Wednesday, October 24, 2012

Today's links

1--Investor Participation in the Home-Buying Market, Atlanta Fed

...institutional investors ramped up activity earlier this year and have indeed concentrated their investment activity within a handful of markets that were hit hard by the housing downturn.

 Acquisition strategies for these larger investors focus on mostly low-priced, distressed properties.
This makes sense. The markets hit hardest by the housing downturn are also the markets where distressed properties make up a significant portion of the available homes for sale. However, data from CoreLogic indicates that the share of distressed sales is steadily declining over time. As the distressed sales share continues to shrink and home prices continue to rise, it stands to reason that investment activity will shrink (or continue to shrink).

It was recently noted that Och-Ziff Capital Management Group LLC, a large institutional investor (not outlined in the table above), announced that it intends to exit this line of business. Perhaps it is just a matter of time before other large investors follow suit.

2--Phoenix Picked Clean, Private Equity Descends on Atlanta, Bloomberg

Renting a house was 57 percent more expensive than owning in Atlanta in August, the same as a year earlier, according to Trulia Inc.

Higher rents make it more profitable for private equity firms to buy and lease properties to tenants, many of whom don’t have the necessary credit score or downpayment to finance a purchase.
In Phoenix, owning is 49 percent cheaper than renting, narrowing from 55 percent cheaper a year earlier. The gap narrowed even as 30-year mortgage rates fell by an average 1 percentage point to 3.5 percent, according to Trulia economist Jed Kolko.
“Rising Phoenix prices outweighed falling mortgage rates,” Kolko said in an e-mail.
Phoenix Prices

Phoenix-area median single-family home prices jumped 34 percent in August from a year earlier to $150,000, according to an Oct. 2 report by Michael Orr, director of real estate research at Arizona State University’s W.P. Carey School of Business. The supply of all homes for sale in September fell 28 percent from a year earlier while distressed listings --bank- owned properties and short sales -- were 63 percent below year- earlier totals, Orr reported.

Investors accounted for 39 percent of August transactions in Maricopa County, which includes Phoenix, Orr said. More than half of all homes below $150,000 were purchased with cash, he said. Rising prices are persuading investors to look elsewhere.

“We’ve seen some big players move away and others replace them,” Orr said in a telephone interview from Phoenix. “The new players are happy with 6 percent cash-on-cash return. Last year they would scoff at that. They wanted 12 percent to 15 percent last year, but that’s not possible here anymore.”...

Arizona and Georgia are both non-judicial foreclosure states, which means it takes less time for lenders to repossess homes from delinquent borrowers than states that require judicial review.
Homeowners in Arizona were delinquent for an average of 500 days before banks seized their properties, while in Georgia it took about 461 days, compared with a U.S. average of 688 days, according to Lender Processing Services Inc. (LPS) The average was 1,037 days in Florida, a judicial state which has the largest foreclosure backlog as a share of mortgaged homes, and 1,014 days in New York.

3--Obama Moves to Make the "War on Terror" Permanent, Info Clearinghouse

4--Remembering Russel Means, Info clearinghouse video

5--Downturn to continue for a generation, Bank of England governor warns, WSWS

6--Bernanke Seen Attacking Jobless Rate With QE Through 2013, Bloomberg

7--Are US households about to re-lever? That's the implication of CBO's latest forecast, sober look

8--US State Dept. Demands Lebanon Form New Govt., antiwar.com

9--Home Builders Need Mortgage Bankers to Keep Recovery Alive, CNBC

Despite the Federal Reserve’s $40 billion weekly infusion into agency mortgage backed securities, mortgage rates are just barely below where they were before the announcement of so-called QE3. Rates did fall immediately after the announcement, but with the 30-year fixed bouncing back up to 3.63 percent from mortgage applications fell dramatically, down 12 percent overall. Refinances fell the hardest last week, down 13 percent, but applications to purchase a home weren’t far behind, down just over 8 percent week-to-week.

“Wow, that was quick. Ahead of today's 2nd day of the FOMC meeting, the MBA said both applications for refi's and purchases are now below the levels of mid Sept when the Fed decided to further help the housing market with more QE,” writes analyst Peter Boockvar of Miller Tabak. “The costs of an eventual Fed exit will far outweigh any benefits.”

Why are mortgage rates rising again? Because even though the ten-year Treasury yield, which mortgage rates generally track, is above where it was before the Fed’s announcement of QE2, the greater demand by the Fed for MBS is being met by plenty of supply in the form of big refinance volume. The banks are not passing through the discounts they are getting to consumers due to tighter lending standards and rising fees.

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