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Home prices fell 8.9% in 2007, the largest decline in the Case-Shiller home price index in at least 20 years, Standard & Poor's reported Tuesday.
Meanwhile, a separate measure of home values reported Tuesday by the Office of Federal Housing Enterprise Oversight showed a 0.3% decline in home prices in 2007, the first annual decline recorded in the 16-year history of the OFHEO purchase-only price index.
The Case-Shiller national home price index fell 5.4% in the fourth quarter alone, S&P said. The OFHEO purchase-only index fell 1.3% in the fourth quarter.
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The U.S. foreclosure crisis is deepening as the number of foreclosures will row higher over the next few years, according to the latest forecast by Housing Predictor. The information driven web site is extending its foreclosure forecast into 2011.
The original foreclosure forecast issued by Housing Predictor, which tracks and forecasts more than 250 local housing markets in all 50 states called for more than 2.5 million foreclosures in the nation through 2009 and was then increased to more than 3-million. The research firm is nearly doubling that forecast as the credit crunch combined with rising unemployment and weakening consumer confidence damages real estate markets in the majority of the country.
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Roughly half of metropolitan areas continued to show rising home prices in the fourth quarter of 2007, according to the latest quarterly survey by the National Association of Realtors.
In the fourth quarter, 73 out of 150 metropolitan statistical areas show increases in median existing single-family home prices from a year earlier, including 11 areas with double-digit annual gains and another 12 metros showing increases of 6 percent or more; 77 had price declines including 16 with double-digit drops.
Lawrence Yun, NAR chief economist, said disruptions in the mortgage market have played a role. "The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges,” he said. "For buyers who need loans of more than $417,000, mortgage interest rates have been running more than a percentage point higher, and that has been having an obvious impact. Higher ratios of sales for more moderately priced homes are naturally dampening the national median price as well as the data for some of the more expensive markets.”
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Loan servicers and lenders who handle about nine out of 10 subprime loans have agreed to participate in an initiative to help delinquent borrowers by putting foreclosure proceedings on hold for up to 30 days to evaluate alternatives.
The Project Lifeline initiative, targeted at borrowers who are 90 days or more behind on their payments, was announced by six major lenders on Feb. 12.
Those lenders include Bank of America, Citigroup, Countrywide Financial Corp., Chase, Washington Mutual and Wells Fargo. The group says that eligible borrowers will be offered workout plans that could lead to formal loan modifications for those who can make payments on new terms for three months.
The lenders are also members of the HOPE NOW coalition organized by the Treasury Department to speed up the process of modifying subprime adjustable-rate mortgages, also known as ARM loans, before interest rate resets. While HOPE NOW members had been focused on modifying subprime ARM loans, Project Lifeline is targeted at nearly all loans, including prime, alt-A, and second-lien mortgages.
By March 31, the Project Lifeline initiative will include every member of the HOPE NOW coalition and an additional 19 lenders and loan servicers.
Under the "Hope Now" scheme only one-in-four of those home-buyers has actually arranged cheaper finance. The rest have simply agreed new repayment plans, often with longer terms according to the New York Times.
"There is this huge disconnect between what is being represented by the industry and what is being experienced on the ground," says Kevin Stein of the California Reinvestment Coalition in San Francisco.
"Borrowers are falling through the cracks while more and more of these press releases come out. It's clearly not enough."
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Fannie Mae, Freddie Mac and the Federal Housing Administration will soon be allowed to finance in, what until now has been the jumbo loan market.
Congress and the Bush administration have agreed to raise the $417,000 conforming loan limit until the end of the year, under a provision of the $150 billion economic stimulus package approved by Congress.
But the devil, as they say, will be in the details. The new formula for determining the conforming loan limit will allow Fannie, Freddie and FHA to guarantee loans of up to 125 percent of the median home price of an area.
While housing markets where the median home price exceeds $216,840 will benefit from higher limits for FHA loan guarantee programs, one analysis suggests Fannie and Freddie will be able to finance into the jumbo loan business in only 19 metropolitan statistical areas.
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Many Americans are anxious about the real estate market. But foreign investors see U.S. apartments, hotels, shopping centers, warehouses and offices as good investments, according to a new survey.
The weak dollar has made the American real estate market look attractive to foreign bargain hunters.
The U.S. rose to the top of lists of the “most stable and secure” countries for real estate investment and the countries with the best opportunity for appreciation, according to the 16th annual survey of the Association of Foreign Investors in Real Estate. New York City and Washington D.C. were the top two global “Cities for Foreign Investors’ Real Estate Dollars,” according to the survey.
The survey of 200 AFIRE members was conducted in the fourth quarter 2007. AFIRE members hold $700 billion of cross-border real estate, including $230 billion in the U.S.
The resilience of the U.S. real estate market among seasoned international investors is underscored by the timing of the survey, conducted during the fourth quarter of 2007, after the much-publicized credit crunch and sub-prime mortgage crisis. In spite of this news:
• On average, survey respondents say that slightly more than 50% of their real estate planned acquisitions in 2008 will be allocated to the U.S. While the percentage allocated to the U.S. remains roughly the same as 2007, the actual dollar amount is expected to increase by 16%.
• Eighty-five percent of survey respondents say that recent fluctuations in the dollar have not prompted them to increase their U.S. allocation.