Real Estate Market Bulletin Blog

A number of conflicting reports suggest that while the housing market recovery has yet to start, we are closer to the end of the carnage than the beginning.

Recent stats:

1. The Massachusetts Housing Partnership reported that a potential 65,000 or more homes could add to the state’s inventory of unsold homes due to pending foreclosures, or homes likely to be foreclosed on even after mortgage modifications.  This possible 2nd foreclosure wave would add as many homes to the market as are typically sold in a given year, suggesting further price depression.
2. At the same time, the Fed’s March 3 Beige Book reports slow but steady strengthening of the economy, including stabilizing employment and rising wages, all of which will help reduce the chance of future foreclosures as those who still have their homes and jobs will be in a position to keep both.
3. Ultimately, home prices are the best gauge of market health.  Those prices have been stopped declining in most parts of the US and are starting to rise in some, according to the Case Shiller index. See S&P PDF file with the current national home price rate of change.

According to the Warren Group, which compiles statistics on the housing market, Massachusetts home sales rose for the second straight month.  August sales rose 2% year over year, following an 11% YOY increase in July.

Still, there’s quite a ways to go - the median sale price for homes in te Bay State remains 10% below last year’s median price, according to the press release.

Since World War II the United States has never seen such a down market for the sales of new homes as we’ve seen in the past two years. This fact can be attributed to several things and can/has raised more questions about when to expect the current recession to end.

Will the houses built during the boom ever be sold? Have home builders kept up with the market in lowering their prices?

For the past thirty plus years existing home sales and new home sales have tended to fluctuate up and down by the same minimal percentage (as pictured in the chart). In past recessions sales of new homes have certainly been less successful however their levels have never reached what we’re currently seeing for as long as we’re currently seeing it.

Floyd Norris of the New York Times said, “At the peak of the housing boom in 2005, sales of both existing and new homes were running at twice the 1976 rate. This year, the sales rate for existing homes seems to have stabilized at about one-third higher than the 1976 rate. New-home sales also seem to have stabilized, but at about half the 1976 rate.�

Even worse than new home prices according to the graphs are the prices of existing homes, at one point this year the median price for existing homes was 29% off from the peak. Norris add, “Median home price figures need to be used with caution, since there is no way to know how the median home sold in one month compares, in terms of size and location, to the median home sold in a different month. But in past recessions, new-home prices have tended to be weaker than existing-home prices, the opposite of what has happened in this cycle.�

Time will only tell what happens to new homes and the prices of existing homes,

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The only United States location to find its way onto the list of most expensive real estate markets for 2009 was New York City coming in at an average price per square meter of $14,989. It should come as no surprise that Monte Carlo comes in first place more than three times more expensive per square meter than New York City at $47,578.

London and Moscow come in at a close 2nd and 3rd. Both coming in at just above $20,000 per square meter for real estate. The price index was based off of a 120 sq. m. good condition high-end apartment in 110 cities around the world.

As you can see from the table, several Asian cities have been on the rise in the past several years. Tokyo and Hong Kong came in 4th and 5th respectively overtaking Paris and Rome a phenomenon that has taken place only several times in the past half a decade.

For those who are bargain hunters, some of the cheapest real estate was detailed as well. The cheapest coming in at just $574 per square meter was found in Cairo, Egypt. In general the cheapest real estate was found in the Middle East, Asian and Latin America. It’s interesting to note that some of the cheapest real estate is found in Asia as well as some of the most expensive.

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About half of all homes sold last month were sold to first-time homeowners that however has not made up for an overall sub-par spring selling season.  The median price for a house in the month of March was $175,200, down 12% from the previous year.  Typically house prices rise in the Spring season however as was expected, prices are historically low in comparison with previous years.  The good news is that house prices are up 4% from February especially in the western states, the region of the US most effected by foreclosures and the economic slump.

Leading this surge in first-time homeowners purchasing houses this spring may be a new initiative for first-time home buyers where upon purchase they can receive an $8,000 tax credit.  Hopefully this recent surge in first-time home owners will last through the summer, boosting some much needed action and money into the housing market.

Click here to read more…

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Government statistics and public markets indicated continued progress on the credit situation even before today’s market rally bega.  Much of this admittedly is not being felt by the general public.  However, excess reserves in banks (see Reuters release and the Federal Reserve ) seems to have peaked with reserves down from $843 billion in the 1st week of January to just over $600 billion March 5, 2009, continuing a downward trend that started at the opening of the year. 

Cash is starting to move out of the banking system.  Much of it is going into precious metals, and the effective printing of money by the Fed announced last week won’t help that.  However, gold prices will peak if the current rally in treasuries and equities continues.  If that happens, look for cash to start flowing into other assets classes by the summer, including possibly housing.  An early sign of this was today’s 5% month on month increase in housing sales.

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Massachusetts ranked third among US states for the greatest decline in foreclosures in February as compared to February, 2008, according to a Smart Money article today (See Bright Spots on the Foreclosure Front).

However if you are still looking for bargains, they can and will be had for some time.  Locate foreclosed homes for sale in Massachusetts at http://www.foreclosurelistingtoday.com/

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Massachusetts Foreclosures

January of 2009 marked the lowest home sales in nearly 12 years.  The National Association of Realtors announced that existing home sales dropped 5.3% last month.  July of 1997 was the last time we saw figures this low.

Real Estate Groups conjecture that this has resulted from expectations and anticipation of government programs boosting the struggling housing market.  Partly because of this we’ve seen the median house price drop from $199,800 in January of ‘08 to $170,300 in January of ‘09.

It’s not all bad news however, despite a decline in home sales the total number of houses for sale has decreased from nearly 3.7 millions homes last December to 3.6 million this January.  “While tight credit and waning consumer confidence continue to depress home sales, the biggest challenge facing the housing market is unemployment” says Mike Larson, a Real Estate analyst.

Read the full article here.

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Existing Home Sales

Local real estate sales in the fourth quarter were expectedly soft according to figures from the Multiple Listing Service (MLS) of the Chattanooga Association of Realtors.

Statistics show:

- “With 1,302 units sold, fourth quarter statistics were down 16.5 percent from 2007’s fourth quarter and 25.5 percent from the third quarter in 2008. It represented the year’s lowest quarter in terms of sales. ”

Even though October through December months represent some of the slowest months in real estate and are outpaced during the peak spring and summer months, the current economic troubles has only added a high degree of stress in the residential real estate market.

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Recent stats mentioned in Bloomberg show that existing homes sales rose as much as 6% last month, due largely to price declines.  Still, a potentially massive increase in inventory may be likely as banks are bringing homes to market slowly according to CNN Money.  As always, we look partly to web site activity for home searches (which are an augur of buying interest) on real estate sites we are affiliated with, which is up 10% - 30% this month depending on the site.  That is a positive trend for sure, but may not be enough to stop the price definitively, in all markets, until later this year.

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