“This spring will be the litmus test for housing demand,” says Steven Ricchiuto, chief economist for Mizuho Securities USA.

The spring season typically runs March through June but may have started early this year because of unseasonably warm weather.

While last year was dismal for existing home sales, this year is looking better. Existing home sales in February were up 9% from the same time a year ago, as was the Pending Home Sale Index, which reflects signed contracts leading to sales, says the National Association of Realtors.

Meanwhile, Realtors’ confidence in the single-family home market is the highest in four years, according to a late February NAR survey of 4,300 agents. Coldwell Banker says its website’s traffic was up 47% in February from last year.

This spring season “will be the best in four or five years,” says economist Paul Dales of Capital Economics.

But not all markets will move together, and spring sales may signal which ones are improving or still declining, says Eric Fox, Veros Real Estate Solutions economist.

Veros forecasts that U.S. home prices overall will drop 0.85% in the next 11 months but that 40% of 321 metropolitan areas will see prices rise.

Phoenix will do best, Veros says. Given a 42% drop in home supply and a relatively strong economy, Phoenix homes will see a 5% price gain this year, Veros says.

A similar-size drop in supply is also helping Denver, says Scott Webber, president of Fuller Sotheby’s International Realty. “We’ve returned to a much more balanced market,” he says.

Denver prices rose 0.2% in January year-over-year, the Standard & Poor’s Case-Shiller index shows. Of 20 cities, only Denver, Phoenix and Detroit posted annual gains, S&P says.

Webber says non-distressed homeowners still hesitate to sell, but others see a shift. In Central Pennsylvania, Coldwell Banker saw a 30% jump in new listings in February over a year ago. March was strong, too, says manager Naomi Fredlund.

“People were holding off,” hoping for stronger prices, Fredlund says. “Now, they’re selling.” She expects flat prices.

Spring sales could disappoint because a mild winter drew some buyers into the market earlier, Dales says. Also, investors bought a record 25.4% of homes in February, says aCampbell/Inside Mortgage Finance survey. They buy all year and may mute the impact of the spring season this year.

Any hits to consumer confidence could also curtail sales in what’s “poised to potentially be a good season,” says Mark Fleming, CoreLogic economist.

The FHA upfront mortgage insurance premium will increase to 1.75% from 1% of the base home loan amount. This will apply regardless of the term or loan-to-value ratio beginning in April.

The annual mortgage insurance premium will increase by 10 basis points for loans under the $625,500 limit beginning April 1 and by 35 bps for home loans above that amount starting in June, the FHA said Monday. Authority for these raises come under the payroll tax cut extension agreed to last fall.

The FHA said the changes will boost the Mutual Mortgage Insurance Fund by $1 billion.

The UFMIP can still be financed into the mortgage. The increase to the upfront premium will cost new borrowers roughly $5 more per month.

Reverse mortgages and borrowers in special loan programs would be exempt from the changes, according to the FHA.

Last week at the Mortgage Bankers Association servcing conference in Orlando, FHA Commissioner Carol Galante said there would be upcoming insurance premium changes for the streamline refinance program. An FHA spokesman said these changes would be included in a letter to lenders due soon.

The MMI fund slipped below the Congressionally mandated 2% threshold in 2008, and in slipped to 0.2% last year. According to an analysis of President Obama’s budget, the fund could have declined further in 2013 and possibly needed a bailout from the Treasury Department. Nearly $1 billion in revenue from settlements with mortgage servicers announced in the last few weeks will also keep the fund from needing assistance, according to FHA.

“After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” Galante said. “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated 2% reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

Source: HousingWire.com

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In a situation like divorce, the general truth is that economic hardship and financial stress tend to be a chief cause. So you’d think that during the recession and housing slowdown that divorce is on the rise. But you’d be wrong.

I stumbled across a discussion of a new economics paper last week that finds the opposite – that economic turmoil today is keeping couples together, and that low house prices are the reason. Although it may seem like low house prices would enable couples to break up and buy on their own more easily than when the market is hot and prices are high, it seems that couples instead would rather stay in their unhappy marriages than sell their homes at a loss.

For those couples whose home values may have fallen below their mortgages, selling may not be an option if the bank won’t approve a short sale. But, even if that’s not the case, the research notes what economists call “loss aversion,” an emotional barrier to selling at a loss. It seems we humans for the most part can’t get over that.

Just how much did the recession and drop in house prices pull down the divorce rate? The research found that a 10% decrease in home prices pulled down the divorce rate of college-educated households from 11.6% to 8.22%.

