NEW YORK – Aug. 31, 2009 – To determine whether it makes more sense to rent or buy in the current economic climate, experts encourage people to examine the price-to-rent ratio, or the average cost of purchasing a house divided by a year’s worth of rent payments.
The ratio reached 24.7 in 2005, according to Economy.com, meaning that individuals could spend 24.7 years in a rental for what it would cost to buy a house. The ratio has fallen to 17.4, and Economy.com notes that the historical average since 1986 is 16.5.
While some believe falling house prices make homeownership a better choice right now, an Economy.com analysis of the price-to-rent ratios in 54 metropolitan areas shows that renting is a better deal than homeownership in 21 cities. Some of the so-called “renter –friendly” cities are Portland, Ore., Baltimore, Raleigh, Charlotte, Salt Lake City, San Antonio, Trenton, Philadelphia, Honolulu, and Seattle.
Center for Economic and Policy Research Co-Director Dean Baker says the price-to-rent ratio should not be the only consideration. People weighing whether to rent or buy also should consider that renting makes more sense if they plan to move in a couple of years, and renting allows them to live in neighborhoods where homeownership might be too costly. Additionally, they do not have to perform maintenance tasks if they live in a rental.
Source: Time (08/31/09)
Monday, August 31, 2009
Friday, August 28, 2009
Survey: People moving for happier reasons
ORLANDO, Fla. – Aug. 28, 2009 – People have gone back to moving in hopes it will improve their lives rather than moving to escape foreclosure or other aspects of the economic crisis, according to a survey of recent movers released this month by Relocation.com.
In the June survey, nearly 42 percent said they were in the process of buying a home or planning to buy one. Poll participants said their reason for moving was:
• To live in a bigger or better home (26 percent).
• To live in a better neighborhood or area (24 percent).
• To be closer to family or friends (12 percent).
• To live in an area with a lower cost of living (9 percent).
• To accommodate a change in marital status (6 percent).
Moving because of school, job loss, retirement or foreclosure each generated 3 percent or less.
Responses to this survey are substantially different from the responses to a similar survey in March, when 41 percent said the recession was, at least partially, driving their move.
Source: Relocation.com
In the June survey, nearly 42 percent said they were in the process of buying a home or planning to buy one. Poll participants said their reason for moving was:
• To live in a bigger or better home (26 percent).
• To live in a better neighborhood or area (24 percent).
• To be closer to family or friends (12 percent).
• To live in an area with a lower cost of living (9 percent).
• To accommodate a change in marital status (6 percent).
Moving because of school, job loss, retirement or foreclosure each generated 3 percent or less.
Responses to this survey are substantially different from the responses to a similar survey in March, when 41 percent said the recession was, at least partially, driving their move.
Source: Relocation.com
Thursday, August 27, 2009
Economy: What’s good, bad
MIAMI – Aug. 27, 2009 – Real estate agent Dave Gervase recently witnessed an astonishing spectacle: a bidding war for a house in South Florida.
When he showed a home to a client, he discovered that 23 other shoppers had already put in bids. “We offered 6 percent over the asking price – and lost out,” Gervase says.
What Gervase saw was an extreme example of a nationwide phenomenon: signs of life in the battered housing market and the overall economy. Housing prices rose 2.9 percent from the first quarter to the second – the first quarterly increase in three years, Standard & Poor’s reported Tuesday. Meanwhile, a business group announced Tuesday that amid signs of economic improvement, consumer confidence rebounded this month.
The S&P/Case-Shiller Home Price Index and the Conference Board’s consumer confidence index were the latest reports to suggest that the U.S. economy is staggering toward recovery. The progress is agonizing, and many ordinary people won’t see the payoff for a while. The Congressional Budget Office expects unemployment to rise from July’s 9.4 percent and average double digits next year.
But for all the caveats, the signs of recovery strike many economists as a huge relief. After the collapse of Lehman Bros. last Sept. 15, the United States and the world seemed to be teetering on the edge of a second Great Depression. And some say the improving outlook vindicates the aggressive actions taken since last fall by Federal Reserve Chairman Ben Bernanke. A student of the economic cataclysm of the 1930s, he slashed interest rates to zero and pumped hundreds of billions into the financial system.
