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New Residential Construction in December 2011

For information about distinguished Southern California luxury real estate in Los Angeles County, as well as coastal Orange County homes and San Diego homes, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties serves discriminating buyers and sellers of California exclusive real estate in Newport Beach, Laguna Beach, and Marina Del Rey homes; Manhattan Beach, Hermosa Beach, and Pacific Palisades homes; Mission Viejo, Redondo Beach, Santa Monica, Malibu, along with exclusive Los Angeles homes in Beverly Hills and Beverly Glen California.

U.S. Census Bureau News

Joint Release
U.S. Department of Housing and Urban Development

NEW RESIDENTIAL CONSTRUCTION IN DECEMBER 2011

The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for December 2011:

BUILDING PERMITS

Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 679,000. This is 0.1 percent (±1.2%)* below the revised November rate of 680,000, but is 7.8 percent (±2.2%) above the December 2010 estimate of 630,000.

Single-family authorizations in December were at a rate of 444,000; this is 1.8 percent (±1.2%) above the revised November figure of 436,000. Authorizations of units in buildings with five units or more were at a rate of 209,000 in December.

An estimated 611,900 housing units were authorized by building permits in 2011. This is 1.2 percent (±1.3%)* above the 2010 figure of 604,600.

HOUSING STARTS

Privately-owned housing starts in December were at a seasonally adjusted annual rate of 657,000. This is 4.1 percent (±11.6%)* below the revised November estimate of 685,000, but is 24.9 percent (±18.3%) above the December 2010 rate of 526,000.

Single-family housing starts in December were at a rate of 470,000; this is 4.4 percent (±11.3%)* above the revised November figure of
450,000. The December rate for units in buildings with five units or more was 164,000.

An estimated 606,900 housing units were started in 2011. This is 3.4 percent (±2.4%) above the 2010 figure of 586,900.

HOUSING COMPLETIONS

Privately-owned housing completions in December were at a seasonally adjusted annual rate of 605,000. This is 9.2 percent (±15.1%)  above the revised November estimate of 554,000 and is 7.1 percent (±10.9%)* above the December 2010 rate of 565,000.

Single-family housing completions in December were at a rate of 448,000; this is 0.9 percent (±11.7%)* below the revised November rate of 452,000. The December rate for units in buildings with five units or more was 147,000.

An estimated 583,900 housing units were completed in 2011. This is 10.4 percent (±2.8%) below the 2010 figure of 651,700.

U.S. Department of Commerce Washington, D.C. 20233

  • Privately-owned housing starts in December were at a seasonally adjusted annual rate of 657,000. This is 4.1 percent (±11.6%)* below the revised November estimate of 685,000, but is 24.9 percent (±18.3%) above the December 2010 rate of 526,000.
  • Single-family housing starts in December were at a rate of 470,000; this is 4.4 percent (±11.3%)* above the revised November figure
  • The December rate for units in buildings with five units or more was 164,000.
  • An estimated 606,900 housing units were started in 2011. This is 3.4 percent (±2.4%) above the 2010 figure of 586,900.

HOUSING COMPLETIONS

  • Privately-owned housing completions in December were at a seasonally adjusted annual rate of 605,000. This is 9.2 percent (±15.1%)*above the revised November estimate of 554,000 and is 7.1 percent (±10.9%)* above the December 2010 rate of 565,000.
  • Single-family housing completions in December were at a rate of 448,000; this is 0.9 percent (±11.7%)* below the revised November rate of 452,000. The December rate for units in buildings with five units or more was 147,000.
  • An estimated 583,900 housing units were completed in 2011. This is 10.4 percent (±2.8%) below the 2010 figure of 651,700.

New Residential Construction data for January 2012 will be released on Thursday, February 16, 2012, at 8:30 A.M. EST.
://www.census.gov/new resconst

EXPLANATORY NOTES

In interpreting changes in the statistics in this release, note that month-to-month changes in seasonally adjusted statistics often show movements which may be irregular. It may take 2 months to establish an underlying trend for building permit authorizations, 4 months for total starts, and 5 months for total completions.

The statistics in this release are estimated from sample surveys and are subject to sampling variability as well as non-sampling error including bias and variance from response, non-reporting, and under coverage. Estimated relative standard errors of the most recent data are shown in the tables. Whenever a statement such as “2.5percent (±3.2%) above” appears in the text, this indicates the range (-0.7 to +5.7 percent) in which the actual percent change is likely to have occurred.

All ranges given for percent changes are 90-percent confidence intervals and account only for sampling variability. If a range does not contain zero, the change is statistically significant. If it does contain zero, the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease. The same policies apply to the confidence intervals for percent changes shown in the tables. On average, the preliminary seasonally adjusted estimates of total building permits, housing starts and
housing completions are revised about three percent or less. Explanations of confidence intervals and sampling variability can be found on our web site listed above.

* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.census.gov/new resconst

Table 1. New Privately-Owned Housing Units Authorized in Permit-Issuing Places
[Thousands of units. Detail may not add to total because of rounding]

2 to 4 5 units

Total 1 unit units or more Total 1 unit Total 1 unit Total 1 unit Total 1 unit

2010: December 630 445 25 160 114 70 97 66 257 211 162 98

2011:

January 568 419 20 129 77 49 94 65 286 216 111 89
February 534 382 15 137 63 39 86 59 288 209 97 75
March 574 392 16 166 60 37 94 64 296 215 124 76
April 563 395 21 147 59 38 94 64 284 210 126 83
May 609 406 20 183 80 36 97 67 293 218 139 85
June 617 402 21 194 71 35 99 68 306 217 141 82
July 601 403 21 177 60 37 96 68 312 214 133 84
August 625 418 25 182 61 34 107 74 313 224 144 86
September 589 413 20 156 64 36 107 74 288 221 130 82
October 644 428 23 193 61 39 107 71 345 232 131 86
November (r) 680 436 21 223 77 41 104 70 339 236 160 89
December (p) 679 444 26 209 72 37 110 73 337 239 160 95

Average RSE (%)1 1 1 9 1 3 3 2 2 1 1 2 2

Percent Change:

December 2011 from November 2011 -0.1% 1.8% 23.8% -6.3% -6.5% -9.8% 5.8% 4.3% -0.6% 1.3% 0.0% 6.7%

90% Confidence Interval 3 ± 1.2 ± 1.2 ± 6.2 ± 2.0 ± 4.6 ± 6.6 ± 3.9 ± 5.3 ± 1.9 ± 2.4 ± 1.9 ± 2.6

December 2011 from December 2010 7.8% -0.2% 4.0% 30.6% -36.8% -47.1% 13.4% 10.6% 31.1% 13.3% -1.2% -3.1%

90% Confidence Interval 3 ± 2.2 ± 1.9 ± 9.2 ± 3.1 ± 7.3 ± 10.5 ± 3.7 ± 5.0 ± 2.4 ± 3.0 ± 4.7 ± 6.5

2010: 604.6 447.3 22.0 135.3 73.8 49.1 103.5 75.4 299.1 232.3 128.2 90.6

2011: (p) 611.9 413.7 21.0 177.2 67.5 38.4 101.4 69.7 310.1 221.6 132.8 84.0

RSE (%) 1 1 5 (Z) 3 3 1 1 1 1 2 2

Year to Year Percent Change 4 1.2% -7.5% -4.5% 31.0% -8.5% -21.8% -2.0% -7.5% 3.7% -4.6% 3.6% -7.2%
90% Confidence Interval 3 ± 1.3 ± 1.1 ± 6.5 ± 2.3 ± 5.1 ± 6.8 ± 1.7 ± 2.1 ± 0.8 ± 0.9 ± 2.7 ± 3.4

2010: December 47.6 30.6 2.0 15.0 8.9 5.3 6.3 3.6 19.9 14.8 12.5 6.9

2011:

January 36.0 26.3 1.2 8.5 4.6 2.9 4.4 2.7 19.9 15.1 7.2 5.5
February 37.2 26.5 1.0 9.7 3.6 2.0 4.5 3.3 22.0 15.9 7.1 5.2
March 53.7 37.6 1.4 14.7 4.7 3.0 8.0 6.0 29.4 21.3 11.6 7.3
April 49.9 36.9 1.8 11.2 4.9 3.3 9.0 6.8 24.8 19.2 11.2 7.7
May 56.3 39.2 1.8 15.3 7.2 3.5 9.6 7.1 26.6 20.4 12.8 8.2
June 62.4 40.9 2.0 19.6 8.2 3.6 9.9 7.3 29.9 21.3 14.4 8.8
July 51.2 35.3 1.8 14.2 5.0 3.3 8.9 6.3 26.5 18.3 10.9 7.4
August 60.9 40.8 2.5 17.6 5.8 3.3 11.1 7.6 30.1 21.6 13.9 8.3
September 51.8 35.6 1.8 14.5 5.8 3.5 10.3 6.8 24.3 18.3 11.4 7.0
October 50.5 33.6 1.9 15.0 5.6 3.4 9.9 6.4 24.9 17.2 10.1 6.6
November (r) 50.3 30.9 1.7 17.7 6.3 3.4 8.3 5.2 24.4 16.3 11.3 6.1
December (p) 50.7 29.3 2.0 19.3 5.6 2.7 7.3 4.0 25.7 16.3 12.1 6.4

Average RSE (%)1 1 1 9 1 3 3 2 2 1 1 2 2

(p) Preliminary. (r) Revised. RSE Relative standard error. S Does not meet publication standards because tests for identifiable and stable seasonality do not meet reliability standards.
X Not applicable. Z Relative standard error is less than 0.5 percent.

  1. Average RSE for the latest 6-month period.
  2. Reflects revisions not distributed to months.
  3. See the Explanatory Notes in the accompanying text for an explanation of 90% confidence intervals. 4 Computed using unrounded data.

Table 2. New Privately-Owned Housing Units Authorized, but Not Started, at End of Period
[Thousands of units. Detail may not add to total because of rounding]

2 to 4 5 units

Total 1 unit units or more Total 1 unit Total 1 unit Total 1 unit Total 1 unit

2010: December 84.8 47.2 2.3 35.2 11.9 7.0 7.6 5.3 42.2 24.5 23.1 10.5

2011:

January 79.4 46.3 2.3 30.7 11.5 7.6 6.2 4.5 39.5 24.1 22.2 10.2
February 79.3 46.3 2.0 30.9 11.0 7.6 6.9 4.8 38.8 23.7 22.6 10.3
March 81.9 48.6 1.8 31.5 10.1 7.3 8.3 6.0 38.8 24.6 24.6 10.7
April 81.8 48.2 2.1 31.5 9.7 6.8 8.8 6.9 38.5 23.9 24.8 10.6
May 82.6 47.6 1.8 33.2 11.1 6.5 7.9 6.0 39.4 24.3 24.2 10.8
June 84.7 45.5 1.7 37.5 11.7 6.2 5.7 4.5 42.4 23.5 24.9 11.2
July 80.7 43.4 1.9 35.5 8.3 5.8 6.2 4.2 43.2 23.6 23.1 9.8
August 87.4 45.5 2.5 39.4 8.7 5.9 7.8 5.9 46.2 23.6 24.8 10.1
September 79.9 45.0 3.5 31.4 8.9 5.8 7.9 5.9 41.6 23.8 21.5 9.5
October (r) 75.3 42.8 3.0 29.5 8.0 5.6 7.0 4.9 39.9 22.8 20.3 9.4
November (r) 73.2 41.8 3.2 28.2 6.7 4.8 7.9 5.0 40.2 22.4 18.4 9.6
December (p) 78.8 42.3 3.0 33.5 8.1 4.7 6.3 4.0 43.1 23.2 21.2 10.4

