Location, location, location, or something else?

Posted on January 16, 2012 by grim

From the Record:

Location still holds key to value

The decline in housing values has not fallen equally on all towns.

A Record analysis of home prices in the first half of 2011 (the latest available in public records) found that, overall, prices were down about 3 percent in Bergen and Passaic counties from the period a year earlier. (Prices are down 17 percent in Bergen and 21.6 percent in Passaic since 2007, when housing prices peaked.)

But in early 2011 at least, wealthier towns generally fared better than lower-income areas affected by the foreclosure crisis.

In addition, less-affluent towns were more affected by tighter mortgage standards and unemployment above 9 percent.

Geography played a role, too.

Towns in eastern Bergen County, close to the George Washington Bridge, also seemed to hold their value better from 2010 to 2011.

From the Press of Atlantic City:

South Jersey towns see more than 16 percent increase in vacant homes

U.S. Census reports show that while the number of total housing units increased nationally by almost 14 percent from 2000 to 2010, the number of vacant housing units ballooned by almost 44 percent.

Michael Busler, a fellow at the William J. Hughes Center for Public Policy at Richard Stockton College, says the gloomy trend may not have reached its end point. “It’s going to get a little bit worse before it gets better,” he said.

New Jersey’s numbers are just as striking — an increase in housing of more than 7 percent while the number of vacant units increased by more than 38 percent. One Essex County town, Belleville, for example, saw the number of vacant housing units jump 134 percent as the number of overall units went up just 1 percent.

Locally, 14 of 23 Atlantic County municipalities have seen the number of vacant housing units increase by 16 percent or more from 2000 to 2010. In addition, 11 of 16 towns in Cape May County and 10 of 14 towns in Cumberland County have seen a similar jump.

“People are becoming frustrated by the system, and a lot of them are walking away from properties,” said James Schroeder, an attorney and real estate agent with Keller Williams in Northfield. He cited statistics from the New Jersey Law Review stating that there were 1.5 million homes nationwide in foreclosure and ready for sale, another 3.5 million to 4 million within three to six months of being sold.

In the end, he said, his company believes that it will be another five to seven years before the traditional housing market picks up again.
…
Cape May County saw an overall increase in vacant units for sale, not seasonal, of 75 percent compared with just an 8 percent increase in total units.

Upper Township saw an increase of 232 percent (83 vacant units for sale in 2010 compared with 25 in 2000), while Cape May saw a 245 percent increase (38 compared to 11), Wildwood Crest a 442 percent increase (130 compared to 24) and Cape May Point a whopping 650 percent increase (15 compared to 2).

Nine Atlantic County towns have seen increases in vacant units for sale of 75 percent or more, including increases of 100 percent in Longport and Estell Manor, 111 percent in Buena Vista Township, 126 percent in Linwood and 204 percent in Somers Point — which saw the number of homes vacant and for sale almost triple, going from 24 in 2000 to 73 in 2010.

Nine other towns in the county have a double-digit increase in the percentage of vacant units for sale, leading to a 32 percent increase overall — in a county that saw just an 11 percent increase in total units.

In Ocean County, the number of homes vacant and for sale in Barnegat Township more than doubled (76 to 172). In Stafford Township, that figure jumped from 151 to 272.

Posted in Economics, North Jersey Real Estate, South Jersey Real Estate | 229 Comments

The other New Jersey housing market

Posted on January 13, 2012 by grim

From the NY Times:

Rural Areas Slower to Rebound

FOR whatever reason, homes sales picked up in New Jersey in the latter part of 2011. A new statewide market report shows contract signings increased in six of the seven months from May through November, compared with 2010.

Also, the inventory of homes for sale shrank every month since May, according to Jeffrey G. Otteau, an analyst, whose Otteau Valuation Group in East Brunswick does monthly reports for the real estate industry; he called the latest news a concrete sign that the market was “stabilizing.”

His December report was the first one in several years to sound a hopeful note. Until the state’s huge foreclosure backlog comes back on the market — and how fast that happens is important — the market may improve sometime this year to the point that prices stop declining and perhaps even modestly start to rise.

But that is the statewide picture. A great division in market fortunes between northern and southern Jersey — and urbanized areas close to Manhattan and more rural regions — became clear during the recent recession and remains stark in the fresh statistics. Mr. Otteau predicted that the gap would shape the timing and pattern of potential recovery, and several agents in the field agreed with him.

