Housing: A Tale Of 2 Recoveries
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
This was an interesting week for housing-data told a tale of two recoveries: the foreclosure fiasco that remains mired in a morass and the nascent recovery that has gotten a leg up from low mortgage rates and the homebuyer tax credit. I explained where the market stands with CBS3 in Philadelphia this morning:
To wit, here are the four reports of the week:
1) The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government's modification program nearly doubled in March.
2) RealtyTrac said foreclosure filings were reported on 932,234 properties in Q1, a 7% increase from the previous quarter and a 16% increase from Q1 2009. One in every 138 US housing units received a foreclosure filing during the quarter. Approximately 6 million homeowners are now more than 60 days late in their mortgage payments.
3) The National Association of Home Builders builder confidence index was 19 in April, up from 15 in March, due to strong sales and buyer traffic. Still, the group noted that once homebuyer tax credit expires at the end of this month, housing transactions could dry up.
4) Housing starts were up 1.6% from the revised February rate, according to the Census Bureau. This is up 30% from the all time record low in April 2009.
And just when you thought that we had all learned the hard lessons from the housing and credit boom and bust, my friend Brian tells me that when he recently researched re-financing his home equity loan, he found that some cautious banks are using loan-to-value ratios (LTV) of 55-60%, well below the historic standard of 80% and far below the 95% during the height of the bubble.
This is the understandable reaction to banks going gaga with credit. What makes no sense is that Brian also found lenders willing to use a LTV of 89%, even in the era of tight lending. Also, some have no closing costs lines of credit, while others treat them as mortgage originations, replete with big closing costs.
Just a friendly reminder: just because a bank is still dumb enough to give you too much money, doesn't mean you should take it. Please see data points #1 and #2 for the proof.
Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.