In Short
- Looking at trends in the average number of days a home stays on the market before an offer is received is one way to view the health of a real estate market. June figures from Altos Research and RealIQ show that, with the exception of San Diego, metro California markets are in better shape than those in many other struggling cities around the country. San Francisco homes over the past three months averaged 73.7 days on the market, less than half of the 153 days a home was on the market in Miami and well below the 131-day average in Detroit. San Jose averaged 79.3 days and Los Angeles remained steady at 94 days on average between April and the end of June. The lone leap in time on the market among the four California markets studied was San Diego, which jumped from 89 days in May to 114 in June and boosted its three-month average to 93.6 days.
- Continued stress in the housing market and a slowing economy were behind a sharp increase in the percentage of delinquent home equity lines of credit (HELOCs) during the first quarter of 2008, according to the American Bankers Association. HELOC payments more than 30 days past due increased 14 basis points to 1.10 percent between the end of 2007 and March 31 – the highest level since 1997 and the largest increase since the ABA began tracking delinquencies about 20 years ago. The news wasn’t all bad, however. Home equity loan delinquencies improved slightly from 2.39 percent at the end of 2007 to 2.34 percent in the first quarter of 2008, while late payments on property improvement loans fell from 1.81 percent to 1.78 percent. Bank credit card delinquencies, meanwhile, increased 13 basis points to 4.51 percent, just above the five-year average delinquency rate of 4.41 percent. The ABA expects delinquencies of all types to remain elevated in future quarters as higher gas and food prices eat away at consumer paychecks. (CAR, 7/10)
Pending Home Sales Fall Nationally - Pending home sales fall 4.7 percent, after posting a sharp gain in April, NAR’s Pending Home Sales Index for May slipped by 4.7 percent and was 14 percent below 2007 levels. While the decline reflects continued softness in the market, there was some good news in the West, which includes California. There, pending sales slipped only 1.3 percent in May and were 2 percent higher than a year ago. (AP, 7/8)
- The national index registered 84.7 on a scale where 100 equals the rate of pending sales during 2001, when the index was initiated. It stood at 98.5 in May 2007. The national decline was driven by the South, where the index fell 7.1 percent to 84.5, 22 percent below last year’s figure, and the Midwest, which experienced a 6 percent decline to 78.6, 13.8 percent lower than a year ago.
- Despite the higher-than-expected national decline, the West region index fell to 97.5 in May led by Sacramento, which experienced double-digit gains in pending sales as homebuyers continued to take advantage of favorable home prices and interest rates.
- NAR President and Long Beach REALTOR® Richard (Dick) Gaylord noted that the current market offers short-term benefits and long-term value for homebuyers. He warned that buyers should consider the potential that interest rates may increase slightly should inflationary fears arise. (CAR, 7/10)
Fed to clamp down on exotic and subprime loans - Signaling that it sees no end to the housing downturn in the foreseeable future, the Federal Reserve Tuesday said it will issue new lending rules next week that are expected to limit exotic mortgages and loans to high-risk individuals, and that it may extend its program of low-cost overnight loans to investment banks beyond September in a further attempt to normalize the nation’s credit markets. (NY Times, 7/9)
- On July 14, the Federal Reserve is expected to present a revised set of rules governing mortgage lending. Proposed rules issued in December drew significant criticism from lenders, who fear that tougher standards at a time when credit already is tight could make many mortgages more costly by increasing paperwork and creating additional legal issues. At the same time, consumer groups argue that the proposed rules already are too weak and that efforts to alter the proposal could make it ineffective.
- Starting in March 2008 during the near-collapse of Bear Stearns, the Fed initiated what was expected to be a six-month program to avert further bank defaults among the 20 top investment banks that regularly trade Treasury securities. Under federal law, the program may continue beyond September 2008 only if "unusual and exigent circumstances" exist in the financial markets. Under the program, the government may hold a wide variety of investments, including hard-to-sell mortgage-backed securities, as collateral for the overnight loans.
- Speaking Tuesday, Fed Chairman Ben Bernanke reiterated his support for the proposed overhaul of Fannie Mae and Freddie Mac. "If these firms are strong, well-regulated, well-capitalized and focused on their mission, they will be better able to serve their function of increasing access to mortgage credit, without posing undue risks to the financial system or the taxpayer," Bernanke said. (CAR, 7/10)
Mortgage Rates Rise - Freddie Mac reports a slight jump in the 30-year fixed mortgage rate to 6.37 percent during the week ended July 10, from 6.35 percent the prior week. The five-year adjustable mortgage rate also moved up, climbing to 5.82 percent from 5.78 percent. However, the 15-year fixed rate fell to 5.91 percent from 5.92 percent; and the one-year ARM was unchanged at 5.17 percent. (Chicago Sun-Times, 7/11)
Housing Rescue Bill Has Hurdles - Once it passes the Senate, the Senate version faces substantial opposition from the House of Representatives. The White House also is still threatening veto. Roadblocks include Rep. Barney Frank (D-Mass.), the Financial Services Committee chairman who won House approval of his version in May. He has made it clear he doesn’t plan to accept the Senate proposal without changes. Speaker Nancy Pelosi (D-Calif.) is working to quell a revolt in the House by representatives who insist that housing tax breaks and any spending in the package must be paid for with tax increases or spending cuts to prevent an increase in the deficit. There is also a push by some lawmakers for far more money for fixing up foreclosed properties. The Congressional Black Caucus also opposes language in the Senate bill that bars the FHA from insuring mortgages obtained by borrowers whose down payments were paid by the seller. (AP, 7/9)
Housing Inventories Fall in Major Cities - Los Angeles among major U.S. cities seeing inventories decline:
- Boston: -10%
- Dallas: -10.6%
- Houston: -2.4%
- Las Vegas: -18.5%
- Los Angeles: -7.4%
- Minneapolis: -4.8%
- Orange County, Calif.: -15%
- Orlando: -3.1%
- Phoenix: -2.6%
- Sacramento: -22.4%
- San Diego: -6.7%
- Tampa, Fla.: -7% (Wall St. Journal, 7/10)
Sources: California Association of REALTORS, Associated Press, Wall Street Journal, Chicago Sun Times, New York Times.
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