Is Desegregation Really Happening?

First appeared in the Wall Street Journal

An exodus of African-Americans from struggling industrial cities such as Detroit and the growth of Sunbelt states have pushed racial segregation in U.S. metropolitan areas to its lowest level in a century, according to a new study.

The report, released by the conservative Manhattan Institute, said U.S. cities are more integrated now than at any time since 1910, based on analysis of census data from neighborhoods.

Fifty years ago, nearly half the black population lived in a ghetto, the study said, while today that proportion has shrunk to 20%. All-white neighborhoods in U.S. cities are effectively extinct, according to the report.

Immigration and gentrification have helped convert ghettos into racially mixed communities and contributed to diversifying suburbia, said economists of Harvard University and of Duke University, who co-wrote the study. "Segregation is as low as we have ever seen it," said the economists. "It's an unprecedented scenario."

Some scholars said the report, titled "The End of the Segregated Century: Racial Separation in America's neighborhoods, 1890-2010," paints too rosy a picture and argued the country is far from being fully integrated.

"That segregation is declining in most places is a real plus," said a Brown University sociologist who has published research on the topic. "But it is declining at a rate that will leave the country with a very high level of segregation for a long time."

From around 1910, rural blacks began moving in large numbers to urban centers in search of work, in what became known as the Great Migration. Government policies and discriminatory practices in areas such as mortgage lending promoted residential segregation, which peaked in the 1960s. The civil-rights movement then paved the way for integration, and the 1968 Fair Housing Act specifically banned housing discrimination.

By the 1980s, blacks were moving to suburbs, which both altered the face of the urban areas they left behind and created racially mixed neighborhoods where they settled.

Using the most common measure of segregation, the "dissimilarity index," the authors found that segregation is lower now than it was in 1970 in all but one of the 658 housing markets tracked by the Census Bureau. Between 2000 and 2010, segregation declined in 522 out of 658 housing markets, the report said.

The index of dissimilarity measures how evenly two groups are distributed in a neighborhood. The score indicates what share of the members of one group would need to move neighborhoods to enable the two groups to be equally distributed.

In 2010, Dallas-Fort Worth and Houston were the country's least segregated large cities. Atlanta's index fell 28 points to 54.1 in 2010 from 82.1 in 1970; Dallas-Fort Worth's fell to 47.5 from 86.9 over the same period.

Still, segregation hasn't been eliminated. The typical urban African-American still lives in an area where more than half the black population would need to move to achieve overall integration.

"There are still segregated places, like the South Side of Chicago, the East Side of Cleveland and Detroit," said a sociologist. "But those places have fewer people."

Many of the people leaving industrial cities moved to the Sunbelt, which stretches from California to North Carolina and has experienced rapid growth in recent decades. As cities such as Phoenix, Houston and Charlotte expanded to accommodate the new population, many neighborhoods became more racially mixed than those left behind in the Rust Belt, a sociologist said.

The beacon of economic opportunity is luring ambitious young African Americans such as a 28 year old, who left Cleveland for Houston a year and a half ago for a promotion in the Veterans Administration. He now manages outpatient care at Houston's Michael E. DeBakey VA Medical Center.

"It was a good promotion, and with the economy being the way it is, it was too good to pass up," said the young man.

A 59 year old, who moved to Phoenix from Racine, Wis., in 1987 to run a janitorial business, said: "Everybody here came from somewhere else so they are not just living next to their own kind."

Immigration has been a factor in desegregation. The Hispanic population has climbed and spread across the U.S. since the 1990s, with Latin American immigrants settling in both predominantly black and white neighborhoods, the report says. The typical African-American now lives in a neighborhood that is 14% Latino.

Access to credit has also fostered mobility and integration. Minority home buyers were affected by the subprime mortgage crisis, but many buyers were able to stay in their homes, the report said.

But the decline in desegregation in residential areas hasn't meant an end to racial inequality. Minorities at every income level tend to reside in poorer neighborhoods than whites with comparable incomes, according to the scholar at Brown.

Rental Demands Changes Housing Outlook

First appeared on Yahoo! News
Brian Keith is busier than ever as the architecture firm he works for rushes to wrap up work on a 300-unit apartment complex in Dallas.

The project is one of dozens the firm, JHP Architecture, has on its hands -- a surge of business driven by a rise in demand in the United States for rental properties.

The increased demand has forced JHP to expand, and it expects to keep hiring at least through the first quarter.

"We're seeing overall work come back and there's a backlog of contracts to go through," said Keith, director of urban design and planning at JHP. "There's strong interest in multi-family units and plenty of pent-up demand."

With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

The percentage of Americans who own their home dropped from a peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter. It edged up to 66.3 percent in the third quarter of this year.

On the flip side, the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier.

In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 "The Year of the Landlord."
"Rents are rising, vacancies are falling, household formations are growing and rental supply is limited," the Morgan Stanley report stated. "We believe the demand for rental properties will continue to grow."

Groundbreaking for new housing jumped 9.3 percent in November to the highest level in 19 months, fueling optimism that the battered housing market was regaining its footing.

The gains, however, were almost solely in multifamily housing. Groundbreaking for structures with five or more units shot up more than 30 percent from October to now stand at nearly double the year-ago level.
Prices reflect the shift in demand. Rental costs are up 2.4 percent over the last year, compared with an increase of just 0.6 percent in 2010.

Steve Blitz, senior economist at ITG Investment Research, says the lure of higher returns is spurring the development of apartment buildings. He argued the next "boom" in residential construction has already started.

"The reason rents were rising is that through the past 15 years there has been an under-building of rental properties because typical renters were increasingly able to garner cheap financing to buy a house," he wrote in a research note.

While the rise in demand is great news for builders and developers, it remains unclear what the pick-up in homebuilding will mean for the economy as a whole.

"Residential construction will be a plus to GDP in 2012, but house price declines will be a negative. So net, net housing will be neutral or a small drag on the economy," said Mark Zandi, chief economist at Moody's Analytics.

At its peak at the end of 2005, homebuilding accounted for about 6.2 percent of overall economic activity. Now, it is only about 2.4 percent.

U.S. housing starts in April 2009 hit their lowest level on records dating to January 1959. While multifamily starts have given them a lift, 2011 may be the weakest year ever for construction of single-family homes.

"Business is slightly down from last year," said Bill Zach, a third-generation homebuilder. His family business, the Zach Building Co. in the Milwaukee, Wisconsin, area, is mainly focused on single-family units.

To Zach, that his firm is still in business when so many of his competitors have gone bust represents some success.

"It used to be my competition was every guy that owned a pick-up truck and called himself a builder. Hundreds of them," Zach said. "That's no longer the case, those guys are dropping by the wayside."

But there are signs of a turn and signals that the housing market may be close to finding a bottom.

The Architecture Billings Index, a gauge of future construction, picked up last month, breaking above the 50 level to signal growth in billings.

And the stock of homebuilders, as measured by a Dow Jones index, has shot up more than 30 percent since early October.

"Residential construction is finally beginning to rise from its post-recession lows," said Joseph Lavorgna, chief U.S. economist for Deutsche Bank. "The true test for starts and (building) permits, as well as most of the sales metrics, will come during the spring buying season."

What Does the 'Foreclosure Crisis' Mean for You?

The Wall Street Journal

For the vast majority of homeowners, new questions about the state of foreclosures appear to be irrelevant. Few people seem to have been wrongly thrown out of their homes, and those who have been are generally months or years behind on their mortgage payments.

But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales.
Real-estate salespeople in some of those places are worried. "September and October are usually the height of the selling-season for us," says Rich Armstrong, who owns the brokerage Rare Properties in Jackson Hole, Wyo. "Now we are seeing a number of what we call 'fence sitters,' people who would have leapt in even a month ago, but now are waiting on the sidelines."

The "foreclosure crisis" is a result of the frenzied real-estate boom and bust of the past decade. Banks made foolish loans, and borrowers signed up for them—only to default later, as the economy slumped. Banks rushed to reclaim properties, launching a record number of foreclosure proceedings.

In the past several weeks flaws have emerged in that complex process. Because of the high volume of foreclosures, the documentation supporting legal actions was prepared hastily, and some homes were seized improperly.

