Existing Home Sales Increase

Existing home sales for July rose 2.3% to 4.47 million, up from 4.37 million in June. Year-over-year existing home sales are up 10.4%. The median home price also rose year-over-year, increasing 9.4% to $187,300 from July 2011.

Existing Home Sales is a measure of the selling rate of pre-owned single-family homes, collected by the National Association of Realtors from 650 realtor associations. It includes a geographical breakdown, as well as a measure of prices and house inventory, the number of months it would take to deplete the existing supply of pre-owned houses at the current sales pace. The data is timely and is used in conjunction with the new home sales release from the Census Bureau. Sales of existing (or pre-owned) houses account for roughly 84% of all houses sold.

Home Improvements That Sell

In a mash-up survey of 450 real estate agents and 1,660 homeowners, homeowners get it - most of the time - when it comes to home improvements that help induce sales and higher prices.

Realtor.com's home improvement survey, conducted online from June 6 to June 13, 2012, tapped agents and Realtor.com users who are homeowners planning to improve their home before putting it on the market.Given today's home buyers are aware of soft market conditions that can put a drag on values, they want a home that's ready to appreciate and that's a home in the best shape possible.Nearly 90 percent of real estate agents believe home improvements can help a home sell faster, and nearly 73 percent say home work can boost the price, provided the home improvements are the right home improvements.Nearly three in four (71.4 percent) real estate agents say sellers too often underestimate the power of simple home improvements - repairs, painting and cosmetic upgrades.Not so, say more than one in four (75.21 percent) of homeowners polled. They most certainly plan to repair broken household items before listing their home for sale.Also, 65.9 percent of real estate agents said another common mistake among homeowners is not making "the right" home improvements for the local market. Like upgrades from home to home help pull up values overall.Agents, 62 percent of them, also said too many homeowners make specialty improvements based on their own tastes rather than what might appeal to a buyer.Recommended home improvementsThe most common home improvements recommended by real estate agents included:• The vast majority, 96.5 percent, of real estate professionals surveyed recommend sellers repair household items that are broken before putting a home on the market.• More than half, 63.8 percent, of real estate agents recommend sellers make kitchen improvements. • Most, 59.3 percent, of real estate professionals recommend sellers make bathroom improvements. What sellers improveAre sellers complying with real estate agents' recommended home improvements? Again, for the most part, yes. The most common improvements made by home sellers:• A majority, 75.21 percent, of sellers planning renovations will repair broken household items before selling their home.• Most, 53.43 percent, of owners plan to add new flooring before selling their home.• Also most, 53.37 percent, of sellers plan bathroom improvements before selling their home.Homeowners appear to have dropped the ball on kitchen work, but they aren't pinching pennies when it comes to home improvements that sell.Home improvement budgets were $2,001 to $5,000 for 24.1 percent of home sellers planning improvements; $5,001 to $10,000 for 22.23 percent and $10,001 to $20,000 for 16.63 percent.Published: August 16, 2012

California is leading the real estate recovery

Real Estate Economy Watch reviews California's turnaround markets.
The state that gave America Alt-A loans, Countrywide, the first tidal wave of foreclosures, the highest prices during the boom and the fastest fall during the bust now is leading the nation out of the six-year housing depression.
In the second quarter, California replaced Florida as the state dominating Realtor.com’s quarterly list of top turnaround towns. In the first quarter of 2012, seven Florida markets and one California market made the top 10 positions in the Realtor.com ranking. Just one market in Florida and six in California now dominate the first 10 positions.
Leading economists like Clear Capital’s Alex Villacorta now describe the West, led by California, as leading the recovery beyond its first phase.
“Now at the start of a more advanced recovery, mid and top tier price segments in the West reported yearly gains in July of 5.0 percent and 2.7 percent, respectively.

These gains indicate the buyer pool in the West has expanded beyond the segment focused on investment opportunities in low tier homes, to the owner occupied segment purchasing higher priced residences,” wrote Villacorta in Clear Capitals July market report.
The California Association of Realtors reports prices continued to improve, with the median home price posting both month-over-month and year-over-year gains for the fourth consecutive month in June. June’s price rose 1.3 percent from a revised $316,410 in May and 8.1 percent from a revised $296,410 recorded in June 2011.

