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The FHA May Require a $943 Million Bailout

“WASHINGTON, April 8 (Reuters) – The cash-strapped Federal Housing Administration will likely require a $943 million taxpayer bailout to cover expected losses from loans it insured as the U.S. housing bubble was deflating, the Obama administration said on Wednesday.

It would be the first bailout of the government’s mortgage insurer in its nearly 80-year history.

The FHA, which has struggled to manage a glut of delinquent mortgages, will likely need the funds given a shortfall in its reserves, the administration said in President Barack Obama’s fiscal 2014 budget proposal.

FHA Commissioner Carol Galante said the agency might still be able to avoid taking aid from the U.S. Treasury despite the projected budget hole. The agency has until Sept. 30 to decide whether it needs a cash infusion.

“FHA, while still under stress from legacy loans, has made significant progress and is on a sound fiscal path forward,” Galante told reporters on a conference call. “We are continuing to act and do everything possible to ensure that the impact of these legacy loans … are corrected as soon as possible.” …”

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Are Rising Home Prices A Recovery or Another Bubble ?

“Shah Gilani writes: Where there’s smoke there’s fire.

When it comes to rising home prices, the question is whether the on-fire price increases are a healthy sign of a housing recovery or a smoke screen masking another investor-led real estate bubble.

The answer is it’s both….”

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Home Prices In China Rise the Most in 26 Months

China’s March new home prices posted the biggest gain in more than two years as buyers rushed into the market ahead of property curbs by local governments, driving real estate stocks higher.

Prices climbed for the 10th month, rising 1.1 percent to 9,998 yuan ($1,610) per square meter (10.76 square feet) from February, SouFun Holdings Ltd. (SFUN), the country’s biggest real estate website owner, said in a statement today after a survey of 100 cities. That’s the biggest increase since January 2011.

“The earlier property policy uncertainty drove quite a lot of buyers into the market, while supply, usually low in the first quarter, couldn’t catch up with the demand,” said Zhao Zhenyi, a Shanghai-based property analyst at Industrial Securities Co. “Home sales will weaken in the coming months as more local governments announce curbs for the cities.”

About 17 cities have issued details of property curbs by the end of the first quarter. The capital city of Beijing banned single-person households from buying more than one residence, while Shanghai prohibited banks from giving credit to third-home buyers, the local governments said over the weekend.

Home prices rose 3.9 percent last month from a year ago, according to the SouFun statement.

gauge tracking property shares advanced 0.9 percent at the close of trading in Shanghai, the most among five industry groups on the Shanghai Composite Index. (SHCOMP) The benchmark measure fell 0.1 percent.

Safe Haven…”

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Major Chinese Cities Enact More Property Curbs

“China’s largest cities, including Beijing and Shanghai, tightened rules on home purchases after the nation asked local governments to step up efforts to cool the property market.

Beijing, the capital, banned single-person households from buying more than one residence while Shanghai prohibited banks from giving credit to third-home buyers, according to the local administration websites. The two cities will also enforce a 20 percent tax on capital gains from property sales.

“This will help calm people’s panic about home prices,” said Yi Xianrong, a Beijing-based researcher at the Chinese Academy of Social Sciences, which advises the Cabinet. “At the same time, restrictions on home purchases don’t change the fundamental demand, and it seems the new measures in Beijing are aimed more at short-term problems rather than long-term healthy development of the property market.”

Home prices in the capital jumped 5.9 percent from a year earlier in February, the biggest increase in two years, China’s National Bureau of Statistics said March 18. Costs across the country rose 160 percent in 1998-2011 after ownership passed into private hands, government data show.

The city administration of Shanghai, where new home prices in February rose 3.4 percent from a year earlier, also said it will increase down-payment requirements and interest rates for second-home mortgages. Shenzhen, Guangzhou, Chongqing, Tianjin and Jinan have also published details on the housing curbs.

Shenzhen Measures…”

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Foreclosed Home Inventory Jumps 9% in Q1

“Foreclosure inventory was up 9 percent year-over-year (YoY) in the first quarter to 1.5 million properties, according to RealtyTrac’s foreclosure inventory report.

