Market Studies

While the share of distressed sales - REOs and short sales - is on the rise when tallying numbers nationwide, it's falling in California. The California Association of Realtors reports that the total ratio of all distressed property types sold statewide declined in March to 51 percent, down from 56 percent in February. REOs sold last month went for 88 percent less than non-distressed properties, while short sales had a median discount of 41 percent.

As home prices began heading further and further south, the term ""strategic default"" made its way into industry jargon...and into the minds of lending and servicing professionals already struggling to keep up with large volumes of borrowers who actually can't afford their mortgage payments. It's a fairly new phenomenon that the industry agrees needs addressing, but the problem is, how do you pinpoint a strategic defaulter? The credit assessment firm FICO says it's developed a method, using consumer behavior analytics, that will allow lenders to identify borrowers who might walk away.

Data released by S&P Indices and Experian showed a decline in mortgage default rates for the fourth straight month. The agencies' index of first mortgage defaults fell to 2.33 percent in March and is down 41 percent from a year earlier. Second mortgage defaults dropped to 1.42 percent, down 49 percent over the past year. Not only has the ratio of on-time mortgage payments improved, but the report indicates consumers are making headway on their debt obligations overall, with declines in monthly default rates across all major credit lines.

Foreclosures in Florida dropped by 12 percent from March to April, according to ForeclosureDataOnline.com. Since the fourth quarter of last year, the state's foreclosure activity is down 47 percent. The site attributes this slowdown to the recent robo-signing foreclosure documentation problems exposed last fall, which resulted in temporary moratoriums and court delays where foreclosures require approval by a judge. However, March data suggest foreclosures will soon rise again as banks continue to work through their backlog of cases.

Data released by the Federal Housing Finance Agency (FHFA) Thursday shows further declines in residential property values. Home prices in the United States declined 1.6 percent on a seasonally adjusted basis from January to February, according to FHFA's latest monthly house price index. FHFA's index is calculated using purchase prices of houses backing conventional mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac, and FHFA says it is now at the same level seen in February 2004.

Interest rates on home loans have headed lower, after four straight weeks of increases. Data released by Freddie Mac Thursday shows the 30-year fixed-rate mortgage averaged 4.80 percent for the week ending April 21, 2011. The 15-year rate came in at 4.02 percent, and adjustable-rate mortgages (ARMs) also declined.

Greg Rand, a 20-year real estate veteran and CEO of OwnAmerica, says now is the time to invest in real estate. Rand compares the current market to the years following the Great Depression when market conditions sparked a boom that sustained 65 years of appreciation in real estate. ""It is true that this is a once-in-a-generation crisis. It is also true that this is a once-in-a-generation opportunity. It's time to focus on the other side of the coin,"" according to Rand.

Foreclosure activity is slowing in Massachusetts, according to the latest report by the Warren Group in Boston. Lenders filed 1,048 petitions to foreclose in the Bay State during March, a 60 percent decrease from March 2010. Foreclosure deeds also dropped, declining 60 percent from a year earlier. Likewise, auction announcements plummeted 62 percent.

The National Association of Realtors reported Wednesday that sales of previously owned homes rose 3.7 percent last month, following the 9.6 drop recorded in February. The results were slightly better than forecast, but reaction was mixed after the release of the report. One economist says sales have now stabilized at a level no higher than that seen during the recession, and with so many forced foreclosed sales, a recovery is not even on the horizon. But another points out that it's distressed properties that are helping to elevate sales activity as investors line up for a bargain.

Prices on commercial real estate have slipped for three consecutive months and are now dangerously close to double-dip territory due to the large share of distressed transactions recently, according to Moody's Investors Service. The agency reported Wednesday that its index of commercial property prices fell another 3.3 percent in February. The index is down 4.9 percent from 12 months earlier and only 0.8 percent above its post-peak low set in August 2010. Approximately 29 percent of the transactions tracked in February were distressed.