Average RSE (%)1 5 7 19 9 15 18 15 15 7 10 12 17

Percent Change: 2

December 2011 from November 2011 7.6% 1.3% -6.6% 18.6% 21.6% -1.5% -20.4% -19.7% 7.2% 3.7% 15.6% 8.0%
90% Confidence Interval 3 ± 5.2 ± 4.4 ± 9.7 ± 12.6 ± 14.0 ± 12.0 ± 14.4 ± 8.3 ± 7.3 ± 6.9 ± 9.7 ± 8.3
December 2011 from December 2010 -7.1% -10.4% 28.0% -4.9% -32.0% -32.7% -16.3% -24.2% 2.1% -5.1% -8.0% -0.8%
90% Confidence Interval 3 ± 7.8 ± 8.1 ± 52.8 ± 14.8 ± 16.4 ± 15.1 ± 17.4 ± 20.6 ± 10.1 ± 11.5 ± 18.5 ± 16.6

(p) Preliminary. (r) Revised. RSE Relative standard error. S Does not meet publication standards because tests for identifiable and stable seasonality do not meet reliability standards.

  1. Average RSE for the latest 6-month period.
  2. Computed using unrounded data.
  3. See the Explanatory Notes in the accompanying text for an explanation of 90% confidence intervals.

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Mortgage Crimes are Focus of New Task Force

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Mortgage crimes are focus of new task force

WASHINGTON (CNNMoney) — A new special task force to investigate and prosecute those responsible for bad mortgages during the housing boom will be part of President Obama’s 2012 agenda.

Obama announced Tuesday that he’s asked the Justice Department to create a special unit of prosecutors and state attorneys general to investigate abusive lending and packaging of risky mortgages that led to the housing crisis. And he’s tapped an avowed Wall Street enemy, New York Attorney General Eric Schneiderman, to help run the crime unit, according to a White House official.

“This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his State of the Union speech.

The new unit’s goal will be to investigate banks, financial firms and mortgage originators that broke the law, and to compensate victims and provide relief for homeowners, the White House official said.

Although the housing bust is more than four years old, this is the first time the Obama administration has indicated it will go after mortgage originators and Wall Street banks that got homeowners into loans they couldn’t afford — actions seen as a key culprit of the financial crisis.

The mortgage industry has often been blamed for its role helping homeowners get lines or credit and bigger mortgages during the housing boom. The industry saw little downside, unloading the risk that the loans would go bad on to the financial markets.

With Schneiderman, who has been working on his own investigations into big banks, Obama is signaling he’s ready to go after financial crimes. And left-leaning progressive groups cheered the news.

“Schneiderman has shown himself to be a courageous hero in his defense of the struggling underwater homeowners in his state and across the country,” according to a statement released by a coalition of left-leaning advocates such as MoveOn and New Bottom Line.

The news came as a surprise to the financial industry, which had been predicting Obama would tout a proposed settlement under discussion among federal regulators, state attorneys general and the largest bank mortgage servicers under investigation for improperly foreclosing on homeowners.

“We believe the industry is worried that this new task force will go after the banks for the origination of many of the mortgages that have defaulted or are now underwater,” said Jaret Seiberg, a senior policy analyst for the Washington Research Group.

The state attorneys general, the Justice Department and the Department of Housing and Urban Development have been in talks for nearly a year with big bank servicers that stand accused of using robo-signers to service home loans. The five largest mortgage servicers involved in the talks are: Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

According to people familiar with the talks, a draft settlement would result in those banks paying $20 billion to $25 billion toward housing relief. About 1 million underwater homeowners would be eligible for an average $20,000 off the principal owed.

In return, state attorneys general would not be able to file future lawsuits against the bank mortgage servicers that agree to the deal. The amount of relief available for homeowners depends on how many state attorneys general agree to the deal.

Obama didn’t mention the talks in his State of the Union speech. A White House official said Wednesday that the new task force would not prevent progress that has been made on that deal.

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Real Estate Recovery Expects to be Slow

For information about coastal and luxury Los Angeles real estate, Orange County CA homes, and San Diego homes in La Jolla and Mission Beach, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services buyers and sellers of Southern California coastal luxury homes from Malibu and Santa Monica to Newport Beach and San Juan Capistrano real estate and distinctive Beverly Hills, Beveral Glen, and Bel Air homes.

Real Estate Recovery Expects to be Slow

Fair warning to U.S. real estate players: Resign yourselves to “a slowing grind-it-out recovery” in 2012, as “enduring economic doldrums” continue to weigh heavily on the market.

Your best bets: a small handful of “property-wealth islands,” including San Francisco and San Jose/Silicon Valley, both seen as “primary 24-hour gateways located along global pathways,” according to a report being released today at the Urban Land Institute conference in San Francisco.

