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Analysis: More Americans are Departing from the Boomerang Dilemma

“WASHINGTON (Reuters) – Americans are feeling increasingly confident in the future and more and more are striking out to set up their own homes, a move that is helping propel the housing recovery.

The deep financial crisis and recession of 2007-2009 kept many Americans from leaving their parents’ nests and drove others back into them, putting a sharp brake on the pace at which new households formed.

Household growth averaged about 500,000 per year from 2008 through 2010 – less than half the rate seen at the height of the housing boom in the years just before that. The pace in 2010 was the weakest since 1947.

But the rate at which individuals or families are getting their own homes picked up over the past two years, underpinned by a steady if tepid economic recovery and gradual labor market gains. In 2011, households increased 1.1 million and they grew closer to 1.2 million last year.

“The rise in household formation bodes well for the housing recovery. Instead of having too many houses, we are turning to a situation where there aren’t enough,” said Guy Berger a U.S. economist at RBS in Stamford, Connecticut.

Indeed, housing has turned from the economy’s sorest spot to its brightest, with new building activity at 4-1/2-year highs. Housing activity in turn spurs related areas like furniture.

That is because of people like Linna Chhean. After graduating from college in May 2007, she moved back in with her parents, helping out in a family-run business.

The 27-year-old finally moved into her own one-bedroom apartment four weeks ago after she was hired as a designer in the Dallas offices of a global public relations firm.

“I wanted to get a job in my field, which is art. I was working for them in a convenience store, which is not what I wanted to do at all,” said Chhean.


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Recent Uptick in Housing and Construction Expected to Continue

“WASHINGTON (AP) — The aftermath of the housing bust forced many homebuilders to dramatically scale back construction on new homes to avoid the risk of ending up saddled with a trove of newly built, yet unsold properties.

But an improving housing market has homebuilders feeling more confident about sales, and that’s likely to kick the pace of new construction into a higher gear this year.

The Commerce Department said Thursday that builders broke ground on houses and apartments last month at a seasonally adjusted annual rate of 954,000. That’s 12.1 percent higher than November’s annual rate. And it is nearly double the recession low reached in April 2009.

Construction increased last month for both single-family homes and apartments. And the pace in which builders requested permits to start more homes ticked up to a 4½ year high.

For the year, builders started work on 780,000 homes. That’s still roughly half of the annual number of starts consistent with healthier markets. But it is an increase of 28.1 percent from 2011. And it is the most since 2008 — shortly after the housing market began to collapse in late 2006 and 2007.

Steady hiring, record-low mortgage rates and a tight supply of new and previously occupied homes available for sale have helped boost sales and prices in most markets. That has persuaded builders to start more homes, which adds to economic growth and hiring.

David Williams, a homebuilding analyst with Williams Financial Group, says builders are very closely tied to what’s happening in the housing market and they’re going to build homes to meet demand, but not go overboard….”

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2012 Saw Fewer Home Foreclosures

“LOS ANGELES (AP) — Lenders took possession of fewer homes in 2012 than a year earlier, but half of states remain hot spots.

The pace of new homes entering the path to foreclosure slowed and banks increasingly opted to allow troubled borrowers to sell their homes for less than what they owed on their mortgage.

All told, banks repossessed 671,251 homes last year, down nearly 17% from 804,423 the year before, according to foreclosure listing firm RealtyTrac.

The trend, along with an annual decline in overall foreclosure activity, suggests that the country’s foreclosure woes are easing, at least on a national level.

But half the states experienced higher levels of foreclosure activity last year and many are expected to continue seeing increases this year, RealtyTrac said….”

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MBA: Mortgage Applications Rebound

“Applications for U.S. home mortgages rose for a second straight week following three weeks of declines, 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, surged 15.2 percent in the week ended Jan 11.

The index of refinancing applications jumped 15.3 percent, while the seasonally adjusted purchase index increased 12.9 percent to the highest level since April 2011…..”

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CORELOGIC Expects Home Prices to Jump 6% This Year

“Going into 2013, home prices are expected to rise 6 percent driven by steady demand, lower bank-owned (REO) sales, and lower inventory of unsold homes.  This is according to CoreLogic’s latest report.

