New home sales plummet to record low

NEW YORK (CNNMoney.com) -- New home sales plummeted to a record low in May, the first month following the expiration of the homebuyer tax credit. This snapped a two-month streak of gains.

New home sales declined 32.7% to a seasonally adjusted annual rate of 300,000 last month, down from an downwardly revised 446,000 in April, the Commerce Department reported Wednesday. Sales year-over-year fell 18.3%.

This is the slowest sales pace since the Commerce Department began tracking data in 1963. The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.

"We expected a slowdown, but the extent of this decline was a surprise," said Anika Khan, an economist at Wells Fargo. The figure was even worse than her relatively pessimistic forecast of an annual rate of 380,000 in May.

A consensus of economists surveyed by Briefing.com had expected May sales to slide to an annual rate of 430,000.

"Clearly, the lack of a tax credit had a lot to do with it, and it's going to be a bit of a bumpy road ahead as we get a few more months of payback," Khan said.

Home sales had surged in March and April as homebuyers scrambled to sign contracts ahead of the April 30 deadline for the tax credit. First-time homebuyers qualified for a tax credit up to $8,000, while repeat buyers could get as much as a $6,500 break.

Homebuyers have until June 30 to close deals, but the Senate may vote to push that deadline back to Sept. 30.

Khan expects home sales to remain depressed through the third quarter as home construction continues to contract and lending standards remain tight. But, she said, sales should pick up slightly in the fourth quarter.

Although, she added, we are still years away from a normal level of new home sales -- an annual rate between 800,000 and 900,000.

"A full housing recovery is contingent on employment," Khan said. "When we see the unemployment rate abate, and some growth in salaries and incomes, we'll get some sustainable momentum in the housing market."

A real estate industry report released earlier this week showed that existing home sales, based closed sales rather than signed contracts, slipped slightly last month but remained elevated.

An estimated 213,000 new homes were for sale at the end of May, the lowest inventory level in more than 40 years.

Still, at the current sales pace, the government expects it will take 8.5 months to sell through that inventory, up from 5.8 months in April. Six months of inventory is considered normal market conditions.

Sales by region: Sales fell the most in the West, where they decreased by more than 50%; the Northwest saw sales declined by about a third. Sales in the South and Midwest declined by about 25%.  

• Of the nation’s 384 MSAs (metropolitan statistical areas), 356 had a declining risk score, with only one showing a slight increase and the remainder unchanged.
• The number of MSAs in the riskiest category fell by 26.4 percent during the fourth quarter.
• The number of MSAs in the least-risky category increased 26.5 percent.

• Columbus, Ohio
• Pittsburgh
• Memphis
• Charlotte, N.C.
• St. Louis
• San Antonio, Texas
• Kansas City, Mo.
• Nashville, Tenn.
• Chicago-Naperville
• Indianapolis

Source: PMI Mortgage Insurance Co.

• The PHSI in the Northeast declined 3.3 percent to 75.1 in March, but remains 27.2 percent higher than March 2009.
• In the Midwest the index increased 1.2 percent to 98.9 and is 18.5 percent above a year ago.
• Pending home sales in the South jumped 12.7 percent to an index of 121.2, which is 28.3 percent higher than March 2009.
• In the West the index rose 1.9 percent to 99.9 and is 8.8 percent above a year ago.

“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”

 Source: NAR

Home Sales Surge in Southern Cities

By THE ASSOCIATED PRESS

Published: April 22, 2010

Filed at 2:31 p.m. ET

MIAMI (AP) -- March home sales climbed nearly 19 percent in the South as buyers scrambled to claim federal tax credits and take advantage of affordable prices.

There were 160,000 sales of previously occupied homes last month in the South, which also saw prices increase more than 5 percent to $154,800, the National Association of Realtors said Thursday. The last time prices rose in the South on a year-over-year basis was June 2008.

Nationally, sales of previously occupied homes rose nearly 20 percent from March last year to a non-seasonally adjusted mark of 427,000. The median home price was flat at $170,700.

Low interest rates and the looming expiration of two tax credits at the end of April attracted more house hunters. First-time buyers are eligible for a tax credit of up to $8,000, and current homeowners who choose to buy and relocate can get up to $6,500.

