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Housing Market

Housing Market

Why U.S. Home Prices Have Been on a Tear

In another sign the housing recovery is genuine, home prices soared the most in more than seven years in April in 20 U.S. cities.

The S&P/Case-Shiller index, released today, climbed 12.1% from April 2012, marking the biggest year-over-year increase since March 2006, and rose 2.5% from March to April.

“The recovery is definitely broad-based," David M. Blitzer, chairman of the S&P's index committee, said in a news release. "Recent economic data on home sales and inventories confirm the housing recovery’s strength."

Experts cited an improving job market, low mortgage rates, high demand and a shortage of housing on the market.

Meanwhile, new home sales rose a bit less than expected in May but climbed a whopping 29% compared with May of last year.

All 20 cities in the S&P/Case-Shillert index, which includes metropolitan areas, showed year-over-year increases in home prices.

San Francisco posted the biggest gain, 23.9%, followed by Las Vegas, at 22.3%. Atlanta, Detroit, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, Seattle and Tampa showed double-digit gains.

Homebuyers in Bidding Wars

Home prices in Dallas increased 7.4%; in Washington, D.C., 7.2%; and in Cleveland, 4.8%. The smallest increase was in New York, at 3.2%.

Even with the increases, home prices aren’t rising fast enough to price buyers out of the market. Indeed, competition for homes has led to bidding wars in some places, including Los Angeles, Boston, San Francisco, Seattle, Washington, New York, Miami and Phoenix.  

And home prices haven’t even approached levels seen during the housing bubble.

Celia Chen, an analyst with Moody's Analytics, told Money Morning that home prices still remain 26% below peak bubble levels.

“The recovery’s alive and well,” Jed Kolko, chief economist at the real estate site Trulia.com, told Money Morning. “Prices continue to rise, new home sales are up and delinquencies and foreclosures are falling.”

Higher prices have also rescued many underwater homeowners.

Kolko noted an extraordinary statistic: It’s cheaper to buy than to rent in the top 100 U.S. housing markets.

At the same time, the inventory of houses available for sale has begun increasing as higher prices have prompted more homeowners to list their homes and more homebuilders to construct new homes.

And one of the nation’s largest homebuilders, Lennar Corp. (NYSE: LEN) reported today it beat analysts’ estimates for the three months through May as prices and sales increased.

Lennar Chief Executive Officer Stuart Miller said on a conference call today he wasn’t too concerned about rising interest rates.

“Interest rates are moving higher in the context of economic improvement,” Miller said. “We’re looking at a supply shortage, so that means that even in the context of rising rates and a better economy, we’re likely to see price increases and rental increases.”

Last week, a new survey of homebuilder confidence from Wells Fargo Bank and the National Association of Home Builders reached its highest level since 2006, and housing starts climbed 6.8% in May and 28.1% year to date.

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Housing Market

Why Homebuilder Stocks are Suddenly Plunging

Homebuilder stocks had soared in 2012 in the early stages of the housing recovery, but have since leveled off and had perhaps peaked earlier this year.

Then Thursday, major homebuilder stocks plunged amid fears of rising mortgage rates.

The declines came a day after the Federal Reserve suggested it may reduce the bond buying that has pumped up equity markets for more than a year.

Experts noted that homebuilder stocks are particularly sensitive to rising interest rates.

With rising rates, said Money Morning Chief Investment Strategist Keith Fitz-Gerald, "The homebuilders are going to have to do one of two things: They're either going to have to stop building because there's no demand or they're going have to lower their prices, which is going to hurt their profit margin."

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Housing Market

7 Reasons This Housing Market Recovery is Genuine

The housing market recovery is for real this time.
Coming after the housing market crash, the recovery is welcome news to those in the industry – and bodes well for the economy as a whole.

"It almost seems too good to be true," Lawrence Yun, the chief economist at the National Association of Realtors, told Money Morning.

The latest confirmation of the market's rebound is the new survey of home builder confidence from Wells Fargo Bank and the National Association of Home Builders, which climbed to its highest level since 2006.

And housing starts were up 6.8% in May and 28.1% year to date, the U.S. Census Bureau said.

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Housing Market

FHA: Potential For Catastrophic Losses Could Lead to a $115 Billion Shortfall

Five years after the financial crisis, just about everyone has had to clean up their act.

Consumers have less credit card debt. Banks are stuffed with capital, prodded by the Federal Reserve. Even the federal deficit is shrinking.

But one federal agency seems to have resisted long-overdue change. It's the Federal Housing Administration or FHA.

