Posts Tagged ‘housing’

Seattle home prices up a tad in Q4, says report

Tuesday, February 26th, 2008

Across the country, Americans saw home prices drop precipitously in the fourth quarter, but in Seattle, that wasn’t the case.

Seattle was one of only three U.S. markets where home prices increased in the latest quarter, according to data released by Standard & Poor’s. Only Charlotte, N.C.; Portland, Ore.; and Seattle showed year-over-year increases in prices. Seattle’s growth was the slightest, at .5 of a percent, followed by Portland, at 1.2 percent, and Charlotte, at 2.3 percent.

South Florida home prices plunged. Home prices in the Miami metropolitan area dropped 17.5 percent in the fourth quarter of 2007, the biggest decline in the country, according to Standard & Poor’s.

Las Vegas and Phoenix were right behind, with a 15.3 percent year-over-year decline. Los Angeles, San Diego, San Francisco, Detroit and Washington, D.C., all posted declines in the double digits.

Nationwide, home prices had fallen 8.9 percent by Dec. 31, ending a full year of declining prices.

The S&P/Case-Shiller quarterly index tracks the prices of existing single-family homes nationwide compared to a year earlier.

“We reached a somber year-end for the housing market in 2007,” said economist Robert Shiller, a creator of the report. “Home prices across the nation and in most metro areas are significantly lower than where they were a year ago. Wherever you look, things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates.”


U.S. Economy: Housing Slump Fails to Quell Inflation

Wednesday, February 20th, 2008

By Courtney Schlisserman and Bob Willis

Feb. 20 (Bloomberg) — The two-year housing slump pushing the U.S. economy toward a recession hasn’t alleviated inflation pressures, reports today showed.

Consumer prices rose 0.4 percent from December, with costs excluding food and energy climbing 0.3 percent, the most since June 2006, the Labor Department said. Builders started work on 1.012 million homes at an annual rate in January, close to a 16- year low, the Commerce Department reported in Washington.

The figures mean Federal Reserve Chairman Ben S. Bernanke will need to consider raising interest rates as soon as the economy stabilizes. Bernanke, who last week said the Fed is prepared to keep lowering interest rates, warned that faster inflation would “greatly complicate” the central bank’s job.

“What this means is that they don’t have as much comfort to play with rates,” Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said on Bloomberg Television, referring to Fed officials. “Once the U.S. economy looks like it’s started to stabilize, they’re going to have to jump right back in to that, raising rates back up to neutral.”

Treasury securities slumped after the consumer price report, while recouping most of the losses later. Ten-year note yields increased to 3.93 percent at 9:54 a.m. in New York from 3.90 percent late yesterday. The Standard & Poor’s 500 stock index lost 0.8 percent, to 1,337.97.

Lowest Since 1991

Building permits, an indication of future construction, fell 3 percent to a 1.048 million rate, the lowest level since November 1991, today’s Commerce report showed.

Housing starts were projected to rise to a 1.01 million pace from an originally reported 1.006 million rate in December, according to the median forecast in a Bloomberg survey of 72 economists. Permits were forecast to drop to a 1.05 million rate, from 1.068 million in December.

“We don’t think housing has hit bottom yet,” said Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto. “Until we get some stabilization in sales or even a mild improvement, it’s likely that construction will continue to weaken.”

A jump in food and energy costs, rents and clothing prices led the consumer-price index higher last month. Economists had forecast a 0.3 percent increase, with the so-called core rate gaining 0.2 percent, Bloomberg surveys showed.

Today’s price report “certainly showed a broad-based intensification of inflation pressures,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. While the Fed currently “is looking at growth,” inflation “will come back on the radar screen” when economic data improve, he said.

Food Costs

Food prices, which account for about one-seventh of the CPI, rose 0.7 percent, matching the biggest gain since May 2004, after a 0.1 percent increase in January. Energy prices last month increased 0.7 percent, after rising 1.7 percent the previous month.

