Month: July 2010

Supply of Homes Set to Grow

The Wall Street Journal

By ROBBIE WHELAN

Sales of new homes are near 47-year lows, yet the supply of new and existing homes is expected to grow in the months ahead as construction ramps up and a wave of foreclosed homes hits the market.

In June, new-home sales were running at a seasonally adjusted annual rate of 330,000 units, the Commerce Department said Monday. While that was up 23.6% from the all-time low of 267,000 in May, the June figures were the second lowest on record.

“What we’re really seeing here is that new-home sales are at what I’d call rock bottom,” said Steve Blitz, an economist at Majestic Research in New York. “The last time we were running these kinds of numbers was the 1982-1983 recession, when we had 100 million less people.”

LPS Applied Analytics, a firm that tracks mortgage data, said Monday that there were 4.56 million loans in default or in some stage of foreclosure in June, down slightly from May. But the number of new foreclosures initiated on properties backed by Fannie Mae and Freddie Mac increased sharply, rising 21% in June from May.

The rise in foreclosures on Fannie and Freddie properties reflects the failure of many troubled borrowers to receive permanent loan modifications plans, analysts said. Having exhausted all options to rescue their homes, many troubled borrowers may now be giving up.

“Looking at the numbers you’re seeing about this pickup in foreclosure starts, it’s hard to see how it’s not going to translate into elevated levels of [properties taken over by banks] down the road,” said Herb Blecher, an analyst at LPS.

Home builders, which began buying up land lots late last year in anticipation of an economic and housing rebound, are stuck with thousands of acres that are prone to lose value as the market struggles. Many will build homes on the land, rather than write off its value and wait for the market to improve.

“Builders are willing to pay a premium to not have that risk on their hands. They’re still facing a tremendous amount of stress,” said Brad Hunter, chief economist at Metrostudy, a housing-market research firm based in Houston. “They’re discounting the homes, they’re making very small profit margins, but they’re building homes. They’re very interested in securing market share.”

Several former bubble markets are seeing the biggest increase in home construction. According to Metrostudy, new-home starts in the second quarter show signs of rising 68.1% in South Florida, 83.7% in Naples/Ft. Myers, 65.1% in Las Vegas and 59.7% in Denver from the same period in 2009.

Other indicators also point to builders preparing to increase home construction, despite lagging sales. The number of finished vacant lots, or parcels of land that have been developed and readied for building, stands at about 1.2 million nationwide, according to Metrostudy, or just 5% below the peak in late 2008.

Most metro areas are flush with vacant homes as well: Metrostudy found that of the 48 metro areas the firm covers, only four—northern Virginia, San Antonio, Houston and Baltimore—have what is considered a “balanced” inventory of unsold homes, or about three months’ supply or less.

Coastal Southern California, which includes many of the cities near Los Angeles, has an ample supply of builder-ready land—about two years’ worth—owned by banks, developers, investors, the government and the builders themselves, which are starting construction in earnest.

Irvine Co., a large land developer and master planner in the coastal region, said it presold 570 homes in the northern portion of its Irvine Ranch project in the first six months of the year, and the $300 million construction will begin soon. The company also has plans to start 700 to 800 additional homes in the coming months, using builders both public and private, including KB Home Inc., TRI Pointe Homes Inc., Van Daele Homes and Brookfield Homes.

“We’re doubling down,” said Dan Young, who heads Irvine Co.’s community-development and home-building division. “While the national home builder is probably still right to say things are still weak, and the mass market is not back, we are seeing improvements in local markets.”

But as inventories grow, it could put further downward pressure on home prices. The median price of a new single-family home has been falling steadily since its 2007 peak of $247,000. Monday’s numbers put the median price in June at $213,400.

Credit Suisse analyst Dan Oppenheim wrote in a note Monday that sales are probably worse than the Commerce Department’s initial report and predicted further declines in home prices, based on continued weak demand.

