Madeleine

Romanello

September 2009
“If you can’t explain it simply,
you don’t understand it well
enough.”
 Is a home still a good investment?

92% say yes!!

Despite all of the bad news in the
media about homeownership and
mortgages, most Americans still
believe buying a home is a great
investment for the future.

Sources: Bankrate.com 8/09

 JD Power Survey
The study also found that
the proportion of first-time
home buyers increased
considerably — to 56% in
2009 from 44% in 2008.
Many of these first-time
buyers may be attracted by
improved home affordability
and the perception of a
strong buyer’s market.

Sources: Housing Wire 7/31/09

Reports are still looking good!!
Pending home salesUP!

Existing home sales UP!

New construction UP!

 New Home Sales up 9.6% in July
Sales are now up 32 % from the bottom in January, but
off 69 % from the frenzied peak four years ago.

Sources: Associated Press 8/26/09

 U.S. Existing Home Year over
Sales Year
$0 -100,000 +38.8%
$100,000 -250,000 +8.7%
$250,000 – 500,000 -6.2%
$500,000 – 750,000 -8.9%
$750,000 – 1,000,000 -10.6%
-23.3%
$1,000,000 –
2,000,000 -32.4%
$2,000,000 +
Sources: Bubble Meter.com 8/22/09
 Mortgage Rates – 30 year fixed

5/21/2009

Source: Federal Reserve

 Mortgage Rates
“The end of the low interest rate environment for
home loans may be arriving sooner rather than
later. In comments contained in a speech,
Richmond Fed President Jeffrey Lacker indicated
that the Federal Reserve may consider a
premature end to its program of purchasing
mortgage-backed securities.”

urce: Examiner.com 8/27/09

 Prices
The Standard & Poor’s (S&P)/Case-Shiller
US National Home Price Index showed
some positive quarterly improvement,
gaining 2.9% in the second quarter
of 2009 over the first quarter. It
marks the first quarter-over-quarter
improvement in three years.

Sources: Case Shiller 8/25/09

 HomeGain 3rd Quarter Realtor Survey

In the next six months, do you think the

values of homes in your market will:

Sources: Homegain 8/2009

 Prices
Knowing that the pace of declines had slowed once before, in early
2008, Robert Shiller, the Yale economist who helped create the index,
said “It really is too soon to call this a turning point.”

Sources: Wall Street Journal 8/25/2009

 Prices

Sources: Calculated Risk 8/09

 Supply & Demand

Sources: Seeking Alpha 8/24/2009

 Supply & Demand

Sources: papereconomy.com 8/14/09

 Supply & Demand
“One of the most vital
fundamentals (in housing),
the ratio between supply
and demand, is still out of
whack.”
- Newsweek

Sources: Newsweek 8/31/2009

 Shadow Inventory
The Zillow survey indicated that many homeowners could
be waiting on the sidelines to sell. When asked about
future plans to sell, 29 percent of homeowners said they
would be at least "somewhat likely" to put their
homes on the market in the next 12 months if
they saw signs of a real estate market
turnaround, creating "shadow inventory"
that could slow a recovery.

Sources: Zillow Q2 Homeowner Confidence Survey 8/09

 Delinquency Rates
Single-family mortgages set a new record
delinquency rate of 13.16% in the second quarter
of 2009, according to the quarterly survey by the
Mortgage Bankers Association.

Sources: Mortgage Bankers Association 8/09

Sources: Seeking Alpha 8/24/2009
 ‘Cure Rate’
Fitch found that
the cure rate for
prime loans
dropped to 6.6%
as of July from an
average of 45%
for the years 2000
through 2006.

Sources: Wall Street Journal 8/24/2009

Sources: Seeking Alpha 8/24/2009
 Prime Mortgages
“While subprime mortgages sparked the first round of housing
problems two years ago, now "troubles are lurking further up the food
chain," says Joshua Shapiro, chief U.S. economist at MFR Inc.
White-collar job losses have
accelerated while more adjustable-
rate loans to prime borrowers are
resetting to higher payments.
‘You put all that together, it leads
me to believe that the next leg
down on home prices is going
to come from the top,’ he says.”

Sources: Wall Street Journal 8/3/09

 Prime Mortgages
If you look at prime jumbo, the
highest quality mortgages,
6.2% are seriously delinquent.
That sounds like a low
number. But two years ago
that number was 1%. It's a
very straight trajectory from
September 2007, pretty
closely mimicking
unemployment.

Sources: Fortune.com 8/12/09

 Causes of Mortgage Foreclosures (2 nd
half 2008)

urce: Wall Street Journal, Stan Liebowitz 7/3/09

 Mortgages Underwater
“Almost one-quarter of U.S. mortgage holders owed more
than their homes were worth in the second quarter and that
figure may rise to as much as 30 percent by mid-2010
as job losses and foreclosures climb, Zillow.com said.
“The negative-equity rate will rise and spin off more
foreclosures,” Stan Humphries, Zillow’s chief economist,
said in an interview. “I see a substantial downside risk to
prices and don’t think we’ll see a bottom until
the middle of next year.”

Sources: Bloomberg.com 8/12/09

 Mortgages Underwater
Karen Weaver, global head of
Deutsche Bank's securitization
research said last week that
48% of U.S. mortgage owners
will end up owing more than
their home is worth by 2011.
According to Deutsche Bank,
home prices may fall another
14% before hitting a bottom.

Sources: Fortune.com 8/12/09

 Mortgages Underwater
At what point of being underwater do homeowners
start falling into foreclosure rapidly?
Once you get to the point where negative equity is
significant -- for example, 25% or more -- there have
been studies that suggest you get more strategic
defaults.

Sources: Fortune.com 8/12/09

 Mortgages Underwater
First American’s
researchers believe more
than 15.2m mortgagors are
underwater, representing
nearly one-third of the
nation’s mortgage market.

Sources: First American CoreLogic 8/09

 Modifications

Sources: Center for Responsible Lending 8/09

 Short Sales
On August 20, 2009, Freddie Mac confirmed in writing
that its servicers are not allowed to renegotiate short
sales commissions. According to the policy, as a
condition of the servicer's acceptance of a short sale
offer, servicers cannot renegotiate the sales commission
below the amount agreed to by the real estate broker and
the seller/borrower. However, if the negotiated
commission exceeds 6 percent, servicers are required to
limit it to 6 percent. This Freddie policy is consistent with
Fannie Mae's policy.
- National Association of Realtors®

Sources: NAR 8/26/2009