Low appraisals that come in below the purchase price are still delaying closings or killing some sales contracts, real estate professionals say in a survey from April.
One out of 10 real estate professionals--or 11 percent--say that low appraisals are causing home sales contracts to fall through. An additional 10 percent say low appraisals are delaying closings, according to an April survey by the National Association of REALTORS®. About the same number of real estate professionals reported the problems with low appraisals in a March survey.
About 14 percent of real estate professionals reported that appraisals below the purchase price are requiring extra negotiating in order to get the deal closed.
"Short sales and foreclosures are still priced too high by the lenders, who do not believe the agents information concerning actual market conditions," said one real estate professional in the survey comments.
Tuesday, May 31, 2011
Tuesday, May 24, 2011
Proposal to Raise FHA Loan Down Payment
Republicans on the House Financial Services Committee have drafted a bill to raise the minimum down payment for Federal Housing Administration-backed loans to 5 percent as well as cut FHA loan limits in many markets. FHA-backed loans are a main source of mortgages for first-time home buyers.
Currently, home owners who take out FHA-backed loans are required to have a minimum down payment of 3.5 percent; the GOP bill seeks to raise that to 5 percent. The GOP says it wants to protect home owners against default and improve FHA’s finances.
The bill has not yet been introduced but remains in draft form. However, the draft legislation is expected to be discussed on Wednesday by the subcommittee.
The draft legislation also calls for lowering FHA loan limits in several areas.
As of now, the maximum size of FHA-backed loans in expensive areas of the country is set to drop to $625,500 from $729,750 as of Oct. 1. In less expensive areas, the limit may drop to $271,050. The GOP draft bill wants to drop the limits even more to 125 percent of a county's median home price, Dow Jones reports.
"While we support reforms to strengthen the program, changes should not be made at consumers' expense by drastically impacting the affordability and availability of mortgage capital," Ron Phipps, the National Association of REALTORS®’ president, said in a statement.
Source: “House Republicans Aim to Raise Money Down for FHA Loans,” Dow Jones International News (May 23, 2011)
Currently, home owners who take out FHA-backed loans are required to have a minimum down payment of 3.5 percent; the GOP bill seeks to raise that to 5 percent. The GOP says it wants to protect home owners against default and improve FHA’s finances.
The bill has not yet been introduced but remains in draft form. However, the draft legislation is expected to be discussed on Wednesday by the subcommittee.
The draft legislation also calls for lowering FHA loan limits in several areas.
As of now, the maximum size of FHA-backed loans in expensive areas of the country is set to drop to $625,500 from $729,750 as of Oct. 1. In less expensive areas, the limit may drop to $271,050. The GOP draft bill wants to drop the limits even more to 125 percent of a county's median home price, Dow Jones reports.
"While we support reforms to strengthen the program, changes should not be made at consumers' expense by drastically impacting the affordability and availability of mortgage capital," Ron Phipps, the National Association of REALTORS®’ president, said in a statement.
Source: “House Republicans Aim to Raise Money Down for FHA Loans,” Dow Jones International News (May 23, 2011)
Monday, May 23, 2011
Finding the Right Sales Price Isn't Easy
In a volatile real estate market, knowing the right price for a home isn’t always clear, experts say.
Having to drop a home's sale price from its initial list price is common. On average, sellers reduce their list prices after about 2.5 months by 8 percent when a property hasn't sold yet, according to a report by Trulia.com. After making one price reduction, 35 percent of those sellers will make a second price cut too.
Even homes without any obvious faults are undergoing price cuts, agents say.
Real estate pros are finding that to find the right price for a home is much more than comparing it to a set of comps. But determining a price to fit a few of a home's unique limitations isn't easy. For example, a 1946 five-bedroom home in a sought-after neighborhood in Scarsdale, N.Y., has had five sales price adjustments. It was first listed at $1.699 million and now is on the market for $1.278 million.
While buyer offers are coming in, real estate pro Claire Civetta with Coldwell Banker Residential Brokerage in Scarsdale, N.Y., says they are far below asking price. The home is on a busy road and doesn’t have as large of buffer from street noise as other nearby homes.
So while comparable houses reveal this one to be well priced, Civetta says “the market has been telling us something else.”
Source: “In House Pricing, Own Up to Flaws,” The New York Times (May 19, 2011)
Having to drop a home's sale price from its initial list price is common. On average, sellers reduce their list prices after about 2.5 months by 8 percent when a property hasn't sold yet, according to a report by Trulia.com. After making one price reduction, 35 percent of those sellers will make a second price cut too.
Even homes without any obvious faults are undergoing price cuts, agents say.
Real estate pros are finding that to find the right price for a home is much more than comparing it to a set of comps. But determining a price to fit a few of a home's unique limitations isn't easy. For example, a 1946 five-bedroom home in a sought-after neighborhood in Scarsdale, N.Y., has had five sales price adjustments. It was first listed at $1.699 million and now is on the market for $1.278 million.
While buyer offers are coming in, real estate pro Claire Civetta with Coldwell Banker Residential Brokerage in Scarsdale, N.Y., says they are far below asking price. The home is on a busy road and doesn’t have as large of buffer from street noise as other nearby homes.
So while comparable houses reveal this one to be well priced, Civetta says “the market has been telling us something else.”
Source: “In House Pricing, Own Up to Flaws,” The New York Times (May 19, 2011)
Friday, May 20, 2011
April Existing-Home Sales Ease
Existing-home sales slipped in April, although the market has managed six gains in the past nine months, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, eased 0.8 percent to a seasonally adjusted annual rate of 5.05 million in April from a downwardly revised 5.09 million in March, and are 12.9 percent below a 5.80 million pace in April 2010; sales surged in April and May of 2010 in response to the home buyer tax credit.
Lawrence Yun, NAR chief economist, said the market is underperforming. “Given the great affordability conditions, job creation, and pent-up demand, home sales should be stronger,” he said. “Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations.”
Obstacles to Recovery
A parallel NAR practitioner survey shows 11 percent of REALTORS® report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10 percent had a contract delayed, and 14 percent said a contract was renegotiated to a lower sales price as a result of a low appraisal.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in April, unchanged from March; the rate was 5.10 percent in April 2010.
“Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards,” Yun said.
All-cash transactions stood at 31 percent in April, down from a record level of 35 percent in March; they were 26 percent in March 2010. Investors account for the bulk of cash purchases.
NAR President Ron Phipps said the lending community needs to return to sensible standards. “We want to ensure that qualified buyers will be able to own their property on a sustained basis from a sound credit evaluation, but banks needn’t be so stingy as to only lend to those with the highest credit scores,” he said.
“Very high shares of cash purchases, and high credit score requirements, have led to historically low default rates among home buyers over the past two years. This trend implies a gulf is opening between those who can and cannot have access to the American dream of home ownership,” Phipps said. “At the same time, existing guidelines from Freddie Mac and Fannie Mae must be fully implemented so all appraisals are done by valuators with local expertise.”
