New Home Sales Rose in July

Commerce Dept.: New Home Sales Rose in July

New home sales in July rose 2.4 percent over the prior month to an annual pace of 515,000, the U.S. Commerce Department reported Tuesday.

At the same time, the number of unsold homes on the market fell 5.2 percent, marking the largest single-month decline since November 1963. Year over year, however, new-home sales were down 35.3 percent and the median new-home price slipped 6.3 percent to $230,700.

Nonetheless, some economists find the latest numbers reassuring.

“We're hopefully getting in the vicinity of a bottom,'' says David Resler, chief U.S. economist at Nomura Securities International Inc. in New York.

“The biggest declines, they’re all behind us now,” says Nigel Gault, chief domestic economist at Global Insight, a research firm.

Sales of new homes slipped in Midwestern and Southern states, according to the Commerce Department report, but rose in the Northeast and West. The median price of a new home in July was $230,700, down 6.3 percent from a year ago. Sales of new homes remained 35.3 percent below their level in July 2007.

Source: Bloomberg, Shobhana Chandra (08/26/2008)

Home Buyers Acting on Lower Prices

Home Buyers Acting On Lower Prices

Existing-home sales rose from the first quarter in 13 states, largely from buyers responding to discounted home prices, according to the latest quarterly survey by the NATIONAL ASSOCIATION OF REALTORS®. Nearly one-quarter of metropolitan areas showed rising home prices in the second quarter from a year ago, with greatly mixed conditions continuing around the country.In the second quarter, 35 out of 150 metropolitan statistical areas 1 showed gains in median existing single-family home prices from the second quarter of last year, while 115 had price declines. NAR’s track of metro area home prices dates back to 1979.NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said foreclosures are distorting the price data. “In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values,” Gaylord said. “Many buyers with long-term expectations are getting exceptional value in the current market. Once the inventory is drawn down, price pressure will return because the costs of construction are rising – today’s buyers are very well positioned to build wealth over time.”A separate recent study by the National Bureau of Economic Research, “Housing Supply and Housing Bubbles,” shows construction costs in 2007 were higher than home prices in 33 out of 79 metro areas studied.Because foreclosures and short sales are accounting for about one-third of transactions, there is a downward pull to the national median price. In the second quarter, the median existing single-family home price was $206,500, down 7.6 percent from the second quarter of 2007 when it was $223,500. The median price is where half of the homes sold for more and half sold for less.Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate2 of 4.91 million units in the second quarter, down 0.8 percent from 4.95 million units in the first quarter, and were 16.3 percent below a 5.87 million-unit pace in the second quarter of 2007.According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 6.09 percent in the second quarter from 5.88 percent in the first quarter; the rate was 6.37 percent in the second quarter of 2007. Lawrence Yun, NAR chief economist, said a clear cause-and-effect response has developed in the housing market. “The biggest home-sales gains over the previous quarter have been in some of the markets with the steepest and fastest price drops,” Yun said. Compared with the first quarter, existing-home sales increased 25.8 percent in California, 25.0 percent in Nevada, 20.5 percent in Arizona and 10.1 percent in Florida. “Buyers in these areas are responding to deeply discounted home prices.” The largest sales gain during the second quarter was in Idaho, up 51.7 percent; Virginia sales rose 10.5 percent.The steepest declines in single-family home prices in the second quarter were in the Sacramento-Arden-Arcade-Roseville area of California, where the median price of $229,500 dropped 35.6 percent from a year ago, followed by Cape Coral-Fort Myers, Fla., at $178,100, down 33.1 percent from the second quarter of 2007, and Riverside-San Bernardino-Ontario, Calif., where it dropped 32.7 percent to $265,200. “Each of these areas has seen a strong buyer response in recent months to the big cuts in home prices,” Yun said.Sharp price declines, in excess of 20 percent, also were reported in the Los Angeles-Long Beach-Santa Ana area; the Anaheim-Santa Ana-Irvine, Calif., area; Las Vegas-Paradise; and Phoenix-Mesa-Scottsdale.“Areas with affordable housing and healthy local economies continue to see price growth,” Yun said. In the second quarter, the largest single-family home price increase was in the Yakima, Wash., area, where the median price of $162,300 rose 8.9 percent from a year ago. Next was the Binghamton, N.Y., area, at $120,900, up 8.7 percent from the second quarter of 2007, followed by the Amarillo, Texas, area, where the second-quarter median price increased 7.2 percent to $124,600. Yun said home price conditions reflect comparisons from 12 months ago. “Prices having fallen sharply and quickly in very distressed markets, but most or all of the price declines may have already occurred in these areas since buyers have now returned to those markets,” he said. “Furthermore, the momentum of buying is likely to continue in light of the housing stimulus package that was recently enacted. About 2.5 million first-time buyers are expected to take advantage of the $7,500 tax credit between now and the middle of next year.”Median second-quarter metro area single-family home prices ranged from a very affordable $71,700 in the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, to nearly 11 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $755,000. The second most expensive area was San Francisco-Oakland-Fremont, at $684,900, followed by Honolulu at $636,000. Other affordable markets include Elmira, N.Y., at $76,400, and the Saginaw-Saginaw Township North area of Michigan with a second-quarter median price of $80,300. In the condo sector, metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $220,000 in the second quarter, down 3.0 percent from $226,900 in the second quarter of 2007. Seventeen metros showed annual increases in the median condo price and 37 areas had price declines.The strongest condo price increases were in the Syracuse, N.Y., area, where the second quarter price of $144,900 rose 17.8 percent from a year earlier, followed by the New Orleans-Metairie-Kenner area of Louisiana, at $192,100, up 15.9 percent, and the Houston-Baytown-Sugar Land area of Texas, where the median condo price of $141,100 rose 9.9 percent from the second quarter of 2007. Areas where condo prices declined mirrored the pattern seen with single-family homes.Metro area median existing-condo prices in the second quarter ranged from $107,500 in the Wichita, Kan., area to $523,500 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was Honolulu at $330,000, followed by Los Angeles-Long Beach-Santa Ana at $327,800. Other affordable condo markets include Greensboro-High Point, N.C., at $109,600 in the second quarter, and the Indianapolis area at $113,500. Regionally, the median existing single-family home price in the Northeast fell 9.6 percent to $269,000 in the second quarter from the same period in 2007. After Binghamton, the strongest price increase in the Northeast was in Elmira, N.Y., up 6.6 percent from the second quarter of 2007, followed by Buffalo-Niagara Falls, N.Y., with a median price of $108,200, up 4.7 percent. The median existing single-family home price in the Midwest declined 0.9 percent to $161,500 in the second quarter from the same period in 2007. The strongest metro price increases in the Midwest were in the Decatur, Ill., area, where the median price of $94,200 was 6.0 percent higher than a year ago, and Des Moines, Iowa, at $156,600, also up 6.0 percent, followed by Peoria, Ill., at $124,800, up 3.7 percent from the second quarter of 2007. In the South, the median existing single-family home price was $177,000 in the second quarter, down 4.1 percent from a year earlier. After Amarillo, the strongest price increase in the South was in the Charleston, W.V., area, at $136,600, up 7.1 percent from a year ago, followed by Corpus Christi, Texas, with a 6.2 percent gain to $144,400, and Greenville, S.C., at $160,300, up 5.1 percent.In the West, the median existing single-family home price was $290,600 in the second quarter, which is 17.4 percent below a year ago. After Yakima, the strongest metro price increase in the West was in the Salt Lake City area, at $234,200, up 0.5 percent from a year ago; all other metro areas reported for the West were down from the second quarter of 2007.Source: NAR

