Home Prices Rose Most in Two Decades in March, FHFA Says

U.S. home prices jumped 1.8 percent in March, the biggest monthly increase in at least two decades, as the housing recovery builds momentum, the Federal Housing Finance Agency said today.

The rise from February exceeded all analysts’ estimates, which ranged from a decline of 0.2 percent to a gain of 0.7 percent. Compared with a year earlier, prices surged 2.7 percent, the FHFA said in a statement.

Record-low mortgage rates, job gains and a dwindling inventory of properties available for sale have combined to strengthen demand for homes. Purchases of previously owned U.S. houses climbed 3.4 percent in April to a 4.62 million annual rate, the first increase in three months, the National Association of Realtors said yesterday.

“Increased affordability and a somewhat smaller inventory of homes for sale are positively impacting house prices,” Andrew Leventis, principal economist with the FHFA in Washington, said in the statement.

The FHFA report measures changes in real estate values using purchases of properties with mortgages backed by Fannie Mae (FNMA) or Freddie Mac. (FMCC) It doesn’t provide a specific price for homes. The monthly increase was the largest in records going back to 1991, according to data compiled by Bloomberg. The average estimate of 18 economists surveyed by Bloomberg was for a 0.3 percent monthly gain.
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“Prices are hitting a bottom,” Patrick Newport, an economist for IHS Global Insight in Lexington, Massachusetts, said yesterday in a telephone interview. “It’s good news because it means that consumer wealth that comes from a home is no longer dropping.”

Sales of Existing Homes in U.S. Rise as Market Stabilizes

Sales of existing U.S. homes rose in April, driven by broad-based gains in demand that signal the market is stabilizing.

Purchases, tabulated when a contract closes, increased 3.4 percent to a 4.62 million annual rate, figures from the National Association of Realtors showed today in Washington. The median price jumped by the most in six years.
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“We are making incremental progress,” said Millan Mulraine, a senior U.S. strategist at TD Securities Inc. in New York, who correctly forecast the sales pace. “People are becoming more confident about job prospects and about taking on mortgages. This is all positive for the economy.”
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The April sales pace was in line with the 4.61 million median forecast in a Bloomberg News survey. Estimates of the 73 economists ranged from 4.47 million to 4.8 million. The prior month’s pace was revised to 4.47 million, from a previously reported 4.48 million. April’s total was just shy of the 4.63 million reached in January that was the highest in almost two years.
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The median price of an existing home climbed 10 percent to $177,400 from $161,100 in April 2011, today’s report showed. It was the biggest year-to-year gain since January 2006 and reflected a seasonal mix in demand toward bigger houses and fewer distressed sales, Yun said.

Families return to the market at this time before the start of a new school year, pushing up demand, he said. Cash transactions, distressed properties and investors accounted for a smaller share of all purchases last month, he said.

Purchases improved in all four regions, led by a 5.1 percent gain in the Northeast.

From CNBC:

Huge Spike in Home Prices Is Not Real

The median price of an existing home that sold in April of this year was $177,400, an increase of just over ten percent from a year ago. That is the biggest price jump since January of 2006. The difference between now and then, though, is the 2006 price jump was real, this latest spike is not.
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The share of home sales in the $0-250,000 price range made up over 73 percent of all sales in February; that has already dropped to 67 percent in April.

If you look at sales by price category, you see the most startling evidence of this shift in what’s selling on the low end out west. Sales of homes $0-100,000 dropped over 26 percent out west in April, but rose 21 percent in the $250-500,000 price range. The national numbers tell the same story.
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So what does this say about where we really are in terms of home prices nationally? The Realtors still expect overall home prices to rise just 2-3 percent in 2012, which is one of the more bullish predictions. If the banks start releasing more properties onto the market or push more delinquent loans to foreclosure, overall home prices will come down again.

NJ added 2,600 jobs in April

New Jersey added 2,600 jobs in April, a slight rebound from the March’s job losses, but unemployment remained high.

The state added 6,300 private sector jobs, and lost 3,700 government jobs, according to the monthly job reports by the New Jersey Department of Labor and Workforce Development.

The report also revised the March report to a loss of 3,700 – well below the previously reported loss of 8,600 jobs.

