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REO sales may not peak until 2013

Foreclosure Sign, Mortgage Crisis

Image via Wikipedia

REO sales may not peak until 2013.

This is a frightening article from HousingWire, not recommended for all audiences…

They run some estimated numbers of potential foreclosures throughout 2012 and 2013.  Their estimates are staggering to say the least.  This year, nationally speaking, the banks liquidated approx 525,000 properties.  In 2013 they are expecting as many as 1.48 million foreclosures and liquidating roughly 595,000 properties.

It is difficult to say what impact our region will feel from this yet as these are only estimates and these estimates have been all over the map…


In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.

…Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.

We have moved well beyond the early days of the subprime mess.  We are now dealing with traditional mortgages with owners in trouble because of job loss and underemployment.

The only way out of this mess is to turn the economy around.

* on a related subject.  If you find yourself as one of the many households facing foreclosure from job loss or whatever reason – there are some resources out there for you.

A Foreclosure Clinic will be held at 6:30 p.m. Thursday, Oct. 27 at the Savage Library.

Read more: Savage Pacer – Foreclosure Employment is No 1 factor

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It’s Time to do some Home Remodeling, BuildFax home remodeling index soars

This is promising for our region in the remodeling industry.   It appears as if many homeowners are opting to remodel their home instead of moving now.

The BuildFax remodeling index showed huge signs of growth, even in the Midwest Region.  The index rose 29% year-over-year, the 22nd straight month.  For the Midwest we rose 10.8% month-over-month gains.

Below is a chart from CalculatedRisk showing the increase in the BuildFax Remodeling Index.

Calculated Risk chart of BuildFax Index (link to)

Viewing the Economic Recovery Through Remodels

“As mortgage rates hit record lows, it is apparent that millions of Americans are refinancing their homes and using some of their new monthly savings to reinvest in their homes with remodeling projects,” said Joe Emison, Vice President of Research and Development at BuildFax. “With remodeling activity growing at an estimated 9.5 percent in 2011 compared to 2010, this is one segment of the economy that is showing continued strength, even as other sectors struggle.” “As millions of Americans believe that they will not be able to secure a new home due to a variety of factors including tight credit, limited buyers and challenging job prospects, they are more and more turning to renovating and remodeling their current properties, sending remodeling activity to record levels,” said Joe Emison, Vice President of Research and Development at BuildFax. “However, this remodeling boom is leaving many of these properties under-insured, as the value of these renovations are often not being captured by the homeowners’ insurance companies.”

Read Full Press Release

I see this an encouraging sign for the housing market for several reasons. 1) this is an early sign of some consumer confidence in housing to invest back into their homes.  2) the housing inventory is getting updated, which will help the market place down the road.  3) this is putting many people in the construction industry back to work.


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Sunday Morning Housing Market Chart

It’s Sunday Morning and being in real estate means today is a work day to be in Model homes, open houses or showings.

As I walked out to the driveway I noticed a great chart indicating our current housing market.

Housing Market

If you notice on the bottom of the chart represents the Buyers, and the top of the chart represents the inventory.

It’s going to a long day!  Fortunately for me only the bottom half of the tire is flat!  I’m a ‘cup is half full’ kind of guy..

Enjoy your Sunday….  I need to change a tire now.


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Hennepin County Foreclosure Risk Scores by City and Zip, how does your zip code rank?

Here is some good information on foreclosures and delinquency by zip code.  Once again it is not in terms of actual numbers, but rather by “ranking” or “score”.  So it doesn’t give us a number of housing units that may be hitting the market in the shadow inventory.

I stumbled upon a website called offers resources intended to help states and localities respond to the foreclosure crisis.

Explanation of the Data they have compiled:

To help states and communities make informed decisions about how to allocate and spend their resources for foreclosure prevention and neighborhood stabilization, the Local Initiatives Support Corporation (LISC) has developed datasets with foreclosure “risk scores” at the ZIP Code level within each state and also within each metropolitan area. These scores incorporate measures of subprime lending, foreclosures, delinquency, and vacancies.

…In the Intrametropolitan ZIP Code level Excel workbooks provides the foreclosure risk score for ZIP Codes by metropolitan area; this score allows users to look at the relative foreclosure risk of all ZIP Codes in a metropolitan area. The highest risk ZIP Code in the metro area is assigned a score of 100 and all other ZIP Codes are assigned a score relative to the highest risk ZIP Code.

