A Brighter Outlook - Lawrence Yun

Here is a great new article by Lawrence Yun that was found on Realtor.org.



A Brighter Outlook?
by Lawrence Yun, Chief Economist, NAR Research


NAR's latest pending home sales index slipped yet again. The index in March again came in soft, falling one percent from the prior month. Of course, what you'll hear in much of the media reports will be that March's index was the lowest reading since the index was created in 2001. However, smarter observers will note that for all intents and purposes, the index has actually been moving in a very narrow range from August of last year to March of this year. It's important to remember that this time period reflects post credit crunch conditions where subprime loan originations virtually disappeared from the market place.
But the pending sales index report did have some bright spots. The Northeast region continues to show some good signs of recovery. In March, pending home sales in the region rose 12.5 percent. The West and South regions were essentially unchanged. Only the Midwest region experienced a meaningful decline with a 10.4 percent fall. As with all things "real estate," some local markets fared better than others. Pending sales rose in localities where affordability conditions have measurably improved. For example, Bakersfield and Providence both showed outright year-over-year gains in March.

As for actual closings, existing-home sales finished the first quarter of this year with a 4.95 million annualized unit sales pace. That is essentially unchanged from the 5.00 million existing-home sales in the fourth quarter of last year. Home sales will continue to trend soft in the current quarter with the expectation of 5.01 million sales. In the second half of this year, look for a measurable lift to the 5.6 to 5.9 million unit range.
There are several reasons to expect the lift. Mortgages will become more widely available. Both Fannie Mae and Freddie Mac recently announced plans to further provide liquidity, including in the new higher conforming jumbo markets. California, where jumbo loans had accounted for close to half of sales in 2005, was witnessing only 10 to 15 percent of jumbo loan originations in early 2008. Any reversal in the share of the jumbo loan market will have a huge impact in markets like those in California.

Legislation is also being debated to make the higher conforming loan limit (now at $729,000 versus $417,000 a year ago) permanent rather than temporary as it is currently. The temporary status of the higher loan limit has not really drawn investor interest in holding on to GSE backed jumbo loans; hence, the interest rates on jumbo loans have remained very high.
Another key reason for a solid recovery is due to wider use of FHA loans. Many lenders are trying to get HUD approval so they can make loans. Consumers are digesting the benefits of this safer loan product that carries much lower interest rates. As consumers realize that FHA loans no longer carry the stigma as being purely for low-and-moderate income households with credit blemishes, more and more consumers will utilized the loans, thereby steadily replacing the disappearance of the subprime loans.

And let's not forget those tax rebates. Tax rebate checks are showing up in bank accounts. There are some who say the rebate is not enough to make an impact on the economy. But rebates did make a difference in 2001. And today's rebate checks are larger than the ones back then.
Other developments are pointing towards better times. Exports continue to ramp up solidly. Business profits are surprisingly solid - outside of homebuilders and the financial industry. Business spending will grow as a result. These factors indicate that the economy will be better in the second half of this year after having stalled in the first half. The improving economy will also life consumer spirits, some gaining enough confidence to buy a home.
All that means that home prices will also improve in the second half of 2008 in many parts of the country. The return of jumbo loans and higher-priced home purchases will result in a higher recorded median home price. (Recent lower median prices were driven by fewer than normal transactions requiring jumbo loans.) As we know all real estate is local and there are large variations across markets. Even though the national median price will be lower in 2008, due to the weak first half and major price declines that already occurred in few markets, more than half of the country is likely to experience a price growth this year.
And there's a possibility of more good news. Legislation providing for a tax credit for homebuyers has been passed by both chambers of Congress, although the White House has hinted at a veto because it did not like the "big" housing stimulus bill. The White House has opposed several aspects of the stimulus bill, though it has not (yet) come out actually opposing the homebuyer tax credit concept if applied for any homes and not just foreclosed ones. The homebuyer tax credit will make market conditions much stronger than what we call for in the current baseline forecast.

