Posts Tagged ‘Chief Economist’
Home Sales Contracts Rise, But Cancellations Run High
The chief economist at the National Association of Realtors said he was baffled by it, but ask any agent working the nation's neighborhoods, and they'll tell you it is all about confidence and financing—specifically, a lack of both.
Government, Fannie Mae Considering Help for Housing Investors
Multiple sources now tell me that the Administration is considering ways to get more investors into the housing market, possibly with the help of Fannie and Freddie. HUD would not confirm that, but Fannie Mae's chief economist Doug Duncan said it is definitely on the table both at HUD and at Fannie.
Is the Mortgage Market Too Tight? Or Just Right?
The message from the National Association of Realtors today, or at least from its chief economist as he released lackluster sales results for October, is that the mortgage market is now largely to blame for the lack of real recovery in housing.
Sales of foreclosure properties on the rise
Foreclosures accelerated in the second quarter, driving down home prices and accounting for nearly half of all sales in several states. Nationally, homes sold at foreclosure accounted for 24 percent of all residential sales in the second quarter of 2010, RealtyTrac reports. The average price of properties sold while in some stage of foreclosure was more than 26 percent below the average for properties not in the foreclosure process. “It’s obvious foreclosures remain a major drag across the U.S.,” says Robert Dye, senior economist at PNC Financial Services Group. “Pioneering buyers with low mortgage rates will continue to take advantage of these properties. It’s going to take quite awhile to work through this inventory. It will take a few years, not months.” A total of 248,534 U.S. properties in some stage of foreclosure – default, scheduled for auction or bank-owned – were sold to third parties in the second quarter. That’s up almost 5 percent from the first quarter, but down 20 percent from second-quarter 2009. Some states were especially hard hit. Foreclosure sales accounted for nearly 56 percent of all sales in Nevada in the second quarter, the highest percentage of any state. Ranked second was Arizona, where foreclosure sales accounted for 47 percent of all sales. In California, 43 percent of sales were foreclosure properties. Other states where foreclosures were large shares of all sales were Rhode Island, 37 percent; Massachusetts, 35 percent; Florida, 34 percent; and Michigan, 33 percent. The uptick in foreclosures comes despite a federal effort to help homeowners struggling to retain their homes get modified mortgages with more affordable payments, as well as efforts by lenders to reduce payments for some borrowers. “It’s clear this will be with us for some time,” says Lawrence Yun, chief economist with the National Association of Realtors. Foreclosures used to be rising because so many borrowers had taken on mortgages they couldn’t afford, he says. “The further we go, more foreclosures will be related to the job market rather than people who overstretched,” Yun says. “There will be more traditional reasons for the foreclosures.” Foreclosure sales could pick up now that a federal tax credit for home buyers has expired, economists say. The credit gave borrowers the flexibility to bid on houses at higher prices. Without the credit, demand for lower-priced foreclosed homes could pick up. And that could pull down overall prices further. “Prices will fall and will put more people into negative equity, which causes more people to (go into) foreclosure,” says Mark Zandi at Moody’s Analytics.com. Copyright 2009 USA TODAY
Consumers see mixed outlook for housing
Fannie Mae’s latest national housing survey finds that most Americans believe the housing market has reached bottom, but they are more cautious about owning a home. Respondents to the Fannie Mae National Housing Survey believe that home prices will hold steady (47 percent) or increase (31 percent) over the next year, and that rental prices will stay the same (46 percent) or go up (39 percent). Across the general population, the average expected rise in rental prices is four times that of home prices (3.6 percent versus 0.9 percent). Seventy percent of Americans think it is a good time to buy a house, compared with 64 percent in a similar survey conducted in January 2010. But 33 percent – up from 30 percent – of all respondents said they would be more likely to rent their next home if they moved. “These findings indicate a return to a more balanced and realistic approach toward housing,” said Doug Duncan, vice president and chief economist, Fannie Mae. “While this will likely weigh on the housing recovery in the near-term, it should, over time, help to build a stronger and healthier market focused on sustainable homeownership. Homeowners and renters alike continue to be wary of taking on risk, and they are less confident in the long-term outlook for housing.” A majority of Americans (67 percent) continue to believe that housing is a safe investment; however, that number is down 16 percentage points from a similar survey conducted in 2003 – the largest drop by far among all investment types tracked since then. Delinquent borrowers and renters are notably more discouraged than mortgage borrowers and underwater borrowers about a home’s safety as an investment and the appeal of buying