Buyers Rush to Meet Tax-Credit Deadline

As the federal tax credits come to an end, home buyers everywhere are hurrying to get in under the wire.

But in California the rush has turned into something of a stampede as some would-be buyers try to qualify for both the federal credit and a $10,000 state credit that kicks in Saturday.

As one home shopper tells the Los Angeles Times, "I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now.”

"The stimulus has worked," says Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. "Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up."

Source: Los Angeles Times, Alejandro Lazo (04/30/2010)

Market Conditions Improving

Existing-Home Sales Rise on Home Buyer Tax Credit and Favorable Market Conditions

Washington, April 22, 2010 Courtesy of National Association of REALTORS

Buyers responding to the homebuyer tax credit and favorable affordability conditions boosted existing-home sales in March, marking the beginning of an expected spring surge, according to the National Association of Realtors®.

Existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 6.8 percent to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, and are 16.1 percent above the 4.61 million-unit level in March 2009.

Lawrence Yun, NAR chief economist, said it is encouraging to see a broad home sales recovery in nearly every part of the country, with two important underlying trends. “Sales have been above year-ago levels for nine straight months, and inventory has trended down from year-ago levels for 20 months running,” he said. “The home buyer tax credit has been a resounding success as these underlying trends point to a broad stabilization in home prices. This is preserving perhaps $1 trillion in largely middle class housing wealth that may have been wiped out without the housing stimulus measure.”

Total housing inventory at the end of March rose 1.5 percent to 3.58 million existing homes available for sale, which represents an 8.0-month supply² at the current sales pace, down from an 8.5-month supply in February. Raw unsold inventory is 1.8 percent below a year ago, and is 21.7 percent below the record of 4.58 million in July 2008.

“Foreclosures have been feeding into the inventory pipeline at a fairly steady pace and are being absorbed manageably,” Yun said. “In fact, foreclosures are selling quickly, especially in the lower price ranges that are attractive to first-time home buyers.”

A parallel NAR practitioner survey³ shows first-time buyers purchased 44 percent of homes in March, up from 42 percent in February. Investors accounted for 19 percent of transactions in March, unchanged from February; the remaining sales were to repeat buyers. All-cash sales remain elevated at 27 percent in March, the same as in February.

The national median existing-home price⁴ for all housing types was $170,700 in March, up 0.4 percent from March 2009. Distressed homes, typically sold at a 15 percent discount, accounted for 35 percent of sales last month – unchanged from February.

“With home values stabilizing, a revival in home buying confidence will likely help the housing market get back on its feet even as the tax credit impact disappears,” Yun said.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said buying conditions are in near-perfect alignment. “Even with tougher loan standards, historically low mortgage interest rates with affordable prices and a sense that the market is turning have created optimal conditions in much of the country,” she said.

“With the fast approaching April 30 deadline to get a contract in place for the tax credit, Realtors® are working harder than ever to negotiate transactions, arrange services and complete paperwork,” Golder said. “Because many repeat buyers need to sell their current home first, many will be purchasing later without the tax credit but now have the benefit of a more buoyant housing market.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage dipped to 4.97 percent in March from 4.99 percent in February; the rate was 5.00 percent in March 2009.

Single-family home sales rose 7.3 percent to a seasonally adjusted annual rate of 4.68 million in March from a level of 4.36 million in February, and are 13.3 percent above the 4.13 million level a year ago. The median existing single-family home price was $170,700 in March, up 0.6 percent from March 2009.

Single-family median prices rose in 14 out of 20 metropolitan statistical areas reported in March in comparison with a year earlier. Five metro areas experienced double-digit increases, including San Diego, St. Louis and Boston.

Existing condominium and co-op sales increased 3.1 percent to a seasonally adjusted annual rate of 670,000 in March from 650,000 in February, and are 39.3 percent higher than the 481,000-unit level in March 2009. The median existing condo price⁵ was $170,600 in March, which is 0.7 percent below a year ago.

Regionally, existing-home sales in the Northeast increased 6.0 percent to an annual level of 890,000 in March and are 25.4 percent higher than a year ago. The median price in the Northeast was $249,800, up 8.9 percent from March 2009.

