Economic Focus

FORECLOSURES PROLONG HOUSING RECOVERY

What do the coming months hold for housing?
Foreclosures are weighing on the housing industry and prolonging the housing recovery. Resolution of the processing issues should be reached by the fall. Housing prices should hit bottom in 2012, as this inventory makes it through the market. These are the projections of many housing observers including economist Celia Chen of Moodys Dismal Scientist. A year ago Dismal Scientist called for a 34% peak-t-trough decline in US housing prices as measured by the Case-Shiller Index, with the bottom hitting in Q3 of this year. But they recently projected the recovery to stretch into Q2 12, for several reasons: The Robo-signing slowed the number of REO sales to third parties by 11% in the first quarter compared with Q4 10. Weakness in the market caused the share of foreclosure sales to increase from 17% to 19%, with an average discount rate of 35%. This caused the Case-Shiller price index to slip by 2%. They had expected that servicers and regulators would resolve the processing issues by this springnot so. The lack of agreement between the servicers and the 50 state attorneys general, as well as from the sustained reduction in foreclosure filings, resolution is likely dragging into this fall.
RELEASE DATE Mon 06/20 1:00 pm et Tue 06/21 10:00 am et Tue 06/21 2:00 pm et Wed 06/22 9:00 am et Wed 06/22 12:30 am et2 Thu 06/23 8:30 am et Thu 06/23 10:00 am et Fri 06/24 8:30 am et Fri 06/24 10:00 am et
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for the week of June 20, 2011 Volume 15, Issue 24

Key Economic Reports Released This Week
ECONOMIC INDICATORS RELEASED BY Dept. of the Treasury National Association of Realtors Federal Reserve Board Mortgage Bankers Association of America Federal Reserve Board Bur. of Labor Statistics Department of Labor Bureau of the Census Dept. of Commerce Bur. of Econ. Analysis Dept. of Commerce Bureau of the Census Dept. of Commerce CONSENSUS 1 SURVEY N/A 4.90M No rate change Weakness Bias N/A No rate change Neutral Bias 415k 315k 2.0% 1.2% Wt. INFLUENCE ON INTEREST RATES

Weekly Bill Auction Existing Home Sales for May 11 FOMC Meeting Fed Open Market Committee MBA Mtg Apps Survey for week ending 06/17 FOMC Policy Statement Fed Open Market Committee Jobless Claims for week ending 06/18 New Home Sales for May 11 Gross Domestic Product (GDP) rd Q1 11 3 estimate Durable Goods Orders for May 11

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If strong demand If weak demand If above consensus If below consensus

Determines Policy Undetermined Determines Policy

If above consensus If below consensus If above consensus If below consensus If above consensus If below consensus If above consensus If below consensus

Survey courtesy of Insight Economics, LLC

* Low Importance ** Moderate Importance *** Important **** Ver y Important

On The Positive Side Celia Chen sees the slow disposition of homes likely to turn into distress sales has a near-term positive effect on house prices, as fewer distress sales means fewer discounted home sales. Even with the bottom delayed, the remaining decline will be a modest 2% more into Q1 12. It is quite possible that house prices will pick up slightly in the second or third quarter of this year, as foreclosure sales remain depressed while non-distress sales pick up. Job gains will improve, combined with high affordabilitywill help boost sales of non-distressed homes, says Chen. New guidelines will motivate servicers to push foreclosures through as efficiently as possible.

Finally, the seasonal factors for housing prices are relative small in this market and the bottom is still seen in the first quarter of 2012.

Jessica Lombardo Loan Officer Hi-Tech Mortgage 2184 McCulloch Boulevard, # A Lake Havasu City, AZ 86403 jessica@hi-techmortgage.com Office: 866.768.5626 Cell: 916.548.8533 Fax: 916.372.2518