Economic Focus

WHAT IS SLOWING A HOUSING CORRECTION?

A recent look at foreclosures impact on home sales by Celia Chen of economy.com summarized the following: Foreclosures and the slow resolution of the so-called robo-signing scandal are keeping distressed homes off the market. As a result, the housing correction will take a little longer to complete than previously expected. House prices will flounder until early next year and start rising in earnest at the end of 2012. The share of distress sales is key to a housing correction. Near-term The key to the near-term outlook is the share of sales of distressed homes, known as REO sales. As this share increases, the proportion of discounted home sales will also increase, causing house prices to fall. Weakness in nondistress sales caused the share of foreclosure sales to increase from 17% to 19%. These homes were sold at an average discount of 35%. Judging from the absence of agreement between the servicers and the 50 state attorneys general, as well as from the sustained reduction in foreclosure filings, resolution is taking longer and is likely to occur by this fall. The slow disposition of homes likely to turn into distress sales has a near-term positive effect on house prices, as fewer distress sales all else equalmean fewer discounted home sales. Long-term Conversely, the prolonged disposition of potential foreclosures also prolongs the length of time house prices will take to complete the correction. Consequently, while the peak-to-trough decline remains unchanged at about 34% and house prices could take longer to reach a bottom, likely the Q1 12. Even with the bottom delayed it is anticipated the remaining decline will be modest.
RELEASE DATE Tue 07/12 8:30 am et Wed 07/13 7:00 am et Wed 07/13 8:30 am et Wed 07/13 2:00 pm et Wed 07/13 2:00 pm et Thu 07/14 8:30 am et Thu 07/14 8:30 am et Thu 07/14 8:30 am et Fri 07/15 8:30 am et Fri 07/15 9:15 am et Fri 07/15 9:55 am et
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for the week of July 11, 2011 Volume 15, Issue 27

Key Economic Reports Released This Week
ECONOMIC INDICATORS RELEASED BY Bureau of the Census Dept. of Commerce Mortgage Bankers Association of America Bur. of Labor Statistics Department of Labor Federal Reserve Board Dept. of the Treasury Bur. of Labor Statistics Department of Labor Bur. of Labor Statistics Department of Labor Bureau of the Census Dept. of Commerce Bur. of Labor Statistics Department of Labor Federal Reserve Board University of Michigan CONSENSUS 1 SURVEY -$44.5B N/A ImPrice -0.8% N/A $70.0B 413k -0.2% core 0.2% -0.1% x-autos 0.1% -0.1% core 0.2% IP 0.3% CU 76.9% 72.0% Wt. ** * ** **** * * *** **** *** *** * INFLUENCE ON INTEREST RATES

International Trade for May 11 MBA Mtg Apps Survey for week ending 07/08 Import & Export Prices for June 11 FOMC Minutes for 06/21-22 meeting Treasury Budget for June 11 Jobless Claims for week ending 07/09 Producer Price Index for June 11 Retail Sales for June 11 Consumer Price Index for June 11 Ind Production / Cap Utilization for June 11 Consumer Sentiment for July 11

If above consensus If below consensus

Undetermined

If above consensus If below consensus

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 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

Prices could pick up this year House prices could pick up slightly into Q3 of this year, as foreclosure sales remain depressed while nondistress sales pick up. Job gains will likely slowly improve as the year progresses, and combined with high affordability with respect to household incomes and quickly improving affordability over renting, further boosting nondistressed homes sales. By Q4 of this year, the distress share will rise, sending the house prices back down a bit. Servicers will be working through the backlog of nearly four million potential distress sales, and the increase in distress sales will again outpace the increase in nondistress sales.
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