Existing home sales jumped 6.8% in March, with home buyers racing to get a tax credit that expires in April, according to a real estate industry report released Thursday.
The National Association of Realtors reported that existing home sales rose last month to a seasonally adjusted annual rate of 5.35 million units, up from the revised rate of 5.01 million in February. Sales year-over-year were up 16.1%.
March can say you thank you to the federal tax credit!
The median price paid for a Bay Area home rose above the year-ago level for the second consecutive month, a reflection of widening price stability, fewer foreclosures selling and more activity in pricier areas. Sales dipped below October but were higher than a year earlier for the 15th consecutive month, a real estate information service reported.
The median price paid for all new and resale houses and condos that closed escrow in the nine-county Bay Area last month was $387,000. That was down 0.8 percent from $390,000 in October but up 10.6 percent from $350,000 in November 2008, according to MDA DataQuick of San Diego.
Prior to its 4 percent annual gain in October this year, the median sale price hadn't risen on a year-over-year basis since November 2007, when it gained 1.5 percent. Last month's median was 33.4 percent higher than this year's low point - $290,000 in March - but was still 41.8 percent lower than the $665,000 peak reached in June and July of 2007.
Skewed data presenting a false sense of housing stability? More pricing pressure and housing woes to come?
'The latest stats show just how much the Bay Area market has changed in a year,' said John Walsh, MDA DataQuick president. 'Financial distress is still a problem with many borrowers, but for now cheap foreclosures have lost their leading role in this housing drama. In the short run, we'll be comparing the new data to some ridiculously low median sale prices a year earlier - medians severely skewed back then by so many inland foreclosures selling, and so few coastal high-end sales.'
'Statistical quirks aside, the longer-term outlook for home values is far from clear,' he continued. 'A lot of people sense lenders are holding back, and that there's at least one more round of foreclosures lurking around the corner. Combine that with less government stimulus in 2010, and it would threaten whatever price stability we see now.'
Currently, there is a tale of two cities in reference to the residential housing market. The bottom end of the market has definitely been firming up in many locales throughout the country. In fact, there has been substantial pricing pressure as inventory levels have been shrinking in this segment of the market. As housing values have been battered, the increased activity and competition has left the price points of six months ago in the rear view mirror. While tax incentives remain in place and interest rates continue to flirt with historic lows, this pressure should continue. When the government begins to rein in the stimulus and depending upon how much additional "shadow inventory" the banks push onto the market will determine if this is a fleeting trend or the beginning of the next push towards home price appreciation. The higher end of the market has been seeing downward pricing pressure in many locales and it appears that many of the Alt-A and Option Arm loans associated with these homes may continue to lead to downward pricing pressure pushing into 2010 especially in states like California.
Below is an excerpt from the preface to PWC's Emerging Trends in Real Estate 2010. Click the link directly above to access the entire real estate report.
After more than a year spent in suspended animation lagging already shattered housing markets, the commercial real estate industry hits bottom in 2010, suffering a surge of painful writedowns, defaults, and workouts. Massive government infusions finally build up loss reserves in financial institutions to levels allowing them to foreclose or strike deals with many overleveraged borrowers. In turn, banks will start to dispose of real estate owned, and government regulators will package and sell more bad loans and real estate assets acquired in takeovers of increasing numbers of failed community and regional banks. Transaction markets will begin to thaw and value declines ultimately will average more than 40 percent off mid-2007 pricing peaks. These property market reversals likely will be the worst registered since the Great Depression, eclipsing the industry debacle of the early 1990s.
In a classic timing play, investors with cash should be poised to take advantage of highly attractive buying opportunities at cyclical lows. Stressed owners, meanwhile, gird to hold on if possible and try to maximize property cash flows by focusing on asset management and leasing strategies in a decidedly tenantsâ€™ market. Emerging Trends surveys indicate that 2010 will be the worst time for investors to sell properties in the report's 30-year history, but will offer a much-improving environment to buy (with cash).
