Home Prices Rise for 3rd Month

Home Prices Rise for 3rd Month

Most markets have signs they’ve hit the bottom; Florida and Southwest’s plight continues

Jim Haughey, Chief Economist, Reed Construction Data September 29, 2009 HousingZone.com

The Case-Shiller home price index for major housing markets increased more than 1 percent in July from June, the third consecutive small improvement. Unfortunately the data is two months old. Other, more recent, housing market measures suggest that prices have continued to rise through September, although the pace of gain may have slowed. The cumulative rise in home prices through September is probably about 2 percent. This leaves home prices still about 30 percent below the previous peak level. Nonetheless, the change in trend is significant.

Financially able prospective home buyers as well as speculators have been waiting several years for a clear sign that the price bottom has been passed. Now they have it, at least in most housing markets. There is no sign of the price bottom yet in the most troubled housing markets in the Southwest and Florida. Home prices remain too high in these regions relative to income and rates for available rental housing. Since these regions also have too many homes relative to their now lower population, the slide in home prices will continue for many months. But elsewhere those who have been waiting can now buy without fear that they are leaving money on the table.

The result of the turn in housing prices will be rising home sales later this year. Home sales are reported when the final paperwork transferring the deed is completed. Typically, this is two or more months after the buyers offer was accepted.  Reed Construction Data projects existing home sales to increase 7 percent and new home sales 11 percent by the end of winter with the growth rate accelerating beyond winter.

Depressed home prices will continue to constrain home sales for several more years. More than a third of mortgaged homeowners will still be “underwater,” having home priced less than mortgage principal at the beginning of 2010. A few of these homeowners will default but most will simply wait for their rising home value top catch up with their falling mortgage principal before they are ready to move.

Existing-Home Sales Dip Slightly in August

Existing-Home Sales Dip Slightly in August

Overall report is good, says Jim Haughey, but difficulty in measuring inventory begs caution

Jim Haughey, Chief Economist, Reed Construction Data September 24, 2009 HousingZone.com

Existing-home sales dropped to a 5.10 million annual rate in August after soaring to 5.24 million in July. Nonetheless, the August total reported by the National Association of Realtors is the second highest in a year and half. The housing recovery is still solidly underway but, as expected, is not as robust as the initial burst of growth in the previous few months suggested. One or more additional brief reversals in either the new- or existing-home markets should be expected in the next six months.

Overall, the August existing-home sales report is encouraging news. Home prices were down only slightly in August from July and above median prices reported earlier in the year. The inventory of existing homes for sales dropped nearly 11 percent. This much overestimates current market trends, but it does confirm that the inventory overhang is shrinking. The surplus inventory and the associated discount pricing is the most serious constraint on new home sales.

Caution: inventory is always difficult to measure in any market. It is likely that the actual level of homes for sale inventory is large then reported because not all foreclosed homes are listed with Realtors. Many homes available for short sale to avoid foreclosure are also not listed. This measurement problem does not invalidate the reported declining trend in surplus inventory, but it does suggest that a return to normal inventory levels will take longer than the reported inventory and sales data suggest.

Reed Construction Data expects existing home sales to rise 10 percent over the next year. The slow improvement in home prices and inventory is being supplemented by several very positive market drivers. The home affordability index, while recently slipping 20 points to 158.5 remains solidly in housing boom territory due to continuing income gains and slipping mortgage rates. Home buyer confidence, while much depressed, is now progressively rising. And the Federal Reserve Board remains committed to providing enough capital to finance a housing market expansion at current interest rates.

Housing Recovery Starts Strong But Will Slow Later This Year

Housing Recovery Starts Strong But Will Slow Later This Year

Jim Haughey’s September 2009 Housing Market Monitor Report

Jim Haughey, Chief Economist, Reed Construction Data September 14, 2009 HousingZone.com

Single-family housing market indicators generally improved in the last few months and now signal a strong start to the housing recovery in the spring, although the level of construction activity remains at a deep recession level. Both the multi-family and remodeling markets continue to decline with recovery not expected to begin until well into 2010.

