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Pending Home Sales on an Upswing
Pending home sales increased again in March, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of Realtors®. The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. This forward-looking indicator based on contracts signed in March, rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1 percent above March 2009 when it was 85.0; this follows an 8.3 percent increase in February.
The data reflects contracts and not closings, which usually occur with a lag time of one or two months. Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing. Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
Goldman clients staying put
It has been nearly three weeks since the federal government stunned Wall Street by bringing civil fraud charges against Goldman Sachs. Since then, the firm has endured a firestorm of criticism and a rash of lawsuits. But so far, that has done little to scare off long-standing Goldman customers. In fact, Goldman has done a pretty admirable job of maintaining the status quo in spite of the scrutiny that has erupted since the Securities and Exchange Commission took aim at it. By most measures, Goldman is still viewed as the firm to beat on Wall Street, with arguably the best stable of talent and the impressive network of contacts that come with it. But a handful of clients have already cut ties with the firm altogether, according to reports, including German commercial lender BayernLB. But that number could grow, some experts said.
Government clients, for example, may shun the firm out of fear of being associated with the Goldman name. Goldman has already lost several clients this year, including the Public Employees' Retirement System of Nevada, which cut ties with Goldman in late March. As of the end of the first quarter, Goldman's asset management business controlled some $840 billion, down $31 billion from the end of 2009. In an effort to prevent further fallout, Goldman employees are believed to be actively reassuring clients across their various businesses, downplaying claims made by the government. There is also speculation that clients could push for a more generous fee arrangement, eliminating the pricing power that some say Goldman has enjoyed over its competitors in recent years. After all, the SEC fraud allegations are centered on a transaction it helped conduct for one of its hedge fund clients.
Refinance Activity Declines in Latest MBA Weekly Survey
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending April 30, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 4.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 5.1 percent compared with the previous week. The Refinance Index decreased 2.1 percent from the previous week and the seasonally adjusted Purchase Index increased 13.0 percent from one week earlier. The Conventional Purchase Index increased 9.4 percent from the previous week while the Government Purchase Index increased 16.7 percent. The unadjusted Purchase Index increased 14.1 percent compared with the previous week and was 10.3 percent higher than the same period one year ago.
"Purchase application activity continued to increase in the last week of the homebuyer tax credit program," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Purchase applications were up 13 percent over the previous week and almost 24 percent over the last month, driven by significant increases in both conventional and government purchase applications. We also saw the Government share of applications for purchasing a home increase to over 50 percent of all purchase applications last week, which is the highest in two decades." The refinance share of mortgage activity decreased to 51.9 percent of total applications from 55.7 percent the previous week. This is the lowest refinance share observed in the survey since the week ending July 3, 2009. The adjustable-rate mortgage (ARM) share of activity increased to 6.3 percent from 6.0 percent of total applications from the previous week.
Diana Olick – Loose Lending Didn't Create the Housing Bubble
"Contrary to the assertions of many economists and others, the boom and bust in housing over the last decade was not primarily caused by low interest rates, reduced down payment requirements, or laxer underwriting standards. Yes, after years of bashing the mortgage industry for lax underwriting, bashing the Federal Government for negligently low interest rates and blaming investors for vacuuming up homes with no-money-down loans, three guys from Harvard say they're all off the hook. Edward Glaeser, a professor of economics who directs the Rappaport Institute and the Taubman Center, and his colleagues, Joshua Gottlieb, a doctoral student in economics at Harvard; and Joseph Gyourko, a professor of real estate at the Wharton School will release their paper: "Did Credit Market Policies Cause the Housing Bubble?" Wednesday at a conference at the Federal Reserve Bank of Boston.
"It isn’t that higher mortgage approval rates aren’t associated with rising home values. They are," they add. "But the impact of these variables, as predicted by economic theory and as estimated empirically over many years, is too small to explain much of the housing market event that we have just experienced. Reduced down payment requirements did not greatly contribute to the housing bubble," claim the authors. Prof. Glaeser shares that the housing bubble is caused by a cocktail of things, and loose lending was certainly an ingredient. Prof. Glaeser argues that the mortgage interest deduction is not healthy for the housing market, and, while he didn't say as much, perhaps more dangerous than low, low mortgage interest rates or no-money-down loans. Why? Because it gives borrowers a continuing, long term incentive to borrow more than they should.”
US Home Loan Demand Up as Tax Credit Ends
Demand for loans to buy U.S. homes raced to a seven-month high last week in the final hurrah for federal homebuyer tax credits that ended April 30, Mortgage Bankers Association data showed on Wednesday. Home purchase loan applications jumped 13 percent to the highest level since early October in the week ended April 30, overshadowing a 2.1 percent drop in refinancing demand. The share of loan refinancing fell to 51.9 percent of all applications, the lowest since early July 2009, the MBA said. Eligible borrowers seeking to take advantage of federal tax credits of $8,000 for first-time buyers and $6,500 for existing homeowners were required to sign contracts by last Friday and must close on their loans by June 30.
The big question now is whether the U.S. housing market has enough traction to continue recovering without government help. In addition to the tax credit, the Federal Reserve bought more than $1.4 trillion mortgage-related securities aiming to keep mortgage rates down to revive the housing market. That program ended on March 31. Housing demand is likely to drop off after the recent flurry of sales ahead of the tax credit expiration, but then mount a slow upturn, most industry experts expect. Homeowners have increasingly turned to the government for their mortgages, including low down-payment products from the Federal Housing Administration. More than half of all purchase applications last week were for government loans, the highest share in two decades, the Mortgage Bankers Association said.
Geithner Pushes Bank Tax, Outsourcers try to wiggle out
In his speech in front of the Senate Finance Committee, Treasury Department secretary Timothy Geithner renewed the push for the Financial Crisis Responsibility Fee, a tax on the liabilities of banks, proposed by the administration in January. The announcement comes at a time when bank wealth managers are becoming increasingly pressured by regulatory reform, according to a poll conducted by SEI, a third-party portfolio servicer. According to the survey of 27 bank wealth mangers located across the US, nearly all expect regulatory scrutiny to grow and only 33% are confident they can keep pace with the change. The survey found that 67% of the respondents report spending significantly more time working on compliance, compared with two years ago.
Regulators and legislators alike are looking to implement a wide variety of changes to the day-to-day operations of bankers. Oftentimes banks are blamed for sharing a huge role in the current recession, but the American Bankers Association (ABA) believes that a bank tax is uncalled for. As it stands, if adopted, qualifying firms would pay a fixed percentage of their assets adjusted for risk, minus their capital, insured deposits, and certain insurance policy reserves. Firms that take on more risk and fund those activities with less stable sources of financing would pay more than firms that are managed more conservatively. “This framework has the significant benefit of including derivatives and off-balance sheet items not otherwise reflected under conventional accounting,” Geithner said. “Had the Troubled Asset Relief Program (TARP) been limited to the banking industry, there would be no losses on the program,” said ABA chief economist James Chessen, in his testimony in front of the Senate Finance Committee. “The bank tax is an arbitrary tax on institutions of a certain size without regard to where the losses actually occurred or the payments made by banks which have provided a significant return to taxpayers.”
Above Post Written by: Chris Mclaughlin with Short Sale Riches.com
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