Don't let the idea of seasonality in the market hold you back.
Now is a GREAT time to sell!
In Chicago's Gold Coast the fourth quarter boasts the highest median price, the 2nd highest number of units sold, and the 2nd highest price per square foot.
*Average over past 3 years
Wednesday, November 10, 2010
Tuesday, November 9, 2010
Aqua Wins Awards
Aqua was one of the big winners last week - receiving an Honor Award at the annual Design Excellence Awards gathering of the American Institute of Architects - the highest form of recognition in the "distinguished building category." Aqua was also named the world's best skyscraper in 2009 by the German-based building database Emporis.
Aqua has also been selected as one of five finalists for the 4th International Highrise Award. It is the only U.S. representative. The finalists were selected in Frankfurt/Main, Germany by an international jury of architects, engineers and property specialists. The other finalists are from Dubai, Tokyo, Bangkok, and Shanghai. The five finalists were selected for demonstrating "a positive trend that has the opportunity of exploring new building forms."
The 334-room hotel venture in Aqua has obtained a $66 million loan to finance the project and construction has started. The Radisson Blu, a new upscale brand run by Carlson Hotels Worldwide is scheduled to open next September - it is the first Raddison Blu Hotel in the U.S.
Aqua has also been selected as one of five finalists for the 4th International Highrise Award. It is the only U.S. representative. The finalists were selected in Frankfurt/Main, Germany by an international jury of architects, engineers and property specialists. The other finalists are from Dubai, Tokyo, Bangkok, and Shanghai. The five finalists were selected for demonstrating "a positive trend that has the opportunity of exploring new building forms."
The 334-room hotel venture in Aqua has obtained a $66 million loan to finance the project and construction has started. The Radisson Blu, a new upscale brand run by Carlson Hotels Worldwide is scheduled to open next September - it is the first Raddison Blu Hotel in the U.S.
Friday, November 5, 2010
Home Prices Stabilizing in Key Markets
Chicago's Loop is #3 Nationally!! Two of the top three are Chicago!
ZipRealty says in its third quarter report that homes in key markets all over the country are selling above the asking price.
The report shows that the spread between the sales-to-list price ratio lessened significantly in most markets, but high-end housing markets in many areas continued to offer great bargains for buyers.
The 10 hottest ZIP codes in the ZipRealty markets where the selling prices was greater than the asking price were:
1. Greater Grand Crossing – Chicago, Ill. (60619)
2. Oakland, Calif. (94603)
3. The Loop – Chicago, Ill. (60603)
ZipRealty says in its third quarter report that homes in key markets all over the country are selling above the asking price.
The report shows that the spread between the sales-to-list price ratio lessened significantly in most markets, but high-end housing markets in many areas continued to offer great bargains for buyers.
The 10 hottest ZIP codes in the ZipRealty markets where the selling prices was greater than the asking price were:
1. Greater Grand Crossing – Chicago, Ill. (60619)
2. Oakland, Calif. (94603)
3. The Loop – Chicago, Ill. (60603)
Thursday, November 4, 2010
Real Estate Revisited, Part 4
WHAT PLANNERS SEE
Regardless of whether home prices will stabilize or whether they'll fall further, many financial planners will be discussing expectations about home purchases and sales at client meetings. "The demand for housing has not gone away," says Jane King, president of Fairfield Financial Advisors in Wellesley, Mass. "People still want to own their own home or have a second home."
She adds that when a client wants to buy a home, her firm will model the purchase. "We'll show clients how buying the place will affect liquidity and the income they can expect in retirement."
The housing slump of the past few years has had a visible impact, though. "There's not as much euphoria among buyers as there was a few years ago," King explains. "They're more likely to offer a certain amount-what they think is a fair price-and then back off if the seller doesn't accept."
King recounts the story of a client negotiating to buy a second home now, from an estate. He offered $650,000; the seller wants $800,000. If the seller won't come down, she says her client will walk away from the deal. He doesn't think that there is a line of buyers who will be bidding against him, so the seller might reduce the asking price.
