Signs of life in the housing sector

Sales are picking up in some of the nation’s hardest-hit regions

Last year the Cape Coral area of Florida had the highest foreclosure rate in the country. Banks moved to seize more than 1 in 10 residential properties in the Gulf Coast community of 165,000. The reverberations are still being felt. Newly built McMansions sit vacant, dusty monuments to the great real estate boom. Smaller homes have been ransacked. Apartment buildings have been boarded up. Former owners are stripping whatever items they can from their homes before the locks get changed, says Kirsten Prizzi, a local real estate agent at AC Global Realty. "Knobs, appliances. Someone was selling windows."

But a curious thing is happening in this blighted former boomtown: Buyers are swooping in. First-time home-owners are suddenly entering bidding wars with real estate speculators from as far away as Spain and Germany. Sales in February outpaced those at the peak of the boom, with some houses getting more than 50 offers and selling above their asking price. "I look for markets that are downtrodden," says Rich Lehrer, a retiree and self-proclaimed "emerging-market investor" from Wilmington, N.C., who wants to buy several properties in the area. "I'm expecting to get better yields than I would get on my cash."

Cape Coral isn't the only bright spot in housing land. Some of the very regions that led the U.S. housing market into the abyss are beginning to show signs of life. Sales on the Gulf Coast of Florida, California's Inland Empire near Los Angeles, and the Las Vegas metropolitan area surged by more than 80 percent in February vs. the same month last year.

So what's going on? In all of these markets, banks are dumping foreclosed properties, attracting cash-rich speculators looking for cut-rate bargains. "Why wait [for a bottom] if it's the right deal?" says Brent McAlee, a 31-year-old Las Vegas resident who recently paid $140,000 for a three-bedroom home that fetched around $350,000 a few years ago. He hopes to rent it out for $1,300 a month.

What's more, first-time buyers are finally rushing in, lured not only by plunging prices but also government incentives like ultralow interest rates and hefty tax breaks. Such sweeteners are just too tasty for some to pass up, at least in markets that have already plunged by 50 percent or more.

Frenetic buying in a few depressed areas doesn't mean the national bust is over — far from it. But it does herald the start of a new phase in the boom-and-bust recovery cycle. Economists might call it equilibrium:

Prices have fallen so much in some areas that shoppers are getting interested again, improving the balance between buyers and sellers. That doesn't mean prices will surge anytime soon. But heavy buying should at least begin to put a floor under prices. "Are we at the bottom?" asks Christopher Thornberg, an economist with Beacon Economics. "We are getting close."

If Thornberg is right, one might expect other markets to begin the bottoming out process in the coming months. Just as California, Florida, and Las Vegas led the nation into the housing bust, those areas could provide the template for a national recovery. "One of the big problems we have across the nation is a lack of confidence," says Adam York, an economist with Wachovia (WFC) in Charlotte, N.C. "As these former bubble markets bounce off the bottom in terms of sales, it could give some hope to [other markets] that the declines are going to end."

Plenty of caveats are in order, because there are peculiar bear-market factors at work. The fact that inventories are falling precipitously in California — to just 6.5 months' supply from 15.3 months a year earlier — would seem to augur well. Historically, "prices respond very dramatically to inventory," says William C. Wheaton, director of research at the Massachusetts Institute of Technology's Center for Real Estate.

But inventories are falling fastest in markets where speculators and first-time buyers are driving the action. Those parties don't have to put their own homes on the market to make a deal. It remains vexingly difficult for home-owners who have bought in the past five or so years to sell one property and buy another.

On top of that, government incentives of up to $8,000 in tax credits for first-time buyers and low mortgage rates engineered by the Federal Reserve are luring shoppers who otherwise would be sitting out. If the government were to take away the punch bowl, markets that seem to be bottoming could well turn down again.

Hard-hit markets
What's more, banks have tightened their lending standards so much that only the most qualified buyers are finding it easy to get loans. Until financing loosens up, the housing market can't possibly take off.

