Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum

RISMEDIA, October 26, 2009—Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®. Existing-home sales–including single-family, townhomes, condominiums and co-ops–jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2% higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007. 

Lawrence Yun, NAR chief economist, said favorable conditions matched with a tax credit are boosting home sales. “Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.” 

Even with the improvement, Yun said the market is underperforming. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said. “We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.” 

Early information from a large annual consumer study to be released November 13, the 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows that first-time home buyers accounted for more than 45% of home sales during the past year. A separate practitioner survey shows that distressed homes accounted for 29% of transactions in September. 

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said affordability conditions remain historically high. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market,” he said. “Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average,” McMillan said. 

Total housing inventory at the end of September fell 7.5% to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0% below a year ago. 

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year. 

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.06% in September from 5.19% in August; the rate was 6.04% in September 2008. The national median existing-home price for all housing types was $174,900 in September, which is 8.5% lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area. 

Single-family home sales rose 9.4% to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7% above the 4.54 million-unit level in September 2008. The median existing single-family home price was $174,900 in September, which is 8.1% below a year ago. Existing condominium and co-op sales jumped 9.7% to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7% above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7% from September 2008. 

Northeast
Regionally, existing-home sales in the Northeast increased 4.4% to an annual level of 950,000 in September, and are 11.8% higher than September 2008. The median price in the Northeast was $234,700, down 7.0% from a year ago. 

Midwest
Existing-home sales in the Midwest jumped 9.6% in September to a pace of 1.25 million and are 7.8% above a year ago. The median price in the Midwest was $147,600, which is 1.0% below September 2008. 

South
In the South, existing-home sales rose 9.0% to an annual level of 2.06 million in September and are 10.8% higher than September 2008. The median price in the South was $153,500, down 7.6% from a year ago. 

West
Existing-home sales in the West surged 13.0% to an annual rate of 1.30 million in September and are 5.7% above a year ago. The median price in the West was $219,000, which is 15.0% below September 2008. 

For more information, visit www.realtor.org. 

U.S. Monthly House Price Index Estimates 0.3% Price Decline from July to August 2009

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RISMEDIA, October 26, 2009—U.S. home prices fell 0.3% on a seasonally-adjusted basis from July to August, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.3% increase in July was unrevised. For the 12 months ending in August, U.S. prices fell 3.6%. The U.S. index is 10.7% below its April 2007 peak. 

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally-adjusted monthly price changes from July to August ranged from -1.6% in the South Atlantic Central Division to + 1.2% in the Pacific Division. 

For more information, visit www.fhfa.gov. 

If you would like to buy or sell Wilmington, NC real estate, contact Sandy and Steve Thornton for all your home buying and selling needs. Specializing in Wilmington, Leland, Hampstead, Sneads Ferry, Jacksonville, Topsail Island including Surf City, Topsail Beach, North Topsail Beach, Beach and waterfront properties covering New Hanover County, Pender County, Brunswick County and Onslow County areas

August Data: Another Month of Better News

By Stan Humphries

Home Price Reduction Levels Stay Above 25% for Fourth Consecutive Month

RISMEDIA, October 12, 2009—Trulia, Inc announced that 25.6% of homes currently on the market in the U.S. as of October 1, 2009 have experienced at least one price cut. More than one in four current listings on Trulia have been reduced in price for the fourth straight month. The total amount slashed from home prices is $28.4 billion, a $967 million increase from June 2009. The average discount for price-reduced homes continues to hold steady at 10% off of the original listing price. 

Northeast with Most Homes Reduced; West Sees Biggest Cuts
Five of the 10 states with the highest percentage of homes with price reductions are in the Northeast— Massachusetts, Rhode Island, Connecticut, New Hampshire and New Jersey. One in three homes in these states has cut their list price at least once. 

Seven of the 10 states leading the country with the biggest listing price cuts are in the West, where heavy foreclosures have taken their toll. In Nevada, Idaho, Arizona, Wyoming, Hawaii, Utah and California, cuts are an average of 13% off the original list price. Of the $28.4 billion slashed nationally, New York, California and Florida account for 35% of the total value of reductions. 

