Debate Rages Over the Supply of Foreclosed Homes

Why is there such a fierce debate about whether the housing market is slowly healing or heading for another free fall? Partly because no one can estimate with much confidence how many foreclosed homes banks need to sell or how fast they are getting rid of all that property.

A huge chunk of today’s housing supply comes from homes that have been acquired by banks or mortgage investors through foreclosure, plus those that are being offered by people who hope to avoid foreclosure by doing “short sales,” selling their homes for less than the mortgage balance due. The National Association of Realtors estimates that such “distressed” situations accounted for 35% of home sales in February and March.

The latest heroic attempt to tally how many foreclosed homes are available for sale comes from analysts at Barclays Capital in New York. They estimate that banks and mortgage investors including Fannie Mae and Freddie Mac owned 480,000 homes at the end of February. That’s far lower than previous estimates. Barclays explains that it has acquired more data on mortgages and refined its methods for analyzing foreclosure trends. Under the bank’s previous methods, the estimate for February would have been more than 600,000.

Estimating the inventory of foreclosed homes is tricky because thousands of banks and others that own the properties disclose those holdings in varying ways, if at all. RealtyTrac Inc., another data provider and one of the few other firms that regularly makes such calculations, estimates that banks and mortgage investors own 758,000 foreclosed homes.

So we have a pretty big gap. Is it 480,000 as Barclays thinks, or 758,000, as per RealtyTrac? Tom Lawler, an independent housing economist who tracks reams of housing data when he isn’t tending the livestock on his farm near Leesburg, Va., figures the total is more than 550,000 but probably less than the RealtyTrac estimate.

“What is truly disturbing,” Mr. Lawler wrote in his daily housing-market commentary Wednesday, “is that given all of the economic data the government tracks, the sector it appears to track the worst is…the housing market!  Why is it that the government has not deployed more resources to better track and report data on the housing inventory, households, home sales, home prices, and, of course, foreclosures and the number of homeowners who have lost their home to foreclosure?”

(That’s an especially good question given that the U.S. government has a bit of exposure to the housing market. Inside Mortgage Finance reports that mortgages backed by government-related entities – Fannie Mae, Freddie Mac, the FHA and the VA – accounted for more than 96% of home loans originated in the first quarter.)

Whatever the number of homes that banks, the federal agencies and private mortgage investors own now, it’s likely to increase. Barclays expects the inventory generally to rise over the next 20 months, peaking at 536,000 in January 2012, and then decline gradually.

To get a rough sense of how many more households will lose their homes to foreclosures or related actions, Barclays tallies what it calls a “shadow inventory,” consisting of homeowners 90 days or more overdue on mortgage payments or already in the foreclosure process. At the end of February, 4.6 million households were in that category.                                            

Barclays expects 1.6 million “distressed sales” of homes – mainly foreclosures or short sales – both this year and in 2011, then a slight decline to 1.5 million in 2012. Last year, Barclays estimates, such sales totaled 1.5 million. Around 30% of all home sales this year and next will be foreclosure-related, forecasts Robert Tayon, a mortgage analyst at Barclays, who says that would be only about 6% in a normal housing market.

Barclays expects U.S. home prices on average to fall another 3% to 5% over the next couple of years, adding to a decline of about 30% already recorded since 2006. That forecast assumes a gradual improvement in the unemployment rate to 8% within the next two years from 9.7% in March. The home-price picture would worsen if job growth sputters or banks “push homes through the foreclosure pipeline faster than expected,” Mr. Tayon says.

Efforts to avert foreclosures by offering many borrowers lower payments have slowed the flow of homes into bank ownership. In some parts of the country, such as the Las Vegas area and Orange County, Calif., that has left bargain-hunters frustrated by what they see as a shortage of bank-owned properties in attractive neighborhoods.

In the Las Vegas area, foreclosed homes accounted for 56% of sales in March, down from 73% a year earlier, according to MDA DataQuick, a research firm.

