Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Wednesday, October 8, 2014
Tuesday, January 22, 2013
Friday, March 30, 2012
Chart of The Day: Median Single Family Home Is Still -42% Off Its Peak...
For some perspective on the all-important U.S. real estate market, today's chart illustrates the inflation-adjusted median price of a single-family home in the United States over the past 42 years.
Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased -- increased. That brings us to today's chart which illustrates how the inflation-adjusted median home price is currently -42% off its 2005 peak.
That's a -$112,000 drop.
In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value
(-13.7% loss). Not an impressive performance considering that more than three decades have passed.
It is worth noting that the median priced home is currently at the bottom of a price range that existed from the late 1970s into the mid-1990s.
Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased -- increased. That brings us to today's chart which illustrates how the inflation-adjusted median home price is currently -42% off its 2005 peak.
That's a -$112,000 drop.
In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value
(-13.7% loss). Not an impressive performance considering that more than three decades have passed.
It is worth noting that the median priced home is currently at the bottom of a price range that existed from the late 1970s into the mid-1990s.
Friday, May 20, 2011
Chart of The Day: Median Home Prices Still On The Decline...
The U.S. real estate market continues to struggle.
For some perspective, today's top chart illustrates the U.S. median price (adjusted for inflation) of a single-family home over the past 41 years while today's bottom chart presents the annual percent change in home prices (also adjusted for inflation).
Today's chart illustrates that, prior to the financial crisis, the inflation-adjusted median home price rarely declined more than -5% in one year (gray shading).
It is also very important to note that due to a large number of distressed properties, a high unemployment rate and stagnant wages, the inflation-adjusted median home price has declined -7.9% over the past year -- an annual decline larger than any that occurred during the 35 years prior to the financial crisis.
Chart & Commentary Courtesy of Chart of The Day
Wednesday, April 27, 2011
Chart of The Day: Median Single Family Home Is Still -38% Off Its Peak...
For some perspective on the all-important U.S. real estate market, today's chart illustrates the inflation-adjusted median price of a single-family home in the United States over the past 41 years.
Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased jumped, too.
That brings us to today's chart which illustrates how the inflation-adjusted median home price is currently -38% off its 2005 peak.
That's a -$100,000 drop!
In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value (a -8.5% loss adjusted for inflation). Not an impressive performance considering that more than three decades have passed. It is worth noting that the median priced home is currently in the bottom half of a price range that existed from the late 1970s into the mid-1990s.
Chart & Commentary Courtesy of Chart of The Day
Wednesday, March 16, 2011
Housing Double Dip?
Home prices are at near their post-bust lows. January saw a double-digit dip in the number of new homes sold. Then Robert Shiller, Yale economist and co-founder of the S&P/Case-Shiller home price indexes, dropped this bomb: "There's a substantial risk of home prices falling another -15%, -20% or -25%," he said.
Besides, a home purchase is more than a potential investment, especially for families planning to stay put for a while. The big plus for them is the pleasure of living in their own homes. "People should base their decision on affordability, lifestyle choices and home preferences, not on investment," said Lawrence Yun, the National Association of Realtors' chief economist.
Buyers may take heart from some positive recent indicators, such as an up tick in the sales of existing homes in January; a drop in vacant rental homes; and more investors snapping up properties.
There's also been an upswing in the number of high-end homes -- those costing more than $750,000 -- being sold, according to Yun. The wealthy buyers of these properties have lots of choices of where to place their money and many are investing in real estate. "The smart money is making their move," said Yun.
Thursday, August 19, 2010
Home Equity Loan Defaults Balloon
According to the American Bankers Association (ABA), lenders wrote off $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows.
So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter. Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar.
“People got 90 cents for free,” says Christopher A. Combs, a real estate lawyer. “It rewards immorality, to some extent.”
The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.
“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”
The delinquency rate on home equity loans was 4.12% in the 1st quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping.
So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter. Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar.
“People got 90 cents for free,” says Christopher A. Combs, a real estate lawyer. “It rewards immorality, to some extent.”
The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.
“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”
The delinquency rate on home equity loans was 4.12% in the 1st quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping.
