JPMorgan warns home prices face another 5% decline

This could be bad for the FHA program, which is supporting 30% of the home purchases.  If home prices drop, then the FHA insurance fund will run out of money and program will need a federal bailout.  Potentially, 30% of the homebuyers will need another avenue for financing.

JPMorgan Securities concluded that if existing home sales fail to reach the 5.5 million level next year, the nation could be looking at another 5% decline in home prices in 2012. Overall, by the end of 2011, home prices will have dropped 3% this year and are expected to fall another 1.6% in 2012.

While the report is not overly optimistic, it does take note of several positive developments, including higher demand in November, increased consumer confidence and an uptick in job gains during the month.

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BofA developing foreclosure rental programs to deal with distressed properties

But private banks own $50.4 billion worth of REO properties, too, according to the Federal Deposit Insurance Corp., and millions of these homes are sitting vacant.

Sturzenegger described how their idea would work.

"We and Fannie Mae are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease. We would go to the customer and say, 'We'll do a short sale. Will you be interested in leasing your property back? We're still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on,'" he said.

I don't think it will be that easy.  A bank is not going on the top of the tenant like a real landlord.  In addition, if the tenant cause $20,000 damage to the place and value of the home continues to decrease isn't the bank losing even more money. 1) If the sell the home in 3 years, but it's not worth as much and tenants have done damage. 2) The can sell the non performing asset and invest the money in a performing asset that's collecting a good return.  However, if the Fed has given the banks $7.7 trillion in shadow loans in the last 3 years, so there isn't really need by the bank to find performing assets, they had cheap loans with the Federal Reserve .

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Jobs, Housing Costs Forcing Millions To Flee California; Most In 100 Years

It's only one line, but I think the impact can be felt.

Housing costs are another factor cited by economists.

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FHA is on the brink: Olick

An annual independent actuarial report puts the FHA's loan loss reserves at .24% of its $1.1 trillion dollars in insured mortgages.

The FHA, which does not originate loans, but insures them, has gone from less than 5 percent market share at the height of the housing boom to now more than 30 percent. The auditor measures the FHA's reserve by estimating future losses, and those estimates continue to grow as home prices fall and mortgage delinquencies still run very high.

The FHA's estimated reserves stand at $2.6 billion as of September 30th, according to the report, down 45 percent from $4.7 billion last year. Congress mandates that the FHA's reserves must be at least 2 percent of its total insurance in force, but it hasn't been at that level for a few years now. Auditors estimate it will not be back above that level until 2014, and that would be based on the current book of business.

And FHA is predicting increase in home values in 2012?!?.

Still, if home prices continue to fall, the FHA could need government support in the form of a bailout.

So, only hope is home values increasing.  What is the chance of that?

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Nearly 29% of mortgaged homes underwater, report finds

Were are slowly getting closer to 1 out of every 3 homes with a mortgage.

The rising percentage of homes with "negative equity" or "underwater" status is due largely to how long the foreclosure sale process takes rather than home value fluctuations, said Zillow chief economist Stan Humphries. Prior to the "robo-signing" scandal around foreclosures that came to light in 2010, the negative equity rate hovered in the 21 to 23 percent range, but has been in the 26 to 28 range since due to added delays in foreclosure sales. While the rate of foreclosures is dropping, the time required for foreclosures to sell has lengthened.

"We're in uncharted waters," Humphries said in an interview. "More than one in four homes underwater and about 9 percent unemployment is a recipe for more foreclosures."

And look at this.

The survey, by Columbus, Ohio-based Home Value Insurance Co., found that one-third of respondents thought buying a home was a risky investment and 18 percent said they were "not sure" they'd advise a younger person to buy one. About 85 percent said they consider now a bad time to sell but a good time to buy, while 23 percent of owners said they were likely to sell within five years.

Who are they going to sell their homes to? And how and they going to have income and a down payment to buy them?  This is going to put a lot of pressure on home prices.

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Sharga: Several more years with nearly 1M foreclosures per year

Sharga said based on lender behavior, he doesn't see a spike happening, rather a slow, steady burn in order to spare home prices from further reductions. Today, roughly 4 million homes sell per year. If 1.5 million REO sold, that would be almost 40% of the market, which would be double the current market share of these properties.

"I think it’s less likely that we’re going to see a 'peak' year in REO sales that looks dramatically different than what we’ve been seeing over the past few years. This is partly due to relatively weak demand, partly due to what I’d call 'inventory control' being executed by the lenders and servicers, and partly due to the fact that foreclosure processing, evictions and redemption periods have all become extended, and often appear to be in a state of flux," Sharga said.

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Zillow: Buyers over optimistic on home value appreciation

More than 42% of prospective homebuyers polled by Zillow believe home values will appreciate by 7% annually in the years ahead.

"It's troubling that we're still in the midst of one of the worst housing recessions in history, and yet prospective buyers continue to have such high expectations for home value appreciation," said Stan Humphries, chief economist at Zillow

 And we are really in trouble, since homebuyers are not understanding some housing basics.

Roughly 41% of respondents believe purchasing private mortgage insurance is mandatory, no matter the down payment. Typically, lenders require PMI when less than 20% down is given.

