Here is a quote from the First Quarter Market Report written by Dave Phillips CEO of the Charlottesville Association of Realtors.
Simply put, there are too many homes on the market right now. This surplus of inventory should keep prices low as sellers are forced to offer “good deals” in a very competitive marketplace. There is a direct, inverse relationship between inventory and prices. The more homes we have on the market, the more pressure there is on sellers to keep prices down. For this reason, we do not expect home prices in the area to increase in the near future.
Currently, we have 3,673 homes on the market, compared to 3,100 at this time last year. The median price of these homes for sale is $319,000. The average DOM (days on market) of these homes is 147 days. It is a great time for first-time buyers, because there are 663 homes for sale under $200,000 with an average DOM of 130. There are 576 homes currently on the market priced at a million dollars or more, with an average DOM of 200.
This is a very accurate statement about the status of our market. It's almost as if buyers and sellers are in an old fashioned Mexican Standoff. Buyers continue to wait for prices to come down, while sellers are resisting the trend. I do have to take this opportunity to say THIS IS A GOOD TIME TO BUY REAL ESTATE.
Play the game, there are a number of people out there trying to move their money out of Real Estate and just want anything they can get. Make an offer, if they reject, move to the next one. In the words of NIKE, Just Do It. You can find really good deals in a market such as this.
Read the entire 1st Quarter Market Report
Let's take a look at the Charlottesville Real Estate Market for March
Number of Homes Listed for Sale: 3642
Number of Homes Sold in March: 195
Months of Inventory: 18.90 (down from 20 at the beginning of the year)
Average Sold Price in March: $322,206
Average List Price in March: $338,517
Average Days on Market: 130
Percentage of Selling Price to List Price: 95.18%
Total of Sold Properties in March: $66,830,132
Conclusions:
With over $66 million dollars in Real Estate sold last month, people are buying. This is a good trend compared to the start of this year, with total monthly sold properties in the $50 million range. This shows more people are getting involved in the Charlottesville Real Estate Market. This probably has a lot to do with Match Day at UVA and the NGIC expanding. A couple things to note here as well, the Months of Inventory went down as well, so the Charlottesville Real Estate Market is leveling out just nicely. Most sellers are ratifying offers within 5% of their asking price, so keep that in mind if you are currently selling a home or thinking about selling a home.
There are many types of foreclosures, so we will start by defining foreclosure. A foreclosure is a legal process in which a lender sells or seizes a person's property to recoup and repay the debt attached to that parcel. When this happens, there are a few crucial steps.
First, the lending institution notifies the owner in writing that they are in default of payment. This is known as the Notice of Default (NOD). After 3 consecutive payments are missed, the lender will bring in an attorney and the attorney will send a letter. If no payments are made, the lender may request to have the property sold at auction.
The first type of Foreclosure is a Judicial Foreclosure. This is when the lender brings a lawsuit against the borrower. It starts with a summons and complaint served upon the borrower. If the borrower doesn't respond or pay the fees, the lender gets a judgement by default. The lender must advertise a notice of sale in the newspaper for a certain period of time, then the public sale is conducted and the property goes to the highest bidder.
The second type of Foreclosure is a Nonjudicial Foreclosure, also known as a power of sale. This is when the borrower gives a deed of trust to a trustee to hold for the lender. Upon default, the lender simply files a notice of default and a notice of sale, which is published in the newspaper. It then gets sold to the highest bidder.
The third type of foreclosure is a Strict Foreclosure. In this scenario, there is no sale required. The borrower has a certain amount of time to pay what is owed. After that date, the title reverts to the lender.
Check with your state to find out which foreclosures are practiced. Virginia only does Judicial and Nonjudicial Foreclosures. Its about a 45 day process, and the lender is only required to advertise the sale for 14-28 days. Of course, there are a multitude of ways to find foreclosures, not just the newspaper. Depending on the interest I get from these articles, I might get into that as well. Good Luck!
Aside from National Factors that affect Real Estate and the Foreclosure Market, there are also Local Factors that affect our market. Again, there are five factors.