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, increased 3.7 percent to 114.1 from 110.0 in September, and is 31.8 percent above October 2008 when it was 86.6. The rise from a year ago is the biggest annual increase ever recorded for the index, which is at the highest level since March 2006 when it was 115.2.
Pending home sales region by region:
The PHSI in the Northeast surged 19.9 percent to 100.2 in October and is 44.2 percent above a year ago. In the Midwest the index rose 11.6 percent to 109.6 and is 36.6 percent higher than October 2008. Pending home sales in the South increased 5.4 percent to an index of 115.4, which is 31.6 percent above a year ago. In the West the index fell 11.2 percent to 127.7 but is 21.9 percent above October 2008.
The tax credits are helping? Lawrence Yun, NAR chief economist, thinks so:
... home sales are experiencing a pendulum swing. 'Keep in mind that housing had been underperforming over most of the past year. Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus,' he said. 'This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future.'
Is the housing market improving or is it simply being propped up in the short term by government stimulus?
I don't think the housing crisis is over," Mark Zandi, chief economist with Moody's Economy.com
New home sales may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury homebuilder. Existing house sales may take longer.
Residential construction and property sales led the way out of the previous seven recessions going back to 1960, said David Berson, chief economist of PMI Group, the mortgage insurer in Walnut Creek, California.
"Market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tight credit for homebuyers and weak consumer confidence," said Donald R. Horton, chairman of D.R. Horton Inc., the nation's second-largest homebuilder.
The jobless rate probably will peak at 10.4 percent in 2010's first quarter, even as the U.S. economy continues an expansion that began in the third quarter, said Douglas Duncan, chief economist of Fannie Mae, the largest mortgage financier.
"You don't pay a mortgage with economic output -- you pay a mortgage with a paycheck," Jay Brinkmann, MBA's chief economist, said yesterday.
There are signs that parts of the U.S. are rebounding. California, among the states where the housing bust started, is one of the few areas that's beginning to recover.
October home prices in Orange County, San Diego and the San Francisco Bay Area increased from a year earlier, MDA DataQuick, a San Diego property information service, said this week. The number of sales also increased in the Bay Area and Southern California.
"We have to be aware that the stabilization that we've seen so far is tenuous at best," Lennar Corp. Chief Executive Stuart A. Miller said Nov. 17 at a conference in New York sponsored by UBS AG.
Homebuilders and investors will get a better gauge of whether housing demand is stabilizing in 2010's first quarter, said Robert Toll, chairman and chief executive officer of Toll Brothers, the largest builder of luxury houses.
"My prediction is we'll probably recover on a seasonal basis," Toll said yesterday at a conference in New York sponsored by Citigroup Inc. "It's generally accepted that the homebuilding industry is off the mat and on the road to recovery."
"The first-time homebuyer tax credit juiced up sales," said Moody's Zandi. "The stimulus was helpful. It augurs, at the very least, that policy makers can't pull life support from housing."
Josh Levin, a housing analyst at Citigroup Global Markets Inc. in New York, said he expects sales to continue to be slow until January or early February, followed by a surge as buyers try to beat the April 30 expiration of the tax credit.
"The bouncing along the bottom is distorted by government policies," he said in an interview yesterday.
Foreclosures will also have limited impact on driving down real estate prices as long as banks are slow to put properties on the market and the government encourages loan modification programs, he said.
"It's clear the government and banks don't want to flood the market with foreclosed homes and it's clear it's going to be dragged out," he said.
Where do you see the housing market going in 2010? Do you think your local market is on the bottom poised for a strong recovery?
Homebuilders began construction at an annual rate of 529,000 new homes during the month, 10.6% below the revised September rate of 592,000 and 30.7% below the 763,000 rate during October 2008. It was the lowest level of housing starts since April, when the annual rate was 479,000.
Building permits showed weakness as well:
That weakness included the number of building permits issued in October, which fell to seasonally adjusted annual rate of 552,000. That was 4% below the revised September rate of 575,000 and 24.3% below the October 2008 estimate of 729,000.
The number of signed sales contracts to buy homes rose in September for the eighth straight month, according to a real estate industry report released Monday.
