Friday, May 25, 2007

WSJ: Existing-home sales retreated in April...

Existing-home sales retreated in April, dropping to the lowest pace in nearly four years, amid tighter lending standards in the subprime-loan market. The median price was $220,900 in April, down 0.8% from a year earlier but up slightly from March. The data came a day after more-encouraging data on new-home sales.

from the Wall Street Journal
FOR MORE INFORMATION, see: http://wsj.com/article/0,,SB118010161739814689,00.html?mod=djemalert

Ray comments:
National figures are interesting and indicate overall direction, but vary quite a bit region-to-region, and indeed, neighborhood-to-neighborhood.

Thursday, May 24, 2007

New Home Sales Soar in April; Poor Survey Methodology Blamed

New-home sales soared in April, an unexpected surge marking the biggest climb in 14 years, according to Commerce Department data. However, the average price of a home last month decreased to $299,100, from $324,700 in March. The median price was $229,100, lower than $257,600 in March.
News Alert from the Wall Street Journal
FOR MORE INFORMATION, see: http://wsj.com/article/0,,SB118000922765113338,00.html?mod=djemalert

Ray comments:
The methodology on the survey of new homes sales is so bad this is a misleading indicator at best, and perhaps an intentional effort to affect public opinion at worse. For one thing, it does not distinguish between price levels or different types of housing. Another important flaw is that the information comes from different builders every month. Some have sales, some have pared back. Over 50% of the figures come from the South, an area of much lower prices than the West, which would partially explain the 11% drop in prices from March 2007. Finally, the figures do not factor in the high rate of cancellations of the sales. The numbers are reported when the homes go under contract, not as closed sales. With all the cancellations (as high as 30% of sales) of what use is this indicator?? This indicator is worse than meaningless... it is downright fraudulent.

Friday, May 18, 2007

NAR: '60 minutes' program inaccurate & unfair

May 14, 2007
NAR: CBS News Magazine Misses the Mark

In the world of political campaigns, it's a standard ploy to set the stage with an empty chair when one candidate refuses to debate his opponents.

The CBS show 60 Minutes gave the NATIONAL ASSOCIATION OF REALTORS® the empty chair treatment in a May 13 segment that examined the impact of online brokerages on the real estate industry. The show featured interviews with a representative from the now-defunct eRealty and the president and CEO of Redfin, but no one from NAR, even though NAR twice offered and prepared association spokespersons for interviews with Leslie Stahl.

NAR expressed disappointment that CBS made the decision it would rather interview opponents and let them make unanswered — and inaccurate and unfair — accusations about REALTORS® and NAR policies.

The one-sided journalism and egregious errors served no one well, especially the once-vaunted news magazine show, NAR says. NAR staff spent nearly a year working with CBS, briefing producers on the issues involved. The producers attended the REALTORS® Conference in New Orleans and met with NAR's legal counsel for half a day in Chicago. Yet, still the segment was full of major errors, NAR says.

NAR: What They Got Wrong

NAR is in communication with 60 Minutes and accuses the program for being unbalanced in its reporting and presentation of misinformation. NAR will be sending the CBS network a letter demanding an opportunity to correct any errors and misrepresentations.

Here are some examples of the misinformation that NAR notes:

Error: The 6 percent commission is "sacrosanct."
Fact: All commissions are negotiable. The average commission rate is not 6 percent, but 5.1 percent, according to Real Trends.

Error: NAR is the industry's "governing body."
Fact: NAR is a trade association. It does not govern the industry.

Error: In 2003, NAR issued new rules of its own that threatened to block Internet discounters' access to the MLS.
Fact: The Virtual Office Web site policy did not block access to MLSs for discounters or any other brokers who are members of the MLS.

Error: The MLS is the database that lists virtually every home for sale in the country.
Fact: There is no single national MLS. Rather, there are more than 900 local and regional multiple listing services. These are not simply "databases" but a private exchange of offers of cooperation and compensation between real estate brokers.

Error: Eight states have "minimum service laws" that require REALTORS® to provide a level of service many Internet discounters can't afford.
Fact: "REALTOR®" is a trademarked term and should never be used synonymously with "real estate agent." The intent of minimum service laws is to ensure consumers receive a minimal level of service from licensees.

