June 26, 2006

‘A New Real Estate World’ In Oregon

The Oregonian has this update from that state. “Last year’s frenzied housing market has noticeably calmed this year, even if home prices don’t yet show it, many of the area’s top real estate agents say. ‘Last year, we were managing traffic; now we’re trying to create the traffic,’ said Kathy Hall, a longtime agent. ‘Now, it’s a whole different thing.’”

“The conflicting observations pose a conundrum: How can a softening market produce a rising median price? The answers from the panel of real estate agents: The latest price figures reflect sales closed in May but negotiated a month or more earlier.”

“Eventually, several of the agents projected, marketwide price figures should reflect a moderating rise, say, in the single-digit percentages, but almost certainly not flat or negative.”

“Supply is going up and sales are going down. Sellers put 5,620 new listings on the market in May, up 27.9 percent from the same month a year ago. But buyers that month consummated 3,054 sales, down 6.6 percent, from the previous May.”

“The real estate agents suggested suburban areas and the highest of high-end markets, such as multimillion-dollar properties on Oswego Lake, are feeling pricing pressure earlier than other places. State Economist Tom Potiowsky said the agents’ sentiments, in and of themselves, also amount to reasonable leading indicators.”

“‘I’ve heard the same stories from around the state,’ Potiowsky said.”

“Dave and Debbie Heidel decided to put their custom-built three-bedroom house on the market for $559,000 in late December, thinking it would sell in two or three months. After all, an appraisal in October determined it was worth $549,000, so it should have been worth more by year’s end, Dave Heidel said.”

“Six months and three price reductions later, they’re asking $499,000, and working with a new agent.”

“‘Last year, there was panic in their eyes,’ said (realtor) Bob Haskins. ‘They had to buy a house. Now, they’re more realistic. If it’s priced right, it’s gone,’ Haskins said. ‘But if you’re ambitious on the price, you’re delusional.’”

“Even some homeowners in desirable close-in neighborhoods are finding themselves in a new real estate world. Ron Martin put his 2,800-square-foot Laurelhurst Cottage on the market in March for $419,000. Martin figured he would get an offer in a few weeks, he said.”

“But the house is a little too close to transit for many. Cars sometimes pull up, then drive off without seeing the house’s great features, Martin said. ‘It’s just been amazing,’ Martin said. ‘Has it cooled off that much?’”




‘The Pie Is So Much Greater Now’

A pair of reports on smaller housing markets, starting with the Tahoe Daily Tribune. “Deemed a market ‘correction’ of sorts, the South Tahoe Association of Realtors reported 495 single family listings on the market with 59 in escrow. That’s up from the average inventory of 300-plus homes.”

“Two months ago, the market showed 407 in current inventory. Last year at this time there were 268 homes on the market. A few years ago, 88 homes were listed.”

“‘The pie is so much greater now. The buyers right now are smart,’ said association President Theresa Souers. ‘We’re seeing a correction that’s happening across California.’”

“Agent Barbara Childs agreed that buyers are testing the waters and so are the sellers. She’s noticed more withdrawals as sellers become frustrated with the offers. ‘They have every right to do it, but if they listen to their real estate agent’s advice, these properties will sell,’ she said. They can’t change the location, but they can be flexible with the price and make improvements, she stressed.”

“‘People have choices,’ she said, while putting on an open house. She listed the 3,314-square-foot home in May. The seller is moving, so he’s reduced the price from $1.1 million to $899,000. Five other homes are for sale on the street.”

The Star Tribune from Wyoming. “Despite stagnant population growth and rising interest rates, the real estate market in southeast Wyoming’s intellectual capital has been ablaze amid rampant construction. Contractors are building homes and multi-unit apartment complexes at a feverish pace while developers press for more subdivisions.”

“The proliferation of new apartments already is affecting demand for lower-end homes, said Kerry Greaser, an owner of a 58-year-old Laramie real estate firm. ‘For years, we had a pretty tight rental market, and the private developers..saw that need and have been building a lot of apartments in the last five years,’ Greaser said. ‘Now, we are at an oversupply of apartments.’”

“Builders have overcompensated for what was a shortage in the rental market, and the new development is pressuring some property owners to lower rents, said (broker) Margaret Peterson. ‘I haven’t gotten to that point with the vacancies,’ Peterson said. ‘I have just forewarned my owners this is a possibility. We may have to reduce our rents.’”

