Sales rate up 3% since January 2005

Monday, February 27, 2006

Inman News

Inventory of new homes for sale continued to build up in January, reaching a supply of 5.2 months at the January sales rate, the U.S. Census Bureau and Department of Housing and Urban Development reported.

Real estate industry groups have said that a supply of about six months is considered to represent a housing market that is roughly in equilibrium between a buyer's market and seller's market – a higher supply tends to represent a buyer's market while a supply less than six months tends to represent a seller's market.

The months' supply estimate is the highest on record for at least the past five years.

Sales of new single-family houses in January 2006 were at a seasonally adjusted annual rate of about 1.23 million in January, the agencies reported, which is 5 percent below the revised December rate and 3.3 percent above the January 2005 estimate.

The seasonally adjusted annual rate is used to project a monthly sales total over a 12-month period, adjusted for seasonal fluctuations in sales activity.

The median sales price of new houses sold in January 2006 was $238,100, or about 6.7 percent higher than the January 2005 median sales price. The average sales price was $291,600, up about 3 percent compared with January 2005. The seasonally adjusted estimate of new houses for sale at the end of January was 528,000.

Statistics are estimated from sample surveys and are subject to sampling variability as well as non-sampling error including bias and variance from response, non-reporting, and under-coverage, the federal agencies reported.

Changes in seasonally adjusted statistics often show irregular movement. It takes six months to establish a trend for new houses sold, the agencies reported. Preliminary new-home sales figures are subject to revision due to the survey methodology and definitions used.

The survey is primarily based on a sample of houses selected from building permits. Since a sale is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. An estimate of these prior sales is included in the sales figure. On average, the preliminary seasonally adjusted estimate of total sales is revised about 3 percent. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics.

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Here's an article about January home sales in Southern California ...

February 15, 2006

DQNews.com

LA JOLLA -- The number of Riverside County homes sold in January increased again, the sole region with positive growth in Southern California, a real estate information service reported Wednesday.

A total of 4,319 homes were sold in the county last month, up 9.3 percent from the 3,951 sold during the same period a year ago, according to DataQuick Information Systems.

Meanwhile, the number of Southern California homes sold in January edged down to the lowest level in five years as many potential buyers decided to sit on the fence during the real estate market's off-season, DataQuick reported.

A total of 20,085 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 30.6 percent from 28,952 in December, and down 7.4 percent from 21,680 for January last year, according to DataQuick.

A decline from December to January is normal for the season. Last month's sales count was the lowest for any January since 2001 when 18,010 homes were sold. The strongest January in DataQuick's statistics was in 1989 when 23,379 homes were sold, the weakest was in 1992 when 10,994 homes were sold.

"Trends in January and February are notoriously bad at predicting upcoming activity. Is the market taking a breather? Or is it starting to tumble? It's impossible to say, there's nothing really ominous in the numbers, but we won't know for another couple of months," said Marshall Prentice, DataQuick president.

The median price paid for a Southern California home was $469,000 last month, down 2.1 percent from November and December's record high of $479,000. Last month's median was up 13.0 percent from $415,000 for January 2005. The median always drops from December to January because of changes in market mix, January is always a weak month for new home sales.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,162 last month, down from $2,255 for the previous month, and up from $1,822 for January a year ago. Adjusted for inflation, current payments are about 0.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle.

Indicators of market distress are still largely absent. Foreclosure activity is edging up from its bottom, but is still low. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity, DataQuick reported.

For a county-by-county breakdown of statistics, click here.

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This article grades the economy thus far ...

Perspective: 'Soft landing' for housing underway

Tuesday, February 14, 2006

By John Burns
Inman News

Today's strong economy is fueled by growth in many sectors. While manufacturing and information jobs have declined in the last three years, the other sectors have added 4.4 million jobs.

The housing industry has been contributing more than its fair share to the growth. Over the last three years, construction jobs have accounted for 13 percent of the growth, with financial services jobs adding another 7 percent. They comprise 5 percent and 6 percent of total U.S. jobs, respectively

The resale market has been cooling for some time, but the levels of unsold inventory remain below historical averages. The "soft landing" that most economists are predicting seems to be unfolding, although we know the market is strong in many areas and quite weak in others.