The first Local Factor that affect your Real Estate Market and the money you can make is Migration and Job Growth. If the area has an increase in jobs and people come to the area, Real Estate prices go up. The reverse happens if the area loses jobs and people leave. This is one of the reasons that Charlottesville is doing so well in a market that is bleak right now. The area keeps expanding in jobs with the University of Virginia to the NGIC expansion. Like anything else you want to track the results. Right now, Virginia's population is increasing by 6%, while the Charlottesville population is increasing by 25%. These things affect the "demand" side of the Supply and Demand Curve of Real Estate.
The second local factor that affects Real Estate are Development Plans. Is there new construction panned for the area? Shopping malls, restaruants, offices, etc? Get to know someone at the Planning Commission and attend the meetings. Find out the answers to these questions, they have a lot to do with where the market is going to go.
The third local factor that affects Real Estate is New Construction. New construction of any type means that the area has positive future potential. New Construction affects the supply side of the Supply and Demand Curve in Real Estate. Property owners will have a hard time increasing prices if new construction is selling for much less. Check with local building departments to find out home many new permits are filed each month. Then compare them to last year and the year before.
The fourth local factor that affects Real Estate is Supply and Demand. Supply and demand create the local business cycle. During an up cycle, the demand is greater than the supply, driving prices upwards. During a down cycle, the supply is greater than the demand, driving prices downwards. Again, track results. Keep track of the area's monthly home sales. That's sales, the number of homes that actually sold. Then compare homes bought in the current month to previous months to see buyer demand and use the MLS (Multiple Listing Service) to figure out the current supply. Understand that Real Estate can be seasonal. For example, more homes are sold during the summer than the winter. Currently in Charlottesville, the supply outweighs the demand.
The last local factor that affects Real Estate is Neighborhood Trends. If you are looking at buying a foreclosure or an investment property, drive around the neighborhood at different times of the day. Are there a lot of broken down cars? Are the yards maintained? Is it a few homes or the entire neighborhood that needs work? Are some houses being fixed up? What are the local employment statistics? Has the population grown? What is the median income? And so on. Use a combination of objective data and instinct.
Keep in mind that a single Local Factor can outweigh multiple national factors. Know your area throughly and invest where you live. If you don't know the streets, you don't know the area. Do your research up front and have your ducks in a row. All these will help minimize the risk of investing.
Here is a list of people you might need during the process of buying a foreclosure or investing"
Mortgage Broker
Real Estate Agent
Attorney
General Contractor
I can make suggestions on any of these if you need them. Just let me know.
Ok, we can now do an overview of the National Factors that Affect Foreclosures and Real Estate. There are five national factors. They are:
1. Interest Rates
2. Inflation
3. Flow of Investment Funds
4. The Business Cycle
5. Cataclysmic Events
You can access the information on any of the National Factors by clicking on them above.
This is the last installment describing the National Factors affecting foreclosures and the Real Estate Market. We have now discussed interest rates, inflation, flow of investment funds, and the business cycle. We are now down to the last National Factor affecting Real Estate. This factor is the easiest to comprehend, yet the most emotional. It is cataclysmic events.
A cataclysmic event is something like Hurricane Katrina. It is a naturally occurring event that devastates an area. During cataclysmic events, building prices are likely to go up, resulting in higher real estate prices.
Luckily, we don't have to deal with events like this every often, but it is something to be aware of as you are buying and selling homes in different areas.
This is installment #4 of our Foreclosure Lessons. This far we have been over interest rates, inflation, and flow of investment funds. Now, we are going to learn about the Business Cycle of Real Estate and how it affects the Real Estate Market and Foreclosures.
The National Economy rises and falls in cycles - so does Real Estate. As our economy goes from recession to prosperity, investments are influenced. So let's define America's economic cycles.
When economy is strong, incomes are high, unemployment is low, and people tend to have more discretionary income to invest in Real Estate.
When economy is weak, incomes are lower, unemployment is higher, resulting in fewer Real Estate purchases, higher foreclosure rates, more renters and lower property values.
Researching the state of the economy is best served by reading things like The Wall Street Journal, Fortune Money, CNNMoney, and USA Today. Of course you can always Google or Digg information on our Economy.
