Roy’s Blog — Page 8 — Roy Hernandez Real Estate Services

OC Home Prices Continue Upward in May

June 26, 2014 By Roy Hernandez Leave a Comment

Home prices continue upward. Equity home sales near 90 % all home sales.

LOS ANGELES (June 23) – Higher home values continued to fuel more equity home sales, which have made up more than 80 percent of all home sales for the past 11 consecutive months. Meanwhile, pending home sales fell in May as investors pulled out of the market due to higher home prices, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Distressed housing market data:

• The share of equity sales – or non-distressed property sales – rose further in May, rising to 89.2 percent, up from 88.4 percent in April. Equity sales have been rising steadily again since the beginning of this year. May marks the 11th straight month that equity sales have been more than 80 percent of total sales. Equity sales made up 78 percent of sales in May 2013.

• The combined share of all distressed property sales continued to decline in May, primarily due to a drop in REO sales. The share of distressed property sales was down from 11.6 percent in April to 10.8 percent in May. Distressed sales continued to be down by more than 50 percent from a year ago, when the share was 22 percent.

• Twenty-seven of the 41 reported counties showed a month-to-month decrease in the share of distressed sales, with 11 of the counties recording in the single-digits, including Alameda, Marin, San Diego, San Luis Obispo, San Mateo, and Santa Clara counties — all of which registered a share of five percent or less.

• Of the distressed properties, the share of short sales dropped to levels last observed in late 2007 at 5.6 percent, down from 5.9 percent in April. May’s figure was nearly a third of the 14 percent recorded in May 2013.

• The share of REO sales fell in May to 4.7 percent, down from 5.3 percent in April and from 7.6 percent in May 2013.

• The supply of inventory increased for equity sales and REO sales in May. The Unsold Inventory Index for equity sales edged up from 3.6 months in April to 3.7 months in May, and from 2.3 months in April to 2.4 months in May for REO sales. The supply of short sales dipped from 4.4 months in May to 4.3 months in April.

Pending home sales data:

• California pending home sales fell in May, with the Pending Home Sales Index (PHSI)* dropping 3.4 percent from a revised 114.1 in April to 110.1 in May, based on signed contracts.

• Pending sales were down 10.6 percent from the revised 123.2 index recorded in May 2013. The year-over-year decline in the PHSI was the first double-digit decline in three months. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

Charts (click link to open):

• Pending sales compared with closed sales.
• Historical trend in the share of equity sales compared with distressed sales.
• Closed housing sales in May by sales type (equity, distressed).
• Housing supply of REOs, short sales, and equity sales in May.
• A historical trend of REO, short sale, and equity sales housing supply.
• Year-to-year change in sales by property type.

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Mortgage Rates Falling, So Where Are Home Buyers?

June 11, 2014 By Roy Hernandez Leave a Comment

Mortgage rates have fallen close to their lowest levels in nearly a year, but housing demand hasn’t budged much yet.

Freddie Mac FMCC -1.36% reported Thursday that the average 30-year, fixed-rate mortgage rose to 4.14% this week, up from 4.12% last week but down from 4.4% just two months ago. This puts rates at roughly the same level seen in late October 2013 and again last June, when rates were zipping up as investors braced for an end to the Federal Reserve’s bond-buying programs.

But even with low rates, mortgage applications have been soft, according to a separate report from the Mortgage Bankers Association, a sign of still muted demand for home loans.

What’s going on?

First, a longer view helps. True, mortgage rates are low—as low as they’ve been in almost 12 months. But in the same way that shoppers may not be lured by “low prices” at a department store that is always advertising a sale, mortgage rates at 4.1% may not be seen as a steal by buyers who lived with rates that were even lower for all of 2012 and the first half of 2013—especially considering that prices have moved higher.

Put differently, which change is more dramatic—a decline in interest rates from 5% to 3.5% over the two years beginning in February 2011 or the decline from 4.5% in January to 4.1% in May?

Given the time it takes for home purchases to come together and the fact that the decision to purchase a home isn’t purely rate-driven—buyers also must weigh what’s for sale, their family and job situation, etc.—it could take a while to see what effect, if any, the recent drop in interest rates has had on demand.

So do rates really matter? At the margins, yes. They’re a key component of a borrower’s monthly payment. And often the first conversation between a real-estate agent and a potential buyer—”How much are you willing to spend?”—can be influenced quite a bit by mortgage rates, provided the buyer isn’t paying entirely in cash.

