August 23, 2006

‘Sellers Are Having To Be Way More Reasonable’: California

Some housing reports from California. “More homes were built in Riverside County than any other county in California last year, adding 29,689 housing units between July 1, 2004, and July 1, 2005. With the housing market leveling off, Borre Winckel, of the Building Industry Association of Southern California, said he doubts Riverside County will make the same ranking next year.”

“Sales office traffic in the county dropped by a third compared to last year, and home sales are down by as much as a quarter, he said. The median sales price in the county is about $425,000 today and he said he expects it will be 10 percent lower in a year.”

“‘The public is waiting, the public is watching what the real estate market is doing,’ Winckel said. For the first time in about five years, builders are offering incentives, he said. But there won’t be a repeat of the speculation-driven housing glut of 1990 and 1991 because builders are more careful and have less inventory, he said.”

The Modesto Bee. “Sales prices have been falling throughout the Northern San Joaquin Valley the past few months. Stanislaus County’s median home price in July was down $20,500 from December’s record high.”

“‘Right now there’s so much inventory to choose from that buyers can get great deals,’ said Daniel Del Real, an agent in Modesto. ‘Sellers are willing to let their homes go for a lot less than their listing price.’”

“Beyond lowering prices, many sellers are offering other incentives to make their homes more affordable, according to Nanci D’Anna Wyatt, an agent in Modesto. Wyatt said some sellers are ‘buying down’ mortgage rates by paying loan fees (called points) for buyers, and others are paying closing costs to help buyers purchase homes for less money up front.”

“‘Sellers are having to be way more reasonable than they were before,’ said Wyatt, noting that many Modesto homes now are selling for $300,000 or less.”

From Reuters. “Father Mark Wiesner has grown accustomed to wishing parishioners bon voyage as they flee the San Francisco area’s high housing costs for California’s Central Valley, where developers are increasingly transforming farms and ranches into a new suburbia.”

“Analysts say the middle-class flight will press on even if coastal home prices sag amid a national housing slowdown. Home prices near the state’s coastline would need to collapse to make buying a home there possible for many households.”

“The interstate linking the San Francisco Bay area to the Central Valley has become one of California’s most congested freeways, said economist Sean Snaith, a consultant to the University of the Pacific.”

“During bouts of insomnia, Snaith has witnessed the cost of the congestion from the window of his home in the Central Valley city of Stockton: ‘It wasn’t unusual to see people lining up at 4 in the morning at the gates of the community where I was living to begin their commute to the Bay area.’”

From MarketWatch. “The latest home-sales figures are in, and they make for some depressing reading. But I could have written this week’s ‘Existing-home sales plunge’ headline months ago.”

“Home and condo sales in the once-hot San Francisco-area housing market fell 31% in July. The morning daily in the trendy Sonoma County wine country revealed that the average home price in July fell for the first time in four years.”

“To say that the housing market here is slow right now is a bit like saying Beirut’s streets need some patching. Ever live in a staged home for five months? It’s about as pleasant as living in your car.”

“‘You’re living in the merchandise now,’ our agent smiled weakly after each round of complaints from us about having to keep our house spotless and perfectly appointed, on the off chance buyers did happen to show up.”

“It’s being called a housing ‘lull,’ or ‘a return to a balanced market.’ There’s more unsold inventory sitting on the market right now, here and in many U.S. housing markets, than you’ll find at a Wal-Mart. Most days it appears ‘For Sale’ signs outnumber mailboxes in our once-overpriced neighborhood.”

“Finally, in desperation, we called one of the three agents we’d interviewed in January about listing our house. He’d given us the lowest price, and that’s probably why we didn’t list with him. But this guy may have seen a train coming. ‘Cut your price,’ he said bluntly — ‘a lot. You’ll get offers.’”

“This after we’d already made several price cuts. And after we’d long ago abandoned the idea of making a tidy sum on the place. So, we cut our price again, this time by $60K (ouch). Miraculously, wary buyers slowly, finally appeared from the brush.”