The increase was led by a 59 percent YoY increase in pre-foreclosure inventory.

Delinquent loans have been working their way through the pipeline after the National Mortgage Settlement was finalized last year.

“The settlement provided some closure regarding accepted foreclosure processing practices, and as a result lenders have been reviving more of these delinquent loans and pushing them into foreclosure over the past 12 months,” said Daren Blomquist vice-president of RealtyTrac in a press release.

“Particularly in states where a lengthy court process has resulted in a bigger backlog of non-performing loans still in snooze mode.”

Here are some details from the report…”

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Pending Home Sales Fall in February Due to Low Inventory

“WASHINGTON (Reuters) – Contracts to buy previously owned homes fell in February, held back by a shortage of properties, but there is little to suggest that the housing market recovery is stalling.

The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, slipped 0.4 percent to 104.8. Still, contracts last month remained at the second highest level in nearly three years.

Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to dip 0.2 percent after a previously reported 4.5 percent jump in January.

The Realtors group blamed the pullback to a shortage of homes for sale. The supply squeeze is helping to push up home prices, putting a solid foundation under the housing recovery….”

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SHILLER: ‘We’re Living In A Totally Artificial Real Estate Economy’

“Housing data released Tuesday was mixed, showing home prices jumped while new home sales dropped, prompting renowned economist Robert Shiller to call the housing recovery positive in the short-term, but not without many headwinds. There might even be a bubble, he said.

“One thing that makes it very hard to forecast home prices right now is that we’re living in a totally artificial real estate economy,” said Shiller, co-creator of the Standard & Poor’s/Case-Shiller Index, a widely followed measure of housing prices.

Shiller pointed to the Federal Reserve, which last week reaffirmed its policies on bond purchases and record-low interest rates. In September, the Fed launched a third round of quantitative easing (QE), in which it has bought $40 billion of mortgage-backed securities per month, primarily in mortgage-backed bonds.

Meanwhile, Fannie Mae and Freddie Mac, the two largest U.S. home funding sources, remain in government conservatorship as Congress looks for ways to raise new tax revenues, Shiller noted.

“All of these things are weighing on the futures of housing,” Shiller said on CNBC‘s “Futures Now,” adding the recovery might even be a bubble. “One thing you learn from history is that bubbles can occur at any time.”….”

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Mortgage Applications Rebound

“(Reuters) – Applications for home mortgages rebounded last week as interest rates pulled back for the first time in three weeks, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 7.7 percent in the week ended March 22.

The index has declined for six of the past nine weeks as rates have pulled higher. Still, interest rates remain low on a historical basis, kept down by the Federal Reserve’s efforts to boost the economy by buying bonds and mortgage-backed securities.

The seasonally adjusted index of refinancing applications jumped 8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, gained 6.7 percent….”

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Home Inventories Rise in February

“For the first time in over six months, the supply of homes for sale is beginning to rise.

While inventories are still down nearly 20 percent from a year ago, they did rise more than the seasonal norm in February from January, according to a new report from the National Association of Realtors.

The raw number of for-sale listings rose 10 percent month-to-month, and when seasonally adjusted, they were up 2.6 percent, the biggest jump in over two years.

“Tight inventory has been a critical issue for the housing market: The limited supply of homes has fueled bidding wars and has meant that buyers have little to choose from and agents have little to sell,” said Trulia.com’s Jed Kolko. “Inventory has been tightening because construction levels are still low, adding little new housing stock, and homeowners are waiting to sell until they have more positive equity. This inventory spiral been especially severe since prices bottomed.” …”

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Existing Home Sales Beat Expectations

“Existing home sales for February were up 0.8 percent month-over-month in February, to an annual rate of 4.98 million.

This missed expectations for a 1.6 percent rise to an annual rate of 5 million.

January’s reading was revised up to reflect a 0.8 percent rise in sales to an annual rate of 4.94 million….”

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Mortgage Applications Fall Off a Cliff as Rates Rise

“Applications for U.S. home mortgages tumbled for a second week in a row last week as interest rates continued to climb to seven-month highs, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.1 percent in the week ended March 15.

The index of refinancing applications dropped 8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, slipped 3.9 percent….”

