Freddie Mac Issues Monthly Volume Summary For June 2012

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Is Your Home Really Worth More than it was Last Year?

Is your home really worth more today than it was last year at this time? Do you believe all of the hype you read in the papers? The answer is probably yes it is worth more, but how much and will the statistics continue to improve?

After four years of decreases, it is uplifting to watch a gradual increase. Economists take the numbers and plot them out in the same directions with the hope of seeing better conditions. Are they correct?

The most important thing to remember is that home prices fell anywhere from 25-35 percent or more since the beginning of this latest economic downturn according to the Price Shiller home price index. Only recently have indicators and statistics shown a rise in values.

The big question in real estate today is which direction home values are headed. There is no shortage of opinions on the subject. National Association of Realtors Chief Economist Lawrence Yun, during the National Association of Real Estate Editors conference in Denver a few weeks ago, said:

“This time next year, there could be a 10 percent price appreciation. I would not be surprised to see that.” So, should the seller wait to list in anticipation of commanding a higher home sale?

Not if one believes Morgan Stanley, in their latest housing report which estimated a “drop of 5-10 percent more”.

With home values rising even as little as 1 percent, homeowners that are only slightly underwater are profiting the most. The jump has been enough to move many homeowners back into positive territory and thus qualifying them for refinancing opportunities. Low inventory that is spiking the number of multiple offers is helping more than just homeowners that want to sell.

Corelogic reported a decrease of home owners with mortgages that were considered underwater on their mortgage from 25.2 percent, or 12.1 million home owners to 23.7 percent — or 11.4 million, Some of the decrease must be contributed to investors flocking to foreclosure auctions. Over 160 properties are considered for auction on a typical Friday morning at the Bellevue auction site.

“While the overall stagnating economic recovery will likely slow the housing market recovery in the second half of this year, reducing the number of underwater households is an important step toward reducing future mortgage default risk,” said Mark Fleming, CoreLogic’s chief economist.

No one can dispute the fact that jobs, housing and the economy are inter-related. With the national unemployment rate hovering at 8.2 percent and statistics in the Seattle area in the 7’s, we are a long way from experiencing an end to our economic woes.

Analysts polled by Briefing.com, expect annualized growth of 1.2 percent for the quarter, down from 1.9 percent growth in the first quarter. This is the wrong direction.

Only 40 percent of companies reported sales above estimates with many companies adjusting projections of third quarter earnings downward. That’s the lowest percentage since 2009, according to research firm FactSet.

Only when employers, from both large and small companies, feel secure in the requirements imposed by the government and begin hiring additional employees will we truly see stability in the housing market.

About this column: Joan Probala is the managing broker for Issaquah Windermere (Windermere Real Estate/East Inc.). She has 30 years of experience in real estate, construction and sales. She is president-elect (2012) of the Seattle King County Association of Realtors.
 

Fewer contracts to buy previously occupied homes signed in June

Last Updated:
10:40 AM, July 26, 2012

Posted:
10:40 AM, July 26, 2012



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WASHINGTON — Americans signed fewer contracts to buy previously occupied homes last month, the latest sign the housing market recovery is uneven.

The National Association of Realtors says its index of sales agreements fell 1.4 percent last month to 99.3. May’s reading was revised down to 100.7.

A reading of 100 is considered healthy. The index is 9.5 percent higher than it was a year ago. The index bottomed at 75.88 in June 2010 after a homebuyers’ tax credit expired.

Contract signings typically indicate where the housing market is headed. There’s generally a one- to two-month lag between a signed contract and a completed deal.

China’s Gift to U.S. Homeowners

They are increasingly rich, hungry for the good things this country has to offer, buying high-end homes, and don’t mind paying huge amounts of cash upfront to get them without going into debt. If you don’t think this reads like a typical American story today, you’re right—these new homeowners are Chinese living in the U.S.

