Skip to comments.Mortgage Burden Grows, but Federal Role Is Shrinking
Posted on 02/13/2013 8:40:41 AM PST by Lorianne
The Federal Housing Administration has played a major role supporting housing markets through the downturn, but there are signs that the agency is beginning to cede market share back to the private sector.
Data from CoreLogic underscores the first point. In the aftermath of the housing bust, private lenders have required down payments of 20%, while loans to the most creditworthy borrowers can have down payments of 10% if borrowers purchase mortgage insurance. For borrowers with less money to put down, government insurance programs are the best bet.
The FHA, for example, allows borrowers to make down payments of just 3.5%. Loans for veterans through the Department of Veterans Affairs and for rural borrowers through the Department of Agriculture allow borrowers to put no money down.
Demand for those low-money-down programs has surged in recent years, and CoreLogic data show that average loan-to-value ratios for home purchases are near the highs witnessed during the bubble.
CoreLogic measured the average combined loan-to-value, which includes second mortgages that were often taken out during the go-go days to substitute for a down payment. The result: average combined loan-to-value ratios, or CLTVs, peaked at 87.8% in late 2006 before declining in 2007 as lenders tightened up. But then they rose back in 2010 to a new high of 89.7% amid a surge in FHA lending. They stood off that high, at 88.2%, last March, the most recent month for which data is available.
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CoreLogic may not be able to be trusted. For instance, in non-disclosure states, they have little to no data.
The National Association of Realtors also has a good article out about Corelogic vs. NAR:
NAR vs. Corelogic Home Sales Data Which One Do You Trust?
February 24, 2011
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More blow back from the Corelogic vs National Association of Realtors home sales data.
At the heart of the debate is Corelogics claim that the NAR over states home sale data. Specifically, NAR home sales data claims that in 2010 there were 4.9 million home sales Corelogic asserts there were only 3.3 million home sales in 2010.
As you can see, a huge difference.
This data matters because its a best indicator of how severe the market crash has been. A healthy markets with a balance of supply and demand means roughly 5.5 million home sales per year with the average home taking 6 months or less to sell. What we have now is far from healthy. Depending on the market, there is a 2+ year supply of homes for sale with the average home taking over a year to sell.
Agents, if should be very obvious to you that this market is all about 3 things: REOs, Short Sales and making money now from BPOs. Watch the new Agent REO Secrets video and download the New how-to list REOs book.
Read this article and share your thoughts:
We knew that 2010 was another disappointing year for the U.S. housing market. But it appears it may have been worse than we were led to believe.
The National Association of Realtors, which publishes the most popular measure of existing home sales, may have included as many as 1.6 million fictitious transactions in its data for 2010. And it wasnt just last year. According to a new report by CoreLogic, a real-estate analytics firm, NAR has long overstated housing sales. But those overstatements appear to have widened starting in 2006, just as the housing market was starting to crack. The question is just how much did NARs inflated counts mask the severity of the real estate downturn. More importantly, the NAR misstatement may mean that it will be longer before housing recovers than we thought. Heres why:
By NARs numbers, there were 4.9 million previously owned homes sold last year, down 5.7% from 5.2 million in 2009. But CoreLogic says the trade groups numbers understate the severity of the drop in housing by about nearly half. By CoreLogics numbers, sales of previously sold homes fell 10.8% to 3.3 million homes in 2010, from 3.7 million the year before.
What might have gone wrong? NAR uses 2000 Census data as its benchmark numbers, and bases its estimates for home sales on a sampling of data collected from multiple listing services, which track local housing markets, and larger brokerages. The farther we get from 2000, the more likely NARs data could be flawed. CoreLogic, on the other hand, calculates its figures through public sales records from county recorders and courts.
The result is a mismatch. When the two data sets are compared, NARs numbers make it look as if U.S. housing sales rebounded in 2009, while CoreLogics show a continued decline through 2010. There have been discrepancies between NARs data and information collected by CoreLogic, the Mortgage Bankers Association and the U.S. Census Bureau for years, says the CoreLogic report. But as the differences have gotten larger, a number ofbloggers and analysts have begun to question NARs statistics.
A spokesman for NAR says that it should be noted that CoreLogic is a competitor of ours when it comes to this kind of statistical data. He says NAR is reviewing its data with a number of independent sources, including outside housing economists, government agencies and academic experts. The NAR calls CoreLogics assumptions that the trade groups numbers are inflated premature at best. Nonetheless, NAR seems to be backing away from their current estimates, saying they will be making benchmark revisions to their sales data later this year with published reports coming this summer.
Which numbers are correct? The housing market does seem to continue to deteriorate. So numbers that argue sales are weaker than we thought would make sense. On Tuesday, the folks who run the Case-Shiller housing price index said that home values fell another 1% in December. Its the third consecutive month the housing barometer has fallen at least a full percent.
Whats more, NAR has a history of being overly rosy about the housing market. According to NAR, a similar statistical miscalculation caused the trade group to have to cut its housing numbers in 2000, that time down 13%. In 2005, NARs then chief economist David Lereah, who TIME named to its list of people to blame for the financial crisis, famously wrote a book titled, Are You Missing the Real Estate Boom?, which came out just as the real estate boom was ending. Lereah continued to make rosy statements even as home prices tumbled. In 2007, Lereah said real estate had hit a bottom. It still hasnt.
So what does all this mean? Well, besides the likelihood that fewer homes actually sold in the last few years than we thought, it probably also means it will be longer before we see home prices begin rising again. In fact, they could continue to fall. Fewer sales means there are more houses on the market waiting without buyers. CoreLogic calculates there are about 16 months of housing supply, compared with NARs estimate of 9.5 months. NAR has historically said that anything more than 6 months of supply indicates a weak housing market.
FHA = the New Subprime Bubble.
NAR = the Same Old Cheerleading Liars.