versus renting. More than 70 percent of all respondents believe it will be harder for the next generation to buy a home, up three points from the beginning of the year. The Fannie Mae National Housing Survey polled homeowners and renters between June 2010 and July 2010. Findings were compared to a similar survey conducted by Fannie Mae from December 2009 to January 2010 and released in April 2010, and a similar survey conducted in 2003. Overview of key findings • A large majority of Americans (78 percent) believe that home prices either will remain flat or go up over the next year, up five points from the beginning of the year. Forty-seven percent believe prices will hold steady, while 31 percent think they will go up. This is a notable shift from January 2010, when these numbers were 36 percent and 37 percent, respectively. • Thirty-nine percent think rental prices will increase over the next 12 months, while 46 percent said they would stay the same. • Consumers continue to believe it is a buyers’ market; 70 percent said it is a good time to buy a house, up six points from January. However, 83 percent believe it is a bad time to sell a house. • A majority of Americans (67 percent) continue to believe that buying a home is a safe investment, although this is down three points since January and 16 points since 2003. Housing ranked second behind putting money into a savings or money market account (76 percent). • Fifty-four percent think it would be very difficult or somewhat difficult to get a home loan today, down six points since January. However, 71 percent of Americans think buying a home will be harder for the next generation, up three points since January. Consumers continue to be cautious in housing decisions • The number of respondents who said they would be more likely to rent rather than buy their next home if they were going to move increased from 30 percent in January to 33 percent in July. • A majority of renters said they would be more likely to rent their next home if they were to move, increasing significantly from 54 percent in January to 60 percent in July, even though 69 percent of renters think it makes more sense to buy a home. • Twenty-two percent of mortgage borrowers said they have reduced their mortgage debt significantly in the last year, and 27 percent of mortgage borrowers say they have reduced their non-mortgage debt significantly. Views on homeownership diverge among sub-groups • Mortgage borrowers (74 percent) and underwater borrowers (69 percent) are more likely to say owning a home is a safe investment than delinquent borrowers (57 percent) and renters (54 percent). However, this measure has fallen among all sub-groups since January, with delinquent borrowers and renters showing the largest declines, down eight and seven points, respectively. • Mortgage borrowers (83 percent) and underwater borrowers (77 percent) said they are more likely to buy in the future than rent – both groups increased two points from January. • The number of renters (37 percent) and delinquent borrowers (52 percent) who said they are more likely to buy in the future declined by seven and four points from January, respectively. Economic and housing attitudes among minority respondents • Forty-eight percent of African-Americans and 36 percent of Hispanics believe the economy is on the right track, compared to just 30 percent of the general public. • Seventy-one percent of African-Americans and 58 percent of Hispanics expect their personal finances to get better over the next year, compared to 44 percent of the general public. • African-Americans (65 percent) and Hispanics (72 percent) believe that obtaining a home mortgage today would be difficult, compared to 54 percent of the general public. • African-Americans (75 percent) and Hispanics (76 percent) both still believe that owning a home is a good way to build up wealth that can be passed along to their families, compared to 58 percent of the general population. A fact sheet containing a complete set of the survey’s key findings can be found (PDF format) at: Fannie Mae National Housing Survey Fact Sheet. © 2010 Florida Realtors®
Florida economy improves, but fragile
Florida’s budget picture is improving but remains shaky, with unemployment expected to climb through the autumn and foreclosures still outpacing home sales, a legislative budget panel was told Tuesday. Analysts reduced next year’s anticipated budget shortfall to $2.5 billion – down from a $5.5 billion gap for 2011-12 that was projected last year. But the red ink will continue to course through Florida’s spending plans for the next three years as federal stimulus dollars dry up, Medicaid costs climb, and the economy remains fragile, analysts said. “We know the recovery is going to be uneven – with a lot of ups and downs,” the Legislature’s chief economist, Amy Baker, told the Legislative Budget Commission (LBC). The LBC formally adopted the three-year budget outlook presented by Baker and compiled by analysts and economists from several budget and policy committees. The outlook effectively serves as a guidepost for lawmakers, based on what analysts say are “events that are known or likely to occur.” Baker conceded, however, that some potential budget factors remain difficult to gauge. The financial impact of the Deepwater Horizon oil spill was not included in Tuesday’s forecast, but Baker counseled that preliminary