Macroeconomic indicators paint a similar picture; a 3 percent rise in GDP is expected during the summer and then a fallback to slower economic growth through next year.

The 20 percent surge in housing starts from April to July was spurred by federal fiscal pump priming directly in the housing market and generally in the overall economy. These are temporary measures that will not sustain a continuing recovery at the initial pace, but they will keep housing below the depressed level, reached early in the spring.

The temporary boosts to single-family housing included the federal $8,000 tax credit for first-time home buyers; several similar state programs that have now expired; and several programs to prevent or delay foreclosures. Fewer foreclosures meant less competition for home builders, with discount-priced existing homes. Most of the state foreclosure moratoriums have now expired. The federal subsidies to mortgage payments are continuing, but the month-to-month rise in spending for these programs is ebbing — so the boost to home buying is also ebbing.

Monthly housing starts from August to December will average slightly higher than the June/July level, but one or two month-to-month declines should be expected as well, as the usual large monthly changes in multi family starts.

Both of the remodeling tracking indicators show continued decline at a slowing pace. This is broadly consistent with the U.S. Census Bureau.

The successful federal efforts to jump start the single-family market come at the expense of a sustained strong housing recovery. The $8,000 tax credit has “borrowed” some home sales and starts from the secondhalf of 2009. Also, the restructuring of mortgage payments with lower interest rates and/or lower loan balances yet to be paid is only postponing many loan defaults from 2009 to 2010-2011. Recent experience suggests that as many as half of the restructured mortgages will eventually default.

This will stretch out the foreclosure problem — discount price existing homes competing with new homes — into 2012 and possibly beyond.

New Affordability Shapes Housing Markets

New Affordability Shapes Housing Markets

Realtor.com Survey Examines Affordability, Foreclosures, and Refinancing

News Release July 10, 2009 HousingZone.com

LOS ANGELES, July 10 — Price declines and low interest rates are motivating millions of home buyers to shop for bargains in the most affordable housing market in 28 years ⁽¹⁾ , yet at the same time only one-in-ten of today’s home owners say they have delayed selling their home due to those same market conditions, according to the new national Realtor.com® Homeownership Survey.

Based on the Realtor.com survey, affordability is clearly driving more than two-thirds (65.2%) of potential buyers back into today’s housing market. Nearly one of five prospective buyers (19.6%) say foreclosure bargains in their communities would motivate them to purchase a home, the most important reason they’re interested in buying in the near future. An additional 15.5 percent said they’re motivated to buy soon because they think prices are as low as they will go, and another 15.5 percent said they’re motivated to buy before interest rates rise. For 14.6 percent of first time home buyers, the Federal $8,000 tax credit is the impetus to purchase a new home in the future.

The survey also found most Americans are not aware of how affordable homes are becoming in today’s fast-changing housing market. More than three-quarters (76.4%) of consumers think a median income family can afford only 50 percent or fewer of the homes for sale in their area. However, in reality, a family earning the national median income of $53,182 can afford nearly 75 percent of the current homes for sale on Realtor.com, the #1 homes for sale Web site.⁽²⁾ In the past year, the Housing Affordability Index maintained by the National Association of Realtors has increased 29 percent overall and 19 percent for first-time homebuyers, and is higher now than at any time in the 28 year history of the index.

“Value is clearly motivating potential home buyers, and today’s new level of affordability is still an under-appreciated reality that needs to be explored,” said Realtor.com President, Errol Samuelson. “The variety and quality of homes currently within reach of the average American family is much greater than most people realize. Making credit available to responsible borrowers and building consumer confidence in the economy are now key factors in restoring vitality to the nation’s housing market.”

Samuelson continues by explaining that the survey found that while lower prices are motivating buyers, they’re also causing one-in-ten current owners to delay selling homes they currently own. At the same time, 87 percent of all Americans are paying more (44.7%) or the same amount of attention (42.3%) to home values as compared to a year ago.

