Real estate roundup: U.S. foreclosures slow, California new home sales dip

The number of foreclosures dropped in October for the third consecutive month, a sign that efforts by banks to take back troubled properties may be easing, according to a report out this morning by RealtyTrac.

The number of foreclosures -- default notices, scheduled foreclosure auctions and bank repossessions -- was down 3% in October from September, though that number is still 19% higher than in October 2008.

One out of every 385 housing units in the U.S. received a foreclosure filing in October, according to the report. The dip in the number of filings was a positive sign. But James J. Saccacio, chief executive officer of Irvine-based RealtyTrac, said in a statement that the moribund economy and the potential pitfalls facing the housing market could imperil any housing rebound.

“Three consecutive monthly declines is unprecedented for our report, and on first blush an indication that the foreclosure tide may be turning,” he said. “However, the fundamental forces driving foreclosure activity in this housing downturn — high-risk mortgages, negative equity, and unemployment — continue to loom over any nascent recovery.”

Nevada, California and Florida posted the highest foreclosure rates out of all the states. California had the second-highest rate, after Nevada, with one in every 156 housing units receiving a foreclosure filing in October.

A total of 85,420 California properties received a foreclosure filing during the month, a decrease of 1% from the previous month but still nearly 50% above the total reported in October 2008, according to the report.

California's default notices and scheduled foreclosure auctions were up 120% and 73% respectively from October 2008, when California foreclosure activity was in the midst of a three-month lull after a state law required lenders to give troubled homeowners extra notification before beginning foreclosure.

With financing still tight and so many cheap foreclosure properties on the market, it is no wonder that few people are buying new homes these days. A report by the California Building Industry Assn. confirmed that new-home sales continued to drop in September.

The report shows that sales in new-home communities of 10 units or more were 11% below September 2008, with only 2,310 new homes and condominiums sold, compared to 2,580 in September 2008.

In the Los Angeles-Long Beach-Glendale region 300 new homes were sold in September, a 9% increase from the 273 sold in the same month one year prior.

-- Alejandro Lazo

Prefab housing goes green in Newport Beach

Here's something a little different on the home-building front: We took photos of a prefab home being put together this morning in Newport Beach.

We're not talking double-wide prefab, but rather a sustainably designed modular home by LivingHomes, a developer based in Santa Monica. The house is "poised to become Orange County's first LEED Platinum Certified Home, the nationally accepted third-party benchmark for the highest-performing green buildings," LivingHomes said in its news release.

The two-story residence came in four preconstructed modules, which were hoisted into place by a 250-ton crane. The design, intended for small, urban lots, is being offered for sale nationwide at $275 a square foot installed, not including the foundation or land. The model, called the LHKT 1.5, was designed by Philadelphia architecture firm KieranTimberlake.

The 2,200-square-foot home has two bedrooms, 2.5 bathrooms and a bonus room. The features that the developer has piled on to qualify for the LEED Platinum certification include recycled steel, recycled wood and bamboo siding, recycled glass tiles, photovoltaic panels, high-performance windows with recycled frames and low-flow bathroom fixtures and gray-water plumbing.

After a few hours, the home was 95% complete. The owners are expected to move into the house in about a month, LivingHomes said.

-- Nancy Rivera Brooks 

Photos: It doesn't look like much yet, but the module being hoisted into place will become part of a prefab green home in Newport Beach. Credit: Christine Cotter / Los Angeles Times

California builders lobby for tax credit extension for new home buyers

 

Remember the $10,000 California tax credit for newly built homes that state buyers exhausted earlier this year in only about four months? Well, new-home activity is down since that money ran out, and state builders are calling for an extension of the credit, according to today's news release from the California Building Industry Assn.

“Since the discontinuation of the popular home buyer tax credit, we have seen a significant drop in traffic these past few months, which continues to drag down new-home construction, and in turn, job creation,” said Liz Snow, CBIA’s president and CEO. “We applaud the Senate for taking swift action in passing the tax credit extension, and we hope the Assembly follows suit.”

According to statistics compiled by the Construction Industry Research Board (CIRB), home builders pulled permits for 2,920 total housing units in September, down 1% from August. When compared to September of last year, production in 2009 was off by 36%. Permits for single-family homes totaled 2,150, down 2% from the previous month and down 12% from September 2008, while multifamily permits totaled 770, up 0.5% from August but down 63% from September of last year.

The builders' stance is that more home building means more jobs and work for Californians, which would benefit the state's overall economy. Because things slowed once the credit funds were exhausted, this doesn't seem to have much staying power as a strategy, although it did help reduce unsold inventory. Will an extension help fuel an economic recovery or just drag out the process?

-- Lauren Beale

Thoughts? Comments?

