Last August I noted that Existing-Home Sales Sink to Lowest Level Ever Recorded. I'm not talking about some minor slowdown in sales or softening in prices. The current sales rates are very low no matter how it is spun.
Before the Irvine Company cheerleaders claim I am crazy, let me point out they did stop building homes for two years followed by a very slow market testing year before building a modest production run this year. I'm glad they sold them. I hope they build more. I'm delighted to see people in the building industry go back to work. As an Irvine resident, I appreciate the product the Irvine Company builds and the communities they leave behind.
Some contend I am anti-Irvine or some such rubbish because I point out the house prices are too high by historic measures. The results can be seen daily here with the cost of ownership of the individual properties that I profile. Some are at or near rental parity, but the nicer properties are still prices far above. That is the state of the market.
I report current market conditions and analyze how these may impact prices moving forward. I don't set out to be bearish, but the facts are what they are, and beyond faith in the California real estate market gods, there isn't much reason to be bullish on appreciation, and with prices still high in coastal markets, there isn't much reason to be bullish about rental income either.
Source: Associated Press/AP Online Publication date: January 20, 2011 By MARTIN CRUTSINGER
WASHINGTON - The number of people who bought previously owned homes last year fell to the lowest level in 13 years, and economists say it will be years before the housing market fully recovers.
High unemployment and a record number of foreclosures are deterring potential buyers who fear home prices haven't reached the bottom. Job growth is expected to pick up this year, but not enough to raise home sales to healthier levels.
"We built too many houses during the boom, and now after the crash, it will take us a long time to get back to normal," said David Wyss, chief economist at Standard & Poor's in New York.
The National Association of Realtors reported Thursday that sales dropped 4.8 percent to 4.91 million units in 2010. That was slightly fewer than in 2008, which had been the weakest year since 1997.
Those are national statistics, but what about California?
California is a big state. Is Southern California having better sales? No, looks about the same.
Irvine is different, right?
The poor year for sales did end on a stronger note. Buyers snapped up homes at a seasonally adjusted annual rate of 5.28 million units in December, the best sales pace since May and the 12.8 percent rise from November was the biggest one-month surge in 11 years.
Gains in mortgage rates may have spurred some fence-sitters to buy homes in December before rates moved higher, analysts noted.
What analysts noted that? Some urgency analyst working for the National Association of realtors? That statement reads like NAr copy.
The increase was an encouraging sign after a dismal year for home sales, said Mark Zandi, chief economist at Moody's Analytics. But he cautioned against raising expectations for a rapid recovery in housing.
"The job market is still very weak, and unemployment is very high. Until we get more jobs, people will be reticent about buying homes," he said.
The housing market cannot recover until the economy does. People without jobs don't buy houses... anymore. With NINJA loans dead, the housing market will not see a new influx of buyers until people get stable incomes. Realistically, even then, it is two years before a new hire qualifies for a loan.
Zandi said home prices would fall another 5 percent this year. Sales of previously occupied homes would likely exceed 5 million. That's a slight improvement from last year, he said, but it will probably take until 2013 or 2014 for sales to reach a healthy level of 6 million units a year.
Home sales will benefit from an improved hiring market. Many economists predict employers will double the number of jobs added this year compared with 2010. A reason for more optimism is a decline in the number of people applying for unemployment benefits over the past four months.
A reason for more optimism? I thought I was reading a news story, but I was really visiting my therapist. I guess internet news is the therapy of the unemployed.
Last week, applications fell to a seasonally adjusted 404,000, the Labor Department said. That followed a spike in applications in the previous week, which is typical after the holidays end and employers let temporary workers go. Even with the holiday bump and this past week's decline, the latest figures were only slightly higher than the 391,000 level reached last month - the lowest in more than two years.
Fewer than 425,000 people applying for benefits is considered a signal of modest job growth. Economists say applications must fall consistently to 375,000 or fewer to substantially reduce the unemployment rate.
Still, the unemployment rate is not expected to fall much below 9 percent this year. And the housing market cannot fully recover until the glut of foreclosed homes is cleared.
Those are the two issues overhanging the housing market. There is (1) a great deal of pent up supply in the form of foreclosures and shadow inventory, and (2) a lack of buyers available to absorb the known supply. The supply and demand imbalance will be problematic until the demand picks up and the supply is absorbed. That will take years, perhaps decades in some markets. If you look at the sales rates and inventories at the high end, the disaster in the making is clear.