The June 2012 figure was 30.7 percent higher than the cyclical bottom of $245,230 reached in February 2009. The median price has posted above the $300,000 level for the third straight month after remaining below that mark for 15 months.
Major California markets have cut inventory dramatically, reduced REOs and now are witnessing growing demand and improving prices. REOs are down 41.7 percent from last year, according to Foreclosure Radar, and short sales are up.
In Sacramento, for example, 54.4 percent of all resales (single family homes and condos) were distressed sales. This was up slightly from 54.2 percent last month, and down from 61.3 percent in July 2011. The percentage of REOs fell to 22.4 percent, according to the Sacramento Association of Realtors.
From Realtor.com and other sources: here’s a review of turnaround markets.
Oakland. In the second quarter of 2012, median list prices in Oakland are up 10.79 percent compared to the same time last year, and inventory is moving 58 percent faster than in Q2 2011. Oakland also reduced its inventory by just over half (57 percent). The foreclosure rate in Contra Costa County is one in every 242 units while Alameda County is one in every 402, both significantly greater than the national rate of one in every 666 housing units.
San Jose. The median sale price of Silicon Valley homes neared a four-year high in June 2012, also the 12th consecutive month with year-over-year increases in home sales. One of the sharpest inventory level decreases occurred in San Jose in Q2 2012; totals were down 41 percent compared to Q2 2011, while median list prices increased 12.03 percent over the same quarter last year. Homes moved 29 percent faster in the last quarter compared to Q2 2011.
Bakersfield saw median list prices appreciate 7.62 percent in the second quarter of 2012 on a quarter-over-quarter basis. While Kern County today generates one foreclosure filing for every 197 homes, its for-sale inventory decreased 49 percent in compared to the same quarter last year. Bakersfield’s 35-day median age of inventory, 40 percent faster in the second quarter of 2012 than the same quarter last year, positions this agricultural capital as the fifth fastest-moving market. New-home closings in Bakersfield in April 2012 were up 66.1 percent from a year ago.
San Francisco housing costs have been one of the most expensive in the nation for years, and its median list price of $699,000 for Q2 makes it one of the most expensive in the nation. Yet, its Q2 2012 inventory is 39 percent lower than it was a year ago and prices are up 11 percent on a year-over-year basis. Its 8.5 percent unemployment rate is higher than the national average. Key to the market’s improvements is fewer foreclosures and an increased number of high-end sales, as well as improved mortgage availability and ultra-low interest rates.
Fresno has seen a nearly 50 percent year-over-year quarterly reduction of inventory. Its age of inventory was 37 days in Q2 2012, which placed it in the top 10 fastest moving markets in the country. Fresno still suffers from very high negative equity at 46.3 percent , compared to 27.3 percent nationwide.

Fresno County’s foreclosure rate - at one in every 145 homes - and its 15.3 percent unemployment rate may make it especially challenging to generate the demand that its housing market will need to continue to improve at the current rate.
Santa Barbara-Santa Maria-Lompoc has seen a 31 percent decrease in year-over-year quarterly for-sale inventory and an increase of median list prices of 17 percent compared to the same time last year. Santa Barbara’s housing market moved 21 percent faster in the second quarter of 2012 than the same quarter last year. Santa Barbara County today generates one foreclosure filing for every 330 homes.

Signs Housing Is on the Mend

Some Americans are still jittery over the housing market, but here are eight positive signs that should quell some of their fears.

1.Housing prices are on the rise across the country.
2.Foreclosures have slowed. Analysts suggest that as the supply of distressed homes slows, buyers will be forced into higher-price properties too.
3.Inventories of for-sale homes on the market are decreasing. In fact, inventories of for-sale homes have dropped 24 percent from a year ago.
4.Mortgage rates are at ultra record level lows, for those who can qualify
5.Housing starts rose 6.9 percent in June. Also, existing-home sales were up 4.5 percent higher in June compared to one year ago.
6.Home building stocks are on the rise.
7.For investors who are buying homes, rents are soaring, allowing them to cash in on their investments. Rental prices are at a 10-year high as median units rent for $710 a month.
8.Home affordability is at record highs for the median income family, due to falling home values and super low mortgage rates. In fact, a recent study found that it is cheaper to buy a home than rent in basically ever major city in the U.S. For those who buy, you can save the cost of renting by owning the home for five years or less.
But while the signs point to a housing market on the mend, some Americans still remain hesitant. Many Americans are still underwater on their mortgage, owing more on their home than it is currently worth. Also, the economy continues to weigh on the recovery, particularly a dampening employment outlook, which analysts see as tied to housing.

