Report: Shadow Inventory Falls 34% from 2010 Peak

Fewer than 2 million homes remain in shadow inventory as of April, CoreLogic reported Tuesday.

This puts shadow inventory at a supply of 5.3 months and represents an 18 percent year-over-year decrease. The data provider also reported shadow inventory is 34 percent lower than the 2010 peak of 3 million. For its estimate, CoreLogic counts unlisted properties that are seriously delinquent, in foreclosure, or held as REOs as shadow inventory.

Currently, serious delinquencies make up the bulk of shadow inventory. Out of the total for shadow inventory, about 890,000 homes are seriously delinquent, while 761,000 are in some stage of foreclosure, and another 336,000 are REOs.

However, serious delinquencies, or mortgages past due by 90 days or more, are trending downward, falling to under 2.3 million in May, which represents 5.6 percent of mortgages.

“The stock of seriously delinquent homes, which is the main driver of shadow inventory, is at the lowest level since December 2008,” said Dr. Mark Fleming, chief economist for CoreLogic. “Over the last year it has decreased in 42 states by double-digit figures, resulting in rapid declines in shadow inventory for the first quarter of 2013.”

The number of homes in foreclosure inventory, or in some stage of foreclosure, totaled 1 million in May, down 29 percent from a year ago and down 3.3 percent over the last month. As a percentage, foreclosure inventory represents 2.6 percent of mortgages, down from 3.5 percent in May 2012.
Completed foreclosures also experienced a steep annual decrease, falling to 52,000 in May, down 27 percent from a year ago when completed foreclosures totaled 71,000. From April to May, however, completed foreclosures increased, rising 3.5 percent from 50,000 in April.

The state that accumulated the most completed foreclosures over the last year was Florida, where 103,000 homes have been lost to foreclosure.

California came in at second, with 76,000 completed foreclosures, followed by Michigan (64,000), Texas (51,000), and Georgia (47,000).The five states alone account nearly half of all completed foreclosures, CoreLogic stated.

Florida was also in the lead for foreclosure inventory, with 8.8 percent of mortgages in foreclosure.

Also in the top five were New Jersey (6.0 percent), New York (4.8 percent), Maine (4.1 percent), and Connecticut (4.1 percent).

Source: DS News

Recovery Persists Despite Interest Rate Hikes

A recent survey conducted by Fannie Mae reveals that a clear majority of prospective homebuyers still believe it’s a good time to buy a home despite increasing interest rates on mortgages. A majority of people surveyed also believe home prices will continue to rise, which supports experts’ theories that most people are aware that the market is still good for buying when compared to previous years. Historical data reflect similar patterns regarding shifts in interest rates, which may also mean that interest rates don’t factor in as heavily as other indicators when people are considering a home purchase. 

Buying a home has become more expensive because of rising home prices and interest rates, but it appears it would take more to shake the housing recovery.

In Fannie Mae's June National Housing Survey, 72% of the respondents said it was still a good time to buy a home, even though the share of respondents who expected mortgage rates to increase in the next 12 months rose by 11 percentage points to 57%, the highest level in the survey's three-year history.

The share of respondents who believe home prices will go up in the next year also hit a survey high of 57%, underlining consumers' confidence in the housing recovery.

"Consumers may recognize that today's still favorable mortgage rates and homeownership affordability levels will recede over time," said Fannie Mae economist Doug Duncan. "Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence."

Housing and mortgage analysts have also argued that the rise in interest rates, while denting affordability, is unlikely to deter the recovery. In fact, some have concluded that interest rates have only a limited impact on home prices.

In a report released Sunday, KBW analysts look at past behavior of home prices in the U.S. and in the state of California during periods of rising interest rates, starting from the 1980s.

Rising interest rates did not cause a drop in home prices as is commonly feared. In fact, the analysts found that historically rising home prices and rising interest rates went hand-in-hand.

This was because "early in a recovery period for home prices, positive economic growth and increasing demand for housing offset rising financing costs," they wrote.

Interest rates appeared to have a very small impact on home prices. For instance, between January 1993 and January 1995, interest rates moved from about 8% to a little over 9%. Home prices in the U.S. still rose, irrespective of the move in rates. In California, however, home prices declined, as the local economy was still climbing out of recession.

Between 2003 and 2007, similarly, home prices rose in both the U.S. and in California, while interest rates rose. Later, in 2007, prices plummeted during a time of declining interest rates.

