Mortgage payments at lowest level in decades

April 23, 2012

By Beth Braverman

(Money Magazine) -- For today's homebuyers, the weight of the monthly mortgage bill is the lightest it's been in decades.

Put 20% down on a median-priced ($154,400) existing home, and your payment will come to $616 a month, only 12.1% of the median U.S. family income. 

In 98 of the top 100 metro areas, it's now cheaper to buy than rent. 

"If you have good credit," says IHS Global Insight economist Patrick Newport, "this is the best time in 40 years to buy."

Want to trade up? You may think the buyer of your current home is getting a deal, but you might get an even better one on your next place. 

Prices for bottom-tier properties have improved since 2011, reports Zillow, while top-tier prices keep falling. 

Want to invest? To get the best rate (a quarter to a half point higher than for your primary residence), you'll have to put at least 25% down, according to federal guidelines. 

 Source: CNN Money

Mortgage rates sink to low not seen since '50s

Average rate on 30-year-fixed loan is 4.15 percent, but many can't take advantage 

AP Associated Press

updated 8/18/2011 12:52:01 PM ET

WASHINGTON — The average rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971.

The rate on the most popular mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.

The last time long-term rates were lower was in the 1950s, when 30-year loans weren't widely available. Most long-term home loans lasted 20 or 25 years.

Few expect record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet prices and sales remain unhealthy and are holding back the overall economy.

Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.

Most homeowners are paying rates more than a full percentage point higher than the current average. The average rate on all outstanding mortgages is 5.3 percent, Freddie Mac said, citing data from the Bureau of Economic Analysis.

After previous recessions, housing accounted for 15 percent to 20 percent of overall economic growth. This time, in 2009 and 2010, housing contributed just 4 percent to the economy.

"The housing market is not going to turn around because of this, because it isn't the mortgage rate that matters," said Joel Naroff, head of Naroff Economic Advisors. Naroff blamed the "horrendous" process of qualifying for a mortgage despite tougher lending standards. He said trying to sell a home in many markets is just as difficult.

Many would-be buyers can't take advantage of the low rates. The unemployment rate is 9.1 percent, few Americans are getting raises and many are struggling to shrink their debt loads.

Banks are also insisting on higher credit scores and larger down payments for first-time buyers. Many repeat buyers have too little equity invested in their homes to qualify for loans. Others are too nervous about the economy or their job security to invest in a home.

The average rate on a 15-year fixed mortgage, which is popular for refinancing, fell to 3.36 percent, also a record low. It's the third straight week of record lows for the popular refinancing option. Freddie Mac's records date to 1991, but analysts believe the new low on the 15-year mortgage is the lowest ever.

Borrowers who qualify have rushed to refinance and take advantage of the low rates. Refinancing accounted for 70 percent of mortgage applications in the first half of the year, Freddie Mac said. Refinancings tend to provide less benefit to the economy than home purchases do.

Mortgage rates typically track the yield on the 10-year Treasury note. Economic fears have drawn investors to the safety of Treasurys, driving down the yield on the 10-year note to barely above 2 percent. That helped lower mortgage rates.

The Federal Reserve offered a dim outlook of the economy last week, saying it expects growth will stay weak for two more years. As a result, the Fed said it expects to keep short-term rates near zero through mid-2013.

Roughly 14 million Americans remain unemployed. And the economy isn't creating enough jobs to rapidly trim that figure. The economy grew at an annual rate of just 0.8 percent in the first six months of this year, the slowest such pace since the recession officially ended more than two years ago. In June, consumers cut spending for the first time in 20 months.

Fewer Americans bought previously occupied homes in July for the third time in four months, the National Association of Realtors said Thursday in a separate report. It said sales fell 3.5 percent last month to a seasonally adjusted annual rate of 4.67 million homes. That's far below the 6 million that economists say must be sold to sustain a healthy housing market.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 3.08 percent, its lowest level on records dating to January 2005. Last week's reading of 3.13 percent also was a record low. The week before was, too.

The average for one-year adjustable-rate loans fell to 2.86 percent, the lowest on records going back to 1984. Last week's average of 2.89 also set a record.

The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.