Report Findings
For the first time in four months, Jacksonville no longer holds the top spot for highest level of home-price reductions: Memphis replaced Jacksonville with 36% of current listings experiencing at least one round of discounts. Several cities continue to see high levels of cuts on home prices with Indianapolis, Milwaukee, Minneapolis, Portland and Raleigh, all earning a place in the top 10 for the third consecutive month. 

“Interest in real estate typically wanes at the end of the year, which means that sellers who didn’t aggressively price their homes may find themselves making difficult decisions to reduce their prices or delay the sale until interest piques again in January,” said Pete Flint, Trulia co-founder and CEO. “We are seeing the beginning of this trend in the Northeast and Western United States with discounting happening at all price points, and expect it to continue.” 

Cities experiencing significant increases in percentage of listings with price reductions from June 2009 to October 2009 include:
-Kansas City, MO – 50% increase in price reductions
-Colorado Springs, CO – 32% increase in price reductions
-Louisville, KY – 27% increase in price reductions
-Indianapolis, IN – 27% increase in price reductions
-Portland, OR – 25% increase in price reductions
-Oklahoma City, OK – 24% increase in price reductions
-Memphis, TN – 24% increase in price reductions
-Tulsa, OK – 23% increase in price reductions
-Milwaukee, WI – 22% increase in price reductions
-Arlington, VA – 22% increase in price reductions 

Cities showing the highest percentage of declines for listings with price reductions from June 2009 to October 2009 include:
-San Antonio, TX – 37% decrease in price reductions
-Las Vegas, NV – 36% decrease in price reductions
-Oakland, CA – 17% decrease in price reductions
-San Jose, CA – 16% decrease in price reductions
-Los Angeles, CA – 14% decrease in price reductions
-Honolulu, HI – 11% decrease in price reductions
-Long Beach, CA – 11% decrease in price reductions
-Dallas, TX – 11% decrease in price reductions
-Washington, D.C. – 10% decrease in price reductions
-New York, NY – 9% decrease in price reductions 

Luxury Market Not Immune
Luxury homes (those listed at $2 million and above) continue to bear the brunt of discounts being offered with an average of 14% being slashed from the original asking price compared to the national average of 10%. Additionally, luxury homes represent less than 2% of all current listings on Trulia, but are responsible for 25% of the $28.4 billion in home price reductions. 

For more information, visit www.trulia.com. 

U.S. Homebuyers Pay Closer to Listing Price in August, but Are Still Negotiating Thousands in Discounts

RISMEDIA, October 9, 2009—Home buyers in much of the U.S. are still paying thousands of dollars below the home’s asking price, but had slightly less negotiating power in August 2009 than they did in July, according to the August Zillow Real Estate Market Reports. Buyers paid a median $6,525, or 3% less than the last listing price on homes bought in August, down from $7,018, or 3.3%, less for homes bought in July. Negotiating power peaked in January 2009, when buyers were paying 4.5% less than last listing price, a median of $10,096. Meanwhile, sellers continue to cut prices on unsold homes. One quarter (24.7%) of all homes listed for sale on Zillow had at least one listing price reduction as of Oct. 1, 2009. The median U.S. price reduction was 6.6% off the original listing price.

Florida home buyers again in August had the most negotiating power, with buyers in the Vero Beach metropolitan statistical area (MSA) paying 8.9%, or a median $20,974, less than the last listing price. Buyers in the Naples MSA paid 8% less than list price. The Naples, Daytona Beach, Miami-Fort Lauderdale, Ocala, Lakeland, Punta Gorda, Melbourne, Gainesville, Tampa, Jacksonville and Fort Myers MSAs also ranked, in that order, as the top markets for negotiation.

But in two California markets, buyers paid more than asking price during August. In the El Centro MSA, buyers paid 2.2%, or a median $2,479, more than asking price. In the Stockton MSA, buyers paid 1.3%, or $2,515, more.

“Negotiating power is a clear reflection of inventory levels, which dropped nationally in August. Tighter supply in some markets is translating into less of a discount off listing price,” said Zillow Chief Economist Dr. Stan Humphries. “Unfortunately, the brisk spring and summer home shopping season is drawing to a close now, and with foreclosures on the rise again, inventory levels will likely head back up in the coming months, leading buyers’ negotiating power to regain the ground it lost in August.”

