MAKING SENSE OF THE STORY FOR CONSUMERS:
The riskiest markets are those with high foreclosure rates, slow or no job growth, and a glut of homes on the market. Markets like Detroit, Cleveland, and Miami display all three characteristics.
By contrast, transactions are rising in San Diego, and that’s a good sign (assuming the increase is sustained). Rising transaction numbers may mean credit is becoming easier to come by and buyers are looking somewhat more favorably on the market. In fact, Forbes suggests prices also may begin to rise over the next six months. That’s because there usually is a lag between increases in transaction numbers and price increases.
The Forbes report also projects better times ahead for San Diego and Sacramento thanks to a 125 percent increase in Fannie Mae/Freddie Mac conforming loan limits. In San Diego, the report notes, 18 percent of the market will see improved lending conditions.
BUYERS WAITING FOR THE RECESSION to pass before getting into the market might not want to wait too long: Clive Granger, winner of the 2003 Nobel Prize in Economics and professor emeritus at UC San Diego, says the U.S. economy has been in a recession for about four months. He expects the current recession to last an additional 2-6 months, depending on what occurs in the housing and financial markets.
SINGLE FAMILY HOME STARTS will drop to their lowest level in 50 years this year, Freddie Mac Chief Economist Frank Nothaft told a lunch audience last week. That’s good news for resale housing, which has a lot of unsold inventory to work through before prices can begin to move up. He expects that life should begin to return to the housing sector late this year or early next but says prices may not recover significantly until 2010.
LOCAL MONTHLY STATS for March show that the most activity in the Santa Cruz County market was in the $600,000 price range with the listing ratio vs the selling ratio at <6.3%>. Following in second were homes in the $500,000 price range followed by homes priced over $1M. In addition, only 14% of those sold were short sales or bank owned and they were all under $500,000 and mistily in the Watsonville area.
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March Statistical Highlights for Single Family Homes:
* Inventory up 15.0% compared to March 2007, and increased7.6% from February 2008
* Sales down 46.3% compared to March 2007, but UP 2.8% from February 2008
* Days on the market increased to 113, month prior 107, prior year 86
* Median home price increased from prior month to $675,000, and decreased 9.9% from March 2007
* Sales price vs.listing price ratio increased to 95.57% from February 2008
* 14.6 months of inventory available at the end of March as compared to 6.8 in March 2007
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(These statistics are believed to be accurate but not guaranteed)
So what area of the market do you think is selling closer to listing price? Maybe you would be surprised to know it is the $900,000 price range, followed closely by $800,000 and the $700,000.
Thursday, April 10, 2008
Thursday, April 3, 2008
America's Riskiest Real Estate Markets
There's roulette and there's skydiving. Then there's investing in Detroit and Cleveland real estate. That's especially risky because those markets are in freefall. Lenders have fled, foreclosures are on the rise, homes aren't selling and local economies have stalled.
Given the state of the country's housing market, it wasn't hard to find others like them. To do so, Forbes.com looked at the country's 40 largest metros and combined data on foreclosures, from RealtyTrac, a foreclosure listing service; job growth from the Bureau of Labor Statistics; transaction volume data from Radar Logic, a New York real estate research firm; and vacancy and current inventory rates from the U.S. Census Bureau and ZipRealty, an aggregator of multiple listing service data.
The riskiest were those that had the highest foreclosure rates, slow job growth (or job loss) and a rash of listed homes. By these measures, Orlando has everything working against it. Other spots, Denver, for example, exhibit negative characteristics like foreclosures, lending problems and vacancies, but are adding jobs, a sign that the local economy can better handle these difficulties.
Risky Business
Before "write-down" entered the national lexicon, the biggest risk facing real estate markets was the prevalence of subprime loans and adjustable rate mortgages. Last year, before the shoe-drop of the credit crunch and the dropping value of banks' loans and debt, we identified ARM-heavy Miami, Fla., Orlando, Fla., and Sacramento, Calif., as the markets most at risk of further fall.
Subprime still matters, as do the concentration of adjustable rate mortgages. Transaction volume, however, especially over the next 12 months is becoming an increasingly important gauge of a market's health. This month the National Association of Realtors reported that sales volume of existing homes was up 2.9%, the first such month-to-month rise since July.
In cities like San Diego, one of five major metros where transactions rose, that's good news, assuming it's sustained. What makes transaction volume a good indicator is that it shows how easy it is for people to get loans and how much confidence there is in the market. If mortgages are available and buyers have some faith in the value of the home, they're more likely to buy.
San Diego's present conditions suggest that over the next half-year, prices may start to rise. That's because "there's usually a three- to six-month lag between when transactions go up and prices go up," says Jonathan Miller, president of Miller Samuel, a Manhattan real estate appraisal firm.