Source: MSNBC.com

June foreclosure numbers for San Diego

Lily Leung

July 19, 2011

June 24, 2011 | The Associated Press

The number of San Diegans filing for foreclosure and defaulting on their mortgages continued to fall in June, reported real estate tracker DataQuick on Tuesday.

The county recorded 1,353 notices of default in June, the same amount as May but down 21.8 percent from a year ago. A notice of default is the first step in the foreclosure process. June's drop marks the 19th consecutive year-over-year decrease for San Diego.

Foreclosures, numbering 949 in June, are down 12.3 percent from a year ago -- marking the 13th consecutive year-over-decrease. They were up 9.3 percent from May.

June numbers for San Diego align with the state's. Foreclosures in California fell to a four-year low during the second quarter, from March to June, the monthly DataQuick report said.

"A lot of theories are being floated as to why the numbers are down," said DataQuick President John Walsh, in a statement. "Bank policy changes. Legal challenges. Politics. Holding back temporarily so as not to flood the market."

Walsh added: "The fact of the matter is that no one really knows, outside of lending and servicing industry insiders. One thing is certain: Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us,"

Comparing 2011's second quarter to last year's second quarter, both notices of default and foreclosures are down. That's a trend seen throughout Southern California, including Los Angeles, Orange, Riverside, San Bernardino, Ventura and Imperial counties.

Southern California recorded 30,384 notices of defaults this second quarter, down 19.5 percent from 2010's second quarter. There were 21,247 foreclosures in the region this quarter, down 13.9 percent from last year's second quarter. 

Notice of default, Q2

County	Q2 2010	Q2 2011	Yr/Yr pct chg
Los Angeles	13,045	11,250	-13.80%
Orange	4,313	3,705	-14.10%
San Diego	5,458	4,158	-23.80%
Riverside	7,266	5,534	-23.80%
San Bernardino	5,945	4,334	-27.10%
Ventura	1,346	1,133	-15.80%
Imperial	375	270	-28.00%
Southern California	37,748	30,384	-19.50%

Source: DataQuick

Foreclosures, Q2

County	Q2 2010	Q2 2011	Yr./Yr. Pct Chg
Los Angeles	7,300	6,733	-7.8%
Orange	2,223	1,887	-15.1%
San Diego	3,315	2,763	-16.7%
Riverside	6,086	4,810	-21.0%
San Bernardino	4,698	4,083	-13.1%
Ventura	745	697	-6.4%
Imperial	319	274	-14.1%
Southern California	24,686	21,247	-13.9%

Source: DataQuick

Source: SignOnSanDiego

New law gives added protection to short sale hopefuls

By Lily Leung

8 a.m., July 18, 2011

A new California law will further protect homeowners pursuing short sales by barring first and secondary lien holders from going after sellers for money owed after the short sales close.

Gov. Jerry Brown signed Senate Bill 458, authored by Senate Majority Leader Ellen Corbett (D-San Leandro,) into law on Friday.

A short sale is a transaction in which the homeowner owes more on the loan than the property is worth. To sell the home, the lien holder or lien holders must approve the sale because the amount owed to the lien holder will be "short" of what is currently owed by the borrower.

Real estate tracker DataQuick said short sales made up 17.7 percent of Southern California home resales in June.

The new law builds on the protections offered by a previous law, SB 931, which required the first lien holder in a short sale to accept an agreed-upon payment as the full payment for the outstanding loan balance. The previous law did not address junior lien holders.

The new law, which became effective immediately, now prohibits secondary lien holders from pursuing deficiencies after a short sale closes.

"As the economic recession continues to impact Californians, SB 458 will allow homeowners forced to sell at a loss to have closure at the end of the process," said Corbett, in a statement to the Union-Tribune. "By extending anti-deficiency protection to all loans on a home when a short sale occurs, a homeowner can use a short sale as an alternative to foreclosure or bankruptcy."

The California Association of Realtors call the bill's signing a "victory for California homeowners."

"SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lien holders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property," said Beth L. Peerce, president of the Realtors group, in a statement.

Gov. Jerry Brown — Associated Press file photo

Senate Majority Leader Ellen Corbett

Source: Sign on San Diego

Normal Heights apartment complex sold

By JAMES PALEN, The Daily Transcript

Thursday, July 14, 2011

The lender-owned apartment complex at 4963 35th St. in the Normal Heights neighborhood of San Diego has sold for more than $1 million cash.

