Residential Housing Inventory Shortage

From Lennox’s Blog…

We are now experiencing, in most market areas, a shortage of homes available for sale. Favorable market conditions have produced a surge of local home buyers (backlog) on top of the elevated number of residential investors. This combined with fewer homes coming on the market has created a shortage of inventory in the more affordable and mid price ranges and the upper end close to job centers.

Possible Sources of Additional Homes for Sale and How to Optimize Support:


1. Sellers with Equity – there has been a major market change

  • Sellers can sell their homes in today’s market
  • OK to buy/sell within same market timing
  • By waiting for higher prices, the next home purchased may also be at a higher price

2. Underwater Sellers – Short Sales

  • Streamline response / acceptance process
  • Pre-approved short sales

3. Resale Condominiums

  • Move up to 70% FHA occupancy ratio

4. Home Price Appreciation – will unlock current “underwater” sellers

  • Appraisal process is restraining the housing recovery

5. New Construction

  • Promote presale product
  • Need streamlining of land development permit process

6. Foreclosures

  • No bulk sales to National investors (market by market analysis)
  • Keep foreclosures available for local home buyers/investors

7. New Condominium Projects

  • Need to overcome construction financing  and take out home buyer financing

8. Apartments converting to condominiums

  • Streamline Process


Before we get started, what exactly is HARP?
If a borrower is current on their mortgage payments and has been unable to get traditional refinancing because the value of their home has declined, they may be able to refinance through the Home Affordable Refinance Program. HARP is designed to help borrowers get new, more affordable and more stable mortgage plans. HARP refinance loans do require a loan application and underwriting process and fees will apply.

More underwater borrowers than ever before are refinancing with the assistance of the Home Affordable Refinance Program (HARP).

“Recently HARP 2.0 was released, which includes provisions to allow more borrowers to take advantage of the program. “Numbers show HARP 2.0 is accomplishing the goals set forth – to provide relief to borrowers who might otherwise be unable to refinance due to price declines,” says FHFA Acting Director Edward J. DeMarco. Borrowers with Fannie Mae – or Freddie Mac – backed loans who are current on their underwater mortgages are taking advantage of the opportunity offered by HARP 2.0.”

The increased volume is due, in part, to record low interest rates on 30 year mortgages as well as the eradicated loan-to value cap and certain risk-based fees enabling more borrowers to take advantage of HARP. The program, which had been scheduled to expire in June 2012, has been extended through the end of 2013. With the extension of the program the previous 125% loan to value cap has been eliminated under HARP 2.0

Entering the Fourth Phase of the US Housing Recovery

From Lennox’s Real Estate Blog

Five years ago, the U.S. government took unprecedented measures to end the subprime mortgage crisis. Since that time we have seen the rolling aftermath. Underwater home owners, short sales, and foreclosures cast a dark shadow over the market. The federal government and the real estate industry have been focused on three pressing issues since then:

  • Helping distressed owners stay in their homes.
  • Moving the housing recovery and US economy forward.
  • Creating an environment for a sustainable housing market.

Many strategies have been attempted since the financial meltdown to turn real estate around. The creation of the FHFA (Federal Housing Finance Agency) and its conservatorship of government-sponsored enterprises Fannie Mae and Freddie Mac ensured a flow of capital to the housing market. The home buyer tax credit, loan-modification refinancing reforms, and the efforts to streamline the short-sale process have given buyers and sellers the tools they need to navigate their way through the tumultuous market.

We are now on the road to not just a temporary recovery but a sustainable recovery. What follows is an explanation of how we got here and how to continue down a positive, sustainable path.

Phase 1, 2009 to Spring 2010: The Home Buyer Tax Credit

The home buyer tax credit worked. It helped bring buyers into the marketplace at a critical time, in particular first-time home buyers. This phase of the recovery helped slow the steadily declining US economy. By the fall of 2008, the Consumer Confidence Index had dropped from 117 (100 being a healthy number) to a staggering 25. We have since seen the Consumer Confidence Index return towards the 70s.

Phase 2, Fall 2010 to Fall 2011: Residential Investors

Around November 2010, everything began to come together to create an opportunity for investors. The Federal Reserve purchased mortgage-backed securities to lower interest rates. This, combined with the lower adjusted prices, created a positive cash flow possibility for investors. They came out in force, snapping up a great deal of the glut of homes on the market with purchases of foreclosures and short sales. This helped to reduce inventory and stabilize values of homes below the median price-points in many areas.

Phase 3, Fall 2011 to Present: Surge of Local Home Buyers

Moving forward to November 2011, the backlog of local home buyers started coming forward to purchase homes, taking advantage of the historically low interest rates and lower adjusted prices. In particular, the low interest rates pushed the National Housing Affordability Index to the highest level since recording began.

This surge in local home buying caused a chain reaction of sales up through various price points, which also reduced inventory in the mid-price ranges. In certain markets with strong job growth, sales activity also increased in the upper end, supported by the rise of high-balance loan limit financing.

Phase 4, Creating a Sustainable Housing Market

In the coming years years, the residential housing market will be entering the fourth phase of its recovery — sustainability. The fourth phase will feature a return of the first-time home buyers. The group leading the charge in this sustainability phase will be the “echo boom” generation — also known as Millennials — who are now 17-31. A recently released Homebuyer Poll from TD Bank, reveals that the vast majority, 84 percent, of the Millennial generation intend to buy a home.

To help this generation of home buyers achieve the American Dream and create a sustainable housing market, we must create a healthy environment for them. This is a critical year for the future of housing. Several major decisions will be discussed and decided within the next year that will set the foundation for a sustainable housing market. Qualified residential mortgage (QRM) regulators have recommended, among other things, that a 20 percent down payment be required for a home purchase. This could devastate the market by excluding up to 30 percent of potential home buyers.

Reform and replace Fannie and Freddie with a transparent federal government support system necessary for keeping a secondary home finance securities market to attract world investors to purchase U.S. mortgage securities. The FHA’s 3.5 percent core down payment financing, USDA rural home financing, and high-balance loan limits for credit worthy home buyers are solid programs that should be continued and made permanent in order to have a sustainable housing market after the surge of backlogged local home buyers and residential investors pass through the market.

While the housing market continues to gain strength, we must maintain the solid programs and tax incentives we currently have in place in order to build a sustainable foundation for the future of housing.