“The construction and development explosion calls into question the source of the demand. Laramie’s population actually declined from 27,204 in 2000 to 26,050 in 2005, according to Census Bureau estimates.”

“Homes in Laramie and the surrounding area are among the most expensive in Wyoming. Some of that is due to the presence of high-end second homes. Local developers and builders, however, aren’t necessarily banking on wooing Laramie’s average wage earners. Jim Stephen of Gateway Construction said investors from California are buying some fourplex units in the Fall Creek development, while Arizonans also have expressed interest in the properties.”

“Laramie developer Grant Lindstrom expressed some apprehension over the construction and development boom in the city. ‘I think it’s going to be overbuilt pretty quickly,’ said Lindstrom.”

“‘I think the market is overpriced, and I think it is going to drop a little bit,’ said Dale Eslinger, a Laramie resident who owns 12 rental homes.”




Fed Pause A ‘Fond Memory’

Many eyes are on the Fed meeting this week. “The pause in the campaign to normalize short-term rates that Fed Chairman Ben Bernanke suggested in April is now a fond memory. One by one Fed officials have picked up the inflation-fighting gauntlet, reinforcing the bond market’s distaste for dovish talk and resistance to an end to the tightening cycle.”

“‘The more data you see the more it looks like a 5.50 percent (Federal Reserve funds rate) is going to happen at some point, with the housing data playing into the idea that the Fed will raise rates this week and again, in August’ said Scott Gewirtz, head of Treasurys trading in New York.”

“As the Federal Open Market Committee meets this week to increase interest rates for the 17th consecutive meeting, 6 in 10 investors say they think the Fed will increase interest rates too much too fast, leading to a recession, according to the June UBS/Gallup Index of Investor Optimism.”

“This belief may be one reason why investor optimism has continued to decline and now stands at its lowest point this year. Rising interest rates may also help explain why investors have such a dim view of the residential real estate market nationwide.”

“‘The Fed’s really walking a tightrope,’ said Scott Anderson, senior economist at Wells Fargo. ‘If they go higher, all bets are off, and there’s a big risk of a more severe housing downturn.’”

“‘Home sales are slowing, houses are sitting longer, and the number of properties on the market (is) at an all-time high,’ said Doug Duncan, chief economist of the Mortgage Bankers Association. ‘All of that is a recipe for a slowing market at a time when the Fed is raising interest rates and squeezing affordability.’”

The Treasury Department had this today. “U.S. mortgage finance giants Fannie Mae and Freddie Mac pose risks to financial systems that could hit primary dealers, tighten credit and reduce liquidity in markets, a Treasury Department official said on Monday.”

“Emil Henry said the potential for spillover into financial markets from any crisis crisis at one of the government-sponsored mortgage finance enterprises (GSEs) is ‘nothing short of breathtaking.’”

“Henry said risks from GSEs could conceivably match the scale of the 1998 meltdown of the Long Term Capital Management hedge fund.”

“A deterioration in GSE financial conditions would almost certainly increase risk premiums and boost yields on GSE debt and mortgage-backed securities relative to Treasury yields and other benchmarks, he said. Primary dealers holding large positions in GSE debt or mortgage-backed securities could incur substantial losses, which would spill over into other markets, he said.”




‘Continuing Difficulties’ In Massachusetts

Some reports on Massachusetts. ” Sales of Massachusetts single-family homes and condominiums fell again in May compared to the prior-year period, according to a report released today by The Warren Group of Boston.”

“Single-family home sales fell 5.1 percent, with 5,208 units moving during May 2006 compared to 5,488 in May 2005. The median sale price fell 4.0 percent to $331,000. Condo sales fell 7.75 percent in May, with unit sales dropping to 3,037 from 3,292 the previous year.”

“‘Economic conditions in the Commonwealth remain a concern with no growth in the state’s population,’ said Breimyer, the past president of the New England Economic Partnership. ‘This suggests continuing difficulties in local housing markets.’”

“A provider of foreclosure data said today that May foreclosure filings against Massachusetts homeowners have more than doubled, a trend that is accelerating as the housing market slows and mortgage rates increase.”

“There were 1,613 filings last month, compared with 788 in May 2005. ‘That’s over 50 a day every day of the month,’ said Derek Beckwith, spokesman.”

