A monthly report that covers bankruptcy, foreclosure, consumer confidence, and other data was released Thursday revealing that foreclosures are increasing—and bankruptcies could be close behind.
LegalShield, a provider of legal safeguards and identity theft solutions, released its LegalShield Law Index that uses five indices: the LegalShield Consumer Financial Stress Index, Bankruptcy Index, Housing Activity Index, Foreclosure Index, and Real Estate Index. The indices rely on LegalShield’s unique and proprietary database of member demand for and usage of legal services as well as a close tracking of the Consumer Confidence Index by The Conference Board, Housing Starts report by the Census Bureau, and Foreclosure Starts by the MBA.
In its Foreclosure Index, foreclosures worsened, which is reflected in a 5.1 point rise to 63.8 in August, even though foreclosures remain down nearly 5 percent year-over-year. LegalShield said if debts such as student loan, credit card, and auto increase, bankruptcies could also be on the rise, mainly due to consumer financial health being weighed down.
"While confidence remains an important economic indicator, our data suggest that confidence is inflated right now,” said James Rosseau, LegalShield's Chief Commercial Officer. “Decision makers who rely heavily on confidence measures in forecasting consumer spending may be disappointed."
Rosseau said the inflated confidence is due to what they believe is stubborn optimism. Though consumers have reason to be assured about the economy, and LegalShield hopes for continued economic strength, their data has worsened in recent months.
“In light of these developments, we want to make decision makers aware that consumer spending will likely continue to fall short of the levels implied by consumer confidence,” Rosseau said. “In short, the consumer picture is pretty good, but not gangbusters."
LegalShield publishes the Law Index on the sixth business day each month. To read the full report, click here.
“The market is about to change and we need to be ready,” said Delgado. “REO is going to increase in 2018 as we see more fractures in the market—how much is determined by location and how big the fall off in price points will be.”
According to Delgado, the real estate market is white hot while demand is still strong. These factors are driving price points, appreciation, and values way up. However, 5 to 10 percent spikes in appreciation along with price points that are overvalued by 15 to 20 percent aren’t a new observation—it’s something he witnessed in 2007 and 2008.
“This is what we think will happen in the next year: Regional or microbubbles will start to burst—pay attention to Denver, Dallas, San Antonio, Las Vegas, Phoenix, Los Angeles, and San Francisco,” said Delgado. “Delinquency will rise and foreclosures will increase.”
Additionally, after being devastated by Hurricanes Harvey and Irma respectively, Delgado said Houston has an understated delinquency population by as much as 300,000 while Florida homeowner insurance deductibles will create long-term hardships putting a greater financial strain on homeowners.
In 2016, Judy Dominguez of Cherry Creek Mortgage, a residential lender based out of Greenwood, Colorado, had her spousal health insurance revoked and was saddled with about $40,000 in medical bills after her wife had a heart attack. Though they have a recognized marriage, the bank cited the decision to revoke as recognizing marriage as a union between a man and a woman.
“Every once in a while when discussing the AMDC I’ll have a well-meaning executive ask ‘what’s the point’,” said Delgado. “Ensuring that stories like this don’t happen again is the point.”
Delgado said that discussions are important and should be had, but anyone can pull professionals together so they can say the right things and feel good about themselves. Once the steps are defined, they must be walked out.
“It is up to each of us to pursue the change that we want to see with passion,” Delgado said. “The stakes are simply too high for us to give anything but our best.”
Negative equity dropped over the first quarter, with the total value of underwater mortgages declining by more than $283 billion since the start of the year, according to the CoreLogic Q1 2017 Equity Insights Report released on Thursday. The national aggregate value fell 0.9 percent over the quarter and 7.1 percent since Q1 2016.
In total, the number of underwater residential mortgages dropped 3 percent since Q4 2016 and 24 percent over the year. Still, about 3.1 million residential mortgages—or 6.1 percent of all U.S. mortgages—remain underwater as of Q1, according to the report. At their peak in 2009, underwater mortgages accounted for a 26 percent share of all mortgages.
Subsequently, positive equity is on the rise across the country. According to the report, about 9 million borrowers have regained equity since 2017, and 91,000 regained equity in 2017 alone. About 63 percent of all homeowners have seen an increase in equity since Q1 2016, with the average homeowner gaining about $13,400 in equity during that time period.
According to Dr. Frank Nothaft, Chief Economist at CoreLogic, mortgage risk is falling as a result.
“One million borrowers achieved positive equity over the last year, which means mortgage risk continues to steadily decline as a result of increasing home prices,” Nothaft said. “Pockets of concern remain with markets such as Miami, Las Vegas, and Chicago, which are the top three for negative equity among large metros, with each recording a negative equity share at least twice or more the national average.”
Broken down by state, Texas had the highest percentage of positive-equity mortgages as of Q1, with 98.4 percent in the black. The Lone Star State was followed by Utah (98.2 percent), Washington (98.2 percent), Hawaii (98.1 percent), and Colorado (98 percent). Washington saw the highest jump in equity over the year, with an average of $37,900 per homeowner.
According to Frank Martell, President and CEO of CoreLogic, rising equity also means a stronger overall economy.
“Homeowner equity increased by over $750 billion during the last year, the largest increase since mid-2014,” Martell said. “The rising cushion of home equity is one of the main drivers of improved mortgage performance. It also supports consumer balance sheets, spending, and the broader economy.”
Nationwide bankruptcy filings were 5 percent lower in October 2016 compared with a year earlier, falling even lower than last month’s reported decrease, according to October 2016 AACER bankruptcy data reported by Epiq Systems.