The September Pending Home Sales Index from the National Association of Realtors (NAR) spiked 6.1% to 110.1, consolidating a 6.4% gain in August. It was the index's highest level since December 2006, when it stood at 112.8.
The leap was far better than expected. A panel of analysts surveyed by Briefing.com had forecast a 1.2% rise.
No doubt the first-time homebuyer tax credit program is helping to boost sales. A large majority of this activity will subside if the first-time homebuyer tax credit program is not extended. The House is expected to vote and extend the credit on November 5, 2009. It also appears, in addition to the $8,000.00 credit expected to be extended to first-time homebuyers, that a new $6,500.00 credit will be offered to existing homeowners who have owned their homes for 3, 5, or 7 years.
Sales of existing U.S. homes probably climbed in July to the highest level in 10 months, signaling the housing crisis that crippled the world's largest economy is easing, economists said before a report today.
Purchases rose 2.1 percent to a 5 million annual rate, according to the median forecast of 64 economists in a Bloomberg News survey. It would be the fourth consecutive gain, capping the longest stretch of increases since 2004.
As noted in our previous post, "Housing Affordability", many factors are contributing to the immediate changing housing conditions:
Foreclosure-driven declines in prices, government credits for first-time buyers and near-record-low borrowing costs may keep stoking demand, helping the economy recover from the worst recession since the 1930s. Ongoing job losses are a reminder that more Americans will probably lose their homes, indicating a rebound will be slow to take hold.
'We've begun a recovery in home sales,' said Ellen Zentner, senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. 'This is the best time to buy a house if you can qualify for credit. We expect to see continued, but gradual, improvement.'
Do you think this trend of stabilizing home sales and prices will continue or is this just a minor positive blip in a gloomy housing future still to come?
Homes continue to be more affordable than they have been in nearly two decades.
The typical American family, making the nation's median income of $64,000 a year, could afford to buy 72.3% of all homes sold in the United States during the second quarter, according a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo (WFC, Fortune 500).
That's off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable.
The measure of housing affordability was calculated as follows:
The NAHB judges a home to be affordable if a family making the metro area's median income could devote no more than 28% of their take-home pay toward housing costs.
Dramatically lower housing prices, Federal / local housing incentives and home buyer credits, and historically low interest rates have made a huge dent in housing affordability.
Despite some positive signs starting to surface in select housing markets, foreclosures are still on the rise:
There were more than 360,000 properties with foreclosure filings -- including default notices, scheduled auctions and bank repossessions -- an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July.
Nevada, California, Arizona, and Florida continue to lead the nation in foreclosures as some foreclosure moratoriums are phased out:
The worst hit areas continue to be in the "sand states," with California posting the highest number of total filings, 108,104, and Nevada posting the highest rate of foreclosure at one for every 56 homes.
The other hardest hit states are Arizona, at one filing for every 135 homes, and Florida, at one for every 154. Las Vegas, with one for every 47 homes, had the highest rate among metro areas. That's Sin City's 31st consecutive month topping the list.
Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.
From the beginning:
Since the mortgage meltdown hit in July 2007, 1,447,866 homes have been lost to foreclosure.
Sales of newly constructed homes unexpectedly rose in February, rebounding nearly 5% after sinking to the lowest level on record in January, according to a government report released Wednesday.
The U.S. Census Bureau reported that new home sales rose 4.7% to a seasonally adjusted annual rate of 337,000 in February from a revised 322,000 in January. The was the first increase since July, and it comes after sales tumbled to all-time lows in recent months.
Economists were expecting a sales rate of 300,000, according to consensus estimates compiled by Briefing.com.
Median sales price tanks year over year:
The report also showed that the median sales price of new houses sold in February was $200,900, down 18% from $245,300 a year ago.
The estimated number of new homes for sale at the end of February was a seasonally adjusted 330,000. At the current sales pace, it would take more than a year to sell through that number of new homes, according to the report.
On Monday the National Association of Realtors said that existing home sales rose 5.1% in February to a seasonally adjusted annual rate of 4.72 million units from a rate of 4.49 million in January.