Yet the far bigger worry is what happens next. A frenzy of lawsuits and banks' examinations of their own practices could throw more of the millions of foreclosures of the past few years into legal jeopardy. Attorneys general in all 50 states are investigating, and plaintiffs' lawyers are working hard to perfect their legal strategies for suits on behalf of people who have been foreclosed on.

The suits might well fail. But just the threat that past foreclosure rulings might be overturned could result in collateral damage. In some places, banks are rushing foreclosed properties to market. In others, buyers are stepping back, refusing to buy foreclosed properties or "short sales"—homes sold by owners for less than the mortgage balance. In markets already beset with large inventories of foreclosed properties, the result could be a slower recovery.

Coastal markets and ski areas are feeling the most anxiety. Some already are littered with foreclosures—in part because they're dominated by second-home and investment properties. Those owners are more willing to walk away from a house that isn't their primary residence.

Foreclosure tracker RealtyTrac estimates that, nationwide, 30% to 35% of properties in foreclosure are owned by investors or were second homes. In Aspen, Colo., the figure is about 60%, says Kim McKinley, owner of McKinley Sales Real Estate in Basalt and Aspen, Colo. If foreclosure proceedings slow from here, inventory could jump, leading to price weakness later.

"We're concerned that the phantom inventory buildup will cause a more rapid and drastic drop in prices in Aspen, which is just getting started in terms of foreclosures coming to the market," says Ms. McKinley.

The timing of the foreclosure mess is especially inconvenient for ski towns, given the fall selling season.

Property owners are growing nervous. In Park City, Utah, lenders are quickly unloading foreclosed homes ahead of what could be a long, stalled foreclosure process, says Joe Trabaccone, a real-estate agent there.

On Oct. 11, for example, J.P. Morgan Chase put up for sale an 8,000-square-foot home adjacent to a private gated golf course. Mr. Trabaccone initially recommended the property be listed for $1.6 million, but Chase opted for $1.26 million. "They are offering these homes far too low just to hurry up and sell them," Mr. Trabaccone says.

Even so, it hasn't worked. A buyer made an offer and signed a contract, but then backed out.

In South Lake Tahoe, Calif., on Thursday, Freddie Mac, the big government-sponsored guarantor of mortgages, put a foreclosed home that had just been listed for sale on hold, freezing the property until paperwork could be straightened out. The foreclosure mess "seems to be filtering down and it could be an impact," says Doug Rosner, the broker who had listed the home. Three other properties in town were also frozen, another real-estate agent says.

The "sand states" of Arizona, California, Florida and Nevada are being hit as well. These areas, too, have a lot of vacation and investment properties—and a lot of foreclosures.

Robin Speronis, a real-estate broker in Cape Coral, Fla., says business had been picking up recently, with several inquiries a day—until the latest foreclosure scandal broke. Since then, she says, inquiries have shriveled to just one in the past week.

Susan Weeks, 55 years old, and her husband, Eddie, aren't optimistic. The couple had expected to retire and downsize when they bought a condo in Clermont, Fla., near Orlando, in 2007 for $192,000. Their plan was to sell their primary residence 10 minutes away and live in the condo. The trouble: They can't sell their first home.

The Weeks paid $269,000 for their three-bedroom home in 2004. The house next door, a bit larger, is listed at $185,000, Ms. Weeks says.

The couple has decided to move back to their primary home and take a renter for the condo. But while that brings in $850 a month, the Weeks take a $450-a-month hit on the condo —on top of the $2,400 a month they pay every month on their primary home.

"We're just going to wait it out," she says.

The possible foreclosure wars to come loom so largely over Florida markets that Ms. Speronis is urging condo sellers to consider any offer they get, even if it is far below asking price or what is owed on the mortgage.

Dianne Cloutier, a records supervisor in Chelmsford, Mass., had been looking for a retirement property in Cape Coral, but decided to wait because of the foreclosure mess. "It's left us on hold until we are sure the banks have legitimately foreclosed on people and that nobody can come back on us to get their property back," she says.

Foreclosures aren't the only problem. Short sales are getting more difficult to pull off, too.

In Bend, Ore., agents say buyers are avoiding short sales or even backing out of contracts because they don't want to deal with paperwork hassles or the chance of a court challenge later.

"I have some people saying 'I don't want to mess with bank-owned properties or short sales,'" says Dianne Willis, principal broker with RE/MAX Sunset Realty in Sunriver, Ore. "They're reluctant because it can be a frustrating process, especially for those who are looking to make a big move."

The short sales "can be very frustrating," adds Becky Ozrelic, of with Steve Scott Realtors in Bend. "You just have buyers waiting and waiting."

For sellers, lining up a short sale was tough even before the latest foreclosure crisis. Banks and mortgage "servicers," the outfits that process payments, already had been scrambling to handle surging workloads.

Mike and Kim Schwarz of San Jose, Calif., are coming up on the one-year mark on their short-sale saga.

The couple had acquired several investment properties over the past few years, including one in Thousand Oaks, Calif., for $751,000. After the tenants stopped paying rent, the Schwarzes couldn't cover the payments and decided to sell, Mr. Schwarz says.

They lined up a buyer in November 2009, and started working with their loan servicer on the short sale. For lenders, short sales are ugly because they guarantee a loss, but they often are preferable to a foreclosure, in which the lender is saddled with a tough-to-sell house.

The servicer, Residential Credit Solutions, took six months to process the paperwork, the Schwarzes say. Faxes and emails were sent, but nothing happened, Mr. Schwarz says.

"We typically don't hear from borrowers about long delays," says Dennis Stowe, president of Residential Credit.

The buyer walked away from the deal in June. The couple found another buyer in August, and resubmitted the short-sale paperwork. Mr. Schwarz says he has sent paperwork to Residential Credit four times since.

On Friday, Mr. Schwarz says, Residential called to tell him the short-sale paperwork looked good and the sale should close in mid-November.

Says Mr. Schwarz: "They didn't make it easy."

Other Ways the 'Foreclosure Crisis' Could Sting Homeowners

The foreclosure mess could hurt homeowners in another way: The costs of buying a home and paying off the mortgage are likely to go up, say housing experts.

The rising costs will come both during the closing and throughout the life of the loan.

At the closing, the cost of title insurance, which protects a property buyer from claims of ownership made by other people, is likely to rise, industry officials say. Title insurance is one of those annoying costs that can sneak up on a buyer during a close; premiums average around $2,000 across states, says Tim Dwyer, CEO of insurer Entitle Direct Group.

The foreclosure mess has sent insurers scrambling. One of the largest, Old Republic Title Insurance, told its agents on Oct. 1 not to issue policies on homes that have been foreclosed by GMAC Mortgage or J.P. Morgan Chase. And on Wednesday, the nation's largest title insurer, Fidelity National Financial, said lenders must vouch for the accuracy of their paperwork before it will insure properties.

Just like homeowners-insurance rates rise after a hurricane, the rates for title insurance are expected to rise, to compensate for the added risk.

The turmoil will likely lead to pricey premiums for new homeowners, says McLean, Va.-based housing economist Tom Lawler. Adds Cameron Finlay, chief economist at mortgage lender Lending-Tree.com: "Any time there is uncertainty in the market or risk implied, it follows that costs go up."

Other costs could be felt during the life of the loan. Until the current mess, servicing loans was a low-margin, high-volume business. Servicers collect mortgage payments from borrowers and send them off to mortgage holders, and if the loan gets into trouble, they manage the foreclosure. Few doubt this process will get costlier now that it is under scrutiny from regulators and the courts. That higher cost likely will show up in higher interest rates for borrowers.

Both of these higher costs also would hit homeowners who refinance their loans.

How much the costs of buying a home will rise is unknown. Mortgage industry officials say it is too soon to tell. And no one believes the costs will significantly change the price of a home. But with the housing market still weak, the uncertainty is making the prospect of buying—or selling—a home that much dicier.

Many Cities Across U.S. Issuing More Housing Permits than during Boom

Reed Construction Data

Des Moines, Charleston, Austin, Columbia and Houston are the strongest large metro housing markets. These are the only cities with a population over 500,000 that issued permits/1000 population at more than three times the national pace over the last year.

