First quarter numbers are out, and I think it is important for investors to educated and knowledgeable as to what is going on in the real estate market. Of course we want to be detailed and specific in our knowledge of our local market, but it is important to be aware of general trends and news in the overall market as well.
I have included an article posted on CNN’s Money website (www.cnn.money.com) that details the specifics of the numbers.
The way I interpret this article is more homes on the market, more people stuck with houses, greater motivation by sellers, more sellers willing to negotiate and sell homes well-below market value. Simply put, this is good news for investors.
Home prices continue sharp descent
NEW YORK (CNNMoney.com) — Single-family home prices dropped 7.7% in the first quarter in the largest year-over-year decline since the National Association of Realtors began reporting prices in 1982.
The median sales price fell to $196,300, down 4.8% compared with the last three months of 2007.
Lawrence Yun, the chief economist of NAR, attributed much of the record decline to liquidity problems dragging down high-priced markets.
“These are highly unusual results because there were very few jumbo loan originations in the latest quarter,” he said. “So sales are much slower in high-cost areas.”
Jumbo mortgages skew results
That sales slowdown changed the mix of houses sold.
In California, according to Yun, homes bought with jumbo mortgages – more than $417,000 – accounted for 40% of all sales before liquidity for these loans dried up during the summer of 2007. Since then only 10% of sales in California involved jumbo loans.
In February, Freddie Mac and Fannie Mae, the government sponsored enterprises that guarantee a market for conforming loans, have raised the $417,000 cap to include mortgages of up to $729,750, but lenders were still charging much higher rates for these “conforming jumbos,” between 1% and 1.5% more than ordinary conforming loans. The higher rates are discouraging sales in higher price ranges and so skewed NAR’s median price results.
Many of these same markets were also among the hardest hit by the subprime implosion, which forced many lower priced homes back on the markets, again dragging down NAR’s results.
That helped put many California and other Sun Belt cities, with their toxic combinations of both high prices and heavy proportions of subprime mortgages, among the biggest losers.
In California, Sacramento prices plummeted 29.2% to $258,500 compared with last year and Riverside prices fell 27.7% to $287,100. Prices in Las Vegas fell 20.2% to $247,600 and those in Phoenix dropped 15.4% to $222,200.
Some Midwestern cities, hard hit by factory closings, also suffered huge losses with Lansing, Mich., prices falling 26.9%. Saginaw, Mich. had the lowest median prices of any of the 150 markets studied. A median house there sold for just $65,400.
The best performing market in the nation was Binghamton, N.Y., where prices rose 11.8% to $109,700. Second was Peoria, Ill., up 10.4% to $119,000 and Spartanburg, S.C., where prices rose 10.2% to $130,300.
In the Northeast, single-family home prices rose slightly, 3.2% to $280,000. But prices in the South dropped 7.5% to $164,200, in the Midwest they fell 7.9% to $142,700 and in the West they plunged 12.3% to $296,300.
Foreclosures put more homes in play
Hurting home prices were big rises in foreclosure rates over the past 12 months, which threaten to get even worse. Delinquencies more than doubled over that time and more than 155,000 lost their homes in bank repossessions during the first three months of the year.
All that foreclosure activity added to the glut of homes on the market. The total inventory has risen to an average of 10 months worth of unsold homes. In addition, a record number – 2.9 million – of vacant homes are up for sale, according to the Census Bureau.
The big inventory has led to aggressive price slashing and increased incentives by builders looking to sell homes. They’ve also cut way back on housing starts, which are at a 17-year low.
The pace of existing home sales, at about 492,000 a month, is about a third less than its peak during the summer of 2005.
Condo prices fared a bit better than single-family homes. The median price fell just 3% since early 2007. The worst hit market was the Sarasota area, where condos dropped 35% over the past 12 months to $268,500. Sacramento condo price cratered 33.4% to $147,200. In Miami, prices fell 26.4% to $176,100.
The best performing condo market was about as far from the madding crowds of South Beach as one can get: Bismarck, N.D., condo prices soared 36.4% compared with 12 months ago, to $124,900.
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