The housing market is recovering so nicely that it has caused some to wonder whether a new housing bubble is forming. Today, we want to explain that the fear of a new pricing bubble in real estate is unwarranted.

Trulia revealed some great data on this point in a recent blog post. They explained that, even with the recent price increases, national home prices are still 7 percent undervalued. Trulia explained:

“Home prices nationally remain undervalued relative to fundamentals and much lower than in the last bubble. That’s why today’s price gains are actually still a rebound, not a bubble.”

Prices are below their fundamental value in the vast majority of the country (91 of the 100 largest metros). Even in the parts of the country that are now overvalued they come nowhere near the percentages we saw in 2006-2007. For example, let’s look at the two markets that are most overvalued today. In Orange County, California prices are currently overvalued by 9%. In 2006, prices in the region were overvalued by 71%! The second most overvalued market today is Austin, Texas at 5%. Texas real estate prices did not skyrocket as they did in many other parts of the country during the last boom. Austin prices were shown as being 12% overvalued at the time.

Again, prices are still undervalued in 91% of markets and, even in the markets that are overvalued, they are nowhere near the numbers of the 2006-2007 bubble.

Jed Kolko, Trulia’s Chief Economist, explained:

“So are we in bubble territory? No. Bubble-phobes can rest easy. Even with recent sharp home price increases, prices are still low relative to fundamentals and are far below bubble levels.”

Dr. David Stiff, chief economist for CoreLogic Case-Shiller agreed in a recently released report on prices:

“Even if double-digit price appreciation were to continue in former bubble metro areas, there is no reason to believe that new home price bubbles are forming. That’s because single-family homes in these markets are still very affordable, even after last year’s large price gains.”

Three reasons there will NOT be another bubble

Prices are determined by the ratio between supply and demand. Here are three reasons a bubble will be avoided.

1. Supply is beginning to increase. A lack of inventory is creating a market of multiple bids which has caused prices to rise. TheNational Association of Realtors (NAR), in their latest Existing Home Sales Report, revealed that the months’ supply of inventory has increased from 4.3 to 5.2 months since January.
2. Demand will decrease in certain demographics. For an example, investors have been a large part of the housing market over the last several years. As prices continue to rise, a certain percentage of these buyers will back off.
3. As mortgage rates increase, buyers will be able to afford less. The Mortgage Bankers Association, Fannie Mae and NARhave all projected an increase in mortgage rates over the next year. Buying power will decrease as borrowers can no longer afford the same price point as monthly payments will increase.

For these reasons, we believe the fear of a new housing bubble are currently unfounded.

Total Increase a Buyer May Pay if They Wait

Total Increase a Buyer May Pay if They Wait

Posted: 23 May 2013 04:00 AM PDT

Earlier in the week, we explained that experts have projected that U.S. home prices will appreciate by approximately 5% in 2013. We also revealed the Mortgage Bankers Association, Fannie Mae and the National Association of Realtors have all projected that the 30-year mortgage rate will be at least 4% by the end of 2013. If we assume that prices and interest rates will rise as projected, here is the monthly difference a buyer may pay if they wait a year.

All Gave Some. Some Gave All.

When It Comes to Wood Floors, Choose Wisely

When It Comes to Wood Floors, Choose Wisely

Rich wood flooring can spell instant warmth and patina in a home. Here’s an overview that can help buyers and sellers evaluate wood floors.

APRIL 2013 | BY BARBARA BALLINGER

Just as with ties and hem lengths, wood flooring styles change. Colors get darker or lighter; planks get narrower or wider; woods with more or less grain show swings in popularity; softer or harder species gain or lose fans; and the wood itself may be older, newer, or even pre-engineered with a top layer or veneer-glued to a substrate to decrease expansion and contraction from moisture.