Existing-home sales in the Midwest rose 7.2 percent in March to a pace of 1.19 million and are 15.5 percent above March 2009. The median price in the Midwest was $139,300, up 0.2 percent from a year ago.

In the South, existing-home sales increased 7.1 percent to an annual level of 1.97 million in March and are 13.9 percent higher than a year ago. The median price in the South was $154,800, up 5.2 percent from March 2009.

Existing-home sales in the West rose 6.6 percent to an annual rate of 1.30 million in March and are 14.0 percent above March 2009. The median price in the West was $209,400, down 7.9 percent from a year ago.

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.

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NOTE: NAR also reports monthly comparisons of existing single-family home sales and median prices for 20 select metropolitan statistical areas, which is posted with other tables at: www.realtor.org/research/research/ehsdata. For information on areas not included in the report, please contact the local association of Realtors®.

¹Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

²Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, condos were measured quarterly while single-family sales accounted for more than 90 percent of transactions).

³First-time buyer and distressed sales data are from the Realtor® Confidence Index.

⁴The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

⁵Because there is a concentration of condos in high-cost metro areas, the national median condo price generally is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for April will be released May 24, 2010. The next Pending Home Sales Index is scheduled for May 4; release times are 10 a.m. EDT.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data in this release, other tables and surveys also may be found by clicking on Research.

Obama's mortgage relief: 10% effective

According to a Congressional Oversight Panel's latest report released today, only 168,708 homeowners have received long-term mortgage modifications as of February - a small fraction of the 6 million borrowers who are more than 60 days behind on their loans. One in ten, in fact. The president's foreclosure-prevention plan will likely assist only 1 million troubled borrowers, short of the administration's original goal of up to 4 million homeowners. The program is funded with $50 billion in Troubled Assets Relief, or TARP, funds, putting it under the panel's purview. "For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes," the panel said of the administration's Home Affordable Modification Program. "It now seems clear that Treasury's programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble."

The panel's report is the latest to slam the president's foreclosure-prevention efforts. Last month two other government watchdogs released blistering reports that slammed the administration for poor implementation of the program and raised doubts that 4 million troubled borrowers could stay in their homes. The panel lays out several concerns, including the long-term sustainability of the modified mortgages and the ultimate cost and goals of the program. The panel is also concerned that the half-dozen foreclosure-prevention programs launched by Treasury over the past year has resulted in confusion and delays.

Mortgage delinquencies continue to climb

According to credit reporting agency TransUnion, 6.89% of mortgage payments were 60 or more days past due in Q409 - up from 4.58% in the final three months of 2008. The previous record delinquency rate was 6.25% in the third quarter of 2009. FJ Guarrera, vice president of TransUnion's financial services business unit, says the fourth-quarter uptick was due in part to normal seasonal spending shifts. Consumers are more likely to have trouble paying bills during the last few months of the year as they run low on cash because of holiday spending. But he says that even accounting for normal season patterns, there is some reason to be concerned about the pace of increase moving higher. "To see continuing growth in the first quarter would certainly raise an eyebrow."

TransUnion tracks mortgages that are two months past due as an indicator of potential foreclosure, because of the difficulty involved in coming up with three payments to bring an account current. The agency said the delinquency rate stayed highest in Nevada, at 16.2%, and Florida, at 14.9%. Arizona and California, the other two states hit hardest by the housing crisis, were third and fourth, at 11.3% and 11% respectively. The highest growth rates compared with the third quarter were in the District of Columbia, Louisiana and Delaware. Guarrera noted that many homeowners still have adjustable rate mortgages written in late 2006 or early 2007 due to reset to higher rates in coming months, and that could drive foreclosures even higher, especially in areas where home prices have fallen to the point where values are lower than mortgages. "We're not out of the woods yet," he said.

