Fourth Quarter Home Sales Surge 13.9%
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Thursday, February 11, 2010
Wednesday, February 10, 2010
Four Reasons Sellers Should Jump in the Market Now
4 Reasons to Sell Now
Selling a property in this tough market can seem like a challenge. Here are four factors that actually make this a good time to post a For-Sale sign.
Sell low and buy low. Because all property values are down, the loss on the property a home owner sells is really only a paper loss because the next property he buys also will be a bargain. If he buys smartly, when prices come back up in a few years, he’ll be in better shape.
Down-payment help is widely available. While nothing-down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over the country, but one good way to find them is to search online for “down-payment assistance programs” and the name of your region.
Your uncle has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash.
Good help is available. Really talented real estate practitioners, contractors, and designers are available and eager for business.
Source: McClatchy Tribune, Kate Forgach (02/07/2010)
Selling a property in this tough market can seem like a challenge. Here are four factors that actually make this a good time to post a For-Sale sign.
Sell low and buy low. Because all property values are down, the loss on the property a home owner sells is really only a paper loss because the next property he buys also will be a bargain. If he buys smartly, when prices come back up in a few years, he’ll be in better shape.
Down-payment help is widely available. While nothing-down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over the country, but one good way to find them is to search online for “down-payment assistance programs” and the name of your region.
Your uncle has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash.
Good help is available. Really talented real estate practitioners, contractors, and designers are available and eager for business.
Source: McClatchy Tribune, Kate Forgach (02/07/2010)
Thursday, February 04, 2010
The Urban Land Institute's New Report Overview
From REALTOR online magazine. I'll review the Urban Land Institute's report and post additional details here; investors may be interested in the findings if purchase prices remain as flat as predicted and renting becomes the trend predicted here.
What Will the Market's New Normal Be?
In a new study, "Housing in America: The Next Decade," Urban Land Institute senior resident fellow John McIlwain says the housing market will not return to what it was prior to the downturn but rather that a "new normal" will take its place.
He expects another 10 percent decrease in residential prices this year, a jump in the number of borrowers abandoning "underwater" mortgages, and a change in consumer perceptions of homeownership.
"The emotional impact on the children and parents and disillusion about the 'joys' of homeownership will be intense; new attitudes to homeownership and the American dream will emerge," McIlwain writes.
He expects home price appreciation to hover around 1 percent or 2 percent per year after the market recovers and the national homeownership rate to drop from 67 percent currently to 62 percent by 2020.
In the coming decade, McIlwain expects the following:
What Will the Market's New Normal Be?
In a new study, "Housing in America: The Next Decade," Urban Land Institute senior resident fellow John McIlwain says the housing market will not return to what it was prior to the downturn but rather that a "new normal" will take its place.
He expects another 10 percent decrease in residential prices this year, a jump in the number of borrowers abandoning "underwater" mortgages, and a change in consumer perceptions of homeownership.
"The emotional impact on the children and parents and disillusion about the 'joys' of homeownership will be intense; new attitudes to homeownership and the American dream will emerge," McIlwain writes.
He expects home price appreciation to hover around 1 percent or 2 percent per year after the market recovers and the national homeownership rate to drop from 67 percent currently to 62 percent by 2020.
In the coming decade, McIlwain expects the following:
- Older baby boomers to move to urban, mixed-use, mixed-age centers near family instead of retiring to Sun Belt communities;
- Immigrants to snub the suburbs in favor of more close-knit communities;
- Younger boomers to face the challenges of lost home equity and a smaller pool of move-up buyers;
- Generation Y to rent for long periods by choice or because they are paying off student loans or have stagnant incomes.
Wednesday, February 03, 2010
What Will Happen When the US Stops Buying Mortgage-Backed Securities? Part 2
This piece is from Reuters and has a different view on the effect that will occur when the US stops buying Mortgage Backed Securities. It asserts that volatility will again enter the market which will push interest rates up, affecting Buyers and Sellers in a negative way. Marie
Fed's MBS exit could lift Treasury yields
NEW YORK (Reuters) - The end of the Federal Reserve's program to buy mortgages backed by Fannie Mae and Freddie Mac could have a ripple effect on the market for U.S. government bonds.
Once the Fed stops buying mortgage-backed securities at the end of March, private buyers will need to step in and take over in a market that the government has propped up since the financial crisis reached its peak. But they won't want to buy MBS unless the securities offer a better return than the current rate, so mortgage rates will likely rise.
jump in yields would increase the cost of borrowing for the U.S. government. The cost of mortgages would also rise, threatening the fragile housing recovery. And a sharp, sudden spike in Treasury yields could spook regular government debt buyers such as foreign central banks.
Some signs in the marketplace are already pointing to this possibility. The Treasury yield curve has steepened and the prices of bond options have risen.
"Some feel that the recent market moves reflect investor positioning for the end of several unconventional Fed facilities," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co., in an e-mail.
VOLATILITY TO RETURN
Treasury strategists have also warned that wider swings in bond prices lie ahead. They will be driven in part by hedging practices MBS investors are known to use that the Fed, as the largest MBS buyer since the financial crisis began, did not employ.
"In essence, the Fed has taken a lot of volatility out of the marketplace," said William O'Donnell, the head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut. "Any subsequent mortgage issuance is likely to fall into the hands of portfolios likely to be somewhat dynamically more hedged. It'll have the prospect and almost the certainty of adding volatility back into the rates markets."
