New originations ended the year down 29.3 percent from 2010, lower than since 2007, and December activity was down 2.7 percent from December 2010. Through November, originations totaled about 5.6 million, down 1 million from 2010, according to the December Mortgage Monitor report released by Lender Processing Services today.

Mortgages originated in 2010-11 have 90-day default rates that were lower than any vintage since 2005, before the housing crash and the implementation of tighter underwriting standards. Ninety day default rates are highest for loans originated in 2006, immediately before lending standards were tightened, and are lowest for loans originate in 2010 and 2011.

December origination data also shows that recent prepayment activity - a key indicator of mortgage refinances - has remained strong, with 2008-09 originations, high credit score borrowers and government-backed loans having benefited the most from recent, historically low interest rates.

Foreclosure starts plummeted in 2011, nearly 40 percent below 2010 for the year as a whole and down 3.7 percent from November to December.

LPS found that half of all loans in foreclosure in judicial states have not made a payment in more than two years. Foreclosure inventories in judicial states are two anmd a half times those in non-judicial states, and the gap continues to widen. Foreclosure sale rates in non-judicial states stood at approximately four times that of judicial foreclosure states in December.

However, pipeline ratios (the time it would take to clear through the inventory of loans either seriously delinquent or in foreclosure at the current rate of foreclosure sales) have declined significantly in judicial states from earlier this year.

Other findings from the LPS report:

Total U.S. loan delinquency rate: 8.15 percent

Month-over-month change in delinquency rate: 0.0 percent

Total U.S foreclosure pre-sale inventory rate: 4.11 percent

Month-over-month change in foreclosure pre-sale inventory rate: -1.3 percent

States with highest percentage of non-current* loans: FL, MS, NV, NJ, IL

States with the lowest percentage of non-current* loans: MT, WY, SD, AK, ND

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

In June, first-timers also accounted for 31 percent. The lowest level ever recorded in the three and a half year old survey of Realtoers was below 30 percent in March 2010.

Realtors participating in the survey blamed stringent credit requirements by lenders who have still not recovered from the Great Recession.

Nearlhy half of December sales went to repeat buyers, 21 percent went to investors, 13 percent to second home buyers, 24 percent were relocation sales and 2 percent went to foreign buyers.

NAR also released projections of 2012 existing home sales at 4.62 million, a 6.3 percent increase over 2011 and median prices at $167,300, a .7 percent rise over 2011.

Average days on market for properties over half a million averaged 222 days last week and has risen every week since August when DOM was at a year-low of 100 days, according to the latest monthly data from the Institute for Luxury Home Marketing. After falling since early July, inventories rose last week, reaching 23,416 homes in the ILHM market profile.

Thirty percent of listed properties have had a price decrease and even though the balance between supply and demand improved slightly in the first two weeks of the year, new listings slightly exceeded absorptions. Median price at $1,097,660 and median asking price per square foot at 333 were unchanged.

Top ten markets with the longest average days on market are Miami (308 days), Chicago (301), Detroit (271), Phoenix (264), New York (261), Orlando (253), Raleigh-Durham (252), Philadelphia (242), Charlotte (228) and Denver (226). Properties are moving fastest in Sacramento/Tahoe (173), San Diego (176) and Washington (176).

Overall existing-home sales rose 5.0 percent in December to a seasonally adjusted annual rate of 4.61 million from a downwardly revised 4.39 million in November, and are 3.6 percent higher than the 4.45 million-unit level in December 2010. The estimates from the National Association of Realtors are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops.

A new analysis from the senior economist at CoreLogic makes the case that declining household formation, vacant REOs and the shadow inventory of defaults and foreclosures in process together have created an oversupply of 1.1 million homes that is negatively impacting prices and will continue to do so for years-as long as it takes to reduce excess supply to levels that will not impact local values.

“Excess supply is important because it has implications for residential investment and therefore heavily impacts economic growth and home prices,” said CoreLogic’s Sam Khater in The MarketPulse, a new newsletter published by the data provider.