This article appeared in the Wall Street Journal on April 28^th, 2010, written by James R. Hagerty

http://blogs.wsj.com/developments/2010/04/28/debate-rages-over-supply-of-foreclosed-homes/

Mortgage markets worsened last week in see-saw trading. By the time Friday's market closed, mortgage rates were higher across the board -- ARMs, fixed rates, FHA and conventional.

The biggest stories of last week were actually non-stories. 

First, the ash cloud from Iceland’s Eyjafjallajökull volcano dissipated, allowing warehouses to move inventory, airlines to move people, and businesses to move product.  In addition, Greece moved closer to securing emergency funding that will help it stave off default.

When these two issues were threats earlier in the month, mortgage bonds rallied on safe haven buying, driving rates down. As the threats lessened over the course of last week, however, mortgage bonds sold off and mortgage rates rose.

By contrast, this week features lots of stories. Economic data will be at the forefront, as will the Federal Reserve which meets for one of its 8 scheduled meetings of the year.

• Monday : Greece is expected to announce an aid package
• Tuesday : Case-Shiller Index reports on home values from February
• Wednesday : Fed adjourns from its 2-day meeting
• Thursday : Initial Unemployment Claims are released
• Friday : GDP and consumer confidence numbers are released

Furthermore, Wall Street will have its eye on the Senate's questioning of key Goldman Sachs employees in the wake of the SEC's fraud charge.

In general, news that's "good" for the U.S. economy will be bad for mortgage rates, and vice verse.  And with mortgage rates changing as quickly as they have been, rates could really rise in a hurry.

The best defense against rising mortgage rates is to execute a rate lock. If you're nervous about rates moving higher, call your loan officer and execute your rate lock today.

More evidence surfaced today that home-loan defaults and foreclosures are receding from historic peaks seen a year ago. However, the pace of defaults and foreclosures remain high, especially in areas where lower-cost homes predominate.

MDA DataQuick reported that lenders filed 81,054 notices of default in California during the first quarter of 2010, down 4.2% from the previous quarter and down 40.2% from the first quarter of 2009.

DataQuick’s analysis shows that the greatest year-over-year declines occurred in areas with cheaper homes, with smaller declines occurred in pricier areas.

“We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods,” DataQuick President John Walsh said.

Notices of default are the first step in the process that can result in the sale of a home in a foreclosure auction.

California foreclosures also declined during the first quarter, DataQuick reported. Homeowners in the state lost 42,857 homes at foreclosure sales. That was down 16.1% from the previous quarter and down 1.7% from the first quarter of 2009. DataQuick’s report showed also:

• Defaults fell nearly 43% from a year earlier in ZIP codes with median home prices of $500,000 and below. But they fell just 19% in ZIP codes above the $500,000 median level.
• Southern California defaults fell 44.4% to 44,581 in the first quarter. They were down by nearly half in the Inland Empire.
• Orange County defaults decreased 37.5% to 5,270 in the first quarter, the smallest percentage drop in Southern California. Foreclosures fell 7.5% in the first quarter to 1,985.
• In the San Francisco Bay Area, defaults fell 30.5% to 13,517 in the first quarter.
• Home loans were least likely to go into default in Marin, San Francisco and San Mateo counties. They were most likely to go into default in Merced, Stanislaus and San Joaquin counties.
• California homeowners getting default notices were behind on house payments by a median rate of 5 months. The median amount left unpaid was $14,066.
• Default rates were below 10% for the state’s most active lenders during the housing boom — Countrywide, World Savings, Washington Mutual, Wells Fargo and Bank of America. Those lenders, nonetheless originated the most loans that ended in default.
• Default rates for subprime lenders exceeded 65%.

There also were signs that lenders were being more accommodating in seeking alternatives to foreclosure, either by modifying loans or by allowing the home to be sold for less than was owed on the mortgage. For example, the foreclosure process averaged 7.5 months in the first quarter, compared to 6.8 months a year earlier, DataQuick reported.

