Southern California home prices rise slightly in May

The median price was $249,000, which is up less than 1% from $247,000 in April. It was the first month-to-month gain since July 2007.
By Peter Y. Hong

June 18, 2009

Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.

The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.

The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.

Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium.

"As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we'll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose," said John Walsh, president of San Diego-based MDA DataQuick.

A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego's Hillcrest neighborhood last month for $750,000.

The couple had admired the place a year ago but couldn't believe the seller wanted $995,000. "I thought, 'What a cool place, but who in the world would ever pay so much money for it ?' " Graham said.

The answer was no one.

In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also "made us feel a little more comfortable paying that price," Graham said.

Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.

The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.

The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.

May's price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.

Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.

The housing market "is starting to reach the bottom; prices have reached levels where they make sense again," said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble.

"But hitting the bottom is different from coming off the bottom," he said, noting that prices will probably remain low as long as "we still have a massive wave of foreclosures to deal with."

About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.

The median price climbed most in the region's more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County's median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.

Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.

The median home price in May essentially matched April's figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.

San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.

Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.

Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers.

"A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they're pricing their homes more appropriately," Berg said.

Spending, Home Sales Probably Increased: U.S. Economy Preview

By Shobhana Chandra

June 21 (Bloomberg) -- Consumer spending in the U.S. probably rose in May for the first time in three months and home sales increased as Americans became more confident the recession will end this year, economists said before reports this week.

Purchases advanced 0.3 percent, according to the median of 58 estimates in a Bloomberg News survey ahead of Commerce Department figures due June 26. Combined sales of new and existing homes likely improved to 5.18 million, capping the first back-to-back increase since 2006, the survey showed.

“There’s more optimism as we get further away from last year’s financial-market chaos,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Spending on the part of consumers seems to be picking up after a soft patch. It looks like housing has bottomed.”

Government efforts to restore the flow of credit and prop up incomes are allowing households to take advantage of retailer discounts even as unemployment soars. Federal Reserve policy makers, meeting this week, may try to reassure investors that interest rates will stay low for the foreseeable future and acknowledge the economy has improved since their last gathering.

The Commerce Department’s spending report may also show incomes increased 0.3 percent in May after gaining 0.5 percent the prior month, mainly reflecting the tax cuts and transfers linked to the administration’s stimulus plan, economists said.

Home Sales

Sales of existing homes climbed 3 percent to an annual pace of 4.82 million, the highest level since October, when the economy was in the throes of the financial crisis, according to the survey median. Foreclosure-driven declines in property values are helping to reduce the glut of unsold houses. The National Association of Realtors’ report is due June 23.

The next day, Commerce data may show purchases of new homes rose 2.3 percent in May to an annual pace of 360,000.

In another sign of the improving economic outlook, the Reuters/University of Michigan final index of consumer sentiment probably rose to 69 in June, the highest level in nine months, from 68.7 in May, economists’ forecasts show. The figures are due on June 26.

Business in Las Vegas has “clearly bottomed out,” said Jim Murren, chief executive officer of casino company MGM Mirage. “It’s just a matter of how long we’re going to be on the bottom, and that is what we’re debating internally,” Murren said in a telephone interview last week. “The business trends are no longer deteriorating.”

More Upbeat

Fed officials on June 24, at the conclusion of their two- day meeting, may say the U.S. is showing signs of emerging from the worst recession in a half century. Following their last meeting in April, policy makers said the economy will “remain weak for a time.” The central bankers will also keep the benchmark interest rate in the range of zero to 0.25 percent, economists said.

“The Fed is likely to sound more upbeat on growth prospects,” Dean Maki, chief U.S. economist at Barclays Capital in New York, said in a note to clients. At the same time, the central bank may “aim to convince investors that tightening is not imminent,” he said.

Such an announcement may be an attempt by policy makers to prevent borrowing costs from climbing even more, undermining tentative signs of recovery. The yield on the benchmark 10-year note reached as high as 3.95 percent at the close on June 10, after being as low as 2.54 percent on March 18, the day the Fed announced it would buy Treasury securities in a bid to push borrowing costs down.

Some parts of the economy are lagging. A Commerce report due June 24 may show bookings for goods meant to last several years slid 0.8 percent in May, the survey showed. Durable-goods orders excluding transportation equipment may have also fallen.