estimates show that its impact on Florida’s economy is “not going to be some of the huge, frightening numbers that came out after the disaster.” Other potential high-impact events include the possibility of a spate of commercial real estate defaults triggering bank failures. Thirty-seven Florida banks have collapsed in the past 18 months, Baker said. Hurricanes and the prospect of a double-dip recession also are on state economists’ watch list. The downsized budget gap for next year is credited to the role of federal stimulus dollars, years of budget cuts, and the arrival of Indian gambling money. But it also prompted sharp-edged questioning from Rep. Ron Saunders of Key West, designated as the incoming House Democratic leader, aimed at Republican gubernatorial candidate Rick Scott. Scott opposes the federal stimulus dollars, which poured $2.5 billion into the state’s current, $70.2 billion budget. State spending also was eased by $855 million in enhanced Medicaid spending approved this summer by Congress and distributed Tuesday by the LBC across five major health programs. Scott also has called for eliminating the state’s corporate income tax, which is on track to bring $1.8 billion into next year’s budget. “I think it shows Rick Scott’s lack of understanding about how the state budget works,” Saunders said. Scott’s campaign spokeswoman, Jennifer Baker, has said the Republican candidate is a political outsider with a “proven track record of creating jobs, balancing budgets.” Democrat Alex Sink has outlined a more sweeping “government reform and accountability plan” that she says would yield $700 million in first-year spending cuts. The reductions, however, may prove inflated since many of the changes she proposes are confined to such steps as reducing state office space, eliminating unneeded layers of management, and bolstering the state’s hand in contracting. Whoever is elected governor in November is almost assured of facing a still-bleak economic outlook, according to details presented Tuesday by Baker. Florida’s 11.5 percent unemployment rate – two percentage points above the national average – is expected to tick upward in coming months, analysts said, based on formerly discouraged workers returning to the job markets amid some signs of improvement. Two regions of the state, Cape Coral/Fort Myers, and greater Orlando, remain in the nation’s top 10 for the number of foreclosure filings – with Florida second in the nation, overall. Median home prices in the state are 22 percent below the national average, a level that has helped spur sales and may eventually contribute to the economic recovery, Baker told lawmakers. Still, amid the rising home sales there are ominous signs, she warned. Fifty-percent of Florida home sales are currently being conducted by banks on foreclosed properties or on quick, lower-priced “short sales,” Baker said. Source: News Service of Florida, John Kennedy
Builders resuscitate stalled projects
A nationwide report on stalled real estate projects shows that many are being completed by builders that are paying less than half the initial value of properties The report by Brad Hunter, chief economist for Metrostudy, found the most activity in Florida, California, Las Vegas, Utah and the suburbs of Washington, D.C. “This is a natural progression of the cycle,” Hunter said. “Projects fail, the price of the asset drops until it reaches a point where it’s profitable for someone else to pick it up and remarket it. They reposition the project and then what was formerly infeasible, is feasible.” The 12 largest homebuilders by market value acquired 16,631 lots in the six months, according to data compiled by Bloomberg. Tom Dallape, principal at the Hoffman Company, a land brokerage advisory firm in Irvine, Calif., says builders are tailoring these revived projects to the market, reducing average home sizes from 3,000 square feet to about 2,000. Source: Bloomberg, Prashant Gopal and John Gittelsohn (09/08/2010) © Copyright 2010 INFORMATION, INC. Bethesda, MD
Pending home sales rise
Following a sharp drop in the months immediately after expiration of the homebuyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors® (NAR). The Pending Home Sales Index (PHSI), a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June; it’s 19.1 percent below July 2009 when it was 98.1. Pending sales data reflects contracts and not closings, which normally occur with a lag time of one or two months. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” says Lawrence Yun, NAR chief economist. “But the recovery looks to be a long process. Homebuyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.” On the other hand, homes have not been this affordable in recent memory. “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy,” says Yun. “The loan underwriting standards are tighter, but homebuyers can improve their chances of getting a loan by staying well within their budget.” The PHSI in the Northeast rose 6.3 percent to 62.5 in July and is 21.1 percent below a year ago. In the Midwest the index increased 4.1 percent to 66.7 and is 25.7 percent below July 2009. Pending home sales in the South rose 1.2 percent to an index of 86.3, and are 15.6 percent lower than a year ago. In the West, the index jumped 11.6 percent to 95.0 and is 17.6 percent below July 2009. The national index had fallen 29.9 percent in May and another 2.8 percent in June.
