Home prices jump 2.2% in May

NEW YORK (CNNMoney) -- In a sign that the U.S. housing market is recovering, home prices rose for the second straight month in May, according to an industry report issued Tuesday.  Home prices climbed 2.2% compared with a month earlier, according to the S&P/Case-Shiller 20-city home price index. Prices are still off 0.7% compared with May 2011, but that's the lowest year-over-year decline in 18 months, according to David Blitzer, a spokesman for S&P.   The report gave support for industry experts who have been saying that the long-awaited housing market recovery is underway. But Blitzer sounded a note of caution.  "We need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall," he said.  Adjusted for seasonal effect, the price gain shrank to 0.9%, but that's still a strong increase.  The roller coaster ride for home prices took them up 106.5% between January 2000 and their high of July 2006. After they peaked, prices lost more than 34% of their value. The gains of the last two months have pared that loss to 33%. 

 All 20 cities in the index posted positive returns, led by Chicago, where prices rose a whopping 4.5% month-over-month. In Atlanta, where prices dropped 17% over the 12 months ended in April, turned that around in May with an increase of 4%.   Other big winners were San Francisco, up 3.9%, and Minneapolis, where prices rose 3%. The smallest gain was recorded by Detroit, where prices inched up 0.4%. Phoenix posted the best annual return by far, up 11.5%.   "Investor money has come in to some of the hard-hit markets like Phoenix and Florida cities," said Mike Larson, a real estate analyst with Weiss Research.   That has helped stabilize housing by shrinking inventory.   

An ongoing change in the mix of homes sold may be contributing to improving prices, according to Stan Humphries, chief economist for real estate website Zillow. Fewer homes are going as foreclosures, which banks discount heavily to move quickly.  Short sales are claiming a bigger market share, according to David Crowe, chief economist for the National Association of Home Builders. They're often in better condition than foreclosures and the selling process plays out more like conventional sales. Prices, as a result, are higher for short sales.  The strength of the gains was unexpected. A panel of experts put together by Briefing.com had projected a year-over-year decline of 1.8% but the big jump in May prices led to the more modest 0.7% dip.   Larson pointed out that Case-Shiller is a lagging housing market indicator. It is a three-month rolling average through the end of May, so some of the data is almost five months old. Back then, the overall economy seemed to be on the upswing and unemployment was dropping.   Those improvements have flattened out. The unemployment rate actually ticked up in May to 8.2% and stayed at that level in June.  "Momentum will fade as we enter the summer months," said Larson. "The broad economy can't seem to generate much growth."  Crowe said that there has also been a fundamental change in market confidence. Buyers are beginning to believe the market has hit bottom and that the time to buy is now, especially with mortgage rates at historic lows.  Humphries said there could be ups and downs during the next six months, but buyers should not be overly concerned about that.  "This will be a function of seasonality in the share of sales that are foreclosures, which will rise as overall sales decline in the fall and winter," he said. "Overall, we remain cautiously optimistic that home values are at a bottom nationally even while our expectations for price appreciation in the next couple of years are muted. "

U.S. Fixed Rate Mortgages Hit New Record-Breaking Lows

According to Freddie Mac's latest Primary Mortgage Market Survey (PMMS), average fixed mortgage rates continuing to find new all-time record lows amid recent data showing less consumer spending and a contraction in the manufacturing industry. The average 30-year fixed-rate mortgage has matched or hit a new record low in 10 of the last 11 weeks. The 1-year ARM also averaged a new record low this week.

Frank Nothaft, vice president and chief economist of Freddie Mac said, "Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week and allowed fixed mortgage rates to hit new all-time record lows. Growth in personal expenditures was revised downward to an annualized rate of 2.5 percent in the final GDP estimates for the first quarter of the year. In addition, monthly consumer spending in April was revised from a 0.3 percent gain to 0.1 percent and was unchanged in May. Finally, the Institute for Supply Management reported that manufacturing shrank in June, the first decline since July 2009."

30-year fixed-rate mortgage (FRM) averaged 3.62 percent with an average 0.8 point for the week ending July 5, 2012, down from last week when it averaged 3.66 percent. Last year at this time, the 30-year FRM averaged 4.60 percent.

15-year FRM this week averaged 2.89 percent with an average 0.7 point, down from last week when it averaged 2.94 percent. A year ago at this time, the 15-year FRM averaged 3.75 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.79 percent this week, with an average 0.6 point, the same as last week. A year ago, the 5-year ARM averaged 3.30 percent.