Price Stability
The national median existing-home price for all housing types was $163,700 in April, which is 5.0 percent below April 2010. Distressed homes — typically sold at a discount of about 20 percent — accounted for 37 percent of sales in April, down from 40 percent in March. They were 33 percent in April 2010.
“Home values, despite month-to-month volatility, have been remarkably stable in the range of $160,000 to $170,000 for the past three years,” Yun said. “Stable home prices in turn will steadily lower loan default rates, including strategic defaults.”
Total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, which represents a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March.
First-time buyers purchased 36 percent of homes in April, up from 33 percent in March; they were 49 percent in April 2010 when the tax credit was in place. Investors slipped to 20 percent in April from 22 percent of purchase activity in March; they were 15 percent in April 2010. The balance of sales was to repeat buyers, which were 44 percent in April.
Single-family home sales slipped 0.5 percent to a seasonally adjusted annual rate of 4.42 million in April from 4.44 million in March, and are 12.6 percent below the 5.06 million pace in April 2010. The median existing single-family home price was $163,200 in April, which is 5.4 percent below a year ago.
Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 in April from 650,000 in March, and are 15.0 percent below the 741,000-unit level one year ago. The median existing condo price was $167,300 in April, down 2.3 percent from April 2010.
Regional Performance
Existing-home sales in the Northeast fell 7.5 percent to an annual pace of 740,000 in April and are 32.1 percent below a year-ago surge. The median price in the Northeast was $225,400, which is 7.3 percent below April 2010.
Existing-home sales in the Midwest rose 5.7 percent in April to a level of 1.12 million but are 16.4 percent below a cyclical peak in April 2010. The median price in the Midwest was $133,200, down 5.1 percent from a year ago.
In the South, existing-home sales declined 4.1 percent to an annual pace of 1.95 million in April and are 9.3 percent below a year ago. The median price in the South was $142,800, which is 4.1 percent lower than April 2010.
Existing-home sales in the West slipped 1.6 percent to an annual level of 1.24 million in April and are 0.8 percent below April 2010. The median price in the West was $203,400, down 6.1 percent from a year ago.
Source: NAR
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, eased 0.8 percent to a seasonally adjusted annual rate of 5.05 million in April from a downwardly revised 5.09 million in March, and are 12.9 percent below a 5.80 million pace in April 2010; sales surged in April and May of 2010 in response to the home buyer tax credit.
Lawrence Yun, NAR chief economist, said the market is underperforming. “Given the great affordability conditions, job creation, and pent-up demand, home sales should be stronger,” he said. “Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations.”
Obstacles to Recovery
A parallel NAR practitioner survey shows 11 percent of REALTORS® report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10 percent had a contract delayed, and 14 percent said a contract was renegotiated to a lower sales price as a result of a low appraisal.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in April, unchanged from March; the rate was 5.10 percent in April 2010.
“Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards,” Yun said.
All-cash transactions stood at 31 percent in April, down from a record level of 35 percent in March; they were 26 percent in March 2010. Investors account for the bulk of cash purchases.
NAR President Ron Phipps said the lending community needs to return to sensible standards. “We want to ensure that qualified buyers will be able to own their property on a sustained basis from a sound credit evaluation, but banks needn’t be so stingy as to only lend to those with the highest credit scores,” he said.
“Very high shares of cash purchases, and high credit score requirements, have led to historically low default rates among home buyers over the past two years. This trend implies a gulf is opening between those who can and cannot have access to the American dream of home ownership,” Phipps said. “At the same time, existing guidelines from Freddie Mac and Fannie Mae must be fully implemented so all appraisals are done by valuators with local expertise.”
Price Stability
The national median existing-home price for all housing types was $163,700 in April, which is 5.0 percent below April 2010. Distressed homes — typically sold at a discount of about 20 percent — accounted for 37 percent of sales in April, down from 40 percent in March. They were 33 percent in April 2010.
“Home values, despite month-to-month volatility, have been remarkably stable in the range of $160,000 to $170,000 for the past three years,” Yun said. “Stable home prices in turn will steadily lower loan default rates, including strategic defaults.”
Total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, which represents a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March.
First-time buyers purchased 36 percent of homes in April, up from 33 percent in March; they were 49 percent in April 2010 when the tax credit was in place. Investors slipped to 20 percent in April from 22 percent of purchase activity in March; they were 15 percent in April 2010. The balance of sales was to repeat buyers, which were 44 percent in April.
Single-family home sales slipped 0.5 percent to a seasonally adjusted annual rate of 4.42 million in April from 4.44 million in March, and are 12.6 percent below the 5.06 million pace in April 2010. The median existing single-family home price was $163,200 in April, which is 5.4 percent below a year ago.
Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 in April from 650,000 in March, and are 15.0 percent below the 741,000-unit level one year ago. The median existing condo price was $167,300 in April, down 2.3 percent from April 2010.
Regional Performance
Existing-home sales in the Northeast fell 7.5 percent to an annual pace of 740,000 in April and are 32.1 percent below a year-ago surge. The median price in the Northeast was $225,400, which is 7.3 percent below April 2010.
Existing-home sales in the Midwest rose 5.7 percent in April to a level of 1.12 million but are 16.4 percent below a cyclical peak in April 2010. The median price in the Midwest was $133,200, down 5.1 percent from a year ago.
In the South, existing-home sales declined 4.1 percent to an annual pace of 1.95 million in April and are 9.3 percent below a year ago. The median price in the South was $142,800, which is 4.1 percent lower than April 2010.
Existing-home sales in the West slipped 1.6 percent to an annual level of 1.24 million in April and are 0.8 percent below April 2010. The median price in the West was $203,400, down 6.1 percent from a year ago.
Source: NAR
Wednesday, May 18, 2011
U.S. Home Sales by Foreign Buyers Surge
The U.S. continues to remain a top destination for foreign buyers as international purchases surged by $16 billion this year, one of the highest increases in recent years. This is according to the National Association of REALTORS®’ 2011 Profile of International Home Buying Activity. According to the survey, total residential international sales in the U.S. for the past year ending March 2011 equaled $82 billion, up from $66 billion in 2010. Total international sales were split evenly between non-resident foreigners and recent immigrants, while combined total domestic and international existing-home sales in the U.S. reached $1.07 trillion.
“The U.S. has always been a desirable place to own property and a profitable investment,” said NAR President Ron Phipps. “In recent years we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory. In addition to the advantageous market conditions, REALTORS® in this country have a global perspective and experience in working with clients from different cultures and real estate practices, helping them bring value to their international clients.”
Historically, foreign buyers have been attracted to property ownership in the U.S. for a number of reasons. U.S. homes are generally less expensive than comparable foreign properties, homes in this country are viewed as a secure investment, and the U.S. market offers rental opportunities and long-term appreciation potential.
More recently, REALTORS® have noticed new factors motivating foreign buyers. Many U.S. colleges and universities have a significant number of international students, and some foreign families are purchasing U.S. properties in college areas so their child has a place to live. Another source of international demand is foreign executives temporarily working in the U.S., some of whom prefer to purchase a residence instead of renting.