April 20, 2010, by Jeff Collins, O. C. Register

Below is the latest Orange County Market Report from my friend Steven Thomas, the President of Altera Real Estate. Steven’s reports are cited and discussed in most of Southern California’s media, as an authoritative source of local real estate information. I have slightly altered his report to make it a bit easier to read, but the context and content remains true to Steven’s report.

“The Orange County Market Report – This Market is Taxing!

Talk to an Orange County buyer, especially a first time home buyer, and you will quickly find that the real estate market is simply crazy. 

Let’s first establish that there are two different markets - below $1 million, HOT, and above $1 million, COLD. The below $1 million market accounts for 77% of the total active inventory, and 94% of demand. The lower the range, the hotter the market.  Most buyers new to the market have already formed an incorrect idea of the real estate market. They think that the market is plagued with desperate sellers waiting for a buyer to finally write an offer to purchase at a major discount and an incredible “deal” for the buyer. Instead, new, fresh inventory is scarce and buyers find that they are competing for anything half way decent that hits the market. Properties that are priced well and in good condition, garner tremendous attention and procure multiple offers.

Writing a purchase offer at the list price only to lose to three other buyers that brought in offers above the list price is common. Sales prices above list prices are common. First time home buyers losing out on properties to investors with larger down payments is common. The reality is that if a buyer is looking to bargain and negotiate, they are better off attending the local weekend swap meet. Remember, values of homes have already dropped significantly, 35% or more. Some economists have argued that values have dropped below where they should be today, which is often the case in real estate downturns. So, homes are already heavily discounted from where they were a few years ago.

Home affordability has returned to the Orange County real estate market. Interest rates are still at historical lows. Throw in buyer income tax credits and we have all of the ingredients for a major seller’s market. Buyers entering the fray in today’s market get a real quick dose of reality and, if they really want to buy, sharpen their pencils real fast. In the lower ranges and in hotter areas, homes are starting to sell for more than the last comparable sale. The only thing that is keeping values from taking off like they did before is the distressed inventory.

Housing Demand: Demand has not seen these levels since the beginning of August 2005.
Demand, the number of new pending sales over the prior month, increased by 126 homes over the prior two weeks and now totals 3,748, a 3% increase and the height thus far in 2010. Last year’s height in demand was reached in June at 3,652 pending sales. Demand is 195 pending sales stronger than last year at this time and 1,374 stronger than two years ago. It seems as if demand is beginning to hit a plateau, so we will have to watch and see if that trend continues over the coming weeks.

Developing Trends: The active listing inventory has continued to gradually increase after bottoming at the beginning of the year. Over the past two weeks, the inventory has increased by 266 homes to 9,177. We started the year at 7,165 listings and so, have added 2,012 homes to the active inventory thus far. Last year, the inventory continued to drop from mid-March to the New Year. Towards the end of last year, the drop was probably more in line with the cyclical drop in the inventory that starts in September until the end of the year.

Customarily, during the beginning of the year and into the Spring market, more and more homeowners place their homes on the market in anticipation of the strongest time of the year to sell. In the Spring market in 2006 and 2007, homeowners often tested the market and attempted to obtain values above the current fair market value. There were a ton of overpriced listings that remained on the market and which were not successful in selling - EVER.

Instead, they just clogged the inventory and it methodically grew, reaching a height in August 2007 of just shy of 18,000 listings. In 2008 and 2009, homeowners no longer tested the market and the discretionary ( “equity”.) seller disappeared. During the second half of 2009, the Orange County active listing inventory continued to shed homes and not as many new, fresh homes were placed on the market. REALTORS® in the trenches were complaining of a lack of inventory and nothing “fresh” to show their buyers.

We still hear that there is a lack of inventory, but behind the scenes, the active inventory is slowly but surely nudging upward, in every price range. It remains to be seen if the trend in an increase in the active inventory continues. Will the equity homeowner return or will more and more homeowners place their toe in the water, testing the market? We will have to wait and see. There are currently 1,384 fewer homes on the market today than just one year ago and 6,379 fewer than two years ago.

