California Real Estate Sales

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 housing and mortgage markets:

1. Low mortgage rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or all) of 2011, relatively low mortgage rates will be a feature of the 2011 mortgage market. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.

2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011.

3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.

4. Refinances will dwindle. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the “seriously delinquent rate” — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

Source: Freddie Mac (12/09/2010)

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La Jolla, CA—Southern California’s housing market continued its step-by-step climb up from the January-February bottom as both sales and prices saw gains last month, a real estate information service reported.

A total of 19,181 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 13.3 percent from October’s 22,132, and up 14.7 percent from 16,720 for November 2008, according to MDA DataQuick of San Diego.

Sales almost always decline from October to November. The year-over-year increase was the 17th in a row. In DataQuick’s statistics, which go back to 1988, the average November had 22,312 sales.

Sales of newly built homes saw an unexpected jump last month. A total of 2,039 new homes were sold, the highest of any month so far this year, and 25.5 percent ahead of 1,625 for November 2008.

Sales have been stoked in recent months by several factors: A federal tax credit for first-time buyers, which had been set to expire last month before it was extended and expanded; robust investor activity, especially inland; super-low mortgage rates; the availability of government-insured, low-down-payment mortgages for first-time buyers; and the allure of a potential “deal” on a distressed property.

“This market is still really lopsided. Foreclosures and short sales are huge factors. There’s still not a lot of discretionary buying and selling outside the more affordable markets. Anybody who can sit tight is doing just that. The market won’t fully rebalance itself until financing becomes available for the higher price ranges,” said John Walsh, MDA DataQuick president.

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Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate¹ of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”

Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place. “There is still a large pent-up demand that can be tapped before the tax credit expires. Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was cancelled or fell through – there likely are many more buyers who were attempting to purchase but simply ran out of time,” Yun said.

Historically low interest rates also are boosting the market. “Mortgage interest rates last month were the third lowest on record dating back to 1971,” Yun noted. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.95 percent in October from 5.06 percent in September; the rate was 6.20 percent in October 2008. Last week, Freddie Mac reporter the 30-year rate dropped to 4.83 percent.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said strong demand by first-time buyers is creating some unusual conditions. “In parts of the country, especially in Southwestern states but also in Florida and suburban Washington, D.C., we’ve been getting many reports of multiple bids in the lower price ranges with foreclosed properties getting absorbed quickly,” she said.

“In fact, low-end inventory has become very tight in many areas and in some cases buyers are becoming more aggressive. In this kind of environment it’s important to work with a Realtor® who can walk you through the process and help you negotiate a satisfactory deal,” Golder said.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply² at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.

“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” Yun said. The last time the relative housing inventory was this low was in February 2007 when it also was at a 7.0-month supply.

The national median existing-home price³ for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

“In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection,” Yun said.

He added that low home prices also are contributing to extremely favorable affordability conditions. “With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”

Single-family home sales rose 9.7 percent to a seasonally adjusted annual rate of 5.33 million in October from a pace of 4.86 million in September, and are 21.4 percent above the 4.39 million-unit pace in October 2008. The median existing single-family home price was $173,100 in October, down 6.8 percent from a year ago.

Existing condominium and co-op sales surged 13.2 percent to a seasonally adjusted annual rate of 770,000 units in October from 680,000 in September, and are 40.8 percent above the 547,000-unit level a year ago. The median existing condo price⁴ was $172,900 in October, which is 10.4 percent below October 2008.

Regionally, existing-home sales in the Northeast rose 11.6 percent to an annual level of 1.06 million in October, and are 27.7 percent higher than October 2008. The median price in the Northeast was $235,400, down 2.6 percent from a year ago.

Existing-home sales in the Midwest surged 14.4 percent in October to a pace of 1.43 million and are 28.8 percent above a year ago. The median price in the Midwest was $146,600, a gain of 1.1 percent from October 2008.

In the South, existing-home sales rose 12.7 percent to an annual level of 2.30 million in October and are 25.7 percent higher than October 2008. The median price in the South was $151,100, down 6.3 percent from a year ago.

Existing-home sales in the West increased 1.6 percent to an annual rate of 1.31 million in October and are 12.0 percent above a year ago. The median price in the West was $220,200, which is 14.7 percent below October 2008.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

By Kathleen M. Howley

Nov. 3 (Bloomberg) — Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.

“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”

American homeownership, once considered a path to wealth, is now leading to disillusionment. Home prices in the last four years have been the most volatile on record, swinging from a gain of 12 percent in 2005 to an estimated 13 percent loss this year, according to the National Association of Realtors. Those gyrations have embittered many property owners and potential buyers, said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts.

“We always talk about homeownership as being the American dream, but during the last decade people forgot it’s shelter and started thinking of it as a fast way to make or lose money,” said Retsinas. “The quicker we move back to seeing real estate as a place to live, a place to put down roots, the quicker the housing recovery will strengthen.”

Home-price growth in the next decade probably will average about 3.5 percent a year, based on Retsinas’s estimate of increases of about 1.5 percent above inflation and the Federal Reserve’s long-term inflation forecast of about 1.7 percent to 2 percent. On that basis, it could take a decade or more for the Dharods to recover from the 36 percent loss on their home.

Cities Gained

While median home prices increased 83 percent in the decade preceding the recession, according to the National Association of Realtors, the gain was far higher in the most populous cities. In New York, prices increased 146 percent. In San Francisco the jump was 160 percent, and in Los Angeles it was 205 percent, according to S&P/Case-Shiller Home Price indices.

Read the Whole Depressing Article at Bloomburg and remember this quote from The Oracle of Omaha.

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. ~ Warren Buffett