D.R. Horton Swings to Profit

D.R. Horton swung to the black in its fiscal first quarter on a double-digit jump in home-building revenue and showed optimism for the spring selling season.

New home sales jump 7.6% in May

The housing market got some good news on Monday, as the government reported that sales of new homes rose 7.6% in May.

FHA Loan Problems Mounted in April as Foreclosure Starts Soar 73%

The performance of FHA loans dominates the April Mortgage Monitor report released Thursday by Lender Processing Services (LPS).  While GSE and private loans saw significant drops in foreclosure starts and portfolio loans trended down slightly, foreclosure starts for FHA loans soared, jumping 73 percent in April.  While all 2005+ vintages of FHA loans had increased numbers of starts, the increases for loans originated in 2008 and 2009 were dramatic.

“In 2008, when the loan origination market virtually dried up, the FHA stepped in to fill the void,” explained Herb Blecher, senior vice president for LPS Applied Analytics. “FHA originations tripled that year, and increased to five times historical averages in 2009. High volumes like that, even with low default rates, can produce larger numbers of foreclosure starts. That represents a lot of loans to work through – the 2008 vintage alone represents some $14 billion of unpaid balances in foreclosure, and the overall FHA foreclosure inventory continues to rise.”

Despite the increase in every vintage, loans originated for FHA after 2009 are performing distinctly better.  At the two year mark the delinquency rate for the 2010 vintage is 0.4 percent compared to 1.3 percent for loans originated in 2006 and 1.8 percent for the Class of 2007.

Nationally there were 181,584 foreclosure starts recorded during April compared to 186,446 in March and 187,323 one year earlier.  The national pre-foreclosure sale rate (foreclosure inventory) was 4.14 percent, exactly the same as in March and in April 2011.   There is still a tremendous difference between the inventory in non-judicial states (2.46 percent) and that in judicial states (6.50 percent.)  The inventory for GSE, private, and portfolio loans decreased slightly during the month but those improvements were offset by a sharp jump in the FHA foreclosure inventory driven in turn by the jump in foreclosure starts.     

Foreclosure sales continue to decrease, down 2.6 percent from March.  Sales were down 2.0 percent in non-judicial states while those in judicial states were largely unchanged.  Even those states that saw increases in foreclosure sales saw only incremental increases in terms of real numbers, and all were still far below pre-moratoria levels.

The delinquency rate in April was 7.12 percent, up slightly from 7.09 in March but well below the 7.97 percent rate a year earlier.  The rate of seriously delinquent loans and loans in foreclosure decreased to 7.37 percent from 7.44 percent.  In April 2011 the rate was 7.86 percent.  This decrease masks the fact that the age of the delinquent loan inventory continues to increase.

On the loan origination front, LPS reported that activity was up for the second straight month and was the highest in four months.  Non-FHA originations rose from 27.3 percent of originations in March to 30.2 percent in April and the volume of non-FHA loans with loan-to-value ratios higher than 80 percent increased from 112,000 in March to 128,000 in April.  Both increases were noted by LPS as “signs of HARP.”

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Single Family Construction Strengthens, Multi-family Falls Sharply

Permits for construction of multi-family housing plummeted in
April, offsetting a small increase in single family permits  and
dropping the total down 7 percent from revised April figures.  Permits
for all privately owned residential construction were issued at a
seasonally adjusted annual rate of 715,000, down from the March rate of
769,000.  The March rate was revised substantially upward from the
original estimate of 747,000.  The April permitting rate is 23.7 percent
higher than that of April 2011 when the annual rate was estimated at

Permits for single family authorizations were at a rate of 475,000, up 1.9 percent
from the March rate which was upwardly revised from 462,000 to
466,000.  The April figure is 18.5 percent higher than the rate of
401,000 one year earlier. Permits for construction in buildings with
five or more units dropped sharply from the April rate of 281,000
(revised from the original estimate of 262,000) to 217,000, a drop of
22.8 percent.   Multi-family permits were issued at a rate 40.0 percent
higher than a year earlier.

Building Permits

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Privately owned housing starts rose modestly to 717,000, a 2.6
percent increase from March and a 29.9 percent increase from the April
2011 rate of 552,000.  The March figure was revised from an original
estimate of 654,000 to 699,000.

