December Housing Starts and Permits Figures Sag

Building permits and housing starts in
December were both below levels reported in November ‘according to data
released this morning by the Department of Housing and Urban Development (HUD)
and the Census Bureau.  Both statistics
were, however, well above the levels one year earlier.

Building permits for privately owned
housing units were at a seasonally adjusted annual rate of 679,000, 0.1 percent
below the revised November rate of 680,000. 
Permitting activity was 7.8 percent higher than in December 2010 when
the pace of permits was 630,000.  The
November figure was revised downward from the 681,000 originally reported.

Permits were issued for single-family
houses at the rate of 444,000, up 1.8 percent from the 436,000 reported in
November.  Multi-family authorizations
(permits in buildings with five or more units) were at a rate of 209,000
compared to 223,000 in November.

The report estimates that there were 611,900
housing units issued during the whole of 2011, a 1.2 percent increase over the
604,600 issued in 2010.

On a regional basis, permitting
increased month-over-month in the Midwest by 5.8 percent and was up 13.4
percent on an annual basis.  Permits in
the West were unchanged from November and down 1.2 percent year-over-year.   Permitting fell 6.5 percent in the Northeast
and was 36.8 percent below that of one year ago while the South had a
fractional -0.6 percent change since November but permitting was still up 31.1
percent for the year.

Building Permits

Click Here to View the Housing Permits Chart

Privately-owned housing starts in
December were at a seasonally adjusted rate of 657,000, 4.1 percent below the
revised November estimate of 685,000 but a 24.9 percent increase from the
December 2010 rate of 526,000.  
Single-family starts were at a rate of 470,000, up 4.4 percent from the
previous month’s pace of 450,000 and 11.6 percent higher than in December 2010. 

There were an estimated 606,900 housing
units for which construction was started in 2011 compared to 586,900 in
2010.  This is an increase of 3.4
percent.

There were strong regional differences
in housing starts.  The Midwest saw a
jump of 54.8 percent in housing starts since November and a year-over-year
increase of 121.5 percent.  The other
regions did not fare nearly as well.  The
Northeast was down 41.2 percent for the month and 1.7 percent since December
2010.  The change in the South was -3.0
percent for the month and 19.0 percent for the year, and the West was down
-17.6 percent since November but up 1.5 percent annually.

Housing Starts

Click Here to View the Housing Starts Chart

Housing completions in December were at
a seasonally adjusted annual rate of 605,000, up 9.2 percent from the upwardly revised
(from 542,000) November figure of 554,000. 
Single family completions were at a rate of 448,000, a -0.9 percent monthly
change.

An estimated 583,900 housing units were
completed during 2011, 10.4 percent below the 2010 figure of 651,700.  At year’s end there were an estimated 78,800
permits that had been issued but for which work had not yet been started.  More than half of these permits (43,100) were
in the South.

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Freddie Mac: Speedy Recovery Seems Unlikely in 2012

“Perspectives on the housing market
depend on where you sit,” according to Freddie Mac’s U.S.
Economic and Housing Market Outlook

for January.  The monthly forecast noted
that existing home sales increased in November, the inventory of unsold homes
decreased to a six to seven month supply, and Freddie Mac’s economists predict
home sales will grow between 2 and 5 percent in 2012. 

But
there is “a historically large gap between sentiments of buyers and sellers.”  Nearly 80 percent of American households
believe it is a good time to buy a home, but sellers are not as happy, with
only 7.6 percent who responded to a Mortgage Bankers Association survey
believing that it is a good time to sell. 
If this gap doesn’t narrow, Freddie Mac’s economists say, the
housing-market recovery will be delayed.

The monthly report titled Toasting the New Year with a Glass Half Full
concludes that, while the economy is undoubtedly in a better place that the
same time a year ago, a speedy recovery still seems unlikely this year. 

Other highlights of the Outlook

  • Economic growth will likely
    strengthen to about 2.1 percent in the first quarter.
  • The current U.S. unemployment rate
    of 8.5 percent is likely to increase after seasonal gains are reversed.
  • Mortgage rates are projected to
    remain very low, at least in the beginning of 2012.

Frank Nothaft, Freddie Mac, vice
president and chief economist said, “With the new year comes a sense of
cautious optimism. There are some positive signs in the job market and consumer
confidence; housing is starting to raise hopes for continued gradual economic
recovery. But the economy still is giving some mixed messages.”

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Appraisers say "Don’t Blame the Messenger" for Low Home Prices

The
Appraisal Institute has apparently had enough and has decided to fight back
against what it perceives as unwarranted blame for depressed home prices.  In a press release the Institute says, ” Don’t blame the real estate appraiser if it turns out that
house you’re trying to sell or buy isn’t worth what you thought it was.”

Speaking for the Institute, its
president Sara W. Stephens, MAI said that real estate agents, homebuilders and
others have placed blame for the market’s distressed condition on appraisers
who produce opinions of value that don’t match a home’s listing, contract or
sales price, delaying a recovery in the housing market and called that
accusation “nonsense.”

“The fact is that appraisers are
undertaking the same thorough research and thoughtful analysis that they always
have in order to continue producing reliable, credible opinions of value,”
Stephens said. “Don’t shoot the messenger.”

It is unclear why the Institute
decided to refute the claims about appraisers at this time.  We did a search and found a number of
articles with the blame appraisers theme, but none that were more recent than
last summer except for charges from the National Association of Realtors that low
appraisals are among the reasons for recent high levels of sales contract
cancellations.  NAR, however, has been complaining
about low appraisals since at least the spring of 2009. 

