More Evidence Housing Market Is Improving: 

Fewer homeowners were underwater on their mortgages in the second quarter, helped by an improvement in home prices, data analysis firm CoreLogic said. 

An "underwater mortgage" is where a home owner owes more on their home than what they could sell it for.  The majority of these home owners pay their mortgage on time (The share of home owners that were underwater and up to date on their payments was 84.9 percent, up slightly from 84.8 percent in the first quarter) but are trapped in their current location.  The fewer homes that are underwater, the more well-qualified buyers hit the market.

About 600,000 home owners returned to positive equity in the second quarter, adding to the 700,000 that were above water in the first quarter.  That is a large number of newly eligible buyers that are ready to take advantage of fantastic rates and are willing to move forward with a purchase because they know first-hand that home values are increasing.

Sens. Boxer and Menendez revive bill to help more homeowners refinance:

California Senator Barbara Boxer and New Jersey Senator Robert Menendez this week reintroduced a measure that would allow millions of homeowners to more easily refinance their mortgages at lower rates. 

First introduced in May, “The Responsible Homeowner Refinancing Act of 2012" would streamline and align the refinance processes of Fannie Mae and Freddie Mac and make it easier for homeowners who are current on their mortgage payments but who have been previously unable to refinance to finally take advantage of record low interest rates.

The proposed legislation would extend streamlined refinancings; waive loan-to-value ratios for existing, well-performing loans to participate in the streamline program; make refinancings more affordable by eliminating up-front fees and appraisal costs; and improve competition for lenders looking to compete with the existing mortgage servicer.

C.A.R. applauds Boxer (D-CA) and Menendez (D-NJ) for reintroducing this bill and recognizing that it benefits all parties involved.  “Responsible homeowners who can refinance will avoid foreclosure and have more money in their pockets.  Fannie Mae and Freddie Mac will see fewer foreclosures, and the housing market can continue its recovery,” C.A.R. President LeFrancis Arnold said in a statement.

When an adjustable-rate mortgage makes sense:

When the housing market began declining, many people claimed that adjustable-rate mortgages (ARMs) were the cause.  However, recently they’ve been making a comeback, especially among affluent borrowers.

Making sense of the story

• An ARM offers an introductory period in which the borrower pays a lower interest rate than with a fixed loan; after that, the rate can fluctuate up or down.

• With rates near historic lows, the safety of locking in a fixed-rate appeals to many borrowers.  But these borrowers are paying a premium for that security.  The spread between rates on 30-year fixed-rate mortgages and the most-popular ARMs now stand at about one percentage point, more than double the difference just five years ago.
• That means that homeowners who are planning to either move or pay off their mortgage over the next few years can save big with an ARM.
• Borrowers can determine if an ARM is the right loan option for them by looking at their financial situation and the terms of the ARM. ARMs carry risks in periods of rising interest rates, but can be cheaper over a longer term if interest rates decline. An ARM may be a good option to consider for borrowers who plan to own the home for only a few years, expect an increase in future earnings, or the prevailing interest rate for a fixed-rate mortgage is too high.

Before deciding to apply for an ARM, borrowers should consider if their income is likely to rise enough to cover higher mortgage payments if interest rates increase; whether they will be taking on other sizable debts such as car loans or school tuition in the near future; how long they plan to own the home; and whether their mortgage payments can increase even if interest rates generally do not increase.

Completed foreclosures decline in July:

CoreLogic’s National Foreclosure Report for July shows there were 58,000 completed foreclosures in the U.S. in July 2012, down from 69,000 in July 2011 and 62,000 in June 2012. Since the financial crisis began in September 2008, there have been approximately 3.8 million completed foreclosures across the country. Completed foreclosures are an indication of the total number of homes actually lost to foreclosure.

 

Approximately 1.3 million homes, or 3.2 percent of all homes with a mortgage, were in the national foreclosure inventory as of July 2012 compared with 1.5 million, or 3.5 percent, in July 2011. Month-over-month, the national foreclosure inventory was unchanged from June 2012 to July 2012. The foreclosure inventory is the share of all mortgaged homes in any stage of the foreclosure process.

 

“Completed foreclosures were down again in July, this time by 16 percent versus a year ago, as servicers increasingly rely on alternatives to the foreclosure process, such as short sales and modifications,” said Mark Fleming, chief economist for CoreLogic. “Completed foreclosures remain concentrated in five states, California, Florida, Michigan, Texas and Georgia, accounting for 48 percent of all completed foreclosures nationwide in July.”

 

Highlights as of July 2012:

• The five states with the highest number of completed foreclosures for the 12 months ending in July 2012 were: California, 118,000; Florida, 92,000; Michigan, 61,000; Texas, 57,000; and Georgia, 54,000. These five states account for 48.1 percent of all completed foreclosures nationally.
• The five states with the lowest number of completed foreclosures for the 12 months ending in July 2012 were: South Dakota, 32; District of Columbia, 120; Hawaii, 445; North Dakota, 575; and Maine, 608.

New home sales rise in July

Sales of new single-family houses rose 3.6 percent in July to a seasonally adjusted annual rate of 372,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 25.3 percent above the July 2011 estimate of 297,000.The median sales price of new houses sold in July 2012 was $224,200; the average sales price was $263,200. The seasonally adjusted estimate of the number of new houses for sale at the end of July was 142,000. This represents a supply of 4.6 months at the current sales rate.

Home prices rose in second quarter:

 

The S&P/Case-Shiller Home Price Indices shows that all three headline composites ended the second quarter of 2012 with positive annual growth rates for the first time since the summer of 2010. The national composite rose 1.2 percent in the second quarter of 2012 compared with the second quarter of 2011 and was up 6.9 percent compared with the first quarter of 2012. The 10- and 20-City Composites posted respective annual returns of 0.1 percent and 0.5 percent in June 2012.

Month-over-month, average home prices in the 10-City Composite were up 2.2 percent and in the 20-City Composite were up 2.3 percent compared with May. For the second consecutive month, all 20 cities and both Composites recorded positive monthly gains. Eighteen of the 20 MSAs and both Composites posted better annual returns in June as compared with May 2012 – only Charlotte and Dallas saw a deceleration in their annual rates.

Pending Home Sales Touch Two Year High: 

Contracts to buy previously owned homes rose to their highest level in more than two years in July, an industry group said on Wednesday, suggesting the housing market recovery was gaining traction.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in July, increased 2.4 percent to 101.7 - the highest level since April 2010 and shortly before the deadline for the home buyer tax credit.

The report was the latest to show momentum in housing market recovery, with gains in home construction and sales and prices.
Pending home sales were up 12.4 percent in the 12 months to July.

"All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage," said NAR chief economist Lawrence Yun.

Contracts in the Northeast gained 0.5 percent last month and increased 3.4 percent in the Midwest. In the South, contracts rose 5.2 percent. The West saw a 1.7 percent drop in contracts last month.