“Besides the strength of the dollar and the general economic trends in the U.S., international buyers are also recognizing the benefits of home ownership in this country, especially in the case of recent immigrants,” said Phipps. “Many foreigners perceive owning a home here as an important accomplishment in their efforts to become established in this country.”
Recent international buyers came from 70 different countries, up from 53 countries in 2010. For the fourth consecutive year, Canada was the top country of origin, with 23 percent of sales to foreigners. China was the second most popular country of origin, with nine percent of international sales this year. Tied for third were Mexico, the U.K., and India. Argentina and Brazil combined reported an increase in foreign sales with five percent, up from two percent in 2010. The top five countries of origin accounted for 53 percent of international transactions in 2011.
The average price paid by an international buyer was $315,000 compared to the overall U.S. average of $218,000. However, 45 percent of international purchases were under $200,000. This price segment has grown significantly over the years, most likely due to overall price declines in the U.S. as well as the strengthening of some foreign currencies.
Almost every state had at least one international transaction in the past year. The four states with the heaviest concentration of international buyer activity have remained the same over the past five years. Florida had 31 percent of total international transactions this year, the most of any state. California had 12 percent, Texas had nine percent, and Arizona rounded out the top four with six percent of international transactions.
Foreign buyers are primarily interested in three factors when deciding where to buy in the U.S.: proximity to their home country; convenience of air transportation; and climate and location. Generally, the East Coast attracts European buyers. The West Coast remains popular for Asian purchasers. Mexican buyers are traditionally attracted to the Southwestern markets. Florida is most popular among South Americans, Europeans, and Canadians.
Similar to last year, 28 percent of REALTORS® in 2011 reported working with an international client. Fifty-five percent served at least one foreign client, while the bulk of international transactions were handled by a small percentage of REALTORS®. Only eight percent of members obtained 50 percent or more of their transactions from international clients.
Sixty-one percent of foreign buyers purchased a single-family home while 36 percent bought a condo/apartment or townhouse. In addition, 62 percent of international purchases were reported as being all cash. This percentage is significantly higher than all-cash purchases for domestic buyers, mostly due to the differences in international credit reporting standards. Financing challenges continue to be a major hurdle for international buyers, with 32 percent reporting these as their reason for not buying a home. Many REALTORS® reported that their foreign clients faced mortgage financing issues, as well as problems with legal, tax and immigration laws.
— NAR
“The U.S. has always been a desirable place to own property and a profitable investment,” said NAR President Ron Phipps. “In recent years we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory. In addition to the advantageous market conditions, REALTORS® in this country have a global perspective and experience in working with clients from different cultures and real estate practices, helping them bring value to their international clients.”
Historically, foreign buyers have been attracted to property ownership in the U.S. for a number of reasons. U.S. homes are generally less expensive than comparable foreign properties, homes in this country are viewed as a secure investment, and the U.S. market offers rental opportunities and long-term appreciation potential.
More recently, REALTORS® have noticed new factors motivating foreign buyers. Many U.S. colleges and universities have a significant number of international students, and some foreign families are purchasing U.S. properties in college areas so their child has a place to live. Another source of international demand is foreign executives temporarily working in the U.S., some of whom prefer to purchase a residence instead of renting.
“Besides the strength of the dollar and the general economic trends in the U.S., international buyers are also recognizing the benefits of home ownership in this country, especially in the case of recent immigrants,” said Phipps. “Many foreigners perceive owning a home here as an important accomplishment in their efforts to become established in this country.”
Recent international buyers came from 70 different countries, up from 53 countries in 2010. For the fourth consecutive year, Canada was the top country of origin, with 23 percent of sales to foreigners. China was the second most popular country of origin, with nine percent of international sales this year. Tied for third were Mexico, the U.K., and India. Argentina and Brazil combined reported an increase in foreign sales with five percent, up from two percent in 2010. The top five countries of origin accounted for 53 percent of international transactions in 2011.
The average price paid by an international buyer was $315,000 compared to the overall U.S. average of $218,000. However, 45 percent of international purchases were under $200,000. This price segment has grown significantly over the years, most likely due to overall price declines in the U.S. as well as the strengthening of some foreign currencies.
Almost every state had at least one international transaction in the past year. The four states with the heaviest concentration of international buyer activity have remained the same over the past five years. Florida had 31 percent of total international transactions this year, the most of any state. California had 12 percent, Texas had nine percent, and Arizona rounded out the top four with six percent of international transactions.
Foreign buyers are primarily interested in three factors when deciding where to buy in the U.S.: proximity to their home country; convenience of air transportation; and climate and location. Generally, the East Coast attracts European buyers. The West Coast remains popular for Asian purchasers. Mexican buyers are traditionally attracted to the Southwestern markets. Florida is most popular among South Americans, Europeans, and Canadians.
Similar to last year, 28 percent of REALTORS® in 2011 reported working with an international client. Fifty-five percent served at least one foreign client, while the bulk of international transactions were handled by a small percentage of REALTORS®. Only eight percent of members obtained 50 percent or more of their transactions from international clients.
Sixty-one percent of foreign buyers purchased a single-family home while 36 percent bought a condo/apartment or townhouse. In addition, 62 percent of international purchases were reported as being all cash. This percentage is significantly higher than all-cash purchases for domestic buyers, mostly due to the differences in international credit reporting standards. Financing challenges continue to be a major hurdle for international buyers, with 32 percent reporting these as their reason for not buying a home. Many REALTORS® reported that their foreign clients faced mortgage financing issues, as well as problems with legal, tax and immigration laws.
— NAR
Tuesday, May 17, 2011
It's Getting Costlier to Insure a Home
Some of the nation’s largest insurers are raising home insurance premium rates, or plan to soon, reports The Wall Street Journal.
For example, State Farm Mutual Automobile Insurance Co. says it increased home owner rates, on average, 7.3 percent, and in some states it raised rates even more. Other insurance companies also report higher rates--a company in Florida reports an 11 percent increase this year in premium rates and in Pennsylvania some areas have faced a 33 percent hike in rates.
So why are rates rising when many home owners are seeing their housing values dropping?
Experts say premiums are partially based on rebuilding costs, not a home’s appraised market value, The Wall Street Journal reports.
While rates have most stayed stable the last five years, they’re now on the upswing. In 2000, the average premium for home owners insurance was $508. In 2010, that grew to $807, according to National Association of Insurance Commissioners and Insurance Information Institute.
More premium rate increases are expected in the near future too, insurers say, due to the increased costs from natural disasters, such as the recent tornadoes that struck the South and even the earthquake and tsunami in Japan.
Source: “While Home Prices May Be Falling, Insurance Premiums Are on the Rise,” The Wall Street Journal (May 17, 2011)
For example, State Farm Mutual Automobile Insurance Co. says it increased home owner rates, on average, 7.3 percent, and in some states it raised rates even more. Other insurance companies also report higher rates--a company in Florida reports an 11 percent increase this year in premium rates and in Pennsylvania some areas have faced a 33 percent hike in rates.