Foreclosures Today

Distressed sales of foreclosures and short sales, which constitute nearly half of all existing home sales today,⁽³⁾ and place downward pressure on prices, are not universally popular with buyers. Two-thirds of those surveyed (66.3%) said they are not likely to consider buying a foreclosure in the future. However, if sellers were willing to pay closing costs, 23.9 percent would be motivated to purchase foreclosures, and 19.5 percent said they would buy a foreclosure if there was a higher level of certainty related to home repairs required to make the home “move-in” ready.

Current fear of foreclosure has lessened since the last Realtor.com Homeownership Survey in March 2009, when 52.5 percent of respondents expressed concern that they or someone they know may face foreclosure in the next 6-12 months. In this latest survey, the number of home owners concerned about foreclosure dropped 8.7 percent compared to March 2009, and the number of owners feeling “not very concerned” or “not concerned at all” increased by 8.4 percent combined in the past three months.

In addition, of the participants in this newest survey who say they or someone they know may be facing foreclosure in the near future, one out of five (20.1%) haven’t taken any steps to resolve their situation, while 22.4 percent haven’t taken steps yet but plan to do something before the Making Homes Affordable refinance program expires on June 10th next year. Approximately a third (37.2%) have talked to their lenders about a loan modification, 43.9 percent have talked with a lender about refinancing, and 25.9 percent have or are planning to refinance under the Administration’s Making Homes Affordable programs.

Based on the survey, the Administration’s Making Homes Affordable programs to reduce foreclosures are not necessarily popular with the majority of survey respondents. Forty-one percent said the administration’s program to reduce the number of foreclosures is not working, 27.8 percent said they felt the program is working, 3.3 percent feel it’s too soon to tell and 26.7 percent don’t know. The programs were designed to help 2 to 4 million homeowners avoid foreclosure through home loan modifications, and another 5 to 7 million through mortgage refinancing.

The Economy and Refinancing

The overall economic situation continues to affect both buyers and sellers in today’s housing market. The greatest barriers to homeownership today, according to survey respondents, are concerns related to employment and the ability to make mortgage payments, especially among respondents ages 25-34 (31.1%) and ages 35-49 (30.8%). The median age of a first time home buyer is 30.⁽⁴⁾ A seller’s inability to sell their current home (16.1%) and lack of available financing (15.4%) to purchase a home were also cited as reasons why buyers and sellers have held back and stayed out of the market.

The June 2009, Realtor.com Homeownership Survey found current economic conditions may be having an impact on how the 29.7% of homeowners who say they refinanced their mortgage in 2009 are spending their refinancing gains. Survey results indicate homeowners who’ve recently refinanced are using the monthly savings as much to pay their living expenses as to remodel or repair their homes. Twelve point three percent are using the proceeds to remodel their homes and 12.2 percent are using the money to pay living expenses, while 10.7 percent are saving their monthly payment savings for retirement.

This survey, the fourth in Realtor.com’s series of quarterly Homeownership Surveys, is based on random telephone interviews conducted from June 19-21, 2009. A total of 1,004 interviews were completed, with approximately 500 female adults and 500 male adults. The margin of error on weighted data is + or - 3 at a 95% level of confidence. The survey was conducted by Omnitel, in a weekly national telephone omnibus service of GfK Custom Research North America. The raw data are weighted by a custom designed computer program, which automatically develops a weighting factor for each respondent. This procedure employs five variables: age, sex, education, race and geographic region. Each interview is assigned a single weight derived from the relationship between the actual proportion of the population with its specific combination of age, sex, education, race and geographic characteristics and the proportion in our sample that week. Tabular results show both weighted and unweighted bases for these demographic variables.

Housing-Starts Recovery Expected This Summer

Housing-Starts Recovery Expected This Summer

Despite slow stimulus impact, turnaround approaching, says chief economist

July 14, 2009 HousingZone.com

The housing market remains stuck at the bottom of it long recession. New-home permits, starts and sales are approximately flat in the last few months. The existing home market may now have also stabilized, but this is still tentative. Consumer buying power and home affordability have grown strongly in the last few months entirely due the mailing of $250 stimulus checks to low and moderate income households. This temporary boost was not enough to halt net layoffs or substantially raise confidence. Home remodeling spending is likely still sinking slowly although the hard data to confirm this is not available.