According to King, her clients who are looking to buy a home are not so worried about whether we've finally reached the absolute bottom in the housing market. "Buyers aren't concerned about prices going down more in the next year or two," she says. "They're in it for the long term, not to flip houses."
SELLER'S REMORSE
However, many home buyers are sellers too; they're moving up or down in the housing market. And not every would-be buyer is an eager seller.
Marc Freedman, who heads a financial planning firm in Peabody, Mass., says some of his clients are thinking about selling their house and downsizing. They might want to move into a retirement community, where they won't have to do as much home maintenance. However, a lot of them are reluctant to sell now because they don't think they'll get the price they want-they have a certain number in their heads as to what their houses are worth.
That number, unfortunately, might be based on what similar homes sold for in 2005 or 2006. Few sellers will get such a price now, so they're holding on to their present house. "Often, they don't realize how much it's costing them to stay there," Freedman says.
Those costs are not just the obvious ones, such as property tax and homeowner's insurance, according to Freedman. Clients also have maintenance costs, including landscaping and plowing. They may be paying a great deal for heating and electricity, especially if they're still living in the big house where they raised their kids. Freedman adds that some of his clients pay a great deal for expenses related to their home swimming pool, even though they might use it no more than three or four times a year."
Clients who are unwilling to sell might be greedy. In addition, they might be looking for an excuse not to pack up a house, Freedman says. "If clients are downsizing, they might be worried about fitting everything into a smaller home."
As Paul Gydosh Jr., managing director of Kensington Wealth Partners in Columbus, Ohio, points out, "Clients who want to sell one home and buy another have several options. They might wait to sell at a higher price, carry the costs of two homes (if they can afford it), rent their former home or sell it to their kids. The most common solution is to reduce their asking price, sell the old home and buy a new one."
Gydosh explores all the options with clients, helping them come to a conclusion. "We've seen instances where a home seller was frozen over a small gap between his asking price and the bid, and we pointed out how little a difference that would make in his net worth," he says.
In some Midwestern cities like Columbus, neither the housing boom nor the bust was as extreme as it was in other areas of the U. S. "Sellers here might not be so anchored to the price they believe their home is worth," Gydosh says. Therefore, they might not be as reluctant to lower their price to close a sale.
Even though sellers will likely have to accept a lower selling price, they could get a good price on the place they buy in today's market. Gydosh tells of a homeowner who sold his place for 10%-15% below the peak price and bought a house down the street for a 30% discount from the peak. "The new home has more square footage, and is also better suited for the wife's elderly mother to live with them."
Even outside the Midwest, there are areas where housing prices have held up relatively well. "Around here, home prices are down 5% to 15% from the peak," says Eleanore Szymanski, principal at EKS Associates, a financial planning firm in Princeton, N.J. "At today's levels, some clients are willing to sell-and they're able to. One $700,000 home sold in three weeks; the sale fell through because of mortgage problems. When the house went back on the market it sold again, in another three weeks."
As Szymanski's anecdote indicates, lenders' extreme caution may be jeopardizing home sales now. "They're putting loan applicants through the ringer," she says. "Clients who are thinking about selling their home expect prices to move up, probably within the next three to five years, which could happen once the banks loosen up a bit." A return to the days of mortgages-for-anyone may not be desirable, but the residential housing market might look a lot healthier if lenders were as reasonable about the loans they make as they seem to be about the properties they have to sell.
By Donald Jay Korn
Read Part 1 Part 2 Part 3
Regardless of whether home prices will stabilize or whether they'll fall further, many financial planners will be discussing expectations about home purchases and sales at client meetings. "The demand for housing has not gone away," says Jane King, president of Fairfield Financial Advisors in Wellesley, Mass. "People still want to own their own home or have a second home."
She adds that when a client wants to buy a home, her firm will model the purchase. "We'll show clients how buying the place will affect liquidity and the income they can expect in retirement."
