Blog - Jeff Cost

Foreclosure Volume Slated To Rise This Spring

March 16, 2012 by Jeff Cost

Foreclosure increases by state Feb 2012

After a series of months during which foreclosure volume was low, total filings have started to rise again, says RealtyTrac.

In February, 21 states posted a year-over-year increase in monthly foreclosure filings, according to the national foreclosure-tracking firm. This is nearly twice as many states as compared to December 2011, marking the highest monthly reading since November 2010.

A “foreclosure filing” is defined to include any one of the following foreclosure-related events : (1) The serving of a default notice, (2) A scheduled home auction, or (3) A bank repossession.

Nationally, the number of foreclosure filings fell 2 percent from January. However, it’s a trend that may reverse. Foreclosure volume is expected to rise over the next few months.

This is because the $25 billion mortgage servicer settlement provides a framework for servicers to execute necessary foreclosures, from notice-to-auction. Some analysts believe that foreclosure filings were artificially depressed in 2011 because of the absence of such guidance.

Like all things in real estate, though, foreclosures remain local.

For example, nationally, there was one foreclosure for every 637 housing units. On a state-by-state basis, however, the results looked different.

Nevada : 1 foreclosure for every 278 housing units
California : 1 foreclosure for every 283 housing units
Arizona : 1 foreclosure for every 312 housing units
Georgia : 1 foreclosure for every 331 housing units
Florida : 1 foreclosure for every 341 housing units

Even on a city-by-city level, foreclosure concentration varied. Figures from several select cities include :

Atlanta : 1 foreclosure for every 244 housing units
Chicago : 1 foreclosure for every 302 housing units
New York : 1 foreclosure for every 3,439 housing units
Seattle : 1 foreclosure for every 1,229 housing units
Washington : 1 foreclosure for every 1,198 housing units

One reason why foreclosure concentration is worth tracking is because homes in various stage of foreclosure are often sold at deep discounts as compared to similar, non-distressed homes. It’s no wonder foreclosed homes are in high demand among today’s Cincinnati home buyers.

However, if you plan to buy a foreclosure in Kentucky , be sure to work with an experienced real estate agent. Foreclosed homes are often sold “as-is”, and may be defective at best and uninhabitable at worst. It makes good sense to have an advocate on your side to help with contracts and inspections.

Mortgage Rates Climb Sharply After Retail Sales Report

March 15, 2012 by Jeff Cost

Retail Sales 2010-2012 The U.S. economy is expanding, fueled by a renewed consumer optimism and increased consumer spending.

As reported by the Census Bureau, Retail Sales in February, excluding cars and auto parts, rose 1 percent to $335 billion as 11 of 13 retail sectors showed improvement last month.

February markets the 19th time in twenty months that U.S. Retail Sales increased on a month-over-month basis.

Unfortunately, what’s good for the economy may be bad for Louisville home buyers and mortgage rate shoppers. Home affordability is expected to worsen as the U.S. economy improves.

The connection between Retail Sales and home affordability is indirect, but noteworthy — especially given today’s broader market conditions.

First, let’s talk about affordability.

Last week, the National Association of REALTORS® released its monthly Housing Affordability Index, showing that homes are more affordable to everyday home buyers than at any time in recorded history. For buyers with median earnings buying median-priced homes, monthly payments now comprise just 12.1% of the monthly household income.

The real estate trade group considers 25% to be the benchmark for home affordability. Today’s payment levels are less than half of that.

The reasons why today’s homes are so affordable are three-fold :

Home prices remain relatively low as compared to peak pricing
Fixed- and adjustable-rate mortgage rates remain near all-time lows
Average earnings are increasing nationwide

Rising Retail Sales, however, can derail the trend. This is because Retail Sales measures consumer spending and consumer spending accounts for roughly 70 percent of the U.S. economy. As the economy expands, the forces that combined to raise home affordability so high begin to wane.

First, in a recovering economy, mortgage rates tend to rise and, throughout 2012 and 2013, home prices are expected do the same. Second, as average earnings increase, it can spur inflation which is bad for mortgage rates, too.

Home affordability is at all-time highs today. But, in part because of February’s Retail Sales data, we should not expect these levels to last. Mortgage rates are higher by 1/4 percent since the Retail Sales data was released — roughly $16 per $100,000 borrowed — and are expected to rise more throughout the spring home purchase season.

Retail Sales are up 6 percent from a year ago.

A Simple Explanation Of The Federal Reserve Statement (March 13, 2012)

March 13, 2012 by Jeff Cost

Putting the FOMC statement in plain English Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

For the fourth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.

In its press release, the Federal Reserve noted that the the U.S. economy has “expanded moderately” since the FOMC’s January 2012 meeting, adding that growth is occurring despite “strains in the global financial markets” that pose “significant downside risks” to long-term outlooks.

The Federal Reserve now expects moderate economic expansion through the next few quarters and a gradual easing in the national Unemployment Rate.

The Fed also noted that :

The housing sector remains “depressed”
Labor conditions have “improved further”
Household spending has “continued to advance”

With respect to inflation, the Fed said that rising oil and gasoline prices will “push up” inflation temporarily, but not over the long-term.

At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at “exceptionally low” levels through late-2014, and to buy mortgage-backed bonds in the open market.

Immediately following the FOMC’s statement, mortgage markets worsened slightly, pressuring mortgage rates higher in and around Louisville.

The FOMC’s next scheduled meeting is a two-day event slated for April 24-25, 2012.

Foreclosure Volume Slated To Rise This Spring

Mortgage Rates Climb Sharply After Retail Sales Report

A Simple Explanation Of The Federal Reserve Statement (March 13, 2012)

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