Housing starts near 5-year high in February

Homebuilders were a lot busier in February than they were a year ago, starting construction on 27.7 percent more units.

Aside from the 982,000 mark seen in December 2012, February's seasonally adjusted annual rate of 917,000 home starts was the highest since July 2008 when it reached 949,000.

Housing starts of all types were up 0.8 percent from January to February, and have climbed by about 90 percent from a post-collapse bottom in early 2009. Single-family starts are up about 75 percent from their post-bubble low, pointed out Bill McBride on his blog Calculated Risk.

Single-family housing starts in February were at a rate of 618,000, a 31.5 percent jump from a year ago and up 0.5 percent from January.

Builder confidence slipped for the second month in a row in March as builders are dealing with the growing pains around restarting an industry, according to a monthly survey from the National Association of Homebuilders (NAHB).

"In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself," said NAHB Chief Economist David Crowe in a statement.

And demand isn't the issue, noted NAHB chairman Rick Judson.

"Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor," Judson said in a statement. "At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals."

All regions saw significant year-over-year increases in their housing start rates in February with the West leading the way with a 63.4 percent jump, followed by the Northeast, Midwest and South with increases of 56.1 percent, 33.3 percent and 10.5 percent, respectively.

Month-over-month, the Midwest and Northeast saw housing start rates reach double-digit growth in February from January with 37.5 percent and 18.4 percent increases, respectively.

The West and South, however, saw dips in their annual rates in February from the month before with drops of 7.2 percent and 5.7 percent, respectively.

Courtesy of Inman News

NEW HOMES BUILDING PICKS UP IN MAY

Groundbreaking for single-family homes edged up 3.2 percent in May, reaching its highest level since December, the Commerce Department reported Tuesday. Single-family construction is now up 26 percent from year ago levels, as the new-home market continues to inch toward recovery.  

However, the volatile multifamily market bit into the pick-up in single-family construction. Overall housing construction in May dropped 4.8 percent compared to April, pulled down by a 21.3 percent decrease in May in multifamily construction. 

Still, there’s reason behind home builders’ increasing optimism about the sector: New housing permits--a future gauge of construction--soared nearly 8 percent in May, reaching the highest monthly level since September 2008. 

Builders’ Feeling More Confident About Recovery

Builders’ confidence is gradually building about the market for newly built, single-family homes. Builder confidence rose one point in June and continuing the trend of several months of steady increases, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index is now at its highest level since May 2007.

Builders in the Midwest and West seem to be the most optimistic that the new-home market is improving. 

The increase in builders’ sentiment is “reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today's low prices and interest rates," says Barry Rutenberg, NAHB chairman. 

However, builders continue to cite overly tight lending conditions and low appraisals as major obstacles in completing sales.

FHA REVOKES CONTROVERSIAL CREDIT DISPUTE RULE

The Federal Housing Administration has decided to rescind a rule that would have made it tougher for borrowers with credit disputes on their records to qualify for an FHA-backed mortgage. The rule had been widely criticized by the lending and real estate industry as shutting out too many potential borrowers from qualifying for a mortgage. 

The new rule originally took effect April 1 but then was postponed a week later until July 1 as the FHA further reviewed the policy change. 

The guideline would have required borrowers who wanted to qualify for an FHA-insured mortgage to pay off any credit dispute in their history of more than $1,000 or set up a documented payment plan on any unpaid collection accounts. 

"FHA killing off the rule is not a surprise when you take into account the resounding objection from the housing finance community and their concern that this would overly constrain credit," Edward Mills, senior vice president at FBR Capital Markets, told HousingWire. "This action shows how it can be incredibly difficult to make choices that move towards protecting the insurance fund over keeping mortgage credit available."

The FHA rule was expected to have the greatest impact on young, first-time borrowers. John Burns Real Estate Consulting found in a recent survey that about a quarter of builders said that the rule had the potential of delaying or losing up to 60 percent of their sales. 

"The ripple effects of the FHA credit dispute rule would have had a notable impact on the housing market," Lisa Marquis Jackson, vice president of John Burns Real Estate Consulting, told HousingWire.

Revised Federal Program to help Homeowner's with Underwater Mortgages

For underwater homeowners who want to refinance their mortgages, the details of HARP 2 are coming into focus.

HARP 2 is a liberalized revision of the Home Affordable Refinance Program. HARP's goal was to allow homeowners to refinance their loans, even if they owed more than their homes were currently worth. Millions of homeowners are in this predicament because their homes lost value in the bursting of the housing bubble.

HARP was introduced in 2009, and it was designed to help homeowners with mortgages owned by Fannie Mae or Freddie Mac. The program let borrowers refinance at up to 125 percent of their homes' current values. For example, under HARP, if you owed $125,000 on a house that was now worth $100,000, you could qualify for a HARP refi, because your loan was 125 percent of the home's value. But if you owed more than 125 percent of the home's value, you were out of luck.

That 125 percent loan-to-value limit has been eliminated under HARP 2. Under new rules issued on Tuesday, there is no loan-to-value limit on HARP refis -- at least, for borrowers who have fixed-rate mortgages.

The elimination of the loan-to-value limit is the biggest change under HARP 2. Here is a rundown of HARP 2's guidelines:

• The program is for borrowers whose mortgages are owned by Fannie Mae or Freddie Mac, and who got their loans before May 2009.
• HARP had been scheduled to expire at the end June 2012; HARP 2 extends the expiration to the end of 2013.
• There is no loan-to-value cap anymore for borrowers who now have fixed-rate mortgages.
• For borrowers with ARMs, the loan-to-value cap remains 105 percent.
• Borrowers can qualify for HARP 2 refis if they have paid on time for the last six months and have no more than one 30-day late payment in the last 12 months. Originally, HARP didn't allow any delinquencies in the last 12 months.
• Fees have been reduced. Lenders are fond of adding fees to loans that have an added smidgen of risk. Fannie and Freddie call these fees "loan level price adjustments," and the charges easily can climb to 2 percent of the loan amount on HARP refis. Under HARP 2, the fees are reduced to zero percent on loans for 20 years or fewer, and 0.75 percent for mortgages for more than 20 years and for ARMs.

Generally speaking, the changes go into effect  Dec. 1.

Regulators and analysts expect HARP 2 to result in 1 million more refis than would have closed under HARP, with an average loan balance of $150,000 to $175,000.

Housing Crisis to End in 2012 as Credit Standards Loosen

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

Krista Franks Brock/Linked In