The turnabout to rising housing starts is still expected this summer with the existing home market beginning to improve at the same time or a month or so later. The remodeling decline will persist into early next year, the typical delay behind the new and existing markets. The key driver of the turnaround will be fewer job losses as a result of resumed expansion in manufacturing after a long inventory reduction. This boost in income and confidence will spillover into home buying. More taxpayer subsidies to housing and the end to the long slide in home prices in more parts of the country will also contribute.

It will be several months after a clear turnaround in housing starts before the good news reaches other market measure. Monthly residential job site construction spending will continue to decline. The pipeline of work in progress is unusually low. More recently started homes are smaller and have fewer features. Many homebuilders no longer have the credit access to build ahead in anticipation of a demand increase. Residential construction employment and wages are likely to decline into the fall.

Home prices will continue declining in the markets in the Southeast, Southwest and Great Lakes that are still dominated by foreclosure and foreclosure avoidance sales. The amount of materials consumed at residential job sites will begin expanding quickly as soon as housing starts are rising. But it will take a few months to clear excess inventory before the turnabout reaches materials producers. Lumber will be impacted first.

None of the market measures in the table have much insight into how the housing recovery will proceed after the initial pickup. That depends on the pace of the parallel general economic recovery. Currently, most signs suggest a sluggish economic recovery, slowed by a constraint on available credit after several years of capital destruction, fear of huge tax increases and the disruption caused by multiple major changes and proposed changes in the health, energy and financial sectors of the economy.

President Obama and the Congress always claim that their proposals will boost the size of the economic pie. But the details and their actions make it clear that they have too much interest in the size of the slices and too little interest in the size of the pie.

Proposed Legislation Would Boost Remodeling Activity With More Tax Credits

Proposed Legislation Would Boost Remodeling Activity With More Tax Credits

HIRE Act of 2009 offers credits for meeting environmental standards

News Release July 13, 2009 HousingZone.com

Congressman Henry Johnson (D-GA) and Nathan Deal (R-GA) are sponsoring legislation, the Home Improvements Revitalize the Economy (HIRE) Act of 2009, to provide tax credits to stimulate the purchase of kitchen cabinets and other remodeling and home furnishing improvements.

“Not only would this help stimulate the manufacturing market for home furnishings and buildings products, it would save retail jobs, generate billions in revenue and increase home values at the time when we really need a boost,” according to Johnson. “By creating this tax deduction, we will offer incentives for consumers who would otherwise forego spending in 2009 and 2010. We will encourage environmentally sound practices by doubling the benefits for the purchase of building products and home furnishings that meet nationally recognized environmental standards.”

Under the proposed HIRE Act, individual consumers and joint filers would receive respective $2,000 and $4,000 tax credits for purchasing items that meet recognized environmental standards (LEED, NAHB, Green Globes, SFI/FSC and ESP). Retailers, contractors and building product resellers can receive up to $10,000 for covered purchases.

A coalition that includes 14 associations representing kitchen cabinets (Kitchen Cabinet Manufacturers Association) home furnishings, flooring, paint and coatings, carpet and rug, and other interests have joined forces to support passage of the legislation.

“This bill would help everyone in our industry – manufacturing, retail, design and suppliers. The costs would be more than offset by increased economic activity and saved jobs. The incentives cease after three years. This definitely is a pump-priming effort of limited duration and near immediate payback,” according to KCMA Executive Vice President Dick Titus.

A copy of the HIRE Act can be viewed on the KCMA Web Site – www.kcma.org. Supporters are encouraged to contact their congressmen and ask that they co-sponsor the bill.