The CoreLogic Home Price Index (HPI) increased 6.3 percent in 2012, the largest increase and highest level since 2006. And year-over-year home price increases were more widespread.

This increase in home prices across a broader geographic spread is expected to continue in 2013.

Here is CoreLogic’s 2013 outlook….”
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Singapore Imposes More Measures to Curb Property Speculation

“Singapore added more measures to curb speculation on residential and industrial properties after home prices climbed to a record and the value of logistics buildings doubled over the past three years.

The stamp duty for homebuyers will increase as of tomorrow by between 5 percentage points and 7 percentage points, the government said in an e-mailed statement today. Permanent residents will have to pay the additional tax when they buy their first home, while Singaporeans will have the levy starting with their second purchase, according to the statement.

The government has tried to rein in residential property prices since 2009. Before today’s measures, it barred interest- only loans for some housing projects, stopped allowing developers to absorb interest payments, imposed additional taxes on foreigners and companies buying properties, and moved to curb the trend of so-called shoebox apartments. In October, it also restricted home-loan maturities to 35 years and required tighter loan-to-value limits for loans exceeding 30 years.

“The reality we face is that interest rates are extraordinarily low, globally and in Singapore and continue to add fuel to our property market,” Tharman Shanmugaratnam, Singapore’s deputy prime minister, said in the statement. “We have to take this further round of measures now to check recent market trends and avoid a more serious correction in prices further down the road….”

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The Consumer Financial Protection Bureau Rolls Out New Mortgage Lending Rules

“The federal Consumer Financial Protection Bureau (CFPB) announced today the adoption of new rules for mortgage lenders that prohibit deceptive teaser rates or no-documentation from borrowers, as well as requirements that lenders make a better effort to determine a borrower’s ability to repay the loan.

The CFPB’s director said:

When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford. Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.

The ability to pay rules require that lenders document a borrower’s financial information, evaluate and decide that the borrower can repay, and not base the ability to repay on a teaser rate.

A second set of rules applies to qualified mortgages. Lenders may still make loans to consumers with “insufficient or weak credit history”, but those will carry higher interest rates and the lender will be presumed to have assured itself that the borrower can repay the loan. Borrowers may challenge that presumption if they can prove that they did not have sufficient income to repay the mortgage. In general, a qualified mortgage will be available to borrowers whose debt-to-income ratio is less than or equal to 43%….”

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As Consumer Consumption Slows, So Does the Need to Build Strip Malls Everywhere

“Retailer demand for space at U.S. shopping centers slowed in the fourth quarter amid sluggish economic and employment growth, Reis Inc. (REIS) said.

Occupied space at neighborhood and community shopping centers rose by a net 2.25 million square feet (209,000 square meters), down from 4.12 million square feet a year earlier, the New York-based real estate research firm said today. While it was the sixth consecutive quarter of positive net absorption, “demand remains incredibly weak,” Reis said in its report.

Slow growth in the U.S. economy and an unemployment rate stuck at almost 8 percent are leading to smaller declines in retail-center vacancies. Gross domestic product growth of about 2 percent last year was “a clear disappointment,” Reis said. Until economic growth and labor-market gains shift into a “higher gear,” consumer spending will be muted, said Ryan Severino, a Reis senior economist.

“There’s a dearth of demand out there,” he said in a telephone interview. “It’s difficult to be more optimistic.”

Shopping-center (BBRESHOP) vacancies dropped to 10.7 percent in the fourth quarter from 10.8 percent in the previous three months and 11 percent a year earlier, Reis said. The fourth-quarter figure was the lowest in three years. Effective rents, or what’s paid after any landlord discounts, averaged $16.59 a square foot, up from $16.51 a year earlier….”

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MBA Index Shows a Rebound in Mortgage Applications


“NEW YORK (Reuters) – Applications for U.S. home mortgages rebounded last week after three straight weeks of declines, even as interest rates jumped, 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, surged 11.7 percent in the week ended Jan 4.

The index of refinancing applications jumped 12.1 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, climbed 9.6 percent.

The refinance share of total mortgage activity held steady at 82 percent of applications….”

