First, a couple of key points to consider on housing.
Note: For more graphs, please see my earlier post: November New Home SalesLet’s start with revisions. This month (November) is one of the few months were the initial report wasn’t higher than the previous month. Usually the small reported gain in sales is then revised away […]
According to the Census Bureau report, New Home Sales in November were at a seasonally adjusted annual rate of 647 thousand. Sales for October were revised down to 711 thousand, from 728 thousand. Numbers for August and September were also revised down.
Click on Graph for larger image.
Sales of new one-family houses in November 2007 were […]
The problem with subprime lenders means there will be more homes in an over-supplied market and not as many people who can step in to make purchases.
By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) — Subprime lenders are already getting crushed, but the impact rising mortgage delinquencies will have on home prices overall is still an open question.
At a minimum, it means financing is drying up for those with less-than-perfect credit and that spells fewer home buyers.
And foreclosed properties will add supply to a housing market that already has too much.
“It’s going to be a really big deal,” says Dean Baker, co-director of the Center for Economic and Policy Research.
“[National] inventory is 20 percent higher than last year, vacancy rates have soared and prices are down about 3 percent,” he says. “Now, with the tightening of credit, I don’t see how prices don’t fall another 5, 6 or 7 percent.”
The tightening of credit could take as many as one million buyers out of the market, says Baker, citing Bear Stearns research. “Even if you cut that in half, say to 400,000 or 500,000, that’s huge.”
Mark Zandi, chief economist for Moody’s Economy.com, is also concerned. “I think the subprime problems will take housing activity to a whole other level,” he says.
Zandi is projecting a doubling of subprime defaults this year to 800,000. “Those homes will go on the market at a discount and will weigh on the market,” he says. He also believes that 500,000 fewer Americans will be able to obtain financing because of the tighter standards.
All that has led Zandi to alter his projection of a 3 percent decline in housing prices this year to a mid-single digit decline. The hardest hit areas, which he thinks will be Arizona, Nevada, parts of California and Florida, will absorb high single digit or even double-digit punches.
Not everyone paints as bleak a picture. “We don’t know how many subprime mortgage holders will actually default,” says Christopher Mayer, an economist at Columbia University. “Banks are working with borrowers [so they can keep their homes]. Plus, there’s plenty of liquidity around for people looking for mortgage loans.”
That’s not to say he sees everything as hunkey-dorey. Mayer thinks values in speculative markets had gotten way ahead of fundamentals and that weak local economies in the Midwest will depress values there.
The extent of the subprime delinquency problem is disputed. According to a report from the Center for Responsible Lending (CRL), about 1 in 5 of the subprime loans written in the past two years will go into default, costing 1.1 million their homes and unleashing a flood of foreclosed homes on the market.
But Doug Duncan, chief economist of the Mortgage Bankers Association, thinks CRL is overly pessimistic, noting that defaults for subprime mortgages have never exceeded 10 percent in any given year.
And he argues that most of the loans written before mid-2005 are unlikely to fail because they are already out of the danger zone - they’ve either reset with their borrowers continuing to pay them off or the increased housing values that accompanied the boom have boosted home equity enough so that owners have comfortable cushions.
More significant than defaults may be the impact of credit tightening.
“Banks have become much more cautious. Lenders are tightening, not just subprimes, but Alt-As (not quite prime) loans and primes as well,” says Ellen Bitton, founder of the Park Avenue Mortgage Group.
Lawrence Yun, an economist with the National Association of Realtors, which tends to have an optimistic view of home markets, is projecting the number of potential homebuyers unable to obtain financing because of the subprime crisis will average about 20,000 a quarter.
Defaults, he believes, will come to perhaps one-half of one percent of mortgage holders, perhaps 200,000 homeowners. NAR’s position is that the impact on prices will be only slight.
“Unlike the last housing crisis in the early 1990s, the economy is very sound; people are getting jobs, not losing jobs,” says Yun.
Baker, perhaps the most pessimistic of the prognosticators (he is someone who sold his Washington, D.C. home a couple of years ago in anticipation of it falling in value), saves most of his concern for the markets that had the most speculation - Las Vegas, Arizona and parts of Florida. Meanwhile New York, Boston, and coastal California, and even D.C. should hold up OK, he says.
Real Estate Market Optimism Abounds In Resort
Shawn Soper
News Editor
03/15/2007 OCEAN CITY ? The pending arrival of spring always brings a sense of optimism in the Ocean City area and resort business leaders are hoping the sudden change for the better will carry over to the still sluggish real estate market.
The current status of the real estate market was a topic of discussion for resort business leaders at last week’s Economic Development Committee (EDC) meeting, and while no one was ready to declare the slump over, there was some reason for optimism.
Coastal Association of Realtors Vice President Ron Edelman presented an optimistic outlook to EDC members last Wednesday. While the overall impression presented by local, state and national media in recent months forecasts continued gloom and doom, a majority of those in the local marketplace believe a turnaround is imminent, according to Edelman.
“It’s a buyer’s market and it’s still pretty jittery, largely because the media is still predicting a bust,” he said. “On the flip side, our survey indicates 60 percent still feels the market will continue to appreciate.”
Edelman said the demographics point to a possible upswing for the real estate market with a large number of baby boomers turning 55 this year, an age considered to be prime for second-home and vacation home buyers.
“The largest number of people ever is turning 55 this year,” he said. “That’s a ton of people we’re going to see coming through the pipeline.”
Edelman then tempered his enthusiasm with a dose of reality. While several indicators point to a turnaround in the real estate market, real progress could be slow in coming, he said.
“We’re going to have a bumpy road in the first part of the year, but we’re seeing some positive things,” he said. “We should see movement in a positive direction soon.”
