DS News

8 EXISTING-HOME SALES CONTINUE SURGE Existing-home sales rose higher in July, while low inventory levels and rising prices are the largest factors lowering sales to first-time buyers to their lowest share since January, according to a report from the National Association of Realtors (NAR). Total existing-home sales rose 2 percent to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June. July sales were at the highest pace since 5.79 million in February 2007. Existing sales have now increased year-over-year for 10 consecutive months and are 10.3 percent above the pace a year ago at 5.07 million. e report also found that single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.96 million in July to their highest level since 5.08 million in February 2007. Single-family sales were 4.83 million in June and are now 11 percent above the 4.47 million pace a year ago. Many economists believe that the growth in existing-home sales can be mostly attributed to growth in the employment sector. "In some markets, this boost has been led by job growth—a key sign that the recovery is on track," said Selma Hepp, Trulia's chief economist. "As millennial employment improves, young adults will continue to move out of their parents' homes and form their own households, first as renters and then as homeowners." Lawrence Yun, NAR chief economist, added, "e creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now. As a result, current homeowners are using their increasing housing equity towards the down payment on their next purchase." According to NAR, the median existing- home price for all housing types in July was $234,000, which is 5.6 percent above July 2014. is increase marks the 41st consecutive month of year-over-year gains. e median existing single-family home price was $235,500 in July, up 5.8 percent from July 2014. "Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand," Yun said. "Realtors in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains." NAR reported that total housing inventory declined 0.4 percent to 2.24 million existing homes available for sale at the end of July. is total is now 4.7 percent lower than a year ago when inventory levels reached 2.35 million. "Tight inventory across the country continues to put pressure on home prices," Hepp said. "As more potential buyers are being pushed out of the market, home sellers may be reluctant to sell if there is a perception that they might not be able to find another home to buy, thus perpetuating the problem." Another decline was recorded in the percent share of first-time buyers in July for the second consecutive month. First-time buyers in July lowered to 28 percent from 30 percent in June, the lowest share since January of this year, which was 28 percent. "e fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face," Yun said. "Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options." Lisa Edwards, director of business strategy with Forsalebyowner.com, told DS News that she believes challenges will always persist with first-time homebuyers. She also added that market conditions like "faster wage growth, continued relaxed lending standards, and interest rates hovering around 4 percent" will be needed to reach first-time buyers. FDIC SUIT CLAIMS BNY MELLON BREACHED TRUSTEE DUTIES FOR $2 BILLION WORTH OF RMBS e Federal Deposit Insurance Corp. (FDIC) has filed a complaint in a Manhat- tan federal court accusing Bank of New York Mellon of breaching its duties as bond trustee for $2.06 billion worth of residential mortgage- backed securities (RMBS) purchased by an FDIC-insured bank in Texas which later failed, according to multiple media reports. e FDIC took Austin-based Guaranty Bank into receivership in 2009, and the agency claims it suffered losses of more than $440 million in March 2010 when it sold 12 mortgage- backed securities that were originally issued by the EMC Mortgage Corp unit of Bear Stearns and by Countrywide Home Loans in 2005 and 2006, according to a report from Reuters. Both Bear Stearns and Countrywide were bought out in 2008 by JPMorgan Chase and Bank of America, respectively. e lawsuit, filed in the U.S. District Court for the Southern District of New York, claims that BNY Mellon "shirked its duty" as a bond trustee to make sure that the securities were not defective. Among the claims made by the FDIC are that servicers collected "excessive fees" for servicing the loans in the covered trust after they defaulted, which resulted in "enormous losses" for the plaintiff, according to the reports. A spokesperson from BNY Mellon could not immediately be reached for comment. is is not the only lawsuit the FDIC has pending against a bank over RMBS sold to Guaranty Bank. Earlier in August, the Fifth U.S. Circuit Court of Appeals in New Orleans revived a suit filed in 2014 by the FDIC accusing Deutsche Bank, Goldman Sachs, and the Royal Bank of Scotland of fraud with regards to $840 million worth of mortgage-backed securities sold to Guaranty Bank in 2004 and 2005. A judge in Austin had previously dismissed the FDIC's suit against the three financial institu- tions, claiming that the suit had not been filed in time under Texas law. e FDIC has a lawsuit similar to the BNY Mellon case pending against bond trustee U.S. Bancorp over the sales of about $248 million worth of RMBS to Guaranty Bank, citing losses when those RMBS were sold.

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