NAR: Existing-Home Sale Continue to Rise

Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions and a first-time buyer tax credit, according to the NATIONAL ASSOCIATION OF REALTORS ®. May’s increase was the first back-to-back monthly gain since September 2005.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.4 percent to a seasonally adjusted annual rate of 4.77 million units in May from a downwardly revised level of 4.66 million units in April. Sales remained 3.6 percent below the 4.95 million-unit pace in May 2008.

Lawrence Yun, NAR chief economist, expected an improvement in sales.

“Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates,” Yun says. “First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory.

Poor Appraisals Stall Transactions

However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

Total housing inventory at the end of May fell 3.5 percent to 3.80 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in April.

Yun says the appraisal problem is serious.

“Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales,” he says. “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”

NAR President Charles McMillan says appraisals and the tax credit are key issues.

“To maximize the potential for a housing recovery and subsequent economic recovery, we need realistic appraisals that are based on proper comparisons and done by a local specialist,” he said. “In addition, the first-time buyer tax credit should be expanded to all buyers of primary homes regardless of income. Extending the credit into 2010 would allow more time for the market to catch up with underlying demand, in part because many families with children, who normally time their purchase based on school year considerations, do not have enough time to move before the start of school in late August.
“Freeing a pent-up demand in housing will absorb inventory at a faster pace, strengthen communities and stabilize home prices earlier,” McMillan said.

A Closer Look at May Housing Data

An NAR practitioner survey in May showed first-time buyers accounted for 29 percent of transactions, and that the number of buyers looking at homes is nearly 10 percentage points higher than a year ago.

“This is the time of year when we see large increases in the number of repeat buyers, who are benefiting from sales to entry-level buyers,” Yun says. “Investors appear less active, but are more prevalent in areas with large price corrections.”

National median existing-home price: for all housing types was $173,000 in May, down 16.8 percent from a year earlier. Distressed properties, which declined to 33 percent of all sales in May from 45 percent in April, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

“The decline in the distressed sales share likely results from an increase of repeat buyers in May,” Yun says. “First-time buyers are concentrated in the lower price ranges, which include most of the distressed sales.”

Single-family home sales: rose 1.9 percent to a seasonally adjusted annual rate of 4.25 million in May from a pace of 4.17 million in April, but are 3 percent below the 4.38 million-unit level in May 2008. The median existing single-family home price was $172,900 in May, down 16.1 percent from a year ago.

Existing condominium and co-op sales: increased 6.1 percent to a seasonally adjusted annual rate of 520,000 units in May from 490,000 in April, but are 8.9 percent below the 571,000-unit level in May 2008. The median existing condo price was $173,800 in May, down 21.9 percent from a year earlier.

By the Region

Here’s how housing fared across the country for existing-home sales:

• Northeast: rose 3.9 percent to an annual level of 800,000 in May, but are 10.1 percent below a year ago. Median price: $243,600, which is 12.5 percent below May 2008.

• Midwest: jumped 9 percent in May to a pace of 1.09 million but are 4.4 percent below May 2008. Median price: $145,800, which is 10.4 percent lower than a year ago.

• South: unchanged at an annual pace of 1.74 million in May but are 8.9 percent below a year ago. Median price: $157,400, down 9.9 percent from May 2008.

• West: slipped 0.9 percent to an annual rate of 1.14 million in May, but are 11.8 percent higher than May 2008. Median price: $197,700, down 30.6 percent from a year ago.

Home Buyer Tax Credit Could Expand

A first-time home buyer tax credit of up to $8,000 has helped to move housing inventory during an otherwise sluggish real estate cycle. Now both legislators and the business community are hoping to build on the incentive's success by expanding it.

A number of bills have been introduced in the House and the Senate that lobby for an expansion of the measure. Among the proposed changes:

• Setting a new cap of $15,000.

• Extending the tax break into mid-2010.

• Making the benefit available to all home buyers, not just first-timers.

• Offering a separate tax credit to $3,000 for borrowers who refinance.

Clean the Ways of Messy Neighbors

A “neighbor from hell” can reduce the value of a property as much as 20 percent, estimates Sid Davis, a real estate practitioner and author of “A Survival Guide to Selling a Home.”

Here are some of Davis' suggestions for approaching the problem.

• Reason with the neighbors. Advise your client to knock on the door and start by saying something positive like, “I’m sure we can resolve this together.”

• Suggest your client volunteer to do the work himself. Sometimes properties are in poor condition because their owners are unable to do the work and can’t afford to hire someone else to do it.

• Offer moral support. While it may work best if your client does the talking, having a real estate professional nearby can ease the situation. Occasionally, getting support from the local authorities or the neighborhood association can help, especially if you are initially rebuffed.

• Lawsuits are a last resort. Sometimes communities have mediation services that can help resolve the problem harmoniously.

Source: Universal Press Syndicate, Ellen James Martin (06/12/2009)

10 Cities Most Likely to Bounce Back Quickly

Some cities are likely to recover more quickly from the housing downturn than others. Forbes magazine has identified the top 10 cities that it believes are poised for recovery by examining unemployment figures, projected gross domestic product from Moody’s Economy.com, and housing affordability data from the National Association of Home Builders.

Overall, cities most likely to recover first are those with strong technology capabilities.

Here is Forbes’ top 10:

1. Austin-Roundrock, Texas
2. Fayetteville-Springdale-Rogers, Ark.
3. Boulder, Colo.
4. Huntsville, Ala.
5. San Antonio, Texas
6. Mobile, Ala.
7. Dallas-Fort Worth-Arlington, Texas
8. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.
9. McAllen-Edinburg-Mission, Texas
10. Seattle-Tacoma-Bellevue, Wash.

FHA Cracks Down on Mortgage Brokers

The Federal Housing Administration is tightening its review of mortgage professionals that are allowed to originate loans.

The Department of Housing and Urban Development requires brokers who originate FHA loans to obtain approval through the agency. People convicted of making fraudulent loans will be barred from the program. Previously, companies were penalized, but individual employees were not.

Richard L. Tracy Jr., a board member of the Connecticut Society of Mortgage Brokers and an FHA-approved lender, says the changes “will go a long way toward getting out the marginal players.”

Source: The New York Times, Bob Tedeschi (06/05/2009)

Mortgage Rates Reach 7-Month High

Higher interest rates put the brakes on mortgage refinancing this week, according to Freddie Mac.

The firm's weekly survey pegged interest on 30-year fixed mortgages at an average of 5.59 percent -- up from 5.29 percent last week and the highest rate since November 2008.

Other rates also climbed:

• Interest climbed to 5.06 percent from 4.79 percent for 15-year fixed loans;
• 5.17 percent from 4.85 percent for five-year, adjustable-rate mortgages;
• 5.04 percent from 4.81 percent for one-year ARMs.