Positive Signs: Home Prices on an Upswing in Second Quarter 2009

 Print Article

RISMEDIA, August 26, 2009-Data through June 2009, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index improved in the second quarter of 2009. The S&P/Case-Shiller U.S. National Home Price Index- which covers all nine U.S. census divisions- recorded a 14.9% decline in the 2nd quarter of 2009 versus the 2nd quarter of 2008. While still a substantial negative annual rate of return, this is an improvement over the record decline of 19.1% reported in the 1st quarter of the year. The 10-City and 20-City Composites recorded annual declines of 15.1% and 15.4%, respectively. These are also improvements from their recent respective record losses of -19.4% and -19.1%.

“For the second month in a row, we’re seeing some positive signs,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The U.S. National Composite rose in the 2nd quarter compared to the 1st quarter of 2009. This is the first time we have seen a positive quarter-over-quarter print in three years. Both the 10-City and 20-City Composites posted monthly increases, as did most of the cities. As seen in both seasonally adjusted and unadjusted data, there are hints of an upward turn from a bottom. However, some of the hardest hit cities, especially in the Sun Belt, show continued weakness.”

As of the 2nd quarter of 2009, average home prices across the United States are at similar levels to what they were in early 2003. From the peak in the second quarter of 2006, average home prices are down 30.2%.

The 10-City and 20-City Composites posted their second consecutive monthly increases. Both indices were up 1.4% in June over May, and up 0.5% in May over April. Eighteen of the 20 metro areas saw improvement in their annual returns compared to those of May. Looking at the monthly data, the same 18 metro areas reported positive returns in June.

In spite of the recent positive data, the overall numbers remain weak, with all metro areas and the two composites posting negative annual returns, and 15 out of the 20 metro areas reporting double digit annual declines. While not alone, Las Vegas and Detroit continue to be two markets that are struggling severely. These are the only two markets that fell in June and saw deterioration in their annual rates of return. Since their relative peaks they have fallen 54.3% and 45.3%, respectively.

More upbeat news is seen in the monthly data across other markets; Dallas and Denver have reported four consecutive months of positive returns. In addition to the two composites, 13 of the MSAs reported positive monthly returns for June that were greater than +1.0%.

Mortgage Rates Down to Lowest Level in Three Months

RISMEDIA, August 24, 2009-Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.12% with an average 0.7 point for the week ending August 20, 2009, down from last week when it averaged 5.29%. Last year at this time, the 30-year FRM averaged 6.47%.

The 15-year FRM this week averaged 4.56% with an average 0.7 point, down from last week when it averaged 4.68%. A year ago at this time, the 15-year FRM averaged 6.00%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.57% this week, with an average 0.6 point, down from last week when it averaged 4.75%. A year ago, the 5-year ARM averaged 5.99%.

One-year Treasury-indexed ARMs averaged 4.69% this week with an average 0.5 point, down from last week when it averaged 4.72%. At this time last year, the 1-year ARM averaged 5.29%.

“U.S. Treasury bond yields fell nearly a quarter of a percentage point over the week, and other long-term yields followed suit,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Interest rates on 30-year and 15-year fixed-rate mortgages fell to the lowest level since the end of May 2009, while initial rates on 5/1 hybrid ARMs declined to levels not seen since January 2005.

“Low mortgage rates are helping to reinforce the housing market. New construction on one-family homes rose for the fifth consecutive month in July 2009 to an annualized pace of almost 500,000 homes, the most since October 2008. In addition, homebuilder views of housing market conditions for the remainder of the year rose for the second month in a row in August to the most positive reading since June 2008, according to the National Association of Home Builders.”

For more information, visit www.freddiemac.com.

Pending Home Sales up for Fifth Consecutive Month

 Print Article

RISMEDIA, August 5, 2009-Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 3.6% to 94.6 from an upwardly revised reading of 91.3 in May, and is 6.7% above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was in July 2003.

Lawrence Yun, NAR chief economist, said a combination of positive market factors is fueling the gains. “Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines. Activity has been consistently much stronger for lower priced homes,” he said. ”Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30.”

The Pending Home Sales Index in the Northeast rose 0.4% to 81.2 in June and is 5.8% above a year ago. In the Midwest the index increased 0.8% to 89.9 and is 11.6% above June 2008. The index in the South jumped 7.1% to 100.7 in June and is 8.9% higher than a year ago. In the West the index rose 2.9% to 100.4 but is 0.2% below June 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, is hopeful that a recently elevated level of contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise,” he said. “This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we’ll see an even closer relationship between contract activity and closed transactions.” McMillan said NAR is continuing to press the appraisal issue. “We have asked Congress and the Federal Housing Finance Agency to immediately implement an 18-month moratorium on the new appraisal rules to further address unintended consequences of the new guidelines,” he said.

