Shares of Toll Brothers (TOL), Hovnanian (HOV) and KB Home (KBH) and other builders have surged. The exchange-traded fund that tracks the group has nearly doubled since March.
Home starts have risen for five straight months, while sales of new homes recently hit their highest level since last September. Prices are up as well: the Case-Shiller index of national house prices rose 2.9% in the second quarter, ending a three-year decline.
These signs -- as well as anecdotal reports about house shoppers growing more willing to write a deposit check -- have executives at homebuilding firms declaring the worst is over.
"We believe declining cancellations and more solid demand indicate that the housing market is stabilizing," Toll Brothers chief executive officer Bob Toll said this month in a conference call with investors and analysts.
But housing boosters have forecast turnarounds repeatedly since the market peaked in 2006, only to be proved wrong by plunging prices. And skeptics say they're wrong again now.
They argue that a deeply indebted consumer, a weak job market, expiring incentives and rising foreclosures spell a quick end to any housing rebound.
"We're entering the phase where the homeowner has to earn his way out of this mess," said Mark Hanson, who runs a California real estate research firm. "This summer is shaping up as the gateway into the next move down."
Sales shift
Hanson attributes the much-ballyhooed recent house price gains to a shift in the types of properties changing hands. Earlier this year, as many as half of all transactions nationally were resales of foreclosed properties, largely at low prices.
Since then, so-called organic sales (those not involving distressed properties) have risen while foreclosure sales have remained stable. This improved mix -- together with cheap financing and a couple of popular tax incentives -- helped to revive prices in some hard-hit areas.
Thus, house prices in California have risen for three straight months, according to data provider MDA DataQuick. Foreclosure sales there have dropped to about a third of recent transactions from a high of 57% earlier this year.
But with schools opening up again and the summer home-selling season winding down, sales by nondistressed sellers are likely to fall in coming months, Hanson said.
Adding to the pressure on prices, the end is in sight (or already here) for some popular housing subsidies. An $8,000 federal tax credit for first-time home buyers is due to sunset in December. A $10,000 California tax credit for buyers of newly constructed houses expired last month.
Prime problems
Another concern is that the housing woes appear to be spreading well beyond the questionable borrowers who were at the center of the first stage of the financial crisis.
Banks leave foreclosures hanging
While many mortgage defaults in 2007 and 2008 stemmed from frauds perpetrated at the height of the bubble, a greater share of problems now are being driven by the weak job market. That's evident in the fact that more so-called prime borrowers -- those with the best credit histories -- are falling behind on their payments.
Prime fixed-rate mortgages now account for about a third of foreclosure starts, according to the Mortgage Bankers Association. MBA chief economist Jay Brinkmann said in a statement earlier this month this is "a sign that mortgage performance is once again being driven by unemployment."
Some 44% of prime borrowers fell behind on payments last year because they lost a job or income. That's up from 36% in 2006, according to data from Freddie Mac.
Other numbers bode ill for a housing recovery as well. The inventory of houses for sale has come down from a recent peak but remains "high on a historical basis," Office of Thrift Supervision economist Sharon Stark said this month.
"The supply of homes continues to be a drag on home prices and the ability for home prices to recover," she added.
An orgy of homebuilding over the past decade has driven vacancy rates higher. The Census Bureau said 14.3% of rental and owner-occupied housing units were vacant in the second quarter, compared with 9.7% a decade ago.
And Hanson said the pace of foreclosures could soon accelerate as mortgage servicers catch up on foreclosures they have delayed while grappling with new mortgage modification guidelines.
"There could be a big wall of foreclosures once the servicers get running again," he said.
Even Toll, who was talking about housing markets "dancing on the bottom or slightly above that" as long ago as December 2006, has been saying lately that the homebuilders could use a hand -- from taxpayers, of course.
Toll said on a conference call Aug. 12 that the government should consider a Cash for Clunkers type plan for the housing market: giving consumers a rebate to scrap an old home and buy a new one.
Toll argued that a four-month program that offered people $15,000 vouchers for new home construction could "put twice as many people to work, twice as fast as what's being done with the auto industry."
It won't be a shocker if Toll finds some takers in Congress for that one, given the growing jobless rolls across the nation. But legislators might first want to consider how effective such a plan might be.
"It took 10 years to create this problem," said Hanson. "Do people really believe we can correct it all in 36 months?"
-Christopher Rockey
877.446.5152
http://www.mresolution.com
Wednesday, September 2, 2009
Monday, August 31, 2009
Actions Speak Louder Than Words
In this case it's lack of any action. My list of tough lender / servicers is no secret when it comes to working on Loss Mitigation and completing Short Sales. I don't often put it in writing just based on the fact that the list differs week to week. I will tell you this though, Citigroup has been on my top five 'Hardest to Work With Lenders' for over a year. And just like every other US lender, the pat themselves on the back because they are doing what they can to help. I have a four letter word for them 'LIES!'
The good news is that Citigroup helped 108,000 people avoid foreclosure during the second quarter, a nearly 30% increase from the previous period.
The bad news is that the number of its borrowers at least 90 days behind in payments surged to 4.7%, up from 3.9% in the first quarter.
Still, CitiMortgage CEO Sanjiv Das feels the bank's ramped-up foreclosure prevention efforts can help stem the number of its borrowers falling behind.
"You keep plugging away at the early stages of delinquency and that's how you slow down the number of foreclosures," Das said in an interview.
Citigroup reported Tuesday that for every completed foreclosure, 12 at-risk borrowers get to stay in their homes. Six months ago, the ratio was 1 to 6.