The housing slump of the past few years has had a visible impact, though. "There's not as much euphoria among buyers as there was a few years ago," King explains. "They're more likely to offer a certain amount-what they think is a fair price-and then back off if the seller doesn't accept."
King recounts the story of a client negotiating to buy a second home now, from an estate. He offered $650,000; the seller wants $800,000. If the seller won't come down, she says her client will walk away from the deal. He doesn't think that there is a line of buyers who will be bidding against him, so the seller might reduce the asking price.
According to King, her clients who are looking to buy a home are not so worried about whether we've finally reached the absolute bottom in the housing market. "Buyers aren't concerned about prices going down more in the next year or two," she says. "They're in it for the long term, not to flip houses."
SELLER'S REMORSE
However, many home buyers are sellers too; they're moving up or down in the housing market. And not every would-be buyer is an eager seller.
Marc Freedman, who heads a financial planning firm in Peabody, Mass., says some of his clients are thinking about selling their house and downsizing. They might want to move into a retirement community, where they won't have to do as much home maintenance. However, a lot of them are reluctant to sell now because they don't think they'll get the price they want-they have a certain number in their heads as to what their houses are worth.
That number, unfortunately, might be based on what similar homes sold for in 2005 or 2006. Few sellers will get such a price now, so they're holding on to their present house. "Often, they don't realize how much it's costing them to stay there," Freedman says.
Those costs are not just the obvious ones, such as property tax and homeowner's insurance, according to Freedman. Clients also have maintenance costs, including landscaping and plowing. They may be paying a great deal for heating and electricity, especially if they're still living in the big house where they raised their kids. Freedman adds that some of his clients pay a great deal for expenses related to their home swimming pool, even though they might use it no more than three or four times a year."
Clients who are unwilling to sell might be greedy. In addition, they might be looking for an excuse not to pack up a house, Freedman says. "If clients are downsizing, they might be worried about fitting everything into a smaller home."
As Paul Gydosh Jr., managing director of Kensington Wealth Partners in Columbus, Ohio, points out, "Clients who want to sell one home and buy another have several options. They might wait to sell at a higher price, carry the costs of two homes (if they can afford it), rent their former home or sell it to their kids. The most common solution is to reduce their asking price, sell the old home and buy a new one."
Gydosh explores all the options with clients, helping them come to a conclusion. "We've seen instances where a home seller was frozen over a small gap between his asking price and the bid, and we pointed out how little a difference that would make in his net worth," he says.
In some Midwestern cities like Columbus, neither the housing boom nor the bust was as extreme as it was in other areas of the U. S. "Sellers here might not be so anchored to the price they believe their home is worth," Gydosh says. Therefore, they might not be as reluctant to lower their price to close a sale.
Even though sellers will likely have to accept a lower selling price, they could get a good price on the place they buy in today's market. Gydosh tells of a homeowner who sold his place for 10%-15% below the peak price and bought a house down the street for a 30% discount from the peak. "The new home has more square footage, and is also better suited for the wife's elderly mother to live with them."
Even outside the Midwest, there are areas where housing prices have held up relatively well. "Around here, home prices are down 5% to 15% from the peak," says Eleanore Szymanski, principal at EKS Associates, a financial planning firm in Princeton, N.J. "At today's levels, some clients are willing to sell-and they're able to. One $700,000 home sold in three weeks; the sale fell through because of mortgage problems. When the house went back on the market it sold again, in another three weeks."
As Szymanski's anecdote indicates, lenders' extreme caution may be jeopardizing home sales now. "They're putting loan applicants through the ringer," she says. "Clients who are thinking about selling their home expect prices to move up, probably within the next three to five years, which could happen once the banks loosen up a bit." A return to the days of mortgages-for-anyone may not be desirable, but the residential housing market might look a lot healthier if lenders were as reasonable about the loans they make as they seem to be about the properties they have to sell.