AIA Design Trends Survey Says Smaller Home Size, Volumes

AIA Design Trends Survey Says Smaller Home Size, Volumes Housing downturn and growing interest in containing energy costs result in smaller home size and volumes with strong preference for outdoor living options and accessibility AIA News Release June 29, 2009 HousingZone

Washington, D.C. – June 29, 2008 – Due to the economic recession and a renewed interest in lowering utility costs, there has been a growing demand for smaller sized homes in recent years. There has also been an adjustment in the volume of living space with a preference for lower ceilings and a diminished interest in two-story foyers. Property upgrades, however, are extremely popular with households trying to maximize their usable space with finished attics and basements, outdoor living enhancements and blended indoor / outdoor features. Accessibility within the home continues to be a concern, especially for an aging U.S. population. Business conditions for residential architects remain weak, but appear to be stabilizing with the first uptick in billings since the second quarter of 2007. These findings are from the American Institute of Architects (AIA) Home Design Trends Survey that focused specifically on overall home layout and use in the first quarter of 2009.

“The era of the ‘McMansion’ could well be over as home sizes have been trending downward recently, with a significantly higher number of architects reporting demand for smaller homes this year,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “And as the housing boom has passed there seems to be a renewed interest in investing in properties to make homes more livable, as opposed to real estate that can be resold quickly for a profit.”

Overall Home Layout and Size Trends

Residential elements (% of respondents that reported increases) 2009 2008 In-home accessibility 63% 67% Open space layout 50% 53% Access info / out of home 49% 59% Informal space 45% 61% Finished basement / attic 32% 46% Single-floor plan 34% 40% High volume 11% 28% Square footage 4% 16% Lot size 2% 7%

“Adding decks, porches and patios are all part of the outdoor living enhancement trend,” added Baker. “But that also extends to more formal outdoor ‘rooms,’ cooking areas and blended indoor / outdoor features.”

Outdoor living and landscaping trends 2008 2007 Low maintenance landscaping 67% 70% Outdoor living space 60% 67% Blended indoor / outdoor living 51% 55% Exterior / security lighting 33% 39% Outdoor amenities 22% 31%

Housing market business conditions

AIA Home Design Survey Index for Q1 2009 (any score above 50 is positive)

• Billings: 24
• Inquiries for new projects: 35

Baker continued, “Business conditions at residential architecture firms really began to deteriorate in the middle of 2008. While still very weak, we are beginning to see a slight reversal in home design and improvement activity.”

Specific residential segments (index score computed as % of respondents reporting improving minus % weakening conditions)

• Kitchen and bath remodeling: 28
• Additions / alterations: 26
• First-time buyer / affordable home market: -27
• Move-up home market: -44
• Townhouse / condo market: -51
• Custom / luxury home market: -52
• Second / vacation home market: -77

About the AIA Home Design Trends Survey The AIA Home Design Trend Survey is conducted quarterly with a panel of 500 architecture firms that concentrate their practice in the residential sector. Residential architects are design leaders in shaping how homes function, look, and integrate into communities and this survey helps to identify emerging trends in the housing marketplace. Business conditions are also monitored on a quarterly basis. Future surveys will focus on specialty rooms and systems (September 2009) and community design trends (December 2009).

About The American Institute of Architects For over 150 years, members of the American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. By using sustainable design practices, materials, and techniques, AIA architects are uniquely poised to provide the leadership and guidance needed to provide solutions to address climate change. AIA architects walk the walk on sustainable design. Visit www.aia.org/walkthewalk.

Summer housing recovery still expected despite small declines in confidence, home prices

Summer housing recovery still expected despite small declines in confidence, home prices

Prices rise in 4 of 10 largest metro areas

Jim Haughey, Chief Economist, Reed Construction Data June 30, 2009 HousingZone

Today’s reports that consumer confidence dipped 5.3 points in June to 49.3 and the Case-Shiller 20-city home price index dropped only 0.6 percent in April have offsetting effects on the timing and strength of the housing recovery still expected this summer. Although the home price index is still declining in most major housing markets, home prices have stabilized or begun to improve in a few of the larger and many smaller markets. The confidence dip is a blunt reminder that buying confidence remains at a recession level until well past then end of the recession.

