The Housing Bubble

The Californian realtors also have March numbers out. “The median price of an existing home in California increased 13 percent in March and sales decreased 15.1 percent compared with the same period a year ago, the California Association of Realtors reported today. Existing, single-family detached homes in March 2006 was 4.8 months, compared with 2.2 months (revised) for the same period a year ago.”

“‘The inventory of homes for sale fell from a 6.6 month supply in February to 4.8 months in March,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Unsold inventory climbed significantly in the first two months of this year as listings increased and sales declined. Although the supply of homes for sale increased again in March, this was more than offset by a seasonal increase in sales, prompting a decrease in the unsold inventory index.’”

From Inman News. “Closed escrow sales of existing, single-family detached homes in California totaled 539,170 in March. Statewide home resale activity decreased from the 634,700 sales pace recorded in March 2005, the trade group reported. Condo sales dropped 23 percent from March 2005 to March 2006, while condo prices dropped 0.4 percent from February 2006.”

“Regionally, sales dropped 27.5 percent in the Orange County area from March 2005 to March 2006, 27.2 percent in the Sacramento area, 25.4 percent in the Monterey area, and 24 percent in the Central Valley area. Prices dropped in 11 of 20 regions from February to March, and year-over-year price appreciation in March was slowest in Northern Santa Barbara County area (1.6 percent).”

“‘March is the month in which we typically see the market gear up for peak season activity, and this year is no exception,’ said C.A.R. President Vince Malta.”

The Sacramento Journal. “Existing home sales fell 12.3 percent in the West during March compared to 12 months earlier, the NAR said Tuesday.”

“Meritage Homes Corp. today announced first-quarter results. Steven J. Hilton, Meritage CEO said, ‘Certain markets have softened in recent months. The change in first quarter primarily reflects a mix shift with more sales in Texas and fewer in California. The gains in Texas helped offset declines in Northern California and Phoenix, where speculative activity and high price appreciation in 2005 has recently contributed to higher-than-average cancellation rates.’”

The Massachusetts realtors have their March numbers out. “Across Massachusetts, sales of detached single-family homes increased 2 percent on an annualized basis, from 3,373 homes sold in March 2005 to 3,440 this past March, while condominium sales improved 2.4 percent over the past year, from 1,691 units sold last March to a record 1,731 condos sold in March 2006.”

“The modest gain in detached single-family home sales activity marks the first time in six months that sales have risen on a year-to-year basis. Among the factors behind the market rebound are mild winter weather, improved consumer confidence, and more realistic pricing on the part of sellers.”

“‘Buyers who had been on the fence in recent months have gotten serious now that mortgage rates are rising, and those who delayed home purchases due to the belief that a housing bubble existed have returned to the market as it’s become clear that major price declines are unlikely,’ said MAR President David Wluka.”

“While the statewide median selling price for detached single-family homes did decline in March from the same period last year, the decrease was a modest 1.7 percent, as the median price slipped from $350,000 in March 2005 to $344,000 last month.”

“‘The softening in prices we’re now seeing is due to today’s more plentiful supply of homes for sale, but it also reflects the decline in purchasing power caused by higher mortgage rates which limit how much home a buyer can afford,’ Wluka noted.”

“The inventory of unsold single-family homes and condos is now at its highest level in over a decade, with 60,373 listings as of March 2006, an increase of 39.4 percent from last March when 43,304 homes and condos we’re listed for sale.”

From CBS 4 in Boston. “Dave Duplin and his wife Charlene have dropped the price of their three-bedroom, three-bath home with hardwood floors and a mother-in-law apartment in Worcester from $369,000 to $349,000 over the past nine months, and his realtor’s asking him to drop it again.”

“That’s good news for the buyer, not such good news for Dave. ‘I would take it off the market. Yes I would rather than giving it away. I have put $85,000 to $100,000 in it where I consider it to be mint.’”

“Dave Stead, who belongs to the Worcester Regional Association of Realtors, says there’s more inventory, more choice. ‘It wasn’t uncommon to sell things in a day or two. Those days are gone.’”

The Florida realtors have their March numbers out. “Slowly rising mortgage rates and higher levels of for-sale inventory influenced Florida’s housing sector in March as the state’s market continued to adjust.”

“Statewide, sales of single-family existing homes totaled 18,881 last month compared to March 2005’s sales of 24,091 homes for a 22 percent decrease. Sales of existing condos also decreased in March, with a total of 6,481 condos sold statewide compared to 8,388 in March 2005 for a 23 percent decline.”

“Used home sales in March decreased by more than 30 percent in Palm Beach and Broward counties from March 2005. But sales rose 21 percent in Miami-Dade. Sales of used condominiums were down in all three counties, year over year.”

