Housing markets that just two years ago struggled with a glut of homes are now facing a new problem: There are fewer properties to lure buyers.
Sales of previously owned homes fell 5.4% in June from May to a seasonally adjusted annual rate of 4.37 million, the National Association of Realtors said Thursday. While above the sales level of a year ago, the number nonetheless disappointed analysts because other recent housing indicators have signaled stronger improvement. The housing market is “back on track” but there will be “bumps on the road,” said Patrick Newport, an economist at IHS Global Insight.
Some economists and the Realtors’ group attributed last month’s decline to a sharp drop in the number of homes on the market, leaving would-be buyers with less to choose from.
Inventories of single-family homes fell to 2.12 million in June, down 3% from May and 24% from one year ago. That is the largest annual drop in at least 30 years, leaving inventories at roughly the historic levels that preceded the housing bubble of the past decade.
Realtor.com® recently released data regarding the top countries (outside the U.S.) where consumers are the most engaged on Realtor.com® & Realtor.com® International. The data highlights the markets within the U.S. that are most popular amongst these global consumers.
Here are the top US Markets searched on Realtor.com® & Realtor.com® International by people from countries outside the U.S., in order of country of origin and city of highest interest:
Canada: Las Vegas, Miami, Los Angeles, Chicago, Orlando
U.K.: Los Angeles, Orlando , Miami, Las Vegas, Kissimmee
Australia: Los Angeles, Las Vegas, New York, Miami, Beverly Hills
Germany: Los Angeles, San Antonio, Las Vegas, Colorado Springs, Miami
India: Los Angeles, Miami, Las Vegas, New York, Chicago
Mexico: San Diego, Miami, San Antonio, Laredo, Chula Vista
China: Las Vegas, Los Angeles, Irvine, New York, Miami
France: Miami, Los Angeles, Miami Beach, Las Vegas, Houston
Japan: Jacksonville , Las Vegas, San Diego, San Antonio, Honolulu
Italy: Miami, Los Angeles, Miami Beach, San Diego, Las Vegas
Netherlands: Los Angeles, Las Vegas, Miami, New York, Orlando
Brazil: Miami, Orlando, Los Angeles, Miami Beach, Boca Raton
South Korea: Las Vegas, Los Angeles, Irvine, San Antonio, Colorado Springs
Philippines: Las Vegas, Los Angeles, Atlanta, San Diego, Austin
Spain: Miami, Los Angeles, Miami Beach, New York, Orlando
United Arab Emirates: Houston, Miami, Los Angeles, Las Vegas, Orlando
Ireland: Los Angeles, Orlando, Homestead (FL), New York, Beverly Hills
Russian Federation: Los Angeles, New York, Miami, Orlando, Chicago
Singapore: Las Vegas, Los Angeles, Houston, San Francisco, Miami
Saudi Arabia: Los Angeles, Orlando, Houston, New York, Las Vegas
The most searched U.S. cities by non-U.S. consumers throughout the month of May 2012:
Commenter ‘D Man’ says that you can debate the Rent vs. Own until you’re blue in the face. We should examine the differences from time to time to note any changes – here’s a link to our discussion two years ago.
Livinincali already left this comment in the previous post:
Of course there’s a new generation that’s been burned by the stock market, burned by the housing market, burned by college debt that are the next wave of producers. Those producers are the ones you’re going to need to sell too and if they don’t value assets the same way you do it might be hard to get top dollar.
All previous generations believed in the American Dream of homeownership.
Today’s buyers have both the cash and confidence to feel comfortable buying – they must, because there are plenty of reason not to buy. But is renting one of them? How attractive is renting to those who are flush with dough?
Reasons Not to Rent
Potentially-rising rents vs. locking into a low 30-year fixed rate.
You wonder if the landlord is making his mortgage payment.
You fear that the landlord might want to move back in, or otherwise make you move.
You hope that he fixes stuff properly, and promptly.
Fear of renting forever (not applicable to all).
Renting does offer maximum flexibility, freedom from home repairs, and tolerance of imperfections – you might be able to live with some stuff knowing that you will only be there temporarily.
Reasons Not to Buy
Inhibits flexibility to move again.
Difficult to secure the right house at right price.
Repairs can be costly and very distracting.
Ties up a big chunk of cash.
Homeownership does provide a sense of accomplishment/putting down roots, the ability to determine your own destiny, a decent tax write-off for now, and provide a work project for those so inclined.
But a factor that should get more attention is the haves vs. have-nots. The affluent are buying at these prices, and keeping homeownership out of reach for the common man. If the affluent are willing and able to hold properties in perpetuity, then there will be less reliance on future generations to pony up.
The Federal Reserve Bank of Boston has released a Public Policy Discussion Paper by two of its economists titled Shifting Confidence in Homeownership: The Great Recession. The paper, researched and written by economist Anat Bracha and senior economist Julian C. Jamison sought answers to whether American attitudes toward homeownership had been affected by the sharp drop in home prices during the recession.
