Market Studies

Home prices across much of the country are still overvalued, but the gap is narrowing, according to Fitch Ratings. The agency has revised its Sustainable Home Price (SHP) model, and the results show that residential property values are now on track to fall an additional 9.1 percent nationally before arriving at a level that is supported by market fundamentals. Though home prices are falling nationally, Fitch notes that price movement in some regional markets is still quite volatile due to the volume and pace of distressed sales being processed.

Home affordability has reached the highest peak ever since 1970, which is when the data was first recorded, according to National Association of Realtor's (NAR) housing affordability index. The index rose to a record high of 206.1 in January. While projections about future mortgage rates and home prices have been mixed, NAR expects little change and anticipates affordability levels will stay high through 2012.

The housing market is healing, a Capital Economics report stated, but the road to recovery will be a long and gradual one. The research firm expects to see home sales and homebuilding continue with increases, while house prices are expected to finally stop falling later this year. While certain areas of the housing market appear to be moving in a positive direction, Capital Economics still points out that with the growth come constraints, such as Eurozone issues and tightened lending standards.

While home prices declined on a year-over-year basis in January 2012, a month-over-month gain was seen when excluding distressed sales, according to CoreLogic's January Home Price Index (HPI). Prices declined 3.1 percent in January 2012 compared to a year ago in January 2011. But, when excluding distressed sales, year-over-year prices declined by 0.9 percent, and a month-over-month gain of 0.7 percent was seen for January. Distressed sales include short sales and REO transactions.

Data through the end of January shows significant movement in both foreclosure starts and sales, and it has some market watchers saying the lull in foreclosure activity seen over the past year-and-a-half may very well be coming to an end. Lender Processing Services' (LPS) latest market report says foreclosure starts jumped 28 percent between December and January, and foreclosure sales soared 29 percent. It also shows that 47 percent of all foreclosures started during the month were repeat foreclosures.

With more homeowners finding themselves underwater alongside the availability of programs offering potential relief, CredAbility reported that it recently counseled the highest number of homeowners since June 2011. CredaAbility, a national nonprofit organization that offers free counseling to homeowners, provided guidance and advice to 6,433 homeowners in February, a 16 percent increase compared to January.

Financial institutions filed 19,934 mortgage loan fraud (MLF) suspicious activity reports (SARs) in the third quarter of 2011, a 20 percent increase compared to the third quarter last year, when 16,567 reports were filed, according to the Financial Crimes Enforcement Network (FinCEN) report of MLF SARs. In the third quarter of 2011, about 62 percent of the filings involved suspicious activities that started four or more years ago, compared to only 24 percent a year ago during the same time. The 2011 filings stem largely from mortgage repurchase demands and special filings generated by several depository institutions related to mortgages originated in the height of the housing boom, according to the report.

Last month, year-over-year home price declines were at their lowest level since April 2011, but REO saturation levels rose in three of four regions, according to Clear Capital's latest Home Data Index. Whether this REO increase is an anomaly or the beginning of a new wave of REOs as banks pick up the pace now that they've reached a settlement with the state attorneys general is yet to be determined. Nationally, home prices fell 1.9 percent year-over-year, according to Clear Capital. The West and Midwest experienced the greatest declines, 3.2 percent and 4.3 percent, respectively.

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody's Analytics. Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors, including auto, bank card, and consumer finance. While the mortgage lending sector continues to see the highest percentage of delinquencies, it too is showing signs of increased traction in the coming months.

During January, approximately 74,000 homeowners received permanent loan modifications from mortgage servicers, according to modification data released by HOPE NOW, a voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors. While the January numbers are a decrease compared to the previous two months, it was a record-breaking month for foreclosure sales. For the first time since October 2009, foreclosure sales, which reached approximately 79,000, outpaced loan modifications.