Now that we have looked at interest rates and inflation, its time to look at the Flow of Investment Funds and how they affect foreclosures and Real Estate in general.
Flow of Investment Funds refers to the number of people that are involved in Real Estate. When money flows into Real Estate, more people are buying homes and selling homes. In reverse, when money flows out of Real Estate, less people are buying and selling. The important thing to know where is the more people that are buying and selling, the more prices fluctuate. Just like the Supply and Demand curve.
Pay close attention to the Flow of Investment Funds. When people are shifting their money from Real Estate to something else, its the time to buy. The reason its the time to buy is because people want money quickly. Its important here to avoid following the crowd. This is where the money is made. Also realize that there are few things you can invest in that is safer and pays like Real Estate. The stock market crashes quickly, the Real Estate market takes months or even years to change.
You can figure out how the Flow of Investment Funds are going by talking to a Realtor, a member of the National Association of Realtors. The National Association of Realtors send out information to its members about the status of the National Market. You will also want to talk with a local realtor about the local market, but we will get into that a little later on.
Alright, we have looked at interest rates and how they affect your purchasing power, now we will look the the second Nation Factor that affects foreclosures and Real Estate in general. It is important to know all the factors before making any decision to buy, whether it is a foreclosure or any other home. The second National Factor is Inflation.
Inflation is defined by wikipedia as a rise in the general nominal level of prices over time. Inflation is is measured as the percentage rate of change of a price index. The governments main gauge of inflation is the Consumer Price Index.
Basically, inflation tends to follow the supply and demand curve, although it isn't affected by any single factor. Inflation causes prices to rise whethere its a pair of jeans at American Eagle, or the house you want to buy. The higher the inflation, the less your money will buy.
Without getting really technical about inflation, the thing to realize here is this: Whenever inflation changes moderately up or down, investing in Real Estate is good. When inflation is low, a real estate investor will want to buy, and when inflation is high, a real estate investor will want to sell. You can look at inflation data here.
In light of all the news surrounding foreclosures, I thought we should take an in depth look at foreclosures. Over the next couple of weeks, we are going to define National and Local Factors affecting foreclosures, as well as Foreclosure laws in Virginia, the types of foreclosures, the types of property, and how to make money with foreclosures.
We will start with the National Factors that Affect Real Estate. The first is the interest rate. When most people buy a house, they have to borrow money, this is known as a mortgage. The bank however, doesn't give money away, the bank wants something in return - the interest on the money borrowed. This is the reason for the interest rate. The interest rate is based on the Federal Funds Rate. The Federal Funds Rate is the interest that banks charge each other for overnight loans of federal funds, which are held by the Federal Reserve.
From this we can determine the Prime Rate. The Prime Rate is what banks charge their largest and best customers. Everyone else gets interest rates above the Prime Rate. Interest Rates DIRECTLY affect your purchasing power. Let's look at an example.
Let's say there is a foreclosure going to the courthouse steps for $150,000. Unless you have $150,000 in the bank, the house is going to be financed. If a real estate investor gets a loan from a bank for $150,000 at 6% interest and we will assume a marginal tax rate of 25%, the monthly payment on a 30 year fixed loan will be $899.33. The total payment over the 30 year period will be $323,755 and the total interest paid will be $173,755.
Now, let's say an investor gets a loan from a bank to finance the foreclosure, but this time the interest rate will be 8% instead of 6% and we will assume the same tax rate. The monthly payment on a 30 year fixed loan will be $1,100.65. This is just over $200 more per month than the six percent quote. The total payment over the 30 year period at an 8% interest rate is $396,230 and the total interest paid will be $246,230.
For current investors, people wanting to become investors, flippers, or people looking to buy a home at a great price, need to be aware of interest rates. I could be the difference between making money or losing money. To look at historical interest rates, check out these sites:
Federal Reserve Statistical Release
Interest Rate Trends from Mortgage-X
Wall Street Journal - News and Analysis (Subscription Service)
Of course you can always Google or Digg historical interest rates. Later we will look at the next National Factor Affecting Real Estate and Foreclosures - Inflation.
