Tag Archives: Housing Supply

The Obama administration is setting the stage for a public-private collaboration to tackle the growing inventory of REO homes. On Wednesday, federal officials called on private investors and industry stakeholders to share their recommendations on how best to dispose of foreclosed homes held by Fannie Mae, Freddie Mac, and FHA. Together, the three hold nearly 250,000 REO homes. Federal officials believe the most effective tactic is to sell off pools of properties to responsible investors who will employ an REO-to-rental strategy.

The combination of declines in home prices and in the value of the dollar is making U.S. homes very affordable for some foreign buyers, according to Capital Economics. The 33-percent drop in housing values since the beginning of 2006 translates to an even greater decline when the dollar value is compared with Canadian, Chinese, and European currencies. While international investors likely won't bring recovery to the American housing market in the near-term, the research firm says they may provide a boost to a handful of states.

The House Financial Services Committee is considering a bill to ease the pressure that unsold inventories of vacant, foreclosed homes are putting on the housing market. The Neighborhood Preservation Act would authorize FDIC-member banks, Fannie Mae, and Freddie Mac to enter into five-year lease agreements to rent REO properties back to the foreclosed homeowner. News surfaced last month that the administration was considering such a policy for Fannie and Freddie, but a group of bipartisan U.S. representatives want to enact it with legislation.

The nation's housing crisis has forced unprecedented numbers of homeowners out of their homes, made for a difficult homebuying environment, and tainted many Americans' ideal of owning a home. These factors are taking their toll on homeownership in this country. The Census Bureau says homeownership in the United States has fallen to its lowest level in more than 13 years, slipping to 65.9 percent in the second quarter. The increase in the homeownership rate seen during the housing boom has been more than completely wiped out by the bust.

Economic activity continues to grow but the pace has moderated in many parts of the country, weighed down by a persistent weakness in the residential real estate sector, according to the latest market-gauging Beige Book from the Federal Reserve. Contacts in the Boston district said housing markets ""remain in the doldrums."" A pickup in sales of higher-priced homes was evident in the D.C. area. In the Kansas City region, they're seeing an increase in all-cash purchases of existing homes, while demand in the Dallas district was described as ""choppy.""

Tight credit conditions for first-time buyers and a foreclosure pipeline full of homes bought with subprime loans mean that house prices at the low end of the market will continue to fall at a faster rate than prices at the middle and high end, according to Capital Economics. The bulk of these low-end homes consists of distressed properties, which already carry steep discounts as lenders and investors try to capture a piece of the limited demand out there to get these homes off their books and back into the hands of responsible homeowners.

Backlogged foreclosures, severe oversupply, and negative equity are pulling home prices down further, according to Radar Logic. The company tracks 25 major metropolitan areas across the country. Its latest index recorded a decline in the composite reading of 5.1 percent in April when compared to April 2010. The monthly sales rate remained more than 9 percent below April 2010. While sales of non-foreclosed homes increased more quickly than sales of foreclosed homes, RadarLogic says foreclosures are selling at an average discount of 39 percent.

The shadow inventory of repossessed and soon-to-be repossessed homes not yet visible to the market has been trimmed, according to CoreLogic. The company reports that as of April 2011, the industry's shadow supply fell to 1.7 million units, down from 1.9 million a year earlier. CoreLogic attributes the decline to fewer new delinquencies and a high level of distressed sales, which has helped to reduce the deluge of foreclosure properties on a market already beset by a supply and demand imbalance.

Distressed properties accounted for just 31 percent of existing-home sales in May, the National Association of Realtors (NAR) reported Tuesday. The ratio of distressed homes - typically bank-owned or pre-foreclosure short sales - was down from 37 percent in April and 40 percent in March. A pick-up in non-distressed sales volume is typical for the spring and summer seasons, but last month, overall sales of previously owned homes dropped along with the distressed percentage to hit a six-month low.

Experts blame the massive inventory of existing homes on the market for hindering the housing sector's recovery. The overhang has been inflated by large volumes of foreclosures, and it's expected to grow with millions more coming down the pipeline. One economist says it will take 6.5 million new household formations to absorb the excess inventory. He expects it will take five years to achieve that goal and emerge from the self-defeating cycle of oversupply pushing prices down, the negative equity triggering defaults, and in turn, further increasing the oversupply.