Jan
25
WASHINGTON – Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.
The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.
“It’s ‘exit stage left’ for first-time homebuyers,” wrote Guy LeBas, an analyst with Janney Montgomery Scott.
December’s sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales had been expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters.
The report “places a large question mark over whether the recovery can be sustained when the extended tax credit expires,” wrote Paul Dales, U.S. economist with Capital Economics.
The median sales price was $178,300, up 1.5 percent from a year earlier and the first yearly gain since August 2007. However, some of that increase could be due to a drop-off in purchases from first-time buyers who tend to buy less expensive homes.
Sales are now up 21 percent from the bottom a year ago, but down 25 percent from the peak more than four years ago.
The big question hanging over the housing market this spring is whether a tentative recovery will stumble after the government pulls back support. The Federal Reserve’s $1.25 trillion program to push down mortgage rates is scheduled to expire at the end of March — a month before the newly extended tax credit runs out.
Last year, first-time buyers were the main driver of the housing market, but their presence is on the decline. They accounted for 43 percent of purchases in December, down from about half in November, the Realtors group said.
The inventory of unsold homes on the market fell about 7 percent to 3.3 million. That’s a 7.2 month supply at the current sales pace, close to a healthy level of about 6 months.
Total sales for 2009 closed out the year at 5.16 million, up about 5 percent from a year earlier. That was the first annual sales gain since 2005. But prices fell dramatically last year, declining 12.4 percent to a median of $173,500, the largest decline since the Great Depression.
Though the results missed Wall Street’s expectations, the Realtors’ group says there are signs the market is finally stabilizing.
“There is some sustainable momentum building in the housing market right now,” said Lawrence Yun, the group’s chief economist. However, he cautioned that the recovery will depend on whether the economy starts adding jobs in the second half of the year.
Many experts project home prices, which started to rise last summer, will fall again over the winter. That’s because foreclosures make up a larger proportion of sales during the winter months, when fewer sellers choose to put their homes on the market.
Despite fears that home prices are starting to fall again, some analysts still believe the worst is over.
“We do not believe it is fair to consider this a double dip in the housing market,” Michelle Meyer, an economist with Barclays Capital, wrote last week. “The recovery is still under way, but hitting some bumps in the road.”
Jan
18
New Home Builds Strengthen Though Sector Remains Weak: Fitch
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Link to source at HousingWire.com
There are more positive signals and developments for housing and related industries than at any time in the past three years, Fitch Ratings analysts wrote in a quarterly outlook report, but despite having fewer competitors, public builders will continue to be challenged and need to maintain tight controls over costs and expenses in 2010.
Read the rest at HousingWire.com
Jan
15
Hud Takes Action To Speed Resale Of Foreclosed Properties To New Owners
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WASHINGTON – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.
“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.
In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
* All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
* In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
* The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.
Jan
11
After a dour year where housing prices fell more than 12% nationwide, will 2010 bring sunnier tidings? The short answer: only a tad in a select few places but overall not really.
Yes, there have been pieces of good news over the past few months that have indicated a quiet, slow bottoming of real?estate prices. For instance, sales of existing homes rose 7.4% in November from the previous month, the highest rate since February 2007, according to data from the National?Association?of?Realtors released last week. The tax incentives for home buyers passed earlier this year along with historically low interest rates have no doubt nudged many buyers into the market.
Yet a recovery depends on several factors. At the top of the list is a turnaround in the labor market. More people going back to work will have a beneficial effect on household income and consumer confidence and would stabilize the housing market, says Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. As of November, one of out every 10 American workers is unemployed, according to the Bureau of Labor Statistics. And while that’s down slightly from October, Moody’s expects the jobless rate to peak in the third quarter next year at 10.6%.
Another factor is the backlog in foreclosures, which are dragging down values and adding to the housing supply. “By all accounts, that backlog is at a historic high,” says Gabriel. “It suggests that many more homes will be sold on a distressed basis either via foreclosure or short sale.”
