Foreclosures for sale: Big supply, low prices

NEW YORK (CNNMoney) — There’s a three-year inventory of homes in foreclosure for sale, and that’s devastating home prices.

Las Vegas has so many foreclosures that 53% of all the homes sold in Nevada are in some stage of foreclosure, according to a report from RealtyTrac, the online marketer of foreclosed properties.

Foreclosures represent 45% of sales in California and Arizona, and 28% of all existing home sales during the first three months of 2011.

“This is very bad for the economy,” said Rick Sharga, a spokesman for RealtyTrac.

What’s more, the homes are selling at steep discounts, especially so-called REOs, bank-owned homes that have been taken in foreclosure procedures.

The average REO cost on average about 35% less than comparable properties, according to RealtyTrac.

But in some areas, the discounts were ever greater: In New York State, the discount for REOs was 53% during the first quarter. And it was nearly 50% in Illinois, Ohio, and Wisconsin.

10 dirt cheap housingmarkets

Also weighing on market prices are “short sales,” homes where the selling price is less than what is owed by the borrowers. These sales sold at an average 9% discount.

Including both REOs and short sales, Ohio had the biggest discount of any state, at 41%.

There were 158,000 deals involving distressed properties nationwide during the first quarter, less than half the nearly 350,000 during the same period two years earlier.

With the slowed sales pace, it will take three years to burn through the inventory of 1.9 million distressed properties, according to Sharga.

“Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” said Sharga.

74.6 percent of homes affordable to median-income households, trade group finds

Housing affordability hit a new high in the first quarter, surpassing the previous high set in fourth-quarter 2010, according to the National Association of Home Builders and Wells Fargo.

The Housing Opportunity Index found that 74.6 percent of new and existing homes sold in the first quarter were affordable to families earning the national median income of $64,400. That’s up from 73.9 percent in the fourth quarter of 2010, and it’s the highest level in the more than 20 years the index has been measured.

“With interest rates remaining at historically low levels, today’s report indicates that homeownership is within reach of more households than it has been for more than two decades,” Bob Nielsen, chairman of the National Association of Home Builders (NAHB), said after the index was issued last week.

“While this is good news for consumers, homebuyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.”

The Seattle metropolitan area also became more affordable with 67.5 percent of homes within reach of those earning the median income of $85,600. That number is the highest recorded since the index started in the first quarter of 1999.

Before 2009, the national index rarely topped 65 percent, the association said. Last quarter was the ninth straight quarter the index was above 70 percent.

Indiana, Ohio and Michigan dominated among the most affordable metro areas. Among metro areas with populations under 500,000, Kokomo, Ind., was the most affordable area, with 98.6 percent of homes affordable to households making a median income of $61,400. The median sales price in the area was $88,000 in the first quarter.

California dominated among the least affordable metro areas. San Luis Obispo-Paso Robles, Calif., was the least affordable among the smaller metro areas with 47.6 percent of homes affordable to households making the median income of $72,500. The median sales price in the area was $320,000 in the first quarter.

Among metro areas with populations of 500,000 or more, Syracuse, N.Y., was the most affordable to households making the median income of $64,300. The median sales price in the area was $80,000 in the first quarter.

Another New York market, New York-White Plains-Wayne, N.Y.-N.J, was the least affordable among both the larger metros.

Less than a quarter of homes, 24.1 percent, were affordable to families making the median income of $65,600 in the first quarter. The median sales price was $425,000.

In other cities in Washington state, Spokane was the most affordable with 82.2 percent of homes within reach of those earning the median income of $60,300. Olympia recorded 81.8 percent; Tacoma, 78.5 percent; Bremerton-Silverdale, 70.1 percent; Bellingham, 69.7 percent; and Mount Vernon-Anacortes, 60.5 percent.

Source: By Inman News

Commercial Real Estate Slowly Turning Around

Sales and leasing volumes in commercial real estate have turned a corner and are heading up, but because the past few years have been so difficult, the upturn barely feels like one. However, the sector is expected to strengthen more over the next couple of years, NAR Chief Economist Lawrence Yun told commercial real estate practitioners on Thursday at the 2011 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington.