Twenty-four smaller cities also had intense housing development at a rate per 1000 population more than three times the national average. This set includes two cities rebuilding from hurricane destruction of homes, several college towns and military base cities, resort and retirement cities in North Carolina and the Rocky Mountains and three market center cities in the Plains states. Several of the resort/retirement cities were part of the 2004-06 housing boom but the rest of the twenty-four cities sat out the boom so they have relatively minor foreclosure and underwater mortgage problems now.

The four large Texas metro areas continue to dominate the list of the largest single family housing markets. Together, they account for nearly 37% of the permits over the last year among the twenty cities issuing the most permits. Las Vegas, Phoenix, Riverside, Tampa, Austin, San Antonio and Orlando are the only housing boom cities still left on the top twenty list. Washington has moved up to third place on the strength of tens of thousands of new federal jobs. Atlanta, the largest housing market for several years has dropped to 7th place due to a weak Georgia economy and a large surplus of unsold homes. Fifteen metro areas, all manufacturing centers without any of today’s high growth industries, have issued less than two permits a month over the last year. Sandusky Ohio has issued no permits and Wheeling West Virginia has issued only one permit.

New York City remains by far the largest multi family permit metro. The recent credit based recession caused much less damage to the New York City economy than expected. Construction activity remains relatively strong partly due to the mild recession and partly because the permitting process is so long and so expensive that developers are always in a catch up mode. Permits are up from a year ago in many college and oil patch towns that escaped both the 2005-06 housing boom and the worst of the ongoing economic recession. San Francisco has returned to the list of top multi family markets due to hiring by its growing technology industries. Other markets that have recently become significant are Salt Lake City (low cost attracts new jobs and residents) and Virginia Beach (a lower cost alternative to South Florida).

Forty-five cities issued more housing permits in the three months ending in March than they did at the peak of the housing boom in late 2005/early 2006. All of these cities are very small markets except for El Paso, Buffalo and Rochester. This should not be interpreted as a list of cities leading the housing market or the economy out of recession. These cities simply missed most of the recession as they did the previous housing boom. Many of them have a locally unique housing demand driver. In El Paso, it is immigration. In Bismarck and Grand Forks, it is a strong farm economy.

Atlanta and Phoenix continue to have the largest declines in homebuilding relative to the peak of the housing boom. The twenty cities on the list are all suffering from the surplus supply created during several years of overbuilding, as with Houston apartments. Excepting, New York City, each of them has an unusually large inventory of homes for sale and a high incidence of foreclosures and underwater mortgages that will keep inventory excessive well into next year and possibly beyond in Florida and the Rocky Mountains.

U.S. Homebuyers still in the Driver's Seat

CNBC

Prices were cut on nearly one quarter of U.S. homes on the market in May, the same as April, with a growing supply of unsold homes keeping buyers in the driver's seat, real estate web site Trulia.com said Wednesday.

Sellers lowered asking prices at least once on 22 percent of homes listed as of June 1, unchanged in the month and up from 20 percent two months ago, San Francisco-based Trulia said in a report provided to Reuters before official release.

A year ago, prices had been cut on 23.6 percent of listed properties. Sellers may face a setback after a brief spring sales spree driven by a rush for federal tax credits of up to $8,000.

To qualify, borrowers who may have purchased in the summer and fall raced to meet the April 30 deadline to sign contracts.

Spring sales could be "providing sellers with a false state of optimism," said Trulia Chief Executive Pete Flint.

"For the unforeseen future, buyers will continue to have the negotiating power and I expect we will see sellers get aggressive via price cuts throughout the summer," he said in a statement.

In the weeks since the tax incentive expired, applications to buy homes toppled to a 13-year low and home builder sentiment worsened.

Inventory levels are growing as sellers gain comfort that the spring season will pave the way for healthier summer sales, Trulia said.

Banks coping with record numbers of repossessed properties will add to the supply as they place the homes on the market, though most economists expect that pace will be measured.

Sellers slashed a total of $26.7 billion in May from asking prices, more than the $25 billion in April and $22.8 billion in March, according to Trulia.

The average discount on the reduced homes held at 10 percent from the original listing. More than a year of tax incentives put the U.S. housing market on a more solid footing.

However, a significant recovery is unattainable without a meaningful improvement in employment, economists agree.

Government data earlier this month showed private-sector hiring rose by 41,000 in May, far overshadowed by the 411,000 temporary census jobs.

Price cutting over the past year was the greatest in cities based in the Midwest and South.

Kansas City, Missouri led by list, with 31 percent of homes for sale cutting prices at least once, up from 20 percent a year earlier.

Other cities with the largest increase in share of homes that lowered prices were Arlington, Texas; Cleveland, Ohio; Louisville, Kentucky, Houston, Texas and Minneapolis, Minnesota.

Western cities had the most improvement in the share of sellers slicing prices over the year.

These were among the cities that had gained the most during the housing boom and have already suffered the most in the crash.

Sellers dropped prices on just 10 percent of properties listed in Las Vegas in May, for example, compared with 30 percent a year earlier.

Six California cities were among the 10 cities showing the most improvement.

Price-cutting on luxury homes listed at $2 million or more was unchanged in May, with an average discount of 14 percent, Trulia said.

Homes in this category account for less than 2 percent of total inventory, but almost one-quarter of total dollars slashed from all homes for sale.

Median Home Prices Up in 60% of U.S. Cities

USA Today

Home prices rose in nearly 60% of U.S. cities in the first quarter of this year, the National Association of Realtors says.

The median sales price for previously occupied homes rose in 91 out of 152 metropolitan areas tracked in the January-March quarter versus a year ago. There were double-digit price increases in 29 cities.

That's a sharp improvement from the fourth quarter of last year, when prices rose in about 40% of cities. The national median price was $166,100, or 0.7% below the first quarter of last year.

Sales of foreclosures and other distressed properties made up 36% of all sales in the first quarter.

The largest percentage price increase was in Saginaw, Mich., where the median price doubled to nearly $61,000. Prices in Akron, Ohio were up 95% to about $95,000. Prices in Cleveland were up 54% to $106,400.

The largest price decline was in Orlando, where they dropped 15% to nearly $132,000. Prices in Ocala, Fla., fell 14.5% to a median of nearly $93,000. Prices in Cumberland, Md., fell 14.4% to $98,300.

Pending Sales of Existing U.S. Homes [Probably] Rose in January; Expect Slow Climb Ahead

Bloomberg

The number of contracts to buy previously owned U.S. homes probably rose 1 percent in January for a second month, showing the extension of a tax credit is sparking limited interest, economists said before a private report today.

The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales in 2009. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound.

“The earlier surge in sales last year spurred hope of a quick housing recovery, but it now appears the recovery will be more slowly paced,” said Aaron Smith, an economist at Moody’s Economy.com in West Chester, Pennsylvania.

The National Association of Realtors is scheduled to release the report at 10 a.m. in Washington. Survey estimates ranged from a drop of 4.2 percent to an increase of 4 percent.

Other Sectors

A 10 a.m. report from the Commerce Department may show a surge in demand for commercial aircraft fueled a 1.8 percent increase in factory orders in January, the biggest gain in four months. A report on bookings for durable goods last week showed orders for capital equipment may have dropped, signaling business investment paused to start the year.

Fewer Claims

First-time filings for jobless benefits dropped by 29,000 to 469,000 last week, according to a Labor Department report today. The number of people receiving unemployment insurance decreased to the lowest level in a year, while those receiving extended benefits climbed.

The productivity of U.S. workers kept surging in the fourth quarter as companies squeezed more out of remaining employees to boost earnings, another Labor Department report showed today.

A measure of employee output per hour rose at a 6.9 percent annual rate, capping the biggest one-year gain since 2002, revised figures showed. Labor costs dropped at a 5.9 percent pace, more than anticipated, and fell 1.7 percent for all of 2009, the biggest drop since records began six decades ago.

Improvement in the labor market is needed to propel the economic recovery and stem the surge in home foreclosures that is holding down prices. Foreclosure filings rose 15 percent in January compared with a year earlier and exceeded 300,000 for the 11th straight month, RealtyTrac Inc. said Feb. 11.