Housing Starts

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This month the Construction Report produced by the U.S. Census Bureau
and the Department of Housing and Urban Development added a
non-seasonally adjusted set of data giving the actual numbers for
construction activity in the current month.  There were 62,000 permits
issued for residential construction during the month, 44,000 for single
family houses, and 16,000 for units in building with five or more
units.  There were also a small number of permits for units in buildings
of two to four units.

Single-family home starts were at a seasonally adjusted rate of
492,000, an increase of 2.3 percent from the March rate of 481,000 and
construction starts for multi-family housing were at a rate of 217,000
up from the March rate of 208,000.  Again the April report showed
substantial revisions of the March figures.  Single-family starts were
revised from the original estimate of 462,000 and multi-family starts
from an estimate of 178,000.

There were 64,200 units for which construction was started during the
month; 45,800 single family dwellings and 17,800 units in multiple unit

The housing completion rate in April was 651,000, a 10.0
percent increase from March and a 20.1 jump from one year earlier when
the rates were 592,000 and 542,000 respectively.  Single-family
completions were up 11.4 percent to 489,000.

There were 457,000 units under construction at the end of April.

On a regional basis, there were 6,900 permits issued in the
Northeast, up from 5,800 in March and 6,200 starts compared to 6,900 the
previous month.  There were 10,600 permits and 11,500 starts in the
Midwest compared to 10,300 and 8,600 in March.  In the South 30,800
permits were issued, down from 34,300 and 34,100 units were started, up
from 29,400.  In the West there were 13,600 permits issued and
construction was started on 12,400 compared to 17,000 permits and 12,500
units started in March.

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Refinancing Applications Jump by Double Digits

Refinancing activity spiked during the week ended May 11, rising 13.0 percent from the previous week’s level according to the Weekly Mortgage Applications Survey released this morning by the Mortgage Bankers Association (MBA).   Refinancing represented 74.9 percent of all applications compared to 72.1 percent the previous week.  The increase drove the Market Composite Index, a measure of mortgage application volume, up 9.2 percent on a seasonally adjusted basis and 8.7 percent unadjusted from the week ended May 4. 

Refinancing more than offset a 2.4 percent dip in both the seasonally adjusted and the unadjusted Purchase Indices on a weekly basis. The unadjusted index was 1.0 percent lower than during the same week in 2011.

The four week moving averages for all indices were up.  The Market Index rose 1.77 percent, the seasonally adjusted Purchase Index 1.57 percent, and the Refinance Index 1.88 percent. 

“A flare up of the sovereign debt troubles in Europe once again led investors to flee to the safety of US Treasury securities last week.  As a result, mortgage rates have reached new lows in our survey, and refinancing application volumes picked up substantially as a result,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “Survey participants indicated that this was not due primarily to HARP volume – the HARP share of refinances fell to 28 percent of refinance applications, down relative to last week and last month, when the share was just above 30 percent in April.  The increase in refinance activity last week was concentrated in the conventional sector, which was up around 14 percent for the week, while government refinance applications were up only 4 percent.”Every fixed rate covered by MBA established a new record low during the week and the effective rate of most loans was also down.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) dropped to 3.96 percent from 4.01 percent, with points decreasing to 0.37 from 0.41.

Purchase Index vs 30 Yr Fixed

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Refinance Index vs 30 Yr Fixed

Click Here to View the Refinance Applications Chart

The average contract interest rate for 30-year FRM with jumbo loan balances (greater than $417,500) decreased 9 basis points to 4.20 percent with points remaining unchanged at 0.36.

The rate for 30-year FHA-backed FRM fell to 3.75 percent from 3.81 percent, with points increasing to 0.66 from 0.45. This was the only product for which the effective rate increased.

The 15-year fixed-rate mortgage rate decreased to 3.26 percent from 3.29 percent, with points increasing to 0.41 from 0.32.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 2.80 percent from 2.83 percent, with points increasing to 0.37 from 0.36.  Applications for all  types of ARMs accounted for 5.4 percent of application volume, down from 5.7 percent. 

All rates quoted are for loans with an 80 percent loan-to-value ratio and points include the origination fee.

During the month of April, the investor share of applications for home purchase was at 5.7 percent, unchanged from March.  The Pacific region has the largest investor share of applications for home purchase at 9.5 percent. In addition, the share of purchase mortgages for second homes decreased to 5.7 percent in April from 5.8 percent in March.

The Mortgage Application Survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.

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