The unemployment rate increased from 9 percent to 9.1 percent, well above the national rate of 8.1 percent.

Charles Steindel, the Treasury’s chief economist, said the numbers are “consistent with continuing job growth.”

Although the jobless rate “edged up, it’s due to improvement in the labor market with New Jersey’s labor participation rate climbing to 66 percent,” Steindel said.

From the Star Ledger:

New Jersey jobs grow in April, so does unemployment

The job market in New Jersey inched forward in April, and dire numbers from March were revised upwards as the state continues its long, slow employment comeback.

Even as jobs were added, more people rejoined the workforce, lifting the unemployment rate by a tenth of a percent to 9.1 percent, a point above the national average of 8.1 percent.

“The number of New Jersey residents working is at a three-year high with over 71,000 private sector jobs added since February 2010,” said Charles Steindel, chief economist for the state Department of Treasury in a statement. “These numbers are consistent with continuing job growth…while the rate edged up, it’s due to improvement in the labor market with New Jersey’s labor participation rate climbing to 66 percent.

Around 6,300 private sector jobs were added, which offset 3,700 jobs lost in the public sector.

One piece of good news in the numbers: previous estimates for March that showed 8,600 jobs lost were revised to show a narrower monthly loss of 3,700 jobs.

N.J. foreclosure inventoryspikes; 2nd most in nation

New Jersey’s percentage of home mortgage loans in foreclosure continues to rise, even as rates nationally have fallen to the lowest level since 2008, a report released Wednesday showed.

New Jersey now has the second-highest percentage of mortgage loans in foreclosure — at 8.4 percent — behind only Florida, at 14.3 percent, according to the report by the Mortgage Bankers Association.

The results come even as other states that were hard-hit victims of the mortgage meltdown that began in 2008 have moved off excessive inventory.

In Michigan, for example, only 3 percent of all home loans are in foreclosure, and in California, that rate is down to 3.29 percent. Both states had been among the leaders during the housing bust.

Jeffrey Otteau, an appraiser and New Jersey real estate market analyst from East Brunswick, said the problem for the Garden State is only going to get worse.

A 2010 court-ordered moratorium on foreclosure filings — issued because banks and mortgage companies often did not have proper documentation — helped build New Jersey’s backlog, Otteau said in an interview.

Meanwhile, New Jersey has a lengthy court process that stretches out the foreclosure process for more than a year.

“The housing market had benefited from it. It lowered the tide, and reduced the number of short sales,” Otteau said. “But now is the time to deal with it, to clear this out at a point where the market can digest it and get to the other side.”

More foreclosures are on the way, Otteau said, but banks just haven’t bothered to file for them yet, even though the moratorium was lifted last August.

“The number is really larger,” Otteau said. “We’re just not clearing the backlog. All the results are putting New Jersey at or near the top.”

Tax-Cut Pledge May Trap Christie as N.J. Revenue Misses

Governor Chris Christie, a Republican who has spent the past four months promising New Jersey income- tax cuts, now confronts the challenge of selling his plan’s feasibility against a backdrop of continuing revenue shortfalls.

April receipts fell 5.3 percent short of budget forecasts, after March collections missed by 2.5 percent, according to statements from Treasurer Andrew Sidamon-Eristoff. So far for the fiscal year that ends in June, the state has brought in $230.3 million, or 1.2 percent, less than projected.

Christie, 49, didn’t remark on the latest figures during two public appearances in Atlantic City and Camden yesterday, when the April data was released. He will continue barnstorming the state with a public forum planned for today in East Hanover. He has regularly pitched the three-year, 10 percent tax cut at such meetings as a key to what he calls the “Jersey Comeback.”

“To back off now would smell of political weakness,” Brigid Harrison, who teaches law and politics at Montclair State University, said yesterday by telephone.

Christie’s $32.1 billion spending plan for fiscal 2013 counts on a 7.3 percent revenue gain, the most since before the recession that began in December 2007. Should revenue miss budgeted amounts for the current year, the state would start the next with less cash than estimated.
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New Jersey collected $3.26 billion last month, less than the $3.44 billion forecast. Income taxes trailed estimates by 2.8 percent and corporate levies fell 22 percent under budget, Sidamon-Eristoff said in a statement.