Photos: Construction workers build a new home in Millbrae, Calif. Credit: Russel A. Daniels / Associated Press 

Housing market may be stabilizing, Lennar chief says

Though home builder Lennar Corp. had a rough third quarter, its executives seem to be seeing the light at the end of the tunnel for the company and for the housing market.

Chief Executive Stuart Miller launched his review today of the company’s third-quarter performance with several minutes about the general economy.

“We’re gaining confidence that we’re getting much closer to the end of this housing-led downturn,” he said. “A combination of low prices, lower interest rates and government incentives have worked to pique the interest of primary buyers and dispel the taboo about home purchases that has deterred so many from the market.”

Lennar divisions have seen an increase in traffic and general consumer confidence as the sales and pricing plunge has slowed or stabilized, Miller said.

But, he said, the future is still murky: Ongoing foreclosures continue adding to inventory, mortgage rates are fluctuating and tax credit programs are potentially nearing their end. Upswings in unemployment and gas prices continue to pose a downside risk.

“By no means would I suggest that housing is out of the woods and recovered,” he said. “To the contrary, many important headwinds remain.”

But the market, he said, “feels materially better than the absolute hopelessness that had existed for so long.”

Home buyers are gradually taking advantage of prices made affordable by the recession, Miller said. If the economy stays relatively stable, executives predict, the company will be profitable by next year.

Housing starts show monthly gain again, but still on track for worst year ever

Housing starts were up in August for the fourth straight month, the Census Bureau reports today. It's another sign that the housing market’s worst days have passed -- but this doesn't mean new-home construction will return to peak levels any time soon.

The seasonally adjusted annual rate of housing starts in August of 598,000 units is up 1.5% from July, but still 29.6% below the same month a year earlier –- and 2008 was by far the worst year for housing starts since the federal government began tracking the data in 1959.

The level of housing starts so far this year is on course to fall below last year’s total of 950,500 units; 2008 marked the first time in the 40-year history of the data that housing starts were below 1 million.
The year-to-date rate of housing starts in August was 379,800 units, down 44% from 678,200 a year earlier.

Construction starts for projects with five or more units was up 35.3% in August from July. Single-family house starts were actually down 3% in August from July.

August’s bump in housing starts was fueled by a 23.8% increase in starts in the Northeast over July. In the West, housing starts for August were unchanged from July. Housing starts in the Midwest were up 0.9% from July, while August starts in the South were down 2.4% from the previous month.

-- Peter Y. Hong

Hovnanian sees better days ahead for the housing market

The worst is over for the housing market.

Or so says Hovnanian Enterprises' CEO Ara Hovnanian.

"Several signals of a housing industry bottom have become apparent," Hovnanian said in a conference call Thursday with Wall Street analysts and investors.

The Red Bank, N.J., homebuilder has seen a recent pickup in home orders and a slowing in house-price declines, Hovnanian said.

“After 15 quarters in a row of shrinking net contracts per community, we are finally seeing the trend reverse,” Hovnanian said. The pace is approaching 2006 levels, he said.

The company is responding by buying land, increasing home prices, reducing incentives and reopening developments in Southern California and Arizona that had been mothballed, he said.

Hovnanian Enterprises, which sells homes in 18 states, has begun an advertising campaign with the slogan “Pounce Before the Bounce” to persuade the public that "this may be their last opportunity to buy homes at rock bottom prices while obtaining favorable mortgage interest rates," he said.

On Wednesday, the company said it narrowed its loss for the quarter ended in July, reporting a loss of $168.9 million compared with a loss of $202.5 million in the year-earlier period. Revenue fell 45% to $387.1 million.

“It’s disappointing to have continued losses,” Hovnanian said. “On the other hand, there were many positive signs that we’re at the bottom and perhaps beginning the recovery.”

-- Nancy Rivera Brooks

Photo: A sign advertises new homes to be built by K. Hovnanian Homes at the Signature Properties Fiddyment Farm housing community in Roseville, Calif. Credit: Bloomberg
 

Bond market signals that mortgage rates may drop

The bond market has been sending slightly better news to mortgage borrowers the last few days as investors in securities carved out of home loans have been accepting lower returns.

Yields on Freddie Mac and Fannie Mae mortgage securities fell today for the third straight day, meaning the buyers are OK with lower rates on the loans backing the securities. The typical rate on a fixed-rate 30-year loan rose to 5.59% last week, up from a record low of 4.78% in late April, according to Freddie Mac.

Yields on Fannie Mae 30-year fixed-rate mortgage bonds dropped to 4.71%, down from 5.07% last Wednesday and the lowest since June 3. Freddie Mac bonds were yielding 4.78%, down from 5.15% Wednesday. On May 20, bond buyers were OK with returns of less than 4% on the securities.

Rising rates have throttled the home refinancing spree that took hold last fall and continued through the winter. While rates under 6% are still great by historic standards, the recent increase also made it tougher to qualify for home purchases, and higher rates generally can put the brakes on the economy.