According to a release on INMAN News on Friday loans entered the foreclosure process at a record rate during the fourth quarter, and things are likely to get worse before they get better, the chief economist for the Mortgage Bankers Association said today.
Although reductions in short-term interest rates have lessened the shock of interest-rate resets for many borrowers with adjustable-rate mortgage (ARM) loans, falling home prices are leaving more homeowners with little or no equity in their homes -- and less incentive to keep up on their mortgage payments.
Home Builders Go 'Green' To Seek New Selling Point By Jim CarltonFrom The Wall Street Journal Online
The Census Bureau and the U.S. Department of Housing and Urban Development jointly released their monthly report on new home sales early Wednesday morning.
I was read this article today from the Wall Street Journal. I thought it pertained to today's relevant Real Estate mindset of younger buyers. Here it is:
Do Young, Tech-Savvy Buyers Need a Real Estate Agent
By Lauren Baier Kim
The generation gap in real estate
In real estate, there is a growing dichotomy: buyers are getting younger, while real estate agents are growing older, according to articles in the Seattle Post Intelligencer and the Boston Globe. Using data from the National Association of Realtors, these articles note that while the median age of home buyers was 39 in 2007, the median age among Realtors is 51. And, among first-time home buyers, 49% were between 25 and 34 years old.
This could present a real problem for the real-estate industry, which despite the current overload of real-estate professionals, is actively trying to recruit younger real-estate agents, reports Aubrey Cohen of the Post-Intelligencer. Younger agents will be needed to replace an aging workforce and to create inroads with a uniquely high-tech set of house hunters, the articles say. Youthful home buyers are more independent and rely more on the Internet in the home-buying process than their predecessors did, these articles note.
As one reader pointed out in response to a WSJ.com post on photos in real-estate listings, "most agents are not utilizing technology efficiently." The readers explains, "We had a young agent and he did an excellent job with marketing our town home. We ended up getting three dozen offers. He also uses BlackBerry and a few other tech gadgets which many agents simply don't use or cannot afford or whatever."
The Globe points out that Gen X and Gen Y buyers don't want the hand-holding of the typical agent/home-buyer relationship. Many of these consumers prefer to do their own house hunting and research online, and some are skipping buyer agents all together to complete the entire home search and home purchase on their own.
To be sure, not all young agents are going to be more tech-savvy and many members of Gen X and Gen Y will still want some hand-holding in the home-buying process.
Home ownership as "indentured servitude"
In the U.S., homeownership generally has been viewed as a good thing -- a "forced savings program" for consumers and a boon to communities as residents invest in their own neighborhoods, but now, post boom, owning a home has become something more akin to "indentured servitude," writes columnist James Surowiecki in the New Yorker.
Our homes are not making us richer -- thanks to the "cheap credit and lax lending standards" of the past few years, about 15 million homeowners "now owe more on their mortgages than their homes are worth," Mr. Surowiecki says. To top it off, instead of building equity in our homes, many of us have borrowed against our properties' worth. Home-equity loans totaled more than $6 billion between 2004 and 2005 -- meaning that our homes are no longer piggy banks building up future wealth, they're piggy banks to tap into for our own personal consumption, he writes.
Also, the recent rise in homeownership may work against our economy's recovery from its current downturn, says Mr. Surowiecki, who notes that the percentage of Americans who own their own homes increased nearly 10% between 1994 and 2005. A rise in homeownership is a bad thing for the economy because it encourages people to stay in one place, instead of moving to where the jobs are, he says, nothing that states with the highest unemployment rates -- places like Alabama, Michigan and Mississippi -- also have some of the highest homeownership rates.
Self-storage units become second homes
As American houses become crammed with more and more stuff, homeowners are buying and selling self-storage units like homes. Units are now being outfitted with extras like cable TV, clubhouses and high-speed Internet and can reach 2,000 square feet, writes Kristina Shevory for the New York Times.
For instance, one person profiled by the Times owns two units valued at $119,000 in Coeur D'Alene, Idaho, and uses one as a "home office" and the other as a place to play games with his children, Ms. Shevory writes. Another owner, in Spokane Valley, Idaho, uses his space to keep a gallery of artwork by Northwestern artists and plans to invite other unit owners to view his collection, Ms. Shevory says.