“This is one month’s worth of collections,” said Kevin Roberts, a spokesman for Christie. “We still have two months.”

So far in fiscal 2012, revenue is $500 million, or 2.7 percent, greater than for the first 10 months of the previous year, reflecting economic growth, Roberts said yesterday.
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“With revenue projections coming in much lower and the governor’s revenue estimates being ridiculously unreachable,

it would be irresponsible at this time to support any type of tax cut,” Senator Raymond Lesniak, an Elizabeth Democrat, said by telephone yesterday, before the April numbers were released. “I know that other members I’ve spoken to agree.”

Gordon MacInnes, president of New Jersey Public Policy Perspective, a Trenton nonprofit research group that focuses on social and political issues, said this is no time to cut taxes.

“New Jersey already has the third-lowest credit rating in the country, greatly increasing our borrowing costs,” MacInnes, a former Democratic state senator and assemblyman from Morristown, said in a statement. “Our leaders should concentrate first on putting the state’s fiscal house in order, not on politically appealing, but reckless, proposals to cut taxes. This is exactly how we got into this mess.”

N.J. Treasury delays release of April revenue figures without explanation

A joint news conference between Gov. Chris Christie and Senate President Stephen Sweeney wasn’t the only thing that didn’t go off as scheduled today in Trenton.

The state’s Treasury Department failed to release April revenue figures as expected. The department declined to explain the delay.

April is a critical month in the budget cycle where the state receives the bulk of its income tax collections.

A memo written earlier this month by the non-partisan Office of Legislative Services said business and income tax collections in April failed to meet expectations, but did not provide specifics. In March, OLS and the Christie administration were already $537 million apart on revenue projections through fiscal year 2013, with the OLS anticipating a slightly lower revenue rebound.

The slumping revenue figures cast doubt on Christie’s and Sweeney’s ability to deliver the tax cuts — and already have some Senate Democrats rethinking the wisdom of offering them while revenue is weakening.

Christie and Sweeney were poised today to announce a compromise on their competing tax cut proposals, but the surprise news conference was abruptly canceled. Sweeney cited “minor” health issues, but sources say he failed to notify key Democratic lawmakers of the compromise and was the target of some internal criticism that prompted him to delay the announcement.

North Jersey foreclosures haunt neighbors

Maywood homeowner Joe Leichtnam spent some time recently trimming the shrubs, mowing the lawn and fixing the siding.

Not at his house; at the empty house next door. It’s a small effort to contain the chaos at the property, which is in foreclosure and has been vacant for several years. The house has a blue tarp covering a hole in the roof and overgrown bushes that threaten to engulf the deck.

The house on Edel Avenue is just one of thousands of vacant homes left by the housing bust all across North Jersey. Neighbors say they’re discouraged and disheartened by the sight of these neglected homes, which can remain empty for years while the foreclosure process grinds slowly forward.

If a neighboring house is empty and in disrepair because of a foreclosure, homeowners can complain to their town’s code enforcement officer. The town then has the power to contact the foreclosing lender, which by law is supposed to correct violations of the property tax code. If that doesn’t work, the town can send in workers to clean up the property and then place a lien on it to pay for the work. That way, the town is repaid either when the lien is purchased by an investor or when the house is sold at sheriff’s auction.

“It just detracts from the whole neighborhood,” said Leichtnam, a retired telecommunications professional. “It definitely has an impact on the value of the homes in the area.”

These homes are orphans of the real estate storm. The homeowners are gone. Foreclosing lenders don’t own the property, and generally do the minimum — mow the lawn or board up windows. Towns can step in, but their workforces are already stretched, and they don’t know when they’ll be reimbursed for the work. Without the level of care that homeowners typically give, the properties can fall into neglect and disrepair. So neighbors like Leichtnam, who see the value and appeal of their own homes threatened, take matters into their own hands.

The blight has not hit just lower- and middle-income areas. On McCain Court in Closter, for example, an empty McMansion sits in a cul-de-sac of half a dozen similar houses. The owner paid $929,000 for the home in 2000, but lender Keystone Nazareth Bank and Trust filed to foreclose in July 2008, according to public records.

