Reports Continue to Show Home Price Declines

CoreLogic and Lender Processing Services
(LPS) have each released their most recent Home Price Indices.  CoreLogic’s HPI covers December; LPS’s covers
the month of November.  Here is a quick
review of each.

LPS found that the average home price
for transactions during November was $199.000, down 0.6 percent from the
October average.  This is the fifth consecutive
month that this index has declined. 
Preliminary information on December sales indicates that the HPI might
have lost another 0.8 percent during that month.

When the market peaked in June 2006 the
total value of the U.S. housing inventory covered by LPS was $10.8
trillion.  The value has declined 30.6
percent to $7.5 trillion since that time.

Price changes were consistent across the
country, increasing in 13 percent of the ZIP Codes in the database.  Higher priced homes had somewhat small price
declines than those in the middle and low price categories with the range from
high to low covering only 13 basis points.

CoreLogic issues two sets of indices,
one including sales of distressed properties, the other excluding those
sales.  The HPI for all sales decreased
1.4 percent in December and was down 4.7 percent on an annual basis, the fifth
year in a row that this HPI has declined.   
The Index covering market sales was 0.9 percent higher than in December
2010 which, Core Logic says, gives an indication of the impact distressed sales
are having on the market.  The HPI excluding distressed sales posted its first month -over-month
gain since last July, rising 0.2 percent. 

Of
the top 100 Core Based Statistical Areas as measured by population, 81 showed
year-over-year declines in November compared to 80 that were down on a monthly
basis in November compared to October.

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St. Joe Pares Back Florida Vision

St. Joe signaled that it is again scaling back its development plans in Florida, an indication that efforts to turn the state’s Northern Gulf Coast into a cluster of luxury second-home communities have been a flop.

SunTrust Settles Loan Discrimination Suit

Victims of discrimination on the part of SunTrust Mortgage will share in a $21 million settlement agreed to yesterday by the company and the Department of Justice (DOJ).  SunTrust, a wholly owned subsidiary of the nation’s 11th largest commercial bank, was accused in a lawsuit of engaging in a pattern or practice of discrimination against African-American and Hispanic borrowers.

The lawsuit claimed that these qualified borrowers were charged higher prices for loans obtained between 2005 and 2009 through SunTrust Mortgage’s regional retail offices and national network of mortgage brokers.  The settlement ends a two-and-a-half-year investigation by DOJ which began after a referral by the Board of Governors of the Federal Reserve to DOJ’s Civil Rights Division in December 2009.  The investigation included a review of company documents and data on more than 850,000 loans.  SunTrust cooperated fully with DOJ and agreed to settle the matter without contesting the litigation.

During the time period covered by the suit, SunTrust allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the prices the company set based on objective credit-related factors.  This subjective pricing discretion resulted in minority borrowers paying more. 

Prior to the settlement the company had instituted policies that substantially reduced this discretion and required reasons for any variations to be documented and reviewed by a supervisor.  The settlement requires SunTrust to keep these improved policies in place for at least the next three years and to monitor its lending for signs of discrimination, reporting regularly to DOJ.  The settlement also incorporates new Federal Reserve policies on loan originator compensation.

“Racial and ethnic bias have no place in the lending market,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia in announcing the settlement. “We are pleased that SunTrust Mortgage is taking steps to compensate the victims and to ensure fair and equal access to credit in the future.”

The proceeds of the settlement will be used to compensate borrowers in 34 states and the District of Columbia.  An independent administrator will contact victims and distribute payments of compensation at no cost to borrowers.  The announcement of the settlement gave no indication of how many borrowers might have been affected by the discrimination.

Earlier this week SunTrust Mortgage located in Richmond, Virginia, appointed David Stevens the current president of the Mortgage Bankers Association as its president. 

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Case-Shiller Home Prices Set New Post-Crisis Lows

Three measures of home prices issued monthly by S&P/Cash-Shiller declined yet again in March.  The data released today showed that the national composite, the 10-City and 20-City housing price indices ended the first quarter of 2012 at new post-crisis lows.

The national composite fell by 2.0 percent from the fourth quarter of 2011 and was down 1.9 percent compared to the first quarter of 2011.  While the changes from a month earlier were minimal (less than 0.1 percent) the 10-city was down 2.8 percent from a year earlier and the 20-City lost 2.6 percent.

At a press conference preceding the release, David M. Blitzer, Chairman of the S&P Index Committee said that flat monthly returns in March did indicate price stability and could be an indication of future gains.

