Missy's Real Estate News

How Many Cars Do You Own?

I  found this to be an interesting tidbit of information.  It's always interesting to see the connections drawn as problems arise.

According to Realtor.org, "A study entitled “Location Efficiency and Mortgage Default”, the authors analyzed performance data on 40,000 mortgages in Chicago, Jacksonville, and San Francisco, and found that the probability of mortgage foreclosure increases as neighborhood vehicle ownership levels rise."

Makes one wonder what the next correlation will be!

 Households and Housing Units

Source: U.S. Census Bureau.

  "Copyright National Association of REALTORS®, Reprinted with permission."

"The reason NAR concentrates on the median instead of the mean is because the mean value calculation has a limitation that can prevent it from reflecting an "average." In calculating home sales price statistics this limitation occurs when the sale price of one home varies greatly from the remainder of the homes. This can skew the average."

"To find a median value, one takes all of the values in the distribution, sorts in ascending order, lines them up and finds the middle value."

• 75.0 million housing units were owner-occupied in the fourth quarter of 2009. This is lower than the peak number of owner-occupied units, 75.9 million, reached in 2006, but the number has stabilized after a general decline in 2007 and 2008.
• The Census Bureau combines data from the Housing Vacancy Survey and Current Population Survey to arrive at these estimates.
• The US home ownership rate in the fourth quarter of 2009 was 67.2 percent. The home ownership rate peaked at 69.2 percent in 2004.
• Looking at a longer perspective below, we can see how extraordinary the recent stagnation in the number of owner-occupied housing units has been. Other than a decline resulting from a measurement adjustment in 2000, only one quarter in 1982 saw a year over year decline in the number of owner-occupied housing units.
• While there were eight quarters of year over year decline in the number of owner occupied housing units beginning in mid 2007, the data released in the fourth quarter of 2009 shows two consecutive quarters of year over year growth.

"Copyright National Association of REALTORS®, Reprinted with permission."

Each month a number of Realtors® respond to a questionnaire describing their experiences with current market conditions. The information is subsequently compiled and presented in the Realtors® Confidence Index Report. Of particular interest is the variety of additional comments that the respondents provide. These responses are generally brief, to the point, and highlight Realtor® views on the most important issues. Issues highlighted in the January 2010 survey responses are summarized below, and an illustrative selection of the approximately 1,000 comments follows.

Key Issues for REALTORS®

• Appraisals: Respondents reported that the appraisal process continues to be a problem, with out-of-the-area appraisers in some cases providing inaccurate appraisals and using inappropriate comps. The comps issue was highlighted in many cases.
• Distressed Property: The major issue identified in the comments focused on the length of time required to complete a transaction. There appeared to be consensus that in many cases the banks/financial institutions delayed the process unnecessarily and/or were not responsive to the customer.
• Mortgages: Obtaining a mortgage is reported to continue to be a problem, given tighter credit standards and a perception that some lenders are not customer responsive. Many Realtors® reported that financial institutions were just not customer responsive.
• First-Time Buyers: There appeared to be general agreement that the first-time buyer tax credit had been a help.
• Buyers Downsizing: For the first time we obtained a number of comments describing buyers’ desire to downsize their space demands in order to conserve energy and save money.
• Market Conditions: Realtors® reported that the bottom -half of the market, price-wise, has been active, while the upper end continues to be very slow . We appear to have several segmented markets: foreclosure/non-foreclosure, and lower price/higher price. A number of people noted that foreclosures had a negative price impact on non-foreclosures, and that non-foreclosures tended to sell more slowly due to less price discounting. According to respondents, while foreclosures are absorbed by the market relatively quickly, frequently in competitive bidding processes, the length of time to complete short sales continues to be excessive.
• Job Market: There seems to be agreement that the actual or perceived lack of jobs is having a major negative impact on the market

Representative Comments:

Appraisals

• Appraisal problems are not allowing any stabilization to occur and are driving declining values down even further.
• The Appraisal process is very difficult as far as comparable sales.
• Appraisals have become more difficult. My latest appraisal came in quite low because there were no ranch style homes that sold within 1 mile of the property. Comps used were in less desirable areas.
• Appraisers are using foreclosures and short sales for comparables.
• Many appraisers are selected from distant cities and do a miserable job selecting comps.
• Appraisals are keeping prices lower than need be.
• I do appraisals of residential homes. The new federal government regulations are now slowing the mortgage process and are having a negative impact on my business.
• We are selling houses, but they are not appraising—appraisers are from out of area and using REO’s for comps.