San Francisco ranks third out of 51 cities as a place to invest in and develop commercial and multifamily apartment properties and fourth in for-sale home building, with San Jose two or three rungs lower in each category, according to the survey compiled by the institute and Pricewaterhouse Coopers.

Washington, Austin and New York are the other top-rated cities.

“We come out very well as top investment places, although even here it’s still a bit of a chug,” said Kate White, executive director of ULI San Francisco.

Put the “chug” down to the enduring doldrums in the housing market, which continues to weigh on San Francisco and San Jose, if not as badly as in other parts of the Bay Area and nation. Even though both rank high in the home-building category, according to the report, their prospects for investment and development are described only as “fair.”

“There’s still an understandable reluctance by potential homeowners to get into the market,” said White.

Not so, however, when it comes to renting or leasing commercial space in high-tech areas like San Francisco’s Mid-Market and South of Market, a trend driven largely by the influx of a younger, more mobile and urban-oriented workforce.

“Gen Y is driving up the demand for apartments and driving up rents, which makes investing in apartments a safer bet,” said White.

Depending on how long it lasts, such a trend could be a game-changer for real estate.

“Living smaller, closer to work, and preferably near mass transit holds increasing appeal as more people look to manage expenses wisely,” notes the report. “More companies concentrate in urban districts where sought-after generation-Y talent wants to locate in 24-hour environments.”

A separate Urban Land Institute report, examining land use changes in California, takes the point further.

Projecting out to 2035, the report says demand for traditional single- family homes will decline, by as much as 10 percent, while “changing demographics” and other factors shift the real estate focus to smaller lots and “multiple or intergenerational households” within walking distance of “transit station areas.”

“California’s future is a lot more urban and transit-oriented than it has been historically. There’ll be an increasing demand for the 24-hour, livable city model,” said White. “The next generation is ushering it in, and local agencies need to plan accordingly.”

Survey Indicates Mood Improves on Home Prices

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Survey Indicates Mood Improves on Home Prices

Consumer expectations for U.S. home prices perked up in December, matching a modest fourth-quarter improvement in the U.S. economy, according to a monthly survey from mortgage market firm Fannie Mae.

For its December reading, Fannie Mae said survey respondents now expect home prices to rise by 0.8% over the next year, up from the 0.2% gain predicted in November.

Views on the direction of the U.S. economy also improved: 22% of respondents indicated a belief that the U.S. economy is on the right track, marking a 6-percentage-point jump from November’s survey.

On personal finances, 40% of respondents said they anticipate their personal financial situation to strengthen over the next year. Fannie Mae noted the response marks the first time since February that a larger share of respondents indicated they expect improved personal finances rather than finances that will remain the same over the next year.

Despite the marked improvement in consumer sentiment, Fannie Mae Chief Economist Doug Duncan cautioned that consumer attitudes remain at depressed levels, with over two-thirds over respondents in December’s survey still indicating a belief that the U.S. economy is headed in the wrong direction.

The survey is based upon a monthly poll of roughly 1,000 adults and has a margin of error of plus or minus 3.1%

A Good Rental History Can Help Borrowers

For information about Southern California luxury homes in Los Angeles County and Orange County real estate as well as coastal San Diego homes, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties serves discriminating buyers and sellers of California luxury and coastal real estate.

A Good Rental History Can Help Borrowers

Mortgage Rates

IF you’re planning to buy a home for the first time later this year, your chances of qualifying for a mortgage might be better if you’ve had a history of paying the rent on time.

Last year Experian, one of the three leading credit-reporting companies, added a section to millions of credit reports showing on-time rent payments, and raised the credit scores of many people. The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.

Now two other companies, CoreLogic and FICO, are planning a new credit report and score that incorporates payment histories from landlords, as well as payday and other nontraditional loans, child support and, later on perhaps, utility and mobile phone bills.

“Evidence of positive rental payments could be a plus for consumers,” said Joanne Gaskin, FICO’s director of product management global scoring. Rental history data could show up on one in five of the new CoreScore credit reports, she estimated.

Around 35 percent of households nationwide were renters in 2010, according to the most recent census data, while in parts of New York City, three-quarters or more rent.

Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments and other credit sources. That includes recent college graduates, students and some divorced people. “The biggest impact is on individuals who were not previously scoreable,” said Brannan Johnston, the managing director of Experian’s rent bureau.

Almost half of those higher-risk consumers experienced an increase of 100 points or more after their positive rental history was added, Mr. Johnston said. (Those with average or higher scores did not experience major movement.)

CoreLogic said it was too early to show the effects of its new credit report, which began in December. The changes are “intended to allow lenders and consumers to have greater transparency,” said Tim Grace, a senior vice president of CoreLogic, and that could lead to increased lending.

People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being “very responsible renters,” Mr. Grace added.

But consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report. Rent may not have been paid, for example, because the furnace was left unrepaired for months.

Consumers can dispute any information they believe is inaccurate. “We check and recheck all the information,” Mr. Grace said, adding that consumers could order a copy of their new CoreLogic credit reports online.

CoreLogic’s Core Score will cover about 100 million people. The three other major credit reporting companies, which also include Equifax and TransUnion, have reports on 200 million; their reports are available free once every 12 months at annual creditreport.com. TransUnion collects rental payment information and shares it with landlords, but Experian is the only one of the three so far to add rental history to credit reports.

Experian has mostly major property managers and apartment companies reporting rent histories, via their accounting software. Most small landlords are not, though Experian is considering a system that could allow more independents to report on-time and problem renters.

If your landlord is participating, your rental contract may show up as debts owed on your credit report for up to 12 months, said Maxine Sweet, Experian’s vice president for public education. If your landlord is not yet reporting to Experian or CoreLogic, she added, you can build your own rental history by documenting on-time payments.

