Market Studies

Despite indications of economic recovery -- such as job growth and some stabilization in home values -- pending home sales dropped for the third consecutive month in September, according to the National Association of Realtors (NAR). Pending sales of existing homes, including REOs and short sales, fell 4.6 percent from the previous month's reading. NAR describes current market conditions as ""a very strange situation,"" considering affordability is at a record-high, yet consumers are not responding.

Fixed mortgage rates showed little change for the second consecutive week amid mixed consumer confidence and housing data, and remain near their 60-year lows. Freddie Mac puts the average rate for a 30-year fixed mortgage at 4.10 percent for the week ending October 27, and the 15-year rate at 3.38 percent. Adjustable-rate mortgages (ARMs) exhibited slightly wider swings.

The economic environment of the last several years has added to the ranks of first-time defaulters. According to a survey conducted earlier this year by Deloitte, 11 percent of bank customers fall into this category, meaning they have experienced their first default or serious delinquency because of the recent financial crisis and recession. Deloitte contends that servicing and default management strategies should be tailored to match these customers' needs to capture what will likely be a profitable segment over time.

Default rates for both first and second mortgages increased during the month of September, according to the S&P/Experian Consumer Credit Default Indices. First mortgage delinquencies rose from 1.92 percent in August to 1.99 percent last month. Second mortgages increased from 1.27 percent to 1.32 percent. Both rates, however, are lower than their levels one year ago when the agencies cited 3.02 percent of first mortgages as delinquent and 2.14 percent of second mortgages were reported delinquent.

Special servicers resolved $63.5 billion in distressed commercial mortgage-backed securities (CMBS) loans in the 18 months from January 2010 to June 2011, according to Fitch Ratings. This amount is more than three-fourths the amount resolved between 2007 and 2009. Modification is the most common resolution strategy for larger balance loans. Fitch reports that the recovery rate for CMBS loans resolved by special servicers has remained at or better than 86 percent since 2007.

The monthly home price index from the Federal Housing Finance Agency (FHFA) has recorded its first decline since March. FHFA reported Tuesday that home prices in the U.S. fell 0.1 percent from July to August, and the previously reported 0.8 percent increase recorded for July was revised to reflect no change. Data released the very same day by Standard & Poor's showed a 0.2 percent increase in the Case-Shiller home price index for the same period. Economists say FHFA's index is ""a better barometer.""

The annual rate of change in home prices continues to show improvement, according to Standard & Poor's. Data released Tuesday by the agency shows the 20-city composite reading of the S&P/Case-Shiller index for August came in below its year-ago level by 3.8 percent. The previous month, S&P reported a 4.1 percent annual decline. The closely watched gauge posted a 0.2 percent increase in August versus July, marking the fifth consecutive monthly gain.

Commercial real estate prices in the U.S. rose 2.4 percent between July and August, Moody's Investors Service reported Monday. The agency's index has risen in each of the last four months, and that monthly boost pushes its reading 15.3 percent above this cycle's low set in April 2011. Much of the improvement in August came from a reduction in the share of distressed deals changing hands, which were 21.7 percent of transactions. That's the lowest distressed reading since January of 2010.

Refinance applications and appraisal complications are holding up home sale closings, according to a HousingPulse survey released Monday. The report states that the normal timeline for a closing is about 30 days. That timeline has been extended to between 45 and 60 days. However, the delay is even more exacerbated among short sales and sales of foreclosed homes - which according to the survey made up 44.4 percent of the market in September.

Having fallen to its lowest level in three years, California's rate of foreclosure filings rose up to come back in line with recent rates, according to the latest information from DataQuick. Filings increased by nearly 26 percent between the second and third quarters. At the same time, the share of properties purchased at foreclosure auctions by investors or other non-lender, non-government entities is growing. Homes that foreclosed in the third quarter took about 9.9 months from the notice of default to the final foreclosure.