Gross domestic product shrank at a 5.7 percent pace in the first quarter, the same as estimated in May, revised figures from Commerce may show. Following a 6.3 percent pace of contraction in the last three months of 2008, the drop capped the worst six-month performance in five decades. The figures are due on June 25.


Bloomberg Survey

================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Exist Homes Mlns 6/23 May 4.68 4.82
Exist Homes MOM% 6/23 May 2.9% 3.0%
Durables Orders MOM% 6/24 May 1.7% -0.8%
Durables Ex-Trans MOM% 6/24 May 0.4% -0.4%
New Home Sales ,000’s 6/24 May 352 360
New Home Sales MOM% 6/24 May 0.3% 2.3%
GDP Annual QOQ% 6/25 1Q F -5.7% -5.7%
Personal Consump. QOQ% 6/25 1Q F 1.5% 1.5%
GDP Prices QOQ% 6/25 1Q F 2.8% 2.8%
Core PCE Prices QOQ% 6/25 1Q F 1.5% 1.5%
Initial Claims ,000’s 6/25 13-Jun 608 600
Cont. Claims ,000’s 6/25 6-Jun 6687 6707
Pers Inc MOM% 6/26 May 0.5% 0.3%
Pers Spend MOM% 6/26 May -0.1% 0.3%
PCE Deflator YOY% 6/26 May 0.4% 0.1%
Core PCE Prices MOM% 6/26 May 0.3% 0.1%
Core PCE Prices YOY% 6/26 May 1.9% 1.8%
U of Mich Conf. Index 6/26 June F 69.0 69.0
================================================================

Inflation worries, mortgage rates ease

BY INMAN NEWS, THURSDAY,
JUNE 18, 2009.
Inman News


Yearly drop in consumer prices biggest since 1950


Mortgage rates fell this week after price reports suggested inflation remains at bay, Freddie Mac said in releasing results of its Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage (FRM) averaged 5.38 percent with an average 0.7 point for the week ending June 18, down from 5.59 percent last week and 6.42 percent a year ago.

The 15-year FRM averaged 4.89 percent with an average 0.7 point, down from 5.06 percent last week and 6.02 percent a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.97 percent with an average 0.6 point, down from 5.17 percent last week and 5.89 percent a year ago.

One-year Treasury-indexed ARMs averaged 4.95 percent with an average 0.6 point, down from 5.04 percent last week and 5.19 percent a year ago.

Reports of benign inflation figures reversed the upward trend seen in mortgage rates in recent weeks, Freddie Mac Chief Economist Frank Nothaft said in a statement.

The producer price index rose only 0.2 percent in May, a third less than forecast, and the consumer price index increased by just 0.1 percent.

A 5 percent drop in producer prices from a year ago was the largest since 1949, and a 1.3 percent yearly decrease in consumer prices was the biggest since 1950.

Tips for Selling Your Home to a First-Time Buyer

1. Maintain and stage.
A home that has been taken care of throughout the years will offer a stark contrast to a vacant, empty foreclosure.

As with any home, a fresh coat of paint, decluttering and the removal of unpleasant odors can go a long way to making a good first impression. But be careful not to over-improve the home, because the investment might not be worth the cost.

2. Mention that you'll help pay closing costs.
Whether it's in the marketing material or in the listing, this could be an extra motivator to reel in a buyer.

If rising mortgage rates have your buyer spooked, consider paying mortgage points to bring the rate down.

3. Offer a home warranty.
First-time buyers are often coming from a rental, and they are used to calling a landlord when there's a problem. To help them more easily transition into homeownership, provide them a warranty that covers major systems when problems arise.

4. Offer a buyer mortgage protection.
In some cases, it might make sense to address buyers' fears by purchasing insurance so they can keep up with their mortgage even if after losing a job. Coldwell Banker has such a program through its parent company, Realogy.

Basically, the plan will make several months of mortgage payments in the event that the buyer becomes unemployed. "There are people with secure jobs who are still nervous. This can give them just a little more comfort," Ms. MacKenzie said.

5. Don't snub low offers
Buyers know prices have fallen, so they're being aggressive in their offers -- sometimes extremely aggressive. But even if they come in with a shocking lowball offer, don't scoff at it. Simply counter.

