Real Estate Market Bulletin Blog

Low interest rates are good for housing, right?

The Federal Reserve moving billions of questionable mortgages off banks books, too, correct?  After all, isn’t it the uncertainty with the quality of mortgages acquired through CBOs and ongoing foreclosures that are keeping banks from risking more lending, and thus keeping housing sales depressed?

Don’t forget that housing depends as much on incomes and people’s willingness to consume.  An interested article from Reuters makes the case that QE3, by depressing interest rates, has actually served to depress consumption too given all of the people that rely on income from interest bearing investments like bonds or savings.

We tend to doubt that this has an effect on housing, however.  Most people that depend so much on interest bearing investments are going to be more conservative investors and thus likely close or in retirement - not necessarily the people who are about to trade up on a home or splurge on a new addition or pool.  Nevertheless, anything that affects overall consumption certainly may have an effect, but it will be less pronounced.

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.

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,

Real Estate News
Real Estate Market
Housing Trends

Just like the average American, celebrities are having financial issues often springing from their real estate or leading to the sale or foreclosure of their real estate. It shouldn’t really come as a surprise to anyone given the size and cost of celebrities’ homes these days. On top of the size and cost of celebs mansions, the current housing market is anything but thriving. Let’s take a look at a few current celebrities facing real estate hardships.

Case 1: Timothy Geithner. After reducing the price of his home to $1.575 million he was attempting to sell he finally resorted to renting his New York suburb mansion out for just $7,500 a month, surely not covering his $27,000 a year taxes and two loans covering the cost of the house.

Case 2: 50 Cent. After having his Farmington, CT house on the market for 2 years he gave up on selling the mansion. It had gone from selling originally at $18.5 million eventually creeping down to $14 million, and even at that price it couldn’t sell. It didn’t help that the house had been known for its legal issues stemming from an issue where 50 Cent had the house repaired for $6 million whereas it had been appraised at only $500,000. On top of that a real estate appraiser leaked to the Hartford Courant that the house isn’t worth a $1 over $5 million.

Case 3: Mel Gibson. Only a short drive away from Mr. Cent in Greenwich, CT Mel Gibson has been having problems selling his mansion (not to mention his divorce). The mansion, nicknamed “Old Mill Farm” had been originally put on the market for a price of $39 million. Even with its 15 bedrooms and 17 bathrooms it couldn’t fetch that price. So Gibson lowered the price to $29 million where it has been sitting for some time now.

Case 4: Elle McPherson. The British model took $2 million off her asking price for her 1850s Victorian house which has been on the market for almost 2 years now. The 6 bedroom home hasn’t attracted much attraction from potential buyers apparently.

It may console you to know that it’s just the average joe having real estate problems. Then again, it confirms the fact that the real estate market is pretty stagnant.

Real Estate News
Real Estate Market
Celebrity Real Estate

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.

Real Estate News
Real Estate Market
Real Estate Trends

You won’t find Miami, Phoenix, or any of the wounded Californian towns on this list of the most promising real estate markets for the upcoming year.  Money Magazine claims that despite a poor real estate market and the housing crisis certain markets are expected to show price gains in the following months and years.  These cities and towns have been virtually uninjured by the economy, seemingly immune to the foreclosures that have plagued the rest of the nation.

Real Estate Opportunity
Housing Market
Real Estate News

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…

Homeowners
Housing Market
Real Estate News

Not since the Great Depression have prices for commercial properties and homes dropped so much.  Falling house prices have been the source of much consternation in the past several months for homeowners, speculators, and the economy in general.  However the new low prices have found a market, especially in regards to distressed properties.  As of recently co-op and condo sales have actually began to rise and its estimated that roughly half of these have been from distressed properites (ie. Foreclosures).

     Although the overall housing market isn’t expected to take a turn for the better until at the best next year, investors who can come up with long term sources of money are purchasing the properties and often renting them out.  Companies such as Angel Acquisition Corp. purchases, renovates and then sells distressed residential properties are banking on the prospect that the real estate market has reachest the lowest it will go and are hoping for a recovery in the housing market soon to reap great profits.

Read More Here

Economic Indicators 
Housing Market
Real Estate Investment

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.

Real Estate Market
Housing Market
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.

Housing Market
Existing Home Sales
Real Estate 4th Quarter