Posts Tagged “Conditions”
Sales of U.S. previously owned homes probably dropped in January from a seven-month high, showing any recovery will take time to develop, economists said before a report today.
Purchases decreased 1.1 percent from December to a 5.22 million annual rate, according to the median forecast of 73 economists surveyed by Bloomberg News. A 13-year-low 4.91 million existing houses sold in 2010.
Home demand has gained ground since July 2010, when sales reached the lowest level in a decade of records, as foreclosure- induced price cuts and historically low borrowing costs made buying more affordable. At the same time, 9 percent unemployment limits the number of buyers able to take advantage of discounts and ensures a mounting supply of distressed properties.
“The underlying trend may be starting to improve, but the level of sales is still low,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. Demand may see a “temporary ceiling” as mortgage rates climb and the labor market is slow to improve, he said.
The National Association of Realtors’ data is due at 10 a.m. in Washington. Economists’ estimates ranged from 4.86 million to 5.5 million after December’s 5.28 million pace. The group today will also issue revisions covering data for the past three years.
Housing, the industry that triggered the recent recession, is struggling to gain traction after the lapse of a government homebuyers’ tax credit worth up to $8,000 caused existing sales to plunge to a 3.84 million pace in July.
Fed’s View
Federal Reserve policy makers noted in their Jan. 26 statement that housing remained “depressed” and falling home values continued to stymie the consumer spending that accounts for about 70 percent of the world’s largest economy.
Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has gained 17 percent since June 30, compared with a 28 percent increase for the S&P 500 Index.
The S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent in December from a year earlier, the biggest 12- month decrease since December 2009, the group said yesterday. Prices were down 31 percent down from their peak in July 2006, near the 33 percent trough reached in April 2009.
Home values were “bouncing along the bottom, with a slightly downward trend,” Karl Case, a co-founder of the index, said on a conference call yesterday.
Industry Concern
Industry projections reinforce the concern about housing. The number of homes receiving a foreclosure notice will climb about 20 percent in 2011, reaching a peak for the housing crisis, RealtyTrac Inc., an Irvine, California-based data seller, said last month.
At the end of last year, about 15.7 million mortgaged single-family homes, or 27 percent, were worth less than the amount of loans outstanding, according to Zillow Inc., a Seattle-based real estate information company. It was the highest share in data going back to the first quarter of 2009.
Rising borrowing costs represent a new hurdle. The average rate on 30-year fixed mortgages exceeded 5 percent for a second period in the week ended Feb. 11, the first time that’s happened since April, the Mortgage Bankers Association said last week. Rates have been rising from a record low of 4.21 percent reached in October.
Homebuilders are still posting losses. D.R. Horton Inc., the second-largest U.S. homebuilder by stock-market value, on Jan. 27 reported a fiscal first-quarter loss that was wider than analysts expected.
“I think 2011 will be a marginal, weak year in the homebuilding industry,” D.R. Horton Chief Executive Officer Donald Tomnitz said during a conference call the same day. “Given the weak macroeconomic conditions, high levels of existing homes for sale and tight mortgage availability, we remain cautious and realistic in our expectations.”
Source: www.businessweek.com
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Market Update
 The housing market continues its slow recovery without the aid of the now expired tax credit. Sales are slower but growing, and prices remain on par with last year’s levels. Interest rates also hit a new historic low, a major factor in helping keep mortgage payments low, which is expected to spur sales.
The economy shone a bit brighter in September. It grew faster during the second quarter than expected, and companies continued to hire. Experts believe there is now less risk of a double-dip recession. Now, the Federal Reserve Board’s challenge is not if the economy will grow but how fast.
Experts anticipate both the economy and the housing market will continue their path on the way to a complete recovery. This march back up provides excellent opportunities: an ample selection of homes, affordable prices, and historically low interest rates.
Home sales began to rebound in August. This increase follows a large drop caused by the expiration of the Federal tax credit in July. Sales are expected to slowly rebound as the market finds its footing without leaning on the government for support. First-time buyers fell from 38% to 31% in August from July. Over the same time period, investors rose from 19% to 21%,
Overall home prices fell slightly in August compared to July, but major markets appear to be bucking trend as the Case-Shiller Index shows an increase of 3.2%.
Distressed properties accounted for a slightly larger proportion of sales in August compared to July. The discount in distressed properties helps explain the slight decline in August prices.
Total inventory came back below 4 million to 3.98 million in August, representing 11.6 months
of inventory. While still at a relatively high level, months of inventory dropped by nearly a month in August from the 12.5 month’s supply in July.
Housing remains highly affordable, and prospective home buyers stand to benefit from the lowest mortgage rates in decades, as well as advantageous home prices. The ratio now stands at 14.9%, growing closer to the record of 13.6%.
