NAR - existing home sales down

Existing-home sales eased in June as contract cancellations spiked unexpectedly, although prices were up slightly, according to the National Association of Realtors (NAR). Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single-family home sales were stable while the condo sector weakened. Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 0.8% to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain 8.8% below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit. The national median existing-home price for all housing types was $184,300 in June, up 0.8% from June 2010. Distressed homes – foreclosures and short sales generally sold at deep discounts – accounted for 30% of sales in June, compared with 31% in May and 32% in June 2010. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.51% in June, down from 4.64% in May; the rate was 4.74% in June 2010.

Total housing inventory at the end of June rose 3.3% to 3.77 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace, up from a 9.1-month supply in May. All-cash transactions accounted for 29% of sales in June; they were 30% in May and 24% in June 2010; investors account for the bulk of cash purchases. First-time buyers purchased 31% of homes in June, down from 36% in May; they were 43% in June 2010 when the tax credit was in place. Investors accounted for 19% of purchase activity in June, unchanged from May; they were 13% in June 2010. The balance of sales was to repeat buyers, which were a 50% market share in June, up from 45% in May, which appears to be a normal seasonal gain.

Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.24 million in June, but are 7.4% below a 4.58 million pace in June 2010. The median existing single-family home price was $184,600 in June, up 0.6% from a year ago. Existing condominium and co-op sales fell 7.0% to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18.0% below the 646,000-unit level a year ago. The median existing condo price5 was $182,300 in June, up 1.8% from June 2010.

Regionally, existing-home sales in the Northeast fell 5.2% to anannual pace of 730,000 in June and are 17.0% below June 2010. Themedian price in the Northeast was $261,000, up 3.1% from a yearago. Existing-home sales in the Midwest rose 1.0% in June to a pace of 1.04 million but are 14.0% below a year ago. The medianprice in the Midwest was $147,700, down 5.3% from June 2010. Inthe South, existing-home sales increased 0.5% to an annual level of 1.86 million in June but are 5.6% below June 2010. The medianprice in the South was $159,100, down 0.1% from a year ago.Existing-home sales in the West declined 1.7% to an annual paceof 1.14 million in June and are 2.6% below a year ago. The median price in the West was $240,400, up 9.5% from June 2010.

Home prices trending up

Home prices and inventory levels are trending upward in many US cities tracked by Altos Research, according to the firm's latest Housing Market Update. The median national home price for all 26 markets covered by Altos hit $450,358 in June, up from $444,273 in May. Meanwhile, in the past three months, listing prices rose 2.31% and inventory levels grew 3.52%. The only city to report a drop in home prices in June was Las Vegas and even that was amere 0.86% decline when compared to the month before. When analyzing home price data for the past three months, both New York and Las Vegas experienced falling prices, reporting drops of 2.2% and 1.61%, respectively, Altos said.

Inventory rose in 12 of the major markets tracked by Altos last month, while falling in the remaining 14 composite cities. The biggest inventory jump occurred in Boston, with the city's inventory level rising to 5.8%. Phoenix, on the other hand, experienced the largest inventory level drop, falling 7.93%. Even though the 90-day home price trends rose somewhat, Altos said a weekly sample taken from the month of June still shows a "slight flattening" in home prices. Comparatively, the latest S&P/Case Shiller report said the average price of a single-family home rose for the first time in eight months during the month of April. Altos suspects the S&P/Case-Shiller will be reporting a few positive trends through September. At the same time when looking forward, Altos foresees a slowing or plateau of home prices in the fourth quarter.

MBA - mortgage applications decrease

Mortgage applications decreased 5.1% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending July 8, 2011. This week's results include an adjustment to account for the Fourth of July holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 5.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 24.0% compared with the previous week. The seasonally adjusted Purchase Index decreased 2.6% from one week earlier. The unadjusted Purchase Index decreased 21.9% compared with the previous week and was 0.2% lower than the same week one year ago. The Refinance Index decreased 6.2% from the previous week, and was 42.1% lower than a year ago. The Refinance Index has decreased the past four consecutive weeks, reaching its lowest level since April 29, 2011. The Refinance Index is not seasonally adjusted but is adjusted for the holiday.

The four week moving average for the seasonally adjusted Market Index is down 4.7%. The four week moving average is down 1.0% for the seasonally adjusted Purchase Index, while this average is down 6.3% for the Refinance Index. The refinance share of mortgage activity decreased to 65.6% of total applications from 66.4% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.5% from 6.1% of total applications from the previous week.

household shifts could affect recovery

"Every now and then you need to take a step back and put the housing market into perspective, take a break from all the monthly motions and commotions, stress and distress. Today I read a report that did just that. It takes a big-picture snapshot of how housing has fundamentally changed over the past several decades, which could have a big impact on its future as the industry rebuilds itself, literally and economically.

The report, from John Burns Real Estate Consulting's Chris Porter, is titled simply, Tremendous Demographic Shift.' And the numbers are pretty tremendous. 'The number of non-family households—people living alone or households that do not have any members related to the householder—has increased nearly five times in the last 50 years, from 7.9 million to 39.2 million. At the same time, the number of family households has increased by just 1.7 times, from 45.1 million to 77.5 million,' according to Porter. In addition, married couples have dropped to less than half of all US households from 75% in 1960. So let's think about the current housing stock, much of which is more than 50 years old. We've recently seen a downsizing trend for several reasons, namely the weak economy and builders constructing cheaper homes to meet the demand but also the environmental movement and the high cost of energy.

