The National Association of Realtors reported yesterday that there are 3.72 million homes now listed for sale, which works out to a stiff nine-months backlog of unsold homes given the current anemic sales pace. That backlog is 50 percent more than the six-month level that is considered normal for a healthy market. Not too much to cheer there.
But a report released today that tracks the nation’s “shadow” inventory of foreclosed homes that have yet to hit the market, as well as homes in the foreclosure pipeline and those whose owners are seriously delinquent, offers a glimmer of hope. CoreLogic reports today that as of the end of April, there were 1.7 million homes in its shadow inventory database, down from 1.9 million a year ago. Moreover, the current shadow inventory is now 18 percent below it’s all-time high in January 2010.
The Less-Bad Housing Market
To be clear, these are still god-awful ugly statistics. There’s no way you can state with a straight face that there is anything good about shadow inventory of 1.7 million. On its own, the shadow inventory represents a five-month supply, or just one month short of what would be healthy inventory for the entire market. But the fact that the shadow inventory trend seems to be less-bad is an encouraging sign that the worst may be over. CoreLogic also reports that the combined total of regular “visible” inventory plus shadow inventory is 5.7 million homes. That’s well more than a year’s worth of supply, but even that ugly data point is 6.2 percent lower than where it stood a year ago.
Mark Fleming, chief economist for CoreLogic noted that a decline in the flow of delinquent loans is a big part of the story here. LPS Applied Analytics, which tracks nearly 40 million mortgages, issued a preliminary report yesterday showing that the mortgage delinquency rate (mortgages at least 30 days late) in May was 18 percent lower than a year earlier. And a joint report from S&P/Experian out yesterday shows the default rate on first mortgages in April is nearly 40 percent below the year-earlier level.
Still, no one is breaking out any champagne. As CoreLogic’s Fleming pointed out, “it will probably take several years for the shadow inventory to be absorbed given the long timelines in processing and completing foreclosures.”
That may well be true. But as noted in 7 Reasons Why Now is a Good Time to Buy a Home, not every state is buried in foreclosures. For example, while 53 percent of recent sales in Nevada were foreclosures, they represent just 7 percent of the New York state sales.
The Big Wild Card
There is one other market driver that could spell the most surprise for the housing market, and not in a good way. CoreLogic reports that there are nearly 11 million homeowners with negative equity, meaning their mortgage is higher than their home’s value. And 2 million of those underwater homeowners are more than 50 percent underwater. Those are the big wild cards in whether the recent less-bad news about the housing market continues, or we get smacked with another leg down. And a lot of that is going to be determined not so much by the housing market itself, but whether the economic soft patch doesn’t ossify and we’re able get some meaningful job growth.
But again, just as with the foreclosure data, the negative equity story is also skewed by what’s going on a few of the hardest hit states. CoreLogic says that 22.7 percent of all homeowners are underwater. But looking at just the most troubled states — Arizona, Florida, Michigan, and California — the share of homeowners that are under water jumps to 39 percent. Outside of those five states, the negative equity share is a still bad (but not nearly as bad) 16 percent. - By Carla Fried
Wednesday, June 22, 2011
California May Home Sales an estimated 35,536 were Sold
An estimated 35,536 new and resale houses and condos were sold statewide last month. That was up 0.9 percent from 35,202 sales in April, and down 13.3 percent from 40,965 sales in May 2010. California sales for the month of May have varied from a low of 32,223 in 1995 to a high of 67,958 in 2004, while the average is 46,840. DataQuick's statistics go back to 1988.
The median price paid for a home in California last month was $249,000, unchanged from April, and down 10.4 percent from $278,000 in May 2010. The year-over-year decrease was the eighth in a row after 11 months of increases. The last time the median fell more on a year-over-year basis was in September 2009, when it fell 11.3 percent. The statewide median’s low point in the current cycle was $221,000 in April 2009, while the peak was $484,000 in early 2007.
Distressed property sales made up about 53 percent of California’s resale market last month.
Of the existing homes sold in May, 35.5 percent were properties that had been foreclosed on during the prior 12 months. That was down from 36.4 percent in April and about the same as 35.4 percent in May 2010. The all-time high was 58.5 percent in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.9 percent of resales last month. That was up from and estimated 16.9 percent in April but down from 18.9 percent a year earlier. Two years ago short sales made up 12.2 percent of the resale market.