Expected Market Time: The lower the range, the lower the expected market time.
The expected market time for all of Orange County is currently at 2.45 months, a slight drop from 2.46 months two weeks ago. For homes priced below $500,000, the expected market time is 1.63 months, a deep seller’s market. For homes priced between $500,000 and $1 million, the expected market time is 2.84 months, still a seller’s market. For homes priced above $1 million, the expected market time is 9.44 months, the higher the range, the slower the market. For homes priced above $4 million, the expected market time is 38.44 months, or over 3 years.

Distressed Inventory: Again, not much has changed in the distressed inventory.
The number of active distressed homes on the market,  short sales and foreclosures combined, decreased by 33 homes to 2,781 and represent 30.3% of the active inventory. Last year at this time, there were 4,006 distressed homes on the market, representing 37.9% of the active inventory.  The number of foreclosures within the active listing inventory decreased by two homes in the past two weeks from 418 to 416. Yes, that is correct. With all of the talk of foreclosures there are only 416 on the market in all of Orange County. The expected market time for foreclosures is 1.01 months.

Short sales are a different story; there are plenty of short sales in Orange County. Short sales are where a homeowner attempts to sell a home for less than the total outstanding loans against the home, which requires the lender (or lenders in many cases) to approve the short sale, indicating their willingness to take less than the full payoff of a loan. Most short sales are not as  fast as their name would suggest, and, on average, take months to close. The number of short sales within the active listing inventory decreased by 31 and now total 2,365. The expected market time for short sales is 1.61 months, also a HOT seller’s market. Everybody’s looking for a deal, so foreclosures and short sales tend to fly off of the market.

The Most Absurd Tax Credit EVER? 

I am still scratching my head trying to understand why California approved $100 million towards a first time homebuyer tax credit. These are for transactions that close escrow on or after May 1, 2010. The $10,000 credit is spread out over three years. So, when will the $100 million run out? For every buyer, the state is counting $5,700 against the $100 million. That equates to 17,543 first time home buyers. Based upon the current wave of first time home buyer activity, the credit is forecasted to last less than two weeks. And, if there are buyers who are supposed to close at the end of this month – to take advantage of the $8000 Federal Tax Credit - and are looking to delay closing until after May 1st, the credit may end even sooner.”  ( End of Steven’s report.)

Like the former “Cash for Clunkers” program for automobiles, there will likely be a mad scramble for those credits – and a lot of disappointed buyers.

Each week, government-led Freddie Mac publishes a weekly mortgage rate survey based on data from 125 banks across the country.  According to this week's results, the relative rate of a 5-year ARM is extremely low versus its 30-year fixed-rate cousin.

Consider this comparison:

• In April 2009, the two products ran neck-and-neck with respect to rates
• In April 2010, the two products are split by 0.99 percent

On a $200,000 home loan, that's a difference of $117 per month to a mortgage payment.

Adjustable-rate mortgages aren't suitable for everyone, but they can be a terrific fit given your individual circumstance.  For example, any one of the following scenarios could warrant a 5-year ARM:

1. Buying a home with an intent to sell within 5 years
2. Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, homeowners with existing ARMs may want to refinance into a brand-new ARM, if only to extend the initial change date on the current note.

Before opting an ARM or a fixed, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist.  The savings may be tempting, but there's more to consider than just the payment.

Mortgage markets improved last week for the second week in a row.  And, also for the second week in a row, rates were down on "safe haven" buying -- just not for the same safe haven reasons as before.

If you'll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the "less risky" description and as Iceland's volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market's weekly close.

Conforming and FHA rates are as low as they've been since March.

This week, there's not much data due until Thursday, but even Thursday's releases won't make a huge impact on rates.

1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
3. Producer Price Index : A "Cost of Living" index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can -- and do -- change quickly. 

You'll want to time your lock accordingly.

Foreclosure filings rose close to 20 percent nationwide last month versus February, according to foreclosure-tracking firm RealtyTrac.com, and for the 13th straight month, total filings topped 300,000.

