by Calculated Risk on 1/20/2010 11:19:00 AM

Via the WSJ, from Moody's:

After 13 consecutive months of declining property values, the Moody’s/REAL Commercial Property Price Index (CPPI) measured a 1.0% increase in prices in November. Prices began falling over two years ago and significant declines were seen throughout 2009, with several months experiencing 5%+ value drops. The 1.0% growth in prices seen in November is a small bright spot for the commercial real estate sector, which has seen values fall over 43% from the peak.

We expect commercial real estate prices to decline further in the months ahead. Prices for properties with short term lease structures, such as multifamily, could show signs of a sustainable recovery later this year, while other property types will likely need longer to turn the corner.

Here is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.

Click on graph for larger image in new window.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

CRE prices peaked in late 2007 and have fallen 43% from the peak and are now back to September 2002 levels.

Notices that CRE trails residential (this is usually true for activity, but also for prices here), and that CRE prices fall quicker than residential (CRE prices tend to be less sticky than residential).

by Calculated Risk on 1/20/2010 10:12:00 AM

The MBA reports: Refinance Applications Increase as Mortgage Rates Fall in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 9.1 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 10.7 percent from the previous week and the seasonally adjusted Purchase Index increased 4.4 percent from one week earlier. ...

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.00 percent from 5.13 percent, with points decreasing to 1.05 from 1.17 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four week moving average has declined sharply since October, and is slightly above the 12 year low set last week.

by Calculated Risk on 1/20/2010 08:30:00 AM

Click on graph for larger image in new window.

Total housing starts were at 557 thousand (SAAR) in December, down 4.0% from the revised November rate, and up 16% from the all time record low in April of 479 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959). Starts had rebounded to 590 thousand in June, and have moved mostly sideways for seven months.

Single-family starts were at 456 thousand (SAAR) in December, down 6.9% from the revised November rate, and 28 percent above the record low in January and February (357 thousand). Just like for total starts, single-family starts have been at around this level for seven months.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Housing Starts:
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 557,000. This is 4.0 percent (±9.3%)* below the revised November estimate of580,000, but is 0.2 percent (±11.5%)* above the December 2008 rate of 556,000.

Single-family housing starts in December were at a rate of 456,000; this is 6.9 percent (±8.5%)* below the revised November figure of 490,000.

Housing Completions:
Privately-owned housing completions in December were at a seasonally adjusted annual rate of 768,000. This is 11.2 percent (±13.6%)* below the revised November estimate of 865,000 and is 25.3 percent (±8.6%) below the December 2008 rate of 1,028,000.

Single-family housing completions in December were at a rate of 503,000; this is 11.1 percent (±10.2%) below the revised November rate of 566,000.

As I've noted before, this is both good news and bad news. The good news is the low level of starts means the excess housing inventory is being absorbed - a necessary step for housing (and the economy) to recover.

The bad news is economic growth will probably be sluggish - and unemployment elevated - until residential investment picks up.

by Calculated Risk on 1/20/2010 01:20:00 AM

Robert Selna at the San Francisco Chronicle discusses the surge in investor buying at the Court House steps, and the changes to the FHA rules that allow the resale of homes in less than 90 days (see HUD Changes FHA Rule for Flipping).

From the Chronicle: Investors dominate home flipping, auctions

House flipping, a quick-buck scheme pursued by amateurs and professionals alike during the real estate boom, now is dominated by investors willing to pay all cash, who troll auctions for foreclosures that banks are gradually trying to siphon off their books.
...
The figures, from research firm ForeclosureRadar.com in Discovery Bay, ... indicate that at December Bay Area auctions, about 2o percent of the sales went to investors rather than back to foreclosing lenders. In December 2008, that number was 3.2 percent.
...
Previously, the FHA refused to provide mortgage insurance for homes resold within 90 days to prevent fraud. A common scam was for investors to purchase a house, make minor repairs and sell it to a straw buyer who never planned to pay off their loan.

That kind of ploy artificially ramped up housing prices, left the FHA with inflated insurance claims, and made for vacant and blighted housing.

The FHA rule reversal is scheduled to last for one year starting Feb. 1 and includes some limited safeguards.

Flipping to FHA buyers - all the cool kids are doing it!

by Calculated Risk on 1/19/2010 09:15:00 PM

From David Streitfeld at the NY Times: F.H.A. to Raise Standards for Mortgage Insurance

The Federal Housing Administration ... is expected to announce on Wednesday that it is tightening standards.

Borrowers who get an F.H.A.-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent.

... The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.

Other changes will try to hold lenders who participate in the F.H.A. program more accountable by publicly reporting their performance rankings.
...
As of December, the F.H.A. was insuring 5.8 million single-family residences that had a total loan balance of $750 billion. More than half a million of the loans were seriously delinquent and heading toward foreclosure.

There is much more in the article.

These are small changes and what HUD has been signaling for some time. But they will make a difference at the margin.