The typical mortgage payment that home buyers committed themselves to paying last month was $1,025. That was down from $1,050 in April and and down from $1,178 in May 2010. Adjusted for inflation, last month's mortgage payment was 53.8 percent below the spring 1989 peak of the prior real estate cycle. It was 61.5 percent below the current cycle's peak in June 2006.
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
Indicators of market distress continue to move in different directions. Foreclosure activity has declined somewhat but remains high by historical standards. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner occupied buying has eased a bit this spring but remains relatively high, DataQuick reported. - DQNews
The median price paid for a home in California last month was $249,000, unchanged from April, and down 10.4 percent from $278,000 in May 2010. The year-over-year decrease was the eighth in a row after 11 months of increases. The last time the median fell more on a year-over-year basis was in September 2009, when it fell 11.3 percent. The statewide median’s low point in the current cycle was $221,000 in April 2009, while the peak was $484,000 in early 2007.
Distressed property sales made up about 53 percent of California’s resale market last month.
Of the existing homes sold in May, 35.5 percent were properties that had been foreclosed on during the prior 12 months. That was down from 36.4 percent in April and about the same as 35.4 percent in May 2010. The all-time high was 58.5 percent in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.9 percent of resales last month. That was up from and estimated 16.9 percent in April but down from 18.9 percent a year earlier. Two years ago short sales made up 12.2 percent of the resale market.
The typical mortgage payment that home buyers committed themselves to paying last month was $1,025. That was down from $1,050 in April and and down from $1,178 in May 2010. Adjusted for inflation, last month's mortgage payment was 53.8 percent below the spring 1989 peak of the prior real estate cycle. It was 61.5 percent below the current cycle's peak in June 2006.
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
Indicators of market distress continue to move in different directions. Foreclosure activity has declined somewhat but remains high by historical standards. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner occupied buying has eased a bit this spring but remains relatively high, DataQuick reported. - DQNews
Saturday, June 4, 2011
Slow-moving economy runs into 'brick wall'
By John W. Schoen - Policymakers, investors and economic forecasters are hoping that a sharp slowdown in economic growth last month was only a speed bump on an already bumpy road to recovery.
Because otherwise the ride could get a whole lot rougher.Friday's jobs numbers showed that the economy produced a meager 54,000 new jobs in May with weakness across all sectors. The data capped a week of reports pointing to a sudden, unexpected slowdown in the recovery.
"It is now pretty clear that the economy ran into a brick wall last month," said Paul Ashworth, chief U.S. economist at Capital Economics.
Prior to this week most data had been pointing to a slow but steady increase in the economy's momentum. What took the wind out of the recovery's sails so suddenly, and will the doldrums last?
On top of the list is a surge in gasoline prices that has forced consumers to tighten spending on the rest of their household budget. Job growth in the retail, leisure and hospitality industries, which had been showing healthy advances, ground to a halt last month.
Floods and deadly tornadoes shut down some businesses in the southern half of the nation last month and may have depressed the jobs count. Some analysts also pointed to a slowdown in U.S. manufacturing because of a shortage of parts as Japanese suppliers continue to rebuild after a devastating earthquake in March.
The impact of those factors should dissipate in the summer and fall. Japanese suppliers are rebuilding faster than initial estimates suggested. In the past month, oil prices have fallen from a peak of $114 a barrel to under $100. Gasoline prices are beginning to ease off too; the average pump price is down 4 percent from a peak of $3.97 a gallon just two weeks ago.
Once those forces are no longer holding back growth, many analysts believe, the economy's underlying strength will restore momentum and get the recovery and job growth back on track.
There are troubling signs, though, that the recovery faces more fundamental, long-term threats. That list begins with the failure of Congress to give the Treasury legal authority to borrow enough money to pay all the government's expenses.
On Thursday, a second major credit rating agency warned Congress and the White House that if they don't agree on a way to raise the nation's borrowing limit, the U.S. government could lose its top debt rating. Such a downgrade would likely force up interest rates and raise borrowing costs, creating a headwind strong enough to increase the risk of another recession.