In addition, bank repossessions reached an all-time, quarterly record. Through the first three months of 2010, banks reclaimed more than 257,000 homes.

Nonetheless, 4 states dominated foreclosure activity nationwide.

California, Florida, Arizona and Georgia accounted for more than half of all bank repossessions. It's a disproportionate distribution of foreclosures. Together, the 4 states represent just 23 percent of the overall U.S. population.

The RealtyTrac report revealed some other interesting statistics, too.

• Foreclosure activity was up in 40 out of 50 states last month
• Bank repossessions rose 9 percent versus the same quarter last year
• For the 13th straight quarter, Nevada topped the state foreclosure rate

Regardless of where you're buying, short sales, foreclosures, and REO are making a profound impact on pricing and product. Distressed homes are 35 percent of the overall resale market.

There's excellent value in foreclosures out there if you know where to look, but keep these points in mind:

1. Buying short sales homes can take 120 days to close or more. Be flexible.
2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
3. Bank-owned homes are frequently sold "as is". There may be defects that render the homes mortgage-ineligible.

The short sale/REO market is very different from the traditional "existing home" market.  Therefore, if you have an interest in buying such a property, be sure to talk with an experienced real estate agent first.  I have been selling properties like these for over 33 years, and would be honored to share my expertise with you.  Give me a call or shoot me an email - and let's talk about real estate!

Not all home improvements are created equal. Especially if you're looking for "resale value" back from your work.

An article from the Wall Street Journal lays it out cleanly. Function beats flash these days so be wary of where you spend.

Environmental upgrades such as home insulation and energy-efficient steel entry doors are recovering a much greater percentage of their cost these days than major remodels including kitchens or bathrooms.  This is especially true for homes that are already "over-improved" relative to the neighborhood.

Upgrading the biggest and best homes on the block can be a losing proposition.

The article's findings include data from groups such as the National Association of Home Builders, Remodeling Magazine, and Consumer Reports.  It lists the following home improvements among its top "paybacks":

• Steel entry door replacement : 129% cost recovery
• Wood deck addition : 81% cost recovery
• Vinyl-replacement window : 77% cost recovery

Energy-efficiency projects also recoup costs monthly in the form of lower heating and cooling bills.

Remodeling Magazine says a larger number of homeowners will remodel their homes in 2010 with less emphasis on upgrading kitchens and bathrooms, and more emphasis on adding new rooms.  From an appraisal perspective, this is a terrific way to increase your home's value -- especially if your home's bed/bath count lags your neighbors.

Before starting a home improvement project, regardless of whether your goal is increase resale value, talk with a real estate agent about other homes in the area and how they're built. At worst, you'll gather some ideas you can work into your plan. At best, you'll keep yourself from over-improving.

Mortgage markets improved last week to the delight of rate shoppers.

Against a sparse economic calendar, Wall Street turned its attention to geopolitics in Greece and the Eurozone.  It didn't like what it saw. Safe haven buying buoyed mortgage bond markets last week as pricing recaptured two-thirds of its monumental losses from the week prior.

Despite last week's surge, however, conforming and FHA mortgage rates remain near their worst levels of the year and appear poised to increase throughout the summer months.

The U.S. economy is improving. From last week:

• Pending Home Sales posted a strong monthly improvement
• Wholesale Trade data pointed to higher consumer spending ahead
• Inflationary threats on the economy are receding, according to the Fed

Furthermore, continuing jobless claims were down again.

Good news for the economy is generally bad news for mortgage rates. Last week, that wasn't the case because of Wall Street's want for "safe" assets right now.  This includes mortgage bonds and is helping to keep consumer rates low. When the safe haven buying eases, rates should climb.

Meanwhile, this week, the calendar is back-heavy. 

There's no real data until Wednesday's Consumer Price Index, and then there's a flurry of new releases through Friday's market close including Retail Sales, Consumer Confidence and Housing Starts. 

Strength in these issues should push mortgage rates back up.