“‘We expected foreclosure rates to increase again this year, but the levels we are tracking outdistance our earlier predictions,’ said Jeremy Shapiro, president and co-founder. ‘We may be witnessing a ‘perfect storm’ scenario where a flat real estate market, higher interest rates, rising energy costs and specialty loans are causing significant difficulty for thousands of Massachusetts property owner.’”




555,000 New Homes For Sale In May, 2006

The new home sales numbers are out. “Sales of new one-family houses in May 2006 were at a seasonally adjusted annual rate of 1,234,000, according to estimates. This is 5.9 percent below the May 2005 estimate of 1,311,000. The median sales price of new houses sold in May 2006 was $235,300. The seasonally adjusted estimate of new houses for sale at the end of May was 556,000.”

The $235,300 median is down from the high in February 2006 of $250,800. The inventory looks like another record:

448,000 May 2005

458,000 June

459,000 July

477,000 Aug.

491,000 Sept.

492,000 Oct.

508,000 Nov.

515,000 Dec.

525,000 Jan. 2006

533,000 Feb.

547,000 Mar.

553,000 April

555,000 May

“The median price of homes sold did decline to $235,300, a drop of 4.3 percent from the April sales price. Economists believe that the huge backlog of unsold homes will put further downward pressure on prices in coming months.”

And Lennar had this out today. “Stuart Miller, CEO of Lennar Corporation said, ‘After a long period of steady growth, the homebuilding industry has slowed, as evidenced by lower new orders and higher cancellation rates in many geographic markets across the country. These conditions are primarily the result of speculators exiting the market and changing homebuyer sentiment.’”

“The company warned the second half of the year would be hurt by slower new orders and higher cancellation rates. Lennar lowered its full-year earnings guidance. The company’s gross margin percentage on home sales fell 1.4 percent in the quarter, due to higher sales incentives that caused declines in the Central and West regions.”

“Lennar plans to cut land costs, production costs and selling, general and administrative expenses to try to partially offset the increased incentives, Miller said in a statement.”

“In a note to investors following the earnings announcement, Margaret Whelan, an analyst at UBS, reduced her earnings estimates for the company for both 2006 and 2007. Whelan said that while the small decline in orders Lennar reported was ‘impressive,’ she believes the company is ‘discounting more heavily than peers.. which will negatively impact future margins.’”




Florida Housing Markets ‘Flooded’

The Sun Sentinel reports on Florida condos. “David Dweck couldn’t believe it. The founder of the Boca Real Estate Investment Club scanned the MLS last week and found 2,700 condominiums for sale just in Palm Beach County retirement communities. That represents roughly 9 percent of the county’s total listings. ‘That’s a staggering number,’ Dweck said.”

“Some of the building facades haven’t been updated in years and aren’t appealing to existing residents or buyers, he said. ‘That market will continue to correct downward,’ Dweck said. ‘I don’t expect it to pick up at least for another year.’”

From Florida Today. “A new report on housing construction permits reflects the slowdown in Brevard County’s real estate market. There were 415 permits issued countywide in May for single-family homes, condos and apartment units, down from 577 in April and 617 in May 2005.”

“Joe DiPrima, (who) builds mainly in Viera, said most of his company’s current construction projects are from contracts that were signed last year. ‘I think we definitely have seen a slowdown in activity,’ DiPrima said. ‘We anticipate that it will take some time for the inventory out there to be absorbed.’”

“He said the flurry of housing construction in Brevard in recent years has flooded the market, and local housing prices in general have fallen somewhat since last summer, when the market peaked.”

“The median sales price in Brevard for existing single-family homes, a market that reflects trends in new-home prices, was $224,800 in April, up 4 percent from April 2005, but down from the peak price of $248,700 in August 2005.”

“The number of local single-family home sales in Brevard fell by 32 percent in April, compared with a year earlier, according to data from the Florida Association of Realtors.”

“DiPrima said said the local market for condominiums seems weaker. In April, the median sales price of a local condo was $175,000, down 17 percent from a year earlier.”

“Also, the number of local condo sales fell by 81 percent in April, compared with a year earlier. ‘The condo market here took off after the single-family-home market,’ DiPrima added. ‘The number of condominiums on the market is higher than it’s ever been.’”