When the government incentives end some experts think the housing market's recovery will stumble. But others argue that there are enough potential buyers to keep the market active.

Foreclosure sales, high unemployment and tight lending standards remain obstacles to a steady recovery. Foreclosures continued to stream into some Southern markets.

''Foreclosures are selling quickly, especially in the lower price ranges that are attractive to first-time home buyers,'' said Lawrence Yun, chief economist for the Realtors' group.

In the South, sales increased in 18 of 19 Southern metro areas covered by the Associated Press-Re/Max Monthly Housing Report, also released Thursday. Sales were nearly flat in New Orleans, which is still feeling the effects of Hurricane Katrina.

Median sales prices rose in 8 of the 19 Southern cities covered by the AP-Re/Max report, which analyzes sales transactions in the metropolitan statistical areas recorded by all real estate agents, regardless of company affiliation.

The Texas metro areas of Dallas-Fort Worth and Houston, two markets which didn't see much of a pricing bubble during the housing boom, had the largest median sales price increases of the Southern cities covered by the AP-Re/Max report.

Prices rose nearly 6 percent in Dallas-Fort Worth to $148,00, and existing home sales climbed 6 percent compared with last March. In Houston, March sales increased 10 percent, and prices increased 4 percent to $153,000.

Real estate agent Mike Bowman said the tax credits, low mortgage rates and prices that remain affordable are creating a sales environment in Dallas-Fort Worth that's ''as good as you are going to get.''

''When people are optimistic about everything, then they are going to spend money, and that can only help the economy,'' said Bowman, president of Century 21 Mike Bowman Inc. in Grapevine, Texas.

While Congress seems reticent to extend the tax credits, Bowman said he wants lawmakers to consider it.

''That would give us enough momentum to carry on through the rest of the year and into 2011,'' Bowman said.

In Florida, home sales in Orlando jumped 42 percent, the highest year-over-year sales increase among the Southern cities covered by the AP-Re/Max report.

Foreclosures and overbuilding, which created high inventory, have pushed prices down in the central Florida metropolis. The median sales price in Orlando was just $111,000, down 18 percent from March 2009, the AP-Re/Max report.

Condos and houses are selling for less than half of what they were going for several years ago, said Orlando-area real estate agent Dana Hall. Houses located near Walt Disney World that once sold for $300,000 are now selling for around $90,000 in some areas, Hall said.

Meanwhile, more international buyers took advantage of favorable currency exchange rates to snare low-priced properties.

One of Hall's clients from the United Kingdom bought a two-bedroom, condo with a balcony for about $80,000 in Celebration, Fla.

The condo, a bank-owned foreclosure that was previously purchased for about $200,000, received multiple offers.

''Buyers now are getting steals,'' said Hall, owner of Century 21 Premium Properties in Celebration.

New-home sales rise fastest in 47 years

NEW YORK (CNNMoney.com) -- New home sales improved in March at the fastest single-month rate in 47 years, according to a government report released Friday, as buyers snatched up properties ahead of the tax credit that's set to expire.

New-home sales rose 26.9% to a seasonally adjusted annual rate of 411,000 last month, compared to an upwardly revised annual rate of 324,000 in February, the Census Bureau said. The gain snapped a four-month streak of declines.

The March sales were the strongest since last July, and the percentage gain was the biggest on a month-over-month basis since a 31% gain in March 1963.

New-home sales spiked in every region of the United States. The South saw the biggest jump in new home sales, up 43.5%, while the Northeast region saw sales climb 35.7%. The West and Midwest regions both saw single-digit percentage growth, with the West up 6% and the Midwest up 4%.

"It's obvious that homebuyers are rushing in to take advantage of the tax credit that's set to expire," said Robert Dye, senior economist for PNC Financial Services.

In November, the government extended and expanded an $8,000 tax credit, which also allows some repeat buyers to qualify for a $6,500 credit. Buyers have until April 30 to qualify.

Dye expects to see continued strength in April's data before "tailing off" through the summer as the group of buyers who rushed in are "all spent out."

The Census Bureau estimated that 228,000 new homes hit the market in March. At the current sales rate, it would take 6.7 months to sell through that inventory, down sharply from an estimated 9.2 months of inventory in February.

