Headlines – Week of December 27, 2009

January 4, 2010

National Association of Realtors 2010 Forecast (from NAR)

If 2009 was the year of economic recovery, 2010 will be the year of growth, says NAR Chief Economist Lawrence Yun.

Existing-home sales in 2009 rose to an estimated 5 million units for the year, a 2 percent increase over the 4.9 million sales in 2008. For 2010, Yun is forecasting sales of 5.7 million units, a 13.6 percent increase.

The key to recovery in 2009 was the lower end of the existing-home market. Fueled by the huge number of distressed sales-which drove down prices nationally by an average of 13 percent for the year-buyers returned to the market looking for bargains.

Also helping were continuing low interest rates (5.2 percent on average for 2009) and the first-time home buyer tax credit, which the IRS says had been tapped by an estimated 1.4 million households halfway through 2009.

 As a result of the sales pick-up, inventory for homes priced at $250,000 and under, which is well under the $417,000 conforming loan limit, improved to just 4.6 months in 2009, according to NAR data. Nationally, the inventory of homes above the $729,750 threshold remained above 40 months throughout 2009.

Yun is forecasting improvement in 2010, as the strong performance at the lower end helps kick start the upper-end market. The new-home market is expected to improve as well. NAR estimates sales this year to jump to 549,000 units, up from 397,000 units in 2009, and housing starts to reach 752,000, compared to 564,000 units last year.

Yun makes it clear that, even under their best-case scenarios, the performance of 2010 will lag behind what he considers to be a market in equilibrium. Although Yun’s estimated 2010 sales volume of 5.7 million is close to what it was in pre-boom 1999, that level is low when the country’s population, now 30 million larger than it was a decade ago, is factored in. Ideally, sales should be closer to 6 million, he says.

One reason for the subpar performance is continuing slow household formation, a key precursor to home sales. Until young people stop doubling up in rental units or living with their parents in such large numbers, sales will continue to lag, Yun says. That shift will be fueled by job growth and consumer confidence.

Once household numbers increase, sales may ignite because the market is seeing a lot of pent-up demand. More than 16 million renter households at the end of 2009 had sufficient income to buy a median-priced home, up from just 11 million in 2000, before the boom, Yun says. Once they get off the fence, sales will start heading up to a level reflective of the population.

Yun predicts home prices to grow 3.6 percent in 2010, a significant rebound from 2009’s 12.9 percent national price decline.

Yun forecasts economic growth of 2.8 percent, up from a recessionary -2.5 percent in 2009. See NAR statistical table.

Full Article

More Credit Defaults Predicted (from Bloomberg.com)

Mark Greene, the CEO of credit-scoring formula maker FICO, predicts that the next six months will lead to more mortgage and credit card defaults.

Greene points to 10 percent unemployment and depressed home prices as the reason why no bailout can effectively help the 30 percent of home owners who are underwater on their mortgages. He says the reality of this is so clear to many home owners that they are changing their priorities and paying off car loans and credit card debt before they pay the mortgage.

“I’m a notch less sanguine than some financial observers are,” said Greene, in an interview with Bloomberg. “We still have a very considerable period of working out credit issues.”

Full Article

More Home Owners Walk Away (from the Wall Street Journal)

First American CoreLogic, a real-estate information company, estimates that 5.3 million U.S. households have mortgage balances at least 20% higher than their homes’ value, and 2.2 million of those households are at least 50% under water. The problem is concentrated in Arizona, California, Florida, Michigan and Nevada. See Stategic Defaults by State

They are leaving the deal behind not because they can’t pay but because they don’t want to. A study by researchers at Northwestern University and the University of Chicago concludes that as many as 25 percent of defaults are driven by strategy, not necessity.

A foreclosure stays on a consumer’s credit record for seven years and can send a credit score (based on a scale of 300 to 850) plunging by as much as 160 points

Brent White, an associate law professor at the University of Arizona, points to actions by banks themselves to avoid staying in bad business deals as an example of why homeowners should make a decision “unclouded by unnecessary guilt or shame.”

Recently, financial services firm Morgan Stanley announced that it is turning five San Francisco office buildings back over to its lender two years after it purchased them when the market was at its priciest. The buildings are estimated to be worth about half of what Morgan Stanley paid.

“This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation.”

Morgan Stanley is apparently current on the loan, so this is what is known as a “strategic default.”

Some might ask: If strategic defaults are OK for banks, why aren’t they OK for ordinary homeowners?

Full Article

Coming Soon: More Foreclosures (from Associated Press)

More than 1.7 million homeowners were verging on foreclosure this fall, making it likely that these houses will soon end up on the market one way or the other, driving down overall housing values.

The number, up from 1.1 million a year earlier, is likely to keep rising through the middle of next year or later.

 “We’re going to be dealing with high levels of distressed (sales) in the marketplace for at least a couple of years,” says Mark Fleming, chief economist of researcher First American CoreLogic.
Already, the foreclosure backlog is equal to nearly half the 3.8 million unsold new and existing homes currently on the market, First American said.

Full Article


No Comments Yet.

Got something to say?

Our Philosophy

Our philosophy revolves around a simple goal - To achieve the objectives of our clients. Our plan is to introduce the necessary talents and resources to our clients and enhance their business goals and profitability

Our Services

*Hotel Management---------------------- *Asset Management---------------------- *Advisory Services----------------------- *Distressed Property Services------------- *Insurance Claim Support Services------- *Development Services-----------------

Warning: Unknown: open(/home/content/28/4334028/tmp/sess_5t6igd3pr7jbr2qfp75k8rdc84, O_RDWR) failed: No such file or directory (2) in Unknown on line 0

Warning: Unknown: Failed to write session data (files). Please verify that the current setting of session.save_path is correct () in Unknown on line 0