By Donald Jay Korn
Read Part 1 Part 2 Part 3
Wednesday, November 3, 2010
Real Estate Revisited, Part 3
LOCATION, LOCATION
Molony's comments bring up a crucial point about housing prices. National data may be interesting, but it's not very helpful for planners advising clients who want to buy or sell a house on a specific lot. Lately housing price movements have varied enormously from place to place. The chart, "Regional Differences," on page 76, shows NAR's regional data on median sales prices of existing single-family homes.
As these numbers show, price declines in the western states over the last two years have been far steeper than in other regions of the United States, reflecting the huge boom in certain markets in previous years. Prices in the West plummeted 37% from 2007 through 2009. In many areas of the South and Midwest, however, prices did not go through a boom and bust in the early years of this century, so they may already be at or near the bottom of this cycle. Prices in the South fell 13.3% over the last two years, while prices in the Midwest were only down 11.5%
The shadow inventory threat will be most ominous in the areas with the greatest portion of distressed homeowners. RealtyTrac reports that California and Florida alone accounted for about 37% of all national foreclosure filings in August 2010. In areas with less speculative building and fewer distressed homeowners, the shadow cast by future housing supply might not be as long.
BALANCING ACT
The question is whether today's buyers should wait, for fear that shadow inventory will drag down prices even further in the next few years. Yun points to a hopeful indicator on the supply side.
"One aspect of the shadow inventory that people aren't talking about is the lack of inventory of newly constructed homes," he says. In a normal year, Yun explains, there is always a flow of new homes hitting the market that needs to be absorbed. But in today's market, the low level of housing starts has cut off the normal flow of new home inventory. "So the low number of new homes will help offset shadow inventory, providing some help in the overall inventory picture."
Luschini concurs that weak housing starts are good news for home prices. "We don't need more inventory now."
What's more, it may be unrealistic to expect millions of homes will be dumped on the market in the next few years, driving down prices. Lenders who find themselves overstocked with real estate-owned (REO) property are being cautious. "On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate," Saccacio says. "On the back-end, the dammed-up inventory of properties already in foreclosure is moving to REO in a steady stream rather than a flood-presumably to prevent further erosion of home prices."
Luschini also sees evidence of efforts to keep housing supply and demand on an even keel. "Many homes are owned by banks, ready to come back on the market," he says. "Banks don't want to be in the business of owning homes. At the same time, they are reluctant to bring too many homes to the market, for fear of exacerbating weakness in home prices."
Thus lenders may be both reluctant home owners and reluctant home sellers. "We see a tug-of-war," Luschini explains. "As the economic recovery continues, more homes will come to market from banks and other owners. This increased supply will keep prices down." On the other end of the rope, when excess supply threatens to pull prices down, banks may rein in the supply of foreclosed properties so that prices can firm up. Arnott agrees that such activity is "clearly going on" and will put a damper on housing prices.
Luschini concludes that home prices are likely to stay "flattish" for several years. The inventory will find its way onto the market, and there will be some continued softness. "Home prices might drop 5% or so, nationwide, but the price drops won't be anything like we've seen in the past few years," he predicts, adding that because the housing market is highly regionalized, some areas of the country may see higher prices while others suffer steeper drops.
What might put housing prices on solid footing? "The answer to price stability is more jobs," Luschini says "When more people are working, more people will be able to commit to service the debt that comes with home ownership." With unemployment still well over 9%, it may be awhile before housing prices can resume an upward surge. In the meantime, the national housing price indexes mighty not stray far from current levels as lenders expand and contract the supply of REO properties coming onto the market.
How might a foreclosure moratorium affect housing prices? In the short term, it could stem further housing price declines because it would preclude new inventory from hitting the market, according to Luschini.
In the longer term, supply will surge once the moratorium is lifted, and prices will fall, says Feifei Li, director of research at Research Affiliates. "The moratorium won't make troubled homes disappear. They will hit the market eventually and cause a big spike in supply, driving prices down further."
By Donald Jay Korn
Catch the conclusion in Part 4 tomorrow!
Miss Part 1 or Part 2? Read them now!