“In Miami-Dade, the median fell 4 percent to $249,200. Miami-Dade has more than 71,000 condos built or planned, and that supply is affecting prices there, real estate analysts say.”

“The Orlando Regional Realtors Association reported its numbers last week and said the local inventory hit a record 14,559 homes in March nearly five times more than a year ago. The metro Orlando median sales price was flat in March at $240,000, down slightly from February and well below the peak of $249,900 in November when the 2005 sales frenzy was still under way.”

“In Collier County, the number of sales fell 31 percent to 371. (In) Charlotte County, the number of sales decreased 27 percent to 315.”

“In Fort Lauderdale, the number of sales fell 32 percent. In West Palm Beach-Boca Raton, the number of existing single-family homes Realtors sold declined by a third. The number of homes sold in Fort Myers-Cape Coral declined 29 percent. The number of homes sold in Fort Pierce-Port St. Lucie declined 19 percent. The number of homes sold in Melbourne-Titusville-Naples declined 31 percent. The number of homes sold in Punta Gorda declined 27 percent.”

“Near South Florida, for existing condos, March over March: the number of condos sold in Fort Myers-Cape Coral declined 53 percent. The number of condos sold in Fort Pierce-Port St. Lucie declined 34 percent. The number of condos sold in Melbourne-Titusville-Palm Bay fell 74 percent. The number of condos sold in Naples declined 51 percent. In one of the biggest swings, the number of condos sold in Punta Gorda fell 91 percent, to 7 condos from 82 condos.”

Some housing bubble news from homebuilders. “M/I Homes, Inc. announced results for the first quarter ended March 31, 2006. Robert H. Schottenstein, CEO, commented, ‘Our first quarter results were in-line with our expectations with gross and operating margins of 27.3% and 11.4%, respectively.”

“Our Florida and North Carolina markets continue to be strong, while Washington, D.C. is experiencing pricing pressures and higher cancellations. Conditions in our Columbus, Indianapolis and Cincinnati markets continue to be challenging.’”

“The home builder said quarterly net income $1.14 a share. The company said the results include a tax charge of 4 cents a share for stock-option expenses. A survey compiled by Thomson First Call had analysts expecting earnings of $1.45 a share on sales of $321.5 million. Total revenue jumped 7% from last year to a record $259.1 million.”

“Investors punished the stock early Tuesday as shares slipped as much as 5% in morning dealings.”

From the Washington Post. “Forget about free plasma TVs, gift cards or upgraded cabinets. What about that free BMW Z4 Roadster that just popped up in ads for a new Fairfax County condo?”

“Builders are using more incentives in a softening market, but a car is a rarity. Two-bedrooms start at $356,900 and three-bedrooms at $408,900, according to the complex’s Web site.”

“But hold your horsepower. Developers of the 202-unit complex aren’t actually giving away the $38,000-and-up sports car. Buyers of two- or three-bedroom units get a free two-year car lease While that’s not quite the same as getting a Beamer, it’s nothing to be sniffed at. BMWs lease for around $400 a month, with a $2,500 down payment plus taxes and tags.”

“No word on whether Legato Corner’s sales have gone into overdrive. Sales staff members deferred questions to marketing company, which did not return calls seeking comment.”

The Voice of San Diego has this update on that housing bubble. “Home buyers in San Diego had 19,238 homes to choose from yesterday. And for a brief time over the weekend, San Diego had more homes listed for sale than ever before. San Diego has seen its inventory level increase 27 percent since the beginning of the year, increasing supply and leading to fears that prices could drop.”

“Realtors say everything’s going fine, if a bit slower than the last few years, while some local homeowners say it’s time to get out before prices go down. It’s just another day in the San Diego real estate circus.”

“On Jan. 1, there were 13,916 homes up for grabs. That number rocketed up by about 100 homes a day throughout January and has been rising at a steady rate through early spring to reach its current level. ‘I think the market is in serious trouble, in San Diego and in many other places as well,’ said (economist) Edward E. Leamer. ‘It’s not a sure thing. Something could jump in and save it, but we don’t see anything on the horizon, nationally or locally, that will turn these markets around.’”

“Darren Fulhorst bought his five bedroom, three-bathroom home in La Jolla in Jan. 2005 and he put it on the market one week ago. Fulhorst said he isn’t desperate to sell, but he nevertheless put his home on the market for $100,000 to $200,000 less than comparable properties.”

“‘I’m not accepting anything lower,’ Fulhorst said. ‘I’m listing it for six weeks, at the peak sales time, at an excellent price, and if it doesn’t sell, I’m holding onto it.’”

“Peter Chinloy of San Diego State University, said there are plenty of people in the same boat as Fulhorst. He said the reason the high inventory levels haven’t translated into substantial price decreases is that sellers are not yet willing to let go of the equity they have built up in their property. ‘What you have is a large number of people who are sort of sticking it out there and hoping that some accident will happen, that someone will offer them a high price for it, but they’re not sufficiently distressed that they’ll take the low offers that come along,’ Chinloy said.”

