Fast Facts

Calif. median home price: April 2011: $293,570 (Source: C.A.R.)

Calif. highest median home price by region/county April  2011: Marin $726,060 (Source: C.A.R.)

Calif. lowest median home price by region/county April 2011: Merced $103,890 (Source: C.A.R.)

Calif. Pending Home Sales Index: March 2011: 128.7 (Source: C.A.R.)

Calif. First-time Buyer Affordability Index: First quarter 2011: 53 percent (Source: C.A.R.)

Mortgage rates: Week ending 5/26/2011 30-yr. fixed: 4.60 fees/points: 0.7% 15-yr. fixed: 3.78 fees/points: 0.7% 1-yr. adjustable: 3.11% Fees/points: 0.5% (Source: Freddie Mac)

Weekly Fraud Alert: Federal Audits Accuse Lenders of Defrauding Taxpayers

A set of confidential federal audits accuse the nation’s five largest mortgage companies – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial – of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, according to a story in the Huffington Post.

The audits accuse the lenders of violating the False Claims Act. The audits were completed between February and March, according to four officials briefed on the situation. The internal watchdog office at HUD referred its findings to the Department of Justice, which now must decide whether to file charges.

Source: Huffington Post

Real Estate Investors Set to Become More Active

Real estate investors are expected to be more active in their local markets by a three-to-one margin compared with typical home buyers over the next 24 months, according to a survey released by Move, Inc.

The survey also suggests local markets may be heating up with renewed investor interest and activity, as nearly 70 percent of investors expect it will be easier to find properties in the near future. Real-estate investors (62%) told Move they’re paying more attention to home values in their local markets, and only 43.5 percent say it will be harder to find bargains. Those who are already in the market are starting to feel optimistic, as well as two out of five investors expecting it’ll be easier to sell their properties in the next six months.

An uptick may be in the offing; some investors (22%) are bullish and expect prices to rise in the next six to 12 months, while almost half expect prices to remain relatively the same. Nearly a quarter of real estate investors expect prices will fall in the next six to 12 months

It is set to get heated out there. The Move Investor survey also suggests investors may be positioned to compete vigorously with traditional first-time homebuyers for hot deals:

65.5 percent said they expect the problems first-time buyers are having in getting mortgages will make it easier for them to compete for properties.

18.5 percent say they’ll be cash-only buyers, a strategy that’s out of reach for most first-time buyers.

80.5 percent expect cash discounts from sellers.

Source: Move, Inc.

Home Prices Nationwide Increase in April Compared With March

CoreLogic’s April Home Price Index increased on a month-to-month basis by 0.7 percent between March and April, marking the first such increase since the conclusion of the federal home buyer tax credit. 

However, home prices nationwide, including distressed sales, declined by 7.5 percent in April 2011 compared with a year earlier. Excluding distressed sales, year-over-year prices declined 0.5 percent in April 2011 compared with April 2010 and by 1.6 percent in March 2011 compared with March 2010. Distressed sales include short sales and real estate owned (REO) transactions.

Source: CoreLogic

California Housing Starts Rise 2 Percent in April

Total housing starts in California, as measured by the number of building permits issued, rose 2 percent in April, according to the California Building Industry Association.

According to statistics compiled by the Construction Industry Research Board (CIRB), builders pulled permits for 3,474 total housing units in April, an increase of 2 percent compared with the same month a year ago, but down 23 percent from March.  Permits for single-family homes totaled 1,978, down 16 percent from April 2010, but up 10 percent from the previous month, while multifamily permits totaled 1,496, up 43 percent from a year ago, but down 45 percent from March.

Source: California Building Industry Association

Short Sale Soundoff: 2011 Short Sale Research Study

CoreLogic recently announced the release of its 2011 Short Sale Research Study, “CoreLogic Analysis on Short Sale Trends, Risks, and Opportunities.” The study was designed to take a rigorously scientific, data-driven look at current trends in short sales and to identify inherent risks and opportunities associated with these transactions.

“Suspicious” short-sale transactions are those where a lender may have incurred unnecessary losses due to the short sale transaction quickly followed by a resale transaction for a substantially higher price where that higher price is not supported by an underlying increase in property value. The focus of the study was to quantify the potential losses associated with these suspicious short-sale transactions.

