According to a new report issued today by real estate information tracking firm CoreLogic, in February 2016, foreclosure inventory declined by 23.9 percent and completed foreclosures declined by 10 percent compared with February 2015.
The number of completed foreclosures nationwide decreased year over year from 38,000 in February 2015 to 34,000 in February 2016. The number of completed foreclosures in February 2016 was down 71.3 percent from the peak of 117,776 in September 2010.
The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure.
Since the financial crisis began in September 2008, there have been approximately 6.2 million completed foreclosures across the country, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 8.2 million homes lost to foreclosure.
As of February 2016, the national foreclosure inventory included approximately 434,000, or 1.1 percent, of all homes with a mortgage compared with 571,000 homes, or 1.5 percent, in February 2015.
The February 2016 foreclosure inventory rate is the lowest for any month since November 2007.
California was among the top five states with the highest number of completed foreclosures for the 12 months ending in February 2016. At 72,000, Florida recorded the most foreclosures over the past 12 months followed by Michigan (49,000), Texas (29,000), California (25,000) and Ohio (23,000). These five states accounted for almost half of all completed foreclosures nationally during the past year, according to CoreLogic.
CoreLogic also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due including loans in foreclosure or REO) declined by 19.9 percent from February 2015 to February 2016, with 1.3 million mortgages, or 3.2 percent, in this category. The February 2016 serious delinquency rate is the lowest in eight years, since November 2007.
"Job creation averaged 207,000 during the first two months of 2016, and incomes grew over the past year," said Dr. Frank Nothaft, chief economist for CoreLogic. "More income and improved household finances have helped bring serious delinquency rates down in nearly every state. However, serious delinquency rates increased in North Dakota and West Virginia, two states affected by price declines for the energy fuel each produces."
"Home price gains have clearly been a driving force in building positive equity for homeowners," said Anand Nallathambi, president and CEO of CoreLogic. "Longer term, we anticipate a better balance of supply with demand in many markets which will help sustain healthy and affordable home values into the future."
5 most profitable housing markets in America
By Catey Hill Published: Feb 4, 2016 12:46 p.m. ET 15
Counties where 2015 home sellers made a 49% or better return on investment
1. San Mateo County, Calif.
2. Alameda County, Calif.
3. Santa Clara County, Calif.
SANTA ANA, Calif.--(BUSINESS WIRE)--First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released First American’s proprietaryExisting-Home Sales Capacity (EHS-C) model for the month of October 2015, which provides a gauge on whether existing-home sales are under capacity or over capacity based on current market fundamentals. The EHS-C rate decreased by 3.1 percent compared to September and decreased by 7.3 percent compared to a year ago. The seasonally adjusted, annualized rate (SAAR) of existing-home sales capacity is up 73.6 percent from the low point of sales reached in February 2009*. The EHS-C decreased by 181,500 sales (SAAR) in October.
“Rising mortgage interest rates and moderation in house price appreciation were the most important market fundamentals that reduced market capacity this month. Now that interest rates are pre-adjusting in response to signals from the Fed for a highly expected increase in December, demand is also declining.”
EHS-C is down 779,000 sales (SAAR) from the most recent peak in February 2014. The current underperformance gap is an estimated 209,000 (SAAR), which is significantly less than the sales capacity gap of 1.7 million existing-home sales in February 2014.
Chief Economist Analysis: Market Capacity Pre-Adjusting to expected Fed Rate Increase
“The housing market’s capacity for existing-home sales is declining with the expectation of a Fed rate increase pre-adjusting mortgage rates and causing a slowdown in house price appreciation. Market capacity remains modestly in excess of actual sales due to leverage-assisted housing asset inflation, which is home price appreciation fueled by low mortgage rates,” said Mark Fleming, chief economist, First American. “Rising mortgage interest rates and moderation in house price appreciation were the most important market fundamentals that reduced market capacity this month. Now that interest rates are pre-adjusting in response to signals from the Fed for a highly expected increase in December, demand is also declining.”
