Demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.
Borrowing costs have tumbled more than 1-1/2 percentage points from summer peaks and are widely expected to slide further as the government steps in to stabilize the worst housing market since the Great Depression.
The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity was unchanged last week at 1,245.7, matching the highest level since July 2003 set the previous week.
The skinny:
Fast-falling mortgage rates are driving demand, particularly for refinancing.
Fixed 30-year home loan rates averaged 5.03 percent last week, marginally lower than 5.04 percent a week earlier but well below the 6.59 percent summer peak in July, according to the Mortgage Bankers Association.
Last week's rate was the lowest since June 2003, the trade group said.
These cheap mortgage rates are great but:
The government interventions "can drive down primary mortgage rates and make getting loans much more affordable, make a borrower's monthly payments lower -- if they can qualify," he said on Tuesday.
Let me also add that these cheap mortgage rates mean nothing to someone who wants to refinance, is credit worthy, but their home no longer appraises since values have dropped so dramatically. Unfortunately, thousands of people fall into both categories. Either no longer credit worthy or credit worthy with a house underwater. Regardless of what bucket most people find themselves trapped in, these times benefit the usual suspects, the ones who need the least amount of help.
All in all, the present status of many housing markets look bad, but there are many underlying aspects that are subtly working towards repairing this housing mess. Mortgage rates are down significantly, (like it or not) the government is throwing unbelievable amounts of money at the problem and some of it will stick, sales numbers and inventory levels in the West seem to be showing signs of some stabilization, values have dropped dramatically in many locales (and have been doing so since July / August of 2005 in some CA markets). Despite the healing that is trying to take place, our current economic stresses and foreclosure madness are making it nearly impossible for these markets to improve because of absurd inventory levels, continued affordability issues, and lack of available credit for most.
Merely stating the obvious, housing values need to stop dropping, people need to be able to comfortably pay their mortgages, and inventory needs to melt away. Until then, the pain will remain and home values will continue to drop as the ultimate equalizer to affordability. Unbelievable opportunities will abound for those who see opportunity where everyone else sees risk and remains paralyzed by fear.
Home prices posted another record decline in October, falling 18% compared with a year earlier, according to a closely watched report released Tuesday.
The 20-city S&P Case-Shiller index has posted losses for a staggering 27 months in a row. In October, 14 of the 20 cities set fresh price decline records.
(Click on chart for better viewing)
(Click on chart for better viewing)
There's not much that needs to be said here. The charts say it all. Most housing markets nationwide continue their free fall. The housing data varies from bad to horrendous depending upon the market. Dallas, TX and Charlotte, NC are two markets holding their own (all things being considered) year over year (housing values down less than 5%) while Phoenix, AZ and Las Vegas, NV have gotten hammered (housing values down over 30%).
Good news: Lenders are ramping up their attempts to help troubled home borrowers.
Now for the bad: Most of the mortgage fixes being deployed are destined to fail.
Hope Now, the coalition put together to fight foreclosures, boasts that it has helped 3 million families stay in their homes since the housing crisis began in July 2007.
But a recent report issued by the U.S. Comptroller of the Currency (OCC) found that 53% of borrowers who had their mortgages modified in the first half of 2008 were already at least two months delinquent again. The report covered 60% of the outstanding primary mortgages.
Your loan and what's being done:
Lenders and servicers take two approaches to working out mortgage problems: repayment plans and mortgage modifications. Repayment plans allow borrowers some time to make up missed payments. Modifications actually rewrite the terms of loans by freezing or lowering interest rates, extending the life of the loan, or reducing the amount owed.
Mortgage modifications are meant to be more effective. The problem, Van Zalingen said, is that they too often fail to reduce a borrower's monthly house payment.
The lenders often don't change the interest rates but merely freeze them at a high, unaffordable level, and then add missed payments into the balance, which increases it, according to Van Zalingen.
The better approach?
Modifications that include interest rate reductions that result in lower payments perform much better. A recent Credit Suisse study reported redefault rates of only 15% for this kind of modification.
