DS News - Digital Archives

» VISIT US ONLINE @ DSNEWS.COM COVER STORY THE BIG PICTURE INDUSTRY INSIGHTS While there's plenty of data that contend the market's on the mend, some experts caution temporary market forces are artificially driving the numbers. W Adding Up the Numbers Credit Where Credit's Due Concerns about rising inventories due to financing issues were also a topic of discussion recently when David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA), testified before the U.S. House Financial Services Subcommittee on Housing and Insurance at a hearing titled "Sustainable Housing Finance: Perspectives on Reforming the FHA." Within his testimony, as prepared for delivery, Stevens noted the Federal Housing Administration (FHA) never played such an important role in the housing market. "Today, [FHA] is the dominant source of mortgage finance for borrowers with low down payments and those without high incomes or inherited wealth," Stevens said. "Many of these are first-time homebuyers, young families looking to put down roots in a community, and a segment that must be served if we are to grow our economy and sustain the housing recovery." Stevens' statement seems to specify that he, as the head of the MBA, thinks the housing recovery is real. He also notes that if young first-time homebuyers do not have access to mortgage financing, they will be pushed out of the housing market. Despite recordlow interest rates on mortgages, it is becoming much POINT— COUNTERPOINT REGIONAL SPOTLIGHT Respected industry veteran Rick Sharga, EVP of Carrington Mortgage Holdings, gave an informative keynote address at REOMAC's Annual Education Summit and Expo in Dallas in April, which included numerous statistics that seemed to demonstrate a very real recovery. He guided the audience through his analysis and projections based on in-depth research gleaned from various industry sources, laying out where we are now in the housing and default servicing industries and where we are likely headed. Sharga was quite adamant that although several polls and studies indicate vast majorities of Americans believe the recovery is artificial, the numbers paint the "real world" picture. "I believe the housing recovery is real," Sharga said with confidence, noting there currently exists only one month of inventory in much of California. "New home inventory is absurdly low, foreclosures are down, and underwater borrowers can't sell their homes unless through a short sale. Inventories of distressed properties are also down. This is causing housing prices to climb across the country." Sharga is not alone in his belief that the housing recovery is tangible. According to data released in late April in the S&P/Case-Shiller Home Price Indices, residential property prices continued their upward swing year-over-year through February 2013, nearing increases of 10 percent. "The 10- and 20-city composites recorded their highest annual growth rates since May 2006; seasonally adjusted monthly data show all 20 cities saw higher prices for two months in a row," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. Sharga did admit in his keynote speech that foreclosure rates are rising again following the National Mortgage Settlement and too much inventory could impact the recovery next year, but it is too early to know for sure. He indicated that noted economists whom he respects feel the recovery will resemble a saw tooth, rising and falling somewhat gently over the coming months and perhaps years. BEST PRACTICES Experts, well-known economists, and others in the housing and mortgage industries today need only point to the growing volume of statistics indicating a current upward trend in home prices to declare the housing recovery is real—after all, to these folks, numbers don't lie. On the other hand, much anecdotal "evidence" indicates the housing recovery could possibly be just smoke and mirrors. THE BIG PICTURE e often attribute the expression, "There are three kinds of lies: lies, damned lies, and statistics," to Mark Twain, but others borrowed the phrase over time. It was coined to point out that statistics are often manipulated in order to bolster an argument or expose its weak points. 57

• Cover