Alaskanomics

Alaska's Foreclosures in Progress Lowest in the Nation; Subprime Delinquencies Half of U.S. Average

The second quarter 2011 survey by the Mortgage Banker’s Association shows that Alaska continues to have the lowest level of problematic subprime residential loans in the country. The report also indicates Alaska has comparatively low levels of delinquencies and foreclosures for all types of mortgage loans in the United States.

For the last two years in Alaska the percent of foreclosures started in a given quarter were about 0.5% of the total number of mortgages outstanding. This improved to 0.4% in the second quarter of 2011 and is about half the national average of just under 1%.

The total inventory of foreclosures in process is only 1% in Alaska, while the country has a much larger lingering foreclosure inventory at 4.4% due to higher rates during the recession and longer resolution times.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The rate of delinquencies and foreclosures on subprime loans is significantly higher. However, Alaska is in a far better position and again leads the nation in this important category. Subprime foreclosures in Alaska are at 4.1% while the national average is 14.9% and the second lowest state is Wyoming at 6.9%.

The survey covers just over 95,000 mortgages in Alaska and approximately 7,500 or 8% were considered subprime. Of those 7,500 subprime loans Alaska’s subprime delinquency rate is 11.1% compared to the national average of 23.5%. Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska’s rate is more than 6% lower than the second place state Colorado at 17.8%.

Alaska does trail North Dakota, South Dakota and Wyoming in the level of overall delinquent loans, ranking fourth best out of 50 states. Alaska’s delinquency rate is 4.5%, while the U.S. average is 8.1%.

 

Alaska Single Family Permits Up 22% in 2010; Multi-Family Units Are Half of 2009 Level

The U.S. Census Bureau recently released their final estimates of building permits for new, privately-owned residential construction in 2010. In the U.S., more than 600,000 permits were issued with a total valuation of $102 billion - a 3.7% increase from the 2009 total. Alaska's permits grew faster than the U.S., at 4.8%, but Alaska's total value of construction was just $205 million, or .2% of the U.S. total.

Single family residential construction permits were up in 2010, but permits for two or more units declined over 2009.

 

The census data for Alaska is likely to be understated because outside of Alaska's larger communities, building permits are not required for any dwelling of three units or less.

Alaska's Foreclosure Rate Lowest in Nation

The first quarter 2011 survey by the Mortgage Banker’s Association shows that Alaska has the lowest level of residential foreclosures started this year, and the lowest level of total foreclosure inventory in the country.

For the last two years in Alaska the percent of foreclosures started in a given quarter were about 0.5% of the total number of mortgages outstanding. This is about half the national average which was just under 1% at the end of March 2011. This is an improvement for the U.S. from one year ago when the rate of new foreclosure starts was 1.5%.

The total inventory of foreclosures in process is only 0.8% in Alaska, while the country has a much larger lingering foreclosure inventory at 3.4% due to higher rates during the recession and longer resolution times.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The rate of delinquencies and foreclosures on subprime loans is significantly higher. However, Alaska is in a far better position and again leads the nation in this important category. Subprime foreclosures in Alaska are at 4.5% while the national average is more than three times higher at 14.7% and the second lowest state is Missouri at 7%.

Alaska’s subprime delinquency rate is 10.5% compared to the national average of 22.9%. Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska’s rate is more than 6% lower than the second place state Colorado at 16.8%.

Alaska does trail North and South Dakota in the level of overall delinquent loans, ranking third best out of 50 states. Alaska’s delinquency rate is 4%, while the U.S. average is 7.8%.

 

Foreclosure Activity Slows in 2011

Today the Alaska Housing and Finance Corporation completed the first quarter of 2011 report on Notices of Defaults and Trustee Deed foreclosure action. In Anchorage, Fairbanks and the Mat-Su there was a fairly significant reduction in the number of notices of default in the first quarter of 2011 compared to the same three months of 2010. Anchorage trustee deed filings were virtually the same in the first quarter compared to last year, but Fairbanks and the Mat-Su were both lower in 2011.