It's best to view the brisk sales in some markets as glimmers of hope in a national market that seems likely to remain weak for a while. Sales continue to fall in many areas, especially those that didn't get hit until recently. In Charlotte, where home prices were rising until a few months ago, sales dropped 38 percent in February over the previous year. Nationally, the S&P/Case-Shiller index that tracks home prices in the top 20 metro areas was down 19 percent in January from a year earlier and 29 percent from its 2006 peak. "The market is still doing badly," cautions Robert J. Shiller, a professor of economics at Yale University and a creator of the index. But, he adds, "there's always light at the end of the tunnel."

That light could be growing brighter in Las Vegas. Home sales began to drop in Sin City before they fell in most other parts of the country. Now Vegas is deeply mired in recession. Unemployment has risen to 10.1 percent, far above the national average. More than 80 percent of the homes for sale are distressed properties, either those where the owner faces foreclosure or those already owned by a bank. Median prices have fallen from $315,000 in June 2006 to $155,603 today, roughly the same level as in 2002.

The lure: low interest rates
Those dizzying price drops are attracting the likes of Mark and Claudia McLaughlin. The couple, who work for the New York State Corrections Dept. and live in Westernville, N.Y., plan to retire in Las Vegas in six years or so. They're eager to find a place while prices are still low. In late March they went house hunting with an agent, checking out 18 homes between $75,000 and $100,000. "We figure we'll buy something now and get a good price on it," says 55-year-old Mark McLaughlin. "We'll rent it out, and it'll pay for itself." They won't need to sell their upstate New York home for years, by which time that local market might have improved.

The Garvins, too, are doubling down while keeping their current home. In 2004, hotel finance manager J.D. Garvin and his wife, Nona, a nurse, paid $202,000 for a 1,200-square-foot townhouse in Las Vegas, which would probably sell for half that today. After the birth of their first child last year, they decided they needed more space. So in late January they bought a 3,800-square-foot home for $300,000 in the suburb of Henderson, Nev.

With prices still low, the Garvins decided to find a tenant for their first home rather than sell it. The rent almost covers the monthly mortgage on their first property. Says 30-year-old J.D. Garvin: "We feel good about the fact that we're paying a little bit more than the other mortgage — and the house is three times as big."

For the Garvins, who weren't eligible for the government tax credit, record-low interest rates were a big enticement. With the rate on their 30-year fixed-rate mortgage at 4.75 percent, the payment on their $292,000 loan is around $1,600 a month. Nationally, the rate on a 30-year fixed-rate loan averages around 4.85 percent, the lowest on record.

In California, politicians are adding to the federal inducements. The legislature has passed a $10,000 tax credit available to anyone who buys a newly built home. (Existing homes don't qualify.)

The tax break lured Marisol Monroy to make the switch from renter to owner. Monroy had been sitting nervously on the fence for more than a year as friend after friend faced foreclosure in Southern California. In March the married mother of three bought a four-bedroom home in a new development in Fontana, part of the once-bustling Inland Empire. Her monthly payment, including taxes and insurance: $2,100, only $600 more than the rent on her three-bedroom apartment in Placentia. Monroy figured her kids would hate moving but says they're excited to get into their new home: "They're counting down the days on the calendar."

Real estate investors are sensing their moment, too. Speculators get a bad name during boom times for driving prices into the stratosphere. But in the depths of a bust, they're needed to help clear out inventory and stabilize prices. John Hoehl has trekked down from Vermont to scope out investment properties in Cape Coral — where some foreclosure properties are selling for just $30,000. So far, he's bid on three properties, scooping up a three-bedroom house on the water for $150,000. "At this rate we're going to see a big shortage of inventory by summer, and that will trigger prices to rise," says Paula Hellenbrand, president of the Cape Coral Association of Realtors. Local agent Marc Joseph of Foreclosure-ToursRUs.com has bought two boats to take prospects in search of waterfront properties on "foreclosure cruises."