What does this payment picture look like right now? The monthly payment on the median-priced U.S. home fell from $673 in February 2011 to $552 in September 2012 as interest rates fell. Interest rates stayed low through May 2013, but the average payment rose to $586 as home prices ticked up. (These calculations assume a 20% down payment on the national median home value as calculated by Zillow).

After interest rates jumped last summer, that average payment bounced to $674 in September 2013. Rising prices and, especially, higher rates eroded the affordability gains of the previous 2½ years in a matter of months. Payments haven’t budged much since then. Modest declines in interest rates have offset modest gains in home prices.

Some look at this and say: wait a minute, a 4.5% mortgage is still an insanely good deal. Why would a rise in rates to levels that are still quite low hurt housing demand? One possible explanation: the overall level of rate matters over the long run, but the speed with which rates rose last year could have dented demand in the short run.

Several economists have argued recently that mortgage rates increases played an important role in last year’s sales slowdown. In part, that’s because activity received a larger boost when mortgage rates were falling from 2011 to 2013 than previously anticipated, wrote Goldman Sachs economists Sven Jari Stehn and David Mericle in a recent report.

The Goldman analysis suggests that the slide in mortgage rates between 2011 and 2013 increased residential investment—the primary measure of housing’s contribution to GDP—by 5 percentage points. “As this tailwind dissipates going forward, the trend in housing activity might be somewhat lower than previously assumed,” they write.

Last year’s mortgage rate increase accounts for nearly half of the difference in expected housing growth and the lower, actual growth, according to a separate analysis published last week by economists at the Federal Reserve Bank of Cleveland.

This isn’t to say that the cold winter and the rate jump are the only reasons housing has slowed down. Low rates and prices may have spurred the release of pent-up demand throughout 2012, as home prices began to rise. This one-time benefit, together with aggressive home purchase by investors (also a temporary phenomenon), could have given false signals about the true health of the demand side of the market in 2012 and 2013.

Moreover, incomes have showed little growth, meaning that it will be harder for more buyers to buy homes if prices continue to rise absent some gains in wages or even bigger declines in financing costs. Sales are also being restrained by low levels of homes for sale, which is pushing prices higher. Some would-be buyers don’t have enough equity to sell their current home, while others have high levels of student debt.

WSJ by Nick Timiraos

3 reasons right now is the best time to buy a home

May 27, 2014 By Roy Hernandez Leave a Comment

The advantage is on the buyer side….

There has never been a better time to buy a home this year.

And yet despite three major advantages for homebuyers, sales so far have been slow.

Buying is cheaper than renting in most markets. And with mortgage activity down, originators, one would think, would be bending over backwards for applicants.

More people want to be homeowners, even younger buyers. A recent Fannie Mae survey of younger renters and buyers finds that though most younger renters prefer owning, many of them may stay renters longer due to insufficient financial capability and/or preparation. They don’t want to be renters – 90% would prefer to be homeowners.

Additionally, according to the latest quarterly report from the Federal Housing Finance Agency, both Fannie Mae and Freddie Mac are reducing the money set aside to cushion any blow to their business, making it fair to say this is the result of the government-sponsored enterprises betting on a continued housing recovery.

There are three reasons this may be the best time to buy a home. (Click the next page below to see the list)

1) Mortgage rates are at six-month lows

Mortgage rates in the first week of May fell once again and this time to the lowest level since Nov. 7, 2013.

The latest Freddie Mac Primary Mortgage Market Survey recorded an average 30-year, fixed-rate mortgage of 4.21% for the week ending May 8, continuing to fall from 4.29% a week ago, but up from 3.42% a year earlier.

“Mortgage rates continued moving down following the decline in 10-year Treasury yields after a dismal report on real GDP growth in the first quarter,” Frank Nothaft, vice president and chief economist with Freddie Mac, said.

2) Home price growth is slowing

According to CoreLogic’s (CLGX) March HPI index, home prices rose year-over-year for 25 months straight in March.

Also, existing home inventory is increasing. Home prices nationwide, including distressed sales, grew 11.1% in March from one year prior.

This is not too far off the February 12.2%, January 12% and December 11% rise over the past three months, respectively.

Looking ahead, the CoreLogic HPI forecast indicates that home prices, including distressed sales, are projected to increase 0.8% month over month from March 2014 to April 2014 and by 6.7% from March 2014 to March 2015.