Distressed Property

• Aggressively priced short sales in good condition are commanding above asking and multiple offers.
• Short sales are impossible. Short sales usually take too long….odds are good that sale won’t close by 30 June for homebuyer credit.
• Short sales take too long—90 to 120 days.
• There really needs to be some sort of standardization in the handling of short sale and REO properties
• There is multi bidding going on for short sales in this area
• Short sales take forever.
• Short sales are a problem in this area.
• Foreclosed homes with financing help are the only activity we are seeing. Prices are under great pressure.
• Foreclosures are affecting the pricing, sending the appraisals lower based on sales of foreclosures.
• REO’s are priced so low that it causes a blind auction that I have been unable to compete with.
• We have many more foreclosure listings in the higher price ranges.

Mortgages

• Banks or lending institutions are almost impossible to deal with……..bunch of morons.
• Deals are taking longer to process through the Mortgage lenders because of added required documentation.
• Debt ratio just lowered 10 percent throwing out some who were previously qualified.
• FHA still seems to be the mortgage produce of choice. Even so, this prohibits moderate income buyers because of a lack of savings. Tighter credit underwriting requirements also make it harder for moderate income buyers to participate in the market.
• FHA transactions have become problematic due to appraisal and other property condition restrictions including objections to items contained in Homeowner Association deed restrictions and covenants.
• Higher end buyers are challenged to get non conforming loans
• It is extremely hard to get a buyer qualified. Even ones with decent credit are being declined for issues that may have happened 5-6 years ago—with strong credit since the issue.
• Banks are taking too long; waiting to hear back from a September cash offer.
• Major complaint of my buyers is that the banks are not responsive at all. I have had 3 deals fall apart because the banks were taking too long to make a loan decision.
• Getting a mortgage approved is a horrendous task.
• Stupid banks.
• The mortgage industry has gone to the extreme for documentation.

First Time Buyers

• The first-time home buyer credit has made a huge difference in increasing sales over the last year in our county by 4 percent. Prices are dropping to meet the price ranges of these first-time home buyers since they are the majority of the market….The $6,500 tax credit has had little effect since most buyers who are ready to sep up have a home to sell….
• A lot of people are listing this early this year to take advantage of the tax credits that are still in place.
• First time home buyer $8,000 has been, and continues to be, a strong motivator for purchasing in the $100-$250K range.
• There are first time homebuyers, but they can’t get loans due to changes in credit scores and/or lack of down payment.

Downsizing

• I believe that smaller sized homes will be the new trend.
• A large section of buyers in the market are moving down to smaller more affordable housing.
• Almost all of my buyer clients are asking about average monthly utility bills. That was not the case two years ago.
• Buyers seem to be more considerate of buying smaller homes for fear of upkeep including utility costs.
• Clients want to downsize due to the current economic conditions due to the fact it does not look like anything is improving.
• Green technology seems to be very popular with buyers of all ages.
• Homes are getting smaller. Energy costs are out of sight.
• McMansions are dead….

The Market

• Anything under $100,000 in good condition usually sells within a week and half the time has multiple bids.
• As you know, the homes over $300,000 are like zombies—very little movement.
• Buyers are putting in unrealistic low offers due to all the press about foreclosures and short sales—on regular properties.
• Buyers are unrealistic as to price and sellers won’t put their homes on the market for fear they won’t get what they want.
• Every townhouse or condo has multiple offers on it. It is a matter of price and availability. The number of months of inventory is very low, around 1.5 months.
• I have a well priced home that received 7 bids in about 3 weeks. It is all about pricing.
• The upper range of the market is suffering—the expensive market is sluggish.
• Homes over $900,000 are still in downward pricing.
• In the $250K and under range I have experienced multiple offers on properties that I have shown.
• It is about job stability. Once we have that, housing will improve.
• Jobs seem to be the key.
• Multiple offers the norm—there is a lack of inventory.
• Sellers still think they can get top dollar for their properties without regard to today’s numbers. They then let it sit on the market as a way of “getting their price” and then get testy regarding the market.
• Almost no hope for a traditional seller right now. They cannot compete with bank pricing.
• This is a split market based on price. Above $200 K, sales prices are almost comatose.
• The smaller, less expensive homes are selling quickly, possible multiple offers.
• Buyers all want to make low-ball offers on the more expensive homes.
• Due to the high unemployment rate it is very difficult for buyers to have any hopes of purchasing a home for 2-5 years.
• 11 percent unemployment and increasing gas prices are killing our market.

  "Copyright National Association of REALTORS®, Reprinted with permission."

Did You Know: Home Purchase Method

Source: National Association of Realtors® 2009 Profile of Home Buyers and Sellers

• Did You Know: Net Household Wealth

• The median value of home equity for homeowners was nearly 10 times the median value of stock wealth for stockholders at the end of 2007.
• Among seniors, home equity makes up a large portion of portfolios, accounting for 26 percent of household wealth among all elderly and 59 percent among the low-income elderly in 2007.
• The Federal Reserve estimates that real home equity fell by $2.5 trillion in 2007 and 2008- BUT still these declines combined are less than the $5.3 trillion plunge in the real value of stocks and mutual funds held by households in 2008.

Source: The State of the Nation’s Housing 2009, Joint Center for Housing Studies of Harvard University

"Copyright National Association of REALTORS®, Reprinted with permission."

The Home Ownership Rate

The home ownership rate released this week by the Census Bureau as part of the Current Population/Housing Vacancy Survey showed that 67.2 percent of Americans owned their homes at the end of 2009. This is a statistically significant decline from the third quarter of 2009, but not statistically different from the rate at the end of 2008. The graph below shows the home ownership rate over the past 10 years. The rate increased in the first half of the decade, peaking in 2004 and holding through 2005. In 2006, the rate began a decline that has largely stabilized in 2009. From its peak in 2004 of 69.2, to its current 67.2 percent the rate declined by 2 percentage points.

More Home Owner Households Today than in 2004

Based on that information, you may be surprised to hear that in at the end of 2009, there were actually more home owning households than there were in 2004. Population growth leads to increasing households. Based on the interaction between the home ownership rate and number of households, the number of home owning households actually peaked in. After a drop-off in 2007, the number of home owning households has been roughly steady.

Growth in Housing Units, Households, and the Number of Home Owners

The survey also provides information on the housing stock that is used to examine changing vacancy rates. The housing stock has grown fairly steadily over the last decade. The number of households has grown slightly less steadily. If we focus on growth rates in households and housing units, as in the chart below, the picture is clearer.

The year over year growth rate in households has fluctuated between 0.1 and 1.9 percent while the year over year growth rate in housing units has varied only between 0.9 and 1.5 percent. Looking at the start of the recession in December 2007, we see that growth rates in both households and housing units began to fall prior to the recession and continued to decline into 2008. The growth in households was variable but generally higher in 2009 than in 2008. The growth rate of housing units stabilized in mid-2008 at a lower level than any other time throughout the decade as builders cut back due to diminished demand and lower prices.

Demographic Factors Drive Changes in the Growth of Households and Home Owners

What drives changes in the number of households? Changes in the number of households are largely based on population changes. There is some adjustment at the margin for children who delay leaving their parents' home to establish their own household or single-householders who decide to have a roommate during more difficult economic times, but these impacts are small in comparison to bigger population trends. The recession will have a more lasting impact on households if reduced opportunity prevents immigration to the United States.

"Copyright National Association of REALTORS®, Reprinted with permission."

Foreclosed Fannie Mae Homes May Qualify for Closing Cost Assistance

The offer of assistance is good through May 1, 2010.  Buyers have the option to choose help on their closing costs or an equivalent amount for appliances.

Fannie Mae, the largest U.S. mortgage-finance company, is offering buyers of its foreclosed homes up to 3.5 % in closing-cost assistance to help clear up an inventory of properties acquired during the housing downturn.

Fannie Mae has been working to reduce its inventory of foreclosed homes, which has risen amid a three-year housing slump in which home prices have been decreasing. The move is designed to foster sales in a still struggling housing market.

Terry Edwards, Fannie Mae’s executive vice president of credit portfolio management stated that, "Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover.  Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help."

The company sold 89,691 foreclosed homes in the third quarter, up from 39,864 in the previous period, it said in its most recent quarterly filing. Fannie Mae had 72,275 such homes, called real-estate-owned properties (REO), as of Sept. 30, 2009.

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.  It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Read this interesting article from CNNMoney.com for more details.

Did You Know: Value of Real Estate held by Households

By Danielle Hale, Research Economist

• After nine consecutive quarters of decline, the aggregate value of household real estate has increased for the second quarter in a row. The market value of household real estate as reported in the third quarter of 2009 is $16.5 trillion, up $850 billion since the first quarter according to Federal Reserve Flow of Funds data. The improvement is mostly due to stabilizing prices. While stabilization is encouraging, the value of real estate is at a level last seen in 2003 meaning that many households have seen a substantial reduction in wealth from the 2006 peak.
• At its peak, the market value of residential real estate was $22.9 trillion. At that time, the replacement value of household real estate was $14.2 trillion as estimated by the Commerce Department. Current replacement value of household structures is estimated to be $13.3 trillion.
• These numbers are subject to revision. The Federal Reserve uses a weighted repeat-sales index of house prices to assess the market value of household real estate. Weighted repeat-sales price indexes help avoid measurement error found in a pure median price series which captures changes in the value of real estate but also changes in value if the types of properties for sale in one period are different than properties for sale in another period (i.e. larger or smaller; in better or worse locations; older or newer).
• One drawback of a weighted repeat-sales price index is that it can lead to substantial revision and these revisions can stretch back significantly to the past. In data released in December, figures for the aggregate value of household real estate changed, falling by as much as $2 trillion in the most recent quarter and increasing by as much as $300 billion in 2004—nearly 2 percent. These revisions mean that the run-up in values and subsequent decline are even sharper than previously measured—according to this method

February 1, 2010

Ken Fears, Manager of Regional Economics

There is no national housing market, only a collection of regional and local markets each with its own dynamics. Some markets entered the national housing recession earlier than others and are now beginning to emerge, while others are stymied with deep inventories. A few markets experienced a harsh slowdown followed by an equally strong rebound, while others only slowed without a resurgent jolt back to "normalcy". Where is your market? The Local Market Reports for the third quarter are now available on the NAR Research website and they provide valuable insights into regional trends developing around the country.