“Even if energy prices remain flat, the continued rise in retail food prices will damp consumer spending growth,” JPMorgan Chase & Co. economists wrote in a note to clients last week.

Fuel costs were up 4.5 percent. Apparel prices rose 0.4 percent after a 0.1 percent increase in December.

The consumer price index is the government’s broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.

Bond Yields

Some bond investors are concerned that the Fed’s interest- rate cuts, totaling 2.25 percentage points since September, threaten to stoke inflation. The reductions came at a time of rising energy and commodity costs, and a falling U.S. dollar.

“The trend is showing elevated levels of inflation above where the Fed would like it to be,” said Don Alexander, director of fixed income in New York at Citigroup Global Wealth Management, which oversees about $1.3 trillion in assets. “You’re not rewarded for taking the risk of” investing in longer-dated Treasuries, he said.

A measure of price expectations derived from the gap in yields between 10-year notes and 10-year Treasuries linked to inflation rose as high as 2.39 percent today, the highest since November, from a low of 2.20 percent last month.

Still, Fed Chairman Ben S. Bernanke and other officials this month indicated that price expectations have yet to reach a level triggering their concern. The Fed chief told lawmakers Feb. 14 that “inflation expectations appear to have remained reasonably well anchored.”

Rate Cuts

Citing a worsening economic outlook, the central bank last month lowered its benchmark interest rate by 1.25 percentage point during two meetings, the fastest rate reduction since the federal funds rate became the main policy tool around 1990.

Compared with a year earlier, consumer prices rose 4.3 percent, after a 4.1 percent gain in December. The core rate was up 2.5 percent from January 2007, the biggest jump since March 2007, compared with a 2.4 percent increase the previous month.

Rents, which make up almost 40 percent of the core CPI, rose 0.3 percent.

Slower economic growth may help damp price pressures.

Economic growth slowed to a 0.6 percent pace in the fourth quarter and the economy lost jobs in January for the first time in more than four years, according to government figures.

Wal-Mart Discounts

Wal-Mart Stores Inc., the world’s largest retailer, said yesterday that fourth-quarter profit rose more than analysts had forecast after it stepped up U.S. holiday discounts and boosted sales in Asia and Latin America. Before the holiday season the company made price cuts on 20 percent more items. Last month, it marked down groceries, medicine, fitness equipment and electronics as much as 30 percent.

The government said Feb. 15 that prices of goods imported into the U.S. jumped 1.7 percent in January, pushed up by higher costs for energy and food. The producer price index is scheduled to be released Feb. 26.

PPI and CPI have some differences in timing that may cause discrepancies. In calculating wholesale prices, the government asks survey participants to report costs as of the Tuesday of the week that includes the 13th. Consumer prices are based on average costs over the entire month.

To contact the reporter on this story: Courtney Schlisserman in Washington

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Housing Slump Starts to Hit Stronger Cities

Friday, February 1st, 2008

It’s getting harder to hide from the housing bust.

Tight credit, fragile consumer confidence and a weakening economy are slowing sales and depressing prices even in some places — such as the Pacific Northwest and North Carolina — that until recently had avoided the housing slump afflicting most of the country.

Even Manhattan, where prices continued to rise briskly last year, looks more vulnerable to a slowdown. Falling home prices and soaring defaults elsewhere have created more than $100 billion of losses on mortgage-related securities at Wall Street firms, destroying many jobs in the New York area. The number of homes listed for sale in Long Island and Queens at the end of 2007 was enough to last 18 months at the current sales rate, up from a 12-month supply a year before.

Local markets still vary hugely around the country, according to The Wall Street Journal’s quarterly survey of housing data in 28 major metropolitan areas. Inventories of unsold homes are enormous in much of Florida, Phoenix, Las Vegas and the Detroit area. But the number of homes listed for sale declined last year in Boston and Denver, and they were flat in Dallas.