Molony's comments bring up a crucial point about housing prices. National data may be interesting, but it's not very helpful for planners advising clients who want to buy or sell a house on a specific lot. Lately housing price movements have varied enormously from place to place. The chart, "Regional Differences," on page 76, shows NAR's regional data on median sales prices of existing single-family homes.
As these numbers show, price declines in the western states over the last two years have been far steeper than in other regions of the United States, reflecting the huge boom in certain markets in previous years. Prices in the West plummeted 37% from 2007 through 2009. In many areas of the South and Midwest, however, prices did not go through a boom and bust in the early years of this century, so they may already be at or near the bottom of this cycle. Prices in the South fell 13.3% over the last two years, while prices in the Midwest were only down 11.5%
The shadow inventory threat will be most ominous in the areas with the greatest portion of distressed homeowners. RealtyTrac reports that California and Florida alone accounted for about 37% of all national foreclosure filings in August 2010. In areas with less speculative building and fewer distressed homeowners, the shadow cast by future housing supply might not be as long.
BALANCING ACT
The question is whether today's buyers should wait, for fear that shadow inventory will drag down prices even further in the next few years. Yun points to a hopeful indicator on the supply side.
"One aspect of the shadow inventory that people aren't talking about is the lack of inventory of newly constructed homes," he says. In a normal year, Yun explains, there is always a flow of new homes hitting the market that needs to be absorbed. But in today's market, the low level of housing starts has cut off the normal flow of new home inventory. "So the low number of new homes will help offset shadow inventory, providing some help in the overall inventory picture."
Luschini concurs that weak housing starts are good news for home prices. "We don't need more inventory now."
What's more, it may be unrealistic to expect millions of homes will be dumped on the market in the next few years, driving down prices. Lenders who find themselves overstocked with real estate-owned (REO) property are being cautious. "On the front end, seriously delinquent loans are rolling into foreclosure at an unusually slow rate," Saccacio says. "On the back-end, the dammed-up inventory of properties already in foreclosure is moving to REO in a steady stream rather than a flood-presumably to prevent further erosion of home prices."
Luschini also sees evidence of efforts to keep housing supply and demand on an even keel. "Many homes are owned by banks, ready to come back on the market," he says. "Banks don't want to be in the business of owning homes. At the same time, they are reluctant to bring too many homes to the market, for fear of exacerbating weakness in home prices."
Thus lenders may be both reluctant home owners and reluctant home sellers. "We see a tug-of-war," Luschini explains. "As the economic recovery continues, more homes will come to market from banks and other owners. This increased supply will keep prices down." On the other end of the rope, when excess supply threatens to pull prices down, banks may rein in the supply of foreclosed properties so that prices can firm up. Arnott agrees that such activity is "clearly going on" and will put a damper on housing prices.
Luschini concludes that home prices are likely to stay "flattish" for several years. The inventory will find its way onto the market, and there will be some continued softness. "Home prices might drop 5% or so, nationwide, but the price drops won't be anything like we've seen in the past few years," he predicts, adding that because the housing market is highly regionalized, some areas of the country may see higher prices while others suffer steeper drops.
What might put housing prices on solid footing? "The answer to price stability is more jobs," Luschini says "When more people are working, more people will be able to commit to service the debt that comes with home ownership." With unemployment still well over 9%, it may be awhile before housing prices can resume an upward surge. In the meantime, the national housing price indexes mighty not stray far from current levels as lenders expand and contract the supply of REO properties coming onto the market.
How might a foreclosure moratorium affect housing prices? In the short term, it could stem further housing price declines because it would preclude new inventory from hitting the market, according to Luschini.
In the longer term, supply will surge once the moratorium is lifted, and prices will fall, says Feifei Li, director of research at Research Affiliates. "The moratorium won't make troubled homes disappear. They will hit the market eventually and cause a big spike in supply, driving prices down further."
By Donald Jay Korn
Catch the conclusion in Part 4 tomorrow!
Miss Part 1 or Part 2? Read them now!
