New Jersey Real Estate Report

From the WSJ:

Finally, It Is Time to Buy a House

Warren Buffett famously once said: “Be fearful when others are greedy, be greedy when others are fearful.”

And if you’re not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren’t keeping you awake at night, either.

The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored a gain, inching up by 0.4%.

Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.

In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.
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Here’s where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.

Foreclosure rates have leveled off, but market analysts believe an increase is likely.

Here’s why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.

Finally, a housing recovery won’t happen, or could be snuffed out, by a rotten economy. There’s never been significant growth in housing with high unemployment. And as Dow Jones’s Kathleen Madigan noted, “Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant’s solid income history before lending.”

There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.
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Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor’s time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it’s time to be greedy.

From the WSJ:

Are Home Prices Rising? A Price-Index Primer.

Look for the S&P/Case-Shiller index to post a year-over-year decline of 1% when the latest results are released Tuesday, according to estimates from Zillow.

That would be the smallest decline in two years, when a short-lived run-up in home prices evaporated after federal home-buyer tax credits expired. Prices have been in negative territory ever since, as housing markets have struggled with a surfeit of homes and anemic demand.

But price declines are easing — and several other indexes are now reporting year-over-year gains — as the supply of homes for sale has fallen sharply. Those inventory declines, coupled with a modest uptick in demand, have helped stabilize home prices.
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What the numbers show: S&P/Case-Shiller reported a 1.9% decline for April home prices from one year ago. Prices were up by 1.3% from March, though the increase was around 0.7% after adjusting for seasonal factors.
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What the numbers show: The FHFA house price index reported that prices rose in May by 3.7% from one year ago. Prices were up by 0.8% from April on a seasonally adjusted basis.
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What the numbers show: CoreLogic, a data firm, reported that prices rose by 2% in May from one year ago. On a month-over-month basis, prices rose by 1.8% from April. Those figures aren’t seasonally adjusted.
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What the numbers show: Home values rose in June by 0.2% from one year earlier, the first year-over-year gain recorded by Zillow since October 2007.

From the WSJ:

Is This What a Housing Bottom Looks Like?

Another housing report shows that market activity is up considerably from one year ago but easing off of the levels set by a surge of transactions earlier this year.

A report Thursday by the National Association of Realtors showed the index of pending home sales, reflecting deals that have gone into contract but haven’t yet closed, fell in June by 1.4% from May, though activity was still above the level of one year ago by 9.5%.

The report is the latest indication of an uneven housing bottom — things aren’t getting better rapidly, but we’re also not in the “hold-your-hat” declines of 2010 or the “spring that never materialized” of 2011. The report is also a reminder that a recovery will have trouble taking hold without meaningful job and wage growth, which has slowed in recent months.

June’s reading is slightly below the level set in both March and May of this year. But it is better than any reading in 2011 and better than all but two months in 2010, when federal tax credits spurred a burst of sales activity. It was the highest level for the month of June since 2007.
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After a strong start to 2012, other sales indicators have hinted at a slowdown in June. New-home sales fell by 8.4% from May, though they were still up by 15.1% from one year ago, according to a report Wednesday. Last week, the Realtors reported that sales of previously owned homes in June fell by 5.4% from May, though they were 4.5% the level of one year ago.

Both Thursday’s pending sales report and earlier reports that builder confidence is at a five-year high don’t quite fit with the recent sales drops. The Realtors have increasingly blamed smaller sales volumes on the dearth of attractive inventory. For-sale inventories in June were down 24.4% from one year ago, the largest annual drop in at least 30 years.

The market faces other challenges: Many buyers can’t qualify for mortgages because they have too much debt. And many sellers can’t sell their house because they owe more than it is worth, depriving the market of all-important “trade-up” buyers. Both of these problems won’t be fixed overnight.

Prices are rising, however, because the number of homes for sale is down sharply from one year ago in many markets.

From the WSJ:

Home Prices Reflect Strengthening

Home prices in the second quarter rose from the year-ago period for the first time since 2007, according to a closely watched index, the latest indication the housing market is starting to recover.

The report, which is scheduled to be released Tuesday by real-estate firm Zillow Inc., found that for the quarter ending in June, home values were up 0.2% from the same period in 2011.

While other indicators have shown home prices turning up since the spring, most examined short-term changes from one month to the next. Other indexes reported gains in median sales prices, which can be skewed based on the type of homes that are sold. But Zillow measures prices of comparable homes in the same community, which some economists say provides a truer picture of market trends.

Nearly one-third of the 167 metropolitan areas tracked by Zillow posted annual price increases for the second quarter compared with the year-ago period. Prices rose fastest in cities with fewer homes for sale and strong investor demand.

“It seems clear that the country has hit a bottom in home values,” said Stan Humphries, Zillow’s chief economist, who had previously forecast that housing wouldn’t hit bottom until late this year or early in 2013. The fact that the gains came during a period in which the economy wasn’t very strong suggests “there’s some fundamental organic strength to the housing market,” Mr. Humphries said.

From Bloomberg:

Sales of Previously Owned U.S. Homes Probably Climbed in June

Sales of previously owned U.S. homes probably rose in June, a report may show today, a sign the recent pickup in demand will be sustained.

Purchases climbed 1.5 percent last month to a 4.62 million annual rate, matching April as the fastest since January, according to the median forecast of 76 economists surveyed by Bloomberg News. Jobless claims increased last week, another report may show.

Mortgage rates at all-time lows and a drop in prices have made properties more affordable for Americans with access to credit. At the same time, the recovery in the housing market will take time as the economy is slow to create jobs and lingering foreclosures put more homes on the market.

“We’re past the bottom and slowly recovering,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “We might have one more bout of price weakness ahead when the foreclosure pipeline empties later in the year, but investor demand is strong and we’ll absorb that.”

The report from the National Association of Realtors is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 4.46 million to 4.75 million.

Federal Reserve Chairman Ben S. Bernanke is among those who say the housing market is improving.

Growth in construction and “historically low mortgage rates” are among “modest signs” of a housing recovery, even as some buyers show concern about personal finances and the broader economy and have difficulty meeting lending standards, Bernanke told the Senate Banking Committee this week.