Few expect a quick recovery. Stricter credit policies at mortgage lenders have disqualified many potential buyers, and foreclosures are adding to an already glutted supply in many areas. In California, notices of default filed by lenders in the fourth quarter totaled 81,550, more than double the 37,994 filed in the year-earlier period, according to DataQuick Information Systems, a research firm in La Jolla, Calif. Meanwhile, builders caught with too much inventory are slashing prices.

All those factors create “a lot of indigestion, and I think it’s going to take all of this year to work its way out,” says Ronald Peltier, chief executive of HomeServices of America Inc. in Minneapolis, which owns brokerages in 19 states. He expects the market to begin slowly improving in 2009.

For now, people trying to sell homes “don’t seem to have a prayer” in competing with lenders offering foreclosed homes and builders dumping excess inventory, says Don Schriver, owner of Assist-2-Sell Good Sense Realty in Buckeye, Ariz., a suburb of Phoenix. He points to a four-bedroom house in Buckeye that was built in 2005 and sold in August 2006 for $775,000. After a lender acquired the home through foreclosure last year, it sold again in December for $380,000.

In California’s Orange County, around a quarter of the listings are either foreclosed properties owned by lenders or homes owned by people trying to do “short sales,” or sell for less than the amount they owe the bank, says Steven Thomas, president of Re/Max Real Estate Services in Aliso Viejo, Calif. Short sales require approval from the lenders, often a lengthy process.

Steve Karsten, a plumber who rents a small house in the Los Angeles area, is typical of today’s wary home shopper. He has been going to open houses and looking into possible bargains on foreclosed homes. But he aims to make a down payment of more than 10% and get a fixed-rate loan. And he won’t jump at the first decent house he finds.

“I’m in no hurry,” Mr. Karsten says. “The longer I wait, the more money I save.”

With buyers on the fence, sales are stalled. December sales in the San Francisco Bay area and in Southern California were the slowest in at least two decades, according to DataQuick.

DataQuick says sales have dried up partly because of relatively high rates on “jumbo” mortgages, those over the $417,000 limit on loans that can be guaranteed by government-sponsored investors Fannie Mae and Freddie Mac. Rattled by defaults, investors are shying away from jumbo loans. The resulting higher costs for these large loans are pinching sales in California and other high-price areas. Home sales in the Bay Area financed with jumbo loans were down 66% in December from a year before, according to DataQuick.

Some of the fastest increases in home listings have occurred in relatively strong markets. The inventory in the Seattle metro area counties of King, Snohomish and Pierce leapt 50% last year. At the end of December, when listings are lower than usual because of the holidays, the inventory there was enough to last 4.9 months, denoting a fairly balanced market — but up from a very lean 2.7 months at the end of 2006. In King County, the median price in December was down 2.6% from a year ago.

Given the rise in supply, home prices in Seattle probably will fall further, says Glenn Kelman, chief executive of Redfin, a real-estate broker based there. “If you walk around town, you see cranes everywhere,” he says.

In Portland, Ore., another fairly buoyant market, the inventory at year end was 5.7 months, up from 3.7 months a year earlier, and the median price fell 4%. In Charlotte, N.C., the supply grew to 7.8 months from 5.9 months.

Listings in the eight-county San Francisco area surged 42% last year, but there are big differences in price trends, depending on location. In December, DataQuick reports, the median price was down 22% from a year before in outlying Sonoma County but just 1.9% lower in San Francisco and virtually unchanged in Santa Clara County, home to many thriving technology companies.

Manhattan so far has dodged the housing slump, but it may not escape completely unscathed. The median price of condominiums and cooperative apartments sold in the fourth quarter was about $850,000, up 6.4% from a year earlier, according to Jonathan Miller, research director at Radar Logic Inc., a research firm. (In the luxury end of the market, the median price jumped 28% to $4.3 million.) The inventory of co-ops at the end of 2007 was down 26% from a year earlier, while the supply of condos was unchanged.