But this comes right after the 'McMansion' era when oversized homes were all the rage. Those homes, of course, still exist in vast quantities, despite the fact that there are, according to this report, fewer big family households and therefore less need for large square footage. We've also talked a lot about the surge in renting; we've blamed it on the housing crash, fear of buying into a depreciating market and the tight credit conditions that are pricing many potential buyers out. Perhaps there's more to it than that as well. Perhaps with fewer large family households and less desire for a big space, smaller, full-service rental apartments are more desirable to a growing segment of the population. 'Family households are more likely to stretch for size over location. Non-family households are more likely to value location—proximity to work, entertainment,etc.—and then size. They are less willing to commute than a family household,' noted Porter. We also have to look at the growing population of Americans who intend to 'age in place,' that is, the baby boomers who are moving out of the big family homes but not into what we used to call 'retirement homes.' Now they're 'active adult communities,' with smaller one-story homes. That demographic, though, plays against a growing demographic of Hispanic Americans. The average Hispanic household is statistically larger than the national average.

So what should home builders and housing watchers take from all this?

Obviously there are and always will be large families in the suburbs who want to live in big houses. There will always be wealthy Americans who desire to live in spaces that far exceed their needs. But the shift in household size cannot simply be considered anecdotal. When you couple that shift with a much-changed mortgage market, one that prices so many more Americans out of larger, move-up homes, you have to be concerned about what happens to the stock of larger homes, old and new. Do we see huge price reductions as demand falters?"

Retailers have strong June sales

American consumers that were enticed by warmer weather and deep discounts of up to 80% on summer merchandise went on a buying binge in June, helping many retailers deliver robust revenue gains for what is typically the second-biggest shopping month of the year. Big merchants Target Corp., Costco Wholesale Corp., Limited Brands Inc. as well as teen retailers such as The Buckle were among the companies that posted June results that beat Wall Street estimates. The few stragglers included Destination Maternity Corp. and Bon Ton Stores, which reported declines. The figures are based on revenue at stores opened at least a year. This measure is considered a key indicator of a retailer's health because it excludes results from stores opened or closed during the year. June is the second most important month on a retailers' sales calendar behind December. During the month, stores typically clear out summer merchandise to make room for fall goods. But this time, it took deep discounts of up to 80% to get shoppers to buy amid worries about the economy.

Analysts fear that retailers have not quite turned a corner. After all, gas prices are still 35% higher than last year at this time. Moreover, prices in the food aisle remain high and this fall, shoppers will be seeing the price tags of fashion and accessories rise as retailers try to offset higher labor costs in China and soaring prices of raw materials like cotton. Shoppers' biggest concerns remain a weak job recovery and stagnant wages. These worries sent consumer confidence to a seven-year low in June, according to the Conference Board's survey released last
week. In fact, consumer confidence has never been this low in the 24th month of a recovery, according to David A. Rosenberg, chief economist and investment strategist at the Toronto-based money management firm Gluskin Sheff. Historically at the two-year mark, confidence is at 94, not 58.5, which was recorded by The Conference Board's June survey.

Wells Fargo modification outnumber Obama's 5 to 1

Wells Fargo completed or started trials on roughly 585,000 mortgage modifications through its private programs since the beginning of 2009, more than five times the 101,000 initiated through the Home Affordable Modification Program (HAMP). HAMP launched in March 2009 but almost immediately drew criticism. Treasury officials admit the more than 3 million modifications initially promised was over estimated. Through May, servicers started roughly 731,000 permanent loan modifications and have been averaging between 25,000 and 30,000 per month this year. According to a recent poll of housing counselors, only 9% of borrowers who entered the program described it as a "positive" experience. Homeowners continually blame servicers for mishandling documentation. Overwhelmed servicers point out many borrowers are simply out of reach. "Avoiding foreclosure is a top priority for us and when customers work with us, we can help seven of every 10 to stay out of foreclosure," said Teri Schrettenbrunner, senior vice president, Wells Fargo Home Mortgage.

The Treasury points out most of the private programs built since the foreclosure crisis use HAMP as a model. But since mishandled foreclosure and modification processes came to light late last year, new standards were put in place, including a single point of contact that servicers are required to provide throughout the loss-mitigation process. The Treasury began to clamp down on poorly performing servicers — at least to the extent their contracts with these firms allow. In June, the Treasury announced it was withholding HAMP payments from Bank of America, JPMorgan Chase and Wells. Schrettenbrunner said the bank continues to build on its primary contact model it established last summer, and the bank has met with 58,000 borrowers at 31 home preservation workshops. Half of those received a decision on the spot or shortly after the event. Schrettenbrunner said the department continues to "aggressively reach out" to borrowers behind on payments to bridge the communication gap as quickly as possible. "We also continue to aggressively reach out to customers 60 or more days behind on their home loans via mail and telephone in an effort to engage them," Schrettenbrunner said.