Report: Half of All Homes Are Being Purchased With Cash

More than half of all homes sold last year and so far in 2013 have been financed without a mortgage, according to an analysis by economists at Goldman Sachs Group.

The analysis estimates that around 20% of all homes sold before the housing crash were “all-cash” sales (or around 30% of sales by dollar volume). But over the past seven years, the all-cash share of sales has more than doubled, increasing by more than 30 percentage points, according to economists Hui Shan, Marty Young and Charlie Himmelberg.

The Goldman study analyzed home sales figures from the Census Bureau and the National Association of Realtors and mortgage-origination data from the Mortgage Bankers Association and Lender Processing Services.

The surprisingly large cash-share of purchases helps to explain why home sales have jumped over the past two years despite more muted increases in broad measures of new mortgage activity, such as the MBA’s mortgage application index.

There’s no exact way to know who is responsible for all of these cash purchases, though they are likely to include some combination of investors, foreign buyers, and wealthy homeowners that don’t want to go through the hassle of getting a mortgage before closing on a sale. Mortgage lending standards have sharply tightened up since the housing bubble, with banks scrutinizing borrowers’ tax returns and bank statements to verify their incomes and the source of their down payment. Read more >>

Shiller: Housing Recovery Could Take 50 Years

From housing starts to home prices, renowned economist Robert Shiller acknowledged "there are a lot of positive signs" for the U.S. housing market right now, but told CNBC Wednesday it's still unclear if a recovery is actually in place.

After all, Shiller noted the housing futures market for single-family homes was only "mildly optimistic" before superstorm Sandy struck the U.S.'s East Coast with expectations for just 3 percent growth per year over the next four years.

"If it goes up 3 percent a year that means that, in real terms, housing is just about flat," Shiller said. "It's not a recovery to write home about."

Shiller is probably best known for helping create the Standard & Poor's/Case Shiller index, a widely-followed measure of housing prices, which recently revealed that U.S. home prices rose 2 percent in August compared to one year ago. Meanwhile, the NAHB/Wells Fargo Housing Market Index - a survey of homebuilders - recently climbed sharply higher. Read more >>

Pending Sales of U.S. Homes Decrease by Most in a Year

The number of Americans signing contracts to buy previously owned homes fell in April by the most in a year, indicating the U.S. housing recovery remains uneven.

The index of pending home resales dropped 5.5 percent following a revised 3.8 percent gain the prior month, figures from the National Association of Realtors showed today in Washington. The median forecast of 42 economists surveyed by Bloomberg News called for no change in the measure.

Mortgage rates at record lows failed to sustain the pace of demand as some buyers may have waited for home prices to decline further. Limited access to credit and persistent foreclosures still weigh on housing, adding to concern it will remain a source of weakness for the world’s largest economy. Read more >>

Nation’s biggest banks and mortgage lenders acquire a glut of foreclosed homes

Image by Getty Images via @daylifeThe nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months. More...

Federal government funds nearly 100 percent of new mortgage loans

A stat which may be of great interest is the prediction by the average of the indexes that our fall in prices is only half-way accomplished – a forecast which, if true, will elicit fear in the hearts of homeowners, buyers, bankers and government officials.

A natural fall-back in prices is a matter of the highest gravity to the Federal Reserve Bank and the Treasury and to current and future homeowners. The federal government has massively intervened in the housing market. It funds nearly 100 percent of new mortgage loans originated today.

Fed and Treasury are attempting to preserve bubble values for homeowners and save mortgage investors. Absent government intervention, housing prices would have fallen 50 percent or 75 percent by now. Probably one-of-three or one-of-two mortgages would be in default. Global depression would surely have followed such a fall. More...

Fannie-Freddie Bailout Could Cost Taxpayers $1 Trillion

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Courtesy of CNBC
For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg.

According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, the cost to the taxpayer could hit as much as $1 trillion.

Two things are clear: Taxpayers don't want to foot the bill, and Fannie and Freddie, taken over by the government in 2008 to stanch the financial bloodletting, need a major overhaul.

"Some of us who don't even own homes are paying to support others and their home ownership, and they ask 'why?' said Robert J. Shiller, a Yale University economics professor and co-creator of the S&P/Case-Shiller Home Price Indices.

The indices measure the US residential housing market by tracking changes in the value of residential real estate both nationally and in 20 metropolitan regions.

Shiller added that the mission of Fannie and Freddie should be severely cut back "so that they're not helping middle-class homeowners, [but] they're helping poor people get into the housing market."

At the crux of the financial crisis, the government took over Fannie and Freddie to avert possible massive losses for banks, money-market funds and, perhaps, most importantly, foreign institutions that purchased billions of Fannie and Freddie debt because of its implied government guarantee.

The Chinese, for example, had invested heavily, and the US decided it didn't want them to take a loss on their investment.

One possible scenario for the entities is to turn them into utilities, said Sean Dobson, CEO and chair of Amherst Securities.

"Freddie and Fannie could be used to standardize the mortgage product," Dobson said, "to completely describe what the risks are and then act as a conduit for the capital markets to take the risk."

9 Years Worth of foreclosed homes in bank inventory

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financialarmageddon.com

Economic theory has it that prices tend to rise when demand exceeds supply. But when the potential inventory of homes for sale by banks -- which is aside from the properties that homeowners and builders might also be looking to unload -- is equivalent to nine years' worth of demand, as detailed by Real Time Economics in "Number of the Week: 103 Months to Clear Housing Inventory," that suggests those who see signs of a recovery in the residential real estate market should probably be thinking about checking into rehab:

103: The number of months it would take to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.

How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern.

As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.

Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses.

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