Apr. 26, 2007 - New-Home Sales Fall Short of Expectations

New-Home Sales Fall Short of Expectations

Daily Real Estate News  |  April 26, 2007

New-home sales edged up at an annual pace of 2.6 percent to 858,000 in March from February, reports the Commerce Department. The figure marked a year-over-year decline of 23.5 percent and fell shy of the 4- to 8-percent increase anticipated by analysts.

The report also showed a modest increase in the median new-home price to $254,000 last month from $250,000 the prior month, but National Association of Home Builders chief economist David Seiders attributed the rise to a large number of high-end sales and pointed to ongoing discounts and other incentives by builders as evidence that prices are not actually rising.

Inventory declined slightly to a 7.8-month supply from 8.1 months in February, which is much greater than the 4.5-month supply that Moody's Economy.com chief economist Mark Zandi says is balanced. According to Zandi, "It's just another indication that the entire housing market is struggling and that the housing correction is in full swing."

Source: Washington Post, Allan Lengel (04/26/07)

Apr. 25, 2007 - Nevada, California Lead Surge in Foreclosures

Nevada, California Lead Surge in Foreclosures

Daily Real Estate News  |  April 25, 2007

More than 430,000 U.S. foreclosure filings were reported in the first three months of 2007, an increase of 35 percent from the previous quarter, according to data released Wednesday by RealtyTrac, which runs an online database of foreclosure properties.

Foreclosure filings include default notices, auction sale notices, and bank repossessions. RealtyTrac says there was one filing for every 264 households, marking the highest quarterly rate since the company began issuing reports 27 months ago.

“The rise in foreclosure activity was quite dramatic and widespread in the first quarter,” says James J. Saccacio, chief executive officer of RealtyTrac. “Certainly the surge in subprime defaults has contributed to the overall rise.”

RealtyTrac estimates that more than half of the first-quarter foreclosure activity was from subprime loans. However, it’s not just low-end homes that are affected, Saccacio says. “We’re seeing a rising percentage of foreclosures with an estimated market value of more than $750,000.”

Some 37 states reported year-over-year increases. Nevada had the highest state foreclosure rate in the country, with one filing for every 75 households — 3.5 times the national average. The state documented a total of 11,514 foreclosure filings during the quarter, an increase of 66 percent from the previous quarter and more than double the total reported in the first quarter of 2006.

Other states in the top 10 for highest rates: Colorado, Georgia, Michigan, California, Florida, Arizona, Ohio, Texas and New Jersey.

Meanwhile, California had the largest state total. With 80,595 foreclosure filings during the first quarter, it accounted for more than 18 percent of the national total. Other states with the highest totals: Florida, Texas, Michigan, Ohio, Georgia, Illinois, Colorado, New Jersey, and New York.

— REALTOR® Magazine Online

Apr. 24, 2007 - Weather Curtails March Existing-Home Sales

Weather Curtails March Existing-Home Sales

Daily Real Estate News  |  April 24, 2007

Winter weather reduced home shopping in February, slowing March sales. The pace of sales was likely further dampened by a decrease in subprime lending, according to the NATIONAL ASSOCIATION OF REALTORS^®.

After rising for three consecutive months, total existing-home sales — including single-family, townhomes, condominiums and co-ops — fell 8.4 percent to a seasonally adjusted annual rate of 6.12 million units in March. That compares to a pace of 6.68 million in February, and is 11.3 percent below the 6.90 million-unit level in March 2006.

“For the last couple months we’ve been expecting a weather ‘hit’ on home sales,” says David Lereah, NAR’s chief economist. “But looking at overall activity in the first quarter we see that existing home sales averaged 6.41 million — a figure that is moderately higher than the sales pace during the second half of 2006.”

Lereah says the market may also be experiencing some of losses as a result of the subprime fallout. “However, this is masking improved fundamentals in the housing market, with lower mortgage interest rates and motivated sellers,” Lereah says. “It’s too early to measure a significant impact from tighter lending standards, which should moderately dampen activity, but we’re still looking for existing-home sales to gradually improve during the last half of 2007.”

A Closer Look at the Numbers

The national median existing-home price for all housing types was $217,000 in March, which is 0.3 percent below March 2006 when the median was $217,600. The median is a typical market price where half of the homes sold for more and half sold for less.

