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Foreclosure filings were reported on 313,841 U.S. properties in June, a decrease of nearly 3% from the previous month and a decrease of nearly 7% from June 2009. June was the sixteenth straight month where the total number of properties with foreclosure filings exceeded 300,000.

Foreclosure filings were reported on 895,521 U.S. properties during the second quarter, a decrease of nearly 4% from the previous quarter and an increase of less than 1% from the second quarter of 2009. Default and auction notices were down on a month-over-month and year-over-year basis in the first quarter, but bank repossessions (REOs) increased 5% from the previous quarter and 38% from Q2 2009 to 269,962—a new quarterly high for the report.

“The second quarter was a tale of two trends,” said James J. Saccacio, chief executive officer of RealtyTrac. “The pace of properties entering foreclosure slowed as lenders pre-empted or delayed foreclosure proceedings on delinquent properties with more aggressive short sale and loan modification initiatives. Meanwhile, the pace of properties completing the foreclosure process through bank repossession quickened as lenders cleared out a backlog of distressed inventory delayed by foreclosure prevention efforts in 2009.

“The midyear numbers put us on pace to exceed 3 million properties with foreclosure filings by the end of the year, and more than 1 million bank repossessions,” Saccacio continued. “The roller coaster pattern of foreclosure activity over the past 12 months demonstrates that while the foreclosure problem is being managed on the surface, a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market.”

Nevada, Arizona, Florida post top state foreclosure rates
Nearly 6% of all Nevada housing units (one in 17) received at least one foreclosure filing in the first half of 2010, giving Nevada the nation’s highest foreclosure rate during the six-month period despite decreasing foreclosure activity. A total of 64,429 Nevada properties received a foreclosure filing from January to June, a decrease of 13% from the previous six months and a decrease of 6% from the first six months of 2009.

Arizona registered the nation’s second highest state foreclosure rate in the first half of 2010, with 3.36% of its housing units (one in 30) receiving a foreclosure filing, and Florida registered the nation’s third highest state foreclosure rate, with 3.15% of its housing units (one in 32) receiving a foreclosure filing during the six months.

Other states with foreclosure rates ranking among the nation’s 10 highest were California (2.54%), Utah (1.91%), Georgia (1.79%), Michigan (1.73%), Idaho (1.68%), Illinois (1.61%) and Colorado (1.40%).

California, Florida, Arizona post highest foreclosure totals
A total of 340,740 California properties received a foreclosure filing in the first half of 2010, the nation’s highest total but down 15% from the previous six months and down nearly 13% from the first six months of 2009.

With 277,073 properties receiving a foreclosure filing in the first six months of 2010, Florida documented the second highest state total. First-half foreclosure activity in Florida decreased nearly 9% from the previous six months but increased 3% from the first half of 2009.

Arizona’s 91,484 properties receiving a foreclosure filing in the first six months of 2010 was the third highest state total even though the state’s foreclosure activity decreased nearly 2% from the previous six months. Arizona foreclosure activity in the first half of 2010 was still up nearly 2% from the first half of 2009.

Other states with first-half totals among the 10 highest in the country were Illinois (85,223), Michigan (78,509), Georgia (71,949), Texas (64,883), Nevada (64,429), Ohio (59,927) and New Jersey (36,542).

The annual returns of the 10-City and 20-City Composite Home Price Indices show increases of 5.4% and 4.6%, respectively, in May 2010 compared to the same month last year. While still positive, Boston, Charlotte, Cleveland, Dallas and Denver reported weaker annual growth rates compared to their reports from last month. Seven of the 20 MSAs are still reporting negative annual growth rates with May’s data.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The two Composites have improved between 5-6% since then, but this is no better than the improvement they had registered as of October 2009. The last seven months have basically been flat.”

“The May 2010 data for 15 of the 20 MSAs and the two Composites show an improvement in annual returns compared to April’s report. With the month-over-month data, while 19 of the 20 MSAs and the two Composites were positive, we are in a strong seasonal period for home prices, so that was largely expected. In addition, there may still be some residual impact from the home buyers’ tax credit, since they affect any purchase that closes through June 30, 2010. We need to watch where the housing markets will go after these temporary stimuli go away. June’s existing and new home sales and housing starts data do not show much real improvement in those statistics either. It still looks possible that the housing market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy.”