Sales Slump

Reports last week showed the housing recovery may be faltering. Sales of previously owned homes unexpectedly dropped 7.2 percent in January after a record decrease a month earlier, according to the Realtors report on Feb. 26. New-home sales fell to the lowest on record, the Commerce Department said Feb. 24.

The housing market will “follow a similar pattern” to recovery as it did in the late 1980s and early 1990s, which both took “several years,” Toll Brothers Inc. Chief Executive Officer Robert Toll said in a statement Feb. 24.

The company, the largest U.S. luxury-home builder, said its orders almost doubled in the first quarter compared with a year earlier. It projected it will sell between 2,100 and 2,750 homes in fiscal 2010 at an average price of $540,000 to $560,000.

Builder Shares

Builder shares have beat the broader market so far this year after another provision in the legislation extending the tax credit allowed construction companies to use losses incurred in 2008 and 2009 to recoup taxes on profits going back as many as five years, three more years than usual. Lennar Corp., KB Home and Ryland Group Inc. are among builders that have reported quarterly profits because of the tax refunds.

The Standard & Poor’s Supercomposite Homebuilding Index has increased 12 percent this year, compared with a 0.3 percent rise in broader S&P 500.

Billionaire Warren Buffett said last week the U.S. residential real estate slump will end by about 2011.

“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this, there will be a buyer who benefits.”

Home Prices Recover in Some Metro Areas

The Wall Street Journal

Home prices rose in more than a third of U.S. metropolitan areas in the fourth quarter, the National Association of Realtors said Thursday as it pointed to a "broad stabilization" in values.

The median price for single-family home resales was up from a year earlier in 67 of the 151 U.S. metropolitan areas included in the trade group's quarterly survey. But other housing analysts say the home-price trend depends heavily on any recovery in the job market and on the pace of foreclosures.

The national median price for single-family homes was $172,900 in the fourth quarter, down 4.1% from a year earlier. That was the smallest decline in more than two years.

Among metro areas showing the biggest gains from a year earlier were Cleveland (25%), Akron, Ohio, (23%) and San Francisco (13%). Those increases don't denote a general surge in home values but rather show that sales of foreclosed homes at fire-sale prices made up a smaller percentage of overall sales than they did a year earlier.

Foreclosures dominated some markets a year ago. Nationwide, "distressed property," including foreclosures and homes at risk of foreclosure, accounted for 32% of fourth-quarter transactions, down from 37% a year earlier, the Realtors estimated.

Metro areas showing big price declines included Las Vegas and Ocala, Fla., (both down 23%) and Orlando (down 20%).

For condominiums, the median resale price in the quarter for 54 metro areas surveyed was $177,300, down 4.8% from a year earlier. Eleven of the metro areas showed higher condo prices, and the rest showed declines.

One major worry is that price drops have left many households without any equity in their homes. Homeowners who are "underwater"—owing more than the value of their homes—are more likely to abandon their houses if their incomes fall or they lose their jobs. That would create more foreclosures, weighing on home prices.

At the end of 2009, 21% of households with mortgages on single-family homes owed more than the current value of their homes, according to a new estimate from Zillow.com, a real-estate data provider.

State and federal efforts to avert or delay foreclosures by offering borrowers easier terms have created a huge backlog of unresolved cases, likely to lead to an eventual bulge in the supply of foreclosed homes. As of Dec. 31, about 3.9% of first-lien home mortgages were 120 days or more overdue but still not in the foreclosure process, according to LPS Applied Analytics. That represents about two million households.

Builders Reassess the Market

The NY Times

RIVER VIEWS At Henley on Hudson in Weehawken, work continues on a 27-unit building that is scheduled to open this summer. It is the fifth building there; a sixth structure is expected to be built later.

THE number of new-housing permits issued statewide in 2009 did not even reach 12,000. The last year the tally was that low: 1945, when New Jersey was still mostly cow and corn country.

If the housing crisis was finally over and the overall economy was headed toward recovery, it would still take at least two years for housing starts to recoup, according to market analysts.

“Traditionally, after past recessions, housing starts have doubled within two years,” said Jeffrey G. Otteau, whose Otteau Valuation Group provides advice on state real estate trends. “Because of the severity of this recession, though, there may be lingering wounds.”

Yet even in the face of these sobering numbers, several builders of multifamily projects have forged ahead — some actually building, others planning on it as soon as weather permits.

Their reasons are varied, based on interviews with developers of several large projects. Some asserted that their condominium developments held special appeal despite the general slowdown in sales; others said they had used the “down time” of the economic crisis to reconfigure plans and now felt that they understood the changes in buyers’ requirements.

“We paused our construction process,” said Lisa Macchi, an executive vice president of sales and marketing at Millennium Homes, in discussing Vizcaya, a high-end development rising atop a ridge off Northfield Avenue in West Orange.

In late 2008, Millennium was at work on 40 condo flats and 46 town homes at Vizcaya; as the outlook for the housing market grew increasingly grim, the company decided to create just the “shell” for another 41 condos. On the north side of the development’s huge main structure, it simply laid in foundation and put up first-floor walls.

Then, according to Ms. Macchi, sales were surprisingly strong at the first residences despite the slowdown: About 80 percent of them sold, at an average price of $1.2 million. So the decision to wait was revised. Last summer, Millennium decided to build out the last group of condos.

Construction is set to begin in March. Contracts have already been signed for a dozen of the units that won’t be completed until early next year, she said. The average sales price for those units is now $1.4 million.

By contrast, other developers expressed the belief that demand for top-end dwellings with the most elaborate possible finishes and features has diminished for the foreseeable future.

One of them, David Barry, the president of the Ironstate Development Company in Hoboken, said his company was instead focusing on ways to create “efficient” units — “not overly large, with high amenities, but lower price points.”

Mr. Barry, who shocked some fellow developers by pulling out of the condo construction game three years ago even as the market was still booming, said Ironstate would not get back in before the end of the year.

But the company is proceeding with plans to create about 70 condos at its Pier Village rental-and-hotel development in Long Branch. One idea Mr. Barry says he is considering is a condo conversion of one rental building at the complex.

It is still very hard to get construction financing, he noted, and conversion is less expensive than new construction. Also, the move would be in line with his notion of “efficient” apartments. The rental units are 700-square-foot one-bedrooms and 1,000-square-foot two-bedrooms.

“This could allow an entry-price point of something like $349,000, not $500,000,” he said, “which is more in line with today’s market.”

Mr. Barry said he and his brother Michael, the other principal at Ironstate, were also back at work on plans for the next phase of building at Port Liberté, the Hudson Riverfront complex in Jersey City. “I don’t know if we’ll start going in ’10,” he said, “but we are starting to work with architects again.”

At Henley on Hudson in Weehawken— part of the Port Imperial complex, which stretches into three towns along the Hudson — work is under way on a 27-unit building that is to open in July. It will be the fifth structure at Henley, with condos priced from the mid-$500,000s, for an 881-square-foot one-bedroom, to the $700,000s for certain two- and three-bedroom units. A sixth building is to be built later with the same configurations.

Michael Skea, the director of operations for Lennar Urban’s Northeast Division, which is developing Henley on Hudson in partnership with the Roseland Property Company, said that for the last 18 months the complex had had nothing available under $1 million. Penthouses and four-story town houses there go for more than $3 million.

“We get a lot of visitors who are enamored of the finishes and amenities we offer,” Mr. Skea said, “but they cannot pay prices that high. We wanted to press ahead with providing homes that are affordable to more buyers. ”

K. Hovnanian Homes, a large builder of single-family and condo developments, has several projects that continued to sell at a healthy pace over the past couple of years, said Steven Caporaso, an area vice president. As a result, construction has continued.

The final phase at Hunter’s Brook in Hackettstown, consisting of 21 single-family houses, is now under construction, for example. Eighty homes have sold since the project began marketing in late 2007, Mr. Caporaso said. This last group of houses is priced from $400,000 to the low $500,000s, for three- and four-bedroom homes. “We want to get the remaining homes ready for someone to purchase prior to April 30,” he said. That is the deadline for the federal tax-credit program for first-time buyers.

Job Growth Erodes as Housing Bust Pushes Mobility to Record Low

Bloomberg

Raul Lopez, laid off from three construction jobs since October 2007, is focusing his search for work near Antioch, California, because his $392,000 mortgage is almost triple the price his home there would sell for today.

