• New homes sales retreated in June from the very strong performance reported for May; a performance that turns out to have been less strong. A joint release from the Census Bureau and the Department of Housing and Urban Development this morning put June sales of newly constructed single family homes at a seasonally adjusted annual pace of 406,000 units. This represents an 8.1 percent dropfrom the revised May rate of 442,000. May sales however were originally estimated to be at the rate of 504,000 units which would have been an 18.6 percent increase over April and, the report said, the most rapid increase in 20 years.

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  • The theme for the economy and the housing market's in 2014 has been set for months; the economy will continue to slowly strengthen; the modest recovery in housing will be sustained. Each monthly or quarterly report or round of economic analysis seems to merely join the chorus. Fannie Mae's most recent entry on Wednesday merely added a new note. Growth is expected to strengthen during the second half, but not enough to save the year.

    Katie Penote, a member of Fannie Mae's Economic & Strategic Research (ESR) Group, writes that the economy experienced the worst performance in five years in the first quarter and incoming data for the second quarter suggests only a moderate improvement. The first quarter's problems are attributed to a significant downward revision in healthcare spending. During the third and fourth quarters, she says, economic activity is expected to accelerate, driven principally by consumer spending with help from business, capital investment, and residential investment. Government spending may also contribute to growth for the first time in five years but inventory investment and exports will be a drag.

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  • Black Knight Financial Services said today that both delinquencies and foreclosure starts were up slightly in June. The information was part of the company's “first look” preview of data from its Mortgage Monitorreport that will be published in early August.

    The nation's delinquency rate, that is the percentage of mortgages that were 30 or more days past due but not in foreclosure, was 5.70 percent, an increase of 1.55 percent compared to May but 14.59 percent below the rate in June 2013. The percentages reflect an increase of 44,000 delinquent mortgages since May to a total of 2,88 million, 445,000 fewer delinquent mortgages than reported a year earlier. Of those delinquencies, 1.16 million are of 90 or more days duration but not yet in foreclosure, down 14,000 from May and 190,000 from a year earlier.

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  • The Market Composite Index, a measure of loan application volume had its first positive week since June 6 last week, increasing 2.4 percent on a seasonally adjusted basis from the previous week.  The Mortgage Bankers Association (MBA) said its unadjusted volume index also finished the week ended July 18 with an increase, up 3 percent.  All other weekly indicators also rose, the first time that has happened since January 10.  

    MBA’s Refinance Index increased 4 percentfrom the previous week and applications for refinancing edged up to a 54.4 percent share from 53.6 percent the previous week, and the highest share of the market since the week ended March. 

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  • The pace of existing home sales reached a nine month high in June, topping 5 million units for the first time since last October while there were reports of continued but moderating home prices from both the Federal Housing Finance Agency (FHFA) and the National Association of Realtors® (NAR). 

    NAR reports that sales of existing single-family homes, condos, cooperative apartments, and townhomes were at an annual rate of 5.04 billion, up 2.6 percent from the adjusted May pace of 4.91 million. The previous high in October 2013 was 5.13 million. June sales however remained below the 5.16 million pace established in June 2013. May sales number were a revision from the 4.89 million originally reported.

    Lawrence Yun, NAR chief economist, said housing fundamentals are moving in the right direction. “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he said. “On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”

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  • Two Bank of America Merrill Lynch (BAML) analysts are defending what they call their big high conviction views for what should happen in the housing world over the next two years.    Chris Flanagan and Gregory Fitter, ABS and MBS strategists say that their views are not mainstream but that recent data has corroborated their theories. 

    The two contend that home price increases will continue to moderate from the skyrocket trajectory they were on in late 2012 and early 2013 will peak in mid-2016.  Second, as unemployment continues to ease, the yield curve will continue to flatten (longer term rates getting lower while shorter term rates get higher, relative to each other) and the spread between two year and 10 year treasury yields should be at zero by the time home prices peak.  The long end of the curve will remain at surprising low yields, fostered by a soft housing market and low inflation.

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  • While he has written about some of the elements in the past, Mark Fleming neatly summed up the current state of housing's supply and demand constraints in the latest edition of CoreLogic's Market Pulse. That issue, the company's chief economist said, is one of the factors underlying the current faltering housing recovery and contributing to what he calls the new housing normal.

    First there is a pent-up supply of housing - that is homes that might be but aren't available for sale.  The shadow inventory, homes in the process of foreclosure (some definitions include homes with the potential of foreclosure) has worried economists since the start of the foreclosure crisis.  While the fear has been that these homes, once they become bank owned, might overwhelm the market they have instead come on the market at a fairly measured pace as foreclosure time-lines stretched into years and have provided a source of low-cost homes for both first-time buyers and investors.  The inventory is now becoming concentrated in a few judicial foreclosure states and REO (bank-owned homes) are available for sale.

