The Census Bureau reports New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 402 thousand. This is a decrease from the revised rate of 417 thousand in August (revised from 429 thousand).

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).


Note the Red columns for 2009. Sales in September 2009 (31 thousand) were below September 2008 (35 thousand). This is the 3rd lowest sales for September since the Census Bureau started tracking sales in 1963.

In September 2009, 31 thousand new homes were sold (NSA); the record low was 28 thousand in September 1981; the record high for September was 99 thousand in 2005.

This is 3.6 percent (±10.2%)* below the revised August rate of 417,000 and is 7.8 percent (±12.0%)* below the September 2008 estimate of 436,000.
And another long term graph - this one for New Home Months of Supply.

There were 7.5 months of supply in September - significantly below the all time record of 12.4 months of supply set in January.
The seasonally adjusted estimate of new houses for sale at the end of September was 251,000. This represents a supply of 7.5 months at the current sales rate.
The final graph shows new home inventory.

Note that new home inventory does not include many condos (especially high rise condos), and areas with significant condo construction will have much higher inventory levels.

Months-of-supply and inventory have both peaked for this cycle, and new homes sales has probably also bottomed for this cycle. Sales were probably impacted by the end of the first-time home buyer tax credit (because of timing, new home sales are impacted before existing home sales).

New home sales are far more important for the economy than existing home sales, and new home sales will remain under pressure until the overhang of existing homes declines much further.

I'll have more later ...

CALIFORNIA REAL ESTATE NEWS

If California is an indicator of the US real estate market, then the tide could be turning.

Just ask realtors like Matthew O’Keefe. As the sales director at Gibson International Realty in Los Angeles, he’s feeling the frenzy that has become the real estate market with first-time home buyers taking advantage of the government tax credit, near-record low interest rates and many buyers seeking deals with the abundance of foreclosed homes.

“I’ve seen my business increase about 300 percent since May,” says O’Keefe, a realtor for six years. “Every year I’ve done better and better, and this year I thought I would be in a difficult situation, but this is going to be my best year ever.”

And it’s a trend across the state. According to the California Association of Realtors, CAR, home sales are now 38 percent higher on a year-to-date basis compared to 2008 and it’s due in large part to the number of distressed properties on the market. In the last 12 months more than 500,000 homes were sold throughout the state and about half involved foreclosed properties.Racing For The Homebuyer's Tax Credit? Here Are Some TipsSeven Tips For HomebuyersCalifornia: Improving From The Bottom UpFlorida: Affordable AgainMortgage Loan Shopping? Look LocallyMid-Atlantic: D.C.'s Hot, Everything Else Is NotMidwest: Less Gain, Less PainNew England: Ahead Of The CurveMortgage Rates: As Good As It GetsBuilders First in Line to Capitalize on Housing RecoveryRent Now, Buy Later: Is It Right For You?How To Move Your House In A Tough MarketGetting In On ForeclosuresYou Don't Need A Realtor To Sell Your HomeBargains, Bubbles & Stable MarketsHomes On Sale Across America

“Everything under $500,000 is moving fast,” says the realtor group's president-elect, Steve Goddard. “Those are our first-time home buyers in California using the tax credit that the government is giving them. Forty percent say they’re buying because of it.”

So what was doom and gloom for areas hard hit with foreclosures last year, such as the outskirts of Sacramento County in the north and Riverside County in the south, is now starting to look a bit brighter as realtors try to keep up with the demand of bargain hunters.

That’s why Vickie Hill, branch manager at Coldwell Banker Residential Brokerage in Temecula (equidistant to San Diego and Los Angeles on Interstate 10), is happy to work in what is known as The Inland Empire.

Although home prices in the area (southwestern Riverside Co.) have dropped by 30 to 40 percent over the last couple of years, she’s now seeing multiple offers on homes where the median home price was about $166,000 in August 2009, according to CAR (statewide the median price was almost $293,000.)

“Our actual solds are up over 150 percent over the last two years,” she says. "We’ve got a lot of cash out here right now and we’ve got buyers that are trying frantically to buy homes.”

Realtors are also starting to buzz about the high-end real estate market again, where they say buyers are making their move on homes priced over $1 million.

“The values of the higher price points are arguably better than the lower price points, and if you have the money, is going to be a better deal,” says Kris Berg, broker and owner of San Diego Castles Realty.

For those looking for a high priced home, the Golden State is exactly the place to look. According to an annual report by Coldwell Banker Real Estate, California is home to eight out of the ten most expensive real estate markets in the nation with La Jolla topping the list. That’s where the average sales price of a 2,200-square foot home is now about $2,125,000.