“The low level of activity [even with the reported increase] is well below desired absorption levels of builders and will lead to additional pressure on home prices,” he wrote.

Home prices tick up 4.6% in May

It was the second straight monthly increase, according to the Standard & Poor’s/Case-Shiller index of 20 U.S. cities, but experts warn it is not likely to last. Los Angeles, San Diego and San Francisco are among the gainers.

By Alejandro Lazo, Los Angeles Times

July 27, 2010

Home prices in 20 major U.S. cities gained in May, according to data released Tuesday, boosted by the effects of federal tax credits that have now expired.

Prices of previously owned single-family homes rose 4.6% in May compared with May 2009, according to the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas, a closely watched index of home prices. The 20-city index was also up 1.3% from April.

Experts warned that the jump in prices is not likely to last given that what was driving much of the market in the spring were tax credits offering up to $8,000 for certain buyers. They expired April 30. Because the index combines data from three months’ worth of sales, including May, it probably captured the run-up in homebuyer demand.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level.”

Prices in California cities continued to appreciate on a month-over-month basis, the non-seasonally adjusted index shows, with Los Angeles up 1.7%, San Diego up 1.1% and San Francisco up 1.7%.

Other cities that gained in May included Atlanta, 2%; Boston, 1.6% and Dallas, 1.5%. Las Vegas fell 0.5%.

Adjusted for seasonal variations, the 20-city Case-Shiller index was up 0.5%. But Standard & Poor’s has warned that the index’s adjusted version is no longer a reliable gauge of prices because of distortions caused by the economic crisis.

U.S. home sales drop 5% in June

July 22, 2010 LA Times Alejandro Lazo

Sales of previously owned homes in the U.S. fell 5.1% in June, a national trade group said Thursday.

Although that’s a drop from the prior month, the seasonally adjusted annual rate of 5.37 million units was a 9.8% increase from June 2009.

Many economists are expecting sales to wane in coming months after the expiration of a federal tax credit of up to $8,000 expired April 30. Buyers who qualified for the credit still have until Sept. 30 to close their deals, and that will likely affect the data as sales are counted when deals close.

“Broadly speaking, sales closed after the home-buyer tax credit will be significantly lower compared to the credit-induced spring surge,” said Lawrence Yun, chief economist for National Assn. of Realtors. “Only when jobs are created at a sufficient pace will home sales return to sustainable, healthy levels.”

A total housing inventory of 3.99 million previously owned homes remained available for sale at the end of June, a 2.5% increase from the prior month. That represents an 8.9-month supply at the current sales pace. 

The national median home price for all housing types was $183,700 in June, a 1% increase from June 2009.

Foreclosures fall 5%

CNNMoney.com.  By Les Christie  July 15 2010

 NEW YORK (CNNMoney.com) — The foreclosure plague seems to have reached its peak and started to fade, but the recovery is still fragile.

The number of foreclosure filings of all types — including notices of delinquency, auction notices and repossessions — fell during the first six months of 2010, according to RealtyTrac, the online marketer of foreclosed properties.

There were 1,654,634 properties with foreclosure filings, a 5% decline compared with the previous six months. That equates to 1 out of every 78 homes being at risk.

Unfortunately, the pace of bank repossessions quickened, with nearly 270,000 homes lost to foreclosure during April, May and June, a 5% increase over the three winter months.

James Saccacio, CEO of RealtyTrac, called the report a “tale of two trends.”

He pointed out that the filings data showed improvement because fewer properties were entering the foreclosure process. Part of that is because lenders are now more committed to modifying defaulting mortgages or allowing homeowners to sell their homes for less than they owe.

At the same time, lenders have cleared many properties out of the foreclosure pipeline, finalizing repossession proceedings rather than allowing homes to sit in limbo.

However, there is still much inventory to move through the system and experts aren’t sure how bad it will be.

“While the foreclosure problem is being managed on the surface,” Saccacio said, “a massive number of distressed properties and underwater loans continue to sit just below the surface, threatening the fragile stability of the housing market.”