Khater argues that the net increase in housing units increased by an annualized 1.64 percent rate during the last five decades while household growth slowed from 1.54 percent to only 1 percent during the 2000s, and reached its rock bottom in 2008 and 2009 when household growth only averaged 0.5 percent. The decline reflected several factors: more women in the workforce, delayed marriage, lower formation rates for younger households and the recession.

Given the net increase in the supply and household growth between April 1, 2010 and November 2011, Khater estimates that the excess supply was roughly between 1.0 and 1.1 million units as of November 2011. Projections of roughly 600,000 net new housing units annually and an REO supply of 400,000 units a year will exacerbate the gap between supply and demand.

“It will take many years for the excess supply to be removed assuming no large policy intervention and the economy continues to grow slowly,” said Khater. “A large caveat to this estimate is the potential for policy intervention because, absent the REO supply, the excess supply would rapidly decline.”

Two years ago, in 2009, sellers made a median $36,000 when they sold, a 27 percent price gain. Owners who sold their home last year realized a median price gain of only $26,000, or 16 percent, according to the 2011 Profile of Home Buyers and Sellers from the National Association of Realtors.

“Generally the longer a seller is in the home the greater the increase attributable to price appreciations; however, the recent path of home prices has resulted in the level of equity, in homes with seller tenures of 1 to 5 years, to vary from that trend,” explains the report.

Owners who sold after 4-5 years are faring the worst.  After purchasing at the height of the boom, they are losing $1200 for a net loss of 1 percent.  Those who bought before the peak in 2006 are doing well even though prices on average have fallen more than 30 percent since then.  Sellers with tenures of 11 to 15 years are realizing median gains of $57,900, or 39 percent.  Those with 16 to 20 years in a home are seeing a $138,000 return, or 161 percent.

Unfortunately, the major reasons people sell their homes force many to sell long before than can realize significant equity gains.  Leading motivations to sell are job relocation (17 percent), home is too small (17 percent) and want to move closer to friends and family (15 percent).

As a result of the economy, including negative equity which makes homes worth less than value of the mortgages used to buy them, the median time Americans own a home has lengthened to 9 years from a low of 6 years in 2007. Sellers of detached single-family homes, which account for the largest share of homes sold, owned their home for a median of 10 years.  Yet even with the longer tenure, owners are realizing significantly lower returns than they did three years ago.

Though the initial product offering is limited to one state, if it’s successful the Home Value Protection Insurance Company hopes to offer it nationwide.  It could transform the way homes are bought and sold in America by reducing the risk of lost value that has scared so many buyers away from the closing table.

Price pessimism is a major reason buyers are postponing their purchase plans, according to recent consumer surveys by Fannie Mae and Move, Inc.  Forecasts like yesterday 2012 outlook from Fiserv, which predicts values will fall another 3.6 percent before stabilizing in mid-2012, fuel their fears.

Would home value protection insurance help calm buyers’ fears?  “Absolutely,” said John Sheehan, an associate broker with Llewellyn Realtors in Maryland.  “People are always looking for a guarantee. They don’t want to look like a jerk if prices go down after they buy.”  Sheehan said virtually all his buyers would be interested in the product and for 15 to 20 percent it might make the difference in deciding to buy now rather than wait.

Here’s how the policy works. The insured home must sell for less than its protected value and also local home values must have declined during the policy period. If both have fallen, the homeowner ca n file a claim for the lesser of the two amounts: the drop in local home values as measured by the Fiserv/Case-Shiller Single Family Home Price Index or the difference in the sales price and the insured value.  Claims are limited to a maximum of 25 percent of the insured value.

Claims on homes sold within two years after the policy purchase are subject to a deductible.  For the first 12 months after the initial policy purchase, the deductible is 10 percent of the insured value. For months 13-24 after the initial policy purchase, the deductible is 5 percent of the insured value. There is no deductible after the first two years of continuous coverage.