The markets hardest hit by the subprime mess are clawing their ways out of what were steep housing recessions. Sales volumes in California, Minnesota, and Virginia surged in late 2008 and early 2009 and have plateaued at high levels, while sales in Florida and Nevada continue to grow rapidly. Inventories in these areas remain elevated, so high levels of demand are needed to reduce excess supply and stabilize prices. However, foreclosure rates are high and growing in some cases as shown in the table below. Several markets in Florida and Nevada have seen foreclosures on prime loans jump by double digits compared to last year and are rising. To add to the problem, the delinquency rate on prime mortgages, a strong indicator of future foreclosures, increased between February and August in nearly all of these markets.

The sales boom pushed prices onto the path of stabilization in many of these markets. Price growth is still negative in most markets in California, but the rate of decline has moderated and is nearly flat. For instance, the median price in San Diego fell 20.0% between the third quarter of 2007 and the same period in 2008. But over the 12 months ending in the third quarter of 2009, prices had declined just 3.0%, an indication that increased demand has helped push the market toward a new price-equilibrium for that market and that positive price growth, if only modest, is the likely next step.

New England and the Northwest both experienced substantial price corrections, but on a much smaller scale than those states that were the epicenter for the subprime crisis. As a result, markets in New Jersey, Connecticut, Pennsylvania, Massachusetts, New Hampshire, Washington and Oregon have undergone steady sales growth from the third quarter of 2008 through the same period in 2009, but not the volcanic rebound witnessed in Florida, Nevada or California.

Housing markets in the South and Midwest were the last to join the national housing boom. Prices were slower to rise in this region than in the hottest markets. Consequently, though the markets are sluggish in their rebound, they were able to avoid the boom-bust cycle of markets like California and Florida. Employment conditions are having a more pronounced effect on demand in these areas, though. These housing markets were slower to blossom because their economies were slower to grow after the recession of 2001 and 2002 suggesting that home sales are more responsive to job creation in these areas. Unemployment has risen sharply in these regions, doubling in some cases as depicted in the table above. Sales have fallen as a result in South Carolina, Tennessee, Alabama, Texas, Utah, North Carolina, Virginia, Kansas, and Oklahoma. This trend will be a drag on housing demand in the near-term.

Unemployment is a widespread concern. In fact, it is a problem in every market covered in NAR's Local Price Reports. All of the 156 markets covered witnessed an increase in the unemployment rate between September of 2008 and September of 2009 of at least 20% with 108 experiencing an increase of 50% or more. Housing markets with larger populations tend to have more diverse economies and stronger demand for housing. One result is that price moderation draws fence sitters to the market; this pattern is helping these markets to find price stability despite the slow economy. But smaller markets with narrow economies and smaller reserves of fence sitters have been less resilient to a decline in demand as the economy stalled.

Despite the economic headwinds weighing on home sales, the majority of markets covered in the Local Market Reports continue to improve. Of the 156 markets, 107 markets experienced positive price-growth movements whether that is a smaller decline in 4-quarter price growth compared to a quarter earlier or an outright increase in prices relative to a year ago. For instance, the median home price for the second quarter in Saginaw-Saginaw Township North (Michigan) metro area was 30.6% lower than the same period in 2008, but by the third quarter of 2009, the year-over-year change had moderated to a decline of 6.7%, a 24 point swing towards 0 or stabilization.

Though the median prices in most markets of California and Arizona markets are still down compared to a year earlier, all of the seven markets in California and two in Arizona registered significantly smaller 4-quarter price declines in the third quarter compared to the 4-quarter period ending in June. In fact, all nine of these markets experienced double-digit changes from a quarter earlier. Every market in Florida experienced a similar change in direction compared to the June reading, but at single-digit levels. One notable move in the wrong direction is the shift in the Raleigh-Carey, Charlotte-Gastonia-Concord, and Greensboro-Highpoint markets of North Carolina. All three markets have seen the decline in their median price accelerate from the second quarter to the third quarter.

Most markets are stabilizing on the upswing, but some are further along than others, while some still languish. To find out how your market is has done, see the Local Market Reports for the third quarter that are now available on the NAR Research website.

 "Copyright National Association of REALTORS®, Reprinted with permission.