Last week RadarLogic, a real estate data and analytics
company, submitted a proposal, which we covered here, to
the Federal Housing Finance Agency (FHFA) in response to a Request for
Information regarding the proposed bulk sale of government owned real estate
(REO). Wednesday, in their RPX Monthly Housing Market Report, they provided the latest
information on their RPX Composite Price, and used updated data to restate and
demonstrate the need for and urgency of their plan.
In brief, the company suggested that a bulk sale would
involve huge discounts that would benefit investors but exacerbate losses to
the government sponsored enterprises (GSEs) and FHA and ultimately taxpayers
and put negative pressure on home prices and demand that would have a domino
effect on appraisals and future home prices.
Instead it suggested a two prong approach; aggressively modifying
distressed mortgages in the foreclosure pipeline and packaging the resulting excess
debt into securities to be sold to investors willing to bet on future increases
in property values. Second, it advocates
the government retain existing and future REO and turn day to day management of
the properties over to professional management companies as rental
properties. Both approaches, the company
said, would return stability to the market and thus to the economy and
dramatically reduce the cost of the recovery to both government and taxpayers.
The RPX report
compiles statistics from the company's composite price index for residential
properties in 25 metropolitan statistical areas (25-MSA RPX). The July 25-MSA RPX price was $187.24 per
square foot (psf), a drop of 0.9 percent from the June value and 4.7 percent
from the value in July 2010. The company
said that, with five months left in the year and the peak selling season behind
us, it appears that the high price for 2011 was reached in June at 188.11, only
slightly above $183.99, the lowest value observed in 2010, on December 31. In late 2007 the composite price reached $270
psf.
There is a great deal of variability in the prices
across the 25 metropolitan areas.
Cleveland and Detroit are both in the $65 range while San Jose,
California has a psf price of $240.74.
The company tracks Manhattan condos as a separate category and found that
price, at $1,094.36 psf, had increased 7.5 percent since July 2010.
Only 20 percent of the MSAs in the index had
year-over-year RPX price increases and the largest of these increases, in
Washington, DC, was 3.5 percent. Three had decreases in double digits, Seattle
(-10.7 percent), Milwaukee (-12.1 percent), and Las Vegas (-12.2 percent.) Thirteen MSA's logged month-over-month
increases, the largest being 3.7 percent in Miami and 2.5 percent in
Tampa. The highest monthly losses were
recorded in San Francisco (-4.4 percent) and Milwaukee (-3.2 percent).
The 25-MSA RPX transaction count increased 8.1 percent
year over year, but "this growth reflects subdued sales closings in July 2010
due to the expiration of the homebuyer tax credit." The transaction count increased 0.4 percent
in July compared to the previous month.
While RadarLogic discounts the importance of the
year-over-year transaction activity because of the anomaly of the tax credit
expiration, Cleveland, Ohio did see a 98 percent increase and Jacksonville,
Florida a 78.2 percent jump. Detroit's
activity level fell 19.1 percent. Eleven
MSAs had increases in transaction activity from June to July with St. Louis,
Missouri being notable with a 27.9 percent jump. San Diego (-7.5 percent), Tampa (-7.4
percent) and San Francisco (-6.5 percent) had the largest decreases.
The report shows little optimism for the future of
housing. The RPX Forward Price Fixings
are established each day by dealer poll and represent the midmarket expectation
of the reference value to be published on the contract expiration date. RPX is projecting little growth in this index
over the next four years. From the
current level in the high $180s, the fixings remain virtually level through the
end of 2015, finishing the chart at just under $200. The cumulative Home Price Appreciation
implied by these composite forward fixings at each years' end are:
2011 - 1.5 percent
2012 - 2.0 percent
2013 - 2.5 percent
2014 - 3.1 percent
2015 - 3.6 percent
Radar Logic said it was predicting
that the next 10- and 20-City S&P/Case-Shiller composite indices will
increase about one percent month-over-month but will remain about 3 percent below
the July 2010 level. The 10-City index,
it says, will come in at about 156 and the 20-City at roughly 143.
Returning to promoting its proposal
to FHFA, the Company restates its concern that foreclosures, bank inventories,
and taxpayer losses are going to continue to grow while prices suffer further
declines. The total of REO properties held by all parties - GSEs, FHA, private
lenders - at the end of Q2 2011 was 548,000, a number that has declined over
the past few quarters as lenders slowed or stopped foreclosures in the wake of
the robo-signing controversy. On
September 20, a witness at a Senate Banking Committee hearing estimated that
10.4 million additional borrowers - or one in five mortgagors in the country - are
likely to default on their mortgages. "This
is a tidal wave headed straight toward REO inventories and ultimately the
nation's housing markets," the Report says.