New Home Sales Drop

On the heels of the S&P/Case-Shiller report yesterday, the Commerce Department said sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined. Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November's previously reported 355,000 units. New home sales for the whole of 2009 fell 22.9 percent to a record low 374,000 units, but despite the slump in sales there were a few bright spots in today's report. The median sale price for a new home rose 5.2 percent last month from November to $221,300, the highest in seven months and the biggest rise since April 2009. Compared to December 2008, the median sale price fell 3.6 percent. The number of new homes on the market last month dropped 1.7 percent to 231,000 units, the lowest level since April 1971. However, December's weak sales pace left the supply of homes available for sale at 8.1 months' worth, the highest since June 2009, from 7.6 months in November.

Long-Term Rates at 6% by Year-End

According to the latest Housing & Mortgage Market Review published by the PMI Group, Inc., mortgage interest rates for 30-year fixed loans are projected to hit 6.00% by the end of 2010. Long-term interest rates have generally headed higher since the end of November, probably in response to signs of economic recovery, PMI noted. The California-based company expects this trend to continue, with a notable increase coming in Q2, influenced largely by the Federal Reserve’s withdrawal from the secondary mortgage market. Another government housing stimulus program – the federal home buyer tax credit – is also expected to leave a significant mark on housing conditions.

The first-time home buyer tax credit pulled sales forward into the months before it expired in November, PMI explained. Even with the extension and expansion of the credit, the company’s report says it’s likely that there will be a payback period from the original tax credit. Looking ahead, PMI says sales should climb more strongly in 2010, once the payback period from 2009’s tax credit comes full circle. As the job market finally starts to improve and credit markets function better, existing sales should climb by 7.7% and new home sales by 35.5%, PMI said in its report. The continued oversupply of homes on the market still weighs on house prices, although the pickup in sales has tempered this, the company said. Following a projected decline in existing home prices of 12.7% for 2009, PMI says prices should fall by another 5.0% this spring. However, stronger sales and reduced inventory should allow prices to remain relatively flat over the course of 2010, the company concluded.

More foreclosures coming

The number of long-term adjustments completed under the president's foreclosure prevention plan rose to 66,465 at the end of December, or 7.4% of all trial modifications started, up from 31,382 a month earlier. Another 46,056 modifications are pending borrowers' final signatures, according to Treasury statistics released Friday. Another 48,924 were denied permanent modifications, mainly because they did not make their trial payments on time, did not hand in the needed paperwork or did not meet the program's criteria. Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier.

Housing experts remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released last Thursday. A lot of borrowers are too far underwater or don't have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed. Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn't think there's anything the government can do to keep these borrowers in their homes. "As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices," said Chen, who expects home prices to fall another 10% by the third quarter of this year.

President and Democrats trying to whip up populism in Massachusetts

The Democrats and the White House are scrambling to salvage the special U.S. Senate election in Massachusetts by trying to whip up a populist furor over banks. Amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks' role in the economic crisis, Senate candidate Martha Coakley (D), Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and Republican Scott Brown (R) as coddling them. This sort of anti-bank populism was popular in the 1930s by demagogues like Father Coughlin, but rarely has a president engaged in this sort of bare knuckle politics to save his agenda. Polls show declining voter enthusiasm for Mr. Obama's health-care plan, and Brown has campaigned on a promise to provide the 41st GOP vote to secure a Senate filibuster to scuttle a health-care bill.

Democratic strategists concede Mr. Obama's support in the past for a Wall Street bailout has fueled voter anger, particularly among conservatives and supporters of the anti-establishment Tea Party movement who are pouring money and volunteer hours into Mr. Brown's race. With the bank tax, "we can take populism back to our side," a Democratic Party strategist said. Mr. Brown he opposed the tax because it would most likely be passed on to consumers through ATM fees, among other things. He said banks would have to pay a hefty tax rather than use the money to extend much-needed loans to small businesses. "If you're having an uphill battle selling health care in a blue state like Massachusetts, that should send shivers down the spine of Democrats looking at races across the country," said Brian Walsh, a spokesman for the National Republican Senatorial Committee. A new Suffolk University poll finds Republican Scott Brown leading Democrat Martha Coakley, 50% to 46%. If Brown wins , ObamaCare dies. He would be the 41st vote to prevent any compromise legislation from coming to the floor of the Senate.

Chris McLaughlin; Loss Mitigation Institute