Typical monthly premiums are estimated in the $35 to $45 range.   ’To reassure policyholders, our policy limits any increase to no more than 5 percent. We don’t set a limit on decreases. Our goal is to keep coverage affordable, and to that end, we don’t foresee making frequent changes to premiums, said Teri Felix, executive vice president of marketing at Home Value Protection Insurance.

“I don’t think buyers would balk at the price,” says Sheehan.  “It’s less than the cost of PMI or an HOA.”

“Ten years ago people didn’t believe they needed coverage on the valuation of their real estate. Before 2007, prices had never fallen on a year-over-year basis.  Today owners want to protect themselves against future losses,” said Ms. Felix.

Felix reports that initial reception in the Ohio market, which has suffered greatly from falling values and foreclosures over the past four years, has been good.   The company is building a network of more than 300 independent agents across the state and it is supporting the new product with an advertising campaign targeting homeowners and home buyers.

That’s the good news from S&P Case-Shiller this month.  Prices actually went up a tiny bit in August, 0.2 percent, and declines from the June/July 2006 peaks the peak-to-current declines for the C-S 10-City Composite and 20-City Composite are only -30.9 percent and -30.8 percent, respectively. They’ve recovered 3.9 percent and 3.8 percent from the “crisis” lows of April 2009 and March 2011.

Though most places moved in the right direction, August prices were nothing to get excited about.  In August, ten of the 20 cities covered by the Case-Shiller indices saw home prices increase over the month. In addition, 16 of the 20 MSAs and both Composites posted improved annual returns compared to July’s data; Los Angeles and Miami saw no change in annual returns in August; and Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory.

The 10- and 20-City Composites posted annual returns of -3.5 percent and -3.8 percent versus August 2010, respectively.  At -8.5 percent, Minneapolis posted the lowest year-over-year return, but has improved in each of the last three months. Detroit and Washington DC were the only two cities to post positive annual returns of +2.7 percent and +0.3 percent respectively.

“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “And even though the annual rates are largely improving, 18 MSAs and both Composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-City Composite is down 3.5 percent and the 20-City is down 3.8 percent compared to August 2010.

“In the August data, the good news is continued improvement in the annual rates of change in home prices. In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing. With 16 of 20 cities and both Composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data. As of August 2011, the crisis low for the 10- City Composite was back in April 2009; whereas it was a more recent March 2011 for the 20-City Composite. Both are about 3.9 percent above their relative lows,” Blitzer said.

According to data released last week by Realtor.com, the national inventory of for-sale single family homes, condominiums, townhouses and co-ops) declined 3.27 percent from August and are 20.09 percent lower compared to one year ago.

The inventory picture painted by Realtor.com’s unique database of more than 2.1 million listings tracks a steady six month decline through the early spring and summer.

The inventory draw down, while healthy in times of lackluster demand, may be a response to depressed prices by owners who have the option of waiting until prices improve.  That might be the case in markets thick with second home and resort properties like Miami, Phoenix-Mesa, Orlando and Fort Myers-Cape Coral-which also happen to be the top four markets for year-over-year inventory declines in the Realtor.com report.

The latest RE/MAX monthly survey also found inventories are down by virtually the same percentage over the same time period.  Inventories in the RE/MAX survey have declined steadily, falling in September for the fifteenth month in a row, suggesting again that more than seasonality is at work.  The average inventory of homes-for-sale in the 53 metro areas surveyed dropped 4.8 percent from August and 20.2 percent from September 2010 (virtually the same year-over-year decline reported by Realtor.com), resulting in a 7.7 months supply of homes.

Both Realtor.com and RE/MAX rely on listing data direct from MLSs.  One of the advantages of listing data is that it’s remarkably timely; when listings come and go is tracked virtually to the minute.   Usually listings depart  because there’s a contract or a closed sale, but these days departures also could be owners taking their properties off the market to wait for better times.