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Is Foreclosure Home Buying in a Bubble ?

“We have seen it for several years now: foreclosure sales—there were 5 million since the peak of the housing bubble—have become the hunting grounds for investors with two goals: hanging on to these homes until the Fed’s flood of money drives up their value; and defraying the expenses of ownership by renting them out. And funds have a third goal: collecting management fees.

Thousands of smaller investors have piled into the game. And so have the giants.

Blackstone Group LP, the world’s largest private equity firm, plowed over $3.5 billion into the housing market, according to Bloomberg, to gobble up 20,000 vacant and foreclosed single-family homes. It just fattened up a credit line to $2.1 billion to do more of the same. Colony Capital LLC, which already owns 7,000, is putting $2.2 billion to work.

Last year, institutional investors made up 19% of all sales in Las Vegas, 21% in Charlotte, 23% in Phoenix, and 30% in Miami….”

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$GS & $BX Call the Top of the German Housing Market as They Hit Bids on Assets

Blackstone Group LP (BX) and Goldman Sachs Group Inc. (GS) are among private-equity investors selling the most German housing assets since they plowed into the market in 2005, a sign that price gains may have peaked.

Investors plan to sell at least 5 billion euros ($6.5 billion) of apartments and shares of property companies this year, according to company statements and people with knowledge of the deals. Private-equity firms divested about 3.8 billion euros of housing in 2007, when there were no share sales, data from broker Jones Lang LaSalle Inc. show.

“We’re using the attractive market to clean out and reposition our portfolio,” said Olaf Claessen, director of asset management at London-based Round Hill Capital LLC, which owns about 2.5 billion euros of German homes. “We don’t think there’s an urgent need to exit, but certain properties have gained in value and could make sensible exit scenarios.”

The German housing market has changed since private-equity firms started investing at the beginning of the last decade, creating opportunities for buyers with different objectives. Investors like Blackstone, the world’s largest buyout firm, and Goldman initially struggled to make good on bets that they could buy apartments in bulk and then raise rents or resell at a profit to individuals….”

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Housing Foreclosures are Back on the Rise Again

“Banks are repossessing fewer homes, in fact the fewest since March of 2007, but in some states that may be about to change, according to a new report from RealtyTrac, an online foreclosure data and sale firm.

Bank repossessions, the final stage of the foreclosure process are down 29 percent from a year ago, but foreclosure starts, which are the first stage of the process, jumped 10 percent in February from the previous month. This after falling for three consecutive months.

“At a high level the U.S. foreclosure inferno has been effectively contained and should be reduced to a slow burn in the next two years,” said Daren Blomquist, vice president at RealtyTrac. “But dangerous foreclosure flare-ups are still popping up in states where foreclosures have been delayed by a lengthy court process or by new legislation making it more difficult to foreclose outside of the court system. Foreclosure starts have been steadily building in those states over the last several months and likely will end up as bank repossessions or short sales later this year.”

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MBA: U.S. Mortgage Applications Off 4.3% Last Week

“The total number of mortgage applications filed in the U.S. last week slipped 4.3% as interest rates increased, the Mortgage Bankers Association said Wednesday.

The refinance index fell 5.2% for the week ended March 8 from the previous week, according to MBA’s weekly survey, which covers more than three-quarters of all U.S. residential-mortgage applications. On a seasonally adjusted basis, the purchasing index was down 2.5% from the prior week, MBA said.

Low interest rates have attracted new buyers and persuaded many homeowners to refinance their existing mortgages. However, tightened credit restrictions still bar many borrowers from filing loan applications….”

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China Continues to Ratchet Up Property Curbs

Chinese stocks fell, dragging the benchmark index to a two-month low, as real estate and construction companies tumbled on concern policy makers will step up property curbs.

Sina.com reported the southern city of Shenzhen banned developers from raising home prices, citing discussions with property companies. Poly Real Estate Group Co. and Gemdale Corp. declined more than 3 percent. Sany Heavy Industry Co. (600031), the nation’s biggest maker of construction machinery, lost 2.1 percent. CSR Corp. (601766) and China CNR Corp., the nation’s top train makers, slumped at least 3.7 percent on concern the dismantling of the rail ministry will curb state spending.

