Category — National Housing Market

Some good news from the housing market in the past few weeks:

• Groundbreaking for new homes rose 2.8% to an annual rate of 591,000 units, reversing the prior month’s drop, a report from the Commerce Department showed on Wednesday.
• Over the past 12 months, housing starts have surged 21.1%, the largest increase since April 2004, the Commerce Department report showed.
• In summer 2009, the seasonally adjusted S&P/Case-Shiller Home Price Index rose for the first time in almost two years. Since May 2009, the index has risen by over 3%, suggesting that the necessary correction to U.S. residential home prices is nearing an end.
• The national median existing-home price for all housing types was $178,300 in December 2009, which is 1.5% higher than December 2008, according to the National Association of Realtors.
• For all of 2009, there were 5,156,000 existing-home sales, which was 4.9% higher than the 4,913,000 transactions recorded in 2008; it was the first annual sales gain since 2005, according to the National Association of Realtors.

Housing starts have risen 2.8% to the annual rate of 591,000.  This is the highest level since July. These starts were consistent with forecasts by economists that were surveyed by marketwatch.

The number of building permits, which is a seperate measure for construction, has also risen in turn with housing starts 17.8% over the last two months.

The government has stepped in an extended the first-time home buyers’ tax credit, which has directly affected the rise of this key index number. Analysts believe this should boost housing starts as spring arrives.

“It is a matter of time before the tax credit drives starts to new highs,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics in a note to clients.  The National Association of Home Builders said Tuesday that its builder sentiment index rose to a three-month high in February.

The Pending Home Sales Index, which is an indicator based on contracts signed in a given month, increased 1 percent and remains 10.9 percent higher than December 2008. 

Lawrence Yun, NAR chief economist, said it’s important to recognize how the tax credit is skewing market data. “There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded,” he said. “These swings are masking the underlying trend, which is a broad improvement over year-ago levels. December activity was the fifth highest monthly tally in two years.”

The index has risen in several different areas.  In the Northeast, the numbers rose 2.3 percent to 76.1 in December.  The Mid-west showed an increase of 5.2 percent to 86.9.  The South rose 2.2 percent to an index of 98.4. 

The CEO of Coldwell Banker LLC appeared on Fox News yesterday to talk Real Estate.  Jim Gillespie appreared on the show Countdown To the Final Bell, with Liz Claman. To no surprise the topic of discussion was the current state of the housing market.  Click here to see the video…

Real estate prices in the Case-Shiller 10-city index have dropped 30% from the peak in 2005.  Declines this steep have not been seen since the great depression.  Mortgage rates have also declined and this along with current  prices are a great combination for buyers. 

According to expert studies, there has not been better deals with mortgage/pricing since the early 90s.  If you buy an average home today, and take out a 30-year mortgage at 5%, the annual bill for interest and repayment of principal will come to about 19 times typical weekly earnings (If you get the $8,000 refundable tax credit too, it drops below 18 times). As you can see from the bottom chart, we haven’t seen it that low since the early 1970s. In his article Latest Home Price Data Is Good News for Buyers, Brett Arends states that, “The Case-Shiller 10-city data go back to 1987. I ran the numbers comparing the index values, mortgage rates and average weekly earnings. Net conclusion: On average–an important point I’ll return to shortly–buying a home now is as cheap as it was in the mid-1990s, when houses were an absolute steal. No, the Case-Shiller data aren’t perfect. The biggest complaint is that they are weighted too much towards the coasts and the big “bubble” cities like Miami, Las Vegas and Phoenix. So I decided to run the same analyses–average prices, mortgage rates and weekly earnings–for the home price data tracked by the U.S. Census. Those numbers go back further than Case-Shiller, to 1972. “ The charts below represent Arend’s study:

Sales of existing homes exceeded expectations of economists in November. 

The number of existing homes sold is at its highest level in 2 years.  The continued rise is thanks in large part to lower interests rates, decreased listing prices and government incentives. 

“Housing is in recovery mode,” Aaron Smith, a senior economist at Moody’s Economy.com said before the report.  “The combination of the homebuyers’ tax credit, good affordability and looser credit conditions going forward will continue moderate gains in housing.” 

In addition, the U.S. economy has grown at a 2.2 percent annual rate in the third quarter. 

It was recently reported that the number of foreclosures in the month of November decreased 8 percent from November 2008.  This is the fourth consecutive month that the foreclosure rates have decreased. Default notices on properties have also been on the decline.

States with the highest foreclosure rates are:

• Nevada
• Florida
• California
• Arizona
• Idaho
• Michigan
• Illinois
• Utah
• Maryland
• New Jersey

Four states account for more than 50 percent of actual foreclosures: California, Florida, Illinois, and Michigan.

New Construction has risen 8.9% in November to around 574,000 units. 

The estimated number was predicted to be 563,000 units based on economists that were surveyed by marketwatch.  There has also been reports of jumps in multifamily housing despite seeing some very low numbers for October. 

“We now expect both starts and permits to rally significantly further over the next few months, though the big test for the market will come in the spring,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics. “We also expect the tax credit, currently due to expire on Jun 30, to be extended through the year-end. It’s popular, relatively cheap, and it is an election year,” he added in a note to clients.

The Obama Administration set guidelines for financially troubled borrowers to sell their homes last week.  The government created these guidelines to encourage the use of short sales. 

To put it simply using a definition from the Wall Street Journal, a short sale is a transactions in which the borrower with lender approval sells the home for less than what is owed on the loan. Short Sales are often less damaging to a neighborhood’s property values than a foreclosure would be.  The program makes it easier for borrowers to voluntarily transfer ownership of properties through a “deed in lieu” of foreclosure. 

This plan will award borrowers $1500 from the government if they sell their home for less than they owe on it.  This is the newest addition to Obama’s $75 billion foreclosure prevention plan. 

Call 252-261-3800 or email sales@seasiderealty.com to speak with a short sales specialist.

Pending sales of existing home sales have unexpectedly increased to to highest level in 3.5 years. 

The National Association of Realtors said that its pending home sales index has also risen at a rate of 3.7%.  This will be the ninth month in a row that the index has shown an increase.  The Association also reports that they have not seen consecutive increases of this nature since 2001. Experts predicted that existing home sales would decrease .8%. 

“The [tax] credit is helping unleash a pent-up demand from a large pool of financially qualified renters,” said NAR economist, Lawrence Yun.