“Simply put,” said Dawn Rapa, a Coldwell Banker Elite agent working in rural Salem County, “the only people I’ve seen selling their houses recently are those who absolutely had to — because they were in financial disarray, a job change, divorce or death.”

Salem County, rich in historic houses and farmland but short on well-paying jobs or a quick commute to an urban center, has the largest inventory of all 21 counties surveyed: 44.5 months’ worth of houses, the preponderance of them priced under $400,000.
…
Several other counties in southern New Jersey have inventories about twice the size of the state average — 29 months’ worth in Cumberland County, 26 in Cape May County, and 24 in Atlantic County.

In Cape May and Atlantic, the primary backlog is for more expensive homes, many of them built in the boom years to appeal to shoreline vacationers. Atlantic has just shy of six years’ worth of inventory in the $600,000-to-$1 million range.

For homes priced from $1 million to $2.5 million, the Otteau report predicted, it will take more than four years to sell the inventory in Atlantic County and close to seven years in Ocean County.
…
The market misery is not all concentrated in the south, however. In the northernmost county, Sussex, the inventory is 20 months. In the $400,000-to-$599,999 bracket, five and a half years’ supply is already on the market.

In the town of Vernon, which is home to several popular ski areas, and where construction was booming in the mid-2000s, the average sale price of a home was $250,000 in 2007, according to the real estate Web site Trulia. Now the site has it at $100,000.
…
Nearby in the somewhat more affluent town of Sparta, a number of large houses built about a decade ago on one-acre or larger lots are now being offered at reduced prices or as short sales.

“Houses are selling,” said Catherine Kut, an agent at Weichert Realtors in Sparta, “but they have to be in fabulous condition and still occupied, as a rule.

Posted in Economics, Housing Bubble, Housing Recovery, New Jersey Real Estate | 220 Comments

January Beige Book

Posted on January 11, 2012 by grim

From the Federal Reserve:

Beige Book – Second District–New York

The Second District’s economy has grown at a somewhat faster pace since the last report, led by brisk holiday-season spending. Labor market conditions, as well as prices, have remained generally stable. Manufacturers report modestly improved general business conditions and steady employment since the last report, along with increased optimism about the near-term outlook. Retailers generally characterize holiday season spending as robust, particularly in the final days before Christmas and right after. Auto dealers report that sales have remained strong since the last report. Tourism activity has held steady at a high level. Conditions have generally remained stable in the housing market, though the rental market has continued to improve. Commercial real estate markets have been stable to moderately stronger in late 2011. Finally, bankers report increased loan demand, steady to somewhat tighter credit standards, and lower delinquency rates across the board.
…
Construction and Real Estate

Residential rental markets continue to strengthen, while real estate sales have shown little change since the last report and new development activity continues to be sluggish. New York City’s rental market remains tight: rents continue to rise, as the inventory of available units remains lean. Manhattan co-op and condo prices were little changed in the fourth quarter, while sales activity slowed from its fairly brisk third quarter pace. Market conditions were reported to be similar in Brooklyn but a bit softer in the other boroughs and on Long Island. On a more positive note, one industry expert in New Jersey sees improved fundamentals in the housing market and foresees a pickup in market conditions in 2012. Real estate contacts in other parts of the District also note some increase in optimism among developers.

Commercial real estate markets have been steady to somewhat stronger since the last report. New York City’s office market has picked up in late 2011, with office vacancy rates edging down and asking rents rising. There were also modest signs of improvement in Westchester and Fairfield counties and in the Albany area, whereas office markets in northern New Jersey and western New York State appear to have slackened modestly. Industrial leasing markets were generally steady overall: conditions firmed in Long Island but showed some signs of softening across upstate New York; in the rest of the District, conditions were little changed.

Posted in Economics, Housing Recovery, New Jersey Real Estate | 163 Comments

Additional info from the Corelogic November HPI

Posted on January 10, 2012 by grim

From CoreLogic (no link):

CoreLogic® Home Price Index Shows Fourth Consecutive Month-Over-Month Decline – Home Prices Down 4.3 Percent Year-Over-Year

Posted in Housing Recovery, New Jersey Real Estate | 151 Comments

CoreLogic: November home prices down 4.3% (0.6% excluding distressed homes)

Posted on January 10, 2012 by grim

From HousingWire:

Home prices decline 4.3% in November: CoreLogic

Home prices nationwide fell 4.3% year-over-year in the month of November, according to analytics firm CoreLogic in its November Home Price Index.

