According to Fannie Mae's November National Housing Survey, positive momentum in the housing market has slowed as Americans remain cautious about their personal finances and the overall state of the economy. Nearly two-thirds of those surveyed believe the economy is on the wrong track. Twenty-two percent expect their personal finances to worsen during the next year, and only 45 percent expect home prices to increase within the next 12 months. According to Doug Duncan, SVP and chief economist at Fannie Mae: "We continue to see caution as the defining feature of Americans' attitudes toward the economy and their personal financial situation. In this environment, the housing recovery is likely to improve, but only at a gradual pace." Duncan continued: "Our November National Housing Survey results show a loss of momentum in expectations for home prices and personal finances. Also, the majority of consumers expecting higher mortgage rates implies a slowing of housing market momentum. As the economy continues to improve and household balance sheets for most Americans are slow to repair, we continue to see the transition to a full housing recovery as a slow process." Additional survey highlights reveal: -The average 12-month home price change expectation continued its fall, down 2.5 percent. -Consumers who say mortgage rates will go up in the next 12 months increased by 2 percentage points to 59 percent. -Only 64 percent feel it is a good time to buy a house, which is an all-time low for the survey. -Rental prices are expected to fall 2.8 percent. -In spite of falling home rental prices, 50 percent of those surveyed say home rental prices will go up in the next 12 months. -Fifty percent say it would be easy for them to get a home mortgage today, an increase of 4 percent from the previous month's survey. -Those who say they would buy if they were going to move decreased slightly to 68 percent. -The share of respondents who say the economy is on the right track increased to 32 percent, but this is a lower total than earlier this year. -Respondents who expect their personal financial situation to worsen in the next 12 months held steady at 22 percent. -Respondents who say their household income is significantly lower than 12 months ago increased to 17 percent. -Thirty-three percent of respondents say their household expenses are significantly higher than 12 months ago. The Fannie Mae National Housing Survey has been conducted monthly since June 2010. It polls about 1,000 households via telephone to assess attitudes on home rental or ownership, the economy, and overall consumer confidence. Fannie Mae shares its survey results to help industry partners and market participants stabilize the housing market and provide support in the future. Visit the Fannie Mae Monthly National Housing Survey page on the GSE's website for detailed findings from the November 2013 survey, an audio podcast synopsis of the survey results, and survey questions asked. Also available on the site are in-depth topic analyses, which provide a detailed assessment of combined data results from three monthly studies.

Interest Rate Reality Check

Interest Rate Reality Check The mortgage market has begun its slow ascent back to normal interest rates which should continue next year. The industry is expecting the rate on the benchmark 30-year fixed-rate loan to be near 5% later next year. Presently, they are in the low 4.00% area. But, what do prospective homebuyers consider “normal”? Expectation vs. Reality: In a recent survey, a large national internet real estate brokerage asked prospective homebuyers what they considered a “normal” interest rate for a 30-year fixed rate mortgage. Their responses point to a rather large discrepancy between expectations and reality. Expectation: 83% of respondents expected a normal rate to be less than 5.00%. Reality: • Since 1990, interest rates have averaged around 6.7% • Prior to March 2009, rates had never been below 5% • During the 1980’s rates ranged approximately 10% to 18% Clearly, the Fed’s easy-money policies since the housing crash has trained buyers to expect rates in the 3% - to 4% range. Alarmingly, more than 40% of the survey respondents said they wouldn’t buy a home if rates rose much further. It might be wise to start adjusting our minds now to a new normal. Normal is not less than 5%! The rise will probably be slow and choppy but the longer one waits to buy or refinance, the greater the risk that rates will be higher. The Fed: It’s the Fed activity of buying Mortgage-Backed Securities (MBS’s) as part of their stimulus plan called “Quantitative Easing” that has kept mortgage rates artificially low. As the economy gains strength, the Fed’s intention is to wean the nation off of this low-rate money. Lately, there have been signs of strength in the form of improved Employment statistics. The Fed meets this Tuesday and Wednesday and the financial markets are looking for some clarity in the Fed’s intentions as to when they will begin to taper their purchases of MBS’s. Look for that Fed announcement to be the driving force behind interest rate gyrations next week.

