Market Studies

Amherst Securities recently released a report declaring that principal reduction modifications, without question, are the most effective form of modification. Between three types of modifications - principal, rate, and capitalization - the controversial and much-debated principal reduction mod was found to be the most effective based when it comes to its 12-month re-default rate. For 2011 modifications, the re-default rate after 12 months for principal modifications was 12 percent compared to 23 percent for rate modifications and 30 percent for capitalization modifications, according to the report.

Although mortgage fraud activity seems to be leveling off, a report from MortgageDaily.com showed that mortgage fraud continues to cause foreclosure problems for the most victimized states. Florida held the highest state index with 163. The state has held the No. 1 position for four of the past five quarters. For the first time since the index's inception in 2006, North Carolina broke into the top five with an index of 53.

New home sales jumped to 369,000 in May - the highest level since April 2010 - as the median and average home prices both dropped, the Census Bureau and Department of Housing and Urban Development reported jointly Monday. Economists had expected sales to reach 350,000 from the prior month's 343,000.

Experts surveyed by Zillow expect home prices to decline slightly in 2012 and predict they will bottom in 2013, according to the June 2012 Zillow Home Price Expectations Survey. The survey was comprised of 114 respondents with various backgrounds including economists, real estate experts, and investment and market strategists. Respondents predicted home prices will fall 0.4 percent in 2012, and then rise by 1.3 percent in 2013. Zillow Chief Economist Stan Humphries commented that the convergence of expectations among economists lends further support to the claim that a bottom is real.

Data shows that the onset of the housing crisis brought with it an increase in students taking out loans for higher education. Since the third quarter of 2008, student loan debt has increased by 47.9 percent ($293 million). This increase is attributed to the drop in the availability of home equity loans, which are often used by homeowning parents to finance their children's education. While student loan debt has risen, NAHB's analysis dismissed speculation that loan delinquency could spell disaster for housing and the economy.

If a lender had to choose between a consumer with a modified mortgage or a consumer who defaulted but did not get modified, turns out, the lender should go with the modified borrower. According to a new TransUnion study, those who received a modification did better with maintaining payments on loans opened after their initial delinquency than those who did not get modified. The study looked at modified and non-modified delinquent borrowers who opened up auto loans and car loans after their initial delinquency.

U.S. home prices averaged $200,000 in April 2012, posting a monthly gain, but still down from a year ago, Lender Processing Services revealed in a preliminary release. According to the analytics company's Home Price Index (HPI), which reports on price changes based on residential real estate transactions occurring in April 2012, prices increased 1.1 percent from the month before and decreased by 0.1 percent from April 2011. The states, including the District of Columbia, which posted the greatest monthly increases were Alaska (2.6 percent), D.C. (2.4 percent), and Georgia (2.2 percent).

The drop in existing home sales reported by the National Association of Realtors (NAR) Thursday likely stemmed from a lack of distressed properties on the market, according to IHS Global Insight. In May, existing-home sales made a fall of 1.5 percent from the month before. The share of investor purchases also declined, which IHS economist Patrick Newport said is likely due to a drop in the number of distressed homes. According to the NAR report, investor purchases made up 17 percent of homes sales in May, down from 20 percent in April and 19 percent in May 2011.

According to Freddie Mac's Primary Mortgage Market Survey (PMMS), average mortgage rates are easing, even in the face of troubling economic signs. The 30-year FRM averaged 3.66 (0.7 point) for the week ending June 21, down from 3.71 percent the previous week. At the same time in 2011, the 30-year FRM averaged 4.5 percent. The 15-year FRM averaged 2.95 percent (0.6 point), down from 2.98 percent in the last survey and a year-over-year drop from 3.69 percent. Adjustable rate mortgages (ARM) both slipped down, as well.

Existing home sales dropped to 4.55 million in May while the median price of an existing home rose to $182,600, the National Association of Realtors reported Thursday. Distressed homes accounted for 25 percent of May sales (15 percent were foreclosures and 10 percent were short sales), down from 28 percent in April and 31 percent in May 2011, the NAR said. Foreclosures sold for an average discount of 19 percent below market value in May, while short sales were discounted 14 percent.