Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun says. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.
Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa.
On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales. “Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income, and jobs,” Yun says. “It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that.”
Here are some highlights from NAR's report:
- New-homes. Sales of new homes are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.
- Rates. The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009.
Affordability. NAR’s housing affordability index is expected to rise 10
Second-Home Sales Accounted For One-Third of Transactions in 2007
The combined total of vacation- and investment-home sales declined with the overall market in 2007, but still accounted for 33 percent of all existing- and new-home sales, which is close to historic norms, according to the National Association of Realtors®.
The market share of homes purchased for investment last year was 21 percent, down from 22 percent in 2006, while another 12 percent were vacation homes, compared with a 14 percent market share in 2006. The total share of second homes declined from 36 percent of transactions in 2006.
Lawrence Yun, NAR chief economist, said the findings suggest different cycles for each of the sectors over the past two years. "Investment-home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007," he said. "Vacation-home sales rose to a new record in 2006 because there was a pent-up demand from buyers who couldn't find a property as a result of tight supplies in preceding years
Yun said lifestyle factors and strong demographics remain positive for the vacation home market. "Investment considerations are secondary for vacation-home buyers, so there is some dormant underlying demand," he said. "A peak of population is moving through the prime years for buying recreational property. It is welcoming to see investment sales returning to pre-boom sales activity."
The median price of a vacation home was $195,000 in 2007, down 2.5 percent from $200,000 in 2006. The typical investment property cost $150,000 last year, unchanged from 2006.
Sixty-five percent of vacation home buyers and 71 percent of investment home buyers purchased existing homes, while the remainder purchased new homes.
The typical vacation-home buyer in 2007 was 46 years old, had a median household income of $99,100, and purchased a property that was a median of 287 miles from their primary residence.
In listing the reasons for purchasing a vacation home, 84 percent of buyers wanted to use the home for vacation or as a family retreat; 30 percent to use as a primary residence in the future; 26 percent to diversify investments; 25 percent to rent to others; 16 percent for the tax benefits; 14 percent for use by a family member, friend or relative; and 6 percent because they had extra money to spend.
Twenty-three percent of investment properties purchased in 2007 were in the Northeast, 19 percent in the Midwest, 38 percent in the South and 21 percent in the West.
Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59 percent of primary residence buyers. Forty-four percent of vacation-home buyers and 57 percent of investment buyers said they were likely to purchase another property within two years.
NAR's 2007 Investment and Vacation Home Buyers Survey, conducted in March 2008, includes answers from 1,965 usable responses. The survey controlled for age and income, based on information from the larger 2007 National Association of Realtors® Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.
America's riskiest real estate markets
Forbes, March 3, 2008
Using data from a variety of sources, Forbes has compiled a list of the nation's "riskiest" real estate markets - which includes San Diego and Sacramento. But, the magazine concludes, there are signs that improvement may be on the horizon for these two major California markets.
MAKING SENSE OF THE STORY FOR CONSUMERS:
- The riskiest markets are those with high foreclosure rates, slow or no job growth, and a glut of homes on the market. Markets like Detroit, Cleveland, and Miami display all three characteristics.
- By contrast, transactions are rising in San Diego, and that's a good sign assuming the increase is sustained. Rising transaction numbers may mean credit is becoming easier to come by and buyers are looking somewhat more favorably on the market. In fact, Forbes suggests prices also may begin to rise over the next six months. That's because there usually is a lag between increases in transaction numbers and price increases.
- The Forbes report also projects better times ahead for San Diego and Sacramento thanks to a 125 percent increase in Fannie Mae/Freddie Mac conforming loan limits. In San Diego, the report notes, 18 percent of the market will see improved lending conditions.
Realtor Magazine : March 24, 2008
Existing-Home Sales Rise in February
Sales of existing homes increased in February and remain within a fairly stable range, according to the NATIONAL ASSOCIATION OF REALTORS®.
Existing-home sales - including single-family, townhomes, condominiums and co-ops - rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.
Lawrence Yun, NAR chief economist, says the gain is encouraging. "We're not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing," he says. "Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year."
The national median existing-home price for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.
