An article by Brena Swanson, of HousingWire.com, dated 9/25/2014:
Nearly 1 million properties returned to positive equity in the second quarter of 2014, bringing the total number of mortgaged residential properties with equity in the U.S. to more than 44 million.
The latest CoreLogic report revealed that 946,000 residential properties regained equity, and nationwide, borrower equity increased year over year by approximately $1 trillion in second quarter 2014.
Negative equity means that borrowers owe more on their mortgages than their homes are worth.
“The increase in borrower equity of $1 trillion from a year earlier is evidence that things are moving solidly in the right direction,” said Sam Khater, deputy chief economist for CoreLogic. “Borrower equity is important because home equity constitutes borrowers’ largest investment segment and, as a result, is driving forward the rise in wealth for the typical homeowner.”
However, there are still approximately 5.3 million homes, or 10.7% of all residential properties with a mortgage, that are still in negative equity as of second quarter 2014. This is compared to 6.3 million homes, or 12.7%, for first quarter 2014, and a negative equity share of 14.9%, or 7.2 million homes, in second quarter 2013, representing a year-over-year decrease in the number of homes underwater by almost 2 million, or 4.2%.
“Many homeowners across the country are seeing the equity value in their homes grow, which lifts the economy as a whole,” said Anand Nallathambi, president and CEO of CoreLogic.
“With more and more borrowers regaining equity, we expect homeownership to become an increasingly attractive option for many who have remained on the sidelines in the aftermath of the great recession. This should provide more opportunities for people to sell their homes, purchase a different home or refinance an existing mortgage,” Nallathambi added.
For the homes in negative equity status, the national aggregate value of negative equity was $345.1 billion at the end of second quarter 2014, down $38.1 billion from approximately $383.2 billion in the first quarter 2014. Year-over-year, the value of negative equity declined from $432.9 billion in second quarter 2013, representing a decrease of 20.3% in 12 months.
In addition, of the 44 million residential properties with positive equity, approximately 9 million, or 19%, have less than 20-percent equity (referred to as “under-equitied”) and 1.3 million of those have less than 5%(referred to as near-negative equity). ( End of Brena’s article.)
From Bob Phillips, CDPE, Realty One Group, South Orange County, CA
The initials after my name, above, CDPE, stand for Certified Distressed Properties Expert, and reflect some unique training I’ve received, over the past several years. They also validate that I have both training and experience, in guiding homeowners who are having difficulties with their mortgages, to solutions, either in continuing to keep their homes, or in assisting them to get out from under an unmanageable mortgage, and on with their lives, as painlessly as possible.
If you, or someone you know, is STILL having difficulty with making your mortgage payments, I am prepared to offer solutions – most of which have ZERO costs associated with them. Give me a call or text today. Bob Phillips, CDPE, Realty One Group, Cell: (949) 887-5305 or email me at BobPhillipsRE@gmail.com
Last week’s economic news largely concerned the Federal Reserve’s FOMC meeting statement and a post-meeting conference given by Fed Chair Janet Yellen. The FOMC statement indicated that the Fed continued its wind-down of Treasury and mortgage-backed securities and that its purchases are expected to cease after the next FOMC meeting.
The FOMC statement said that committee members find the economy to be improving at a moderate pace and currently strong enough to further reduce the QE3 monthly asset purchases. The Fed seeks to achieve and sustain its dual mandate of maximum employment and an inflation rate of 2.00 percent. While the unemployment rate is lower than the Fed’s benchmark of 6.50 percent, FOMC members cited concerns that the labor force is underutilized and that labor markets, while recovering, could use further improvement. The Fed repeated its customary statement that the Fed’s monetary policies are not on a pre-determined course, and that FOMC members continually review and interpret developing financial and economic news as part of their decision-making process.
Chair Yellen explained during her press conference that it is not possible to provide a specific date when the Fed will change its target federal funds rate. Economists and media analysts expressed concerns that raising the target federal funds rate, which is currently at 0.00 to 0.250 percent, could cause overall interest rates to rise. Chair Yellen said that she expects the current target federal funds rate to remain for a “considerable time” after the QE asset purchases cease. She also said that it is impossible to provide a specific date when the Fed will change its target federal funds rate and cited multiple influences considered by FOMC when changing monetary policy.
Home Builder Confidence Grows, Housing Starts Fall
The National Association of Home Builders Housing Market Index rose by three points in September for a reading of 59. Analysts had predicted an index reading of 56 against August’s reading of 55. September’s reading was the third consecutive reading above 50. Stronger labor markets were cited as supporting the higher reading, but builders were also concerned by tight mortgage credit standards. Any reading above 50 indicates that more builders perceive market conditions for new homes as positive as those that do not.