Here are key categories for consideration:

Solid Plank

This is what some refer to as “real” wood because the wood usually ranges from three-eighths to three-quarters of an inch in total thickness to permit refinishing and sanding. Thicker floors have a thicker wear layer to allow for more frequent refinishing and sanding, so they can withstand decades of use, says architect Julie Hacker of Stuart Cohen and Julie Hacker Architects. It also can be stained, come from different species of tree, and be sold in numerous widths and lengths:

• Width and length: Designer Steven Gurowitz, owner of Interiors by Steven G., is among those who prefers solid flooring for many installations because of its rich, warm look. Like other design professionals, he’s seeing greater interest in boards wider than the once-standard 2 ¾ to 3 ¾ inches — typically 5 to 6 inches now but even beyond 10 inches. And he’s also seeing corresponding interest in longer lengths, depending on the species. Width and length should be in proportion. “The wider a board gets, the longer the planks need to be, too, and in proportion,” says Chris Sy, vice president with Carlisle Wide Plank Floors. These oversized dimensions reflect the same trend toward bigger stone and ceramic slabs. The downside is greater cost.
• Palette: Gurowitz and others are also hearing more requests for darker hues among clients in the northeastern United States, while those in the South and West still gravitate toward lighter colors. But Sprigg Lynn, on the board of the National Wood Flooring Association and with Universal Floors, says the hottest trend is toward a gray or driftwood. Handscraped, antique boards that look aged and have texture, sometimes beveled edges, are also become more popular, even in modern interiors, though they may cost much more.
• Species and price: Depending on the preference of the stain color, Gurowitz favors mostly mahogany, hickory, walnut, oak, and pine boards. Oak may be the industry’s bread and butter because of the ease of staining it and a relatively low price point. A basic 2 ¼-inch red oak might, for instance, run $6.50 a square foot while a 2 ¼-inch red oak that’s rift and quartered might sell for a slightly higher $8.50 a square foot.
• Maintenance: How much care home owners want to invest in their floors should also factor in their decision. Pine is quite soft and will show more wear than a harder wood like mahogany or walnut, but it’s less expensive. In certain regions such as the South, pine comes in a harder version known as heart pine that’s popular, says Georgia-based designer Mary Lafevers of Inscape Design Studio. Home owners should understand the different choices because they affect how often they need to refinish the wood, which could be every four to five years, says Susan Brunstrum of Sweet Peas Design-Inspired Interior. Also, Sy says that solid planks can be installed over radiant heating, but they demand expert installation.

Engineered Wood

Also referred to as prefabricated wood, this genre has become popular because the top layer or veneer is glued to wood beneath to reduce expansion and contraction that happens with solid boards due to climatic effects, says Sy, whose firm sells both types. He recommends engineered, depending on the amount of humidity. If home owners go with a prefabricated floor, he advises a veneer of at least one-quarter inch. “If it’s too thin, you won’t have enough surface to sand,” he says. And he suggests a thick enough substrate for a stable underlayment that won’t move as moisture levels in a home shift.

His company’s offerings include an 11-ply marine-grade birch. The myth that engineered boards only come prestained is untrue. “They can be bought unfinished,” he says. Engineered boards are also a good choice for home owners planning to age in place, since there are fewer gaps between boards for a stable surface, says Aaron D. Murphy, an architect with ADM Architecture Inc. and a certified Aging in Place specialist with the National Association of Home Builders.

Reclaimed Wood

Typically defined as recycled wood — perhaps from an old barn or factory — reclaimed wood has gained fans because of its aged, imperfect patina and sustainability; you’re reusing something rather than cutting down more trees. Though less plentiful and more expensive because of the time required to locate and renew samples, it offers a solid surface underfoot since it’s from old-growth trees, says Lynn. Some companies have come to specialize in rescuing logs that have been underwater for decades, even a century. West Branch Heritage Timber,for instance, removes “forgotten” native pine and spruce from swamps, cuts them to desired widths and lengths, and lays them atop ½-inch birch to combine the best of engineered and reclaimed. “The advantage is that it can be resanded after wear since it’s thicker than most prefabricated floors, can be laid atop radiant mats, and doesn’t include toxins,” Managing Partner Tom Shafer says. A downside is a higher price of about $12 to $17 a square foot.