Robert Shiller, Professor of Economics, Yale University, said that the housing patterns we are seeing have lasted a long time.  There are indications that we may be breaking out of the flat pricing trend, but previous attempts to do this have fizzled. 

Karl Case, Professor of Economics Emeritus at Wellesley College, said we don’t have a lot of knowledge about how bubbles unwind but the first positive indicators appear to be volume data such as existing home prices, new home sales, housing starts, and affordability.  These have all been up in recent months, but are still not great relative to history.  Housing starts, in fact are still below what was a previous 30 year low.

Case said other positives to look for are declining inventories, and distressed properties, improving demographics especially housing starts, and low vacancies.  Countervailing forces would be tight credit, the shadow inventory, the overall economy and the wild card of the economy in Europe. 

Another factor which could negatively impact housing is the final outcome of current discussions about risk-based prices.  Case said that if the government divorces itself from the risk, interest rates could rise by as much as 300 basis points.

As regards demographics, Case said one key is household formation which is needed to absorb increases in housing stock.  While household formation has been down, affected by falling immigration, the age distribution, and doubling up in housing, new census data shows that in the first quarter household formation rose by one million.  However, during the same period rental households increased by 1.5 million which means that owner occupied households are disappearing; that homeowners are becoming renters at a rapid pace. 

Returning to the Indices, Blitzer said that while there have been improvements in some regions, housing prices have not turned.  “This month’s report saw all three composites and five cities hit new lows.  However, with last month’s report nine cities hit new lows.  Further, about half as many cities, seven, experienced falling prices this month compared to 16 last time.”

Only three cities, Atlanta, Chicago, and Detroit saw annual rates of change grow worse in March.  The other 17 cities and both composites improved the annual rate of change from February.  In seven cities, Charlotte, Dallas, Denver, Detroit, Miami, Minneapolis, and Phoenix, the annual rates of change are now positive.

As of the first quarter of 2012, average home prices across the U.S. are back at their mid-2001 levels and the 10 and 20-City composites have returned to levels in late 2001 and early 2003 respectively.

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April New Home Sales Bounce Back after March Drop

Sales of new single-family houses in April 2012 were at a seasonally adjusted annual rate of 343,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.3 percent above the March rate of 332,000 and is 9.9 percent above the April 2011 estimate of 312,000.  The March rate had originally been estimated at 328,000 so this revision somewhat moderates to -5.9 percent the sharp 7.1 percent decline which had been the focus of the March report.

On a non-seasonally adjusted basis there were an estimated 33,000 homes sold during the month, up from 32,000 in March.  This was the highest number of estimated monthly sales since April 2010 when there were 41,000 sales.  Sales one year earlier, April 2011, totaled 30,000.

At the end of April there were 146,000 new homes for sale (seasonally adjusted), more than half of which (88,000) were in the South.  The total represents a 5.1 month supply at the current sales pace, down from 6.7 months one year earlier when there were 174,000 new homes on the market.

Sales rose in all regions except the South where the annual rate was 177,000 units, down 10.6 percent from March but up 4.7 percent year-over-year. The rate in the Northeast was 28,000 units, up 7.7 percent from March and 16.7 percent from one year earlier.  The rate in the Midwest was 50,000, an increase of 28.2 percent and 22.0 percent respectively while in the West sales were at a rate of 88,000 units, up 27.5 percent and 12.8 percent.

The median sales price of new houses sold in April 2012 was $235,700 and the average sales price was $282,600 compared to $224,700 and $269,900 in April 2011.

MND received some reactions from industry analysts.  Andrew Grantham, an economist with CIBA World Markets said of the Census data “The slightly better figure reflected both a sharper rebound during the current month and some slight upward revisions to previous data. However, following a still sharp decline in March, the underlying trend in new home sales since the start of the year remains broadly flat, following the gradual uptrend towards the end of 2011. While this morning’s figures were slightly better than expected, reaction should be limited as markets remain preoccupied with events and news flow out of Europe.”

“The new homes sales data is much like what we saw from existing home sales yesterday,” according to Sean Incremona, Economist, 4Cast Ltd. “There is progress but still at a gradual pace. It is still baby steps. This increase of 343,000 still comes in below that February high, which was probably inflated by weather. It does look like we have found a bottom, which is encouraging, but it is still very slow progress at this point.”

Subodh Kumar, Chief Investment Strategist, Subodh Kumar and Associates said, “I don’t think this adds anything new for the market at this stage because there was some indication housing was bottoming out from yesterday’s numbers.

“It’s positive in the sense there have been various signs the pressure on housing is starting to abate. If new housing starts to pick up, it has a chain effect on the rest of the housing market.”

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