Apartment Realty Group represented the seller, 4639 35th Street LLC, which, according to ARG Managing Director James V. Carter, was the San Diego-based private lender that took possession of the property around four years ago. ARG procured more than 10 written offers on the 5,500-square-foot, eight-unit property before closing escrow with the all-cash buyers, Gerald G. Gossman and Rose M. Gossman, for $1,087,500.

Built in 1962, the complex contains six two-bedroom, one-bathroom units and two one-bedroom, one-bathroom units.

Carter spearheaded the sale, while Don Warfield of Donald Warfield & Associates represented the buyer.

Source: San Diego Source The Daily Transcript 

Rents Rise, Vacancies Go Down

By WESLEY LOWERY 

July 7, 2011

Apartment landlords are enjoying rising rents and falling vacancies.

The average effective rent, the amount paid after discounting, was $997 in the second quarter of the year, up from $974 a year earlier, according to a report scheduled for release Thursday by Reis Inc., which tracks leasing data for 82 markets. Second-quarter rents rose in all but two markets.

Rent levels rose fastest in San Jose, Calif., to $1,501 in the second quarter. The average effective rent in San Francisco was $1,806; Wichita, Kan., $495, and New York, $2,826.

Vacancies, meanwhile, fell in 72 of the 82 markets during the second-quarter vacancy rate to 6%, the lowest since 2008 and compared with 7.8% a year earlier, according to Reis. Vacancies declined fastest in Charleston, W.Va., Greensboro/Winston-Salem, N.C., and Richmond, Va.

"Rising rents and falling vacancies are the perfect situation for landlords," said Rich Anderson, an analyst for BMO Capital Markets. "It's like drinking without the hangover."

But there were some cautious signs in the data. Landlords filled a net 33,000 units in the second quarter, a slowdown from the 45,000 units they filled in the first quarter. That was somewhat surprising because typically, the net "absorption" rate falls faster during the summer as college graduates leave campus and descend on cities in search of jobs. Some analysts said the slower absorption rate could be linked to slower job growth, although it is too soon to know for sure. The peak apartment renting season runs from May to September.

"When you're going from big numbers and getting gradually smaller it's tough to determine if things are in fact cooling," says Haendel St. Juste, an analyst at Keefe, Bruyette & Woods.

Meanwhile, supply remains constrained. Roughly 8,700 new apartment units opened during the second quarter, the second-lowest quarterly tally for new completions since Reis began collecting data in 1999.

But there is new construction in the pipeline. The CoStar Group, a Washington, D.C.-based real-estate research firm, expects about 22,500 units to be added this year, followed by 94,600 in 2012 and more than 109,000 in 2013.

But as long as employers keep adding jobs to the economy, analysts say, they expect vacancy rates to keep falling and rents to keep rising. "Barring some unexpected shock from the global economy, we expect the recovery to continue through 2011," Reis wrote in the report. "Vacancies should continue to decline while rents rise at an even faster pace than we observed in the first half of the year."

Source: The Wall Street Journal

 

Apartment Market Pushing toward 6 Percent Annual Rent Growth

By Joshua Pringle, Online News Editor

Jun 30, 2011

Dallas–Axiometrics Inc., a multifamily data and analysis providor, released a research report today that shows the national apartment market continuing to heat up in May, with effective rents (rents net of concessions) increasing 0.7 percent from April levels. Axiometrics estimates that effective rents will rise 5.9 percent in 2011, which would be the largest annual increase since a rate of 5.8 percent in 2005.

Year-to-date, effective rents nationally have risen 3.17 percent, as compared to 2.55 percent in 2010. Top performing submarkets for annual effective rent growth in May included San Jose (13.0 percent), San Francisco (9.7 percent), Austin (8.7 percent), Seattle (8.5 percent), Boston (7.4 percent) and Dallas (6.5 percent).

Axiometrics President Ron Johnsey says, “With year-to-date increases in effective rents, and continued strong occupancy levels, renters who are able might be wise to sign longer term leases as property owners in most markets will maintain pricing power at least through the rest of 2011.”