Porcelain “Wood”

A new competitor that closely resembles wood, Gurowitz says porcelain wood offers advantages: indestructibility, varied colors, “graining” that mimics old wood, wide and long lengths, quickness in installation, and no maintenance. “You can spill red wine on it and nothing happens; if there’s a leak in an apartment above, it won’t be destroyed,” he says. Average prices run an affordable $3.50 to $8 a square foot. The biggest downside? It doesn’t feel like wood since it’s colder to the touch, Lynn says.

Bottom Line

When home owners are making a choice or comparing floors, Sy suggests they ask these questions:

1. Do you want engineered or solid-based floors, depending on your home’s conditions?

2. Do you want a floor with more natural character, or less?

3. What board width do you want?

4. How critical is length to you in reducing the overall number of seams?

5. What color range do you want — light, medium, or dark?

6. Do you want more aggressive graining like oak or a mellower grain like walnut?

7. Do you want flooring prefinished or unfinished?

8. How thick is the wear layer in the floor you’re considering, which will affect your ability to refinish it over time?

9. What type of finish are you going to use? Can it be refinished and, if so, how?

10. For wider planks that provide greater stability: Where is the wood coming from, how is it dried, what is its moisture content, and what type of substrate is used in the engineered platform?

Housing Prices Projected to Increase

House Prices Projected to Increase Posted: 21 May 2013 04:00 AM PDT Experts have projected that U.S. home prices will appreciate by 5.4% in 2013. If we assume that prices will rise about the same 5% over the next twelve months, here is the difference a buyer will pay if they wait a year.

Buying VS. Renting

ZOMBIE FORECLOSURES?? BOOMERANG BUYERS??

Over the last few years, new words have become part of our real estate vocabulary when discussing distressed properties. Terms such as ‘shadow inventory’, ‘cure rate’ and ‘short sales’ were introduced. Other words like ‘underwater’ and ‘upside down’ took on totally new meanings.

Today, we want to add two additional words that we will be hearing often over the next year or so: ‘zombie foreclosures’ and ‘boomerang buyers’. 

Zombie Foreclosures

Bankforeclosuresales.com explains the term on their website:

“A zombie foreclosure or zombie home is a property that the homeowner has abandoned and assumed the home has become the property of the lender. Essentially what happens is the homeowner leaves the property after receiving a notice of sale from the lender, and then the home is left empty until the bank acquires the property. This acquisition can take longer than desired and during the period in which the home is not yet owned by the bank, technically the homeowner is still responsible for the property.
Sometimes the homeowner thought the property was foreclosed upon and therefore became the property of the bank. However, they occasionally find out (often years later and without notification) that the bank never took possession of the property and instead the homeowner (who thought they were no longer attached to the home) is notified that they are still responsible for the property legally.”

This situation is occurring in many markets right. The impact of the resolution of this situation is still to be determined.

Boomerang Buyers

In a article late last year, the Wall Street Journal coined the term ‘boomerang buyer’ to categorize a segment of the home buying population who have lost homes to foreclosure or short sales or have gone through a bankruptcy and are again eligible for a new mortgage. There are hundreds of thousands of buyers in this category currently in the market.

Both ‘zombie foreclosures’ and ‘boomerang buyers’ will be part of many real estate conversations moving forward.