And 56% of those polled said appraisals determine whether a home is in good condition, which is something an inspection does.

Nearly half of those surveyed said a prospective buyer  owns a home as soon as the contracts are signed, when in fact the purchase and sales agreements kicks off the closing phase, which can be lengthy.

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Investors Raising Cash to Buy Government Foreclosures

The investors are looking for volume discounts.

"Many investors are out there raising billions of dollars to buy these properties," says Jaret Seiberg of MF Global. "It's a great idea, and it's one of the few things that we've heard in several years now that could really help housing in a meaningful way."

Seiberg likens it to the Resolution Trust Corporation, which liquidated assets (primarily real estate assets) during the Savings and Loan crisis in the 1980's.

"The idea is not just to reduce supply but to reduce the fear that there's going to be this massive flood of foreclosed homes into many markets, and it's that fear of this foreclosure inventory that's really keeping prices down," adds Seiberg.

And...

Investors would need some incentives, however, like perhaps a tax break or low-interest-rate loans. Currently Fannie Mae caps the number of loans it makes to investors in single family properties at 10. Any program would of course have to go through Fannie and Freddie's regulator, the Federal Housing Finance Agency (FHFA), which is still, shall we say, mulling.

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Housing market will get much worse: Peter Schiff via Register

Here is he no why the housing market is such a financial pickle.

The current market is still being propped up by government-subsidized mortgages, artificially low interest rates, and a backlog in the foreclosure process. Prices will not bottom out until these props are removed and true market forces are allowed to clear the market. In addition, the California economy is going to get a lot worse. More business will leave the state and more workers will lose their jobs. More people will chose to rent, and many that do will have to have roommates. The vast majority of new home construction is currently taking place in the multi-unit building category, which confirms this trend.

Most people that mortgage will have to increase again.  This is Peter Schiff take on increasing mortgage rates.

The market is already on life support, even with mortgage rates at the lowest levels in nearly 70 years. But imagine if rates rose to the levels they were at just five years ago, to say six or seven per cent? What will that do to property values? I think ultimately mortgage rates will rise farther, maybe even above 10%. At the same time, I think the California unemployment rate will continue to rise and taxes in California, will continue to go up. I also think there is a distinct possibility that the ability to deduct mortgage interest from personal income taxes will, at some point in the not too distant future, be curtailed or eliminated, especially for wealthy individuals. What do you think would happen to real estate prices under that scenario? Pretty soon you will not have to imagine this, you will be living it.

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Fannie puts chance of another recession at 50-50

The economics and mortgage market think tank within Fannie Mae estimates a 50% chance the country will slide back into a recession by the end of the year.

On the bright side, there is an equal chance the economic recover will continue unabated, according to the group's October 2011 Economic Outlook.

“Home prices are a key factor for any positive movement in the housing market, and the large inventory of distressed homes working their way through the market is putting downward pressure on prices," Fannie Mae Chief Economist Doug Duncan.

"Now that we are entering a traditionally weak seasonal sales period, we expect home prices to show renewed declines after firming for several months," Duncan added.

Other dragging factors outside of housing include the Greek debt crises spreading to other economies in Europe. Closer to home, fiscal austerity measures including the scheduled expiration of various tax cuts and unemployment benefits will likely dampen monetary spirits. Continuing financial reform is also stifling business growth.

The estimations are largely in line with other predictions.

Moody's Analytics Chief Economist Mark Zandi said in September there is a 40% chance the economy will slide back into recession within the next year.

He listed the same reasons as Fannie for drawing his conclusion

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Home prices could dip another 7%: Barclays

Home prices could fall up to 7% by the end of the 2012 first quarter, Barclays Capital said Friday in a report to clients

Barclays also noted the worst-case scenario for a further home price collapse, where property value falls another 15 to 20% from current levels, is low.

Fannie Mae's recent survey of a sample pool of Americans found that most of those surveyed believe home prices will fall another 1.1% over the next year.

Home prices recently experienced a minor decline.

In August, home prices decreased 0.4% on a month-over-month basis, the first monthly decline in four months, according to CoreLogic.

Meanwhile, Clear Capital expects another home price dip is on the way.

Home prices rose nationally 3.5% in the third quarter over the previous quarter, according to the latest home data index from Clear Capital.

However, the  company also predicts another minor decline in home prices for the fourth quarter of 2011, and a continued slide through the end of the first quarter of 2012.

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RealtyTrac anticipates rise in foreclosures

Data firm RealtyTrac says foreclosure filings plummeted 34% in the third quarter from a year earlier. However, the CEO said the market may be a bottom, with signs activity will likely begin to grow.

On average, properties stayed on the market longer in the third quarter. U.S. foreclosures spent on average 336 days in the default process. That's up from 318 days in the second quarter and the highest hold time reported in four years.

In the third quarter, foreclosure filings were reported on 610,337 properties, up less than one percent from the previous quarter and a drop of 34% from the third quarter of 2010.

"U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork," said James Saccacio, chief executive officer of RealtyTrac.

"While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up," he said

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Survey sees no housing recovery until 2020

That prediction has to be just a guess.  Many things can happen in 8 years.

