Thursday, April 17, 2008

Second-Home Sales Accounted For One-Third of Transactions in 2007

The Following article is gleaned from "Second-Home Sales Accounted For One-Third of Transactions in 2007" by Walter Molony from Realtor.org

WASHINGTON, March 28, 2008 -
The combined total of vacation- and investment-home sales declined with the overall market in 2007, but still accounted for 33 percent of all existing- and new-home sales, which is close to historic norms, according to the National Association of Realtors®.
The market share of homes purchased for investment last year was 21 percent, down from 22 percent in 2006, while another 12 percent were vacation homes, compared with a 14 percent market share in 2006. The total share of second homes declined from 36 percent of transactions in 2006.
Lawrence Yun, NAR chief economist, said the findings suggest different cycles for each of the sectors over the past two years. “Investment-home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007,” he said. “Vacation-home sales rose to a new record in 2006 because there was a pent-up demand from buyers who couldn’t find a property as a result of tight supplies in preceding years.”
The overall sales decline in 2007 resulted from a combination of factors. “Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” Yun said. “The other factor is the disruption in the mortgage market, with a significant tightening of credit during the second half of 2007. Some buyers simply adopted a wait-and-see attitude.”
Yun said lifestyle factors and strong demographics remain positive for the vacation home market. “Investment considerations are secondary for vacation-home buyers, so there is some dormant underlying demand,” he said. “A peak of population is moving through the prime years for buying recreational property. It is welcoming to see investment sales returning to pre-boom sales activity.”
There were no significant changes in investment housing types. Sixty-one percent of investment homes purchased in 2007 were detached single-family homes, 20 percent condos, 11 percent townhouses or rowhouses, and 8 percent other. Twenty-eight percent of vacation-home buyers paid cash for their property, as did 35 percent of investment buyers.
Sixty-five percent of vacation home buyers and 71 percent of investment home buyers purchased existing homes, while the remainder purchased new homes.
The typical vacation-home buyer in 2007 was 46 years old, had a median household income of $99,100, and purchased a property that was a median of 287 miles from their primary residence.
In listing the reasons for purchasing a vacation home, 84 percent of buyers wanted to use the home for vacation or as a family retreat; 30 percent to use as a primary residence in the future; 26 percent to diversify investments; 25 percent to rent to others; 16 percent for the tax benefits; 14 percent for use by a family member, friend or relative; and 6 percent because they had extra money to spend.
Last year, 19 percent of vacation homes were purchased in the Northeast, 16 percent in the Midwest, 41 percent in the South and 24 percent in the West. In terms of location, 30 percent of vacation homes were purchased in rural areas, 20 percent in resorts, 20 percent in a suburb and 14 percent in an urban area or central city.
When asked about the most important reasons for their purchase of an investment home, 51 percent said to provide rental income; 39 percent to diversify investments; 21 percent to use for vacations or as a family retreat; 16 percent for use by a family member, friend or relative; 11 percent for tax benefits; 10 percent to use as a primary residence in the future; and 4 percent because they had extra money to spend.

Existing Home Sales to Stabilize Before Upturn in Second Half of 2008

The following article is gleaned from "Existing-Home Sales to Stabilize Before Upturn in Second Half of 2008" by Walt Molony from Realtor.org

WASHINGTON, April 08, 2008 -
Little change is expected in existing-home sales over the next few months, before improving notably during the second half of the year, according to the latest forecast by the National Association of Realtors®.
Lawrence Yun, NAR chief economist, said the market will come into clearer focus this summer. “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said. “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6 from an upwardly revised reading of 86.2 in January, and was 21.4 percent lower than the February 2007 index of 107.6. “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” Yun said.
Existing-home sales are likely to rise from an annual pace of 4.9 million in the first quarter to 5.9 million in the fourth quarter. With relatively weak activity in the first part of the year, existing-home sales for all of 2008 are forecast at 5.39 million, increasing 6.6 percent to 5.74 million in 2009.
“Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year,” Yun said. The aggregate existing-home price will probably ease by 1.4 percent to a median of $215,800 for all of 2008 before rising 3.7 percent to $223,800 next year.
“The economy will not grow in first half of the year,” Yun said. “However, the combination of recent fiscal stimulus enactment and the lagged impact of monetary policy will help jump start the economy in the second half.” Growth in the U.S. gross domestic product (GDP) is expected to be 1.4 percent in 2008 and 2.4 percent next year. The unemployment rate is forecast to average 5.4 percent this year and 5.6 percent in 2009.

Tuesday, April 8, 2008

Bush: More Help on Way for Home Owners

The Bush administration released over the weekend a sweeping proposal to revise regulation of financial markets.The proposal, which will be outlined in detail April 1, will merge or eliminate some long-standing institutions like the Securities and Exchange Commission, and streamline others. The Federal Reserve would get a new role as the super cop in charge of financial-system stability. Some proposals are expected to directly address the current mortgage-risk problems. Treasury Secretary Henry Paulson, who authored the plan, says it wouldn't necessarily prevent future financial crises."I don't think any regulatory system is going to change that," Paulson says. "I think we rely very, very heavily on market discipline. Having said that, I still think we need a system that is more efficient and gives us a better chance, gives us more tools to try to solve problems."Rep. Barney Frank of Massachusetts, the Democrat who chairs the House Financial Services committee, says he found the plan encouraging. But he says that for the rest of this year, lawmakers need to devote all their energy to stabilizing the mortgage-market turmoil rather than determining broader fixes. "It's too close to an election and it's a very major thing," he says.

Source: The Wall Street Journal, Damian Paletta, Greg Ip and Michael M. Phillips (03/31/08)

Tuesday, April 1, 2008

The Good News About Our Housing Market

The following article is from Tuesday April 1st, 2008 The Oregonian.


The Oregonian's headline asserted that "economists expect worse is to come" ("Portland home values take first dip," March 26). But the story includes Lake Oswego economist Bill Conerly saying that he isn't certain how much home values will drop because so much of the market is driven by buyers' perceptions.
What do you suppose sensational headlines and dour front-page predictions do to buyers' perceptions? The biggest challenge facing Portland's housing market is uncertainty among buyers.
Most buyers aren't housing experts. So before they make a decision they want to feel assured that it's a good time to buy a house. Unfortunately, in a competitive news environment, headlines sell papers, and bad news sells even more.
The truth about our housing market is that home values are still holding strong in the Portland area. The Oregonian acknowledges this (once you read past the headlines), as the same story ultimately admitted that the decline is "such a slight drop, economists consider values to be essentially flat" and that "[home] values are leveling off."
In historical perspective, interest rates are low right now, inventory is high, sub-prime credit problems and loan defaults are far fewer in Oregon, and our housing market is faring much better than the rest of the country. Plus, people still want to move here, creating continued demand.
Housing experts agree that the best time to buy property is not at its peak in value, but in slower cycles. People who bought two years ago did it on the sellers' terms. Today's homebuyers with good credit have ample access to home loans at great rates, and they're getting more home value for their money than they've been able to get in recent memory.
Is the nation's housing market hurting? In some areas, absolutely. But Portland's market still has quite a bit of good news in it, and The Oregonian's front-page headlines fail to give readers a solid understanding about what is really happening locally and what is available to buyers, whether they are looking for their first home or their next home.
If you've been thinking about home ownership, look around and ask an expert you trust. Peaks and dips are a natural part of every housing market everywhere. Waiting until the market takes off again, as it always does, just means you'll pay more for less home value.