The buying would be brisker still were it not for the banks. Financing remains a wet blanket both for first-timers and speculators. With banks toughening their lending standards, it helps for first-time buyers to come with as much cash as possible. Dean Brittingham and her partner, Nancy Rocks, put a solid 20 percent down on a $350,000, Mediterranean-style home in Santa Rosa, Calif.—and they still had problems. An investor had bought the three-bedroom house just a few months before for $187,000. The quick flip on the distressed property raised red flags for their mortgage lender, which insisted on a second appraisal. As the couple jumped through that hoop, they missed a deadline and decided to start the process all over at a different bank. The two finally closed on the property in March. "Our agent said it's a brand-new time," says Brittingham. "Everything's different."

Speculators, too, are dealing with tight financing — sometimes by looking beyond banks. During the boom, Robert Close made a tidy profit building homes that cost as much as $640,000 in the Inland Empire. Now he's focused on working with a small group of investors to buy and fix up foreclosed properties. Because many banks won't lend money for homes that need major repairs, Close pays cash — or turns to what's known as "hard money," independent financiers who charge interest rates as high as 12 percent.

But Close says he can make money even with such high interest rates — a sign that prices may be too low. He typically shells out $75,000 for each house, plus $20,000 for repairs. He then rents it out for up to $1,500 a month, producing double-digit returns on his investment. In the past seven months Close has picked up 34 properties, taking care to avoid the homes he built. "I guess I'm superstitious," he says. "I don't want to press my luck." That kind of cautious speculation is a far cry from the go-go days. But after a three-year bust, it's a sign that some markets might be moving in the right direction.

By Christopher Palmeri, Mara Der Hovanesian and Prashant Gopal

updated 7:43 a.m. ET, Tues., April 7, 2009

http://www.msnbc.msn.com/id/30032506//

Beach to Bay Real Estate Center is a full service real estate brokerage servicing buyers, sellers and renters at the Delaware beach areas. We handle all forms of real estate, including residential, commercial, and lots and land, in addition to bank owned, short sales and auctioned properties and representation; mortgage needs including refinances, new home purchases, second homes, first time homebuyer programs and reverse mortgages; maintain professional relationships with local settlement attorneys, insurance companies, contractors, and inspection companies; and are affiliated with a preservation and restoration company. Beach to Bay services all of Sussex County, and southern Kent County, with a strong focus on the beach resort areas of Rehoboth Beach (19971), Lewes (19958), Bethany Beach (19930), Dewey Beach (19971), Milton (19968), Millsboro (19966) and more.

Existing-Home Sales Soften on Economic Volatility

WASHINGTON, November 24, 2008

Existing-home sales declined on the heels of a strong gain in September as uncertainty and economic concerns increased in October, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 3.1 percent to a seasonally adjusted annual rate1 of 4.98 million units in October from a downwardly revised pace of 5.14 million in September, and are 1.6 percent below the 5.06 million-unit level in October 2007.

Lawrence Yun, NAR chief economist, said consumer hesitation is understandable. “Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.”

Total housing inventory at the end of October slipped 0.9 percent to 4.23 million existing homes available for sale, which represents a 10.2-month supply2 at the current sales pace, up from a 10.0-month supply in September.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.20 percent in October from 6.04 percent in September; the rate was 6.38 percent in October 2007. “Mortgage interest rates have been moving up and down in a historically low range, with the fixed rate down to 6.04 percent last week,” Yun noted.

Even with the overall decline, Yun identified a number of areas with solid sales gains from a year ago, including many California and Florida markets, as seen previously, as well as Boston, Minneapolis, and Denver.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the need for professional assistance is growing. “Navigating the transaction process is easier said than done without professional assistance in today’s market,” McMillan said. “Proper valuation when many homes are being sold below replacement construction costs is very challenging – buyers remain in the driver’s seat.”


The national median existing-home price3 for all housing types was $183,300 in October, down 11.3 percent from a year ago when the median was $206,700. There remains a significant downward distortion in the current price from a large number of distress sales at discounted prices; the median is where half of the homes sold for more and half sold for less.

Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007. The median existing single-family home price was $181,800 in October, down 11.2 percent from a year ago.

Existing condominium and co-op sales eased by 1.8 percent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 percent below the 625,000-unit pace a year ago. The median existing condo price4 was $193,000 in October, which is 13.0 percent below October 2007.

