Lower mortgage rates encouraged more applications, pushing the Mortgage Bankers Association applications index up 11.9 percent on an adjusted basis from 379.9 the previous week to 425 last week.
On an unadjusted basis, the index increased 10.5 percent compared with the previous week and was down 40 percent compared with the same week a year ago.
Refinances increased 16.1 percent while conventional purchases rose 6.5 percent and purchases using government loans jumped 15.3 percent.
According to the association, 30-year fixed-rate mortgages decreased to 6.24 percent from 6.47 percent; 15-year fixed-rate mortgages decreased to 5.90 percent from 6.14 percent; 1-year ARMs decreased to 6.18 percent from 6.86 percent.
A flat pattern in home sales activity should continue for the next couple of months before improving over the summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. “Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas,” he says. “As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available.”
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9.
NAR President Richard F. Gaylord says additional costs in many markets are hindering a recovery. “Our members are telling us that more buyers are looking at homes but are slow in signing contracts, and that’s contributing to the weakness in pending home sales,” he says. “In many cases buyers are waiting for greater access to affordable credit, especially in higher cost areas, but some are disappointed with what appears to be unnecessarily restrictive lending requirements. The good news this week is there is some discussion toward relaxing some of the burdensome lending practices.”
The PHSI in the Northeast jumped 12.5 percent in March to 80.8 but remains 15.4 percent below a year ago. In the South, the index slipped 0.1 percent to 84.9 and is 26.7 percent lower than March 2007. The index in the West declined 1.4 percent in March to 91.2 and is 9.5 percent below a year ago. In the Midwest, the index fell 10.4 percent in March to 74.1 and is 22.3 percent below March 2007.
Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun says. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.
Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa.
On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales. “Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income, and jobs,” Yun says. “It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that.”
Here are some highlights from NAR's report:
- New-homes. Sales of new homes are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.
- Rates. The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009.
- Affordability. NAR’s housing affordability index is expected to rise 10 percentage points to 127.0 for all of 2008.
- GDP. Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.3 percent in 2009. The unemployment rate is projected to average 5.3 percent in 2008 and 5.5 percent next year.
- Inflation. Inflation, as measured by the Consumer Price Index, is seen at 3.4 percent this year and 2.2 percent in 2009. Inflation-adjusted disposable personal income is forecast to grow 1.2 percent in 2008 and 3.0 percent next year.
Curl up with a book in this English cottage. Original mahogany doors & trim with hardwoods & plantation shutters add finishing touches to this home. New heat, air, therm windows, landscaping, kitchen and baths don't leave anything for you to do. Master bedroom with den upstairs. Fireplace viewable from liviing, dining. and bedroom.
For a flyer, click on the photo below to enlarge and again to enlarge to full size. To see a Virtual Tour click
Stunning Dibel tudor in Rockhill Gardens. Large 4 bedroom, 2.5 bath with hardwoods throughout. All new Ralph Lauren paint on every wall. Side and back porch make great for Spring gatherings. Private drive & 2 car garage. Very private back yard. Rec room or 4th bed with 2nd Fireplace in basement. Hurry!
For a flyer, click on the photo below. To view the Virtual Tour, click HERE!
3 Bedroom, 2 Bath, BRAND NEW 2 Car Garage, Siding, Thermal Windows on a double lot! Click photo below for flyer or click HERE for Virtual Tour!
Totally renovated 2 Bed, 1 Bath, New Kitchen and Bath, Hardwood Floors, 1 Car garage. Close to Marlborough Heights without the prices. Click photo below for flyer or click HERE for Virtual Tour!
3 Bedroom, 2.5 Bath, 2 Car Garage sits on 1/2 Acre Treed Lot. GREAT buy in Holmes Wood. Close to schools, churches and shopping. Very private street. Click photo to enlarge for flyer. For Virtual tour click HERE!
With retirement nearing for myself and my husband, we are planning to move to northern Arizona in the next year. We have a home in Orange County, Calif., that we bought in 1973. We realize that this would be a good time to buy -- but not such a good time to sell our current home. If we choose to keep our present home and rent it, we would give up the tax exclusion on $500,000 of the gain. Can you tell us the pros and cons of such a decision?
