Market Studies

Housing starts fell 1.1 percent in February to 698,000, compared with market expectations for a smaller decline, the Census Bureau and Department of Housing and Urban Development reported jointly Tuesday. Single family starts plunged 9.9 percent to 457,000, the steepest decline in a year.

As the government begins to tiptoe into the REO-to-rental arena after many months' deliberation and input from thousands of industry participants, Fannie Mae released a data note on the single-family rental market. Single-family renting increased by 2.7 percentage points from 2005 to 2010; multifamily renters decreased by about as much, 3 percent. This may suggest the single-family rental sector is cutting into the multifamily market share, but Fannie says the single-family renter doesn't fit the demographic that typically drives multifamily demand.

Even with recent reports of rising mortgage rates and falling home prices, Capital Economics stated it still expects the housing recovery to be under way. The research firm cites two reasons in a report on why mortgage rates won't threaten recovery: rates can only rise so far when tighter monetary policy is still years away, and homes will still be affordable even if mortgage rates were to rise back to normal levels. Capital Economics notes that over the last six months, total home sales have increased by 13 percent.

Builder confidence was flat in March, matching a downwardly revised February index of 28, the first time in six months the index has not increased, the National Association of Home Builders reported Monday. The builder assessment of present home sales conditions actually dipped in March, falling to 29, the first decline since last September. The outlook for home sales in the next six months rose to 36 - the highest level since June 2007 - from 34 in February. Buyer traffic was flat in March at 22.

Home sales in California showed signs of improvement for February compared to the previous month of January and year before in February 2011, according to data from the California Association of Realtors (C.A.R.). For February, sales were up 2.1 percent from January's revised 517,120 and up 5.5 percent from the revised 500,480 sales pace recorded a year ago. While the state followed the national trend of declining home prices, C.A.R. reported other signs are pointing towards stabilization.

Appraisers, lenders, and investors appear to be routinely overestimating the values of homes prior to foreclosure, especially in the weakest housing markets, according to two economists with the Federal Reserve Bank of Cleveland. Their report suggests that more accurate pricing could speed the clearing of REO inventories, save lenders money by reducing the carrying costs associated with bank-owned homes, and bring greater stability to housing markets across the country.

Rates for all mortgage loan products headed higher this week as positive employment indicators rolled in, with job growth over the last six months the strongest it's been since 2006. That, coupled with the Greek debt restructuring on the international front and the results of the Federal Reserve's stress tests pointing to a stronger U.S. banking system, boosted investor confidence and drove bond yields higher. Studies from both Freddie Mac and Bankrate showed the same measurable increases in rates across-the-board.

The FHFA's decision to not allow for principal reductions on Fannie Mae and Freddie Mac loans came under sharp criticism during a Senate subcommittee hearing Thursday. John DiIorio, CEO of 1st Alliance Lending, a mortgage origination firm, argued in support of principal reduction, even when analyzing the benefits from a bottom-line perspective, not simply as a form of aid. Laurie Goodman, senior managing director of Amherst Securities, said there were a number of flaws in an FHFA study used to defend the decision to not apply principal forgiveness, and discussed three major criticisms and ""technical flaws.""

While foreclosure inventory showed a year-over-year decline for January 2012, REO inventory held by servicers grew faster in January than the pace at which REO properties sold, according to CoreLogic's National Foreclosure Report for January 2012. The distressed clearing ratio, which calculates the rate at which REO properties are sold, was 0.69 for January 2012, down from 0.80 in December 2011. A higher ratio indicates a faster pace of REO sales relative to the pace of completed foreclosures. On a year-over-year basis, the number of foreclosures actually dropped, going from 80,000 in January 2011 to 69,000 in January 2012, according to CoreLogic's National Foreclosure Report.

First time claims for unemployment insurance fell 14,000 in the week ended March 9, the Labor Department reported Thursday, the first drop in four weeks. Continuing claims, reported on a one-week lag, also fell, dropping 81,000 to 3,343,000, after two straight weekly increases. The four week moving average for initial claims was flat at 355,750, unchanged from the previous week, while the four week average for continuing claims declined 25,250 to 3,394.250.