NAR’s Housing Affordability Index (HAI) remains very favorable. The affordability index stood at 159.2 in July, down from record peaks in recent months but it remains 36.6 percentage points above a year ago. Under these conditions the typical family would devote 15.7% of gross income to mortgage principal and interest, well below the standard allowance of 25%. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

“A monthly rise in home prices and somewhat higher mortgage interest rates led to a modest decline in affordability in June, but it was still the sixth highest index on record dating back to 1970,” Yun said. “Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales.”

A median-income family, earning $60,700, could afford a home costing $289,100 in June with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of what a median-income family can afford. The affordable price was much higher than the median existing single-family home price in June, which was $181,600.

Yun expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.”

For more information, visit www.realtor.org.

Have We Reached Bottom? 10 Factors to Consider

RISMEDIA, June 24, 2009-Historically, the value of real estate goes through cycles. Many factors affect the value of homes including the laws of “supply and demand.” From the Appraisal Institute, here’s a quick reference guide to some of the factors involved and advice on how to spot a turning point in the market:

1. A spike in local sales activity. A spike refers to a significant rise in the number of home sales (or values) in a local market area, which generally is measured month to month. A spike does not necessarily mean continued growth, i.e. it could be a one month phenomenon.

2. Higher asking and selling prices vs. appraisal value opinions for residential properties. Appraisers study the markets; they do not make the markets. When the data shows higher sale prices in comparable properties market value opinions will increase proportionally. Appraisers seek evidence of value but do not create the value. In time periods with low activity, evidence of any kind is difficult to find.

3. More activity at open houses. Open houses with five to eight attendees is considered average, so a dozen or more people attending an open house means buyer interest is picking up. Also, the mood of the attendees is important. Are they optimist and upbeat? Buyers interest alone does not always translate to effective purchasing power. If the number of buyers in the market increases but they do not have requisite down payments, the sales may still not occur.

4. Shorter marketing times. In some markets, houses have been up for sale for more than a year. In most balanced residential markets, properties that are priced competitively will typically sell in less than six months. If the Days On Market (DOM) is shortening, many practitioners will read an improvement in the market.

5. Reduced number of foreclosures and short sales. A reduction in these transactions commonly signals a more balanced market. If lenders are reluctant to foreclose because of an oversupply of inventory, they may choose to wait to repossess the properties, which could allow a spike in the number of foreclosures later despite a better market condition.

6. Stabilized employment. Stable or increasing employment rates provide the necessary confidence for potential buyers to invest in a home. Since most buyers rely on borrowed funds to make real estate purchases and borrowing money usually requires a source of repayment and that usually means jobs, an increase in this basic need, will enable more real estate sales.

7. Fewer buyer incentives and seller concessions. Seller-paid incentives or concessions are a sign of seller motivation. If there are fewer builders offering “free” upgrades and fewer sellers sweetening the deal with big screen TVs, it may be a sign of lessening supply and therefore a better market.

8. New construction starts. Most builders are quite attune to their markets and will not build new homes without a corresponding contract for sale or a perceived increase in demand. An increase in the number of building permits usually indicates higher demand and higher prices. If residential properties are selling for 25% less than they cost to build, only a few new homes will be built. It would be prudent to buy an existing home rather than build a new one for a much higher price.

9. “Move-up” buyers entering the market. More buyers willing to move to a larger or superior quality home indicates a healthy market. The lack of buyers at the lower end of the price range will have a chain reaction throughout the market. If a buyer for a high priced home has a lower priced home to sell first, the sale of the higher priced home may have to occur before the higher priced one can sell.

10. Apartments advertising renter specials - fewer renters in the market may indicate more people are moving into owner occupied homes or it could indicate a reduction in population. Lower population will cause an oversupply of housing which will oftentimes permeate throughout several markets.

For more information, visit www.appraisalinstitute.org.

Realtors Urge First-Time Buyers to Act Quickly, Tax Credit to Expire Soon

RISMEDIA, August 3, 2009-The New Jersey Association of Realtors (NJAR) is encouraging those considering buying a home for the first time to act quickly, as there is very limited time to qualify for the $8,000 first-time homebuyer tax credit. As of August 1, there were only 121 days for first-time purchasers to take advantage of the credit. In order to qualify, the transaction must close before 11:59 p.m. on November 30, 2009.

“November might seem like it is far enough away, but potential buyers need to account for the time it takes to shop for a home, present an offer on the property of their choosing, and manage the various contracts and logistics that are required in a real estate transaction,” said 2009 NJAR President Diane Dilzell. “Starting the process now should allow just enough time to reach closing before the expiration of the credit.”