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  • The Federal Housing Finance Agency's Office of Inspector General (FHFA OIG) has released an evaluation of Fannie Mae's and Freddie Mac's (the GSEs) increased recent level of purchases of loans from small banks, credit unions, and non-bank mortgage companies.  Such purchases, OIG said, presents both potential benefits and certain risks.  

    Historically the GSEs have purchased loans from large commercial banks and other financial companies that acted as loan aggregators by purchasing mortgages originated by smaller lenders and bundling them with their own loans for sale.  The aggregation system offered several benefits to participants:

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  • It has been a long eight years, but foreclosure activity appears to have returned to levels last seen before the housing downturn was born in 2006.  RealtyTrac said today that the 2 percent decrease in the various types of foreclosure filings in June brought overall activity down to the lowest it has been since July of that year.  The company released its Midyear Foreclosure Market Report which contains data on both June foreclosure filings and those that occurred during the first half of 2014.

    June filings, including default notices, scheduled auctions, and bank repossessions or completed foreclosures, were filed on a total of 107,194 properties, down 2 percent from May and 16 percent from June 2013.  For the first half of the year there were 613,874 filings, a decrease of 19 percentfrom the last half of 2013 and 23 percent from the first six months of that year.  Filings at mid-year equate to one filing for every 214 housing units in the U.S.

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  • All three residential construction indicators fell in June according to the U.S. Census Bureau and the Department of Housing and Urban Development.  Housing permits and housing starts were down for the second month in a row and completions, which increased in May, also fell.

    Permitsfor residential construction were issued as a seasonally adjusted annual rate of 963,000 units, a decrease of 4.2 percent from the May rate of 1,005,000.  The May rate was revised upward from the 991,000 pace originally reported.  June permitting was 2.7 percent higher than the June 2013 rate of 938,000.

    Permits for single family units were issued at a rate of 631,000, 2.6 percent higher than in May and up 0.6 percent from the 627,000 rate a year earlier.   The May number was revised to 615,000 from 619,000.  Permits for units in buildings with 5 or more were issued at an annual rate of 301,000 compared to 363,000 in May.

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  • JP Morgan Chase appears to be questioning the wisdom of remaining an FHA lender.   The company's Chairman and CEO, Jamie Dimon, made critical comments about the FHA program during a conference call on Tuesday accompanying release of its 2nd quarter financial report. 

    In February, Chase reached a settlement with FHA and the Department of Justice in the amount of $614 million.  The government claimed that the bank had improperly approved FHA-insured loans that did not meet the agency's underwriting standards.

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  • Homebuilder confidence in the market for new homes crossed into positive territory in July, the first time the measure has been above the crucial 50 mark since January.   The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) jumped four points to 53 and two of its three component measures were also firmly positive.   The HMI topped 50 in June 2013 for the first time since the beginning of the housing bust and remained positive until early this year when it crashed by 10 points, falling to 46 in February.

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  • The Mortgage Bankers Association's (MBA) Market Composite Index notched another decline during the week ended July 11, the fifth straightdown week for the index which measures the volume of mortgage applications.  The index decreased 3.6 percent on a seasonally adjusted basis from the week ended July 4.  The prior week's numbers included an adjustment for the July 4 holiday. On an unadjusted basis the index was up 20 percent from the previous week, rebounding from the 19 point loss of the short holiday week.

    The Refinance Index was 0.1 percent below that of the previous week and the refinance share of mortgage application activity rose to 54 percent from 52 percent the previous week. 

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  • The rule of thumb for household budgeting is that no more than 30 percent of income should go toward housing; more constitutes a cost-burdened household and spending more than 50 percent a severely cost one. The Harvard Joint Center for Housing Studies, in concluding its report on The State of the Nation's Housing, estimates that 40.9 million householdswere cost-burdened in 2012, more than a third of U.S. families and individuals.  Despite a drop of 1.7 million between 2011 and 2012, these households had increased by 9 million in the previous 10 years and, more disheartening, 5.8 million of this increase were severely cost burdened households.

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  • While the magnitude isn't clear, that the growth of renter households has risen far above average in recent years is. The Housing Vacancy Survey reports that the number of these households increased by half a million in 2013 while the Current Population Survey reports nearly double that number.  In the fifth part of its report on The State of the Nation's Housing,the Harvard Joint Center on Housing Studies said either number exceeds the 400,000 annual increase of the last few decades.  The report also notes that this increase appeared to slow at the end of 2013 along with the drop in homeownership rates.

    Along with growth, there has been a shift in the renter population.  The usual groups, young adults, low-income households, and singles have been joined by high-income earners, families with children, and older persons. While those under age 35 account for a quarter of renter growth, renters 55-64 ballooned almost as much.

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