Additionally, the national occupancy rate increased for the 12th time in the past 16 months, rising from 93.3 percent in April to 93.96 percent in May. From January through May 2011, the occupancy rate has increased 86 basis points (bps), which is below the rate of 136 bps for the same period of 2010. Axiometrics says that the slowdown in absorption can be attributed partially to the increase in effective rents year-to-date. But occupancy in May was still above the previous peak of 93.5 percent reached in August 2008.

From May 2010, eight major markets increased occupancy by more than 100 bps and have rates above 95 percent: New York, Minneapolis, Austin, San Jose, Cleveland, Orange County, Chicago and Denver. Some of the most overbuilt markets are recovering rapidly as well. Six major markets that had low occupancy rates in May of 2010 have increased their occupancy levels between 142.5 and 333.4 bps: Charleston, Charlotte, Dallas, Orlando, Phoenix and Houston.

Source: Multi-Housing New Online

Multifamily market limps forward; small uptick seen in rents

By ANDREW KEATTS, The Daily Transcript

Friday, June 24, 2011

 

 

The news isn’t all good in San Diego’s multifamily housing market, but it’s better than in many other markets, and it’s only going to improve, according to a panel of local experts.

The San Diego chapter of the California Apartment Association hosted a panel discussion on the state of the local multifamily market on Thursday, with panelists essentially saying, “Things could be a lot worse.”

Rents here are expected to increase between 2 and 4 percent this year on an annual basis, according to Darcy Miramontes, executive vice president of Jones Lang LaSalle.

That would lead to more pronounced growth in 2012 and 2013, she said, citing a Moody’s estimate of rent growth in those years approaching 5 percent. Even if that estimate is a bit aggressive, property owners can be sure rent growth wouldn’t fall below its 2011 level.

Renters who’ve moved in with family members during the lean years of the recession are expected to uncouple and look to live on their own again, according to Nathan Moeder, principal of London Group Realty Advisors. Since there’s been virtually no new projects delivered to the market recently, those renters will put upward pressure on rents.

“Even if only 20 percent of the people who’ve doubled and tripled up return to the market, that’s still a significant amount of demand,” he said.

Josh Harnett, senior manager of asset management for Irvine Company Apartment Communities, marked Escondido and Carlsbad as markets poised for an uptick in traffic and leasing, leading to rising rents.

He expects Torrey Hills to continue as one of the region’s strongest markets, but said Mission Valley will see the biggest year-over-year increase in rental rates.

North County beach markets are expected to remain the tightest in the region, Miramontes said, pointing to the area’s comparatively low 3.7 percent average vacancy rate.

She added that the vacancy rate downtown is artificially high. More than 600 units came into the market at the same time, due to the Vantage Point building, skewing the statistics.

The only large-scale project of note on the horizon is Sudberry’s Civita in Mission Valley, the three panelists agreed.

The master-planned community just north of Friars Road will bring nearly 5,000 housing units to market. After being discussed for more than a decade, it broke ground earlier this year. Two townhouse buildings by Shea Homes, and an apartment complex by Sudberry are scheduled to be delivered this year.

Other than Civita, the only other projects breaking ground are for affordable housing, according to Moeder.

“There’s just not a lot of inventory we’re going to see built immediately,” he said.

Small investors looking to purchase apartment buildings in the area are learning they need to get farther away from San Diego to find deals that make financial sense, according to Moeder. Some are now looking as far as El Centro.

But San Diego is largely seen as a safe market, and multifamily units in general are seen as a safe investment nationwide, he said.

Miramontes said investors like that San Diego development is constrained by its three physical borders, Camp Pendleton, Mexico and the Pacific.

“Investors like that, because it helps keep the area in check,” she said. “During the darkest part of the recession, San Diego wasn’t going too bad.”

Driven by the cost of debt the current state of capital markets, cap rates are low, according to Miramontes.

Roughly speaking, she said core, A-level product carries a 4.5 percent cap. That’s closer to 5 percent for class B, and it ranges widely after that. Class C could be anywhere from 5 to 7.5 percent.

“It depends on the individual story, and the position you want to take it to,” she said.

The apartment market fared far better than the for-sale housing market during the recession, according to Moeder. It’s currently down 4 percent from its peak, while the housing market remains 20 to 30 percent lower than its peak years, he said.

