-Purchase Index, Week/Week -5.4%
-Refinance Index, Week/Week -5.2%
-Composite Index, Week/Week -5.0%
This week-to-week data is clouded at the start of the year by the Christmas, New Year, and MLK holidays. It can also be affected by winter storms. “Believe me Mr. & Mrs. Smith, I assure you that under that snow is a beautiful 3 bed, 3 bath home.”
Pending Home Sales (for December 2011)
-Pending Home Sales Index, Month/Month -3.5% to 96.6
-Pending Home Sales Index, Year/Year +5.6% vs. December 2010 index level of 91.5
-Even with December decline, November-December numbers were best since March-April 2010
–Full December report
-Pending Home Sales should be a leading indicator for Existing Home Sales (EHS)
-Also, the December EHS report showed that 33% of realtors reported cancelled contracts
FHFA House Price Index (November 2011)
-Price Index, Month/Month +1.0%
-Price Index, Year/Year -1.8%
-The previous index was -0.7% month/month.
The housing market is is the “just barely recovering” mode. It is still cursed by a real oversupply and a substantial shadow inventory of home on which the owners are not making payments.
The SOTU speech (key excerpts here) seemed to indicate that the President was suggesting expanding HARP 2.0 to include refinancing of loans not already owned by FNMA or FHLMC. The problem with HARP 2.0 is that lenders are still reticent to take on loans with LTV > 105%. There are at least two reasons 1) even if the lender is shielded from losses there are significant costs associated with foreclosures. Foreclosures tie up cash. 2) the bad publicity is still implicitly there. Foreclosures have generated enormous losses of cash and enormous negative PR for banks.
The stronger underwriting rules (the “runaround” referred to) have been created not by the banks but by FHFA. The head of FHFA sees as his charter minimizing losses to Treasury on the FNMA/FHLMC portfolio. Those stricter rules are part of the runaround. Blaming the situation on banks may function as an election strategy but those rules are not helping homeowners or the housing market.
Also, it was Congress and the President who funded the Social Security decrease (Temporary Payroll Tax Cut Continuation Act of 2011) with an 0.1% increase in the rate on all mortgages from FNMA and FHLMC. That was not a runaround but more of a direct hit.