For more information, visit www.Zillow.com.

Finding Your Dream Foreclosure: What to Know When You’re Buying an REO Property

By Amy Hoak

RISMEDIA, October 5, 2009—(MarketWatch/MCT)—Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge.

“The vast majority of the banks don’t want us to advertise them as ‘bank-owned’ because it comes with a negative connotation,” said Ryan Melvin, co-owner of More Realty Group in Las Vegas.

That means no sign on the front lawn indicating the home is anything other than a traditional sale. A buyer probably won’t find a property advertised as a foreclosure on marketing materials, said Melvin, who specializes in real-estate owned properties, or REOs, those that have been reclaimed by a bank, typically after an unsuccessful foreclosure auction.

Plus, in some markets, including Las Vegas, foreclosure inventory is actually down compared with last year as government programs attempt to keep owners in their homes and banks aren’t putting as many homes on the market, Melvin said. That’s making it harder for buyers to snag a foreclosure, and those paying with cash often win a bid over someone who needs financing.

If you’re considering the purchase of a home that is now owned by a bank, it’s also important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.

Those looking for the best deal probably shouldn’t rule out non-foreclosure properties, either, said Mark Goldman, a mortgage broker with Cobalt Financial Corp., and a real estate lecturer at San Diego State University. Sometimes, people set their sights on bank-owned properties “like the word ‘foreclosure’ equals ‘good deal,’” he said.

And that’s not always true.

One option for finding foreclosure listings: Go straight to the bank.

Lender Web sites, such as those operated by Bank of America, Chase and Citibank, will list the properties the financial institution has reclaimed when borrowers defaulted. To find a list, simply do a Web search for REOs and the name of the lender. Contact information for the property’s listing agents is usually provided for each entry.

For a fee, other sites will hunt down properties for you. RealtyTrac.com, which helps people find foreclosure and pre-foreclosure properties, charges $49.95 a month, after a free seven-day trial. The company also recently launched BankHomesDirect.com, which charges $19.95 per month and lets people search just for REOs.

Foreclosures.com charges $49.95 per month, after a free seven-day trial.

Otherwise, you might want to enlist the help of a realty agent. Someone who works regularly with REOs might be able to track down the properties more easily than a traditional agent. Melvin is a member of the National REO Brokers Association, nrba.com, which has a searchable database of brokers on its site. There’s also the REO Network, reonetwork.com, which connects buyers with those who specialize in selling REOs.

Lenders aren’t held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn’t occupied the home to notice leaks or other problems. For that reason, an inspection is crucial.

“If there are lessons out of the last couple of years, it’s certainly buyer beware,” said Dan Steward, president of the home inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.

“We have all heard the stories of people ripping the copper pipe and wiring out … people have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall,” Steward said. Some have ripped out toilets and kicked in walls or left water faucets running before they left the house, often out of anger.

You don’t need to be told the toilet is gone, but an inspector can tell if there is damage 20 feet down the water line because of the way that toilet was ripped out, he said.

Other issues could pop up due to the property being vacant. Large banks will often hire a field service to cut the grass, shovel the snow and winterize a home, yet when homes aren’t occupied it’s harder to catch small problems before they become big ones.

“When we live at home or drive the car, if something is off we notice it. We notice it and we deal with it,” Steward said. When a place is unoccupied, pests could become an issue. If you were living in a home, a nest of raccoons probably wouldn’t be able to find a home in your crawlspace—not for long, anyway.

A neighborhood environmental report might also be worthwhile, he said, which could reveal if the property was the site of a drug lab, for example. When a meth lab is operating in a home, air quality issues can arise; when a home was used for growing marijuana, there is a tendency for mold problems from the high humidity, Steward said.

The time it takes to complete the sale can vary from lender to lender. In some cases, the process goes smoothly, Goldman said. Other lenders are disorganized.

“It really depends on who you’re doing business with,” Goldman said.