3) Most housing markets have recovered

Fifty-nine metros have fully recovered from the last housing market crash, and 300 saw year-over-year gains, according to an index of markets put together by the National Association of Home Builders/First American.

The nationwide economic score rose slightly to 0.88 from a revised April reading of 0.87.

This means that based on current permit, price and employment data, the nationwide average is running at 88% of normal economic and housing activity. The index showed an overall reading of 0.82 a year ago.
“Our builder members tell us they are starting to see more optimism in the field,” said NAHB chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “Mortgage rates are low, home prices are affordable and with the harsh winter behind us our latest surveys show builders are feeling more bullish about future sales conditions.”

Credit and affordability issues remain, but this may be the best time for the buyer who is on the fence.
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Lansner: Nervous about fall in home sales

April 23, 2014 By Roy Hernandez

OK, now I’m a bit worried.

The local homebuying slump extended itself into the start of the traditional house-shopping season – and Southern Californians certainly can’t blame “bad winter weather” for the sluggishness.

DataQuick reported that buyers in six counties in the region – Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura – closed on a modest 17,638 homes in March. It was the slowest-selling March in six years, but there’s also more to be nervous about:

• While March’s sales count is up 26 percent from February, that’s limited oomph for the unofficial opening of the prime house-hunting period. February-to-March sales have averaged a 36 percent increase since 1988.

• March sales were off 14 percent in a year, the sixth consecutive year-over-year drop. Half a year of any trend – up or down – is worth examining.

I fired up my trusty spreadsheet and looked back over a quarter-century of DataQuick homebuying patterns for the six local counties. The collective sales counts have fallen on a year-over-year basis for six straight months only five times. So the housing market is in rare territory.

The five previous six-month dips were tied to the two most recent housing debacles. That’s already a reach-for-the-antacids analysis.

And my spreadsheet tells me that such buying slowdowns don’t end quickly. So Southern California history says not to expect a sales rebound any month soon. It’s clear that these slump periods were tinged with economic change that put off, at a minimum, the anxious shoppers.

Curiously, selling prices don’t react as quickly. I’m guessing one reason is that economic uncertainty often initially nudges out the financially weak house seekers or buyers of lower-priced homes, so the remaining shoppers have deeper pockets and can – and do – pay up.

History should not be ignored – nor is it a perfect prognosticator. So let’s review the five previous six-month strings of buying slumps for any hidden meanings.

• November 1989: The region’s grand 1980s housing expansion came to an end. Home sales a year later would slow by another 34 percent – though prices didn’t budge. All told, sales volumes would fall on a year-over-year basis for another 24 consecutive months. Remember, a key source of lending – savings and loans – was collapsing. And the region and the nation were headed into recession, a mild one for the U.S. but an ugly one for us. The job market, so key to homebuying, would shrink in 1991, 1992 and 1993.

• September 1992: The 1980s real estate boom didn’t end pretty. The local housing market had trouble getting into gear, and this slump was in many ways just another dip in the middle of an extended down cycle. Sales volumes would drop, year-over-year, for eight of the next 10 months – but within a year they were up at a 17 percent annual clip as the Federal Reserve made money cheap. Prices would dip 4 percent by September 1993.

• May 1995: The Fed did the region no good in 1994. Interest rates were jacked up to cool a hot national economy, which had not spread its vitality deep into Southern California. (Rising rates pushed Orange County into bankruptcy, thanks to its wrong-way bond bet!) However, you could say that this housing sales slump was the last throes of the long real estate downturn. Sales did fall, year-over-year, for 10 more months, but by May 1996 they were rising at a 31 percent annual pace. Local housing was nearing its lengthy revival, as regional jobs would grow from 1994 through 2007.

• March 2006: The longest sales drop in 11 years was an early red flag that bad stuff was about to happen – a housing-induced nationwide Great Recession. The abrupt end of stupid lending practices, which overinflated the housing market, was the final straw. The local job market cratered in 2008 through 2010. Southern California homebuying would fall on a year-over-year basis for 15 more months – including an annualized drop of 32 percent by March 2007. Intriguingly, prices would rise 5 percent in the year after March 2006, only to tumble by 24 percent in the following 12 months.