Risks do still exist. Very high oil prices could stick around and that will hold back consumer spending growth. Inflation could notch higher, which then will result in higher mortgage rates.
Despite these risks the economy and the housing market look to improve markedly in the
second half of 2008. The momentum will carry forward into 2009.

Most Recent Foreclosure Information

Most Recent Foreclosure Information (May 2008)

Hey Everyone-

Check out the above link and let me know if you have any questions.

Real Trends Survey Shows Brokers Optomistic

The Real Trends May Pulse survey of real estate
brokers across the country found that the majority
of them are seeing positive signs of improvement
in their local housing markets.
Sixty percent of the survey respondents said they
strongly agreed or somewhat agreed with the statement
“Our market is showing signs of improvement
as of the end of April 2008.” The respondents said
they saw increases in open house activity, showings,
and pended sales in April. Some of the respondents
also said they were getting multiple offers
on the best priced properties.
Real Trends’ Monthly ‘Pulse’ Survey Finds Real Estate
Brokers Nationwide Are Positive About the Market
When asked to comment on the statement “Sellers
are resistant to lowering their asking prices at this
time,” 65 percent of the respondents either disagreed
to strongly disagreed with the statement.
The monthly Pulse survey polls approximately
750 real estate industry leaders from all 50
states and the District of Columbia, and includes
a wide variety of realty firms representing every
major metro area of the country.

-cbburnet.com

New GPS Technology from Coldwell Banker

Coldwell Banker announced that it has become
the first national full-service real estate company
to distribute its listings to a GPS device. Coldwell
Banker is partnering with Dash Navigation Inc.,
the developer of the first Internet-connected GPS
device, to bring Coldwell Banker listings directly
into the car on the company’s Dash Express™.
This is another example of how Coldwell Banker
is committed to utilizing the newest technology
to reach consumers in the early phases of the
home buying/selling process.
To take advantage of this new distribution system,
Coldwell Banker Burnet sales associates
and offices don’t need to do anything more
than continue to load listings like they currently
do onto www.ColdwellBanker.com. Coldwell
Banker will automatically feed these listings to
the Dash Express GPS, just like it feeds listings
to such Web sites as Google, Yahoo, Trulia, and
openhouse.com.
Coldwell Banker Announces Listings Distribution to
Dash Navigation GPS Device
Dash owners can easily add the Coldwell Banker
listings button to their Dash Express via the MyDash
Web site. Listings then automatically load onto
their Dash navigation device. The listings appear
in simple text format and include details about the
home, including price and features; sales associate
contact information; and directions to the home.
This Coldwell Banker feed, which is exclusive to
Dash Navigation, also allows consumers to map the
properties and view other Coldwell Banker listings
that are in close proximity.
Chris Butler, content development director for
Dash, said, “Dash drivers have been asking for
real estate listings on Dash Express since our beta
trial period, so to enter the space with a leader
like Coldwell Banker is a great fit for Dash.”

MAAR Article

Seasonal price increases suggest early signs of market stabilization
MAAR released its monthly housing statistics press release last week. It said this and more:

The median price values of homes in the Twin Cities housing market are showing signs of seasonal increase. The April median sales price of $204,500 represents the second consecutive month of monthly upward price movement, on the heels of seven consecutive months of downward movement.

Despite the seasonal increase, the overall April median sales price of $204,500 is 7.9 percent behind April of last year. Lender-mediated properties, which include foreclosures and short sales, saw a decline of 9.6 percent for the same time period, while traditional, non-lender-mediated properties saw a decline of only 1.4 percent.

At the end of April there were 32,368 homes for sale, a mere 1.5 percent above this time last year, the lowest such year-over-year growth since MAAR began tracking the figures. Year-to-date, the number of new listings has fallen by 9.5 percent relative to the same time period in 2007. The number of year-to-date new listings which are not lender-mediated is decreasing at an even quicker pace—down by 24.0 percent from the same time period last year.