Tuesday, November 2, 2010
Real Estate Revisited, Part 2
ONLY THE SHADOW KNOWS
Not everyone is convinced that statistics tell the whole story, though. A scan of press reports produced more skeptics than adherents of the idea that home prices have reached a bottom. A recent Bloomberg article, for example, found only two votes for near-term stability, while five other experts saw prices falling by as much as 15% over the next few years.
Why the doom and gloom amid encouraging data? One reason is the threat of a "double-dip" recession. "We think a second round is reasonably likely," says Rob Arnott, chairman of Research Affiliates in Newport Beach, Calif. According to Arnott, just the threat of a tax boost could cause affluent consumers to spend less and turn a fragile recovery into a renewed recession. That would be troublesome for housing prices, which could fall another 10%-20%. "We don't see a bottom in housing prices until 2012," he says.
Arnott also mentions the huge "overhang" of houses that are in or near foreclosure as a factor that will increase the supply of homes on the market and thus put a lid on prices. This is the so-called shadow inventory of properties that are not on the market now but soon may be on sale. Some of those properties are held by banks after a foreclosure; others still belong to homeowners in some pre-foreclosure stage.
By some estimates, this shadow inventory is as large as seven million homes, which could go on the market in the next few years. Today, there are about four million existing homes for sale in the United States. If seven million homes are added, more than doubling for-sale listings, the surplus of sellers over buyers could drive down home prices even further, bearish forecasters predict.
WHERE CREDIT WAS DUE
Besides the shadow inventory, bears on housing prices point to another reason for doubting the staying power of recent home price stability-the expiration of housing tax credits. Throughout 2009 and into the second quarter of 2010, certain home buyers qualified for federal income tax savings of up to $8,000. According to NAR, an estimated 4.3 million home buyers were eligible to use the tax credits, including one million who might not have bought without the tax break.
If those million home buyers had kept their checkbooks closed, leaving an extra million homes on the market, prices probably would not have stabilized in 2009-2010. Now that the tax credits have expired, with no apparent renewal in sight, will flagging demand lead to a resumption of home price declines? "We see some footing in housing prices, but we're not far enough from the housing tax credits to see how solid the bottom is," Luschini says.
Perhaps the lack of tax credits won't cause a double-dip in home prices. "Our forecast for 2010 is for home prices to be essentially unchanged nationally from 2009," says Walter Molony, a spokesman for NAR. "Unless home sales remain depressed for more than a few months, we don't expect an impact on prices. Prices have overcorrected in some areas; homes are selling for less than replacement construction costs in many markets."
By: Donald Jay Korn
Check in tomorrow for Part 3!
Missed Part 1? Read it here?
Not everyone is convinced that statistics tell the whole story, though. A scan of press reports produced more skeptics than adherents of the idea that home prices have reached a bottom. A recent Bloomberg article, for example, found only two votes for near-term stability, while five other experts saw prices falling by as much as 15% over the next few years.
Why the doom and gloom amid encouraging data? One reason is the threat of a "double-dip" recession. "We think a second round is reasonably likely," says Rob Arnott, chairman of Research Affiliates in Newport Beach, Calif. According to Arnott, just the threat of a tax boost could cause affluent consumers to spend less and turn a fragile recovery into a renewed recession. That would be troublesome for housing prices, which could fall another 10%-20%. "We don't see a bottom in housing prices until 2012," he says.
Arnott also mentions the huge "overhang" of houses that are in or near foreclosure as a factor that will increase the supply of homes on the market and thus put a lid on prices. This is the so-called shadow inventory of properties that are not on the market now but soon may be on sale. Some of those properties are held by banks after a foreclosure; others still belong to homeowners in some pre-foreclosure stage.
By some estimates, this shadow inventory is as large as seven million homes, which could go on the market in the next few years. Today, there are about four million existing homes for sale in the United States. If seven million homes are added, more than doubling for-sale listings, the surplus of sellers over buyers could drive down home prices even further, bearish forecasters predict.