So why are rates rising when many home owners are seeing their housing values dropping?
Experts say premiums are partially based on rebuilding costs, not a home’s appraised market value, The Wall Street Journal reports.
While rates have most stayed stable the last five years, they’re now on the upswing. In 2000, the average premium for home owners insurance was $508. In 2010, that grew to $807, according to National Association of Insurance Commissioners and Insurance Information Institute.
More premium rate increases are expected in the near future too, insurers say, due to the increased costs from natural disasters, such as the recent tornadoes that struck the South and even the earthquake and tsunami in Japan.
Source: “While Home Prices May Be Falling, Insurance Premiums Are on the Rise,” The Wall Street Journal (May 17, 2011)
New Homes Competing Against Foreclosures
Builders broke ground on fewer homes in April as the new-home sector continues to face competition from a glut of foreclosures that in many markets has brought home values down.
Construction on homes and apartments dropped 10.6 percent to a seasonally adjusted annual rate of 523,000 units, the Commerce Department reported on Tuesday. In March, housing starts reached a 585,000-unit pace (an upward revised figure). Residential construction is down 23.9 percent compared to April of last year--its largest drop since October 2009.
Considered the “volatile part” of the new-home market at the moment, construction of multifamily homes (buildings with five or more units) particularly hampered housing starts last month, decreasing 28.3 percent. Single-family home construction--which generally makes up 75 percent of all housing starts--dropped 5.1 percent from a month earlier.
Regionally, the results were mixed. In the South, housing starts dropped 23 percent and 4.8 percent in the Northeast. However, the Midwest posted a 15.7 percent gain in housing starts, as well as the West with 3.7 percent.
Permits for future home construction dropped last month, falling 4 percent to a 551,000-unit pace last month, the Commerce Department reports.
The Distressed Sales Impact
New-home construction is being weighed down by an oversupply of existing homes on the market, particularly foreclosures, experts say. Buyers are increasingly choosing bargain-priced foreclosures and previously owned homes over--in general--pricier new homes.
“Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing," NAHB Chairman Bob Nielsen said Monday in statement about the National Association of Home Builder/Wells Fargo Housing Market Index, which shows builders’ confidence about the new-home market remains low.
Construction on homes and apartments dropped 10.6 percent to a seasonally adjusted annual rate of 523,000 units, the Commerce Department reported on Tuesday. In March, housing starts reached a 585,000-unit pace (an upward revised figure). Residential construction is down 23.9 percent compared to April of last year--its largest drop since October 2009.
Considered the “volatile part” of the new-home market at the moment, construction of multifamily homes (buildings with five or more units) particularly hampered housing starts last month, decreasing 28.3 percent. Single-family home construction--which generally makes up 75 percent of all housing starts--dropped 5.1 percent from a month earlier.
Regionally, the results were mixed. In the South, housing starts dropped 23 percent and 4.8 percent in the Northeast. However, the Midwest posted a 15.7 percent gain in housing starts, as well as the West with 3.7 percent.
Permits for future home construction dropped last month, falling 4 percent to a 551,000-unit pace last month, the Commerce Department reports.
The Distressed Sales Impact
New-home construction is being weighed down by an oversupply of existing homes on the market, particularly foreclosures, experts say. Buyers are increasingly choosing bargain-priced foreclosures and previously owned homes over--in general--pricier new homes.
“Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing," NAHB Chairman Bob Nielsen said Monday in statement about the National Association of Home Builder/Wells Fargo Housing Market Index, which shows builders’ confidence about the new-home market remains low.
Monday, May 16, 2011
Foreclosures Fall Again, Reaching 3-Year Lows
Fewer home owners are losing their homes as the number of foreclosure filings sank to more than a three-year low in April, RealtyTrac reports.
The number of foreclosure filings in April dropped 34 percent from a year ago, also marking the seventh straight month of declines, and reaching its lowest level since December 2007. Foreclosure filings include notices of default, scheduled auctions, and bank repossessions. Also, 69,532 homes were repossessed in April — an 8.6 percent drop from March and a 32 percent drop from last September’s peak.
Banks being blamed for faulty paperwork continued to slow the pace of foreclosure activity last month, but many foreclosures still loom, experts warn. About 3.7 million borrowers are at least 90 days late on payments.
However, there are hopeful signs of a turnaround: The employment picture is improving, which will allow more home owners to make payments and banks are completing more loan modifications to keep borrowers in their home. Banks completed 77,000 mortgage modifications in March, which is a 26 percent increase from February.
States With the Highest Foreclosure Rates
Nevada, Arizona, and California continue to post the highest foreclosure rates in the nation.
Ten states account for more than 70 percent of all foreclosure activity in the country: California, Florida, Arizona, Michigan, Nevada, Illinois, Texas, Georgia, Ohio, and Colorado.
The number of foreclosure filings in April dropped 34 percent from a year ago, also marking the seventh straight month of declines, and reaching its lowest level since December 2007. Foreclosure filings include notices of default, scheduled auctions, and bank repossessions. Also, 69,532 homes were repossessed in April — an 8.6 percent drop from March and a 32 percent drop from last September’s peak.
Banks being blamed for faulty paperwork continued to slow the pace of foreclosure activity last month, but many foreclosures still loom, experts warn. About 3.7 million borrowers are at least 90 days late on payments.
However, there are hopeful signs of a turnaround: The employment picture is improving, which will allow more home owners to make payments and banks are completing more loan modifications to keep borrowers in their home. Banks completed 77,000 mortgage modifications in March, which is a 26 percent increase from February.
States With the Highest Foreclosure Rates
Nevada, Arizona, and California continue to post the highest foreclosure rates in the nation.
Ten states account for more than 70 percent of all foreclosure activity in the country: California, Florida, Arizona, Michigan, Nevada, Illinois, Texas, Georgia, Ohio, and Colorado.
Thursday, May 12, 2011
Economy, Affordability to Drive Home Sales Growth
Home sales are on track to outperform last year, even though the market doesn’t have the benefit of the home buyer tax credit. This is thanks to sustained economic growth, the slowly recovering jobs picture, and historically high affordability conditions, NAR Chief Economist Lawrence Yun told a packed room on Thursday during the Residential Economic Update at the 2011 REALTORS® Midyear Legislative Meetings.
Although unemployment remains high at about 9 percent, the country is seeing steady job growth. More than 100,000 jobs are being created a month, and the U.S. could see 1.5 million net new jobs this year, Yun said.
Frank Nothaft, chief economist for secondary mortgage market company Freddie Mac, who spoke later at the same session, said he expects a bit more robust job growth, closer to 2 million, but both economists said the unemployment rate will remain high despite the new jobs because of the size of the hole that needs to be filled. More than 8 million jobs were lost during the 2008-09 recession, and new entrants to the labor force, such as recent college graduates, add another 2 million to the hole.