Santa Ana, Calif.-based CoreLogic said home prices declined 1.4% from October to November, making it the fourth consecutive monthly decline.

When excluding distressed home sales, prices year-over-year fell only 0.6%, compared to 1.6% in October. Distressed sales include all short sales and REO deals.

“With one month of data left to report, it appears that the healthy, non-distressed market will be very modestly down in 2011,” said Mark Fleming, CoreLogic’s chief economist. “Distressed sales continue to put downward pressure on prices, and is a factor that must be addressed in 2012 for a housing recovery to become a reality.”

Capital Economics expects prices to stop falling this year, although the recent acceleration in the rate of declines “will provide more support to those Fed officials who recently have championed more action to revive the housing market.”

“The current balance between demand and supply, as measured by how long it would take to clear all the homes on the market at recent rates of sale, is consistent with prices stabilizing in six months’ time,” according to the Toronto-based firm.

Posted in Foreclosures, Housing Recovery, National Real Estate | 166 Comments

2010 – Lowest property tax increases since 1992

Posted on January 9, 2012 by grim

From the Star Ledger:

Special Report: Did N.J. property tax reform help most taxpayers?

New Jersey homeowners paid an average of 2.4 percent more for property taxes in 2011, the smallest increase in nearly two decades, showing Gov. Chris Christie’s push to restrain local levies might be working.

A Star-Ledger analysis of taxes in all 566 New Jersey towns shows the average property tax bill was $7,758 last year, an increase of about $182 from 2010.

Although more than 82 percent of the towns saw some increase in their average property tax bills last year, the 2.4 percent increase was a significantly slower rate of growth, the newspaper found. In 2010, property taxes rose 4.1 percent and year-over-year increases topped 7 percent for three consecutive years in the middle of the past decade.

The last time property taxes rose by such a small rate was 1992, when they went up 1.9 percent, according to state figures.

Christie has made reining in New Jersey’s highest-in-the-nation property taxes a big goal of his administration. Along with the Democrat-controlled Legislature, he limited property tax collections for towns, schools and counties at 2 percent, starting last January.

“Am I satisfied? Of course not. Unless you told me it was 2 percent, I wouldn’t be satisfied,” Christie said in an interview. “But we’re making great progress. When you think that in the 10 years before I became governor, property taxes went up 70 percent in 10 years and now people are talking about 2-and-change increase, that’s great progress and progress that nobody else before we got here created in this state.”
…
The analysis found:

• In total, towns, counties and schools collected about $25.6 billion from taxpayers in 2011, a 2.5 percent increase from 2010.

• Loch Arbour Village in Monmouth County had the highest average property tax bill at $22,715. Tiny Tavistock Borough, Camden County, came in second with $22,297, followed by Millburn, where the average property taxpayer coughed up $19,989.

• The least expensive place to live in New Jersey was Walpack in Sussex County, where the average taxpayer paid about $514.

• Bergen, Morris and Union counties had the highest average property taxes in 2011. The average Bergen County taxpayer paid $10,317, a 2.6 percent jump from 2010. Morris County’s average bill was $9,644, while Union County overtook Essex for third place, at $9,493.

• The lowest county average was in Cumberland, where the average tax bill was about $3,419 in 2011, down 1 percent.

• Together, the three taxing authorities (towns, schools and counties) exceeded a 2 percent increase in collections in 312 towns, while 165 stayed within 2 percent and 89 saw the levy stay the same or decrease. In 2010, 529 towns saw an increase in their total tax levy, 425 of which went over 2 percent.

• Counties were more successful than towns and schools in keeping their tax levy below the cap.

Posted in New Jersey Real Estate, Politics, Property Taxes | 135 Comments

NJ downpayment size, 13.71%, highest in the nation

Posted on January 7, 2012 by grim

From the NY Times:

State Leads Nation in Down-Payment Size

BUYERS in New Jersey have the highest down-payment rate in the country, putting down an average 13.71 percent of the purchase price, according to a new report from LendingTree. That surpasses percentages in cities like Washington, and states like New York, Hawaii and California, though only by tenths of a point. In New York, the average down payment works out to 13.47 percent. The national average is 12.24 percent, for the year ending in November.