EDC Chairman Dr. Lenny Berger said many investors will likely turn back to real estate given the recent fluctuations in other investment opportunities, such as the stock market.
“With the volatility in the stock market, I think it’s going to drive money back into real estate,” said Berger. “It’s up to us to get the message out that this is a buyer’s market right now and it’s a great time to invest.”
Berger agreed the public perception that the market is soft is still accurate, but said there is no reason to believe it won’t turn around soon.
“There are always doomsayers, and we know the market has been sickly,” he said. “But the good news is, we have a lot of inventory ready to sell. With people coming back to Ocean City after a long winter, we should be in good shape going into a new season.”
Homebuyers have been pilloried for their aggressive buying habits in recent years. And recent sluggishness in the housing market may be fair payback for previous overindulgences.
Big shot investors, meanwhile, have been having their own feeding frenzy on commercial real estate. Recent months have seen billion-dollar deals become routine. Buyers of trophy properties run from established real estate players ? including Irvine Co. boss Don Bren ? to Wall Street’s hyperactive “private equity” pools of cash.
My gosh, Mills Corp.? the financially ailing operator of malls including The Block in Orange ? is in play, no less.
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Stocks, rare coins, even wine, offer better returns than real estate
By By Garry Marr
CanWest News Service–Toronto
A new Re/Max study says real-estate prices have risen 264 per cent — that’s impressive, until you consider that’s the total return for the past 25 years.
On a compounded annual basis, real estate has returned 5.3 per cent on a national basis over that period, about double the rate of inflation.
Meanwhile, the Canadian stock market has recorded double the returns of real estate during the same time period. More obscure investments, such as art and sports collectibles, claim even bigger gains.
But according to Re/Max, none can claim the safety and security of real estate.
“The average Canadian is not comfortable with the stock market and other investments and they go towards real estate because it is very predictable,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada.
[More]
New Delhi, Feb 11: Direct investments in the Asian real estate sector has the potential to grow robustly in the long term, but infrastructure and lack of transparency would pose a challenge for the global investors, especially in India, a study said.
“With an asset base directly exposed to the macro growth story that draws so many institutional investors to the region, Asian real estate offers a gamut of possibilities at every stage, from nascent market to mature developed economy,” a Asian Venture Capital Journal report on Asia real estate sector said.
However, the sector’s progress is hindered by volatility, immaturity and market opacity, which could act as a deterrent to the potential investors from entering the markets, the report said.
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Big-name real estate companies investing big dollars in retail
BY JEFF ZIMMER : The Herald-Sun
jzimmer@heraldsun.com
DURHAM — Durham’s burgeoning retail sector is drawing shoppers of a different sort — national real estate firms with deep pockets that are spending tens of millions to buy area shopping centers as investments.
In the last couple of years, big-name companies with billions in assets have spent $100 million to acquire four retail centers in Durham and one in Chapel Hill, according to deed records in Durham and Orange counties.
While the sale of Regency Plaza on Shannon Road last year for $6.3 million was the smallest deal among the five shopping centers sold, it could turn out to be among the most valuable.
The new owners of the 23-year-old center want to pump $75 million into a mixed-use project that would convert the 14-acre site — now an aged one-level shopping center — into residential units and stores in six multi-level buildings.
“Our goal is to create something unique and special out of a depressed asset,” said Shoff Allison, an official with Hawthorne Capital in Charlotte, a private investment company affiliated with the shopping center’s owner.
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As CNN recently reported, the current state of the housing market is not accurately reflected in recently released national statistics.
An Indiana man writes to say he can’t sell his house even asking less for it than he paid - four years ago.
A Duluth, Minnesota, reader writes, “The housing market is brutal, has been for months. Prices dropping at least $20,000, some as high as $60,000 just to get them sold. Most aren’t selling even with the drop.”
It’s not just the Rust Belt. A reader from northeastern Connecticut moved to Maine and can’t find a buyer for his previous house even though all he’s looking for is to sell for what he owes.
A Gulf Breeze, Florida, reader reports, “The market here went sky high and now went down - houses are selling cheap and people are not buying.”
Yet, when the National Association of Realtors (NAR) released its third quarter median sales prices, the downturn was very modest, just 1.2 percent compared with 12 months earlier. The government’s Office of Federal Housing Enterprise Oversight (OFHEO) home price index actually showed a gain for the same period.
[More]
Real Estate can be a very lucrative and enjoying career path for many types of people. Think you might have what it takes? Below are some tips our visitors recommended to us that we found very helpful for those interested in entering the field.
Real estate agents are required to be licensed before conducting any business. Online training is available in most states to complete your pre-license course.
Be cautious when picking a school. Some schools are somewhat new and have written their own online courses. Look for courses which are written by authors who are recognized. For example: Gaines, Coleman, & Crawford.
Look for online schools that allow you a full year to complete your pre license course. Some schools offer you just a few months to complete, and that can be a problem if you run into trouble during the course. You will get to learn: property basics, ownership transfer, real estate law, math, contracts and escrow.
Look for online school that offer 24 hour 7 Day a week instructor support. Some schools offer you a 24 to 72 hour call back or email reply, and that can be a long time to wait for reply.
The pre license course gives you the credit you need in order to become a professional licensed Real Estate Sales Associate (Salesperson). And after completing the pre license course online you have met the educational prerequisite to sit for the State Exam.
After you have completed training and become a licensed Real Estate Agent, there will be ongoing continuing education requirements. The usual minimum is 15 hours or so every 2 years more or less depending on your state.
Each State has differing requirements. Our real estate resources include links to your state’s official real estate authority.