“Eventually, barring a large rebound in sales activity, prices are going to have to come down eventually, Leamer said. ‘It’s not until the sellers look around their neighborhoods and see all these other homes for sale and say ‘I’ve got to get ahead of this,’ that they start cutting prices,’ he said.”

“Typically, it takes a while for high inventory levels to translate into price decreases, Leamer said. He said sellers typically stay optimistic for about a year before they start to get cold feet.”

“With nearly 20,000 homes on the market in the county, all the analysts know something has to give. Whether disappointed sellers pull their homes off the market until things calm down, or relent on prices and give up some of the gains of the past few years, remains to be seen.”

The existing home sales numbers are out. “Sales of previously owned homes edged up slightly in March but not enough to keep the inventory of unsold homes from hitting a record high as the once-booming housing market continued to flash signals of a slowdown.”

“The National Association of Realtors said Tuesday that sales of existing homes edged up a tiny 0.3 percent last month to a seasonally adjusted annual rate of 6.92 million units. The March increase followed a bigger 5.1 percent jump in February with the two months representing the first advances since five consecutive monthly declines.”

“Total housing inventory levels rose 7.0 percent at the end of March to 3.19 million existing homes available for sale.”

“The national median existing-home price2 for all housing types was $218,000 in March, up 7.4 percent from March 2005 when the median was $203,000. The median is a typical market price where half of the homes sold for more and half sold for less. Historic price data has been revised back to 1989, including updates to reflect geographic changes over time, but price patterns are consistent with previously reported data.”

“NAR President Thomas M. Stevens said changes in the housing market mean consumers need more professional guidance. ‘Changing waters require navigational adjustments, and this is especially true for home sellers in most areas who are now dealing with buyers that are on equal footing, it’s no longer a seller’s market,’ said Stevens.”

“‘Most buyers in today’s market are well-informed and have agents that represent their interests, so sellers need good advice on how to show and market their homes in the current environment, as well as negotiation skills, critical values that real estate agents bring to the table.”

The 7% increase in inventory was a monthly number. The year over year increase was 39%.

3.05..2,297,000

4.05..2,474,000

5.05..2,556,000

6.05..2,678,000

7.05..2,756,000

8.05..2,841,000

9.05..2,772,000

10.05.2,868,000

11.05.2,924,000

12.05.2,846,000

1.06..2,883,000

2.06..2,985,000

3.06..3,194,000

The Sun Herald has this update on some Florida housing markets. “As the 2006 high season ends, local builders, investors and real estate salespeople with unsold homes, are still counting on retiring Northern baby boomers to reenergize the local housing market. Some local Realtors say the market is simply shifting back down to its traditional level. Others insist it was as if someone had thrown up a concrete wall last October.”

“A specialist in the sale of lots, Arthur W. Broslat reports that at the end of March there were 14,382 lots listed by the Punta Gorda, Port Charlotte and North Port MLS. Broslat adds that just 212 lot sales closed in March, 2006, while 1,204 lots were sold in Punta Gorda, Port Charlotte and North Port in March of last year.”

“There currently are 1,085 active lot listings in South Gulf Cove and in the past week six contracts have been signed, after ‘large price reductions,’ Broslat notes.”

“There also is a glut of new homes on the market, apparently holding back sales of older homes. ‘There are roughly 1,100 new houses listed by the MLS today, compared to almost none at this time last year,’ Broslat says. He also notes that the largest home builders, and even some of the smaller ones, do not list their unsold new homes on the MLS. So Broslat believes the number of new homes for sale is probably substantially higher.”

“Broslat also reports that many of those new homes, often called ’speck’ homes in the industry, are now being offered well below what it would cost to build the same dwelling today.”

An editorial in the same paper. “It has become a buyers market. That means people who are buying are a little more cautious and will no longer just throw thousands of dollars at a $70,000 house priced at $150,000. There have been cases where the homeowner has called and harangued an agent, wondering why the agent has not sold a home. In some cases, the seller has bounced from agent to agent looking for the right person to sell his overpriced home.”

“One broker at a nationally known real estate agency advises a homeowner to deal with a national real estate firm. The logic here is they are more established and have national recognition. I fail to see where that comes into play when you are dealing with an irate homeowner wanting to unload an overpriced home.”

“For the agent: Don’t paint an unrealistic picture, be honest in the pricing, follow your instincts if you sense a troublesome seller that maybe you should pass up, have a list of comparable prices and pictures of homes at different price levels to show the prospective home seller what he’s up against. I’ll add that now is the time for all real estate agents, either with a national organization or a local one, to work together for everyone’s benefit.”