Fleming added, “This past September, I published an analysis of the impact of a possible rate increase on existing-home sales and house prices titled "Does a Fed Rate Increase Doom Housing?" Based on a 25 basis point increase in the 30-year fixed rate mortgage rate, house price appreciation on a year-over-year basis slows down by 1 percent more than expected without the rate increase. Existing-home sales slow by about 2.5 percent on annualized and seasonally adjusted basis, a decline of less than 150,000 sales a year. The housing market isn’t doomed by a Fed rate increase, but demand would fall modestly.”
Rising Mortgage Rates Can be Good for Housing Market
“An increase in rates on the part of the Fed, causing mortgage rates to rise, can actually be good for the housing market in the long run. Continued low mortgage rates are a contributing factor to the pace of price appreciation that we have seen in the housing market over the past three years,” said Fleming. “Leverage-assisted housing asset inflation is a significant contributing factor to the market capacity for existing-home sales exceeding actual existing-home sales. The longer rates remain low, the longer leverage-assisted housing asset inflation outpaces income growth and reduces affordability for the first-time homebuyer.”
Current Projection for October Existing-Home Sales and 2016 Look Ahead
Actual existing-home sales were estimated to be 5.55 million (SAAR) in September. Early forecasts for October actual existing-home sales predict a significant drop from the 5.55 million (SAAR) reported in September.
“Based on our EHS-C model, I estimate that actual existing-home sales in October will be 5.44 million (SAAR),” said Fleming. “Looking ahead to 2016, I expect existing-home sales to reach 5.5 million by the end of the year. Housing demand is expected to be increasingly dominated by the first-time homebuyer as existing homeowners will have a reduced incentive to sell in a higher rate environment.”
*Previous EHS-C releases referred to November 2011 as the low point of sales. The model used to generate existing-home sales capacity has been enhanced to more accurately reflect the dynamic relationships between sales, prices, interest rates and the user-cost of housing, resulting in a model that more accurately reflects past conditions.
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The average interest rate for a conventional 30-year mortgage rose to 4.08 percent this week, its high point for the year.
Freddie Mac's weekly survey of lenders started the year at 3.87 percent and sank to 3.59 percent in early February. This week's report, released Thursday, showed the 30-year fixed-rate loan at or above 4 percent for the fourth survey in a row, and up from 4.02 percent last week.
Lenders offered 15-year fixed-rate loans to solid borrowers at an average of 3.24 percent, up from 3.21 percent a week ago, Freddie Mac said. The starting rates for adjustable loans also rose.
The slowly rising rates come as the Federal Reserve, having ended a bond-buying program designed to keep long-term interest rates low, is now pondering when to start raising short-term rates.
That increase would not only directly affect consumer rates tied to the prime rate, such as many home-equity credit lines and adjustable-rate mortgages, but also increase pressure on long-term rates like those on 30-year home loans.
In another sign the state's housing market continues to heal, people who lost a home in the Great Recession are looking to buy again and both younger wage earners who are forming households and other buyers say they plan to live in their homes longer than in previous years, according to an annual survey released Monday.
The results of the California Association of Realtors "2015 Survey of California Home Buyers" generally reflect a shift toward buying patterns more common before the market meltdown during the middle of the last decade.
But it also shows that today's buyers plan to be nesters rather than getting into the move-up mindset common in earlier years.
For example, today's buyers plan to live in their homes an average of 20 years, more than three times longer than the six years cited by respondents in the 2013 survey, the association said.
The findings are somewhat surprising because the average length of ownership has been in the single digits for years, said Leslie Appleton-Young, the association's vice president and chief economist.
And this fact may go a long way to solving the mystery of why there has not been a supply response to what real estate agents and others say is strong buyer demand.
"I think that's really an important thing just in general terms of this market's cycle and why we have a lid on listings," Appleton-Young said.