“The upper end properties have found a value that’s brought the smart money off the sidelines,” says Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego, “and we’re seeing multimillion dollar homes being purchased with cash.”

But the question is, will the home buying frenzy continue?

While the California realtors trade group reported that home sales in August 2009 increased by 9 percent compared to August 2008, home sales in the state actually dipped about 5 percent between July and August 2009, due to a thinning inventory of foreclosed homes.

To many, it’s a sign that the market could be leveling out in the state, but to others it means we’re just bouncing along the bottom.

According to Andrew LePage, analyst for MDA DataQuick, the San Diego metro area is showing the highest signs of price stability, where the median home price in August 2009 was about $375,700, down just 3 percent from a year ago, based on CAR data. In the north, the median sales price in Sacramento County was about $192,000, down 13 percent from the year before.


"Sacramento county was the first metro area to go into the downturn, but the last four to six months indicate that prices have flattened out and aren’t falling any where near as fast as they were and there are far few foreclosures,” says LePage.

Still, the low inventory of distressed homes could just be temporary, which makes it too soon to say whether California is hitting the bottom of the market.

The real answer depends on the number of foreclosures that could be coming and when they will hit. Right now, many realtors guess that lenders are sitting on defaults or simply haven’t been able to process the backlog of delinquencies. Either way, the uncertainty proves that the housing market remains soft and unpredictable.

REAL ESTATE AT A CROSSROADS

To say the residential real estate market is at a crossroads is the understatement of the current economic recession. After several months of gains in new and existing home sales, as well as price stabilization in some of the hardest hit local markets, the question going forward is: Can this housing “recovery” be sustained?


Taking into account the fact that most of the real estate data we report is seasonally adjusted, fall is still considered the slow season in real estate. Families are tied to the school calendar and younger, single business executives may be waiting for year-end bonuses.

This fall, the residential market is facing additional headwinds. The expiration of the $8000 first-time home buyer tax credit at the end of November, which has added an estimated 200,000 buyers to the market, will undoubtedly take its toll. Realtor and home builder lobbyists are hitting Capitol Hill hard, and while several bills to extend and even expand the credit are on the table, budget-wary representatives are questioning continued housing stimulus.

Rising foreclosures are also riling the recovery, with various moratoria expiring and banks and servicers pushing properties through the system more quickly. Inventories of unsold homes, new and existing, have been falling over the summer months, but a new wave of foreclosures could reverse what was thought to be a promising trend.

Make no mistake, the government’s Home Affordable Modification Program is putting a dent in potential foreclosures, with over 500,000 trial modifications underway and more than 45 servicers participating. But with rising unemployment, fewer borrowers are qualifying for the much-needed modifications. The Treasury’s Assistant Secretary for Financial Institutions, Michael Barr, admits, “that challenges remain in implementing and scaling up the program.”

Finally, the mortgage market is still standing at odds with housing’s recovery. Much-needed mortgage reform is protecting housing’s future, but it’s a double-edged sword.

New rules for appraisals are slowing the mortgage process, and higher standards throughout the industry, and even the Federal Housing Administration is pushing some potential borrowers out of the market.

“On the whole, the new borrowers are at risk of not being able to be served, as FHA and the private mortgage insurance industry come under stress,” notes industry analyst Howard Glaser.

It’s a buyer's market, for those with good credit and substantial money to put down. Consumer confidence is gaining slowly, and investors are definitely draining excess inventory from the very low end of the market.

A real, sustained housing recovery will be slow to build, and unemployment is arguably one of its greatest impediments, but there are unprecedented opportunities in today’s real estate landscape; all it takes are the right tools, information and expertise to find them.

Here's what we have in our guide to help you through that process.

Foreclosures Making A Comeback

RealtyTrac, an online marketer of foreclosed homes, says that despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter. "They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac. During the third quarter, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. During the third quarter, a record 237,052 homes were repossessed, a 21% jump from the previous three months. So far this year lenders have taken back 623,852 homes in total.

Fed on Hold as U.S. Consumer Prices Show No Threat of Inflation

Fed on Hold as U.S. Consumer Prices Show No Threat of Inflation

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By Timothy R. Homan

Oct. 15 (Bloomberg) -- Slowing inflation may give the upper hand to Federal Reserve policy makers who want to keep interest rates low for a long time to support a recovery from the worst recession since the 1930s.

