Tuesday Report, June 21, 2011
Special to the Texas Low Income Housing Information Service
As more doom and gloom stories characterize the housing industry, Bank of America and Wells Fargo exit the reverse mortgage market. BoA aborts the venture as it posts a $73 billion loss in housing investments.
Meanwhile, forecasters see house prices plummeting as unsold inventories mount.
For a pdf version of the full articles, plus contextual stories on social, environmental and legal areas, contact Bo McCarver at firstname.lastname@example.org
Housing prices will fall another 20 percent
Housing prices, once on the rebound, are falling again. Inventories of unsold homes mean housing prices will remain weak for years.
By A. Gary Shilling Christian Science Monitor June 16, 2011
Many housing optimists a year ago believed not only that the housing collapse was over, but also that a robust rebound was under way. Low mortgage rates and collapsed housing prices, not to mention the $8,000 federal tax credit for new home buyers and other initiatives, seemingly were going to kick-start housing activity nationwide.
Then a funny thing happened on the way to the housing recovery. The tax credits expired, home sales dried up, and prices resumed their declines from their 2006 peak. Excess inventories piled up due to overbuilding and mounting foreclosures. In the meantime, buying those lower-priced houses became more difficult as lenders, burned by the housing crash, tightened lending standards and increased down-payment requirements.
As a result, the housing sector not only has failed to bolster the weak economic recovery but is also likely to continue to struggle for years. And that’s bad news for the economy, which has softened in recent months.
Home equity loan losses pile up for Bank of America
By Rick Rothacker Charlotte Observer June 19, 2011
Of all the mortgage woes at Bank of America, one of the less-publicized ones could turn into one of the most expensive: home-equity loans.
From the beginning of 2008 through the first quarter of this year, the Charlotte bank has racked up $18.5billion in home-equity loan losses, according to an analyst report last week. That was about 40 percent of the bank’s $46billion in housing-related losses so far, and more than any other category.
By the end of 2013, the bank could post an additional $27billion in losses on housing-related issues for a total of about $73billion, according to the report. Of that, $24.8billion could come from home-equity loans, just shy of the $25.8billion that could come from investor requests to buy back soured home loans, a more high-profile issue.
“A tepid recovery in both employment and housing is keeping home equity on the table as a front-burner issue,” Sanford C. Bernstein analyst John McDonald wrote in his report.
Home-equity loans or lines of credit are mortgages taken out on a property that are secondary to the first mortgage. As housing prices soared in the last decade, homeowners – often encouraged by banks – tapped their home equity as a way to finance renovations, vacations, credit card payments and other expenses.
Wells Fargo to exit reverse mortgage market
By Rick Rothacker Charlotte Observer June 17, 2011
Wells Fargo & Co. said Thursday it will stop making reverse mortgages, joining rival Bank of America Corp. in abandoning the product for senior citizens.
In a reverse mortgage, the bank pays the borrower instead of the other way around, with the borrower losing equity rather than building it. The product can be useful for some seniors in need of cash, but it has been criticized for high upfront fees.
The San Francisco-based bank will eliminate 1,000 jobs with the move, including an unspecified number in Fort Mill and Greensboro. Employees will be given a chance to find other positions in the company.
The latest cuts follow an announcement in April that Wells was eliminating 1,900 mortgage jobs nationwide, as home loan applications slowed. The bank employs a total of 270,200.
Wells has been making reverse mortgages since 1990, as part of a U.S. Housing and Urban Development Department program started three years earlier. It decided to exit the product because of the unpredictable nature of today’s housing market, Greg Gwizdz, a national sales manager in Wells’ mortgage unit, said in an interview. “It’s been hard for us to gauge home values,” he said.
Area foreclosures fall 23 percent
Austin American-Statesman June 17, 2011
Foreclosures in Austin area decline again
Austin-area foreclosure postings for the July 5 auction are down 23 percent from a year earlier, the fifth consecutive year-over-year decline and the biggest drop so far according to an Addison company that tracks the market.
For the first seven months of the year, the 8,618 postings are down 4 percent from the same period in 2010, Foreclosure Listing Service Inc. reported.
“If this year-over-year decline continues, reaching six consecutive months, then we may be able to see the other side of this foreclosure crisis,” said George Roddy Sr., president of the company.
Roddy said he could not explain the big drop for July.
“There hasn’t been any major development in the economy that would change the posting numbers this much,” he said. But he said lenders — under investigation by federal agencies and the attorneys general of all 50 states — may be being more careful with their paperwork.
A total of 1,016 properties were posted for July in Travis, Williamson, Hays and Bastrop counties.
Existing home sales lag, but some statistics point to upturn in Central Texas
Austin American-Statesman June 20, 2011
Existing home sales in Central Texas were down 8 percent in May from a year earlier, the Austin Board of Realtors reported Monday.
A total of 1,891 homes sold last month, with a median price of $198,100, which was up 4 percent from the previous month.