WHERE CREDIT WAS DUE
Besides the shadow inventory, bears on housing prices point to another reason for doubting the staying power of recent home price stability-the expiration of housing tax credits. Throughout 2009 and into the second quarter of 2010, certain home buyers qualified for federal income tax savings of up to $8,000. According to NAR, an estimated 4.3 million home buyers were eligible to use the tax credits, including one million who might not have bought without the tax break.
If those million home buyers had kept their checkbooks closed, leaving an extra million homes on the market, prices probably would not have stabilized in 2009-2010. Now that the tax credits have expired, with no apparent renewal in sight, will flagging demand lead to a resumption of home price declines? "We see some footing in housing prices, but we're not far enough from the housing tax credits to see how solid the bottom is," Luschini says.
Perhaps the lack of tax credits won't cause a double-dip in home prices. "Our forecast for 2010 is for home prices to be essentially unchanged nationally from 2009," says Walter Molony, a spokesman for NAR. "Unless home sales remain depressed for more than a few months, we don't expect an impact on prices. Prices have overcorrected in some areas; homes are selling for less than replacement construction costs in many markets."
By: Donald Jay Korn
Check in tomorrow for Part 3!
Missed Part 1? Read it here?
Monday, November 1, 2010
Real Estate Revisited
Real Estate Revisited
By Donald Jay Korn
Have real estate prices finally hit bottom? As far as home prices go, the data says they have. Prices are up across the board in 2010 compared to 2009. Many observers are doubtful, however, predicting further slippage. The pessimists point to the possibility of a double-dip recession, the expiration of housing tax credits and an increase in shadow inventory, as more troubled properties flood the market.
In fact, that inventory may be coming out of the shadows. There were more foreclosures this summer than in any three-month period since the housing bust began in 2006, according to RealtyTrac, a foreclosure listing service. Banks seized 288,345 properties in July through September, and are on pace to foreclose on 1.2 million homes by the end of 2010.
But the pipeline may slow due to a coordinated probe by the top prosecutors in all 50 states into improper foreclosures by the nation's largest loan servicers. The investigation comes after lawyers accused mortgage lenders of "robo-signing," or signing off on foreclosure documents without reviewing them as required by law.
Although the prosecutors have not called for mortgage lenders to freeze all foreclosures, mortgage lenders are taking various measures to ensure that their foreclosures are legal. As we went to press, Bank of America had halted foreclosure sales in all 50 states for a few weeks in October, and GMAC Mortgage and JPMorgan Chase stopped them in the 23 states that require court approval to complete foreclosures.
While the implications of these developments play out in the short term, it is becoming clear that lenders who have become major property owners, by default, may be manipulating the current housing cycle. "There are clear indications that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers," says James Saccacio, CEO of RealtyTrac in Irvine, Calif. In the longer term, such management might promote price stability (or stagnation, depending on one's point of view), both short- and long-term.
THE GOOD NEWS
According to the National Association of Realtors (NAR), the median sales price of existing family homes peaked in 2006 at $221,900. In 2009, that median price was $172,100-a drop of more than 22%. In the first seven months of 2010, the monthly medians ranged from $163,800 to $183,500, with the latest month (July) at $183,400. From July 2009 to July 2010, the median price was up 0.9%. Home prices in two out of four regions were up less than 5%, year over year, while the other two were down no more than 3%. Anyone looking for a statistical example of stability has found it.
Further evidence that housing prices have found a bottom comes from the Case Shiller 20-City Home Price Index. In the latest month to report-July 2010-prices were up 3.2% from a year earlier. "Ten of the 20 cities saw year-over-year gains and only one (Las Vegas) made a new bottom," says David Blitzer, chairman of the index committee at Standard & Poor's. "Judging from the recent behavior of the housing market, stable prices seem more likely" than a return to the lofty levels of 2005-2006.
Some industry observers are encouraged by these statistics. "Home values have shown stabilizing trends over the past year," says Lawrence Yun, the chief economist at NAR. He credits home-buyer tax credits for stimulating sales and bolstering prices.
