Posts Tagged Wall Street Journal
Some Americans are still jittery over the housing market, but here are eight positive signs that should quell some of their fears.
- Housing prices are on the rise across the country.
- Foreclosures have slowed. Analysts suggest that as the supply of distressed homes slows, buyers will be forced into higher-price properties too.
- Inventories of for-sale homes on the market are decreasing. In fact, inventories of for-sale homes have dropped 24 percent from a year ago.
- Mortgage rates are at ultra record level lows, for those who can qualify
- Housing starts rose 6.9 percent in June. Also, existing-home sales were up 4.5 percent higher in June compared to one year ago.
- Home building stocks are on the rise.
- For investors who are buying homes, rents are soaring, allowing them to cash in on their investments. Rental prices are at a 10-year high as median units rent for $710 a month.
- Home affordability is at record highs for the median income family, due to falling home values and super low mortgage rates. In fact, a recent study found that it is cheaper to buy a home than rent in basically ever major city in the U.S. For those who buy, you can save the cost of renting by owning the home for five years or less.
But while the signs point to a housing market on the mend, some Americans still remain hesitant. Many Americans are still underwater on their mortgage, owing more on their home than it is currently worth. Also, the economy continues to weigh on the recovery, particularly a dampening employment outlook, which analysts see as tied to housing.
Still, The Wall Street Journal concludes in a recent article that if you take into account all the positive signs lately in the housing market, “housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.”
Note from TMN:
This is an interesting article and the Vail Valley has seen some of the same bidding wars, particularly in the lower end of the market. Personally, I’ve made two offers recently for buyers and we were out bid by another buyer. There is a tremendous appetite for bank owned properties. Looking at Eagle County foreclosure sales, we should peak this year and start seeing fewer foreclosures next year.
Much of it has to do with declining inventories. This graph shows what is happening in the Vail Valley with inventory. We are slowly but surely moving back to a more “normal” market although I don’t expect to hit the highs of the bubble before the recession.
A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today’s are a result of supply shortages.
“It’s a little surprising because we thought bidding wars were done with,” said Andy Aley, who is looking to buy his first home in Seattle’s Beacon Hill neighborhood. The 31-year-old attorney was outbid this year when he offered up to $23,000 above the $357,000 listing price and agreed to waive inspections and other closing conditions.
Competitive bidding in the current environment isn’t producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.
An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.
“We very much believe we’ve hit bottom,” said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago. Earlier this week, she raised her home-price forecast for the year, calling for a 1% annual gain, up from a 1% decline.
The Wall Street Journal’s quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months’ supply. In March, there was a 6.3-months’ supply.
Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply.
Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York’s Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.
Increased competition is frustrating buyers and their agents. “We’re writing a record number of offers, but we’re not seeing a record number of closings and that’s because it’s so competitive,” said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. in Seattle with offices in 14 states.
Nearly 83% of offers that Redfin agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Redfin represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for “Buddy,” a white toy poodle.
Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers.
In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation’s biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago.
Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.
Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren’t concerned. “There’s an enormous appetite for foreclosures. Release the inventory. It will sell,” said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands.
The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963.
Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.
Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is “entirely affordability driven, which tells me there will be strong resistance to price increases” by buyers, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm.
Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level.
Rates are “so low that we can afford a house that was out of our price range before,” said Aarthi Srinivasan, who is looking with her husband for a home around Palo Alto, Calif., one of the country’s hottest real-estate markets.
Ms. Srinivasan says she fears that prices are being bid up too quickly. She says she had her “aha moment” earlier this year while touring a 50-year-old house that needed extensive remodeling. The home, listed at $1.1 million, received nearly 10 offers and eventually went under contract for more than $1.3 million to a buyer who hadn’t even viewed the property.
“There are only so many buyers who are going to be in such a hurry, so we’re hoping it’ll top off soon,” she says. On Monday, they offered to pay more than the $1.2 million list price for a four-bedroom, bank-owned foreclosure. They haven’t found out if they made the top bid.
On the other side of those transactions are sellers like Debbie and Bill Wetherell, who had 17 offers in four days for their four-bedroom home in Danville, Calif. “I was floored. It was so fast, it was surreal,” says Ms. Wetherell. The home sold on Wednesday for $796,000, more than $50,000 above the asking price.
Still, the sale is for nearly $180,000 less than what they paid for the house in 2005. Ms. Wetherell’s husband has commuted to Reno, Nev., for five years and they have decided to relocate.
Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the “trade-up” market has been stalled. These homeowners can’t sell their current homes, let alone come up with the down payment for their next home.
Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won’t appraise at the price that buyers have agreed to pay sellers.
Still, borrowers with stable jobs are looking to make deals. Kelly Pajela-Fu and her husband offered to pay the asking price of $600,000 for a four-bedroom home in Marblehead, Mass., within a day of the property hitting the market.