If you're floating or shopping a loan right now, be wary of market volatility. Rates have been jumpy since April 1 and mortgage rates are changing quickly. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.

As the federal home buyer tax credit nears its April 30 end-date, there's a lot of would-be home buyers still working to get under contract.

A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender "re-pre-approve" you.  Mortgage guidelines have been in flux and your original lender letter may now be invalid.

For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:

• Maximum debt-to-income ratios
• Minimum allowable credit scores
• Calculation of "assets in reserve"

For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.

Today's mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today's buyers should revisit their qualifications. What passed underwriting in January may not pass in May.

Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it'll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home's already under contract.

Talk to your agent and your loan officer about your pre-qualification/pre-approval letter before you bid on a home.

Taxes are due April 15 and if you're among the millions of Americans who wait until the last week to file, below is a linked video interview that could help you reduce your federal tax liability. 

Originally broadcast by NBC's The Today Show, the 4-minute piece reviews various tax credits and deductions, plus some recent tax law changes.  A few of the topics covered include:

• Tax filers receiving larger "personal exemptions" in 2009 versus 2008
• Unemployment income recipients being required pay taxes beyond the first $2,400 received
• The "first time" home buyer credit being extended to non-first time home buyers for up to $6,500

The interview also talks about how taking a parent, child or other family member into your home may change your tax filing status and reduce your tax liability.

Even if you've filed your taxes already, watch the video above. You may find that you missed a potential deduction. If that's the case, consider filing an amended return with the IRS to recapture the credits you left on the table.  Most times, the benefits of re-filing will outweigh the costs of doing it.

Be sure to talk with your tax professional for personal tax advice.

Mortgage markets improved yesterday after the Federal Reserve released its March 16, 2010 meeting minutes. It's good news for home buyers and rate shoppers -- rates could have just as easily gone the other way.

The Fed Minutes is a detailed recap of the debate and discussion that shapes the nation's monetary policy. The notes are dense; it takes 3 weeks to compile them for publication.

As compared to the more well-known, post-meeting press release, the Fed Minutes are extremely lengthy. For example:

• March 16 press release : 451 words
• March 16 meeting minutes : 6,152 words

If the press release is the executive summary, the Fed Minutes are the novel.

The extra words matter.The minutes recount what the Fed did, how the Fed did it, and what the Fed plans to do next. And, in the minutes, Wall Street looks for clues. 

This is why the report is important to every rate shopper in the country.

When the Federal Reserve publishes the minutes from its meetings, it leave clues about the groups next policy-making steps.  For example, in March's Fed Minutes, it's clear that the Fed's concern about inflation is hugely diminished and that's a major plus for the mortgage bond market.

Inflation causes mortgage rates to rise. The absence of inflation, therefore, helps them to fall.  This improves home affordability, among other things.

Similarly, the Fed Minutes note that real estate sales may have been worse throughout the winter months if not for low mortgage rates and the sense among Americans that home prices were troughing. We may infer, therefore, that rising rates may suppress home sales later this year.

Markets are always looking for clues from inside the Fed and the last meeting's minute signal that the economy is on its way up.  If you're looking for a bargain in the housing market, your window to act may be closing.

As expected, the Pending Home Sales shot higher in February, boosted by the federal home buyer tax credit's April 30 deadline.

Versus the month prior, February's index rose 8 percent but remains well off the highs set last October.

For today's home buyers and seller, the Pending Home Sales Index is an important measurement. This is because a "pending home" is a property that is under contract to sell, but not yet closed.

According to the National Association of Realtors®, 80% of homes under contract close within 60 days, historically. Therefore, a higher Pending Sales figure in February projects that April's Existing Home Sales will be higher, too.

If you're a home buyer today, no doubt you've noticed the extra market activity.

On right-priced homes, multiple offer situations are more common; sales prices are settling closer to listing price; Days on market is falling. These are the signs of a buyer-heavy market.  It drives home supplies down and home prices up.

It's a good time to be a seller, in other words.  Especially as buyer activity looks poised to peak.

