by Calculated Risk on 1/08/2015 03:04:00 PM

Update2: Clarification: Current FHA-insured borrowers WILL need to Refinance to obtain lower MIP

I was thinking there would be a refinance boom for FHA loans. The HUD press release read:

"FHA’s new annual premium prices will take effect for all new FHA-insured mortgages endorsed toward the end of January 2015. FHA will publish a mortgagee letter detailing its new pricing structure shortly."
emphasis added

That sounded like people would need to refinance to obtain the lower MIP.

This would be a significant number of borrowers because the annual MIP was increased to 1.15% in April 2011, to 1.25% in April 2012, and to 1.35% in April 2013 (for borrowers with less than 5% down). Looking at the mortgage rates available at those times, it appeared a large number of FHA insured borrowers would consider refinancing now.

However HUD just corrected their press release to read:

"FHA’s new annual premium prices are expected to take effect towards the end of the month. FHA will publish a mortgagee letter detailing its new pricing structure shortly."

The "new FHA-insured" was removed. Update: Or this change could mean that loans currently in the process will receive the old MIP, and loans originated after January will receive the new MIP.  It is difficult to lower the MIP for current borrowers ...

So I'm expecting an FHA refi boom.

by Calculated Risk on 1/08/2015 01:37:00 PM

From Trulia chief economist Jed Kolko: What Falling Oil Prices Mean for Home Prices

Nationwide, asking prices on for-sale homes were up 0.5% month-over-month in December, seasonally adjusted — a slowdown after larger increases in September, October, and November. Year-over-year, asking prices rose 7.7%, down from the 9.5% year-over-year increase in December 2013. Asking prices increased year-over-year in 97 of the 100 largest U.S. metros.

Four of the five markets where asking prices rose most year-over-year are in the South, including Atlanta, Cape Coral-Fort Myers, North Port-Sarasota-Bradenton, and Deltona-Daytona Beach-Ormond Beach. Of the top 10, four are in the Midwest, including Cincinnati, Detroit, Lake-Kenosha Counties, and Indianapolis. Among markets with the largest asking price increases, Houston stands out for having a large local oil industry, accounting for 5.6% of jobs there.

Only Bakersfield and Baton Rouge have an even higher employment share in oil-related industries than Houston. Oklahoma City, Tulsa, New Orleans, and Fort Worth round out the seven large metros where oil-related industries account for at least 2% of employment. It’s not until you look at smaller metros that you find oil-related industries representing a larger employment share. In Williston, ND, and Midland, TX, they account for almost 30% of local jobs. [see graph of percent oil jobs at article]

This history offers three lessons for today’s housing market. First, any negative impact of falling oil prices on home prices should be concentrated in oil-producing markets in Texas, Oklahoma, Louisiana, and other places with large oil-related industries. Second, in these markets, oil prices won’t tank home prices immediately. Rather, falling oil prices in the second half of 2014 might not have their biggest impact on home prices until late 2015 or in 2016. Third, falling oil prices will probably help local economies and home prices in markets that lack oil-related industries.
...
Nationwide, rents rose 6.1% year-over-year in December. The least affordable rental markets are Miami, Los Angeles, and New York, where median rent for a two-bedroom unit eats up more than half of the local average wage.
emphasis added

Note: These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and although year-over-year price increases had been slowing, the year-over-year change increased in November.

The month-to-month increase suggests further house price increases over the next few months on a seasonally adjusted basis.

There is much more in the article, especially on the impact of falling oil prices on housing.

by Calculated Risk on 1/08/2015 11:38:00 AM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported GLVAR reports local home prices stay up through holidays

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in December was 2,734, up from 2,483 in November, but down from 2,915 one year ago. At the current sales pace, [GLVAR President Keith] Lynam said Southern Nevada continues to have less than a four-month supply of available homes. REALTORS® consider a six-month supply to be a balanced market.

For all of 2014, GLVAR reported that 36,550 total properties were sold through its MLS. Lynam noted that was the lowest number of sales in at least six years, down from 47,685 sales in 2009; 44,045 in 2010; 48,798 in 2011; 45,698 in 2012; and 41,477 in 2013.
...
GLVAR said 34.1 percent of all local properties sold in December were purchased with cash. That’s up from 31.9 percent in November, but well short of the February 2013 peak of 59.5 percent, suggesting that fewer investors have been buying homes in Southern Nevada.
...
GLVAR has been tracking a two-year trend toward fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. That continued in December, when 10 percent of all local sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s up slightly from 9.6 percent in November. Another 8 percent of all December sales were bank-owned properties, down from 8.7 percent in November.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in December was 12,377, down 7.8 percent from 13,421 in November and down 7.0 percent from one year ago. GLVAR tracked a total of 3,282 condos and townhomes listed for sale on its MLS in December, down 7.0 percent from 3,529 in November, but up 13.1 percent from December 2013.