Now, though, the housing slump that afflicts most of the country is creating huge losses at some Wall Street firms that gambled on mortgage securities. That means more job cuts and smaller bonuses this year. On the plus side, the weak dollar continues to bring in foreign buyers. Mr. Miller sees “very modest” price increases this year.

But Dean Baker, an economist at the Center for Economic and Policy Research in Washington who has been bearish on housing for years, says Wall Street’s woes make New York’s real-estate market look “quite vulnerable.”

Job growth in the next two years is likely to be very weak in the New York metro area, where financial services account for about a quarter of income earned, says Mark Zandi, chief economist at Moody’s “Wall Street is unraveling and taking the economy with it,” he says.

In Miami-Dade County, there was a 37-month supply of condos listed for sale at year end, according to figures compiled by Esslinger-Wooten-Maxwell, a big local real-estate broker. But that excludes “for sale by owner” units that aren’t listed, as well as about 19,000 units due to be completed this year, says Jack McCabe, a real-estate consultant in Deerfield Beach, Fla., who says he advises investors who hope eventually to find bargains in the area. He notes that foreclosures will add to the supply and predicts that 2008 will be “the year of the great condo meltdown.”

Monica Harvey, a real-estate agent for Esslinger-Wooten-Maxwell in Miami Beach, says sales have slowed so much that she can work out at her gym more often and even drive to the airport to meet potential buyers. Ms. Harvey is encouraged, though, by the flow of buyers from Europe and Latin America, taking advantage of a weaker U.S. dollar. Already a Spanish speaker, she’s thinking of studying Mandarin. “I’m waiting for the Chinese,” she says. “I know they’re going to come at some point.”

Copyrighted, Dow Jones & Company, Inc. All rights reserved.

Sales of New Homes Fell by 26% in 2007

Friday, February 1st, 2008

January 28, 2008
Sales of New Homes Fell by 26% in 2007

The housing industry, caught in a maelstrom of sinking demand, rising foreclosures, and bulging inventories, is in its worst slump in decades, a growing body of economic evidence shows.

Sales of new homes fell last year by 26 percent, the steepest drop since records began in 1963, the Commerce Department said on Monday.

Last week, the National Association of Realtors reported that sales of previously owned single-family homes, a large portion of the overall housing market, suffered their biggest annual drop in 25 years. And the median price of those homes fell for the first time in at least four decades, and possibly since the Great Depression.

Some economists predict the market may start to recover in the summer. Others are less optimistic. “There is no sign of a bottom in any of these data,” wrote Ian Shepherdson, a London-based economist at High Frequency Economics.

Last month alone, sales of new homes tumbled 4.7 percent, to a 604,000 annual rate, the smallest monthly sales figure since February 1995.

Prices also fell sharply. In December, the median price of a new home fell to $219,200, down 10.9 percent from December 2006.

“No matter which way you look at it, the December new home sales report is simply awful,” wrote Dimitry Fleming, an economist at ING Bank.

December capped off a painful year for home builders, who have watched demand dry up as buyers abandon contracts or stay on the sidelines with the expectation that prices will fall further. For the year, the median price of new homes rose just 0.2 percent, to $246,900.

A wave of foreclosures and tightened lending standards have made it more difficult to obtain a mortgage, even for buyers with good credit ratings. And banks have been more reluctant to lend in light of the subprime mortgage crisis.

Builders are now trying to lure buyers by dropping prices and throwing in incentives like new appliances. They have also cut back on new construction.

But the strategy has failed to make a dent in inventories: the backlog of new homes on the market ticked up last month to 9.6 months’ supply based on the current sales rate, the Commerce Department said.

Sales of new homes were down in most regions of the country, with the steepest declines in the South and West. There was a slight sales uptick in the Northeast.

The Commerce Department also revised down its estimate for new home sales in November, to a 634,000 annual pace. It has originally estimated a rate of 647,000.