“This study reveals that short sales that show another sale transaction closing on the same day account for 16 percent of all suspicious short sales in the industry. These same-day resales are on average $50,000 greater than the lender agreed upon short sale price,” said Tim Grace, senior vice president of Product Management and Analytics at CoreLogic. “The study also validates an industry perception related to Limited Liability Company buyers in short-sale transactions: while they comprise only two percent of all buyers, they comprise more than 25 percent of buyers in suspicious short-sale transactions.”

Key findings from the study include:

It is estimated that lenders, servicers, and investors may incur potential losses in excess of $375 million in 2011 due to suspicious short sale transactions. This is up more than 20 percent from $310 million in estimated losses for 2010.

Rates of suspicious transactions are on the rise. In the first half of 2010, approximately one in every 52 (1.9 percent) short sale transactions appears to be suspicious, wherein the lender may have incurred unnecessary loss.

Some of the states with the largest short sale volume (California, Arizona, Colorado, and Florida) are now the same states with the highest rates of suspicious short-sale transactions. This convergence results in maximum negative impact on the industry.

Source: CoreLogic

Home Prices Decline 4.2 Percent in First Quarter

The latest S&P/Case-Shiller Home Price Indices show that the U.S. National Home Price Index declined by 4.2 percent in the first quarter compared with the fourth quarter.  Nationally, home prices are back to their mid-2002 levels.

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.1 percent decline in the first quarter of 2011 compared with the first quarter of 2010. In March, the 10- and 20-City Composites posted annual rates of decline of 2.9 percent and 3.6 percent, respectively.

Source: S&P/Case-Shiller

Foreclosure Homes Account for 28 Percent of First Quarter 2011 Sales

RealtyTrac® the leading online marketplace for foreclosure properties, released its Q1 2011 U.S. Foreclosure Sales Report™, which shows that sales of bank-owned homes and those in some stage of foreclosure accounted for 28 percent of all U.S. residential sales in the first quarter of 2011, up slightly from 27 percent of all sales in the fourth quarter of 2010 and the highest percentage of sales since the first quarter of 2010, when 29 percent of all sales were foreclosure sales.

The average sales price of properties in some stage of foreclosure — default, scheduled for auction or bank-owned (REO) — was $168,321, down 1.89 percent from the fourth quarter of 2010 and down 1.46 percent from the first quarter of 2010.

The average sales price of foreclosure properties was nearly 27 percent below the average sales price of properties not in foreclosure, unchanged from the 27 percent foreclosure discount in the fourth quarter and up slightly from the 26 percent foreclosure discount in the first quarter of 2010.

Third parties purchased a total of 158,434 U.S. bank-owned homes and those in some stage of foreclosure during the first quarter, a decrease of 16 percent from a revised fourth quarter total and down 36 percent from a revised Q1 2010 total. Bank-owned properties that sold in the first quarter had been repossessed by the bank an average of 176 days prior to the sale, while properties that sold in the earlier stages of foreclosure in the first quarter were in foreclosure an average of 228 days before selling.

“While foreclosure sales continue to account for an unusually high percentage of all residential home sales, sales volume is well off the peak we saw in the first quarter of 2009, when nearly 350,000 foreclosure properties sold to third parties,” said James J. Saccacio, chief executive officer of RealtyTrac. “While this is probably helping to keep home prices relatively stable, it is also delaying the housing recovery. At the first quarter foreclosure sales pace, it would take exactly three years to clear the current inventory of 1.9 million properties already on the banks’ books, or in foreclosure.”

Foreclosure sales by type

A total of 107,143 bank-owned (REO) residential properties sold to third parties in the first quarter, down 11 percent from the previous quarter and down nearly 30 percent from the first quarter of 2010. REO sales accounted for nearly 19 percent of all sales in the first quarter, up from 17 percent of all sales in the previous quarter and up from 18 percent of all sales in the first quarter of 2010. REOs sold for an average discount of 35 percent, the same discount as in the previous quarter and up from an average discount of 33 percent in the first quarter of 2010.