For a housing market just starting its recovery, foreign investment in U.S. residential real estate has been a bright spot, and there’s no sign of the trend letting up. According to data released last month by the National Association of Realtors, non-U.S. buyers accounted for $82.5 billion in residential property sales in the 12 months ended March 2012. Chinese purchasers made up 11 percent of this total, while Canadians continued to represent the largest swath at 24 percent. Perhaps even more striking is the fact that 27 percent of Realtors surveyed by the NAR reported working with international clients in the last year. Along with China and Canada, buyers from countries including Mexico, India, and the U.K. combined to make up 55 percent of purchases from abroad—mainly concentrated in Florida, Texas, Arizona, California, and New York. The fastest growth in recent years is among Chinese buyers.

The global interest is driven by several different factors, yet for the Chinese in particular, the chance to get their children into top universities is probably the largest motivation. To Chinese parents, the opportunity provides proof that their years of effort have paid off. “The Chinese work very hard—it’s part of their culture,” says Cathy Zhao, a real estate broker in Maryland who has served many wealthy Chinese clients. “For them, the most important thing is education, and with prices being very low as they are, they see a chance to get near a good school.” And once here, most international buyers want to stay, Zhao adds, because their chance of a better-paying job is still better in the U.S. than back home.

The chance to earn a prestigious degree is not the only reason Chinese buyers find the U.S. market increasingly appealing. “There is an increasing number of wealthy Chinese who are buying in the U.S. to diversify their portfolio,” says NAR economist Jed Smith, who helped compile the annual survey. “Even with the rally in recent months, homes here still look very good from an investment point of view.”

Unlike Japanese corporations in the 1980s, which bought at the top of the market in their quest for big-name commercial properties, the Chinese are more interested in good deals. With residential real estate prices still almost a third less than they were at their peak in 2007, it’s a strategy that may well pay off if job growth returns and triggers a rally in the housing market, according to Smith.

Last year the average price of a foreign-purchased U.S. home was more than $400,000, which is double the national average—so the search for good value might only extend so far. That high figure becomes even more impressive when one considers that buyers from abroad often lack credit scores and access to mortgages, and frequently opt to pay the whole price upfront. “[S]ales transactions can often be completed quickly as many Chinese purchasers prefer all-cash deals,” Pamela Liebman, president and chief executive officer of the Corcoran Group, a New York real estate firm, writes in an e-mail. Liebman also says that her company has serviced more Chinese clients this year than at any time in the past, and that their interest is not just in residential real estate but in commercial property as well. Sixty-two percent of purchases by foreign buyers last year were in cash, according to the NAR. Zhao says many of the deals are for very large homes, capable of supporting several generations under one roof, which is a preference for affluent families.

Foreign buyers still make up a small part of all U.S. sales, accounting for just 4.8 percent of the total dollar amount in the last year. While in relative terms this represents an increase, the numbers will probably not spur a nationwide real estate recovery.

“In a market the size of New York, it would take a substantial influx of any one buyer group to significantly affect market prices,” writes Liebman of Corcoran. “The number of Chinese purchasers of New York real estate has not reached the critical mass it would require to impact prices.” It’s a point echoed by Smith of the NAR. “The only thing that will really get the market back to where it was is jobs. Really it’s all about jobs in the end,” he says.

That may be true, but the pattern of recent years might allow Americans to take some solace in the fact that their country is still top of the list when it comes to places where individuals from around the world want to live and learn.

Fannie Mae Cuts 2012 GDP Growth Forecast


Fannie Mae has cut its U.S. gross domestic product growth projection for the year, citing an uncertain job market and weak consumer spending.

The mortgage-finance company said GDP growth would be 2%, down from its earlier estimate of 2.2%. “The data from the past month collectively point to decelerating economic growth, but growth nonetheless,” Chief Economist Doug Duncan said. He noted, however, that housing continues to be a bright spot, presenting a “rare upside boost” to the economy.

Compared with the same period last year, home sales increased by 9% and single-family housing starts were 20% higher, though the company said levels are still considered below healthy norms.

