Oct. 30, 2009 - Sonoma County Real Estate Housing Affordability Report

Record Streak Continues for Pending Home Sales

Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors.

The pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The Index is at the highest level since June 2007 when it was 100.7.

Lawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better.  "The recovery is broad-based across many parts of the country.  Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit," he said.

"Other buyers are taking advantage of low home values before prices turn higher.  Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family's monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970.  As long as home buyers stay within their budget, mortgage payments will be very manageable," Yun said.

 NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 250,000 additional sales that would not have taken place without the credit.  Buyers have little time to act because they must complete the transaction by November 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible - it is taking approximately two months to complete home sales in the current market.

The Pending Home Sales Index in the Northeast declined 3.0 percent to 78.8 in July but is 4.7 percent higher than July 2008.  In the Midwest the Index slipped 2.0 percent to 88.1 but is 8.1 percent above a year ago.  In the South, pending home sales activity rose 3.1 percent to an Index of 103.8 in July and is 12.0 percent above July 2008. In the West the Index jumped 12.1 percent to 112.5 and is 20.0 percent above a year ago.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas/Fort Worth, said Congress needs to keep the momentum going.  "Even with a good recovery taking place, the market is not yet back to normal.  With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices," he said.

"To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we're encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences.  The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy," McMillan said.

NAR's Housing Affordability Index stood at 158.5 in July, below the peak set in April but is still 36.0 percentage points higher than a year ago.  The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

Yun expects existing-home sales to rise through the fourth quarter.  "Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year," he said.  "However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010.  The buyer psychology may be shifting from, 'Why buy now when I can purchase later,' to 'I don't want to miss out on a recovery'."

Oct. 30, 2009 - Sonoma County, CA Mortgage Rate Outlook

Mortgage Rate Outlook

With September now behind us, stock markets started October in a fashion similar to other Octobers: they sold off to some degree.  After a pretty good third quarter's profits were booked, at least some of those gains from equity sales have been stashed back into Treasuries, driving yields down.  This turn is pressuring mortgage rates down to the lows of earlier this year.

The overall average for 30-year fixed rate mortgages declined by almost a tenth percent this week, and HSH's FRMI closed Friday with five-day average of 5.4%.  Five-one hybrid Arms also eased back, shedding eight basis points to close in national survey at 4.75%.  At 5.07%, conforming 30-year FRMs sported their lowest average rate since the late March to late May period gave us nine consecutive weeks just over (and under) the 5% mark.

A bright spot was Construction Spending rose by 0.8%, its second positive reading of the year.  More impressive was the 4.7% rise in spending for residential projects, which was more than enough to offset drags from the troubled commercial sector (-0.1%) and the 1.1% drop in the public sector.  Stimulus money isn't making it out to lower-level projects all that quickly, and cash-strapped states and counties are simply putting projects on in definite hold.

Low mortgage rates continue to provide support for housing markets, and the gains in residential construction spending could be one of the keys to getting a firmer recovery underway.  However, credit conditions remain tight, and while home prices have begun to firm to some degree, it may be a long time until most underwater homeowners will be able to take advantage of those low rates to recast their balance sheets.

Does October continue to live up to its reputation as a wicked month for stocks? To the degree that it does, mortgage rates should benefit.  Spring lows ignited a fair bit of refi activity, but building lasting refi waves requires low (if not continually declining ) interest rates for a period of weeks, even months.  We'll continue to have low rates, but significant declines are unlikely.  If you're considering refinancing, don't hesitate too long or a fickle October market may catch you napping.

Treasury yields dipped at week's end, so mortgage rates should start next week on a softer note.

Oct. 30, 2009 - Sonoma County, CA Real Estate Report Sept / Oct

Sonoma County, CA Real Estate Report

County Home Sales up, Prices Down in September

1. Median Sonoma County, CA home prices in September '09: $350,000
2. Median Sonoma County, CA home prices in August '09:  $369,500
3. Median Sonoma County, CA home prices in September '08: $358,250

1. Average Sonoma County, CA home prices in September: $412,018
2. Average Sonoma County, CA home prices in August '09: $426,760
3. Average Sonoma County, CA home prices in September '08: $435,428

1. Home Sales in September '09: 398
2. Homes Sales in August '09: 370
3. Homes Sales in September '08: 428

1. Sale/List Price Ratio September '09: 97.5%
2. Sale/List Price Ratio August '09: 97.7%
3. Sale/List Price Ratio September '08: 96%

Days on Market: August, '09: 107, July '09: 110, August '08: 100

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Nov. 18, 2008 - C.A.R.'s "2009 California Housing Market Forecast"

LOS ANGELES (Oct. 15) - Home prices throughout most areas of California will post declines next year, while sales of existing homes will continue the rise in 2009, according to the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.)  "2009 California Housing Market Forecast".

The current uncertainty about the financial system and economy is likely to persist over the next several weeks, and could extend into next year," said C.A.R. President William E. Brown.  "Our forecast assumes that the financial system will begin to show signs of stabilization late in 2008 and into early 2009.

"We expect that the economy will be at its weakest period over the next three quarters through the second quarter of 2009, with recessionary economic conditions throughout that time period, before we begin to see a turnaround in the second half of next year," he said.  "Going forward, a great deal depends on the state of the financial system in general and the real estate finance situation in particular, as well as the flow of distressed sales through the market. We expect sales of distressed properties to peak in early 2009- a critical factor in the housing market that directly impacts the time frame for stabilization in the median price.

"Looking ahead, home prices and favorable interest rates in 2009 will contribute to gains in affordability," Brown said.  'However, we need to move through the current financial crises and restore the flow of credit so that qualified buyers are able to take advantage of improved affordability and successfully purchase homes."

The median home price in California will decline 6 percent to $358,00 in 2009 compared with a project median of $381,000 this year, according to the forecast.  Sales for 2009 are projected to increase 12.5 percent to 445,000 units, compared with 395,600 units (projected) in 2008.

"Sales in 2008 will be ahead of last year by 12 percent,with a further increase of 12.5 percent expected in 2009," said C.A.R.  Vice President and Chief Economist Leslie Appleton-Young.  'However, the next couple of quarters in late 2008 and early 2009 will be marked by seasonal decreases in activity, with a pickup expected by the second quarter of next year.  At 445,000 units sales projected in 2009, the sales environment will be well above the low point of 265,000 units in late 2007.

"The median price will be influenced through the balance of 2008 by the typical seasonal decrease in home prices as well as ongoing downward pressure from distressed sales," she said.  'For all of 2008, the median price is expected to fall by 31.7 percent from $558,100 to $381,000. Next year, we're projecting that the median price will show a 6 percent decline to $358,000."