President Obama is sold. Taking time off his vacation in Martha’s Vineyard in Massachusetts, the president announced Tuesday that he would reappoint Bernanke when his first four-year term as Fed chairman expires in January. “Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic free fall,” Obama said.
Bernanke “has done a first-rate job,” says S&P economist David Blitzer. “The risks were incredible, and the Fed had to step in.”
The Fed chief “deserves a significant amount of credit for ending the recession,” says Mark Zandi, chief economist at Moody’s Economy.com. “If he hadn’t acted as aggressively and creatively as he did, we would still be in a recession, and we’d be talking about a depression.”
Long climb ahead
Even so, the economy is a long, long way from a full recovery, and Bernanke has plenty of critics. The Congressional Budget Office predicts economic output will fall 1 percent this year and unemployment will average 10.2 percent in 2010. Housing prices are still down 30 percent from their 2006 peak, household incomes are shrinking, employers are still cutting jobs and consumer confidence is struggling back from rock-bottom levels.
Critics say Bernanke was slow to see trouble brewing, as President Bush’s chief economic adviser in 2005 and as Fed chairman. By not moving faster to counter the economy’s slide, Bernanke made “a huge, huge mistake,” says Dean Baker, co-director of the left-leaning Center for Economic and Policy Research in Washington D.C. “And millions of people are suffering for it.”
But after the Lehman Bros.’ collapse sent the world economy into a tailspin last fall, Bernanke sprang into action. He pushed the rate that banks charge each other for short-term loans as low as zero and kept it there; and he announced unprecedented plans to pump up to $1.75 trillion into parched financial markets by buying government debt and mortgage-backed securities. He kept investment banks afloat with billions in loans and made unorthodox cash infusions into the inter-bank lending market and the commercial paper market that companies rely on for short-term financing. “It stopped the plumbing from backing up,” says Bruce Kasman, chief economist at JPMorgan Chase.
The idea was to get credit flowing and, along with Obama’s $787 billion stimulus program, jump-start the stalled economy.
It may be working. Unemployment fell unexpectedly last month, though partly because many discouraged workers stopped looking for jobs.
Industrial production rose in July for the first time in nine months. “We’ve had some nice, pleasant upbeat reports,” Blitzer says. “We could haggle over whether it’s June, July or August that the recession ends.”
Even the housing market appears to be recuperating from a three-year bloodbath. Home prices rose in 18 of the 20 cities tracked by the S&P/Case-Shiller index from May to June. Month-to-month comparisons can be unreliable and overall prices are about where they were in early 2003. Still, “The numbers are telling us prices may have already hit bottom,” says Patrick Newport, economist at IHS Global Insight. That helps by producing:
• More consumer spending. Rising home prices give homeowners more confidence to spend. They tend to tighten their belts if they owe the bank more than their house is worth.
“Everyone is very cautious, and there is instability in employment,” says Jackie Williams, a real estate broker in Middletown, Conn. “But people will spend if (their home is worth) a reasonable price. Consumer confidence will build a little.”
• More buyers moving into the housing market. Rising prices may nudge more potential homebuyers off the fence. Ryan Burns and his wife are renters in Bellingham, Wash., now, and their lease is almost up. “We were considering extending our lease another six to 12 months in order to pack away a larger downpayment,” Burns says. “But if prices are on the rise, we might just speed up our search.”
• Fewer toxic assets on the books for banks. Rising home prices are an elixir for banks stricken with questionable mortgage loans and foreclosed property. “It improves the balance sheet of the bank. That will hasten the end of the credit crunch,” says Joel Naroff, of Naroff Economic Advisors. “Do I think it will happen very fast? No.”
Worries about winter
Moody’s Zandi expects the housing market to be depressed this winter when banks auction off foreclosed property. Lenders have delayed the sales, he says, while trying to figure out how to qualify for a government program to modify troubled mortgages; eventually, the foreclosures will continue.
Other government programs may be providing a one-time boost. An $8,000 tax credit for first-time homebuyers ends Nov. 30. “Once this credit expires,” Newport writes, “home sales, housing starts and house prices will take a hit. Unknown is how big this hit will be.”