What exactly does this mean? Well, it’s interesting data to understand when examining the dynamics of the housing market, what affects it and how it affects other parts of the economy and everyday life. For some couples, who knows – maybe the extra years they spend together because of avoiding a loss on their home sale will actually help them reconcile. Or, maybe it makes it worse.

I think a big take away from this is that it shows the emotional component of the housing market that can’t always be predicted. Data and forecasts are great; they’re helpful to understanding the various factors and impact of economic events. But, sometimes in housing there is good old human emotion that comes in and throws all the data and forecasts for a loop.

consider selling your house now rather than waiting.

Here are five reasons why:

1. This is when your house will get the most exposure.

There is currently an increase in the number of buyers attending open houses and searching online for a home. This surge dramatically increases the exposure for your house. The best chance of getting quality offers (perhaps even multiple offers) is RIGHT NOW!

2. Foreclosures and short sales will increase in about 90 days.

The good news is that the number of people paying their mortgage on time is increasing. This will lead to less distressed property sales later this year and throughout 2012. The not-so-good news is that there is still a large inventory of existing foreclosures and short sales that will still be coming to market.

As an example, LPS reported in their latest Mortgage Monitor that:

- There are still twice as many loans going 90+ days delinquent as are starting foreclosure.

- There are almost three times the number of foreclosure starts as there are foreclosure sales.

- Distressed property inventory levels are almost 45 times the rate of monthly foreclosure sales.

This means that there is a backlog of properties which will start coming to the market in about 90 days as banks clear up their paperwork challenges. These properties sell at dramatic discounts. They will be your competition. Both Fannie Mae and Freddie Mac have recently discussed the magnitude of this challenge.

3. Interest rates have risen over the last six months.

Interest rates have stabilized recently. However, in the last six months, interest rates have climbed over 1/4%. Every time the rates increase 1/4%, approximately 250,000 buyers are eliminated from qualifying for a mortgage. In an environment of volatile rates, waiting could mean that there will be fewer buyers eligible to purchase your house. It also could mean that you will pay a higher rate on the next home you buy.

4. Qualifying for a mortgage is about to get even more difficult.

Besides increasing rates, there are other factors that will hinder a buyer’s ability to qualify for a mortgage as we move forward. Lending standards have been getting tighter over the last year. And as the government debates the new proposed guidelines (QRM), banks are gearing up for even more stringent standards.

Morgan Stanley recently stated:

“Recent developments in issues such as GSE reform, Dodd-Frank securitization rules, and foreclosure settlement issues suggest a tighter and more expensive environment for mortgage credit.”

This may impact any potential purchaser for your property and may also impact your next purchase.

5. It’s time to get on with your life.

Probably the most important reason to sell is so you can get on with your life. You placed your home on the market for a reason. Do not allow a less-than-stellar housing market prevent you from reaching your goals as an individual or as a family. Think about the reasons you decided to move in the first place. Are these reasons still important to you? If you have to take less than you were originally hoping to get for your house, your family has a question to ask each other: Is the dollar difference in sales price worth putting off our plans? Only you and your family know the answer to that question.

If you plan to sell this year, the reasons above prove that selling now makes more sense than waiting to later in the year. Sit with a real estate professional in your area today to fully understand your best option.

There are some limited exceptions such as if the borrower is a corporation, an LLC, an LP or a political subdivision. Also, if the lien is secured by a bond, a public utility lien and there are additional provisions is the loan is cross collateralized. Lastly, although lenders cannot require a borrower to pay any additional compensation in exchange for a short sale approval , the new law allows for the borrower to voluntarily offer a monetary contribution to a lender in hopes of receiving a short sale. It goes on to state that contributions from other parties such as lenders, Realtors, and family members are allowed.

The odd thing about all these questions is that survey after survey keeps telling us that price is not the reason families actually buy a home. When money is considered at all, it is in light of not paying rent to a landlord. Let’s look at two recent surveys as examples:

National Housing Survey

The top five reasons given in the survey for buying a home, in order, are:

• It means having a good place to raise children and provide them with a good education
• You have a physical structure where you and your family feel safe
• It allows you to have more space for your family
• It gives you control of what you do with your living space (renovations and updates)
• Paying rent is not a good investment

The Myers Research and Strategic Services Survey

The top five reasons given in the survey for buying a home, in order, are:

• Home ownership provides a stable and safe environment for children and other family members
• Home ownership means the money you spend on housing goes towards building equity, rather than to a landlord
• Home ownership creates the opportunity to pay off a mortgage and own your home by the time you retire
• Home ownership creates the opportunity to live in a neighborhood that you enjoy
• Home ownership allows you the right to decorate, modify and renovate your home as you see fit

Bottom Line

Price dominates conversation when we talk about buying a home. However, when it comes down to it, we actually buy for the same reasons our parents and grandparents did – we want a better lifestyle for ourselves and our families.