Los Angeles Sues Nation's Largest Banks

Los Angeles Sues Nation's Largest Banks The city of Los Angeles launched a series of lawsuits against three of the nation's largest banks alleging they persisted in discriminatory lending practices that contributed to more than 200,000 foreclosures between 2008 and 2012 that cost the city more than $1.2 billion. The city filed lawsuits against Citigroup and Wells Fargo last Thursday and a suit against Bank of America Friday. "Today we begin to address the devastating consequences of the foreclosure crisis in America's second largest city," Mike Feuer, Los Angeles city attorney, said in a press statement coinciding with last week's filings in U.S. Federal Court. "These lawsuits send the firm message that we will use every tool at our disposal to fight for all Los Angeles taxpayers and neighborhoods," Feuer said. Feuer alleges in the lawsuits that the banks "engaged in a continuous pattern and practice of mortgage discrimination in Los Angeles since at least 2004 by imposing different terms or conditions on a discriminatory and legally prohibited basis." The lawsuits charge all three banks with redlining and reverse redlining. Cited in the court filing is a study by the Alliance of Californians for Community Empowerment, which estimates the more than 200,000 foreclosures in Los Angeles during the foreclosure crisis resulted in $78 billion in decreased home values, $481 million in lost tax revenue, and $1.2 billion in additional services to maintain vacant and foreclosed properties. The banks deny the allegations of discriminatory lending. A spokesperson for Bank of America told DS News, "Our record demonstrates there is no basis for the city's claims." The spokesperson stated the institution "has deep ties to this community" and said Bank of America has "a firm commitment and strong track record for fair lending." Citi responded similarly, claiming the lawsuit is "without merit" and saying, "We are disappointed that the LA attorney does not recognize our deep commitment to fair lending. Citi considers each applicant by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis," a Citi spokesperson said. Wells Fargo could not be reached for comment, but the bank reportedly told the Los Angeles Times it maintains a record "as a fair and responsible lender." In the lawsuit against Wells Fargo, Feuer mentions that the bank has already faced similar lawsuits from the city of Baltimore, the city of Memphis, the Department of Justice, and the Federal Reserve Bank. Wells Fargo's 2011 legal battle with the Federal Reserve resulted in an $84 million penalty, the largest the Fed has ever claimed in a consumer protection case.

Markets Approach Normalcy as Foreclosure Crisis Enters 'Ninth Inning'

Markets Approach Normalcy as Foreclosure Crisis Enters 'Ninth Inning' The national foreclosure crisis is reaching its end as many markets work their way toward normalcy, according to the latest U.S. Foreclosure Market Report from RealtyTrac. As major evidence of this trend, RealtyTrac reports foreclosure starts reached a 95-month low in November. At the same time, overall foreclosure activity across the nation declined by 15 percent from October to November, while year-over-year, activity was down 37 percent, RealtyTrac found. The company says the monthly decrease is the largest on record since November 2010, and that decline of 21 percent three years ago took place alongside what RealtyTrac calls the "revelation of the so-called robo-signing scandal," which derailed foreclosure processes for many large banks. A total of 113,454 homes received foreclosure filings last month, accounting for one in every 1,155 homes in the country, RealtyTrac reports. While conceding that some of November's decline could be seasonal, Daren Blomquist, RealtyTrac VP, said "the depth and breadth of the decrease provides strong evidence that we are entering the ninth inning of this foreclosure crisis with the outcome all but guaranteed." With foreclosures nationwide declining at such a significant rate, some real estate professionals are beginning to see a return to "normalcy" in their local markets. "Foreclosures continue to decline and it's beginning to feel like a 'normal' housing market again," Steve Roney, CEO of Prudential Utah Real Estate in Salt Lake City and Park City, told RealtyTrac. Similarly, Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty in Oklahoma City and Tulsa, said, "There will always be defaults, but it's clear that we are working our way back towards a normal housing market." Some markets, however, continue to struggle with an extensive backlog of foreclosures. For example, despite four consecutive months of declining activity, Florida continues to outrank all other states in foreclosure activity. One in every 392 homes in the state received a foreclosure filing in November, even though activity was down 15 percent over the month and 23 percent annually. Furthermore, eight of the 10 metro areas with the highest foreclosure rates last month are located in Florida, RealtyTrac says. Like the state overall, these metros ranked high despite annual declines in foreclosure activity. Throughout the state of Florida, foreclosure starts were down 46 percent during the 12 months ending in November, and bank repossessions were down 16 percent. Scheduled foreclosure auctions, however, have been on the rise for the past 11 months and increased 2 percent year-over-year in November. The metro area with the highest foreclosure rate in the state and nation was Jacksonville, Florida, where one in every 288 homes had a foreclosure filing in November. Miami followed with one in every 307 homes receiving a filing, and Port St. Lucie ranked third with a rate of one in every 341 homes. The only two metros in RealtyTrac's top-10 list located outside of Florida were Rockford, Illinois, and Charleston, South Carolina, which ranked No. 5 and No. 7, respectively. At the state level, the state with the second-highest foreclosure rate in November earned its ranking after drastic increases in foreclosures over both the month and the year. Delaware's foreclosure activity was up 56 percent on a monthly basis and 141 percent on an annual basis. One in every 480 homes in the state received a foreclosure filing last month, according to RealtyTrac's assessment. Following Florida and Delaware on the company's top-10 list were Maryland, South Carolina, Illinois, Ohio, Connecticut, Nevada, Iowa, and Utah.

