Housing market

The Texas economy continues to buck national trends thanks to the strength of the residential real estate market. Four of the nine cities that made the Gadberry Group’s new list of most notable high-growth areas in the nation are in the Lone Star State.  Two Dallas suburbs — Frisco and McKinney — also made the list of 25 finalists. Industry research indicates that the state’s comparatively stable housing market is likely a contributing factor in the strong rankings, says Larry Martin, principal of Little Rock-based Gadberry.

Mansfield came in at number seven as the number of households more than doubled in the last nine years. It added 15 percent of its total households last year alone. Also on the list is Wylie, which has had an impressive 163 percent increase in the number of households since 2000. According to the report, most of the new households are located in one of Wylie’s eight “Emerging Blocks.”

Other Texas cities that made the list are Atascocita and Katy, both located near Houston. Here’s the complete list of 9 from 2009:

• Braselton, Georgia (Atlanta suburb)
• Atascocita, Texas (Houston suburb)
• Spring Hill, Tennessee (Nashville suburb)
• Lincoln, California (Sacramento suburb)
• Katy, Texas (Houston suburb)
• Wake Forest, North Carolina (in the Raleigh-Durham triangle)
• Mansfield, Texas (Dallas suburb)
• Wylie, Texas (Dallas suburb)
• Buckeye, Arizona (Phoenix suburb)

According to the latest data, troubled homeowners are finding more success in restructuring their mortgages. The Wall Street Journal reports,

Some 18.7% of loans modified in the second quarter of 2009 were at least 60 days past due three months later, according to the report, by the Office of Comptroller of the Currency and the Office of Thrift Supervision. That compares with a redefault rate of 30% or more after three months for loans modified in the previous four quarters.

What has caused the improvement? Approximately 80% of loans restructured in the 2nd and 3rd quarters of 2009 resulted in lower monthly payments — helpful adjustments that weren’t being made in earlier quarters. The Obama administration, whose foreclosure-prevention strategy centers around affordibility, is encouraged to see that monthly payments have dropped an average of 35% for borrowers in the Obama program.

Despite the declining redefault rates, borrowers with good credit have been increasingly unable to pay their mortgages, resulting in more 3Q troubled loans.

For further information, visit WSJ.com.

To everything, there is a season – and in real estate there’s a time to buy, and a time to sell. But how do we know when one season is ending, and another has begun? M. Anthony Carr of realtytimes.com comments, “We’ve been watching a buyer’s market for so long, we’ve almost forgotten how to see the signs of the building of a seller’s market.” Just as nature provides several indicators of seasonal transitions, the housing market gives buyers and sellers little hints that the times, they are a’changin.

A buyer’s market can hit overnight, but a seller’s market usually builds gradually over multiple months. While national averages and trends can give buyers and sellers a good overview, that data won’t help much with determining when local markets have bottomed. Instead, keep an eye on these signals:

1. Housing Inventory: When inventory numbers drop, the market is likely switching from a buyer’s market to a seller’s market.

What this means for Dallas? At the end of October, Dallas had 33,981 houses on the market — a 16% decline from October 2008. This put Dallas at just under a six months’ supply of homes, which is considered a balanced market.

2. Home Pricing: To locate the bottom of the market, watch month-to-month pricing rather than annual changes. Carr warns, “A market can experience price increases month after month while still showing lower prices than a year before – thus the buyer, while waiting for signs that prices are moving up over last year, may have missed the bottom on pricing.”

What this means for Dallas? Dallas’ average home prices climbed consistently from February 2009 through August 2009, then dipped slightly (.7%) in September. The latest Standard & Poor/Case-Shiller’s home price index ranked Dallas and Denver as the healthiest U.S. markets.

3. Days on Market: When prices hit bottom, buyer activity increases. With this rise in competition, the average days on market drops.

What this means for Dallas? At the end of October, homes were on the market for an average of 76 days, which was 6% lower than a year ago.

As this data reveals, Dallas’ residential real estate sector – fortunate to evade the extreme boom and bust that plagued other markets – has taken significant steps toward stability over the last several months. Homebuyers and sellers are wise to watch local reports as we wait to see what’s in store.

For more information, visit realtytimes.com.

30-year and 15-year mortgage rates have fallen for five straight weeks, and now 30-year rates have reached their lowest level in 38 years.

The Wall Street Journal reports,

The 30-year fixed-rate mortgage averaged 4.71% for the week ended Thursday, down from last week’s 4.78% average and 5.53% a year ago. Rates on 15-year fixed-rate mortgages were 4.27%, down from last week’s prior low of 4.29% and 5.77% a year earlier.

In the video below, Amy Hoak and the News Hub discuss these record-breaking interest rates and the other favorable market conditions that today’s homebuyers will encounter.

For more information, visit wsj.com.

The latest survey from the National Association of Realtors reports that sales are up in four major regions of the U.S., and scattered markets are even experiencing bidding wars. Realtytimes.com reports, “Sales of single family homes, townhouses, condos, and co-ops surged by a little over 10 percent in October, and were 24 percent above where they were a year before.” Furthermore, closed transactions also have risen significantly: nearly 12% in the Northeast, 14.4% in the Midwest, 12.7% in the South, and 1.6% in the West.

Why the sudden increase in activity?

• Of course, the government tax credit has provided a powerful incentive for renters to enter the world of homeownership.
• Another factor is the record-breaking affordability of houses right now. Measured by comparing home prices with household incomes and mortgage interest rates, housing affordability is at its most favorable point since 1970.
• Many buyers want to take advantage of record-low interest rates, which are expected to spike in 2010. Rates on 30-year fixed loans recently dropped into the upper 4% range — much lower than last year’s 6.2% rates.