Of course, very few borrowers pay the average percentage, which is computed by figuring out the average down payment on conventional loans made by banks and government-insured Federal Housing Administration or Department of Veterans Affairs loans, which have down payment minimums of 3.5 percent.

Countrywide, about a quarter of all mortgage loans are government-backed, according to lending specialists.

State market experts offered various nuanced reasons for New Jersey’s unenviable top position on the list compiled by LendingTree, which tries to match borrowers and favorable mortgage deals. Most boiled down to this: There is more higher-priced housing in New Jersey than in most other states. The bigger a mortgage loan is, the greater the percentage that lenders now require in down payment.
…
Mortgage lenders have “definitely tightened loan requirements across the board in the last three years,” said Michael DiSalvio, the president of the Mortgage Bankers Association of New Jersey and an account manager for Genworth Financial. “We’ve learned our lesson.”

But he also said all of the roughly 75 banks belonging to the association offered some loans to qualified buyers of midpriced homes with just 5 percent down.

“We are stricter with credit scores for buyers,” he said. “Our limit is 660 to 670 from FICO, while the F.H.A. will take lower, maybe down to 640. We also have tightened the debt-to-income ratio; we keep it at 45 percent of buyers’ projected income, and F.H.A. will keep it at 55 percent. But 5 percent money is out there, it is widely available” among banks.
…
Sounding the same note as LendingTree’s founder and chief executive, Douglas Lebda, who announced results of the down-payment study last month, Mr. DiSalvio opposed federal regulators’ idea for a 20 percent down payment on conventional loans carrying the lowest interest rates. He said such a move would “suffocate” the housing industry.
…
“It would destroy us,” said Edward Walters Jr., the founding partner of the Walters Group, a development company that is building on 370 acres of the Pinelands region in southern New Jersey. (The Ocean Acres development where the Gallaghers bought their house is a part of it.)

Mr. Walters put it this way: “You don’t have to have a degree from Harvard to recognize that average people, making average salaries, paying normal utility and tax bills, figuring in the cost of food and gas, and considering loan interest rates of 5 or 6 percent, these people will not be able to afford a $350,000-to-$450,000 house — which is what about 80 percent of what our product is — if they have to come up with 20 percent down.”

Posted in Economics, New Jersey Real Estate | 46 Comments

Just a little more 2012 prognostication

Posted on January 6, 2012 by grim

From the Ledger:

Real Estate May Begin to Come to Life in 2012

The housing market — staggering under a slow economy and still paying for the excesses of the boom years — may start to stir to life in 2012.

But experts warn that a real rebound is still several years away.

“Our outlook is that things (in 2012) will be a little bit better than 2011,” said Patrick Newport, an economist with IHS Global Insight. “But that’s not saying much.”

Blame the economy, with unemployment topping 8 percent. If economic and job growth pick up in 2012, housing is likely to get a boost. But that’s a big “if.” IHS expects the U.S. economy to grow at an anemic 1.6 percent — or possibly even tip into recession as a result of Europe’s debt problems.

“Our view is that the economy isn’t going to grow fast enough to bring down the unemployment rate,” said Newport. “That’s one of the reasons that it will take the housing market another 1 ½ to two years to get back on track and start growing again.”

“People are not going to come out and make the most expensive purchase of their lives if there’s any uncertainty about their jobs,” said Robert Denk, an economist with the National Association of Home Builders, who predicts that home construction won’t return to normal levels until 2015.

And the housing market is still suffering a hangover from the wild times of 2004 and 2005, when questionable mortgage practices inflated prices to unsustainable levels, and allowed unqualified buyers to get into homes they couldn’t afford.
…
Newport expects prices nationwide to slide another 5 or 10 percent in 2012, as the foreclosure pipeline gets moving again, dumping distressed properties on the market. Foreclosed properties tend to sell at a discount of 20 to 30 percent, according to several studies.

Lower prices have left many homeowners (especially those who paid high prices at the market peak) owing more on their homes than the properties are worth.