However, the percentage change in recent months has been distorted by a geographic shift in the composition of sales from high-cost markets to moderately priced areas, in contrast with the sales distribution a year earlier, according to NAR.

Here’s what happened regionally with existing-home sales:

• South: existing-home sales declined 6.2 percent to an annual sales rate of 2.41 million in March, and 9.7 percent below March 2006. The median price in the South was $180,700, up 0.4 percent from a year ago.

• Northeast: existing-home sales fell 8.2 percent to a level of 1.12 million in March; 5.1 percent lower than a year earlier. The median existing-home price in the Northeast was $268,600, which is 0.7 percent lower than March 2006.

• West: existing-home sales fell 9.1 percent in March to an annual pace of 1.20 million, which is 16.7 percent lower than March 2006. The median price in the West was $330,600, down 2.9 percent from a year ago.

• Midwest: existing-home sales dropped 10.9 percent in March to a level of 1.39 million, and is 13.7 percent lower than a year ago. The median price in the Midwest was $160,400, down 0.2 percent from March 2006.

Single-family home sales dropped 9.5 percent to a seasonally adjusted annual rate of 5.32 million in March from 5.88 million in February, and are 11.9 percent lower than the 6.04 million-unit level in March 2006. The median existing single-family home price was $215,300 in March, down 0.9 percent from a year earlier.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 800,000 units in March, the same as in February, and are 6.7 percent below the 857,000-unit level in March 2006. The median existing condo price was $228,200 in March, up 3.2 percent from a year ago.

A Buyers Market

NAR President Pat Vredevoogd Combs, from Grand Rapids, Mich., says market conditions are clearly favoring buyers. “It’s a good time to buy, in part because home buyers are not pressured to make quick decisions,” Combs says. “We’re in a window of low interest rates with a plentiful supply of homes on the market and flat prices in most areas. First-time buyers now have more power to negotiate with sellers for help on down payment or closing costs.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in March, down from 6.29 percent in February; the rate was 6.32 percent in March 2006.

Total housing inventory levels fell 1.6 percent at the end of March to 3.75 million existing homes available for sale, which represents a 7.3-month supply at the current sales pace, up from a 6.8-month supply in February.

— REALTOR® Magazine Online

Apr. 23, 2007 - Sellers Offer to Take Back Second Mortgage

Sellers Offer to Take Back Second Mortgage

Daily Real Estate News  |  April 23, 2007

Worried sellers are again considering financial incentives, including taking back a second mortgage to entice buyers.

Several factors can make a second trust, as it is often called, attractive to buyers and sellers, including:

• The buyer won’t need to come up with so much cash.
• The seller can set the interest rate below what the buyer could get almost anywhere else.
• A seller can defer a portion of any capital gains tax he might owe on the property.

But there is also at least one big negative to consider. The second trust will be recorded in the land records after the first loan and always will be in the second position. If the first loan goes into default and the lender forecloses on the property, the second trust will be wiped out. The seller holding the second trust can sue the borrower based on the promissory note that is usually signed, but that might be pointless if the borrower has no money.

Source: The Washington Post, Benny L. Kass (04/21/2007)

Apr. 23, 2007 - More Homebuyers Turn to Parents for Help

More Homebuyers Turn to Parents for Help

April 23, 2007

With many first-time and even move-up buyers strapped for down-payment cash, an increasing number of parents are helping their grown children buy a home — and taking an equity share in return.

Typically, parents put in cash to help the buyers amass a down payment of at least 20 percent. That allows buyers to qualify for a conventional 30-year fixed-rate mortgage. The equity sharers get back their initial stake plus 10 percent to 50 percent of the profits.

Generally, a written contract spells out that the home owners are responsible for mortgage payments and get the tax deduction that comes with it. The contract also specifies who pays the property taxes — often that’s a 50-50 split. In some cases, the parent’s name is on the loan. In others, it isn’t.

Economist Andrew Caplin of New York University and a number of other experts are designing standardized shared-equity mortgages that would allow outside investors to buy a piece of the equity gain. Caplin estimates that about 25 percent of first-time homebuyers could find such arrangements attractive. One thing is certain: Investors in it for the money will extract stiffer terms than mom or dad.

Source: Business Week, Christopher Farrell (04/23/07)