20% of homes underwater

Real estate website Zillow.com says one of every five U.S. home owners owed more on their mortgage than their home was worth in the fourth quarter. The percentage of American single-family homes with mortgages in negative equity rose to 21.4% in the fourth quarter from 21% in the third quarter, according to the Zillow Real Estate Market Reports.

U.S. home values declined again in the fourth quarter, as the Zillow Home Value Index fell 5% year-over-year and down 0.5% quarter-over-quarter, to $186,200. It was the 12th consecutive quarter of year-over-year declines, the reports showed. "The prevalence of markets in or near a double-dip situation shows that we are not yet at the bottom, in terms of home values," Stan Humphries, Zillow chief economist, said in an interview.

One in five, or 29 of the 143 markets tracked by Zillow, had at least five consecutive month-over-month increases in home values during 2009 before values began to flatten or fall again in the second part of the year. These markets included the Boston, Atlanta and San Diego metropolitan areas. Zillow said it defines a "double dip" as two periods of sustained declines in home values separated by a brief period of stabilization or recovery. Foreclosure resales remained high, making up 20.3% of all U.S. home sales in December.

Foreclosure resales also made up the majority of sales in several metropolitan areas, including Merced, California, at 68.3%; Las Vegas, at 64 percent, and Modesto, California, at 62%. Additionally, 28.5 percent of home sales nationwide sold for less than what the seller originally paid. Home values increased year-over-year in 27 of 143 markets and remained flat in 15.

DSNews.com - Jumbo market getting worseDelinquencies on prime jumbo loans continue to climb, and Fitch Ratings says they could reach 10 percent as early as next month. Loan performance among high-end mortgages within private residential mortgage-backed securities (RMBS) showed further weakness in January, as serious delinquencies rose for the 32nd consecutive month, Fitch said. According to Fitchs data, overall, prime jumbo RMBS at least 60 days past due swelled to 9.6 percent in January, up from 9.2 percent in December 2009. The prime sector of the jumbo market was the only one in which new delinquencies increased from a year ago, Fitch said. Although prime jumbo delinquencies began to rise in the second quarter of 2007, the company says they accelerated in 2009 nearly tripling over the course of the year.

Fitch notes that delinquency rates on pre-2005 loans remain well below that of more recent originations. The five states with the highest volume of prime jumbo loans outstanding California, New York, Florida, Virginia, and New Jersey comprise approximately two-thirds of the $381 billion jumbo loan market. Florida saw the biggest monthly jump of these states. It holds only 6 percent of the market share, but now has the highest serious delinquency rate at 16.6 percent, according to Fitchs analysis. MBA - mortgage applications downThe Mortgage Bankers Association (MBA) said rates on 30-year fixed-rate mortgages, the most widely used loan, fell below 5 percent for the first time since the week ended Dec. 18, but U.S. mortgage applications dipped last week.

The MBA's Weekly Mortgage Applications Survey for the week ending February 5 decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.6 percent compared with the previous week. The Refinance Index increased 1.4 percent from the previous week and the seasonally adjusted Purchase Index decreased 7.0 percent from one week earlier. The unadjusted Purchase Index decreased 1.1 percent compared with the previous week and was 7.5 percent lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 3.8 percent. The four week moving average is up 0.8 percent for the seasonally adjusted Purchase Index, while this average is up 4.8 percent for the Refinance Index.

The refinance share of mortgage activity increased to 69.7 percent of total applications from 69.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.5 percent of total applications from the previous week.Economy to coolAccording to a Reuters poll of 80 economists, U.S. economic growth is set to cool after a burst of activity late last year and expectations for a jobless recovery will prompt the Federal Reserve to keep interest rates on hold until well into the second half of 2010. Gross domestic product is forecast to grow by an annualized 2.7 percent this quarter, nearly halving from a 5.7 percent expansion between October and December last year. For all of 2009, the world's biggest economy contracted by an estimated 2.4 percent but economists expect it to grow 2.9 percent this year. Those median forecasts are similar to a poll of the same analysts taken last month.