Why Home Prices Are and Are Not Stabilizing

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Why Home Prices Are and Are Not Stabilizing

Home prices are falling again, but some analysts see a silver lining because the prices of homes that aren’t selling out of foreclosure have been holding steady.

CoreLogic reported that home prices in October declined by 1.3% from September and by 3.9% from one year ago. A separate index released Monday by LPS Applied Analytics showed that home prices in September had dropped by 1.2% from August.

“Many housing statistics are basically moving sideways,” said Mark Fleming, chief economist at CoreLogic.

Still, the CoreLogic index shows an important emerging trend where home prices are stabilizing after excluding distressed sales.

What’s the difference between distressed sales and non-distressed sales?

Unlike traditional owners, banks are often faster to cut prices in order to unload properties quickly—or what are called “distressed” sales. The upshot is that, the more homes being sold by lenders in any given month the faster prices tend to fall.

This was clear throughout the initial years of the housing bust. Prices declined most sharply in 2008 as banks dumped foreclosed properties at fire-sale prices. Owner-occupants are less likely to list their homes for sale in the winter months, too, which means that each winter there are also drops in prices because distressed sales account for a growing share of sales.

Are prices of distressed homes falling at the same rate as non-distressed homes?

That’s been the case up until recently. While total home prices were down by 3.9% from one year ago, prices were down by just 0.5% from one year ago when excluding distressed sales. In September, total prices were down by 3.8% from one year ago, but non-distressed prices were down by 2.1%.

This shows that while price declines are resuming, they are not yet falling from one-year ago for non-distressed homes. In fact, during the first nine months of 2011, prices of non-distressed homes remained relatively stable, with year-over-year declines between 2% and 3%.

Analysts at Barclays Capital called this “the most important trend in the housing industry right now,” in a report published on Monday.

Why would any stabilization of non-distressed prices matter?

If it’s true that prices of non-distressed homes are stabilizing, even as distressed homes continue to fall in price, it would mean that a distressed home is “increasingly being seen as a poor substitute for a non-distressed home,” writes Stephen Kim, the Barclays housing analyst. He says it’s possible that the “bifurcation between distressed and non-distressed homes will only widen with the passage of time.”

Won’t the overhang of foreclosures put pressure on non-distressed prices anyway?

That’s all too possible. There are more than two million loans in some stage of foreclosure, and it may be too early to argue that those won’t in some way impact the sales prices of non-distressed homes. For one, homes that sell out of foreclosure at significantly lower prices could be used by appraisers as “comparable” sales that may make banks less willing to lend at an agreed sales price for a non-distressed home.

In certain markets where many homes are selling out of foreclosure, it’s hard to simply set aside distressed homes. “You can’t deny the fact that if half of homes that sold in San Diego in a given year were distressed, that is the trend,” said Kyle Lundstedt, managing director at LPS.

What could happen if this trend holds up, with distressed prices falling and non-distressed prices staying flat?

It could stabilize something else: home-buyer confidence. “There is nothing that strikes fear in a homeowner’s heart than to hear that his home value has declined,” writes Mr. Kim of Barclays. “But if it was home price trends that got us into this funk, it stands to reason that a recovery in sentiment will be similarly ushered in once price declines have abated—which is precisely what the CoreLogic price data shows us.”

What Went Wrong With Foreclosure Aid Programs

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What Went Wrong With Foreclosure Aid Programs

At the time, they thought they were being reviewed for a loan modification through the U.S. government’s foreclosure-prevention program.A Realtor knocking on their door to tell them to vacate told them otherwise.

“I’m bitter,” says Harry Johnson.  “We did everything they told us to do.”

The Johnson’s are angry not only at their mortgage company, but also at the government, and they’re two voices among a discontented chorus.

The Obama administration’s initial foreclosure-prevention programs, launched in early 2009, were intended to help 7 million to 9 million people. So far, they’ve aided about 2 million, and not all of those are out of foreclosure danger.

Programs begun later have also faltered. One intended to help at least 500,000 has helped just a few hundred a year after its launch. Another initiative to extend $1 billion to help the jobless or underemployed avoid foreclosure ended in September, obligating less than half of its funds. The unused money went back to the U.S. Treasury.

As of Nov. 30, the government had spent just $2.8 billion of the $46 billion war chest it had in 2009 to devote to the housing crisis, the Treasury Department says. More has been committed, but only $13 billion will ultimately be spent, the non-partisan Congressional Budget Office estimated in March.

Meanwhile, 2.5 million homes have been lost to foreclosure since 2009, an additional 4 million are in the foreclosure process or seriously delinquent, and home prices are still falling in much of the U.S., shrinking household wealth for millions of Americans.
“Every program has fallen far short of goals. I can’t think of one that’s been largely successful,” says the  director of an Unemployment Project, a non-profit that’s been involved in foreclosure prevention for decades.

The administration’s programs were hampered by design flaws, their reliance on a mortgage industry overwhelmed by the fallout from a historic collapse in home prices, and a brutal extended housing downturn. Nor could they always overcome the conflicting interests of borrowers with too much debt, mortgage investors unwilling to surrender profits and mortgage servicers with sometimes greater financial incentives to foreclose on loans than to permanently modify them, say housing and government policy analysts, consumer advocates and former administration officials.

Critics also say the administration failed to entice banks and mortgage-finance giants Freddie Mac and Fannie Mae to take bolder steps to address the crisis even though the institutions received billions in government bailout funds.