Noting that buyers and sellers often
have emotional value attached to a home or are unaware of the market, Stephens
pointed out that appraisals completed for mortgage transactions are used to
assist lenders, who are the clients, not buyers or sellers, in making lending
decisions – and are not intended to confirm a listing, contract or sales price.
There’s no reason to assume the contract price is the “correct” price simply
because it’s higher than the appraisal, she said.

As to the claim that appraisers are
using distressed sales as comps for market rate properties, Stevens said that
qualified appraisers know how to handle adjustments for distressed properties
and added that in some markets, distressed sales are so prevalent that it would
be improper not to use them as comparables.

The Institute also released two
handouts.  The first explains the process
of conducting an appraisal
in a declining market and includes a discussion of
how an appraiser discounts a distressed comp. The second handout attempts to
explain what an appraisers job really is, making the points that:

  • Appraisals aren’t intended to confirm a home’s sales
    price.
  • Appraisers don’t set the real estate market; they
    reflect what’s happening in the market.
  • Appraisers work not for buyers or sellers, but for
    lenders.
  • Appraisers are independent, third-party experts with
    no motive to be biased.
  • Appraisals sometimes are assigned to the least
    qualified, least competent appraisers, but especially in a distressed market,
    competent and qualified appraisers – such as designated members of the
    Appraisal Institute – should be hired for difficult assignments.
  • Appraisers know how to use distressed sales as
    comparables.

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Credit Defaults Increase, Led by Mortgage Markets

Bank cards were the only type of
consumer debt to see a decline in defaults during December according to data
released today by S&P Indices and Experian. 
The S&P Experian Consumer Credit Default Indices showed increased
defaults in both first and second mortgages and in auto loans.  Driven primarily by the increase in mortgage
defaults, the national composite index rose from 2.22 percent in November to
2.24 percent in December, the highest rate since April of 2011.  In December 2010 the Index stood at 3.01
percent.

The default rate for second mortgages increased
from 1.26 percent to 1.33 percent, auto loan defaults rose to 1.27 percent from
1.17 percent and first mortgage defaults increased to 2.19 percent from 2.17
percent.  The default rate for bank cards
however dropped from 4.91 percent to 4.60 percent.  All rates have improved from those of one
year earlier when the default rate for second mortgages was 1.74 percent; first
mortgages, 2.93 percent; auto loans, 1.69 percent; and bank cards, 6.73
percent.

“Led by the
mortgage markets, the second half of 2011 saw a slight reversal of the two-year
downward trend in consumer credit default rates,” says David M. Blitzer,
Managing Director and Chairman of the Index Committee for S&P Indices.
“First mortgage default rates rose for the fourth consecutive month, as did the
composite. Since August, first mortgage default rates have risen from 1.92% to
the 2.19%. The composite also rose those months, from 2.04% to 2.24%.  The
recent weakness seen in home prices is reflected in these data.  Bank card
default rates, on the other hand, were favorable, falling to 4.6% in December.
This is more than a full percentage point below the 5.64% we saw as recently as
July 2011.

S&P Experian data highlighted
five Metropolitan Statistical Areas (MSAs). 
Three of the five showed increases in default rates for the month: Miami
increased from 4.47 percent to 4.73 percent; Dallas from 1.38 percent to 1.56
percent, and Los Angeles to 2.54 percent from 2.53 percent.  Chicago was unchanged at 2.84 percent and New
York decreased from 2.21 percent n November to 2.13 percent in December. 

Blitzer said
of the MSA data, “Given what we know about the mortgage markets, it is likely
that these cities are seeing this recent weakness because their housing markets
have still not stabilized.”


 

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First Round of Pilot Rental Initiative Completed with 2,500 Homes Sold

The first round of winners has been
selected to purchase foreclosed real estate from Freddie Mac and Fannie
Mae.  The Federal Housing Finance Agency
(FHFA) announced today that 2,500 single family homes had been awarded to successful
bidders under a pilot initiative to convert real estate acquired by the two
government sponsored enterprises (GSE) through foreclosure into rental property. 

Successful candidates for purchasing properties
from the GSE’s real estate portfolio (REO) had undergone several steps in a
qualification process before being permitted to bid on the houses which they had
to agree to hold and rent for a period of time before reselling. 

The properties were offered in sale
pools which were geographically concentrated in various locations across the
United States.  The GSEs, FHFA and other federal
agencies involved, Departments of Treasury, Housing and Urban Development,
Federal Deposit Insurance Corporation and the Federal Reserve, had several
goals
for the program.  They hoped to
relieve the GSEs of the costs and administrative burdens of managing thousands
of foreclosed properties, alleviate the blight imposed on communities by large
number of vacant and possibly deteriorating properties, increase the rental
stock, while at the same time not flooding the market with distressed
properties.

 FHFA described the response to the pilot
initiative as “robust with strong qualified bidder interest.”  Some 4,000 responses were received to the
initial “Request for Information” issued by the program sponsors last February,
however beyond announcing that the awards had been made FHFA released no
information on the names or even the numbers of successful bidders.

“FHFA
undertook this initiative to help stabilize communities and home values in
areas hard-hit by the foreclosure crisis,” said Edward J. DeMarco, Acting
Director of FHFA. “As conservator of Fannie Mae and Freddie Mac, we believe
this pilot program will assist us in achieving our objectives and help to
maximize the benefit to taxpayers. We are pleased with the response from the
market and look forward to closing transactions in the near future.”

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