Residential investment is expected to increase this year but from a very low base, and is expected to contribute to economic growth for the first time since 2005.

According to Fannie Mae’s June 2012 National Housing Survey, homeowners are showing greater confidence in one-year-ahead home price expectations, and their broad attitudes regarding the housing market continue to improve. The share of polled consumers who say they would buy a home if they were going to move increased to the highest level seen in the survey’s two-year history, partly due to low interest rates and the assumption that home prices have hit bottom.

Michigan Congressman Calls For Fannie Mae Eviction Moratorium

Rep. Hansen Clarke, D-Mich., has called on Fannie Mae to implement a 90-day moratorium on homeowner evictions.

In a letter to Fannie Mae President and CEO Timothy Mayopoulos and Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco, Clarke urged that the government-sponsored enterprise adopt a case-by-case policy of reviewing whether homeowners can remain in their homes if they are able to continue making “reasonable payments” or are able to purchase the property at a fair market rate.

“My office has heard numerous reports of Fannie Mae refusing to sell homes in foreclosure to the families who have lived in them for years, sometimes decades, despite reasonable offers from those families or outside nonprofits working with the homeowners,” Clarke wrote. “Instead, Fannie Mae evicts these families and allows their homes to become vacant. Once homes are vacant, they are often stripped of valuable materials and deteriorate into blighted structures that require demolition. This process has devastated many metro Detroit neighborhoods, increasing crime, lowering home values, and decreasing the local tax base, which funds services for all city residents.”

Clarke, who noted that Fannie Mae does not have an office in Detroit, invited the Fannie Mae and FHFA leaders to meet with Detroit-area homeowners and community groups to discuss the situation at greater length.

Freddie Mac Announces The Issuance Of A New Seven-year Reference Notes …

/PRNewswire/ — Freddie Mac (OTC: FMCC) announced today that it plans to issue a new seven-year USD Reference Notes® security, CUSIP number 3137EADK2, due on August 1, 2019.  The issue will be priced on Friday, July 27, 2012, and will settle on Monday, July 30, 2012, at benchmark size.

The new seven-year Reference Notes security will be offered via a syndicate of dealers headed by Citigroup Global Markets, Barclays Capital and J.P. Morgan Chase.  An application will be made to list the issue on the Euro MTF market of the Luxembourg Stock Exchange.

This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (“SEC”) on March 9, 2012; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (‘Exchange Act”) since December 31, 2011, excluding any information “furnished” to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information “furnished” to the SEC on Form 8-K.

Freddie Mac’s press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2011, and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s Web site at www.sec.gov.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four homebuyers and is one of the largest sources of financing for multifamily housing. www.FreddieMac.com.

SOURCE Freddie Mac

Scrutiny grows on Newt Gingrich after SEC sues former Freddie Mac, Fannie Mae execs

WASHINGTON — Just two weeks before the crucial presidential Iowa caucuses, Newt Gingrich, the Republican presidential front-runner, found himself again mired by questions about his ties to Freddie Mac and Fannie Mae after federal regulators sued six former executives of the two beleaguered lending giants over charges of securities fraud.

The charges came the morning after rivals hammered the former House speaker for his ties to Freddie Mac, the federally backed loan company that, along with Fannie Mae, some conservatives have been blamed for deepening the country’s housing bust.

Gingrich has insisted that he was never a lobbyist for the company, but merely offered his guidance as a consultant and “historian.�

Today’s Securities and Exchange Commission announcement injects another potential talking point in what is already a politically charged discussion in the GOP presidential contest over the government’s housing loan programs.

During Thursday’s debate in Iowa, Representative Michelle Bachmann took issue: “The speaker had his hand out and he was taking $1.6 million to influence senior Republicans to keep the scam going. … We cannot have as our nominee someone who continues to stand with Freddie Mac and Fannie Mae,â€� she said. Bachmann accused Gingrich of influence peddling.