Both Yun and Nothaft are predicting home sales a little higher than 5 million, which would improve upon last year even though 2010 had the artificial stimulus of the tax credit, they said.
Historically high affordability is one of the key drivers of the improved sales performance. NAR’s affordability index is at its highest level ever, at nearly 170, which means households earning the national median income have 170 percent of the income needed to buy a home at the national median price.
Behind the affordable conditions are low interest rates, which today are below 5 percent, and home prices that, while rising in some areas (like booming North Dakota), remain quite a bit below their peak during the housing boom. The high number of distressed homes (those in which the value is below the amount of equity the owners have in them) is one of the main reasons values are struggling to get off the bottom.
Yun said that overly strict lending standards are holding back more robust sales: 2010-vintage mortgage originations have a lower serious delinquency rate than in 2002, when serious delinquencies were barely above 1 percent, and 2011 is shaping up to be another stellar year in delinquency rates, but lenders are still requiring extraordinarily high credit scores and putting up other hurdles to obtaining financing. “If lenders would just go back to the normal standards that were in place prior to the boom years, sales might be 20 percent higher,” Yun said.
Although he’s seeing no signs of lenders opening up on lending yet, Yun said conditions are in place for lenders to start easing up. They’re sitting on plenty of money, and they could be reaching the point at which they can earn more revenues at reasonable risk levels by making home loans than by doing other things with their money. “I’m not seeing that yet, but that is a potential upside,” he said
In some ways, the heroes of housing today are the all-cash buyers. They’re 40 percent of the market now, so they’re helping to drive sales despite the tight availability of financing. Yun thinks all-cash buyers are investors who either can’t get financing or think they can get a better return on their cash by putting it into real estate than they can in savings instruments or stocks, particularly given the rock-bottom process of so many houses. He also thinks some empty-nest baby boomers might be acting as the lender for their children, buying a home for them on an all-cash basis and taking back a note. “I’m seeing this anecdotally. I don’t know if it’s a trend,” he said.
Yun’s forecast: The U.S. economy will grow about 2.5 percent this year, with between 1.5 and 2 million new jobs added to the economy. Home sales will reach about 5.1 million, up 7-10 percent from last year, with home values staying virtually unchanged. Nothaft had a largely similar forecast.
Although unemployment remains high at about 9 percent, the country is seeing steady job growth. More than 100,000 jobs are being created a month, and the U.S. could see 1.5 million net new jobs this year, Yun said.
Frank Nothaft, chief economist for secondary mortgage market company Freddie Mac, who spoke later at the same session, said he expects a bit more robust job growth, closer to 2 million, but both economists said the unemployment rate will remain high despite the new jobs because of the size of the hole that needs to be filled. More than 8 million jobs were lost during the 2008-09 recession, and new entrants to the labor force, such as recent college graduates, add another 2 million to the hole.
Both Yun and Nothaft are predicting home sales a little higher than 5 million, which would improve upon last year even though 2010 had the artificial stimulus of the tax credit, they said.
Historically high affordability is one of the key drivers of the improved sales performance. NAR’s affordability index is at its highest level ever, at nearly 170, which means households earning the national median income have 170 percent of the income needed to buy a home at the national median price.
Behind the affordable conditions are low interest rates, which today are below 5 percent, and home prices that, while rising in some areas (like booming North Dakota), remain quite a bit below their peak during the housing boom. The high number of distressed homes (those in which the value is below the amount of equity the owners have in them) is one of the main reasons values are struggling to get off the bottom.
Yun said that overly strict lending standards are holding back more robust sales: 2010-vintage mortgage originations have a lower serious delinquency rate than in 2002, when serious delinquencies were barely above 1 percent, and 2011 is shaping up to be another stellar year in delinquency rates, but lenders are still requiring extraordinarily high credit scores and putting up other hurdles to obtaining financing. “If lenders would just go back to the normal standards that were in place prior to the boom years, sales might be 20 percent higher,” Yun said.
Although he’s seeing no signs of lenders opening up on lending yet, Yun said conditions are in place for lenders to start easing up. They’re sitting on plenty of money, and they could be reaching the point at which they can earn more revenues at reasonable risk levels by making home loans than by doing other things with their money. “I’m not seeing that yet, but that is a potential upside,” he said
In some ways, the heroes of housing today are the all-cash buyers. They’re 40 percent of the market now, so they’re helping to drive sales despite the tight availability of financing. Yun thinks all-cash buyers are investors who either can’t get financing or think they can get a better return on their cash by putting it into real estate than they can in savings instruments or stocks, particularly given the rock-bottom process of so many houses. He also thinks some empty-nest baby boomers might be acting as the lender for their children, buying a home for them on an all-cash basis and taking back a note. “I’m seeing this anecdotally. I don’t know if it’s a trend,” he said.
Yun’s forecast: The U.S. economy will grow about 2.5 percent this year, with between 1.5 and 2 million new jobs added to the economy. Home sales will reach about 5.1 million, up 7-10 percent from last year, with home values staying virtually unchanged. Nothaft had a largely similar forecast.
Wednesday, May 11, 2011
Affordable, Reliable Home Financing Is Priority
Reforms to America’s housing finance market must ensure a reliable source of affordable mortgage lending for creditworthy consumers. That’s according to REALTORS® and other industry insiders who examined the federal government’s future role in the secondary mortgage market at a session called “Fannie Mae & Freddie Mac: Obama Options and Beyond” at the NATIONAL ASSOCIATION OF REALTORS® 2011 Midyear Legislative Meetings & Trade Expo in Washington, D.C.
Steve Brown, 2011 NAR first vice-president nominee, opened the session by outlining NAR’s position for reforming the government-sponsored enterprises (GSEs), saying that reform is required, taxpayers must be protected from losses, and the federal government must continue to play a role in the secondary mortgage market to ensure a steady flow of mortgage liquidity in all markets under all economic conditions.
Reform Must Be Thoughtful
“As the leading advocate for home owners, NAR is concerned that eliminating the GSEs without a viable replacement is not a reasonable option and will severely restrict mortgage capital and result in higher fees and costs for qualified borrowers,” said Brown. “Reform of the secondary mortgage market needs to be comprehensive and undertaken methodically.”
James Parrot, senior advisor for housing at the National Economic Council in Washington, D.C., overviewed the Obama administration’s recommendations for reforming the GSEs in the wake of the financial crisis, which included varying levels of government backing. He noted the primary objective of the proposals was twofold: first, to lay out an immediate near-term path for reform, with steps that could be taken the next few years to reduce taxpayer risk and move the housing market to more stable footing, and second, to frame the discussion regarding the government’s long-term role in housing finance.
“The government’s large presence in the housing finance is unhealthy and needs to be scaled back; however, the steps we take over next few years to reduce the government’s role and increase private capital will have a tremendous impact on the housing market and economy as well as the availability and affordability of mortgages,” said Parrot. “The objective isn’t to turn away from housing, but to make the housing finance market stronger so that families and their most important asset are better protected,” said Parrot.
