We?re not looking at cute metrics anymore. ~ Safa Rashtchy
What?s your favorite indicator of where the market it going? Each month I publish a variety of Monroe County statistics hoping to lend perspective to our local real estate and mortgage finance markets. Mortgage and deed recordings, transfers, foreclosures started and finished just to name a few. I slice them, dice them and try to put them in meaningful relationships with a cool graph or two.
The Monthly Mortgage Market Share report reflects my unfulfilled desire to find the holy grail of market indicators. The one stat that above all others would tell me when the market would turn, how vigorous it would be and when it would end. Were I able to find such a metric, I?d be forever free from the anxiety of living or dying with daily order counts?a curse I?ve endured for over thirty years.
My job would be easy. My confidence would soar. I?d know exactly what decisions to make and I?d always be right. Staffing, capital expenditures, expansion would all be easy considerations. Alas, my search continues. I do know if asked that ?Well, we?re busy in the summer, and slow in the winter.? But that?s about it. Anything else I can add is history; what happened last month, quarter or year.
So I still form my opinions about the future from anecdotal evidence that over the years I?ve learned to trust. For example, I mentally track the number of new for-sale signs between home and the office every week. Before email and Adobe? attachments became common place, I could tell how things were going by how much fax paper we used every day. More than a ream and I knew that we?d be rocking soon.
One of my favorite market predictors is the weekend parking lot indicator. It?s quite simple. On any Saturday or Sunday, I just look out my office window and across the street to Re/Max Professionals? parking lot. When it?s empty, I know that few of my friends are schlepping buyers around looking for dream houses. When it?s full though, especially with cars I don?t recognize, get ready. The market will be turning soon. Make sure there?s paper in the fax. Right now this indicator is pretty darn bullish.
What?s your favorite market indicator? I?ve posted this commentary on my blog here:? http://www.johnbtitle.com/category/blog/
Leave a comment and let the world know. You?re probably more insightful than you give yourself credit for.
This is not the end. It is not even the beginning of the end. But it is perhaps, the end of the beginning. ~ Winston Churchill
There are encouraging signs for the Monroe County real estate and mortgage finance markets. Commercial loans showed signs of life in December. Residential sales in the higher price ranges improved over the last six months of the year. Neither of these developments appears to be the result of any artificial stimulus, such as home buyer tax credits. That?s good news.
The twenty mortgages securing loans over $500,000 (see detail) made in December is the highest total in Monroe County since July 2008?the month when the sub-prime crisis became obvious. Most of these loans appear to be commercial in nature which is a positive indicator for the 2011 market. I?ll be watching closely the next few months in hopes that this is a trend, and not a year-end aberration.
Sales of properties for use as a primary residence (see chart) also displayed an upbeat trend. Although the total sales in the second half of 2010 were down compared to the 2009 period, sales in the upper price ranges were actually higher?a lot higher. Second half sales with a stated sales price in excess of $200,000 increased over forty percent over 2009?from 178 to 251! These sales are less driven by tax credits and artificial stimulus. The drivers are more likely low interest rates and buyers feeling financially confident about making a change.
The last trend to keep an eye on is mortgage foreclosures. The number of new foreclosures started and the number of recorded Sheriff?s deeds (foreclosures finished) both continued to drop in Monroe County. Is this drop is real or is it just a pause as a result of the robo-signer-gate revelations in the fourth quarter? Let?s hope it?s the beginning of a return to normal.
The market still has a long way back. The ever increasing overhead of regulation and compliance certainly will retard its progress. Nevertheless, signs of improvement should be celebrated.
“We’ll take the best ones, test them on consumers, and then soon be able to unveil a new, easy-to-understand, federal disclosure form,”
~Treasury Secretary Timothy Geithner speaking about combining the TILA and GFE forms
I?ve suggested here on occasion that Compliance Officer might be the hot career track in mortgage finance. This past year left no doubt about that. If dealing with the Home Valuation Code of Conduct, RESPA, TILA, and endless new loan guidelines from Fannie, Freddie and FHA weren?t enough, we enter 2011 riding the wave of Robo-signer-gate to where Dodd-Frank Financial Reform awaits.
According to the New York Times, the newly created Bureau of Consumer Financial Protection (just the name alone makes me feel safer!) will oversee the writing of 243 financial rules and conduct 67 studies that I?m sure will find the necessity for even more rules. We?re going to need a compliance army, not just an officer. And politicians wonder why everyone is afraid to buy, borrow or lend.