An uptick in prices “is encouraging,” Blitzer says, “but happy days are not here again in the real estate business. ... If you bought a house at exactly the wrong point in Miami or Las Vegas or Phoenix, say in 2006, you aren’t going to sell it for that kind of money for a long time.”
Even the South Florida house that drew 24 offers was a special case: An owner who owed more than the house was worth, was working with a bank to sell it for $65,000 less than the mortgage. But real estate agent Gervase says he’s seen market-priced homes set off bidding wars, too.
Critics also fret that Bernanke and the Fed will fail to keep inflation under control once the economy picks up strength. But for now, many economists say Bernanke’s audacious intervention has averted disaster.
“Given where we are now and where we come from, he has been vindicated,” Blitzer says. “My guess is that five years from now, he will still be vindicated.”
Bad: Unemployment projected to hit 10 percent
In a new economic forecast, the Congressional Budget Office estimated the unemployment rate – 9.4 percent in July – will be 10.2 percent at the end of 2010 and 9.1 percent at the end of 2011.
Copyright © 2009 USA Today
When he showed a home to a client, he discovered that 23 other shoppers had already put in bids. “We offered 6 percent over the asking price – and lost out,” Gervase says.
What Gervase saw was an extreme example of a nationwide phenomenon: signs of life in the battered housing market and the overall economy. Housing prices rose 2.9 percent from the first quarter to the second – the first quarterly increase in three years, Standard & Poor’s reported Tuesday. Meanwhile, a business group announced Tuesday that amid signs of economic improvement, consumer confidence rebounded this month.
The S&P/Case-Shiller Home Price Index and the Conference Board’s consumer confidence index were the latest reports to suggest that the U.S. economy is staggering toward recovery. The progress is agonizing, and many ordinary people won’t see the payoff for a while. The Congressional Budget Office expects unemployment to rise from July’s 9.4 percent and average double digits next year.
But for all the caveats, the signs of recovery strike many economists as a huge relief. After the collapse of Lehman Bros. last Sept. 15, the United States and the world seemed to be teetering on the edge of a second Great Depression. And some say the improving outlook vindicates the aggressive actions taken since last fall by Federal Reserve Chairman Ben Bernanke. A student of the economic cataclysm of the 1930s, he slashed interest rates to zero and pumped hundreds of billions into the financial system.
President Obama is sold. Taking time off his vacation in Martha’s Vineyard in Massachusetts, the president announced Tuesday that he would reappoint Bernanke when his first four-year term as Fed chairman expires in January. “Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic free fall,” Obama said.
Bernanke “has done a first-rate job,” says S&P economist David Blitzer. “The risks were incredible, and the Fed had to step in.”
The Fed chief “deserves a significant amount of credit for ending the recession,” says Mark Zandi, chief economist at Moody’s Economy.com. “If he hadn’t acted as aggressively and creatively as he did, we would still be in a recession, and we’d be talking about a depression.”
Long climb ahead
Even so, the economy is a long, long way from a full recovery, and Bernanke has plenty of critics. The Congressional Budget Office predicts economic output will fall 1 percent this year and unemployment will average 10.2 percent in 2010. Housing prices are still down 30 percent from their 2006 peak, household incomes are shrinking, employers are still cutting jobs and consumer confidence is struggling back from rock-bottom levels.
Critics say Bernanke was slow to see trouble brewing, as President Bush’s chief economic adviser in 2005 and as Fed chairman. By not moving faster to counter the economy’s slide, Bernanke made “a huge, huge mistake,” says Dean Baker, co-director of the left-leaning Center for Economic and Policy Research in Washington D.C. “And millions of people are suffering for it.”
But after the Lehman Bros.’ collapse sent the world economy into a tailspin last fall, Bernanke sprang into action. He pushed the rate that banks charge each other for short-term loans as low as zero and kept it there; and he announced unprecedented plans to pump up to $1.75 trillion into parched financial markets by buying government debt and mortgage-backed securities. He kept investment banks afloat with billions in loans and made unorthodox cash infusions into the inter-bank lending market and the commercial paper market that companies rely on for short-term financing. “It stopped the plumbing from backing up,” says Bruce Kasman, chief economist at JPMorgan Chase.