Insanity:
Chris and Cherita Barnes got a mortgage modification from their servicer, Ocwen Financial Corp., in March 2008.
But they're already behind again. The loan workout froze the 8.75% interest rate on their adjustable rate loan, but added their missed payments, interest and late fees back into the mortgage balance, raising it to $354,000 from $329,000.
The Barnes' new monthly bill came to $3,167, up from $2,890. That was better than it would have been had their interest rate continued to reset higher but it still pushed their mortgage payments, including taxes and insurance, to about 53% of their income.
You think!
Modifications that don't involve some kind of principal reduction or somehow lower payments substantially "just don't work very well," said Mark Zandi, chief economist for Moody's Economy.com. But, he added, many lenders have recently gotten much more aggressive when it comes to loan modifications.
This, like seemingly every other other economic issue right now is insane. The incompetence is insane. The logic is insane. Whether or not you agree with loan modifications, they're being done. If they're going to be done, what in the world is everyone wasting their time doing them for if the monthly payment is not going to be made substantially more affordable for the distressed owner? Isn't it obvious that if they're struggling now, odds are, in these difficult economic times, that they're going to continue to face hardships for the foreseeable future? According to the article, the nickels and dimes being saved on the front-end are merely being balled up on the back. Perhaps they should change the name of this process from loan modifications to loan reorganizations.
Principle reductions, rate reductions, that's a loan modification that has a chance to work. Again, whether you agree with these types of "bailout" programs or not, they're going to be done and if they're going to be done it seems to me that it would make sense to do it right instead of peddling false hopes and prolonging the inevitable.
Sales of previously owned homes in the U.S. fell more than forecast in November and prices dropped by the most on record, indicating the real estate slump will extend into a fourth year and worsen the recession.
Purchases declined 8.6 percent to an annual rate of 4.49 million, from a 4.91 million rate in October that was less than previously estimated, the National Association of Realtors said today in Washington. The median price dropped 13.2 percent from a year earlier, the biggest decline since records started in 1968. Separately, the Commerce Department reported today that new-home sales fell 2.9 percent last month.
Making more of the wrong kind of history:
The median price of an existing home fell to $181,300, and the percentage drop from a year ago was “probably the largest price decline since the Great Depression,” although records don’t go back that far, said NAR Chief Economist Lawrence Yun.
Foreclosures and short sales accounted for 45 percent of last month’s home purchases, Yun said.
Resales of single-family homes fell 8 percent to an annual rate of 4.02 million. Sales of condos and co-ops declined 13 percent to a 470,000 rate.
What happened in your neck of the woods?
Purchases declined in all regions of the country, led by drops of 12 percent in the Northeast and 10.9 percent in the South. Sales fell 7.4 percent in the Midwest and 4.3 percent in the West. Prices also fell throughout the country, led by a decline of 25.5 percent in the West.
The Western region continues to fare better in recent existing home sales reports. It looks like the dramatic drop in prices in many of the Western markets (CA, AZ, NV) are pulling in a respectable number of buyers looking for and finding deals. During the earlier stages of the housing decline, the Southern region had been holding strong, now, they're feeling the strongest pain in reduced sales.
Do we really need to restate that Real Estate is local, Real Estate cycles, and money flows in and out of markets. If you can't sell your home in CA, how can you afford to move to North Carolina? Simply one basic example of cause and effect. One less home on the market in CA, one more home still on the market in North Carolina. Inventory, inventory, inventory.