A total of 51,291 pre-foreclosure properties — in default or scheduled for auction — sold to third parties in the first quarter, down nearly 26 percent from the previous quarter and down 45 percent from the first quarter of 2010. Pre-foreclosure sales accounted for nearly 9 percent of all sales, down from 10 percent of all sales in the fourth quarter of 2010 and down from 11 percent of all sales in the first quarter of 2010. Pre-foreclosure sales, which are often short sales, sold for an average discount of 9 percent, down from an average discount of 13 percent in the fourth quarter and an average discount of 14 percent in the first quarter of 2010.

Nevada, California, Arizona post highest percentage of foreclosure sales

Foreclosure sales accounted for 53 percent of all residential sales in Nevada during the first quarter, the highest percentage of any state but down from nearly 54 percent of all sales in the previous quarter and down from 59 percent of all sales in the first quarter of 2010. The average foreclosure sales price in Nevada during the first quarter was nearly 18 percent below the average sales price of homes not in foreclosure. Bank-owned properties that sold in the first quarter had been repossessed by the bank an average of 130 days prior to sale, while properties that sold in the earlier stages of foreclosure were in foreclosure an average of 135 days before selling.

California foreclosure sales accounted for 45 percent of all residential sales in the state during the first quarter, up from 43 percent of all sales in the fourth quarter but down from nearly 48 percent of all sales in the first quarter of 2010. The average foreclosure sales price in California was nearly 34 percent below the average sales price of homes not in foreclosure. California bank-owned properties that sold in the first quarter had been repossessed by the bank an average of 164 days prior to sale, while properties that sold in the earlier stages of foreclosure were in foreclosure an average of 156 days before selling.

Foreclosure sales also accounted for 45 percent of all residential sales in Arizona during the first quarter, down from 50 percent of all sales in the previous quarter and down from nearly 47 percent of all sales in the first quarter of 2010. Arizona bank-owned properties that sold in the first quarter had been repossessed by the bank an average of 129 days prior to the sale, while properties that sold in the earlier stages of foreclosure were in foreclosure an average of 176 days before selling.

Other states where foreclosure sales accounted for at least one-quarter of all sales were Idaho (33 percent), Florida (32 percent), Michigan (32 percent), Oregon (32 percent), Virginia (30 percent), Colorado (30 percent), Illinois (29 percent), Georgia (27 percent) and Ohio (25 percent).

Source: Realty Trac

More Than Half of U.S. Adults Believe Housing Recovery Unlikely Until 2014 or Later

An ongoing survey conducted by Harris Interactive on behalf of Trulia and RealtyTrac finds that 54 percent of U.S. adults believe recovery in the housing market will not happen until 2014 or later. In a previous survey conducted six months ago, 42 percent of American adults said they thought the market would turn around by 2012 or had already turned around. Now, only 23 percent continue to think this will happen.

According to the survey, 45 percent of American adults say the government is not doing enough to prevent foreclosures, and only 17 percent say too much is being done. Sixteen percent say the government is doing the right amount to prevent foreclosures, and 22 percent are unsure.

More than half of U.S. renters (56 percent) and 47 percent of current homeowners are at least somewhat likely to purchase a foreclosed home, according to the survey. Along with having some concerns about hidden costs, a risky buying process and loss in home value, the majority of American adults expect to pay 38 percent less for a foreclosed home than a similar home that was not in foreclosure – not too far above the average discount of 36 percent on sales of bank-owned homes (REO) compared to sales of homes not in foreclosure reported in the RealtyTrac 2010 Foreclosure Sales Report.

Source: Trulia

California’s Median Home Price Increases, Home Sales Decrease in April

California’s median home price for existing, single-family homes rose 2.5 percent in April to $293,570, while home sales declined 2.9 percent, compared with March, according to C.A.R.’s latest sales and price report.

In year-to-year comparisons, sales of existing, single-family detached homes rose 5 percent and the median price fell 4.4 percent.

C.A.R.’s Unsold Inventory Index stood at 5.4 months in April, up from 5.3 months in March, and up compared with April 2010’s 4.9-month supply. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

The median number of days it took to sell a single-family home in California was 53 days in April 2011, compared with 37.4 days for the same period a year ago.