The study involved answers to several questions added to the monthly Michigan Survey of Consumers in July and August 2011. In particular, the 986 individual respondents were asked about attitudes toward renting versus buying a home, about commuting, and about how much a family should be willing to spend on a mortgage.
The responses were matched to data on housing prices and the extent of their decline and analyzed by sex, age, homeownership, and a number of other variables including whether or not the respondent had suffered directly from the effects of the housing downturn or merely knew of its effects from the news or other sources.
The authors matched answers from individuals to the decline in the housing price index in the zip codes where the respondents’ lived and analyzed them to determine if the decline affected attitudes toward buying versus renting a home, paying a mortgage, and commuting to work to reduce housing expenses.
They found that recent housing market conditions had little effect on individuals if their exposure to the housing downturn had come through information only such as newspaper or television stories as opposed to personal experience. Individuals who had not been impacted nor anyone in their close circle been impacted by foreclosure or lost large amounts of money on real estate also had no change in attitudes toward the financial soundness of homeownership or their willingness to undertake a commute to reduce housing expenses.
There was, however, a link between a decline in housing prices and the amount these “information only” respondents thought a family should spend on a mortgage.
Where respondents or a family member had been personally affected by the housing crisis there were changes in attitude but the affect varied by age group. The greater the drop in home prices in their location the less confident those under 58 years of age were in the soundness of buying a home. Those over that age, even with personal experience in the crisis, had more confidence in the wisdom of buying. Furthermore, this confidence grew with the decline in home prices in their location.
The authors conclude that, as those with full information about the recession but no direct negative experience with it did not experience a shift in attitude, it may point to a more general rule; information alone is not sufficient to change attitudes, only actual experience is. Furthermore, the crisis’s effects seem to be confined to attitudes toward buying a home and do not spill over into attitudes related to other homeowner decisions such as how much money one should spend or to commuting decisions.
That the decline had a negative effect primarily on younger person’s attitudes is consistent with the idea that older persons have a fixed set of beliefs and interpret the crisis as a temporary deviation from a known trend. Younger individuals and their lowered confidence would be consistent with the idea that their beliefs are still flexible and can change over time.
As the sign suggests….. we offer for sale, our wonderful, cozy, slightly-retro bungalow located just a stones throw from the heart of Portland, in Beaverton, Oregon. We did everything right. Married ten years. Two kids: one perfect boy, one bouncy, perfect baby girl. We had almost no debt outside of our cars and we bought a house…. but, as with many marriages, our story ends in divorce.
I’m not sure how this all happened… but, all I can is that as soon as your husband/wife starts using new texts languages like :/, or starts talking to you like a college kid…. check your phone bill – you’re probably going to be in for a surprise. For me that surprise came in the form of a 22 year old college student who likes yoga… and, other people’s husbands.
Well, I liked him too …. and I’m sure one day I’ll like him again. lol – So, I guess I can’t blame her too much, right? This whole thing happened so fast (started in March, 2012), and while it has been the darkest hours of my life so far, it has also been filled with wonderful friends, neighbors and family who have helped in so many ways. It’s the death of my marriage and the family I had as I knew it… but, that’s all. I know that sounds crazy, but at some point you have to put the brakes on and realize that worse things are happening to someone else right now as you’re reading this. As my wise Grandmother always say’s, “Jews in Auschwitz would love to have your problems….”. And she’s right (aren’t Grandma’s always right?). This isn’t the worse that could happen to me.
Sure I’m angry, and every bit as sad as the sign suggests… but I’m also equally grateful for the life I do have and I know that the best the way to more forward for all of us is to focus on that. Hence my quirky marketing For Sale By Owner plan. 🙂 So, our wonderful, cute, sweet family home is FOR SALE! That’s where YOU come in…. please have a look around our website and feel free to contact me either via phone or our contact page. I have TRIED to be as honest and forthcoming and factual as possible… but I’m not a realtor, nor do I have the same access to all the fun little stats they have…. but I amassed the info here from online resources and the previous sale of our home to us.
Do you have any recommendations for homeowners* who are under water?
*Homeowner current on payments, didn’t buy “too much” home, but neighborhood is collapsing around them”
It depends if you want to move or not.
1. If you don’t want to move. All you can really do is work on your own situation by paying down your loan(s) faster. Add an extra couple of bucks monthly to your regular payments, and knock out big chunks when possible. It has been suggested that the lenders holding second mortgages that are underwater should be happy to get anything, so they might be more negotiable about a payoff amount.
If you have ambition, you can volunteer to be the neighborhood cheerleader, and every time a house comes on the market you alert everyone you know who might want to buy it so at least they sell quick. You may end up being a realtor eventually, but that’s another conversation!
