The following is a statement by National Association of Realtors® President Charles McMillan:
“NAR would like to congratulate and thank Department of Housing and Urban Development Secretary Shaun Donovan and Federal Housing Administration Commissioner Dave Stevens for implementing the FHA–Making Home Affordable Loan Modification Program. This newly enhanced program will help struggling homeowners who qualify to significantly reduce their monthly mortgage payments and keep the home they worked so hard to obtain.
“As Secretary Donovan noted, this is another tool the federal government is providing to help homeowners avoid foreclosures by making mortgage payments more affordable. These changes expand the Obama administration’s Making Home Affordable Loan Modification Program to include FHA borrowers, and Realtors® are optimistic that this will have positive implications for thousands of homeowners.
“Until foreclosures have been significantly reduced and housing inventory reaches a more normal level, there can be no true housing recovery. The FHA–HAMP program will go a long way in achieving these important goals by helping FHA servicers bring mortgages current, buy down loans by up to 30 percent of the unpaid principal balance, and defer these amounts until the first mortgage is paid off.
“The actions taken over the past several months are beginning to help stabilize the housing market. Now, helping more families stay current on their mortgage and remain in their homes will reduce the impact of foreclosures on families and communities.
“Moving forward, NAR will continue to call on Congress and the Obama administration to expand the first-time home buyer tax credit to all home buyers and to continue efforts to streamline the short-sale process. Along with the expanded loan modification program, addressing these issues will help reduce foreclosures and housing inventory, and stabilize home values.”
Tuesday, August 18, 2009
Single-Family Housing Starts and Permits Rise in July
August 18, 2009 - Production and permitting of new single-family homes continued on an upward trajectory in July, according to newly reported numbers from the U.S. Commerce Department today. Meanwhile, substantial declines on the multifamily side dragged down the overall numbers, with combined single- and multifamily starts down 1 percent to a seasonally adjusted annual rate of 581,000 units and combined single- and multifamily permits down 1.8 percent to a 560,000-unit rate.
“With the impending expiration of the first-time home buyer tax credit at the end of November, July was probably the last month in which to get homes permitted and started in time for customers to take advantage of that valuable incentive,” noted Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “Builders were responding to improved demand related to that upcoming deadline and also to the first signs of an economic recovery.
However, it remains to be seen what happens after the tax credit expires, and the severe credit crunch that has curtailed many multifamily projects is looming over single-family builders as well. Congress and the Administration need to take action now in order to maintain the momentum toward a housing and economic recovery.”
“The latest report marks a fifth consecutive month of improvement in single-family housing starts and a fourth consecutive month of improvement in single-family permits,” noted NAHB Chief Economist David Crowe. “This is exactly in keeping with our latest member surveys, which indicate that builders are cautiously optimistic about single-family sales conditions over the next several months. That said, the significant drop-off in multifamily construction and permitting shown in recent months’ reports may be a harbinger of the financing challenges facing all home builders going forward. A severe lack of credit for acquisition, development and construction financing, along with other issues tied to low appraisals and the upcoming expiration of the first-time buyer tax credit, could derail the progress made so far. Government action is required to ensure that housing can help generate jobs and economic growth in the days ahead.”
NAHB is calling on Congress to extend the first-time home buyer tax credit for another year and to offer it to all income-eligible buyers. In addition, NAHB is urging Congress to help eliminate the credit crunch, correct faulty appraisal practices and expand Net Operating Loss tax provisions that can help avoid more layoffs.
Single-family housing starts posted a 1.7 percent gain to a seasonally adjusted annual rate of 490,000 units in July, while single-family permits registered a 5.8 percent gain to 458,000 units. Both of these were the highest levels registered since October of 2008. Meanwhile, multifamily starts tied a record low set in April of this year, falling 13.3 percent to a 91,000-unit rate. Multifamily permits fell 25.5 percent to 102,000 units.
Due largely to declining multifamily production numbers, housing starts fell in three out of four regions in July. The Northeast posted a 16.3 percent decline, while the South and West posted more moderate declines of 1.4 percent and 1.6 percent, respectively. The Midwest was the only region to report a gain, of nearly 13 percent. Meanwhile, housing permits fell 5.2 percent in the Northeast and 9.2 percent in the South, but gained 14.1 percent in the Midwest and 7 percent in the West in July.
