6 posts tagged “home sales”
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.
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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.