More Transparency Needed
Panelist Susan Wachter, a professor at The Wharton School, University of Pennsylvania, agreed that private capital needs to return to the housing finance market, but that most likely won’t happen until the market has stabilized.
“There needs to be more accountability and transparency in the secondary mortgage market so that private investors can best assess their risk and safely get back into the market,” she said.
Mark Calabria, director of Financial Regulation Studies at the Cato Institute, argued for a very limited government role in the secondary mortgage market; saying that the private capital market has the funds and capacity to absorb Fannie Mae and Freddie Mac’s market share. He said that increased government support in the past few decades has only slightly increased America’s home ownership rate and that rates in other countries are higher despite their government’s limited involvement.
Despite his opposing viewpoint to the level of involvement, Calabria did acknowledge that some government backstop was essential in the future, since the housing and finance markets are sensitive to booms and busts.
David Katkov, executive vice president and chief business officer at The PMI Group, countered that it would be naïve to move to a purely private market because it’s been successful in other countries, adding that the U.S.’s housing finance system dwarfs that of other countries and is far more complex.
Ann Grochala, vice president at the Independent Community Bankers of America also shared concerns for small lenders and community bankers in a purely private market, where competition from large lenders would be great.
Source: NAR
Steve Brown, 2011 NAR first vice-president nominee, opened the session by outlining NAR’s position for reforming the government-sponsored enterprises (GSEs), saying that reform is required, taxpayers must be protected from losses, and the federal government must continue to play a role in the secondary mortgage market to ensure a steady flow of mortgage liquidity in all markets under all economic conditions.
Reform Must Be Thoughtful
“As the leading advocate for home owners, NAR is concerned that eliminating the GSEs without a viable replacement is not a reasonable option and will severely restrict mortgage capital and result in higher fees and costs for qualified borrowers,” said Brown. “Reform of the secondary mortgage market needs to be comprehensive and undertaken methodically.”
James Parrot, senior advisor for housing at the National Economic Council in Washington, D.C., overviewed the Obama administration’s recommendations for reforming the GSEs in the wake of the financial crisis, which included varying levels of government backing. He noted the primary objective of the proposals was twofold: first, to lay out an immediate near-term path for reform, with steps that could be taken the next few years to reduce taxpayer risk and move the housing market to more stable footing, and second, to frame the discussion regarding the government’s long-term role in housing finance.
“The government’s large presence in the housing finance is unhealthy and needs to be scaled back; however, the steps we take over next few years to reduce the government’s role and increase private capital will have a tremendous impact on the housing market and economy as well as the availability and affordability of mortgages,” said Parrot. “The objective isn’t to turn away from housing, but to make the housing finance market stronger so that families and their most important asset are better protected,” said Parrot.
More Transparency Needed
Panelist Susan Wachter, a professor at The Wharton School, University of Pennsylvania, agreed that private capital needs to return to the housing finance market, but that most likely won’t happen until the market has stabilized.
“There needs to be more accountability and transparency in the secondary mortgage market so that private investors can best assess their risk and safely get back into the market,” she said.
Mark Calabria, director of Financial Regulation Studies at the Cato Institute, argued for a very limited government role in the secondary mortgage market; saying that the private capital market has the funds and capacity to absorb Fannie Mae and Freddie Mac’s market share. He said that increased government support in the past few decades has only slightly increased America’s home ownership rate and that rates in other countries are higher despite their government’s limited involvement.
Despite his opposing viewpoint to the level of involvement, Calabria did acknowledge that some government backstop was essential in the future, since the housing and finance markets are sensitive to booms and busts.
David Katkov, executive vice president and chief business officer at The PMI Group, countered that it would be naïve to move to a purely private market because it’s been successful in other countries, adding that the U.S.’s housing finance system dwarfs that of other countries and is far more complex.
Ann Grochala, vice president at the Independent Community Bankers of America also shared concerns for small lenders and community bankers in a purely private market, where competition from large lenders would be great.
Source: NAR
Tuesday, May 10, 2011
Existing-Home Sales Rise in Most States
Existing-home sales continued to recover in the first quarter with gains in 49 states and the District of Columbia, while 22 percent of metropolitan areas saw prices rise from a year ago, according to the latest survey by the NATIONAL ASSOCIATION OF REALTORS®.
Total state existing-home sales, including single-family homes and condos, rose 8.3 percent to a seasonally adjusted annual rate of 5.14 million in the first quarter from 4.75 million in the fourth quarter, and are only 0.8 percent below a 5.18 million pace during the same period in 2010.
Also in the first quarter, the median existing single-family home price rose in 34 out of 153 metropolitan statistical areas from the first quarter of 2010, including four with double-digit increases; one was unchanged and 118 areas showed price declines.
Lawrence Yun, NAR chief economist, said home prices are all over the map. “The reading of quarterly price data can be volatile because they are based on the types of homes that are sold during the quarter. When buyers principally purchase distressed properties in a given market, the recorded prices will be very low, which is what we’re seeing now in much of the country,” he said. “Annual price data provides a better guide about the direction of the market in those areas.”
Distressed Sales Put Pressure on Prices
The national median existing single-family home price was $158,700 in the first quarter, down 4.6 percent from $166,400 in the first quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes typically sold at a discount of about 20 percent, accounted for 39 percent of first quarter sales, up from 36 percent a year earlier.
Yun said lower priced homes have seen the best sales performance. “The biggest sales increase has been in the lower price ranges, which are popular with investors and cash buyers,” he said. “The preponderance of sales activity at the lower end is bringing down the median price, so what we’re seeing is the result of a change in the composition of home sales.”
Although sales are slightly below a year ago, the volume of homes sold for $100,000 or less in the first quarter was 8.9 percent higher than the first quarter of 2010, creating a downward skew on the overall median price.
The share of all-cash home purchases rose to 33 percent in the first quarter from 27 percent in the first quarter of 2010.
More Investors in the Market
Investors accounted for 21 percent of first quarter transactions, up from 18 percent a year ago, while first-time buyers purchased 32 percent of homes, down from 42 percent in the first quarter of 2010 when a tax credit was in place. Repeat buyers accounted for a 47 percent market share in the first quarter, up from 40 percent a year earlier.
“The rising sales trend in nearly all states is a part of the healing process to clear off inventory. Sales need to rise before prices can firm up,” Yun added.
NAR President Ron Phipps said strong sales of distressed homes are exactly what the market needs. “The good news is foreclosures, which account for two-thirds of all distressed homes sold, are selling very quickly,” he said. “Short sales still take far too long to get lender approval, but it appears the inventory of distressed property is peaking and will be gradually declining next year. This means the market should slowly return to balance. We are encouraged that recent home buyers are having exceptionally low default rates.”
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.85 percent in the first quarter, up from a record low 4.41 percent in the fourth quarter, but below the 5.00 percent average in the first quarter of 2010.