• December 2010: When various midrecession government homebuying incentives ended throughout 2010, shoppers initially balked. This sales slump was brief, though, running only another seven months – though prices did dip 7 percent over a year. This slump set the stage for the real estate rebound that ran through 2013 as local job counts increased three straight years. In the second year after this six-month sales dip, sales were rising at a 5 percent annual pace, and prices were up 20 percent.

BY JONATHAN LANSNER / STAFF COLUMNIST
Published: April 20, 2014 Updated: April 21, 2014 3:32 p.m.
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O.C. house prices up 16.4% in February

April 2, 2014 By Roy Hernandez

A two-year streak of rising house prices continued in Orange County through February, up 16.4 percent year over year, CoreLogic’s latest home price index shows.

However, the rate of gain is on the wane.

February’s year-over-year increase was the smallest since February 2013 and is down from a high of 23 percent in August.

The Irvine-based data firm, which produces one of a series of competing home-price indexes, shows steady year-over-year price gains in the county for the past 1 1/2 years.

In addition, the index value — based on comparisions of repeat sales — increased 1.3 percent from January to February, CoreLogic reported. Month-to-month gains have occurred in 23 of the past 24 months.

Orange County’s February price gains were greater than seven of the 10 most populous metro areas in the nation.

Only three metro areas had bigger gains: The Inland Empire led the nation with a 22.2 percent gain, followed by Los Angeles County at 18.8 percent and the Atlanta area at 16.7 percent.

Nationwide, house prices increased 12.2 percent in the year ending in February, according to CoreLogic.

California led the states with price appreciation at 19.8 percent. Fourteen states had double-digit year-over-year gains and 22 states were approaching pre-recession price peaks.

“As the spring home-buying season kicks off, house price appreciation continues to be strong,” said CoreLogic Chief Economist Mark Fleming.

Rising prices are expected to spur more homeowners to jump into the market, Fleming added. That rising supply should keep home price gains moderate in the near future.

In Orange County, for example, the number of homes for sale jumped 8 percent in March from February and was up 23 percent since the start of the year, according to Steve Thomas of ReportsOnHousing.com.

BY JEFF COLLINS / STAFF WRITER/ OC Register /Published: April 2, 2014 Updated: 7:22 a.m

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7 Financial Benefits of Home Ownership This Tax Season

March 31, 2014 By Roy Hernandez

The financial benefits of homeownership are evident year round, but particularly around tax time – they seem to jump off the page. Let’s examine how homeownership makes “cents” – from the tax benefits, to good old fashioned financial stability.

1. Homeownership Builds Wealth Over Time

We were always taught growing up that owning a home is a financially savvy move. Our parents knew it, and their parents knew it. But this past decade of real estate turbulence has shaken everyone’s confidence in homeownership. That is why it’s so important that we discuss this again now that we’re in a ‘new market.’ Homeownership can be a very savvy financial move – but only if people buy homes they can actually afford. In 2014, this idea of sticking to a home you can afford to gradually build wealth is a “rule” that just happens to be new and old at the same time.

2. You Build Equity Every Month

Your equity in your home is the amount of money you can sell it for minus what you still owe on it. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity. That is especially true now with the elimination of risky mortgages like negative amortized and interest-only loans – thanks to the new “Qualified Mortgage” rules. The way mortgages work is that the principal portion of your payment increases slightly every month year after year. It’s lowest on your first payment and highest on your last payment. Thus, as the months and years go by, your equity grows!

3. You Reap Mortgage Tax Deduction Benefits

Mortgage deduction: The tax code allows homeowners to deduct the mortgage interest from their tax obligations. For many people this is a huge deduction, since interest payments can be the largest component of your mortgage payment in the early years of owning a home.
Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller. And because origination fees of 1 percent or more are common, the savings are considerable.
Property tax is deductible: Real estate property taxes paid on your primary residence and a vacation home are fully deductible for income tax purposes.

4. Tax Deductions on Home Equity Lines

In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit). This allows you to shift your credit card debts to your home equity loan, pay a lower interest rate than the horrendously exorbitant credit card interest rates, and get a deduction on the interest as well.

5. You Get a Capital Gains Exclusion

If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. Now, it may sound ridiculous that your house could be worth more than when you purchased it after these past several years of falling house prices. However, if you purchased your home anytime prior to 2003, chances are it has appreciated in value and this tax benefit will come in very handy.

6. A Mortgage Is Like a Forced Savings Plan

Paying that mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more valuable equity in your home. In a sense, you are being forced to save—and that’s a good thing.

