June 4, 2009

Pending home sales rebounding

Number of signed sales contracts continues bounce off record lows for third consecutive month.

By Les Christie CNNMoney.com staff writer
Last Updated: June 2, 2009: 11:02 AM ET

Source:
http://money.cnn.com/2009/06/02/real_estate/April_pending_home_sales/index.htm?postversion=2009060211

NEW YORK (CNNMoney.com) - The number of home sales contracts signed in April continued to bounce back from record lows hit last winter, according to a widely watched industry report. This is the third consecutive month of gains.

The Pending Home Sales Index from the National Association of Realtors rose 6.7% in April after jumping 3.2% in March. That was far above the forecasts of experts surveyed by Briefing.com, who predicted a 0.5% increase. The index was 3.3% higher than 12 months earlier.

Pending home sales are a forward-looking indicator since many of the contracts don't result in completed deals for many weeks or months.

"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR's chief economist in a prepared statement. "Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers."

The credit allows many homebuyers who have not owned a home in the past three years to claim up to an $8,000 refund on their taxes. The result has been a flood of first-time homebuyers even into lukewarm markets like Indianapolis, according to Glenn Bill, an agent there for Century 21 Sheetz.

"Our first-time homebuyer market is exploding," he said. "That's one good thing to come out of the stimulus package."

Low prices
Also driving sales is falling home prices. The national median home price is down more than 30%, according to the S&P/Case-Shiller Home Price Index. That has drawn many bargain-hunting homebuyers back into the market.

Mortgage rates in April were also very favorable, averaging well under 5% for a 30-year, fixed-rate loan. However, rates have risen recently.

All those factors have raised NAR's index of affordability to near record highs. It went up to 174.8 in April from an upwardly revised 171.9 in March, its second highest monthly reading ever. This index measures the relationship between home prices, mortgage interest rates and family income.

Regionally, the biggest improvement in home sales came in the Northeast, where they shot up 32.6%. Sales ramped up 9.8% in the Midwest, inched up 1.8% in the West and cooled 0.2% in the South.

Also boosting sales, according to NAR president Charles McMillan, a Coldwell Banker broker in Dallas, is that some states and non-profit agencies are helping first-time homebuyers come up with down payments.

"Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," he said.

The Department of Housing and Urban Development announced last week an additional program that enables homebuyers to add the tax credit to their down payments on FHA mortgages at closing, which should also help to enhance affordability and give a push to home sales.

May 11, 2009

First-time buyers benefit from housing slump

In many markets, homes that were once prohibitive now are affordable.

By Jane Hodges
msnbc.com contributor
updated 11:59 a.m. ET, Fri., May 8, 2009
Kostas Kalaitzidis wanted to buy a home when he moved to Phoenix in 2008, but between his modest salary and the expensive market, he couldn't swing it.

What a difference a year makes.

Kalaitzidis recently made an offer on a home priced at $82,000, far less than the $220,000 it might have fetched last year.

"I'm very glad I waited," Kalaitzidis said. "People like me are the ones buying in now."

First-time buyers like Kalaitzidis are dominating the real estate market right now. They snapped up 53 percent of all properties sold during March 2009, up from the usual 40 percent or less, according to data from the National Association of Realtors.

While America's declining home values have wrought havoc on home sellers, owners and lenders, first-time buyers can celebrate the housing market bust, and may even help fix it. The Realtors' group expects first-timers to account for the majority of home sales through the remainder of 2009.

Kalaitzidis was fortunate enough to get a new job recently and now earns about $60,000 as a local government public information officer, up from his previous income of $40,000. But salary was a small factor in his decision to purchase, he said. The bigger factor was the nosedive in prices. If his transaction closes as planned, this month he'll become the owner of a 2,200-square-foot, contemporary home with four bedrooms and two-and-a-half bathrooms.

In addition to price drops in most markets, federal tax credits for first-time homebuyers are motivating many to get off the sidelines, Realtors spokesman Walt Molony said. He estimates that tax credits could motivate as many as 300,000 fence-sitters to buy this year. The Internal Revenue Service extended $7,500 tax credits to first-time buyers last year and has raised that to $8,000 or 10 percent of the purchase price for 2009.

First-time buyers are picking up the carnage in many hard-hit markets.

"The metro areas with the highest levels of foreclosure activity in the first quarter of 2009 paint a picture of concentrated problems in a relatively small number of hard-hit areas," said James Saccaccio, chief executive officer of RealtyTrac, a distressed property research firm in Irvine, Calif. "Sales activity appears to be increasing in some of these markets as home prices have fallen to levels that are attractive to first-time homebuyers and investors."

Buyers like Kalaitzidis are taking advantage of foreclosures, short sales and bank-owned homes listed in some of the hardest-hit areas of the country along with traditional listings. Kalaitzidis is buying a bank-owned home, meaning the prior owner lost it to foreclosure. He said he's not afraid of the fact that other homes in the community are in foreclosure because prices have dropped sufficiently to where he thinks only primary owners - not speculators and investors - will want to buy there. That, he said, reassures him that his neighborhood will remain viable.

Albert Ko, a 24-year old entrepreneur who runs a discount shopping Web site, is currently shopping for a home in Orange County, Calif. He moved there in 2007, at a time when homes cost about $800,000 - far more than he could afford. He recently got pre-approved for a $400,000 mortgage and is happy to see that prices have dropped to that level both in parts of Irvine and cities further inland. Because of his youth, he's looking for a primary home that can double as an investment — a place he can live in now but rent out later.

"I'm looking now," Ko said. "Two years ago, this would have been out of the question."

While existing homeowners shudder to watch home values tumble around them, for new buyers the repriced real estate market promises something they haven't seen in a long time: affordability.

Affordability is measured not just by sticker price but by how much of their monthly income homeowners must dedicate to their mortgage and related housing costs, said John Burns, president of John Burns Real Estate Consulting in Irvine, Calif.

The market peaked at different times in different markets, but according to Burns' research, buying a median-priced home in cities like Oakland, Calif., or Miami would have consumed more than 75 percent of the median income at the market peak. Now a typical home would consume 28 percent of average income in Oakland and 34 percent in Miami.

Burns' consulting group estimates that, nationally, the median-priced home now costs 25 percent of a household's median pre-tax income, down from a peak of 44 percent during the summer of 2006. This means that, assuming a 20 percent down payment and fixed-rate mortgage at current rates, a household with $60,000 in pre-tax income would pay $15,000 per year for a mortgage versus $26,400 - a substantial difference.

Source:
http://www.msnbc.msn.com/id/30551169/