January House Prices Worse Than Expected

As Posted to CNBC.com

Prices of U.S. single-family homes in January plunged a record 19.0 percent from a year earlier, showing a U.S. housing market that is still in the throes of a deep recession, according to a Standard & Poor's/Case-Shiller report on Tuesday.

The composite index of 20 metropolitan areas fell 2.8 percent in January from December, S&P said of the index that dates back to 2000.

The U.S. housing market is in the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down home prices.

The drops on a month-over-month as well as year-over-year basis were bigger than expectations based on a Reuters survey of economists.

Michelle Meyer, an economist at Barclays Capital in New York, said the large number of foreclosures were behind the steep home price drops in certain areas.

"Home prices fell on a year-over-year basis in all 20 metro areas surveyed, driven by steep drops in boom-to-bust markets such as Las Vegas, Phoenix and San Francisco," she said.

"Home prices are falling sharply in these markets due to deeply-discounted foreclosed homes, which make up more than half of existing home sales," she said.

S&P said its composite index of 10 metropolitan areas declined 2.5 percent in January from December for a 19.4 percent year-over-year drop, also a record. The 10-city index dates back to 1988.

As of January, average home prices across the United States are at similar levels to late 2003. From the peak in the second quarter of 2006, the 10-City Composite is down 30.2 percent and the 20-City Composite is down 29.1 percent.

Most parts of the country appear to remain on a downward path, with all 20 metro areas reporting annual declines, and nine of them falling more than 20 percent in the last year, David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in a statement.

"There are very few bright spots that one can see in the data," he said.

The composite indexes have been reporting consecutive annual record declines since October 2007, while on a month-to-month basis they have shown 30 consecutive months of falls, he said.

The U.S. housing market is critical to the economy, with a wide-ranging impact from the construction industry to the sale of appliances and furniture. After hurting growth for multiple quarters, a continued deterioration could prolong a turnaround for the world's largest economy, which has been in a recession since late 2007.

Economists believe the housing market will not begin to recover until home prices fall far enough to stimulate demand, which has emerged in some states, such as California.

Many potential buyers, however, are opting to stay sidelined, waiting for home prices to stabilize from their downward spiral.

The three worst performing cities, in terms of annual declines, continued to be from the Sun Belt. Phoenix was down 35.0 percent, Las Vegas declined 32.5 percent and San Francisco fell 32.4 percent.

Dallas, Denver and Cleveland fared the best though they too suffered drops, with prices falling 4.9 percent, 5.1 percent and 5.2 percent, respectively.

New York, buoyed by plentiful jobs and big bonuses in the financial sector in recent years, showed a more modest annual decline of 9.6 percent. Home prices in New York, however, are vulnerable, with rampant financial sector layoffs expected to take a toll on real estate.

Local home prices rise 5%

Housing prices in the Raleigh area rose by nearly 5 percent in the last 12 months, according to new federal data.

The numbers come from the Office of Federal Housing Enterprise Oversight, the group that oversees the government-backed mortgage buyers Fannie Mae and Freddie Mac. Across the country, OFHEO says, prices were flat over the past 12 months.

OFHEO's numbers put Raleigh 30th among the hundreds of metropolitan statistical areas in the country for home price increases.

But the increases come at a time when sales themselves are flat, with buyers waiting for the market to hit bottom. Triangle home sales dropped by 24 percent in April, the Triangle Multiple Listing Service recently reported.

MLS also said that the sale price of an existing home fell 1.5 percent in April from a year earlier. MLS' data include nearly all home sales in the region, however, while OFHEO's figures only include mortgages that qualify to get bought by Fannie or Freddie. That excludes most "subprime" mortgages to borrowers with poor credit - by far the worst part of the market.

OFHEO's numbers also include refinancings and home appraisals.

Home prices in the Durham area rose by 3.92 percent in the past 12 months, OFHEO says.

Across the state, prices in Charlotte increased by 6.16 percent. Asheville's home prices were up by 4.52 percent, Durham's by 3.92 percent, Winston-Salem's by 3.82 percent, Greensboro's by 2.76 percent and Wilmington's by 1.30 percent.


Triangle Business Journal; May 22, 2008

Home-Price Decline Spreads

Number of Metro Areas Hit Reaches Three-Decade High; Toll Brothers Feels the Pinch
In the latest sign that the housing market is deflating at a record pace, the National Association of Realtors said prices declined in more metropolitan areas in the first quarter than at any time in the past three decades.

The trade group said median prices fell in about 100 metro areas -- the most since the trade group began keeping such records in 1979. It also said Tuesday that median home prices rose in 48 metro areas -- the lowest number on record. Nationally, the median home price fell to $196,300, down 7.7% from a year ago.

Lawrence Yun, the group's economist, said the sales-price data are being distorted by foreclosed homes and other distressed sales, which are fueling price drops in certain neighborhoods, while the lack of available so-called jumbo mortgages for high-priced homes has resulted in fewer sales in upscale neighborhoods. The upshot is that the median price for a metro area may be falling, but the prices may very sharply "neighborhood by neighborhood," Mr. Yun said.

Still, high-end homes are clearly under some price pressure. Luxury builder Toll Brothers Inc., which reported preliminary second-quarter results on Tuesday, said its average home price dropped 17% to $590,000 from a year earlier and was down 7% from the previous quarter, partly because of increased incentives. Toll says it is offering most incentives on homes that were built for buyers who ultimately backed out of their contracts. The builder also said its average price was lower because it sold fewer homes in high-price markets such as California and Manhattan.

