The Mortgage Corner

Total existing home sales are accelerating, and prices are rising along with declining inventories. Sales that include single-family homes, townhomes, condominiums and co-ops, rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November from a downwardly revised 4.76 million in October. They are 14.5 percent higher than the 4.40 million-unit pace in November 2011. Sales are at the highest level since November 2009 when the annual pace spiked at 5.44 million.

NAR chief economist Lawrence Yun said there is healthy market demand. "Momentum continues to build in the housing market from growing jobs and a bursting out of household formation," he said. "With lower rental vacancy rates and rising rents, combined with still historically favorable affordability conditions, more people are buying homes. Areas impacted by Hurricane Sandy show storm-related disruptions but overall activity in the Northeast is up, offset by gains in unaffected areas."

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Graph: Calculated Risk

The problem now is inventory, as months of supply have been falling as lenders work off their shadow inventory of defaulted properties. Supply fell sharply to 4.8 months at the current sales rate from 5.3 months in October which was already a multi-year low. The number of existing homes on the market, at 2.03 million, is the lowest since 2001.The good news is that it is boosting home prices.

The national median existing-home price for all housing types was $180,600 in November, up 10.1 percent from November 2011. This is the ninth consecutive monthly year-over-year price gain, which last occurred from September 2005 to May 2006.

October FHFA home prices, a better measure of affordable homes with Fannie Mae or Freddie Mac conforming loans were up a better than expected 0.5 percent nationally after remaining virtually unchanged in September. On the year, the index was up 5.6 percent after increasing 4.1 percent the month before.

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Graph: Econoday

Distressed homes - foreclosures and short sales sold at deep discounts - accounted for 22 percent of November sales (12 percent were foreclosures and 10 percent were short sales), down from 24 percent in October and 29 percent in November 2011. Foreclosures sold for an average discount of 20 percent below market value in November, while short sales were discounted 16 percent.

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Graph: Econoday

LPS reports that delinquencies continue to decline. The total delinquency rate has fallen to 7.03 percent from the peak in July 2010 of 10.57 percent. A normal rate is probably in the 4 to 5 percent range, so there is a long ways to go. The in-foreclosure rate was at 4.08 percent. There are still a large number of loans in this category (about 1.96 million).

"The market share of distressed property sales will fall into the teens next year based on a diminishing number of seriously delinquent mortgages," said the NAR’s Yun.

Well, it does look like 2013 will fulfill predictions that housing will be in full recovery. The Fed has said it will hold interest rates at record lows through 2015, so what more could prospective home buyers wish for? Maybe a few more new homes under construction.

Harlan Green © 2012