“Property curbs and the central bank’s possible attitude towards tightening liquidity make investors nervous,” said Wang Weijun, a strategist at Zheshang Securities Co. inShanghai. “There’s concern the economic recovery will falter.”

The Shanghai Composite Index (SHCOMP) dropped 1 percent to 2,263.97 at the close, capping a five-day, 3.6 percent losing streak that’s the longest in four months. The gauge also erased its gain for the year. The CSI 300 Index declined 1.1 percent to 2,527.49. The Hang Seng China Enterprises Index (HSCEI)retreated 2.2 percent in Hong Kong, taking its loss from a Feb. 1 high to 9.6 percent. The Bloomberg China-US 55 Index (CH55BN) fell 1.7 percent in New York yesterday.

The Shanghai Composite Index has lost 7 percent since this year’s high on Feb. 6 amid concern the government will tighten monetary policy at the same time as economic expansion slows. Data over the weekend showed inflation accelerated in February, while industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed.

Zhou Comments…”

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Boomerang Generation are Back Buying Homes

“Homeowners who defaulted on their mortgages during the housing market collapse are back in the market buying again.

They’re called boomerang buyers. And mortgage lenders appear to be welcoming them with open arms.

Since the real estate bubble burst, 4.8 million homeowners lost homes in foreclosure and 2.2 million sold their homes in short sales, according to RealtyTrac data cited by CNNMoney.

Mike Edgar, an Idaho broker, worked with 15 boomerang buyers last year and expects that number to double this year, according to CNNMoney.

After a foreclosure or short sale, former homeowners typically see their credit scores fall 85 to 160 points, Jon Maddux, CEO of YouWalkAway.com, a foreclosure agency advising homeowners, told CNNMoney. Restoring credit may take three to seven years.

Fannie Mae and Freddie Mac, which purchase or guarantee most home loans, require boomerang buyers to wait five years, to have credit score of at least 680 and put 10 percent down, according to CNNMoney. The wait can be cut to three years, if potential buyers show that an extenuating circumstance, like a layoff or illness, prompted their default.

Quantifying the number of boomerang buyers can be difficult.

“It’s more than incremental business, that’s for sure,” Dan Klinger, president of K. Hovnanian American Mortgage, told The Wall Street Journal. “The industry is saying, ‘Pay your dues and then get back into the market.’”

Many of the boomerang buyers purchased homes at or near the peak of the housing bubble using adjustable-rate mortgages that reset to higher monthly payments. When the bubble popped, their home equity vanished, and their mortgage payments exploded….”

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U.S. Commercial Property Prices Expected to Hit New Highs This Year

“Prices for U.S. commercial property are expected to climb in the next six months, extending a rebound that has sent values close to levels reached at the market’s peak in 2007, according to Green Street Advisors Inc.

There is an 80 percent likelihood that commercial real estate prices will rise over the next six months, the Newport Beach, California-based research firm said in a report yesterday. Prices climbed 1 percent in February and are within 1 percentage point of their August 2007 high, according to the company, which tracks real estate investment trusts.

“We’re effectively back to peak pricing,” Mike Kirby, Green Street’s director of research, said in a phone interview. “We’re fairly confident that the rebound will continue.”

A “renaissance” in the issuance of commercial mortgage- backed securities will help boost prices, particularly for lower-quality properties, because financing will be more available, according to the report. JPMorgan Chase & Co. raised its 2013 CMBS sales forecast to $70 billion from $45 billion last month as issuance in January and February exceeded expectations.

Green Street’s commercial real estate price index is based on its estimate of the value of portfolios of REITs (BBREIT), which tend to own high-quality properties. Another measure of national values, the Moody’s/RCA Commercial Property Price Index, is 20 percent below its peak in November 2007….”

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Mortgage Applications Surged Last Week as Rates Fell

“NEW YORK (Reuters) – Applications for home mortgages rebounded last week after three straight weeks of declines as interest rates tumbled, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applicationactivity, which includes both refinancing and home purchase demand, jumped 14.8 percent in the week ended March 1. The index hit its highest level since mid-January….”

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