Mortgage-Bond Yields Fall for Fifth Day, Signaling Lower Rates

By Jody Shenn

June 17 (Bloomberg) -- Yields on Fannie Mae and Freddie Mac mortgage securities declined for a fifth day, tracking a drop in rates on benchmark U.S. Treasuries and suggesting further declines in borrowing costs for new home loans.

Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds fell 0.06 percentage point to 4.52 percent as of 10:55 a.m. in New York, the lowest since May 29, according to data compiled by Bloomberg.

Treasuries and so-called agency mortgage bonds rallied after a government report showed the cost of living rose less than forecast in May. The mortgage-bond yields are down from 5.07 percent on June 10, the highest level since the Federal Reserve announced plans to buy home-loan bonds in November.

“There is a large feeling that we hit the highs in yield last week because of supply,” said Adam Brown, a managing director and Treasury trader at primary dealer Barclays Capital Inc. in New York, referring to government notes. “The absence of supply has allowed the market to rally back to what people think are fair levels.”

The difference between yields on the Fannie Mae bonds and 10-year Treasuries fell 0.02 percentage point today to 0.9 percentage point, Bloomberg data show. The gap, which grew to as much as 2.38 percentage points last year, contracted to 0.7 percentage point on May 22, the lowest since 1992.

The mortgage securities had soared from 3.94 percent on May 20, helping drive the average rate on a typical 30-year loan to 5.59 percent in the week ended June 11, up from 4.82 percent for the week ended May 21 and a record low of 4.78 percent April 30, according to McLean, Virginia-based Freddie Mac.

‘Tail of the Dog’

The rate fell to 5.53 percent as of early yesterday, from a six-month high of 5.74 percent on June 10, according to Bankrate.com. Yield spreads over 10-year government notes on the mortgage bonds have narrowed from a two-month wide of 1.14 percentage point on June 8.

Hedging by mortgage-bond holders and servicers had driven some of the recent increase in Treasury yields and spreads on home-loan bonds, a dynamic that is now being reversed.

“A lot of the movements in Treasuries have come because of supply and demand from other markets, namely mortgages and swaps,” Brown said. “The Treasury market has been the tail of the dog and not the dog itself.”

As rates increase, the expected average lives of mortgage bonds and loan-servicing contracts extend as potential refinancing drops, leaving holders with portfolios of longer- than-anticipated durations. Investors then may seek to pare durations by selling longer-dated Treasury securities, mortgage bonds and interest-rate swaps, sending yields even higher. The opposite happens when rates decline.

Bond Duration

The duration of the agency mortgage-bond market extended to the equivalent of about $1.9 trillion of 10-year U.S. Treasuries as of yesterday, almost double the year-end level of about $1 trillion, Chris Ahrens, Jeana Curro and Eric Liverance, UBS AG strategists in New York, wrote in report today.

Duration is an estimate of how much the price of a bond will change when interest rates rise or fall. The duration of fixed-rate agency-mortgage bonds fell to 3.18 years as of yesterday, down from a seven-month high of 3.85 years on June 10, according to Barclays Capital index data.

“For those who believe rates will go down, hedge ratios will certainly shrink which will result in an immediate contraction as borrowers refinance,” the UBS analysts wrote. “We do not expect to see 4.875 percent mortgage rates anytime soon and consequently anticipate the market will stay extended for some time.”

Consumer Prices

Yields on agency mortgage bonds are guiding rates on almost all new U.S. home lending following the collapse of the non- agency market in 2007 and a retreat by banks. The almost $5 trillion market includes securities guaranteed by government- controlled Fannie Mae and Freddie Mac and bonds of U.S.-insured, low-down-payment loans backed by federal agency Ginnie Mae.

The consumer price index increased 0.1 percent in May after no change a month earlier, capping the biggest 12-month decline since 1950, the Labor Department said today in Washington. Economists forecast consumer prices rose 0.3 percent, according to the median of 75 projections in a Bloomberg News survey.

California imposes 90-day foreclosure moratorium

The Associated Press

SACRAMENTO, Calif.—California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.
The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.
But supporters acknowledge the California Foreclosure Prevention Act won't stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.
The bill passed in February is similar to the Obama administration's Making Home Affordable Program that began in March.
Both encourages lenders to cut interest rates or rewrite loans to affordable levels.