By the end of December, GLVAR reported 7,774 single-family homes listed without any sort of offer. That’s down 5.1 percent from 8,195 such homes listed in November, but up 18.0 percent from one year ago. For condos and townhomes, the 2,309 properties listed without offers in December represented a 6.1 percent decrease from 2,458 such properties listed in November, but a 38.8 percent increase from one year ago.
emphasis added

There are several key trends that we've been following:

1) Overall sales were down 6,2% year-over-year.

2) However conventional (equity, not distressed) sales were up about 9% year-over-year.  In December 2013, only 70.8% of all sales were conventional equity.  In December 2014, 82.0% were standard equity sales.   Note: In December 2012, only 44.7% were equity!  A significant change.

3) The percent of cash sales has declined year-over-year from 44.4% in December 2013 to 34.1% in December 2014. (investor buying appears to be declining).

4) Non-contingent inventory is up 18.0% year-over-year. The table below shows the year-over-year change for non-contingent inventory in Las Vegas. Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It appears the inventory build is slowing (an important change in many areas).

Las Vegas: Year-over-year Change in Non-contingent Inventory
Month	YoY
Jan-13	-58.3%
Feb-13	-53.4%
Mar-13	-42.1%
Apr-13	-24.1%
May-13	-13.2%
Jun-13	3.7%
Jul-13	9.0%
Aug-13	41.1%
Sep-13	60.5%
Oct-13	73.4%
Nov-13	77.4%
Dec-13	78.6%
Jan-14	96.2%
Feb-14	107.3%
Mar-14	127.9%
Apr-14	103.1%
May-14	100.6%
Jun-14	86.2%
Jul-14	55.2%
Aug-14	38.8%
Sep-14	29.5%
Oct-14	25.6%
Nov-14	20.0%
Dec-14	18.0%

by Calculated Risk on 1/08/2015 09:25:00 AM

From CoreLogic: CoreLogic Reports 273,000 Residential Properties Regained Equity in Q3 2014

CoreLogic ... today released new analysis showing nearly 273,000 U.S. homes returned to positive equity in the third quarter of 2014, bringing the total number of mortgaged residential properties with equity to approximately 44.6 million, or 90 percent of all mortgaged properties. Nationwide, borrower equity increased year over year by approximately $800 billion in Q3 2014. The CoreLogic analysis indicates that approximately 5.1 million homes, or 10.3 percent of all residential properties with a mortgage, were still in negative equity as of Q3 2014 compared to 5.4 million homes, or 10.9 percent, for Q2 2014. This compares to a negative equity share of 13.3 percent, or 6.5 million homes, in Q3 2013, representing a year-over-year decrease in the number of underwater homes by almost 1.5 million (1,433,296), or 3.0 percent.

... Of the 44.6 million residential properties with positive equity, approximately 9.4 million, or 19 percent, have less than 20-percent equity (referred to as “under-equitied”) and 1.3 million of those have less than 5-percent equity (referred to as near-negative equity). Borrowers who are “under-equitied” may have a more difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall. In contrast, if home prices rose by as little as 5 percent, an additional 1 million homeowners now in negative equity would regain equity. ...

“Nationally, the negative equity share is down over three percentage points over the past year. Declines were concentrated in a handful of states, such as Nevada, Georgia, Michigan and Florida,” said Sam Khater, deputy chief economist for CoreLogic. “Forecasted house price appreciation of about five percent over the next year suggests that negative equity should be at about 8 percent a year from now, still above average, but approaching the pre-crisis level.”
emphasis added

Click on graph for larger image.

This graph shows the break down of negative equity by state. Note: Data not available for some states. From CoreLogic:

"Nevada had the highest percentage of mortgaged properties in negative equity at 25.4 percent, followed by Florida (23.8 percent), Arizona (19 percent), Rhode Island (14.8 percent) and Illinois (14.1 percent). These top five states together account for 33.1 percent of negative equity in the United States."

Note: The share of negative equity is still very high in Nevada and Florida, but down from a year ago (Q3 2013) when the negative equity share in Nevada was at 32.2 percent, and at 28.8 percent in Florida.

The second graph shows the distribution of home equity in Q3 compared to Q2 2014. Close to 4% of residential properties have 25% or more negative equity, down from Q2.

In Q3 2013, there were 6.4 million properties with negative equity - now there are 5.1 million.  A significant change.

by Calculated Risk on 1/08/2015 08:33:00 AM

The DOL reported:

In the week ending January 3, the advance figure for seasonally adjusted initial claims was 294,000, a decrease of 4,000 from the previous week's unrevised level of 298,000. The 4-week moving average was 290,500, a decrease of 250 from the previous week's unrevised average of 290,750.

There were no special factors impacting this week's initial claims

The previous week was unrevised.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased slightly to 290,500.

This was lower than the consensus forecast of 300,000, and the level suggests few layoffs.