The latest monthly read on home prices from the Standard & Poor’s/Case-Shiller home-price index, released Tuesday, was mixed at best. The index of prices in 20 cities was up 0.7 percent in April, the first increase since last July, but when adjusted for seasonal factors the index actually slipped 0.1 percent.

Like everything else about real estate, much depends on where you live and how much house you’re trying to buy or sell. Some regions remain mired in an ongoing price slide. While prices for middle and high-end homes have held up relatively well, house prices on the lower end of the market have been hit hardest.

The numbers also tell the story of a very uneven recovery from one region to the next. Washington, D.C., for example, saw the biggest price increases, followed by San Francisco, Atlanta and Seattle. Prices have flattened out in Los Angeles and San Diego, but six other metro areas — Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa — fell to the lowest levels in the nearly four years. Since the housing market collapsed in 2006, prices have fallen more than they did during the Great Depression.

“I would not assume it’s straight up from here,” said David Blitzer, head of S&P’s index committee. “About a year ago we saw similar numbers, and those fizzled out after the summer.”

Spring is traditionally the housing industry’s best season. But a combination of weak consumer finances, falling confidence, tighter mortgage lending requirements and a huge inventory of foreclosed homes has kept a lid on sales and prices. As seasonal demand begins to fade, some economists think home prices will resume their downward trend.

Story: Spring buying boosts home prices in big cities

“We believe that weak demand and the weight of these mortgages-gone-bad will lead to distressed sales that will eventually drag the Case-Shiller composite indexes down at least another 5 percent,” said Patrick Newport, an economist at IHS Global Insight.

Demand is also being held back by an uncertain financial outlook, as wary consumers face the prospect of continuing high unemployment and stagnating wages.
A series of downbeat economic reports last month sent consumer confidence plunging to a seven-month low in June, according to a report released Tuesday by a private research group. The Conference Board’s Consumer Confidence Index slipped to 58.5 in June — down from a revised 61.7 in May, when it dropped nearly six points.

“Given the combination of uneasiness about the economic outlook and future earnings, consumers are likely to continue weighing their spending decisions quite carefully,” Lynn Franco, director of the Conference Board’s Consumer Research Center, said in a statement.

Consumers’ worsening mood is based on more than bad headlines. With gasoline and food prices higher than they were a year ago, wages have barely budged, further stretching household budgets. On Monday, the government reported that consumer spending in May fell to the lowest levels in 20 months as after-tax incomes edged up just 0.1 percent.

After surging to an average of $4 a gallon, falling gasoline prices have begun to provide some relief for household budgets. But rising food prices are still putting the squeeze on consumer paychecks.

“We’re starting to see the lagging impacts of grocery price increases that were announced in the first quarter,” said Brian Sozzi, a retail industry analyst at Wall Street Strategies. “When consumers are hit with increased grocery prices, they have to make adjustments. I see it every week. When consumers get paid the aisles are packed. On the weeks they don’t get paid, it looks like a barren wasteland.”

With consumers on the lower end of the economic ladder living paycheck to paycheck, demand at the lower end of the housing market has been weakest. First-time home buyers shopping for a starter home are also finding it tough to get their mortgage applications approved.

The result is a much sharper price drop for houses in the lower tier of the market, where prices have fallen 45 percent since 2007, according to Case-Shiller data. That compares with price drops of 35 percent in the middle tier and 25 percent in the upper tier.

Lower-tier prices will continue to feel the biggest downward pressure for two reasons, according to Paul Dales, a senior U.S. economist at Capital Economics.

First, there are no signs that credit criteria for first-time buyers are loosening, he said. They may have an even harder time getting a loan if proposed new lending guidelines are approved, as the guidelines require more lenders to obtain a down payment of 20 percent or more.

Second, a large portion of the unsold inventory of foreclosed houses now pushing prices lower was purchased with sub-prime loans on homes in the bottom tier.

“That means the downward pressure on prices from forced foreclosed sales will be greater at the low end of the market,” Dales said.