Source: California Association of Realtors

Mortgage Loan Delinquency Rate Increases in First Quarter

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 8.32 percent of all loans outstanding as of the end of the first quarter of 2011, an increase of seven basis points from the fourth quarter of 2010, and a decrease of 174 basis points from one year ago, according to the Mortgage Bankers Association’s National Delinquency Survey.

The percentage of loans on which foreclosure actions were started during the first quarter declined 1.08 percent, down 19 basis points from last quarter and 15 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.

The percentage of loans in the foreclosure process at the end of the first quarter was 4.52 percent, down 12 basis points from the fourth quarter of 2010 and 11 basis points lower than one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.10 percent, a decrease of 50 basis points from last quarter, and a decrease of 144 basis points from the first quarter of last year.

The combined percentage of loans in foreclosure or at least one payment past due was 12.31 percent on a non-seasonally adjusted basis, a 129 basis point decline from 13.60 percent last quarter.

Source: Mortgage Bankers Association

April Pending Home Sales Drop After Two Monthly Gains

Pending home sales fell in April with regional variations following increases in February and March, with unusual weather and economic softness adding to ongoing problems that are hobbling a recovery, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 11.6 percent to 81.9 in April from a downwardly revised 92.6 in March. The index is 26.5 percent below a cyclical peak of 111.5 in April 2010 when buyers were rushing to beat the contract deadline for the homebuyer tax credit.

The data reflects contracts but not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said the dip in contracts may be due to temporary factors. “The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” he said. “The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims.”

Yun notes the growth in retail sales slowed measurably in April, while sales at furniture and home furnishing stores declined sharply. “Nonetheless, the magnitude of the fall in pending home sales is larger than can be implied by broad economic factors, so we need to see if it’s just a one-month aberration.”

Yun said tight credit is the primary long-term factor holding back the market. “No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow,” he said. “Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years. A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves.”

“We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings,” Yun added.

The PHSI in the Northeast rose 1.7 percent to 64.5 in April but is 33.4 percent below a year ago. In the Midwest the index fell 10.4 percent to 74.1 and is 30.2 percent below April 2010. Pending home sales in the South dropped 17.2 percent to an index of 91.3 in April and are 27.0 percent below a year ago. In the West the index declined 8.9 percent to 89.1 and is 16.9 percent below April 2010.

“Even with very favorable affordability conditions, job growth and a pent-up demand from abnormally low household formation during the past three years, the recovery will continue to be uneven and sluggish given the ongoing credit constraints,” Yun said.

Source: NAR

Fast Facts

Calif. median home price: April 2011: $293,570 (Source: C.A.R.)

Calif. highest median home price by region/county April 2011: Marin $726,060 (Source: C.A.R.)

Calif. lowest median home price by region/county April 2011: Merced $103,890 (Source: C.A.R.)

Calif. Pending Home Sales Index: March 2011: 128.7, up 15.2 percent compared with February (Source: C.A.R.)

Calif. First-time Buyer Affordability Index: First quarter 2011: 53 percent (Source: C.A.R.)

Mortgage rates: Week ending 5/19/2011 30-yr. fixed: 4.61 fees/points: 0.7% 15-yr. fixed: 3.80 fees/points: 0.7% 1-yr. adjustable: 3.15% Fees/points: 0.6% (Source: Freddie Mac)

Winners of the Rental Economy

Members of the Rent is Too Damn High Party beware! Residential rental prices are on the rise. Here's who wins in the new non-ownership society.

There are still many factors discouraging even the most savvy homebuyers from purchasing a home, but a new class of renters is expected to bring a bright spot to the troubled U.S. real estate market. Prices for rental apartments are expected to rise nationally – by approximately 4.5% in 2011 and up to another 3% in 2012, according to Rent.com.

During the housing boom between 2001 and 2005, prices for rentals fell by nearly 10% as easy credit offered by banks lured many newcomers to homeownership. Since the bust of the housing market, rents have more than made up those declines as more people now question the financial merits of homeownership or simply can't get approved for a mortgage. From 2006 to 2009, rental prices on average increased by more than 15%, according to Moody's Analytics economist Andreas Carbacho-Burgos. Nationwide, the average rent today is $1,360 a month.