"We don't have a very positive outlook for job creation in the next few months," said William Dunkelberg, chief economist at the the National Federation of Independent Businesses, whose members this week reported in a monthly survey that they're cutting back on hiring plans. "The big issue for us is confidence. We don't have any confidence in the leadership that they're going to solve this problem."
The solution itself could spell trouble. At roughly $1.5 trillion, the federal budget deficit represents about 10 percent of gross domestic product. Closing that deficit too quickly, with either deep spending cuts, tax increases or both, could send the economy back into recession. Spending cuts by cash-strapped state and local governments have already eliminated nearly 450,000 jobs since September 2008.
In May, state and local governments cut 28,000 jobs, the most since November, while private businesses hired only 83,000 new workers.
Perhaps the biggest force holding back the recovery is the housing market, still mired in its deepest downturn since the Great Depression. There was no improvement in May, as home builders sat on the sidelines for the fifth spring since the housing market collapsed in late 2006.
"In every cycle we have come out of, construction has always been a major factor in the recovery, going back to the end of World War II and even back to the '30s," former Federal Reserve Chairman Alan Greenspan told CNBC Friday. "This is the first time when construction has not come out of this."
The collapse of the housing market has stunted job growth for several reasons. Apart from begetting jobs directly in building trades, new home construction creates related jobs in fields such as real estate sales and mortgage lending. Growth in demand for home furnishings and appliances has also been hurt.
More broadly, falling home prices are robbing American consumers of their savings and weighing on consumer confidence. Home values are in free-fall in many parts of the country as lenders struggle to unload millions of foreclosed properties by sharply cutting prices. Housing industry analysts say that the foreclosure pipeline will take several more years to clear.
Even if the latest "pause" in job growth is temporary, the pace of hiring is expected to remain painfully slow. Economists are still debating why the current recovery has been so sluggish. But nearly two years after the recession ended, the rebound is far slower than past recoveries.
"This remains a horribly weak economic recovery. We're still looking at payrolls today that show 7 million fewer jobs compared to the peak of January 2008," said John Lonski, an economist at Moody's Capital Markets Group. "Until we make more progress on the jobs front, until we start to generate jobs at a rate of at least 300,000 to 350,000 per month, we're going to be disappointed with the pace of activity."
Friday, June 3, 2011
Home sales fall in Orange County
by Jon Lansner - For the 22 business days ending May 20 – DataQuick’s freshest stats — the Orange County real estate market had homebuying patterns showing:
| Slice | Price | Ch. | Sold | Ch. |
|---|---|---|---|---|
| House | $500,000 | -5% | 1,752 | -16% |
| Condo | $270,000 | -10% | 794 | -20% |
| New | $540,500 | -16% | 198 | -10% |
| All OC | $425,000 | -4% | 2,744 | -17% |
- 26 of O.C.’s 83 ZIP codes with gains in their respective median selling price. Overall, buyers’ prices were -4.5% vs. a year ago.
- Taking sales volume in consideration, home-sale pricing is up in ZIPs representing 26% of the Orange County market.
- 6 of 83 O.C. ZIPs with median sales prices above $1 million in the period vs. 11 million-dollar ZIPs when the county median price peaked in June 2007. Since that pricing pinnacle, there’s been a 34% drop in the countywide median price!
- Current million-dollar ZIPs were 4% of all sales in the most recent period tracked.
- There were 4 ZIPs with medians under $250,000 vs. 4 a year ago. ZIPs with medians under a quarter million had 4% of all sales in the most recent period.
- 60 of 83 O.C. ZIPs had year-over-year sales declines in the period — or 72% of the market.
- Overall, countywide sales were down 16.6% vs. a year ago.
- 1 of 83 O.C. ZIPs has sales gains of 100% or more in the period at the same time as 4 had sales drops greater than 50%!
- NOTE! 7 local ZIPs had both sales gains and price gains in the period. (Highlighted in green below!) These double-gainers had combined sales volume equal to 7% of the Orange County market.