“There was nowhere near the effort to help Main Street as there was to help the banks,” says former senator Ted Kaufman, D-Del., who chaired a congressional oversight panel that oversaw $475 billion in Troubled Asset Relief Program (TARP) funds. Most of that went to banks and the auto industry, but $46 billion in TARP money also funded foreclosure-prevention efforts.

Administration officials defend their response. They say the scope of the problem was unprecedented — and so were their actions. Federal programs prevented many foreclosures even if they didn’t help as many people as expected, officials say. They say the administration’s efforts will save homeowners billions in mortgage costs.

They also say the initiatives helped millions of other homeowners by driving service improvements in the mortgage industry and preventing an even worse collapse in home prices. Since the peak of the housing market in 2006, $3 trillion in home equity has been lost, researcher LPS Applied Analytics estimates.

“It’s too easy to underestimate the scale and complexity of these issues,” Shaun Donovan, secretary of Housing and Urban Development, said in a recent interview, while acknowledging that some administration programs “haven’t reached as many people as we originally targeted.”

Those shortfalls are most evident in the:

•Home Affordable Modification Program (HAMP). Through October, the biggest foreclosure-prevention effort has resulted in 883,076 homeowners getting permanent loan modifications that made their loans more affordable and improved their ability to avoid foreclosure.

But HAMP was targeted to help 3 million to 4 million homeowners,President Obama said when he announced it in 2009. When it expires next December, it will have prevented fewer than 800,000 foreclosures, Kaufman’s congressional oversight panel estimated in December 2010.

HAMP “has been a failure,” Neil Barofsky, the former special inspector general for TARP, told a congressional committee in October.

•Home Affordable Refinance Program (HARP). Through September, it’s helped 928,570 homeowners get lower-interest loans even though they lacked the amount of equity usually needed for a new loan.

HARP was intended to help 4 million to 5 million homeowners. While it was recently overhauled to encourage more refinancing, federal officials now say it will help fewer than 2 million borrowers by the end of 2013, when it expires.

So far, those getting HARP refis also tend to be people who aren’t deeply underwater — those who owe more on their homes than they’re worth. HARP refis have gone largely to homeowners with some equity or who were only slightly underwater, government data show. It’s unclear whether the recent revamping will significantly change that, says Alan White, law professor and mortgage lending expert at the Valparaiso University School of Law.

More than 11 million homeowners — more than a fifth of homeowners with mortgages — are underwater, says market researcher CoreLogic. Many are unable to take advantage of today’s historically low interest rates and wring some relief from the ravages of the recession and weak economic recovery.

Rep. Dennis Cardoza, D-Calif., whose district encompasses Stockton, one of the nation’s worst foreclosure hot spots, says more needs to be done and that the changes to HARP are “too little, too late.”

•Federal Housing Administration Short Refinance program. Intended to help 500,000 to 1.5 million homeowners refinance into loans with a lower interest rate, the FHA program did fewer than 400 deals through September, a year after the effort’s launch, government data show.

The program requires mortgage owners to forgive at least 10% of a borrower’s unpaid principal before that loan can be refinanced into an FHA loan at a lower interest rate.

But mortgage owners have been reluctant to forgive principal, fearing that doing so for some would create a “moral hazard,” leading other borrowers to default to get help, says James Parrott, a senior adviser to the White House’s National Economic Council.

“The moral hazard concern was stronger than we realized,” Parrott says.

One big bank says it warned of the program’s limitations.

Bank of America, which services 12 million mortgages, gave federal officials data showing the program would benefit only 10,000 to 15,000 customers because of its design and the degree of support from investors who owned loans, says spokesman Dan Frahm.

Almost 1 million modifications

Administration officials say the programs’ statistics alone don’t fully reflect what’s been accomplished. “You have to look at the ripple effect,” Donovan says.

HAMP, which most often lowers mortgage payments through interest rate reductions, is approaching 1 million permanent loan modifications.That is “not a negligible sum,” Parrott says.

HAMP also “significantly changed the market,” says Michael Barr, former assistant secretary at Treasury who worked on mortgage issues while in the Obama administration.

Before HAMP, mortgage servicers had no standard approach to modify loans. HAMP created one and streamlined the process, says Barr, who now teaches at the University of Michigan Law School.

Since HAMP’s launch, lenders have independently offered more than 2.5 million loan modifications outside of HAMP, staving off foreclosures for many.

“The overall impact of the (HAMP) program has gone unnoticed,” says Teri Schrettenbrunner, senior vice president of communications for Wells Fargo Home Mortgage.

HAMP was announced just weeks after Obama took office and at a time when home prices had fallen for 30 months in a row.

Given the short time the administration took to launch HAMP and HARP, “We knew they wouldn’t be perfect. We knew they’d be as good as they could be given the time we had,” Barr says.

He says a prime reason that government programs haven’t reached more people is that mortgage servicers “were really bad at doing their jobs.”

Servicers collect home loan payments for investor-owners. Big banks, such as Bank of America, Wells Fargo and JPMorgan Chase, are among the largest ones.

The servicers lacked adequate processes and enough employees to meet the crush of distressed borrowers, Barr says. They took too long to beef up staff. They couldn’t do “basic blocking and tackling” in communicating with borrowers, he says.

The Government Accountability Office documented problems when it surveyed housing counselors who work with borrowers seeking HAMP modifications. Almost 60% complained that servicers lost documents, 54% said trial modifications took too long, and 42% said borrowers felt that they were wrongly denied modifications, according to the GAO’s report in March.

The Johnson’s weren’t the only ones who lost a house to foreclosure while thinking help was on the way. Others did, too, said Treasury official Darius Kingsley in congressional testimony in October. He called such situations egregious.