Gas Prices Force Buyers to Rethink 'Burbs

Gas Prices Force Buyers to Rethink 'Burbs

High gas prices are affecting American workers' attitudes toward commuting and are prodding many to trade in their large homes in the exurbs for smaller, more urban properties.

Buying a 6,000-square-foot home with a large yard and a sport-utility vehicle to boot made sense when gas and property prices were low, economists say, but gasoline is now cost-prohibitive for many.

If the federal government lifts the heavy gas subsidies that encourage suburban growth, many Europeans pay $8 a gallon for gas, suburban residents will abandon their properties en masse and move in closer to urban transit stations.

"What were pluses of that lifestyle are now liabilities: a big SUV, a big home to heat, the energy needed to mow the lawn," says CEO Tom Darden of the Raleigh-based real estate conversion group Cherokee Investment Partners.

The firm takes properties close to transit centers in urban areas and develops them into housing.

Properties in the Washington, D.C.-metro area, Montreal, and Denver are thriving, says Darden, while property values in far-removed exurbs like Loudoun County, Va., and California's Central Valley are plummeting.

Source: The Washington Post, Eric M. Weiss (08/05/08)

More Unmarried Couples Buying Homes

More Unmarried Couples Buying Homes

Unmarried couples made up 7 percent of home buyers last year, according to the NATIONAL ASSOCIATION OF REALTORS®, making up the second-fastest growing buyer segment.

Such arrangements make sense in that there are two people contributing to the down payment and monthly expenses, and both parties can take advantage of the tax benefits of homeownership.

However, there are numerous factors that an unmarried couple must consider before finalizing the purchase, such as a plan in case one owner dies or wants to sell.

Experts recommend that each buyer have a will stating that their share of the property goes to the surviving owner upon his or her death, but they also should consider including joint tenancy with the right of survivorship in the deed.

They also must understand that obtaining a mortgage requires full financial disclosure, meaning that their past credit histories will be out in the open. Moreover, buyers must understand that in the event of a breakup, the mortgage must be refinanced for it to be removed from one's credit report.

Source: Atlanta Journal-Constitution, C.W. Cameron (08/03/08)

Market Perceptions, Realities Not in Sync

Market Perceptions, Realities Not in Sync

Home owners are quite aware of the slow housing market, but most of them don’t think the trend is affecting their property, according to recent survey of 1,361 home owners.

Harris Interactive conducted the Homeowner Confidence Survey on behalf of real estate Web site Zillow. Results show that nearly two out of three (62 percent) home owners think their home value has increased or remained the same in the past year.

However, 77 percent of U.S. homes lost value in the past 12 months, according to preliminary analysis of Zillow's Q2 Real Estate Market Reports, due to be released August 12. Only 19 percent of homes increased in value, and 5 percent remained the same.

Another interesting finding from the survey: Home owner’s optimism about real estate prices doesn't extend to neighboring homes, as 42 percent expect values in their local market to drop and 58 percent think values will increase or remain the same.

The survey underscores a wide gap between home owners' inflated perception of their home values and the market reality. To monitor this perception-reality gap over time, Zillow has created the Home Value Misperception Index, which is the difference between the adjusted percentage of home owners who believe their home value increased over the past year and the adjusted percentage of homes that have increased in value.

Nationwide, the second quarter Home Value Misperception Index is 32, reflecting this broad gap. Those in the West, which has the highest proportion of homes (88%) that declined in value during the quarter, seem to have the best grasp on reality with a Misperception Index of 23, while those in the South have the widest gap at 36.

“We attribute this gap to a combination of inattention and a fair bit of denial that causes people to believe their home is insulated from the woes of the market that affect others, but not them," said Dr. Stan Humphries, Zillow vice president of data and analytics.

Source: Zillow