Also, want to see what kind of housing the median price buys in a specific neighborhood? Click on the ZIP code, and you’ll see current for-sale listings in the median’s “ballpark” — a range from 10% below to 10% above — in that ZIP …
| Town | ZIP | Price | Yr. chg. | Sales | Yr. chg. |
|---|---|---|---|---|---|
| Aliso Viejo | 92656 | $345,000 | -17.7% | 77 | -31.3% |
| Anaheim | 92801 | $300,000 | -6.3% | 29 | -27.5% |
| Anaheim | 92802 | $320,000 | -1.8% | 17 | -26.1% |
| Anaheim | 92804 | $300,000 | -12.8% | 38 | -25.5% |
| Anaheim | 92805 | $307,000 | +2.3% | 32 | -22.0% |
| Anaheim | 92806 | $360,000 | -7.7% | 25 | +47.1% |
| Anaheim | 92807 | $418,500 | -11.0% | 38 | +35.7% |
| Anaheim | 92808 | $391,000 | -15.9% | 20 | -42.9% |
| Brea | 92821 | $450,000 | -4.3% | 19 | -26.9% |
| Brea | 92823 | $789,500 | +8.9% | 8 | +100.0% |
| Buena Park | 90620 | $342,500 | -17.0% | 28 | -36.4% |
| Buena Park | 90621 | $350,000 | -3.3% | 20 | +17.6% |
| Corona del Mar | 92625 | $1,650,000 | -5.4% | 27 | -6.9% |
| Costa Mesa | 92626 | $525,000 | +3.5% | 29 | +3.6% |
| Costa Mesa | 92627 | $405,000 | -4.7% | 38 | -25.5% |
| Cypress | 90630 | $450,000 | -0.6% | 30 | -31.8% |
| Dana Point | 92624 | $455,000 | -17.3% | 7 | -36.4% |
| Dana Point | 92629 | $595,000 | +0.8% | 41 | -6.8% |
| Foothill Ranch | 92610 | $323,500 | +1.1% | 18 | -25.0% |
| Fountain Valley | 92708 | $549,500 | -4.4% | 32 | -45.8% |
| Fullerton | 92831 | $356,000 | -2.2% | 19 | -9.5% |
| Fullerton | 92832 | $322,500 | -5.7% | 18 | -14.3% |
| Fullerton | 92833 | $370,000 | -2.6% | 35 | -39.7% |
| Fullerton | 92835 | $490,000 | -0.5% | 19 | -5.0% |
| Garden Grove | 92840 | $311,000 | -10.5% | 28 | -41.7% |
| Garden Grove | 92841 | $355,000 | -2.1% | 20 | -23.1% |
| Garden Grove | 92843 | $269,500 | -20.3% | 30 | -21.1% |
| Garden Grove | 92844 | $317,500 | -2.3% | 12 | -61.3% |
| Garden Grove | 92845 | $420,000 | -14.1% | 11 | -35.3% |
| Huntington Beach | 92646 | $415,000 | -21.0% | 64 | -24.7% |
| Huntington Beach | 92647 | $475,000 | -6.9% | 36 | -7.7% |
| Huntington Beach | 92648 | $690,000 | -11.0% | 44 | -4.3% |
| Huntington Beach | 92649 | $480,000 | -15.0% | 34 | -5.6% |
| Irvine | 92602 | $660,000 | +2.6% | 15 | -50.0% |
| Irvine | 92603 | $1,075,000 | +21.8% | 30 | +11.1% |
| Irvine | 92604 | $501,000 | -4.6% | 30 | +3.4% |
| Irvine | 92606 | $520,000 | +17.1% | 18 | -10.0% |
| Irvine | 92612 | $421,000 | -11.2% | 43 | -10.4% |
| Irvine | 92614 | $331,000 | -38.7% | 23 | -20.7% |
| Irvine | 92618 | $563,318 | -4.0% | 62 | +26.5% |
| Irvine | 92620 | $582,750 | -16.8% | 52 | -17.5% |
| Ladera Ranch | 92694 | $533,000 | -1.3% | 50 | -29.6% |
| La Habra | 90631 | $305,000 | -6.7% | 53 | -5.4% |
| La Palma | 90623 | $495,000 | -11.6% | 9 | -35.7% |
| Laguna Beach | 92651 | $1,052,500 | +4.7% | 27 | -38.6% |
| Laguna Hills | 92653 | $440,000 | -11.1% | 31 | +0.0% |
| Laguna Niguel | 92677 | $497,750 | +0.3% | 103 | -8.8% |
| Laguna Woods | 92637 | $220,000 | +37.5% | 36 | +24.1% |
| Lake Forest | 92630 | $406,250 | +12.8% | 51 | -20.3% |
| Los Alamitos | 90720 | $725,000 | +9.8% | 9 | -40.0% |
| Midway City | 92655 | $340,000 | +51.1% | 2 | -77.8% |