A Closer Look at Price Trends
In the condo sector, metro area condominium and cooperative prices – covering changes in 53 metro areas – showed the national median existing-condo price was $152,900 in the first quarter, down 10.4 percent from the first quarter of 2010. Eleven metros showed increases in the median condo price from a year ago, one was unchanged and 41 areas had declines.
Regionally, existing-home sales in the Northeast increased 0.8 percent in the first quarter to a level of 800,000 but are 7.3 percent below the first quarter of 2010. The median existing single-family home price in the Northeast declined 5.0 percent to $234,100 in the first quarter from a year ago.
Existing-home sales in the Midwest rose 7.9 percent in the first quarter to a pace of 1.09 million but are 5.0 percent below a year ago. The median existing single-family home price in the Midwest fell 5.3 percent to $124,400 in the first quarter from the same period in 2010.
In the South, existing-home sales increased 8.5 percent in the first quarter to an annual rate of 1.96 million and are 2.8 percent higher than the first quarter of 2010. The median existing single-family home price in the South slipped 0.6 percent to $141,800 in the first quarter from a year earlier.
Existing-home sales in the West jumped 13.5 percent in the first quarter to a level of 1.29 million and are 2.1 percent above a year ago. The median existing single-family home price in the West fell 4.7 percent to $197,400 in the first quarter from the first quarter of 2010.
Total state existing-home sales, including single-family homes and condos, rose 8.3 percent to a seasonally adjusted annual rate of 5.14 million in the first quarter from 4.75 million in the fourth quarter, and are only 0.8 percent below a 5.18 million pace during the same period in 2010.
Also in the first quarter, the median existing single-family home price rose in 34 out of 153 metropolitan statistical areas from the first quarter of 2010, including four with double-digit increases; one was unchanged and 118 areas showed price declines.
Lawrence Yun, NAR chief economist, said home prices are all over the map. “The reading of quarterly price data can be volatile because they are based on the types of homes that are sold during the quarter. When buyers principally purchase distressed properties in a given market, the recorded prices will be very low, which is what we’re seeing now in much of the country,” he said. “Annual price data provides a better guide about the direction of the market in those areas.”
Distressed Sales Put Pressure on Prices
The national median existing single-family home price was $158,700 in the first quarter, down 4.6 percent from $166,400 in the first quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes typically sold at a discount of about 20 percent, accounted for 39 percent of first quarter sales, up from 36 percent a year earlier.
Yun said lower priced homes have seen the best sales performance. “The biggest sales increase has been in the lower price ranges, which are popular with investors and cash buyers,” he said. “The preponderance of sales activity at the lower end is bringing down the median price, so what we’re seeing is the result of a change in the composition of home sales.”
Although sales are slightly below a year ago, the volume of homes sold for $100,000 or less in the first quarter was 8.9 percent higher than the first quarter of 2010, creating a downward skew on the overall median price.
The share of all-cash home purchases rose to 33 percent in the first quarter from 27 percent in the first quarter of 2010.
More Investors in the Market
Investors accounted for 21 percent of first quarter transactions, up from 18 percent a year ago, while first-time buyers purchased 32 percent of homes, down from 42 percent in the first quarter of 2010 when a tax credit was in place. Repeat buyers accounted for a 47 percent market share in the first quarter, up from 40 percent a year earlier.
“The rising sales trend in nearly all states is a part of the healing process to clear off inventory. Sales need to rise before prices can firm up,” Yun added.
NAR President Ron Phipps said strong sales of distressed homes are exactly what the market needs. “The good news is foreclosures, which account for two-thirds of all distressed homes sold, are selling very quickly,” he said. “Short sales still take far too long to get lender approval, but it appears the inventory of distressed property is peaking and will be gradually declining next year. This means the market should slowly return to balance. We are encouraged that recent home buyers are having exceptionally low default rates.”
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.85 percent in the first quarter, up from a record low 4.41 percent in the fourth quarter, but below the 5.00 percent average in the first quarter of 2010.
A Closer Look at Price Trends
In the condo sector, metro area condominium and cooperative prices – covering changes in 53 metro areas – showed the national median existing-condo price was $152,900 in the first quarter, down 10.4 percent from the first quarter of 2010. Eleven metros showed increases in the median condo price from a year ago, one was unchanged and 41 areas had declines.
Regionally, existing-home sales in the Northeast increased 0.8 percent in the first quarter to a level of 800,000 but are 7.3 percent below the first quarter of 2010. The median existing single-family home price in the Northeast declined 5.0 percent to $234,100 in the first quarter from a year ago.
Existing-home sales in the Midwest rose 7.9 percent in the first quarter to a pace of 1.09 million but are 5.0 percent below a year ago. The median existing single-family home price in the Midwest fell 5.3 percent to $124,400 in the first quarter from the same period in 2010.
In the South, existing-home sales increased 8.5 percent in the first quarter to an annual rate of 1.96 million and are 2.8 percent higher than the first quarter of 2010. The median existing single-family home price in the South slipped 0.6 percent to $141,800 in the first quarter from a year earlier.
Existing-home sales in the West jumped 13.5 percent in the first quarter to a level of 1.29 million and are 2.1 percent above a year ago. The median existing single-family home price in the West fell 4.7 percent to $197,400 in the first quarter from the first quarter of 2010.
Monday, May 9, 2011
Slow Economic Recovery Blamed on Housing
While the employment picture continues to gradually improve, the economy is not recovering at the pace some experts had hoped for, and some are pointing fingers at the housing market for the slow recovery.
Federal Reserve Chairman Ben Bernanke says the economy is recovering at a “moderate pace” and that a high number of foreclosures and home owners who are “underwater” on their mortgages continues to drag down housing prices and the economy.
"Declines in the values of homes and stocks sharply reduced the wealth of many Americans during the crisis,” Bernanke says. “Three-fifths or more of families across all income groups reported a decline in wealth between 2007 and 2009, and the typical household lost nearly one-fifth of its wealth, regardless of income group.
"Moreover, one in eight of the households ... started the crisis with zero or negative net worth and thus had scant resources to fall back on to maintain their standard of living during bouts of unemployment."
However, there are signs the outlook is starting to improve. The construction industry in April increased employment by 9,000, which is its first monthly increase in years and may be a sign that the sector is finally in recovery mode. Overall, unemployment continues to decline, which will help more households start to feel more financially secure. However, long-term unemployment remains historically high, particularly among the young, minorities, and those with less education.
Source: “Real Estate Outlook: Bernanke on Housing,” Realty Times (May 9, 2011)
Federal Reserve Chairman Ben Bernanke says the economy is recovering at a “moderate pace” and that a high number of foreclosures and home owners who are “underwater” on their mortgages continues to drag down housing prices and the economy.
"Declines in the values of homes and stocks sharply reduced the wealth of many Americans during the crisis,” Bernanke says. “Three-fifths or more of families across all income groups reported a decline in wealth between 2007 and 2009, and the typical household lost nearly one-fifth of its wealth, regardless of income group.