Bankers have dusted off their crystal balls, and what they see isn't pretty.

A new survey of risk managers across the country found that about half of them don't expect housing prices to return to 2007 levels until 2020. The survey by consumer credit firm Fair Isaac Corp. and the Professional Risk Managers' International Association found that most expect mortgage defaults to be a significant problem for years.

"They don't see things getting any better, and the data reflects that," said Andrew Jennings, chief analytics officer at Minneapolis-based Fair Isaac (also known as FICO) and head of FICO Labs. "They don't see the future being any brighter.

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Market reports point to housing desolation

Moody's Investors Service lowered its near-term outlook for housing and the broader economy this week. Home sales and starts are now hitting a bottom, while home prices will continue to sink until early 2012, said Celia Chen, senior director at Moody's Analytics in a research note.

"As 2011 began, the recovery appeared healthy and ready to turn into a self-sustaining expansion. Job growth was strong, unemployment was falling, and income and consumer spending were accelerating," Chen said. "Today, the economy is struggling to avoid another recession."

And look at this little nugget.

Of the bankers surveyed by analysts at the consumer credit firm FICO and the Professional Risk Managers International Association more than half do not expect home prices to climb back to 2007 levels before 2020.

"Have we finally hit rock bottom? That’s hard to say, but according to our survey, it’ll be quite some time before prices fully recover. The fact is that the market needs help to clear the backlog of distressed properties," researchers said. "We are in no man’s land right now."

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SHILLER: House Prices Probably Won’t Hit Bottom For Years

The economy has deteriorated significantly since July, Professor Shiller observes, and he suspects that the housing market has followed suit. And, from a broader perspective, house prices are still down more than 4% year over year.

In February, Professor Shiller startled those looking for an imminent "bottom" in house prices by suggesting that house prices could still fall 10% to 25%. He's standing by that assessment.

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Five years after peak, still no bottom seen in housing market

Although some local real estate markets are stable or strong, more broadly, fundamentals in the U.S. housing market remain very weak, despite record-low interest rates, according to the results of the September 2011 home price expectations survey, issued by financial technology company MacroMarkets LLC.

The report, compiled from 111 responses of a diverse group of economists and other experts, found that home prices are expected to grow at a mere 1.1 percent nominal average annual rate through 2015. The findings are based upon the projected path of the S&P/Case-Shiller U.S. National Home Price Index over the coming five years.

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Amherst to Senate: 10 million more mortgages set to default

Roughly 10.4 million mortgages, or one in five outstanding home loans in the U.S., would likely default if Congress refuses to implement new policy changes to prevent and sell more foreclosures, according to analyst Laurie Goodman from Amherst Securities Group.

At the end of the second quarter, more than 2.7 million long-delinquent loans, others in foreclosure and REO properties sat in the shadow inventory, more than double what it was in the first quarter of 2010 (Click to expand the chart below). With the market averaging roughly 90,000 loan liquidations per month, it would take 32 months, nearly three years, to move through the overhang.

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California foreclosures set to surge

"It wouldn't be a stretch to say that we might see NODs in the range of 30,000 per month in California for a few months, but it's difficult to predict that they'd get anywhere near the record levels we saw back in 2009," Sharga said.

From January 2010 through September 2010, California NODs averaged 28,000 per month. That dropped to 26,000 per month for the rest of 2010 after the robo-signing scandal broke in October, when servicers were found to be signing affidavits en masse and without a proper review of the loan files.

And the timing of this drop.

A restarted foreclosure process means prices in California are set for possibly more drops, but the effect will not be seen immediately, according to Michael Simonsen, co-founder and CEO of the data analytics firm Altos Research.

"The price implications for the foreclosure spike are further down the road," Simonsen said. "August prices did indeed lose their steam from the first half of the year, but it's largely seasonal."

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New Report Shows a Stunting of Homebuyer Growth

Housing is on the edge of a another big downturn...along with the rest of the economy.

“Although the summer gains appear to signal strong growth in home prices, it’s important to keep in mind that these gains are off of the record lows of winter,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter. The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices."

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JPMorgan expects further drop in home prices

Home prices could dip another 6% to 7%, before hitting rock bottom in early 2012, according to analysts at JPMorgan Chase (JPM: 32.62 -2.66%).

If that is the case, prices will fall about 37% from peak levels reached before the 2008 housing meltdown.

In the banking giant's September home price monitor report, analysts said the outlook is bleak, noting persistently weak housing demand. The firm said existing home sales in July hit a disappointing annualized pace of 4.67 million units, while mortgage applications plunged 14% in August.

JPMorgan Chase analysts warned policymakers are running out of tools to boost housing demand. The fed funds rate has been near zero for a few years, and  Federal Reserve Chairman Ben Bernanke has committed to keeping the rate low through 2013.

However on Thursday, Bernanke said the central bank is prepared to use several tools to boost the economy. But GDP estimates for the first half of 2011 were revised lower to anemic levels, and analysts have ratcheted projections lower, as well.

JPMorgan analysts forecast a home sales pace of 5 million housing units for 2011, but remain cautious saying the estimate may move toward the downside.

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