Regionally, existing-home sales in the Northeast slipped 1.2 percent to an annual pace of 830,000 in October, and are 9.8 percent lower than a year ago. The median price in the Northeast was $241,700, down 9.8 percent from October 2007.

Existing-home sales in the West eased by 1.6 percent to an annual rate of 1.21 million in October but are 37.5 percent higher than October 2007. The median price in the West was $231,400, down 27.0 percent from a year ago.

In the South, existing-home sales declined 3.2 percent to an annual pace of 1.84 million in October, and are 10.2 percent below a year ago. The median price in the South was $161,100, which is 5.8 percent lower than October 2007.

Existing-home sales in the Midwest fell 6.0 percent in October to a pace of 1.10 million and remain 9.1 percent below October 2007. The median price in the Midwest was $149,400, down 6.7 percent from a year ago.

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NOTE: References to performance in states or metro areas are from unpublished raw data used to analyze regional trends; please contact your local association of Realtors® for more information.

1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

2Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.

3The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

4Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for November will be released December 23, and the next Pending Home Sales Index & Forecast is scheduled for release at 10 a.m. EST December 9.

For more information visit: www.realtor.org/research/research/ehsdata

Home Prices Rise in Some Metros, Buyers More Active in Other Areas

WASHINGTON, November 18, 2008

Four out of five metropolitan areas recorded lower home prices in the third quarter from a year earlier, while existing-home sales fell in 32 states from the second quarter, according to the latest quarterly survey by the National Association of Realtors®.

In the third quarter, 28 out of 152 metropolitan statistical areas ¹ showed increases in median existing single-family home prices from the same quarter in 2007; four were unchanged and 120 metros experienced declines. NAR’s track of metro area home prices dates back to 1979.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said price comparisons in many areas are like apples and oranges. “A very large proportion of distressed home sales are taking place at discounted prices compared to more normal conditions a year ago,” McMillan said. “It’s very challenging to understand proper valuation, given the differences between distressed sales and a larger share of traditional homes in sound condition. Under these circumstances, it’s extremely important for consumers to be armed with the professional expertise Realtors offer.”

Distressed sales – foreclosures and short sales – accounted for 35 to 40 percent of transactions in the third quarter, pulling down the national median existing single-family price to $200,500, which is 9.0 percent lower than the third quarter of 2007. A year ago, when there were significantly fewer distressed transactions, the median price was $220,300. 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 5.04 million units in the third quarter, up 2.6 percent from 4.91 million units in the second quarter, but remain 7.7 percent below the 5.46 million-unit pace in the third quarter of 2007.

Lawrence Yun, NAR chief economist, said conditions continue to range widely. “A pattern of sharply higher sales in areas with large price declines is well established,” Yun said. “Affordability conditions have consistently been a major factor in driving sales. Historically during recessions, buyers have responded to incentives and it’s important for government to keep that in the forefront of stimulus decisions.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 6.32 percent in the third quarter from 6.09 percent in the second quarter; the rate was 6.55 percent in the third quarter of 2007. Last week, Freddie Mac reported the 30-year fixed fell to 6.14 percent.

The largest sales gain during the third quarter was in Arizona, up 28.3 percent from the second quarter, followed by California which rose 28.1 percent and Nevada, up 26.2 percent.

The steepest declines in single-family home prices in the third quarter were in three California markets: the Riverside-San Bernardino-Ontario area, where the median price of $227,200 dropped 39.4 percent from a year ago, followed by Sacramento-Arden-Arcade-Roseville at $212,000, down 36.8 percent from the third quarter of 2007, and San Diego-Carlsbad-San Marcos, where the price dropped 36.0 percent to $377,300. “These areas have seen some of the strongest sales gains with some reports of multiple bidding,” Yun said.

The largest single-family home price increase in the third quarter was in the Elmira, N.Y., area, where the median price of $105,000 rose 12.5 percent from a year ago. Next was Decatur, Ill., at $93,400, up 8.7 percent from the third quarter of 2007, followed by the Bloomington-Normal, Ill., area, where the third-quarter median price increased 8.1 percent to $168,400.

