The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.39 percent of all loans outstanding at the end of the fourth quarter of 2013, the lowest level since the first quarter of 2008. The delinquency rate decreased two basis points from the previous quarter, and 70 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

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 fourth quarter was 2.86 percent, down 22 basis points from the third quarter and 88 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since 2008.

The non-seasonally adjusted percentage of loans on which foreclosure actions were started during the fourth quarter decreased to 0.54 percent from 0.61 percent, a decrease of seven basis points, and the lowest level since 2006.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 5.41 percent, a decrease of 24 basis points from last quarter, and a decrease of 137 basis points from the fourth quarter of last year.

“We continue to see substantial improvement in both delinquency and foreclosure rates, with most measures now back to pre-crisis levels,” says Michael Fratantoni, MBA’s Chief Economist and Senior Vice President of Research and Industry Technology.

“The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of over 10 percent in 2010 and is edging closer to the historical average of around 5 percent. The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in six years. The percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range.

“There was broad improvement in foreclosure rates in the fourth quarter, with 49 states and the District of Columbia recording a decrease. Florida still leads the nation in the percentage of loans in foreclosure, but that percentage has fallen to 8.56 percent from a peak of 14.5 percent. New Jersey and New York had the next two highest rates but both states did see a drop from the previous quarter. States with judicial foreclosure systems still account for most of the loans in foreclosure. Of the 17 states that had a higher foreclosure inventory rate than the national average, 15 were judicial states. While the percentage of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 4.92 percent compared to the average rate of 1.52 percent for nonjudicial states. That being says, for judicial states this was still a significant improvement from the rate of 6.88 percent recorded in 2012.

“In terms of new foreclosures started, about one fifth of all states saw an increase, but as we have pointed out previously, quarterly movements in this measure have often been the result of changing state laws and the timing associated with these changes and implementation. This has usually resulted in quarterly swings in the foreclosure start rate, sometimes with an offsetting change in the 90 day or more delinquency category, as the foreclosure process is started and stopped.

“The total past due rate for FHA loans increased over the quarter by 41 basis points, but is still down 70 points relative to last year at this time. The increase for the quarter was driven by a 37 basis point increase in loans one payment past due. The foreclosure measures for FHA loans declined both over the quarter and relative to last year.

“Loan cohorts from 2009 and earlier continue to make up more than 90 percent of seriously delinquent loans. Loans originated in 2007 and earlier accounted for 75 percent of the seriously delinquent loans, while loans originated in 2008 and 2009 accounted for another 16 percent. This is important to note because current home prices, while still rising, are about 9 percent below the peak in 2007. Therefore, borrowers with loans originated in 2007 will be more vulnerable to traditional delinquency and foreclosure trigger events such as a divorce, job loss, health issue, or death in the household.

“We have been collecting metro area data for over a year now and these are showing improvements similar to the national numbers. Among the 25 largest metropolitan areas, the Baltimore-Towson metro area had the highest 90+ day delinquency rate at 3.87 percent, but that rate was an improvement from 4.91 percent in the fourth quarter of 2012. The Minneapolis-St Paul metro had the lowest at 1.43 percent. With respect to the proportion of loans in foreclosure, Miami had the highest rate at 10.34 percent, but it also had the largest decrease in its foreclosure rate over the past year. The two metro areas out of the top 25 that showed an increase in loans in foreclosure over the year were Nassau-Suffolk, New York and Edison-New Brunswick, New Jersey.”

Change from last quarter (third quarter of 2013)
On a seasonally adjusted basis, the overall delinquency rate decreased for all loan types, except for subprime fixed loans, subprime ARM loans and FHA loans. The seasonally adjusted delinquency rate decreased 12 basis points to 3.23 percent for prime fixed loans and 53 basis points to 5.44 percent for prime ARM loans. For subprime loans, the delinquency rate increased 32 basis points to 19.52 percent for subprime fixed loans and 87 basis points to 22.33 percent for subprime ARM loans. The delinquency rates for VA loans fell by 12 basis points to 5.29 percent and the FHA delinquency rate rose by 41 basis points to 10.47 percent.

The non-seasonally adjusted percentage of loans in foreclosure, also known as the foreclosure inventory rate, decreased from 3.08 percent last quarter to 2.86 percent. The foreclosure inventory rate for prime fixed loans decreased 16 basis points to 1.56 percent, and the rate for prime ARM loans decreased 69 basis points from last quarter to 3.85 percent. For subprime loans, the rate for subprime fixed loans decreased 71 basis points to 8.28 percent and the rate for subprime ARM loans decreased 97 basis points to 15.48 percent. The foreclosure inventory rate for FHA loans decreased nine basis points to 3.27 percent, while the rate for VA loans decreased three basis points to 1.78 percent.

The non-seasonally adjusted foreclosure starts rate decreased three basis points for prime fixed loans to 0.30 percent, one basis point for prime ARM loans to 0.59 percent, 39 basis points for subprime fixed to 1.47 percent, 100 basis points for subprime ARM loans to 1.91 percent, two basis points for FHA loans to 0.75 percent, and increased three basis points for VA loans to 0.47 percent.

Change from last year (fourth quarter of 2012)
Given the challenges in interpreting the true seasonal effects in these data when comparing quarter to quarter changes, it is important to highlight the year over year changes of the non-seasonally adjusted results.