Hardest hit states

As they have for many months now, the “sand states” led the nation in foreclosures during the first half of the year. One in 17 Nevada households, or 64,429, received a filing. That is the highest rate of any state.

The number of California homes with filings came to more than 340,000, the highest total of any state.

Florida had more than 277,000 filings, or 1 for every 32 households; Arizona had more than 91,000, 1 in 30 homes.

Lenders repossessed 45,000 Calif. homes during the three months ended June 30, more than in any other state. Nevada, with a much smaller population, had nearly 11,000 repossessions, about twice the rate of the Golden State.

Southland home sales edge up, prices level off

July 13, 2010 www.dqnews.com

La Jolla, CA—Southern California’s housing market continued its slow crawl toward normalcy in June as sales volume rose and the median price slipped back a notch from May, but remained 13 percent higher than a year ago. Red-hot, fire-sale deals continued to give way to mere bargains in the lower- cost inland markets where first-time buyers and investors have competed fiercely, a real estate information service reported.

A total of 23,871 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 7.2 percent from 22,270 in May, and up 2.6 percent from 23,262 for June 2009, according to MDA DataQuick of San Diego.

The sales count was the highest since July last year when 24,104 homes were sold. It was the strongest month of June since 2006 when 31,602 homes sold. The average June since 1988 has had 28,086 sales.

“The market was wildly out of kilter a year ago, now it’s just somewhat out of kilter. We’re still seeing lots of bargain hunting, and we’re not seeing much discretionary buying. The single-biggest issue is still mortgage financing. Rates may be at record lows, but that doesn’t mean much if the lender won’t qualify you,” said John Walsh, MDA DataQuick president.

“Still, more money was spent last month buying homes in Southern California than in the past two years, and more money was loaned. The tax credits had something to do with that, though it’s not clear exactly how much. With the impact of the credits fading fast, the next few months will tell us a lot.”

The median price paid for a Southland home was $300,000 last month. That was down 1.6 percent from $305,000 in May, and up 13.2 percent from $265,000 for June 2009. The low point of the current cycle was $247,000 in April 2009, the high point was $505,000 in mid 2007. The median’s peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.

Foreclosure resales accounted for 33.0 percent of the resale market last month, down from 33.9 percent in May, and down from 45.3 percent a year ago. The all-time high was February 2009 at 56.7 percent, DataQuick reported.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 39.0 percent of all mortgages used to purchase homes in June.

Last month 20.8 percent of all sales were for $500,000 or more, compared with 22.2 percent in May and 19.3 percent a year ago. Zip codes in the top one-third of the Southland housing market, based on historical prices, accounted for 29.6 percent of existing single-family house sales last month, down from 31.0 percent in May but up from 27.8 percent a year ago. Over the last decade those high-end areas have contributed a monthly average of 33.3 percent of regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.

High-end sales would be stronger, and the overall market recovery more robust, if adjustable-rate mortgages (ARMs) and “jumbo” loans were more available. Both have become much more difficult to obtain since the August 2007 credit crisis.

While 43.9 percent of all Southland purchase mortgages since 2000 have been ARMs, it was 6.6 percent last month, up from 6.5 percent in May and up from 2.7 percent in June last year.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.3 percent of last month’s purchase lending, up from 17.2 percent in May and from 14.9 percent in June 2009. Before the credit crisis, jumbos accounted for 40 percent of the market.

Absentee buyers – mostly investors and some second-home purchasers – bought 19.7 percent of the homes sold in June, paying a median of $220,000. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 23.5 percent of June sales, paying a median $213,000. In February this year cash sales peaked at 30.1 percent. The 22-year monthly average for Southland homes purchased with cash is 14.1 percent.