But for your best chance at having an offer accepted and for a quick closing process, have everything in order before making the offer, said Duane Andrews, CEO of Clear Capital, a company that provides valuation products for the mortgage and lending industries. That includes having the financing firmed up and writing a clean offer — for example, asking for new oven racks as part of the deal could peg you as a demanding buyer who will be annoying to deal with, he said.

“What this tells the seller is this guy is going to be a pain and they don’t have time for this pain,” Andrews said.

In fact, most bank-owned properties are sold “as is,” so if there is something you want fixed, it’s best to just factor that into the price you’re offering, Melvin said.

But don’t expect to bargain the listing price way down, Melvin added.

Banks typically price their properties at a 20 percent to 30 percent discount anyway, he said. If the property has been on the market for a week or two, don’t expect the bank to drop the price; if the listing is older, you might have more power, he said.

Also, don’t be surprised if the bank that is selling the property asks you to get an approval from its mortgage operation; you often don’t have to take the loan from their company, but they may want to get a closer look at your finances to make sure you’re a solid buyer, Melvin said.

Above all, make sure to follow directions when submitting the offer, he said. That likely includes having an approval letter from the bank and the correct amount of earnest money.

“Most listing agents will have instructions how we want buyers agents to submit the offer,” he said. Delays can occur when instructions aren’t followed exactly.

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

Record Streak Continues for Pending Home Sales

RISMEDIA, October 3, 2009—Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001, according to the National Association of Realtors®. 

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August 2009, rose 6.4% to 103.8 from a reading of 97.6 in July, and is 12.4% above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5. 

Lawrence Yun, NAR chief economist, said not all contracts are turning into closed sales within an expected timeframe. “The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules,” he said. “No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month.” 

The Pending Home Sales Index in the Northeast jumped 8.2% to 85.3 in August and is 12.0% higher than August 2008. In the Midwest the index rose 3.1% to 90.8 in August and is 7.6% above a year ago. In the South, pending home sales increased 0.8% to an index of 104.6 and is 8.2% above August 2008. In the West the index surged 16.0% to 130.5 and is 22.3% above a year ago. 

“There is likely to be some double counting over a span of several months because some buyers whose contracts were cancelled have found another home and signed a new contract to buy,” Yun explained. “Perhaps the real question is how many transactions are being delayed in the pipeline, and how many are being cancelled? Without historic precedents, it’s challenging to assess.” 

Yun also noted that the data sample coverage for pending sales is smaller than the measurement for closed existing-home sales, so the two series will never match one for one. 

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said first-time buyers need to act now. “Potential first-time buyers must make a contract offer very soon to have a reasonable chance of qualifying for the tax credit,” he said. “Congress needs to extend and expand this program because it’s stimulating the economy and reducing inventory close to price stabilization points.” 

McMillan said a sizable number of homebuyers already in the pipeline could be let down because of the tight deadline. “We know there is a pent-up demand because sales are below normal levels for the size of our population. The faster we absorb excess inventory, the sooner we’ll turn the corner on home prices, prevent additional families from becoming upside-down in their mortgages, and give Wall Street the confidence to extend credit to other sectors,” he said. “Each home sale pumps an additional $63,000 into the economy through related goods and services, so the benefits of extending and expanding the tax credit far outweigh the costs.” 

Yun said the forecast for home sales and prices depends very much on whether a tax credit is extended. “All we can say for certain is sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession,” he said. “Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.” 

For more information, visit www.realtor.org. 

First-Time Homebuyers Buoy Real Estate Market

By David Bracken

RISMEDIA, October 2, 2009—(MCT)—The housing market is getting a much-needed boost as first-time homebuyers rush to take advantage of an $8,000 federal tax credit that is set to expire Nov. 30, 2009. 

The incentive is helping to slow the decline in home sales. In August, sales were down 1% over the comparable period last year, the smallest year-over-year decline in any month since late 2007. As Congress considers extending the credit, real-estate agents and home builders worry sales could slump again if it’s allowed to expire.

A full accounting of the program’s popularity won’t be available for several months, but brokers say first-time buyers have been driving much of the activity in the market in recent months, especially for cheaper homes. 