Even if you don't sell your house in Southern California right away, you won't necessarily have to give up your potential tax break.
"The rule is that a married couple can get a $500,000 tax exclusion [on the sale of their primary residence] as long as they have lived in the house for two of the previous five years," says Nancy Flint-Budde, a certified financial planner in Salem, N.Y.
That window gives you a little wiggle room. You could go to northern Arizona, "try it out, and see if you really like the place" before making any big housing decisions, Ms. Flint-Budde says. "My advice to a client who's relocating in retirement is to always try it out rather than committing to a purchase in the new place right away. What if they get there and they find out they don't like it?"
Then there's your other decision: to rent or not to rent. Learning to deal with the travails of being a landlord can be tough -- especially when you're doing it from afar. Ms. Flint-Budde recommends getting help from a professional property manager.
"We're not just talking about maintaining the house," she says. "We're talking about those calls in the middle of the night because the tenants have problems. We're talking about tenants who become problems."
If you do convert your house to rental property and "take any tax benefits such as depreciation," those could affect the exclusion amount if you sell the home, says Jim Weil, a certified financial planner in Chicago. So if you go this route, you may want to consult a certified public accountant to make sure you don't run afoul of the tax rules.
And if you rent out your house for any portion of a year, you don't get to count that year as one of the two in the past five that the house was your principal residence, he adds.
Mr. Weil also advises running the numbers to make sure you could afford to carry the costs of homes in Arizona and California in months when you might not collect rent. "You need rainy-day money if the house isn't rented, or if it's not rented at the rate you expected. It's a big bet -- will the market in California come back in the next two to three years? The last time this happened, the cycle took a lot longer," he warns.
Another thing to consider: If one spouse dies before you sell the house, the surviving spouse's exclusion eventually gets cut in half. A tax rule that took effect Jan. 1 gives surviving spouses the $500,000 exclusion on the home sale for two years after the date of death. After that, the exclusion falls to $250,000.
By Kelly Greene
From The Wall Street Journal Online
Email your comments to rjeditor@dowjones.com.
In what may be the first fluttering of a recovery in the housing market, sales of existing homes last month actually increased from January levels according to the National Association of Realtors (NAR.)
Sales of previously occupied single-family houses, condominiums, co-ops and town houses rose 2.9 percent in February to a seasonally adjusted annual sales rate of 5.03 million units. The January sales level was 4.89 million. In spite of the encouraging small increase, February’s rate was still 23.8 percent below the 6.60 million pace one year earlier.
NAR's chief economist Lawrence Yun said the increase is encouraging. "We're not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing," he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year."
Sales of single-family homes increased 2.8 percent to an annual rate of 4.47 units from an upwardly revised estimate of 4.35 million in January but are still 22.9 percent lower than the 5.80 million sales in February 2007. Condo and co-op sales did a little better, rising 3.7 percent to 560,000 units from January’s level of 540,000.
Another bit of good news; inventories of existing dwellings fell 3.0 percent in February to 4.03 million homes available for sale. This is a 9.6 month supply at the current rate of sales compared with a 10.2 month supply in January.
Prices did continue to drop, with the median price of all housing types dropping to $195,900 in February 2008, a decrease of 8.2 percent from the median of $213,500 in February 2007. NAR said that the slowdown in sales from a year ago is greater in high-cost areas, so there is a downward pull to the national median with relatively fewer sales in higher priced markets.
The median price of single-family houses was down 8.7 percent year-over-year to $193,900 and the median existing condo price was $211,700, 4.9 percent lower than a year ago.
Readers of the survey were advised to look as well at home prices within metropolitan areas. Roughly half of the metro areas in the U.S. have had price increases with healthy gains in markets such as Oklahoma City and Trenton, New Jersey. "In other areas such as Sacramento, a rapid price decline has induced buyers to come into the market and sales are now rising," Yun said. "The relationship between home prices, interest rates and income has improved to the point where buyers are more serious about making offers."