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A Mortgage Bond Boom Isn’t a Housing Recovery

“The new issue of Bloomberg Markets magazine looks at the year’s best-performing hedge funds. Topping the list are several that have invested in mortgages, led by the 38 percent return at Deepak Narula’s Metacapital. Within this winning category there are funds that invest in Fannie and Freddie-backed mortgages, and (believe it or not) in subprime. For everything there is a price and a time.

Housing has risen this year, with a 4.3 percent gain in the S&P/Case-Shiller home price index. As is usually the case with housing, it doesn’t take much for the word “recovery” to start getting tossed around. Don’t confuse mortgage bonds with housing. The Big Picture’s Barry Ritholtz has several times charted the long run view of home prices, and they’re still above the historical average relative to household income. (Standard & Poor’s Co.’s David Blitzer shows them slipping below historical norms compared to per capita income; with changing family sizes, that’s  the wrong measure.)

Narula gives some detailed insight into his strategy, and it’s worth reading for the view it affords not only into his fund, but into the housing economy. He’s gained with bets that mortgages would rise relative to Treasury bonds, and that fewer debtors would be able to refinance than the U.S. government hoped.

That reveals some painful truths about the housing recovery. Low rates have made housing relatively more affordable … for those who haven’t been locked out of the market by credit standards that are much tighter than they were even before the housing boom. The winners in a concerted Federal effort to keep housing afloat are banks, investors, and the limited group of homeowners who’ve been able to finance purchases at low rates….”

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Luxury Home Sales Soared Last Q

“Sales of luxury homes spiked in the final months of 2012 as high-end homeowners rushed to take advantage of lower tax rates before January 1.

Many sellers wanted to cash in on their homes before a widely expected capital gains hike — to 20% from 15% — that was part of the fiscal cliff budget deal. High-income earners (singles with income of $200,000 or more and couples making more than $250,000) also wanted to close sales ahead of a 3.8% Medicare surtax on investment income that was already slated to go into effect this year as part of the Affordable Care Act.

All told, a high-earner would pay $88,000 less in taxes if they made a $1 million profit on their home in 2012 rather than in 2013.

That considerable tax savings motivated many wealthy homeowners to move fast. According to the National Association of Realtors (NAR), sales of homes valued at $1 million or more spiked 51% in November compared with a year earlier.

In Manhattan, one of the most expensive markets in the nation, the number of sales of home valued at more than $10 million jumped 44% year-over-year during the last three months of 2012, according to broker Brown Harris Stevens….”

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Mortgage Applications Fall for a 3rd Week


“(Reuters) – Applications for home mortgages fell last week for the third consecutive week asrefinancings fell to the lowest level since last April, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 10.4 percent in the week ended December 28.

The MBA’s seasonally adjusted index of refinancing applications also fell 10.4 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 10.5 percent. Both indexes dipped for a third straight week….”

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Pending Home Sales Rise 1.7 Percent, Beating Forecast

A” measure of Americans who signed contracts to buy homes increased last month to its highest level in two and a half years, the latest sign of improvement in the once-battered housing market.

The National Association of Realtors says its seasonally adjusted pending home sales index rose 1.7 percent in November from October to 106.4. That’s the highest since April 2010, when a homebuyer tax credit caused a spike in sales. And after excluding those few months when the tax credit was available, it’s the best reading since February 2007…”

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Uncle Sam Quietly Takes Over the Mortgage Market


“During the financial crisis of 2008-2009, officials from both the George W. Bush and Barack Obama administrations joined Wall Street bankers to condemn calls from the Left to nationalize all or part of the banking system, which had failed spectacularly. But since then the government has quietly and almost completely taken over the U.S. home mortgage industry because banks and other for-profit lenders refuse to lend money to homeowners without the guarantees and other support the government provides.


In fact, about 90% of all new mortgages are backed by the government, three times more than in 2006. Fannie Mae and Freddie Mac, the taxpayer-controlled, semi-private housing giants, were saved with infusions of $187.5 billion of public funds starting in 2008, and now guarantee 69% of new mortgages, up from only 27% in 2006, while the Federal Housing Administration and the Department of Veteran’s Affairs back about 21% of mortgages, up from just 2.8% in 2006…”

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New Home Sales Jump 4.4%

“New home sales climbed 4.4 percent in November to 377k.