The “flipping” of homes has also trended higher over the past year. Last month the percentage of Southland homes flipped – bought and re-sold – within a six-month period was 3.4 percent, while a year ago it was 1.9 percent. Last month it varied from as little as 3.0 percent in Orange and San Diego counties to as much as 3.8 percent in Los Angeles County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,251 last month, down from $1,293 for May, and up from $1,193 for June a year ago. Adjusted for inflation, current payments are 44.3 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 54.4 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above- average, MDA DataQuick reported.

http://www.dqnews.com/Articles/2010/News/California/Southern-CA/RRSCA100713.aspx

http://www.dqnews.com/Charts/Monthly-Charts/SDUT-Charts/ZIPSDUT.aspx

Southland median sale price back over $300K; sales at 4-year high

June 15, 2010, DQNews.com

La Jolla, CA—Southern California home sales rose last month in all but the lowest price categories as buyers took advantage of tax credits and low mortgage rates. The median price paid topped $300,000 for the first time in 20 months, largely because the ultra bargains have been drying up in the low-cost inland areas while sales have increased in the pricier coastal neighborhoods, a real estate information service reported.

A total of 22,270 new and resale houses and condos closed escrow in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 9.7 percent from 20,299 in April, and up 7.2 percent from 20,775 in May 2009, according to MDA DataQuick of San Diego.

May sales were the highest for that month since May 2006, but they still fell 15.0 percent short of the average number sold in May since 1988, when DataQuick’s statistics begin. The 9.7 percent increase in sales between April and May compares with an average change of 6 percent since 1988.

The combination of tax incentives and low mortgage rates helped stoke sales in mid- to high-end areas, where distress has increased over the last year and sellers have become more motivated and realistic.

Last month 21.6 percent of all sales were for $500,000 or more, compared with 19.3 percent in April and 17.4 percent a year ago. Zip codes in the top one-third of the Southland housing market, based on historical prices, accounted for 30.9 percent of existing single-family house sales last month, up from 28.6 percent in April and 25.3 percent a year ago. Over the past decade, those high-end areas have contributed a monthly average of 34.1 percent of total regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.

Meantime, sales have fallen in many affordable inland communities. In May, zip codes in the bottom one-third of the market, based on their historical prices, saw resales of single-family houses drop 3.9 percent from April and drop 16.2 percent from a year earlier. Part of the decline reflects the dwindling foreclosure inventory, which had been the major draw for first-time buyers and investors. In the upper one-third of the market by price, May resales climbed 10.8 percent from April and rose 21.7 percent from last year.

This shift toward more high-end sales helped the Southland median jump $20,000 between April and May and $56,000 between this May and May 2009.

The median paid for a Southland home rose to $305,000 last month, up 7.0 percent from $285,000 in April, and up 22.5 percent from $249,000 in May 2009. The May 2009 median was just $2,000 higher than the median’s post-housing-boom low of $247,000 in April 2009.

Last month was the sixth in a row in which the median rose on a year-over-year basis. However, the May median was still 39.6 percent below the $505,000 peak, reached multiple times in spring and summer 2007.

The median’s steep fall from its mid-2007 peak to its spring 2009 trough was the result of two factors: a widespread decline in home values, and a huge run-up in sales of lower-cost inland homes, especially foreclosures, at the same time high-end sales plummeted.

Over the past year, however, that situation has been reversing itself.

“Last month’s jump in the regional median sale price is the flipside of what we saw a year ago, when low-cost inland foreclosures dominated and sales in the costlier coastal towns struggled for a pulse. Today the bargains on foreclosures are fewer and farther between, and the high-end is approaching a normal sales rate,” said John Walsh, MDA DataQuick president.

“The important thing to remember, though, is that what we saw in May was partly driven by government stimulus,” he continued. “In the second half of the year the market will have to stand on its own again, barring new forms of government involvement. Prices will be tested if there’s any sudden move by lenders to release a flood of distressed properties.”