| Mission Viejo | 92691 | $424,000 | -3.9% | 63 | +23.5% |
| Mission Viejo | 92692 | $450,000 | -9.1% | 59 | -25.3% |
| Newport Beach | 92660 | $980,000 | +4.3% | 43 | -6.5% |
| Newport Beach | 92661 | $2,825,000 | +61.4% | 3 | -57.1% |
| Newport Beach | 92662 | $3,525,000 | +101.4% | 2 | -60.0% |
| Newport Beach | 92663 | $850,000 | +18.9% | 26 | +13.0% |
| Newport Coast | 92657 | $1,422,500 | -25.1% | 23 | -25.8% |
| Orange | 92865 | $400,000 | -12.3% | 22 | -31.3% |
| Orange | 92866 | $432,000 | -1.8% | 13 | +30.0% |
| Orange | 92867 | $433,000 | -15.8% | 39 | +5.4% |
| Orange | 92868 | $245,000 | -10.9% | 14 | +55.6% |
| Orange | 92869 | $451,000 | +9.7% | 30 | -18.9% |
| Placentia | 92870 | $445,000 | -2.2% | 41 | +5.1% |
| Rancho Santa Margarita | 92688 | $382,500 | +10.9% | 64 | -32.6% |
| San Clemente | 92672 | $461,000 | -18.8% | 29 | -34.1% |
| San Clemente | 92673 | $668,750 | -1.7% | 52 | +15.6% |
| San Juan Capistrano | 92675 | $312,000 | -13.1% | 35 | -23.9% |
| Santa Ana | 92701 | $220,000 | +63.0% | 21 | -36.4% |
| Santa Ana | 92703 | $259,000 | -11.5% | 39 | +21.9% |
| Santa Ana | 92704 | $298,750 | +1.3% | 46 | -38.7% |
| Santa Ana | 92705 | $398,500 | -36.2% | 53 | +35.9% |
| Santa Ana | 92706 | $353,000 | -1.7% | 15 | -46.4% |
| Santa Ana | 92707 | $242,000 | -2.2% | 43 | -25.9% |
| Seal Beach | 90740 | $660,000 | +36.1% | 13 | +18.2% |
| Stanton | 90680 | $251,250 | -7.8% | 23 | +0.0% |
| Trabuco/Coto | 92679 | $662,000 | +12.2% | 52 | +2.0% |
| Tustin | 92780 | $418,000 | +11.5% | 35 | -23.9% |
| Tustin | 92782 | $588,500 | +0.2% | 38 | -15.6% |
| Villa Park | 92861 | $740,000 | -23.1% | 7 | +16.7% |
| Westminster | 92683 | $421,500 | -0.2% | 52 | -27.8% |
| Yorba Linda | 92886 | $610,000 | -4.7% | 53 | -28.4% |
| Yorba Linda | 92887 | $600,000 | -5.5% | 32 | -3.0% |
| Total O.C. | $425,000 | -4.5% | 2,744 | -16.6% |
Is Now A Good Time To Invest In Real Estate?
- Although mortgage rates have recently risen slightly from their all-time lows, the recovery of the housing market is not a reality in many areas of the United States. This means that houses in several different states cost less than they have in years and rates are still low enough to make investing in real estate a popular consideration for many investors. But is this really a good time to be investing in property that you won't be living in? After all, there are many things to consider beyond the opportunistic aspects of the decision.
Carrying CostsCarrying costs for an empty property meant for resale don't just include the monthly mortgage payment. They also include insurance costs, property taxes, upkeep and repair expenses. Even if you plan on renting the property before it is sold, you still need to have adequate cash reserves to pay all of these expenses because the rent you are able to charge in your area might not be enough to provide adequate resources. Finally, consider how long you may need to cover these costs. When the housing market was booming and houses were easily flipped, carrying costs might not have been a concern; but now, when houses can sit on the market for months or years, they are.