Los Angeles, CA (-24.9% change in median home price predicted for 2009)
Stockton, CA (-24.7% change in median home price predicted for 2009)
Riverside, CA (-23.3% change in median home price predicted for 2009)
Miami-Miami Beach, FL (-22.8% change in median home price predicted for 2009)
Sacramento, CA (-22.2% change in median home price predicted for 2009)
Santa Ana-Anaheim, CA (-22.0% change in median home price predicted for 2009)
Fresno, CA (-21.6% change in median home price predicted for 2009)
San Diego, CA (-21.1% change in median home price predicted for 2009)
Bakersfield, CA (-20.9% change in median home price predicted for 2009)
Washington, D.C (-19.9% change in median home price predicted for 2009)
Roughly another 20-25% in median home price declines predicted for these markets in 2009. Do you agree with these numbers in consideration that some of these markets have already dropped 40-50% from their peak? Is doomsday really upon us?
Bank lending will take 1-2 years to return to normal, and asset prices need as much as 18 months to stabilise, Barclays (BARC.L) Chief Executive John Varley said in an interview released on Saturday.
This economic mess will simply take time to work through but work through we must:
"I think that we will see the process of reduced borrowing play out over at least the course of the next 12 months ... maybe 24 months," he said.
"That is a painful process, it's a process through which the world absolutely has to go," he said.
Stating the obvious:
"As soon as asset prices stabilize, then we will see the financial economy recover. And when will that occur? That will occur some time over the course of the next 18 months," he said.
It took years to get to this point. Really, no surprise that it has already taken some time and will continue to do so before a solid recovery takes place. This housing and economic mess is like a clogged drain. Slowly, over time and with major neglect, the clog gets worse until one day it becomes completely clogged and only a major effort will fix what could have been prevented with simple basic measures. If only ...
For many, this goes beyond a sad story that you read about in the newspaper or hear about on the local nightly news. Right now, this is the harsh reality of hundreds of thousands of people throughout the country. Foreclosure! Behind the scenes, in the trenches. Ugly times.
The streamlined modification program (SMP) announced Nov. 11 has now rolled out and will allow government-sponsored entities Freddie Mac (FRE: 0.69 -2.82%) and Fannie Mae (FNM: 0.69 0.00%) to modify large numbers of delinquent mortgage loans in an effort to prevent foreclosures, the GSEs - along with the Federal Housing Finance Agency - announced Thursday.
The SMP officially went into effect Monday and will replace several time-consuming steps in the traditional modification process with faster procedures and standard eligibility requirements, Freddie said in a press statement. The program will allow mortgage and escrow payments to be cut to 38 percent or less of an eligible borrower’s gross monthly income by either reducing mortgage rates, extending the mortgage term up to 40 years, or forbearing on a part of the principal amount until the loan matures or is paid off, at which time the borrower will be required to make a balloon payment.
Looks like a few people are being helped:
Fannie Mae said in a separate statement that it has been working with FHFA and 27 lenders and servicers in the HOPE NOW alliance to implement the SMP. "Along with other recently announced initiatives by Fannie Mae to reach and help financially troubled borrowers earlier, including our Early Workout program, the SMP is a critical component of our company's foreclosure prevention efforts," president and CEO Herb Allison said. "These efforts are helping more than 10,000 delinquent borrowers every month get back on track."
It continues to appear that many banks feel that loan modifications are the path to housing salvation and subdivisions without foreclosures. Rate reductions, principle reductions, and neither rolled onto the back-end. Perhaps, with these types of provisions, a significant dent could be made as these loans would become affordable again to a much larger group of distressed homeowners. Until then, current efforts are better than nothing but still a very sloooow uphill battle.
Housing permits and starts fell to record lows in November, the government said Tuesday, in the latest sign that the housing market is continuing its decline.
Housing permits fell more than 15% to an annual rate of 616,000 last month, the Commerce Department said, while starts slid nearly 19% to an annual rate of 625,000.
Ugly but ....
"Arguably, these dismal numbers are what we need to see to get housing inventories back in line with the reduced level of demand out there," said Larson.
Again, as we written in previous posts, none of these numbers bode well for Real Estate related jobs of present. However, as Larson states at the end of the article, we want the housing start numbers to be low. Less homes, less inventory, equals less problems with the housing market.
The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.
Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.
Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.
The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent.