Diversity in San Diego’s employment market allowed it to fare better as well, he said.

Victims of foreclosure ended up in the rental market, according to Harnett, softening the effect of the downturn on the multifamily market.

Moeder said cities in the county are much more approachable when it comes to entitling projects.

“You can get the cities’ ears these days,” he said. “You can go back to the city and re-entitle for more economic uses. They’re interested in asking what they can do to revive a project.”

But he was highly skeptical that SANDAG’s estimations that 85 percent of new home construction will be multifamily. Historically, 60 percent of the county’s housing has been single-family homes.

“You can’t force people into that product,” he said.

Source: The Daily Transcript 

Survey: County has lowest apartment vacancy rate in nation

By THOR KAMBAN BIBERMAN, The Daily Transcript

Thursday, June 23, 2011

 

A new PricewaterhouseCoopers and Reis Inc. investor survey states San Diego has the lowest apartment vacancy rate of any major metropolitan area in the country and even has a strengthening office market.

The investor survey report subtitled "Optimism Prevails Despite Economic Unease" said the average apartment vacancy rate here was 3.9 percent during the first quarter of 2011 -- a full percentage point stronger than the 4.9 percent recorded during the like period a year earlier.

The 3.9 percent figure was stronger than all other major metropolitan areas surveyed. It was followed by Los Angeles at 4.5 percent and Baltimore at 4.7 percent, according to the survey that examined 18 of the largest metropolitan areas in the United States.

The survey said San Diego County's apartment investment market is in a strong recovery period for this year and next and will see a significant growth in demand in 2013 and 2014 -- likely fueling significant construction in those years.

San Diego's MarketPointe Realty Advisors has reached similar conclusions, but placed the average vacancy rate at 5.06 percent as of the end of March, with a 5 percent level considered to be ideal by the industry. Even at that, San Diego would still rank among the top five apartment markets in the country.

The PricewaterhouseCoopers report said the county absorbed 446 rentals in the first quarter of 2011, compared to 679 units in the fourth quarter of 2010 and 422 in the first quarter of 2010.

The report didn't stop at apartments. It said San Diego's office market, while decidedly less impressive, demonstrated some surprising strength during the first quarter of the year.

"Strengthening economic conditions, positive net absorption and a decline in sublease space are creating momentum in the San Diego office market," the report states.

The report adds that the technology services, hospitality, and education/health employment sectors are showing signs of growth in San Diego.

"In particular, the biotechnology and renewable energy sectors are attracting attention from venture capitalists, leaving these sectors poised for near-term expansion," the report continues.

It also helps that the unemployment rate has been on a slow but steady decline, currently at 9.6 percent, according to the state Employment Development Department.

The office vacancy rate tightened by a full 100 basis points to 16.8 percent year-over-year in March, according to Cushman & Wakefield. The amount of sublease space declined by 26.2 percent, while the total net absorption increased by 17.3 percent during the same one-year period.

Not everything is as office landlords would wish, however.

"The leasing market is remarkably slow for owners marketing 2,000- to 10,000-square-foot spaces," describes a survey participant.

That hasn't stopped landlords from seriously considering significant rent increases to augment their balance sheets.

"Further evidence of investors' optimistic outlook for this market is the growing use of rent spikes. The percentage of surveyed participants using rent spikes in their cash flows rose from 60 percent to 80 percent over the past three months," the report said.

San Diego's office market is presently in a recovery mode that will strengthen in 2013 and 2014, according to the report.

Retail is a mixed bag. Although many formerly empty large retail boxes continue to be refilled by such retailers as Kohl's, Best Buy, Dick's Sporting Goods and Discount Tire, the PricewaterhouseCoopers report said the retail market is still effectively in recession here and will continue to be so through next year. The report is projecting a retail recovery happening in San Diego County in 2013 and 2014.

Nationally, the report says stabilized real estate investment trust retail assets are faring the best in this economy, though malls have had their troubles. While there are many high-quality assets, few high-quality retail properties are being placed on the market -- at a time when "a flood of lower quality malls are being offered for sale ..."

In one case, Fashion Valley mall owner Simon Property Group (NYSE: SPG) has placed four malls for sale in Florida and Tennessee that have an average age of 27 years. What's more, it has been an average of 13 years since a major renovation occurred at the malls.