Not true, Gingrich shot back. “I never lobbied under any circumstance.�

While not a registered lobbyist, Gingrich has come under attack for his contracts, extending from 1999 to 2007, with the Federal Home Loan Mortgage Corporation, more widely known as Freddie Mac.

The charges against the former executives further draw attention to Gingrich’s ties to institutions so reviled by conservatives, said Tim Hagle, an associate professor of political science at the University of Iowa.

“You have to imagine that it will be a part of his rivals’ talking points, and for them this will be additional ammunition,� Hagle said.

Former Massachusetts Governor Mitt Romney has called on Gingrich to give the money back.

A Gingrich spokesman did not respond to requests for an interview.

Representative Barney Frank, who has tussled with Gingrich over the country’s dysfunctional housing program, declined to leap into the fray. The Newton Democrat and ranking member of the House Financial Services Committee said yesterday that he “had no basisâ€� to do so — despite incendiary remarks earlier this year by Gingrich that Frank and others should be jailed for their roles in the housing crisis.

Since resigning from Congress in 1999, Gingrich has written books and built a consulting business that has received about $55 million in client fees, including from Freddie Mac.

Bobby Caina Calvan can be reached at bobby.calvan@globe.com. Follow him on twitter @GlobeCalvan.

Fannie Mae, Freddie Mac Getting Receivership Contingency Plan

The U.S. regulator overseeing Fannie
Mae
, Freddie Mac and the Federal Home Loan Banks has hired a
consulting firm to create contingency plans for taking the
mortgage-finance firms into receivership, according to contract
documents.

The plan is part of “ordinary regulatory activities” and
does not indicate that the Federal Housing Finance Agency intends
to take the companies or the banks into receivership, agency
spokeswoman Denise Dunckel said. Receivership would involve
winding down the companies and selling off their assets.

“This planning activity is routine and does not indicate
any condition of the current status of the regulated entities,”
Dunckel said.

Fannie Mae and Freddie Mac (FMCC) have been operating under U.S.
conservatorship since September 2008, when investments in risky
loans pushed them to the brink of insolvency. Under
conservatorship, as opposed to receivership, the two taxpayer-
owned companies continue to operate while having drawn almost
$190 billion in aid from the U.S. Treasury.

The FHFA in May signed a contract with New York-based
PricewaterhouseCoopers LLP to “recommend guidelines, procedures
and other protocols the FHFA should have in place prior to
placing any regulated entity into receivership,” according to
the document.

The document said PricewaterhouseCoopers will “develop a
framework for the FHFA to use in building the capacity” to
liquidate Fannie Mae, Freddie Mac, or any of the 12 regional
U.S. Home Loan Banks.

Uncertain Future

The fate of Fannie Mae and Freddie Mac is in limbo. Private
financing for mortgages evaporated in the aftermath of the 2008
financial crisis, and the two companies now own or guarantee
about 60 percent of residential mortgages. President Barack
Obama
’s administration and members of Congress called for
shrinking the government role in the housing market, but have
not taken action.

Edward J. DeMarco, acting director of the FHFA, has said
the agency will do what it can to prepare for the future of the
government-sponsored enterprises in the absence of a plan from
Congress and the White House to wind them down or otherwise
reorganize them. The FHFA is working on plans to build a single
platform for securitizing home loans and to set standards for
how those loans are managed.

The FHFA released the PricewaterhouseCoopers contract to
Vern McKinley, a financial consultant working with the
Washington-based legal organization Judicial Watch, in response
to a Freedom of Information Act request.

“Conservatorship is kind of this limbo they’ve been in
since 2008 and receivership would be more aggressive toward
liquidating Fannie and Freddie and putting them out of
business,” said McKinley, who has filed other FOIA requests
with the FHFA seeking to find out why Fannie Mae (FNMA) and Freddie Mac
weren’t dissolved in 2008. “They’ve never taken any steps in
that direction.”

Staff from the FHFA and PricewaterhouseCoopers have met
since May with staff from Fannie Mae and Freddie Mac to discuss
the receivership plans, the documents show.