“If it wasn’t for the house, I’d probably move closer to Oakland, Hayward, San Leandro, places where there are jobs,” said Lopez, 36, who is married with four daughters.

The ability to relocate for employment, which helped the U.S. recover quickly after previous deep recessions, is the latest victim of the housing bust. About 12.5 percent of Americans moved in the year ended March 2009, the second-lowest ever, estimates Brookings Institution demographer William Frey, after a 60-year record low of 11.9 percent the previous year.

Local moves may rise “a little bit” in the 12 months that end this March, with long-distance migration “staying flat,” Frey said. “Both will be below normal levels from earlier in the decade.”

Some households are staying put because they owe more on their mortgages than their properties are worth; others have trouble selling houses in depressed areas, economists say. The S&P/Case-Shiller composite index of home prices in 20 U.S. metropolitan areas was down 29 percent in October from its July 2006 peak.

“One of the hallmarks of America’s labor market is a high level of mobility,” said Joseph Stiglitz, a Nobel Prize-winning economist, in a Jan. 3 interview in Atlanta, where he was speaking to an economics conference. “We are about to lose that.”

Stagnant Workforce

The stagnant workforce may raise the long-term trend rate for unemployment by 1 percentage point and lower economic growth 0.3 percent a year through 2012, said Michael Feroli, an economist in New York for JPMorgan Chase & Co. It has already contributed to keeping the jobless rate as much as 1.5 percentage points higher than would have been suggested by the depth of the recession, Peter Orszag, director of the U.S. Office of Management and Budget, estimated in July.

The U.S. economy shrank 3.8 percent in the 12 months that ended in June, the worst performance since the 1930s. Unemployment reached a 26-year high of 10.2 percent in October before sliding to 10 percent in November. The rate stayed at 10 percent in December, according to the median estimate of 72 economists in a Bloomberg News survey. The Labor Department will release the data on Jan 8.

Pharmaceutical and biotechnology companies have lost potential employees in the past two years as candidates are stuck with houses worth less than their mortgages, said Deborah Coogan Seltzer, a vice president in Atlanta for the Dallas-based executive search firm Pearson Partners International. Some prospects also worry it may take a year or more to sell their homes, even if they have equity in the properties, she added.

Candidates Withdraw

“It’s a constant factor,” Seltzer said. “Conservatively, in at least 70 percent of the searches I’ve worked on in the last 12-to-18 months at least one or two candidates have withdrawn from the process after they’ve investigated their real-estate situation.”

Some companies are allowing recent hires to stay where they are and use a combination of telecommuting and traveling, said Kevin Kelleher, president and chief executive officer of Danbury, Connecticut-based Cartus Corp., which specializes in relocation.

Employers and their prospects are “thinking about assignments or commuting policies rather than picking up the family and moving on,” he said.

Seltzer and Kelleher declined to provide names of specific companies.

Labor-Market Recoveries

The ability and willingness of workers to relocate has contributed to labor-market recoveries following recessions that ended in March 1975 and November 1982, said Mark Zandi, chief economist at West Chester, Pennsylvania-based Moody’s Economy.com. The unemployment rate fell 1.6 percentage points to 7.4 percent in May 1976 from a year earlier and dropped 2.5 percentage points to 8.3 percent in December 1983 from the previous December.

While some economists say the recession that began in December 2007 may have ended last summer, unemployment will fall only 0.8 percentage point to an average of 9.2 percent in 2011, according to a December Bloomberg News survey of 46 economists.

“You don’t have to be a rocket scientist” to know that unemployment will be higher and “the noninflationary speed limit, or what economists call the potential growth rate of the economy, is going to be lower as a result of the housing-related decline in labor mobility,” David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto, said in a Jan. 4 telephone interview.

‘Negative Equity’

Almost 10.7 million homes, or 23 percent of all mortgaged properties, were worth less than the debt owed on them at the end of the third quarter, according to a Nov. 24 report from First American CoreLogic. An additional 2.3 million mortgages are approaching “negative equity” as loan defaults mount nationwide, the Santa Ana, California-based real-estate research company said.

Sixty-five percent of Nevada homeowners owed more than their houses were worth, the highest rate in the nation, according to the report. Arizona ranked second, at 48 percent, followed by Florida, Michigan and California.

States that grew the fastest during the 2002-2006 housing bubble, including Florida and Nevada, are now experiencing reversals in population trends. The number of people in Florida, where unemployment is 11.5 percent, fell 58,294 in the 12 months ended April 2009, the first decline since 1946, the University of Florida Bureau of Economic and Business Research estimated in August.

Can’t Sell

More people might have left if they had been able to sell their homes, said Jack McCabe, president of McCabe Research & Consulting in Deerfield Beach, Florida, which specializes in real estate.

“Loan modifications have been of insignificant help,” he said.

Through November, U.S. lenders had permanently renegotiated about 31,000 of the 4 million mortgages targeted for relief by the Obama administration’s foreclosure-prevention plan.

Housing woes have exacerbated a decline in worker mobility that began in 1951, when 21 percent of Americans moved, according to the Census Bureau. More families now depend on two incomes, which makes moving more complicated, said Peter Francese, a demographic-trends analyst in Exter, New Hampshire, for New York-based advertising agency Ogilvy & Mather Worldwide.

Aging Population

The aging U.S. population also reduces mobility, he said. The largest age group is 45- to 55-year-olds and the fastest- growing segment is 55- to 65-year-olds, both of which have established family and social networks that complicate relocation, Francese said.

Out-of-state moves, usually associated with job changes, remained at a record low 1.6 percent of the population for a second year in the 12 months ended March 2009, Brookings’ Frey estimates.

Anecdotal evidence suggests an even lower rate for the full year. Shipments handled by movers and paid for by individuals in the first half dropped 18 percent from January-June 2008, while employer-paid moves fell 27 percent, according to the American Moving & Storage Association, an industry trade group based in Alexandria, Virginia.

“This is our first national slump caused by a housing bubble and that ties down workers,” said Nobel Prize-winning economist Paul Krugman in a Jan. 4 interview. “It is a transitory thing, but transitory can mean several years.”

Annual Remodeling Report Finds 4 Best Improvements For Selling Your Home

MSN

House prices are still dropping, so it pays to know which upgrades will deliver the best return when you sell your home. An annual remodeling report finds 4 basic replacements are likely your smartest choice.

Remodeling is a better investment in some years than others. This year is among the worst if you’re hoping to recoup much money when you sell, says a newly released report. Homeowners are getting back just 64%, on average, of a project’s cost, compared with 87% in 2005, according to Remodeling Magazine’s 2009-2010 Cost vs. Value report.

Some projects pay back better than others. You get more bang for the buck putting money into a basement or attic upgrade than adding a wing to the house. Some of the highest-return projects include a deck addition and quick, conservatively priced replacements of old siding, entry door or windows. (If you want a different perspective, personal-finance guru Liz Pulliam Weston calls remodeling “a waste of money.”)

The report compiles responses from about 4,000 members of the National Association of Realtors in 80 cities to survey questions about 33 hypothetical projects. “I think what the real-estate agents are saying is you’re taking a big risk if you’re buying these high-ticket items, because the market is slow. Buyers are looking for utility,” says Sal Alfano, the magazine’s editorial director. “They’re not so wowed these days as they were three or four years ago.”

A retreat from overbuilding
Some contractors are dropping their rates to get work, so it might seem a good moment, if you have the money, to do a big, blow-out addition. And maybe it is, if you can keep the house long enough. But today, a high-end master suite remodel, for example, returns just 56% of the cost, on average, compared with 80% in 2005. 

“You’re not seeing the big 750-square-foot additions being put on the side of a house like you were a few years ago,” says Martin Conneely, owner of Conneely Contracting, in Arlington, Mass. “Our biggest (jobs) right now are maintenance replacements (of windows, doors, siding and roofing), basement renovations and moderately priced upgrades in the kitchen and bath.”

Despite widespread talk of falling labor prices among remodelers, the cost of construction overall hadn’t changed much.  Return on investment (ROI) is dropping because, in a market flooded with foreclosures, even if labor costs are dropping, the price of existing homes is at such a discount that anything newly built can’t compete.