The administration casts much of the blame on the industry, but others blame the government.

Barofsky says Treasury had to have known that servicers were “totally unequipped” to handle HAMP when it launched. Still, it rushed out a “poorly designed program,” he says.

Servicers say changing program guidelines made it tough to implement the government programs.In a three-month period, Treasury made 100 changes to HAMP, making it “physically impossible” for servicers to keep up, said Barbara Desoer, president of Bank of America Home Loans, in a recent speech to community leaders in San Francisco.

HAMP provides financial incentives — generally about $4,000 a loan — to servicers to modify loans.The goal is to make it more economical for servicers to modify a loan than to foreclose.But the incentives weren’t big enough to draw broader servicer participation, says Jared Bernstein, former economic policy adviser to Vice President Biden.What’s more, the government made HAMP a voluntary program for servicers, then failed to make sure that participating servicers followed HAMP’s rules, consumer advocates say.

HAMP ran for two years before financial incentives were withheld from any uncompliant servicer, even though abuses were “widespread,” Barofsky says.

“There’s been no enforcement or accountability,” says Diane Thompson of the National Consumer Law Center.

The $1 billion Emergency Homeowner Loan Program was open to homeowners in 32 states who were ineligible for aid from a $7.6 billion fund for homeowners in 18 states hardest hit by the recession and falling home prices.

HUD took too long to launch the program, which didn’t leave enough time to get applicants through an onerous application process, consumer advocates say.

Instead of helping 30,000 homeowners as first intended, the program is on track to help fewer than 12,000, HUD’s preliminary data show.That “is an absolute disgrace,” says Ira Rheingold, executive director of the National Association of Consumer Advocates.HUD officials say it took time to identify contractors to run the program, set up fiscal controls and ensure the program was run fairly.”We, too, are disappointed,” Carol Galante, a senior HUD housing official, testified at a congressional hearing in October.

More but smaller plans to come

New efforts are underway, but none appear to have the scope of previous plans.
State attorneys general and federal officials are negotiating a multibillion-dollar settlement with major mortgage servicers to help more homeowners.

If a deal is struck, it will include principal forgiveness on more home loans, Donovan says. That may show loan owners that forgiving principal really does lead to fewer defaults, Rheingold says, and encourage more of it.

Most of the $7.6 billion in Hardest Hit Funds, too, have yet to reach the market. States have through 2017 to use those funds.The Treasury Department also says there are still 1 million homeowners who could be eligible for HAMP.”We’re going to keep fighting to fix this housing market,” Donovan says

5 Reasons to get a New Mortgage in 2012

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5 Reasons to get a New Mortgage in 2012

Mortgage interest rates, near all-time lows, are likely to remain attractive throughout 2012. That means opportunities for new homebuyers and for homeowners who want to refinance.

Here are five reasons why you might want to get a new mortgage, and what you should know.

While depressed housing prices and low mortgage rates have made homes more affordable, economic uncertainty and volatile housing markets have discouraged so many homebuyers that mortgage purchase applications dropped to a 15-year low in August, the Mortgage Bankers Association reported.

In qualifying for loans, buyers face hurdles including a down payment and the ability to document at least two years of income, says Justin Lopatin, vice president of Baytree National Bank & Trust in Chicago. Income documentation can be hard for people who’ve suffered temporary unemployment and those who are self-employed or have irregular wages.

Many investors pay cash to purchase residential rental properties. But some take out a mortgage to increase their leverage, says Julie Miller, sales manager at Prospect Mortgage in Irvine, Calif.

Lopatin says low interest rates are an inducement for investment property buyers.

“If you can take out an investment loan at 4.5 percent and rent out (the property) and make a few dollars a month, annually, the return will be worth the loan,” he says. “Not to mention the tax write-offs and other advantages of owning real estate.”

Mortgage insurance isn’t an option for investment property, so a fat down payment, typically 20 percent or more, is a must.

Investment buyers also need to show that they have enough income and reserves to afford the payments even if the tenant fails to pay the rent or moves out. Lenders typically will count 75 percent of the rent toward the borrower’s income-qualifying ratios, Lopatin says. For example, a monthly rent of $1,000 would count as $750 of income.

Low rates can make rate-and-term refinancing a smart financial move. This type of new loan is exactly what the name implies: a refinance in which the interest rate or term is changed, but the loan amount stays the same.

Another benefit might be locking in a fixed interest rate instead of an adjustable rate.

Homeowners who want to refinance must provide income documentation and have a “decent” credit score, to use Miller’s characterization.

Equity is also required for most loan refinance programs. This hurdle can be troublesome because homeowners don’t control a property’s market value, Lopatin says.

If your loan amount exceeds your home’s value, consider the Home Affordable Refinance Program, or HARP, part of the federal government’s Making Home Affordable initiative. If your loan is insured by the Federal Housing Administration, the FHA Short Refi program might enable you to refinance in a negative equity position.

A home equity loan or line of credit can be a good way to get cash for financial needs such as remodeling, major home repairs or financing a college education. The benefits, Lopatin says, include immediate cash, low-cost debt and potentially an income tax write-off.

There’s a catch: You can’t borrow against your equity if your mortgage debt exceeds your home’s value.

Taking out cash isn’t free money. In fact, a cash-out refinance increases your debt, which is “just not wise today,” says Alfred McIntosh, principal of McIntosh Capital Advisors, a financial planning firm in Los Angeles.

Co-signing a home loan for someone might sound like a feel-good proposition. But those warm fuzzies are the only benefit to co-signing.