Forecasts for the first quarter varied widely, from a contraction of 0.4 percent to 4.5 percent annualized growth. Two economists predicted the economy would contract again at some point in the first half of the year. "The economy shows signs of recovery in terms of activity and volumes, but persistent challenges in bank le nding and policy-making will probably translate into a slow recovery for the job market," said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago. "Long-term rates are likely to benefit from renewed volatility in international markets, and we anticipate a strengthening in the dollar." Consumer price inflation is expected to average 2.1 percent in 2010 and 2.0 percent in 2011, according to the poll. Core inflation, which removes volatile food and energy costs, is seen at 1.4 percent in 2010 and 1.5 percent in 2011.Trade deficit widensThe US Commerce Department says the trade deficit surged to a larger-than-expected $40.18 billion in December, the biggest imbalance in 12 months. The wider deficit reflected a rebounding economy that is pushing up demand for imports.

The December deficit was 10.4 percent higher than the November imbalance and much larger than the $36 billion deficit that economists had expected. For December, exports of goods and services rose for an eighth consecutive month, climbing 3.3 percent to $142.70 billion, reflecting strong gains in sales of commercial aircraft, industrial machinery and U.S.-made autos and auto parts. Imports were up 4.8 percent in December to $182.88 billion, led by a 14.8 percent surge in oil imports which rose to the highest level since October 2008. For all of 2009, the deficit totaled $380.66 billion, the smallest imbalance in eight years, as a deep recession cut into imports. However, economists believe the deficit will rise in 2010 as U.S. demand for imp orts outpaces U.S. export sales. Last year's decline in the value of the dollar against the euro, the joint currency of 16 European nations, and several other major currencies has helped make American goods more competitive on overseas markets. That will help lift the fortunes of America's beleaguered manufacturing sector.

However, the export gains are expected to be outpaced by an even larger rebound in imports.Builders bet on spec housesHome builders are ramping up speculative construction to attract last-minute home buyers who want to tap the soon-to-expire tax credit. "We know that we're going to have more people out now," says Lance Wright, co-owner of CastleRock Communities in Houston, Texas. "Buying is an emotional decision. Seeing the actual product that you're moving into will certainly make it easier." Ken Campbell, chief executive of California-based Standard Pacific Corp., agrees. Buyers trying to beat the tax credit's expiration "will buy a house somewhere," he says. "It does make a difference if the home is ready, available to go." Late last year, builders lost sales because they didn't have enough houses to satisfy a flurry of demand from buyers looking to take advantage of a federal tax credit for first-time buyers before they expired on Nov. 30. Builders expect buyers will wait until the last minute."As we roll into March and April, more people are going to become aware of the fact that there's a deadline, and it's for real," says Rob Bowman, president of Lancaster, Pa.-based Charter Homes Neighborhoods.

It's difficult to measure the total number of spec homes nationwide, but according to a survey conducted by John Burns Real Estate Consulting, based in Irvine, Calif., home builders have about three finished homes with no buyer per community. That's up slightly from 2.8 finished homes in November but much lower than the peak of six finished homes in July 2008. "Every builder I talk to around the county is starting a spec home or two per community for the spring season, provided they have the cash to do it," said Jody Kahn, a John Burns vice president. The strategy is risky. If the buyers don't materialize, builders could be saddled with unsold homes that will require heavy discounting to sell, hurting profits and slowing the housing recovery.

New homes may also con tinue to lose market share to lower-priced foreclosed houses. Indeed, some economists expect an avalanche of foreclosures in the months ahead as lenders release homes they have been keeping off the market.DSNews.com -

FHA Defaults hit 9%The latest numbers from the Federal Housing Administration (FHA) show that the percentage of loans it backs that are at least 90 days past due hit 9.12% at the end of 2009. That figure is up from 6.82% one year earlier a 34% increase. FHA officials have repeatedly cited a rise in loan defaults as inevitable given the agencys exponential growth in market share.

The FHA currently backs about 30 percent of all new loans for home purchases and 20 percent of refinanced loans. Those figures represent an increase of nearly 1,000 percent since 2006, when private lenders began to pull back and the credit crunch set in. According to the agency, the bulk of its problem loans stem from originations made in 2007 and 2008.

Officials say tighter underwriting standards make more recent and new loans less likely to default. In fact, HUD said in its fiscal year 2011 budget that it expects new business from FHA to generate a $6 billion overall profit, although that number will be eclipsed by projected losses of $19 billion from insuring soured loans. In the fourth quarter of 2009, lenders originated $86.1 billion in FHA single-family loans, up 21 percent compared to the same period in 2008. Sixty percent, or $51.8 billion, of the fourth-quarter financing was used to fund home purchases. For the full 2009 year, FHA insured 5.8 million loans, with an aggregate balance of $752.6 billion a 24 percent increase compared to 2008s business.