Power centers have been trading. In one of some 70 power centers that have traded thus far this year, Rancho Bernardo-based Excel Trust acquired the 325,431-square-foot Gilroy Crossing in Gilroy for about $210-per-square foot.

Source: The Daily Transcript

 

5 signs a Craigslist rental listing is fake

By Lily Leung

5:24 p.m., June 10, 2011

Screenshot of the Craigslist landing page for San Diego, taken June 10, 2011.

You're on Craigslist looking for a rental. As you're skimming listings in the $2,000 range for one particular area, you suddenly see one for $1,200 a month.

Too good to be true? In many cases, yes.

Real estate agents and property managers in San Diego County come across scammer listings on Craigslist and other websites from time to time. What usually happens is someone lifts the information from an existing sales or rental listing and makes a duplicate featuring a drastically lower price and different contact number.

Sometimes, the scammer asks respondents for cash up-front or an application with their Social Security number and other sensitive information -- then never follows up. The ads often are taken down after the consumer inquires about the status of the transaction, agents and property managers say.

Century 21 Award agent Nancy Beck, who specializes in University City properties, came across this just three months ago. Someone cloned one of her sales listings in that area, taking everything from the specs to property photos. What changed was the home's price and its status from a sale to a rental.

"People would call me after seeing my listing for a super-low price," Beck said. "It would create a frenzy, and people would drive by the listing, see that it was for sale" and follow up with a phone call to Beck.

"That's how I became aware," said Beck, who went through two other similar incidents within a year.

The Union-Tribune talked to Kayla Roeder, vice president of Cambridge Management Group in San Diego, who shared some signs that a rental listing is likely a scam.

The person renting out the property:

1. Does not have the keys to the home and cannot show it to you.
2. Doesn't do credit checks.
3. Deals only in cash, which makes fraud untraceable.
4. Tells you to fill out an application without letting you see the home first.
5. Lists the property at a price that's drastically lower than those of comparable homes in the area.

What others are saying:

This is a terrible scam. (Renters) go out to properties thinking they're going to get something for $1,000, and they're disappointed when they don't.

--Marilyn Lewis, office manager at Park Place Realty & Asset management in San Diego, who's recently come across cloned listings of her company's properties.

These scams drastically reduce the rent and make the rentals way below market value. People are not thinking with their heads and instead with their wallets. They have this need to snap (the deal) up. It's out of desperation.

--Jennifer Newton, president of Walters Home Management in San Diego.

Craigslist did not respond to a request for comment.

Some agents and managers said they normally flag the cloned listings, and they're usually taken down within a timely manner.

Source: SignOnSanDiego

Quote of the day: California's housing market

By Lily Leung

6:37 p.m., June 13, 2011

A year ago we were talking about sales reaching a four-year high as buyers rushed to take advantage of expiring federal homebuyer tax credits. Now sales are stuck at a three-year low. The government stimulus is long gone and some of the fundamental drivers of housing demand have yet to strengthen enough to lift sales to even average levels. Some of the key culprits are weak job growth, tight credit and a hesitancy among potential buyers and sellers, who question whether this is the best time to make their move.

 --John Walsh, president of San Diego-based DataQuick Information Systems, which culls and analyzes real estate data.

Source: SignOnSanDiego

Quote of the day: mortgage rates down, again

By Lily Leung

4:50 p.m., June 9, 2011

Long-term Treasury yields moved lower following a weak jobs report and mortgage rates followed suit. The economy added 54,000 jobs in May, the fewest in eight months, and factories cut payrolls for the first time in seven months. As a result, the unemployment rate rose to 9.1 percent, representing the highest rate since December.

Frank Nothaft, the chief economist of Freddie Mac, on this week's average mortgage rates, which fell to their lowest levels this year.

The 30-year fixed this week was 4.49 percent, down from 4.55 percent last week. A year ago, it averaged 4.72 percent.

The 15-year fixed this week was 3.68 percent, down from 3.74 percent last week. A year ago, it was 4.17 percent.

Source: SignOnSanDiego

Rental Demand Brightens Dark Housing Outlook

By Jann Swanson

Jun 7, 2:31PM

The gloomy picture painted by The State of the Nation's Housing report released yesterday by Harvard's Joint Center on Housing Studies has but one bright spot - the improving rental housing market. 