Findings by a congressional committee, released last week, show the giant government mortgage-insurance agency could face a $115 billion shortfall – at least, if the housing market tanksby 20% again.

The figure is so large the FHA has worked to keep it under wraps for as long it could.

This winter the Fed required the nation's 18 biggest banks to undergo the same sort of "stress test" scenario.

The FHA, though, excluded the results of its stress test from an independent actuarial review released in November – and hoped to release the results later when Congress and reporters weren't paying attention.

In an October e-mail to Integrated Financial Engineering Inc. of Rockville, Md., which conducted the review, an FHA official wrote, "We just do not want that analysis [the stress test results] to be in the actuarial review report."

The e-mail went on to say, "In congressional hearings, it is quite possible that we will be required to present this information on the record, but that will be well after the actuarial review is released and the initial media coverage takes place."

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Fight Club

The Fight Club: Are "Dignity Mortgages" Essential or Insane?

Editor's Note: There's a new idea sweeping through the country. It's called dignity mortgages.

Backers say this new financing idea will help millions of homeowners and get the middle class back to the heart of the American recovery.

Opponents think it's a recipe for disaster that will make the first financial crisis look like a cakewalk.

Today the Fight Club is taking on this growing issue — let's get ready to rumble…

Buy, Sell or Hold

Buy, Sell or Hold: Is Lennar's Big Move Just a Sign of Another Housing Bubble?

All you have to do is look at a price chart of Lennar Corp (NYSE: LEN) to see the proof that the U.S. housing market is on the mend.

Since January 2012, shares of the Miami, Fl.-based new homebuilder have more than doubled.

In fact, since the industry nearly collapsed six years ago, new-home construction for builders like Lennar is now clearly on an upswing.

According to the March 2013 report from the U.S. Commerce Department, new home construction was on pace for more than one million units for the first time since the gaudy days of June 2008. 

Much of this home-buying fervor can be attributed to a few important points: 

    1. A pent-up demand that has built up over the last six years,

    2. Low inventories,

    3. And an outrageously low interest rate environment thanks to the Federal Reserve.

The question now is whether or not the "Housing Bubble 2.0" still has legs, making Lennar Corp. a smart new buy with plenty of room to run.

Is Lennar Still a Buy?

Of course, evaluating Lennar on its own merits is a fine exercise in due-diligence.  

Housing market

U.S. Housing Market: 5 Things Every Homebuyer Needs to Know Right Now

The U.S. housing market's recovery is gaining momentum, but there are still a number of issues for homebuyers to be cautious of.

To get to the bottom of what's really going on in the housing market, we talked to Gerri Willis, author of "Home Rich" and host of FOX Business Network's The Willis Report (6 p.m. weekdays), about the key things homebuyers need to know in today's challenging market.

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Housing Market

The 10 Best U.S. Housing Markets 2013

The percentage of Americans optimistic about the U.S. housing market has reached levels not seen since rumblings of the financial crisis began.

A new Rasmussen Reports national survey found 37% of homeowners believe the value of their home will increase in the next year – thehighest since September 2008.

And 58% of Americans believe their homes are worth more now than when they bought them. That's the highest percentage believing this since fall 2011.

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Housing Market

Is the Housing Market 2013 Being Propped Up by Wall Street?

The housing market 2013 is showing signs of improvement from last year – but there's reason to believe this recovery isn't sustainable.

Home prices and sales have been climbing, fueling optimistic outlooks for the rest of the year – but mortgage lending hasn't risen by a similar amount.

That's because it's not families or new home buyers driving the housing market rebound in 2013. There's another major buyer moving markets. And if that buyer stops purchasing homes, this "recovery" could lose its steam.

We caught up with Money Morning market expert Shah Gilani, who in the following interview explained this development in the 2013 housing market.

Click here to watch Shah's interview.

Housing Market

Here's Another Troubling Sign America is Circling the Drain

Don't blame yourself if you missed this tidbit last week…

On Thursday, the Consumer Financial Protection Bureau hit the nation's four largest mortgage insurers with a total of $15.4 million in fines for "allegedly" paying kickbacks to lenders to steer business their way.

Of course, they didn't have to admit they did it, and therefore, they didn't do what they were fined for.

Back in the summer of 2009, the Inspector General of the Department of Housing and Urban Development handed the Justice Department evidence that laid bare a scheme by lenders (the usual suspects: Citigroup, Wells Fargo, Countrywide, and so on) to get kickbacks from mortgage insurers for making borrowers – who had to buy mortgage insurance – purchase coverage from those companies kicking back profits to lenders. In the industry, it's called "forced placement"

Who did what here?

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