We are what we think. So, what do we think, and what are the actual results in the real estate and lending world right now?
The fact is we are transacting home loans; more than we've done in the last 4 years or so. There is plenty of money out there for good credit borrowers. Yes, underwriting requirements continue to be tight, but get past that and you're good to go.
Underwater? HARP 2 contunues to be a viable option for many.
Wells Fargo's economic team suggests that early reports indicate that the critical spring home buying season has gotten off to its best start in five years. "Sales of new single-family homes totaled 83,000 units during the first quarter, up 16 percent from a year ago, while sales of existing single-family homes rose 7.2 percent, marking the best combined pace for first quarter home sales since 2007. The rise in existing home sales has generated a little excitement, as news is spreading that homes sold outside the foreclosure process are often receiving multiple bids and selling above the asking price."
Wells suggests that "the sudden prevalence of multiple bids around the country appears to be the result of unseasonably mild winter weather, which brought buyers back into the market to a much greater degree than sellers. The first quarter is typically the slowest quarter of the year, with March being the only busy month. Inventories of existing homes have fallen to just a 6.3-months' supply, and the inventory of unsold vacant homes has fallen by 353,000 units over the past year. Inventories of new homes continue to decline and are now at a paltry 144,000 units nationwide. Only about one-third of those homes are actually completed. With inventories dwindling, home prices have improved a bit."
Of course Realtors and Lenders can tell you that the better news on sales and prices, along with near record high affordability and near record low mortgage rates, has encouraged builders to move forward with a few more projects. Starts of new single-family homes rose 16.7 percent during the first quarter, for a total of 104,600 units.
But the Jefferies Monthly Housing Monitor took somewhat of the opposite tack: On the surface it appears that momentum is building towards favoring a near-bottom in U.S. housing. Small positives have emerged, as they have in the past, but the data is "still inconsistent enough to keep us concerned about such a fragile sector. Nonetheless, it is easy to agree that mixed is certainly better than down and the recent stronger-than-expected pending homes sales report adds support. The positive spin is that we haven't seen material drops in recent months in most housing data, and in some cases we have seen actual improvements. The negative spin is simply that the market remains saturated with inventory (lots in the "shadows") and that lending activity for home purchases remains exceptionally tight in the face of record low costs of home ownership."
Practically everyone agrees that if affordability is at record levels, the government continues to try and prop up housing markets, so why are we still mired in such a soft housing sector? On the lending side, loan officer's and underwriters can tell you that access to, and the securing of, mortgage capital is still a challenge for many borrowers. Loan origination is economically very lucrative for lenders, but lack of clarity on future regulatory fronts and the costs of compliance weigh heavily on the sector: simply put, lack of clarity results in lack of funding.
See: http://mijoymortgage55.blogspot.com/2012/04/taming-underwriting-beast.html
Politicians and others have floated ideas regarding housing recovery related to negative equity and/or shared appreciation loan modification plans that address homeowner/lender responsibility.
See: http://mijoymortgage55.blogspot.com/2012/02/menendez-introduces-bill-to-keep-people.html.
Here's a "piggy-back" idea that seems to be gaining momentum in some circles:
Steve Kaye with Catalyst Funding says: "A little over 2 years ago I went to see my Congressman, Darrel Issa (R-US Rep, CA); since January 2011, Rep. Issa has served as Chairman of the House Oversight and Government Reform Committee.
I wished to share a plan that stressed a more aggressive approach to the housing crisis was necessary; one that extended beyond simple loan modification.
The problem with a straight modification-only plan is that it only provides a temporary solution - at best - and only addresses the mortgage payment - which is no longer the only issue or concern. The homeowner who is $150K or more upside down on his mortgage would absolutely benefit from saving $500 a month or more on his mortgage payment. However, when he wakes up the next morning, he is still going to be $150K upside down on his mortgage and looking at a minimum of 8-10 years at normal appreciation to climb out of that hole. No...This is merely a band aide that would only extend our housing woes."
He continued, "I lobbied for historic reform that would require, in conjunction with the modification, a principal reduction plan that would put home values at 100% of current market value --- a 'clean start", so to speak. It would not give the gift of equity, but would provide some optimism and hope for the future. And if the owner sold in the following 5 years, 50% of any equity gained would have to be paid to the existing lender who provided the modification/reduction. Other portions of the Plan addressed additional ways to stimulate the market in regard to expanding home ownership and purchasing power without compromising normal loan qualifying. Clearly, we cannot stimulate the housing market by only providing opportunity for 1st time home buyers. Yes, there would be losses absorbed by lenders and financial institutions However, the revitalization and stabilization of the housing industry would stimulate the economy and provide additional earnings through more home lending, more use of credit, etc. Homeowners who are not upside down will also gain as equity - lost during these past years - will return and provide value. The more I have read over the past year, the more I am convinced that these 'simplistic' ideas will, in some manner, be put into play at some point --- they have to.
Some excerpts are from Mortgage Daily, 5-9-12
Certainly, any successful loan modification or refinance must address not just monthly payment savings; negative equity will continue to be a drag on housing and full economic recovery. While saving on the payment is better than not....it would be great if, while saving on the payment, negative equity issues could be addressed at the same time in a modification or refinance.
Your ideas or comments are appreciated!
Until next time...
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