Board Chairman Judith Bundschuh said the drop was not a surprise; last May was the peak month for sales tied to the federal buyer tax credit, which was worth up to $8,000.
That month, a total of 2,059 homes were sold — the highest number for the entire year — as buyers rushed to conclude deals before the tax credit deadline.
But the market may be turning: the 2,156 sales in the pipeline last month to close were up 53 percent from a year earlier, and the highest number since 2,813 pending sales in April 2010.
Last month’s pending sales gain was the first year-over-year increase so far this year.
The tax credit distorted the typical seasonal pattern, with home sales strongest in the summer months. Bundschuh said the market may now be returning to its normal pattern.
For the first five months of the year, the 7,182 sales were down 8 percent compared with the same period of 2010.
However, the median price was down only 2 percent, to $192,000, reflecting a higher concentration of sales at higher price ranges.
July foreclosures in North Texas fall 28 percent
By Jim Fuquay Fort Worth Star-Telegram June 20, 2011
Foreclosure postings in North Texas plunged 28 percent for July’s auctions, the fifth consecutive month of declines and the largest drop during that stretch, according to the Foreclosure Listing Service.
Tarrant County filings are down 23 percent for July, to 1,374, and are down 8 percent for the year. In the area’s four biggest counties — Tarrant, Dallas, Denton and Collin — combined postings are down 10 percent for the year but remain 15 percent above 2008 levels.
George Roddy, president of the listing service, said if postings fall one more month, “we may be able to see the other side of this foreclosure crisis.”
Tarrant County commercial foreclosures up 8% from ’10
By Sandra Baker Fort Worth Star-Telegram June 19, 2011
Foreclosure postings on commercial properties in Tarrant County are up 8 percent at midyear from the same period in 2010, according to the Addison-based Foreclosure Listing Service.
Filings from January to June totaled 687 in Tarrant, the real estate research firm said in a report Friday.
For the broader Metroplex, including Tarrant, Dallas, Denton and Collin counties, postings were up 13 percent to 1,881 in the first six months of the year.
Postings surged in Dallas County. In the first six months, commercial foreclosures totaled 825, up 31 percent from the same period a year ago, figures show.
Postings in Collin and Denton counties were down 4 percent and 6 percent respectively.
Commercial properties include land, apartment complexes and office, retail and industrial buildings.
Forecast: Homebuilders to focus on Calif. Cities
By Jacob Adelman Bloomberg Businessweek June 15, 2011
Many of the homebuilding jobs lost during California’s economic downturn won’t be coming back to help fuel its recovery, according to an economic study released Wednesday.
The quarterly Anderson Forecast from the University of California, Los Angeles, said there would likely be no major rebound in single-family home construction due to the growing dominance of a younger population that prefers urban-style apartment and condo living.
“What we’ve seen is this shift toward multifamily housing demand,” said the forecast’s author, Jerry Nickelsburg. “You can see that in the demographics.”
Since apartment units require far fewer workers than single-family homes, the post-recovery homebuilding sector will employ fewer people than before the downturn, Nickelsburg said.
Those jobs will be missed most acutely in the state’s inland regions. In those areas, far from the urban coastal areas where most new residential demand is expected, single-family home construction had been a chief source of employment before the housing bust.
Full story at: http://www.businessweek.com/ap/financialnews/D9NSH5B80.htm
Will Single-Family Players Sit Back as the Multifamily Opportunity Takes Shape?
By John McManus Big Builders Online June 15, 2011
Job creation prospects are dimmer than earlier this year. Based on the slowdown that has cropped up again and again in recent regional and national private sector economic activity reports, projections for U.S. net employment growth through the balance of 2011 are getting a haircut to a level that barely keeps pace with layoffs in the public sector and natural additions to the workforce.
So, just at an instant the domestic economy seemed to be ready to try getting along without the steadying support of Uncle Sam, confidence that it can manage without crutches seems to be in short supply.
What happens in instances like these is that new measures, some of them smart and some of them desperate, take on allure. “The administration hasn’t tried … ” “The government needs to address …” “None of the prior programs aimed to catalyze demand worked, so … .”
El Paso’s revised landscape ordinance irks developers
By Vic Kolenc El Paso Times June 19, 2011
Some shopping center developers are crying foul over a recently revised city ordinance that dramatically increases the amount of trees and other landscaping required at new shopping centers and new commercial properties, including office complexes, industrial parks and apartment complexes.
“This is going to slow us down. It makes everything cost more. This means we will build less stuff,” said Bob Ayoub, president of Mimco Inc., one of El Paso’s two largest developers of strip shopping centers.
Adam Frank, president of River Oaks Properties, the other large El Paso developer of strip shopping centers, said it’s OK for the City Council to want to improve the look of the city, but it passed the ordinance “without analyzing the effect on the taxpayers — the people who build the centers.”