She notes that storage units that can be bought and sold (most storage units are rentals) tend to be located in vacation-home locales or in cold climates where people have a lot of winter gear to store, and that units can cost anywhere from $57,000 to $200,000. For the units, owners have deeds and must pay property taxes, utility bills and monthly homeowner fees, she says.By Lauren Baier Kim
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March 6, 2008-Home Warranty of America announced the availability of one of the first-ever green home warranty options in the nation. According to HWA, real estate professionals can now offer their buyers a comprehensive home warranty from HWA with the option to purchase GreenPlus. This new option provides replacement of the appliances and systems shown below with Energy Star rated products, if the unit cannot be repaired.
DishwasherRefrigeratorClothes WasherHeating System (with 90% efficiency)Water Heater (with a tankless water heater)Oven, Range, Cook Top
“This is an incredible breakthrough in the home warranty business. It means that many of the thousands of replacements we handle each year for our customers with these appliances and systems will upgrade to much more energy efficient units, helping to save money for our customers. It will also reduce energy consumption and positively impact the environment through less greenhouse gases” said David Sobel, vice president of sales, Home Warranty of America.
“We know from Energy Star that if just one in 10 homes used Energy Star qualified appliances, the change would be like planting 1.7 million acres of trees. We believe real estate professionals and consumers want this and so do we. It can only be a win-win for all of us,” said Marc Roth, president & CEO, Home Warranty of America.
The company says that HWA has made GreenPlus also available through its direct-to-consumer home warranty programs to expand its reach and impact. This allows those consumers not selling or buying a home to also participate.
“We want to be a part of reducing greenhouse gases and saving our customers real money. Doing our part in this global action is imperative to secure our children’s and grandchildren’s futures,” added Sobel.
Heating, ventilation and air conditioning (HVAC) can account for up to 45% of a homes energy costs. Energy Star HVAC equipment can save up to 20% on heating and cooling costs. Source: www.energystar.gov
For more information, visit www.hwahomewarranty.com.
The company says that GreenPlus is now available to real estate professionals in Texas, California, Nevada, Oregon, Washington, Kentucky, Indiana, Ohio, Arkansas, Mississippi, Alabama, Georgia and Tennessee. It will be available nationally by April 1, 2008.
Please e-mail Rob Alley at roballey@robsellscharlottesville.com if you have any questions, or go to my website at http://www.robsellscharlottesville.com
Bloomberg News reported on Wednesday that Fannie Mae is proposing to ban the use of appraisals by a lender's employees or those arranged by mortgage brokers.
The proposal was contained in what Bloomberg referred to as a "talking points" memo distributed to lenders this week and was in response to an investigation of the mortgage industry by New York Attorney General Andrew Cuomo. In November the AG filed suit against First American, parent company of one of the country's largest appraisal management companies, charging them with folding under pressure from Washington Mutual, a major client, to use only those appraisers that provided property values acceptable to WaMu.
WaMu was not included in the original suit but Cuomo demanded that Freddie Mac and Fannie Mae each appoint an Independent Examiner to review mortgages and the underlying appraisals that the two GSEs have purchased with particular emphasis on those purchased from WaMu.According to the Bloomberg article, the memo was part of an on-going effort by Fannie Mae to cooperate in the Cuomo probe.
The proposed change would mean that Fannie Mae would no longer authorize its lending partners to use appraisers employed by a wholly owned subsidiary and, while we have not seen the memo, apparently it contains reference to the eventual establishment of an appraisal clearinghouse which we assume would assign appraisers to a project.
Bloomberg quotes Jonathan Miller of a New York appraisal company Miller Samuel, Inc. as saying that about three quarters of residential mortgage appraisals are arranged through brokers who only get paid if a loan closes. Miller called the practice "laughable" because it creates a financial incentive for mortgage brokers to push appraisers toward higher valuations. Higher appraisals also mean more homeowners qualify to refinance their homes and take cash out, he said.