Source: National Association of Realtors
Interest Rates
Mortgage rates once again set new record lows in early September and remained below 4.4% throughout the month. As economic activity gains momentum, rates will rise to keep inflation at an acceptable level.
Rates as of September 30 .
This Month’s Video
Topics For Home Owners, Buyers & Sellers
Bonus For Buyers
For Owner Occupants that Buy Fannie Mae Foreclosures
Like a car dealership at the end of its model year, Fannie Mae is offering special incentives exclusively for owner occupants that purchase property from its sizable inventory of foreclosures, also known as HomePath properties.
Owner occupants that purchase a Fannie Mae HomePath property by December 31 will receive up to 3.5% toward closing costs and a home warranty. These incentives for foreclosures are unheard of – banks typically sell foreclosures “as-is” without incentives, warranties, or repairs. This could help buyers to view a HomePath property more like a traditional sale, not a foreclosure, during their search process.
Owners and investors can purchase HomePath properties for 3% down and no mortgage insurance. For homes that are not in tip-top shape, Fannie Mae also offers the HomePath Renovation financing, which works similarly to FHA’s 203(k) mortgage by allowing the cost of light renovation to be included in the mortgage. Furthermore, owner occupants get a 15-day “first dibs” on HomePath properties through the First Look program.
Fannie Mae is also offering agents an additional $1500 for representing owner occupants who purchase these properties, helping to compensate them for the extra paperwork and other potential obstacles that come along with foreclosure transactions.
Buyers should be sure to take a second look at Fannie Mae’s HomePath properties before settling on “the one.” It could mean not just a great deal but an excellent one.
To see Fannie Mae’s HomePath homes, check out HomePath.com
 Options for Investors
Not only is it the perfect time to buy a home, but it’s also an excellent time to purchase an investment property. If you already own and are not interested in moving – or you can’t because of the 3-year occupancy requirement to keep your home buyer tax credit – but still want to take advantage of the market, investing can be a great way to do so.
In the current lending situation, lenders often require investor buyers to have six months reserves of mortgage payments and a 25% down payment. This stipulation keeps many would-be investors out of the market.
Here are some little known tips to help investors purchase, regardless of the tighter lending environment:
- Investors can purchase a Fannie Mae HomePath investment for 3% down.
- Any investor, not just veterans, can purchase a Veterans Affairs(VA) foreclosure with VA’s Vendee Financing for 5% down.
- Investors purchasing a VA foreclosure with Vendee Financing can use 75% of anticipated rent to offset the monthly payment if the investor has experience managing rental properties.
Sources: The Wall Street Journal, Inman News, KW Research
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Brought to you by
The Helen Oliveri Team of Keller Williams Realty
www.helenoliveri.com
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Home prices gained 5.7% over the three months ending in August, according to real estate data provider Clear Capital. But analysts added price growth has slowed and will contract well into 2011.
The price gain through August is down 240 basis points from the July report, which dropped 70 bps from June. Alex Villacorta, senior statistician at Clear Capital, said prices built up a 13% cushion from its trough in 2009.
“Overall, prices look poised to continue their deceleration with a likely drop into negative territory by the end of the year,” Villacorta said.
With the drastic drop in home sales shown in July, prices will continue to soften and drop below 2009 levels next year.
Drilling down to the metropolitan statistical areas (MSAs), many of the 15 highest performing markets showed double-digit quarterly gains through August. Home prices in San Diego increased 11.2% above levels seen a year ago, but most of the improved areas were in the Midwest and South regions.
Conversely, 11 of the previously top-performing markets showed accelerating declines. New Orleans, Cleveland and Columbus had prices fall by more than 7%.
“The interesting part about all of these markets is that for the first time, the local markets are left to their own devices,” Villacorta said.
During the housing bubble, all the markets trended up with the widespread availability of credit, and when the market made its downturn in 2008, REO properties had flooded the market, dragging down prices fairly evenly, Villacorta said.
But as the national market tries to recover, the gaps between the different micro-markets will begin to widen.
“Now that we’re getting close to that point again, it’ll really start to separate which markets are healthy enough to have a sustained recovery and which ones still have a way to go,” Villacorta said. “When you’re talking national, when you look at one number that’s supposed to characterize the whole country, it’s akin to putting out one weather forecast for the entire country.”
Housingwire.com
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U.S. apartment landlords are seeing a surge in rentals as mounting foreclosures reduce home ownership and an improving job market for young adults encourages them to find their own places to live.
The number of occupied apartments increased by 215,000 in the 64 largest U.S. markets in the first half, according to MPF Research. That’s almost double the units added in all of 2009 and the most since the firm began tracking the data in 1992. The vacancy rate declined to 6.6 percent last month from 8.2 percent in December.
“Demand is pretty stunningly strong in the first half,” Greg Willett, a vice president at the Carrollton, Texas-based apartment-industry research firm, said in an interview.