PricewaterhouseCoopers will deliver the receivership plans
by Oct. 1 and will be paid $757,000, the contract says.

To contact the reporters on this story:
Meera Louis in Washington at
mlouis1@bloomberg.net
Clea Benson in Washington at
cbenson20@bloomberg.net;

To contact the editor responsible for this story:
Maura Reynolds at
mreynolds34@bloomberg.net

Declining inventories signal return of seller’s market

Though many home shoppers who assume they are still in a buyer’s market find it hard to believe, one of the sobering fundamentals shaping real estate this summer is shrinking inventory: The supply of houses for sale is down significantly in most areas compared with a year ago, sometimes dramatically so. And that is having important side impacts — raising prices and homeowners’ equity stakes, and reducing total sales.

In major metropolitan markets from the mid-Atlantic to the West Coast, the stock of homes listed for purchase is down by sometimes extraordinary amounts — 50 percent or more below year-ago levels in several areas of California, according to industry studies. In Washington, D.C., and its nearby suburbs, listings are down by 28 percent, reports Redfin, a national online realty brokerage. In Los Angeles, available inventory is 49 percent lower than it was last summer, San Diego by 53 percent. In Seattle, listings are off by 41 percent. According to the National Association of Realtors, total houses listed for sale across the country in June were 24 percent lower than a year earlier. The dearth of listings is often more intense in the lower- to mid-price ranges.

Peggy James, an agent with Erick Co. of Exit Choice Realty in Prince William County, Va., says she gets calls “all the time” from buyers asking, “Where are all the new listings? Are you agents bluffing” — holding back? But the reality is that “there just haven’t been many” listings in some high-demand price categories lately, she said. In Orange, Calif., Carlos Herrera, broker-owner of Casa Blanca Realtors, said “it’s really strange right now. We have many buyers but few sellers.”

Just south of San Francisco, Redfin agent Brad Le says inventory in Silicon Valley is down so drastically — and demand so strong — that the bidding wars are spinning off the charts. “We’re not just talking about 10 or 15” offers, he said, “but sometimes 40 and 50.” Some buyers are inserting escalation clauses into their contracts to keep pace with counter-bids, and waiving financing contingencies, inspections and even agreeing to increase their down payments to counter any differences between the accepted sale price and the appraised value. One modest, 1,700-square-foot house recently was listed at $879,000. It drew more than 50 competing offers and sold to an all-cash buyer for $1,050,000 in less than a month.

Silicon Valley is in its own special economic niche, but declining inventories are nationwide. In its latest survey of 146 large markets, Realtor.com found that 144 had lower supplies of listings last month than a year earlier. Online real estate and mortgage data firm Zillow reports that some of the steepest declines in inventory are in places that got hit the hardest during the bust, and where sizable percentages of owners still are underwater on their mortgages. In Phoenix and Miami, for example, 55 percent and 46 percent of owners respectively have negative equity.

Both cities have seen significant drops in inventory, and both are experiencing strong appreciation in home prices. According to data from research firm CoreLogic, Phoenix prices are up 14.7 percent for the year and Miami by 9.7 percent.

What’s behind the widespread declines in listings? Analysts say negative equity plays a major role — it discourages people who might otherwise want to sell from doing so. They don’t want to take a big loss, especially in a slowly improving price environment. So they sit tight rather than list. Banks with large stocks of pre-foreclosure and foreclosed properties are doing the same, creating a so-called “shadow inventory” of houses estimated to total 1.5 million units.

Where’s this all headed? Stan Humphries, chief economist for Zillow, says the likely trend is for more of the same: Constricted supplies will lead to price increases, especially in segments of local markets where demand is strongest. Longer term, price increases will gradually rewind the cycle, increasing owners’ equities and convincing more of them to list and sell. This, in turn, should put a brake on price increases.

Bottom line for anyone looking to list or purchase anytime soon: Though conditions vary by location and price segment, lower supplies of houses available for sale are putting sellers in stronger positions than they’ve been in years.