The shadow inventory of troubled mortgages and foreclosed homes saw a 1.2 million decrease in the first half of the year, according to research conducted by JPMorgan Chase.

Chase researchers expect that progress to double before the year’s end, too. That would then bring the shadow inventory to more than 4 million, which is down from the 6 million peak reached in 2010.

A rising number of short sales has allowed more banks to clear the shadow inventory that has threatened the housing market’s recovery, according to the research. Banks also have been increasing loan modifications.

Shadow inventory is known for creating uncertainty in the housing market. In calculating the shadow inventory, Chase researchers include trouble mortgages that haven’t been paid in at least 60 days.

"Although re-defaults and new delinquencies will continue to keep shadow inventory elevated, the rapid decline should prevent downward pressure on home prices going into 2013," according to Chase analysts. "Combined with better existing home sales, investors have reason to be optimistic about running recovery scenarios."

Chase analysts say that if home prices rise 10 percent, the current number of 10.8 underwater borrowers could then decrease to 9 million.

Source: “Shadow Inventory Declines by 1.2 Million in 2012,” HousingWire

In a nation as diverse as the United States, the idea of "the American dream" means different things to different people. Many associate the dream with intangible ideals like freedom of expression, freedom of religion, optimism and family ties. But the American dream has also long been associated with attaining a higher standard of living, particularly one that surpasses that of the previous generation.

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source: NPR

Low-income households face a potential housing shortage that could lead to a large rise in homelessness, warns a new report by the Institute for Children, Poverty, and Homelessness.

The study shows that there are 5.4 million housing units available for rent to a family of three at the federal poverty line of $18,310. However, there are more than double the number of households below the poverty line (10.9 million).

The shortage in housing has led to a 20 percent rise in family homelessness from 2007 to 2010, according to the ICPH report, “A Home by Any Other Name: Enhancing Shelters Addresses the Gap in Low-Income Housing.” 

The ICPH blames the rising cost of rental units and a decline in the number of public housing projects for the shortage in affordable residences.

"It is clear that the number of affordable rental units has not changed in three decades as the number of people who need affordable housing has skyrocketed," says Matthew Adams, ICPH’s principal policy analyst. "This gap is unsustainable.”

Americans who earn the minimum wage cannot afford fair market value of rent for at two-bedroom apartment, according to the report. What’s more, the amount of federal dollars that is spent on housing programs for low-income households has dropped 20 percent since 1995 and is at a record low. 

Source: “Homeless Face Unprecedented, Overwhelming Housing Shortage,” Realty Times (Sept. 20, 2012)

Fed Chairman Ben Bernanke announced last week that the Fed would again be pumping money into mortgage-backed-securities as a way to stimulate the economy. The big question for us becomes what impact this will have on the housing market. There is absolutely no doubt that Bernanke had the housing industry in mind while making this decision. In his post meeting news conference Bernanke explained:

“I think that house prices are beginning to rise in some markets, which will encourage people to look at homes, will encourage lenders to make more mortgage loans. I am hoping we will continue to see progress in the housing market. That is one of the missing pistons in the engine here, housing is usually a big part of a recovery process. We haven’t had that nearly to the usual extent. And to the extent that we can support housing I think that would be a very useful outcome.”

How does keeping rates low help the market?

HSH Associates which reports on trends in the mortgage rate environment explains:

“Of all the Fed policies, driving down mortgage rates has arguably been the most successful. Low rates have fostered refinancing, putting money in homeowner pockets and helping to spur consumer spending. Those low rates have enhanced housing affordability, while the steadying aspect of the Fed’s presence in the market has allowed for more of those transactions to complete; in turn, this has helped to firm up home prices. The Fed is trying to cause at least some inflation, namely in asset prices — homes, stocks.”

But what impact will it actually have on home sales?

Keeping interest rates low will definitely help. However, we are not sure it will be a driving force in a housing recovery. Rates are already at historic lows and  the challenge to many buyers is availability of mortgage money more than it is the cost of that money (rate). HSH Associates believes:

“Looking across the potential audiences who want to buy homes, can a claim be made that interest rates are an impediment? More likely, credit ruined in the downturn, a lack of income, unemployment or even asset strength are keeping people out of the market. In addition, there is arguably a cohort which cannot participate due to a foreclosure, short-sale or deed-in-lieu effected over the last few years, and there is likely still another group who will not buy a home at all, having watched family and friends suffer mightily with real estate issues and losses in the downturn. In this way, lower interest rates aren’t much of an inducement for a lot of folks, and except at the margins, the change merely enhances the opportunity for people already well-positioned and motivated to buy a home.”

Richard Green, director of the University of Southern California Lusk Center for Real Estate, echoed this sentiment in a recent MarketWatch article:

“While QE3 certainly won’t hurt the housing market, its short-term effect will likely be limited. The constraint that is keeping people out of the housing market is absence of equity. The drop in house prices means that many borrowers are underwater on their houses, and high unemployment has prevented potential first-time buyers from accumulating down payments.”

Keeping rates low can’t hurt the market and perhaps it will encourage some move-up buyers to make the move now. But few believe it will spur a dramatic increase in home sales.

via: KCM

Economists are increasingly confident that home prices have bottomed out.

For the last three years, home prices have usually risen in the spring and summer to only then lose all of those increases—plus more—in the fall and winter months. However, economists expect this year to be different and do not foresee such a big drop to occur to home prices in the colder months ahead, The Wall Street Journal reports.

While the fall months likely will bring out some sort of decrease in recent home price increases, “we have a much better supply and demand dynamic” than in previous years, Mark Fleming, CoreLogic’s chief economist, told The Wall Street Journal.

Home prices have posted some of their largest year-over-year jumps compared to the last six years. According to CoreLogic, home prices have risen 9.6 percent from February, which was the month prices reached their lowest levels since the housing slowdown. Economists say it’s unlikely that, given recent indicators, home prices will reverse course steeply and fall 9.6 percent or even more in the coming months. Home prices haven’t dropped by that type of percentage since the economy was in a recession.

Source: “Here’s More Evidence That Home Prices Have Hit Bottom,” The Wall Street Journal

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