As of May 2010, average home prices across the United States are back to the levels where they were in the autumn of 2003. Measured from June/July 2006 through May 2010, the peak-to-date figures for the 10-City Composite and 20-City Composite are -29.6% and -29.1%, respectively.

In May, Las Vegas posted a new index low as measured by the current housing cycle, where it peaked in August 2006. The peak-to-trough figure is -56.4%, with that market generally returning any gains it had posted since 2000. Detroit is the only market that is worse off. Its index is at levels last seen in late 1994, indicating that any appreciation in value during the past 15 years is now gone.

Nineteen of the 20 MSAs and both Composites showed month-over-month increases in May. The 10- and 20-City Composites were up 1.2% and 1.3%, respectively. San Diego continues to improve, with its 13th consecutive positive monthly increase. Miami and New York, the two markets that had declined in April, posted positive monthly changes in May 2010, increasing 0.9% and 0.8%, respectively. Las Vegas on the other hand, showed a drop in index level by 0.5% in May as compared to April 2010.

“Today’s numbers are an encouraging sign that new-home sales are coming back from an expected slow period that followed the expiration of the home buyer tax credit program,” said Bob Jones, chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “While we still have quite a way to go on the path to recovery, it’s good to see that we are headed in the right direction.”

“It’s worth noting that some of the new-home sales in June were due to move-up buyers who were able to sell their previous home to a tax-credit-eligible buyer while that program was active,” said NAHB Chief Economist David Crowe. “Also, while sales activity is still far from robust, it has picked up some momentum as positive factors such as historic low mortgage rates, great selection and attractive prices help draw potential home buyers back to the market. We anticipate that this momentum will continue along with a gradually improving economy.”

Sales of new homes rose strongly in three out of four regions in June. The largest percentage increase was the Northeast’s 46.4% gain, followed by a 33.1% gain in the South and a 20.5% gain in the Midwest. The West was the only region where new-home sales did not improve in June, instead falling 6.6% to a new record low.

Meanwhile, the nationwide inventory of new homes for sale declined to 210,000 in June, the thinnest it has been since September of 1968. This amounts to a 7.6 months’ supply at the current sales pace.

For more information, visit www.nahb.org.

Testifying before the Senate Banking Committee, Bernanke acknowledged that European debt problems are slowing U.S. growth, as is the protracted slump in the U.S. housing sector. He said mounting federal budget deficits must be addressed, but added that government spending is warranted given the lack of private-sector demand for goods and services.

Bernanke shot down suggestions that his Fed is out of bullets should the economy slide back toward contraction.

“If the recovery seems to be faltering, then we at least need to review our options. We need to think about possibilities. But, broadly speaking, there are a number of things we could consider,” he said.

The Fed’s benchmark interest rates, a main lever of the central bank to spur economic activity, have been near zero for the past two years. That’s led some economists to worry that the Fed is running out of options to spark a slumping economy.

Bernanke countered that there are a number of unconventional steps the Fed still could take to stimulate the economy, ranging from resuming purchases of mortgages to reinvesting in securities to issuing a statement that interest rates will remain at zero for a fixed period to provide certainty to investors.

“We have not come to the point where we can tell you precisely what the leading options are,” he said, adding that “policy is already quite stimulative. I think we still do have options, but they are not going to be the conventional options.”

Bernanke was blunt about the challenges, and he acknowledged that some government stimulus that powered the expansion in the first half of 2010 is likely to fade.

“Although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth,” Bernanke said in opening remarks.

He later discounted, when asked directly, the chances of sliding back into recession.

“Our expectation is still for a moderate recovery which will over time bring down the unemployment rate. That’s still our main scenario, that the economy will continue to grow and that private demand will take over as the driver of growth,” he said.

Financial markets slumped shortly after Bernanke’s testimony was made public, in part because of his acknowledgement that “the economic outlook remains unusually uncertain,” but the thrust of what he said was positive.