In virtually every housing report we have seen over the last few months the situation in the Northeast seems to be improving faster than in other parts of the country. That is true of the current existing home sales report wherein sales in the Northeast were up 11.3 over January but are remain 26.4 percent below February 2007. The median price in the Northeast was $264,800, up 0.4 percent from a year ago.
Two of the other regions also showed increases. Existing-home sales in the Midwest rose 2.5 percent last month while lagging behind February 2007 sales by 19.5 percent. The median price in the Midwest was $143,900, which is 7.1 percent lower than February 2007.
In the South, sales increased 2.1 percent but are 22.0 percent below February 2007. The median price in the South was $163,400, down 8.6 percent from a year ago.
Sales in the West slipped 1.1 percent month-over-month and are 29.2 percent below a year ago. The median price in the West was $290,400, down 13.4 percent from February 2007.
By Jonathan Clements
From The Wall Street Journal Online
Financial lore says you should buy when there's blood in the street -- which suggests real estate is a bargain, because there's blood all over the neighborhood.
Time to invest? I wouldn't be surprised to see home prices drop sharply this spring, as long-suffering sellers in hard-hit areas throw in the towel and slash their asking price.
That could spell opportunity for this year's buyers. But what if you already own a home -- and have no desire to become a landlord? Here are three ways to play today's battered housing market.
Trading up. If you're hankering after a larger home or a house in a better neighborhood, this could be your chance to trade up on the cheap.
To be sure, when you go to sell your current home, you will likely get a modest price. Since 2006's second quarter, real estate has fallen 10.2%, as measured by the S&P/Case-Shiller U.S. National Home Price Index. But your new, grander house will also be relatively inexpensive, so you're effectively cranking up your real-estate exposure when the market is well below its peak.
That said, I wouldn't think of this move as an investment. Your new home will probably mean not only a bigger mortgage, but also higher ongoing costs, including homeowner's insurance, property taxes and maintenance expenses. These ongoing costs will offset a large chunk of any future home-price appreciation.
In other words, trading up to a larger home or a better neighborhood is really about wanting to consume more real estate. Still, like any thrifty shopper, you want to buy when there's a sale -- and that is what today's market offers.
"It's like going from a Honda to a Mercedes," says Charles Farrell, a financial adviser with Denver's Northstar Investment Advisors. "It's a lifestyle choice. As long as it doesn't cut into your ability to accumulate capital for retirement, this is probably a pretty good time to upgrade."
Doubling down. Instead of trading up, you might be eyeing a vacation home. If you don't plan to rent the place out, the same logic applies: Once you subtract the annual costs from the price appreciation, you likely won't make very much money -- which means the property won't be much of an investment.
On the other hand, maybe you're two or three years from retirement and are toying with buying a second home that could become your sole residence once you quit the work force. Does it make sense to purchase now, given the decline in home prices?
Buying today is no doubt appealing, because it'll give you a chance to vacation in your future home. But whether it turns out to be a wise financial move depends on what happens to property prices -- and that's tough to predict.
Still, I wouldn't bank on a rapid bounce back in home prices. At the current sales pace, it would take a whopping 10.3 months to clear January's backlog of unsold homes. By contrast, in January 2005, the supply of unsold homes was at a mere 3.6 months, according to the National Association of Realtors.
The bottom line: If you think you'll get a lot of use from a second home, go ahead and buy. But if you view the purchase as a bet on rising home prices, I would hold off for now.
Helping hand. While buying more real estate for your own use probably won't be a great investment, you could help your adult children make good money -- by transforming them from renters to homeowners.
To that end, you might give your kids an advance on their eventual inheritance, so they have enough money to make a down payment. Yes, that means they will start to incur the housing costs I mentioned above, including property taxes and maintenance expenses. But your children will also replace their monthly rent check with a monthly mortgage check, and that will allow them to start building home equity.
"If you have kids who are first-time buyers in markets that are relatively depressed, this could be a good time," Mr. Farrell reckons. "These days, they might need to make a 10% down payment. You could make a gift to them of the down payment or make a loan to them."