On virtually every other level it appears that a housing recovery is still months if not years away. Rather than leading the country out of the recession as it has done in prior downturns, the housing industry is holding back economic growth. The report details a number of housing areas where, rather than the outlook improving as the economy began to pick up, things actually got worse.

First of all, household growth has dropped precipitously since 2007.  In the four years since, an average of 500,000 new households have formed each year compared to the 1.2 million annual pace averaged between 2000 and 2007.  This is even more disheartening as the "echo boomer" generation, those born after 1986, is the largest generation in our history to reach its 20s, peak household formation years.   Instead of forming households, many in this age group have stayed in or returned to their parents' homes.  At the same time, for the first time in decade the rate of immigration as slowed.  From 2004 to 2007 the number of new households headed by foreign born citizens increased by 200,000 per year but since 2007 the number foreign-born non-citizen households have declined by the same amount. 

The rental and the homeowner market have diverged.  There has been a net shift of 1.4 single family homes from owned to rental property between 2007 and 2009, almost twice as many as in the previous two year period.  Still, rental vacancies are down, dropping from about 3.5 million to less than 2 million between 2009 and 2010, and rents have begun to move up.  At the same time homeowner vacancies, which dropped from over 9.5 million in 2008 to about 7.8 million in 2009 has declined only fractionally since even though new home construction has slowed considerably and banks appear to be holding large numbers of foreclosed homes off of the market.  Still, housing prices, unlike rents, have resumed their decline. Unusually large numbers of households are switching from owner to renter and the ownership rate has fallen from 69 percent in 2004 to 67 percent in 2010.  The report says that the continuing foreclosures and reluctance on the part of owners to buy as long as prices are unstable will cause home ownership to continue its decline through 2011. 

The Harvard report cites a Fannie Mae study showing that while attitudes toward homeownership have become more negative over the last few years, 74 percent of renters and 87 percent of the general population still view homeownership as safe investment.

While many households aspire to homeownership, tightened underwriting standards may stand in their way and the report speculates that the proposed 20 percent down payment requirement for qualified residential mortgages could sharply curtail homeownership unless the borrower obtains a government guarantee.  "Over the longer term, it is unclear how the impending reform of the housing finance system, (...) will influence the cost and availability of mortgage loans.

The number of rental households accelerated in the second half of the last decade, swelling by an estimated 3.9 million between 2004 and 2010 but rental vacancy rates increased and rents fell during the same period as new units were added and homes were converted from ownership to rentals.  In 2010, however, the rental market moved into high gear and the vacancy rate dropped from 10.6 percent to 9.4 percent over the course of the year.  MPF Research reported vacancy rates below 5 percent in almost one third of the 64 markets it studied and more than half had rates below 6 percent.   As vacancies declined, rents rose.  Rents in professional managed apartments were up 2.3 percent last year with most of the growth in metropolitan areas.  As employment grows, especially among younger persons, and homeownership continues to decline there will be pressure on the rental market, pushing rents up and encouraging multi-family construction.   Given the time line for new construction, however, rents are likely to remain tight in the short term and will present increased affordability challenges for low-income renters.

There is much uncertainty in the market regarding access to mortgage credit, home buying attitudes, immigration trends and laws, and household formation, but there is certainty about some factors related to demographics.  It is known that the aging baby boomers will drive up the number of older households by some 8.7 million by 2020.  This tends not to be a mobile population and will provide "ballast" for the owner market, offsetting in part the lower homeownership rates among younger households.

While the senior population is likely to age in place, if boomers follow the pattern of the preceding generation some 3.8 million will downsize their homes over the next ten years, lifting demand for smaller housing units and having a major impact on the housing markets in preferred retirement destinations.  The large pre-boomer population will create a similar demand for assisted and independent living developments.

The echo-boomer generation will have a less predictable impact on housing markets.  There are questions involving their homeownership attitudes and the net impact of immigration.  There is reason to believe that this generation will be large enough to boost household formation and the demand for starter homes and apartments.  The report states that if household formation (headship) rates return to their pre-recession average and if immigration is just half of what the Census Bureau projects, the number of households under age 35 will grow to nearly 26.5 million in the next decade.