Bankruptcy filings totaled 63,042 in October, which was an increase from September’s total of 64,614, and was approximately 2.4 percent higher than October 2015’s total of 63,042 (an increase of 1,572). Year-to-date, there have been 656,125 bankruptcy filings nationwide for the past nine months of 2016 (about 65,613 per month), down from 2015’s year-to-date total through the end of October of 700,014 (about 70,001 per month).
The average number of filings per day in October 2016 was 3,152 over 20 days, which is an increase from September’s daily average of 3,077 over 21 days. The extra filing day in September compared to October accounts for the slight increase in the number of filings in September; had October featured 21 filing days, there would have been over 100 more filings averaged per day than in September. Bankruptcy filings have averaged 3,121 for the past nine months of 2016 over a period of 210 filing days.
October’s total of 63,042 bankruptcy filings was less than half of the peak total for the month of September recorded in 2010 of 135,771.
The state with the most cumulative filings for the past nine months of 2016 was again California with 61,173. As has been the trend, Illinois was second in year-to-date filings with 44,965. The next three states with the most cumulative filings were Georgia (39,3777) Florida (37,430), and Ohio (30,888).
Tennessee and Alabama continued to rank first and second among states in bankruptcy filings per capita for October with 5.66 and 5.53 for every 10,000 people, respectively. Those numbers were virtually the same as September’s numbers. The national average of filings per capita in October 2016 held steady over-the-month at 2.53, though it has increased by about 50 basis points since January 2016’s average of 2.02 percent.
Epiq Systems is a leading global provider of technology-enabled solutions for electronic discovery, bankruptcy and class action administration. Top legal professionals depend on us for deep subject-matter expertise and years of firsthand experience working on many of the largest, most high-profile and complex client engagements. Epiq Systems, Inc. has locations in the United States, Europe and Asia.
According to Redfin, buyer demand rose by 13.3 percent over-the-month in September up to a level of 105, its highest level in three-plus years, after nearly 32 percent more potential buyers toured homes and nearly 27 percent more potential buyers made offers.
A reading of higher than 100 for the Redfin Housing Demand Index indicates stronger or higher-than-expected demand, while a reading of lower than 100 indicates weak demand. For September 2015, the reading was 101.
This data indicates that there is a healthy pool of buyers ready and willing to purchase a home as long as they find the right one, according to Redfin.
“Buyer demand gained momentum after Labor Day when a pop of fresh listings hit the market,” said Redfin chief economist Nela Richardson. New listings are up 3.3 percent compared to last year at this time. “More than any other factor, new listings pulled buyers into the market in September. The pace of this demand will only be sustained if the supply of homes for sale continues to improve.”
Despite the new listings that hit the market after Labor Day, Redfin agents still reported a need for more inventory in what has turned out to be a lengthy housing supply shortage. The National Association of Realtors (NAR) reported that in September, there were 2.19 existing homes for sale, which was 6.8 percent lower than September 2015’s inventory despite a slight monthly increase.
“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in,” NAR Chief Economist Lawrence Yun said. “Unfortunately, there won't be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”
A recent report from ATTOM Data Solutions, parent company for RealtyTrac, found that although men may make more money than women, women do a better job of avoiding foreclosure.
ATTOM reports that in order to determine this information, they looked at the public property records for more than five million single-family home and condos nationwide.
Specifically, it is noted that overall male homeowners have slightly higher foreclosure rates compared to female homeowners. This is represented by 73 out of 10,000 male homeowners in foreclosure compared to 72 out of every 10,000 female homeowners. Following this trend married men and widowers both have significantly higher foreclosure rates than married women and widows.
Broken down further, it was shown that 83 out of every 10,000 married male homeowners are in foreclosure. This is compared to 66 out of every 10,000 married female homeowners. It was also shown that 112 out of every 10,000 widowed male homeowners were in foreclosure contrasting greatly with 94 out of 10,000 widowed female homeowners in foreclosure.
There is one exception for this trend though. ATTOM reports that for single men homeowners, it was found that 70 out of 10,000 of those homeowners were in foreclosure. This was a slightly lower rate than single women homeowners, which report that 73 out of 10,000 of these homeowners are in foreclosure.
Cash sales accounted for 29.7 percent of total home sales in July 2016, down 1.9 percentage points year over year from July 2015. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25 percent. CoreLogic reports that if the cash sales share continues to fall at the same rate it did in July 2016, the share should hit 25 percent by mid-2018.
REO sales, no surprise, had the largest cash sales share in July 2016 at 57.6 percent. Following behind, resales had the next highest cash sales share at 29.4 percent with short sales close behind at 28.1 percent and newly constructed homes at 15 percent.
While the percentage of REO sales within the all-cash category remained high, REO transactions have been in decline since peaking in January 2011. REO sales made up 4.3 percent of the distressed sales share of total home sales while short sales made up 2.9 percent in July 2016.
Most notably, CoreLogic reported that the distressed sales share of 7.2 percent in July 2016 was the lowest distressed sales share since September 2007. As with cash sales, the pre-crisis share of distressed sales was traditionally significantly than that of the post-crisis share. If the current year-over-year decrease in the distressed sales share continues, it will reach that "normal" 2-percent mark in mid-2018.
Eight states did record higher distressed sales shares in July 2016 compared with a year earlier, though. Maryland had the largest share of distressed sales of any state at 19.4 percent, followed by Connecticut at 18.6 percent, Michigan at 17.8 percent, New Jersey at 15.6 percent, and Illinois at 15.5 percent. North Dakota had the smallest distressed sales share at 2.5 percent.
While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels, says CoreLogic, each within one percentage point.
On the cash sales side, New York had the largest share of any state at 44.6 percent, followed by Alabama at 43.6 percent, Florida at 39.6 percent, New Jersey at 37.3 percent, and finally Indiana at 37 percent.
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