Error: The brokerage industry has a powerful lobby. Eleven states flatly prohibit rebates.
Fact: The intent of anti-rebate laws is to prevent kickbacks in real estate transactions, not to limit brokers' incentives to attract customers. The brokerage industry does not lobby for anti-rebate laws.

Other key points 60 Minutes misrepresented or overlooked that NAR cites include:

NAR supports all business models and favors none. NAR's 1.3 million members include REALTORS® who work on a full-service basis, as well as those who consider themselves to be limited service, fee-for-service, minimum service, and discounters. NAR says it's great that consumers have a choice today.

The real estate industry has harnessed technology for the benefit of consumers and will continue to do so. Real estate is both high-tech and high-touch, so it can be enhanced by both electronic and personal interaction.

There is no such thing as a "standard commission." Commissions are negotiable and prices vary. The fact is that commission rates have decreased 16 percent from 1991 to 2004, according to Real Trends.

The real estate business is unique in that competitors must also cooperate with each other to ensure a successful transaction, and MLS systems facilitate that cooperation. The first MLS was created more than 100 years ago as a way for brokers to share their listing agreements with each other in the hopes of procuring buyers for their properties more quickly and efficiently than they could on their own.

The MLS is a tool to help listing brokers find cooperative buyer brokers to help sell their clients' homes. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems, fragmenting rather than consolidating property information, NAR says.

NAR is encouraging real estate professionals to contact CBS to voice their concerns about the program.

— REALTOR® Magazine Online

Wednesday, May 16, 2007

NAR Reports 1st Quarter Sales Data

The national median existing single-family home price dropped 1.8 percent to $212,300 in the first quarter compared to first-quarter 2006, the National Association of Realtors trade group announced today , while the sales rate slipped 6.6 percent.

Prices dropped 2.8 percent in the Midwest, 2.5 percent in the Northeast, 1.8 percent in the West and 0.6 percent in the South in first-quarter 2007 compared to the same quarter last year. The median is a typical market price where half of the homes sold for more and half sold for less.

The largest metro-area price drops in the first quarter compared to first-quarter 2006 were in Elmira, N.Y., down 14.9 percent; followed by Sarasota-Bradenton-Venice, Fla, down 12 percent; New Orleans-Metairie-Kenner, La., down 10.9 percent; Reno-Sparks, Nev., down 8.9 percent; Palm Bay-Melbourne-Titusville, Fla, down 8 percent; Green Bay, Wis., down 7.5 percent; Deltona-Daytona Beach-Ormond Beach, Fla., down 7.3 percent; Davenport-Moline-Rock Island, Iowa-Ill., down 6.4 percent; Milwaukee-Waukesha-West Allis, Wis., down 5.8 percent; and Hagerstown-Martinsburg, Md.-W.V., down 5.6 percent.

Meanwhile, the metro markets with the largest year-over-year price gains in the first quarter were: Cumberland, Md.-W.V., at 17.1 percent; Beaumont-Port Arthur, Texas, 16.5 percent; Gulfport-Biloxi, Miss., 15.7 percent; Salem, Ore., 15.6 percent; Bismarck, N.D., 14.1 percent; Albuquerque, N.M., 12.7 percent; Salt Lake City, Utah, 12.3 percent; Seattle-Tacoma-Bellevue, Wash., 12.3 percent; Oklahoma City, Okla., 12.1 percent; and Farmington, N.M., 12 percent.

The seasonally adjusted annual rate of sales for single-family homes, condos and co-ops was 6.41 million in the first quarter, compared with 6.86 million in first-quarter 2006. This rate is a projection of a quarterly sales total over a 12-month period.

The sales rate dropped 11.9 percent in the West, 7.3 percent in the South, 6.1 percent in the Midwest and rose 1.2 percent in the Northeast.

The largest statewide sales rate drop in the first quarter compared to first-quarter 2006 was in Nevada, at 27.4 percent, followed by Hawaii, 25.5 percent; Florida, 25.1 percent; Louisiana, 19.5 percent; New Mexico, 16.3 percent; Tennessee, 15.5 percent; Arizona, 14.3 percent; California, 13.6 percent; Utah, 11.5 percent; and Illinois, 11.3 percent.