The appraisers themselves have long urged that appraisers be required to keep arms-length from the lenders. Many complain that honest appraisers who refuse to match the values that the lenders want soon find them selves without work and that they are frequently pressured by the loan officers who assigned them to a project to raise their values.
The proposed restrictions would apply to loans acquired after Sept. 1, according to the memo.
I ran across this article today by Matthew Graham. I thought it would be useful information for those looking to buy property. Here it is:
"I can't decide what was more troublesome yesterday: the comically uninformed questions put to Big Ben regarding mortgage rates, or the comically inaccurate article printed by CNBC on the same subject. Whatever the case, the media is awash with analysts, experts, officials, and laypersons offering rather strong opinions on a subject about which they have such a painfully shallow understanding.
Today Bernanke testified before congress on the state of the economy. I'll leave it to the 1000 or more other articles to bring you up to speed on the salient points. I'm more concerned with something that no one has really talked about yet: the lack of understanding of our mortgage problems. My concern began to peak after overcoming my amazement at a question I heard today from Luis Gutierrez. CNBC has kindly saved me from needing to type the exchange, listen here.
This question would not be that troublesome at all if it came from a mortgage consumer in the general public (if you don't know why it's troublesome yet, that's OK, we will cover that in a moment). But it comes from a member of the House financial services committee, a member of the subcommittee on financial institutions/consumer credit, and the chair of the subcommittee on domestic and international monetary policy. This guy should know something about this topic! For all I know, he and the rest of his ilk are quite knowledgeable in the rest of their purview, but his question, in conjunction with previous communications from members of congress, illustrates an appalling lack of understanding about the very specific topic of the macroeconomic role of mortgage finance.
Simply put, mortgage rates are tied to Fed policy decisions about as much as they are tied to the price of pork bellies! OK, that's a slight exaggeration. But I've previously written on just how unconnected the two can be. We've seen some Fed rate cuts that have preceded decreasing mortgage rates, and other rate cuts that have preceded increasing mortgage rates. It's enough to confuse anyone! (sarcasm) Wait! Maybe Fed rate cuts don't have a direct bearing on mortgage rates! (sarcasm) Sure, Home Equity Lines of Credit are tied to Prime, but that's about it. Maybe there is more than just one thing that affects mortgage rates! (sarcasm)
Since I know you're burning with curiosity, I'll give you a short version of the answer Bernanke should have given. Here goes... Almost all mortgage rates are in direct relationship with the yields of Mortgage Backed Securities (MBS). MBS are basically bonds: when the price goes up, the yield goes down. Their yields vary directly with mortgage rates and they are responsive to macroeconomic forces in a similar way to other types of bonds. So since inflation decreases today's value of a dollar, and since bonds return a fixed income, inflation makes bonds less valuable. (do you see where I'm going with this yet?). When something is less valuable, less people want to buy it, so the price goes down to attract buyers. When the price goes down on a bond, the yield goes up. And we just said that MBS yields equal mortgage rates. Ipso facto, ergo, therefore, rising inflation is a stimulus for rising mortgage rates.
Granted, this is not the whole story, but it is one of the most easily understandable reasons that mortgage rates have not fallen in concert with the Fed rates. Yes, money is cheaper for banks when rates are cut but BANKS DO NOT SET MORTGAGE RATES!!
Countrywide has to get together with Fannie Mae or Freddie Mac, pour a couple billion dollars of 30 year fixed mortgages into a cauldron, mix well with eye of newt and leg of toad, go down to the flea market, and auction off very small cups of this witch's brew (individual Mortgage Backed Securities) to investors. It's these investors: Saudi oil barons, overseas governments, institutional investors, and billionaire Chinese businessmen, who really hold the note on your mortgage. It's their appetites and goals that truly determine mortgage rates. Luis Guitierrez should know that. And you should too.
The fun continued when I read CNBC's article. I don't even have the space in this article to go line by line on this one, but suffice it to say that, should our bovine friends (especially bulls) not feel up to the task, the assertions herein could serve as equivalent fertilizer.
Mortgage rates high? Historically we're quite low! Perhaps it is referencing the fact that mortgage rates haven't fallen as much as they "should have" considering the yield on the 10 year treasury, which even mortgage brokers believe (incorrectly) is a good indicator of interest rate direction.