The typical seller purchased their home six years ago and is experiencing net equity gains. The national increase in value since the third quarter of 2002 is 18.3 percent, which is a median gain of $31,000. Even with the current downward price distortion, 90 percent of metro areas are showing six-year price gains.

Median third-quarter metro area single-family home prices ranged from an affordable $65,800 in the Saginaw-Saginaw Township North area of Michigan to $650,000 in the San Jose-Sunnyvale-Santa Clara area of California. The second most expensive area was San Francisco-Oakland-Fremont, at $615,700, followed by Honolulu at $615,000.

Other affordable markets include the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $74,300, and South Bend-Mishawaka, Ind., at $88,000.

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 metro areas – showed the national median existing-condo price was $210,800 in the third quarter, down 7.1 percent from $227,000 in the third quarter of 2007. Sixteen metros showed annual increases in the median condo price and 41 areas had price declines.

The strongest condo price increases were in the Dallas-Fort Worth-Arlington area, where the third quarter price of $149,900 rose 11.1 percent from a year earlier, followed by Bismarck, N.D., at $148,000, up 11.0 percent, and the Houston-Baytown-Sugar Land area, where the median condo price of $134,100 rose 8.1 percent from the third quarter of 2007.

Metro area median existing-condo prices in the third quarter ranged from $112,600 in the Greensboro-High Point, N.C., area to $456,300 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was the New York-Wayne-White Plains area of New York and New Jersey at $324,000, followed by Honolulu at $322,000.

Other affordable condo markets include the Indianapolis area at $113,500 and the Cincinnati-Middletown area of Ohio, Kentucky and Indiana, at $117,300 in the third quarter.

Regionally, existing-home sales in the West rose 13.1 percent in the third quarter to an annual rate of 1.15 million and are 12.4 percent above a year ago.

The median existing single-family home price in the West was $266,300 in the third quarter, which is 21.4 percent below the third quarter of 2007. The only reported metro price increase in the West was in Farmington, N.M., at $193,600, up 1.7 percent from a year ago.

In the Midwest, existing-home sales rose 2.7 percent in the third quarter to a pace of 1.15 million but remain 10.6 percent below a year ago.

The median existing single-family home price in the Midwest declined 5.5 percent to $159,900 in the third quarter from the same period in 2007. After Decatur and Bloomington-Normal, the next strongest metro price increase in the Midwest was in the Wichita, Kan., area, where the median price of $125,300 was 5.5 percent higher than a year ago, followed by Champaign-Urbana, Ill., at $146,400, up 2.7 percent.

In the South, existing-home sales slipped 1.4 percent in the third quarter to an annual rate of 1.87 million and are 13.8 percent lower than the same period in 2007.

The median existing single-family home price in the South was $174,200 in the third quarter, down 3.7 percent from a year earlier. The strongest price increase in the South was in the Tulsa, Okla., area, at $139,800, up 5.1 percent from a year ago, followed by Amarillo, Texas, with a 4.2 percent gain to $128,300, and the New Orleans-Metairie-Kenner area of Louisiana at $166,800, up 4.1 percent.

In the Northeast, existing-home sales declined 1.6 percent in the third quarter to a level of 863,000 units and are 11.7 percent below a year ago.

The median existing single-family home price in the Northeast fell 6.5 percent to $267,700 in the third quarter from the same period in 2007. After Elmira, the strongest price increase in the Northeast was in the Trenton-Ewing, N.J., area, at $342,500, up 4.2 percent from the third quarter of 2007, followed by Buffalo-Niagara Falls, N.Y., with a median price of $114,200, up 3.0 percent.

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Data tables for both metro area home prices and state existing-home sales are posted at:

http://www.realtor.org/research/research/metroprice. For areas not covered in the tables, contact your local association of Realtors®.

¹Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at:

http://www.census.gov/population/estimates/metro-city/0312msa.txt

Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series was launched at the beginning of 2006, with several years of historic data.

Because there is a concentration of condos in high-cost metro areas, the national median condo price sometimes is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional area will be included in the condo price report.

²The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

Fourth quarter metro area home price and state resale data will be released February 12.