My New Blog

The Standard & Poor's S&P/Case-Shiller Home Price Indices (HPI) for January which were released on Tuesday are reporting further bad news on the home value front.

The HPI which tracks, in two different indices, 10 and 20 metropolitan statistical areas (MSAs) across the United States, reported that the prices of existing family homes nationally continued to decline into the new year. 16 of the 20 MSAs in the larger survey reported record declines, ten of them reaching double digits.

Both the 10-City and the 20-City Composite Indices are now reporting annual declines in excess of 10 percent. The 10-City had a record annual decline of 11.4 percent; the 20-City reported a decline of 10.7 percent.

Las Vegas and Miami - boom cities only months ago - share honors for being the weakest cities price-wise in January. Both showed price declines year-over-year of 19.3 percent with Phoenix not far behind at 18.2 percent. Other MSAs with double-digit declines include Detroit (15.1 percent), Los Angeles (16.5 percent), Minneapolis (10 percent), San Diego (16.7 percent), San Francisco, (13.2 percent,) Tampa (15 percent), and Washington (10.9 percent).

David M. Blitzer, Chairman of the Index Committee at Standard & Poor's commented about the survey results; "Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007. Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune from the housing crisis, with 19 of the 20 metro areas reporting annual declines in January and the remaining - Charlotte North Carolina - eking out a benign 1.8 percent growth rate. Looking deeper into the data, you can see that 16 of the metro areas are also reporting record low annual growth rates. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking five consecutive months. On top of that, the declines have increased through time, in general, as 13 of the 20 MSAs reported their single largest monthly decline in January."

Taking the long view of the HPI data, however, homeowners in many MSAs should still be counting their blessings. The indices use the year 2000 as a base, assigning that year the number 100. Therefore a current score of 150 would indicate a 50 percent price appreciation in the last eight years. The score for the 10 City Composite is 196.06 and the 20-City 180.65. Some of the worst hit cities by current performance still show remarkable appreciation since 2000; for example, Miami (225.40), Los Angeles (224.21) and Las Vegas (186.05).

New York Attorney General Andrew M. Cuomo announced an agreement on Monday between his office and Freddie Mac and Fannie Mae under which the two largest purchasers of home loans will buy home mortgages only from those lenders that meet new standards that it is hoped will ensure independent and reliable appraisals.

The agreement which also includes the Office of Federal Housing Enterprise Oversight (OFHEO) will create an independent organization to implement and monitor the new appraisal standards.

Fannie Mae and Freddie Mac, which purchase roughly 60 percent of all home loans originated in the United States, have agreed to the following:

• Establishment of the "New Home Valuation Protection Code," which creates requirements governing appraisal selection, solicitation, compensation, conflicts of interest and corporate independence, among other reforms. Under the new code mortgage brokers will be prohibited from selecting appraisers and lenders will be prohibited from using "in-house" staff appraisers to conduct initial appraisals or from using appraisal management companies that they own or control.
  
• Beginning January 1, 2009, Fannie Mae and Freddie Mac will require that lenders represent and warrant that appraisals related to mortgage loans originated on or after January 1, 2009 conform to the new code or they will not be purchased.
   
• The new "institute" which will be funded with $24 million from Fannie and Freddie will field complaints from appraisers who believe that their independence has been compromised and will protect those appraisers from retaliation. The institute will also establish a nationwide consumer hotline to manage complaints about appraisal fraud or violations of the new code. The institute will be funded with $24 million from Fannie Mae and Freddie Mac and will be required to report to OFHEO and the Attorney General's office on a regular basis.

"Today's agreement with Fannie Mae and Freddie Mac begins to set right what had gone so horribly wrong in the mortgage industry - rampant appraisal fraud," said Cuomo. "The integrity of our mortgage system depends on independent appraisals. Again and again our industry-wide investigation found that banks were putting pressure on appraisers to drive up the value of loans just to make a quick buck. We believe the new standards, and the new independent monitor agreed to today, can begin to erase this problem from the industry."

"Accurate, independent appraisals are very important to ensuring the safety and soundness of Fannie Mae and Freddie Mac and the mortgage market," said OFHEO Director James Lockhart. "OFHEO is committed to working closely with fellow regulators, the Attorney General, Fannie Mae, Freddie Mac, appraisers, lenders and other market participants to assure that the roll-out of the new code builds upon best practices, recognizes constructive comments to identify further refinements, and avoids unintended consequences."

As per Realtor Magazine Online the cost is approximately $71,000.

Of projects that saw national cost recovery rates of more than 80 percent in 2007, only one — a minor kitchen remodel, with 83 percent of cost recovered — was a strictly interior job. The others were an upscale siding replacement using fiber cement materials (88.1 percent), a wood deck addition (85.4 percent), midrange vinyl siding replacement (83.2 percent), and upscale vinyl and midrange wood window replacements (81 percent and 81.2 percent, respectively).

On most projects, the value of remodeling trended down in 2007 compared with 2006. No project exceeded an 88 percent return. The likely culprits for the year-to-year drop: rising remodeling costs and slowing home appreciation brought on by the lackluster housing market in many areas.

NEW YORK (Reuters) - Home prices in 10 major metropolitan areas fell a record 8.4 percent in the year through November, suggesting the housing slump is worsening, according to a Standard & Poor index released on Tuesday.

The decline in the S&P/Case-Shiller Home Price Index topped the 6.7 percent annual drop for October and was deeper than predicted by economists at Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. The consensus was for a 7.1 percent fall, Goldman economists said.

Home prices across big cities have now declined for 11 consecutive months and show little sign of bottoming, said economists, including Robert Shiller, a founder of the index and chief economist at MacroMarkets LLC. The decline in the index accelerated to 2.2 percent in November over October, from 1.4 percent in the previous month, S&P said.

It "confirms our outlook that the housing shock is by no means over," said Michelle Meyer, an economist at Lehman Brothers in New York. "Home prices are falling in response to weak demand, which is a function of buyer sentiment and tight credit conditions."

Falling U.S. home prices in the past year have fueled rising delinquencies and foreclosures, with homeowners unable to get out of costly loans. Banks and investors, throttled by losses in risky mortgages, have sharply curtailed financing for all but the most credit-worthy borrowers.

A broader but newer index of 20 cities recorded an annual decline of 7.7 percent in November, S&P said. Miami and San Diego led with annual declines of 15.1 percent and 13.4 percent respectively.

"While the sharpest decline in home prices has decidedly been in the once-hot regions such as Miami and San Diego, the weakness is spreading throughout the nation," Meyer said in a research note.

Other double-digit year-over-year declines were in Las Vegas, Detroit, Phoenix, Tampa and Los Angeles.

(Reporting by Al Yoon; Editing by Dan Grebler)