Toll says one of the biggest problems is that many buyers are putting down deposits but end up canceling because they fear they won't be able to sell their existing home. "They go to their friends and neighbors and say, 'We just bought a new home,' and everybody says 'What? Are you crazy? Prices are dropping,'" Chief Executive Robert Toll told analysts during a conference call.

There were some glimpses of improvement. The median price of existing single-family homes rose 3.2% to $280,000 in the Northeast in the first quarter, the NAR said. Mr. Toll reported a mixed bag in the Northeast, calling Putnam and Duchess counties in New York state and the state of Connecticut "B-plus" markets, while Massachusetts was a "D-minus" market.

Home prices fell 12.3% to $296,300 in the West and dropped 7.5% to $164,200 in the South. Yet Toll recently raised prices in a development in Naples, Fla., which had been one of the worst housing markets in the nation. "It gave us some happy times, especially considering that Naples was one of the worse markets," Mr. Toll said during the conference call.

Across most markets, however, Toll described the spring selling season as "quite weak," as buyers remained on the sidelines, despite improving housing affordability.

Toll's home-building revenue in the quarter ended April 30 fell 30% from the year-earlier period to $817.9 million. Net contracts for new homes fell 44% to 929 homes.

Analyst Ivy Zelman says even if Toll dropped its prices as much as other builders have, that might not generate many more sales in this high- end sector.

"Price is not the issue," Ms. Zelman said. "The problem is that many of Toll's buyers can't sell their existing homes. People are in a situation where they think 'I need to sell my house for $1 million and the best bid is $800,000.' They have negative equity, and they can't afford a down payment on a Toll Brother's home."

As home prices and sales decline, home builders have been writing down billions of dollars of land and inventory values on their books. Joel Rassman, the builder's chief financial officer, estimated second-quarter impairments would be in the range of $225 million to $375 million.

On the bright side, Toll reported about $1.2 billion in cash, which is expected to help the builder weather the downturn while credit tightens to buy land and pay for construction. Toll will release final second-quarter results June 3.


By: Michael Corkery
Wall Street Journal; May 14, 2008

Housing Prices Fall Nationwide Yet Rise in Raleigh; Durham Cary Apex and Chapel Hill Markets.

NEW YORK - Home prices in many cities continued to plunge by record levels in January as sellers cut their asking bids and rising foreclosures took their toll, new data showed Tuesday.

While the spring selling season usually gives the market a bounce, some analysts say any notable improvement may not come until well into the summer. U.S. home prices fell 10.7 percent in January, and the Standard & Poor's/Case-Shiller home price index of 20 cities saw the steepest decline in the index's two-decade history.

Worst-hit were Las Vegas and Miami, both reporting 19.3 percent drops, as the regions are still paying the price for rampant speculation and overbuilding during the boom years. Those cities and 14 others, including Phoenix, San Diego, and Detroit, posted record lows.

"I wouldn't be looking for a pattern of improvement until April, May or June," said Brian Bethune, Global Insight's chief U.S. economist.

Only Charlotte, N.C., squeaked by as a gainer in the Case-Shiller index, with a 1.8 percent rise in January compared to a year earlier.

"We are still selling here in Charlotte," said Dianne McKnight, a broker associate at Re/Max Executive Realty in the city. "If a property is priced right, it sells in a day and you have multiple offers. There are plenty of buyers out there kicking around."

But the overall downbeat figures come on the heels of data released Monday showing that the median price of existing homes being sold in February fell in the largest year-over-year drop since at least 1999.

"Home prices continue to fall, decelerate and reach record lows across the nation," said David Blitzer, index committee chairman at S&P. "No markets seem to be completely immune from the housing crisis."

Blitzer said all 20 cities S&P tracks have seen falling prices for five consecutive months when compared to the prior month. What's more, the declines are growing in severity, with 13 of the 20 cities reporting their biggest single monthly decline in January.

Pava Leyrer, president of Heritage National Mortgage in Detroit, said the tightening of loan standards has compounded the problems of too much inventory, foreclosures and worries over the economy.

"It's just a spiral that will end up taking this year to get out of," Leyrer said.

She said it would take until the spring of 2009 before they started to see the market in Michigan improve.

While the vast majority of homes in the U.S. are not in danger of foreclosure, the housing slump has raised concerns about a recession and has had ripple effects across the economy as consumers spend less in other areas and banks tighten lending requirements. Prices that wont rise in raleigh are the price of Raleigh Web Design, Web Design Raleigh, SEO Raleigh, Web Development Raleigh and Raleigh Web Development.

Consumer confidence sank to a five-year low in March as tight credit markets, rising prices and worsening job prospects deepened worries that the economy has fallen into recession. The Fed has aggressively slashed interest rates to spur growth and free up the credit markets.

A narrower survey, released separately Tuesday by the Federal Housing Enterprise Oversight said home prices fell 3 percent in January from the same month last year, and dipped 1.1 percent from December. The declines were sharpest in New England.

The monthly OFHEO index is down 4.1 percent since its peak last April. The index is calculated using mortgages of $417,000 or less that are bought or backed by government-sponsored mortgage companies Fannie Mae or Freddie Mac. Legislation enacted in February temporarily raised the limit to as much as $729,750 in high-cost areas.

Many sellers in some parts of the country seem to be cutting prices more aggressively. While sales of existing homes notched a surprise increase in February after falling for six straight months, the median price fell, according to data Monday from the National Association of Realtors.

The trade group said sales rose 2.9 percent last month to a seasonally adjusted annual rate of 5.03 million units - the biggest increase in a year. But the median existing sales price in February fell to $195,900, the largest year-over-year drop on records that go back to 1999.

By VINNEE TONG, AP Business Writer
The News & Observer; March 25