Real Estate Magazine : The New Baby Boom : by Robert Freedman
U.S. Population as of Jan. 1,2008 : 303 146.284
Percent change from Jan. 1,2007 : +0.9%
Rate of U.S. births ; 1 every 8 seconds
Rate of U.S. deaths : 1 every 11 seconds
Rate of International migration to U.S. : 1 every 30 seconds
Total rate of U.S. growth: 1 every 13 seconds
Economists can argue about the short-term prospects of home sales as consumers ponder the best time to buy. But there's little doubt among analysts about the market's long-term prospects.
The Unided States is adding one person every 13 seconds. At the sart of 2008, the country had surpassed 303 million residents, almost 3 million more than it had at the start of 2007, the Census Bureau says.
One of the driving forces of this increase is a rise in the U.S. birth rate, now the highest it has been in more than 40 years, according to an Associated Press review of births dating back to 1090. Fueling the births are higher rates for immigrant households, particularly Hispanics.
For real estate professionals, the country's continuing strong growth is a good sign in today's challenging times. "With a population increase of 3 million, household formation typically expands by up to 1.5 million," says NAR Chief Economist Lawrence Yun.
An because new household formation is the critical first step toward home ownership, the population gains point to robust demand in the years ahead, especially since a significant portion of the increase is fueled by immigrants, who arrive at the rate of one every 30 seconds, the Census Bureau says.
California Desert Association of Realtors article in our February bulletin:
Sales of existing Coachella Valley homes increased in November for the second straight month after five months of declines. Sales of the existing homes rose 2.2 percent in November over October, but were 16.2 persent lower than November 2006, according to Multiple Listing Service figures representing closed escrows.
"It is premature to call two months of sales increases a trend mainly because December traditionally is a slower sales month due to the holidays and may not keep pace. However, the market is slowly movingupward" said Greg Berkemer, CDAR Executive Vice President.
"The bottom line of the housing market is a combination of sales and prices" Berkemer said "Desert prices remained soft and trnding down through November, but should sales continue to improve over the next few months and the market abssorbs excess resale inventory, we may be looking back at the middle part of 2007 as the market bottom. Prices will be affected not only by the number of sales but also by the absorption of lower priced properties sellers can no longer afford and developers aggressively selling their already built new homes"
The typpical (median) single family home for sale in the Desert Area MLS to day is three bedrooms, two baths, 1,931 square feet, listed at $379,500 and has been on the market for 90 days.
California Desert Association of Realtors report for December 2007
Regional Sales & Price Activity - December 2007
Median price fell 16.5% and sales decreased 33.4 % compared to the same time a year ago for California statewide. Locally, median price fell 1.2 % & sales declined by 24.5 % from a year ago
2006 2007 2008Desert Area MLS Residential For Sale Inventory
Dec. 8,236 9,186
Nov: 8,598 9,593
Oct. 8,076 9,170
Sept: 7,723 8,599
August 7,285 8,417
July: 7,420 8,600
June: 7,436 8,930
May: 7,497 9,108
April: 7,467 9,153
March: 7,351 9,005
February 7,046 8,852
January: 6,395 8,490 9,134
Median price comparaison in California
Dec 2007 Nov 2007 Dec 2006
Calif. (sf) 475,460 489,570 569,350
Calif. (condo) 383,950 405,200 421,440
Palm Springs 364,660 318,180 369,090
The only comparable geographic areas in California with a lower median price than the desert are the High Desert (Victorville, Lancaster) and Sacramento
- Compared to the State of California as a whole the Desert market fared better in December 2007 in terms of a double digit increase in price over Nov.07 and a slowing sales rate year over year that was about a 1/3 smaller decline.
- The Chart indicates the monthly sales for 2007: Feb was better than Jan; March was better than Feb; April and May leveled out; then a 4 month decline(June, July, Aug, Sept); then Oct was better than Sept; November was better than Oct; and finally Dec was only slightly lower in a month that is traditionally much slower due to the Holidays.
What does this mean?
- The market is improving - although very slowly it is moving in the right direction.
- Too early to call an end to this market shift. It will take a number of additional positive months to announce an end and point backwards to the bottom of the market.
- The market may be in the bottom trough and this may be the Buyer's best window of opportunity.
- Sellers who must sell now will still need to be flexible in terms and pricing despite these upward signs
- The Desert is enjoying a triple benefit of the influence of foreign buyers (mostly Canadian); actions of the Fed to lower interest rates; and its traditional selling "season" -- plus winter weather only equaled in the U.S. by Hawaii and So. Florida.
