a very sad day when my companies lost the ability to work with BoA directly as a broker. We were able to find lenders that sold to BoA and were able to obtain similar pricing. This is another big blow to the chaotic mortgage industry. Milwaukee mortgage rates will be on average higher because of this enormous channel being lost and the lack of serious competition.
Posted by Douglas Lenski on Tue, Aug 30, 2011 @ 11:05 AM
Featured Chart for Tuesday, August 30th
Home Prices Rise in 19 Out of 20 Cities
This map displays the results of the Case-Shiller home price index for June 2011. Nineteen of the 20 cities in the index saw home price increases, with Portland remaining flat. Overall the 20 cities combined for an increase of 1.1% in June. Nationally, home prices rose 3.6% in the second quarter.
Posted by Douglas Lenski on Fri, Aug 12, 2011 @ 09:06 AM
A report was released by the University of Michigan that said the US Consumer is less confident. The equity markets are selling off as I write this article. That tells you how much you can not trust these swings in the market and why the equity markets will recovery quickly.
How do I say this delicately for the people on Wall Street. DUH!!!! The consumer has seen gridlock in Washington that resulted in an 11th hour negotiation just to beat the deadline. We saw our credit rating drop from AAA to AA+. That resulted in losses on the Dow of 700,600,500 and 400 in just over a week of trading. The consumer saw their 401k get smashed for the 2nd time in 3 years. This makes the consumer a little unsettled. The surprise is that anyone on Wall Street found this as newsworthy and started a sell off. The report before consumer confidence was retail sales and that came in better than expected.
With all the data that the US consumer has had to digest over the last 30 days they were still shopping and keeping the economy moving. Wall Street only looked at the fact that consumers were concerned that Washington and Wall Street are hurting the American consumer's bottom line.
I really can not believe that these are the brilliant minds that run Wall Street. The markets are starting to come back as I get to the end of the article. Remember that fear and greed drive the markets. The more fear they import to the public the more money they can make on the rebound.
Milwaukee Mortgage rates are unchanged.