"We are not attempting to draw a conclusion that higher mortgage rates support rising home values," the analysts emphasized in their report. "Rather we are suggesting that the direction of mortgage rates has little impact on the direction of home prices, as other factors, such as economic growth and home supply, are likely the key drivers of home price movements."

Indeed, while low interest rates have enabled many people to refinance or purchase homes, they are not the reason behind the rise in home prices. Rates were low for a long time after the bust, yet home prices went nowhere but down until March 2012.

Rather it was the decline in excess supply of homes that kickstarted the housing recovery.

For now, the supply of existing and new homes remains constrained, but it is expected to ease as more sellers list their homes and homebuilders ramp up construction.

This could moderate price gains, especially if mortgage credit standards remain tight, forcing more people to rent.

Source: NuWire Investor

US Foreclosure Rates Falling

The newest report from CoreLogic shows that foreclosure activity dropped in May as the U.S. continues forward in its housing market recovery. The foreclosure inventory is also shrinking and seriously delinquent loans are at their lowest level since the end of 2008. Part of it is due to an improving economy and more positive activity in the housing sector, but it’s also because many banks have chosen to deal with delinquency by way of short sales and loan modifications rather than enter into costly foreclosures. Experts say the overall impact contributes to rising home prices and even more sales activity, further boosting the recovery. 

Fewer homes were lost to foreclosure in May and the total number of homes in the foreclosure process continued to decline, according to the latest report from real estate analytics provider CoreLogic.

The number of completed foreclosures dropped 27% year-over-year in May to 52,000. Month-over-month, completed foreclosures rose 3.5%.

Completed foreclosures represent the number of homes actually lost to foreclosure. Since the crisis began in September 2008, there have been 4.4 million completed foreclosures. Prior to the crisis, completed foreclosures averaged 21,000 a month, less than half the current pace.

Still, the latest reports continue to support the view that the foreclosure crisis is slowly moving behind us.

The number of homes in some stage of foreclosure was about 1 million in May, down 29% year-over-year. Month-over-month, the foreclosure inventory was down 3.3%. About 2.6% of all homes with a mortgage were in some stage of foreclosure, compared to 3.5% a year earlier.

Seriously delinquent loans -- loans that 90 days or more past due -- are now at their lowest level since December 2008, at 2.3 million mortgages.

The decline in seriously delinquent loans is significant because a good proportion of these loans could ultimately end up in foreclosure if they are not resolved. And mounting foreclosures add to the supply of distressed homes in the market, dragging down home prices.

Homes that could potentially wind up in foreclosure represent "shadow inventory" or pending supply that could hit the market.

As of April, the shadow inventory was under 2 million, or 5.3 months' supply.

For a long time time shadow inventory was seen as a threat to the housing market. However, that view changed as banks began to opt for short sales and loan modifications over a costly foreclosure process. An extremely lengthy foreclosure process, particularly in judicial foreclosure states, also slowed the pace of foreclosed homes hitting the market.

Ironically, the housing market now faces a housing shortage. The decline in foreclosures and shadow inventory has drained the excess supply of existing homes. Meanwhile, existing homeowners trapped with an underwater mortgage are unable to sell, while homebuilders are struggling to ramp up new construction.

This has caused a sharp rise in prices in the housing market, though rising mortgage rates might moderate price gains going forward.

Source: NuWire Investor

Delinquency, Foreclosure Rates Decrease to Post-Crisis Lows in May

The national delinquency rate and foreclosure inventory rate each fell to post-crisis lows in May, Lender Processing Services reported Tuesday. At 6.08 percent, the national delinquency rate in May stood at the lowest level since May 2008, when the rate was 5.96 percent. 

At the same time, the foreclosure inventory rate slipped to 3.05 percent, which represents the lowest point since March 2009 when the rate was 2.90 percent. Over the last year, foreclosure inventory has plunged 27 percent and also fell by 3.9 percent over the last month. 

LPS also reported about 3.04 million mortgages were past due by at least one month, but not yet in foreclosure. Of that total, about 1.34 million are 90 days or more past due but not in foreclosure.

The five states that topped the list for having the highest percentage of past due mortgages were Florida, New Jersey, Mississippi, Nevada, and New York.

The five states with the lowest percentage of non-current loans were Montana, Alaska, Wyoming, South Dakota, and North Dakota.

Source: dsnews.com; Lender Processing Services.