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Virginia Housing Development Authority
Review of VirginiaMarket Conditions and
Foreclosure Trends
What’s Ahead for Housing?A Symposium on Federal Housing Policy Change
June 14, 2013
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Where we are inthe market recovery
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Home sales continue to rise. April/May sales were strong following a slowing in the 1st Qtr.
Source: Virginia Association of Realtors (VAR)
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The increase in home sales has been somewhat stronger downstate than in the Northern Tier.
Source: Virginia Association of Realtors (VAR)
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Nonetheless, NoVA’s extremely tight inventoryis pushing up prices more than in other regions.
Source: Federal Housing Finance Agency (FHFA)
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Rising prices are alleviating negative equity,but it remains a constraint on for-sale inventories.
Source: CoreLogic, a real estate data and analytics company
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Investor sales remain high in the Northern Tier,but are much lower than elsewhere in the nation.
Sources: MRIS (regional data), National Association of Realtors (U.S. data)
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Tight inventory and difficulty in accessing creditare keeping first-time buyers on the sidelines.
Source: National Association of Realtors (NAR)
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Loan Performance Trends
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New problem loans rates are declining, but are only half-way back to their long-term average.
Source: Mortgage Bankers Association (MBA)
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Likewise, long-term serious delinquency rates are only half way to their long-term average.
Source: Mortgage Bankers Association (MBA)
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The decline in serious delinquencies continuesto closely track improvement in unemployment.
Sources: Mortgage Bankers Association (MBA) and Virginia Employment Commission (VEC)
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Subprime and ARM loans make up most of the 45% drop in foreclosures from the 2009 peak.
Source: Mortgage Bankers Association (MBA)
Drop in Active Virginia Foreclosures from the Peak
1st Qtr. 2013Estimated Active Foreclosures
18,400
10,500
2,400
5,500
Prime & Govt. Fixed-Rate Loans
Prime& Govt.ARM Loans
SubprimeLoans
2nd Qtr. 2009 (peak)Estimated Active Foreclosures
33,500
10,900
10,300
12,300
Prime& Govt.
ARM Loans
SubprimeLoans
Prime & Govt.Fixed-Rate
Loans
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Nonetheless, subprime and ARM loansremain a disproportionate share of foreclosures.
Source: Mortgage Bankers Association (MBA)
Share of 1st Mortgage Loans Share of Active Foreclosures
Virginia Foreclosure Activity by Type of Loan 1st Quarter 2013
57%13%
30% Prime & Govt. Fixed Rate
Loans
Prime& Govt.ARM Loans
Subprime Loans
83%
9%8%
Prime & Govt.Fixed-Rate Loans
Prime & Govt.ARM Loans
Subprime Loans
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The Northern Tier’s improved loan performance in not yet being seen in downstate markets.
Source: Federal Reserve Bank of Richmond/Lender Processing Services (LPS) Applied Analytics
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Northern VA’s number and share of problem loans has fallen, while Hampton Roads’ has risen.
Source: Federal Reserve Bank of Richmond/Lender Processing Services (LPS) Applied Analytics
Estimated Seriously Delinquent Loans
21,400
13,90011,800
15,800 12,800
14,00011,300
13,800
Other Markets
Other Markets
RichmondMetroArea
RichmondMetroArea
HamptonRoads
Metro Area
HamptonRoads
Metro Area
Washington Metro Area
(VA part)
Washington Metro Area
(VA part)
March 2013 51,900
March 2011 62,900
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Distressed sales in Hampton Roads remain high, and continue to constrain increases in prices.
Sources: National Association of Realtors (U.S. data), Tom Lawler, Economist, Calculated Risk Blog /MRIS (regional data)
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Short sales are playing a bigger role inGreater Washington than they are nationwide.
Source: National Association of Realtors (U.S. data), Tom Lawler, Economist, Calculated Risk Blog /MRIS (regional data)
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Conclusions
1. Price rises are being driven by abnormal factors:
– Low mortgage rates: Ongoing Federal Reserve bond purchases are keeping rates at historic lows.
– Constrained inventories: Negative equity and fewer distressed sales are constraining listings of existing homes.
2. Despite market recovery, key undertows remain:
– Lagging Fundamentals: Traditional housing and lending fundamentals — income, employment and household debt — continue to be weak.
– Reluctant Buyers: Increases in traditional buyers, as well as sellers, are needed to support a sustained recovery.
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Conclusions
3. The housing recovery still relies on federal stimulus.
– Low mortgage rates remain critical to the restoration of positive owner equity and the mitigation of troubled loans.
– However, the Federal Reserve cannot maintain current levels of mortgage bond purchases indefinitely.
– The recovery will remain fragile until higher home prices can be sustained by economic fundamentals — i.e., rising incomes and more normal sales volumes and mortgage interest rates.