Home Prices Decline

Standard & Poor's Case-Shiller composite index, which tracks single-family home prices in 20 metropolitan areas, decreased by 0.7 percent from October 2011 to November 2011 and was down 3.7 percent from November 2010. That leaves the average home price at roughly the same prices as 2003. Of the 20 cities that were tracked, 19 showed lower prices. The worst area was Atlanta, with an almost 12 percent decline. Tampa, Seattle and Las Vegas also saw decreases. Phoenix was the one city to show a price increase.

Foreclosures in 2011

According to RealtyTrac, foreclosure notices were filed on 1,887,777 homes (one in every 69 homes) in the U.S. in 2011, a 34% decline from 2010, which itself had an artificially low number of foreclosures filed because banks halted foreclosures in October 2010. Foreclosure activity in 2011 was also 33% below 2009 levels and 19% below 2008 levels.

We have a dysfunctional foreclosure system in which banks are not processing foreclosures at an acceptable rate. It is unclear what the banks' long-term plan is with the homes they own through foreclosure, but a key part of our recovery is to get these homes back onto the market and purchased. The government's plan to allow investors to buy portfolios of foreclosed properties to turn into rentals is not good for the rest of us. The U.S. taxpayers bailed out the banks and Fannie Mae and Freddie Mac and they are the ones who deserve first crack at the foreclosed properties.

30-year Fixed Mortgage Rate

The 30-year fixed mortgage rate rose to 3.98% last week, up from 3.88% from the previous week. The 15-year fixed mortgage rate increased to 3.24% from 3.17%. The Federal Reserve said last week that it plans to keep rates low until 2014.

The mortgage interest rates we see now are historical lows and present an incredible opportunity for anyone who needs financing to purchase a home. Owning at home at these interest rates means your mortgage will likely be much lower than your rent would be for the same home.

Some Homeowners to Get Principal Reductions?

In an approximately $20 billion to $25 billion deal reached between federal regulators and banks, about one million homeowners could receive principal reductions on their mortgages. The settlement was reached to resolve acts of robo-signing and other unlawful foreclosure practices engaged in by the banks. By agreeing to the settlement banks are avoiding the risk of federal government lawsuits, though states could still go after the banks civilly. The banks participating in the deal include Bank of America, Wells Fargo, J.P. Morgan Chase, Citigroup and Ally Financial.

It is unclear how the money will be distributed or how homeowners will qualify or apply for this program. The mortgages that qualify for principal reduction will be limited to private mortgages that were foreclosed upon between 2008 and 2011. Since this program is limited to private mortgages, all mortgages owned by Fannie Mae and Freddie Mac (about 50 percent of all mortgages, or about 31 million mortgages) will not qualify.

Approximately 750,000 mortgagees (about half the number who will qualify for this program) will receive checks for $1,800. The banks will put $5 billion in reserve accounts for state and federal programs, part of which would be used to cover the $1,800 checks. One million mortgagees could have their principal reduced by around $20,000 (this will account for approximately $17 billion of the settlement). And $3 billion would be used to help homeowners refinance at 5.25 percent.

I see this deal as being a big coup for the banks and not much help to homeowners. A check for $1,800 isn't going to make a difference for someone who already lost their home to foreclosure.

Florida's 2011 Home and Condo Sales Increase from 2010

Florida's existing home sales increased to 185,921 in 2011 from 172,462 in 2010, an 8 percent increase. The median price was $131,700 in 2011, a decrease of 3 percent from the $135,900 median price in 2010. For condos, 87,581 units sold were sold in 2011, which was a sizable 15 percent gain over the previous year's 76,209 units. The median price in 2011 was $88,300, down 2 percent from the $90,000 median in 2010.

Rate on 30-Year Fixed Mortgage Hits Record Low

Setting a record for the eighth time in a year, the average rate on a 30-year fixed mortgage fell to 3.88%, down from the record 3.89% from last week. The average 15-year mortgage increased to 3.17% this week from 3.16% last week, which was a record low. Records on interest rates date back to the 1950s.

Citizen's Property Insurance Corp. to Rethink Replacement Costs

In a bit of happy news for homeowners, Citizen's Property Insurance Corp, the state-owned insurer of last resort, has agreed to start using more than one vendor to estimate a building's replacement cost, which determines how much insurance a property owner needs. As always, it is not good for consumers when a company, in this case 360Value, has a monopoly on a resource, such as estimates on replacement costs. It could easily be argued that 360Value had an incentive to provide excessively high estimates of replacement cost to Citizen's because that created more revenue for Citizen's through higher insurance premiums. The assurance of inflated premiums could have kept Citizen's willing to deal exclusively with 360Value.

Citizen's will now consider estimates from other vendors; an appraisal from someone licensed to estimate insurance replacement costs; a general contractor, architect or engineer; and a property inspection report that has been completed within the past 12 months.

Now let's all give three cheers for a free market economy and competition.