Experts predict rents will continue rising.

Christina Aragon, director of strategy and consumer insight of Rent.com, says this is being driven by demographic changes coupled with an improving economy and ongoing foreclosure problems hampering the market for single-family homes. Much of the demand for rentals will likely come from younger people who tend to rent rather than buy. The economic recession pushed many jobless twenty- and early thirty-somethings to crash with friends and parents, but Aragon expects that the improving job market will get them to find their own place. What's more, the number of people aged 25 to 34 is forecast to grow 1.4% per year through 2013, helping drive demand further.

Paying more to the landlord might be bad news for renters, but it could signal that better days are ahead for the overall housing market. Here are a few winners of our burgeoning rental economy.

Builders and developers

Since the bust of the housing market, residential construction has dropped to record lows. But that is poised to change as builders and developers have already begun trying to cash in on higher demand for rental apartments.

Charles Brindell, chairman of the National Association of Home Builders' Multifamily Leadership Board, says he expects apartment construction to pick up to at least 160,000 units this year, mostly in urban areas along the East Coast. This would be significantly higher, given that construction since 2009 has totaled less than 90,000 a year – the lowest in 50 years.

Brindell, also CEO of a Texas-based firm that invests and develops apartment communities, says he's bullish because of the improving job prospects for younger workers. More than 60% of jobs created in 2010 went to workers between 20 to 24-years old – the prime age group for renters. Brindell's Mill Creek Residential Trust is planning to build 3,000 apartment units this year, mostly in the Northeast including the Boston area, Long Island, New York, and Virginia.

However, while a burst of activity in multi-family homes is certainly good news for the construction sector, it is by no means enough to return the homebuilders to their previous level of activity. The NAHB index that tracks builder confidence remains low at 16 -- it was as high as 72 in 2005.

Real estate investment trusts (REITs)

It's not that homeownership is dead, but people are certainly renting more and investors have picked up on the higher demand.

REITs, which invest in commercial properties from office buildings to rental apartments – have outperformed the S&P500 since the financial crisis. In 2010, investments in apartment complexes led gains in the overall REITs market with total returns at 47%. Returns for the overall REITs market was 28%, markedly higher than the S&P500 that saw returns of 15%.

Last month, real estate investment trusts Equity Residential, headed by real estate mogul Sam Zell, and AvalonBay Communities -- both among the nation's biggest apartment owners -- posted higher year-over-year revenue as the companies raised rents.

For Equity Residential, average rent rose 3.6% to $1,400 and occupancy rose to 95% from 94.6% the previous year on properties the company operated for a year or more. Revenue rose by 4%. And AvalonBay reported that revenues jumped 3.7% and average monthly rental rates ticked up slightly quarter over quarter from $1,873 to $1,879.

As of Monday, total returns for REITs were 8.73% (with about seven months to go), outperforming the Russell 2000, NASDAQ and S&P 500. Investments in apartment complexes continued contributing much of the gains.

Overall U.S. housing market

Given that many homeowners are still trying to clean up their messy finances, it might be hard to see how higher rents could benefit the overall U.S. housing market. In theory, at least, renting could become so expensive that it costs less to buy a house and make monthly mortgage payments.

In fact, that's happening already, even if it hasn't yet translated to a return to homeownership. In Moody Analytics' latest list of rent ratios for 54 U.S. metropolitan areas, 29 cities fell into the "better to buy" category. With many experts predicting that home prices have further to fall this year and with higher expectations for rentals, more cities could end up on the buy side of the buy-versus-rent calculator.

But much of that will likely depend on huge hurdles weighing on the housing market – namely, record foreclosure rates, high unemployment and tighter lending standards for new mortgages. Areas that continue to experience high foreclosure rates and widespread unemployment, such as Florida and Arizona, might find it more affordable to buy than rent. Yet renting will likely be king in more urban areas with more employment opportunities, such as New York and Seattle.

Source: Fortune Magazine