Prospective buyers, particularly first-time buyers, should factor in the following steps that are typically involved in the purchase of real estate: shopping for and securing a mortgage, finding a Realtor, creating a list of preferable features for the home, searching for homes that fit that criteria, settling on a home, presenting an offer, obtaining a home inspection, shopping for homeowners insurance, and closing. Buyers should factor in extra time to allow for unforeseen circumstances and any additional steps that may be necessary in their particular transaction.

Dilzell added, “The clock is also ticking for buyers to maximize their purchasing power in this market. Affordable prices and low interest rates are aligning right now with the $8,000 credit to form an unprecedented opportunity that is not guaranteed to last much longer.”

All transactions vary, and there are different circumstances for each of them that could lead to a longer buying process. NJAR has compiled testimonials from real New Jersey consumers at www.realstorynj.com/news/real-stories that detail their individual experiences.

“Unique circumstances can be encountered in any transaction so it is important to get started early to account for those factors,” Dilzell said. “Since numerous third parties are involved, delays can often be expected no matter how swiftly you act. That wait time can be very detrimental if it is the difference between $8,000 and nothing.”

The tax credit is available to buyers who have not owned a principal residence during the three-year period prior to the purchase. The credit does not have to be repaid, and it must be claimed on your federal income tax return.

Buyers are finding that the credit is allowing them to take advantage of opportunities they might not otherwise consider. For example, the $8,000 can be applied toward repairs and renovations in fixer-uppers that buyers might not otherwise have been able to afford. The extra funds can be invested for future use, or applied to new furniture and appliance purchases.

Talk to a Realtor about initiating the home purchase process today.

For more information, visit www.njar.com.

Slow and Steady - Foreclosure Process Tests Patience

By Al Heavens

RISMEDIA, July 23, 2009-(MCT)-It’s not a very common question, but one that is being asked more often than not as homeowners navigate their way through today’s market. The question is simple: How do you get a lender to speed up the foreclosure process, but the answer is oftentimes hard to put a finger on.

But when you think about it, prolonging the process can be costly for a homeowner, who likely does not have the money to pay for maintenance and utilities.

This is the situation in which Clark Engle, a resident of Wayne, Pennsylvania finds himself, and I discovered, after simply scraping a thin layer from the surface, that it is a problem homeowners in high-foreclosure areas increasingly are facing.

Engle owns a couple of condos in Florida that he bought as investments when he lived there, but when he relocated to Pennsylvania in 2006, he tried to sell and then rent the condos, not finding any luck.

To say the Florida market is glutted is an understatement. Homes, especially condos, began plummeting in value about three years ago, and today, for example, a unit in the St. Petersburg/Tampa area purchased for $350,000 in 2005 is selling for $90,000, according to Pinellas County records.

“I can’t keep them, rent them, or sell them,” Engle said.

About 14 months ago, Engle was served with foreclosure papers by his lender, but nothing has happened since. Because there are so many homes in foreclosure, he assumes that “the bank obviously does not want to take them over because then they become responsible for the back taxes, condo fees, and maintenance until there is a market.”

So, on his lawyer’s advice, Engle continues to pay the liability insurance and the utilities-more than $1,000 a year.

“I didn’t want to ask (the lawyer) to write a letter unless it’s really going to make the bank move faster,” Engle said. “If he could cite some law or legal precedent that the bank can’t leave these in limbo, perhaps that might do something.”

Bankrate.com columnist Holden Lewis, who is based in South Florida, said he’s not sure the process can be pushed along. “Florida has judicial foreclosures,” Lewis said. “Courts have backlogs, law firms are probably overwhelmed, too. Tax receipts are down. I doubt anyone is spending stimulus money to hire more court personnel to speed up foreclosures.”

According to Florida law, the foreclosure process typically should take only five months; thanks to the backlog, it is taking 10 months or more. That may be good news for people trying to avoid foreclosure, but it’s bad news for people like Engle who have been caught in the real estate squeeze and want out.

Rick Sharga, chief economist at RealtyTrac, which tracks foreclosures nationally, said Engle’s assumption that the bank wants to avoid more costs is right on the money. “I don’t believe there’s any way to compel them to conduct the (process) faster than they want to.” Engle “could try discussing a deed-in-lieu-of-foreclosure arrangement with the lender, suggesting that it would save the bank thousands of dollars compared to a formal foreclosure and maybe allow them to come out ahead,” said Sharga. “If that doesn’t work, Engle will just have to wait it out.”

(c) 2009, The Philadelphia Inquirer.
Distributed by McClatchy-Tribune Information Services.