Monday, August 9, 2010
20 Million Underwater Mortgages by 2012?
More than 14 million borrowers were underwater as of Q1 2010, and with a further 10.8% decline in house prices expected relative to Q4 2009 levels, another 6 million borrowers are likely fall into negative equity by the end of 2011, according to commentary by Deutsche Bank.
The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.
The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences. The existence of recourse — when a lender is able to pursue a borrower's other assets — also acts as a disincentive against strategic default.
Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.
"Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals," Deutsche Bank researchers said.
Many existing academic studies model homeowners' default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower's house has negative equity.
Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.
The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.
The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences. The existence of recourse — when a lender is able to pursue a borrower's other assets — also acts as a disincentive against strategic default.
Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.
"Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals," Deutsche Bank researchers said.
Many existing academic studies model homeowners' default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower's house has negative equity.
Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.
Wednesday, February 17, 2010
Commercial Real Estate Is The Next Crisis
The Congressional Oversight Panel said in a report that mounting commercial real estate losses could endanger the banking system and thwart economic recovery.
A total of $1.4 trillion in commercial real estate loans will require refinancing in the next 4 years, and more than 50% of those loans are underwater, written for properties whose value has dropped like a rock.
The expected losses when loans go bad could hit between $200 billion to $300 billion and threaten 3,000 small and mid-size banks with a disproportionate share of commercial real estate assets on their books, according to the panel.
The report is intended to "wave a red flag" to the White House and Congress that the commercial real estate loan market is going to get a lot worse before it gets better.
"We're at a point where even as TARP is ramping down another major challenge in our economy is ramping up," said Elizabeth Warren, the oversight panel's chairwoman.
"We need to start now, before the system is on the brink of collapse to figure out a plan," she added.
The Panel's research found that 2,988 banks are heavily invested -- with more than 3 times their assets tied up -- in commercial real estate loans. Of that number, 2,500 banks each have less than $1 billion in assets.
The Panel offers a number of possible solutions for policymakers to head off a commercial real estate crisis, including stress tests for banks, injecting capital into these small banks, buying their toxic assets, or guaranteeing loans.
A total of $1.4 trillion in commercial real estate loans will require refinancing in the next 4 years, and more than 50% of those loans are underwater, written for properties whose value has dropped like a rock.
The expected losses when loans go bad could hit between $200 billion to $300 billion and threaten 3,000 small and mid-size banks with a disproportionate share of commercial real estate assets on their books, according to the panel.
The report is intended to "wave a red flag" to the White House and Congress that the commercial real estate loan market is going to get a lot worse before it gets better.
"We're at a point where even as TARP is ramping down another major challenge in our economy is ramping up," said Elizabeth Warren, the oversight panel's chairwoman.
"We need to start now, before the system is on the brink of collapse to figure out a plan," she added.
The Panel's research found that 2,988 banks are heavily invested -- with more than 3 times their assets tied up -- in commercial real estate loans. Of that number, 2,500 banks each have less than $1 billion in assets.
The Panel offers a number of possible solutions for policymakers to head off a commercial real estate crisis, including stress tests for banks, injecting capital into these small banks, buying their toxic assets, or guaranteeing loans.
Tuesday, December 1, 2009
The Next Shoe To Drop?: Commercial Real Estate Defaults Double
Real Estate Econometrics LLC says commercial mortgage default rate on loans held by U.S. banks more than doubled to 3.4% in the third quarter as vacancies rose and rents declined.
Defaults climbed from 1.37% a year earlier and from 2.88% in the second quarter, the New York-based property research firm said today in a report.
Default rates in the first three quarters of 2009 have been the highest since 1993, the firm said.
“Mortgages originated in 2006 and 2007 are experiencing the most significant shortfalls in current cash flow relative to current debt-service obligations,” Sam Chandan, chief economist of the firm, said in the report.
Federal Reserve Chairman Ben S. Bernanke said in a November 16 speech that “the fallout” for banks from commercial real estate could slow the nation’s economic recovery.
Defaults on bank-owned commercial property mortgages posted the biggest quarterly jump from the previous quarter in six years of FDIC data analyzed by Real Estate Econometrics.
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