The practice is known as convexity hedging. Investors holding MBS can actually find themselves losing money if mortgage or interest rates rise suddenly and they cannot get rid of their lower-yielding securities. They often try to offset unexpected increases in mortgage and interest rates by selling Treasury notes.
"If you look at option prices presently, we have the implied volatility for longer-dated options trading 25 percent over their long-term historical levels. One could argue the reason for this is that people anticipate uncertainty after March 31 end date of the Fed's MBS program." said Harley Bassman, a managing director at Bank of America Merrill Lynch.
"People are concerned about what might happen when the Fed starts to drain liquidity. This is why the volatility surface is so steep from one month to two years expiries."
BEWARE OF CONVEXITY
Convexity hedging often feeds on itself, causing Treasury yields to rise even faster.
Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital in New York, said if rates rise sharply, agency MBS could extend and trade to much longer durations.
"It is not a risk for the next 30 basis points or so in interest rates, but at a 4.10 percent (10-year) Treasury yield, the market will start to worry," he said.
Arthur Frank, director and head of MBS research at Deutsche Bank Securities in New York, said while a 4 percent Treasury yield could spark a big pick-up in convexity hedging, he noted that hedging by mortgage servicers, the banks that manage mortgage loans and collect payments from borrowers, is driven more by MBS prices.
"Servicers have varied trigger points, but it is safe to say, they might start selling mortgage duration at 99-1/2 or at 99," he said.
The Fannie Mae 30-year 4.50 percent coupon is priced at 100-8/32, with a yield of 4.438 percent.
The relationship between interest rates and MBS prepayment rates directly influences MBS pricing. More mortgage borrowers are likely to quickly pay off their old loans when interest rates are low and they can get a better deal by refinancing.
In a bond market rally, prepayment rates rise, reducing the price gains of MBS, while in a bear market, prepayment rates slow, resulting in increased price losses. This price movement is commonly referred to as "negative convexity."
(Additional reporting by Jennifer Ablan; Editing by Jan Paschal)
Fed's MBS exit could lift Treasury yields
NEW YORK (Reuters) - The end of the Federal Reserve's program to buy mortgages backed by Fannie Mae and Freddie Mac could have a ripple effect on the market for U.S. government bonds.
Once the Fed stops buying mortgage-backed securities at the end of March, private buyers will need to step in and take over in a market that the government has propped up since the financial crisis reached its peak. But they won't want to buy MBS unless the securities offer a better return than the current rate, so mortgage rates will likely rise.
jump in yields would increase the cost of borrowing for the U.S. government. The cost of mortgages would also rise, threatening the fragile housing recovery. And a sharp, sudden spike in Treasury yields could spook regular government debt buyers such as foreign central banks.
Some signs in the marketplace are already pointing to this possibility. The Treasury yield curve has steepened and the prices of bond options have risen.
"Some feel that the recent market moves reflect investor positioning for the end of several unconventional Fed facilities," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co., in an e-mail.
VOLATILITY TO RETURN
Treasury strategists have also warned that wider swings in bond prices lie ahead. They will be driven in part by hedging practices MBS investors are known to use that the Fed, as the largest MBS buyer since the financial crisis began, did not employ.
"In essence, the Fed has taken a lot of volatility out of the marketplace," said William O'Donnell, the head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut. "Any subsequent mortgage issuance is likely to fall into the hands of portfolios likely to be somewhat dynamically more hedged. It'll have the prospect and almost the certainty of adding volatility back into the rates markets."
The practice is known as convexity hedging. Investors holding MBS can actually find themselves losing money if mortgage or interest rates rise suddenly and they cannot get rid of their lower-yielding securities. They often try to offset unexpected increases in mortgage and interest rates by selling Treasury notes.
"If you look at option prices presently, we have the implied volatility for longer-dated options trading 25 percent over their long-term historical levels. One could argue the reason for this is that people anticipate uncertainty after March 31 end date of the Fed's MBS program." said Harley Bassman, a managing director at Bank of America Merrill Lynch.
"People are concerned about what might happen when the Fed starts to drain liquidity. This is why the volatility surface is so steep from one month to two years expiries."
BEWARE OF CONVEXITY
Convexity hedging often feeds on itself, causing Treasury yields to rise even faster.
Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital in New York, said if rates rise sharply, agency MBS could extend and trade to much longer durations.
"It is not a risk for the next 30 basis points or so in interest rates, but at a 4.10 percent (10-year) Treasury yield, the market will start to worry," he said.
Arthur Frank, director and head of MBS research at Deutsche Bank Securities in New York, said while a 4 percent Treasury yield could spark a big pick-up in convexity hedging, he noted that hedging by mortgage servicers, the banks that manage mortgage loans and collect payments from borrowers, is driven more by MBS prices.
"Servicers have varied trigger points, but it is safe to say, they might start selling mortgage duration at 99-1/2 or at 99," he said.
The Fannie Mae 30-year 4.50 percent coupon is priced at 100-8/32, with a yield of 4.438 percent.
The relationship between interest rates and MBS prepayment rates directly influences MBS pricing. More mortgage borrowers are likely to quickly pay off their old loans when interest rates are low and they can get a better deal by refinancing.
In a bond market rally, prepayment rates rise, reducing the price gains of MBS, while in a bear market, prepayment rates slow, resulting in increased price losses. This price movement is commonly referred to as "negative convexity."
(Additional reporting by Jennifer Ablan; Editing by Jan Paschal)
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