Affordability is another challenge facing the housing market.  In 2009 10.1 million renters and 9.3 million owners paid more than half their income for housing.  While this hits low-income households the hardest, households with incomes under $15,000 pay over 80 percent of their incomes for shelter, the cost pressures have been moving up the income scale.  Households earning $30 to $45 thousand increased the proportion of their incomes spent on housing from 30 percent to 40 percent over the ten year period ending in 2010.

The recent crash has wiped out household wealth, ruined credit ratings and devastated communities with foreclosures and has left nearly 15 percent of homeowners in homes that are "under water".  This has reduced the amount that owners can cash out of their homes by selling or refinancing.

The report concludes by saying that the strength of the housing recovery, when it does finally occur, will depend on how fully employment bounces back, and then local markets will revive in proportion to the increase in jobs, the depths housing fell during the recession, and the amount of overbuilding that occurred before the downturn.  But the most critical factor for housing recovery in the resumption of household growth and it may be that the unemployment rates on top of the long-term housing affordability issues may have lowered the baseline trend of household growth itself.  "To match the 1.12 million annual rate average in the 2000s, household formation rates must return to their 2007-2009 average and net immigration must reach at least half of Census Bureau projections," the report says.

In the near term it will be rental markets that are likely to lead the housing recovery, but once consumers decide that a floor has formed under house prices, their reentry into the market could quickly burn through the lean inventory of unsold new homes and reduce the excess supply of existing homes on the market.  There is also the danger that government programs to address rent affordability and assisting distressed neighborhoods will feel the budget axe just as affordability problems are escalating.

Related MND comments....

From: HUD Focused on Rebuilding America's Dilapidated Housing Inventory

"Take note of HUD-sponsored initiatives aimed at rebuilding America's dilapidated housing stock." says MND's Managing Editor Adam Quinones. "This is where housing professionals will find the most opportunity in years ahead.  The FHA should reopen the 203(k) program to investors if they want to encourage private investment in the U.S. housing market."

From: Home Remodeling a Forward Indicator of Housing Bottom?

"With so many foreclosed properties sitting empty on the market we can expect remodeling and rehabbing to be a leading indicator of a bottom in the housing market", says MND's Managing Editor Adam Quinones. "We already know there is dearth of affordable rental housing available to low income renters. From that perspective, FHA should open its 203(k) program to investors if they want to accomplish their affordable housing goals."

Source: Mortgage News Daily

Unemployment Falls in 39 US States

Published: Friday, 20 May 2011 | 11:46 AM ET 

By: AP

Unemployment rates fell last month in more than three-quarters of nation's states, evidence that companies are feeling more confident in the U.S. economy.

The Labor Department said Friday that unemployment rates dropped in 39 states in April. That's an improvement from March when 34 states had reported decreases. Rates rose in three states and the District of Columbia. They were unchanged in eight states.

Employers added workers in 42 states. Only eight states and the District of Columbia lost jobs last month.

Nationally, businesses have added more than 250,000 jobs per month, on average, in the past three months. It's the fastest hiring spree in five years. The unemployment rate has dropped nearly a full percentage point since November. Still, it remains very high at 9 percent.

New York added 45,700 jobs in April, the most of any state. It was followed by Texas, which added 32,900 jobs, and Pennsylvania, which gained 23,700 jobs.

Michigan lost 10,200 jobs, the largest decline of any state. Minnesota lost 5,200 jobs and South Carolina shed 3,800 jobs.

Nevada reported the biggest monthly drop in unemployment among all states. Despite the decline, unemployment in Nevada was 12.5 percent, the highest in the nation. New Mexico and Oklahoma reported the next biggest monthly decreases.

North Dakota had the lowest unemployment rate of any state at 3.3 percent. It has benefited from oil production, which is among the state's top industries.

Other states with low unemployment rates were Nebraska, New Hampshire and South Dakota.

By region, the Northeast had the lowest unemployment rate at 8 percent. The Midwest's unemployment rate was 8.1 percent, followed by the South, 8.8 percent, and then the West, 10.4 percent.

The West region includes California and Nevada, two of the states hit hardest by the foreclosure crisis.

Source: CNBC