Daily Archives: April 8, 2012

FICO Scores and Mortgages | Bedford Hills Real Estate

A number of Realtors® responding to the February 2012 Realtors Confidence Index survey, indicated that prospective home buyers had difficulty in qualifying for a loan. Although interest rates are currently low, some prospective purchasers are reported as having problems in qualifying. A comparison of FICO scores for transactions as reported by Realtors® responding to the RCI compared with FICO scores reported by Fannie Mae’s “Acquisition Profile by Key Product Features” shows that credit availability to lower scoring applicants seems to have declined.

Housing Recovery Helps Retail Sales | Mount Kisco Real Estate

The recovering housing market is showing some impact in the retail sector.  Furniture stores are reporting an 11 percent increase in sales recently from a low point two years ago.  A stronger 22 percent in gains are occurring at building supply and gardening stores.

In addition to the visible impact to retail sales in stores directly related to housing, there is always a further multiplier effect even in areas such as restaurant spending and electronics as people earn more income from improved home sales.

The housing component to the broader economy (GDP) in the past years has not been pretty.  The declines in new home construction and existing home sales cut into GDP.  From 2006 to 2009, GDP was cut by about 1 percentage point.  That is, had the housing market not suffered the downturn and had been simply neutral, GDP growth would have been a full one percentage point higher.  (There is a big difference between 3% GDP growth versus 4% GDP growth, for example.)

Percentage Point Impact to GDP from the Housing Sector

Now, with housing showing some recovery, though at a moderate pace, the contribution to the GDP will be positive both this year and next.  A housing market recovery will result of an approximate 0.7 percentage point growth in GDP.  That’s good news for people working in the industry, for retail shops, and for the broader economy.

Apartment Vacancies Decline in 2012.Q1 | North Salem NY Real Estate

The first quarter of this year brought signs of a strengthening economy.  With improving employment conditions, household formation is expected to grow.  Coupled with lingering issues in the housing market, these factors are boosting the performance of the apartment sector.

Demand for apartments, as measured by net absorption, posted a good year in 2011.  The trend continues into the first quarter of 2012, with net absorption at a positive 36,484 units, according to REIS. Vacancy rates declined to 4.9 percent for the quarter. In addition, rent growth continued on an upward trajectory, with effective rents rising 0.9 percent during the first quarter, the fastest rate of growth since 2008. Nationally, effective rents were at $1,018 per month.

The View from Underwater | Cross River NY Real Estate

Based on the latest Corelogic report on negative equity, 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011.

Of the total of about 48.718 million mortgages, roughly 10 percent have a loan-to-value (LTV) ratio of 125 percent or more – that constitutes about 4.8 million loans. Another 1.6 percent have a LTV of 120 to 124 percent about 2 percent have a LTV of 115 to 119 percent, 2.4 percent have a LTV of 110 to 115 percent, 3 percent have a LTV of 105 to 110 percent, and 4 percent have a LTV of 100 to 105 percent.

Note that a 10% price gain will remove 3.5 million people from an underwater status into the clear. Of the 11.1 million upside-down borrowers, there are 6.7 million first liens without home equity loans. This group of borrowers has an average mortgage balance of $219,000 and is underwater by an average of $51,000 or an LTV ratio of 130 percent.

For all first-lien-only borrowers, the negative equity share was 18 percent, while 41 percent of all first-lien-only borrowers had 80 percent LTV or higher. The remaining 4.4 million upside-down borrowers had both first and second liens and bigger trouble. Their average mortgage balance was $306,000 and they were upside down by an average of $84,000 or a combined LTV of 138 percent.

The negative equity share for all first-lien borrowers with home equity loans was 39 percent, more than twice the share for all first-lien-only borrowers. Over 60 percent of borrowers with first liens and home equity loans had combined LTVs of 80 percent or higher.

The states with largest share of underwater homeowners are in Nevada, Arizona, Florida and Michigan, Georgia, and California.  To get them all above water, prices would need to rise 25% at least.  And that may take about 7 years. An alternative currently under discussion is principal reduction strategies.

March Payroll Jobs Data | Waccabuc Homes for sale

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses March payroll job data.

  • Nonfarm payrolls rose by 120,000 in March, below the pace that economists had anticipated. During the past 12 months, the number of jobs has increased by 1.9 million.
  • Manufacturing employment increased by 37,000 jobs on the strength in auto manufacturing. Since reaching a low-point in January 2010, factory jobs have increased by 470,000. There were gains in healthcare and professional services as well.
  • Retail employment tumbled by 34,000. Not surprisingly, consumers are feeling the pinch of higher gas prices and are cautious about spending.
  • Construction jobs fell for the second month, down by 7,000. Overall, construction employment has been flat for nearly 2 years.
  • The unemployment rate fell to 8.2%, down one notch from 8.3% in February. There are currently 12.7 million unemployed, of which 5.3 million have been out of work for at least 6 months.
  • Although the March jobs numbers are somewhat disappointing, data released earlier this week show that the number of initial unemployment claims continues to fall, which is necessary if the job market is to continue recovering. For this reason, the March employment data may represent a temporary pause and not a change in direction.