“With the impending expiration of the first-time home buyer tax credit at the end of November, July was probably the last month in which to get homes permitted and started in time for customers to take advantage of that valuable incentive,” noted Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “Builders were responding to improved demand related to that upcoming deadline and also to the first signs of an economic recovery.
However, it remains to be seen what happens after the tax credit expires, and the severe credit crunch that has curtailed many multifamily projects is looming over single-family builders as well. Congress and the Administration need to take action now in order to maintain the momentum toward a housing and economic recovery.”
“The latest report marks a fifth consecutive month of improvement in single-family housing starts and a fourth consecutive month of improvement in single-family permits,” noted NAHB Chief Economist David Crowe. “This is exactly in keeping with our latest member surveys, which indicate that builders are cautiously optimistic about single-family sales conditions over the next several months. That said, the significant drop-off in multifamily construction and permitting shown in recent months’ reports may be a harbinger of the financing challenges facing all home builders going forward. A severe lack of credit for acquisition, development and construction financing, along with other issues tied to low appraisals and the upcoming expiration of the first-time buyer tax credit, could derail the progress made so far. Government action is required to ensure that housing can help generate jobs and economic growth in the days ahead.”
NAHB is calling on Congress to extend the first-time home buyer tax credit for another year and to offer it to all income-eligible buyers. In addition, NAHB is urging Congress to help eliminate the credit crunch, correct faulty appraisal practices and expand Net Operating Loss tax provisions that can help avoid more layoffs.
Single-family housing starts posted a 1.7 percent gain to a seasonally adjusted annual rate of 490,000 units in July, while single-family permits registered a 5.8 percent gain to 458,000 units. Both of these were the highest levels registered since October of 2008. Meanwhile, multifamily starts tied a record low set in April of this year, falling 13.3 percent to a 91,000-unit rate. Multifamily permits fell 25.5 percent to 102,000 units.
Due largely to declining multifamily production numbers, housing starts fell in three out of four regions in July. The Northeast posted a 16.3 percent decline, while the South and West posted more moderate declines of 1.4 percent and 1.6 percent, respectively. The Midwest was the only region to report a gain, of nearly 13 percent. Meanwhile, housing permits fell 5.2 percent in the Northeast and 9.2 percent in the South, but gained 14.1 percent in the Midwest and 7 percent in the West in July.
Tuesday, August 11, 2009
Builders Call On Congress To Extend And Enhance Home Buyer Tax Credit
August 10, 2009 - To help create jobs and set the stage for a strong recovery, the National Association of Home Builders (NAHB) today called on Congress to extend and enhance the $8,000 first-time home buyer tax credit due to expire on December 1.
Specifically, NAHB is asking Congress to extend the home buyer tax credit program through November 30, 2010 and make it available to all buyers of principal residences.
“If Congress acts to extend the tax credit program, it would spur 383,000 additional home sales, including 80,000 housing starts, creating nearly 350,000 jobs over the coming year,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “That’s good for the economy and good for America.”
Although there have been some signs of economic stabilization in recent weeks, the unemployment rate is rapidly approaching double-digits. Without a concerted focus on the housing sector, which comprises more than 15 percent of the GDP, any hope for a recovery could fade.
“At best, it looks like a jobless recovery once it gets underway,” said Robson. “This is why Congress needs to take bold, meaningful action now.”
In addition to extending the tax credit, Robson said home builders will be meeting with their lawmakers in their home districts during the August congressional recess and urging them to:
- Correct a faulty appraisal process. The inappropriate use of distressed and foreclosed sales as comps in determining home values is hurting home values and killing home sales. The situation is so bad that a recent NAHB survey of more than 500 builders found that one out of every four new-home sales are lost because appraisals are coming in below the contract sales price. NAHB is urging Congress to work with housing and federal regulators to adopt and enforce clear, concise regulatory guidance that will allow appraisers to develop realistic valuations based on sales that are truly comparable. Lawmakers should also call on the Federal Housing Administration, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac to establish an appeals process similar to the one used by the Veterans Affairs Loan Guaranty Program. Under the VA program, the appraiser is required to seek more information when it appears the appraised value will fall short of the sales price.