August’s housing starts were inconsistent with the Home Builders Index; according to the Department of Commerce, construction of new homes fell by 14.4 percent from July’s reading to 956,000. Analysts expected 1.03 million starts against July’s reading of 1.12 million homes started.
Mortgage Rates Rise, Weekly Jobless Claims Fall
Freddie Mac reported higher mortgage rates last week. Average mortgage rates rose across the board with the rate for a 30-year fixed rate mortgage 11 basis points higher at 4.23 percent. The rate for a 15-year mortgage also rose by 11 basis points to 3.37 percent and the rate for a 5/1 adjustable rate mortgage rose from 2.99 to 3.06 percent. Average discount points were unchanged for all mortgage types at 0.50 percent.
New weekly jobless claims dropped to 280,000 against an expected reading of 305,000 and the prior week’s adjusted reading of 316,000 new jobless claims. The original reading for the prior week was 315,000 new jobless claims. The less volatile four-week average of new jobless claim fell by 4,750 new claims to a reading of 299,500 new claims.
This week’s scheduled economic news brings multiple housing-related reports. The National Association of REALTORS® will release its Existing Home Sales report for August. Case-Shiller’s monthly Housing Market Index report and the FHFA’s Home Value report will bring new light to national market trends. The Department of Commerce will release its New Home Sales report, and as usual, Freddie Mac’s weekly report on mortgage rates will come out on Thursday.
Last week’s housing related economic reports were slim, but an unexpected increase in weekly jobless claims gained attention. Analysts calmed concerns by noting that last week’s reading of 315,000 new jobless claims was not far removed from jobless claim levels before the recession. Expectations for last week’s reading were for 301,000 new jobless claims based on the previous week’s original reading of 302,000. The previous week’s reading was revised to 304,000 new jobless claims.
Jobless Claims: 4-Week Average for Continuing Claims Hits Lowest Level Since 2007
Prospective home buyers and current homeowners typically consider their jobs and employment prospects before seeking a home purchase mortgage or refinancing their existing home loans. Last week’s readings released by the Department of Labor suggest that while weekly jobless claims increased, overall trends in hiring and continuing jobless claims indicate a stronger labor sector.
The four-week average of new jobless claims rose from 303,250 to 304,000. The four-week average is typically less volatile than week-to-week readings. Continuing jobless claims increased by 9,000 to 2.49 million for the week ended August 30. The four-week average for continuing jobless claims fell by 15,500 claims to 2.50 million continuing jobless claims. This was the lowest reading for continuing jobless claims since 2007.
In other labor related news, job openings were nearly steady at 4.67 million in July against June’s reading of 4.68 million new job openings. The Labor Department reported that job openings increased by 22 percent year-over-year, with private sector jobs rising to 4.19 million job openings and government jobs increasing by 101,000 job openings to 485,000 in July. The number of hires in July rose from June’s reading of 4.79 million to 4.87 million in July. This was the highest number of hires since 2007. Pre-recession hiring levels were approximately 5 million; this suggests that U.S. labor trends are approaching pre-recession levels.
Mortgage Rates Rise, Discount Points Unchanged
Freddie Mac reported higher mortgage rates on Thursday, with average discount points unchanged at 0.50 across the board. Average rates for a 30-year fixed rate mortgage rose from 4.10 percent to 4.12 percent; the average rate for a 15-year mortgage was two basis points higher at 3.26 percent and the average rate for a 5/1 adjustable rate mortgage rose to 2.99 percent from the prior week’s average of 2.97 percent.
This week’s scheduled news includes several reports related to housing. In addition to Freddie Mac’s usual mortgage rates report, The National Association of Home Builders (NAHB) will release its Housing Market Index and the Department of Commerce will release data on housing starts in August. General economic reports include the Consumer Price Index, Core Consumer Price Index, and Leading Economic Indicators.
The Federal Open Market Committee of the Federal Reserve will release its post-meeting statement on Wednesday, and Fed Chair Janet Yellen is also expected to give a press conference. The Federal Reserve may provide further indication of its intention concerning the target federal funds rate, which is currently at 0.00 to 0.250 percent. The Fed may address its intentions concerning the federal funds rate, but the FOMC has been consistently vague about details concerning its economic strategy.