RealtyTrac, an online marketplace of foreclosure listings, estimates 3.2 million households will have received a foreclosure notice in 2009, up from 2.3 million in 2008. The firm projects that number could approach four million in 2010. “We do think 2010 will probably represent the peak, and in 2011 [foreclosures] will start to go down at least marginally,” says Rick?Sharga, senior vice president at RealtyTrac. Why the acceleration next year? First, says Sharga, there have been enormous delays in processing this year. Many homes that would have gone into foreclosure in 2009 won’t actually enter and complete the process until 2010.
Second, a big wave of option adjustable-rate mortgages (ARMs) will reset next year. (These are a somewhat obscure category of ARMs that were popular during the real?estate?boom, which allowed borrowers to make a range of monthly payments. The options include a partial-interest payment that adds the unpaid interest to the loan’s balance. On many of the loans, balances have risen while values of the underlying properties have plummeted.) “The number of loans that will adjust starts to go up significantly in the middle of next year. A lot of those loans are underwater…and owners will be really hard-pressed to avoid going into foreclosure,” Sharga says.
Home prices, of course, are variable and depend on many factors, each of which are difficult to predict. Still, average home prices will drop by 7.9% nationwide in 2010, according to Moody’s Economy.com. In the few areas where there could be positive price growth, the projected increase is modest. “These areas will essentially be flat next year,” says Steve Cochrane, managing director at Moody’s Economy.com.
The five areas that Moody’s foresees home prices performing best in 2010 are: Tacoma, Wash., (an increase of 2.44%); Memphis, Tenn., (up 0.99%); Pittsburgh (up 0.89%); Charleston, S.C. (up 0.18%); and Seattle (decline of 0.50%). (These five markets are culled from data on Moody’s Economy.com and based on the largest 100 metro areas.)
These pockets of the country share a few important characteristics. One is that they are starting with a limited supply of housing stock. Another is that throughout most of the decade, prices basically stayed in synch with household income, says Cochrane.
There are other factors, too. Pittsburgh , for example, along with western Pennsylvania, is late in the traditional business cycle, and “our variations tend to be smaller,” says Robert Strauss, a professor of economics and public policy at Carnegie Mellon University in Pittsburgh. The economy has managed to stay fairly stable mostly because over the past several decades it transformed from a center of manufacturing to one of education and health care with a bit of financial services and technology.
Smaller areas across the Southeast are expected to fare well in 2010 primarily because they fared relatively decently during the housing crisis, says Jeannine Cataldi, a senior economist at IHS Global Insight. “They didn’t have such a big run-up, and they have a diverse economic base that enabled them to stay stable,” she says. Home prices in Charleston didn’t get out of line with household incomes; also, Boeing is investing in a fairly large manufacturing plant there, which could create some potential for income and job growth, says Cochrane.
As for Memphis, the city’s largest employer is FedEx. Transportation services is one of the early industries to turn around as the economy recovers, says Cochrane, and that should support the area’s housing market.
The economies of Tacoma and Seattle – which are neighboring cities – were “much stronger for much longer than much of the rest of the country,” says Cochrane. Software giant Microsoft, based in Redmond, Wash., a Seattle suburb, was one reason the area remained stable. Another was Boeing, which builds its commercial airplanes in Seattle.
Going forward, Seattle’s position as a key hub of trans-Pacific trade should be a plus for the economy. Orders are increasing for commercial aircraft and it should see some rising demand for tech products, Cochrane says. The outlook for 2010 for the two Washington cities “is for fairly stable, moderate economic growth,” he says.
Jan
4
Commercial Real Estate Poses Risk to U.S. Recovery, Ryding Says
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Jan. 4 (Bloomberg) — The commercial real estate market poses a threat to the U.S. recovery, said John Ryding, chief economist at RDQ Economics in New York.
“We have yet to see the full extent of those problems,” Ryding said today in an interview on Bloomberg Radio.
The housing market, which plunged the economy into recession, remains fragile, too, Ryding said.
“Maybe housing credit has gotten ahead of itself,” he said. “I don’t think were out of the woods yet on the write-off situation.”
Regarding the labor market, “our feeling is we will see a small positive number” in the government’s report on non-farm payrolls in December, Ryding said. He didn’t provide an estimate.
He also said the Federal Reserve’s “easy policy stance is going to boost inflation expectations.” The Fed has held its benchmark rate near zero since December 2008.