Compared with the fourth quarter of 2012, the foreclosure inventory rate decreased 54 basis points for prime fixed loans, 283 basis points for prime ARM loans, 100 basis points for subprime fixed, 276 basis points for subprime ARM loans, 58 basis points for FHA loans, and 30 basis points for VA loans.?Over the past year, the non-seasonally adjusted foreclosure starts rate decreased eight basis points for prime fixed loans, 38 basis points for prime ARM loans, 35 basis points for subprime fixed, 95 basis points for subprime ARM loans, 11 basis points for FHA loans, and two basis points for VA loans.

For more information, visit www.mba.org.

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.

MBA estimates that sales of new single-family homes were running at a seasonally adjusted annual rate of 543,000 units in January 2014, based on data from MBA’s Builder Applications Survey.

“While the big jump may appear to conflict with other data, such as MBA’s purchase application index and NAR’s existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes,” says Mike Fratantoni, MBA’s Chief Economist.  “It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December.”

The estimated 543,000 unit sales pace for January was an increase of 35 percent from December’s pace of 402,000 units.  On an unadjusted basis, the MBA estimates that there were 38,000 new home sales in January 2014, a 36 percent increase from the level of 28,000 units in December 2013.  The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

Mortgage applications for new home purchases increased by 27 percent relative to the previous month.  This change does not include any adjustment for typical seasonal patterns.

By product type, conventional loans composed 69.4 percent of loan applications, FHA loans composed 15.9 percent, RHS/USDA loans composed 1.3 percent and VA loans composed 13.4 percent.  The average loan size of new homes decreased from $300,444 in December to $289,358 in January.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.  Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level.  This data also provides information regarding the types of loans used by new home buyers.  Official new home sales estimates are conducted by the Census Bureau on a monthly basis.  In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. 

For more information, visit www.mortgagebankers.org. 

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.

A majority of more than 100 forecasters says they expect large-scale investors to sell off the bulk of homes in their portfolios in the next three to five years, boosting inventory and potentially contributing to a smoother market ahead, according to the latest Zillow® Home Price Expectations Survey. On average, panelists also says they expected nationwide home value appreciation of 4.5 percent this year, with a steady slowdown in appreciation rates each year through 2018.

The survey of 110 economists, real estate experts and investment and market strategists asked panelists to predict the path of the U.S. Zillow Home Value Indexi through 2018 and solicited opinions on investor activity and federal monetary policy. The survey was sponsored by leading real estate information marketplace Zillow, Inc. and is conducted quarterly by Pulsenomics LLC.

Throughout the recovery, large-scale investors have purchased thousands of homes nationwide, particularly lower-priced vacant and foreclosed homes, fixing them up and keeping them in their portfolios as rental properties. This investor activity helped put a floor under sales volumes during the depth of the housing recession, but also created competition for many would-be buyers and contributed to rapid price spikes in some areas.

Panelists were asked to assess the impact to the market if these institutional investors were to significantly curtail their activity this year. Among those panelists expressing an opinion, 79 percent says the impact would be significant or somewhat significant. Panelists were also asked when they thought these investors will have sold the majority of homes in their portfolios. Among those with an opinion, 57 percent says they expected this to occur in the next three to five years.

"Real estate investors, both large and small, played a crucial role in helping to stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn’t necessarily a bad thing, and could have real benefits for buyers," says Zillow Chief Economist Dr. Stan Humphries. "Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year which should be some small solace given the higher prices and mortgage rates that they will encounter. The gradual decline of investor activity should be viewed as another sign of the market slowly returning to normal, and I agree with the panel’s expectations that there will not be a rush for the exit by institutional investors."

Panelists were also asked when the Federal Reserve should end its ongoing stimulus efforts, known as "quantitative easing." Since September 2012, the Fed has been purchasing tens of billions of dollars worth of Treasury bonds and mortgage securities each month, which has helped keep mortgage interest rates low and stimulate demand. The program is now being wound down.

"Mortgage rates have been riding a rally in U.S. Treasury securities caused by volatility in emerging markets in recent weeks, so the impact of Fed tapering on the housing market has been minimal thus far," says Pulsenomics Founder, Terry Loebs. "More than 70 percent of the experts want to see the monetary stimulus reduced to zero before the end of this year, and the current pace of tapering will get us there. Of course, whether Janet Yellen’s Fed will maintain the current pace as new economic challenges arise remains an open question."

Appreciation Expected to Normalize through 2018

On average, panelists says they expect nationwide home value appreciation of 4.5 percent through the end of this year, a pace that exceeds historically normal annual appreciation rates of around 3 percent. This appreciation is expected to slow to roughly 3.8 percent in 2015 and 3.3 percent by 2018, rates much more in line with historic norms.

Based on current expectations for home value appreciation during the next five years, panelists predicted that overall U.S. home values could exceed their April 2007 peak by the first quarter of 2018, and may cross the $200,000 threshold by the third quarter of 2018.

The most optimistic groupii of panelists predicted a 5.6 percent annual increase in home values this year, on average, while the most pessimisticiii predicted an average increase of 3.4 percent. The most optimistic panelists predicted home values would rise roughly 10.6 percent above their 2007 peaks by the end of 2018, on average, while the most pessimistic says they expected home values to remain about 4.5 percent below 2007 peaks.

For more information, visit www.zillow.com.

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.