"Moreover, one in eight of the households ... started the crisis with zero or negative net worth and thus had scant resources to fall back on to maintain their standard of living during bouts of unemployment."
However, there are signs the outlook is starting to improve. The construction industry in April increased employment by 9,000, which is its first monthly increase in years and may be a sign that the sector is finally in recovery mode. Overall, unemployment continues to decline, which will help more households start to feel more financially secure. However, long-term unemployment remains historically high, particularly among the young, minorities, and those with less education.
Source: “Real Estate Outlook: Bernanke on Housing,” Realty Times (May 9, 2011)
Thursday, May 5, 2011
Gallup Poll: Americans Say Buy Now
With dropping home values in many markets mixed with interest rates at historical lows, homes are more affordable now than they’ve been in the last 35 years, reports Zillow.com.
The average buyer nowadays can expect to spend about 17 percent of her monthly gross income on a mortgage, which compares to a 25 percent average since 1975, Zillow reports.
With affordability high, Americans seem to be getting the message about the value of home ownership. Nearly 70 percent of Americans say now is a good time to buy a home, according to a recent Gallup poll.
Men are about 16 percent more likely to say now is a good time to buy a home than women. And Americans living in the West are most favorable toward buying (75 percent), which compares to 64 percent of Americans who live in the South who say now is a good time to buy.
Americans with higher incomes also expressed more of an interest in home ownership, according to the Gallup poll. Americans who make $75,000 or more a year are 18 percent more likely to say that 2011 is a good time to buy a home than those making $30,000-$75,000.
The average buyer nowadays can expect to spend about 17 percent of her monthly gross income on a mortgage, which compares to a 25 percent average since 1975, Zillow reports.
With affordability high, Americans seem to be getting the message about the value of home ownership. Nearly 70 percent of Americans say now is a good time to buy a home, according to a recent Gallup poll.
Men are about 16 percent more likely to say now is a good time to buy a home than women. And Americans living in the West are most favorable toward buying (75 percent), which compares to 64 percent of Americans who live in the South who say now is a good time to buy.
Americans with higher incomes also expressed more of an interest in home ownership, according to the Gallup poll. Americans who make $75,000 or more a year are 18 percent more likely to say that 2011 is a good time to buy a home than those making $30,000-$75,000.
Wednesday, May 4, 2011
Big Jump Expected in New U.S. Households
Millions of young adults are beginning to move out of their parents’ homes and create new households at the fastest rate since 2007. Some housing experts are predicting these young adults may provide a major jump to U.S. housing starts--possibly by more than 50 percent, even by next year--and increase housing consumption at a rate nearly double that of the past two years, Bloomberg News reports.
In 2011, between 750,000 and 1 million new households are expected to be created, says UBS Securities LLC’s Maury Harris and IHS Global Insight’s Patrick Newport. In the year ended March 2010, new households stood at 357,000--the lowest on record, according to U.S. Census data. The “depressed rate” in new household formation has continued to jeopardize the housing market’s recovery, experts say.
But as the employment picture continues to improve, more young adults are leaving Mom and Dad’s house and making a new home for themselves. The “moving-back-in-with-Mom-and-Dad phenomenon” had caused a backlog of pent-up households, Charles Lieberman, chief investment officer with Advisors Capital Management LLC in Hasbrouck Heights, N.J., told Bloomberg News. “Improved economic conditions” will “enable these households to split up and resume living in their own residences.”
Housing starts are expected to get a boost to about 648,000 this year and near 900,000 in 2012 (it stood at 586,800 last year), says Brad Hunter, chief economist and national director of consulting for Metrostudy. The increase in housing starts, he says, reflects a “shadow demand” for new homes among family members who have moved in together because of economic conditions.
“The demographic component of housing demand is strong," he says. "It’s just the economic and psychological components that are holding things back.”
In 2011, between 750,000 and 1 million new households are expected to be created, says UBS Securities LLC’s Maury Harris and IHS Global Insight’s Patrick Newport. In the year ended March 2010, new households stood at 357,000--the lowest on record, according to U.S. Census data. The “depressed rate” in new household formation has continued to jeopardize the housing market’s recovery, experts say.
But as the employment picture continues to improve, more young adults are leaving Mom and Dad’s house and making a new home for themselves. The “moving-back-in-with-Mom-and-Dad phenomenon” had caused a backlog of pent-up households, Charles Lieberman, chief investment officer with Advisors Capital Management LLC in Hasbrouck Heights, N.J., told Bloomberg News. “Improved economic conditions” will “enable these households to split up and resume living in their own residences.”
Housing starts are expected to get a boost to about 648,000 this year and near 900,000 in 2012 (it stood at 586,800 last year), says Brad Hunter, chief economist and national director of consulting for Metrostudy. The increase in housing starts, he says, reflects a “shadow demand” for new homes among family members who have moved in together because of economic conditions.
“The demographic component of housing demand is strong," he says. "It’s just the economic and psychological components that are holding things back.”
Tuesday, May 3, 2011
Construction Spending On The Rise
The U.S. construction industry saw an increase in spending for the first time in four months -- the biggest improvement since April 2010.
In March, construction spending grew 1.4 percent to $768.9 billion.
With an increase in home remodeling activity outpacing declines in apartments and single-family homes, residential construction expenditures rose 2.6 percent. Outlays for nonresidential projects, meanwhile, climbed 1.6 percent due to robust spending for hotel, office, and industrial construction.
Source: "U.S. Construction Spending Up," Investor's Business Daily (05/03/11)
In March, construction spending grew 1.4 percent to $768.9 billion.
With an increase in home remodeling activity outpacing declines in apartments and single-family homes, residential construction expenditures rose 2.6 percent. Outlays for nonresidential projects, meanwhile, climbed 1.6 percent due to robust spending for hotel, office, and industrial construction.
Source: "U.S. Construction Spending Up," Investor's Business Daily (05/03/11)
Monday, May 2, 2011
Home Owners to Congress: Leave MID Alone
More than half — 53 percent — of home owners recently surveyed say they want Congress to leave the federal tax credit for home owners alone, according to a recent opinion poll at HousingPredictor.com. Those surveyed also say they want Congress to instead focus its efforts on instituting other tax advantages to stimulate the real estate market.
Some congressional leaders have raised the issue of trimming the mortgage interest deduction as a way to increase federal taxes and alleviate the ongoing budget crisis.
The mortgage interest deduction allows home owners to write off the mortgage interest and state taxes paid as itemized deductions on their personal federal income taxes.
The National Association of REALTORS® has strongly opposed any cut to the mortgage interest deduction and has lobbied Congress to protect it.
Some congressional leaders have raised the issue of trimming the mortgage interest deduction as a way to increase federal taxes and alleviate the ongoing budget crisis.
The mortgage interest deduction allows home owners to write off the mortgage interest and state taxes paid as itemized deductions on their personal federal income taxes.
The National Association of REALTORS® has strongly opposed any cut to the mortgage interest deduction and has lobbied Congress to protect it.
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