Several economists believe now is a good time to buy, as prices are flattening out and the housing inventory (now at a 7-month supply) is not far from a balanced market. It is likely that interest rates will rise in the spring if the Fed does indeed phase out its extensive investments in mortgage securities.

Pending home sales increased 3.7% in October, rising for the 9^th consecutive month and reaching the highest recorded level since March 2006. Up almost 32% from October 2008, pending home sales experienced the largest annual increase ever posted for NAR’s pending sales index.

Lawrence Yun, NAR’s chief economist, attributes the high numbers to the government’s home buyer tax credit, which has helped “unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future.” Yun predicts that the extended credit could cause a lag in existing-home sales in December, but expects housing conditions to stabilize around the middle of 2010.

October presented positive movement in other sectors of the housing market, as well:

• Private residential construction spending surged 3.9%
• Housing inventory decreased to a 7-month supply, down from a 10.2-month supply in October 2008

For further reading, visit cnnmoney.com.

For all the home shoppers seeking clarity about the home buyer tax credits, we’ve posted the information below as concisely as possible.

FIRST-TIME HOME BUYERS:

The original cut-off date of November 30, 2009, for the $8,000 tax credit has been extended to include contracts executed on or before April 30, 2010. Important details to note:

• The government extension begins December 1, 2009.
• The tax credit may be as high as $8,000 ($4,000 for married couples filing separately).
• The buyer must not have owned a property within the last three years.
• The contract must be executed on or before April 30, 2010.
• The home must close on or before June 30, 2010.
• The purchase price limit is $800,000. -Income limits for the full tax credit: $125,000 (single) and $225,000 (married couples)

LONG-TIME HOMEOWNERS:

New legislation authorizes a tax credit for long-time homeowners buying a replacement principal residence.

• The buyer must have used the home sold or being sold as a principal residence consecutively for five of the previous eight years.
• The tax credit is up to $6,500 ($3,250 for married couples filing separately).
• The contract must be executed on or before April 30, 2010.
• The home must close on or before June 30, 2010.
• The purchase price limit is $800,000.
• Income limits for the full tax credit: $125,000 (single) and $225,000 (married couples).

For further information, contact Jonathan Doddridge at Ascent Financial Services, LLC, at 972-877-9787, or visit IRS.gov.

The Commerce Department reported Wednesday that new home sales rose 6.2% from September to October, reaching a seasonally adjusted rate of 430,000 sales per year. The numbers took several Wall Street analysts by surprise – a panel of expert forecasts had expected an annual rate of 404,000 new-home sales.

A decrease new-home inventory – down to a 6.7 month supply of 239,000 homes – was also positive news, indicating that housing supply and demand levels are continuing to stabilize.

Though the recent reduction of home construction has helped to bring the housing market closer to equilibrium, it has also negatively affected the economy at large. Residential construction contributes significantly to America’s gross domestic product, thus the industry’s return to health is imperative for the nation’s economic recovery.

Though the latest reports show improvements, new-home sales are still 70% lower than their peak in July 2005. The market has taken another step in the right direction, and it still has several steps to go.  

For a more detailed report, visit cnnmoney.com.

If only they sold a GPS system for the real estate market. (Can somebody get on that?) It sure would help in determining precisely where the housing market is, and where it is headed. Though the exact answers to those questions remain uncertain, the latest numbers indicate further improvement and stabilization.

What are the facts?

Nationally:

• The October housing inventory reached a 7 months’ supply, down from 8 months in September. (A 6 months’ supply is considered a balanced market)
• New-home starts dropped by a seasonally adjusted rate of 10.6%. New-home inventories are at the lowest levels since 1982, which is helping to liquidate the existing-home inventory and bring it back to normalcy.
• The median sale price of existing homes declined 7.1% from October 2008, which was a lower rate than the 8% year-over-year decline in September.
• Mortgage rates are incredibly low, with 30-year loans averaging around 4.8% and 15-year loans around 4.3%.
• As of the 3Q of 2009, average home prices across the U.S. are at similar levels to what they were in the fall of 2003. The latest numbers show improvement over Q1 and Q2 of 2009, and have risen well off their recent bottom. (See chart below.)

Locally:

• DFW’s existing-home prices stayed steady from September to October, according to the latest Standard & Poor’s / Case-Shiller Home Price Index.
• Foreclosure filings for the upcoming December foreclosure auctions are down 12% in Dallas County when compared to the same period last year, reports the Dallas Business Journal.
• Dallas saw an annual home price decline of only 1.2% from October 2008. (See chart below)
• Dallas tied Denver for the U.S. markets with the smallest annual price decline.

Due to variables such as the temporary tax credit and the fragile labor market, the future trajectory of the housing market is not entirely clear. Nonetheless, we have reason to be thankful today: the graphs are pointing in the right direction.

For more information, see dallasnews.com, businessweek.com, dallas.bizjournals.com, and realestatechannel.com.

Steve Brown of the Dallas Morning News gave Dallas residents some good news this afternoon:

Housing and finance analyst First American CoreLogic has upped its outlook for the Dallas housing market. The Dallas area will see a 1.85 percent increase in home prices over the next year, First American says in its latest 12-month forecast based on September data. The Dallas price gain is better than the 1.1 percent national increase First American is predicting.

Click to read his full post at dallasnews.com.