Of course, the lower prices have also made it easier for buyers to afford homes. And once the foreclosure bottleneck is cleared, many low-priced properties will come onto the market, said Patrick O’Keefe, an economist with J.H. Cohn in Roseland, N.J.

“There will be a lot of opportunities for purchasers to get steeply discounted properties,” he said. He predicted prices will stabilize by the end of 2012.
…
During the 2007-09 recession, about 2 million fewer new households than expected were created, according to Denk, the economist with the National Association of Home Builders. And household formation has continued to be depressed since the recession ended, Denk said.

After losing their jobs (or their homes to foreclosure), millions of people doubled up with friends or relatives. At the same time, young adults stayed in their parents’ homes longer while they searched for good jobs.

But sooner or later, most of these people will create their own households, ratcheting up demand for apartments and homes.

Posted in Economics, Housing Recovery, National Real Estate | 150 Comments

Housing Bailout #307b – “Sacrifice for the greater good”

Posted on January 5, 2012 by grim

From HousingWire:

Bernanke calls for nationwide REO rental program

The government should consider helping the nation’s vacant, unsold stock of foreclosed properties by supporting initiatives to occupy.

Federal Reserve Chairman Ben Bernanke believes that one aspect should be a government support program that allows renters to move into those houses.

In a letter Wednesday to ranking members on the House Committee of Financial Services, Reps. Spencer Bachus, R-Ala., and Barney Frank, D-Mass., Bernanke said that inefficiencies in the foreclosure and mortgage origination processes are dragging on the economic recovery.

However, solutions are available, he added.

“Preliminary estimates suggest that about two-fifths of Fannie Mae’s REO inventory would have a cap rate above 8% — sufficiently high to indicate renting the property might deliver a better loss recovery than selling the property,” Bernanke’s staff writes in a supporting white paper.

“Estimated cap rates on the Federal Housing Administration’s REO inventory are a bit higher — about half of the current inventory has a cap rate above 8% — because FHA properties tend to have somewhat lower values relative to area rents,” they said.
…
In a scenario of declining house prices such as this, homeownership should be promoted, according to the white paper. Indeed, they argue that in many cases REO-to-rentals may be inappropriate. Yet unless mortgage origination requirements, with tighter underwriting standards, are loosened in the immediate future, borrowers may have little choice but to rent.

Furthermore, support for such a program will cost mortgage servicers, bond investors and even taxpayers. But it may be a sacrifice for the greater good.

Posted in Economics, Foreclosures, National Real Estate, Risky Lending | 222 Comments

First National Bank of Mom and Dad drives Gen-X purchasing

Posted on January 4, 2012 by grim

From NJBIZ:

In hurting market, first-time buyers depend on parents to secure a home

New Jersey’s struggling housing market and high unemployment rate among the 25- to 34-year-old set have driven those who want to fulfill the American dream of homeownership to the wallets of their parents and grandparents.

And with New Jersey tops in the nation for the highest average home down payment, according to data released by LendingTree, it’s no question why approximately one in five baby boomers have gifted money or co-signed a loan for their child or grandchild’s down payment on a home.

According to Jeffrey Otteau, president of Otteau Valuation Group, in East Brunswick, the expiration of last year’s homebuyer tax credits, tighter lending standards and low employment — compounded by boomers who put off retirement for 10 or more years — have had the greatest negative effect on first-time homebuyers, especially those younger than 34.

Despite an increasing number of buyers who can’t afford a first home without help from mom and dad, Rutgers University urban planning and policy development program director Robert Burchell, himself a boomer, said both parties can benefit when parents give money to their children for a down payment.

“If I didn’t give my son the $5,000 he needed 10 years ago to buy his first home — which ultimately allowed him to purchase two more homes on his own — then he would have needed $100,000 as a down payment for the house his lives in now, or else he would still be renting,” Burchell said. “I may have to give him a subsequent $10,000 to help him move to a better home for his family in the future, but knowing he can hold his own with finances otherwise — thanks to that initial $5,000 — is a huge payoff for both of us.”

Burchell’s decision is common in New Jersey. According to a recent survey by Better Homes and Gardens Real Estate, adults over the age of 45 with at least one child or grandchild older than 18 are most interested in giving money to their children, and least interested in co-signing a loan. More than two-thirds of boomers surveyed said they are willing to provide financial support for a down payment on their child’s first home, and those who had already provided funding are most confident they will do so again.