Real consumer spending appears to have expanded at about a 2.5% annual rate in the first half of 2010, Bernanke said, with purchases of durable goods—such as large appliances—increasing especially rapidly.

The economic forecast of the Fed’s Open Market Committee (FOMC), which sets the benchmark lending rate that influences borrowing costs across the economy, remains mostly unchanged, he said. Most FOMC members expect the economy to grow at a rate of 3-3.5% this year and 3.5-4.5% in 2011 and 2012, and they anticipate a jobless rate of 7-7.5% by late 2012.

Not everyone agrees with the Fed’s assessment.

“This forecast looks a bit optimistic. Our own outlook calls for growth of 2.4% in 2010 and 2.5% growth next year,” Mark Vitner, senior economist with Wells Fargo Securities in Charlotte, N.C., wrote in a research note to investors after Bernanke’s testimony.

What Bernanke didn’t say was also noteworthy. There was no mention of the threat of deflation, a fall in prices across the economy.

Deflation leads businesses and consumers to hoard cash on the assumption that prices will be lower soon, and growth skids. The word deflation doesn’t appear anywhere in Bernanke’s 56-page Monetary Policy Report to Congress, either.

Yet some prominent economists fear that the United States is nearing a deflationary cycle like the one now in Japan. They point to core inflation, which strips out volatile food and energy prices. Through June, it was running at a year-over-year rate of 0.9%, the lowest increase since 1966. That’s below the Fed’s target rate of 1-2%.

“Bernanke has thought long and hard about how to avoid a Japanese-style economic trap, and the Fed’s researchers have been obsessed for years with the same question. But here we are, visibly sliding toward deflation—and the Fed is standing pat,” columnist Paul Krugman, a Nobel Prize-winning liberal economist, wrote recently.

Krugman’s concerns are shared by John Makin, a highly-regarded analyst at the conservative American Enterprise Institute, a research center. Makin fears that consumers and businesses may begin sitting on cash because it gains purchasing power as prices fall.

“The desire to hold cash is a dangerous part of the deflation psychology,” he warned, noting that deflation often accompanies a financial crisis.

Near the end of his lengthy testimony, Bernanke was asked directly about deflation and he discounted the threat.

“Forecasts are very uncertain, but I don’t view deflation as a near-term risk for the United States,” he said, noting that the Fed would be “assiduous” should deflation emerge. As the economy picks up steam, inflation will start ticking back toward the 2% range, Bernanke said.

The House today approved a flood insurance reform bill that would reauthorize the National Flood Insurance Program to September 30, 2015, a provision strongly supported by the National Association of Realtors®.

Passage of H.R. 5114, the Flood Insurance Reform Priorities Act, would strengthen the NFIP and bring certainty to many real estate markets that are much in need, NAR said, and commended Rep. Maxine Waters (D-Calif.) for marshalling the bill through House passage.

“This longer-term reauthorization of the NFIP is critical to millions of taxpaying American families who rely on the program for flood insurance, which is required to obtain a mortgage in nearly 20,000 communities across the nation. This would restore flagging confidence in a vital program by ensuring its continuation for several years without further disruption to real estate markets upon which our nation’s economic recovery depends,” said Vicki Cox Golder, NAR president and owner of Vicki L. Cox Real Estate in Tucson, Ariz.

Golder noted that the authority has been allowed to expire twice in the past two years while Congress approved eight short-term extensions, resulting in multiweek delays if not cancellation of thousands of real estate transactions. Such stop-gap measures have caused many hardships and lost sales for property buyers, sellers and their communities, she said.

The bill now heads to the Senate where the prospects of passage are not clear.

The 15-year FRM this week averaged 4.07% with an average 0.7 point, up from last week when it averaged 4.04%. A year ago at this time, the 15-year FRM averaged 4.69%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.75% this week, with an average 0.7 point, down from last week when it averaged 3.79%. A year ago, the 5-year ARM averaged 4.82%. This rate is also an all-time low since Freddie Mac began tracking it in 2005.