The higher rates also contributed to an unexpected decline in confidence among U.S. home builders in June, according to a National Assn. of Home Builders/Wells Fargo housing survey out today.

Analysts had expected confidence to increase, but the builder group said anxiety over jobs and the economy, along with higher rates, had clouded the prospects for a housing recovery.

-- E. Scott Reckard
 
  

New home construction and project permits fall to record lows in April

New home construction saw a few dramatic drops in April, setting record lows for both housing starts and permits issued for new projects, the Commerce Department said today.

New home and apartment building fell 12.8% last month, to its lowest numbers in 50 years, with a seasonally adjusted annual rate of 458,000 units, the department said in its monthly report on new residential construction.

Applications for new building permits dropped 3.3 %, to an annual rate of 494,000, another record low, the report says.

Despite the record lows set last month, there is some hope for the construction industry in the building of single-family homes, which increased  for the second month in a row. Single-family home construction rose 2.8% to an annual rate of 368,000 in April, after a modest 0.3% increase in March and no change in February, the department said.

Multifamily home construction saw another month of reeling decline, dropping 46.1% to an annual rate of 90,000 units, the report says. In March, multifamily home building took a 23% plunge, the department said.

The bulk of the plunge was seen in the Northeastern part of the nation, where housing construction dropped 30.6%.

The West was the only part of the country showing an increase in new home construction, with a 42.5% bump. New home building fell 21.4% in the Midwest and 21.1% in the South. To see what states make up each of region of the U.S. in the department's report, click here.

-- Nathan Olivarez-Giles

Home builders, California Realtors offer layoff insurance

Latest sales tactic: layoff insurance for home buyers. From the Associated Press:

With the unemployment rate at a 26-year high and home sales still in the dumps, a growing number of homebuilders and even some real estate agents are trying to coax buyers with a kind of mortgage unemployment insurance.

Major builders offering job loss mortgage payment plans include Lennar Corp., Pulte Homes Inc., The Ryland Group Inc. and Toll Brothers Inc.

"We’re literally adding at least one builder a day throughout the country," said Todd Ludlow, senior vice president of Rainy Day Foundation, a nonprofit organization that administers the programs for many builders.

Builders can pay anywhere from $450 to $900 per customer for the coverage. Some absorb the cost as they would any other sales promotion, while others pass it on to buyers, Ludlow said.

In January, Lennar unveiled a version of Rainy Day’s program called "Piece of Mind Mortgage Payment Protection Plan." Lennar covers monthly mortgage payments between $1,800 and $2,500, depending on the market, for a maximum of six months. Buyers can take advantage of the program only if they lose their job within the first two years after purchasing the home.

For first-time buyers looking at existing homes, the California Assn. of Realtors announced its program this week. Thanks to commenter Maggie Knowles for flagging it:

To help provide first-time home buyers with peace of mind when purchasing a home, the California Association of Realtor (C.A.R.) Housing Affordability Fund is offering a new mortgage protection program to first-time home buyers.

Through the C.A.R. Housing Affordability Fund’s Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.

Talk about pulling out all the stops to sell homes. Think this will get any fence sitters to take the plunge?

-- Lauren Beale

Thoughts? Comments?

Photo: Simone Williams of Pasadena, left, and her mother, Carolyn, check out a model home at a KB Home development in Sylmar in March. Credit: Christina House / For The Times

Home builders try to entice buyers with low interest rates

Some home builders are cutting interest rates as a further incentive to home buyers. From the Wall Street Journal:

As mortgage rates fall to near historic lows, some home builders are offering even lower interest rates, in an effort to lure buyers amid the slow spring selling season.

The latest sales promotion: Lennar Corp. is offering a fixed 3.625% rate over the life of a 30-year fixed rate mortgage. The deal is besting average rates that have fallen below 5% nationwide, but it comes as other builders are reporting mixed results from similar incentives.

Hovnanian Enterprises Inc.'s recent offer of a 3.99% rate sparked "underwhelming" interest from home buyers, says Dan Klinger, president of the builder's mortgage operation. "It wasn't like we needed crowd control," says Mr. Klinger.

How low they can go to lure buyers is regulated however.

Federal regulations limit how much the builders can contribute to buy down mortgage rates. Currently, if a home buyer puts down 5% or less, the builder is limited to incentives worth 3% of the sales price, says Mr. Klinger. For downpayments of 10%, the limit climbs to 6%.

Meanwhile, by comparison, the Mortgage Bankers Assn. released its Weekly Mortgage Applications Survey today. From the news release:

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.61 percent from 4.63 percent, with points decreasing to 1.03 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate is a new record low for the survey, which began in 1990. 

Takes some of the shine off those builders' rates.

-- Lauren Beale

Thoughts? Comments?