Whether owners are pulling listings or simply not listing in the first place, the inventory numbers provide an insight into the psychology of supply and demand at work.  With demand soft in many markets and national average prices several points below last year’s post-tax credit plunge, keeping properties off the market for the near term may be a good idea for everyone concerned. “While such developments can be viewed as encouraging, markets remain fragile and could easily begin to deteriorate with further weakening of the economy or increases in foreclosure rates,” concluded the Realtor.com commentary.

RE/MAX, which uses MLS data in 54 larger markets, found that September prices were down 3.3 percent from last year at this time and 2.5 percent from August.  Last week Clear Capital reported prices nationally were down 3.8 percent from September 2010.

Before the September dip, RE/MAX said its prices had increased for 4 of the last 7 months, while on a year-to-year basis, median price losses have been improving for 6 consecutive months. Of the 53 metro areas reviewed for this report, 17 saw price increases from last year, including:  Detroit, MI +13.4 percent, Miami, FL +8.4 percent,  Orlando, FL +7.8 percent,  Anchorage, AK +5.1 percent, and Indianapolis, IN +4.5 percent.

September sales were down seasonally from August, dropping 14.6 percent.  However, sales were up 7.6 percent year over year, making September the third month in a row that sales were higher than the same month a year ago.  Transactions have shown positive growth for 4 of the 9 months in 2011.  Of the 53 metro areas surveyed, 44 experienced a rise in home sales from 2010, including: Des Moines, IA +31.3 percent, Minneapolis, MN +30.1 percent, Wilmington, DE +28.4 percent, Trenton, NJ +27.3 percent, and Providence, RI +23.5 percent.

RE/MAX also confirmed a steady decline in inventories nationally, falling in September for the fifteenth month in a row.  The average inventory of homes-for-sale in the 53 metro areas surveyed dropped 4.8 percent from August and 20.2 percent from September 2010, resulting in a  7.7 months supply of homes for September, which is up from 6.8 in August, but down from the 9.8 months supply seen in September 2010. Average days on market for 53 markets was 94, just four days higher than the average of 90 in August, and six days higher than the average in September 2010.

Not only did CoreLogic’s August Home Price Index record its first month-over-month decline in four months, on a yearly basis prices are now significantly below August 2010, when prices tanked in the wake of the expiration of the federal tax credits.

Home prices in the U.S. decreased 0.4 percent on a month-over-month basis, the first monthly decline in four months. Excluding distressed sales, year-over-year prices declined by 0.7 percent in August 2011 compared to August 2010 and by 1.7 percent in July 2011 compared to July 2010. Distressed sales include short sales and real estate owned (REO) transactions.

“Although the calendar says August, the end of the summer traditionally marks the beginning of ‘fall’ for the housing market as it begins to prepare for ‘winter.’ So the slight month-over-month decline was predictable, particularly given the renewed concerns over a double-dip recession, high negative equity, and the persistent levels of shadow inventory. The continued bright spot is the non-distressed segment of the market, which is only marginally lower than a year ago and continues to exhibit relative strength,” said Mark Fleming, chief economist for CoreLogic.

National highlights as of August 2011:

• Including distressed sales, the five states with the highest appreciation were: West Virginia (+8.6 percent), Wyoming (+3.6 percent), North Dakota (+3.5 percent), New York (+3.2 percent), and Alaska (+2.2 percent).

• Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.4 percent), Arizona (-10.7 percent), Illinois (-9.6 percent), Minnesota (-7.8 percent), and Georgia (-7.2 percent).

• Excluding distressed sales, the five states with the highest appreciation were: West Virginia (+10.7 percent), Mississippi (+4.8 percent), Hawaii (+4.4 percent), North Dakota (+4.2 percent), and Kansas (+3.7 percent).

• Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8 percent), Arizona (-8.3 percent), Delaware (-4.9 percent), Michigan (-4.3 percent), and Minnesota (-4.2 percent).

• Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to August 2011) was-30.5 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -21.0 percent.

• Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 80 are showing year-over-year declines in August, eight fewer than in July.