“We just knew this house would go quickly,” says Ms. Pajela-Fu, a 31-year-old doctor who had lost out on an earlier offer. Their strategy to avoid a bidding war paid off: The sellers accepted their offer before having an open house.
Write to Nick Timiraos at email@example.com
People continue to wonder how we will cut our deficit which is currently running over $1 trillion/year. In the following article, Romney gives some clues as to what he is thinking regarding raising revenues and cutting expenses. One idea in particular could harm our local economy. Romney says he will consider eliminating tax deductions for wealthy second home owners. He doesn’t give details of his idea but it probably includes not allowing folks to deduct interest payments on second homes.
TerryBy MICHAEL D. SHEAR
Mitt Romney inadvertently offered a public preview of some of his economic plans on Sunday, revealing to high-dollar donors at a private fund-raising event that he wants to eliminate tax deductions for wealthy people who own second homes.
Mr. Romney’s comments were overheard by reporters standing outside the event on a sidewalk and first reported by The Wall Street Journal and NBC News. During the event, Mr. Romney also told the donors that he might eliminate the Department of Housing and Urban Development and reduce the size of the Education Department.
Mr. Romney told the donors that the housing agency “might not be around later” and said the Education Department would be “a heck of a lot smaller” even if it wasn’t eliminated altogether, The Journal reported.
“I’m going to take a lot of departments in Washington, and agencies, and combine them. Some eliminate, but I’m probably not going to lay out just exactly which ones are going to go,” Mr. Romney said, according to NBC. “Things like Housing and Urban Development, which my dad was head of, that might not be around later. But I’m not going to actually go through these one by one. What I can tell you is, we’ve got far too many bureaucrats. I will send a lot of what happens in Washington back to the states.”
The overheard comments offer a first glimpse of the kind of specific policies that Mr. Romney might pursue as president. Publicly, Mr. Romney has hinted that he would limit deductions for wealthy homeowners, but has not said how he might do that. And in his remarks Sunday, he also hinted that he might curtail deductions for state and property taxes for the wealthy.
And Mr. Romney has resisted offering many details about the cuts to government spending that would allow him to achieve the kind of deficit reductions he has projected considering the cuts in taxes that he has talked about.
Officials with the Republican campaign said Mr. Romney was just tossing out ideas at the fund-raiser, not unveiling new policies. They accused Democrats of using the incident to try to distract attention from the economic situation under President Obama.
“While President Obama is interested only in offering excuses and blaming others for his failures, Governor Romney is discussing some of the ideas he has to tackle the big issues facing America,” said Andrea Saul, a spokeswoman for Mr. Romney. “Governor Romney has also laid out a bold set of policy proposals that will grow our economy, cut spending and get our massive debt under control.”
At the fundraiser, Mr Romney and his wife, Ann, offered candid and casual observations that did not appear intended for wider public consumption. Mr. Romney, instance, remarked that Fox News was watched by “true believers,” and that the party needed to broaden its appeal to women and independents, according to the NBC account. And Mrs. Romney said she “loved” the fallout generated when a Democratic political operative say that Mrs. Romney had “never worked a day in her life.”
“It was my early birthday present for someone to be critical of me as a mother, and that was really a defining moment,” NBC quoted her as saying.
Mr. Obama’s campaign quickly pounced on the remarks, describing Mr. Romney as willing to reveal his intentions only to well-connected donors, not to the public.
“Apparently, Governor Romney believes only high-dollar donors have a right to know what programs he will cut,” wrote Ben LaBolt, a spokesman for Mr. Obama’s campaign, in an e-mail to reporters. “Education. Housing. To pay for $5 trillion tax cuts for the wealthiest Americans.”
Democrats have already been trying to convince voters that Mr. Romney is hiding things from voters. They point to the fact that Mr. Romney has not identified his “bundlers,” the handful of donors who gather up contributions from their wealthy friends. And they have criticized Mr. Romney for releasing only two years of tax returns.
An e-mail Monday morning from Brad Woodhouse, the communications director for the Democratic National Committee, was headlined: “In case you’re keeping count at home: Things Mitt Romney Hides.”
To that list, Mr. Woodhouse added, “Now we learn policies he’d pursue as president (unless you’re a high-dollar donor, of course).”
The Romney campaign quickly sought to play down the new proposals on Monday, suggesting that the candidate was simply bouncing around a few ideas with donors, not laying out new policy.
During a Romney campaign conference call focused on President Obama’s tax proposals, former Senator James M. Talent of Missouri said Mr. Romney “was discussing ideas that came up at the meeting, which happens a lot when you are on the stump or doing interviews with the press.”
When it became clear that questions from the news media about Mr. Romney’s remarks at the Florida fund-raiser would dominate the conference call, an aide to Mr. Romney ended the session after three questions.