Yun adds that houses have become more affordable in today's market. According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, 72.3% of the homes sold in the second quarter of 2010 were affordable to families earning the national median income of $64,400. That's just a shade below the historic peak of 72.5%, in the first quarter of 2009, and far above the level of three years ago, when less than half of the families earning the median income could afford the median-priced home.
"Residential housing may be quite inexpensive now, with prices down and the low cost of servicing debt," says Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "The huge number of homes for sale just adds to the appeal of a buyer's market," he says.
Besides lower home prices, record low interest rates are helping to make housing more affordable. In mid-October, rates on 30-year fixed mortgages remained below 5%, the lowest level since May of 2009, when 30-year rates settled at 4.81%.
By Donald Jay Korn
Have real estate prices finally hit bottom? As far as home prices go, the data says they have. Prices are up across the board in 2010 compared to 2009. Many observers are doubtful, however, predicting further slippage. The pessimists point to the possibility of a double-dip recession, the expiration of housing tax credits and an increase in shadow inventory, as more troubled properties flood the market.
In fact, that inventory may be coming out of the shadows. There were more foreclosures this summer than in any three-month period since the housing bust began in 2006, according to RealtyTrac, a foreclosure listing service. Banks seized 288,345 properties in July through September, and are on pace to foreclose on 1.2 million homes by the end of 2010.
But the pipeline may slow due to a coordinated probe by the top prosecutors in all 50 states into improper foreclosures by the nation's largest loan servicers. The investigation comes after lawyers accused mortgage lenders of "robo-signing," or signing off on foreclosure documents without reviewing them as required by law.
Although the prosecutors have not called for mortgage lenders to freeze all foreclosures, mortgage lenders are taking various measures to ensure that their foreclosures are legal. As we went to press, Bank of America had halted foreclosure sales in all 50 states for a few weeks in October, and GMAC Mortgage and JPMorgan Chase stopped them in the 23 states that require court approval to complete foreclosures.
While the implications of these developments play out in the short term, it is becoming clear that lenders who have become major property owners, by default, may be manipulating the current housing cycle. "There are clear indications that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers," says James Saccacio, CEO of RealtyTrac in Irvine, Calif. In the longer term, such management might promote price stability (or stagnation, depending on one's point of view), both short- and long-term.
THE GOOD NEWS
According to the National Association of Realtors (NAR), the median sales price of existing family homes peaked in 2006 at $221,900. In 2009, that median price was $172,100-a drop of more than 22%. In the first seven months of 2010, the monthly medians ranged from $163,800 to $183,500, with the latest month (July) at $183,400. From July 2009 to July 2010, the median price was up 0.9%. Home prices in two out of four regions were up less than 5%, year over year, while the other two were down no more than 3%. Anyone looking for a statistical example of stability has found it.
Further evidence that housing prices have found a bottom comes from the Case Shiller 20-City Home Price Index. In the latest month to report-July 2010-prices were up 3.2% from a year earlier. "Ten of the 20 cities saw year-over-year gains and only one (Las Vegas) made a new bottom," says David Blitzer, chairman of the index committee at Standard & Poor's. "Judging from the recent behavior of the housing market, stable prices seem more likely" than a return to the lofty levels of 2005-2006.
Some industry observers are encouraged by these statistics. "Home values have shown stabilizing trends over the past year," says Lawrence Yun, the chief economist at NAR. He credits home-buyer tax credits for stimulating sales and bolstering prices.
Yun adds that houses have become more affordable in today's market. According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, 72.3% of the homes sold in the second quarter of 2010 were affordable to families earning the national median income of $64,400. That's just a shade below the historic peak of 72.5%, in the first quarter of 2009, and far above the level of three years ago, when less than half of the families earning the median income could afford the median-priced home.
"Residential housing may be quite inexpensive now, with prices down and the low cost of servicing debt," says Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "The huge number of homes for sale just adds to the appeal of a buyer's market," he says.
Besides lower home prices, record low interest rates are helping to make housing more affordable. In mid-October, rates on 30-year fixed mortgages remained below 5%, the lowest level since May of 2009, when 30-year rates settled at 4.81%.
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