The number of signed purchase agreements (pending sales) in April was 4,208, down only 6.6 percent from last April. Since 2006, these year-over-year declines have typically been between 12 and 20 percent.

Taken from MAAR e-newsletter

Coldwell Banker Growing

Here is a great article from REJournals.Com about the expansion of Coldwell Banker.


Friday May 09 2008
Griffin Companies affiliates with Coldwell Banker
Ostlund says move needed to stay competitive

Staff Writer REJournals.com


Minneapolis-based Griffin Companies has joined the national affiliated Coldwell Banker Commercial system. Based in New Jersey, Coldwell Banker is one of the world's largest commercial real estate brokerage franchise systems. Griffin will now be known as Coldwell Banker Commercial Griffin Companies.



Griffin Companies has served the Twin Cities and other surrounding markets for almost 40 years and currently has 16 full-time commercial sales professionals and a total staff of 50. The company delivers commercial real estate services in all major commercial property sectors including investments, land, office, retail, industrial and multifamily. Its property management services include construction management and maintenance services.



"Griffin Companies have successfully served this region for four decades and we take great pride in our accomplishments and unmatched grasp of the Twin Cities market," says Griffin Companies president Bill Ostlund. "But to compete in today's highly competitive commercial real estate market, we felt it was important to tap into the resources of a global brand. The Coldwell Banker Commercial network was an ideal fit for us."



Ostlund says, "The strong leadership of the CBC brand and philosophy of superior client servicing mirrored the core values of Griffin Companies. But when you combine the leading-edge technology and marketing tools that CBC offers to its affiliates with the ability to retain our independence and serve our market the way we know best, it was a logical decision."



The firm will continue to be headquartered at 615 First Avenue Northeast in Minneapolis.

NAR Article

Here is a great article I found on realtor.com


Daily Real Estate News May 7, 2008
Expect a Summer Rise in Home Sales

A flat pattern in home sales activity should continue for the next couple of months before improving over the summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. “Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas,” he says. “As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available.”

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9.

NAR President Richard F. Gaylord says additional costs in many markets are hindering a recovery. “Our members are telling us that more buyers are looking at homes but are slow in signing contracts, and that’s contributing to the weakness in pending home sales,” he says. “In many cases buyers are waiting for greater access to affordable credit, especially in higher cost areas, but some are disappointed with what appears to be unnecessarily restrictive lending requirements. The good news this week is there is some discussion toward relaxing some of the burdensome lending practices.”

The PHSI in the Northeast jumped 12.5 percent in March to 80.8 but remains 15.4 percent below a year ago. In the South, the index slipped 0.1 percent to 84.9 and is 26.7 percent lower than March 2007. The index in the West declined 1.4 percent in March to 91.2 and is 9.5 percent below a year ago. In the Midwest, the index fell 10.4 percent in March to 74.1 and is 22.3 percent below March 2007.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun says. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.

Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa.

On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales. “Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income, and jobs,” Yun says. “It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that.”

Here are some highlights from NAR's report:

New-homes. Sales of new homes are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.
Rates. The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009.
Affordability. NAR’s housing affordability index is expected to rise 10 percentage points to 127.0 for all of 2008.
GDP. Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.3 percent in 2009. The unemployment rate is projected to average 5.3 percent in 2008 and 5.5 percent next year.
Inflation. Inflation, as measured by the Consumer Price Index, is seen at 3.4 percent this year and 2.2 percent in 2009. Inflation-adjusted disposable personal income is forecast to grow 1.2 percent in 2008 and 3.0 percent next year.

Source: NAR

Great opinion article from the Wall Street Journal

Hey All-

Here is a great opinion article from the Wall Street Journal. Please let me know what you think.


The Housing Crisis Is Over
By CYRIL MOULLE-BERTEAUX
May 6, 2008; Page A23

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor. . New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.