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Archive for the ‘Housing Analysis’ Category:

How Big Is The Foreclosure Market? It Depends On Where You Live, Of Course.

Foreclosure concentration, by state (July 2010)Foreclosure filings rose 4 percent nationwide last month versus June, according to foreclosure-tracking firm RealtyTrac.com. For the 17th straight month, total filings topped 300,000.

A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

As with most months, just a handful of states dominated foreclosure activity nationwide.

  • California : 14.9 percent of all activity
  • Florida : 11.6 percent of all activity
  • Arizona : 6.4 percent of all activity
  • Michigan : 6.2 percent of all activity
  • Georgia : 6.1 percent of all activity
  • Texas : 4.9 percent of all activity

Together, these 6 states represent just 30 percent of the overall U.S. population.

The other 44 states (and Washington D.C.) were home to the remaining 49.0%.

Despite this imbalance, though, in all markets, foreclosures and REO are making a profound impact on pricing and product. “Distressed” homes now represent 32 percent of the overall resale market nationwide, according to the National Association of Realtors®.

Buying a foreclosed home can make for a terrific “deal”, but buying in the REO market is decidedly different from buying a non-foreclosed property.

As 3 examples:

  1. Buying bank-owned homes can take 120 days to close.
  2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
  3. Bank-owned homes are often sold “as is”. There may be defects that render the homes mortgage-ineligible.

If you have an interest in buying REO, consider talking with a real estate agent first. Even the negotiation process is different as compared to a non-distressed sale. It helps to have an experienced professional representing your interests.

Home Values Within 12.5 Percent Of April 2007 Peak, Nationwide

Home Price Index from April 2007 peak

According the Federal Home Finance Agency’s Home Price Index, home values are now off just 12.5 percent from their April 2007 peak nationwide.  This, after a half-percent monthly increase in prices in May, on average.

Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.

In contrast to “national markets”, the real estate markets in which you and I live are decidedly local.  It’s a major difference and the distinction renders the Home Price Index somewhat less important. 

After all, the HPI doesn’t account for housing activity in individual neighborhoods like Beachwalk , nor does it track value across cities like Corpus Christi. Instead, it summarizes data in giant chunks of geography.

A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average.  The others varied by as much 1.3 percent.

As a sample:

  • Mountain Region : + 1.7 percent
  • New England : + 0.2 percent
  • South Atlantic : +1.0 percent

And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.

Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood.  That type of granularity can’t be tracked in a report like the Home Price Index.

The best place to get that data is from a local real estate agent that knows the market well.

As The Pending Home Sales Index Falls, Home Buyers See Dollar Signs

Pending Home Sales Dec 2008 to June 2010The Pending Home Sales Index failed to rebound from a cliff-dive in May, falling by another 3 percent more in June.  The index remains at record-low levels.

A “pending home sale” is a home under contract to sell, but not yet closed. The data is culled from local real estate associations and large brokers and accounts for 20 percent of all purchase transactions in a given month nationwide.

The Pending Home Sales Index is a future indicator for the housing market; there is a high correlation between the PHSI and the monthly Existing Home Sales report.  This is because of the relatively large sample set used for the PHSI, and because 80 percent of homes under contract close within 60 days, according to the National Association of Realtors.

 

June’s Pending Home Sales Index is weak by most measures, but if you’re a home buyer in Port Aransas , the headlines aren’t so bad. Fewer home sales can push negotiation leverage to the buy-side of a transaction.

Plus, there’s other positives in the market for today’s buyers:

  • Home supplies are up, which creates competition among sellers
  • Builder confidence is down, which leads to “free” upgrades and incentives
  • Mortgage rates are low, which increases cash flow and disposable income

All things equal, the current home buying conditions haven’t been this favorable in years.

The falling figures in June’s Pending Home Sales Index hint that home sales will be down through the rest of the summer and into early-Fall. However, mortgage rates may not and higher mortgage rates can do more to change a monthly payment that a small reduction in home price.

If you’re planning to buy a home later this year, consider moving up your time frame. 

It’s an excellent time to be a buyer in Cinnamon Shores.

Case-Shiller Shows Home Price Improvement In 95% Of Cities

Case-Shiller Change In Home Values April-May 2010

Standard & Poors released its Case-Shiller Index Tuesday. On a seasonally-adjusted basis, between April and May 2010, home prices rose in 19 of Case-Shiller’s 20 tracked markets.  It’s the second straight month of strong Case-Shiller findings.

Also, May’s numbers are a mirror-image of February’s. In February, 19 of 20 markets lost value.

In its press release, the Case-Shiller staff resisted calling May’s data proof of a housing recovery, noting that home values remain flat as compared to October of last year. However, there are some noteworthy numbers in the Case-Shiller report.

  1. 13 of the 20 tracked cities are showing home price improvement year-over-year
  2. Foreclosure posterchlld San Diego has now shown 13 straight months of improvement
  3. San Diego, San Francisco and Minneapolis are showing double-digit annual growth

These are all good signs for the housing market, but the Case-Shiller Index is not without its flaws. Most notably, the data is limited to just 20 cities nationwide — and they’re not even the 20 largest ones

Cities like Houston, Philadelphia, and San Jose are excluded from Case-Shiller, while cities like Tampa (#54) are not.

Another Case-Shiller flaw is that it reports on a 2-month delay.

Therefore, today is several days from the start of August but we’re now reflecting on data from May. Given the speed at which the North Padre Island real estate market can change, May’s data is almost ancient.  Today’s values may be higher or lower than what Case-Shiller reports.

For home buyers, reports like the Case-Shiller Index may not be useful in making a “Buy or Not Buy” decision, but can aid in watching longer-term trends in housing.  For real-time data, talk to a real estate agent with access to local figures instead.

New Homes Sales Gain in June, But Gains Are Relative

New Home Supply June 2009 - June 2010

After a down month in May, the sales of newly-built homes appears back on track.

As published by the Census Bureau, June’s New Home Sales report showed:

  1. A 24 percent sales volume increase from the month prior
  2. A 2-month drop in the supply of newly-built home

There are now just 210,000 new homes for sale nationwide.

June’s data is a major improvement over May, but it’s possible that the true “new home market” may be softer than the statistics suggest.  This is for several reasons.

First, we’re comparing June’s sales data to the worst month in New Home Sales history.

In May, sales of new homes totaled just 267,000 units nationwide. That’s one-quarter fewer sales than in the previous worst month in New Home Sales history. May’s sales levels were awful by any measure but June’s improvement to 330,000 units remains second-worst sales levels ever posted.

Second, although much improved, June’s new home supply of 7.6 months is elevated versus the historical norm near 6.0 months.  The last year has averaged 7.7 months.

For buyers of new homes in Corpus Christi , this combination of low sales volume and higher-than-normal inventory may be a positive.  It’s the main reason why homebuilder confidence is reeling and the downturn has opened some doors for big discounts and deals. Free upgrades and closing cost credits can make a well-priced home even more attractive.

Plus, with mortgage rates at all-time lows and expected to rise, home affordability is may never be better.