Today, the house sits with expensive but overgrown landscaping, a knocked-over mailbox and signs of damage in a high corner where the side wall meets the roof. There’s a notice on the door from United Water, dating to December, warning that the water’s about to be turned off because of an unpaid bill of $1,367.
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Mortgage companies will often turn off the water in a house to prevent burst pipes. But they don’t always act in time. Theresa Rolaf says an empty house on her street, Terrace Street in Bergenfield, was flooded when an upstairs pipe broke.

“I called the police and they came to shut the water off,” said Rolaf. “I’m sure there is a lot of damage inside.” The house is now owned by JPMorgan Chase, according to property records. A note on the door from the bank’s lawyers indicates that the homeowners gave the bank the deed, to head off a foreclosure.
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The homes can stay vacant for years. It now takes, on average, more than 2½ years for lenders to go through the legal process to evict New Jersey homeowners who can’t pay their mortgages. The New Jersey foreclosure pipeline came to a near-halt in 2011 over sloppy paperwork by lenders — called “robo-signing” because lender representatives allegedly signed documents without checking them, in the rush to evict homeowners. The foreclosure machine has shown recent signs of starting up again in New Jersey, but with the backlog of properties in the system, distressed properties are likely to linger for years.

Because vacant homes can be a “calamity” in a neighborhood, Affuso, of the bankers’ group, said the state should try to streamline the foreclosure process on empty properties, since the homeowners obviously aren’t contesting the foreclosure. A recent bill proposed in the Legislature to turn foreclosed homes into affordable housing would help, because it sets out a way to identify vacant homes and allow banks to repossess them more quickly, he said.

Memo to Would-Be Members of the 1%: Move to the Northeast or Mid-Atlantic

Reaching for the American dream? Your best chances are probably in New York, New Jersey or Maryland.

Those states are best at helping Americans move up the income ladder, both in absolute terms and relative to their peers, according to a groundbreaking new study from the Economic Mobility Project at the Pew Center on the States.

Generally speaking, states in New England and the mid-Atlantic had the most upwardly mobile residents, whereas states in the South had the least mobile populations.

The study, which appears to be the first to try to measure economic mobility at the state level, looked at the incomes of Americans in each state over a 10-year period using data from the Census Bureau and the Social Security Administration. Researchers tracked a group of nationally representative Americans who were age 35 to 39 at any point from 1978 to 1997.

They then examined how each individual’s earnings had changed exactly one decade after the initial income number was collected.

Across the country, the income of the typical American rose by about 17 percent in inflation-adjusted terms during that time. There was great variation among the states, though.
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To measure this “relative upward mobility,” the authors focused on people in the bottom half of the income distribution and tracked whether those individuals were able to move up at least 10 percentiles.

For example, a person who started out in the 20th percentile would have to climb to at least the 30th percentile after a decade in order to be considered “upwardly mobile” in this study.
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Using all three metrics together — absolute income gains, relative upward mobility and relative downward mobility — the researchers determined that New York, New Jersey and Maryland performed best in the country. They were, in fact, the only three states that outperformed the country as a whole on all three measures.

Pending Home Sales (Contracts)
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Bergen County
April 2011 – 669
April 2012 – 813 (Up 21.5% YOY)

Essex County
April 2011 – 324
April 2012 – 402 (Up 24.1% YOY)

Hunterdon County
April 2011 – 100
April 2012 – 141 (Up 41% YOY)

Morris County
April 2011 – 397
April 2012 – 472 (Up 18.9% YOY)

Passaic County
April 2011 – 171
April 2012 – 260 (Up 52% YOY)

Somerset County
April 2011 – 284
April 2012 – 339 (Up 19.4% YOY)

Sussex County
April 2011 – 107
April 2012 – 140 (Up 30.8% YOY)

Union County
April 2011 – 333
April 2012 – 360 (Up 8.1% YOY)

Warren County
April 2011 – 75
April 2012 – 95 (Up 26.7% YOY)

Partly Sunny at the Shore

JOEL NAROFF, an economist who last year won a prize from the National Association for Business Economics as the country’s most accurate forecaster, found his prediction skills wanting four years ago when it came time to buy his own vacation house at the Jersey Shore.

