Economists Analyze Positive Reports on New Home Sales

05/23/2012 By: Esther Cho 

New home sales rose 3.3 percent month-over-month in April to a seasonally adjusted annual rate of 343,000, the Commerce Department and HUD reported Wednesday. On a yearly basis, new home sales rose 9.9 percent. And, the good news did not end there. The months’ supply of inventory fell to 5.1, and while sales were down in the South, they were up in Northeast, Midwest, and West.

This report was followed by the National Association of Realtor’s existing home sales report released Tuesday, which showed the sale of existing homes rose 3.4 percent on a monthly basis and 10 percent year-over-year.
In comparison to the sale of existing homes, Paul Diggle, property economist with Capital Economics, said new home sales will still continue to lag behind the existing home sales market.

“New homes are still having to compete with discounted foreclosures and short sales,” Diggle wrote. “Moreover, we have started to hear anecdotal reports that homebuilders are running low on high-grade lots for development, which opens the possibility that starts, and thus sales, may pause temporarily if builders need to replenish land supply.”
Even though the new home sales sector is not expected to improve as quickly, there were still noteworthy signs economists pointed out for the market.
In an analysis, Patrick Newport and Michele Valverde, economists with IHS Global Insight, commented, “Not only were sales a bit higher than expected, the numbers for the prior three months were revised up. Sales for 2010 and 2011 were also revised, but only marginally. This market is unquestionably improving. Activity, though, is still less than half of normal.”
Capital Economics also noted that new homes are also being sold earlier in the construction process, with 58 percent of new homes sold in the previous three months un-started or still under construction.
“The rising share of new homes selling earlier in the construction process strikes us as
further evidence of the improvement in buyer confidence. After all, you’re unlikely to
buy a home if you expect it to be worth significantly less by the time it has been built,” Diggle wrote.
With the slight drop in inventory from 5.2 months in March to 5.1 in April, Newport and Valverde said, “Inventory may have hit or is nearing a bottom. This is good news, since re-stocking inventory to meet rising demand will give housing starts a small boost in the coming months.”
As for the future, IHS economists said they project sales to rise to 361,000 in 2012 from 307,000 in 2011, and they do not expect to see sales climb above 800,000 until 2015.

Affordability Reaches All-Time High Again: NAHB/Wells

05/22/2012 By: Esther Cho 

With low rates and low prices, homeowner affordability continues to hit record levels, reaching another high during the first quarter of 2012, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
During the previous record-breaking 2011 fourth quarter, 75.9 percent of homes sold were affordable to median-income earners. For this most recent quarter, HOI data showed 77.5 percent of all new and existing homes sold were affordable to families earning the national median income of $65,000.

“Homes in this year’s first quarter were more affordable than they have been at any time in more than 20 years, yet many potential sales are not happening because of overly tight lending conditions that are keeping hardworking families from obtaining a suitable mortgage,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Florida. “Without this significant hurdle, the housing and economic recovery could be proceeding at a much stronger pace.”

Among the largest metros, Indianapolis-Carmel, Indiana was ranked as the most affordable since 95.8 percent of homes sold during the period were affordable to households earning the area’s median family income of $66,900. The least affordable larger metro was New York-White Plains-Wayne, New York-New Jersey, where 31.5 percent of homes sold was affordable for those earning the median income of $68,200. In the New York metro, the median sales price for a home was $400,000.
Cumberland, Maryland-West Virginia was ranked the most affordable among small metros and nationally. In Cumberland, 99 percent of homes sold during the first quarter were affordable to families earning the area’s median income of $53,000. The least affordable smaller metro was Ocean City, New Jersey, where 45.9 percent of homes sold in the first quarter were affordable to families earning the median income of $71,100.
On a national scale, Fairbanks, Alaska came in second after Cumberland. In Fairbanks, 98.9 percent of homes were affordable to those earning the area’s median income of $92,900. Wheeling, West Virgina-Ohio came in third, followed by Kokomo, Indiana. The larger metro Indianapolis ranked number five on a national scale.
The NAHB/Wells Fargo Housing Opportunity Index is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company.

Median Home Prices Rise in April: RE/MAX

05/18/2012 By: Tory Barringer 

The RE/MAX National Housing Report found that the national median home price rose for the third straight month in April, indicating that the housing recovery in 2012 is continuing.

The report surveyed 53 metropolitan areas and found that the median home price was $161,000, 3.2 percent higher than in March and 5.9 percent higher than in April 2011. February marked the first time in 18 months that home prices experienced an increase, and data from March and April shows a positive trend.