“The American dream is becoming more unattainable for those (ages) 18 to 34, who could very well have been first-time homebuyers in the past,” Otteau said. “But those with help from baby boomer parents still have a chance.”

Posted in Economics, New Jersey Real Estate | 186 Comments

Rent or buy? Either one it seems.

Posted on January 3, 2012 by grim

From HousingWire:

S&P: Buying, renting costs draw closer

An index from Standard & Poor’s shows a narrowing gap between the cost of buying a house and renting.

David Blitzer, chairman of the company’s index committee, said the rent-buy price ratio from October “shows not extreme favoritism” either way, as it moves toward a long-run average near 90.

S&P calculates the index using the 10-city composite of the S&P/Case-Shiller home price index, as well as the consumer price index for rental of a primary residence.

The most-recent HPI showed home prices declined about 1.1% in the 10-city composite for October from a month earlier.

The rent-buy ratio has a 1987 benchmark reading of 100. Vertical movement on the index indicates a price difference, with upward movement showing an increase in rental prices, and vice versa.

Rental costs peaked in the late 1990s when the index approached 120, and buying costs topped out at a reading near 50 in the housing boom of the mid-2000s. The index has moved closer to average levels since the ensuing housing bust.
…
In a separate measure, S&P said house prices fell in comparison to disposable income per person. The ratio fell to 90, well below the average value of 102 since 1987. “Houses are almost cheap” according to the measure, Blizter said.

Posted in Economics, Housing Recovery, National Real Estate | 136 Comments

2012 – Year of the bottom in housing?

Posted on January 2, 2012 by grim

From the Star Ledger:

The new year could bring opportunities for home buyers; market expected to improve by mid-year

Are we at the bottom of the housing market?

It’s the primary question on the minds of real estate agents and analysts. Have we hit bottom yet? Are we close? Or are we rebounding by now? It could be months or years before the numbers from home sales and prices prove any conclusion, but by that time the buyer-friendly market could be shifting back to the sellers’ favor, experts said.

“My read is, several years from now we’ll look back at 2012 as having been one of those rare homebuying opportunities that comes along once or twice in a generation,” said Jeffrey Otteau, a real estate analyst and president of Otteau Valuation Group in East Brunswick.

Prices and interest rates are low, and job creation is starting to look more positive, he said. Home sales could regain their footing somewhere around mid-2012 and begin to build from there, he said.

“The buyers’ lament will be, ‘I wish I had bought then,’ ” Otteau said. “By then, those buyers will be looking at higher prices and higher interest rates for the same houses.”

Various economic indicators released in recent weeks show a housing market that will face a bumpy recovery.
…
All the figures are making buyers wonder when is a good time to make a move.

“Buyers face this dilemma of ‘how long do I wait,’ and if they think prices are going down, ‘do I wait at all?’” said Gary Large, president of New Jersey Association of Realtors and branch manager of Prudential New Jersey Properties in Morristown.

“Trying to time the market,” Large said, “is very difficult and not a wise strategy.”

From a buyer’s perspective, that means understanding that “cheaper is not always better,” Otteau said. Houses listed at a bargain price will not hold their value as long as or rise as quickly as those that are near employment centers or transportation corridors, and the buyer will end up paying the difference in gas and commuting costs.

The trick to sell, industry leaders said, is to price a house properly. If the listing price is too high, offers could come in significantly lower or the house could stay on the market so long buyers think something is amiss.

“Sellers really have to be aggressive to get their homes sold,” Large said. “The buyers have so much information at their fingertips that they can spot an overpriced listing a mile away, and so they don’t want to look at it.”
…
Recovery will happen once buyers are confident again and decide that prices won’t drop any further, experts said.

That could happen as soon as mid-2012, and appreciation could start — slowly — by 2013.

“That’s really why people are on the sidelines,” Otteau said. “Prices have corrected, interest rates are cheap, job security is better than it was, but now the next question is, ‘Is the value of this asset going to go lower?’’”

“And by the time the public gets comfortable with that,” he added, “prices will have already started rising.”

