This document summarizes recent trends in the US housing market, including interest rates, home prices, foreclosures, and short sales. It notes that interest rates have been kept artificially low by government intervention but are expected to rise in the coming years. Home prices nationally are projected to continue declining in 2010 before hitting bottom, and foreclosure and delinquency rates remain elevated. Short sales are increasingly seen as an alternative to foreclosure for distressed homeowners and the government has created incentives for short sales through programs like HAFA.
3. Mortgage Rates – 30 year fixed Source: Federal Reserve 6/25/2009 2/25/2010 Source: KCM 3/2010 Federal Reserve
4. Interest Rate Support Source: KCM 3/2010 TARP Report to Congress 1/30/2010 “ The Government has done more than simply support the mortgage market, in many ways it has become the mortgage market .”
8. "Housing has been on government life support, and without it the crash would have been much more severe. This spring and summer as those policy efforts unwind, we most likely will see mortgage rates move higher and more house-price declines." Source: KCM 3/2010 Source: San Francisco Chronicle 2/15/2010 - Mark Zandi, chief economist with Moody's Economy.com Interest Rates
14. Percentage with a Price Reduction Source: KCM 3/2010 Source: Trulia 2/2010
15. “ The remaining correction in home values we'll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise. While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time." - Zillow Chief Economist Stan Humphries Prices Source: KCM 3/2010 Source: Zillow 2/2010
16. We believe that the recent improvement in house prices is a temporary reprieve … Prices will decline an additional 8% from the fourth quarter of last year to the bottom in the fourth quarter of this year. - Moody‘s Source: KCM 3/2010 Source: Moody’s ResiLandscape 2/11/2010 Prices
17. "We have a boatload of homes that ultimately will find their way to a foreclosure sale, and that will put pressure on house prices. The more that distressed home sales rise, the more home prices get pushed down." Source: KCM 3/2010 Source: San Francisco Chronicle 2/15/2010 Mark Zandi, Chief Economist with Moody's Economy.com Prices
19. Source: Chicago Mercantile Exchange 03/01/10 May ‘11 Today’s Price Nov ‘13 Source: KCM 3/2010 Projected Bottom
20. “ But I still think the risk of continued weakening in house prices nationally is considerable…The potential for another wave of distressed property coming to market remains very high. While the government’s mortgage modification program may have slowed the number of foreclosed properties coming to market, its near complete failure is likely to result in a whole new wave of distressed activity down the road.” Source: KCM 3/2010 Source: Housing Wire 2/09/2010 - Dave McCarthy, President and CEO Integrated Asset Services Prices
29. Source: First American CoreLogic 2009 4thQ Negative Equity Data Source: KCM 3/2010 Negative Equity by State Data available for Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming
30. Walking Away The New York Times : “ Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property… The borrower isn’t escaping the consequences; he is suffering them .” The Wall Street Journal: “ Give serious thought to walking away from the debt …No, you shouldn’t feel bad about it, and you shouldn’t feel guilty… You need to be ruthless about your cash flow…The economy is fundamentally amoral…Whether we like it or not, walking away from debts is as American as apple pie.”
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32. Return to the Market: One benefit of a short sale is that consumers usually can buy another home in two to three years, rather than five to seven as is the case with a foreclosure. Deficiency Judgment: Most of the time, the lender will release the seller from any further obligation to repay the debt. Source: New York Times 2/22/2010 Source: KCM 3/2010 ‘ Short Sales’
34. HAFA creates financial incentives for borrowers, servicers, and investors to avoid a foreclosure by utilizing a short sale or a deed-in-lieu of foreclosure. According to Treasury, these options generally provide borrowers, investors, and communities with a better outcome than a typical foreclosure sale. Source: KCM 3/2010 TARP Report to Congress 1/30/2010 ‘ Short Sales’
37. Source: KCM 3/2010 Source: Campbell Surveys 2/2010 Percentage of Distressed Sales Investor REOs Move-in REOs Short Sales
38. “ This will be the year of the short sale.” - Calculated Risk 2/15 Source: KCM 3/2010
39. “ Everyone is touting 2010 as the year of the short sale. I would agree that it seems to be heading in that direction. There are going to be hundreds of thousands of short sales.” - Cary Sternberg is the president of Excellen REO. Source: Housing Wire 2/12/2010 Source: KCM 3/2010
40. “ Treasury suggests servicers consider such factors as severity of the loss, local market conditions , timing of the pending foreclosure, and borrower motivation and cooperation.” Source: KCM 3/2010 TARP Report to Congress 1/30/2010 ‘ Short Sales’