Risk and ReturnThe discussion above about carrying costs gives an indication of the amount of risk you might be taking on when you invest in real estate. Conventional investing wisdom says that real estate is an investment that will grow over time, but recent years have shown that this growth may not be as straight forward as an investor might want. Additionally, after paying the mortgage interest, insurance, property taxes and maintenance expenses for a number of years, the return made when you sell the property for more than you purchased it for could be much less than you anticipated because your cost basis is comprised of more expenses than just purchase price and interest.
LiquidityReal estate is not generally considered a liquid investment because it is not easily sold for cash, and in a restrictive financial environment, real estate is even more illiquid. Even if you just need to pull some equity out for an emergency, assuming you have any equity,the restrictive lending environment could mean that you have difficulty accessing any cash.
Investing GoalsYour personal investing goals and timeline will have a lot of bearing on whether or not real estate is a good investment for you right now. If you are within a few years of retirement, investing in real estate could actually push your retirement back until a later date, especially if you tap into your retirement savings for the down payment. In addition, if you have to carry the property for a great deal of time, it could reduce the amount of money you can save and your subsequent earnings on those savings. If you have a longer-term saving plan, then you might have more flexibility to add something as unpredictable as real estate to your financial plan.
The Bottom LineOften, a "good time to buy" for one investor may not be for another. Sure, opportunities for return abound, but if it isn't actually a good time for you to invest then the opportunities that you see will not be something that you can trust to provide an opportunity to you. Instead, they may turn into financial mistakes and burdens that you have trouble keeping up with. When evaluating the potential of investing in real estate, don't just think about home prices and interest rates; take the time to consider your personal financial situation and whether or not you can afford the long-term commitment a real estate investment might entail.
- San Francisco Chronicle
Carrying CostsCarrying costs for an empty property meant for resale don't just include the monthly mortgage payment. They also include insurance costs, property taxes, upkeep and repair expenses. Even if you plan on renting the property before it is sold, you still need to have adequate cash reserves to pay all of these expenses because the rent you are able to charge in your area might not be enough to provide adequate resources. Finally, consider how long you may need to cover these costs. When the housing market was booming and houses were easily flipped, carrying costs might not have been a concern; but now, when houses can sit on the market for months or years, they are.
Risk and ReturnThe discussion above about carrying costs gives an indication of the amount of risk you might be taking on when you invest in real estate. Conventional investing wisdom says that real estate is an investment that will grow over time, but recent years have shown that this growth may not be as straight forward as an investor might want. Additionally, after paying the mortgage interest, insurance, property taxes and maintenance expenses for a number of years, the return made when you sell the property for more than you purchased it for could be much less than you anticipated because your cost basis is comprised of more expenses than just purchase price and interest.
LiquidityReal estate is not generally considered a liquid investment because it is not easily sold for cash, and in a restrictive financial environment, real estate is even more illiquid. Even if you just need to pull some equity out for an emergency, assuming you have any equity,the restrictive lending environment could mean that you have difficulty accessing any cash.
Investing GoalsYour personal investing goals and timeline will have a lot of bearing on whether or not real estate is a good investment for you right now. If you are within a few years of retirement, investing in real estate could actually push your retirement back until a later date, especially if you tap into your retirement savings for the down payment. In addition, if you have to carry the property for a great deal of time, it could reduce the amount of money you can save and your subsequent earnings on those savings. If you have a longer-term saving plan, then you might have more flexibility to add something as unpredictable as real estate to your financial plan.
The Bottom LineOften, a "good time to buy" for one investor may not be for another. Sure, opportunities for return abound, but if it isn't actually a good time for you to invest then the opportunities that you see will not be something that you can trust to provide an opportunity to you. Instead, they may turn into financial mistakes and burdens that you have trouble keeping up with. When evaluating the potential of investing in real estate, don't just think about home prices and interest rates; take the time to consider your personal financial situation and whether or not you can afford the long-term commitment a real estate investment might entail.
- San Francisco Chronicle
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