The idea was to get credit flowing and, along with Obama’s $787 billion stimulus program, jump-start the stalled economy.
It may be working. Unemployment fell unexpectedly last month, though partly because many discouraged workers stopped looking for jobs.
Industrial production rose in July for the first time in nine months. “We’ve had some nice, pleasant upbeat reports,” Blitzer says. “We could haggle over whether it’s June, July or August that the recession ends.”
Even the housing market appears to be recuperating from a three-year bloodbath. Home prices rose in 18 of the 20 cities tracked by the S&P/Case-Shiller index from May to June. Month-to-month comparisons can be unreliable and overall prices are about where they were in early 2003. Still, “The numbers are telling us prices may have already hit bottom,” says Patrick Newport, economist at IHS Global Insight. That helps by producing:
• More consumer spending. Rising home prices give homeowners more confidence to spend. They tend to tighten their belts if they owe the bank more than their house is worth.
“Everyone is very cautious, and there is instability in employment,” says Jackie Williams, a real estate broker in Middletown, Conn. “But people will spend if (their home is worth) a reasonable price. Consumer confidence will build a little.”
• More buyers moving into the housing market. Rising prices may nudge more potential homebuyers off the fence. Ryan Burns and his wife are renters in Bellingham, Wash., now, and their lease is almost up. “We were considering extending our lease another six to 12 months in order to pack away a larger downpayment,” Burns says. “But if prices are on the rise, we might just speed up our search.”
• Fewer toxic assets on the books for banks. Rising home prices are an elixir for banks stricken with questionable mortgage loans and foreclosed property. “It improves the balance sheet of the bank. That will hasten the end of the credit crunch,” says Joel Naroff, of Naroff Economic Advisors. “Do I think it will happen very fast? No.”
Worries about winter
Moody’s Zandi expects the housing market to be depressed this winter when banks auction off foreclosed property. Lenders have delayed the sales, he says, while trying to figure out how to qualify for a government program to modify troubled mortgages; eventually, the foreclosures will continue.
Other government programs may be providing a one-time boost. An $8,000 tax credit for first-time homebuyers ends Nov. 30. “Once this credit expires,” Newport writes, “home sales, housing starts and house prices will take a hit. Unknown is how big this hit will be.”
An uptick in prices “is encouraging,” Blitzer says, “but happy days are not here again in the real estate business. ... If you bought a house at exactly the wrong point in Miami or Las Vegas or Phoenix, say in 2006, you aren’t going to sell it for that kind of money for a long time.”
Even the South Florida house that drew 24 offers was a special case: An owner who owed more than the house was worth, was working with a bank to sell it for $65,000 less than the mortgage. But real estate agent Gervase says he’s seen market-priced homes set off bidding wars, too.
Critics also fret that Bernanke and the Fed will fail to keep inflation under control once the economy picks up strength. But for now, many economists say Bernanke’s audacious intervention has averted disaster.
“Given where we are now and where we come from, he has been vindicated,” Blitzer says. “My guess is that five years from now, he will still be vindicated.”
Bad: Unemployment projected to hit 10 percent
In a new economic forecast, the Congressional Budget Office estimated the unemployment rate – 9.4 percent in July – will be 10.2 percent at the end of 2010 and 9.1 percent at the end of 2011.
Copyright © 2009 USA Today
Wednesday, August 26, 2009
Index shows home prices increase from 1Q to 2Q
NEW YORK (AP) – Aug. 26, 2009 – Home prices across most of the country have started to rise from the depths of the housing slump, a critical trend that will help stabilize the broader U.S. economy, according to new figures released Tuesday.
Nationally, prices in the second quarter posted their first quarterly increase in three years, according to the widely watched Standard & Poor’s/Case-Shiller’s U.S. National Home Price Index.
While home prices are still 30 percent below the mid-2006 peak, their new direction should bring relief to both lenders and homeowners. Falling property values have wiped out $4 trillion in homeowner equity, and thousands have walked away from homes that are worth far less than their mortgage balance. Lenders have written off billions of dollars in bad loans and to sell foreclosed homes at a fraction of their former cost.
“People are much more inclined to stay where they are and work something out,” if they have equity in their homes, said Sanjiv Das, chief executive of Citigroup’s mortgage unit.