2. If you DO want to move, there are options.
a) Buy your next home in an area where you can qualify for both the new and old home – because they won’t allow the rent of the old house to be used as income yet. It means that the new home might not be as glamorous as you once hoped, but it is certainly possible. This is probably an option for those who are willing to leave town, and buy where it is cheaper.
b) You can go rent a new residence for one year, which might not be a bad idea if you were already thinking of trying a different area. Once your old house has been rented for 12 months, the mortgage guidelines will allow that rent to be used towards your qualifying income for the new house/mortgage.
c) The third and least-desirable option is to work the free-rent program. Once the Homeowners Bill of Rights goes into effect on 1/1/2013, lenders won’t be allowed to initiate foreclosure proceedings against you until the attempts to modify your loan are exhausted.
This will probably tack on an additional 12+ months to the existing free-rent programs, because you could stall and delay for months trying to provide enough data for them to come to a decision.
It will be interesting to see how diligent the lenders are in pursuing these loan modifications. They will also be required to have one contact person per file, but they can probably robo-clerk these files by committee. I wouldn’t be surprised if your contact person is Bill Smith, and he always sounds a little different every time you talk to him.
If you do work the free-rent program, it might be smart to take a shorter version just to re-start your ability to get a new loan sooner. Figure that it will only take 3-4 years before you can qualify for a new loan, but you’d have to re-establish credit and use at least a 20% down payment.
The public scorn about foreclosure is a lot less than it used to be, and you can do either that or a short sale with hardly anyone knowing anyway.
Do what you think is best for you and the family, and stay put if you can!
The Securities Industry and Financial Markets Association released a legal memo on Tuesday drafted by law firm O’Melveny & Myers at the request of the association that addresses what it says are legal and constitutional problems with the infamous eminent domain proposal out on the west coast.
The association then held a conference call in which it gave three reasons why it thinks the proposal does not provide an overall public good, which it must — by law:
It does nothing to help homeowners who are behind on their payments and are in foreclosure. Only performing loans in private-label securities will be seized. “This will do little or nothing to prevent public blight in any of the neighborhoods. So it does not provide a public good,” SIFMA noted;
It doesn’t maximize the value of properties in question and that it just transfers wealth from one investor to a more aggressive short-term investor; and
Investors would be forced to revalue mortgage pools based on the possibility of government seizure. These losses, SIFMA says, would reduce access to credit for mortgage borrowers in San Bernardino county by increasing interest rates. And reduced access to mortgages would reduce the demand for homes, putting downward pressure on housing prices.
The idea, headed by venture capital firm Mortgage Resolution Partners, does not go after defaulted or delinquent loans, where the property at issue might be subject to a imminent threat of blight. The proposal instead is limited to performing loans secured by underwater homeson the theory that forcibly transferring and discounting them will reduce the risk they could default and lead to future blight.
A Georgetown law professor is proposing that a Resolution Trust Corporation (RTC) like entity might be the key to getting the housing market back on track.
In Clearing the Mortgage Market through Principal Reduction: A Bad Bank for Housing (RTC 2.0) Adam J. Levitin considers ways in which negative equity problems might be addressed and assesses the feasibility of using a “bad bank” entity for pooling and standardized restructuring and resecuritization of underwater mortgages. This is the first of two MND articles summarizing the paper which Levitin wrote for The Big Picture, a Wall Street oriented blog.
Levitin says that the housing market is not clearing and has not since at least 2008 and possibly 2006. He defines “clearing” as a climate in which willing buyers and willing sellers are able to meet on a price. One reason for this failure is negative equity which currently affects 27.1 percent of all residential mortgages. The average negative equity is $65,000, considerably greater than the average household disposable income of $49,777.
“The depth of negative equity,” Levitin says, “is likely to increase as housing prices drop” due to foreclosures and lack of upkeep on properties where homeowners see no upside to further spending. Negative equity impedes clearing because even where buyer and seller are able to meet on a price they often cannot close the deal because the seller cannot pay the additional $65,000.
At the heart of the problem then is that mortgages, unlike houses, are not marked to market but are carried at book value. If they were marked to market they would track home values but a change in accounting is unlikely and ill-advised so we must look to other ways of clearing the market.
To date there has been only one – foreclosure, a method that is slow, inefficient and rife with negative externalities on neighbors, communities, and local governments. Foreclosures can also result in over-clearing. For various reasons the market for distressed properties is thin, bids are heavily discounted, and market prices are driven even lower.
Though it appears that the market is moving in a positive direction, it sure can be a challenge.
Examples:
1. A couple, who has sold their house and are living in a hotel, makes a full-price offer on my REO listing on Kerisiano.
But BofA isn’t satisfied, and instead counters, raising the deposit from $5,000 to $5,190, which is 10% of the purchase price. The buyers reluctantly agree, and then do their inspection and promptly cancel the sale for unknown reasons. But you can guess where the aggravation started.
2. My buyers sign off all contingencies and look forward to closing on a house ten days later. Though it was discussed previously, upon receipt the listing agent says that now the seller will be talking to the tenant-occupants about moving. What? They need to be out prior to close! (Thankfully they agreed, and did move).
3. The latest Fannie Mae REO listing is a one-bedroom condo in San Carlos. Two other one-bedroom units on the same floor in the same building have closed this year for $75,000, and $82,000.
