July 27, 2006

‘The Market Looks A Lot Different’ In California

Some housing bubble reports on California. US News and World report. “Sales of new homes fell 3 percent in June, the biggest decline in four months and 11 percent below the same period a year ago, the Commerce Department reported today. The figures are more good news for buyers, who are already benefiting as homebuilders reduce prices and throw in a range of freebies, from granite countertops to extra rooms.”

“‘They started at $821,000, but we’re now down to $789,000,’ Sheila Anderson said of the deal she is negotiating for a new home near San Diego. ‘And that’s on top of $25,000 in upgrades.’”

The Tahoe Daily Tribune. “With lagging sales and record prices, California homes may still be listed higher than what the market will bear in an industry that revolves around expectation.”

“The association’s chief economist Leslie Appleton-Young discussed the real estate economy for the South Tahoe Association of Realtors meeting. ‘What I can tell you is the market is good, not great, and looks a lot different than a few years ago,’ she said. ‘But what you need to note is this is a cyclical business. The economy is growing but not growing as fast as we thought it would.’”

“Moreover, the sellers have to change their market psychology to list their prices at a going rate to accommodate stubborn buyers. ‘Clients are very impatient. The biggest question I get (from sellers) is: ‘At what price should I be selling my home,’ real estate agent Monique McIntyre said. ‘The only houses selling are desperation sales.’”

“Indeed, the median asking price for half the year was $569,000 in South Lake Tahoe. The median sales prices this June turned out to be $485,000. And active residential listings last month almost doubled to 575 year to date. In 2005, they hovered at about 300, according to the South Tahoe Association of Realtors.”

The LA Daily News. “Foreclosure activity in California soared an annual 104.4 percent in the second quarter as the housing market slump deepened. In the April through June period, 27,606 property owners entered some stage of the foreclosure process across the state, the second most in the nation.”

“A key factor to track now is the extent to which some of the higher-risk, adjustable-rate mortgages go into default, Realty Tracks Rick Sharga said. Hundreds of millions of dollars of these types of loans are due to re-set during the rest of this year.”

“It’s a worrisome trend,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. ‘There are some people who could fall off the edge. We’ve got to watch this trend very carefully.’”

The Daily Bulletin. “When the ARMs begin adjusting, when payments begin climbing, more homes likely will find their way into foreclosure. Regional economist John Husing said that he thought buyers who took the mortgages out in 2003 and 2004 would be fine.”

“‘They’ll have some equity in their homes,’ he said. ‘It’s the ones who bought in 2005, since there hasn’t been much appreciation since then, who could be in trouble.’”




‘We Have Come To The End Of This Wave’

The Connection reports, the ‘Condo Craze Fizzles’ in Virginia. “The craze began in December 2003 like a shock wave, 492 rental properties would be going condo. By May 2005, the city of Alexandria lost more than 2,000 rental units.”

“By the time that Park Center registered with the General Assembly to go condo in September 2005, residents of its 574 rental units faced a stark choice: buy or move. But less than eight months after applying to go condo, Park Center scrapped its condominium project, opting to revert its property to rental apartment units.”

“Some officials at City Hall see Park Center’s retreat as a sign of future trends. ‘We probably have come to the end of this wave,’ Melodie Barron, a division chief in the Office of Housing said. ‘This also happened in the late 1980s when several condo projects were shelved.’”

“Urban planners say that housing trends are cyclical, with supply and demand forming peaks and valleys over the decades. To illustrate that point, Ralph Rosenbaum, a demographer in the city’s Department of Planning, turns to a listing of ‘residential properties authorized’ from the city’s 2005 statistical profile. It shows several prominent peaks in the mid-1960s, the mid-1970s, the late 1980s, the late 1990s and our recent spike.”

“The city has 1,518 condominiums that are under construction, 320 condominiums that have been approved and 2,349 potential condominiums that are under review. The future may see some of these projects reconsidering their development strategies.”

“As early as last summer, Deputy City Manager Mark Jinks predicted that Alexandria’s market would be experiencing a slowdown. ‘I think you’ll see a lot of these condo conversions becoming rental properties,’ Jinks told City Council members at last year’s annual retreat.”

