Take, for example, a recent week in which the 30-year fixed rate fell to 3.79 percent. Freddie Mac has been tracking interest rates since 1971 or so, and had no record of the 30-year ever being as low.
But why was the rate at 3.79 percent? Because concerns over the Greek debt crisis’ threat to the eurozone canceled out positive economic signs in the United States, lowering bond yields and rates.
Freddie Mac chief economist Frank Nothaft’s list of positive signs seems more like a recipe for real estate recovery:
- Industrial production rose 1.1 percent in April, the largest gain since December 2010.
- Consumer sentiment in May rose to its highest reading since January 2008.
- Housing starts rose to an annualized rate of 717,000 homes in April, well above the market consensus forecast, and construction on one-family homes increased to its strongest pace in three months.
Foreclosures remain a big question mark in housing’s recovery. The latest data from RealtyTrac suggest that a crisis that had been limited to the West, Southwest, Florida, and then the Midwest, is now drifting east.
For those of you who have been visiting relatives on Mars since 2006, foreclosures, which average 500,000 a year in a normal market (home prices rising 0 to 2 percent a year), began to explode in California, Arizona and Nevada. The reason: California prices, always the nation’s highest, skyrocketed in the boom years. Buyers leveraged themselves to their armpits to afford houses, using now-discredited loan products that required little proof of ability to repay.
When prices proved unsustainable, buyers who had planned to refinance into loans that were more stable found that their houses were worth less than they owed. Unable to reduce their monthly payments and incapable of paying the current figure, millions went into foreclosure.
Nevada, Arizona and Florida followed — with Nevada, and especially Las Vegas, the most distressed markets in the country.
The shift in foreclosure activity to the East Coast could have a complex explanation, or it could be based on perspective. California, Nevada and Arizona are non-judicial-foreclosure states, meaning that lenders don’t have to navigate overburdened court systems to repossess houses.
Although those states, especially California, have hundreds of thousands of foreclosures compared with the low thousands in Pennsylvania, those houses moved through the process at a much faster rate and have, for the last few years, comprised the lion’s share of sales.
Pennsylvania and New Jersey are judicial-foreclosure states, where the process is much longer and the sales ratio of bank repossessions to unencumbered transactions is much lower, too.
There may be a larger number of foreclosures here now than previously, but those numbers remain much lower than in states that have been able to process them faster.
"On the House" appears Sundays in The Inquirer. Contact Alan J. Heavens at 215-854-2472, firstname.lastname@example.org or @alheavens at Twitter.