Foreclosure resales accounted for 33.9 percent of the resale market last month, down from 36.4 percent in April and 49.8 percent a year earlier. The all-time high for foreclosure resales – homes that had been foreclosed on in the prior 12 months – was 56.7 percent in February 2009. Foreclosure resales have waned over the last year as lenders have channeled more distress into loan modifications and short sales.

On the lending front, May saw modest gains in the use of “jumbo” and adjustable-rate mortgages (ARMs). Historically both helped drive high-end sales, but they became far more difficult to obtain after the August 2007 credit crunch.

In May 6.6 percent of all home purchase loans were ARMs, up from 5.8 percent in April and up from 1.9 percent in May last year. However, the monthly ARM average since 2000 is 39.2 percent.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 17.2 percent of last month’s purchase lending, up from 16.1 percent in April and 12.9 percent in May 2009. But before the credit crisis, such jumbos accounted for 40 percent of the market.

While financing restraints have hampered the market’s high end, the federal government has kept the spigot wide open for loans used to buy low- to mid-priced abodes. Government-insured FHA loans, popular among first-time buyers, accounted for 37.1 percent of all mortgages used to purchase homes in May, down from 38.4 percent in April and 40.3 percent in May 2009.

Absentee buyers – mostly investors and some second-home purchasers – bought 19.4 percent of the homes sold in May, paying a median $220,000. That compares with 22.9 percent absentee buyers in April who paid a median $205,000, and 19.6 percent absentee buyers paying a median $170,000 in May 2009.

Buyers who appear to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 24.5 percent of May sales, paying a median $220,000. In April cash sales were 28.6 percent and a year ago it was 26.1 percent. The 23-year monthly average for Southland homes purchased with cash is 14.1 percent.

The “flipping” of homes has trended higher over the past year. Last month 3.4 percent of the Southland homes that sold had been flipped – bought and re-sold within a six-month period. That’s the same flipping rate as in April, but it’s up from 1.5 percent a year ago. Last month flipping varied from as little as 2.8 percent of sales in Orange and Riverside counties to as much as 4.4 percent in Ventura County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,293 last month, up from $1,238 in April, and up from $1,052 in May a year ago. Adjusted for inflation, that typical payment was 42.3 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 52.7 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average, MDA DataQuick reported.

Rush on to meet tax credit deadline

Lasner on Real Estate Blog, posted by Jeff Collins

Local escrow offices are rushing to meet today’s deadline to close home-buying deals in time to meet the federal tax credit deadline.

“It’s very busy,” said Elaine Janks, vice president-sales for Chicago Title’s Irvine office, which handles escrows for much of Southern California. “We’re getting a lot of incoming wires and trying to meet the different county recorder deadlines and get loose ends tied together.”

Janks estimated that her office has had a 25% increase in business over its usual month-end workload.

Homebuyers had until April 30 to start a transaction that qualified for up to $8,000 off their federal income taxes. But those deals had to close escrow by today to qualify for the tax credit.

Californians had an added incentive to close escrow by today. A pair of state home-buyer tax credits — one for first-time buyers, another for new-home buyers — allow home-buyers to get up to $18,000 in federal and state tax credits.

As of June 22, more than 17,800 first-time home-buyers had applied for state tax credits, accounting for more than 90% of the $100 million available in the first-time buyer program, the Franchise Tax Board has announced.

In addition, more than 6,400 buyers applied for new-home buyer credits, accounting for more than 40% of another $100 million in credits.

“We have several transactions that we’re trying to close today,” said Debi Peters, certified senior escrow officer for Tiempo Escrow II in Laguna Niguel.

Peters noted that some lenders selling foreclosed homes are letting deals close even though some bills are missing. Normally, they insist on knowing how much their total costs are before closing escrow.

“They were willing to work with the buyer,” Peters said. “They were willing to bend their own rules to get it closed.”

Peters said that in her office, opening new transactions have taken a back seat to getting existing deals done on time.

“Everyone’s concentrating on closings,” she said.

http://lansner.ocregister.com/2010/06/30/rush-on-to-meet-tax-credit-deadline/71093/