Yes, the spreads between mortgage rates and treasury rates are wider than they've been in the past. Maybe that has something to do with the perception of quality decreasing in the wake of a massive mortgage crisis! (understatement) Mortgage yields have always been higher than treasury yields in order to compensate investors for the extra risk.
So don't be surprised when the Fed cuts rates and mortgages hold steady. As long as inflation is a concern and the quality of MBS as an investment is in question, there will not be a direct relationship. My Scoff-O-Meter was tripped all the more abruptly as yesterday was a fantastic day for mortgage rates, a very inopportune day to write such an article.
In conclusion, even if it's not feasible for the average consumer to digest and understand the complex macroeconomic forces that govern mortgage rates, the more people in congress and the news media that understand, the better equipped the general population will be to mitigate our freefall towards and stimulate our recovery from what will be one of the lowest points in our economic history."
Thank you matthew for you wonderfully written post. Leave comments and let's discuss this!
The National Association of Realtors® (NAR) has insisted for years, and insisted adamantly since the "bubble" started to burst, that real estate, like politics, is local. The quarterly survey of home prices that NAR released on Thursday proves this point and also indicates that, while the housing market is grim in some parts of the country it is doing quite well in others.
The survey which covers the fourth quarter of 2007 showed that 73 of the 150 metropolitan areas in the survey continued to show rising median prices for existing single-family homes.
11 areas actually showed double-digit annual gains and another 12 had increases of 6 percent or more. 77 Areas had price declines and 16 of those lost values in the double digits.
Still, in spite of the fact that the market is holding up well in much of the country, median prices for the country as a whole and for each of the four regions were down from the fourth quarter of 2006. The median price for the country declined 5.8 percent from $219,000 to $206,200. The West, which also had the highest prices in the country, took the biggest hit. The median price in that region in the fourth quarter of 2006 was $355,000 but had declined 8.7 percent to $324,100 in the latest report. The Midwest, which has the lowest median price fared the best, losing only 3.2 percent to a fourth quarter price of $156,300.
The largest single-family price increase was in the Cumberland area of Maryland and West Virginia. Prices there rose 19.0 percent from a year ago to a median of $116,500. Other big winners were Yakima, Washington (18.0 percent to a median of $170,600) and Binghamton, New York where prices increased 14.8 percent to a median of $110,000.
Big losers were Lansing/East Lansing Michigan where median prices dropped 18.8 percent to $109,600; the Sacramento California MSA which lost 18.5 percent in value to $297,600; and Jackson Mississippi and Riverside/San Bernardino California each at -16.8 percent to median prices of $120,900 and $338,000 respectively.
Lawrence Yun, NAR chief economist, said disruptions in the mortgage market have played a role. "The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges. For buyers who need loans of more than $417,000, mortgage interest rates have been running more than a percentage point higher, and that has been having an obvious impact. Higher ratios of sales for more moderately priced homes are naturally dampening the national median price as well as the data for some of the more expensive markets."
NAR President Richard Gaylord said he is encouraged by the raising of Freddie Mac, Fannie Mae, and FHA conventional loan limits. "Higher limits for FHA loans, which go into effect March 14, will be a big help to first-time buyers in high-cost markets. Higher limits for conventional loans purchased by Freddie Mac and Fannie Mae will take a bit longer - when they become available, high-income, creditworthy borrowers in high-cost areas will have access to affordable and safer financing, and that will help unleash pent-up demand."
The NAR report also covered condominium and cooperative prices in 59 metropolitan areas. The national median price for existing condos was $221,100 in the fourth quarter, only $100 less than in the fourth quarter of 2006. Thirty-three areas showed year-over-year increases (four of these had double-digit gains) while 26 areas saw prices decline, four of those by double-digits.
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate(2) of 4.96 million units in the fourth quarter, down 8.5 percent from 5.42 million in the third quarter, and are 20.9 percent below a 6.26 million-unit pace in the fourth quarter of 2006.
NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series was launched at the beginning of 2006, with several years of historic data.