- Improve housing credit conditions. Since there can be no meaningful economic recovery until the flow of credit is restored to housing, NAHB is calling on Congress to urge regulators and the banking industry to end the stranglehold on acquisition, development and construction (AD&C) loans that has emerged as a major impediment to the housing recovery. Lenders are refusing loans for viable new housing projects and cutting off funding or calling performing outstanding loans, producing unnecessary foreclosures and losses on AD&C loans. Congress needs to urge regulators to allow and encourage lenders to give leeway to residential AD&C borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance to give builders time to complete and sell their lots and homes.
- Co-sponsor Net Operating Loss (NOL) relief legislation in the House and Senate. NOL bills H.R. 2452 in the House and S. 823 in the Senate would prevent further layoffs in building and other industries hit hard by the recession. The legislation would help all businesses by eliminating the current $15 million cap on average annual gross receipts and allowing 2009 losses to be eligible for the expanded carryback. In addition, the bills would also help taxpayers who have been hit by the Alternative Minimum Tax to fully benefit from any NOL carryback. The bills both enjoy bipartisan support. Currently, H.R. 2452 and S. 823 have 92 and 37 co-sponsors, respectively.
Taken together, these four issues – extending the $8,000 home buyer tax credit for one year and making it eligible for all home buyers; bringing common sense to the appraisal process; urging banking regulators to ease AD&C credit; and passing the NOL carryback legislation – will not only create needed jobs for American workers quickly, but also stimulate demand for goods and services throughout Main Street America.
Specifically, NAHB is asking Congress to extend the home buyer tax credit program through November 30, 2010 and make it available to all buyers of principal residences.
“If Congress acts to extend the tax credit program, it would spur 383,000 additional home sales, including 80,000 housing starts, creating nearly 350,000 jobs over the coming year,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “That’s good for the economy and good for America.”
Although there have been some signs of economic stabilization in recent weeks, the unemployment rate is rapidly approaching double-digits. Without a concerted focus on the housing sector, which comprises more than 15 percent of the GDP, any hope for a recovery could fade.
“At best, it looks like a jobless recovery once it gets underway,” said Robson. “This is why Congress needs to take bold, meaningful action now.”
In addition to extending the tax credit, Robson said home builders will be meeting with their lawmakers in their home districts during the August congressional recess and urging them to:
- Correct a faulty appraisal process. The inappropriate use of distressed and foreclosed sales as comps in determining home values is hurting home values and killing home sales. The situation is so bad that a recent NAHB survey of more than 500 builders found that one out of every four new-home sales are lost because appraisals are coming in below the contract sales price. NAHB is urging Congress to work with housing and federal regulators to adopt and enforce clear, concise regulatory guidance that will allow appraisers to develop realistic valuations based on sales that are truly comparable. Lawmakers should also call on the Federal Housing Administration, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac to establish an appeals process similar to the one used by the Veterans Affairs Loan Guaranty Program. Under the VA program, the appraiser is required to seek more information when it appears the appraised value will fall short of the sales price.
- Improve housing credit conditions. Since there can be no meaningful economic recovery until the flow of credit is restored to housing, NAHB is calling on Congress to urge regulators and the banking industry to end the stranglehold on acquisition, development and construction (AD&C) loans that has emerged as a major impediment to the housing recovery. Lenders are refusing loans for viable new housing projects and cutting off funding or calling performing outstanding loans, producing unnecessary foreclosures and losses on AD&C loans. Congress needs to urge regulators to allow and encourage lenders to give leeway to residential AD&C borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance to give builders time to complete and sell their lots and homes.
- Co-sponsor Net Operating Loss (NOL) relief legislation in the House and Senate. NOL bills H.R. 2452 in the House and S. 823 in the Senate would prevent further layoffs in building and other industries hit hard by the recession. The legislation would help all businesses by eliminating the current $15 million cap on average annual gross receipts and allowing 2009 losses to be eligible for the expanded carryback. In addition, the bills would also help taxpayers who have been hit by the Alternative Minimum Tax to fully benefit from any NOL carryback. The bills both enjoy bipartisan support. Currently, H.R. 2452 and S. 823 have 92 and 37 co-sponsors, respectively.
Taken together, these four issues – extending the $8,000 home buyer tax credit for one year and making it eligible for all home buyers; bringing common sense to the appraisal process; urging banking regulators to ease AD&C credit; and passing the NOL carryback legislation – will not only create needed jobs for American workers quickly, but also stimulate demand for goods and services throughout Main Street America.