LOS ANGELES (AP) — A resurgent housing market, rising home values and steady job gains are helping more U.S. homeowners stay on top of their mortgage payments.
The percentage of mortgage holders at least two months behind on their payments fell by 21 percent in the first three months of this year versus the same period in 2012, credit reporting agency TransUnion said Wednesday.
The sharp annual decline in the mortgage delinquency rate represents the biggest quarterly drop on record for TransUnion, whose data go back to 1992.
"We certainly expected improvement this quarter, as the housing sector is in recovery, but the magnitude of the improvement was unexpected," Tim Martin, TransUnion's group vice president of U.S. housing, said in a statement.
All told, the mortgage delinquency rate was 4.56 percent in the first quarter. That's down from 5.78 percent in the prior-year quarter, TransUnion said.
The first-quarter rate also fell 12 percent compared with the last three months of 2012, when it was 5.19 percent, a four-year low.
Even so, the mortgage delinquency rate is still above the 1 percent to 2 percent average historical range, an indication that many homeowners still are struggling to make their payments.
Before the housing bust, mortgage delinquencies were running at less than 2 percent nationally. They peaked at nearly 7 percent in the fourth quarter of 2009.
The rate has been trending down since then, aided by a rebound in home sales and rising home prices that began gaining traction about a year ago.
U.S. home prices rose 10.5 percent in March compared to a year earlier, the biggest gain since March 2006, according to real estate data provider CoreLogic. March marked the 13th month in a row that home prices have increased on an annual basis nationwide.
Rising home values make it easier for borrowers to refinance their mortgages or sell their homes if they lose their jobs or otherwise become unable to make payments. They also help bring down the number of homeowners who are underwater on their mortgage, or owe more on their home loan than their homes are worth.
Last year, 1.7 million homeowners who had been underwater on their mortgage were moved into positive equity, according CoreLogic. That left another 10.4 million, or nearly 22 percent of all homes with a mortgage, still in negative equity at the end of last year.
Steady job growth also has helped.
Employers have now added an average of 208,000 jobs per month from November through April. That's much higher than the average of 138,000 in the previous six months. And the national unemployment rate, while still elevated, fell last month to 7.5 percent from 7.6 percent in March.
Every state and the District of Columbia posted an annual decline in the late-payment rate of home loans in the first quarter, with Arizona leading the way. The state's mortgage delinquency rate was 4.3 percent, down nearly 38 percent from a year earlier, TransUnion said.
California, with a rate of 4.2 percent, and Colorado (2.7 percent) also had steep annual declines in the rate of late payments.
Florida, a foreclosure hotbed throughout the housing downturn, clocked in with the highest mortgage delinquency rate in the nation for the January-March quarter at 11 percent — but that's down nearly 21 percent from the same period last year, the firm noted.
Nevada (9.1 percent), New Jersey (6.9 percent) and Delaware (6.3 percent) rounded out the top four states with the highest late-payment rate.
Meanwhile, mortgage debt per borrower dipped about 1.2 percent to $186,018 in the first quarter from a year earlier, and was essentially flat with the previous quarter, the firm said.
TransUnion, which draws its data from a sample of 27 million consumer records, anticipates the national mortgage delinquency rate will continue to decline in the current quarter to about 4.5 percent.
"There is no reason to believe the decline in mortgage delinquencies will not continue," Martin said. "We do not know if the first quarter was a blip, or if it's the beginning of a more rapid decline."


Read more: http://www.sfgate.com/business/personal-finance/article/Late-payment-rate-on-mortgages-tumbled-in-1Q-4496755.php#ixzz2Su1SrYd1

How Difficult Is the Mortgage Process for Buyers? Posted: 08 May 2013 04:00 AM PDT TD Bank recently announced the results of their inaugural Mortgage Service Index. The index was designed to identify best practices and trouble areas in home financing and act as a service indicator for lending institutions. Below are some of the key findings of the survey. Positive Experiences The index identified the percentage of respondents who had a positive (“excellent” or “very good”) experience in certain parts of the home buying experience: 64% had a positive experience during the home buying experience 55% finding a good Realtor 55% with the home appraisal/inspection process 53% finding the right lender 53% with the length of the entire home buying process What Creates an Overall Positive Experience? Certain key aspects of the relationship with the lender were important to those who said they had a very positive overall home buying experience. They rated their lender as “excellent” or “very good” in the following categories: Responsive 74% Accessible 76% Honest and transparent 76% Instilled confidence throughout the process 73% Helped buyers understand the process 73% Kept buyer informed during process 73% Explained the mortgage and available options 72% Other Key Findings: 1. On average, home buyers considered approximately two banks or lenders when applying for a mortgage 2. An equal number of those surveyed (43%) obtained information on the lending process from their bank and from their Realtor, demonstrating that Realtors are used as informative resources by consumers during the mortgage process 3. Only 34% of home buyers obtained a mortgage at their primary bank

Housing Crash Fades as Defaults Decline to 2007 Levels By John Gittelsohn

Six years after the start of the foreclosure crisis, American homeowners are paying their mortgages like the housing crash never happened.

