TheMReport

March, 2013

TheMReport — News and strategies for the evolving mortgage marketplace.

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cover story growth has outpaced the national recovery. In many cases, these areas have strong energy-related industries, such as North Dakota and Texas." Stephanie Sims, managing editor of Chicago Agent Magazine, pinpointed some potentially hot markets, citing Las Vegas and Houston as thriving MSAs. "Home prices have increased, but quality housing can still be bought for inexpensive prices in comparison to other cities," Sims said of Las Vegas. "In terms of stable markets, Houston's market—and, overall, Texas—has been on track for a while now. Its cities didn't get too caught up in the exuberance of the housing boom, so the state didn't fall as far; but also, its economy has been doing well, with several job opportunities in the energy sector available." Elaborating on markets facing more significant challenges in 2013, Sharga explained, "On the other hand, some states have been hampered by brutal winters, multiyear foreclosure processes that continue to delay market recovery, and in the case of the Northeast, catastrophic damage from Superstorm Sandy. It's likely that states like New York and New Jersey, which have been hampered by all three of these factors, and Florida, which continues to struggle with high foreclosure inventory and foreclosure backlogs, will lag behind some of the betterperforming states." Pallotta also offered commentary to clear up the data dilemma presented by early 2013 forecasts, stating, "Many neighborhoods located in the Rust Belt areas of the country are still somewhat depressed as a result of very high unemployment and extreme negative equity. While home prices in many areas of the country (particularly in the Sun Belt) are still far below their peak of 2007, there is robust activity of late as bargain hunters take advantage of historically low rates. " Moving on to foreclosure trends, Sharga underscored the "The next 18 months could prove to be the sweet spot for mortgage lending." —Taylor D. Nadauld, Brigham Young University importance of tracking timelines and progress on a national and regional level. "Following foreclosure activity and inventory levels can also be useful, in terms of planning which types of products make sense to market within a specific area," he offered. "If there are more foreclosures than average, a product like the FHA 203k loan is a great product to market to first-time homebuyers. In markets where there are few foreclosures and limited inventory, prices are likely to increase more rapidly, and more expensive properties are likely to be sold. These markets may require jumbo loans or conventional loans with mortgage insurance." Key Takeaway: By focusing on markets hardest hit during the housing crisis and those where economic growth is above the national average, mortgage professionals can tailor their strategic approach to potential borrowers. Relative to those two factors, real estate markets presenting the greatest opportunities this year are likely to be those in California, Arizona, Phoenix, North Dakota, and Texas. Meanwhile, regions affected by natural disasters and extended foreclosure timelines will show the most limited activity for housing, and states likely to display declining opportunities include New York, New Jersey, and Florida. Regions that appear ripe for bargain hunting real estate investors include states in the Rust Belt and the Sun Belt. Resilience & Recovery P roviding a broader perspective on current market analytics, Taylor D. Nadauld, an assistant professor of finance at the Marriott School of Management at Brigham Young University, recalled the distinction—and inseparable connection—between the housing and lending industries. Pointing to new data on home prices, permits, and starts, Naduald noted that "homeowners and professionals in real-estate-related industries [are] cautiously opti- mistic that the housing market might be on a path towards a sustainable recovery." Naudauld continued, advising lenders and originators to remain vigilant regarding homeowners who are underwater, reiterating that those classified as distressed will benefit from rising home values and could become candidates for refinancing sooner than anticipated. "The next 18 months could prove to be the sweet spot for mortgage lending," Nadauld predicted. "The Federal Reserve continues to signal their intent to preserve the low interest rate environment, at least until sometime in 2014. If house prices continue to rebound over the next year, more and more borrowers could find themselves in a position where their home values would support refinancing." Touting the mortgage and housing industries' resilience, Donhoff concluded, "The lending industry overall is like a Rose Parade (or Macy's Parade for Easterners) with all the wheels stolen. It's only moving forward by brute force against great resistance." The M Report | 25

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