Review of Virginia Market Conditions and Foreclosure Trends

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1 Review of Virginia Market Conditions and Foreclosure Trends August 6, 2013 Virginia Housing Development Authority

2 Where we are in the market recovery 1

3 Home sales continue to rise. 2 nd Qtr. sales were strong following a slowing in the 1 st Qtr. Source: Virginia Association of Realtors (VAR) 2

4 The increase in home sales has been somewhat stronger downstate than in the Northern Tier. Source: Virginia Association of Realtors (VAR) 3

5 Nonetheless, NoVA s extremely tight inventory is pushing up prices more than in other regions. 4 Source: Federal Housing Finance Agency (FHFA)

6 Rising prices are alleviating negative equity, but it remains a constraint on for-sale inventories. Source: CoreLogic, a real estate data and analytics company 5

7 Cash purchases remain high in the Northern Tier, but are much lower than they are nationwide. Sources: MRIS (regional data), National Association of Realtors (U.S. data) 6

8 Tight inventory and difficulty in accessing credit are keeping first-time buyers on the sidelines. Source: National Association of Realtors (NAR) 7

9 Loan Performance Trends 8

10 New problem loans rates are declining, but are only half-way back to their long-term average. 9 Source: Mortgage Bankers Association (MBA)

11 Likewise, long-term serious delinquency rates are only half way to their long-term average. 10 Source: Mortgage Bankers Association (MBA)

12 The decline in serious delinquencies continues to closely track improvement in unemployment. Sources: Mortgage Bankers Association (MBA) and Virginia Employment Commission (VEC) 11

13 Subprime and ARM loans make up most of the 45% drop in foreclosures from the 2009 peak. Drop in Active Virginia Foreclosures from the Peak 2nd Qtr (peak) Estimated Active Foreclosures 33,500 1st Qtr Estimated Active Foreclosures 18,400 Subprime Loans Prime & Govt. Fixed-Rate Loans Subprime Loans 12,300 10,900 5,500 10,500 10,300 Prime & Govt. ARM Loans Prime & Govt. ARM Loans 2,400 Prime & Govt. Fixed-Rate Loans 12 Source: Mortgage Bankers Association (MBA)

14 Nonetheless, subprime and ARM loans remain a disproportionate share of foreclosures. Virginia Foreclosure Activity by Type of Loan 1st Quarter 2013 Share of 1st Mortgage Loans Share of Active Foreclosures Prime & Govt. ARM Loans Subprime Loans 8% 9% 83% Prime & Govt. Fixed-Rate Loans Subprime Loans Prime & Govt. ARM Loans 30% Prime & Govt. Fixed Rate Loans 13% 57% 13 Source: Mortgage Bankers Association (MBA)

15 The Northern Tier s improved loan performance is not yet being seen in downstate markets. Source: Federal Reserve Bank of Richmond/Lender Processing Services (LPS) Applied Analytics 14

16 Northern VA s number and share of problem loans has fallen, while Hampton Roads has risen. Estimated Seriously Delinquent Loans March ,900 March ,900 Other Markets Washington Metro Area (VA part) Other Markets Washington Metro Area (VA part) 15,800 13,800 12,800 21,400 Richmond Metro Area 11,800 13,900 Hampton Roads Metro Area Richmond Metro Area 11,300 14,000 Hampton Roads Metro Area Source: Federal Reserve Bank of Richmond/Lender Processing Services (LPS) Applied Analytics 15

17 Distressed sales in Hampton Roads remain high, and continue to constrain increases in prices. Sources: National Association of Realtors (U.S. data), Tom Lawler, Economist, Calculated Risk Blog /MRIS (regional data) 16

18 Short sales are playing a bigger role in Greater Washington than they are nationwide. Source: National Association of Realtors (U.S. data), Tom Lawler, Economist, Calculated Risk Blog /MRIS (regional data) 17

19 Conclusions 1. Price rises have been driven by abnormal factors: Low mortgage rates: Ongoing Federal Reserve bond purchases are keeping rates at historic lows. Constrained inventories: Negative equity and fewer distressed sales are constraining listings of existing homes. 2. Despite market recovery, key undertows remain: Lagging fundamentals: Traditional housing and lending fundamentals income, employment and household debt continue to be weak. Constrained buyers: Traditional buyers are discouraged by restrictive financing, limited inventory and investor competition. An increase in traditional purchasers is needed to support a sustained recovery. 18

20 Conclusions 3. The housing recovery still relies on federal stimulus. Low mortgage rates remain critical to the restoration of positive owner equity and the mitigation of troubled loans. However, the Federal Reserve cannot maintain current levels of mortgage bond purchases indefinitely. The recovery will remain fragile until higher home prices can be sustained by economic fundamentals i.e., rising incomes and more normal sales volumes and mortgage interest rates. 19

Review of Regional Market Conditions in the Greater Piedmont Area

Review of Regional Market Conditions in the Greater Piedmont Area Greater Piedmont Area Association of Realtors June 7, 2010 Virginia Housing Development Authority Overview of Current Market Conditions