Older Adults at Higher Risk for Foreclosure.

Older Adults at Higher Risk for Foreclosure

More than 1.5 million older adults have lost their homes to foreclosure and millions more are at risk, according to a new AARP report. The risk appears to be greatest among Americans 75 years and older, as well as minority home owners.

About one in 30 adults 75 and older face foreclosure today. That’s significant when compared to 2007, when one in 300 home owners aged 75 and older were at risk of foreclosure.

Furthermore, older minorities — particularly African Americans and Hispanics — have foreclosure rates that are nearly double than those of white home owners at the same age, the report notes.

What’s more, the number of older adults who are underwater on their mortgage is alarmingly high. About 3.5 million — or 16 percent of older home owners — have underwater mortgages, which could put them at risk of foreclosure.

“The Great Recession has been brutal for many older Americans,” says Debra Whitman, AARP’s policy chief.

Just in the past five years, the number of loans held by older Americans who are seriously delinquent on their mortgage soared more than 450 percent.

Many older adults live on fixed incomes and are in retirement, which makes catching up with their mortgage payments once they fall behind particularly difficult.

Rep. Elijah Cummings, D-Md., is pushing the federal government to do more to help older Americans keep their homes, such as by promoting more mortgage principal reductions and loan-modification programs.

“These are people who in many instances have never missed a payment in 20 years,” Cummings told the Associated Press. “You see grown men crying because of the potential foreclosure.”

Source: “Foreclosure Crisis Hits Older Americans Hard,” Associated Press (July 19, 2012)

Commercial real estate continues to Lead Rebound.

Commercial real estate continues to Lead Rebound

Two recent reports highlight the strength of the commercial market.

Morningstar reports that commercial real estate is much stronger than housing as evidenced by real estate funds, which have recorded an average annualized return of 33 percent over the past three years.  Through June, real estate funds have attracted $2.9 billion in new cash while investors have pulled out of nearly every other stock fund group.  The decline in commercial real estate was not nearly as severe as the residential market crash due to the fact that office buildings, industrial facilities, hotels, and apartments were not overbuilt to the same extent as homes.

Meanwhile, Fitch Ratings reports that delinquencies on commercial real estate collateralized debt obligations (CDO) declined in June for the second month in a row.  The rate fell to 12.3 percent last month from 13 percent in May.  Just five new delinquencies were added to the Fitch index in June, while 15 assets were removed.  Eight of those 15 interests were disposed of at full to partial losses, which contributed to the $115 million in realized losses reported by asset managers in June—the highest monthly total so far in 2012.

Sources: “Real Estate Funds Lead the Pack, Can It Last?” USA Today (June 21 2012) and “Fitch: Commercial Real Estate CDO Delinquencies Fall for Second Month in a Row,” Wall Street Journal (June 20 2012)

New Home Building at Highest Level in 3 Years.

New Home Building at Highest Level in 3 Years.

The New Home Building industry continues to dig out of its slump as the pace of construction posts big jumps for single-family and multifamily houses. Builders had a level of starts in June not seen since October 2008, the Commerce Department reported Wednesday.

New Home Building starts in June soared 6.9 percent, reaching a seasonally adjusted annual rate of 760,000 units. Broken down, single-family home construction, which makes up the largest segment of those new housing starts, increased 4.7 percent in June. Multifamily housing starts, considered a volatile segment of the market, jumped 12.8 percent last month.

New Home Building starts were nearly 24 percent higher in June compared to last year at that time.

“Housing continues to be the one sector of the U.S. economy that is outperforming expectations,” Michael Gapen, an economist at Barclays, told Reuters.

Still, while New Home Building starts posted a big leap in June, new housing permits — a gauge of future building — dropped 3.7 percent in June.

Source: “Housing Starts Are Up, but Building Permits Decline,” Reuters (July 18, 2012)

Luxury Homes Linger Longer Than Lower-Priced Houses.

Luxury Homes Linger Longer Than Lower-Priced Houses

While the market for lower-priced and entry-level homes is showing signs of momentum, the Luxury Homes market seems to be stagnant.

The average days on the market for Luxury Homes — houses selling for more than half a million dollars — is 186 days, according to the Institute for Luxury Homes Marketing weekly report. On the other hand, the national median for all homes dropped to 84 days in June, according to REALTOR.com MLS data.

Inventories of for-sale homes in the luxury market as well as median asking prices have mostly stayed stable since November, according to the ILHM.

Meanwhile, lower-priced homes are seeing falling inventories and list prices increase.

The dropping inventories in lower-priced homes may be helping to drive most of the momentum. For example, Sam Khater, a CoreLogic economist, estimates that lower-priced homes are appreciating three times faster than Luxury Homes due to the lower inventories and higher buyer demand.

Source: “Tight Inventories Almost Bypass Luxury Market,” RISMedia (July 18, 2012)

False Housing Recovery or for Real This Time?

False Housing Recovery or for Real This Time?

Deutsche Bank says that there have been seven false housing recovery reports with the housing market in the last six years. But housing analysts and economists are more optimistic that this time around a residential housing recovery will finally stick.

The signs analysts point to for a false housing recovery:

• Stocks of home building companies are rising and even doubling in the last nine months.
• Falling inventories of for-sale homes—both new and existing homes—have caused a shortage in the market and sparked higher demand.
• Home prices have appeared to bottom out in many areas and are gradually starting to reverse course and rise.
• And the increased costs of renting has made more Americans see housing as a better deal.

Housing experts also turn to a case in Delray Beach, Fla., as another recent example of a turnaround. Home buyers started lining up at 6 a.m. to buy one of the 44 homes that were for-sale that weekend.

Still, economists and housing analysts say they have concerns about a false housing recovery, such as that elevated numbers of foreclosures will soon hit the market and cause prices to fall again. But, they say, as long as the foreclosures come on the market gradually and not all at once, they believe the housing market—and home prices—can sustain the recovery.

Source: “Buying into a Housing Comeback,” Fortune (July 2012)

Home Owner Insurance Deductibles on the Rise.

Home Owner Insurance Deductibles on the Rise

Home owners beware: “Your home owner insurance now probably covers less while costing more,” The Wall Street Journal reports.

Home owner insurance deductibles have been rising the last few years, as home owners who may have once seen $250 to $500 a claim soar to $1,000 to $2,500 a claim in recent years.

There’s been a move by the industry to go to percentage-based home owner insurance deductibles, which have caused prices to rise. For example, home owners may have once had a $500 to $1,000 deductible but now have a form of a deductible of 2 percent of the insured value of a home for items like wind and hail damage. That could mean that insurance may only cover half the cost of a roof replacement.

What’s more, more insurance companies are issuing more limits on what all they will pay for in replacing a home.

Texas home owners pay the highest home owner insurance premiums in the country, but a consumer group in the state found that newer policies are covering less, like limiting coverage on plumbing leaks or damage to foundations.

With insurance policies squeezing more home owners’ budgets, housing experts say home owners need to take an active role in reviewing their policy to find out what all is covered. Also, they say that home owners need to think twice before making several claims.

“One large claim will affect you less than multiple small ones,” The Wall Street Journal article notes. “Of course, you buy home owner insurance to be covered, so you are always free to file a claim. But you should know that insurers keep close track of claims and will penalize you for making too many, even if you just happen to hit a string of bad luck.”

Source: “Insurance Deductibles Soar,” The Wall Street Journal (July 13, 2012)