Wow. Again, the Fed cut the Fed funds target rate from 1% to 0-.25%. I think they said it best over at Calculated Risk - "This is quite a statement ... Fed will hold rates low for an extended period." Things are bad and it looks like they will continue to be so for the foreseeable future.
American homeowners will collectively lose more than $2 trillion in home value by the end of 2008, according to a report released Monday.
Beginning, middle, and end, this housing story remains deplorably bad:
"This year marked the acceleration of the market correction, and is likely to end with the eighth consecutive quarter of declines in home values," said Stan Humphries, Zillow's vice president of data and analytics. "Homeowners in most areas we cover are struggling with foreclosures pouring into the market, large amounts of negative equity and dropping home values."
Don't put the battering ram away just yet:
The foreclosure picture is not likely to clear up in the coming months, according to Humphries (Stan Humphries, Zillow's vice president of data and analytics). He expects to see more foreclosed, vacant homes added to already bulging inventories, sending prices spiraling down and putting more mortgage borrowers deeper underwater.
For many, it was hard to ever image a time when housing would fall. Now, for many, it's hard to image that the future will bring better days. The doom and gloom continues ... for good reason don't you think?
Fannie Mae is finalizing a national policy that will allow tenants to remain in their homes even if their landlord goes into foreclosure -- a landmark decision for tenants.
The policy will be in effect Jan. 9, Fannie Mae said Sunday, and reflects growing pressure on the mortgage company from a legal-aid group that threatened to sue over recent evictions. The company said it will also ensure its current holiday moratorium on new evictions is being followed until the new policy takes effect.
In a previous post (Foreclosures Hurt Tenants Too) we highlighted and discussed the fact that some tenants don't even realize that the owner of their residence is in trouble until the Sheriff knocks on the door. In regards to that aspect of a foreclosure, Fannie Mae looks to be doing their part to help prevent this unfortunate circumstance.
Could you imagine if you were living up to your end of the bargain and you still get thrown out on your ear with no notice? Doubt you'd like it!
Here's some potentially good news for investors from the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.
James Lockhart, who runs the agency, says there's been some "re-thinking" underway on the controversial limits on the numbers of rental properties investors can own if they're seeking new financing.
Current investor loan limitations:
Both Fannie Mae and Freddie Mac have imposed a four-unit limit, reversing their previous investor maximum of ten units.
The rationale for the change, according to the agencies, was their belief that investors who own higher numbers of rental condos and houses pose a greater risk of default, foreclosure and loss for the companies.
The restriction effectively shut out many small investors from Fannie's and Freddie's standard programs -- and pushed them into much higher-cost financing from so-called "hard money" lenders.
Perhaps a change is on the way?
In a letter to Charles McMillan, president of the National Association of Realtors, Lockhart said, "While no final decisions have been made, I can share with you the fact that the issue of raising the selling guide ceiling on investors loans is under active consideration at one of the (corporations), and reflects an appreciation of the role for investors in the housing recovery."
Realty Times obtained a copy of Lockhart's letter to McMillan, which was intended to respond to issues raised at the Realtors' annual convention in Orlando in November, where Lockhart spoke to two sessions. Lockhart did not disclose which company may soften its rule, but when one changes its standards, the other typically follows suit.
Reducing inventory will ultimately lead towards a stabilization of the housing market. With many economic markets in turmoil and housing prices having tanked in countless markets, real estate is beginning to get a second look from investors.
If Freddie and Fannie loosen the four-home limit imposed on investors and those investors have the financial means, they will most likely buy more than four homes since values in many areas are becoming increasingly attractive.
Real appraisals, a few dollars invested towards a down payment, and providing full documentation ... if an investor meets the said requirements, why shouldn't they be allowed to obtain lending to buy more than four properties?
November foreclosure filings fell to 259,085, or one for every 488 households in the nation, according to the latest report from RealtyTrac, the online marketer of foreclosure properties. That was down from October, but up 28% from November of 2007.