The 1-year Treasury-indexed ARM averaged 3.75% this week with an average 0.7 point, down from last week when it averaged 3.80%. At this time last year, the 1-year ARM averaged 4.82%.

“With mortgage rates falling to historic lows, refinance activity has been strong over the past three months,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The Bureau of Economic Analysis reported that the effective mortgage rate of all loans outstanding was just below 6% in the first quarter of 2010, the lowest since the series began in 1977. Since the start of the second quarter, two out of three mortgage applications on average were for refinancing, according the Mortgage Bankers Association.

“Household balance sheets also improved in other ways over the first three months of the year. The Federal Reserve (Fed) reported household net worth rose by almost $1.1 trillion in the first quarter of 2010. The share of credit card loans that were 30-days or more past due fell to the lowest since the first quarter of 2002, according to the American Bankers Association. Finally, the aggregate household debt burdens were at a level not seen since the third quarter of 2000, based on the Fed’s debt service ratio.”

“While all real estate in the U.S. is local, the same is not true for property owners,” said NAR President Vicki Cox Golder. “The U.S. continues to be a top destination for international buyers from all over the world. Foreign buyers understand the value of owning a home in this country and can rely on Realtors to help guide them through the complex process of buying property in the U.S. With expertise, knowledge and experience, Realtors have a global perspective.”

The survey covers the period between April 1, 2009 and March 31, 2010. During that time, foreign buyers, including those with residency outside the U.S. as well as recent immigrants and temporary visa holders, are estimated to have purchased $66 billion of U.S. residential property, or 7% of the residential market.

Slightly more than a quarter of Realtors, 28%, reported working with at least one international client in the past year. This is a significant increase from the 2009 report, when 23% of Realtors worked with foreign clients. Eighteen percent of all Realtors were estimated to have completed at least one sale, compared to 12% last year.

“Several factors have contributed to an increase in international buyer interest in the U.S.,” said Golder. “A large majority of Realtors report the changes in value to the U.S. dollar have had a strong impact on the international real estate business. In addition, perceptions abroad about trends in the U.S. real estate market have led many international clients to believe purchasing a home in the U.S. is more affordable than in their country and holds more value.”

International buyers came from 53 different countries around the world. The top four countries were Canada, Mexico, the U.K. and China/Hong Kong. With 23% of international buyers coming from Canada, the country has remained the largest buying group in the past three years. Foreign buyers from Mexico have been steadily increasing. In 2010, Mexico replaced the U.K. as the second largest buying group with 10% of buyers. Buyers from the U.K. decreased from 10.5% in 2009 to 9% in 2010. Eight percent of recent buyers came from China/Hong Kong.

Two factors important to international clients when purchasing property in the U.S. are proximity to their home country and the convenience of air transportation. Florida typically attracts European, Canadian and South American buyers while the East Coast draws Europeans. The West Coast brings Asian buyers and the Southwest attracts Mexicans.

International buyers were reported in 39 states in 2010, but a slight majority of the total buyers are concentrated in Florida, California, Arizona and Texas. These four states account for 53% of purchases and have remained the top destinations for the past three years, with Florida and California remaining the top two destinations.

The median price paid by international buyers for a home in the U.S. was $219,400, a decrease from 2009’s median price of $247,100. However, the median price paid by foreign buyers was significantly higher than the overall median market price, which was $172,500 in 2009. On average, foreign buyers tend to purchase closer to the upper end of the market; 16% of the total international purchases were for homes priced at more than $500,000. According to Realtors, this was because international buyers are typically looking for a second home.

A majority of international buyers, 66%, purchased single-family detached homes. However, more international buyers purchased a condo than did their U.S. counterparts, at 23% and 7%, respectively. Only 44% of international buyers used a mortgage to pay for their home, compared to 92% of domestic buyers. Fifty-five percent of foreign buyers paid all cash. Realtors reported that a majority of international buyers use all cash because of the difficulty in establishing international credit in the U.S. Over one-third, 34% of potential foreign buyers were unable to complete transactions because of financing problems in the U.S.

For more information, visit www.realtor.org.

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