“The very next day after we finally accepted an offer at our new fire-sale price. But look on the positive side: My wife and I are thrilled. We both agree: Better to live next to a salvage yard than in a staged house during a slow real-estate market.”




‘A Dramatic Slowdown’ In Massachusetts

The Massachusetts realtors have the July numbers out. “The state’s real estate is experiencing a dramatic slowdown. Single-family house sales in July slumped 25.3 percent, while house prices declined 3.5 percent, the Massachusetts Association of Realtors said today.”

“The condominium market began its downturn earlier but sales slumped dramatically last month: Condo sales fell 21.4 percent, pushing the median condo price down by 4.1 percent.”

“Sales of single family homes and condominiums fell across Massachusetts for a fourth consecutive month in July. ‘Today’s buyers are looking for value and many are still holding out for lower prices,’ observed MAR President David Wluka.”

“‘Increasingly, sellers also have stopped actively looking for homes until they have reached agreement on the sale of their own home,’ he noted in explaining the more moderate sales pace during July.”

“‘With such a large inventory of unsold homes, we’re beginning to see more realistic pricing on the part of sellers, and now that mortgage rates have fallen back below 7 percent, there’s incentive for buyers to get more serious,’ said Wluka.”

“Data from the MAR report shows that the number of residential listings has increased 23 percent over the past 12 months, from 51,178 homes and condos on the market in July 2005 to 63,144 homes and condos for sale this past July.”

From the talking points. “The 25.3 percent decline in detached single-family home sales in July represents the largest annual decrease in monthly home sales since April 1995 when sales fell 39.3 percent. The slower sales pace this July reflects a more cautious approach to home buying..along with growing resistance on the part of buyers to current market pricing.”

“The number of condominiums for sale has increased 36.3 percent in the past year, from 15,174 units last July to 20,677 in July 2006.”

The Boston Herald. “Bay State house sales plunged a stunning 27 percent in July, the biggest drop in 11 years, new figures show, and experts see few signs of a turnaround any time soon.”

“Lots of would-be home sellers are finding no takers. Erika Cummings hasn’t gotten a single offer on her West Roxbury home despite cutting her asking price three times since listing the place in May. ‘It’s really weird,’ said Cummings, who just four years ago had buyers outbidding each other for the last home she sold.”

“In Roslindale, JoAnne Kelly has held a dozen open houses and reduced her asking price several times, but gotten just one offer so low ‘that I told the broker ‘Don’t even write it up.’”

“‘I’m four months into this process and I’ll tell you, I don’t see any light at the end of tunnel,’ Kelley said. ‘I don’t how much more (would-be buyers) could ask from me, other than my first born.’”

“Experts are split over whether the latest downturn represents the start of a major collapse, a bursting real estate bubble - or just a one-time blip. ‘I suspect this is the big shoe dropping, although I have some doubts,’ said Yale University economist Robert Shiller.”

“John Bitner, chief economist of Boston-based Eastern Bank, said, ‘Last year was not a normal, real estate market,’ Bitner said. ‘It was frenzied with speculators trying to buy and flip homes and first-time buyers trying to get in before mortgage rates went higher.’”

“The economist doesn’t see the latest numbers as signaling a collapse, ‘just a correction in real estate that we had expected.’”




Homeowners And Builders ‘Caught Off Guard’

The Wall Street Journal looks at the housing sector. “For years, real-estate brokers and home builders promised that the soaring property market eventually would glide to a soft landing. It isn’t working out that way. The rapid deterioration of the market over the past 12 months has caught many homeowners and builders off guard. Some are being forced to cut prices far below what their homes could have fetched a year ago.”

“‘It would be difficult to characterize the position of home builders as other than in a hard landing,’ says Robert Toll, Toll Brothers CEO.”

“Last August, when Toll Brothers reported that its quarterly profit had doubled, Mr. Toll boasted: ‘We’ve got the supply, and the market has got the demand. So it’s a match made in heaven.’ Since then, Toll has cuts its guidance four times on the number of homes it expects to close on, and its share price has fallen by more than 45%. Yesterday, the company said orders for new homes in the third quarter were down 48% from a year earlier.”

“Joan Guth is one homeowner who was taken by surprise. Last September, she put her stately five-bedroom home in Herndon, Va., on the market for about $1.1 million. But her home in the Washington suburbs attracted few serious lookers, and in March, she cut her asking price to $899,900. Still there were no takers. Finally, on the advice of her broker, she called in an auction firm, beginning a process that would eventually reveal to her just how weak the Northern Virginia market had become.”

“On the morning of Aug. 5, the auctioneer, Stephen Karbelk, set up loudspeakers on Ms. Guth’s side lawn. Although Mr. Karbelk tried to stir excitement, the bidding petered out within minutes. Kristin Eddy was the high bidder, at $475,000. Looking stricken, Ms. Guth and one of her sons..told the auctioneer they wouldn’t accept the bid, which fell below the stipulated minimum that hadn’t been revealed to bidders. Late that afternoon, Ms. Eddy raised her offer to $525,000. The Guths wavered for two days before agreeing to accept about $530,000.”

“For some homeowners who bought as the market was peaking last year, the downturn is already creating a financial pinch. The slump has been particularly harsh in Northern Virginia, where in recent years, large home builders have turned open fields and wooded lots into new subdivisions. Inventories of unsold homes here have risen 147% over the past year, compared to a 40% increase nationally.”

“Would-be sellers such as Tahir Javed are growing frustrated. One year ago, Mr. Javed decided to move up from his town house in Ashburn, Va. He signed a contract to buy for $983,000 a four-bedroom brick colonial that a developer planned to build in nearby Leesburg. He put down a $60,000 deposit and planned to move into the new house in October 2006.”

“In May, Mr. Javed put his town house on the market for $499,900, which he says is far above the $212,000 he paid in 1999, but in line with asking prices for similar homes in the neighborhood. He hasn’t been able to find a buyer, and the balance he owes on his new house, about $920,000, is due in about six weeks.”

“Mr. Javed says he asked the builder for a price break, but the answer was no. He’s considering cutting the asking price for his town house to slightly under $470,000, and if that doesn’t work, he may try to find a renter. He had planned to use the money from selling the town house as a 20% down payment on what he owes on his new home, and to borrow the other 80%. Now he may need a bigger loan, which could carry a higher interest rate, he says. ‘That is the painful part,’ he says.”




‘Signs Of Market Adjustments’ In Florida

The Florida realtors have the July numbers out. “Florida’s housing sector continued to show signs of market adjustments in July as mortgage rates edged up and the inventory of homes available for sale remained at higher levels in many markets. A total of 14,451 existing single-family homes sold statewide last month, a decrease of 33 percent from the 21,691 homes sold during the previous July, according to FAR.”

“Sales of existing condos also decreased in July, with a total of 4,260 condos sold statewide compared to 6,739 in July 2005 for a 37 percent decrease.”

“The housing slowdown continues in South Florida as the median price of an existing single-family home in Broward County fell 1 percent in July compared to the same month last year. Sales across the region continued to plummet, especially in Palm Beach County, where sales were off 44 percent compared to last July.”

“In Miami-Dade County, the slowdown in condo sales narrowed in July. Sales were off just 12 percent, but the median price fell 11 percent to $252,000.”

The Herald Tribune. “Realtors in the Sarasota-Bradenton area sold 49 percent fewer homes in July than they did a year ago, and the median price on the homes they did sell declined 11 percent. The Port Charlotte-Punta Gorda market was nearly as dismal. July closings declined 37 percent to 236 from the 374 of a year ago. The median price of a Charlotte County home fell 4 percent from a year ago to $228,300 from $236,600.”

The Naples News. “Realtor-assisted single-family home sales in Collier County slumped 51 percent last month compared to July 2005. The median price dropped 6 percent in the year. Home sales in Lee County dropped 32 percent, from 1,026 in July last year to 694 last month. The median price dropped 8 percent. Condo sales in Lee County dropped 50 percent, from 356 to 179, although prices increased 35 percent, from $256,700 to $346,300.”

The Orlando Sentinel. “Toll Brothers Inc. said Tuesday that its third-quarter profits fell by 19 percent as the housing-market malaise weighed on sales and caused the luxury home builder to abandon some locations. CEO Robert Toll told analysts during a conference call that he doesn’t yet see signs of improvement nationwide.”

“‘I don’t see a turnaround in any of the markets,’ he said. ‘I don’t see any forming a bottom.’”

“The housing market has been getting weaker faster than expected, said Alex Barron, senior housing analyst with JMP Securities. Toll Brothers’ vulnerability is its luxury niche. ‘What’s hurting Toll is just the fact that they build luxury homes. Luxury homes are very discretionary,’ he said. ‘People who want to live on the golf course, they can do so today or they can wait a year. There’s no hurry.’”

“Barron said Toll Brothers’ strategy of not cutting prices hurt its sales, since many builders are doing it. Over the weekend for example, Lennar Corp. slashed prices of homes in a Florida community. One 3,900-square-foot house was selling for $560,000 down from $768,000, a savings of $208,000.”




‘Price Softening Is Good News’: NAR

The realtor trade group has the July numbers out. “Sales of previously owned homes plunged in July to the lowest level in 2 1/2 years and the inventory of unsold homes climbed to a new record high. The median price of a home sold last month was up just 0.9 percent from the same month last year and marked the smallest year-over-year increase since May 1995.”

“The inventory of unsold homes in July rose to a record high of 3.86 million. That represents a supply of homes still available for 7.3 percent of a month. That is the longest period to exhaust the supply of home since the spring of 1993.”

“Existing home sales were 11.2 percent below the 7.13 million-unit level in July 2005. David Lereah, NAR’s chief economist, said higher interest rates dampened sales but that price softening is good news for the housing market because it is drawing buyers.”

“‘Many potential home buyers have been on the sidelines, some ‘kicking the tires,’ but mostly waiting for sellers to compromise on prices and terms,’ he said. ‘Now sellers in many areas of the country are pricing to reflect current market realities. As a result, there could be some lift to home sales, but it’ll likely take some months for price appreciation to rise.’”

“Total housing inventory levels rose 3.2 percent at the end of July to 3.86 million existing homes available for sale, which represents a 7.3-month supply at the current sales pace.”

“Regionally, existing-home sales in the South were 7.0 percent below July 2005. Existing-home sales in the Northeast were 12.5 percent below a year ago. Existing-home sales in the Midwest were 10.1 percent lower than July 2005. Existing-home sales in the West were 18.0 percent lower than a year earlier.”

“The U.S. had an ‘unprecedented housing boom’ for about the last 10 years, said Mark Vitner, senior economist at Wachovia Corp. ‘It’s over, there’s no question about it.’”

“Sales have slowed because mortgage rates have risen while soaring price gains have pushed many homes out of reach of typical buyers. ‘In addition, there is a large psychological factor restraining home sales–buyers believe they are overpaying and if they hold out they can get a better price, while sellers want to receive the price they would have had at the peak of the housing market,’ said Drew Matus, an economist for Lehman Bros.”

“The report shows that the bloom is off the rose. Sales dropped to a seasonally adjusted annual rate of 6.33 million. The latest snapshot of housing activity was weaker than analysts anticipated. Economists were forecasting the pace of sales to fall to 6.55 million. ‘The housing sector is fragile,’ said Lereah.”

“Lereah said he still expects a ’soft landing’ for the once high-flying housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again, as some analysts have said is a possibility.”

“The housing sector’s transition from a red-hot market to a cool one has important implications for the overall economy. Consumers who watched their homes rise rapidly in value over the last several years felt wealthy and more inclined to spend. They also borrowed against their homes, treating them like ATMs, to support their spending ways.”




‘A Market In Unparalled Uncertainty’

Kelley Bennett writes at the Voice of San Diego.org. “There are neat charts of data. There are historic accounts and industry predictions. And then there’s emotion. That psychology is what many real estate analysts consider the ‘x-factor,’ the part of the market that can’t be logically graphed and analyzed. It’s hard to predict what people will do especially in a market that finds itself in unparalleled uncertainty.”

“James Hughes, at Rutgers University, said the psychological and emotional factors involved in real estate have gone in cycles, depending on whether the market was up or down. But the psychology is always there. ‘We used to call recessions ‘panics,’ he said. ‘We didn’t have a fancy word to describe them. The switch goes from greed to fear to greed to fear.’”

“And, with as much media focus on the real estate market as ever, experts say psychology will continue to play a role going forward. ‘It feels like a bigger thing than it really is,’ said local real estate analyst Gary London said. ‘Now the question is, ‘How long and how deep?’ We’re no longer asking ourselves, ‘Is the market down?’, we’re now asking ourselves, ‘How down, and for how long?’”

“But it takes more than one person getting greedy or scared to turn the entire market. Herd mentality, even when rooted in economic reality, forms the foundation for most dramatic market shifts. And now, homebuyers are a lot more cautious about getting on the train, said Alan Gin, professor of economics at the University of San Diego.”

“‘It could conceivably work in the other direction,’ he said. ‘Buyers keep hearing this talk about a bubble, about housing prices slowing. Buyers might just decide that they’re going to wait, possibly make lowball offers.’”

“‘People are swapping worst-case scenarios at cocktail parties,’ London said. ‘That’s bound to add to the psychological cloud.’”

“Norm Bour has been in real estate for 25 years and he said he hears from sellers all the time who can’t seem to sell their homes. ‘I tell them, ‘It doesn’t matter how much you paid for it, you just need to take a loss, lick your wounds and move on with your life,’ he said. ‘They need to realize that their house is not going to sell for more than the most recent comparable sale.’”

From the Daily Bulletin. “The CAR has changed its (affordability) methodology because of changes in the mortgage finance landscape. The new report assesses affordability only for first-time buyers, and says 23 percent of first-timers can afford a median-priced home in the state. That’s better than the 14 percent overall affordability in CAR’s final index under the old methodology.”

“But some are questioning whether the new index actually says very much. ‘This new report looks like they’re jockeying the numbers,’ said Bill Velto, manager of Tarbell Realtors in Upland. ‘They’re basing it on a 10 percent down payment, and close to 80 percent of first-time buyers are going the 100 percent financing route.’”

“The study assumes an adjustable interest rate of 6.48 percent and a 10 percent down payment, leaving buyers with an income requirement of $98,700 and a monthly payment (including taxes and insurance) of $3,290. ‘That’s a ridiculous number,’ Velto said. ‘Very few first-time buyers can afford $3,290 a month.’”

“Some of those who thought they could apparently can’t. Foreclosures jumped by 48 percent in San Bernardino County.”

“Regional economist Jack Kyser of the L.A. County Economic Development Corp. said both reports indicated a softening in the housing market. ‘Affordability of 23 percent is not terrible for first-time buyers, and the numbers are better inland,’ he said. ‘The real question is what will happen in both these areas as prices come down some.’”

“‘A lot of people got into the market with adjustable-rate mortgages,’ Kyser said. ‘They jumped to get in because they thought prices would keep climbing to the sky. Now whether they can stay in depends on their financial strength. I think there’s going to be some suffering in the next year or two.’”




Bits Bucket And Craigslist Finds For August 23, 2006

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