Last week’s economic news included several reports related to housing. The Case-Shiller and FHFA reports for June showed a further slowing in home price growth. New home sales for July fell short of the expected reading, but pending home sales exceeded expectations. The details:
Case-Shiller, FHFA: June Home Price Growth Slows
The Case-Shiller 10 and 20-City Home Price Index for June moved from May’s year-over-year reading of 9.40 percent growth to 8.10 percent in June. Home prices grew by 1.00 percent on a month-to-month basis in June as compared to May’s reading of 1.20 percent.
Demand shrank due to increasing inventories of available homes and stricter mortgage standards. For the first time since 2008, each of the 20 cities tracked showed slowing growth in home prices. Home prices are about 17 percent lower than their pre-recession peak in 2006. Case-Shiller also reported that the national median home price rose by 2.90 percent year-over-year to $269,800.
Analysts said that slower gains in home prices coupled with increasing confidence among home builders signals a return to more normal housing market conditions.
FHFA reported that home prices for purchase transactions grew by 0.20 percent less than May’s year-over-year reading of 5.40 percent. FHFA reports on properties connected with mortgages owned or backed by Fannie Mae and Freddie Mac.
New Home Sales Slip in July, Pending Home Sales Gain
The Department of Commerce reported that New Home Sales missed expectations for July with a reading of 412,000 new homes sold on seasonally adjusted annual basis. June’s revised reading was 422,000 new homes sold, and analysts expected new home sales at a rate of 430,000 in July against June’s original sales pace of 406,000. Three out of four regions posted slower growth rates for new home sales, with the South posted a gain in new home sales. New home sales were 12.30 percent higher than one year ago.
Analysts said that improving labor market conditions and the slower rate of home price growth are positive trends for housing markets as more home buyers can afford to buy homes. Mortgage rates are approximately one-half percent lower than last year, which also increases affordability.
Pending home sales exceeded expectations for July to an 11 month high, which may ease concerns over July’s dip in new home sales. The National Association of REALTORS® Pending Home Sales Index rose to 105.9 in July as compared to June’s index reading of 102.5. Homes under contract increased from a negative reading of -1.30 percent in June to July’s reading of +3.30 percent. Pending home sales are considered a strong indicator of future home sales.
Mortgage Rates Mixed. Consumer Confidence Jumps
Freddie Mac reported that average mortgage rates were little changed. The rate for a 30-year fixed rate mortgage was unchanged at 4.12 percent. 15-year mortgages had an average rate of 3.25 percent which was an increase of two basis points over the previous week. The average rate for a 5/1 adjustable rate mortgage moved from 2.95 percent to 2.97 percent. Discount points were unchanged at 0.50, 0.60 and 0.50 percent respectively.
Two gauges of U.S. consumer confidence indicated stronger levels of consumer confidence in the economy. The Consumer Confidence Index rose to 92.4 in August from July’s reading of 91.9 and exceeded a lower expectation of 88.5. The University of Michigan’s Consumer Sentiment Index rose to 82.5 against July’s reading of 79.2 and the expected reading of 80.1. Increasing consumer confidence suggests that as more consumers become comfortable with current economic conditions, they may be more confident about buying homes.
What’s Coming Up
Next week’s economic reports include construction spending and the Fed’s Beige Book Report. The Bureau of Labor Statistics will also release Non-farm Payrolls and the National Unemployment Rate for August. No activity is scheduled for Monday due to the Labor Day holiday.
The Case-Shiller 10 and 20-City Home Price Indices for June reported year-over-year gains of 8.10 percent while the Case-Shiller National Home Price Index covers all nine census regions and reported a year-over-year gain of 6.20 percent.
Readings for all three indices worsened as compared to May readings, and all cities tracked showed slower growth in home prices. The National Home Price Index, which is now published monthly, rose by 0.90 percent from May’s reading, and both the 10 and 20-City Index posted month-to-month gains of one percent.
Five cities including Detroit, Las Vegas, New York, Phoenix and San Diego posted larger gains in June than for May.
Regional Home Price Growth: NYC Leads Cities in June
According to the Case-Shiller 20-City Index, New York City led home price growth in June with a reading of +1.60 percent. Chicago, Detroit and Las Vegas posted gains of 1.40 percent with Las Vegas posting its largest home price gain since last summer.
Year-over-year, Las Vegas posted the highest growth rate at 15.20 percent. San Francisco’s home price gains slowed to a year-over-year rate of 12.90 percent. Phoenix posted its slowest home price growth since March of 2012 with its June reading of 6.90 percent.