And as consumers feel more confident in the value of their residences, they will feel safer about spending again. Consumer spending makes up about 70 percent of U.S. economic activity. In August, consumer confidence rose to the highest level since the recession began, the New York-based Conference Board said Tuesday.
Case-Shiller’s monthly index of 20 major cities also rose from May to June, with Dallas and Denver clocking their fourth-straight increase. Only Detroit and Las Vegas saw prices fall in June.
There are concerns, however, that the momentum behind home prices will stall at the end of November with the expiration of a federal tax credit for first-time homebuyers. These newbie buyers are snapping up one in every three homes sold.
First-time buyers get a credit of 10 percent of the sales price of a home, up to $8,000. The credit phases out for singles earning more than $75,000 and couples earning more than $150,000. The real estate industry is lobbying to have the credit extended.
“If the tax credit is making a significant impact, then housing will take a big hit when it expires,” said Pat Newport, an economist at IHS Global Insight.
Here’s a look at this month’s Case-Shiller report:
The news: The U.S. National Home Price Index rose 1.4 percent from the first quarter to 133, though was still down almost 15 percent from the second quarter of last year.
Home prices, on a seasonally adjusted basis, are at levels not seen since early 2003.
The monthly index of 20 major cities increased 0.7 percent to 142 from May to June, the second straight month the index didn’t decline. It was still 15.5 percent below June a year ago.
Every metro showed annual declines, with fifteen reporting double-digit drops.
The report: The Case-Shiller indexes measure home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.
What it shows: The 20-city index is a three-month moving average of repeat sales of a designated group of single-family homes in each city. By measuring the sales price of the same properties over time, the index prevents the data from being skewed by a change in the types of homes sold. Sales between related parties, such as family members, are excluded because they may not reflect true market values.
The Case-Shiller quarterly index is a composite of home price indexes for the nine U.S. census divisions.
What it doesn’t show: The indexes only measure price data in 20 major metropolitan areas in 15 states and the District of Columbia. So, many areas of the country are not represented.
Why it matters: Investors closely watch the Case-Shiller indexes to gauge the level and direction of home prices. The indexes include a broader mix of properties compared to the index created by the Federal Housing Finance Agency. That index excludes many high-end properties, as well as homes bought with riskier mortgages or all cash.
The quote: “For the second month in a row, we’re seeing some positive signs,” said David M. Blitzer, chairman of the S&P index committee, adding, “There are hints of an upward turn from a bottom.”
Copyright © 2009 The Associated Press
Nationally, prices in the second quarter posted their first quarterly increase in three years, according to the widely watched Standard & Poor’s/Case-Shiller’s U.S. National Home Price Index.
While home prices are still 30 percent below the mid-2006 peak, their new direction should bring relief to both lenders and homeowners. Falling property values have wiped out $4 trillion in homeowner equity, and thousands have walked away from homes that are worth far less than their mortgage balance. Lenders have written off billions of dollars in bad loans and to sell foreclosed homes at a fraction of their former cost.
“People are much more inclined to stay where they are and work something out,” if they have equity in their homes, said Sanjiv Das, chief executive of Citigroup’s mortgage unit.
And as consumers feel more confident in the value of their residences, they will feel safer about spending again. Consumer spending makes up about 70 percent of U.S. economic activity. In August, consumer confidence rose to the highest level since the recession began, the New York-based Conference Board said Tuesday.
Case-Shiller’s monthly index of 20 major cities also rose from May to June, with Dallas and Denver clocking their fourth-straight increase. Only Detroit and Las Vegas saw prices fall in June.
There are concerns, however, that the momentum behind home prices will stall at the end of November with the expiration of a federal tax credit for first-time homebuyers. These newbie buyers are snapping up one in every three homes sold.
First-time buyers get a credit of 10 percent of the sales price of a home, up to $8,000. The credit phases out for singles earning more than $75,000 and couples earning more than $150,000. The real estate industry is lobbying to have the credit extended.
“If the tax credit is making a significant impact, then housing will take a big hit when it expires,” said Pat Newport, an economist at IHS Global Insight.