Although many believe the regulation and compliance emphasis is going overboard, it?s awfully hard to argue against it when the banks, loan servicers and foreclosure attorneys can?t stay out of their own way in the foreclosure mess. Each week seems to bring a new revelation; lost promissory notes, foreclosing on the wrong property, waltzing home owners around the mortgage modification dance floor only to pull the rug out by foreclosing, “technical error? is the new legal term for falsified affidavit. Each disclosed bungle is naturally followed by politicians convening televised hearings and calling for even more regulation.
All we can do is get ready for more of the same. We?re destined for more regulations to ensure that the age of irresponsible borrowing never occurs again. And if responsible borrowing is a casualty, as our local originations clearly show, then so be it.
And to Secretary Geithner I have but four words. Good luck with that!
“I would tell you that we?re probably there,?we are probably tighter than we need to be.?
~ William Emerson, CEO Quicken Loans, Inc.
In case you haven?t noticed, the purchase market is quite soft. July through October deed recordings were down a whopping twenty-nine percent compared to the same four months in 2009. (757 to 540) How quickly things change. After the first six months of 2010 that number was up seventeen percent. Now, after ten months the comparisons show a total market decline of five percent. (1561 to 1482)
Clearly all the homebuyer tax credits achieved was to accelerate business into the second quarter that probably would have closed in the third quarter. There?s no evidence that the credits brought new buyers into the market. By year end the decline will be even greater since homebuyer tax credits were driving business at the end of last year.
In an interview with Al Yoon of Reuters? last week, William Emerson said what we all know. The credit pendulum has swung too far to the conservative side. And he doesn?t see that changing for another two years. That?s worrisome.
In a related matter, J.D. Powers and Associates reported November 18th that the length of time from loan application to closing has increased again to 52.1 days?the third year in a row. Not surprisingly, consumer satisfaction with the mortgage origination process continues to decline over the same period. Consumer satisfaction with big banks scored even worse on servicing issues. Here are links if you want to take a look. ?Origination Survey. Servicing Survey.
So, fewer people are buying. More people don?t qualify. For those that do the process takes longer, is less satisfying and the experience tends to get worse if you have to deal with the bank on a servicing issue.
And big banks wonder why no one will believe their characterization of problems with foreclosure affidavits as ?technical.?
Despite the challenges of the market place, 2010 has been a great year for our company. Everyone here at the World Headquarters wishes to extend many thanks to all our clients and associates for your confidence in us. We all hope that you have a wonderful holiday season and come back renewed and refreshed to pursue the opportunities that await us in 2011.
?Lots of folks confuse bad management with destiny.?
Is anyone really surprised by the latest foreclosure revelations that thousands of affidavits submitted to hundreds of courts in support of thousands of foreclosures were prepared with something less than careful attention to detail? Not to worry, though. As soon as the bank stock analysts started questioning the effect of this latest snafu on bank earnings we were told literally within hours, ?It?s ok now. No real problem. Let the foreclosures resume.? I?m certain that somewhere, a foreclosure processing manager is well regarded by upper management because his or her ?foreclosures processed per employee per month? metric is so high.
The vast majority of foreclosures are warranted. However, fifty state attorney generals are now investigating big banks and their foreclosure process. Many of the AG?s will ask why there are not more loan modifications, a politically popular question with a complicated answer. And to the extent that the investigations discover a callous and condescending approach to the rule of law, big banks will suffer. Foreclosure delays will increase costs. The increasing public perception of bank complicity in the problem won?t help things either.
These procedural errors will begat the inevitable onslaught of class action litigation. The plaintiff?s bar, with endless depositions and requests for production of documents will further increase the cost of foreclosures and lengthen the amount of time that it will take to work out of the foreclosure debacle. In the end these actions will probably extract small changes to the foreclosure process in the name of the consumer and big checks in the names of the attorneys.
There?s a bigger skeleton in the closet though. The Wall Street Journal? recently reported that the investors who bought all the securities containing bad mortgages are beginning to mobilize. The ultimate goal is to prove that the mortgages comprising the securities were not originated to the standards represented in the offering. That could result in those bad mortgages being put back to the banks who originated them. I?ve read some astoundingly high estimates of the big bank?s potential liability. Expect a long drawn out battle when this starts happening.
The sub-prime induced mess that we?re in started about three years ago. It is far from over. To the extent these recent developments retard the recovery of the housing sector of the economy, we all suffer.