When the home buyer credit faced its last expiration in November 2009, we saw a pattern of buyers rushing to beat the deadline.  There's no reason to expect that won't happen again. And as it does, Pending Home Sales should continue to climb. Average home sale prices should rise.

Home buyers may find it smart to go under contract sooner rather than later. Pending Home Sales is a warning shot.  Higher home sales figures are ahead.

Mortgage markets performed terribly last week as losses piled up day by day.  It marked the second straight week of sell-offs.

Pricing was influenced on several fronts including better-than-expected economic data, the end of the Federal Reserve's mortgage buyback program, and a short trading week.

Mortgage rates rose to their highest levels since late-December last week.

The data from the most anticipated story from last week -- the jobs report -- included a few good-for-the-economy surprises.

1. Although payrolls fell 22,000 short of expectations in March, they were boosted by +62,000 in net revisions from January and February
2. "Temporary Employment" -- a leading jobs indicator -- is up 313,000 in the last 6 months
3. The average work-week and factory overtime both rose in March -- a sign that hiring should increase soon

In general, what's good for the economy is bad for mortgage rates and that's one reason why rates spiked Friday. Employment is a keystone in the economic recovery and mortgage markets reacted accordingly.

This week is short on data but there's a lot to move the markets.

For one, the Federal Reserve has called an emergency meeting to review its Discount Rate policy.  The meeting is called for today, Monday April 5, at 11:30 AM ET.  It's unknown exactly what the meeting will cover, but if new monetary policy is made, expect that mortgage rates will be influenced.

Also worth watching this week are the technical trading patterns present in the mortgage-backed bond market.

Unlike fundamental trading in which markets move on data and projections, technical trading is how markets move based on patterns over time. The two methods co-exist on Wall Street but, occasionally, technical forces can be pronounced, leading markets to lurch up or down.  This week may be one of those times. 

Mortgage pricing is far below its 200-day moving average, resting slightly north of a key support level. If pricing worsens this week and bonds fall below the support level, mortgage rates could easily tack on quarter-percents or more per day until the market refinds its balance.

Overall, it's a week you don't want your rate to be floating. Sure, rates could improve, but there's a lot more room for them to worsen.

In its 12-month home price forecast issued Wednesday, Veros Real Estate Solutions said it had “continued bad news for Florida.” Markets in the Sunshine State claimed the top five spots on the collateral valuation company’s list of areas where prices are expected to drop the most over the next year.

The Deltona-Daytona Beach-Ormond Beach market has the farthest to fall when it comes to price depreciation. There, Veros projects prices will plunge another 10 percent between now and March 2011.

In Palm Bay-Melbourne-Titusville, the forecast is a decline of 8.9 percent. Naples-Marco Island will likely see prices drop another 8.8 percent, Veros says. The company expects Orlando-Kissimmee to suffer price depreciations of 8.7 percent over the next year. And Port St. Lucie-Fort Pierce is projected to see a decline of 8.6 percent.

Eric Fox, Veros’ VP of statistical and economic modeling, said, “Florida remains ground zero for the weakest home price forecasts in the U.S. although extreme declines of 20 or 25 percent are no longer expected since strong price corrections have already occurred.”

One of the other big bust states – California – shows more promise, according to Veros’ analysis. The Golden State is home to three of the five markets the company expects to post the strongest price gains over the next 12 months.

Veros projects home prices in the San Diego-Carlsbad-San Marcos market to increase by 3.4 percent between now and March 2011. In Los Angeles-Long Beach-Santa Ana, the company forecasts a rise of 3.1 percent, and San Francisco-Oakland-Fremont is expected to see price gains of 3.0 percent.

“More of California’s coastal areas are showing modest signs of appreciation,” Fox said, noting that Los Angeles and San Francisco were not among the top five for price gains in the company’s study last quarter, but have edged their way up the ranks over the past three months.

Two Texas metro areas also made the “strongest markets” list, with prices in Houston-Sugarland-Baytown expected to see gains of 3.0 percent over the next year, and prices in Amarillo forecast to increase 2.7 percent.

