Foreclosure Activity Continues to Wind Down

RealtyTrac® (www.realtytrac.com), released its U.S. Foreclosure Market Report™ for April 2014 today showing foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 115,830 U.S. properties in April, a 1% decrease from the previous month and down 20% from April 2013. The report also shows one in every 1,137 U.S. housing units with a foreclosure filing during the month. Despite the decrease in overall foreclosure activity, bank repossessions in April increased 4% from the previous month, but were down 14% from a year ago. There were a total of 30,056 bank repossessions nationwide in April.

Bank repossessions increased from the previous month in 26 states and were up from a year ago in 16 states, including New York (142% increase), Oregon (91% increase), New Jersey (58% increase), Illinois (55% increase), Indiana (52% increase), Maryland (45% increase), Connecticut (44% increase), California (27% increase), and Nevada (15% increase).

Scheduled foreclosure auctions down nationally, up from year ago in 17 states

A total of 49,239 U.S. properties were scheduled for a future foreclosure auction in April, down 3% from the previous month and down 21% from a year ago — the 41st consecutive month where scheduled foreclosure auctions decreased annually.

Scheduled auctions increased from the previous month in 22 states and were up from a year ago in 17 states, including Oregon (up 229%), Utah (up 101%), Colorado (up 87%), New Jersey (up 73%), Alabama (up 25%), New York (up 25%), and Florida (up 8%).

Foreclosure starts down nationally, up from a year ago in 16 states

A total of 54,613 U.S. properties started the foreclosure process in April, down 2% from the previous month and down 22% from a year ago — the 21st consecutive month where U.S. foreclosure starts decreased annually.

Foreclosure starts, which are scheduled auctions in some states, increased from the previous month in 26 states and were up from a year ago in 16 states, including Massachusetts (up 101%), Indiana (up 60%), New Jersey (up 15%), and Wisconsin (up 13%).

Florida, Maryland, Delaware post top state foreclosure rates

Florida foreclosure activity decreased 9% from a year ago in April, but the state still posted the nation’s highest foreclosure rate for the seventh consecutive month. One in every 400 Florida housing units had a foreclosure filing during the month, nearly three times the national average.

Maryland foreclosure activity increased from a year ago for the 22nd consecutive month in April, helping the state maintain the nation’s second-highest foreclosure rate for the third consecutive month. One in every 624 Maryland housing units had a foreclosure filing during the month.

Delaware foreclosure activity increased 8% from a year ago in April, giving it the nation’s third-highest state foreclosure rate for the month: one in every 657 housing units with a foreclosure filing. Delaware foreclosure activity has increased on an annual basis in 11 of the last 14 months.

Indiana foreclosure activity in April increased 13% from a year ago — the second consecutive month with an annual increase in foreclosure activity — and the state posted the nation’s fourth highest foreclosure rate for the month: one in every 681 housing units with a foreclosure filing.

New Jersey foreclosure activity in April increased 29% from a year ago — the fifth consecutive month with an annual increase in foreclosure activity — and the state posted the nation’s fifth highest state foreclosure rate for the month: one in every 700 housing units with a foreclosure filing.

Other states with foreclosure rates ranking among the top 10 were Illinois (one in every 706 housing units with a foreclosure filing), Ohio (one in every 750 housing units), Nevada (one in every 770 housing units), Connecticut (one in every 887 housing units), and South Carolina (one in every 890 housing units).

Affordable Housing Hot Topics Event

Please save Tuesday, June 10, for Standard & Poor’s Ratings Services’ Affordable Housing Hot Topics Event in New York. Senior credit analysts from S&P Ratings’ Housing Enterprises and Structured Securities group along with our financial services, corporate and RMBS ratings teams will discuss mortgage finance and housing industry trends.

Our cross-sector topics will include:

  • U.S. macro-economic outlook, presented by Standard & Poor’s Ratings Services’ Chief Economist, Beth Ann Bovino
  • The role of municipal issuers in the affordable housing sector
  • Keynote presentation by John Burns, CEO, John Burns Real Estate Consulting
  • Internal and external views on GSE reform and its potential impact on affordability

A full agenda will be available shortly.

Click here to R.S.V.P. and reserve a seat today.

Home Prices Defy Weak Sales Numbers According to the S&P/Case-Shiller Home Price Indices

Data through February 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the annual rates of gain slowed for the 10-City and 20-City Composites.