The sales rate rose most in Wyoming, at 19.9 percent; followed by District Of Columbia, 9.3 percent; Arkansas, 8.8 percent; Iowa, 8.2 percent; New Jersey, 7.6 percent; New York, 7.4 percent; North Dakota, 4.7 percent; Kentucky, 3.9 percent; Massachusetts, 3.9 percent; Indiana, 2.9 percent; and Texas, 2.7 percent.

Median first-quarter metro-area single-family prices ranged from a low of $75,300 in Elmira, N.Y., to a median price of $788,000 in the San Jose-Sunnyvale-Santa Clara, Calif., metro area. The second most expensive metro area was San Francisco-Oakland-Fremont, Calif., at $748,100, followed by the Anaheim-Santa Ana-Irvine, Calif., area at $697,300.

After Elmira, other low-price markets included Decatur, Ill., with a first-quarter median price of $76,200, and the Youngstown-Warren-Boardman, Ohio-Penn., area at $78,300.

Metro-area condominium and cooperative prices -- covering changes in 59 metro areas -- show the national median existing condo price was $224,500 in the first quarter, up 1 percent from the same quarter in 2006, NAR reported.

Twenty-seven metros showed annual increases in the median condo price, including seven areas with double-digit gains; while 31 areas had price declines and one was unchanged.

The strongest condo price gains were in the Salt Lake City area, where the first-quarter price of $164,600 rose 25.6 percent from a year ago, followed by Albuquerque, where the median condo price of $147,100 rose 17.9 percent from the first quarter of 2006, and the Austin-Round Rock area of Texas at $169,000, an increase of 14.4 percent.

Metro area median existing-condo prices in the first quarter ranged from $91,600 in Bismarck, N.D., to $584,700 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was the Sarasota-Bradenton-Venice, Fla., area at $413,900, followed by Los Angeles-Long Beach-Santa Ana, Calif., area at $403,500.

Other affordable condo markets include Wichita, Kan., at $94,500, and Greensboro-High Point, N.C., at $112,100.

Santa Clarita Valley Home Sales Defy Statewide Trend

Local Realtor Association Says Market is Just Fine, Thank You

While other regions of the state are seeing a slowdown in home resale activity, the Santa Clarita Valley showed remarkable vigor during the first quarter of 2007, the Southland Regional Association of Realtors reported.

Sales of 608 single-family homes were up 18.1 percent over the same period a year ago and the 261 closed escrows reported this March were 14.0 percent higher. Condominium sales declined 4.9 percent to 274 transactions for the 1st quarter and were off 6.6 percent from March 2006.

For comparison, sales activity throughout California during March was off 20.8 percent from a year ago.

"Because local activity is down from the boom of several years ago even some Realtors would say higher sales can't be, yet I just put a home in escrow and I've been busier than I had been," said Larry Gasinski, president of the Association's Santa Clarita Valley Division. "Santa Clarita is a highly desirable isolated pocket that continues to draw people seeking a great lifestyle."

Gasinski said he was not surprised to see condo sales decline slightly.

"As prices soften on single-family homes and the selection widens," he said, "it makes sense that more people would opt to buy a home over a condo."

Despite public perception that prices are plummeting and the inventory soaring, both reflect only methodical, moderate changes, said Jim Link, the Association's Executive Vice President.
"Statistics suggest that prices will remain relatively flat or decline slightly, but not enough to warrant waiting a long time to buy," Link said.

The median price of the 608 homes sold during 1st quarter 2007 was $579,300, down 6.4 percent from a year ago, the Association reported. During March of this year, the single-family median was $580,000 off 3.3 percent from the figure reported in March 2006.

The 1st quarter 2007 condo median price was $369,000, down 6.4 percent from last year. And the condo median reported this March of $385,000 was off a mere 1.0 percent.

"Perhaps the 1st quarter trend with higher sales will continue as sellers adjust to the new realities and buyers realize that opportunities abound," Link said. "Actually, it's refreshing to experience a market that is balanced, where sales come at a steady pace."

Link and Gasinski noted that, despite reports to the contrary, there is not an excessive number of properties listed for sale. At the end of March the active inventory was up 14.6 percent to 1,953 listings. Of that number, 1,426 were single-family homes and 527 were condominiums. The March inventory was down 7.3 percent from the February total.

