September 28th, 2011
Econintersect: This week the July 2011 Case-Shiller Home price index was released (analysis here). Real time data is still showing that Case-Shiller home prices should start contracting beginning with the August release next month. On the other hand, CoreLogic this week published its shadow inventory report showing a continuing decline from the peak shadow inventory levels in early 2010.
Current residential shadow inventory as of July 2011 declined slightly to 1.6 million units, representing a supply of 5 months. This is down from 1.9 million units, a supply of 6 months, from a year ago, and follows a decline from April 2011 when shadow inventory stood at 1.7 million units. The moderate decline in shadow inventory is being driven by a pace of new delinquencies that is slower than the disposition pace of distressed assets.
Altos Research published its Mid-cities report covering markets smaller than the Case-Shiller 20 city index. Home prices and values have the same basic trends as the Case-Shiller index - except this is data updated into September 2011.
“Three mortgages would have been extreme, even in the boom days of the 2000s. Nonetheless, over-leveraged real estate had a profound effect on today’s housing market. We’re not out of the woods yet and the market trends tell us we’re settling in for a long, cold winter.
This month prices decreased in 13 of the 20 markets, and inventory decreased in 19 of the 20 markets. The market trends indicate a further cooling of the market as we approach the fall.”
The Mortgage Bankers Association’s (MBA) Mortgage Applications Survey for the week ending September 23, 2011 showed mortgage applications increased 9.3% week-over-week.
“Mortgage rates declined last week, at least partially in response to the Fed’s announcement that they would shift their portfolio towards longer-term Treasury securities, and that they would resume buying mortgage-backed securities,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “With lower rates, refinance application volume increased to its highest level since August 19, 2011. Purchase application volume also increased. However, the increase was in conventional purchase applications, which were up by 4.9 percent. Purchase applications for government loans fell by 0.6 percent over the week, likely influenced by the pending decline in FHA loan limits.”
The refinance share of mortgage activity increased to 79.7% of total applications from 78.3%t the previous week. This is the highest refinance share of mortgage activity since the survey’s re-benchmark in January 2011.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.25% from 4.29%. Hat tip to Calculated Risk for the graphic below.