S&P/Case-Shiller Home Price Indices ─ February 2014

Housing Puzzle: Prices Rise, Sales Slow

The Sunday New York Times surveys housing and argues that weak demand is cause of slow sales and falling housing starts even as prices continue to rise.  Tuesday’s report on the S&P/Case-Shiller Home Price Indices will give the latest data on prices. Will prices keep rising or is the demand for housing really shifting down? Stay tuned…

New Home Sales, Other Housing Numbers Weak

Recent reports on housing show weakness despite continued rising prices.  New Home sales in March were down 14.5% from February and 13.3% below March 2013.  Sales in the northeast were up while the other three regions were all down.  The number of homes for sale was up 3.2% and the month supply rose to six, boosted by the weak sales figure.  The number of houses for sale has risen slowly over the last year suggesting that inventory may not be an issue.  Housing starts were also lackluster, down 2.4% in March from February but up 11.2% from a year earlier.  Despite the year over year gain, housing starts remain under one million units at annual rates, a pace that is too weak to meet demographic growth.  Existing Home Sales aren’t making up for the new home weakness. Existing home sales were 4.59 million at annual rates in March, down 0.2% from February and down 7.5% from a year earlier.  The weakness was in both single family homes and condos and coops.  Nationally months of supply is 5.2 months, little changed in the last year.

Interest rates and unemployment are often blamed for sluggish housing numbers.  However, mortgage rates haven’t changed much since May last year. The economy and the labor market are improving.  Foreclosures continue to decline as the housing markets continues to recover from the financial crisis of five years ago.  If higher home prices – up 13% in the last 12 months – are the factor slowing home sales, we may see prices level off and turn down in coming months.

Housing Looking for Good Old Days

Rising Home Prices are boosting property taxes while mortgage lenders may be getting more generous.

Bloomberg reports that property tax collections are rising at the fastest pace since the financial crisis with gains spread across the country. Among cities cited as enjoying renewed revenue gains were San Jose CA, Nashville TN, Houston TX and Washington DC.  Rising home prices, as chronicled by the S&P/Case Shiller Home Price Indices are a key factor in the rebound.  With some communities under pressure from lower revenues in recent years, the rebound will be welcome.

A different development in housing finance may remind some people of darker memories however. The Wall Street Journal reported over the weekend that one major bank is offering mortgages with only 5% down payments.  This does not appear to be a return to the sub-prime days of years past and the loans are not being offered to all comers.  It may also reflect the decline since last May in mortgages for refinancing. Since the Fed first hinted about tapering and the end of QE last year, the refi business has dropped from 75% of all mortgages to roughly half.  Nevertheless, some may wonder if the generosity will turn out badly for the lender.

Properties Under Water at Lowest Level in Two Years

RealtyTrac® released its U.S. Home Equity & Underwater Report on April 17th. For the first quarter of 2014, the report shows that 9.1 million U.S. residential properties were seriously underwater — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 17 percent of all properties with a mortgage in the first quarter.

The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012. In the fourth quarter of 2013, 9.3 million residential properties representing 19 percent of all properties with a mortgage were seriously underwater, and in the first quarter of 2013 10.9 million residential properties representing 26 percent of all properties with a mortgage were seriously underwater. The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29 percent of all properties with a mortgage were seriously underwater.

The universe of equity-rich properties — those with at least 50 percent equity — grew to 9.9 million representing 19 percent of all properties with a mortgage in the first quarter, up from 9.1 million representing 18 percent of all properties with a mortgage in the fourth quarter of 2013.

Another 8.5 million properties were on the verge of resurfacing in the first quarter, with between 10 percent negative equity and 10 percent positive equity. This segment represented 16 percent of all properties with a mortgage in the first quarter. That was compared to 8.3 million properties representing 17 percent of all properties with a mortgage in the fourth quarter of 2013.

Fewer distressed properties had negative equity in the first quarter, with 45 percent of all properties in the foreclosure process seriously underwater — down from 48 percent in the fourth quarter of 2013 and down from 58 percent in the first quarter of 2013. Conversely, the share of foreclosures with positive equity increased to 35 percent in the first quarter, up from 31 percent in the fourth quarter and up from 24 percent in the third quarter of 2013.

Markets with most negative equity States with the highest percentage of residential properties seriously underwater in the first quarter were Nevada (34 percent), Florida (31 percent), Illinois (30 percent), Michigan (29 percent), and Ohio (27 percent).  Major metropolitan statistical areas (population 500,000 or more) with the highest percentage of residential properties seriously underwater were Las Vegas (37 percent), Lakeland, Fla., (36 percent), Palm Bay-Melbourne-Titusville, Fla., (35 percent), Cleveland (35 percent), Akron, Ohio (34 percent), and Detroit (33 percent).

Markets with most resurfacing equity Major metro areas with the highest percentage of resurfacing equity — between negative 10 percent and positive 10 percent — were Louisville, Ky., (37 percent), Columbia, S.C. (28 percent), Colorado Springs, Colo., (28 percent), Little Rock, Ark., (28 percent), and Tulsa, Okla., (27 percent).