At the current pace of sales those 1,953 listings represent a 5.5-month supply - precisely the point where real estate experts believe the market is balanced between buyers and sellers.

"Today's inventory offers choices to buyers," Gasinski said, "but it is not a glut, the market is not flooded with listings. Wise buyers and sellers know the difference and understand what it means."

Tuesday, May 15, 2007

The Local Market Update

I haven’t had much commentary to add lately, since there has been no news that has altered my mildly bearish view. I continue to monitor the Wall Street Journal and listen to CNBC business news for the mainstream take on housing and general economic trends. Both lately do not see a ‘bottom’ in the housing market, although neither predicts a collapse. Various newsletters and commentary fill my inbox, and I read many of them in the spare time. They vary from the happy-talk of the usual Realtor suspects, including the predictably rosy National Association of Realtors’ view of ‘Problems? What problems?’ to John Maulden’s cautionary tales of structural weakness on the macroeconomic front. Locally, the numbers of homes coming on the market are increasing as befits the spring selling season, even as the number of homes going into escrow drops. Prices are gently falling… which presages a dive to the bottom as the sellers who really need to sell get realistic and drop prices in search of the elusive buyers.

And just where are the buyers? Open house traffic around the valley has dropped down to the zero range, even in traditionally hot areas of central Valencia. Sign calls are down although Internet hits in various advertising remain fairly steady. The response intensity has fallen, with many buyers deferring decisions or thinking there is plenty of time to consider options. There is a significant segment of buyers who have sold, who are buying out of area or even out of state. Yes, this ‘take the money and run’ crowd sees opportunity elsewhere, and for some, moving out is in itself a move up. But for those tied to local employment, there are still significant ‘move up’ opportunities, as long as their original home indeed sells.

The high-profile agents in our area, whose massive expenditures in advertising are not getting the same return, or in talking with them individually, any return. There are indications that some will be leaving the area, having made their money in the fast market of a few years ago and now a few are ready to move out. Many will stay, but with a lowered advertising presence and cost-containment again coming into vogue.

Mortgage brokers and direct lenders continue to be busy, as those with option ARM mortgages try to convert to loans with better and more stable terms. This refinance activity will maintain the industry, albeit at lower levels than the go-go era that we have come out of, while the new purchase mortgage market goes into decline. With credit standards tightening (especially in the sub-prime market), the resale market is hurting. I would expect that to continue and intensify for the foreseeable future.

Thankfully there have not been huge drops in local housing prices, with overall drops in the five percent range, but this trend of a general but gentle drop in prices is likely to continue into at least next year, if not beyond. For those with a statistical frame of mind, reversion to the mean is a valid concept, and the unwinding of excess appreciation is likely to take years.
That’s not to say that there aren’t some great deals out in the market for a buyer who uses a good Realtor. There are. And with as much inventory on the market, writing up a low offer and finding the deal may take a little time, but it can be done. To ignore this aspect of the market in favor of following conventional wisdom that ‘this is not a good time to buy’ is just foolish. Yes, there are deals to be made.

My advice to sellers? Drop that price down to the lowest of the competition, or lower still if there are adverse conditions such as location or condition. Now is not the market for cutting commissions either on the listing side or the selling side, See-BS’ ’60 Minutes’ report on the housing industry considered and rejected for our local market. With as much inventory as there is out there, price is not the only consideration… you also want what buyers who are out there to be brought to your home by the Realtors. While I would encourage any seller who gets an offer to seriously work with it, the first step is getting the buyer through the door.

Overall, we live in terrific times. There is much to celebrate in the economy: low unemployment (around 4% in our local area), record-setting stock markets, highest rates of home-ownership in history, and low inflation (not counting gas prices!). We are blessed with great weather, excellent schools, responsive local government, plenty of shopping and entertainment options, and so much more. Sure, there are problems and we are in our own ways both culturally and individually addressing them over time. But look around… it could be a lot worse and how much better could it be?