The Notices of Default are based on legal property descriptions and may contain multiple units of housing. They do not distinguish between commercial structures, residential structures and land. Statewide there were 548 notices of default in the first quarter of 2011 compared to 749 in the first quarter of 2010. The quarterly average number of notices was 654 in 2008, then rose to a high of 864 in 2009, and declined to 700 in 2010. The complete report gives detail for the largest communities in Alaska and graphs the trend back to 2000. Anchorage notices declined from 354 in the first quarter of 2010 to 237 in the first quarter of 2011. Fairbanks notices declined from 100 to 93 during the same first quarter comparison, while the Mat-Su fell from 152 to 109.

Notices of Default are a leading indicator of upcoming foreclosure activity. This can be tracked by the filing of Trustee Deeds, which represent the completion of the foreclosure process a minimum of 90 days later. There were 309 Trustee Deeds filed statewide in the first quarter of 2011 compared to 361 in the first three months of 2010. The quarterly average number of Trustee Deeds was 283 in 2008, 312 in 2009, and 347 in 2010.

There were 120 Trustee Deed filings in Anchorage during the first quarter of 2011. This was right on par with 2010 when there were 117 first quarter filings and an average of 119 each quarter during the year. In Fairbanks there were 43 filings in the first quarter of 2011 compared to 55 in the first quarter of 2010 and 56 on average per quarter for the year. The Mat-Su had 64 filings in the first quarter of 2011 compared to 104 in the first three months of 2010 and 91 on average per quarter for the year.

Looking back at all the data from 2000 to 2010 there were a total of 21,666 notices of default filed in Alaska and 10,422 resulted in the issuance of Trustee Deeds. Therefore, roughly half (52%) of notices of default were cured or restructured in some way before a foreclosure was completed. Over the last 11 years there was an annual average of 1,968 Notices of Default statewide. The last four years have all been higher than the long-term average, which is partially explained with inherent growth in the economy. However, 2009 was clearly the worst year with rates 76% higher than average. 2010 showed an improvement to 42% above average and the first quarter of 2011 is about 11% higher than the historical quarterly average.

The total number of foreclosure actions in the last three years has also been higher than the average since 2000, but the percentage of notices of default that turn into trustee deed filings is getting smaller. For example, in 2000 there were 1,484 defaults and 1,066 trustee deeds. Therefore, only 28% were cured or restructured compared to an average over the decade of 52%. In 2009 the comparable number was 36% and 49% in 2010.

Click Here to view a copy of the three page report. It contains several graphs of this data which show an increase in this activity in 2007 and the beginning of a decline trend in 2010.

Housing Delinquencies, Foreclosures Remained Low Through 2010

Alaska continues to have one of the lowest levels of foreclosures and delinquent residential mortgage loans in the country according to the Mortgage Bankers Association fourth quarter 2010 survey. Alaska ranked third best in the nation behind North and South Dakota as having the lowest percentage of mortgage loans delinquent.

Alaska’s fourth quarter delinquency rate of 4.25% was significantly better than the national average of 8.9%. The U.S. improved 0.5%, while the delinquency rate in Alaska improved 0.7% from 4.95% in the third quarter of 2010. The highest rate for Alaska was the third quarter 2009 survey at 5.1% and the recent low was 2.7% in the third quarter of 2008.

Alaska ranked 2nd best of all 50 states in both total foreclosures in progress and those started in the fourth quarter of 2010. Alaska’s total foreclosure rate remained unchanged at 1.1%, compared to 4.6% nationally. Alaska’s rate had averaged 0.9% in 2008 and then began to rise in 2009 to a high of 1.4%. It remained at that level in 2010 until it began improving in the third quarter. Nationally the foreclosure rate was 2.8% in 2008 and continued to rise each quarter, reaching 4.6% by year end 2009, where it remains.

Subprime loans to traditionally unqualified borrowers were a major source of the mortgage problems that plagued the country recently. However, Alaska continues to have the lowest level of subprime loans delinquent or foreclosed in the nation. Alaska’s subprime delinquency rate is 10.9% while the national average is 25.3%. The second lowest state is Colorado at 18.4%, so Alaska is far ahead of the pack in this key category. Alaska’s rate dropped from 12.3% to 10.9% in the last quarter of the year, but is still higher than the recent low of 6.3% in the third quarter of 2008.

Anchorage Building Permits Continue to Decline in 2010; New Projects Slated for 2011

In a presentation to the Anchorage Building Owners and Managers Association (BOMA) on January 7, 2011, Brian Meissner of ECI/Hyer reviewed construction results for 2010. Total building permit values in Anchorage continued to decline from a peak of $800 million in 2006 to $386 million in 2010. Residential permit values grew 8% from 2009 to 2010, while commercial permit values were down 22%. Meissner identified a number of high-dollar private and public projects planned for 2011 and beyond, however, including more than $600 million in military projects and other health care, university, library and school projects throughout Alaska. Click here for Brian's presentation.