First-time delinquent home loans fell to 0.84 percent of the 50.2 million mortgages in March, the first month below 1 percent since 2007, before a wave of defaults led to the financial crisis, according to a report today by Lender Processing Services Inc. The rate of first-time defaults, defined as loans that went from performing to at least 60 days delinquent, peaked at 2.89 percent in January 2009.

The decline in new problem loans shows that the recovering U.S. economy, falling unemployment and rising home prices, combined with more than four years of banks’ tightening lending standards, are propelling the worst real estate crash since the Great Depression into the rearview mirror.

“Mortgage quality is improving rapidly,” Mark Zandi, chief economist for Moody’s Analytics Inc. said in a telephone interview from his office in West Chester, Pennsylvania. “Once we’re able to work through this last bulge of foreclosed property, which I think we’ll be able to do over the next 18 to 24 months, mortgage credit quality is going to look absolutely beautiful.”

Mortgages at least 30 days delinquent or in some stage of foreclosure fell to 5 million in March, down from a peak of 7.7 million in January 2010, according to Lender Processing Services, a real estate information service based in Jacksonville, Florida. That’s still more than double the 2.2 million non-current mortgages of January 2005, when the housing market was rising toward its peak.

Lending Standards
Tight lending standards have made it harder for borrowers to obtain mortgages, helping drive down default rates while reducing the homeownership rate in the first quarter to 65 percent, the lowest since 1995.

The Federal Housing Administration, which offers loans to buyers with downpayments as low as 3.5 percent, has steadily raised its credit scores. In the third quarter of 2012, the most recent available, 97 percent of FHA borrowers had credit scores above 620 of a possible 850. In the last quarter of 2006, only 53 percent had a score above 620.

New mortgage default rates are highest among so-called “underwater” borrowers, who have negative equity because they owe more on their home than the balance of their loan, said Herb Blecher, senior vice president at LPS Applied Analytics.

The new default rate was 4 percent for borrowers who owe at least 50 percent more than the value of their home compared with 0.6 percent for owners with equity, according to today’s report.

Negative Equity
The number of home loans with negative equity fell to about 9 million or 18 percent of homes with a mortgage in January, the report said. That’s down 41 percent from a year earlier and 47 percent lower than the peak of 17 million loans in February 2011.

U.S. home prices climbed at the fastest pace since May 2006, rising 9.3 percent in February from a year earlier, according to an April 30 report by the S&P/Case-Shiller index of property values.

There’s a “feeding frenzy in housing” as Americans seek to take advantage of prices still about 29 percent below their 2006 peak and mortgage rates near record lows, said Ross Perot Jr., 54, chairman of Dallas-based real estate company Hillwood Development Co., in a telephone interview. Perot’s father, H. Ross Perot, twice ran for president as an independent candidate.

‘Very Shrewd’
“The big picture: this economy is coming back,” Perot said during a telephone interview from Newport Beach, California, where he was breaking ground on a condo project backed by his Dallas-based company. “The American people are very shrewd and they realize it’s a great time to borrow to buy a home because pricing is very cheap.”

The average rate for a 30-year fixed mortgage dropped to 3.35 percent last week, down from 3.84 percent a year ago as the Federal Reserve has bought $85 billion of bonds to stimulate the economy. The average 15-year rate is a record low 2.56 percent.

Demand is also rising as more Americans find jobs. The unemployment rate fell to 7.5 percent in April, its lowest rate since December 2008, the Labor Department reported May 3. The Dow Jones Industrial Average last week rose above 15,000 for the first time.