7. Long Term, Buying Is Cheaper than Renting

In the first few years, it may be cheaper to rent. But over time, as the interest portion of your mortgage payment decreases, the interest that you pay will eventually be lower than the rent you would have been paying. But more importantly, you are not throwing away all that money on rent. You gotta live someplace, so instead of paying off your landlord’s home or building, pay off your own!

As always, you must look very hard at your personal situation before making the big decision to buy.
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Buyers- What do you want in a neighborhood?

March 11, 2014 By Roy Hernandez Leave a Comment

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Home prices are slowing, Case-Shiller index suggests

February 26, 2014 By Roy Hernandez Leave a Comment

By Andrew Khouri
February 25, 2014, 7:13 p.m, Los Angeles Times

Home prices nationally posted their best year since 2005, but signs are growing that the housing rebound has stalled.

Prices in the 20 largest metro areas have dropped slightly for two months in a row, according to the S&P/Case-Shiller index, a leading national home price gauge.

Demand is waning because of higher prices and mortgage rates, and home buyers have only modest expectations for price appreciation, said Robert J. Shiller, a Yale economist and co-creator of the index.

Quiz: How much do you know about mortgages?

“It’s not a time of great enthusiasm for a home purchase,” Shiller said.

He even warned that prices could drop on an annual basis by the end of 2014 amid a retreat by institutional investors and a still-weak economy.

“I am not predicting that, I am saying it’s a worry,” said Shiller, who famously predicted last decade’s housing crash.

The downbeat assessment comes after prices rose rapidly for much of last year. Rock-bottom mortgage rates supercharged demand and pushed up property values in America’s biggest cities. Despite the recent slowdown, home prices in the 20 largest metro areas rose 13.4% over the year ending in December, according to the index.

The Case-Shiller data lag behind other indicators, which also have signaled falling demand. Home prices have risen far faster than incomes, pricing many buyers out of a market with few homes for sale.

In January, the National Assn. of Realtors reported that sales of previously owned homes plunged to the lowest level in 18 months, on a seasonally adjusted basis. The Case-Shiller data are not seasonally adjusted, so they reflect, in part, a typical winter slowdown.

Only six cities, including San Francisco and Las Vegas, saw prices climb in December from November. And 11 metro areas saw slower annual price increases in December compared with a month earlier.

Los Angeles posted a strong rise of 20.3% from December 2012 to December 2013, but that was smaller than L.A.’s November-to-November gain.

And December’s year-over-year gain across the largest cities was the slowest since September.

“The strongest part of the recovery in home values may be over,” said David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices.

The price slowdown has been welcomed by many. As prices soared early last year, so did fears of another bubble. Many economists now predict continued gains in 2014, although at a slower pace.

Zillow chief economist Stan Humphries called 2013 “an undeniably great year in housing” and pegged gains this year around 3% — a level he called “more sustainable.”

“The market is gearing up for a spring home shopping season that should be a bit smoother for buyers, with less investor competition and marginally more inventory,” he said.

Some real estate agents say they have already noticed spring’s arrival. On Sunday, Amber Dolle held an open house for a three-bedroom in the San Fernando Valley priced at $499,000.

“We got two offers on it, and there must have been 70 people that came through,” she said.

There are signs sellers are increasingly placing their homes on the market. Inventory remains very tight, but more homes were for sale nationally and across Southern California in January than a year earlier, according to Realtor.com.

The Case-Shiller index, created by Shiller and economist Karl E. Case, is widely considered the most reliable read on home values. The housing index, which uses a three-month moving average, compares the latest sales of detached houses with previous sales, and accounts for factors such as remodeling that might affect a house’s sale price over time.

Some economists say a rapidly shrinking foreclosure crisis has distorted the index. With fewer foreclosed homes sold, recent price gains become exaggerated, they say.

Western cities — a favorite of deep-pocketed investors — continued to post the largest annual gains. Prices in Las Vegas rose 25.5% compared with December 2012; San Francisco 22.6%; and Los Angeles, which includes Orange County, jumped 20.3%.

“I am a little concerned,” said Dean Baker, co-director of the Center for Economic and Policy Research. “It’s hard for me to believe those price increases are justified by the fundamentals.”

Amid those higher prices, investors have recently shown signs of pulling back.