California Coastal Housing Unaffordable Again

California Coastal Housing Unaffordable Again One of the earliest phenomenon that occurred during the housing bubble was the ascension of home prices that led to housing becoming unaffordable relative to incomes. This was especially acute in California coastal cities and spurred outflows to Riverside and Sacramento, which then in turn became overdeveloped epicenters of the housing bubble and subsequent burst. The cascade of markets across the nation from affordable to unaffordable was a key signal that prompted us to warn of the coming housing downturn. It now appears that this first symptom has cropped up once again, as almost all of California's coastal cities are now reading as unaffordable according to our calculations. Home prices along the California coast have rebounded spectacularly from their trough, with all the major coastal cities seeing gains of at least 21 percent, and San Jose, Orange County, Oakland, and LA seeing gains of at least 30 percent. Despite that robust growth, prices are still well below their all-time peaks, with L.A., Oakland, and San Diego home prices still more than 20 percent below their highs. Despite the discount in prices, affordability proved temporary for the Golden State, as the lack of income growth and rising mortgage rates has made home prices unaffordable once again at these levels. Only San Diego measures out as affordable and that is by a very slim margin. The lack of wage recovery during the economic recovery has been a persistent feature, owing to high unemployment, and every major California coastal metro saw median family income lower at the end of 2012 than in 2007 when it peaked. Even San Francisco and San Jose, the epicenters of the social media and tech boom that has occurred, have seen incomes fall 3.3 percent and 2.1 percent, respectively, from their 2007 peak. San Diego has seen incomes fall 7 percent, and L.A./Orange County has seen incomes fall 4.3 percent from their peak. In addition to a lack of wage growth, mortgage rates have risen significantly over the last several months. Conventional 30 year fixed mortgage rates hit a low of 3.49 percent at the end of 2012, and have been climbing since, measuring 4.59 percent most recently in October. The rise in rates by more than a full percentage point has been rapid, and coupled with strict underwriting standards already in place, has made buying a home increasingly difficult for many. Though mortgage rates remain below their pre-recession level, it is not enough to offset the lost income from the recession. While it is possible for unaffordability to remain in place for some time, especially in destination markets such as San Francisco and L.A., we believe something will have to give to normalize the market. Last time we saw this phenomenon, it resulted in people fleeing the coast for more affordable inland markets, prompting development that eventually got ahead of itself. We do not expect this to reoccur given how many people were just burned by it and the fleeting liquidity that exists in the housing market due to the preponderance of institutional buyers. However, the status quo is unsustainable for a long period of time. Currently, our up-to-the-minute auction data shows home prices easing in the state, and this should be reflected in home price data that comes out over the next several months. Traditional pricing metrics have a several-month-lag owing to the long closing and reporting times of traditional home sales. The easing in prices should help dissuade concerns about affordability temporarily. The healthiest resolution, though, would be for the economy to kick it up a gear, reducing the slack in the labor market and generating a rise in incomes. This would likely signal a shift into economic expansion and perhaps mean the whole episode is finally behind us. The other solution would be for mortgage rates to fall, but a significant downshift seems improbable. Interest rates are already low and the next Fed action, whether it comes sooner or later, is going to be a de facto tightening of policy, which should bring rates higher. As we mentioned, it is possible for markets to remain unaffordable for a period of time, but it is very hard to imagine significant, sustained home price appreciation in the California coastal markets until incomes begin to rise-something that has proved elusive throughout this economic cycle.