Builders continued to hire more workers in April, though employment among an age cohort important to household formation slipped, according to today’s jobs report, which showed more overall growth than expected.

Residential construction jobs are up 4.1 percent year over year, towering about the overall jobs growth rate of 1.6 percent, said Trulia Chief Economist Jed Kolko, citing data released by the Bureau of Labor Statistics today.

Total residential-construction jobs moved up from a seasonally adjusted 580,200 in March to 586,400 in April, according to the report. In April of last year, the sector supported 572,000 jobs, the report showed.

But that jobs growth lags compared to actual construction growth. Kolko chalks up the discrepancy to the fact that the number of jobs for every construction project is more than normal.

At the same time, today’s report also showed that employment among a cohort that is crucial to household formation, 25 to 34-year-olds, has slipped recently, dropping from 75.6 percent in December 2012 to 75.2 percent in April, Kolko said.

But Fannie Mae Chief Economist Doug Duncan said that the report was positive overall and “better-than-expected.

“The unemployment rate, which dipped 0.1 percentage points to 7.5 percent, truly indicates improving market conditions as a large gain in employment outpaced a decent gain in the labor force. One soft spot was a sizable drop in average weekly hours, which fell for the first time in three months,” he said in a statement.

Duncan added that a survey that Fannie Mae will release next week is expected to show that the housing market “is gradually approaching its sweet spot as the share of consumers who believe that it is a good time to buy remains high while the share of those who think it is a good time to sell continues its upward trend witnessed over the past year.”

“The unemployment rate, which dipped 0.1 percentage points to 7.5 percent, truly indicates improving market conditions as a large gain in employment outpaced a decent gain in the labor force. One soft spot was a sizable drop in average weekly hours, which fell for the first time in three months,” he said in a statement.

Duncan added that a survey that Fannie Mae will release next week is expected to show that the housing market “is gradually approaching its sweet spot as the share of consumers who believe that it is a good time to buy remains high while the share of those who think it is a good time to sell continues its upward trend witnessed over the past year.

Gallup: Latest Data on Homeownership [INFOGRAPHIC]

Lending Standards: Are They Actually Loosening?

In a recent story on MSN Money titled, Mortgage Borrowing Is Getting Easier, it was revealed that:

“Credit is not raining down on would-be borrowers, but it will be a bit more accessible this year.”

The article bases it findings on the Federal Reserve’s January Survey of Loan Officers. Dan Greene of the Daily Mortgage Report addresses the survey:

“The Q4 2012 survey marks the ninth straight survey in which fewer than 10% of banks tightened standards. Many more are loosening instead. It’s a good sign for the 2013 home purchase market, which has shown strong buyer demand and rising home prices. Despite what you may hear from friends and neighbors, the nation’s banks are no longer tightening their respective mortgage lending standards.”

In the article, Cara Hawkins, a production manager at Ameripro Fundingalso weighed in on the subject:

“There are more players in the mortgage buying ‘game’ than in past years, which opens the door to looser credit standards because the appetite for loans on the secondary market is higher. While it is still fairly black and white when it comes to mortgage qualification, I am seeing an increase in more approvable loans than in past years because of the market opening up.”

And a recently released report from FICO/PRMIA, US Consumer Credit Risk Trends and Expectations showed:

Expectations among bank risk professionals for the relaxation of lending standards increased sharply, rising from 12.1 to 19.9 percent

Why Are Lending Standards Easing?

The FICO/PRMIA report revealed two reasons for the industry’s current comfort with the housing market.

1. 83.7% believe that the level of mortgage delinquencies will decrease or stay the same, a significant improvement over last quarter.
2. 70.8% feel that home prices were rising at a sustainable pace.

The Niche Report also covered the FICO/PRMIA report explaining:

“One out of five bank risk professionals now expect the approval criteria for loans to become less stringent, the third highest level ever registered for looser lending standards in the three year history of the FICO survey.”

What Will This Mean for the Real Estate Market?

Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, said it best:

“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery. Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses.”