“The Great Plains region including Texas remains steady,” Fox said.

Addressing the overall picture, Fox added, “Although there are no overwhelmingly strong appreciating forecasts among the larger metropolitan areas, the depreciating forecasts are noticeably milder than a year ago.”

Veros says it anticipates “gradual improvement” of property value trends in key markets over the next 12 months.

The company’s predictions are based on its analysis of more than 900 counties, nearly 300 metro areas, and almost 14,000 zip codes, encompassing such critical factors as interest, unemployment, and inflation rates; housing inventory levels; and economic and geographic trends.

From DSNews.com,  April 1, 2010,  by Carrie Bay

Note from Bob Phillips: Meanwhile, in Orange County, California, the median price has climbed by more than 10% over the past 14 months. With currently low inventory of available houses, continued historically low interest rates, an $8,000 Federal tax credit still available, AND a new $10,000 California tax credit, there is NO reason to expect that 2010 won’t be just like 2009.  This is probably the most affordable houses in Orange County, California have been in the past decade.

HOPE NOW announced Wednesday that its members completed an estimated 95,586 proprietary loan modifications in February 2010, which is almost double the 52,905 modifications completed under the government’s Home Affordable Modification Program (HAMP) during the same month.

Of the proprietary loan modifications completed in February, approximately 78 percent included a reduction of principal and interest payments. HOPE NOW’s data also showed that foreclosure starts and sales dropped 17 percent for the month, along with a 4 percent decrease in the number of 60-plus day delinquencies.

“Our data shows that mortgage servicers are continuing a strong effort on proprietary and HAMP modifications in the first two months of 2010,” said Faith Schwartz, executive director of HOPE NOW, the private sector alliance of mortgage servicers, investors, mortgage insurers and nonprofit counselors

However, with almost 4 million loans currently in default, Schwartz said HOPE NOW realizes that its work is not yet done. She said mortgage servicers and housing counselors have worked extremely hard through aggressive borrower outreach, and HOPE NOW remains determined to keep as many families as possible in their homes.

Meanwhile, doom & gloom bloggers continue to dismiss these significant facts, continuing to promote their fabrications that the Administration’s programs are a dismal failure – an absolute distortion of the reality that things are steadily getting better.

There's just 30 days remaining to use the federal home buyer tax credit.

The credit ranges up to $8,000 for first-time homebuyers, and up to $6,500 for existing homeworkers who have lived in their main home for 5 of the last 8 years.

Claiming the federal tax credit is a two-step process. First, you must be under contract for a new home on or before April 30, 2010.  Then, you must close on said home on or before June 30, 2010. 

There are no exceptions on the dates.

Timeline aside, homebuyers and the subject property must also meet minimum requirements in order to be tax credit-eligible:

• You can't purchase the home from a parent, spouse, or child
• You can't purchase the home from an entity in which the seller is a majority owner
• You can't acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements
• The home sale price may not exceed $800,000
• Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete eligibility checklist is published on the IRS website.  Or, if you find IRS-speak too difficult, make a phone call to your accountant.  Asking a tax professional's advice on a tax-related matter is never a time-waster.

And lastly, don't forget that if you're claiming to federal tax credit for home buyers, it's a tax credit and not a deduction.  This means that a tax filer who qualifies for the full $8,000 and for whom the "normal" federal tax liability is $8,000, will owe no federal taxes in 2010 to the IRS.

If you're an active buyer , mark your calendar for April 30, 2010. It's 30 days from now and, as the date gets closer, buyer traffic will increase. The likely result is higher home prices and more difficult negotiations.  The best time to act may be today.

Of course here in California we have an even better reason to act soon, as the Governor recently signed a bill giving the state's homebuyers up to an additional $10,000 tax credit. For escrows that close between May 1st and June 30th, buyers MAY be eligible for up to $18,000 in total credits between the Federal and State's programs. That is a BIG incentive to get off the fence!