These are confusing days for anyone for clear signals from the housing market. A flurry of reports released this week shows what appears to be conflicting trends. Here's a summary of those reports:
With pending sales falling, home prices rising and home building on the upswing, what's a news junkie to make of these numbers? The housing market is in the midst of a seasonal slow-down exacerbated by the government shut-down and higher mortgage rates. Indeed, low inventory is putting upward pressure on home prices - and the demand for new houses. But the unusually strong price gains are more a reflection reflection of mid-summer investor purchases and big declines in foreclosure sales.
Here's a very good summary of the situation from David Blitzer, chairman of the index committee for Case-Shiller: "Housing continues to emerge from the financial crisis: the proportion of homes in foreclosure is declining and consumers’ balance sheets are strengthening. The longer run question is whether household formation continues to recover and if home ownership will return to the peak levels seen in 2004.”
HousingLink, a Minnesota non-profit housing group, said that there were 2,972 foreclosures in statewide during the third quarter, down 33 percent from the same quarter last year.
This was the first quarter during which the number of sheriff's sales fell to less than 3,000 since 2006, and it was the fifth consecutive quarter of year-over-year declines.
All of this is great news for the broader housing recovery, but an alarming number of homeowners are still struggling. Foreclosure levels are still nearly twice that of pre-crisis levels.
Here's a link to the full report, and to information about how to get help, if you're having trouble paying your mortgage.
Fallen St. Paul developer, Jerry Trooien of the JLT Group, recently sold this Summit Avenue manse in a short sale for nearly a half-million dollars less than he paid. The sale was recorded on August 29 for $958,000 with a previously recorded sale price of $1.4 million in 2002.
The house, which was built in 1901 at 965 Summit Av., has been on and off the market since 2010. It has six bedrooms, seven bathrooms and about 7,500 square-feet, and has an estimated market value of $1.6 million with annual property taxes of about $35,000, according to county records, which also describe the sale as a "Forced Sale Or Legal Action Or Foreclosure." The listing agent, Silvana Zoraqi of Edina Realty, said that because the house sold for less than was owed on the mortgage, it was a short sale.
Trooien, whose empire was been plagued by legal disputes with lenders and problems in his commercial real estate portfolio, filed for a Chapter 11 bankruptcy in 2010, owing creditors $284 million. He exited bankruptcy in 2011.
Federal prosecutors charged nine people with defrauding mortgage lenders of more than $14 million at Cloud 9, a former office building in Minnetonka that Trooien’s firm redeveloped into condos at the height of the housing boom. Trooien has not been charged in the case.
As housing prices rise in the metro, these short sales are becoming far less common.
If you saw my recent story ("Deep pocketed investor paying cash for hundreds of Twin Cities homes") about Invitation Homes, a division of Blackstone, buying once-distressed houses in the Twin Cities as part of a massive rental portfolio - and a hedge on the housing recovery, you'll be interested in a recent story that says the Oaktree Capital Group is preparing to put its portfolio of 500-plus, fully leased rental homes on the market, suggesting that the group is ready to exit the buy-to-rent business. Oaktree doesn't have any holdings in the Twin Cities, but this move might be a sign of things to come for other investors.
New data suggest that higher mortgage rates are having a very modest impact on home prices in the Twin Cities and beyond.
The oft-watched S&P Case-Shiller Home Price Index, which tracks repeat-sales of the same property in 20 major metropolitan areas across the country, increased 1.8 percent from June to July, and 12.4 percent compared with last year.
For the fourth month in a row all 20 regions posted monthly gains, but 15 regions and the 20-city composite showed that month-to-month price gains have begun to decelerate.
“Following the increase in mortgage rates beginning last May, applications for mortgages have dropped, suggesting that rising interest rates are affecting housing," said David Blitzer, chair of the Index committee. "The Fed’s announcement last week that QE3 bond buying will continue for the time being may have only a limited, though favorable, impact on housing.”
The Twin Cities, which is often among the standouts in these national reports, didn't fare as well this time - it was among seven regions that saw slower annual growth rates, posting the biggest the largest annual decline in price gains with a 9.5-percent year-over-year increase in July compared with a 11.5-pecent annual increase in June. From June to July, prices in the Twin Cities were up 1.8 percent - in line with the national average.
On a quarterly basis, that index was 7.1 percent higher during the second quarter and 10.1 percent higher than the last four quarters.
In a blog post last week, the group's economist, David Blitzer, said that the report "could show a shift in home prices following the rise in interest rates in May and June."
The latest local market data that's available is from the Minneapolis Area Association of Realtors and its monthly market report. Here's a summary of that data for August:
House prices in the Twin Cities and beyond are on the rise because demand is strong and listings are in short supply, but there's another critical factor at play: Fewer homeowners are losing their homes to foreclosure, and that's reducing the number of heavily discounted properties that are hitting the market. The foreclosures are a serious drag on home prices, and this morning there was a good news on that front.
CoreLogic said that during July the average foreclosure rate in Twin Cities and across the county declined, an that the rate in the Twin Cities is well below the national average.
The average foreclosure rate in the metro was 0.94 percent, a decrease of 0.75 percentage points compared to July of 2012 when the rate was 1.69 percent. The national foreclosure rate, which was 2.43 percent during July, also declined.
The mortgage delinquency rate in the Twin Cities metro - an indication of future foreclosure sales and a measure of how many homeowners with a mortgage were 90 days more more delinquent - fell to 3.03 percent from 4.33 percent last year, representing a decline of 1.30 percentage points.
Here's a look at the national market, according to data released this week by several research groups:
There was plenty of good news in the in-box today.
The National Association of Realtors today said that house prices rose increased in 87 percent of the 163 U.S. cities tracked by the group. Just a year ago, only 75 percent of those regions posted gains. The group said that the median sale price for existing single-family homes sold during the quarter was $203,500, up 12 percent from a year ago and the biggest gain since the fourth quarter of 2005.
More than 100 forecasters said they expect the Zillow Home Value Index to finish 2013 up 6.7 percent compared with last year. That's according to the latest Zillow Home Price Expectations. In addition, few respondents expressed concern about the impact of recent increases in mortgage rates - most said that rates would have to hit 6 percent or higher before threatening the recovery. Thursday morning Freddie Mac released a weekly survey showing that rates were largely unchanged this week, with the 30-year fixed-rate mortgage averaging 4.4 percent.
And finally, fewer homeowners are behind on their mortgage payments or facing foreclosure. The Mortgage Bankers Association said Thursday "5.9 percent of mortgages on one-to-four-unit homes were 90 days or longer past due or in the foreclosure process at the end of the June, representing around 2.8 million households and a decline from a peak of 4.5 million. The second-quarter figure was down from 7.3 percent one year earlier and a high of 9.7 percent in late 2000."