Still, The Wall Street Journal concludes in a recent article that if you take into account all the positive signs lately in the housing market, “housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.”

Source: “Finally, It Is Time to Buy a House,” The Wall Street Journal (Aug. 1, 2012)

3 Big Predictions for Real Estate

A few major predictions came out of the panel discussion that kicked off Inman's Real Estate Connect event yesterday morning in San Francisco. The session, moderated by Inman News founder Brad Inman, featured experts from the worlds of real estate and finance. Here were some of the most important forecasts for the real estate industry:

1. Rates will remain low for at least another year.

Amy Brandt, CEO of Vantium Capital, offered the most conservative prediction: that rates would probably start to rise significantly by the summer of next year. Bill Emmons, assistant vice president and economist of the Federal Reserve Bank of St. Louis, said he expects the Fed to do whatever it can to hold rates down until the end of 2014.

2. No matter what happens, the government will continue to play a major role in mortgage financing.

Brandt pointed out that more than 90 percent of mortgages are somehow supported today by the federal government. It will probably stay that way for a couple of reasons, the first being that investors want it that way, said Joel Singer, CEO of the California Association of REALTORS®. But another issue is that no private entity or group is big enough to fill that role right now. However, it's unclear whether the FHA or a reconstituted Fannie Mae and Freddie Mac would take the lead.

3. Hard assets such as oil, gold, and real estate will probably be on the rise for some time to come.

All of the panelists agreed, with some minor exceptions, that real estate is a good investment right now. And like other tangible assets, it will likely grow in value over the next few years.

They also all agreed that it will take some time before the economy returns to stable, long-lasting growth. The reason? The downturn was driven by major problems in the financial sector, and the broken system will have to be retooled before the economy can truly flourish, said Patrick Stone, president and CEO of the Williston Financial Group.

　

That rebuilding could take some time, Singer added. "This transition is going to take a while," he said. "The failure of institutions to grasp the problem and come up with solutions is what's caused this to last so long." Emmons said the extreme aversion to risk among business right now -- causing capital to flow into low-risk, low-return assets -- should improve soon, but added that unprecedented levels of public and private debt could hold back growth. "There's still a lot of debt to work through," he explained. "In some respects, we look like Japan. Rather than take the 18 months of hell to get through that, we're just kicking it down the road."

However, the panel was generally optimistic about the long-term prospects of the economy. "We train and educate the innovators of tomorrow," Stone said. "And no country is better at connecting capital and innovation."

Brandt also expressed confidence in the ability of most real estate professionals to adapt to any major economic shifts, just as they did with the advent of the Internet. "I think this is an innovative group that can come up with solutions," she said, but added that practitioners should raise their awareness of and involvement in the mortgage financing part of the transaction.

"If I were running a real estate company, I would try to be more tightly integrated with the financial side," she said.

- Brian Summerfield, REALTOR Magazine

Housing Market Lifts Off From the 'Bottom'

Recent housing indexes have shown single-family home prices are on the rise, providing more evidence that the “bottom” of the market is already behind.

"We’re wiping out just about all of the decline,” Joel Naroff, chief economist at Naroff Economic Advisors, told NBC.com about recent housing data showing home prices inching up. “It indicates the market has turned the corner on the pricing side.”

Some recent housing indexes suggest that the “bottom” of the market was reached in January 2012. Since that time, housing prices have been picking up in many housing markets.

But "the turnaround in home prices was unexpected," says Patrick Newport, an economist with IHS Global Insight. "The conventional wisdom in February, following that landmark agreement [of the $26 billion mortgage settlement with the nation’s five largest banks], was that we would see a surge in foreclosures of some size that would lead to lower home prices. This surge never materialized and home prices have turned.”

Newport points to several signs of a housing market on the mend. For one, housing starts are up, after reaching a low in the fourth quarter of 2011. Also, he says the FHFA monthly House Price Index shows a 3.7 percent increase in May year-over-year, which he notes is higher than inflation and “means that real housing wealth, a consumer spending driver, was also up.”

The increase in home prices is also leading to a fewer number of home owners who are underwater on their mortgages, owing more on their mortgage than their home is currently worth. The number of underwater home owners fell from 12.1 million at the end of 2011 to 11.4 million at the end of the first quarter this year, according to CoreLogic data.

Source: “Evidence Mounts that Home Prices Hit Bottom Last Winter,” NBC News (July 31, 2012)