Last year, a record 1 million homes were lost to foreclosures, and foreclosure tracker RealtyTrac Inc. predicts 1.2 million more will be lost this year.
Foreclosures or distressed sales such as short sales - when lenders let homeowners sell for less than they owe on their mortgages - are forcing home prices down in many markets. That has made it difficult for some potential buyers looking to upgrade, because they would have to accept less money to sell their current home.
Even historically low mortgage rates have done little to boost the sales.
The average rate on a 30-year fixed mortgage rose to 4.74 percent this week, Freddie Mac said Thursday. That's up from a 40-year low of 4.17 percent in November. The average rate on the 15-year loan, a popular refinance option, slipped to 4.05 percent last week. That's nearly half a point higher than the 3.57 percent rate in November - a 20-year low.
For December, sales rose in all parts of the country, with the strongest gain a 16.7 percent increase in the West. Sales rose 13 percent in the Northeast, 10.1 percent in the South and 11 percent in the Midwest.
The median price for a home sold in December was $168,800, down 1 percent from a year ago.
Double dip.
The banking cartel members are all in agreement that pushing REO through the system right now would be a bad idea because there is not enough volume to make a difference, and the effect on pricing is devastating. However, each of them will have a different opinion as to when the market has turned and it is safe to process their REO. We will not see that phase of the cartel collapse until volume picks up enough that buyers are available for the lenders to fight for.
Peak buyer gives up after five years
How low do you wait for the market to come back? For many the real question is "how long can they sacrifice and continue making payments while they are underwater?" Perhaps it was an adjusting ARM, or perhaps he simply lost faith in appreciation of Irvine real estate, but for whatever reason, this loan owner is selling short after owning a little over five years.
He paid $643,500 back on 10/20/2005. He used a $514,550 first mortgage, a $64,300 HELOC, and a $64,550 down payment. His asking price wipes out his down payment, the HELOC and part of the first mortgage.
If this property could transact at this price, it would be at or below rental parity. In all likelihood, this property will get bid up higher as the short sale process limps along.
Home Purchase Price … $643,500 Home Purchase Date .... 10/20/05
Net Gain (Loss) .......... $(202,640) Percent Change .......... -31.5% Annual Appreciation … -5.7%
Cost of Ownership ------------------------------------------------- $469,000 .......... Asking Price $16,415 .......... 3.5% Down FHA Financing 4.78% ............... Mortgage Interest Rate $452,585 .......... 30-Year Mortgage $94,693 .......... Income Requirement
$2,369 .......... Monthly Mortgage Payment
$406 .......... Property Tax $307 .......... Special Taxes and Levies (Mello Roos) $78 .......... Homeowners Insurance $274 .......... Homeowners Association Fees ============================================ $3,435 .......... Monthly Cash Outlays
-$387 .......... Tax Savings (% of Interest and Property Tax) -$566 .......... Equity Hidden in Payment $30 .......... Lost Income to Down Payment (net of taxes) $59 .......... Maintenance and Replacement Reserves ============================================ $2,570 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $4,690 .......... Furnishing and Move In @1% $4,690 .......... Closing Costs @1% $4,526 ............ Interest Points @1% of Loan $16,415 .......... Down Payment ============================================ $30,321 .......... Total Cash Costs $39,400 ............ Emergency Cash Reserves ============================================ $69,721 .......... Total Savings Needed
Property Details for 195 GROVELAND Irvine, CA 92620 ------------------------------------------------------------------------------ Beds:: 3 Baths:: 3 Sq. Ft.:: 1950 $0,241 Lot Size:: - Property Type:: Residential, Condominium Style:: 3+ Levels, Contemporary Year Built:: 2006 Community:: Woodbury County:: Orange MLS#:: P765561 Source:: CARETS ------------------------------------------------------------------------------ This gem of an end unit has a bright open floor plan with beautiful Cherrywood floors and cabinets and Tile flooring in the kitchen. The bedrooms have upgraded wall to wall carpet. Crown molding and window Shutters add their own elegance. Woodbury is one of the nations finest communities with seven pools, sport fields, tennis and basketball courts, many parks and award winning schools. Walk to the mall with both nationl chain stores and boutique shopping.
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