Housing Market Recovery Next Year? Don’t Be Foolish. Plan For The Worst

I am generally amused at the market soothsayers who continually predict that the housing recovery is right around the corner. I suppose that all the years I have spent in the housing “ditch” have caused me to become oblivious to the information the experts use to make their predictions. I guess I could take a “let’s wait and see” attitude, but in the meantime consider the following. Let’s begin with housing starts, which are currently on an annualized run rate of approximately 550,000 new starts. This represents less than half of what is needed in a normal market. Existing home sales declined 2.2% in October and are currently tracking at an annual rate of 4.43 million. Then there are the foreclosures. According to RealtyTrac, 25% of home sales in the 3rd…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.

Mortgage Rates Rise on Stronger Housing Reports

By Mia Lamar

Rates for fixed mortgages moved higher over the past week amid positive signals from the long-suffering U.S. housing market, according to Freddie Mac’s weekly survey of mortgage rates.

“Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note,” said Freddie Mac Chief Economist Frank Nothaft, noting encouraging data like a report that existing home sales rose 5% at the end of the year to 4.61 million houses, the largest amount since May 2010.

The 30-year fixed-rate mortgage averaged 3.98% for the week ended Thursday, up from 3.88% the previous week, though below 4.8% a year ago. Rates on 15-year fixed-rate mortgages averaged 3.24%, up from 3.17% last week and below 4.09% a year earlier.

Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.85%, up from 2.82% last week and below 3.7% a year ago. One-year Treasury-indexed ARM rates averaged 2.74%, matching the prior week and below 3.26% last year.

To obtain the rates, 30-year and 15-year fixed-rate mortgages required an average 0.7 percentage point and 0.8 percentage point payment, respectively. Five-year and one-year adjustable rate mortgages required an average 0.7 percentage point and 0.6 percentage point payment, respectively. A point is 1% of the mortgage amount, charged as prepaid interest.

Write to Mia Lamar at mia.lamar@dowjones.com

Pending Home Sales Decline in December, Remain Above a Year Ago

Pending home sales fell off of the
19-month high reached in November according to figures released on Wednesday by
the National Association of Realtors® (NAR), but were still higher than one
year ago.  NAR’s Pending Home Sales Index
(PHSI) dropped from 100.1 in November to 96.6 in December, a decline of 3.5 percent.  December pending home sales were still 5.6
percent above the December 2010 index of 91.5.

The PHSI is a measure of signed
sales contracts for home purchases where the transaction has not closed.  It is considered a forward indicator as the
sale is usually finalized within one or two months of contract signing.  An index
of 100 is equal to the average level of contract activity during 2001.

Lawrence Yun, NAR chief economist, said the trend line remains
positive.  “Even with a modest decline, the preceding two months of
contract activity are the highest in the past four years outside of the
homebuyer tax credit period,” he said.  “Contract failures remain an
issue, reported by one-third of Realtors® over the past few months,
but home buyers are not giving up.”

Yun said some
buyers successfully complete the sale after a contract delay, while others stay
in the market after a contract failure and make another offer.  “Housing
affordability conditions are too good to pass up,” he said.  “Our hope is
lending conditions will gradually improve with sustained increases in closed
existing-home sales.”

On a regional
basis results were mixed with three regions showing increases on a year to year
basis but only one increasing during the December.

Pending Home Sales by Region

Region

Index in

December

Chg Nov to
Dec.

(%)

Chg Dec.
2010 to

Dec. 2011
(%)

Northeast

74.7

-3.1

-0.8

Midwest

95.3

+4.0

+13.3

South

101.1

-2.6

+4.9

West

107.9

-11.0

+3.7

U.S.

96.6

-3.5

+5.6

NAR also issued an economic forecast which predicts a healthy growth in
both real and nominal GPD over the next two years with real GDP growing in a historically
normal range of around 3 percent and the unemployment rate falling under 8
percent by 2013. 

Housing starts are expected to improve to around 750,000 in 2012 and
reach a million the next year – both figures well below the historically
typical 1.5 million.  Housing sales, both
new and existing, will remain relatively flat with new home sales reaching a
half million by the end of 2013.  
Existing home sales are estimated to have totaled 4.26 million in 2011
and will rise gradually to 4.45 million and 4.62 million in 2012 and 2013
respectively. 

Inventories are not projected into the future, but the supply of existing
homes is trending down and is now around 2.25 million.  The inventory of new homes has declined to a
nearly negligible level, however given the pace of sales, both inventories
represent about a six month supply.