“I see no reason why anyone should co-sign on anything for anyone, unless it’s a relative, because you’re putting yourself in a position to jeopardize your credit,” Lopatin says.

Miller sees “more negatives than positives” because the co-signer is equally responsible for the loan. If the borrower fails to make payments, the co-signer is on the hook.

Mortgage rates fell this week, reaching new record lows as investors seemed to ignore the latest signs of economic recovery.

The 30-year fixed-rate mortgage fell 3 basis points to 4.18 percent. A basis point is one-hundredth of 1 percentage point.

The 15-year fixed-rate fell 4 basis points to 3.4 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, fell 2 basis points to 4.62 percent.

The 5/1 ARM fell 1 basis point to 3.19 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.

Fewer Major Metros Show Home Value Declines

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U.S. Home Values Unchanged in November; Fewer Major Metros Show Value Declines

More than half of local markets appreciated or remained flat month-over-month in November according to Zillow Real Estate Market Reports

Home values in the United States were essentially unchanged in November, decreasing a marginal 0.1 percent from October, according to this month’s Zillow® Real Estate Market Reports[i]. Annually, the Zillow Home Value Index[ii] fell 4.6 percent from November 2010 to $147,800 and has returned to late 2003 levels.

Regionally, home values appreciated or remained flat from October to November in 60 percent of the 165 housing markets covered by Zillow, compared to 24 percent last year. Major metropolitan statistical areas (MSAs) that experienced flat or increasing home values include Los Angeles, Washington, Miami-Ft. Lauderdale, Fla., San Francisco and Detroit. On an annual basis, the median home value is down for nearly all (90 percent) of the 165 MSAs covered by Zillow, although the rate of annualized depreciation has slowed significantly in the majority of the markets.

Meanwhile, foreclosure liquidation rates have fallen steadily since the robo-signing controversy in late 2010 as banks slowed down their processing of foreclosures. In November, 8.1 out of every 10,000 U.S. homes were foreclosed upon. Foreclosure liquidations peaked in October 2010 at 11 out of every 10,000 homes and could rise again pending the attorneys general settlement which will give banks more certainty over the foreclosure process, therefore opening the backlog of foreclosures.

“Overall, we are seeing encouraging signs in housing data such as sequential months of slowing depreciation rates, stabilizing markets and organic improvement in value trends, largely in the absence of government policy intervention,” said Zillow Chief Economist Dr. Stan Humphries. “However, we’re not out of the woods yet. Supply and demand are still not in balance in many markets and we do expect higher foreclosure liquidation rates near-term, which will put additional downward pressure on home values.”

Dr. Humphries continued, “Even with the anticipated increase in foreclosures, look for 2012 to be a transitional year in which home values fall modestly followed by a prolonged period of flat home values. We’re still three to five years away from ‘normal’ housing market conditions.”

Obama Administration Releases December 2011 Housing Scorecard

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OBAMA ADMINISTRATION RELEASES DECEMBER 2011 HOUSING SCORECARD

WASHINGTON- The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today [1/9/12] released the December edition of the Obama Administration’s Housing Scorecard – a comprehensive report on the nation’s housing market. Data in the December Housing Scorecard show some subtle improvements in the market over the past year, but underscore fragility as the overall outlook remains mixed. For example, new and existing home sales rose compared to the prior month and remain higher than a year ago, and homes are more affordable than they have been since 1971. Median-income families today have nearly double the funds needed to cover the cost of the average home. However, home prices showed a slight dip from the prior month and remain below year ago levels. The full report is available online at hud.gov/scorecard.

HUD Assistant Secretary Raphael Bostic said, “As we compare today’s data to market data from last year – and certainly from the economic conditions when we took office in 2009 – it’s clear that we’ve made important progress in recovering from this housing crisis. But with so many homeowners still struggling to pay their mortgages or move into more sustainable loans, we cannot rest on our laurels. There is still a lot of work to do. That’s why the Obama Administration continues to push hard for effective implementation of our recovery programs to help more underwater borrowers and unemployed or underemployed homeowners stay in their homes whenever possible.”

“The Administration’s programs have set standards that have benefitted millions of families across the country and helped them avoid foreclosure,” said Treasury Assistant Secretary for Financial Stability Tim Massad. “We remain committed to helping as many families as we can while the housing market continues to recover.”

The December Housing Scorecard features key data on the health of the housing market and the impact of the Administration’s foreclosure prevention programs, including:

  • The Administration’s recovery efforts continue to help millions of families deal with the worst economic crisis since the Great Depression, even as new mortgage delinquencies continue to decline. More than 5.5 million modification arrangements were started between April 2009 and the end of November 2011 – including more than 1.7 million HAMP trial modification starts and more than 1.1 million FHA loss mitigation and early delinquency interventions. Nearly 910,000 homeowners have received a HAMP permanent modification to date, saving an estimated $9.9 billion in monthly mortgage payments. The Administration’s programs continue to encourage improved standards and processes in the industry, with HOPE Now lenders offering families and individuals more than 2.6 million proprietary mortgage modifications through November.
  • Eligible homeowners entering HAMP have a high likelihood of earning a permanent modification and realizing long-term success.Eighty-three percent of eligible homeowners entering HAMP since June 1, 2010 received a permanent modification, with an average trial period of 3.5 months. The Office of the Comptroller of the Currency (OCC)’s Mortgage Metrics Reportfor the Third Quarter of 2011 found that HAMP continues to prove more sustainable for homeowners than industry modifications, as a result of HAMP’s emphasis on affordability relative to a homeowner’s income and successful completion of a trial payment period.