Real Estate Sales and House Prices
- Rising Inventories Weigh on Home Prices (WSJ, September 13th): "Inventories of homes in 18 large metropolitan areas expanded by 3.4% in August, according to data compiled by ZipRealty Inc... The biggest increases included 8% in Orlando, 6.4% in Seattle, 6.1% in San Francisco and 5.6% in Miami."
- Housing Still Cooling (SignOnSanDiego, September 13th): "San Diego County's residential real estate market continued to cool last month, with overall prices down 2.2 percent from August 2005. It was the third straight month of year-over-year price declines, the research firm DataQuick Information Systems reported yesterday. It also was the slowest August in terms of sales volume since 1997."
- Home Buying 'Frenzy' May be Leveling Off (SeattlePI.com, September 13th): "Seattle home prices fell last month from their July level and posted the lowest year-to-year increase in 18 months, according to new statistics released Tuesday. August prices fell 3.8 percent from July and were up 8 percent from August 2005, according to the Northwest Multiple Listing Service. Prices have dipped month to month several times in the past year, but the year-to-year increase was the first in the single digits since April 2005 and the lowest since February 2005."
- Housing Market: More Selection, Fewer Sales (The Forecaster, September 13th): "The latest quarterly figures from the Maine Real Estate Information System show that between May 1 and July 31, the number of existing single-family homes sold in Cumberland County decreased 10.38 percent from the same period in 2005, from 1089 units last year to 976 units this year. In addition, statewide, sales during the month of July decreased 16.19 percent. The median sales price for an existing single-family home in Cumberland County showed only a slight rise in the past quarter, compared to the same period in 2005, from $253,000 to $255,000."
- Area's Home Prices Idling as Buyers Take More Time (The Seattle Times, September 13th): "For the third month in a row, median home prices were nearly flat — up just 0.5 percent in August compared with July in King County, 1.5 percent in Snohomish County and 0.2 percent in Pierce County, according to data from the Northwest Multiple Listing Service. Kitsap County prices slipped 0.2 percent, said the MLS, which tracks home sales in 17 counties in Western and Central Washington. Median prices for homes and condos combined were still above their levels of August 2005 — up 12 percent in King County, 12.8 percent in Pierce County and 14.2 percent in Snohomish County — but the rate of increase has slowed compared with earlier this year."
- U.S. Cities With Biggest Housing Inventories (Business Week, September 13th): "While price cuts are becoming rampant in most areas of the country, a handful of markets are too stubborn to come down. In the San Francisco Bay Area, inventory has almost doubled in the past year -- from 15,826 to 28,621 homes -- yet a proportionally small number of sellers have dropped their asking price. ZipRealty's Price Reduction Index [PRI] tracks the percentage of homes that have reduced their asking price out of the total number of homes on the market. Where a percentage of high-30s is indicative of a near-equilibrium market, San Francisco has a PRI of 28%... Boston is already backing down from its peak inventory level of 45,815, recorded in June of this year. Last month, 46% of the homes for sale in Boston were reduced -- an aggressive selling trend that will likely begin to show its face in more and more markets around the country."
- Realtors: Home Prices to Fall for the Rest of the Year and Into 2007 (Central Valley Business Times, September 13th): "Housing prices are expected to continue to have a limited fall throughout 2006, according to the National Association of Realtors. The sellers’ market of the past five years is transitioning to a buyers’ market, it says. NAR forecasts a drop in home sales of around 8 percent in 2006, followed by another 2 percent decline in 2007. The numbers are based on the stabilizing of mortgage rates and modest expansion of the economy, it says. Also predicted is that home price growth will be minimal — less than 3 percent in 2006 and 2007."
- U.K. House-Price Index Rose to 2-Year High in August, RICS Says (Bloomberg, September 14th): "An index of U.K. house prices rose to its highest level in more than two years in August as an interest-rate increase failed to dent demand for homes in Europe's second-largest economy, the Royal Institution of Chartered Surveyors said in a report. A survey of real-estate agents and land surveyors showed those reporting higher home values outnumbered those showing declines by 35 percentage points, the highest since May 2004, the London-based RICS said today. The index, adjusted for seasonal swings, rose a revised 30 points in July."
Real Estate Investing and Sentiment
- Housing Downswing Expected To Bottom Out By Mid-2007, Builders Tell Congress (National Association of Home Builders, September 13th): "The National Association of Home Builders (NAHB) told Congress today that the current downswing in home sales and housing production following the record housing boom of 2004-2005 is expected to bottom out around the middle of next year and gradually move back up toward trend by late 2008... There also are considerable uncertainties about the impacts on consumer spending from a fading housing wealth effect as well as from the impacts of “payment shock” on home owners facing upward adjustments to monthly payments on “exotic” types of adjustable-rate mortgages (ARMs). The record housing starts and sales of the past two years were well above levels supportable by demographics and other fundamental demand factors, and were fueled to a great extent by investors and speculators seeking to make a quick profit and through the surge of unconventional ARMs... After posting double-digit gains during the past two years, national home price appreciation is expected to remain relatively flat for the foreseeable future."