The housing market is dynamic. There will always be opportunity in one or many parts of the market, but there will not be opportunity in all parts of the market all the time. Sometimes individuals over-extend and get ahead of the market trends (or go counter-trend to their eventual dismay), and their opportunity lies in the early recognition of the facts, and then retrenching or re-grouping. Take a look at the SCV Home Team website to see who is selling and who is buying. If you want to find out where the opportunity exists for you and your individual circumstances, give us a call at 661-287-9164.

Monday, May 07, 2007

Strategies for a Successful Business Life

~~ from our friend Gene Bleecker of First Southwestern Title

1. Your level of happiness should be in direct proportion to your appreciation. Look around you and be happy for the things you have in your life like your freedom, your family, your friends, your home, and your health.

2. You should focus on others more than you focus on yourself. It is truly better to give than receive. It makes your heart a happy place.

3. Know the value of laughter. Learn to laugh at yourself, and don't take life so seriously. Laughter is the best medicine in having a happy life.

4. Never see failure a failure. Failure is the first step to achieving success and a healthy part of business life. Today's failures will be tomorrow's victories.

5. Never take rejection personally. Some people just don't know "you" and the benefits in working with you. Tomorrow is a whole new day, and you get a fresh start to meet more people who will find value in what you have to offer.

6. Stay away from pickle suckers. These are the people who suck the joy out of your life. Surround yourself with happy positive people who value your friendship want you to succeed.

Think about it...

Friday, May 04, 2007

Some Lenders Endorse Sub-Prime Re-fi Principles

The Mortgage Bankers Association and several large mortgage lenders have agreed to endorse a set of principles for working with troubled borrowers drawn up by the Senate Banking Committee.

The principles include making early contact with holders of adjustable-rate mortgages who face interest-rate resets, and working to modify loan terms where feasible to prevent defaults and foreclosures.

The principles are the product of an April 18 Homeownership Preservation Summit convened by Senate Banking Committee Chairman Sen. Chris Dodd, D-Conn. The committee invited consumer and civil rights groups, along with the largest subprime mortgage lenders, to put forward proposals to stem the rise in delinquencies and foreclosures in subprime loans.

In addition to the Mortgage Bankers Association, lenders endorsing the principles include Citigroup, JPMorgan Chase, Litton Loan Servicing, HSBC, Bear Stearns, Freddie Mac, Fannie Mae and the Self-Help Credit Union. Consumer and civil rights groups endorsing the principles included the Leadership Conference on Civil Rights, AARP and the Association of Community Organizations for Reform Now (ACORN).

"The crisis affecting the subprime market is a comprehensive one, and involves many parties," Dodd said in a statement. "It cannot be solved overnight, and cannot be solved by one party acting alone. Each party needs to do its part in helping to address this problem. The companies and organizations that endorse these principles demonstrate their commitment to being part of finding solutions to foreclosures."

Countrywide Financial Corp. and Wells Fargo & Co. attended the summit but did not endorse the principles, which include:
  • Early contact and evaluation: Servicers should try to contact subprime ARM borrowers before their interest rates reset to determine whether they can afford the higher payments. If it's clear that they won't be able to make the payments, the servicer can assume a default is likely, and decide whether to modify the loan terms.
  • Loan modification: When loan servicers are considering modifying loan terms to avoid default, the goal should be a permanent solution, sustainable for the life of the loan, rather than deferring the rate reset. Modifications could include switching the loan from an adjustable to a fixed-rate loan; reducing the interest-rate factoring in debt-to-income ratio, taxes and insurance; reducing principal; reamortizing a loan to make payments more affordable; and the creation of escrows to make tax and insurance payments.
  • Staffing up: Servicers should adopt policies that allow large numbers of loan modifications to be done quickly by dedicated teams. Where possible, servicers should partner with third-party counselors and nonprofits for their outreach.
  • Low-cost refinancing: Eligible borrowers should have the option to refinance to prime loans quickly and affordably.
  • Credit availability: Government-sponsored entities -- Fannie Mae, Freddie Mac, and Federal Home Loan Banks -- should work with lenders to make credit available on affordable terms through new products and expanded programs.

With some of the largest sub-prime lenders declining to participate, the impact of these 'principles', which do not have the force of law, appears to be minimal, although I suppose that many lenders and loan brokers will use this as a fig leaf to hide behind as a more widespread correction of past excesses in the mortgage market spreads.