1-year Treasury-indexed ARM averaged 2.68 percent this week with an average 0.5 point, down from last week when it averaged 2.74 percent. At this time last year, the 1-year ARM averaged 3.01 percent.  

California's Low Listing Inventory Becomes an Issue as Home Sales Rise to Highest Levels in Three Years

Los Angeles, CA

(Los Angeles, CA) -- The California Association of Realtors (C.A.R.) reported today that California's housing market continued to improve in May, with home prices posting solid gains for the third straight month and home sales well above last year's pace.

"California home sales were strong in May, continuing the gradual recovery of the California housing market," said C.A.R. President LeFrancis Arnold. "First-time buyers are recognizing that the housing market has hit bottom and are now seeing a sense of urgency to take advantage of ultra-low interest rates and advantageous home prices. Additionally, trade-up buyers are returning to the market after sitting it out for the past few years to get in on favorable home prices."

Closed escrow sales of existing, single-family detached homes in California climbed 3.4 percent from April's revised 553,670 to a seasonally adjusted annualized rate of 572,260 in May, according to information collected by C.A.R. from more than 90 local Realtor associations and MLSs statewide. May sales surged 21.5 percent from May 2011's revised 470,910 pace, marking the highest year-over-year sales increase since May 2009. The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the May pace throughout the year and is adjusted to account for seasonal factors that typically influence home sales.

The May 2012 sales pace was the highest since February 2009, when 598,770 homes were sold at a seasonally adjusted annualized rate.

Home prices appear to be stabilizing, with the median home price posting both month-over-month and year-over-year gains for the third consecutive month. The statewide median price of an existing, single-family detached home was $312,110 in May, the highest since September 2010.

May's price was up 1 percent from a revised $309,050 in April and 6.6 percent from a revised $292,850 recorded in May 2011. The May 2012 figure was 27.3 percent higher than the cyclical bottom of $245,230 reached in February 2009. The median price has posted above the $300,000 level for the second straight month after remaining below that mark for 15 months.

The increase in the median price can be attributed to the strong sales increase in the higher-priced coastal regions, particularly in the San Francisco Bay Area, where job growth is strong and the economy is growing faster than other areas of the state.

California's housing inventory sank lower in May, with the Unsold Inventory Index for existing, single-family detached homes dropping to 3.5 months in May, down from 4.2 months in April. May's housing inventory was down from a revised 5.7 months in May 2011. The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate. A 7-month supply is considered normal.

Leslie Appleton-Young

"Low housing inventory continues to be the critical issue in the California market," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "Inventory levels have not been this low since December 2005, when the supply matched the current level. The Bay Area has the greatest shortage of homes for sale, with inventory levels in the two- to three-month range for Santa Clara, San Mateo, Alameda, and Contra Costa counties."

Interest rates continued their downward trend in May, with 30-year fixed-mortgage interest rates averaging 3.80 percent, down from 3.91 percent in April and 4.64 percent in May 2011, according to Freddie Mac. Adjustable-mortgage interest rates averaged 2.74 percent in May, down from 2.78 in April and 3.13 percent in May 2011.

Homes are moving faster on the market with the median number of days it takes to sell a single-family home dropping to 46.6 days in May, down from a revised 48.9 days in April and 52.0 days in May 2011.

Short Sales up in Q1 2012

Monday, June 4, 2012 — Short sales increased dramatically during the first quarter, rising 25% over year-ago figures and reaching a three-year high, according to foreclosure research firm RealtyTrac.
Homes acquired in pre-foreclosure, generally via short sales, grew 16% from the previous quarter to 109,521 pre-foreclosure sales and increased 25% from the first quarter of 2011.
Transactions involving all distressed property made up a larger portion of the homes sold in the first quarter of 2012 — 26% of all U.S. home sales in 1Q, up from 22% in the fourth quarter of 2011 and 25% from the year-ago period.
The average sales price of a home in foreclosure or bank-owned hit $161,214, down 1% from the previous quarter and down 2% from the first quarter of 2011. The price of homes in foreclosure is 27% below the average sales price of nondistressed home sales for the same month. That figure also is down from the 29% discount on foreclosures experienced in the first quarter a year earlier.
“Foreclosure-related sales picked up in the first quarter, particularly pre-foreclosure sales where a distressed homeowner is selling to avoid foreclosure — typically via short sale,” said Brandon Moore, chief executive officer of RealtyTrac.
“Those pre-foreclosure sales hit a three-year high in the first quarter even as the average pre-foreclosure sales price dropped to a record low for our report. Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions.”