In Phoenix, prices fell 0.3% from November, the first decline after 26 consecutive increases. The spring home buying season should provide better insight whether first-time and move-up buyers can fill the void. Would-be home buyers face a tougher challenge to adjust to higher prices than last decade, when credit was loose and standards were low.

Values shouldn’t drop, though, said IHS Global Insight economist Patrick Newport. Few homes on the market and a depressed level of new construction will continue to support price increases, he said. “We are just not building enough homes.”

And although Shiller expressed concerns prices could fall, he, too, predicted gains this year — just not as stark as buyers recently experienced.

The recent price run-up is small compared with what Americans saw last decade and homes aren’t as expensive, Shiller said.

“I am less worried,” he said, “than I was back in 2006.”

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U.S. Home Sellers Return for Spring as Buyers Get Relief

February 20, 2014 By Roy Hernandez

By Prashant Gopal, Bloomberg, Feb 7, 2014 5:58 AM PT

Suzanne Baker and her siblings bought a foreclosed home in Atlanta two years ago, added a fourth bathroom, then waited for values to rebound before considering a sale. Now, she says, they’re ready to cash in.

The family last month listed the four-bedroom house in the affluent Buckhead neighborhood for $710,000. It was purchased as an investment for about $375,000 in late 2011, before bulk buyers snapped up many of the area’s distressed homes, helping to drive up prices in Atlanta by more than 25 percent.

“The market is back up,” Baker said. “We think we can make a good amount of profit so we’re going to try.”

For two years, a shortage of sellers like the Bakers has propped up prices across the U.S. as shoppers jostled for a dwindling supply of houses. Now, as the market’s busiest season approaches, escalating values are spurring more listings as homeowners regain equity lost in the worst crash since the 1930s. While new-home construction at a third of its 2006 peak will keep inventory tight, the supply increase is poised to damp price gains while higher mortgage rates cut into demand.

Related:

For would-be buyers, more choice would mean relief from the bidding wars of last year, when the supply was at a 12-year low leading into the key spring season. The period traditionally starts in mid-February, with deals picking up in the following months as weather in much of the country starts to warm.

Prices “won’t be rising as much as they were rising last spring.” said Jed Kolko, chief economist of San Francisco-based Trulia Inc. (TRLA), operator of an online property-listing service. “It will be a less frantic market with more inventory and fewer investors.”

Tightest Markets

The number of available homes climbed on a year-over-year basis in each of the last four months of 2013 after 30 straight declines, according to the National Association of Realtors. The increase in December was 1.6 percent.

Inventory rose the most in some of the tightest areas, from Arizona and California to Georgia and Florida, where leaps in prices erased negative equity and encouraged homeowners to lock in profits, according to a separate report from Realtor.com, the property-listings website for the Realtors association.

In Sacramento, California, where asking prices climbed 11 percent last year, listings jumped 58 percent in December, according to the website. The supply rose 35 percent in the Minneapolis area; 31 percent in Orlando, Florida; 27 percent in Atlanta; 24 percent in Dayton, Ohio; 23 percent in Oakland, California; and 21 percent in Phoenix.

Slowing Gains

“Rising inventory is the primary reason that we expect the pace of price gains to drop back,” Paul Diggle, property economist for Capital Economics Ltd. in London, said in a telephone interview.

Prices nationwide will climb 4 percent this year compared to 2013’s expected 11 percent gain, according to Diggle. Increasing mortgage rates also will weigh on prices because the higher costs will push some buyers out of the market, while forcing others to look for cheaper deals, he said.

Diggle’s firm projects 30-year fixed mortgage rates of 5 percent by the end of the year. That compares with the average this week of 4.23 percent, according to data from Freddie Mac. Rates will climb as the Federal Reserve scales back bond purchases that have bolstered the housing recovery by holding borrowing costs down, he said.

While rates have leveled off after reaching a two-year high in August, a jump from near-record lows in May has contributed to cooling demand. In December, contracts to buy previously owned houses fell by the most since May 2010, data from the National Association of Realtors show. Completed purchases rose 1 percent from November for the first gain in five months.

Buyer Enthusiasm

“Buyer enthusiasm has really softened in the past three months,” said Lawrence Yun, the Realtors group’s chief economist, who said colder-than-normal weather may be partly to blame. “In some markets, prices may rise further and buyers will want to catch it” before the increases put them out of their budget.