Here’s a look at this month’s Case-Shiller report:
The news: The U.S. National Home Price Index rose 1.4 percent from the first quarter to 133, though was still down almost 15 percent from the second quarter of last year.
Home prices, on a seasonally adjusted basis, are at levels not seen since early 2003.
The monthly index of 20 major cities increased 0.7 percent to 142 from May to June, the second straight month the index didn’t decline. It was still 15.5 percent below June a year ago.
Every metro showed annual declines, with fifteen reporting double-digit drops.
The report: The Case-Shiller indexes measure home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.
What it shows: The 20-city index is a three-month moving average of repeat sales of a designated group of single-family homes in each city. By measuring the sales price of the same properties over time, the index prevents the data from being skewed by a change in the types of homes sold. Sales between related parties, such as family members, are excluded because they may not reflect true market values.
The Case-Shiller quarterly index is a composite of home price indexes for the nine U.S. census divisions.
What it doesn’t show: The indexes only measure price data in 20 major metropolitan areas in 15 states and the District of Columbia. So, many areas of the country are not represented.
Why it matters: Investors closely watch the Case-Shiller indexes to gauge the level and direction of home prices. The indexes include a broader mix of properties compared to the index created by the Federal Housing Finance Agency. That index excludes many high-end properties, as well as homes bought with riskier mortgages or all cash.
The quote: “For the second month in a row, we’re seeing some positive signs,” said David M. Blitzer, chairman of the S&P index committee, adding, “There are hints of an upward turn from a bottom.”
Copyright © 2009 The Associated Press
Tuesday, August 25, 2009
$8K buyer tax credit extension possible
WASHINGTON – Aug. 24, 2009 – Bills to extend the maximum $8,000 tax credit for first-time homebuyers, which expires Nov. 30, are pending in both the U.S. House and the Senate.
Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.
Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, “It’s something we can get done.”
Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing aren’t as good, observers say.
Source: Washington Post Writers Group
Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.
Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, “It’s something we can get done.”
Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing aren’t as good, observers say.
Source: Washington Post Writers Group
Monday, August 24, 2009
Report: Chinese drywall has no radioactive threat
MANATEE COUNTY, Fla. (AP) – Aug. 24, 2009 – State and federal officials say homeowners shouldn’t worry about radioactivity from Chinese drywall.
The U.S. Consumer Product Safety Commission asked the U.S. Environmental Protection Agency and the Florida Department of Health to test drywall samples for phosphogypsum, or calcium sulfate.
According to a report released Friday, traces of the material were found but the radioactive levels were no higher than what ordinarily would be found in the natural environment.
Officials are continuing to investigate more than 1,100 drywall-related complaints. Chinese drywall has been blamed for emitting putrid odors and corroding metal air conditioning parts, and homeowners nationwide have complained about nosebleeds, headaches, sore throats and other ailments.
Copyright © 2009 The Associated Press
The U.S. Consumer Product Safety Commission asked the U.S. Environmental Protection Agency and the Florida Department of Health to test drywall samples for phosphogypsum, or calcium sulfate.
According to a report released Friday, traces of the material were found but the radioactive levels were no higher than what ordinarily would be found in the natural environment.
Officials are continuing to investigate more than 1,100 drywall-related complaints. Chinese drywall has been blamed for emitting putrid odors and corroding metal air conditioning parts, and homeowners nationwide have complained about nosebleeds, headaches, sore throats and other ailments.
Copyright © 2009 The Associated Press
Friday, August 21, 2009
23% of Florida home loans past due or in foreclosure in second quarte
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WASHINGTON – Aug. 21, 2009 – As home prices fell and the job picture worsened, the percentage of Florida home loans either past due or in foreclosure hit 23 percent in the second quarter, outpacing any other state in the nation.
The figure represents 807,000 loans, a staggering sum of the roughly 3.5 million mortgages outstanding in Florida.
“Florida deserves special mention as the worst state in the country,” said Jay Brinkmann, chief economist of the Mortgage Bankers Association that released the numbers Thursday. “Nevada is a close second, but everyone else is far behind.”
Florida, along with California, Arizona and Nevada – states that saw some of the headiest home price increases during the boom – represented 44 percent of the total number of loans in foreclosure nationally.