Our grading system of the economy and the housing market is a "bell curve" model, with statistics at an all-time high receiving an "A," statistics near the long-term average receiving a "C," and the worst times ever receiving an "F." In this grading system, it is OK to be a "C" student.

Here is our current report card:

Economic Growth: C-

Economic growth remains solid. More than 2 million new jobs were added during the 12 months ending January 2006, which is a growth rate of 1.6 percent. The unemployment rate declined slightly to 4.7 percent. Retail sales increased 6.3 percent over the previous year. Inflation inched up slightly to 2.2 percent, which is still well below its historical average of 4.2 percent.

Leading Indicators: C

The leading indicator index is up 2.1 percent on an annualized basis over the last six months, which is somewhat encouraging for our outlook for 2006. As a result of the increase in the Fed Funds rate at month end, the spread between the Fed Funds rate and the 10-year Treasury index inverted for the first time since March 2001.

The stock market started 2006 with relatively significant improvements, with the Dow Jones gaining 4 percent over the prior 12 months and the NASDAQ, S&P 500 and Wilshire 5000 gaining 12 percent, 8 percent and 11 percent, respectively. The S&P Super Homebuilding Index has returned 13 percent over the last 12 months.

Mortgage Rates: B+

Fixed rates fell slightly in January, and adjustable rates ticked up slightly. The average fixed mortgage rate fell to 6.12 percent, and the one-year adjustable mortgage rate was 5.2 percent at month's end. The percentage of loans with an adjustable rate stood at 29.5 percent in January.

Consumer Behavior: C+

Consumer confidence continued to rise in January to 106.3. Consumer sentiment decreased only slightly during the month to 91.2.

Existing-Home Market: B+

The median existing-home price fell slightly in December to $211,000. Annual sales volume decreased to 6.6 million sales per year, with declines in almost every region of the country. The inventory of existing homes rose slightly again to 5.1 months. The pending home sales index fell in December, but remains strong at 116.4.

New-Home Market: B-

Annualized new-home sales rose 1.5 percent in December to 1.27 million units, ending the year up 1.8 percent from the total volume in 2004. The median new-home price fell to $221,800, and the Housing Market Index fell to 57 in December, which is just slightly above the historical median. The supply of unsold homes remained flat, at 4.9 months.

Housing Supply: C+

Annualized housing starts decreased to 1.93 million in December, with single-family starts dropping to 1.64 million permits.

Burns is the founder of Real Estate Consulting in Irvine, which monitors changes in real estate market conditions and provides consulting services, including strategic planning, market research and financial analysis.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here are the latest housing affordability rates for California ...

CAR reports December's Housing Affordability Index at 14 percent statewide

Thursday, Feb. 9, 2006

California Association of Realtors

The percentage of households in Riverside County able to afford a median-priced home stood at 16 percent in December, compared with 17 percent for the same period a year ago, according to a report released Thursday by the California Association of Realtors (CAR).

Statewide, the affordability index dropped to just 14 percent, compared with 19 percent a year earlier, the association reported.

CAR’s monthly housing affordability index measures the percentage of households that can afford to purchase a median-priced home in California. CAR also reports housing affordability indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being in the state.

The minimum household income needed to purchase a median-priced home at $548,430 in California in December was $134,200, based on an average effective mortgage interest rate of 6.33 percent and assuming a 20 percent downpayment.

At 24 percent, the High Desert region was the most affordable CAR region in the state, followed by the Sacramento region at 19 percent. Santa Barbara County was the least-affordable region in the state at 6 percent, followed by the Northern Wine Country region at 7 percent.

Affordability was also low in Monterey (9 percent), San Diego (9 percent), Orange County (10 percent), Palm Springs/Lower Desert (10 percent), and San Luis Obispo (10 percent) regions, the association also reported.

Home prices increased from $960,000 to $1.3 million (35.4 percent) in the Santa Barbara South Coast area from December 2004 to December 2005, the association reported.