Data revealed that of the 53 metro areas surveyed, 43 saw an increase in median home prices over last year, and 12 of those saw double-digit percentage increases.
Also encouraging was the fact that home sales in April were 4.1 percent higher than the previous year, making it the 10th month in which sales pushed higher year-over-year. Of the metros surveyed, 39 reported more home sales than a year before, with 18 showing double-digit percentage increases. These increases indicate a strong season, RE/MAX said.
The average Days on Market for all home sales in April was 96, a drop from March’s 101 and April 2011’s 98. In the last 12 months, the average for Days on Market has been below 90 in only two months. This is in contrast to what is expected in a market with a dwindling inventory and increased sales.
Based on the 53 metro areas surveyed, the report also showed that the inventory of homes for sale fell 3.7 percent and was 25.6 percent lower than April 2011. Month-to-month inventories have fallen for 22 consecutive months, owed largely to the fewer foreclosure properties coming to market.
At the current rate of sales, the average Months Supply is now 5.3, the same as March but two months lower than the 7.1 supply last year. Months Supply is the number of months it would take to clear a market’s active inventory at the current rate of sales. A six-month supply is considered a balanced market between buyers and sellers.

Week After Week, Rates Continue to Break Record-Low Numbers

05/17/2012 By: Esther Cho 

Just when it seemed like they could not fall any further, fixed-rate mortgages continued to drop, breaking record-low numbers once again, according to Freddie Mac’s weekly mortgage market survey.

“The European debt crisis overshadowed improving economic indicators for the U.S. and allowed Treasury bond yields and fixed mortgage rates to ease for another week,” said Frank Nothaft, VP and chief economist for Freddie Mac.

The 30-year fixed-rate mortgage averaged 3.79 percent (0.7 point) for the week ending May 17, slipping from last week’s average of 3.83 percent. Last year at this time, the 30-year rate was 4.61 percent.
The 15-year fixed-rate mortgage ended the week at 3.04 percent (0.7 point), dropping from 3.05 percent last week. Last year at this time, the 15-year averaged 3.80 percent.
The 5-year ARM rose to 2.83 percent (0.6 point) from last week’s average of 2.81 percent. A year ago, the 5-year ARM averaged 3.48 percent.
The 1-year ARM also moved up, averaging 2.78 percent (0.5 point) this week compared to last week’s average of 2.73 percent. Last year at this time, the 1-year ARM averaged 3.15 percent.
Bankrate.com, which releases a weekly survey using data provided by the top 10 banks and thrifts in the top 10 markets, reported a record-low average for the 30-year fixed, which dropped below 4 percent.
The 30-year averaged 3.97 percent, down from 4.02 percent last week, while the 15-year rate remained unchanged from last week at 3.20 percent.
The 5-year ARM moved up slightly to 3 percent; last week, it averaged 2.99 percent.

HUD Studies Suggest Counseling Keeps Owners in Homes

05/16/2012 By: Esther Cho 

Buying a home is the biggest financial investment many people will ever make. It’s also an investment that, in recent years, has become lost for millions. According to data from CoreLogic, since September 2008, there have been 3.5 million completed foreclosures.

Through counseling, HUD found homeowners are more likely to stay in their properties, even when facing foreclosure.
HUD released reports on two types of counseling: pre-purchase and foreclosure prevention. In both studies, HUD reported counseling significantly improved the likelihood homeowners remained in their homes.
The studies enrolled clients in the fall of 2009 and early 2010. For those who enrolled into pre-purchase counseling, HUD revealed that 35 percent of participants became homeowners within 18 months of pre-purchase counseling and only one of those buyers fell behind on mortgage payments.
The foreclosure counseling study revealed that of those who received assistance, nearly 70 percent obtained a mortgage remedy to retain their home, and 56 percent cured their defaults and became current again.
“The evidence is clear, with a little investment on the front end, we can go a long way toward improving the chances families will buy a home they can afford and sustain their homes in the long run,” said Raphael Bostic, HUD’s assistant secretary for policy development and research.