Commercial conditions favor business growth
Commercial real estate sectors, hurt by weak job growth, are offering incentives in many areas that are conducive to business expansion, according to the National Association of Realtors®. Lawrence Yun, NAR chief economist, said fallout from the recession continues to impact commercial real estate. "Vacancy rates are beginning to level off in some sectors, but rent discounts and moderate levels of landlord concessions are widespread," he said. "This is very much a tenant's market, which is quite favorable for businesses that are considering expansion. It's also encouraging that there is a modest improvement in the sentiment of commercial real estate practitioners." The Society of Industrial and Office Realtors' "SIOR Commercial Real Estate Index," an attitudinal survey of more than 600 local market experts, finds vacancy rates are beginning to level, but rents remain depressed, and subleasing space is high. The SIOR index, measuring 10 variables, rose 2.8 percentage points to 41.0 in the second quarter, but remains well below a level of 100 that represents a balanced marketplace. This is the third consecutive quarterly improvement after nearly three years of decline; the last time the commercial market was in equilibrium at the 100 level was in the third quarter of 2007. Fifty-seven percent of respondents expect improvements in the office and industrial sectors in the third quarter. Commercial real estate development remains stagnant in all regions with low investment activity; 88 percent of respondents said it is virtually nonexistent in their markets, but development acquisitions are beginning to grow in many areas in what is described as a buyer's market. Looking at the overall market, vacancy rates will shift modestly in the coming year according to NAR's latest Commercial Real Estate Outlook. The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors. Office Markets Vacancy rates in the office sector, with high levels of available sublease space, are expected to increase from 16.7 percent in the second quarter of this year to 17.0 percent in the second quarter of 2011, and then ease later next year. The markets with the lowest office vacancy rates in the second quarter were New York City, Honolulu and Long Island, N.Y., with vacancies around the 9 to 11 percent range. Annual office rent should fall 2.7 percent this year and decline another 2.1 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be a negative 13.6 million square feet this year and then a positive 22.6 million in 2011. Industrial Markets Industrial vacancy rates are likely to decline from 14.1 percent in the second quarter of 2010 to 13.7 percent in the second quarter of 2011, and then continue to ease modestly as the year progresses. The areas with the lowest industrial vacancy rates in the second quarter were Los Angeles, San Francisco and Kansas City, with vacancies ranging between 8 and 11 percent. Annual industrial rent is estimated to drop 5.4 percent this year, and to decline another 4.7 percent in 2011. Net absorption of industrial space in 58 markets tracked is seen at a negative 31.7 million square feet this year and a positive 157.2 million in 2011. Retail Markets Retail vacancy rates should hold steady at 13.1 percent in both the second quarter of this year and in the second quarter of 2011, with a level pattern for most of next year. Markets with the lowest retail vacancy rates in the second quarter include San Francisco, Honolulu and Miami, with vacancies of 7 to 8 percent. Average retail rent is expected to decline 2.6 percent in 2010 and then flatten out, slipping 0.1 percent next year. Net absorption of retail space in 53 tracked markets is forecast to be a negative 2.3 million square feet this year and then a positive 6.4 million in 2011. Multifamily Markets The apartment rental market – multifamily housing – is benefiting from modestly higher demand. Multifamily vacancy rates are likely to decline from 6.0 percent in the second quarter of this year to 5.6 percent in the second quarter of 2011. Areas with the lowest multifamily vacancy rates in the second quarter include San Jose, Calif.; Pittsburgh; and Philadelphia, with vacancies of less than 4 percent. With additions from new construction, average rent should slip 0.6 percent in 2010, and then hold even in 2011. Multifamily net absorption is expected to be 105,200 units in 59 tracked metro areas this year, and another 138,000 in 2011.
Economic outlook: Jobs key to home sales
Millions of Americans – and others, perhaps – are watching mortgage interest rates hit historical lows and mumbling about how very bad the timing is. With the housing market flush with foreclosed properties and long-term interest rates scraping 4.5 percent – 30- and 15-year loans set record lows six weeks in a row this summer – the American Dream of a domicile with a white picket fence in a quiet neighborhood is within the grasp of more people than ever, if only affordability could be a little better timed. As home sales held their own last year, the National Association of Realtors® pointed out that the $8,000 first-time homebuyer federal tax credit was, indeed, priming the pump. And the numbers were telling. As the first deadline for the tax credit came and went, a crush of buyers lined up for loans. When Congress extended the credit through April of this year, sales went through a second cycle of popularity, which ended predictably and precisely as the tax credit again came to a close. In July, without the government’s help, the sale of existing homes fell 27.2 percent compared to June with the annual rate of home sales plunging to 3.83 million, well below expectations. The NAR, which released the figures, promptly pointed out that this new reality was how the market looked without the emperor’s new clothes – without, that is to say, the artifice of a tax credit to parade down Main Street. By the numbers, first-time homebuyers fell to 38 percent of all buyers in July from 43 percent in the previous month. In that sense, it is easy to shed crocodile tears for the tax credit, but some pundits are looking past that and hoping the government will stay out of the way and let the market do its ugly thing. Home prices held up in July, a silver lining in the collapse that may be temporary, as many expected prices to start falling. The Washington Post quoted Mizuho Securities Chief Economist Steven Ricchiuto as saying, “Homes are still being priced without taking into proper consideration the balance sheet of the consumer. What consumer would buy them when they can’t afford them?” That’s right: What the NAR calls a high rate of affordability now is the very definition of moot. After all, even consumers know you don’t apply for a loan when you are out of work. The tax credit? Congress can slap that back into place before their morning coffee cools down. What needs fixing now is the job market, rising employment rates being, perhaps, the surest cure to deflation in an otherwise haphazard arsenal of government options. Copyright © United Press International 2010, Anthony Hall
