Homeowners Falling Behind On Mortgage Payments

The delinquency rate for residential mortgage stood at 4.67 percent of all loans outstanding in the third quarter of 2006 on a seasonally adjusted basis. That's up 28 basis points from the second quarter, and up 23 basis points from one year ago, according to Mortgage Bankers Association's National Delinquency Survey.

The survey noted that consumers holding subprime and FHA mortgages registered the largest increase in delinquency.

Subprime loans carry higher interest rates and most often are sold to consumers with modest income and little or no credit.

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Most Profitable Renovations

Renovation costs are shooting higher and homeowners are getting a lot less bang for their remodeling bucks, according to a report by the National Association of Realtors (NAR) and Remodeling Magazine.

Last year, for example, adding a master bedroom suite to a house cost an average of $75,959 nationwide and boosted the home's resale value by $64,419 - that's 84.8 percent of the cost recouped. The same job this year cost a lot more - $94,331 - and returned just $68,458, or 72.6 percent.

The Harvard University Joint Center for Housing Studies estimates that Americans will spend nearly $160 billion for home remodeling projects over the next 12 months.

Many costs associated with remodeling have spiked. Last year, the national average for a midrange kitchen renovation was $43,862, according to NAR. But this year, that average cost had leaped to $54,241.

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First-Time Home Buyers Look at Houses Again

High home prices have helped drive many first-time buyers out of the housing market. Now, with prices falling in many areas, there are some signs that buyers are beginning to drift back.

The share of first-time home buyers dropped earlier this year to its lowest level since 1987, according to the National Association of Realtors. First-time home buyers now account for 36% of home purchases, according to a study released last month by the Realtors group, down from 40% in the three previous years.

First-time buyers play a key role in the housing market. They provide a source of new demand for homes, and they also make it possible for owners of entry-level properties to trade up, creating a ripple effect that affects higher-priced sectors of the market. Declining affordability has made it difficult for first-time buyers to buy homes in many parts of the country, an important factor in the recent housing downturn.

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Not All Pricing News is Gloomy

Housing prices continued to climb in the third quarter, according to the only national survey that covers the sale of both new and existing homes.

The ascent wasn't nearly as relentless — just 3.1% — but prices are still rising nonetheless, according to the quarterly figures from the Federal Housing Finance Board.

The average in the nation's 32 largest markets was $326,700 as of Sept. 30, up from $317,000 a year earlier. Of the 32 markets, 19 showed increases, including surprising double-digit gains in several places.

Like studies conducted by other government agencies and the National Assn. of Realtors, the housing finance board's survey is not without drawbacks. It doesn't include houses sold with government financing, for example, so the numbers tend to skew a bit higher.

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Shoppers Shake Off Housing Slowdown

A sharp slowdown in the housing market isn't darkening consumers' moods as feared, suggesting they will continue to be a source of strength in the economy through this year and possibly into 2007.

Results from the first few days of the key holiday shopping season point to increases in retail sales from a year ago, despite a mediocre performance at Wal-Mart, the nation's largest retailer.

With consumer spending accounting for more than two-thirds of U.S. economic activity, spending gains are good news for the broad economy as it faces a number of headwinds, including the housing slowdown and turmoil in the automobile industry.

"A lot of the worries out there about consumers … are all much exaggerated," National City chief economist Richard DeKaser says.

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