The consumer-price index rose 0.2 percent last month, after a 0.4 percent increase in August, figures from the Labor Department showed today in Washington. Compared with a year earlier, consumer prices were down 1.3 percent.

Recent comments have shown a growing rift between policy makers who believe the central bank has plenty of time to act before inflation flares and those saying rate increases may happen sooner, or with more force, than some investors anticipate. Bond-market trading shows investors expect inflation over the next 10 years to exceed the latest readings.

The Fed “can keep it low for quite some time,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York, referring to the benchmark rate. “There’s a lot of excess slack built into the system, and it’s not going to go away quickly.”

Ricchiuto forecasts central bankers won’t raise rates at least through the middle of 2011. The median estimate of economists surveyed by Bloomberg News from Oct. 1 to Oct. 8 showed policy makers will wait until the third quarter of 2010 to start raising that target for the overnight borrowing cost between banks as unemployment rises and inflation slows.

The rate has been near zero since December, the lowest on record.

Fed Minutes

The minutes of the policy-making Federal Open Market Committee’s Sept. 22-23 meeting, released yesterday, showed officials weighed the risks that an anemic recovery would lead to “subdued and potentially declining wage and price inflation.”

Fed Vice Chairman Donald Kohn, echoing the concerns of New York Fed President William Dudley, said this week that inflation and growth will probably stay below the Fed’s objectives for some time, warranting low interest rates for an “extended period.” In contrast, Kansas City Fed President Thomas Hoenig and Fed Governor Kevin Warsh have been among those saying rate increases may be needed sooner.

Today’s report on consumer prices showed the so-called core index, which excludes food and energy, climbed 0.2 percent in September, pushed up by health-care and a rebound in automobile prices. Compared with September 2008, prices climbed 1.5 percent after a 1.4 percent increase in the 12 months ended in August.

Inflation Outlook

The difference between rates on 10-year notes and TIPS, which reflects the outlook among traders for consumer prices, was at 1.97 percentage points today, the most in more than two months. The spread, which signals the expected inflation rate over the next 10 years, is little changed from the 2.18 percentage points average over the last five years.

Categories such as rents and food are among those making a pickup in inflation less likely, economists said. Rents, which account for almost 40 percent of the core index, dropped 0.1 percent last month, the fist decrease since 1992. Record levels of vacancies will probably continue to restrain those costs.

Food prices were down 0.2 percent in the 12 months to September, the first year-over-year drop since 1967.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Real Estate Recovery Slowing Down?

Though some economic analysts are warning that the housing market's rebound will slow down as the weather turns colder, this week's numbers show no hints of that.

In fact, they're actually pretty warm.
Start with house prices. The Clear Capital Home Data Index, which tracks price movements in thousands of neighborhoods and ZIP codes across the country, reported a 6.3 percent gain last week for the period covering August 27th through September 25th.
The latest index found prices up for the first time since 2006 in two of the hardest-hit real estate markets - Riverside-San Bernadino, California, and Orlando, Florida. Though the gains weren't big - just 1.2 percent in Orlando, and half a percentage point in Riverside-San Bernadino - just the fact that they're finally bottoming out has got to be good news for property owners and sellers there.
Baltimore also saw its first positive price change in seven quarters on the Clear Capital Index, while other major markets continued their multi-quarter strings of gains.
Dallas-Ft. Worth, for example, saw prices rise by an average 2.3 percent. Miami-Ft. Lauderdale was up 3.4 percent, Houston 3.1 percent and even New York, which has had a tough time recently in Manhattan, posted a 1.6 percent jump.
Meanwhile, the mortgage market continued to provide plenty of financing fuel for home buyers looking to use the $8,000 tax credit before it possibly disappears at the end of November.
The Mortgage Bankers Association says average thirty year rates dropped again last week in its national survey -- hitting 4.89 percent -- the lowest they've been since May.
Fifteen year fixed rates decreased to just 4.3 percent, which is the lowest ever recorded in the mortgage association's survey history.
Not surprisingly, record low rates are pulling in massive numbers of new loan applications. Overall applications were up by 16 percent last week. Loans to people planning to buy homes jumped by 13 percent, while refinancing applications soared by 18 percent.
And here's a truly amazing statistic: New mortgage applications to buy houses using FHA loans were 52 percent higher last week than they were a year ago!
With mortgages flying out of banks with interest rates in the mid -to -upper four percent range, you don't spend a whole lot of time worrying about a slowdown in the real estate rebound.
Unless, of course, Congress doesn't extend the $8,000 tax credit into next year.
Published: October 13, 2009
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