Monday, August 10, 2009
Keeping You Updated on the Market for the week of August 10, 2009
MARKET RECAP
Another week, another report on improving home sales. The latest news might not constitute a sustainable trend, but it's surely beginning to resemble one. And why not? Pending home sales were up for the fifth consecutive month. The data shows contracts signed in June increased 3.6% from May. For what it's worth, and we think it's worth something, the last time pending sales rose for a fifth straight month was in July 2003, just after the post-9/11 recession ended, and that trend didn't end until late 2006.
Of course, history never repeats exactly, but that's not to say we shouldn't be encouraged. And we are encouraged, particularly when considering new-home builders appear to be inching toward prosperity. Private single-family residential spending rebounded 2.4% in June after posting a 3.1% drop in May. It's not a lot to hang a hat on, to be sure, but it suggests the worst in new-home construction is behind us. Of course, sustaining any positive trend depends on sustaining consumer spending. On that front, it's still a little iffy. Consumer spending jumped 0.4% after edging up 0.1% in May, though enthusiasm was tempered by concerns that the increase is reflective of one-off payments associated with the fiscal stimulus package. These payments sharply boosted the May figure but were substantially smaller in June, which means we could see a decrease in consumer spending in July.
Then again, consumer spending could be sustained if payroll numbers continue to improve. Private payroll counts showed substantial improvement last month, down 371,000 in July versus a 463,000 drop in June. The improvement, the best in eight months, confirms expectations that unemployment may not get as high as some economists have forecast. Indeed, the unemployment rate dropped to 9.4% in July when it was expected to rise to 9.7%.
For those consumers willing to spend, particularly on big-ticket items like houses, interest rates remain favorable. Bankrate.com's latest national survey showed the benchmark 30-year fixed-rate mortgage averaged 5.65% last week, while the benchmark 15-year fixed-rate mortgage averaged 4.97%. It's worth mentioning that anytime the 30-year fixed-rate mortgage is hovering around 5.5% and the 15-year fixed-rate mortgage is hovering under 5%, odds are historically slim that rates will go much lower.
Small but Consequential News
It's usually more insightful to stitch together little pieces of news to form a mosaic that arrives at a conclusion than to draw a conclusion from one big consequential piece of news. Reason being, market bottoms usually end in a whimper instead of a bang, and these whimpers are often marked by a surfeit of anecdotes of strife and struggle.
We've been seeing a surge in strife-and-struggle articles in recent months. But these articles often serve as contrarian indicators. Yes, they can be bothersome, but they tend to increase in multitude and amplitude just when the economy is poised for a sustained recovery.
Another seemingly small piece of news that can prove consequential is when someone of renown finally acknowledges an improving market. Such was the case last week when Robert Shiller, co-founder of the Case-Shiller Home Price Index, launched a new investment vehicle, the MacroShares Major Metro Housing Up fund. Shiller's fund essentially represents leveraged bets on housing prices. What the introduction of this fund tells us is that more investors are expecting more upside in housing prices.
On our end, we've been painting a mosaic of an improving housing and mortgage market over the past few months, and not because we wish it were so, but because the small, consequential pieces of news suggest it is so.
Another week, another report on improving home sales. The latest news might not constitute a sustainable trend, but it's surely beginning to resemble one. And why not? Pending home sales were up for the fifth consecutive month. The data shows contracts signed in June increased 3.6% from May. For what it's worth, and we think it's worth something, the last time pending sales rose for a fifth straight month was in July 2003, just after the post-9/11 recession ended, and that trend didn't end until late 2006.
Of course, history never repeats exactly, but that's not to say we shouldn't be encouraged. And we are encouraged, particularly when considering new-home builders appear to be inching toward prosperity. Private single-family residential spending rebounded 2.4% in June after posting a 3.1% drop in May. It's not a lot to hang a hat on, to be sure, but it suggests the worst in new-home construction is behind us. Of course, sustaining any positive trend depends on sustaining consumer spending. On that front, it's still a little iffy. Consumer spending jumped 0.4% after edging up 0.1% in May, though enthusiasm was tempered by concerns that the increase is reflective of one-off payments associated with the fiscal stimulus package. These payments sharply boosted the May figure but were substantially smaller in June, which means we could see a decrease in consumer spending in July.
Then again, consumer spending could be sustained if payroll numbers continue to improve. Private payroll counts showed substantial improvement last month, down 371,000 in July versus a 463,000 drop in June. The improvement, the best in eight months, confirms expectations that unemployment may not get as high as some economists have forecast. Indeed, the unemployment rate dropped to 9.4% in July when it was expected to rise to 9.7%.