From CNBC:

Housing’s New Hope

I’m not sure if it’s that usual New Year’s Eve optimism evoked by the generic philosophy that the grass is always greener on the other side of the calendar year, or perhaps the emotional need to dig ourselves out of what has surely been one of the more lugubrious periods in the U.S. economy, but there is some hope in housing.

A few positive readings in home sales and housing starts recently, topped off by today’s 7.4 percent monthly jump in contracts to buy existing homes, are fueling what I dare say is a spark, albeit not a fire. They are also managing to trump what was a particularly opposing reading in home prices from the number crunchers at S&P/Case-Shiller this week.
…
Then there is a big story in the Wall Street Journal today of hedge funds putting their money back in housing, suggesting that while the numbers aren’t all there for a big win, these funds are usually ahead of big market shifts, so the housing surge must be on its way. I’ve spoken to some of these hedge fund types as well, and they seem to be playing on the surging rental market for now, getting the bargains but not expecting any big “flipping” returns any time soon.

“Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing,” says Peter Boockvar at Miller Tabak. “I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.”
…
It’s all relative. Are things getting a bit better? Probably. I heard (or read…can’t remember) someone today say that housing has gone from a negative to a nothing for the U.S. economy. So when we tout and rave about today’s pending home sales numbers, we mustn’t forget where we’ve been:

“It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,” said IHS Global Insight’s Patrick Newport. In other words, housing ain’t exactly fecund, but it’s at least inching off life support.

Posted in Housing Recovery, National Real Estate | 121 Comments

Predictions 2012!

Posted on December 31, 2011 by grim

This is becoming a tradition around here, so here we go again! You know how this works, break out the crystal balls and prognosticate.

Ground Rules

Review the Predictions 2011! thread, and if you did make a prediction, please post it here so we know how you did (please do not skip this step). Predictions provided should either be for June 30th, 2012 or December 31st, 2012, please specify.

Provide justification for your forecast, where applicable (unless you are just making it up, if so, state that).

You may provide any caveats and/or assumptions that your forecast is based on.

You need not provide a forecast for all categories below.

Where applicable, forecasts are judged against the surveys/reports listed.

Real Estate
National
Existing Home Sales – NAR
Existing Home Price – S&P Case Shiller HPI
Existing Home Price – OFHEO HPI

New Jersey
Existing Home Sales – NAR/NJAR
Existing Home Price – S&P Case Shiller HPI
Existing Home Price – OFHEO HPI

National New Home Sales – NAHB
Median New Home Price – NAHB

Commodities
Energy (Oil, NatGas)
Metals (Gold, Silver, Copper)

Equities
United States
International Developed Markets
Emerging Markets

Mortgage Financing
30-Year Fixed – Freddie Mac PMMS
15-Year Fixed – Freddie Mac PMMS

Macroeconomic
10y Treasury
Fed Funds Rate
National Unemployment Rate
New Jersey Unemployment Rate

Oddball
Anything else you’d like to make a prediction about.

Posted in General | 100 Comments

November Contracts Surprise – But can we believe the numbers?

Posted on December 30, 2011 by grim

From the WSJ:

Pending-Home Sales Hit 19-Month High

The housing market showed signs of improvement as the number of Americans signing contracts to buy existing homes increased in November to the highest level in 19 months.

The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes increased 7.3% on a monthly basis to 100.1, the industry group said Thursday. Sales increased in all four regions of the country.

Economists surveyed by Dow Jones Newswires had expected pending-home sales would climb by 0.5% in November. November’s 100.1 level was the highest since April 2010.

The NAR credited the increase partly to pent-up demand from buyers who have been on the sidelines for months and may have previously failed to obtain a mortgage.

“Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” the trade group’s chief economist, Lawrence Yun, said in a statement.

The NAR’s pending sales gauge is 5.9% above its level in November 2010.

From Bloomberg:

Pending Sales of U.S. Existing Homes Rose 7.3% in November

The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand.

The index of pending home sales increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1.5 percent gain, according to the median estimate in a Bloomberg News survey.

The industry that triggered the 18-month recession that ended in June 2009 is showing signs of stabilizing as construction picks up, builder confidence improves and the number of houses on the market declines. Nonetheless, another wave of foreclosures may weigh on real-estate values next year.

“It looks like buyers are becoming more confident and are attracted to record-low mortgage rates,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. At the same time, he said, “activity still looks depressed by historical standards.”