In Southern California’s Inland Empire, east of Los Angeles, homeowners got a jump on the spring selling season and began listing properties earlier than usual, said Paul Reid, an agent with brokerage Redfin.

Sellers are “nervous about what the spring is going to bring,” said Reid, who is based in Temecula, California. “They don’t know if everybody will list this spring then you’ll have a big counterbalance toward too much inventory, or if there’ll be a crunch again. They figure they’ll get out ahead of the market, list, sell and be done with it.”

Weak Demand

Rising inventory may unlock sales in severely constrained markets such as California’s Silicon Valley, where homes spend a median of 18 days on the market, according to Redfin data.

While those types of areas will benefit from more supply, demand in much of the country remains relatively weak and won’t recover without stronger job growth, said Sam Khater, senior economist for CoreLogic Inc.

Adjustable-rate mortgages, used by first-time buyers in past decades to purchase more expensive properties, may not be an option because of stricter lending standards adopted after the housing crash, he said.

“More supply will not create its own demand,” Khater said. “It will slow prices to a more sustainable rate of growth, but it won’t make the market more affordable. Once prices reach their natural state, future price appreciation will depend on income increases.”

Job Growth

The U.S. gained 113,000 jobs last month, less than economists’ forecast for a 180,000 increase, even as the unemployment rate fell to a five-year low of 6.6 percent, Labor Department data showed today. The jobless rate for Americans in their early 20s, many of whom are living with their parents longer rather than renting or buying homes, was almost 12 percent.

First-time buyers accounted for 27 percent of completed home purchases in December, down from 30 percent a year earlier, according to the Realtors group.

An increase in supply would indicate the housing market is moving toward more normal conditions as it rebounds from the five-year slump that started to turn around in 2012.

“Inventories had been very, very low and still are despite this turnaround,” said Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania. “It’s part of the process toward normalization, although the weakening in demand needs to be watched very carefully because if demand does not pick up in the spring, that’s going to call into question the strength of any recovery.”

More Homebuilding

For homebuilders, the spring selling season traditionally starts the weekend after the National Football League’s Super Bowl, which was played five days ago. Companies are stepping up production, adding to the options for buyers. New-home starts, which rose 15 percent in 2013, will jump 25 percent this year, according to Brad Hunter, chief economist of Metrostudy, a research firm that tracks construction.

While sales are poised to rise as the economy improves, higher mortgage rates and aggressive builder price increases slowed demand in the second half of 2013, he said.

“It’s going to be a good season for homebuilders, maybe just not as good as last season,” Hunter said. “There are more projects operating this year than last year so it’s a more competitive environment.”

PulteGroup Inc. (PHM) and D.R. Horton Inc., the second- and third-largest U.S. homebuilders by market value, said January sales were encouraging.

‘Very Positive’

“We’re right on the cusp of a strong spring selling season,” Donald Tomnitz, chief executive officer of Fort Worth, Texas-based D.R. Horton, said last week on the company’s earnings conference call. “The spring selling season has started a little early, for our company, and that’s a very positive thing.”

In Atlanta, home starts surged 67 percent in 2013 — the biggest jump on record — and many of those properties will be completed this year, said Eugene James, Metrostudy’s director in the region.

Buyers of existing homes will face less competition from investors, who have caused shortages in many areas. Bulk purchases will start to slow as the foreclosure crisis fades and bargains disappear, according to Khater of CoreLogic. Multibillion dollar private-equity firms such as Blackstone Group LP — which helped drive up prices by buying thousands of single-family homes to rent in Arizona, California and Florida are already are looking elsewhere.

Phoenix Investors

In the Phoenix area, institutional buyers purchased 44 properties in December, down from a peak of 831 in July 2012, according to Michael Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W.P Carey School of Business.

Active listings, excluding homes under contract, jumped 34 percent in December from a year earlier, while foreclosures and other distressed properties — the main source of supply for investors — fell 24 percent, Orr said.

Price gains in the area are easing, with a 20 percent increase in 2013 compared with 31 percent in 2012, Orr said. Home sales in December fell 11 percent from a year earlier and the decline may have been much higher in January, he said.

“Demand is still weak and supply has been growing faster than last year,” Orr said in an e-mail. “I’m not seeing any likelihood of further price gains in the near term. Sales concessions are on the rise and list-price cuts are widespread.”