The 22-year-old Cost vs. Value survey makes clear that return on investment depends greatly on where you live. The highest payback is in the Pacific region (Alaska, California, Hawaii, Oregon and Washington). There, although costs are double the next-most-expensive region (the Mid-Atlantic, including New Jersey, New York and home remodeling Pennsylvania), high resale values more than compensate.

Peter Michelson, CEO of Renewal Design-Build in Decatur, Ga., cautions homeowners to be aware that projects described and priced in this report can — and often do — cost considerably more than the amounts given.

ROI is better in the West South Central (Arkansas, Louisiana, Texas, Oklahoma), South Atlantic (Washington, D.C., Delaware, Florida, Georgia, Maryland, the Carolinas, Virginia, West Virginia) and East South Central (Alabama, Kentucky, Mississippi, Tennessee) regions.

Residents of the Mountain states (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona and New Mexico) and New England (Maine, Massachusetts, Connecticut, New Hampshire, Rhode Island, Vermont) enjoy average returns.

It’s hardest to make a buck back on your project in the Middle Atlantic, West North Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, the Dakotas) and East North Central (Indiana, Michigan, Ohio and Wisconsin) regions.

The math didn’t always come out so poorly. As recently as 2005, few homeowners bothered to figure out if their plans meant overbuilding for the neighborhood, Alfano says. They just commissioned the work they wanted and assumed prices would rise to cover their costs.

They were largely correct until 2006, when payback began shrinking along with the scale of jobs that homeowners were undertaking. “The projects that were evaluated as having the most return were not kitchens and baths so much anymore. All of a sudden it was these exterior replacements: roofing, siding and windows,” Alfano says.

It was the beginning of the end of the housing boom. “Today, resale value has come to the forefront. People are much more conscious of building for the neighborhood, and they’re worried about their mortgage rates and their jobs.”

Basic replacements rule
As a group, low-cost replacements — new siding, windows, doors and roofing — deliver the best bang for the buck now, a considerably better payback than from a two-story remodel or a kitchen remodel.

Given great improvements in materials, you can replace your inefficient 10- or 15-year-old products with highly efficient ones for a decent return when you sell. In addition, the improvements help you save on heating and cooling bills. Replacing leaky windows with highly efficient newer ones is a good example. The technology behind the glass and frames has so improved that you’re tightening up your home’s weatherproofing in the process. You get more comfort and, from the real-estate agent’s point of view, new windows show off your house from the street.

Replacement projects included in the Cost vs. Value survey all cost less than $20,000 and most cost considerably less. They instantly enhance curb appeal, boosting a home’s marketability, and they require little maintenance once installed - all of which are better prospects than with a home addition. A bonus: Most of these replacements qualify for a federal tax credit for energy efficiency (not included in Remodeling Magazine’s ROI calculations).

1. Replace the front door.

    * The absolute best return on the money of any of the projects surveyed — 129% of cost — is gained by replacing a beat-up front door with a $1,200 steel-shell door filled with foam insulation.
    * A new fiberglass door (more expensive, at $3,490) returns less, about 65%. (Fiberglass is the new chic building material because it’s rugged and durable, can be painted and will mimic almost any wood. Unlike wood, it doesn’t crack, warp or shrink and needs zero maintenance.)
    * Spend about $7,500 on an entire new entrance, including a widened opening, a solid-core wood door and high-end glass, new lighting and better locks, and you’ll recoup 69%, on average.

2. Replace home siding

    * Replacing old siding with a durable fiber-cement product ($13,287) recoups about 84% at resale.
    * Use vinyl siding ($10,607) to get an 80% return.
    * Foam-backed vinyl ($13,022) costs more and earns back less — roughly 79% — but it is much more efficient at insulating a home.

3. Replace windows. Three of the four window-replacement projects considered in the survey pay back about 77%:

    * Wood-trimmed windows ($11,700).
    * Lower-end vinyl windows ($10,728).
    * Windows trimmed in higher-end vinyl ($13,862).
    * The fourth project, higher-end wood-replacement windows ($17,816), has a return of about 72%. Fiberglass windows weren’t included in the study.

Replace the roofing: Spend $19,731 on new fiberglass asphalt shingles and you’re likely to recoup about 67% of the cost.

    * A higher-end roof replacement using standing-seam metal ($37,359) pays back about 61% of the cost, agents told the survey.

Additions aren’t cost-effective
Except for a new deck, which pays back nicely, adding to a home’s footprint brings a poor return these days. There are better ROIs for Raleigh real estate.

A new deck
    * Wood is high-maintenance, but homebuyers love it: A new wood deck ($10,634) returns 81%.
    * New outdoor decks of midrange composite planks ($15,373) return around 71% of the cost at resale.
    * A higher-grade composite ($37,745) brings an ROI of about 61%.

Other additions
    * Adding a 200-square-foot sunroom ($73,167) recoups 51%. [Find a Sunroom Builder in Grand Rapids Michigan]
    * A high-end ($225,995) master suite project, adding 640 square feet to the house, including a bath with walk-in shower and stone walls, brings a 56% return.
    * A less ambitious, less costly ($103,696), 640-square-foot master suite addition including whirlpool bath and ceramic tile recoups 65%.
    * A garage addition ($87,230) earns back about 56%.
    * A high-end bathroom addition ($75,812) earns about 58% at resale.
    * Adding a midrange, 6-by-8-foot full bath ($39,046) recoups about 60%.
    * Add a midrange two-story wing ($156,309) to the house, including 24-by-16-foot first-floor family room and second-floor bedroom and full bath, for a return of about 69%.
    * A midrange family room addition ($82,756) returns around 65% of the cost.
    * Adding a sunroom or home office were the projects that yielded the least payback, presumably because these special-purpose rooms appeal to fewer buyers and are in less demand.

Best use of the money (besides replacements)
Upgrading existing space, such as a bathroom remodel, is the best bet for recouping cost. It makes sense: Pouring a foundation, framing a structure and bringing in electricity and plumbing are among the most expensive aspects of a building project. When you can largely skip these steps and increase your usable space, the payback is richer:

    * An attic conversion, including a 15-by-15-foot bedroom with dormer and a 5-by-7-foot bath with shower ($49,346) returns comparative gold: 83% return, on average. Agents in several cities said this job would return more than 100%.
    * A basement ($62,067) remodel —a 20-by-30-foot entertainment room and 5-by-8-foot full bath — recoups about 75% of its cost.
    * A midrange 5-by-7-foot bathroom remodel ($16,142) with standard fixtures and trim has a 71% ROI.
    * Expanding that bathroom to 100 square feet ($52,295), including moving plumbing and wiring and adding higher-end cabinets and fixtures, brings a 62% ROI.

Kitchens and baths: Scaled back but ever popular
High-end kitchens and baths are fading in popularity, replaced by “very practical things,” Michelson says. “The $400,000 and $500,000 jobs are few and far between. The jobs between $50,000 and $200,000, we’re doing lots of those.”

Bath and kitchen remodeling hasn’t stopped, since these projects maximize the enjoyment of the most-used spaces in a home. But “people are definitely being smarter with their money,” Conneely says. “For instance, a $75,000 remodel five years ago? That same client would today spend $50,000.” People who blithely bought the best of everything now pursue the same look by choosing materials judiciously.

    * A minor kitchen upgrade ($21,411) installing new cabinet fronts, laminate counters and other cosmetic improvements is a decent investment, at 78% ROI.
    * A major kitchen remodel ($57,215) using midrange materials — semi-custom cabinets and laminate counters — pays back about 72%.
    * A high-end major kitchen remodel ($111,794) with top-of-the-line cherry cabinets, stone counters, glass backsplash and expensive, built-in appliances, pays back just 63%.

10 Questions Regarding The Housing Market

The Wall Street Journal

The U.S. housing market has been in a slump for the past four years. When will it ever end?

In recent years, real estate has proven as jittery and unreliable as any other market. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has fallen about 30%. The drop has been 53% in the Las Vegas metropolitan area and 39% in Miami, where about a quarter of all households with mortgages are behind on their payments or in foreclosure. The value of your home might be determined more by whether the neighbors keep their jobs than whether the house has ample light and closet space.

