Incline Village Real Estate National Mortgage Trends

December 2011

Posted by Tim Lampe, Incline Village Realtor.   Content by Jeff Pogol, Mortgage Consultant.

The National Association of Realtors (NAR) reported that U.S. existing home sales rose 1.4% from September to 4.97 million units in October. That was much stronger than the 4.8 million units expected by consensus. However, contract failures have quadrupled over last year. By contrast, September cancellations were much less common, amounting to twice as many as one year earlier.  

The inventory of unsold homes dropped to 8.0 months from 8.3 months in September, while prices for existing homes were down as well. The median home price fell to $162,500 in October. It is now down 4.7% from October 2010. Condominium/co-op sales were unchanged at an annual rate of 590,000, yet are 10.5% above the rate from one year ago. Single-family home sales, on the other hand, rose by 1.6% in October to a rate of 4.38 million. The median existing single-family home price is 4.7% below October 2010.  

Most regions saw gains, with only the Northeast reporting a 5.1% decline over September. The Northeast was up just 1.4% over last October. The other regions saw double-digit year-over-year sales gains, with the Midwest reporting the largest-19.6%-year-over-year jump.  

The NAR also reported that first-time buyers purchased 34% of existing homes in September, compared with 32% one month and one year earlier. Investors accounted for 18%, also in line with previous periods. All-cash sales made up 29% of transactions.  

But New Home Sales Were Up
October new home sales totaled 307,000 units, up from the revised 303,000 in September but a bit lower than the figure initially reported by the Census Bureau that month. Over the last 13 months, new home sales averaged about the same-303,000 units. The new home inventory represents a 6.3 months supply at current sales rates. The market is, at best, flat and still far down from both the boom times and what might be considered normal.  

Case-Shiller: Home Prices Fell in September and the Third Quarter
Data through September 2011, released November 29 by S&P Indices for its S&P/Case-Shiller Home Price Indices show that nationally home prices did not register a significant change in the third quarter of 2011, with the U.S. National Home Price Index up by only 0.1% from its second-quarter level. On an annual basis, the national index posted a decline of 3.9%, an improvement over the 5.8% annual decline posted in the second quarter. Nationally, home prices are back to their first quarter of 2003 levels. As of September 2011, the annual rate of change in 14 of the 20 metropolitan statistical areas (MSAs) and both Composites, covered by S&P/Case-Shiller Home Price Indices, improved versus August. Atlanta, Las Vegas, Los Angeles, San Francisco, Seattle and Tampa recorded lower annual declines in September compared with August. Detroit and Washington, D.C., were the only two MSAs to post positive annual rates of 3.7% and 1.0%, respectively. Detroit has now recorded three consecutive months of positive annual rates. On a monthly basis, 17 of the 20 cities and both Composites were down in September. (See chart below.)

Housing Starts Dip After September Surge, But Permits Issuance Increases
October housing starts were down 0.3% from September but up 16.5% from October last year, according to the Census Bureau. Despite the slight drop, starts were better than most analysts expected. Permits for new construction saw strong gains, up 10.9% from September and 17.7% from October 2010. Single-family home starts were up 3.9% from September but down 0.9% from October 2010. A lot of the strength is in apartment construction as well as in single-family homes. Even with some recent gains, which have taken starts and permits to the highest levels in the last 18 months, housing is still stuck at very low levels.  

Foreclosures Remain High
Foreclosure data released November 28 by the New York Federal Reserve Bank on consumer credit trends confirm that foreclosures are very much an issue. The number of new consumers facing foreclosure and the percentage they represent of all consumers both peaked in 2009 at the worst of the recession and have come down substantially since then. However, the number and percentage of new consumers facing foreclosures remains about double what it was in the first half of the 2000s.  

First Mortgage Default Rate Climbs, While Second Mortgage Rate Moves Down
On November 15, data released by S&P Indices and Experian for the S&P/Experian Consumer Credit Default Indices showed that first mortgage default rates rose to 2.08% in October from September's 1.99%. The first mortgage default rate had hovered near 1% throughout 2006 and the first half of 2007. It then began to rise steadily until reaching a post-bubble peak of nearly 6% in the middle of 2009. The default rate for second mortgages in October fell from 1.32% to 1.29%. Auto loan default rates decreased slightly, moving down from 1.29% in September to 1.22% in October. Bank card default rates declined the most, from 5.36% in September to 4.85% in October.  

Mortgage and Refinancing Activity Cools
Mortgage applications decreased 1.2% during the week ending November 18, according to the Mortgage Bankers Association. Mortgage refinancing accounted for slightly less of the activity, 75.9% of total applications compared with 77.3% one week earlier. Adjustable-rate mortgage activity decreased to 5.7%, from 6.1%. The average interest rate for conforming 30-year fixed-rate mortgages was unchanged at 4.23%. The average rate on 15-year fixed-rated home loans rose to 3.58% from 3.54%. It was the second week in a row of rising rates, after six consecutive weeks of declines.