Estimates for pending home sales ranged from a drop of 3 percent to an increase of 11 percent, according to the median of 30 forecasts in the Bloomberg survey.

Pending home sales were up 6.9 percent from November 2010. (this is 5.9, not 6.9 – jb)

From HousingWire:

Pending home sales up 7.3% in November

Pending home sales — a measure of mortgage contracts signed and an indicator of possible home closings – increased 7.3% in November from October, reaching its highest level in 19 months, the National Association of Realtors said Thursday.

The trade group’s pending home sales index hit 100.1 in November, up from a revised 93.3 for October and 5.9% higher than 94.5 a year earlier.

The last time the index score topped 100 was April 2010 when it hit 111.5, which was buoyed by the effects of the federal homebuyer tax credit.

Lawrence Yun, NAR chief economist, said November’s gain is likely due to delayed transactions that stalled over mortgage contracting issues.

“Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high,” Yun said. “Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage.”

Posted in Economics, Housing Recovery, National Real Estate | 135 Comments

Time: What mattered in 2011 – Grim: What really mattered in 2011

Posted on December 29, 2011 by grim

From Time:

5 Events that Really Mattered for Housing in 2011 – and Beyond

Government, the mortgage industry and forces of nature all shook the housing market in 2011. They had both an immediate impact and slow-burning effects, setting the stage for a bumpy 2012 with more foreclosures, political battles and local market risks.

1) Robo-Signing Reverberations
…
What Really Mattered: The threat of robo-signing lawsuits made banks gun-shy about pursuing foreclosures in 2011, which left many homes stuck in the foreclosure process. But once a settlement is reached, we’ll see a rush of foreclosures in 2012.

2) The Debt Ceiling and the Budget Deficit
…
What Really Mattered: After the debt ceiling debate, the back and forth deliberations by the unsuccessful bipartisan deficit-reduction supercommittee teased us with some proposals that will surely rear their heads again. One idea that both Republicans and Democrats didn’t totally disagree about was reducing the mortgage interest and other tax deductions. If and when that happens, high-income homeowners with mortgages would pay a lot more in taxes.

3) The Expansion of HARP
…
What Really Mattered: Borrowers who strategically fell behind on their payments in hopes of negotiating a loan-modification won’t be helped. What this plan will do is stimulate the economy without having to get Congress to agree on additional stimulus.

4) Natural Disasters Cause Insurance Disaster?
…
What Really Mattered: In flood-prone areas, you can’t get a mortgage if you don’t have flood insurance. Without NFIP, housing markets in these areas would skid to a stop. As part of last week’s payroll tax agreement, the program got a last-minute extension until May 2012, but its future remains uncertain.

5) Lowering the Conforming Loan Limit
…
What Really Mattered: Mortgage lenders are willing to charge lower rates for loans that are backed by Fannie or Freddie; with a lower conforming loan limit, a small number of loans that used to qualify for federal backing no longer do.

From Grim:

What Really Mattered for Housing in 2011

1) Continued decline of prices

How can you possibly overlook the continuation of the housing decline into it’s fifth year? This is, undoubtedly the single most important event for housing in 2011.

2) Stabilization of prices

Not to sound contradictory, but the decrease in the overall rate of decline (Second derivative? Don’t crash if you are reading this on your phone in the car morning) in spite of numerous negative forces (double digit U-6, slow to no job or income growth, etc), and without significant market influence (homebuyer credits, etc) does point to an overall stabilization in pricing.

3) Disconnect between mortgage rates and housing demand

I think these one can finally be put to bed this year. Extremely low mortgage rates do not necessarily lead to an increase in housing purchase activity. For years the thought was a lower price of housing capital (interest) would lead to greater demand for it. Turns out this isn’t the case and Greenspan’s greatest play simply can’t be repeated.

4) Slow Economic Recovery/High Unemployment

Probably the biggest single external influence on the housing market? Nothing more needs to be said here.

5) Bailout Capitulation

Finally the year that the housing bailout went out of style. Realization sets in that other than shoveling dollars into buyers pockets directly, which at best only elicits a temporary boost in housing, there just isn’t a scheme that’ll fix the market.

Posted in Economics, Housing Bubble, Housing Recovery, National Real Estate | 134 Comments