Financing remains a major stumbling block, with little commercial mortgage backed security activity happening, but banks — particularly regional banks — are stepping in with portfolio loans, said Yun.

That’s a bit surprising, because the big-four national banks — Wells Fargo, Citibank, Chase, and Bank of America — are in a far better position to make loans. Not only are they sitting on piles of money, but because they’ve grown to the point where they’re too big to fail, they have a de facto implicit federal guarantee, Yun said.

A big concern looming is inflation. It remains low, about 2.9 percent (excluding energy and other volatile components to the economy), but inflation could rise and hit 5 percent by the end of the year and 6 percent in the early part of 2012, Yun predicted. If that happens, interest rate costs would also rise. For the federal government, a 2 percent increase in rates could wipe out a lot of any deficit reduction steps the government might take between now and the end of the year, because in some analyses, that could translate into $2 trillion in increased debt service payments for the government.

In the individual commercial sectors, multifamily housing has been the standout over the last year. Vacancies hit historically normal levels last year at about 5-6 percent with solid rental rate growth. Look for 4 percent higher rents nationally by the end of this year. That figure could be considerably higher in some first-tier markets like Washington, D.C., where rental rates have been rising at almost a double-digit clip.

Those gains might ease in the next year or two, though, as residential home sales improve. The high rental rate increases could tip the scale for some renters to consider home ownership. Yun has said on other occasions that almost 40 percent of the renter population today has the financial ability to become home owners, but for now are choosing to rent.

In the office market, vacancy rates are expected to decline steadily, from 16.5 percent in the first quarter of this year to 16 percent at the end of the year. Rental rate increases could turn positive for the first time in a while, too, to maybe 5 percent from a negative 2 percent. Offices are benefitting from recent job gains in professional service-type jobs like accountants and lawyers.

Among markets tracked by NAR, New York City has the lowest vacancy rate at a little over 8 percent. Washington, D.C., with its federal government-fueled activity, also has a relatively low vacancy rate. Pittsburgh, which has been steadily transitioning from an industrial city to a high-tech and professional services city, is among the metros with relatively strong office trends.

Industrial markets are also expected to improve, with vacancy rates projected to decline from 14.2 percent to about 12.9 percent at the end of the year. Yun is predicting positive rental rate growth of about 2 percent this year. Los Angeles, with its big Asia import-export trade, has the lowest vacancies at 7.5 percent.

Retail markets continue to struggle, with consumers still retrenching in their spending. In the long run, increased savings by consumers is good, because it boosts household financial stability, Yun said, but in the short term retail properties are getting little relief. Vacancy rates are only expected to improve marginally, from about 13 percent to just slightly better by the end of the year. Even so, the sector might see some improvement in rental rate growth, moving from a negative 1 percent to 1 percent in positive territory by the end of the year. San Francisco is in the best shape among major metro areas with a vacancy rate of about 6.7 percent.

You might not “feel the impact of the recovery,” Yun said. “The hole was so deep, it might still feel like we’re in a hole.”

Source: By, Robert Freedman, REALTOR® Magazine

Improving job market ignites sharp rise in apartment rents

Apartment rents are rising at their fastest pace in years as the U.S. economy creates jobs and spurs demand for rental housing.

Nationwide, rents started edging up last year after several years of little growth or even declines, market researcher Reis says. It predicts apartment rents will jump 4.3% this year, marking the biggest annual increase in four years. MPF Research, which also monitors apartment rents, expects them to rise more than 5% this year, says Greg Willett, MPF Research vice president.

Job growth is driving much of the increase. As more people get jobs, people who doubled up in homes during the recession, especially younger workers, move out on their own, says Ryan Severino, Reis senior economist. Many of those workers are choosing to rent rather than to buy, because of dropping U.S. home values and tight lending standards that make it harder to buy homes, Severino says.

Lack of construction is also helping rents. This year, just 40,000 new apartment units are expected to be added to the U.S. supply, Reis says. That’s down from about 130,000 new units each year for much of the past decade.

Apartments make up about half the nation’s rental supply, Willett says. Single-family homes and condominiums account for the rest.