Short Sale Process Expected to Get Shorter

 

Tuesday, May 29, 2012 — The short-sale process is expected to get shorter starting June 15. New guidelines issued under the Federal Housing Finance Agency will require Fannie Mae and Freddie Mac to give home buyers of short sales notice of their final decision within 60 days. The new guidelines also will require the mortgage giants to respond to initial short-sale requests within 30 days of receiving an offer from a potential buyer.
The speedier process is expected to be a boost to the housing market, Michael McHugh, president of the Empire State Mortgage Bankers Association, told the New York Times. Home buyers and sellers often have to wait months before they receive a decision from a lender on an offer for a short sale. Some deals fall apart just from the long wait alone.
Short sales have been increasing in recent months, as many lenders find them more appealing than foreclosures, which can be much more costly and take longer to remove from their books.
Short sales now outpace foreclosure sales in many parts of the country. Short sales represent more than 14 percent of existing-home sales, according to CoreLogic housing data from March, the most recent month available.

McHugh says that a faster short-sale process may be particularly helpful in speeding the recovery in judicial states, where foreclosures must go through the courts before they are approved. For example, in New York, judicial foreclosures can take a year or longer to be approved. Now short sales may be viewed by defaulting home owners as more of an option in avoiding foreclosure.
“There should be a significant improvement in the turnaround,” McHugh said regarding housing markets with judicial foreclosure processes.

More Good News for the Housing Market

10 Housing Markets set for Double-digit Price Gains

NEW YORK (CNNMoney) -- Ten hard-hit housing markets will record double-digit price increases through 2013, according to a report Wednesday. And with mortgage rates low, many house hunters have already started to pounce on bargains, said David Stiff, chief economist at Fiserv, a financial analytics company that prepared the forecast. "Some markets may have overshot to the downside, and people are jumping in to try to catch the bottom," Stiff said. Nationwide, home prices will start rebounding late this year and gain an average of 4% a year over the next five years, Fiserv projects.

In a separate report released Wednesday by the National Association of Realtors, the national median home price declined by just 0.4% in the three months ended March 31 compared with the same period in 2011. About half of the 146 metro-area markets surveyed by NAR showed a price increase, as buyers make inroads into the supply of homes for sale all across the country. National inventory has dropped by 22% compared to a year earlier… 0:00/4:27Buffett's carpet chief eyes housing bounce Home prices will also be driven higher as banks opt for short sales instead ofrepossessions. Repossessed homes sell for between 25% and 50% less than comparable homes sold by conventional sellers, according to Daren Blomquist, a spokesman for RealtyTrac, which markets foreclosed properties. Bank repossessions often go through lengthy foreclosure processes and long periods of vacancy, during which they may deteriorate and lose value.

Fiserv's Stiff forecasts that Madera, Calif., will produce the largest home price gain over the next two years. This market bubbled during the housing boom, with the median home price jumping above $300,000, according to the National Association of Home Builders. Prices have since tumbled 53% off their peak, to about $125,000. Fiserv is projecting a price jump of 21.5% by the end of 2013 with 16.5% of that increase coming next year.Other double-digit gainers will include Medford, Ore., with a 20.1% rise, Yuma, Ariz., with 16.7%, and Corvallis, Ore., with 11.4%.

Medford, Oregon

Median home price: $144,000   Drop since market peak: 37.1%  Forecast gain through 2013: 20.1%

A hot spot among retirees, this small city located just north of the California border is staging a comeback. "We now have the lowest [housing] inventory in six years and the strongest buyer traffic in seven years," said Colin Mullane, a real estate broker at Full Circle Real Estate in Medford. Homes are selling at a quicker pace and at higher prices than they did over the past several years, according to the local multiple listing service. Another promising sign: more distressed properties are being sold in short sales rather than going into foreclosure.One factor could hinder the housing market recovery, however: unemployment. In March, unemployment stood at 11.7%, well above the national average. But a steady influx of retirees should help. According to Mullane, many seniors are drawn to the area for its mild Mediterranean-like climate, excellent medical facilities and reasonable cost of living.