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Archive of posts filed under the Real Estate Analysis category.

Double Dip in Housing?

30 January 2010, 9:55 am

-Robert Larsen

The Governments Effect on Housing

A recent real estate report indicates that consumers may be taking their time house hunting this winter, which some economists believe could lead to a “double dip” in home prices. A recent report from the NATIONAL ASSOCIATION OF REALTORS® (NAR) showed that its pending home sales index declined 16 percent in November to a reading of 96, the first decline after nine consecutive months of gains.
MAKING SENSE OF THE STORY FOR CONSUMERS
• NAR’s Pending Home Sales Index (PHSI) is a barometer of future sales. Typically, there is a one- to two-month lag between the signing of a sales contract and the close of escrow. Although government incentives, low interest rates, and affordable home prices have attracted many buyers, especially first-timer buyers, to the market, historically sales decline during the winter months and begin to rise in the spring, and ultimately peak in the summer.
• Because of the government’s efforts to stimulate the housing market, some economists believe that housing prices will decline once the incentives come to an end. However, the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) closely watched “2010 California Housing Market Forecast,” projected that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009.
• According to C.A.R.’s Vice President and Chief Economist Leslie Appleton-Young, unlike the rest of the nation, home sales in California already bottomed out more than two years ago, and the median home price reached its trough in February 2009.
• Although home buyers should not focus solely on future home price appreciation, according to data collected by C.A.R. over the last 40 years, homeowners who purchase and live in their home for at least five years, have averaged an annual rate of return of nearly 12 percent.

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2010 and Beyond…

20 January 2010, 1:35 pm

Defaults Down 35 Percent from a Year Ago

Throughout 2009, a common theme was the existence of “shadow inventory” andCartoon the growing presence of mortgage defaults. Now, in  2010, all the talk has stopped and investors betting on a continued down market are looking towards other statistics to support their theory. But, before we begin to analyze new arguments, lets look at why the previous talk about shadow inventory and defaults stopped.

Banks filed 1,535 notices of default in Orange County in December, down 35 percent from a year ago and 18 percent from November ‘09, reports MDA DataQuick. The lowest levels since September of 2008.

Default notices, which start the foreclosure process, have been trending down since reaching a peak of 3,485 in March 2009. They have declined each of the past five months.

Foreclosures totaled 796 houses and condos last month, up 18 percent from November and 11 percent from a year ago. Foreclosures generally increase from November to December, but the total was also the highest in five months. One data point does not signify a trend, but it will be interesting to see if banks work on their foreclosure backlog in coming months while starting the foreclosure process on fewer homes.

Take a look at the default and foreclosure numbers below:

Despite the tragedy of so many people losing their homes to foreclosures, it is an inevitable process. One home lost, is a new home for another; and the foreclosures are being purchased. It wouldn’t be such a bad thing if more bank owned homes were on the market, but unfortunately investors are purchasing the REOs in bundles. Each month more and more homes are being purchased by investors and flipped for a quick profit. Below is a graph illustrating the number of foreclosed homes purchased either through REO or by an investor.

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