Kelly Cobb, a broker with Fonville Morisey Realty in Cary, North Carolina, said four of the six listings her office put under contract in the last month involved first-time buyers. Cobb said that as the deadline gets closer, she’s seeing more lower-end homes with multiple offers on them. “It has really, really fueled our market,” she said. “I think anybody who waited until now is going to pay top dollar.” 

In order to qualify for the tax credit, a buyer must close on their property by Nov. 30. Brokers say in most cases that gives potential buyers about five more weeks to begin the closing process. The tax credit has been available since the start of the year, and for many families it has been too good to pass up. Terri Hutter and her husband, Fred Neumann, had been repaying credit-card debt and trying to build up savings in recent years. Hutter said the couple originally planned to continue renting for a year or two longer. “With that deadline I’m like, ‘Oh, let’s do it,’” said Hutter, who runs the culinary job training program for the Inter-Faith Food Shuttle. Hutter and Neumann expect to close Oct. 9 on a 1,360-square-foot home in Durham, N.C. The couple paid the listing price of $145,000 for the house and got a 30-year mortgage at a 4.875% interest rate. 

Albert Blackmon and his fiancee, Rachel Blair also expected to wait a few years before buying a home. But Blackmon, who works as a Web developer in Apex, N.C., said the tax credit put buying a home within reach. The couple got a U.S. Department of Agriculture Rural Development loan with a 5% interest rate that required no money down. They paid $134,500 for a 1,250-square-foot home in Clayton, N.C. “We’re basically borrowing some money from some family members interest free, and when the credit comes back, we’re going to pay them right back and we have some instant equity in the house,” Blackmon said.

Those hoping to take advantage of the tax credit will need to have their financial house in order, as skittish lenders are closely scrutinizing a potential borrower’s credit and income history. 

Tom Simon and his fiancee Tera Caldwell recently used the tax credit to purchase a home near downtown Raleigh. Simon admitted that getting financing was a long process, but he said that made him more confident that the couple could realistically afford the $193,000 house they ended up buying. Simon said the tax credit was not the deciding factor in the couple’s buying a home, but it did make them start seriously looking for a house sooner than they would have otherwise. 

There’s still a chance that Congress could extend the tax credit in its current form or amend it. Some lawmakers worry about the program’s cost, which may hit an estimated $15 billion, more than double the amount projected in February’s economic stimulus bill, according to the Associated Press. Critics of the program also say it is artificially inflating demand at the expense of the taxpayer. “I would argue that it has the same effect of manipulating the real estate market that we’ve had with some other problems,” said Dallas Woodhouse, state director for the conservative group Americans for Prosperity. “There will be a day of reckoning for that.” 

If the program is allowed to expire, real estate professionals will be watching closely to see what happens to home sales after it’s gone. George Pittman, CEO of Ammons Pittman GMAC Real Estate in Raleigh, said increased sales of lower-priced homes have not translated into more sales at the higher prices. Pittman said he would normally expect those selling $150,000 homes to then buy more expensive homes. “The thing we’re trying to figure out is why it is not snowballing up,” Pittman said. “It’s had some impact, but the upper end is still a bit soft right now.” 

The tax credits have already had an effect on new home construction. As the inventory of modestly priced homes shrinks, builders are able to convince lenders that there is a need to replace them. The average cost of homes built in Wake County, N.C., was $165,000 in July, down from $195,000 during the same month a year ago, according the Home Builders Association of Raleigh-Wake County. There’s also been a spike in the number of building permits issued in Wake County in recent months. Tom Anhut, a division president in Raleigh for Toll Brothers home builders, said he believes the increase is a result of builders rushing to get homes finished by the end of November. “I think that there is a demonstrable increase in construction activity at the lower end right now because of that,” he said. 

Tim Minton, executive vice president of the Home Builders Association of Raleigh-Wake County, said there’s no question the credit has helped stabilize a volatile market. “The question is, from a long-term standpoint, at some point that spigot does have to be turned off,” he said. 

(c) 2009, The News & Observer (Raleigh, N.C.).

Distributed by McClatchy-Tribune Information Services.