Low Foreclosure and Delinquency Rates Continue in 3rd Quarter

Alaska continues to have one of the lowest levels of foreclosures and delinquent residential mortgage loans in the country according to the Mortgage Bankers Association 3rd quarter survey.

 
Alaska ranked 4th best in the nation behind North Dakota, South Dakota, and Montana as having the lowest percentage of mortgage loans delinquent, meaning more than 30 days past due, but not yet in foreclosure. Alaska’s rate of 4.95% was significantly better than the national average of 9.4%. The U.S. remained unchanged, while the delinquency rate in Alaska did increase 0.2% from 4.76% in the 2nd quarter of 2010. The highest rate for Alaska was the third quarter 2009 survey at 5.1% and the recent low was 2.7% in the third quarter of 2008. Nationally the delinquency rate was 6.2% in June of 2008 and increased to 10.4% by the end of 2009. It then showed an improvement of 1% in the first quarter of 2010 declining to its current level of 9.4% for the last three quarters.

Alaska ranked 2nd best of all 50 states in both total foreclosures in progress and those started in the 3rd quarter of 2010. Alaska’s total foreclosure rate of 1.1% compares to 4.4% nationally and both areas showed improvement in the third quarter. Alaska’s rate improved 0.3%. It had averaged 0.9% in 2008 and then began to rise in 2009 to a high of 1.4% at the 3rd quarter. It remained at that level in 2010 until this quarter’s improvement. Nationally the foreclosure rate was 2.8% in 2008 and continued to rise each quarter, reaching 4.6% by year end 2009. It has remained constant at this level in 2010 until the 0.2% improvement in the third quarter.

Subprime loans, to traditionally unqualified borrowers, were a major source of the mortgage problems that plagued the country recently. However, Alaska continues to have the lowest level of subprime loans delinquent or foreclosed in the nation. Alaska’s subprime delinquency rate is 12.3% while the national average is 26.6%. The second lowest state is Colorado at 19.2%, so Alaska is far ahead of the pack in this key category. It is important to note that Alaska is still 6% worse than its recent low of 6.3% in the 3rd quarter of 2008.

Risks, Costs increasing for mortgage loans

By Barbara and Clair Ramsey 

If you have been waiting for house prices to drop more you risk losing out. Flexible buyer-financing rules are changing. Loans will be harder to get and require more upfront cash.

Change 1: Seller-Paid Closing Costs
Sellers will no longer be able to pay up to 6 percent of the buyer's closing. New Federal Housing Administration rules have reduced seller's contributions to 3 percent maximum.

On a $200,000 home loan, sellers can only contribute $6,000 versus the previous $12,000 toward buyers' closing costs, reserves and repairs. Buyers must still have 3.5 percent of their own funds for the down payment.

Change 2: Mortgage Insurance Premiums
Mortgage insurance protects lenders if the buyer defaults. Buyers pay into a reserve with an up-front fee and in each monthly mortgage payment. FHA increased the annual premium from 0.55 to 0.85 percent for loans with 5 percent to 20 percent down payments. For loans with less than 5 percent down, the annual premium increased from 0.55 to 0.90 percent. The average buyer must pay this in their monthly mortgage payment until the loan-to-value reaches 78 percent AND made five years of mortgage payments.

Change 3: Credit Scores
Previously Buyers with low credit scores could qualify for an FHA home loan without penalty. FHA can increase the interest rate and down payment for low credit score buyers. On a $200,000 loan, a 3.5 percent down payment of $7,000 could increase to $20,000.

Change 4: Condominium Approvals
Condo projects are under a more intensive national review. This could hold up your purchase if an association is not proactive. A few must-have criteria include at least 70 percent of the units be owner-occupied and less than 15 percent of the units in foreclosure. Without financing approval for a condo project, seller- financing or cash are the only alternatives.

Less House for Same Money
These are just a few of the risks of inaction. Interest rates will start to rise. For every 1 percent increase in interest rates, you lose 10 percent in borrowing power to keep the same monthly payment. So the longer you wait, the less you will be able to borrow if you want to keep the same monthly payment.