A total of 78,179 families lost their homes during the month, down 8% from October when 84,868 homes were repossessed by lenders. A total of 1,014,618 homes have been lost to foreclosure since the housing crisis hit back in August 2007.
Loan modifications not getting the job done:
Meanwhile, evidence is mounting that current foreclosure-prevention efforts are falling well short of the mark.
A Dec. 8 report from the Office of Comptroller of the Currency stated that more than half of the borrowers who had their mortgages modified in the first half of 2008 are already delinquent again. Many of these delinquencies will turn into foreclosures in the coming months.
"A lot of those modifications are simply pushing back principal payments," said Sam Khater, senior economist for First American CoreLogic, a financial data and analytics company. "They're not reducing the level of debt. Many homeowners are in such bad shape that only much more drastic or radical modifications will help them."
Simply put, it looks like more foreclosures are coming since many loan modification efforts are failing. The end result, Christmas break for foreclosures and back to reality for what will be a not so happy New Year for many.
Mortgage rates fell again this week, following the government's efforts to assist the troubled housing market.
Government sponsored mortgage lender Freddie Mac said Thursday that fixed rates on 30-year mortgages averaged 5.47% for the week ending Dec. 11. That's down from 5.53% last week and well below 6.11%, which is where the rate stood at this time last year.
We have to go back quite some time to find equally low rates:
The 30-year rate has not been this low since March 25th, 2004 when it averaged 5.40%.
....
The 15-year fixed rate mortgage this week averaged 5.20%, which is down from 5.33% last week. A year ago at this time, a 15-year fixed rate loan averaged 5.78%.
The 15-year rate has not been this low since February 7, 2008, when it averaged 5.15%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.82% this week, up from last week when it averaged 5.77%. At this time a year ago, the 5-year ARM averaged 5.89%.
And the one-year Treasury-indexed ARM averaged 5.09% this week, up from last week when it averaged 5.02%. Last year, the 1-year ARM averaged 5.50 percent.
Wow. Let's see. You're looking to buy your first home. You can get a loan. You have money for the down payment and you're still on the sidelines? Why?
Could prices drop more? Most likely they will. Would it be a surprise in consideration of the overall economic market conditions? However, many markets have already seen huge drops, there's still lackluster demand, and rates are back to better than bargain basement levels.
Remember, if you're planning to stay in your home for the next 5-7 years, stop worrying about the market falling another 10%. It's really unimportant since you can negotiate more than 10% off of current market values due to existing conditions in most housing markets. Add phenomenal rates to the cocktail .... stop being greedy. Greed got us here. Get why the gettin' is good.
Or, perhaps you're just that good. Your crystal ball will be able to pinpoint the actual hour when housing officially bottoms. When it does, do us a favor and drop us a line.
Imagine faithfully paying your rent month after month, and then having a sheriff at your door telling you that your family has to leave - immediately.
While foreclosures have been hammering homeowners for months, they can be even more tragic for tenants in good standing who are blindsided when their landlord defaults on the mortgage.
Homeowners aren't the only ones losing their homes. This problem runs much deeper than people simply working hard and pulling themselves up from their bootstraps. Just because you're doing well, don't automatically assume that your success is the result of you working harder than everyone else. When you get sucker-punched there's not always much you can do.
Despite a meltdown in financial markets, a credit freeze and soaring unemployment, housing markets fared better than expected in October.
Pending home sales fell just 1% year over year according to a report out today from the National Association of Realtors (NAR), and were down 0.7% from September. Analysts surveyed by Briefing.com had expected pending sales to slip by 3.6% year over year, and by 3% from September.
Different regions, drastically different numbers.
NAR found that sales in the West climbed 17.4% in October, compared with a year ago. Northeast sales plunged 14.1% year-over-year; Midwest sales dropped 6.8%; and sales in the South inched down 2.9%.
Real Estate is local! Values in many western regions have fallen so far it seems like some stabilization is trying to occur when you look year over year. No surprise as we should be getting to that point in areas like California. The problem remains the underlying economic conditions which will continue to slow down and negatively impact the stabilization process.