Builders See Signs of Stabilization Toll Brothers, Hovnanian Post Smaller Losses as Lower Prices Drive Sales

By JAMES R. HAGERTY and JOHN SPENCE


Home builders reported encouraging signs of stabilization in the housing market, but they cautioned that foreclosures and rising interest rates cloud the outlook.

Bloomberg News Rising unemployment and increases in the foreclosure rate remain big worries for housing. Above, a Toll Brothers development in Coppell, Texas.
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Two big builders, Toll Brothers Inc. and Hovnanian Enterprises Inc., said losses in the fiscal second quarter ended April 30 shrank from year-earlier levels as lower prices lured some buyers back into the market.

A report Wednesday from IHS Global Insight, a research firm in Lexington, Mass., said home prices on average fell at an annual rate of 2.2% in this year's first quarter, compared with a 12.5% rate in the fourth quarter of 2008. The report is based on price data from the Federal Housing Finance Agency. In the latest quarter, prices were down in 199 of 330 metropolitan areas examined in the study. In the fourth quarter, 312 metro areas showed declines.

MoreDeals: M&A Boom is Far Off for Home Builders Developments: Housing Shows Signs Of Stabilizing, But Rising Interest Rates Could Mar Outlook .
"While it's too early to see a bottom of this housing downturn," the report said, the latest data "may signal that the market is beginning to stabilize."

Among the biggest worries are rising unemployment and increases in the foreclosure rate. Foreclosure actions were initiated on 1.4% of first-lien home mortgages in this year's first quarter, up from 1.0% a year earlier, the Mortgage Bankers Association said last week. Meanwhile, after falling to their lowest levels since the 1950s, mortgage interest rates have increased. In the week ended May 29, the average interest rate for new 30-year fixed-rate mortgages jumped to 5.25% from 4.81% a week earlier.

Toll Brothers, based in Horsham, Pa., had a loss of $83.2 million for the fiscal second quarter ended April 30, compared with a loss of $93.7 million a year earlier. In the latest quarter, the builder of luxury homes booked pretax write-downs of $119.6 million, down from $288.1 million.

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Toll said its receipts of refundable deposits per community have been up from a year earlier in nine of the past 11 weeks. But, Toll added, "we believe that concerns about job security and the economy continue to inhibit traffic and the conversion of deposits to contracts."

Quarterly revenue plunged to $398.3 million from $818 million. The company declined to offer a profit outlook, citing uncertainty in the housing market.

Toll said it is starting to see more opportunities to buy land at attractive prices from banks. "Things are starting to loosen up," said Chief Executive Robert Toll in a conference call Wednesday.

Hovnanian late Tuesday reported a loss of $118.6 million for the fiscal second quarter ended April 30, largely due to write-downs of land values, compared with a year-earlier loss of $340.7 million.

Hovnanian, based in Red Bank, N.J., said the average number of sales contracts per community rose to 7.4 from 5.9 a year earlier. Even so, revenue was down 49% to $398 million.

Santa Monica Listing Trends

Santa Monica Homes For Sale

Median Sales Price in Santa Monica hits '05 level

Is this your opportunity to live in Santa Monica?

Santa Monica Recently Sold Homes

Down Market? How about an Ideal Opportunity?

RISMEDIA, June 4, 2009-With the passing of an $8,000 tax credit for first-time buyers, much has been made about the great opportunity available to those who have never owned a home. Yet, the reality is that today’s market offers just as many advantages for existing homeowners wishing to move-up to a larger home.

“Many current homeowners mistakenly don’t think it is good time to buy because they are focused on what they might have sold their home for in the past,” said James W. Weichert, president and founder of Weichert, Realtors. “Once they realize how beneficial it can be to trade-up now, both financially and personally, they often have a change of heart.”

The Financial Benefits

Given the recent decline in home prices, some homeowners are understandably hesitant to sell their home. However, when you factor in the cost-savings on the home also being purchased, trading up now can produce a very positive financial outcome.

Take for example a homeowner who paid $200,000 for a home several years ago. If prices in their market declined by 10%, they would experience a $20,000 loss upon the sale of their home. However, if they are also buying a larger home that had cost $400,000; they would now benefit from a $40,000 savings on their purchase. This is a $20,000 gain in overall equity as a result of moving up. In addition, when prices begin to rise, this trade-up buyer will see greater appreciation in their new home than their previous one.