Barbara and Clair Ramsey are industry leaders in residential real estate marketing in Alaska.

Changes Needed to Foreclosure Process

By Barbara and Clair Ramsey 

The current national real estate crisis, with the enormous amounts of foreclosures in some parts of the Lower 48, is a long-term problem that needs a creative solution to resolve and not an assembly line approach. Here are two ideas, that when used together, could create better results.

The first is to place foreclosed properties into one of the following categories:

#1 Properties that can be rented back to the current owners to collect some offsetting income.

#2 Properties that need minimal work and can be placed on the market for sale, once repairs are completed.

#3 Properties that need some work, but are in good enough condition to be put on the rental market immediately with minimal effort. A rental property doesn't have to be in as good a shape as a property for sale.

#4 The remaining foreclosures are more challenging. After the most cost-effective work is completed, the property is held off the market until it can replace a property in category 2 or 3. 

The second idea is that maintenance shouldn't stop after a property is foreclosed. Maintaining the yard, general cleaning and preventative maintenance helps preserve the home in the best condition to sell or rent. Dumping properties on the market without preparation guarantees the lowest price possible.  As foreclosed properties slide into disrepair, a vicious circle starts in the immediate area. As property values slide, the next foreclosure could be the neighbor. One problem creates another. 

In Alaska, we don’t yet have a foreclosure problem, but we need to learn from the mistakes we see on a national level where the current system is overwhelmed. To be successful, it will require a change in attitude with better property management, marketing and people skills. 

Barbara and Clair Ramsey are industry leaders in residential real estate marketing in Alaska.

Home Loan Activity Increases 24% Over 2nd Quarter 2009, Refinance Activity Continues to Slow

The Alaska Housing Finance Corporation (AHFC) has released the 2nd quarter 2010 Alaska Housing Market Indicators report. It tracks new loan activity for single family homes and condominiums in Alaska. The data is based on a survey representing approximately 95% of mortgage lenders in Alaska and also includes AHFC loans.

 

It recorded 2,604 loans worth $618 million in the second quarter of the year. This was a 24% volume increase over the same period in 2009 and $120 million more in terms of dollars. The sale of single family homes accounted for $98 million of this growth and condos increased $22 million over last year’s activity. The average sales price of the homes was $266,908 or 0.8% higher than the second quarter of 2009.

There were 218 loans for new construction single family homes statewide worth $58 million in the second quarter. This represented about 10% of all home mortgage activity. Existing homes accounted for 1,909 loans and $478 million. 55% were in Anchorage, 15% in the Mat-Su and 13% in Fairbanks. New construction condos led to 64 loans for $14 million, 99% of which were in Anchorage. 413 loans on existing condos accounted for another $68 million in loan activity, 94% in Anchorage.

The 30 year fixed mortgage rates are at historic lows, averaging 4.35% at the end of September 2010 according to the Federal Reserve. Sustained low rates coupled with the very popular Federal first time home-buyers tax credit of $8,000 has caused a large increase in mortgage activity this year. In addition to accommodative monetary policy, the Federal government is actively engaged in subsidizing the market by committing up to $200 billion in capital to Fannie Mae and Freddie Mac. These two Government Sponsored Enterprises now purchase a majority of the mortgage loans in the United States.

30 year conventional fixed interest rate mortgage loans have been getting less expensive for three decades. In 1981 they peaked at 16.6% and have undergone a slow and steady decline ever since. In early 2009 rates dipped under 5% on average for the first time and a surge in refinance activity began.

According to AHFC statistics there was less than $200 million in refinance loans completed per quarter in Alaska in 2006 and 2007. In 2008, the average rose to $400 million. Then in the first quarter of 2009 the activity spiked to $1.4 billion, followed by $1.2 billion in the second quarter. During this time the average 30 year interest rate declined nearly 1.5% in six months. The refinance pace slowed somewhat in the last half of 2009, but still finished the year with $3.7 billion in refinanced mortgage loans according to AHFC statistics. In the first six months of 2010 there has been $798 million in refinance activity. This is higher than historic levels, though much lower than 2009. Many people who benefited from a refinance already took advantage of the low rates in 2009.

The complete report of data tables can be viewed at: http://www.ahfc.state.ak.us/grants/housing_market_indicators.cfm