There are still issues and obstacles(such as short term excess inventory and credit and financing clean up) but growth, planning, location, and lifestyle here have made the Desert far more resilient than ever before.
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A Normal Market : Outlook shows steadying picture by Robert Freedman
Realtor Magazine : January 2008
After trudging through the real estate slowdown in 2007, you can expect to see a light at the end of the tunnel this year - whether you'll actually reach that light before 2009, however, economists aren't sure.
The National Association of Realtors is forecasting existing-home sales and prices to stabilize in the second quarter and rise throughout the second half of the year, reaching 5.7 million sales by the end of 2008, equaling the forecast for 2007.
| NAR's 2008 Forecast |
2006
|
2007
|
2008
|
| Interest Rates 30-year fixed |
6.4%
|
6.4%
|
6.5%
|
| Existing-home sales price increases |
1.0%
|
-1.7%
|
0.0%
|
| Existing-home sales |
6.5 million |
5.7 million |
5.7 million
|
| New-home sales |
1.1 million |
796,000
|
693,000
|
Although U.S. economic growth this year isn't expected to be spectacular-about 2.8 percent of gross domestic product for the year - job, wage, and wealth gains from a rising stock market will be sufficient to give consumers the wherewithal to start buying again. "This slowdown has never been about the undelrying fundamentals of the economy" says NAR Chief Economist Lawrence Yun. "Consumers have the means to buy, but they have lacked the confidence. Once they see sales and prices stabilizing, they will be back in the market."
The availability of financing will help them. This year there will be ample financing available for most borrowers with sound credit. That holds true for borrowers of both conventional and jumbo loans, although jumbo loans could remain a bit on the costly side as lenders wrestle with lingering skittishness among investors about the safety of non conforming mortgages. Yun thinks the pool of buyers, while shrunken, will be larger than some analysts believe because buyers will have other financing avenues such as federally backed loans.
California in particular, faces a daunting shake-out period. That's because so many borrowers there, facing high housing costs, turned to risky subprime loans during the boom and now are in trouble as rates reset to levels they can't afford. We have not seen the bottom on foreclosures yet," says Leslie Appleton-Young, chief economist of the California Association of Realtors. "We won't see the worst of that until the first part of this year."
"There are places where people will still be hurting" says Markstein (Bernard Markstein - vice president of forecasting and analysis, National Association of Home Builders). Nationally, though, prospects are brightening.
Whatever optimism economists have about housing in 2008 could quickly fade away , if the economy sinks into recession. But chances of that happening are relatively low -former Federal Reserve Chairman Alan Greenspan in speeches late last year gave it a less than one-in-three chance. Those odds will improve even further when housing stops acting as a drag on the economy, economists say.
"That's typically how the pendulum swings" says Duncan (Douglas Duncan - Chief Economist. Mortgage Bankers Association). "Buyers sit on the sidelines until they think they have seen the bottom, and sometimes they wait a little longer than what the longer-term trend line would , but eventually they get back in."
Multifamily would seem to be the one sector in a position to benefit from the housing slump, as renters delay buying and new households turn to rentals. Indeed,NAR is forecasting occupancy and rental rate to rise.
Overall, 2008 will prove to be a solid year in which residential sales shore up after two years of decline.
Is Now a Good Time to buy?
The Long View by Lawrence Yun, Vice President NAR research - October 2007
" How much have real estate investors lost due to the housing market bust?"
That was the (highly loaded) question posed to me recently by a producer of one of the major evening news programs. The show wanted to run a story about the "pains" being felt in the market.
Hmm. Well, exactly how much real pain are we talking about? Let's look at a couple of examples. An investor who bought a property in Las Vegas five years ago would be ahead by $150,000; up $200,000 in Miami. The average investor nationwide - up $54,000. Only the recent buyers (flippers) who bought last year in few specific markets would have encountered a loss.
Not All Losses Are Created Equal
I'm not discounting the discomfort of those who lost big, especially lenders and hedge funds who had large exposures to subprime loans. Investors in homebuilder stocks have certainly experienced pains. But nearly all real estate investors who have a reasonable holding period are doing quite fine. Some of these fortunate buyers who got into the market several years ago will still consider a modest give back as a loss without considering the large gains reaped during the housing boom. That's the nature of the human mind. A gain of $190,000 in Miami feels like a $10,000 loss considering that the gain had been $200,000.