Pre-purchase study
For the pre-purchase study, 573 people enrolled in counseling services in fall 2009 from 15 HUD-funded counseling agencies across the country.
Most purchasers, or 71 percent, had a FICO score of 620 or higher, and 72 percent were reported as having completed counseling by their housing counselor.
Participants represented different racial backgrounds (52 percent African American, 32 percent White, 16 percent of another race or multi-racial, and 19 percent Hispanic), and 51 percent were under age 35.
Foreclosure study
HUD’s foreclosure counseling study included 824 foreclosure clients. About three-quarters of the homeowners fell behind on payments because of a loss of income, and very few had any savings for their missed payments.
Homeowners who sought counseling before becoming delinquent or in the early stages of delinquency (1-3 months) were more likely to obtain a remedy, retain their home, and become current on their mortgages.
Most study participants attempted to contact their servicer when they first fell behind but were unsuccessful in negotiating with their lenders.
At the 18-month follow up period, nearly 70 percent of clients who sought counseling before becoming delinquent were in their home and current on payments, whereas only 30 percent of clients who were six or more months behind at the time they entered counseling were in their home and current at follow-up.
The study also found that those who sought counseling via telephone tended to have more income and savings, were less likely to be a minority, lived in more geographically dispersed areas, and achieved stronger housing outcomes.
According to the study, this may suggest expanding telephone counseling provided an important alternative for those who can’t receive in-person couns

NAR Finds Income to Qualify for Mortgage Well-Below U.S. Median

05/11/2012 By: Esther Cho          

Interest rates continue to slide further down alongside the decline in home prices. In addition to these factors improving affordability for homeowners, the National Association of Realtors (NAR) found the amount of income needed to qualify for a mortgage is actually well below the median income in most parts of the U.S.

The national median family income was $61,000 in the first quarter. If a buyer wanted to purchase a home at the national median price, he or she would need an annual income of $34,700 if making a 5 percent downpayment. A 10 percent downpayment would lower the requirement to $32,900, while a 20 percent downpayment requires about $29,300.
The information on qualifying incomes to purchase a median-priced single-family home on a metropolitan area basis assumes a favorable credit rating and an interest rate of 4 percent with 25 percent of gross income set aside for principal and interest.

Lawrence Yun, NAR chief economist, provided a more specific example and said a buyer in Indianapolis would only need an annual income of $24,000 after a 10 percent down payment to purchase a median-priced home, while in Seattle, the income would be $55,300.
“For now, buyers are facing an extraordinarily advantageous situation if they can obtain a mortgage,” he said.
The NAR report also found that 32 percent of home purchases paid all-cash in the first quarter o 2012, and investors, who make up the bulk of cash purchasers, accounted for 22 percent of all transactions in the first quarter.
Inventory has also seen a decline, with the number of existing homes for sale dropping 21.8 percent the first quarter of 2012 compared to a year ago during the same quarter, according to NAR. The number of homes for sale this quarter was 2.37 million and a year ago there were 3.03 million homes on the market in the first quarter.
NAR also reported the national median existing single-family home price was $158,100 in the first quarter, down 0.4 percent when it was $158,700 in the first quarter of 2011. The median price was down by even more compared to the previous 2011 fourth quarter when it was $163,500.
Yun explained that sales transactions were negotiated mostly in the previous quarter so home prices actually lag sales activity.
“Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future,” he said.
Distressed homes – foreclosures and short sales which drag prices down, made up 32 percent of first quarter sales compared to 38 percent a year ago.

Rates Continue to Fall Hitting New Lows Amid Economic Concerns

05/10/2012 By: Esther Cho 

Just when it seemed like rates could not fall any further, Freddie Mac reported fixed mortgage rates sunk even further for the week ending May 10.

The 30-year fixed-rate mortgage averaged 3.83 percent (0.7 point), down slightly from last week’s average of 3.84 percent. A year ago at this time, the 30-year was 4.63 percent.
The 15-year fixed also moved downward, ending at 3.05 percent (0.7 point) this week. Last week it averaged 3.07 percent, and last year at this time it was 3.82 percent.
The 5-year ARM dropped to 2.81 percent (0.5 point) compared to 2.85 percent last week and 3.41 percent a year ago at this time.

The 1-year ARM moved up to 2.73 percent (0.5 point). Last week the 1-year ARM averaged 2.70 percent and 3.11 percent a year ago.
“Following April’s weaker than expected employment report, and the French and Greek election results raising concerns over the stability of the Euro currency zone, long-term Treasury bond yields declined allowing fixed mortgage rates to ease to new all-time record lows this week,” said Frank Nothaft, VP and chief economist for Freddie Mac.
Nothaft also noted the 115,000 jobs the economy added in April, which was below the market consensus forecast and less the prior month.
Bankrate.com also reported record low numbers after conducting its survey, which pulls data provided by the top 10 banks and thrifts in the top 10 markets.
The 30-year fixed fell to 4.02 percent, down from 4.05 percent last week.
The 15-year fixed hit a record low number at 3.20 percent, moving downward from the 3.25 percent reported last week.
For the first-time, the 5-year ARM fell below the 3 percent, averaging 2.99 percent this week compared to 3.02 percent last week.
The 3-year ARM tied with its record low of 3.06 percent