For those consumers willing to spend, particularly on big-ticket items like houses, interest rates remain favorable. Bankrate.com's latest national survey showed the benchmark 30-year fixed-rate mortgage averaged 5.65% last week, while the benchmark 15-year fixed-rate mortgage averaged 4.97%. It's worth mentioning that anytime the 30-year fixed-rate mortgage is hovering around 5.5% and the 15-year fixed-rate mortgage is hovering under 5%, odds are historically slim that rates will go much lower.
Small but Consequential News
It's usually more insightful to stitch together little pieces of news to form a mosaic that arrives at a conclusion than to draw a conclusion from one big consequential piece of news. Reason being, market bottoms usually end in a whimper instead of a bang, and these whimpers are often marked by a surfeit of anecdotes of strife and struggle.
We've been seeing a surge in strife-and-struggle articles in recent months. But these articles often serve as contrarian indicators. Yes, they can be bothersome, but they tend to increase in multitude and amplitude just when the economy is poised for a sustained recovery.
Another seemingly small piece of news that can prove consequential is when someone of renown finally acknowledges an improving market. Such was the case last week when Robert Shiller, co-founder of the Case-Shiller Home Price Index, launched a new investment vehicle, the MacroShares Major Metro Housing Up fund. Shiller's fund essentially represents leveraged bets on housing prices. What the introduction of this fund tells us is that more investors are expecting more upside in housing prices.
On our end, we've been painting a mosaic of an improving housing and mortgage market over the past few months, and not because we wish it were so, but because the small, consequential pieces of news suggest it is so.
Wednesday, August 5, 2009
Uptrend Continues in Pending Home Sales
Washington, August 04, 2009
Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of 91.3 in May, and is 6.7 percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was in July 2003.
Lawrence Yun, NAR chief economist, said a combination of positive market factors is fueling the gains. “Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines. Activity has been consistently much stronger for lower priced homes,” he said. “Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30.”
The Pending Home Sales Index in the Northeast rose 0.4 percent to 81.2 in June and is 5.8 percent above a year ago. In the Midwest the index increased 0.8 percent to 89.9 and is 11.6 percent above June 2008. The index in the South jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago. In the West the index rose 2.9 percent to 100.4 but is 0.2 percent below June 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, is hopeful that a recently elevated level of contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise,” he said. “This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we’ll see an even closer relationship between contract activity and closed transactions.”
McMillan said NAR is continuing to press the appraisal issue. “We have asked Congress and the Federal Housing Finance Agency to immediately implement an 18-month moratorium on the new appraisal rules to further address unintended consequences of the new guidelines,” he said.
NAR’s Housing Affordability Index2 remains very favorable. The affordability index stood at 159.2 in June, down from record peaks in recent months but it remains 36.6 percentage points above a year ago. Under these conditions the typical family would devote 15.7 percent of gross income to mortgage principal and interest, well below the standard allowance of 25 percent.
The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.
“A monthly rise in home prices and somewhat higher mortgage interest rates led to a modest decline in affordability in June, but it was still the sixth highest index on record dating back to 1970,” Yun said. “Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales.”
A median-income family, earning $60,700, could afford a home costing $289,100 in June with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was much higher than the median existing single-family home price in June, which was $181,600.
Yun expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
1The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
2The Housing Affordability Index is a relative index where a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home, taking into account the relationship between median home price, average effective interest rate for loans closed on existing homes, and median family income. The higher the index, the better housing affordability is for buyers.
The calculation assumes a downpayment of 20 percent and a qualifying ratio of 25 percent of gross income for mortgage principle and interest payments. The index is a general gauge with conditions varying widely around the country. Affordability conditions are lower for first-time buyers with smaller downpayments and less income.
Monthly publication of the index began in 1981 with annual data calculated back to 1970.
Existing-home sales for July will be released August 21; the next Pending Home Sales Index will be on September 1.
Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of 91.3 in May, and is 6.7 percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was in July 2003.
Lawrence Yun, NAR chief economist, said a combination of positive market factors is fueling the gains. “Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines. Activity has been consistently much stronger for lower priced homes,” he said. “Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30.”