Markets with most equity-rich properties Major metro areas with the highest percentage of equity rich properties — those with at least 50 percent equity — were San Jose, Calif., (39 percent), Honolulu (35 percent), San Francisco (35 percent), Poughkeepsie, N.Y., (34 percent), and Los Angeles (32 percent).

Markets with most positive-equity foreclosures Major metro areas with more than 50 percent of properties in foreclosure with equity included Denver (64 percent), Boston (58 percent), Minneapolis (58 percent), Houston (54 percent), and Washington, D.C. (52 percent).

Lackluster Housing Numbers

Housing data are disappointing.  Permits for new homes in March were down 2.4% from February with weakness concentrated in apartments and a slight  increase in single family homes. Housing starts were up 2.8% in March from February and single family unit starts were up 6% on the month. However, at 946,000 starts at annual rates, housing construction remains weak.  The NAHB Sentiment index was flat in April at 47.

The best thing one can say about housing is that this late (five years) into an economic expansion, housing should be passing the growth leadership to other parts of the economy.  The difficulty with that bit is that housing still hasn’t seen a real rebound in starts – figures should be comfortably north of one million units at annual rates.  Most likely signs of strength will continue to be limited to existing homes for awhile longer.

National Credit Default Rates Decreased in March 2014 According to the S&P/Experian Consumer Credit Default Indices

S&P Dow Jones Indices released the latest results for the S&P/Experian Consumer Credit Default Indices. Data is through March 2014.

S&P/Experian Consumer Credit Default Indices Press Release – March 2014 

After Several Years Of Steady Decline, U.S. Household Leverage Is Showing Signs Of Increasing Again

The great leveraging of America began in the mid-1980s with the wider use of credit cards and the introduction of home equity lines of credit. By 2000, household debt had grown to more than 90% of disposable personal income, and by the end of 2007, it had peaked at 135%. During the financial crisis and the resulting recession, however, the trend toward increased household leverage reversed itself. The recession altered households’ behavior as they borrowed less and paid down their debt, which changed their net borrower status (the difference between borrowing and saving during a period) to net lender.

Household deleveraging is one of the chief reasons that the recent economic recovery has been so anemic, with the average annualized quarterly real GDP growth since the recession ended at just 2.3%, much less than the historical average of 3.2% during the post-war period. Until recently, it continued to dampen consumer spending. That said, there are now signs that the drawn out deleveraging by households might be coming to an end. Recent indicators from the Federal Reserve’s Financial Accounts of U.S. (previously known as the Flow of Funds Account) suggest that household balance sheets are improving, and there are early signs of willingness to take on new debt.

Indebtedness

The U.S. Financial Accounts document that 2013 ended with households and nonprofit organizations (collectively referred to as households in this article) increasing their debt for a third consecutive quarter. This is the first time that has happened since the Great Recession ended. By the end of fourth-quarter 2013, households had accumulated $13.8 trillion in debt, which is about 2% above the trough of the most recent debt cycle (third-quarter 2012). This is still 5.7% below the historical peak of $14.6 trillion in the third quarter of 2008, which was the culmination of the skyrocketing household debt that began in 2000. Much of the growth in household debt came from increases in mortgage liability. Rising house prices and attractive mortgage financing encouraged more people to buy homes. Credit innovations and expansions also enabled formally non-qualifying households to obtain mortgages. All of these factors contributed to an increase in mortgage liability in the household sector of about 91% in real terms from 2000 to 2007. For all of 2013, household debt climbed 1.2%–the largest annual gain since 2007.

Debt in the U.S. household sector–even after scaling by disposable income to account for the population increase, price changes, and the substantial increase in the volume of economic activity over the period–had been rising since the post-war period (see Chart 1). In the fourth quarter of 2001, the total indebtedness ratio crossed the 100% mark. (An indebtedness ratio above 100% indicates that the household debt outstanding is larger than the annual flow of disposable personal income; a ratio of less than 100% means the opposite). This ratio continued to increase until fourth-quarter 2007, when it began to fall as the impact of the financial crisis and recession hit households. At the height of indebtedness, households owed $1.35 for each $1.00 of disposable income.

To make matters worse, the combination of the large amount of debt stemming from the home-buying spree and the fall in home prices from 2006 to 2009 led to an overhang in household debt that has–until just recently–been a terrible drag to U.S. consumption levels. Because consumption accounts for two-thirds of U.S. GDP, the decreased consumption has held back GDP growth. The ratio of households’ aggregate mortgage debt to the aggregate real estate asset values jumped during the housing bust (see Chart 2), leaving a deep scar on many households’ balance sheets. Six years later, home prices have rebounded back to more or less to their pre-crisis levels, and people with foreclosed homes no longer have mortgages on their balance sheets, all of which–together with households’ drawn out deleveraging–has helped bring down the ratio substantially.

To read the full report, click here.

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