“I was hoping we had gotten a good portion of the decline behind us and I was ready to make the move,” said Mr. Naroff, speaking of the house he bought in Margate in 2008 not long before Lehman Brothers crashed. The market had indeed skidded by then — but not anywhere near as much as it was about to. “I made what I thought was a reasonably low offer, but clearly we had not hit the bottom yet.”

Today, however, as the president of Naroff Economic Advisors of Holland, Pa., Mr. Naroff says he is confident that the market has truly bottomed out. And based on a recent flurry of activity at the Jersey Shore, he is hoping that he and his neighbors can start to turn the page on losses suffered these last few years.

“What we’re seeing now are very reasonable prices for expensive homes,” Mr. Naroff said. “The high-end real estate has come down to where people are getting back into it. The one-percenters have the money, and they’re seeing there are good deals out there.”

A few trouble spots aside, brokers up and down the shore seem to agree with Mr. Naroff. Randy Leiser, a sales representative with Avalon Real Estate, said the first quarter had been his agency’s strongest since 2006, with 97 new contracts so far this year, versus 75 in the first quarter of 2011 and 55 in the first quarter of 2010. Lee Childers, a broker-owner of Childers Sotheby’s International Realty, said the first quarter of 2012 had been very active for his office as well, but most activity was taking place in lower to middle price range.

“We’re still experiencing some drifting downward, particularly in the upper end,” Mr. Childers said. “There’s still plenty of seven-figure stuff sitting on the market.” He estimated overall prices at the shore in northern Ocean County were down 5 percent since last year, and 20 to 30 percent since the peak.
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eal estate activity has picked up, if a little less robustly at the shore than the rest of the state as a whole, according to Jeffrey Otteau, the president of the Otteau Valuation Group. Statewide, first-quarter sales were up 25 percent over last year’s; looking at the shore separately, activity increased by only 15 percent, Mr. Otteau reported.

But it is another story for prices. Overall pricing at the shore was down by 3.5 percent in March, as compared with March 2011. The picture is even less positive for the southern shore, where Mr. Otteau said prices were down 6.1 percent. In towns from Long Beach Island northward, the decline is more like 1 percent.
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Kevin Gillen, an economist with the Econsult Corporation of Philadelphia who studies real estate trends in the Philadelphia area and the southern Jersey Shore, said overall shore values were down by 30 percent from their height in the mid-2000s, and closer to 50 percent in Atlantic City. The latter, a year-round market as well as a vacation destination, has seen a severe drop in gambling activity since casinos opened in Pennsylvania. That decline in turn has hurt the housing market, Mr. Gillen said.

Another urban shore community that has suffered greatly since the downturn has been Asbury Park, whose market has been “decimated,” according to Gerald Scarano of Exit Realty. He said houses had lost 30 to 50 percent of their value since the heyday of the early 2000s, when gay New Yorkers discovered the city as a hip alternative to Fire Island and the Hamptons.

“The Good Ship Lollipop is stuck on a sandbar,” said Mr. Scarano, an investor turned broker who once earned tidy profits buying, renovating and selling homes in Asbury Park. As evidence of the continued weakening, he cited a 2,064-square-foot Dutch colonial in the desirable Deal Lake area that was listed six years ago at $775,000 and finally sold in March for $520,000. Nearby, a Victorian sold for $349,000 in late April, having started out at $469,000 last fall.
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Mr. Naroff says he doesn’t like to think about how much value his Margate home has lost, noting that such speculation is fruitless anyway. “It’s not a loss,” he said, “if I don’t have to sell.”

Report: Asking Prices Bode Well for Spring Sales

A report out Thursday says that strengthening asking prices for homes point to higher sales prices as early as June, which would be a welcome turn for the beleaguered sector.

Asking prices nationally were 0.5% higher in April than in March on a seasonally adjusted basis, said Jed Kolko, chief economist for home-listings company Trulia. Similarly, seasonally adjusted asking prices rose 1.9% over the quarter. Compared with this point last year, however, home price tags have only risen 0.2% nationally.

“When we look back years from now and try to figure out when the turnaround in prices actually happened, September 2011 is the time when prices look like they stabilized,” Mr. Kolko said.

The market may stabilize but it has a long way to go to reach pre-bust housing prices. As of February, the S&P/Case-Shiller indexes showed home prices dropping to new post-bubble lows. The 20-city composite index is hovering near late-2002 levels.

