Market Update for December 28th

Mortgage and Lending with Peoples Home Loans NMLS 13530



Keeping you updated on the market!

December 28 , 2011




Much has been written and said on the depressing influence of shadow inventory on the housing recovery. Most of us are familiar with the ubiquitous refrain: excessive shadow inventory impedes recovery because it lowers home prices, which, in turn, retards home sales and building activity while encouraging strategic defaults.

Shadow inventory hasn't gotten much better in recent months, but it hasn't gotten worse either. CoreLogic reports 1.6 million housing units are slotted into the shadow-inventory category – a five-month supply at the current sales pace. These numbers have held steady since July, but it's worth noting that they are a significant improvement over the numbers posted this time last year.

Positive news from homebuilders suggests that shadow inventory could become less of a depressing influence going forward. Homebuilder confidence is growing. The homebuilder sentiment index rose to 21 in December, posting its best reading in nearly 18 months.

Homebuilders are reporting more interest from potential buyers, and more action from these buyers to boot. Housing starts surged 9.3 percent to an annualized rate of 685,000 units in November. The gain was led by a 25.3-percent jump in the multifamily component, though the much larger single-family component also improved, 2.3 percent, after a 3.6-percent rise in October.

The fact is that confidence and activity don't increase if you are overly concerned about falling prices and rising inventory. Yes, shadow inventory remains a problem, but not an intractable one. Markets have been clearing and will continue to clear inventory until more normalized supply levels are reached.

It's difficult to say when the clearing process will end. The NAR's sweeping revision to its data reporting clouds any estimates. Sales of existing homes posted at the annualized rate of 4.4-million units in November. Initial consensus estimates called for 5.1 million units, but this was before the NAR announced its revision. Based on the revised October sales, November sales actually posted a 4-percent month-over-month increase.

Pricing and supply were the positive takeaways. The NAR's data also show that the median national home price increased 2.1 percent to $164,000, while supply dropped to seven months at the current sales pace compared to 7.6 months in October.

The degree of NAR's revisions raised a few eyebrows, shaving sales, through 2007 to 2010, by a monthly average of 14 percent. But it's important to keep in mind that where we're going is always more important than where we've been.

That's also an important point to keep in mind when vetting the mortgage market. We've been warning for the past year that borrowers have become too complacent with the idea that rates will remain permanently low. We think this is a dangerous assumption because inflation is a permanent fixture of our economy and money supply. Over time, investors need to be compensated for loss of purchasing power. Interest rates are a compensating variable.

To be sure, mortgages rates remain low, but improvements have been slight over the past month. This tells us that rates really don't have much incentive to go lower. This isn't to say they can't go lower, but it's important to remember that a 4-percent 30-year fixed-rate loan is the anomaly not the norm.





Date and Time



Home Price Index

Tues., Dec. 27,
9:00 am , et

0.2% (Decrease)

Moderately Important. More current data point to firming prices in many metropolitan markets.

Consumer Confidence

Tues., Dec. 27,
10:00 am , et

60 Index

Important. Improving job prospects are lifting confidence and home-buying prospects for 2012.

Mortgage Applications

Wed., Dec. 28,
7:00 am , et


Important. Purchase activity has slowed in the past month, but remains positive.

Pending Home Sales Index

Thurs., Dec. 29,
10:00 am , et

94 Index

Important. Recent gains in contract signings point to a firm start to the new year.




Bottom Up Over Top Down recently ran a short but acknowledging article on smaller mortgage originators. Basically, the article explained the positive growth in this market segment.

The article didn't surprise us, or reveal anything we didn't already know. Small business people tend to be more nimble in meeting consumer demands than their large counterparts. This isn't to say that large originators aren't populated with employees with a small-business mentality, but when you're in the trenches handling most aspects of the business, you tend to be a little more attuned to market reality.

The point we want to highlight is that we are very important aggregators and disseminators of market information and knowledge. We know how to get things done, and markets will improve mostly due to our actions and less to directives from sources that are less connected.

We say this because it's easy to forget how important our presence and insights are for getting things done and correcting market imbalances. We think this sentiment is worth keeping at the forefront of our thoughts as we head into the new year.



Posted by

Michael Dutra

Regional Sales Manager

Peoples Home Loans

Phone: (508) 372-9176

Cell: (401) 486-6894




Lending in ALL 50 States


NMLS 13530


This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Rhode Island Bristol County Barrington Rumstick Point
real estate

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Ronald DiLalla
Century 21 Discovery DRE 01813824 - Anaheim, CA
No. Orange Cty Real Estate

Hi Michael,  always interested in viewing figures from other Communities.....thanks for sharing with us.

Dec 28, 2011 03:24 AM #1
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Michael Dutra

Ask me a question
Spam prevention

Additional Information