Last week, the Commerce Department reported that initial construction of new homes surged 22% in February to a seasonally adjusted annual rate of 583,000, up from a revised 477,000 in January. It was the first time housing starts increased since June, when they rose 11%.
It's Spring, the weather is improving, and so are the housing numbers. Will this be a fleeting Spring bump or have we found a bottom in many markets?
Sales of existing homes unexpectedly rose in February, recovering from a sharp drop in the previous month, according to an industry report released Monday.
The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January. February sales were down nearly 5% from year ago levels.
The report said first-time buyers made up half of all purchases in February, and that sales of distressed properties accounted for about 45% of all transactions.
Where the sales were HOT?
Sales were unexpectedly strong in the West, with activity increasing more than 30% over last year.
Median home price drops:
The national median existing-home price was $165,400 in February, down 15.5% from last year, when the median price was $195,800.
Meanwhile, the total number of existing homes on the market at the end of February rose 5.2% to 3.80 million units. At the current sales pace, it would take an estimated 9.7 months to sell down that inventory of properties.
The report also said the total number of homes for sale has steadily declined over the past six months from a record level last July.
Falling home prices have been translating into increased sales activity and trending lower inventory levels. Couple that with 4-5% interest rates and home buyer credits .... bargains and good deals abound.
From Bloomberg - On the surface, more terrible news in regards to new housing starts and new construction permits. The silver lining asserted in the video is that we are not "effectively adding new housing to the inventory." Yes, less supply will ultimately leads towards stabilizing this dreadful housing market.
Listen to the video to get another opinion on where we're at and what it's going to take to turn this housing market around.
"People are responding to discounted prices and are slowly absorbing the excess inventory," said NAR President Charles McMillan. "Buyers clearly see value in today's pricing."
The biggest losers:
In Cape Coral-Ft. Myers, Fla., which has the third-highest rate of foreclosure filings in the nation, prices fell a devastating 50.8% for the year, to $110,900 from $225,300. That was the most precipitous plunge for any metro area.
In Saginaw, Mich., prices fell 41.4%. In Riverside-San Bernardino, Calif., prices dropped 40.8% and in San Jose, Calif., prices declined 37.7%.
The biggest winners. Yes, some homes are appreciating and, in fact, are doing quite well in some areas. Real estate is local! The importance of this can't be reiterated enough. With that being said, I'm willing to bet most people had no idea that some markets have been performing as strongly as the housing markets identified below:
The Beaumont-Port Arthur area of Texas bucked the national trend. Its median home price jumped 16.7% to $132,600 - the highest increase in the nation. Other winners included Bloomington, Ill., up 9.6%; Dover, Del., up 6.5%; and Bismarck, M.D., up 6%.
Needless to say, foreclosures are a sad and unfortunate circumstance confronted by many Americans today. This video gives brief insight to markets at work and the opportunities that abound from the depths of despair. The real estate industry continues to crash but, as a result, another industry is born.
U.S. mortgage applications rose in the last week of January, reflecting a jump in demand for home refinancing loans even as interest rates rose to their highest levels since early December, data from an industry group showed Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Jan. 30 increased 8.6% to 795.4 after slumping 38.8% during the previous week.
Inside the MBA's purchase and refinance index:
The MBA's seasonally adjusted purchase index fell 11.2% to 261.4 in the latest week. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.2%.
The Mortgage Bankers seasonally adjusted index of refinancing applications, meanwhile, jumped 15.8% to 3,906.3.
Inside the mortgage rates:
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.28%, up 0.06 percentage point from the previous week. Three weeks earlier, mortgage rates were 4.89%, the lowest level recorded since the MBA survey began in 1990.
The adjustable-rate mortgage share of activity decreased to 2.1% in the latest week, down from 2.4% the previous week.
Fixed 15-year mortgage rates averaged 5.15%, up from 4.98% the previous week. Rates on one-year ARMs increased to 6.09% from 5.96%.
The long and the short is that mortgage rates have been inching up but still remain incredibly cheap.