However, this gain comes on top of last month’s 361k number, which was revised down from a preliminary reading of 368k.

Economists were expecting November sales to climb 3.3 percent to 380k.

So, while the pace of growth was better than expected, the level of sales was a bit light.

From the Census: ”
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U.S. Home Prices Rise for the 9th Month

“NEW YORK (Reuters) – U.S. single-family home prices rose in October for nine months in a row, reinforcing the view the domestic real estate market is improving and should bolster the economy in 2013, a closely watched survey showed on Wednesday.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.7 percent in October on aseasonally adjusted basis, stronger than the 0.5 percent rise forecast by economists polled by Reuters.

“Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength,” David Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement.

While record low mortgage rates and modest job growth should keep the housing recovery on track, analysts cautioned home prices face downward pressure from a likely pickup in the sales of foreclosed and distressed properties and reduced buying investors and speculators.

Prices in the 20 cities rose 4.3 percent year over year, beating expectations for a rise of 4.0 percent.

Las Vegas posted the biggest monthly rise on a seasonally adjusted basis at 2.4 percent, followed by a 1.7 percent increase in San Diego, the latest Case-Shiller data showed.

“Higher year-over-year price gains plus strong performances in the Southwest and California, regions that suffered during the housing bust, confirm that housing is now contributing to the economy,” Blitzer said.

Housing contributed 10 percent to the overall U.S. economic growth in the third quarter, while the sector represented less than 3 percent of gross domestic product, he said….”

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Case Shiller Reports a 0.7% Increase in Home Prices


“U.S. single-family home prices rose in October, reinforcing the view the domestic real estate market is improving and should bolster the economy in 2013, a closely watched survey showed on Wednesday.

The S&P/Case Shillercomposite index of 20 metropolitan areas gained 0.7 percent in October on a seasonally adjusted basis, stronger than the 0.5 percent rise forecast by economists polled by Reuters.

“Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength,” David Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement. (Read MoreUS May Expand Mortgage Refinance Program: Report)

Prices in the 20 cities rose 4.3 percent year over year, beating expectations for a rise of 4.0 percent.

The recovery was somewhat uneven, with 12 of 20 cities showing declines for the month…”

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U.S. May Expand Mortgage Refinance Program: WSJ

“(Reuters) – The U.S. government is considering expanding its mortgage refinancing program to include borrowers whose mortgages are not backed by Fannie Mae and Freddie Mac , the Wall Street Journal reported, citing people familiar with the discussions. (http://link.reuters.com/mej84t)

The refinancing program now being considered also seeks to include “underwater” borrowers who owe more than their homes are worth, the Journal said.

The proposal would also transfer potentially riskier loans held by private investors to the government-sponsored mortgage entities Fannie Mae and Freddie Mac, the paper said.

Such a move would require congressional authorization to temporarily change the charters of Fannie Mae and Freddie Mac, according to the Journal.

About 22 percent of all homes with a mortgage, or around 10.8 million homes, down from 12.1 million last year, were worth less than the outstanding balance at the end of June, the Journal said, citing data from CoreLogic…”

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Higher End Home Market Finally Gets Into Gear

“Sales of existing homes beat expectations in November, with Realtors reporting a surprisingly modest effect in the Northeast from Superstorm Sandy. An even bigger surprise was a huge gain in activity among higher-end homes. Sales of homes priced above $750,000 jumped 50 percent from a year ago, as sales of the lowest-end homes (largely distressed) fell 4 percent, according to the National Association of Realtors.

The change in the mix of homes selling pushed the median home price nationally (median defined as half selling higher and half selling lower) to $180,600, a 10.1 percent increase from November of 2011. This is a far higher jump than other so-called “repeat” sales indices have shown, because a median measure does not compare the sale prices of homes selling now to similar homes selling a year ago, but the median of all sale prices nationally, which is skewed to which types of homes are selling. Still, the shift to more activity in higher price ranges is important…”

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