MPF and Reis both say San Jose and New York City are the strongest rental markets. In the first quarter, rents in those markets were up 4.6% and 4.4%, respectively, from the same period last year, Reis’ data show. Nationwide, rents rose not quite 2% from the first quarter of 2010 to the same quarter this year, Reis says. Vacancies fell 1.8 percentage points to 6.2%.

Other markets seeing first-quarter year-over-year rent increases in excess of 3% included suburban Virginia and Maryland; San Francisco; Rochester, N.Y.; Portland, Ore.; and Denver, Reis says.

Real estate broker Richard Gonzalez of Realty World sees the market tightening in San Jose as homeowners who lose homes to foreclosure or short sales become renters. “They’re starting over and need to rent,” Gonzalez says.

Las Vegas was one of the few metropolitan areas in which rents fell in the first quarter, Reis and MPF say. They dropped almost 3% year-over-year.

Las Vegas has the highest foreclosure rate in the nation, and investors are buying homes there and turning them into rentals. The city hasn’t seen apartment rents rise since the third quarter of 2008, Reis says.

Increasing demand and lack of new rental supply will boost rents for the next couple of years, predicts Paul Dales, economist at Capital Economics. Eventually, though, as rents rise and home prices drop, “homeownership becomes more valuable again,” says Jim O’Sullivan, chief economist at MF Global.

In Time for Buying Season, Rates Reach Yearly Lows

The 30-year fixed-rate mortgage, a popular choice among buyers, sank even lower this week, matching its yearly low of 4.71 percent from January, reports Freddie Mac in its weekly mortgage market survey. Last year at this time, the 30-year fixed-rate mortgage averaged 5 percent.

Meanwhile, the 15-year fixed-rate hit a new yearly low of 3.89 percent this week. Last week, the 15-year fixed-rate mortgage averaged 3.97 percent. The 15-year rate averaged 4.36 percent last year at this time. It reached its lowest level on record in November when it averaged 3.57 percent.

The one-year adjustable-rate mortgage averaged 3.14 percent, down from last week’s 3.15 percent. Last year at this time, it averaged 4.07 percent.

“Weaker economic data reports reduced Treasury bond yields and allowed mortgage rates to drift lower for the third consecutive week,” says Frank Nothaft, Freddie Mac’s chief economist.

Source: “30-Year Fixed-Rate Mortgage Matches Yearly Low of 4.71 Percent,” Freddie Mac (May 5, 2011)

Gov’t Looks to Reduce Real Estate Inventory

The Obama administration is looking to get rid of 14,000 surplus properties that the federal government owns around the country and is costing taxpayers money to maintain.

The surplus properties include everything from unused roads and empty lots to warehouses and office buildings.

“The government can no longer foot the bill for vacant buildings,” says Rep. Jason Chaffetz, R-Utah, who also has authored a bill to quickly dispose of the government’s surplus property, but without using a special commission as the Obama administration has proposed.

The federal government spent about $134 million to maintain surplus buildings in 2009. The Obama administration says that improving the government’s management of surplus properties stands to save taxpayers $15 billion over several years.

The Obama administration is proposing a special commission be used to handle the surplus property in order to try to sidestep problems that have hindered the sale of these properties in the past. The presidentially-appointed, seven-member Civilian Property Realignment Board would evaluate surplus federal properties and make recommendations to “significantly reduce” the government’s real estate inventory, which ultimately would be voted upon by Congress.

The government believes there are some 12,000 surplus federal properties within the U.S. and about 2,000 overseas. The commission would not deal with military, national security sites, national parks, or wildlife refuges.

Source: “Obama Seeks Special Panel to Unload Federal Real Estate,” McClatchy Newspapers (May 4, 2011)

Contracts for home sales rose 5.1% in March; mortgage rates drop

WASHINGTON — More Americans signed contracts to buy homes in March, but sales were uneven across the country and were not strong enough to signal a rebound in housing.

Sales agreements for homes rose 5.1% last month to a reading of 94.1, according to the National Association of Realtors’ pending home sales index, released Thursday.

Signings are more than 20% above June, the low point of the housing bust. But the index is below 100, which is considered a healthy level.

Sales rose in every region but the Northeast.

Source: By AP, USA Today (April 29th, 2010)