Jim Hitcher's Real Estate Blog

Here’s some good support for a bottoming in the housing market. When the smart guys at Pimco believe it’s safe to go out and buy a home it’s probably a good indication that we have hit a bottom…or are pretty darn close. In the link below there’s a great interview with one of the financial managers at the world’s largest bond fund. It is certainly worth a listen to get his perspective and teh actions he has taken over the lat 8 years.

Kiesel\’s own housing decision

All markets are different, but in the East Bay there has been a bottoming that has occurred at the lower end of the market. This will only improve as housing rents increase and will eventually spread to the other segments of the housing market.

Pending home sales increased in March and are well above a year ago, according to the National Association of Realtors.

NAR’s pending home sales index, a forward-looking indicator based on contract signings, rose 4.1% to 101.4 in March from an upwardly revised 97.4 in February. It is 12.8% above March 2011 when it was 89.9. The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First-quarter sales closings were the highest first-quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said.

“The housing market has clearly turned the corner,” Yun added. “Rising sales are bringing down inventory and creating much more balanced conditions … which means home prices will be rising in more areas as the year progresses.”

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year of examination.

Image via CrunchBase

U.S. home values edged up 0.5% from February to March, making it the largest monthly increase in six years, real estate data firm Zillow said in its latest home value index.

The data arrived the same week as Standard & Poor’s/Case-Shiller national indices report.

The S&P Case-Shiller note, which measures real estate data further out, said home values in nine metro areas reached record lows. S&P reported that its 10-city composite index experienced an annual home-price decline of 3.6% in February, while the 20-city composite index declined 3.5% from a year earlier.  

Zillow, which evaluates home prices in 30 markets using its value index, reported that nineteen markets have either reached a bottom in home prices or are expected to hit bottom by year’s end. 

Nationally, home prices are expected to remain flat over the next 12 months, with values reaching a bottom in late 2012 and falling approximately 0.4% from the first quarter of 2012 to the first period of 2013, Zillow said.  

“For people who have been waiting to time their home purchase close to market bottom, it’s time to start shopping,” said Zillow chief economist Dr. Stan Humphries. “When the bottom will hit will vary by market, and it’s nearly impossible to time a purchase exactly right. But home prices are not the only part of the equation. Buyers also should take into account the possibility that rising mortgage rates could offset any further home value declines that may occur.”

Fixed mortgage rates hovered near record lows this past week as the 15-year FRM plunged to a new record low of 3.13%, Freddie Mac said Thursday. 

The government-sponsored enterprise released its primary mortgage market survey showing the 30-year FRM averaging 3.88%, down from last week’s average of 3.90%. The same mortgage rate hit 4.88% last year. 

The 15-year FRM reached 3.13%, down from 3.17% a week earlier and 4.15% last year. 

In addition, the 5-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 2.81%, down from 2.83% a week earlier and 3.73% last year. 

The one-year Treasury-indexed ARM averaged 2.73%, up from 2.72% last week and 3.21% a year earlier. 

“With these historically low rates and declining house prices, the typical family had more than double the income needed to purchase a median-priced home in January, according to the National Association of Realtors Housing Affordability Index which registered the highest reading since records began in 1970,” said Frank Nothaft, vice president and chief economist at Freddie Mac.

“In fact, the Corelogic National Home Price Index fell for the sixth consecutive month in January to the lowest level since January 2003. This high level of affordability likely contributed to the recent two-week rise ending March 2 in mortgage applications for home purchases.”

Bankrate.com survey results show the 30-year, fixed-rate mortgage hitting 4.11%, up from 4.10% last week. 

Meanwhile, the 15-year, FRM hit 3.34%, down from 3.35%. 

In addition, the 5/1 ARM fell from 3.04% to 3.03% in the most recent Bankrate survey.

kpanchuk@housingwire.com

Well it’s been a long time coming, but it appears that the banking world, at least those at the helm of Wells Fargo, believe the worst is behind us and the downside is very minimal. Why do I say this? Wells Fargo is expanding their lending division to fund loans that DO NOT meet FNMA and FHLMC guidelines. For the last 5 years FNMA, FHLMC and FHA, have been the only source of financiong for real estate transactions. Last week they came out with the announcement that they are expanding into mortgage lending that will not be tied to those entities guidelines.

This is a huge move in the lending world. Someone had to make the first move. Soon there will be another enitity, or company to be created to offer additional sources of mortgage financing. It may be Wilbur Ross, John Paulson or any other conglomerate of wealthy individuals that know the mortgage space that may follow down the same path that is being blazed by Wells Fargo. It has been much needed and will create a floor under real estate prices and possibly create that initial snap back we will have in real estate prices at some time.

Here’s the story:

Wells Fargo ($31.03 0%) finalized a new division built to originate mortgages outside of Fannie Mae and Freddie Mac guidelines.