- Housing Not Facing Bust, Just Normalcy: Experts (Washington Post, September 13th): "While the U.S. housing market is drifting down from stratospheric levels, the sector is just returning to normal and is not poised to crash, several economists and industry leaders told lawmakers on Wednesday. "True housing busts are a relatively rare event," Federal Deposit Insurance Corp chief economist Richard Brown said at a congressional hearing on the housing market... "Contrary to many reports, there is not a 'national housing bubble'," [National Association of Realtors President Tom Stevens] said. Instead, Stevens said the slowdown reflected cooling in some overheated markets, while other regions had never even known a real warm spell."
- Three Cents Worth: Condos Cross The Line (Curbed, September 13th): "One of the primary instigators of the housing slowdown, besides mortgage rates, has been the addition of inventory to the market at a pace that cannot be absorbed by the demand. This swelling inventory corresponds with a sharp increase in [Manhattan] condo supply over the last few years. Conventional wisdom says there should be more co-op listings than there are condo listings. This is logical since the ratio of owner occupied housing stock is about 75% co-op to 25% condo. This summer, however, co-op inventory actually eased a bit while condo inventory climbed. In fact, the ascent of condo inventory has been steeper than co-op inventory since the peak of the housing boom, which I estimate as late 2004 or the beginning of 2005. Since the end of 2004 through the end of August 2006, co-op inventory climbed 50% and condo inventory climbed 143%, a significant disparity."
Mortgates and Real Estate Lending
- Foreclosures Spiked in August (CNN Money, September 13th): "In August, 115,292 properties entered into foreclosure, according to RealtyTrac, an online marketplace for foreclosure sales. That was 24 percent above the level in July and 53 percent higher than a year earlier.It was the second highest monthly foreclosure total of the year; in February, 117,151 properties entered foreclosure. Some of the bellwether real estate market states are among the leading foreclosure markets. Florida, had more than 16,533 properties in foreclosure in August. That led all states and was 50 percent higher than in July and 62 percent higher than in August 2005. California foreclosures are increasing at an even faster annual rate, up 160 percent since last year to 12,506. And the formerly red-hot Nevada market recorded a spike of 24 percent compared with July and a whopping 255 percent increase from August 2005."
Macro Impact, and Will a Housing Crash Cause a Recession?
- IMF Says U.S. Housing Market Slowdown Could be Sharper Than Expected (International Herald Tribune, September 12th): "The slowdown in the U.S. housing market could be sharper than expected, which would hurt the U.S. economy, global growth and financial markets, an official from the International Monetary Fund said Tuesday. While expectations are that the U.S. will follow the example of housing markets in Australia and the U.K., where a slowdown in housing was orderly, there is a risk that the U.S. slowdown could be more severe, said Hung Tran, deputy director of the IMF's international capital markets department... Asked about the most vulnerable segment of the U.S. housing market, Tran singled out sub-prime mortgages..."
- Fed Official Does Not See Housing Bubble (The Mercury News, September 12th): "Although the housing sector has slowed, the Bay Area real estate market is not imperiled by a housing "bubble," thanks to a regional economy that has recovered strongly, a top official with the Federal Reserve said Tuesday. Janet Yellen, president of the Federal Reserve Bank of San Francisco, offered a benign outlook about a housing market that has been a bulwark of economic activity -- and individual wealth -- in fast-growing regions such as the East Bay."
- IMF Warns over UK Property Crash (The Independent, September 14th): "A sharp rise in interest rates could trigger a slump in house prices, which are overvalued by "any conventional measure", the International Monetary Fund warned yesterday... "House prices in Spain, Ireland and the United Kingdom still look elevated, and could come under pressure in a rising interest rate environment," it said... It raised its forecasts for GDP growth for this year to 2.7 per cent from April's estimate of 2.5 per cent and upgraded 2007 by 0.1 per cent to 2.7 per cent."
Homebuilder Stocks, and Hedging Your House Price By Shorting Stocks
- David Fry's Daily Market Outlook (David Fry in Seeking Alpha, September 13th): "Evidently all the bad news for housing has been digested and built into prices. Despite more bad news all last week, streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB) has been on an upward tear. Why? Because some “value” oriented computer models are buying based on price to book and low P/E’s. They don’t care about the news, as long as it fits their model. However, there is no doubt that over the past few trading sessions big buyers have been in the ETF buying with both hands. Fortunately, we exited our short positions over a month ago. Don’t fight the tape for now."
Web Site of the Day
Foreclosure.com is a subscription-based service -- it costs $10 per week -- that lists foreclosures, pre-foreclosures and tax liens.
The pre-foreclosure stage is the period between the owner receiving a Notice of Default from the lender and the day the lender puts the property up for auction. Buyers of pre-foreclosures need to deal directly with the original owner, which can be challenging, particularly if the owner doesn't know the property has been publicly listed for sale.
Can regular home buyers find bargains in the foreclosure market? Not clear. The market is fairly efficient, and professional real estate investors are likely better at handling the purchase process.
But Foreclosures.com is still useful because it lists the numbers of foreclosures for sale on its (free) home page. Savvy housing market watchers will want to track that number carefullly.
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