More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said Monday.
Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference.
You think?
The high redefault rate raises concerns about the long-term effectiveness of loan modifications, which many are pushing as a key solution to the nation's financial crisis.
Falling further and further behind ...
A record 1.35 million homes are in foreclosure, while the number of borrowers who have fallen behind on their payments soared to a record 6.99%, the Mortgage Bankers Association said last week.
I guess we shouldn't be too concerned with these numbers. After all, nearly half of the loan modifications seem to be working. With all of the incompetence to this point, should we expect anything less or shall I say expect anything more?
I hope someone is planning on early Christmas bonuses for those responsible for this successful effort. No money you say, perhaps more tax dollars would be fitting to support this purpose. That's the way it works. Right?
A record 1.35 million homes were in foreclosure in the third quarter, driving the foreclosure rate up to 2.97%, the Mortgage Bankers Association said Friday.
That's a 76% increase from a year ago, according to the group's National Delinquency Survey.
At the same time, the number of homeowners falling behind on their mortgages rose to a record 6.99%, up from 5.59% a year ago, the association said.
This means that one in 10 borrowers in America are either delinquent or in foreclosure.
Many of those troubled borrowers are in California and Florida, which have among the highest delinquency rates in the nation.
It looks like the subprime is now beginning to taint prime:
The weakened economy and mounting job losses are expected to push these numbers even higher. And that will likely affect homeowners with prime, fixed-rate mortgages, which make up the vast majority of loans and have so far held up fairly well. Until now, much of the housing market's problems were concentrated in the subprime, adjustable-rate market, where homeowners with weak financial backgrounds got loans they ultimately couldn't afford.
"We have not gone into past recessions with the housing market as weak as it is now, so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past," said Jay Brinkmann, MBA's chief economist.
Who's feeling the pain?
California and Florida continue to have the country's highest rates of new foreclosures. These states have about 93,000 and 90,300 of the foreclosure starts in the quarter, respectively, according to the group. The next state, Illinois, is far behind with about 27,500 starts.
California and Florida also lead the nation in job losses, with the Golden State losing 101,300 positions over the past year and the Sunshine State shedding 156,200 jobs.
... Seven other states had rates of foreclosure starts that were above the national average for the quarter: Nevada, Arizona, Michigan, Rhode Island, Illinois, Indiana, and Ohio. But 20 states saw a decline in their foreclosure start rate, due to the moratoriums and modification efforts.
Subprime is really bad. Prime is bad and getting worse:
One in five subprime loans are now delinquent, crossing the 20% threshold for the first time, the group said. That level was up 3.72 percentage points from a year ago.
The number of prime loans past due also increased to 4.34%, up 1.22% from a year ago.
Essentially, the article concludes that this housing mess now comes down to one thing ... it's the economy stupid!
While Treasury officials are keeping mum about the latest proposal, lobbyists said Thursday it is aimed at reducing rates to 4.5% only for people buying homes. Those looking to refinance would not qualify.
How will dropping rates put a dent in our housing crisis?
Lowering rates to 4.5% -- about a percentage point below today's rate -- would spur 500,000 home sales over the next year, he said. That would put a big dent in the supply of 4.6 million homes on the market. Right now, there is a 10-month supply of homes for sale, three to four months more than in normal conditions.
A 4.5% mortgage rate would prompt many people to buy, even if they fear home prices will continue to fall and the economy to weaken, he said. Rates have not fallen below 5.37% for 45 years.
A wave of purchases should stabilize home values, which, in turn, will help the economy to turn around.
Will dropping the rates to 4.5% do the trick?
What's keeping many home buyers out of the market are stringent lending standards, not interest rates, experts said. As long as credit remains tight and banks require 20% downpayments, many buyers will remain on the sidelines.
Instead, banks should make mortgages available with a 5% or 10% downpayment, Rosen said. And while he doesn't advocate a return to the "mirror standard" (when borrowers could get money if they simply could fog a mirror), banks should allow more people to qualify for fixed-rate mortgages if they show sufficient income.