The bank's loss mitigation initiatives include repayment plans, payment extensions, forbearance, and loan modifications.
When borrowers can't afford to stay in their homes, Citi also helps them avoid foreclosure through short sales -- in which a homeowner sells the property for less than what's owed -- and deeds-in-lieu-of-foreclosure, in which a homeowner signs over the house to the bank. The 1 to 12 ratio that it reported Tuesday does not include short sales or deeds-in-lieu.
Total modifications decreased by 5% during the quarter as the bank ramped up its implementation of the Obama administration's loan modification program. The president's program, which gives banks incentive payments to modify loans, requires that borrowers be put into a three-month trial period before the modification is finalized. Citi also has its own modification programs.
The bank, one-third of which is owned by U.S. taxpayers, said the redefault rates for modified loans continued to decline. Only 6.54% of loans adjusted in the first quarter were delinquent after 30 days, compared to 7.67% of loans modified in the fourth quarter and 10.86% of those adjusted in the third quarter.
More troubling, however, is the fact that foreclosures and delinquencies continue to rise. The number of foreclosures in process for Citi-serviced loans increased about 10% from the first quarter, though foreclosures initiated dropped by 14%. Completed foreclosures rose by 5%.
It will be interesting to see if the American consumer takes a hostile position against Sanjiv Das the way they have with B of A CEO Ken Lewis.
Just a thought.
-Christopher Rockey
The good news is that Citigroup helped 108,000 people avoid foreclosure during the second quarter, a nearly 30% increase from the previous period.
The bad news is that the number of its borrowers at least 90 days behind in payments surged to 4.7%, up from 3.9% in the first quarter.
Still, CitiMortgage CEO Sanjiv Das feels the bank's ramped-up foreclosure prevention efforts can help stem the number of its borrowers falling behind.
"You keep plugging away at the early stages of delinquency and that's how you slow down the number of foreclosures," Das said in an interview.
Citigroup reported Tuesday that for every completed foreclosure, 12 at-risk borrowers get to stay in their homes. Six months ago, the ratio was 1 to 6.
The bank's loss mitigation initiatives include repayment plans, payment extensions, forbearance, and loan modifications.
When borrowers can't afford to stay in their homes, Citi also helps them avoid foreclosure through short sales -- in which a homeowner sells the property for less than what's owed -- and deeds-in-lieu-of-foreclosure, in which a homeowner signs over the house to the bank. The 1 to 12 ratio that it reported Tuesday does not include short sales or deeds-in-lieu.
Total modifications decreased by 5% during the quarter as the bank ramped up its implementation of the Obama administration's loan modification program. The president's program, which gives banks incentive payments to modify loans, requires that borrowers be put into a three-month trial period before the modification is finalized. Citi also has its own modification programs.
The bank, one-third of which is owned by U.S. taxpayers, said the redefault rates for modified loans continued to decline. Only 6.54% of loans adjusted in the first quarter were delinquent after 30 days, compared to 7.67% of loans modified in the fourth quarter and 10.86% of those adjusted in the third quarter.
More troubling, however, is the fact that foreclosures and delinquencies continue to rise. The number of foreclosures in process for Citi-serviced loans increased about 10% from the first quarter, though foreclosures initiated dropped by 14%. Completed foreclosures rose by 5%.
It will be interesting to see if the American consumer takes a hostile position against Sanjiv Das the way they have with B of A CEO Ken Lewis.
Just a thought.
-Christopher Rockey
Thursday, August 27, 2009
More Loan Modification Details
So here's the deal... I am now being blasted by Loan Modification company's daily because they are so insistent on their "Huge Success Rate." I am currently interviewing Loan Modification company's on a national platform to refer agents to. I have found one Loan Modification company that I am close to endorsing based on a couple key features. First, I like that they are in the non profit sector. Second, I like that they do not charge an advanced fee to apply to their Loan Modification program. I also like their executive transparency, nobody seems to be hiding behind gate keepers. I have a national conference call tomorrow at 1:00 with this company. I will keep you posted. In the meantime, I wrote a manual on how homeowners can speak to lenders while seeking a Loan Modification. Please email me if you would like a copy of my "Guide to Negotiating a Settlement with your lender and Keeping Your Home." Here are a few passages:
What is a loan modification? To “negotiate” a loan modification means to talk to your lender and negotiate a more favorable payment plan. This usually means lowering your rate or extending the payment plan. There are several steps:
1. Realize that you cannot pay your current mortgage rates
2. Create a income vs. expense worksheet. Include your total income, your household expenses and then calculate how much you can reasonably afford per month to pay mortgage.
3. Write a “letter of hardship” explaining your current financial situation and why you need a loan modification. Lenders do not want you to file for bankruptcy and would rather give you a loan modification. Make sure to emphasize that you can pay off your mortgage if you are given a modification. This will increase your chances of success.
4. Contact the loan modification department of your lending company. Be patient and be nice. There brokers are your key to a modification.
5. Your broker will ask you for your income worksheet and your letter of hardship. Have those ready.
6. Now its negotiation time. Your broker will be working with the bank to see if you can get a modification. At this time, read our “loan modification negotiation tips”.
7. Once negotiations have ended the decision will be made. If you failed to secure a loan modification consider contact an attorney to help you negotiate. Qualified attorney have the legal power to aggressively make you a priority to your lender. Beware of unqualified attorneys or so called “loan modification” companies. These companies do not have any more knowledge than you do from reading this article.
Good luck! If you succeed then I can guarantee you that you that paying your mortgage will be a lesser burden.
-Christopher Rockey
rockey@mresolution.com
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