Here is a guide to navigating a fractured and volatile market:

1. Is the housing market getting better?

It has shown some signs of healing this year, but the much-touted recovery is tentative and fragile.

Home sales have increased from the severely depressed levels of 2008. The inventory of unsold homes listed for sale also is down. Bidding wars are breaking out for foreclosed homes in the sorts of neighborhoods (near jobs and decent schools) that attract both first-time buyers and investors seeking rental properties.

But more than 6.7 million U.S. households with mortgages, or about 13%, are behind on their payments or are in the foreclosure process, according to the Mortgage Bankers Association. Eventually, many of them will lose those homes, sending more supply onto the market. Unemployment has continued to rise, and the housing market is unlikely to show a sustained recovery until job growth resumes.

While the supply of middle-class homes on the market has declined somewhat, it remains ample in most places. And there is a huge glut of high-end houses for sale in many areas. That means prices of high-end homes might still have a long way to fall.

2. When will housing bottom out?

There probably won't be any clear turning point. Monthly indicators, such as home sales and prices, tend to bounce erratically from month to month, making it hard to discern the underlying trend. And the housing bust will end at different times in different places. House prices already might have bottomed out in the coveted Virginia suburbs with short commutes into Washington, D.C., for instance. But it probably will be years before all of the unsold condos find buyers in parts of Florida.

Generalizations about states or metropolitan areas don't say much about what is happening in your neighborhood. In Summit, N.J., known for good schools and an easy, 45-minute train commute to Manhattan, the median home price in September was up 1.2% from a year earlier, according to Otteau Valuation Group, an appraisal company. In Atlantic City, N.J., which suffers from too much speculative building of condominiums and weak demand for vacation homes, the median price is down about 12% from a year ago.

3. What signals should I watch to determine whether my local market is improving?

One way to get a sense of supply is to ask a good local real estate agent for stats on how many homes are listed for sale in your town and how many months it would take at the current sales rate to absorb that supply. Anything over about six months generally is considered high, meaning that sellers might have to cut prices. Another way to get a sense of a neighborhood's health is to count the number of for-sale signs and vacant houses. If there are more than a couple vacant homes in a block, that might be a bad sign, particularly if no one is taking care of them.

The supply of homes listed for sale has fallen very sharply in some areas. But the supply is likely to balloon again in many areas with a renewed surge in foreclosures. Many local newspapers provide information on foreclosure filings.

Demand depends heavily on the job market. The U.S. Bureau of Labor Statistics provides unemployment rates by metropolitan area. In September, they ranged from 2.9% in Bismarck, N.D., to 30% in El Centro, Calif. State and local agencies provide job-market data, too. Celia Chen, a housing economist at Moody's Economy.com, says help-wanted signs can be a useful local indicator; if you start seeing more of them around your neighborhood, that is a sign that business in your area could be starting to recover.

4. How can I figure out the value of my home?

You never know for sure what a home will fetch until you put it on the market, and then it is partly a matter of luck. Will the eager buyer who shares your taste in home style and neighborhood show up on day one or day 200?

Some Web sites -- including Zillow.com, HomeGain.com and Cyberhomes.com -- provide estimates of individual home values. These estimates are largely based on recent sales of nearby homes, and in some cases they are wildly off the mark. But they often provide a ballpark idea of a home's value.

You might come closer to the real value by talking to a local agent and looking at recent prices for homes that you know are very similar to yours. If you want to be more scientific and don't mind paying a few hundred dollars, hire a professional appraiser.

5. Does it matter whether I'm "under water"?

At least you have plenty of company. About 20% of owners of single-family homes with mortgages owe more than the current estimated value of their homes, according to Zillow.com.

If you can afford your monthly payment and don't need to move soon, that might not be a big problem. But it is hard, and sometimes impossible, to refinance a mortgage if you are under water, and you will take a bath if you have to sell the home now. Some people who can afford to make their monthly mortgage payments are deciding it doesn't make sense to do so because they don't expect their home values ever to recover to past peaks, and they could rent similar houses for much lower monthly costs.

6. If I lose my home to foreclosure, how long will it take to repair my credit record?

It probably will be three to five years before you can qualify for a home mortgage insured by the government, depending on your circumstances, and that assumes you have re-established a record for paying your bills on time. The foreclosure will remain a blot on your credit record for seven years, likely raising your interest costs even if you do get another loan. If you pay bills on time, keep your credit-card balances low and don't apply for too many cards, you can make a "slow, gradual improvement" in your credit score, says Tom Quinn, a vice president at Fair Isaac Corp., which provides tools for analyzing credit records.

7. If I'm renting, is now a good time to buy a house?

It may well be. Prices in most areas are well below their peaks, even if they haven't hit bottom. Don't kid yourself that you can time the bottom of the market perfectly. But don't feel any pressure to buy in a hurry, because the supply of housing is likely to remain ample for years in many areas.

Generally, it doesn't make sense to buy unless you expect to remain in the house for at least four or five years, because the transaction costs -- including commissions for real estate agents and mortgage fees -- are heavy.

But now is clearly a good time to rent. Many landlords need tenants badly. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. So landlords are cutting rents and offering such sweeteners as free flat-screen televisions or several months of free rent to retain or attract tenants. Some owners of condos will "cut their throats to get some kind of rental income to cover part of their expenses," says Jack McCabe, a real estate consultant in Deerfield Beach, Fla.

8. Can I get a tax credit if I buy a home now?

Under an expanded and extended program approved by Congress earlier this month, tax credits are available to many people who buy or sign a contract to buy a principal residence by April 30 and complete the purchase by June 30. The tax credit is up to $8,000 for first-time home buyers and $6,500 for people who already have owned a home for at least five consecutive years during the previous eight years. The credit is available for individual taxpayers with annual incomes of up to $145,000 or joint filers with incomes up to $245,000.

9. Can I get a mortgage on attractive terms?

Only if you have a good credit record, a moderate amount of debt in relation to your income and the ability to fully document your income. That last requirement is fairly easy for people who work for a salary and have had the same employer for more than two years, but it can be tough for self-employed people with incomes that vary substantially from year to year.

A borrower with a strong credit score of 740 or higher (on the scale of 300 to 850) and the ability to make a down payment of at least 20% could get an interest rate of about 5% with no origination fees on a 30-year fixed-rate mortgage, says Lou Barnes, a mortgage banker in Boulder, Colo. But if your credit score is 680, the rate jumps to about 5.5%.

People who can't make a down payment of at least 20% generally are being funneled into loans insured by the Federal Housing Administration. That means paying extra fees for the FHA insurance.

Borrowing costs are steeper at the high end of the housing market. For so-called jumbo loans -- those above $729,750 in areas with the highest housing costs or $417,000 in places with the lowest costs -- interest rates on 30-year fixed-rate mortgages last week averaged 5.95%, according to HSH Associates, a financial publisher.

10. Should I invest in foreclosed homes?

Probably not. A lot of investors chase these properties, and only the most experienced know how to deal with all of the pitfalls. Homes auctioned at trustee or sheriff sales are sold on an as-is basis, and there is no provision for an inspection before you take ownership. If after buying you find out that termites have been treating the floor joists as an all-you-can-eat buffet, that is your problem. You must pay for the full price within a day or two, so you need a lot of cash or access to special short-term loans for investors that come with interest rates of around 18%. This is a pursuit best left to people with a lot of time, nerve, cash and knowledge of the local market.

New Home Sales Highest Since 2008

Bloomberg

Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired.

Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low.

Rising demand shows the administration’s incentive for first-time buyers, which earlier this month was extended into next year and expanded to include current owners, may help housing recover from the worst slump since the Great Depression. Home values may remain under pressure as builders are forced to compete with mounting foreclosures as unemployment climbs.

“We are getting some help from the Federal Reserve in terms of low rates, lower prices and of course the tax credit,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. “People are coming off the fence and getting into the market. We have seen a bottom. I’m pretty confident that the turn in the housing industry is behind us.”

Sales were projected to climb to a 404,000 annual pace from an originally reported 402,000 rate in September, according to the median estimate in a Bloomberg survey of 75 economists. Forecasts ranged from 350,000 to 425,000. The government revised September’s reading up to 405,000. Commerce Department also said.

