Finally, good news for housing
Several new reports indicate that the ailing US housing market is improving on multiple fronts.
This post comes from Marilyn Lewis of MSN Money.
No one is claiming that the housing debacle will be over quickly. But news this week seems to indicate solid progress. Several reports show the ground under homeowners' feet growing more solid:
- Home prices rose 5.8% compared with this time last year.
- Mortgage modifications appear finally to be working.
- Fewer people are defaulting on home loans.
- March saw more building permits issued than at any time since September 2008.
Home prices rising
Home prices are on a gentle roll. In March, for the second month in a row, sale prices in 53 metro areas came in higher than the year before, according to the RE/MAX National Housing Report.
The turning point was in February, when, for the first time in 18 months, prices rose compared with the previous year. "Year-to-year price increases haven't occurred in two consecutive months since August 2010," said a statement by RE/MAX.
Inventories -- the number of homes on the market -- are shrinking and homes are spending less time on the market, all signs of a more normal housing market. "Many markets (are) witnessing multiple offers with bidding competitions," according to RE/MAX.
Not only are prices rising but greater numbers of homes are selling: 25.4% more sales took place in March than February -- 1.5% over March 2011. Sales have increased for nine straight months, RE/MAX says. (Post continues below.)
Modifications finally working
The federal government's HAMP (mortgage modifications) and HARP (refinances) programs got off to a really slow start. Private lenders made more modifications, but they weren't reducing payments enough to help troubled homeowners.
Now, though, things are picking up, The Boston Globe reports. Some 70% of about 448,000 borrowers who got modifications from their lenders between January and September 2011 are paying on time, the Office of the Comptroller of the Currency says. In 2009, the rate was 37%.
The Globe reports:
"It proves the point, if you can provide homeowners with an affordable payment, they will pay it," (John Rao, staff attorney with the National Consumer Law Center) said.
Modifications typically incorporate interest rate cuts, term extensions, principal deferral, and -- less frequently -- debt reductions.
What changed? Regulators have been effective at persuading banks to give homeowners more substantial help, the Globe says. Today, modifications are more likely to "significantly reduce monthly principal and payments."
Defaulting homeowners are the Achilles' heel of the housing market. Their failing loans create foreclosures, bringing down neighborhood home prices and tipping off a cascade of problems.
In another hopeful sign, default rates in March declined on first mortgages, second mortgages and liens and auto loans.
Mortgage defaults started snowballing in 2007, when the housing bubble began unraveling. In March, the composite Standard & Poor's/Experian index (.pdf file) fell to 1.96%, the lowest level since July 2007, when it was 1.85%.
Short sales increasing
It's a marked contrast from a couple of years ago. In 2010 The New York Times detailed banks' resistance, to the frustration of borrowers who wanted to sell their homes.
The change should be good for communities. It puts homes immediately into the hands of new owners, potentially reducing the number of neglected and vacant properties.
Also, banks are increasingly giving borrowers cash incentives to move on, Bloomberg says. At Bank of America, short sales increased 31% in January and February as the bank paid $19.9 million to 22,534 borrowers who returned their property deeds in exchange for debt forgiveness. Lenders absorb a loss on the difference between the value of the mortgage and the price a new buyer will pay in the short sale.
Short sales recently have surpassed foreclosures, Bloomberg says. New rules from Fannie Mae and Freddie Mac help: They require short sales to be completed in 30 days. Bloomberg cites data from Lender Processing Services and quotes Jonathon Weiner, a vice president:
The growing percentage of short sales, which don't require going through the drawn-out foreclosure process, is a sign that the U.S. is making progress in working through its inventory of distressed properties, Weiner said. The increase in short sales also may help values find a floor quicker.
And, finally, two other encouraging bits of housing news:
- The number of building permits taken out in cities and counties is increasing, The Associated Press says. Permits are a prime indicator of economic strength.
- The demand for mortgages is growing. CEO Richard Davis told CNBC that U.S. Bancorp has never before seen demand this strong.
More on MSN Money:
- Should we tear down foreclosures?
- Today's lowest mortgage rates
- Lose your home, get socked by IRS?
- Calculator:How much house can you afford?
- Weird stuff that hurts home values
- Calculator:Should I refinance?
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