Home Prices Rise, But Modestly
While home prices in all cities tracked by Case-Shiller rose for the third consecutive month, analysts said that the Federal Reserve may increase its target federal funds rate as soon as the first quarter of 2015. This would lead to higher mortgage rates, which could further flatten home price growth.
Home affordability became an issue for many would-be buyers after the rapid rate of home price growth seen in 2013. Lower demand for homes could also impact the rate of home price appreciation as inventories of available homes rise. With these factors and no one knowing exactly when the Fed will act to raise rates, it’s unlikely that home prices will rapidly escalate in the coming months.
FHFA Reports Slower Home Price Growth in June
FHFA, the agency that oversees Fannie Mae and Freddie Mac, reported that June home prices slowed from May’s reading of 5.40 percent year-over-year to 5.20 percent year-over-year in June. FHFA reports on properties connected with mortgages owned or guaranteed by Fannie Mae and Freddie Mac. FHFA shared some positive trends for seasonally adjusted purchase-only home prices in its June report:
- June’s home prices rose in 40 states.
- Home prices rose for the seventh consecutive month
- Home prices rose for 23 of the last 24 months with the November 2013 as the exception.
- Home prices rose in the second quarter of 2014 in 74 of 100 metropolitan statistical areas (MSAs) tracked by the federal government.
- Home prices in the Pacific and Mountain census districts continued to slow in the second quarter. After rapid growth in home prices in 2013, this appears to indicate and expected adjustment rather than an unexpected crash in home prices for these regions.
While slower growth in home prices is of concern to homeowners, more affordable prices will likely encourage more would-be buyers to become actual buyers.
Last week’s economic news brought several reports related to housing. The National Association of Home Builders (NAHB) Wells Fargo Housing Market Index for August rose by two points to 55, which was its highest reading in seven months.
Components of the NAHB HMI include builder surveys on conditions related to upcoming sales of new homes, which rose by two points for a reading of 65. Builder sentiment concerning present sales conditions also rose by two points to 58.
Builder views on prospective buyer traffic rose from 39 to 42. Readings above 50 indicate that more builders viewed housing market conditions as positive as negative.
NAHB cited job growth and low mortgage rates as conditions driving higher builder confidence in market conditions.
Housing Starts, Building Permits Up in July
According to the Commerce Department, housing starts and building permits rose in July. Housing starts increased to 1.09 million from June’s reading of 945,000 and exceeded expectations of 975,000. This reading reflects higher builder confidence and could contribute to easing demand for housing as new homes expand the inventory of available homes.
Construction of single family homes accounts for about 75 percent of new home construction. July’s reading was 656,000 single family housing starts on an annual basis. Regionally, housing starts declined by 25 percent in the Midwest, but rose by 44 percent in the Northeast, 29 percent in the South and 18.60 percent in the West.
Building permits issued in July rose to an annual rate of 1.05 million, which was an increase of 8.10 percent over June’s reading of 973,000 permits issued. Permits for single family homes increased by 0.90 percent to a reading of 640,000 permits annually.
July’s readings for housing starts and building permits are in line with overall economic growth and suggest that housing markets may improve in coming months as the supply of new homes increases.
Let’s add more icing to the cake. The National Association of REALTORS® reported that existing home sales rose to 5.15 million on a seasonally adjusted annual basis against predictions of 5.00 million existing homes sold and June’s reading of 5.05 million sales of previously owned homes.
Mortgage Rates Fall, FOMC Minutes Indicate Economic Improvement
Freddie Mac’s weekly survey of mortgage rates reported that average rates fell across the board: The average rate for a 30-year fixed rate mortgage dropped by two basis points to 4.10 percent with discount point lower at 0.50 percent.
The rate for a 15-year mortgage dropped by one basis point to 3.24 percent with discount points unchanged at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage dropped by two basis points to 2.95 percent with discount points unchanged at 0.50 percent.
The Federal Open Market Committee (FOMC) of the Federal Reserve released minutes from its July meeting. Highlights included the committee’s 9-1 vote in favor of continuing the slow pace of reducing economic stimulus.
The minutes indicated that the committee intends to keep the federal funds rate below normal levels for “some time.” Previous FOMC statements have consistently indicated the Fed’s intention to maintain very low short-term interest rates after asset purchases under QE3 end in October, but FOMC has not released a specific time frame or details of its intentions concerning the federal funds rate.
The Fed acknowledged economic improvements, but cited lingering concerns over unemployment, which remains higher than average.