U.S. stocks rose after the report. The Standard & Poor’s 500 Index increased 0.2 percent to 1107.66 at 10:36 a.m. in New York.

Sales in the South

The entire increase in sales was in the South, while the other three U.S. regions registered a decline.

“The South is the largest region by size, accounting for over 50 percent of new home sales, so that the gain is still significant, even though a broader improvement would have been more favorable,” Ryan Wang, an economist at HSBC Securities USA Inc. in New York, said in a note to clients.

The median price of a new home in the U.S. decreased to $212,200, from $213,200 a year earlier.

Sales of new homes were up 5.1 percent from October 2008, the first year-over-year gain since November 2005.

Inventories dropped. The number of homes for sale fell to a seasonally adjusted 239,000, the fewest since May 1971. The supply of homes at the current sales rate decreased to 6.7 months’ worth, the lowest level since December 2006.

Timely Indicator

While accounting for less than 10 percent of the housing market, new-home purchases are considered a timelier indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier.

President Barack Obama this month extended the $8,000 tax credit for first-time homebuyers until April 30 from Nov. 30, and expanded it to include some current homeowners.

Borrowing costs may stay low as Fed policy makers have signaled they will hold the benchmark interest rate near zero for an extended period.

“The housing sector continued to recover, on balance,” central bankers said in minutes of the Nov. 3-4 meeting released yesterday.

Lower rates and stimulus efforts are reviving demand. Existing home sales jumped in October to the highest level since February 2007, the National Association of Realtors reported this week.

Tax Credit

The timing of the tax incentive’s extension indicates existing home purchases may jump again this month, decline in December and early 2010, before picking up again, the Realtors group said this week.

The erosion in prices is also abating, the S&P/Case-Shiller home-price index showed yesterday. Home prices in 20 cities rose in September from the prior month, the fourth straight gain. Compared with September 2008, the gauge had the smallest year- over-year decline since the end of 2007.

The labor market needs to turn around to ensure a sustained rebound in housing, according to economists. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will exceed 10 percent through the first half of 2010, a Bloomberg survey showed.

Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data.

Home Improvement

Companies seeing signs of stability include Home Depot Inc., the largest U.S. home-improvement retailer. The Atlanta- based company’s third-quarter profit beat the average estimate of analysts as it slashed costs, and the chain gained market share.

Home Depot “continued to see signs of stabilization in the markets that were hardest hit by the housing crisis,” Chief Executive Officer Frank Blake said on a conference call with analysts on Nov. 17. “Despite this positive momentum, caution is appropriate.”

Housing Sales Up 17% In Triangle Housing Market

Triangle Business Journal

For the first time in more than a year, the Triangle residential market made a monthly gain in the number of homes sold, with 17.6 percent more homes sold during October compared to the year prior,

Market watchers say the data signifies a major turning point in the local housing economy.

In the Triangle, 2,009 homes were sold in October compared to 1,709 homes sold the same month the year prior, according to Triangle Multiple Listing Service. Triangle MLS tracks new and existing home sales data in Wake, Durham, Orange and Johnston counties.

The dollar volume of homes sold last month also grew, by 8.3 percent, to $441.8 million in October compared to $407.9 million in homes sold the year prior. That’s the first gain in sales volume since October 2008, says residential real estate analyst Stacey Anfindsen.

“We’ve hit the floor, and at least we know how low we can go – hopefully -- and operate our business off of that,” Anfindsen says.

Anfindsen gave two reasons the market improved. First, the federal $8,000 first-time home buyer tax credit program, which expires at the end of November, helped convince many buyers who were on the fence to take the plunge. The federal government since has instituted another tax credit program that offers a $6,500 tax break to qualified homeowners looking to move up to middle-market homes that cost no more than $800,000.

Second, home sales in the Triangle started their free-fall in late 2008, so the market today is in comparison to one of the slowest housing markets in decades.

“October, November and December should be really good because everything kind of shut down this time last year,” Anfindsen says. “We’ll probably see the market grow 5 to 10 percent and have nice comparisons until about February when we will see it start to normalize.”

All is not well, though. The average Triangle home sale price was down by 8 percent in October compared to October 2008, and it took four more days on market to sell than the year prior. But the inventory of homes for sale also declined, by 13 percent, and the number of new listings including Raleigh real estate declined by 2.5 percent, meaning there is less competition for the homes on the market for sale.

In Wake County, 1,141 homes sold in October compared to 967 home sales the year before, which is an 18 percent increase. Total dollar volume of homes sold in the county was $270 million, which was up by 5.5 percent from the year prior.

In Durham County, 269 homes sold in October compared to 210 homes sold the year before, which is a 28 percent increase. Total dollar volume of homes sold in the county was $52 million, which was up by 23.4 percent from the year prior.

In Orange County, 91 homes sold in October compared to 62 homes sold the year before, or a 47 percent increase. The total dollar volume of homes sold in the county was $28.3 million, which was up 43 percent from the year prior.

In Johnston County, 193 homes sold in October compared to 176 homes the year before, or a 9.7 percent increase. Total dollar volume of homes sold in the county was $32 million, which was up by 5 percent from the year prior.

Current Market Trends

Story from the Press Democrat

The real estate industry is full of clichés and metaphors, for example: “location, location, location,” “a wave of foreclosures is about to hit the market,” “are we at the bottom of the market?” and “interest rates are the lowest they’ve been since the Macedonian Period!”

These clichés and metaphors are spewed out more frequently than the phrase “bailout” flashes across the ticker on Fox News, MSNBC and other media conglomerates who attempt to shape our economic thought process and buying habits. The million-dollar question: “Is this the right time to buy real estate?”

Although we can’t look into the future and give an accurate answer to that question, we can look at history and trends.

According to Kiplinger’s Personal Finance, “It’s a good time to snag a bargain if you’re confident in your job prospects and you don’t plan to sell for at least five years.” Over the past decade, real estate lost its way. Real estate was typically purchased to have a place to call “home” and raise a family or create lifelong memories. However, when real estate rose faster than a kindergartner’s hand when asked by their teacher “who wants a cookie?” real estate became a commodity and the American dream of owning a home changed overnight to an appreciation feeding frenzy.

Consumers thought it was their right to gain 20 percent appreciation year after year until they were ready to sell and retire from the proceeds or refinance with a less risky loan and take cash out for exotic vacations, vehicle and boat purchases or trips to the local home improvement store where homes were transformed from an outdated and sometimes unlivable dwelling to the neighborhood Taj Mahal.

With all of that aside, it does seem like now is a good time to buy real estate. In fact, according to Forbes.com, the number one item on their list of things to buy before the economy improves is housing. “This may be the best time in a generation to buy a home.”

The Pew research center reported that 75 percent of Americans said it was a “good” or “very good” time to buy (people-press.org). The Wall Street Journal reported that median home prices in the San Francisco Bay Area are up 9.2 percent year-to-date and MSN Money.com/Case Shiller posted the following statistics regarding return on investment from Jan. 1, 2001 through Dec. 31, 2008: The Dow Jones down 19.8 percent, the S&P down 35.2 percent, the Nasdaq down 59.9 percent and real estate up 69.8 percent.

I am often told by consumers that they’re waiting for the market to go down even more before they decide to buy. However, keep in mind that if homes decrease another 10 percent, you’ll save $50,000 on a $500,000 purchase, but if interest rates increase by more than 1 percent it will offset the $50,000 you saved on your purchase price and your monthly cost will increase.

USA Today is currently estimating that California’s excess supply of homes will be substantially depleted and new construction will be needed to meet demand, thus leading to a housing recovery. Over the past six years, 30-year mortgage interest rates have hit historical lows on five different occasions, followed by quick and dramatic increase in rates as reported by the Federal Reserve.

Again, one cannot predict the future, but with data and statistics one can be informed and make an educated decision. Our market place (especially homes priced under $400,000) is very competitive. Buyers in this price range are often bidding against multiple offers, homes are selling for above asking price and inventory is very low — all creating a demand for a supply that has decreased dramatically. It is a good time to buy, so contact a real estate professional, get pre-qualified with a loan officer and let the shopping begin!

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.