Market Studies

Unemployment and other economic difficulties have caused millions of homeowners to involuntarily default on their mortgages, but there are some borrowers who are induced to simply stop making payments because their property value has fallen and they owe more than their home is worth. According to a study commissioned by the Mortgage Bankers Association, oftentimes strategic defaulters are encouraged to walk away at the behest of so-called mavens, or prominent influencers within their social networks.

Home prices in the U.S. decreased 0.2 percent on a seasonally adjusted basis in October, according to the Federal Housing Finance Agency's (FHFA) House Price Index released Thursday. On a yearly basis, prices were down 2.8 percent. The drop brings prices to levels seen in February 2004. Current prices are about 19.2 percent below their peak in April 2007. FHFA also revised the previous month's index, lowering the 0.9 percent increase reported for September to a 0.4 percent increase.

As 2011 comes to a close, Zillow anticipates home value declines for the year will total more than $681 billion. The rate of depreciation, however, is slowing, the company says. This year's decline is 35 percent less than last year's $1.1 trillion drop in value. Additionally, much of this year's decline occurred during the first half of the year. In terms of dollar value, the sharpest decline in 2011 was seen in the Los Angeles metropolitan area, followed by New York and Chicago.

Mortgage interest rates continue to head south. Freddie Mac reported Thursday that the average 30-year fixed-mortgage rate sank to 3.91 percent this week, setting a new all-time record low. Adjustable-rate mortgage (ARM) products also hit new record lows. The 15-year fixed rate settled in to match last week's historic low at 3.21 percent. To put the declines into perspective, Freddie says today's homebuyers are paying over $1,200 less per year on a $200,000, 30-year fixed-rate loan than they would have just 12 months ago.

First-lien mortgage performance among large national banks' servicing portfolios is stabilizing, with 88 percent current over the third quarter of this year, according to the Office of the Comptroller of the Currency (OCC). Delinquencies - both early stage and serious delinquencies - remained unchanged, with 3 percent of loans 30 days to 59 days delinquent and 4.9 percent 60 or more days delinquent. However, new foreclosures rose 21.1 percent. The OCC says nearly half of the loans modified since 2008 have since redefaulted.

The number of distressed properties not currently listed on multiple listing services stood at 1.6 million as of October 2011, according to CoreLogic. This shadow inventory is approximately half of the industry's visible inventory, the company says, meaning for every two homes available for sale, there is one home in the ""shadows."" CoreLogic's latest shadow inventory assessment represents a supply of five months and is down from October 2010, when it stood at 1.9 million units, or 7-months' supply.

Existing-home sales rose again last month, according to the National Association of Realtors (NAR). That assessment, however, is coming off of lower sales numbers than previously thought, reflecting revisions to NAR's data going back to 2007. The trade group has adjusted sales and inventory figures for the last four years downward by 14.3 percent. NAR's November report shows sales of previously owned homes up 4.0 percent to an annual rate of 4.42 million from 4.25 million in October, and 12.2 percent above the 3.94 million-unit pace a year earlier.

Homebuyer demand appears to be intensifying, especially among lower-priced REO properties, according to an industry study released Tuesday. Time-on-market for move-in ready REO was just 10.1 weeks in November, the lowest in 15 months, according to the HousingPulse survey. Time-on-market for damaged REO was even lower at 9.0 weeks, also the lowest in 15 months. The HousingPulse survey polls approximately 2,500 real estate agents nationwide each month to assess market trends surrounding homes sales.

At the height of the financial crisis in 2008, Fannie Mae and Freddie Mac held $2 trillion in high-risk subprime loans, amounting to 42 percent of their single-family portfolios, according to Edward Pinto of the American Enterprise Institute. Pinto, who served as chief credit officer for Fannie Mae until the late 1980s, arrived at this number by relying on data from the Securities and Exchange Commission (SEC), which filed a lawsuit against six former GSE executives for fraud.

Homeowners who receive foreclosure prevention counseling are at least 67 percent more likely to be current on their loans nine months after a loan modification than those who do not, according to NeighborWorks America. Additionally, among homeowners who receive mortgage modifications, those who participate in counseling decrease their monthly payments by $176 more than those who do not. However, NeighborWorks says the reduced redefault rate is more a result of the counseling than the lower monthly payment.