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Could it really be good news for the housing market?
The National Association of Realtors (NAR) issued its report on existing-home sales this week and reported that sales rose 3.4 percent — making the total so far 4.62 million homes, 10 percentage points higher than this time last year.
It’s not just for investors any more
NAR’s chief economist noted that “regular” consumers are once again entering the home-buying fray, bringing more balance to the beleaguered Miami real estate market:
“it is no longer just the investors who are taking advantage of high affordability conditions. A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.
The general downtrend in both listed and shadow inventory has shifted from a buyers' market to one that is much more balanced, but in some areas it has become a sellers’ market.”
New home sales on the rise too
The Commerce Department reported that new home sales rose 3.3 percent. While compared year-over-year, sales this April were up 9.9 percent from the same month last year. Approximately 7.6 percent of home sales are new homes — especially as so many of previously owned homes are in distress and selling for far below market value.
Nonetheless, the median price for both new and previously owned homes rose in April, up 4.9 percent from April of 2011. Via Reuters and Realty Times.
All of a sudden, the election doesn’t seem so far away, and the key states that are teetering may be swing back towards Obama as their housing markets show signs of life.
Key states see some improvement
An improving economy could significantly impact Obama’s chances of re-election — a Reuters review of 10 “key” states showed some positive movement in “even the most battered real estate markets, notably Florida, with some other key battlegrounds doing much better.”
The other states looked at by Reuters were: Arizona, Colorado, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Pennsylvania and Virginia. According to the report, the state of Virginia has seen an increase of 2.4 percent in home prices year over year. For Obama, that may mean good news, as a recent poll put him 8 points ahead of Romney in that state.
US News reported Jason Gold, director of the Progressive Policy Institute's (PPI) "Rethinking U.S. Housing Policy Project noted
“this flattening implies that the ever important states that will determine the fall election are in the process of putting a floor under falling home prices.”
A lot can happen in a few months
Although there has been improvement of up to 3 percent in some of these swing states, the election is still nearly six months away. Whether the money from the National Settlement is going to the intended recipients, how much of a role Freddie Mac and Fannie Mae have and will have, and the fluctuating job market will all continue to bring pressure, positive and negative, on the housing market.
National boom, national crash, regional recovery
The Progressive Policy Institute maintains a “Battleground Home Values Index” — in the latest summary, they noted that Dr. Mark Zandi, Chief Economist, Moody’s Analytics, has “proclaimed the crash to be over,” while Ron Insana, Senior Analyst and Commentator, CNBC, and panel moderator, “added some geographic context to Zandi’s assertion, artfully describing the housing market as a “ ‘national boom, a national bust and a regional recovery.’ ”
Zandi goes on to say that in looking at the housing market recovery, the focus should be on “hitting singles,” and that when interest rates do finally begin to rise — and, yes, one day they will begin to go up — there will be a giant flurry of activity as buyers realize the days of sub-4 percent rates are disappearing.
Both 30- and 15-year mortgages reached record lows
Long-term mortgages were introduced to the U.S. market in the 1950s — and the 3.83 percent average for a 30-year loan reported by Freddie Mac last week is the lowest rate recorded since then.
The average for a 15-year mortgage dropped to a record low of 3.05 percent.
First quarter home sales highest in five years
According to NAR, home sales in the first three months of 2012 were the highest of any first quarter since 2007. Home sales increased 4.7 percent from the fourth quarter of 2011 and were up 5.3 percent year over year from the same period in 2011.
Loan fees and delinquencies dropping too
Last week, the average fee for 30-year loans dropped from 0.8 to 0.7, although the fee for 15-year loans remained steady at 0.7.
At the same time, homeowners behind on their mortgage payments reached the lowest level in three years — only 5.78 percent of borrowers were late on payments for the first quarter of 2012. This is down from 6.19 percent year over year from 2011, and from 6.01 percent the quarter prior (the last quarter of 2011).
New foreclosures down more than 30% year over year
For months, economists and industry experts have been predicting a flood of foreclosures to upset the housing market once bank settlements and other distressed mortgage initiatives were ironed out. As it turns out, however, the March Mortgage Monitor report issued by LPS shows that although new foreclosures for March are up 8.1 percent over February, they are down 31.1 percent from the same time a year ago. (via Lender Processing Services)
Completed foreclosures down nearly 20% from last year
CoreLogic’s monthly foreclosure report shows that there were 69,000 completed foreclosures in March, compared with 85,000 last March — a decrease of 18.8 percent. According to CoreLogic’s CEO, the reduction in completed foreclosures, given that the foreclosure inventory is also shrinking, “suggests that loan modifications, short sales, deeds-in-lieu are increasingly being used as an alternative to foreclosures to clear distressed assets in our communities. This is what was envisioned with the recent National Foreclosure Settlement, and can often be a better outcome for both borrowers and investors.” (via CoreLogic National Foreclosure Report - March 2012)
Short sales outpace foreclosure sales
For the first time, it appears that lenders are finally catching on to the idea that “short sales should be the dominant way of disposing of assets [in distress],” as Jonathon Weiner of Lender Processing Services puts it. In January 2012, short sales were 23.9 percent of home purchases, while foreclosed homes accounted only for 19.7 percent. A year ago, foreclosures were 24.9 percent while only 16.3 percent of home sales were short sales. Weiner also observed that the growing preponderance of short sales is a positive sign that the country is finally making real progress working through its overwhelming inventory of distressed properties — and could be a sign that home prices will bottom out this year. (via Bloomberg Businessweek)
According to the S&P/Case-Shiller report released last week, the composite index for 20 metropolitan areas gained 0.2 percent this February when seasonally adjusted — meeting forecasts made by economists. The rise is the first increase since April of last year. S&P’s index committee chairman noted that the news was a mix of good and bad news — prices in some areas continue to decline, and without the seasonal adjustment, the 20-city index was down 0.8 percent to reach 134.20, the lowest it’s been since 2002. (via Reuters)
Barclays Capital sees first signs of price increases
Analysts from Barclays Capital consider the 22 pecent order growth seen by homebuilders in the first quarter of 2012 as an early sign of the market beginning to see price increases return. The managing director of Barclays’ homebuilding division said that Phoenix, Denver, Orange County, CA, among others are seeing pricing comebacks. Three builders concurred with that perspective — Lennar, Meritage Homes and Ryland Group have reported the strongest order growth across both location and buyer type. Other homebuilders, D.R. Horton, PulteGroup, and M/I Homes also showed order growth, but without the same strong feeling for the trend to continue.
It’s possible that the last 12 to 24 months of increased investor activity buying existing homes has raised consumer demand for new homes. If so, that could mean good news for the homebuilding sector and the housing market. (via Housing Wire)