“Last year, the condominium assessments increased by 23 percent, with the average condo going for $287,765. The Office of Housing estimates that a family would need to have an annual income of $86,627 to afford that kind of a purchase.”

“‘While individual circumstances vary, for most current residents, the cost of purchasing will entail a substantial increase in monthly housing payments above the cost of renting,’ wrote City Manager Jim Hartmann on the subject of condo conversions. “




‘The Tide Has Turned’ In Greater Cincinnati

The Cincinnati Inquirer has this update on the tri-state housing market. “A dramatic rise in the number of homes for sale in Greater Cincinnati and Northern Kentucky has created opportunities for buyers but will make it tougher for sellers to fetch the prices they want.”

“In Greater Cincinnati, the number of single-family homes and condos for sale on June 30 was 16,349, up 27 percent from June 30, 2005. The figure in Northern Kentucky was 1,313 on June 30, up 10 percent from June 30, 2005, according to the MLS of Greater Cincinnati and Northern Kentucky. The inventory buildup reflects a dramatic shift in home sales from the record-setting pace of 2005, when 34,511 were sold across Greater Cincinnati, Northern Kentucky and Southeast Indiana.”

“Jamie Smith has taken full advantage of the market conditions. He bought a three-bedroom house in April in Colerain Township for $96,000, about $4,000 less than the original asking price of $99,900. ‘By the time the deal actually closed, the sellers cut their price by $7,900 when you figure in all the concessions they made,’ he said.”

“Smith, who moved into his new home in June, has reaped the rewards of a cooling real estate market, in which rising interest rates and other factors have slowed demand and created a housing glut that has put buyers in the driver’s seat. ‘We said it last month, and we’ll say it again, it’s a buyer’s market,’ said Dave Otto, president of the Cincinnati Area Board of Realtors.”

“Homes have begun staying on the market longer, and many sellers have been forced to lower asking prices to accommodate higher mortgage costs, a glaring departure from the buying frenzy that marked the past five years. ‘We all have just gotten a little spoiled by the low interest rates and the market those rates drove,’ said (broker) Tom Sturm in Colerain Township.”

“Sturm said housing market conditions are the toughest he has seen in 13 years.”

“Northern Kentucky couple Erich and Barrie Kuehnle bought a new home for $205,000 in May after the builder knocked $3,000 off the asking price for the four-bedroom home in Independence. Barrie said the builder also threw in new carpeting, lighting fixtures and stainless steel appliances, including a microwave, range and dishwasher.”

“While average prices across the local region continue to climb, the median price fell for the first three months of 2006. The median price of existing homes fell 1.4 percent to $137,700 in Southwest Ohio, Northern Kentucky and Southwest Indiana, compared to the first three months of 2005, the NAR reported in May. It was the first decline since the trade group started tracking prices in 1979.”




New Home Sales Fall, Record High Inventory

The Commerce Department has the new homes sales numbers out. “Sales of new one-family houses in June 2006 were at a seasonally adjusted annual rate of 1,131,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.0 percent below the revised May rate of 1,166,000 and is 11.1 percent below the June 2005 estimate of 1,272,000.”

“The median sales price of new houses sold in June 2006 was 231,300; the average sales price was $290,600. The seasonally adjusted estimate of new houses for sale at the end of June was 566,000.”

“Sales of new homes fell in June by the largest amount in four months while the inventory of unsold homes climbed to a record high, providing further evidence that the once-booming housing sector is slowing.”

“The Commerce Department reported Thursday that new home sales dropped by 3 percent last month to a seasonally adjusted annual sales pace of 1.131 million units. It marked the first drop since an 11.5 percent plunge in February.”

“The government reported that the median price of a new home was $231,300 in June, which was up by just 2.3 percent from a year ago and was down by 1.5 percent from May.”

And from Reuters. “Beazer Homes USA Inc. on Thursday said quarterly profit fell 9 percent and orders dropped 16 percent, prompting the company to cut its forecast again in another sign of the weakening U.S. housing market.”