More Good News: Jobless Claims Lower, Economic Indicators Up
Weekly jobless claims fell to 298,000, lower than expectations of 300,000 new jobless claims and the prior week’s reading of 312,000 new claims. Leading economic indicators (LEI) rose by 0.89 percent in July after increases in May and June. Analysts interpreted this reading as a further indication of stronger economic conditions.
This week’s scheduled economic reports include New Home Sales, the Case-Shiller Home Price Index and FHFA House Price Index. General economic reports include the Consumer Confidence Index and the University of Michigan Consumer Sentiment Index. It will be interesting to see whether consumer views of the economy are consistent with recent economic improvements.
During the course of a marriage, it is common for the couple to acquire property together. This is what is referred to as joint or community property.
When a couple divorces, it is up to the parties involved to determine what happens to this joint property or let a judge use applicable law to determine how property is to be split.
What Happens To The House?
A couple of options are available when deciding what to do with a house where both partners are listed on the mortgage. First, the couple may decide to simply sell the home and split the proceeds from the sale.
Another option would be for one person to give the other person the house as part of the divorce settlement.
Technically, the house is sold or transferred and whoever gets the home is now the sole person listed on the mortgage.
Beware Of The Tax Implications
Typically, the person who gets the house should be the person who is in the lower tax bracket. This is because capital gains taxes may be lower or non-existent for those who are in the 10 or 15 percent tax bracket.
If the house is sold and the proceeds are split, capital gains taxes are exempted on the first $250,000 of profit made on the sale. For a married couple, the exemption is $500,000. Therefore, it may be worthwhile to sell the house before the marriage is over.
What If Children Are Involved?
In the event that the divorcing couple has a child, the best interest of the child must be considered. Typically, a judge will award a principal residence to the parent who will raise the child after the divorce is finalized.
To help the custodial parent afford any payments on the house, the other parent may be asked to help make payments as part of a child support or alimony agreement. This may be beneficial to the noncustodial parent as payments that are considered alimony are tax deductible.
When a couple divorces, they have a lot to think about. As this may be an emotional time, figuring out what to do with a home where both parties are on the mortgage can be difficult. However, those who are divorcing amicably or who want what is best for their children can come to an agreement without a lot of stress or drama.
I Can Help You Sort Out Your Options – Both Of You
For over 38 years I’ve been helping South Orange County people in all facets of their real estate lives, buying, selling, and leasing local property. I would be honored to assist you in your real estate planning.
Bob Phillips, Realty One Group, South Orange County, CA. Cell/Text: (949) 887-5305, BobPhillipsRE@gmail.com
As if homeowners who are facing foreclosure don’t have enough to worry about, a multitude of loan modification scam artists have invaded the internet, public files and even foreclosure notices in newspapers in hopes of targeting their next victim. By identifying the top three modification scams and learning how to avoid them, at-risk homeowners can protect themselves (and their homes).
Never Pay For Mortgage Modification Assistance
Many desperate homeowners fall victim to scam artists who offer to provide them with assistance in the loan modification process for an exorbitant fee. Many times the scam artist who promises to provide assistance will require that the homeowner pay the fee upfront, after which they will provide very little assistance or simply take the money and run. Consumers should be aware that assistance and counseling services are offered for free through a number of reputable HUD approved counseling agencies.
Avoid Transferring The Deed
One popular scam that at-risk homeowners often face is the property deed scam in which scam artists promise to purchase the home in question, agreeing to let the desperate homeowner rent it out. They suggest that turning over the deed to a borrower with a better credit rating will offer additional financing opportunities, thus preventing the loss of the home. The scammer often promises to sell the home back to the homeowner, but in reality has no intention of doing so.
Many times the scam artist will sell the home to another buyer. In some instances, the crook will collect any processing fees, take the title to the home and any equity, and then leave the home to default. It is a good idea for consumers who are approached with a property deed scam to report it to the FTC.
Ignore Unrealistic Promises
Mortgage modification scammers often make promises to do such things as negotiate a solution to the foreclosure more quickly, process mortgage payments for the consumer while the negotiation is being worked out, or even guarantee a loan modification. Since the actual lender is the only one who can agree to a loan modification, and this solution requires additional processing time, overnight fixes are almost always scams. Additionally, consumers should never make mortgage payments to anyone other than their lender.
For additional information about mortgage modification scams and how to avoid them, or to receive assistance with working out a solution to avoid foreclosure, at-risk homeowners should contact someone with distressed property training and experience. In South Orange County, California, I am just such a person.