Another good sign for the coming year? Increased credit availability. We took into account increased Fannie Mae and Freddie Mac (GSE) loan limits. The new legislation will open up credit in markets such as Sacramento and San Diego by boosting the GSE loan limit by 125% of the median price. That's a huge deal for San Diego, where 18% of the market will see improved lending conditions, based on projections by Radar Logic, a New York-based real estate research firm.
Not as fortunate are hard-hit foreclosure markets such as Denver, which saw 50,000 foreclosure filings last year, according to RealtyTrac, which comes out to a 2.6% foreclosure rate, ninth in the nation behind the likes of Las Vegas and Detroit. Here, GSE loan limits won't change to boost liquidity, though at the beginning of this year the local economy had added jobs at a rate of 2%, which is triple the national average, according to the Bureau of Labor Statistics.
The availability of jobs gets at the critical question of how much money is available within a market. A market with money on the sidelines has better recovery prospects because it means potential buyers are out there. A market without economic activity to generate buyers is simply sinking.
"People aren't pulling the trigger right now," says Steve Cesinger, vice-chairman at Dewberry Holdings, an Atlanta-based real estate investment group. "But it's a big difference if they're not pulling the trigger because the prices haven't declined enough or because they're waiting to catch the bottom."
Matt Woolsey, Forbes Magazine, 03.31.08, 10:30 AM ET
Given the state of the country's housing market, it wasn't hard to find others like them. To do so, Forbes.com looked at the country's 40 largest metros and combined data on foreclosures, from RealtyTrac, a foreclosure listing service; job growth from the Bureau of Labor Statistics; transaction volume data from Radar Logic, a New York real estate research firm; and vacancy and current inventory rates from the U.S. Census Bureau and ZipRealty, an aggregator of multiple listing service data.
The riskiest were those that had the highest foreclosure rates, slow job growth (or job loss) and a rash of listed homes. By these measures, Orlando has everything working against it. Other spots, Denver, for example, exhibit negative characteristics like foreclosures, lending problems and vacancies, but are adding jobs, a sign that the local economy can better handle these difficulties.
Risky Business
Before "write-down" entered the national lexicon, the biggest risk facing real estate markets was the prevalence of subprime loans and adjustable rate mortgages. Last year, before the shoe-drop of the credit crunch and the dropping value of banks' loans and debt, we identified ARM-heavy Miami, Fla., Orlando, Fla., and Sacramento, Calif., as the markets most at risk of further fall.
Subprime still matters, as do the concentration of adjustable rate mortgages. Transaction volume, however, especially over the next 12 months is becoming an increasingly important gauge of a market's health. This month the National Association of Realtors reported that sales volume of existing homes was up 2.9%, the first such month-to-month rise since July.
In cities like San Diego, one of five major metros where transactions rose, that's good news, assuming it's sustained. What makes transaction volume a good indicator is that it shows how easy it is for people to get loans and how much confidence there is in the market. If mortgages are available and buyers have some faith in the value of the home, they're more likely to buy.
San Diego's present conditions suggest that over the next half-year, prices may start to rise. That's because "there's usually a three- to six-month lag between when transactions go up and prices go up," says Jonathan Miller, president of Miller Samuel, a Manhattan real estate appraisal firm.
Another good sign for the coming year? Increased credit availability. We took into account increased Fannie Mae and Freddie Mac (GSE) loan limits. The new legislation will open up credit in markets such as Sacramento and San Diego by boosting the GSE loan limit by 125% of the median price. That's a huge deal for San Diego, where 18% of the market will see improved lending conditions, based on projections by Radar Logic, a New York-based real estate research firm.
Not as fortunate are hard-hit foreclosure markets such as Denver, which saw 50,000 foreclosure filings last year, according to RealtyTrac, which comes out to a 2.6% foreclosure rate, ninth in the nation behind the likes of Las Vegas and Detroit. Here, GSE loan limits won't change to boost liquidity, though at the beginning of this year the local economy had added jobs at a rate of 2%, which is triple the national average, according to the Bureau of Labor Statistics.
The availability of jobs gets at the critical question of how much money is available within a market. A market with money on the sidelines has better recovery prospects because it means potential buyers are out there. A market without economic activity to generate buyers is simply sinking.
"People aren't pulling the trigger right now," says Steve Cesinger, vice-chairman at Dewberry Holdings, an Atlanta-based real estate investment group. "But it's a big difference if they're not pulling the trigger because the prices haven't declined enough or because they're waiting to catch the bottom."
Matt Woolsey, Forbes Magazine, 03.31.08, 10:30 AM ET
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