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» VISIT US ONLINE @ DSNEWS.COM FISERV PROJECTS HOME PRICE GROWTH INTO 2017 LPS RECORDS SHARP DROP IN FORECLOSURE STARTS The latest numbers from the Fiserv CaseShiller Indexes show that the housing market may finally be on solid footing again. Average U.S. home prices increased 1.2 percent in Q2 2012 when compared to the same quarter in 2011. The year-over-year increase is the first since 2006 when excluding 2010, which was influenced by the federal homebuyer's tax credit. The indices indicate that from the second quarter of 2012 to the same quarter in 2013, home prices will increase 0.3 percent and will continue to increase as the year progresses. Fiserv projects housing prices will grow annually at a rate of 3.3 percent from mid-2012 through Q2 2017. The cities hardest hit by the housing bust have seen the biggest increases in prices. Phoenix recorded an uptick of 14.5 percent in Q2 2012, Detroit saw an increase of 11.6 percent, and Miami saw home prices rise by 6.9 percent. "The real estate market in the spring and summer of 2012 was the strongest since the peak of the bubble. There is now strong evidence for a slow, sustainable recovery on both the supply side and the demand side," said David Stiff, Fiserv's chief economist. "On the demand side, existing home sales increased to their highest levels since 2007, save for the sale spikes caused by the homebuyer tax credit," Stiff continued. "At the same time, supply is decreasing . . . . In many markets, limited inventories are holding back sales activity as potential buyers are unable to find properties to purchase, pushing up home prices as buyers compete for a dwindling supply of homes for sale." The housing sector isn't in the clear just yet. Fiserv says the battle over the fiscal cliff restrained the housing market and anticipates next summer's market conditions will likely be weaker. "In some markets, investor demand for housing will start to fade before first-time and trade-up buyer demand has ramped up enough to take its place. This will be most evident in markets with large foreclosure inventories," Stiff said. "Currently, investors are snapping up foreclosed properties almost as quickly as they are being listed for sale, but the pool of investors is limited and, as prices rise, the potential returns on residential real estate diminish. Consequently, Fiserv Case-Shiller projects a small, short-term price decline for many markets that recently experienced double-digit appreciation." Foreclosure starts fell further in October after a steep drop in September, according to data from Lender Processing Services (LPS). In October 2012, foreclosure starts numbered about 124,000, which represents a 22 percent decline from September and a 48 percent decrease from October 2011, the analytics company reported. In September, foreclosure starts were down monthly and yearly by 21 percent and 28 percent, respectively. LPS explained the plunge in foreclosure starts was likely driven by new borrower notification requirements from the national mortgage settlement. "LPS observed a drop-off in foreclosure starts in September that accelerated in October," said Herb Blecher, LPS Applied Analytics SVP. "This decline coincided with the implementation of new procedural changes outlined in the National Mortgage Settlement, which requires, among other things, that mortgage servicers provide written notice to borrowers 14 days prior to referring a delinquent loan to a foreclosure attorney." However, LPS believes the influence of the national mortgage settlement will not have a lasting effect. "This has resulted in what is likely a temporary slowdown in foreclosure starts that we do not believe is indicative of a longer-term trend," Blecher said, adding that he and the analytics team at LPS will be monitoring this activity very closely in the coming months. LPS says the drop in foreclosure starts helped to bring down the foreclosure inventory rate, which fell nearly 7 percent monthover-month and 16 percent year-over-year. Foreclosure inventory in judicial states remained elevated, more than three times higher than inventories in non-judicial states. In judicial states, the foreclosure inventory rate was 5.92 percent in October compared to 1.96 percent for non-judicial states. As foreclosure starts dropped off, foreclosure sales increased 14 percent month-over-month, totaling 68,000 in October, LPS reported. The delinquency rate for the month was 7.03 percent, down 4.9 percent month-over-month after spiking 7.7 percent in September. The seriously delinquent rate, which includes 90plus delinquencies and foreclosures, stood at 7 percent, down 3 percent from September and 11 percent from October 2011. LPS found nearly one-third of all home sale transactions were distressed over a recent oneyear period. From November 2011 to October 2012, sales totaled 4.1 million with 1.3 million of those counted as distressed. To put these figures into perspective, LPS notes that in November 2005, when home sales peaked at 8.2 million over a 12-month period, only 260,000 transactions were distressed sales. Overall, the number of properties 30 days or more past due or in foreclosure numbered 5.3 million as of the end of October, based on LPS' assessment. Of that total, 3.5 million are 30 days or more past due but not in foreclosure, while 1.8 million remain in pre-sale foreclosure inventory. Of the properties past due but not in foreclosure, 1.5 million are seriously delinquent or 90 days or more past due. 25

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