Home prices rose in April in four of the 10 largest metro areas: Boston (+0.4 percent), San Francisco (+0.6 percent), Washington (+0.8 percent) and Denver (+1.5 percent). Boston had a relatively mild housing recession; home price declines began earlier and hence are ending earlier. San Francisco had an average-plus housing recession, but it’s recovering quickly with a California subsidy to home buyers; the return of some speculative buyers; and improvements in mortgage rates and credit access for its very expensive homes. The Washington, D.C., housing market is being boosted by a generous federal government wage increase and aggressive hiring for new regulatory jobs. There is no sign yet of an end to home price declines in Arizona, Nevada, Florida and the industrial Midwest.

Consumer confidence is being severely stressed by the long, deep recession. The labor market weakened further over the last month. Pay cuts are becoming more common. Layoffs have reached public and service jobs that are not affected in a milder recession. The price of gasoline went up as much as $0.25 between the two survey periods although it fell $0.05 since the latest survey. Consumers are also concerned about higher taxes. Many states and cities have or are about to raise taxes and pending legislation in Washington threatens a huge federal tax increase.

Reed Construction Data still expects a gradual upturn in the statistics measuring the national housing market this summer. This will be driven by two things: federal subsidies to home buying already in place but just now becoming significant and by a growing share of prospective buyers and investors who believe that home prices have bottomed in some market and are near the bottom in other markets.

The initial housing upturn will take place while the national Case-Shiller home price index is still dropping and the more comprehensive FHFA index is stable but not yet clearly rising. The housing recovery will begin while the Consumer Confidence Index remains in the deep recession zone but well above the cyclical low point earlier this year.

Recall that the housing recession began in early 2006, market by market, more than a year and a half before growth slowed to the 0-1 percent range in the overall economy. The recovery will be similar. It will be market by market. It will start first in markets where home prices have stopped dropping with little threat of further drops from bloated inventories of homes for sale or imminent foreclosures. Generally, these are the midsize markets in the middle of the country where home prices have been more stable in the last five years and where there have been no outsize job losses from collapsing local industries.

New-Home Sales Virtually Flat in May

New-Home Sales Virtually Flat in May

May sales of new single-family homes held even with the previous month, declining less than one percentage point to a seasonally adjusted annual rate of 342,000 units

National Association of Home Builders June 24, 2009 HousingZone

WASHINGTON, June 24 – Sales of newly built, single-family homes in May held virtually even with the previous month, declining less than one percentage point to a seasonally adjusted annual rate of 342,000 units, according to data released by the U.S. Commerce Department today.

“In the midst of the prime home buying season, builders report that a number of factors are limiting new-home sales. These include consumer concerns about job security, potential buyers’ inability to sell their existing homes, and problems with appraisals coming in too low,” said Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “The latter issue is directly related to the use of distressed properties (foreclosures and short sales) as comps, which disproportionately impacts assessed values of nearby homes.”

“Today’s report provides further evidence that the recovery is going to be a slow one as the housing market continues to bump along, trying to find a bottom,” added NAHB Chief Economist David Crowe. “The good news is that, even as the sales pace leveled in May, inventories of unsold new homes continued to shrink for a 25th consecutive month - a trend that is helping bring supply and demand into better alignment and thereby setting the stage for an eventual market recovery.”

New-home sales declined 0.6 percent to a seasonally adjusted annual pace of 342,000 units in May. Meanwhile, the number of new homes for sale fell 2.3 percent to 292,000, which is a 10.2-month supply at the current sales pace.

Regionally, the decline in new-home sales was entirely focused on the South, where sales fell 8.5 percent for the month. Meanwhile, sales of new homes gained 1.3 percent in the West and posted double-digit gains of 28.6 percent and 18.6 percent in the Northeast and Midwest, respectively.

Striking Screened Porch, Deck and Patio at Delaware Beaches

Enhance your living space with a porch addition, new deck or patio. You will expand your entertainment area as well as create a venue to harmonize with nature.  Enjoy the views and peacefulness of early Spring through late Fall, and take pleasure in watching nature in its own habitat. Treat yourself to the best scenery  that your environment has to offer.

Screen Porch During Framing Process

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