"It's a very good sign to see [the March inventory] number down," said Dye. "But this needs to tighten up more to see upward pressure on prices."

The average price of a new home was $258,600, according to the Census Bureau. That was virtually flat compared to a year earlier, and 12% below average prices in 2008.

A precarious jobs market continues to threaten the housing market. Dye expects the April unemployment rate to dip to a still-high 9.6% from March's 9.7% when data are announced May 7.

"Firming house prices and an improving jobs market will make recovery felt on Main Street as well as Wall Street," said Dye. "We're headed in the right direction."  

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Developer Opportunity Possible 8-9 Lots

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CHARMING 3 BED 2 BATH RANCH

• 1,092 sq. ft., 2 bath, 3 bdrm single story "RANCH" - MLS® $189,900 - GREAT HOME FOR THE MONEY

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IF  ARE STILL ON THE FENCE ABOUT BUYING A HOME NOW IS THE TIME. THE MARKET IS RECOVERING AND THE HOME PRICES HAVE BEGUN TO STABLIZE. Now is the time to buy before the prices start to go up again. Dont miss the chance to receive that first time home buyer credit of $8000 or the repeat home buyer credit of $6500. There are certain qualifications so check the federal guidlines to make sure you qualify.

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Mortgage Rates Improve, Stocks Fall

While the economic data released this week had little impact, mortgage rates were heavily influenced by two big stories. One was an announcement that China will take steps to slow its economic growth and the other was President Obama's proposed new restrictions on the activities of financial institutions. Both measures are expected to lead to slower economic growth in the US, which hurt the stock market but helped fixed income markets. As a result, mortgage rates ended a little lower.

During the week, China released a report showing that its Gross Domestic Product (GDP) grew at an 8.7% pace in 2009. Rapid growth generally leads to higher inflation. In an effort to slow its economy and prevent inflation, China announced that it is going to curb bank lending. China currently has the third largest economy and is responsible for a significant percentage of global economic growth, so the effects of a slowdown in China will be felt around the world. In the US, President Obama proposed to limit the size and activities of large banks to reduce the risks to the financial system as a whole. If passed by Congress, this too would lead to slower growth for many large US financial services firms. The potential for slower economic growth and the resulting reduction in inflationary pressures was favorable for mortgage rates.

To build capital and reduce risk, the FHA announced that it will raise insurance rates and tighten credit score requirements. The major changes include increasing upfront premiums from 1.75% to 2.25%, reducing the maximum seller contribution from 6% to 3%, and increasing the level of FICO scores from 500 to 580 below which a down payment of 10% is required. At this point, the expected timing of the upfront premium increase will be in the spring, and the other changes will take place over the summer.

Ten Inexpensive Ways to Wow Buyers
Now is the time for home owners contemplating a spring sale to spruce up their properties in anticipation of what Mike Larson of Weiss Research calls a potentially vibrant home-selling season. "If you have been beating your head against a wall, this is going to feel a lot better,” he jokes.

Here are 10 cheap ways to make a property more attractive to shoppers.

1. Improve first impressions. Touch up the paint on the front door and other areas that buyers see first.
2. Clean up the landscaping. Trim the hedges and trees and plant some annuals in the flowerbeds.
3. Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean.
4. Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned.
5. Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed.
6. Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling.
7. Improve energy efficiency. New windows or improved insulation tell a potential buyer the seller is on top of things plus they come with tax benefits.
8. Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression.
9. Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel.
10. Tidy up the bathrooms. Get rid of mildew, replace caulking and replace stained sinks.

1. Boston-Cambridge-Quincy, Mass.
2. Charlotte-Gastonia-Concord, N.C.-S.C.
3. Chicago-Naperville-Joliet, Ill.-Ind.-Wis.
4. Cincinnati-Middletown, Ohio-Ky.-Ind.
5. Denver-Aurora-Broomfield, Colo
6. Minneapolis-St. Paul-Bloomington, Minn.-Wis.
7. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
8. Portland-Vancouver-Beaverton, Ore.-Wash.
9. San Francisco-Oakland-Fremont, Calif.
10. Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.