More House for Your Buck

With home affordability at a record-high and interest rates at a record-low, those looking to move-up can get more for their dollar today than at any time in recent memory. For some this historic buying opportunity can translate in to a home with more bedrooms for the kids or a bigger yard where the dog can play. For others it might mean a larger dinning room for entertaining family and friends.

Whatever the reason, today’s market makes it possible for many trade-up buyers to afford a home they couldn’t just a few years ago and might not be able in a few years to come.

In the Middle of the Action

Perhaps the biggest advantage for trade-up buyers is the fact that they are in the middle of the real estate action - literally. In most cases, the home they own is in the best-selling segment of today’s market, while the home they wish to buy is in a price range that is seeing far less activity.

According to the National Association of Realtors, for the first-time ever, more than half of all buyers are now first-time home buyers. More often than not, the properties these first-time buyers want and can afford are the homes currently owned by move-up buyers. As a result, trade-up buyers who own starter homes that would be attractive to a first-time buyer may have a much easier time selling than they expected.

On the flip side, those looking to move up benefit from the reality that there are less people looking to buy larger, higher-priced homes. This lack of activity at the higher end of the housing market offers move-up buyers more negotiating power and affords the opportunity to be more selective. It also provides the very real possibility of even greater savings on the buy side during the trade-up process.

What remains unclear is just how long this opportunity to move-up to a larger home at an affordable price will last. After several years of price declines, many financial experts are predicting the market is close to a bottom. In addition, the government’s continued involvement shows that it is committed to stabilizing the housing market to stimulate the economy. At the same time, there is much speculation that interest rates may begin to rise in the near future after remaining stagnant within the same range for several months.

“Today’s affordable prices and low interest rates have opened a great window of opportunity for all buyers, not just first-time home buyers. The big question is how long the window will stay open before it slams shut,” added Weichert.

Pending home sales rise 6.7% in April

The National Assn. of Realtors says that its seasonally adjusted index of sales contracts signed during that month surged 6.7% to 90.3 in the biggest monthly jump since October 2001.
Associated Press

June 3, 2009

Washington — The number of home buyers who agreed to buy a previously occupied home took the largest monthly jump in nearly eight years in April, but there are still plenty of danger signs for the U.S. housing market.

Home sales appear likely to head upward this summer, potentially to levels not seen since the stock market collapsed last autumn, but prices are expected to keep falling well into next year. Layoffs, which are causing foreclosures to soar, coupled with rising mortgage rates could dampen any real estate recovery.

The National Asn. of Realtors said Tuesday that its seasonally adjusted index of sales contracts signed in April surged 6.7% to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2%.

The big boost reflects the effect of a new $8,000 tax credit for first-time buyers that was included in the economic stimulus bill signed by President Obama in February. Since buyers need to complete their purchases by Nov. 30 to claim the credit, "we expect greater activity in the months ahead," Lawrence Yun, the Realtors' chief economist, said in a statement.

Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.

Even though economists are encouraged by signs that demand for housing is returning, the outlook is far from sunny. Mortgage rates are rising, making homes less affordable for many borrowers. The average rate for a 30-year fixed-rate mortgage is around 5.3% this week compared with about 5% last week, according to Bankrate.com.

The health of the U.S. housing market, mired in a three-year slump, is one of the key issues facing the economy. Though sales may be recovering, analysts cautioned that prices would take longer to stabilize because of the glut of unsold properties for sale. Prices are unlikely to rise until foreclosures start declining, and that's unlikely to happen before the end next year.

Tax credit approved for use as down payment

Qualified, first-time home buyers using a Federal Housing Administration (FHA)-insured mortgage now can apply the $8,000 federal tax credit toward their down payments, the Dept. of Housing and Urban Development (HUD) announced today.

Currently, borrowers applying for an FHA-insured mortgage are required to issue minimum down payments of 3.5 percent. Previously, FHA-approved lenders were not allowed to monetize the tax credit as part of the 3.5 percent; however, under the new guidelines announced this afternoon, borrowers now can use the tax credit as additional down payment, or for other closing costs.