Market Studies

The California Homeowner Bill of Rights (HBR) is the main driving force behind the recent slowdown in foreclosure sales and short sales in the Golden State, according to a research report from Barclays. In addition to stalling the foreclosure process, provisions in the new bill, which took effect January 1, 2013, have also led to an increase in litigation risk for servicers, analyst at Barclays found. As a result of the HBR, Barclays believes ""servicers have become significantly more cautious when carrying out foreclosure sales"" in the state.

Rising home prices and higher levels of short sales are leading to declining loss severities in the residential mortgage-backed securities (RMBS) market, according to Fitch Ratings. The agency's quarterly report noted its Loss Severity Index declined from 67.5 percent in the first quarter of 2012 to 64.2 percent in the first quarter of this year. Loss severities on short sales tend to be 10 to 15 percent lower than loss severities on REOs, according to Fitch. Also, short sales are generally resolved about 12 months sooner than REOs, the agency stated.

With the price of a new home barely above year-ago levels, builder confidence fell for the third straight month in April, dropping two points to 42, the lowest level since October, the National Association of Home Builders reported. Economists had expected the Housing Market Index (HMI), the measure of confidence, to improve to 45 from March's reading of 44. It was the second straight month the index fell when economists had expected it to improve.

A recent industry survey detects rising optimism in the commercial real estate sector and the single-family housing sector over the next few years. The survey, conducted in March by the Urban Land Institute and Ernst & Young, finds a consensus among economists and analysts that the real estate market will improve as transaction volumes rise and vacancies decline. Commercial real estate transactions totaled about $290 billion last year and are expected to rise to $310 billion this year. By 2015, analysts expect volumes of about $360 billion. The single-family market is anticipated to experience a rise in housing starts and a deceleration in price increases.

Foreclosure starts in California showed a huge increase since the beginning of this year, but the long-term trend still points to an overall decrease, ForeclosureRadar reported. In the Golden State, Notices of Default (NOD), or the first stage of the foreclosure process, increased 14.2 percent month-over-month in March. Since January, NODs have surged 72.5 percent. Despite the significant year-to-date increase, ForeclosureRadar reported foreclosure starts were still down 63.8 percent from a year ago.

Wells Fargo reported record net income of $5.2 billion for Q1 2013, up from $5.1 billion quarter-over-quarter and from $4.2 billion year-over-year. Tim Sloan, CFO at Wells Fargo, credited the record results to a rise in average loans and deposits, a drop in expenses, and improvement in credit metrics. However, origination volume dropped at the nation’s biggest mortgage lender. JPMorgan also posted strong performance across its businesses, recording a net income of $6.5 billion (compared with $4.9 billion in the first quarter of 2012).

Foreclosure timelines are getting longer, according to recent reports from Moody's Investors Service and RealtyTrac. In addition to this trend, Moody's highlighted the importance of net present value (NPV) models in the loss mitigation process for residential mortgage-backed securities. Foreclosure timelines increased for all servicers in the fourth quarter, Moody's reported. RealtyTrac also found the average time to foreclose went up in 39 states in the first quarter of this year compared to the previous quarter.

While rapid price gains have recently prompted fears of another housing bubble on the horizon, recent reports from Capital Economics and Redfin asserted no such bubble is forming--at least not on a national level. Capital Economics addressed concerns that home price increases, which are rising twice as fast as gains in income and residential rent, are not sustainable in the long run. One argument the firm made is housing actually has more to gain than lose from rapid price gains since it would help more homeowners rise out of negative equity and help those with low equity.

As the housing market recovers from the impact of foreclosures, the New York and northern New Jersey region is still struggling with a growing backlog of foreclosures, according to a blog from the Federal Reserve Bank of New York.

Fixed mortgage rates plummeted this week following the release of disappointing employment data for March. According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 3.43 percent (0.8 point) for the week ending April 11, down from 3.54 percent last week. A year ago, the 30-year FRM was averaging 3.88 percent. The 15-year FRM this week averaged 2.65 percent (0.7 point), down from 2.74 percent in the last survey.