Trulia’s report tracks the most recent listing-price data in the largest 100 metro markets and takes into account comparable property types for a more apples-to-apples comparison. Month-to-month and quarterly data are seasonally adjusted to discount the typical springtime bump in prices. It also records year-over-year rent changes.

“It’s been a strong few months for housing, but some of that was frontloaded” during the winter months, when home construction and sales picked up because of unseasonably warm weather, Mr. Kolko said.

On the tenant side, rents have risen a more robust 5.6% nationally, according to Trulia, driven by job growth and a tightening rental supply in several markets. Would-be buyers are also being deterred by strict lending standards.

From Forbes:

Rising Home Prices: Coming to a Market Near You

Nationally, housing prices have bottomed and are on the rise. Asking prices on for-sale homes were 1.9% higher in April than one quarter ago. A 0.5% month-over-month rise in April, on top of month-over-month price increases in March and February, makes for three months in a row of rising asking prices, after adjusting for typical seasonal trends. In fact, prices have been stable or rising for the past eight months, except for a dip in December 2011. This marks a new milestone: asking prices were 0.2% higher in April than a year ago. Before April, prices were still falling year-over-year.
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Even within a metro area, neighborhoods have their own price and rent trends. This month we looked at trends within five large metros: New York, Los Angeles, Chicago, Washington DC and the San Francisco Bay Area.

In the New York area, prices rose year over year in Brooklyn, Manhattan and Staten Island, while declining in the rest of the region. But rents rose everywhere – both in the City and suburban areas.
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New York City Area
Borough or County Y-o-Y % Change in Asking Price Y-o-Y % Change in Rent
Brooklyn 2.4% 5.7%
Manhattan 1.1% 6.8%
Staten Island 0.8% *
Hudson, NJ (Jersey City) -0.2% 7.7%
Queens -1.6% 7.1%
Bronx -1.7% 4.7%
Nassau, NY (Long Island) -2.1% 4.5%
Bergen, NJ (Hackensack) -3.0% 2.0%
Westchester, NY -3.1% 3.4%

Renters Really Prefer Owning, Builder Survey Says.

A survey from PulteGroup — one of the nation’s largest home builders — has found a surprising result: Many renters want to buy homes.

Given the source, some caution is in order. Still, this comes as many builders and real-estate agents say the previously moribund housing market is reviving. In some markets, bidding wars – not seen since the housing market crashed – have returned. Rising rents may also be pushing people to consider buying, particularly given low home prices and mortgage rates.

Pulte’s survey found that, among renters who plan to purchase a home in the future, 60% have “increased their intent” to do so from a year ago, meaning they are inclined to hop off the sidelines. Half of those surveyed apparently “like being able to call themselves homeowners,” while 44% “view it as a good financial investment.” (That figure seems a bit high since home values are down by a third or more from the peak.)

More believable are the survey’s findings on why people aren’t buying: More than half think they don’t have enough money for a down payment, while nearly 30% believe renting is cheaper than buying. More than 20% cite uncertainty with employment status as a deterrent to buying a home.

America’s 10 Richest Counties

10. Westchester County, N.Y.
Average income: $128,127
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9. Morris County, N.J.
Average income: $128,371

Morris County, located about 25 miles from New York City, is another county within easy commuting distance to Manhattan. It includes Harding Township once named one of the richest zip codes in the U.S. by Forbes.

Morris County has numerous Revolutionary war-era historic sites, such as Washington’s Headquarters and Jockey Hollow, where the Continental army endured the brutal winter of 1779-80. The county’s unemployment rate for 2011 was 7.3, nearly 3 points lower than the state average of 10 percent according to the N.J. Department of Labor and Workforce Development.
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8. Marin County, Calif.
Average income: $128,544
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7. Somerset County, N.J.
Average income: $129,222

Somerset County is another wealthy location in the New York metropolitan area. Area companies include Johnson & Johnson, Verizon, Pfizer and UPS. Somerset includes the picturesque hilly town of Bernardsville, location of the former estates of Jackie Onassis, Mike Tyson and Malcolm Forbes.
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6. Fairfield County, Conn.
Average income: $130,074
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5. Hunterdon County, N.J.
Average income: $130,723