Twelve percent of all Florida loans were in some stage of the foreclosure process as of June 30, with 10.8 percent past due by a month or more.
Nationwide, 4.3 percent were in foreclosure and 9.2 percent were 30 or more days delinquent.
Barring loan modifications that would help homeowners stay in their properties, the high number of foreclosures will likely result in more homes being put on the market for resale by lenders, potentially contributing to further price declines.
Florida’s mortgage hardships swept across all loan categories, with so-called prime borrowers, or those with good credit, showing the biggest increases in delinquencies. This indicates job losses and falling home prices are taking a toll on a new set of homeowners.
Between the first and second quarter, the percentage increase in delinquencies and foreclosures among borrowers with fixed loans even outpaced borrowers with subprime loans – or those sold to borrowers with spotty credit histories and staggering default rates.
Delinquencies and foreclosures among prime borrowers rose from 10.7 percent to 12.42 percent in the second quarter.
Among subprime loans, 52 percent of roughly 536,000 subprime loans tracked by the MBA were past due or in foreclosure in the second quarter, up from 51 percent in the previous three-month period.
Delinquencies among prime-fixed borrowers are key because they reflect problems with the underlying economy rather than problems arising from the structure or underwriting of loans.
“This is further confirmation of what we have been saying and expecting for the last year or more,” that these problems are being driven by fundamental issues in the economy, Brinkmann said.
Falling real estate values often lead borrowers to walk away from their homes rather than continue to pay off loans worth far more than the properties. Until the employment picture improves – sometime in the middle of next year, Brinkmann predicted – delinquencies will continue to rise.
Foreclosures should start tapering off about six months after that as the foreclosures cases are worked through the system and the homes are taken back by lenders or sold at auction.
Copyright © 2009 The Miami Herald
WASHINGTON – Aug. 21, 2009 – As home prices fell and the job picture worsened, the percentage of Florida home loans either past due or in foreclosure hit 23 percent in the second quarter, outpacing any other state in the nation.
The figure represents 807,000 loans, a staggering sum of the roughly 3.5 million mortgages outstanding in Florida.
“Florida deserves special mention as the worst state in the country,” said Jay Brinkmann, chief economist of the Mortgage Bankers Association that released the numbers Thursday. “Nevada is a close second, but everyone else is far behind.”
Florida, along with California, Arizona and Nevada – states that saw some of the headiest home price increases during the boom – represented 44 percent of the total number of loans in foreclosure nationally.
Twelve percent of all Florida loans were in some stage of the foreclosure process as of June 30, with 10.8 percent past due by a month or more.
Nationwide, 4.3 percent were in foreclosure and 9.2 percent were 30 or more days delinquent.
Barring loan modifications that would help homeowners stay in their properties, the high number of foreclosures will likely result in more homes being put on the market for resale by lenders, potentially contributing to further price declines.
Florida’s mortgage hardships swept across all loan categories, with so-called prime borrowers, or those with good credit, showing the biggest increases in delinquencies. This indicates job losses and falling home prices are taking a toll on a new set of homeowners.
Between the first and second quarter, the percentage increase in delinquencies and foreclosures among borrowers with fixed loans even outpaced borrowers with subprime loans – or those sold to borrowers with spotty credit histories and staggering default rates.
Delinquencies and foreclosures among prime borrowers rose from 10.7 percent to 12.42 percent in the second quarter.
Among subprime loans, 52 percent of roughly 536,000 subprime loans tracked by the MBA were past due or in foreclosure in the second quarter, up from 51 percent in the previous three-month period.
Delinquencies among prime-fixed borrowers are key because they reflect problems with the underlying economy rather than problems arising from the structure or underwriting of loans.
“This is further confirmation of what we have been saying and expecting for the last year or more,” that these problems are being driven by fundamental issues in the economy, Brinkmann said.
Falling real estate values often lead borrowers to walk away from their homes rather than continue to pay off loans worth far more than the properties. Until the employment picture improves – sometime in the middle of next year, Brinkmann predicted – delinquencies will continue to rise.
Foreclosures should start tapering off about six months after that as the foreclosures cases are worked through the system and the homes are taken back by lenders or sold at auction.
Copyright © 2009 The Miami Herald
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