“Beazer, which sells homes largely to mortgage-rate sensitive, first-time home buyers, followed Pulte Homes and Centex Corp., which reported much greater declines in home orders as rising mortgage rates and housing prices pressured buyers.”

“‘Looking ahead, we do not see conditions in the housing markets improving significantly in the remainder of the fiscal year,’ Ian McCarthy, Beazer’s CEO said.”

“Home orders fell to 4,378 from 5,202, as increases in Texas and some Southeast markets were offset by significantly lower new home orders in the West and Florida.’

From the PDF file at the Commerce Department, ‘total for-sale at the end of the period’:

458,000 June 2005

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

550,000 Mar

558,000 April

560,000 May

570,000 June




‘More For-Sale Signs Than Drapes’ In Florida

The Miami Herald has this update from Florida. “In January last year, two of 23 residential projects planned for Fort Lauderdale’s Flagler Village area were under construction. More than a year and a half later, construction has started on only four others. At least eight projects have been put on hold, delayed or scrapped. Whether the rest get built may largely depend on how the real estate market plays out.”

“‘To do a condominium project now is really a risky venture,’ said analyst Jack McCabe. All of the uncertainty led Doug McCraw to halt plans for Brickell Point, a 205 loft-condo project. ‘I stopped the project cold turkey,’ he said. ‘Everybody has backed away until the market has settled.’”

“Developers of the Waves, a 21-story, 75-unit condo development, also put the brakes on its project earlier this year after failing to obtain construction financing. Dozens of buyers who had put down deposits totaling 20 percent of the purchase price have sued. ‘You have to have $10 million in the bank before you can borrow $4 million,’ said W. Bruce DelValle, a Kissimmee lawyer representing the Waves’ developers.”

“Metrostudy said families moved into only 291 of the 795 homes built in the 8,300-acre development during the first six months of this year. ‘Go into any new subdivision in St. Lucie County and you’ll see more for sale signs up than you’ll see drapes in the windows,’ said Jack McCabe. ‘St. Lucie County, at times, had led the nation in rising home prices; naturally, they will be subject to the greatest potential downturns.’”

“There were 958 new homes left vacant, up from the 447 a year ago. Adding in the 1,518 units under construction in St. Lucie County subdivisions, the report estimates that it would take more than 19 months for those homes to be filled at the current pace of homes being occupied, the report stated. Indian River County had 637 vacant new homes.”

“Richard Hope, president of the Treasure Coast Builders Association, attributed rising inventory levels to builders oversold spec homes to investors, novice speculators walking away from builder contracts that required extremely low down payments or reservations fees, (and) developers over built homes hoping the market would continue to show strong returns.”

“‘As far as the stats go, I hate to say it but it confirms what’s been going on awhile, the market is cooling’ said Hope.”

The St. Petersburg Trimes. “Only half as many homes were sold in Pasco County in the first six months of this year compared with the same period last year. ‘Supply has caught up with demand,’ property appraiser Mike Wells said. ‘When that happens, sellers have to become realistic, and what they’re asking for their product. The investor has moved on. I do think that builders are probably competing with investors that they sold houses to a year ago.’”

“About a third of Pasco homes are listed as nonprimary residences, Wells said. As prices soften, market watchers say investors are getting burned off.”

The Herald Tribune. “Now that the boom is largely over and listings are piling up all over Southwest Florida and the nation, the combination of smart pricing and marketing has taken on a new air of importance.”

“There is a lot of static in Southwest Florida’s real estate market right now. Just in the Sarasota MLS, for example, listings of homes and condos had soared 300 percent to 11,229 this month. Meanwhile, real estate agents are only moving 141 units per week, a decline of 40 percent from the clip a year earlier.”

“Pricing a home to sell is nothing new, but has gained credence as the market all over the nation has become weaker. ‘When everybody is $20,000 or $30,000 over price, looking for a miracle, it doesn’t work,’ said David York, (broker in) Sarasota. ‘What I advise my clients to do, if they want to be the next one to sell, they have to price it under every other comparable property.’”




Bits Bucket And Craigslist Finds For July 27, 2006

Please post off-topic ideas, links and Craigslist finds here.