Archive for April, 2012
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By ALEJANDRO LAZO
The housing market’s long, cold winter may finally be heading into a springtime thaw.
New data show price declines easing in big cities, sales of new homes improving nationally and foreclosures in California dropping to levels not seen since before the start of the credit crunch nearly five years ago.
The easing of foreclosures is seen as key by many economists, since the glut of these properties being sold at a discount has been a significant drag on home prices.
“The foreclosure market is turning into a drought, not a wave, and that has resulted in a lack of inventory,” said Sean O’Toole, chief executive of ForeclosureRadar.com. “If it continues, it will likely mean that we’ve either seen a bottom – or have passed a bottom – in prices because of limited supply and still strong demand.”
Home prices remain depressed from their peak in 2007, when the median-priced home in Southern California sold for $505,000. The median price last month was $280,000.
The economy overall has been improving, however, with unemployment, retail sales, corporate profits and other measures showing steady if unspectacular gains. Housing has been one of the last holdouts, but analysts note that prices have stabilized and sales volume has been gaining.
“What are important are sales and inventory, and those are pointing in the right direction,” said Christopher Thornberg, a principal at Beacon Economics who was one of the early callers of the housing crash. “I would say that by the end of the year, they should translate into better prices.”
Thornberg added, “The recovery is here.”
Notices of default, the first step in the foreclosure process, fell to 56,258 statewide in the first three months of the year, a 17.6 percent drop from the same period last year, DataQuick of San Diego reported Tuesday. That was the fewest number of default notices filed since the second quarter of 2007.
Banks still retain many foreclosed properties on their books, and some analysts have predicted that housing prices could weaken again if lenders dump these properties into the recovering market. But O’Toole and other analysts see that long-feared “second wave” as increasingly unlikely, pointing out that the banks would be acting against their own interests by undercutting prices through a fire sale.
“A few years back, there were some breathtakingly negative forecasts making the rounds regarding the foreclosure problem,” DataQuick President John Walsh said. “It’s not necessarily playing out the way some pundits thought.”
Low interest rates and the availability of bargain-priced properties are drawing more buyers into the market.
Bobbie Dunlap, 61, an office manager, said she recently bought a bank-owned home for $225,000 that she intends to fix up and rent out. The South Gate, Calif., resident had to raise her price to beat competing bids on the two-bedroom property in nearby Bellflower. She hopes that the rental income from the investment will provide her with a financial cushion when she stops working.
“It is in pretty good shape, but it still needs some extra work, of course,” Dunlap said.
Maryam Javadi of Palos Verdes Estates, Calif., is hopeful that buyers will take the plunge this spring. She recently listed her 2,074-square-foot house at $950,000, and about 40 people showed up Sunday to check out the four-bedroom property, which has canyon views and sits near the end of a quiet cul-de-sac.
“Some people have been back to see it two or three times already,” Javadi said.
Betting on the rebound, investors made up a record share of buyers in Southern California during the first two months of the year, according to DataQuick. As more foreclosed homes in hard-hit neighborhoods are filled with renters, an increasing number of everyday buyers will grow interested in owning, said Ivy Zelman, chief executive of Zelman & Associates, a New York housing research firm.
“This is not a robust recovery, but I feel confident that we are not sitting here lingering,” said Zelman, who predicts that home prices will end the year up about 1 percent. “There really is more meat to the bone.”
Several factors continue to hold back a major turnaround in housing, including a weak job market, tight mortgage lending standards and the huge number of homeowners who owe more on their mortgages than their homes are worth, leaving them essentially stuck in their properties. And the absence of a major housing recovery is likely to hold back the broader economy.
“Housing generates a ton of jobs and income. However, I don’t think the housing recovery is going to be nearly as robust this time as it has been in prior cycles,” said Christopher Low, chief economist for FTN Financial. “The bubble started with froth in local markets and then spread out to a national level; the recovery is going to come in local markets and eventually spread and become a national phenomenon.”
Other new housing data also point to a fledgling recovery.
The real estate website Zillow estimated that home values in Los Angeles hit a bottom in the first quarter as the median price flattened from February to March; several communities posted price increases, including Compton, Manhattan Beach and Santa Monica. Zillow’s is among several recent predictions that certain markets have put the worst behind them.