The Pending Home Sales Index in the Northeast rose 0.4 percent to 81.2 in June and is 5.8 percent above a year ago. In the Midwest the index increased 0.8 percent to 89.9 and is 11.6 percent above June 2008. The index in the South jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago. In the West the index rose 2.9 percent to 100.4 but is 0.2 percent below June 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, is hopeful that a recently elevated level of contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise,” he said. “This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we’ll see an even closer relationship between contract activity and closed transactions.”
McMillan said NAR is continuing to press the appraisal issue. “We have asked Congress and the Federal Housing Finance Agency to immediately implement an 18-month moratorium on the new appraisal rules to further address unintended consequences of the new guidelines,” he said.
NAR’s Housing Affordability Index2 remains very favorable. The affordability index stood at 159.2 in June, down from record peaks in recent months but it remains 36.6 percentage points above a year ago. Under these conditions the typical family would devote 15.7 percent of gross income to mortgage principal and interest, well below the standard allowance of 25 percent.
The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.
“A monthly rise in home prices and somewhat higher mortgage interest rates led to a modest decline in affordability in June, but it was still the sixth highest index on record dating back to 1970,” Yun said. “Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales.”
A median-income family, earning $60,700, could afford a home costing $289,100 in June with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was much higher than the median existing single-family home price in June, which was $181,600.
Yun expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
1The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
2The Housing Affordability Index is a relative index where a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home, taking into account the relationship between median home price, average effective interest rate for loans closed on existing homes, and median family income. The higher the index, the better housing affordability is for buyers.
The calculation assumes a downpayment of 20 percent and a qualifying ratio of 25 percent of gross income for mortgage principle and interest payments. The index is a general gauge with conditions varying widely around the country. Affordability conditions are lower for first-time buyers with smaller downpayments and less income.
Monthly publication of the index began in 1981 with annual data calculated back to 1970.
Existing-home sales for July will be released August 21; the next Pending Home Sales Index will be on September 1.
Monday, August 3, 2009
Keeping You Updated on the Market
MARKET RECAP
With all due respect to Ethel Merman, everything really is coming up roses...well, sort of. Sure, some weeds remain, but they are becoming fewer and farther between.
Of course we are talking about the housing market, where prices posted their first monthly gain in three years, climbing 0.5% in May according to the Case-Shiller Price Index – a closely watched housing-price monitor. The price increase offers yet another sign that the formerly battered-and-bruised residential real estate market is stabilizing.
New home sales provided another sign of stabilization, jumping 11% in June to post the biggest monthly gain in eight years. Sales of single-family homes increased to a seasonally adjusted annual rate of 384,000 units, a 2009 high, thanks to more buyers availing themselves of falling prices.
Speaking of falling prices, the median price for a new home fell to $206,200 in June compared to $219,000 in May; however, inventory levels are falling and prices are dropping much less quickly. Furthermore, the ratio of houses for sale to houses sold in June was 8.8, down from 10.2 in May. The aggregated data has convinced a few economists to say that they see new-home prices rising in the coming months.
Rising home prices aren't beyond the realm of possibility; the economy is performing much better than expected. Gross domestic product for the second quarter of 2009 contracted at a less-than-projected 1% annual rate. The consensus estimate was for a contraction of 1.6%. Consumer spending and unemployment remain overhangs, to be sure, but they could soon be corrected by recent increases in business earnings, which should eventually supply additional stimulus to the economy.
Continued affordability in the mortgage market should also help keep home prices stable, if not rising. Though not as low as they were a couple months ago, rates are still low by historical measures. Last week, Bankrate.com's national survey had the benchmark 30-year fixed-rate mortgage averaging 5.56% and the 15-year fixed-rate mortgage averaging 4.88%. Of course, any individual rate is subject to duration, loan type, FICO score, income, assets, down payment and points paid.
Perfection is Impossible
Bad news sells, which is why whenever a business reports starts off positively it's nearly always tempered negatively. You could call it being prudent, circumspect, and balanced, and that would be a legitimate argument. To wit: A report in Housingwire.com last week provided an example of good news being tempered by bad. Data from MDA DataQuick showed that sales in the very hard-hit Phoenix area have surged 72% this year. MDA DataQuick was quick to note, though, that “for the foreseeable future, the Phoenix region will continue to have many foreclosures to recycle, and that inventory of lender-owned property will weigh on home prices.”