Orlando Shift

In Orlando, sellers aren’t getting as many offers as they did a year ago, said David Welch, a Realtor with locally based Re/Max 200 Realty. The market has changed since October 2012, when the Orlando Sentinel reported that a bank-owned property drew 64 offers before fetching $86,000 — about 23 percent more than the asking price.

The median home price in December was $160,150, up 21 percent from a year earlier, according to the Orlando Regional Realtor Association. Sales dropped 5.2 percent, while new listings rose 24 percent.

“Prices have gone up quite bit,” Welch said. “That house that was a great investment a year ago has gone up 20 percent and may not be anymore.”

For Baker, the director of a nonprofit community revitalization group in Atlanta, the timing seems right to jump into the market and sell her family’s investment. The house, which she and her siblings used off and on in the past two years, is now vacant, and as a part-time student working on a master’s degree in social work, she can use the extra cash.

“We’re trying it now and we’ll see what bites we get,” Baker said.

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O.C. home sales decelerate in January

February 18, 2014 By Roy Hernandez

BY JEFF COLLINS / STAFF WRITER
Published: Feb. 12, 2014
Updated: Feb. 13, 2014 7:08 a.m.

Orange County home sales continued to swoon last month in the face of elevated prices and higher interest rates.

Housing market tracker DataQuick Information Systems reported Wednesday that sales closed on 2,205 houses, condos and newly built homes in January, down 9.3 percent year-over-year to the lowest number in almost two years.

But the median price – or price at the midpoint of all sales – hovered at $550,000, due in part to an increase in sales of larger and more expensive homes, market observers said.

Last month’s median home price was the third highest for a January in records dating back to 1988, DataQuick figures show.

“We have slowed down a little in the number of sales we’re seeing, (but) not necessarily in prices,” said Kim Rossi of Berkshire Hathaway Home Services in Monarch Beach.

“Last year, the market was unbelievable,” added Keller Williams Realty agent Reza Shirangi of Mission Viejo. “Then as interest rates rose from 3.5 percent to 4.5 percent (last summer), literally for three to four weeks, the market just stopped.”

Regionwide, median home prices increased 18.4 percent last month, to $380,000 in six Southern California counties, DataQuick reported. Southern California home sales dropped 9.9 percent, to 16,058 deals.

“Southland home sales have fallen on a year-over-year basis for four consecutive months now and remain well below average,” said DataQuick President John Walsh. “We’re still putting a lot of the blame on the low inventory. But mortgage availability, the rise in interest rates and higher home prices matter, too.”

Although home prices remain 15 percent below the all-time high of $645,000 reached in June 2007, Orange County’s housing market has recovered 65 percent of the ground lost in the housing crash.

January tends to be the slowest month of the year, reflecting deals signed during the slow Thanksgiving to New Year’s holiday season.

Orange County had 5,087 homes for sale on Jan. 30, less than half the multiple listing service average, according to Steve Thomas of ReportsOnHousing.com.

That compares with 3,276 homes for sale the same time last year – an inventory shortage that created “a flash market” in the first six months of 2013, said Mac Mackenzie, a Coldwell Banker agent in Irvine.

“It was a false market set up for success,” Mackenzie said. “It’s now a whole new ballgame. … We’re seeing a solid market, but nowhere near where it was last year.”

Price reductions began to appear in late summer, Mackenzie said, and homes priced overzealously have sat on the market without a buyer. For example, Mackenzie said he sold a home in Irvine’s Turtle Rock area in January 2013 for $1.45 million. Six months later, an identical home on a larger lot sold for $1.25 million.

A change in the mix of home sales has kept the median price artificially high, said Chris Pollinger, senior vice president of sales for Irvine-based First Team Real Estate.

DataQuick figures show, for example, that sales for $500,000 or less fell 32 percent in January. Sales for $700,000 and above rose 28 percent.

“The cheap seats are all taken,” Pollinger said. “We’re seeing a little bit more action at the high end. That’s why your prices are up a bit more.”

Sales drops also reflect decreased demand for existing homes, while new home sales have doubled in the past year.

Berkshire Hathaway’s Rossi noted that there are about 50 new home projects actively selling in Orange County, including the 2,380-home Baker Ranch development in Lake Forest. A spokeswoman for the developer said 9,000 to 10,000 home shoppers turned out for Baker Ranch’s grand opening last weekend.

“We need to educate our sellers who they are competing with,” she said. “They’re not just competing with the neighbor down the street. Now is the time to spruce up.”

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