NAR expects
median prices of both new and existing homes to rise only slightly from current
levels of$223,400 and $166,100 during 2012 but will rise more rapidly during
2013 to a median level of $235,800 and $172,600 by year end.

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.

Freddie Mac: Speedy Recovery Seems Unlikely in 2012

“Perspectives on the housing market
depend on where you sit,” according to Freddie Mac’s U.S.
Economic and Housing Market Outlook

for January.  The monthly forecast noted
that existing home sales increased in November, the inventory of unsold homes
decreased to a six to seven month supply, and Freddie Mac’s economists predict
home sales will grow between 2 and 5 percent in 2012. 

But
there is “a historically large gap between sentiments of buyers and sellers.”  Nearly 80 percent of American households
believe it is a good time to buy a home, but sellers are not as happy, with
only 7.6 percent who responded to a Mortgage Bankers Association survey
believing that it is a good time to sell. 
If this gap doesn’t narrow, Freddie Mac’s economists say, the
housing-market recovery will be delayed.

The monthly report titled Toasting the New Year with a Glass Half Full
concludes that, while the economy is undoubtedly in a better place that the
same time a year ago, a speedy recovery still seems unlikely this year. 

Other highlights of the Outlook

  • Economic growth will likely
    strengthen to about 2.1 percent in the first quarter.
  • The current U.S. unemployment rate
    of 8.5 percent is likely to increase after seasonal gains are reversed.
  • Mortgage rates are projected to
    remain very low, at least in the beginning of 2012.

Frank Nothaft, Freddie Mac, vice
president and chief economist said, “With the new year comes a sense of
cautious optimism. There are some positive signs in the job market and consumer
confidence; housing is starting to raise hopes for continued gradual economic
recovery. But the economy still is giving some mixed messages.”

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.

Pending Home Sales Rise; NAR Sees Tight Inventory Leading to Price Increases

Pending home sales in May bounced
back to match March numbers which were the highest seen in two years. The
improvement was broad-based, affecting every region in the country according to
the National Association of Realtors® (NAR). 

NAR’s Pending Home Sales Index (PHSI)
rose 5.9 percent in May from 95.5 in April to 101.1, equaling the index level last
March.  This was an increase of 13.3
percent from May 2001 when the index was 89.2. 
The last time the PHSI was higher than the March and May number was in
April 2010 when buyers were rushing to beat the deadline for the home buyer tax
credit.

The PHSI is a forward indicator
reflecting signed contracts for home purchases. 
The index does not include closing transactions which are generally
expected to occur within 60 to 90 days.

Lawrence Yun, NAR
chief economist, said longer term comparisons are more relevant.  “The
housing market is clearly superior this year compared with the past four
years.  The latest increase in home contract signings marks 13 consecutive
months of year-over-year gains,” he said.  “Actual closings for
existing-home sales have been notably higher since the beginning of the year
and we’re on track to see a 9 to 10 percent improvement in total sales for
2012.”

The national
median existing-home price is expected to rise 3.0 percent this year and
another 5.7 percent in 2013.

On a regional
basis, May pending sales in the Northeast increased 4.8 percent to 82.9, 19.8
percent above May 2011.  The pending sales number in the Midwest was 98.9
up 6.3 percent from April and 22.1 percent from a year ago.  The index for
the South increased 1.1 percent month over month and 11.9 percent year over
year to an index of 106.9.  In the West
the index jumped 14.5 percent in May to 108.7 and is 4.8 percent stronger than
a year ago.

Yun said that
low inventory could negatively impact some contract activity.  “If credit
conditions returned to normal and if we had more inventory, especially in the
lower price ranges, more people would become successful buyers.  In an
environment of historically favorable housing affordability conditions, it’s
frustrating to see some consumers thwarted in the process,” he said.

The low
inventory in some cases is because of the numbers of homeowners who are unwilling
to list their homes for sale because they are underwater on their mortgages.  Selling underwater homes requires that sellers
either bring cash to the table or undergo a lengthy and often frustrating short
sale process.  NAR estimates 85 percent
of homeowners have positive equity, with 15 percent in an underwater situation.

“Low inventory
can be cured by increasing new home construction,” Yun said.  He projects
housing starts to rise by 26 percent this year and another 50 percent in 2013.  “If housing starts do not rise in a meaningful
way over the next two years due to the difficulty in getting construction
loans, and barring an unexpected shift in the economy, the steady shedding of
inventory could lead to shortages where home prices could get bid up close to
10 percent in 2013,” Yun said.

…(read more)

Forward this article via email:  Send a copy of this story to someone you know that may want to read it.