LISC cannot provide loan and foreclosure counts at this level of geography because these estimates are based on proprietary data. Therefore, in addition to the foreclosure risk scores, the table contains summary scores for each of the subprime, foreclosure, and delinquent loan components. The scores indicate relative risk of ZIP Codes on each component individually. For example, the subprime component score is only based on the number of subprime loans and percentage of all loans that are subprime. The highest risk ZIP Code in terms of subprime loans in each metro area receives a score of 100 and a ZIP Code with a score of 50 is estimated to have about half the risk level.

So I downloaded their data set for the Minneapolis/St Paul area by Zip Code, called their IntraMetroRiskScores.   Again, it doesn’t give the actual numbers of loans but it shows the zip codes/cities risk  score compared against the highest risk zip code in the area.  In the Minneapolis / St Paul metro area, zip code 55441 is the highest risk area and therefore scored at 100.  So the other areas are ranked against that benchmark.

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The above were all listed under Minneapolis, and then the Zip Codes.  I see Plymouth and Bloomington are listed above by zip code.  Below were also listed by Zip Code but were also broken down by City, so I charted those separately because it easier to identify by name rather than zip code…

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This data is a little out of date being from March 2011, but it still paints a good picture of the regions foreclosure risk by zip code.   I did read on their website that they do not publish the actual numbers of loans at risk of foreclosure because it is proprietary information.   If we had a ballpark figure of loans at risk of foreclosure, we could use these figures to calculate how many potential homes could hit the market in each zip code.  Once we have that we could run some absorption rate calculations to figure out the impact on the market and make some guesses on price declines.

If you are interested in other areas, got to their website to get the data set.  They have every zip code in the Country.

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Americans Double Up to Make Do

Thought I would share an interesting short read.  They do a good job explaining households doubling up, what I refer to as “pent up demand”.   Makes me wonder if we are winding a spring tighter and tighter and when the economy starts moving will it trigger another bubble?  Just thinking out-loud there..

During the Depression, few American homes had an empty bedroom. The housing recession of the past four years has made empty spare rooms a luxury again by freezing families in place for years and limiting their housing choices.

via Americans Double Up to Make Do.

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NAR Housing economic Outlook 2011-2012

The National Association of Realtors Economic Outlook is showing some interesting forecasts for 2012.  Keep in mind no one has a crystal ball, but the economists go ahead and make forecasts anyhow.  The great thing about economists is they are usually about as accurate as the weather forecasters, yet I continue to listen to the weather forecast anyhow…

As of October 2011, here is what the economists are currently forecasting for 2012.

It looks like they are forecasting very little change in the unemployment rate, nudging down to 8.6%.  I am particularly interested that they are forecasting the 30 year mortgage rate to inch upwards to 5% by the end of 2011.  Apparently they are not expecting much help from Operation Twist, which I think is accurate.


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Their forecast (above)on Existing Home Sales is showing a fairly steady growth through 2012.  While Housing starts and new construction sales are showing a big jump in the last 2 quarters of 2012.  This is showing % change from a year ago.

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The above chart is kind of frightening, take a look at the Real Disposable Income line.  I didn’t realize I had any disposable income and their forecast is showing it is going to get worse!  The GDP is showing a forecast of pretty flat growth and the CPI showing flattening mid 2012.  I would disagree with that, but I am no economist…  I would expect the CPI to increase steadily throughout 2012…

These graphs are just a couple snapshots from their Forecast.  For more information on their Economic Outlook, check out their data here.





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10 year treasury moves up and the 30 Year mortgage rates are up

This is pretty interesting because this is the other direction than what the experts thought Operation Twist would have on the market.  John Murphy pointed this out earlier on his post, then tonight I saw the St Louis Fed had updated their 30year mortgage average rates.

There are 2 things I find really interesting here but can’t explain.

1) the spread gets larger between the mortgage rates and the 10 year treasury the lower the treasury goes.

2) the 10 year treasury is going up, when most thought it would go down as a result of Operation Twist.

Note: the 30 year mortgage is updated as of 10/13/2011.    The 10 year treasury is updated as of 10/11/2011 at 2.18%

Just curious what Edina Realty Mortgage rates are today…  Looks like they are heading up.

Today’s Mortgage Rates

The current interest rates shown below are based on a purchase of a single-family, primary residence. For current refinance rates, contact us

as of 10/13/2011 09:15 AM Central

Product Interest Rate APR
Conforming1 and FHA1 Loans
30-Year Fixed 4.250% 4.434%
30-Year Fixed FHA 3.750% 4.550%
15-Year Fixed 3.375% 3.692%
7-Year ARM 3.000% 3.238%
5-Year ARM FHA 2.750% 2.908%
Jumbo1 Loans – Amounts that exceed conforming loan limits1
30-Year Fixed 4.500% 4.644%

 Equal Housing Lender

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