Prices increased 31.1 percent in the High Desert area, 26.2 percent in the Santa Barbara County area, and 20.6 percent in the Riverside/San Bernardino area in that time, according to the report. Price increases were slightest in the North Santa Barbara County area (4 percent), San Diego area (4.6 percent), San Francisco Bay Area (8.2 percent), and Palm Springs/Lower Desert area (8.2 percent) from December 2004 to December 2005.

CAR reported that it will begin reporting the Housing Affordability Index on a quarterly basis – rather than a monthly basis – this year. The first quarter HAI will be released May 4. The California Association of Realtors has about 185,000 members.

For a breakdown by county and region, click here.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's an article about homeowners keeping the economy moving ...

Debt consolidation, home improvement top list of stimuli

Inman News

A full 80 percent of Freddie Mac-owned loans that were refinanced in the fourth quarter resulted in new mortgages with loan amounts that were at least 5 percent higher than the original mortgage balances, the mortgage giant reported this week. This percentage is up from the third quarter of 2005, when the share of refinanced loans that took cash out was 73 percent, and is the highest since the third quarter of 2000.

"The refinance share of mortgage applications in the fourth quarter of 2005 was 45 percent while the average rates on 30-year fixed-rate mortgages climbed 0.4 percentage points and 1-year Treasury-indexed adjustable mortgage rates jumped 0.6 percentage points from third-quarter averages," said Frank Nothaft, Freddie Mac vice president and chief economist. "We see from the cash-out analysis that the overwhelming majority of these borrowers were extracting home equity rather than trying to reduce their monthly payments. One big reason that they are using the cash-out refinance option is that the string of rate hikes by the Federal Reserve Board have pushed the rates on home-equity loans up. Home-equity loans are typically linked to the prime rate, which currently is at 7.5 percent. In contrast, the average rate on 30-year fixed-rate mortgages is presently near 6.25 percent.

"We estimate that home equity extraction from the refinancing of prime first mortgage liens will result in an extraction of $243 billion in 2005," Nothaft said. "However, equity extraction in 2006 will likely fall sharply, by a little more than half to about $117 billion, as we expect lower refinance activity and slower house-price appreciation."

Freddie Mac expects the refinance share of mortgage applications to fall to around 37 percent and home prices to grow at an average rate between 6 percent and 8 percent nationally in 2006.

Freddie Mac expects 30-year fixed mortgage rates to average three-tenths of a percentage point higher in 2006 relative to 2005, and the average rate on one-year Treasury-indexed adjustable-rate mortgages to rise by seven-tenths of a percentage point.

"Refinancing activity was very strong in the fourth quarter, even with higher interest rates," said Amy Crews Cutts, Freddie Mac deputy chief economist. "The large share of borrowers who took cash out when refinancing their mortgages combined with the strong overall refinance volume led to an extraction of home equity through prime first-lien refinances of $70.3 billion, slightly higher than the revised estimate of $67.2 billion extracted in the third quarter. We expect the share of all refinance borrowers who take out cash to remain high in 2006 because of the relatively high cost of second mortgages and home-equity lines of credit."

In the fourth quarter of 2005, the median ratio of old-to-new interest rate was 1.02. In other words, one-half of those borrowers who paid off their original loan and took out a new one had an interest rate on their old loan that was at least 2 percent higher than the new interest rate.

"Also, in the fourth quarter of 2005, homeowners who refinanced their fixed-rate mortgages lowered their interest rate an average of 0.35 percentage points. On an average loan size of $150,000, that lower rate translates into a payment that is about $34 a month lower for a savings of about $410 annually," said Cutts.

"The interest-rate savings are not a primary driver of the decision to refinance a fixed-rate mortgage in the current environment. Now, the dominant refinance borrower is looking at the best way to consolidate debt or finance a big project such as a home improvement. And we also have borrowers who took out adjustable-rate mortgages in recent years that are scheduled to have their payment reset this year that may be looking at the option to refinance into a fixed-rate product or into another adjustable-rate mortgage."