Our thoughts. Sure, some of this is going to help. In the near term, it can't hurt. In the long term, another story.
Program after program. Dollars chasing more dollars. Bailout and incentives after bailout and incentives. Sooner or later some of this will ultimately make a mark. Throw enough against the wall, something will stick.
Unfortunately, all of these measures seem to be nothing more than haphazard attempts at applying band-aids to a severed artery.
"If at first you don't succeed, Try, try again." There's a lot of trying going on and not much of anything else.
Mortgage applications more than doubled last week, a mortgage bankers' group said Wednesday, as government bailouts led to sinking interest rates that made refinancing especially more attractive.
In the weekly report, the Market Composite Index - the association's measure of mortgage loan application volume - surged 112.1% on a seasonally adjusted basis from the week earlier.
If you're looking to buy a home; you're one of the lucky few who can still get a loan; you don't have another home to sell; you're looking to stay put for 5-7 years; WHAT ARE YOU WAITING FOR? If it looks like we're screaming, we are!
There are phenomenal deals to be had in many markets and rates in nearly all markets are EXTREMELY attractive right now. Do yourself a favor and get out there and find yourself a good deal.
The nation's top banking regulator warned Tuesday that help for troubled homeowners is failing to keep pace with the foreclosure crisis.
"We're definitely behind the curve, and we fall further behind the curve every day," FDIC Chairwoman Sheila Bair told an audience at the Fortune 500 Forum in Washington, D.C.
According to Bair, the nation's financial system would be in much better condition today if earlier warnings she made about mortgage modification had been heeded.
Bair began sounding the alarm more than two years ago, warning that lenders had to shore up capital reserves to offset non-performing loans. In October 2007, she told lenders that they should start modifying more at-risk mortgages so borrowers could afford to stay in their homes.
Meanwhile the mortgage mess has ballooned, expanding beyond the housing market into the entire financial sector and the overall economy.
Foreclosures still growing in large numbers:
... Nearly 280,000 struggling homeowners received some kind of foreclosure notice during October, according to RealtyTrac, a 25% increase over October 2007. And nearly 85,000 families actually lost their homes, up 59% year-over-year.
Those increases illustrate the difficulties in getting foreclosures under control, including resistance from the investor community - the individuals and organizations that purchased many of these at-risk loans as mortgage-backed securities.
"The legal authority is there to modify loans, but there are conflicting economic interests on the part of investors [in mortgage-backed securities]," Bair said at the Fortune 500 Forum.
These mortgages have been broken up into classes or tranches, as they are called in the industry. The senior tranches have first claim on assets should the loan fail. Other tranches have a secondary claim on assets.
In a modification that reduces the value of an investment, "The senior claim may be okay but the lower tranches could get wiped out," said Bair.
In concluding:
She (Bair) told the Fortune 500 Forum that it's not too late to step up foreclosure prevention initiatives.
"The sooner we do it the better," she replied. "I see higher delinquencies growing through 2010."
Acting now would help many families who would otherwise lose their homes. And that would benefit everyone.
"Attacking the financial problem at its roots is the fiscally responsible and smart thing to do," she said.
We don't know about you, but we're not holding our breath. Our government has been disgustingly inept in handling these housing and economic problems and there is absolutely no reason to believe that anything is going to change now. We're at the point where it's every wo(man) for themselves. This is what we get when no-one is paying attention - the majority of the American people included!
Just think, give all this a few years and we'll be breaking out the champagne cheering the beginning of doing this all over again.
Real Estate and cycles. They can't exist without each other, without us either!
Bueller ... Bueller ... school's in session. A little housing debt and now an economic world crisis.
If you were or still are confused on all of this housing and credit mess that we find ourselves suffocating under here in the states, take the time to watch the video. A simple approach and a few dominoes laying the groundwork for much of this economic disaster, how it began, and how it caught fire.