Investors are betting the expanding ranks of renters will lead to earnings increases next year of about 5 percent to 10 percent or more for apartment real estate investment trusts such as Equity Residential and AvalonBay Communities Inc. UBS AG this month raised its rating on AvalonBay, Essex Property Trust Inc. and Post Properties Inc. to “neutral” from “sell.”
The change signifies a “less bearish” view on apartments, while acknowledging that “headwinds will remain,” according to the July 7 report by New York-based analysts Dustin Pizzo, Ross T. Nussbaum and Derek Bower.
“The apartment REITs have priced in the most growth within the broader REIT group and as such are most vulnerable if the economy slows and job growth does not begin to come through in a meaningful way,” they wrote.
The Bloomberg REIT Apartment Index has gained 28 percent this year, double the 14 percent advance in the broader Bloomberg REIT Index. The Standard & Poor’s Supercomposite Homebuilding Index has fallen 3.1 percent.
The economy’s recovery from the worst recession since the 1930s has revived hiring enough to stimulate demand for apartments. The growth hasn’t been enough to prevent more home foreclosures, which lift rental demand, or to lead to a sustained rebound in homebuying.
New jobs are the biggest driver of apartment occupancy. Employers began hiring again in January, adding an average of 147,000 jobs a month through June, according to the Labor Department. Employment for people 20 to 29 years old — a key group for landlords — rose in May and June on a year-over-year basis for the first time since the end of 2007.
While payroll growth has been modest compared with pre-recession levels, it may be enough to have persuaded some families sharing housing with relatives to get their own places, according to Mark Zandi, chief economist of Moody’s Analytics Inc. in West Chester, Pa.
“Given how hard it is for families to live together for very long, they moved out as soon as they got a job or even thought they could find one,” he said in an e-mail.
Finances for homeowners didn’t improve fast enough to prevent more than 1.65 million foreclosure filings in the first half, an increase of 8 percent from the same period in 2009, RealtyTrac Inc., a data company in Irvine, Calif., said July 15. A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010.
The U.S. homeownership rate fell to 66.9 percent in the second quarter, the lowest since 1999, the U.S. Census Bureau said Tuesday. The rate peaked at 69.2 percent in the fourth quarter of 2004.
“As homeownership continues to decline, people need to live somewhere,” said Henry Cisneros, who was President Bill Clinton’s housing secretary from 1993 to 1997 and is executive chairman of CityView, a real estate investment firm in Los Angeles that focuses on urban projects including apartments.
The rate of new-home sales last month was the second-lowest on record, behind May, following the expiration of a government tax credit for homebuyers, the Commerce Department reported Monday. Sales of previously owned homes fell 5.1 percent in June, the National Association of Realtors said last week.
“The rental market will be robust for the next few years,” Cisneros said.
Effective rents, or what tenants pay after concessions or breaks from landlords, increased 1.4 percent in the biggest markets in the first half, according to MPF Research. Rents may rise 4 percent to 6 percent in both 2011 and 2012, compared with a gain of about 2 percent this year, Willett said.
AvalonBay, which took a nine-month hiatus from construction in 2009, said in April it had seven communities under development and would increase rents for tenants renewing in the second quarter. It raised its forecast last month for second- quarter and 2010 earnings based on “improved operating trends.”
The Arlington, Va.-based company’s funds from operations, a widely used measure of earnings, will rise 8 percent in 2011, according to the medial estimate of 20 analysts surveyed by Bloomberg.
Equity Residential, based in Chicago, has pushed rents up by “high single digits” in all of its markets since January, Chief Executive Officer David Neithercut said in a June 11 interview. Funds from operations in 2011 also will rise 8 percent, according to a survey of 22 analysts.
Landlords won’t be able to raise rents too aggressively because unemployment remains high at 9.5 percent and declines in home prices have made it no more expensive to buy than rent in about half of larger markets around the nation, Willett said.
In Atlanta, the median home price has fallen 37 percent to $110,100 from the peak in the third quarter of 2006, according to the National Association of Realtors. Assuming a 10 percent down payment and a 30-year mortgage at 5 percent, the monthly principal and interest cost is $532. That compares with average monthly rents of $774 in the city, Willett said.
Riverstone Residential Group of Dallas, which manages 175,000 units in 30 markets around the country, reduced average concessions to about a half-month’s rent from about two months a year ago, CEO Walt Smith said. Vacancies have fallen below 5.9 percent in buildings that aren’t newly constructed, from 8.25 percent last year. Smith said he expects significant rent growth by 2012 as supply tightens with so few new units being built.
“Landlords are cautiously testing the strength of the submarket their property is in to see if the market will withstand small rent increases,” Smith said. “In most markets, they’ve been successful.”
http://finance-commerce.com/2010/07/apartment-rentals-surge-on-foreclosures-jobs/
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