1st Reverse Mortgage Folds

Wilmington Savings Fund Society (WSFS), FSB announced earlier today that effective today they will begin winding down 1st Reverse Mortgage Company’s operations. Starting on July 31st, 1st Reverse will no longer accept any new applications. They remain committed to completing all loans currently in the pipeline (or in the pipeline by July 31st). This includes processing, underwriting and funding the loans.

The news about 1st Reverse Mortgage is slightly disconcerting in light of Senior Lending Network folding earlier this month. While 1st Reverse was not as large of a player as Senior Lending Network, it did complete a significant volume of loans. Although the time seems ripe for the reverse mortgage industry to grow and prosper, the folding of these companies lends some support to the argument that the problems in the real estate market are negatively impacting the reverse mortgage industry, rather than providing the industry with enough business to flourish despite the economy.

Homeowner Confidence Declines, But Most Optimistic About Future

Zillow’s quarterly Homeowner Confidence Report reveals all-time low levels of confidence in their homes, with 60% of homeowner believing that their homes have lost value in the last 12 months. However, they are still more optimistic than the reality: 80% of homes have lost value in the last year. The 60% level indicates the closest homeowners have come to predicting the reality of the market since the survey began at the beginning of 2008.

On a positive note, 74% of survey participants believed that value of their home would not decline any further, with 27% believing their home values will increase. In the Northeast, the most optimistic region, 77% of survey participants believed that the value of their home would not decrease, while 33% believe it will increase.

Therefore, although homeowners are aware of their declining property values, they seem to believe that the situation will improve. In a real estate market where so much is based on perception, this seems to be a positive sign.

Is the Housing Market Getting Better or Worse?

The WSJ featured this photo of a bulldozer tearing down houses in Southern California.

Today has been filled with mixed messages in regards to the housing market. Is it performing well or poorly? The Wall Street Journal published images of bulldozers tearing down half-finished homes in Southern California because the lender determined the cost of completing the homes would be more than they could be sold for. On the other hand, the New York Times published a front page story about how the market in Sacramento is rebounding– a potentially good sign. Sales are up 45% since last year. Sales in Las Vegas, another market hit hard when the housing bubble burst, are up 35%.

So which is it? It seems hard to tell. It is easy and addictive to follow all the housing articles published recently, but, after writing on several of them, it appears that the bottom line keeps remaining the same:

- Yes, there are a lot of foreclosures, permeating classes where they’ve never been felt before.

- Yes, many markets have been extremely hard hit by the housing crisis. Las Vegas, Phoenix, California, and Miami are four of the worst. Very few, if any, areas have emerged unscathed.

- Yes, the new $8,000 tax credit has helped buyers, leading many first-time homeowners to enter the market. Perhaps as a result, many areas have seen sales increase this past year and in the past few months.

It therefore seems safe to draw the following conclusions:

1. The nation was hit hard by the housing crisis.

2. Foreclosures still abound, as neither the economic nor the housing crisis have lifted yet. This is especially true amongst the middle-class, who in many cases took longer to feel the effects of the crisis.

3. However, foreclosures mean that prices have been pushed down in many markets, leading to a glut of new buyers who, in addition to pursuing the tax credit, can pay less in a mortgage payment than they can in their monthly rent, saving money by buying a home. This situation is especially profound in the depressed market, but leads many analysts to think that there are signs of life in the market.

What do you think? Is the housing market getting better or worse?

Housing Prices Drop Record Levels In January

The New York Times published a big story today on the record decline in home values in Standard & Poor’s Case-Schiller Property Index. The Index, which measures the home values in 20 metropolitan areas, fell 19% in January from January a year ealier. Since the housing bubble broke, many metropolitan areas have seen their indexes cut nearly in half. Phoenix has seen prices drop 48.5% from its June 2006 peak, while Las Vegas, Miami, San Francisco, and San Diego have all seen declines of more than 40%.

Analysts cited the Case-Schiller Index performance as proof that housing prices have likely still not bottomed out and that the housing market continues to perform poorly. The report is especially interesting in light of the fact that the US Census Bureau recently released a report indicating that the sale of new homes rose in February. While many viewed this report as a sign that the housing sales market has bottomed out, home prices generally take longer to rebound. It is also unsurprising that sales are increasing as prices are plummeting- many are taking advantages of foreclosures and the low prices to enter the market for the first time.