A Home is Not a Stock Certificate -- Thank God!
Foreclosures are rising and construction workers are being laid off. REALTORS® are feeling the pinch as well. The median income of a typical REALTOR® has been falling due to the correction in sales transactions. However, consumers and homeowners who are in it for the long-term are once again coming out well ahead.
Because of the power of leveraging, $10,000 used for a down payment on a typically priced home in the United States at a typical appreciation rate of 5 percent will return $110,000 after 10 years. The same $10,000 invested in the stock market appreciating 10 percent annually will result in $23,600. No wonder the data from the Federal Reserve show consistent results year-after-year of the staggering difference in net worth between homeowners and renters. A typical homeowner had $184,400 in net worth versus only $4,000 for a typical renter.
The Spooky Thing
The lack of buyer confidence to enter the market has been the one principal reason in holding back home sales. Many would-be buyers are spooked of a possible home price decline. And the media is fueling that fear. Some of the most popular market gurus who offer their advice on television and other media say so. Caution is in order, however. As a recent Barron's article pointed out, stock picks made by one such expert actually underperformed the market.
Opportunities to Seize
It's also important to point out that times of crisis often turn out to have been times of opportunity in hindsight. With over four million net new job additions in the past two years- the time frame during which home sales have steadily fallen - a significant pent-up demand has developed. Home sales and home prices will be higher in 2008 compared to 2007. And, as with any investment, look longer term. Those investing in a home and keeping it for a typical holding period of six to ten years will likely see their investment pay off; those homes will have been a good investment.
As for stocks, they are not the enemy of real estate. Many REALTORS® own stocks. (So do many economists!) The latest NAR research on vacation-home buyers reveals that many of them rely on stock market wealth to fund that second-home purchase. Stocks and real estate both promote the importance of private ownership.
Where to Throw the Darts
Of course, with housing figures down, all eyes at looking to the stock market. Indeed, the stock market is at an all-time high. That's terrific in and of itself and reflects confidence in the U.S. economic outlook. Just be careful about taking specific advice from any hyper-emotional TV personality. Darts should not be thrown at publicity posters of any "mad money" host. You'll likely have just as good of luck by reining in your emotions (and money) and throwing them randomly on the financial pages of your newspaper for your next stock pickings.
September 2007 posted in REALTOR Magazine
Lawrence Yun , vice president of research for the National Association of Realtors.
"Predictions are always risky, but I am going out on a limb to say existing-home sales will improve markedly by the fourth quarter. Here's why :
Pent-up demand. The coiuntry has added nearly 4 milion jobs since home sales started cooling in mid-2005, and the typical worker's wages have risen 7 percent, leading to a $1.35 trillion rise in aggregate national income. At the same time, wealth has grown significantly, with the Dow Jones Industrial Average hovering at record highs. Indeed, accumulated houselhold wealth as of the first quarter was at a record $56.2 trillion. So, if you are wondering if people have the means to purchase, they do.
Delayed household formation. The number of households typically grows by up to 1.5 million a year, but in the first quarter, the year-over-year figure was only half a million. That weak performance suggests people are holding back because of uncertainty over the future, a trend that fuels pent-up demand..
Rising rents. With renters hesitating to buy, landlords are raising rents. Average rents rose 8 percent in the past two years. As renters start feeling squeezed, ownership will look increasingly good.
Condos make modest gains. The condo market has outperformed the single-family market in sales and price changes since early this year. Single-family homes could follow suit.
Better mortgage quality. Mortgage applications for home puchases have been rising nearly 10 percent on a year-over-year basis since May. This data, from Morgage Bankers Association, focuses mainly on applicants for prime and FHA loans, so the rise indicates a flight to quality.
Dollar weakness. The falling dollar has dangled a big "For Sale" sign in front of property attractive to foreigh buyers. Europeans can now buy a vacation home at essentially a 15 percent discount. That's good for sales. And despite the weak dollar, which usually leads to higher interest rates, mortgage rates remain attractive at around 6.7 percent.
2008 rate cut. Inflation looks to slide as the year proceeds. If it does, the Federal Reserve could lower interest rates, possibly as soon as early 2008.
So keep your eyes on the horizon. There are forces at play that will turn the market around, and buyers who make the commitment now could be smiling next year."