The Cash-Out Refinance Report also revealed that properties refinanced during the fourth quarter of 2005 experienced a median house-price appreciation of 27 percent during the time since the original loan was made, up from 24 percent in the third quarter 2005. For loans refinanced in the fourth quarter of 2005, the median age of the original loan was 2.9 years, about three months older than the median age of loans refinanced during the third quarter.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

This story details the latest home-foreclosure rates in California ...

County notices of default increase 43.1 percent; 15.6 percent rise in California

DQNews.com

LA JOLLA -- Foreclosure activity jumped in Riverside County in fourth-quarter 2005, the result of lower appreciation rates, a real estate information service reported. The number of notices of borrower default only edged up statewide.

Lending institutions sent 14,999 default notices to California homeowners during the October-to-December period. That was up 19.0 percent from 12,606 for the third quarter, and up 15.6 percent from 12,978 for 2004's fourth quarter, according to DataQuick Information Systems. Notices of default went out to 1,607 Riverside County homeowners for the same period, up 43.1 percent from the 1,123 in the same period the previous year.

Foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in 1996's first quarter at 59,897. DataQuick's default statistics go back to 1992.

"There's always going to be a certain amount of financial distress. People lose their jobs, have medical emergencies, get divorced, pass away or make bad money decisions at a certain rate. Because of the rise in home values, much of that financial distress has been covered by the increasing amount of equity that people have had in their homes. That equity is now being created at a slower pace, and default activity is inevitably on the rise," said Marshall Prentice, DataQuick president.

The annual home appreciation rate in the state hit 22.8 percent during the second quarter of 2004. Since then it has come down, and in fourth-quarter 2005, it was 14.5 percent. The appreciation rate is expected to fall below 10 percent sometime this summer.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. The numbers count recorded notices of default, the first step of the formal foreclosure process.

The median amount owed when the default notice was recorded was $6,862 in fourth-quarter 2005, up from $6,130 for the same period a year ago.

Only about 5 percent of homeowners who find themselves in default actually lose their homes to foreclosure. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying off the home loan(s).

All regions of the state saw an increase in foreclosure activity, ranging from 10.5 percent in the Bay Area to 19.6 percent in Southern California (see chart).

On a loan-by-loan basis, mortgages are least likely to go into default in Marin County. The likelihood is highest in the Central Valley and Inland Empire.

While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today's market is negligible, DataQuick reported.

For a breakdown on the county and regional statistics, click here.

Source: DataQuick Information Systems

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Another article about the slowing real estate market ...

Wednesday, February 1, 2006

National Association of Realtors

WASHINGTON – Pending home sales continue to decline but are expected to recover in the months ahead, according to the National Association of Realtors.

The Pending Home Sales Index, based on contracts signed in December, was down 3.0 percent to a level of 116.4 from 120.0 in November, and is 5.5 percent below December 2004. Pending sales have trended steadily down from a record index of 129.2 last August.

The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales.

David Lereah, NAR’s chief economist, said momentum in the housing market shifts slowly.

“Changes in the overall direction of the housing market are akin to a large ship making course corrections – it takes some time for the driving factors to materialize as a change in the sales level,” he said. “In many recent transactions we’re looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected. Mortgage applications have trended up in recent weeks, so we shouldn’t be surprised to see pending home sales rise in the next couple months.”

View Pending Home Sales Data

Even with an upturn in sales, Lereah expects the housing market to stay below last year’s record.

“We’re going through a period of adjustment," he said. "As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment.”

Regionally, the PHSI in the South rose 2.3 percent in December to 135.9 and was 4.1 percent above December 2004. In the Northeast, the index increased 1.5 percent to 90.7 but was 11.1 percent below December 2004. The index in the West fell 8.1 percent to 117.1 in December and was 11.8 percent lower than a year ago. The index in the Midwest dropped 9.3 percent to a level of 105.8 and was 11.0 below December 2004.

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

The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.

Existing-home sales for January will be released February 28; the next Pending Home Sales Index will be on March 6.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula