These Are All Good Signs
The Rocky Mountain News reports from Colorado. “More than one out of four homes in the Denver area placed under contract in May failed to close, according to an analysis of a monthly report on homes sold by Realtors. The 25.81 percent ‘fallout rate is staggering,’ said Larry McGee, president of the Berkshire Group, who for the first time analyzed that aspect of the market.”
“Buyers often ask for repairs or improvements that the seller considers unreasonable or too costly, McGee said. ‘The average buyer, smelling blood in the water, feels that the average seller is desperate to sell,’ McGee said.”
“Independent broker Gary Bauer, who also prepares a monthly report based on Metrolist data, said deals that aren’t consummated fall into three camps: buyer remorse, homes not passing inspection and buyers not qualifying for loans under the stricter underwriting standards.”
“The median price of a single-family home dropped almost 10 percent to $226,500 from $251,155 in May 2007, while the average price of a single-family home fell by 15 percent to $276,374 from $318,904 in the same period.”
“Bauer said he is helping a family of five buy a foreclosed home in Commerce City for $70,000, which previously sold for more than $163,000, almost a 60 percent drop.”
‘In 2005, homes priced under $100,000 accounted for 3 percent of the homes sold, Bauer said. ‘Today, they account for about 13 percent of the mix,’ Bauer said. ‘That’s what foreclosures have done to the market.’”
The East Valley Tribune from Arizona. “Le Meridien will have a lot fewer condos and a much-delayed opening date, but a Tempe debut is still in the works, a partner in the much-touted luxury hotel project said.”
“The project will get in gear as soon as the construction market stabilizes and the hotel is redesigned with fewer condominiums, said Adrian Glover, a partner in Sierra Hospitality.”
“Condos, once requisite for new hotel projects, have fallen out of favor with investors because they are not selling, he said.”
The Arizona Daily Star. “Housing news hasn’t gotten any less grim, but some real estate agents are trying to keep the Tucson market from being painted in gloom and doom with a broad statistical brush.”
“Long Realty Co. is using tools from a California data-analysis company to provide in-depth market numbers, including inventory levels and prices, for areas as small as ZIP codes or individual subdivisions.”
“Long representatives said the in-depth information is useful in winning over buyers and helping sellers price their homes competitively. ‘If you’re in an area where you’ve got 17 months (of inventory), versus an area where there’s only four months, there’s an entirely different strategy,’ said Rosey Koberlein, CEO of Long Cos.”
“Overall, the Tucson market had about nine months of inventory and a median price of $195,000 in April, down about 13 percent from the same month in 2007, according to the Tucson Association of Realtors MLS.”
“In the 85747 ZIP code, on the Southeast Side, inventory was about four months, according to Long’s numbers. The median price was down about 14 percent from a year ago at $202,000. The average price was down about 12 percent at $221,076.”
“But in the 85653 area code, in Marana, inventory was at 13 months. The median price was $189,900, down about 25 percent from the same time last year. The average price dropped even further in that time, falling by more than 30 percent to $232,452, according to Long’s numbers.”
The Review Journal. “On Monday, about 100 miles southeast of the Las Vegas Valley in Kingman, Ariz., the Mohave County Board of Supervisors gave Clark County developer Jim Rhodes the go-ahead to begin building a master-planned community that could one day have 25,000 homes and more than 75,000 residents.”
“Since Mr. Rhodes first announced this project in 2004 — when housing prices in Southern Nevada were quickly rising beyond the reach of the valley’s service-industry workers — it has been alternately denounced and dismissed by a variety of interests.”
“Many residents of Mohave County were horrified by such large-scale development, hoping their area would remain little more than a highway stop for travelers and truckers. Others said there wasn’t enough water to support tens of thousands of new residents.”
“The environmentalist set bristled at the thought of people buying homes that create two- to three-hour commutes to Phoenix, Las Vegas, and Southern California.”
“And when home values plunged from the stratosphere, skeptics agreed Mr. Rhodes’ projects would never be built.”
“‘We have addressed every issue that’s been brought up repeatedly by the detractors of the project and we feel it is time to send a message to the development world that Mohave County is open for business,’ Rhodes Homes representative John Gaul said.”
“By the middle of this century, residential communities and businesses will line the empty desert floor between Las Vegas and Kingman. That’s the big picture, no matter how bad today’s news is.”
“The inventory of homes for sale in Las Vegas crept up to 23,348 in May, about 400 more than the previous month, the Greater Las Vegas Association of Realtors reported.”
“Inventory, considered one of the culprits in the valley’s declining housing market, peaked above 24,000 in summer 2007 and has climbed by a few hundred each month since its December low.”
“The median sales price of $236,692 is down 21.5 percent from a year ago but up slightly from April, the Realtors’ statistics showed. Patty Kelley, the association’s president, said she’s encouraged to see sales prices and the supply of homes starting to stabilize.”
“‘These are all good signs for a local housing market that has been working its way through some unprecedented challenges over the past 16 months,’ she said.”
“Realtors had been reporting a steady decline in median home prices during the first quarter, largely due to the high number of bank-owned properties that were selling below market value, Kelley said.”
“About 45 percent of contingent sales have been identified as ’short sales.’ Applied Analysis principal Brian Gordon said. ‘One area we remain concerned about is units being sold as short sales. Many of these units still require bank approval. It’s difficult for lenders to release home sellers from those obligations,’ he said.”
“The number of new listings coming onto the market in May dropped 10.7 percent from a year ago to 5,142 units. Home owners are waiting for foreclosures to work their way out of the market and for better financing conditions before listing their homes for sale, Kelley said.”
The Reno Gazette Journal from Nevada. “The median price for Reno-area homes was $251,500, based on the Global Insight/National City house value report for the first quarter of 2008, 0.2 percent below what the report considers absolute fair value. The last time Reno-area home prices were considered fair value was in 2004.”
“Increased buyer willingness is exactly what Karen Scarbrough is hoping for. Scarbrough, who wants to move to south Reno, offered her 2,350-square-foot home in the Skyline area for sale in October. Interest in the home was scarce in the beginning. But calls started picking up last month after Scarbrough lowered her price to $399,000 from the original $459,000 asking price.”
“Having the Reno area’s housing prices classified as a fair value can only help, she said.”
“‘Buyers can come in without worrying that they will be upside down on their house,’ Scarbrough said. ‘So, it should help both buyers and sellers.’”
“In the Reno area, short sales and bank-owned properties make up about 40 percent of listings but account for two-thirds of the houses going into escrow, said Wayne Capurro, president of the Reno/Sparks Association of Realtors. Given the number of short sales and bank-owned properties in the market, Capurro predicts median home prices to also drop in the next month or two, which is not necessarily a bad thing.”
“‘The median price has to go down to where properties are more affordable and then the number of sales also have to increase,’ Capurro said. ‘Those two things have to happen before we hit bottom and prices start going back up.’”
“Even at today’s lower prices, Scarbrough, who bought her house in 2002 before the bubble started, remains poised to make a good profit on her home. And with banks a lot stricter these days, her purchase of the home she wants in south Reno is contingent on the sale of her current house.”
“‘This house has been very good to us,’ Scarbrough said. ‘But with my husband now working in Carson City and my son deciding to go to Galena, we decided that it was time for us to move.’”
“‘I’m averaging about one to two showings a week, and I have two barking dogs so I have to find somewhere for them to go when we have people over. I am so ready for this house to sell,’ she said.”
From Tahoe.com in Nevada. “Single-family home sales and sales-prices continued to decline in Washoe County during the first quarter of 2008. New single family home sales dropped 56% in the first quarter from the fourth quarter, and 74% from a year ago. Median sales prices were also down 2% from the fourth quarter and 10% from the first quarter of 2007.”
“Sales of existing single family homes were similarly battered: down 27% from fourth quarter, and down 54% from a year ago.”
“There have not been many signs of life in the single family market lately, and I wouldn’t be surprised if we’re in for another 20% decline in median sales prices. What’s that estimate based on? Just for fun, I made a spreadsheet of quarterly home sale prices going all the way back to 1990, then I removed the ‘bubble years’ of 2002-2005 and looked at the average quarterly appreciation rate for the area, which turned out to be 0.96% per quarter.”
“I applied that quarterly appreciation rate to the median sales price of homes in the last quarter of 2001 and began estimating new resale prices from 2002 to today to see what today’s values would look like if we never went through the bubble and the difference was sobering.”
“Assuming that we had avoided the housing bubble altogether and had continued growing at a more reasonable (read: historically average) rate of appreciation, the median home resale price today would be just over $200,000. Using that same source data, the actual median home resale price last quarter was nearly $60,000 higher.”
“That tells me that today’s pricing is still about 23 percent higher than it ’should’ be and leaves the door wide open for continued price adjustments in the area.”
The Salt Lake Tribune from Utah. “Downtown Salt Lake City’s condo market has gone from sizzling to fizzling. Just 12 months ago, buyers signed contracts to purchase more than half of the available units at The Metro condominiums downtown in just the first two weeks they were on the market.”
“Through December, dozens more people committed to buy units. But since then? Just one buyer has signed on the dotted line.”
“A decade ago, condos in the downtown area weren’t selling very well. In recent years, the market has improved as more people have been drawn to downtown living and the proliferation of attractions. But as with the single-family market along the Wasatch Front, tighter lending standards put in place last summer after the nation’s subprime lending crisis have taken their toll.”
“Veteran downtown real estate agent Babs De Lay doubts that the condo market, while slowing, is headed for serious trouble because several projects that would have substantially added to inventories of properties for sale are on hold.”
“‘Lenders aren’t willing to finance anything right now, and that will keep inventory very reasonable for the next few years,’ she said.”
“At The Metro, units originally sold from $150,000 to $900,000. The 16 unsold units are priced from $330,000 to nearly $583,000. The building will be ready for residents to close on their properties and move in this summer.”
“Andre Ausseresses of Salt Lake City, who is under contract to buy in the project, said he has noticed the lack of sales activity in recent months.”
“Ausseresses sold a condo in the Cottonwood Heights area last spring, so he doesn’t have to worry about selling another property before he can close on his new one. The only worry now is that the remaining condos in The Metro get sold and that the developer doesn’t resort to cutting the asking price below what Ausseresses and other buyers committed to pay earlier.”
“Across downtown, to the west, Howa Capital expected to start work on its 90-unit condo and town-home development in January. Instead, the company is set to begin construction shortly on the planned retail and office space of the Marmalade project.”
“‘It’s just not a great business situation to start a condo project right now,’ said Dru Damico, director of development for Howa Capital. ‘We’re seeing a lot of inventory on the market in the price range we’re looking to sell these for, and we’re not seeing a lot of sales volume.’”
“Just how fast the real estate market turned in the Salt Lake area has surprised developers such as Craig Mecham, who is redeveloping part of the heart of Sugar House with a mix of offices, retail space and condos. He said he’s concerned that as he nears the point of breaking ground, commercial and residential real estate are slowing down. The condo market, he said, is one of his greatest concerns.”
“‘Everything is softening. It makes us nervous, to be quite honest,’ he said.”
“Utah’s rising foreclosure rate and its moderating or declining home values has not dampened Lawrence Yun’s optimism. As the National Association of Realtors’ chief economist, Yun offered Utah real estate agents gathered in Park City on Friday a cheery message on the future direction of Utah’s residential real estate market.”
“Home sales and prices are poised to rebound later this year and may reaccelerate in 2009, he said. ‘We went through a period of overly optimistic exuberance,’ Yun said, adding that he now believes the pessimism that followed the end of the national housing market boom has gone way too far.”
“It was just what the real estate agents wanted to hear. ‘People need to make their [home-buying decisions] not on short-term trends but on long-term trends,’ Yun said. ‘Five years from now 99 percent of the markets will have higher values than today.’”
The Deseret News. “Homeowners gleefully watched the value of their homes skyrocket last year. Now one of the state’s leading economists says it’s good for Utah that those values are falling back to earth. And we should root for them to fall a bit further, Wells Fargo vice president Kelly Matthews said Friday.”
“A market correction was inevitable. Now, Matthews said, ‘Prices have outstripped income so people cannot buy, afford or sustain their mortgages.’”
“‘We all hate the idea of falling home prices,’ he said, ‘but we have to realize it’s an affordability problem. We’re not going to get incomes rising any faster than they are or interest rates that are any lower.’”
“If home values do reach a 20 percent drop, homebuilders can start building homes again, ‘hopefully,’ Matthews said, ‘homes we can afford to buy.’”