New-home sales nationally fell 7.1 percent in March from the previous month, the Commerce Department said Tuesday, but that was partly because it revised February sales figures up significantly. Even though the figure for March was the lowest since November, overall sales of new homes are up about 16 percent for the first three months of the year compared with 2011, the department said. The report helped boost the Dow Jones industrial average 74.39 points to 13,001.56.
That improvement means that new-home sales will probably be stronger than last year’s, which were the worst on record.
One of the most widely watched measures on home values, the Standard & Poor’s/Case-Shiller index of 20 U.S. cities, showed price declines moderating from January to February. Prices fell 0.8 percent from January to February, and were down 3.5 percent from February 2011. Los Angeles fell 0.8 percent in February from the previous month, while San Francisco was down 0.7 percent. San Diego was slightly positive, up 0.2 percent from January.
Many economists brushed off the decline as the Case-Shiller numbers capture the traditionally slow months of January and December, as well as February, because they average three months’ worth of data. The index’s year-over-year decline in home values has also been steadily shrinking in recent months.
(Times staff writer Lauren Beale contributed to this report.)
While asking prices for homes declined 0.7% over the past 12 months through March, rents rose 5%, according to a report released Thursday by real estate listing site Trulia.
The median rent for all types of rental homes hit $1,350 a month in March, up from a median of $1,285 a month 12 months ago, Trulia reported.
“Buying a home is more affordable than renting now in almost every part of the United States,” said Jed Kolko, chief economist for Trulia.
Several metro areas recorded double-digit percentage increases in rental rates.
In Sarasota, Fla., the average rent jumped 12.9% year-over-year, the biggest increase of any of the 100 largest metro areas Trulia surveyed. Miami and San Francisco saw the next biggest increases, with rent hikes of 12.1% and 11.1%, respectively.
The metro areas that sustained the highest rent increases were a decidedly mixed bag, but obviously shared one factor: rising demand for a limited supply of rental units.
Low-ball appraisal: Mortgage denied
The national vacancy rate for apartments fell 0.3 percentage points during the first quarter to 4.9%, its lowest point since late 2001, according to a separate report from Reis Inc., a real estate research firm. With such limited availability, it has put pressure on rentals of all types.
In cities like Miami that were hit hard by the housing bust and recorded a high number of foreclosures, all of the displaced residents have to live somewhere.
“A lot of people who were owners lost their homes in the bust in these places,” said Kolko. Many of them turned to the rental market, boosting demand and driving up rents, he said.
Other cities have put constraints on the construction of new multi-family housing, thereby limiting supply. For example, in San Francisco, where the median rent is a whopping $2,625, there are few tracts of land available to develop, raising demand for housing and pushing rents there higher.
Several Rust-Belt cities also saw large rent increases in the past year, including Indianapolis, where rents went up 9.7%, and Columbus, Ohio, where they jumped 9.3%.
These cities have seen big gains in the industrial sector, which have led to a growing number of jobs and higher rents, said Kolko. As hiring levels off, he does not expect the big rent increases to continue.
Buying a home is cheaper than renting
Meanwhile, asking prices for homes nationwide crept lower over the past 12 months, according to Trulia.
That, along with record low mortgage rates, has made buying a home more affordable than it’s ever been and a bargain compared to renting. However, many Americans will not be able to seize this historic opportunity to become homeowners, said Kolko.
Unemployed, too broke to come up with a down payment or with credit scores too battered to qualify for a mortgage, many people simply cannot qualify to buy a home right now, according to Kolko
With fewer consumers able to make the leap into homeownership, rents could continue to climb higher, he said.
By GARY M. SINGER — Sun Sentinel
QUESTION: With the market up and down and with elections on the horizon, my husband and I are unsure about whether we should buy a home. We don’t want to wait too long and have prices go back up. What are your thoughts on buying in 2012?
ANSWER: Buy. The housing market is nearing a bottom in many areas. But I think this recovery is fragile, just like the beginnings of a recovery in the economy. Unforeseen events certainly could cause another dip in prices. Even if this occurs, I don’t think that most areas will drop very much. And temporary declines don’t matter as much to people who buy and intend to live in the home long-term. Interest rates seem to be on the rise, and that will cause mortgage payments to rise as well. I would start planning to buy, but don’t be in a rush.
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