Other reports last week were equally as tempered. One economist stated after the good news on new-home sales and housing prices that “a glut of grossly overpriced homes currently on the market and the possibility of climbing mortgage rates are among several potential challenges facing the market.” That sentiment was repeated often.
We are all for prudence, circumspection, and balance. After all, it's important to question the data you are being fed, because all markets offer the potential for risk, along with the potential for reward. But it's also worth remembering that there is no such thing as a “perfect market.” Home prices, mortgage rates, and the economy will never be “just right.” It's also worth remembering not to give one side of the argument more weight than it deserves.
In this market, we still think too many potential borrowers and home buyers are overweighting negative news while holding out for perfection. Unfortunately, perfection doesn't exist, which is why waiting for it guarantees missing opportunity.
With all due respect to Ethel Merman, everything really is coming up roses...well, sort of. Sure, some weeds remain, but they are becoming fewer and farther between.
Of course we are talking about the housing market, where prices posted their first monthly gain in three years, climbing 0.5% in May according to the Case-Shiller Price Index – a closely watched housing-price monitor. The price increase offers yet another sign that the formerly battered-and-bruised residential real estate market is stabilizing.
New home sales provided another sign of stabilization, jumping 11% in June to post the biggest monthly gain in eight years. Sales of single-family homes increased to a seasonally adjusted annual rate of 384,000 units, a 2009 high, thanks to more buyers availing themselves of falling prices.
Speaking of falling prices, the median price for a new home fell to $206,200 in June compared to $219,000 in May; however, inventory levels are falling and prices are dropping much less quickly. Furthermore, the ratio of houses for sale to houses sold in June was 8.8, down from 10.2 in May. The aggregated data has convinced a few economists to say that they see new-home prices rising in the coming months.
Rising home prices aren't beyond the realm of possibility; the economy is performing much better than expected. Gross domestic product for the second quarter of 2009 contracted at a less-than-projected 1% annual rate. The consensus estimate was for a contraction of 1.6%. Consumer spending and unemployment remain overhangs, to be sure, but they could soon be corrected by recent increases in business earnings, which should eventually supply additional stimulus to the economy.
Continued affordability in the mortgage market should also help keep home prices stable, if not rising. Though not as low as they were a couple months ago, rates are still low by historical measures. Last week, Bankrate.com's national survey had the benchmark 30-year fixed-rate mortgage averaging 5.56% and the 15-year fixed-rate mortgage averaging 4.88%. Of course, any individual rate is subject to duration, loan type, FICO score, income, assets, down payment and points paid.
Perfection is Impossible
Bad news sells, which is why whenever a business reports starts off positively it's nearly always tempered negatively. You could call it being prudent, circumspect, and balanced, and that would be a legitimate argument. To wit: A report in Housingwire.com last week provided an example of good news being tempered by bad. Data from MDA DataQuick showed that sales in the very hard-hit Phoenix area have surged 72% this year. MDA DataQuick was quick to note, though, that “for the foreseeable future, the Phoenix region will continue to have many foreclosures to recycle, and that inventory of lender-owned property will weigh on home prices.”
Other reports last week were equally as tempered. One economist stated after the good news on new-home sales and housing prices that “a glut of grossly overpriced homes currently on the market and the possibility of climbing mortgage rates are among several potential challenges facing the market.” That sentiment was repeated often.
We are all for prudence, circumspection, and balance. After all, it's important to question the data you are being fed, because all markets offer the potential for risk, along with the potential for reward. But it's also worth remembering that there is no such thing as a “perfect market.” Home prices, mortgage rates, and the economy will never be “just right.” It's also worth remembering not to give one side of the argument more weight than it deserves.
In this market, we still think too many potential borrowers and home buyers are overweighting negative news while holding out for perfection. Unfortunately, perfection doesn't exist, which is why waiting for it guarantees missing opportunity.
Saturday, August 1, 2009
Avoid Foreclosure Rescue Scams!!!
Home owners: Don't let a scam foreclosure rescue company turn your mortgage distress into disaster. Watch this video from the Federal Trade Commission (FTC), the nation's consumer protection agency, to learn the signs of a foreclosure rescue scam...
http://springfieldhba.us1.list-manage.com/track/click?u=cf281b67b4dc4e5733aa922d2&id=f274789cf4&e=d50fe516d8
http://springfieldhba.us1.list-manage.com/track/click?u=cf281b67b4dc4e5733aa922d2&id=f274789cf4&e=d50fe516d8
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