Hunterdon County is located in the northwestern part of New Jersey between this list’s No. 9 county, Morris, to the northeast, and No. 7, Somerset County, to the east. It’s more rural than its Central Jersey neighbors and is a destination for fishing and hunting white tail deer. In Hunterdon, commuters are split between New York City and Philadelphia.
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4. Fairfax County, Va.
Average income: $132,662
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3. Loudoun County, Va.
Average income: $134,098
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2. Pitkin County, Colo.
Average income: $134,267
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1. Nantucket County, Mass.
Average income: $137,811

Housing Ends Slide but Faces a Long Bottom

Nearly six years after home prices started falling, more U.S. housing markets appear to be nearing a new phase: a prolonged bottom.

Hitting a bottom, of course, isn’t the same as a full-fledged recovery, which is still years off for many housing markets—as well as for millions of people who purchased homes or took cash out during the bubble.

The good news is that housing construction and home sales appear to have hit a floor. Home builders cut back heavily in the past four years and began construction on just 434,000 single-family homes last year, the lowest level on record. Research firm Zelman & Associates estimates builders will start construction on 540,000 homes this year, a 24% increase.
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Sales of previously owned homes, meanwhile, are up 32% from their low point of mid-2010, when sales plunged following the expiration of home-buyer tax credits.

That leaves prices as the last measure that hasn’t yet stopped falling. But there are signs of progress on that front, too, as the pace of declines is slowing.

In February, home prices fell by 2% from their level of a year earlier, according to CoreLogic Inc., a real-estate-data firm. But after excluding foreclosures and other distressed sales, prices were down by just 0.8%, the smallest year-over-year decline since May 2010.

“If you remove the distress, you’re looking at housing prices not falling much further,” said Jonathan Miller, president of Miller Samuel Inc., a New York-based appraisal firm.

The problem, of course, is that foreclosures are still a very high share of sales in many of the hardest-hit markets.
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Housing economists are debating whether that shadow inventory will spoil any housing recovery. “That’ll be like a ball and chain,” said Mark Fleming, chief economist at CoreLogic. “It won’t prevent a recovery, but it could drag it out over several years.”
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Ms. Zelman, who was among the first to warn that the air had begun seeping out of the housing bubble six years ago, said the shadow inventory is “not going to result in the double dip that people always talk about.” She points to a burgeoning appetite for housing from investors, who are scooping up homes that can be converted to rentals, and six years of pent-up demand from traditional buyers who feel better about their financial prospects. “The fear is gone,” she said.
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Ms. Zelman, who was among the first to warn that the air had begun seeping out of the housing bubble six years ago, said the shadow inventory is “not going to result in the double dip that people always talk about.” She points to a burgeoning appetite for housing from investors, who are scooping up homes that can be converted to rentals, and six years of pent-up demand from traditional buyers who feel better about their financial prospects. “The fear is gone,” she said.

NJ Home Sales Up 25% YTD (Click for graph)

Home sales continued to surge in March as combined purchase-contracts for resales and new homes rose by 20% in March. YTD sales are now running 25% ahead of 2011 through Q1 2012 due to the combined effects of higher consumer confidence, low home prices and low mortgage rates. Another key driver for the increase is that home purchase affordability in New Jersey rose from 131% in Q4 2011 to 136% in Q1 2012, resulting in record high purchasing power for home buyers.

Through the first 3 months of 2012, home buyers have signed contracts to purchase 17,683 homes compared to 14,104 during the same period in 2011. Still more positive news comes from Unsold Inventory in New Jersey which stands 17% lower than one year ago. At the end of the 1st quarter there were 60,965 homes being offered for sale compared to 73,263 one year ago. This reflects a reduction of 12,298 homes including both resales of existing homes and new construction. The combined effects of a 25% increase in purchase demand with a 17% decline in Unsold Inventory are expected to stabilize home prices in 2012 and lead to modest price increases in 2013. One cautionary note is that sales pace has slowed in April due to rising asking prices.

Home buyers remain highly resistant to price increases at this stage of economic recovery which appears to be reducing the sales pace this month. Also affecting the April sales pace is that both Easter and Passover occurred during the month which had the effect of deferring some purchase demand into May.