The bank promoted Brad Blackwell, formerly a sales manager in charge of West Coast operations, to lead the new business. He will work with Wells Fargo community banks, wealth brokerages and retirement groups, and the non-agency, jumbo and home equity loans will be kept on the Wells portfolio.

Blackwell will report to Mike Heid, the president of the Wells mortgage department.

“The market has changed and we are adapting with it to add more horsepower to help homeowners and homebuyers succeed financially,” Blackwell said in a statement.

The government continues to finance 95% of the mortgage market after credit froze during the crisis in 2007.

A Wells spokeswoman said the non-agency loans could potentially securitized in private-label bonds in the future, but there are no plans to “at this point.” The bank did not project how many new loans the new division plans to write.

Greg Gwizdz, formerly an East Coast sales manager, will lead the national consumer lending team. It will continue its traditional retail lending business.

Wells remains the nation’s largest mortgage lender. It originated $357 billion in new mortgages in 2011 more than double the $157 billionBank of America ($8.04 0%) wrote as the next largest lender.

There’s still a lot of work to be done. While the mortgage arena will not, and should not be as loose and ridiculous as it was in the first half of the 2000′s, it does need more flexibility to serve some future homeowners (and existing homeowners) who have had difficulty conforming to every guideline in the GSE’s manual. This move by Wells Fargo and hopefully additional banks will allow more people to participate in purchasing and refinancing.  Its a great move in the right direction.

Image via Wikipedia

WOW! I ran a few calculations of the real estate activity so far since Thanksgiving Day and I was a little surprised.

110 Properties went pending collectively in the 11 days since Thanksgiving 2011 in the cities of Livermore, Pleasanton, Dublin, San Ramon and Danville.

In the same period after the Thanksgiving Day holiday in 2010, 83 properties had gone pending.

This year we’ve seen 27  more homes than last year go pending in the first 11 days, which equates to a 32% increase in PENDING SALES over 2010′s numbers. That’s a large number and is difficult to ignore.

Why has this happened?

There can be various reasons as to why this is happening. Among them would be :

People are feeling better about their financial condition

People feel we’re getting closer to the bottom of the real estate market.

People may feel like we have hit the bottom of this tough real estate market.

Investors are finding good value.

Sellers are willing to discount their asking prices to make a sale happen.

You might be wondering what is the break down of these pending sales. How many are the old fashion regular sale and how many are not.

Type of Transaction   2010      2011

Regular Sale                36%        36%

Short Sale                    35%        43%

Bank Owned                29%        21%

Ironically, the regular sales are pending at the same pace as in 2010, but you can see that the number of homes that are classified as a “Short Sale”, or where the home seller owes more than the offer, has increased, while the Bank Owned properties has decreased. Overall, it is some good news for home owners and their single largest asset.

Where do we go from here?

Now this is great news, but will they turn into closed transactions.? That’s the bar that all things in real estate are compared to. All of them will not close, of course, but a foundation for 2012 may be forming with buyers making offers. Like I’ve mentioned before, the holiday months are not the best time to be a seller, but there are still buyers out there, and they’re  making offers. And, from these numbers, there are more serious buyers this year than last year! This should be good news as we go into the spring buying season of 2012.

If you would like some additional information about homes available in the area, email me or give me a call.

More promising news for the real estate market. While it will likely not create a rebound effect for real estate and send  prices soaring, the case is being made that we are closing in on the bottom of the market. Great news for those that are concerned about further price erosion in the real estate market. A bottom is being formed.

Barclays Capital (BCS: 11.92 +0.51%) analyst Stephen Kim predicts a housing recovery buoyed by improving jobs numbers and the fact prices for nondistressed homes will have stabilized without government support.

“In the absence of a government homebuyer incentives, prices for non-distressed home sales have stabilized for almost a year,” Kim said. “This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of nondistressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”

Barclays said recent economic data — including higher job creation in November, housing starts and improved homebuyer traffic — point to some improvement potential in the sector.

In mid-2010, the federal homebuyer tax credit expired, leaving the housing market without training wheels for the first time since the 2008 economic meltdown. Yet, prices in some housing markets remained stable on the back end.

With its new outlook in the market, Barclays upgraded D.R. Horton‘s (DHI: 12.61 +6.06%) stock to buy and raised price targets for D.R. Horton, Lennar (LEN: 19.28+4.73%), Toll Brothers (TOL: 20.74 +2.52%) andMeritage Homes (MTH: 22.69 +3.04%).

At the same time, the investment bank raised its 2012 earnings-per-share estimates for D.R. Horton, Lennar, Meritage Homes, Pulte (PHM: 6.39 +3.73%) and Toll Brothers, while lowering its estimates for KB Home (KBH: 7.89 -0.63%).

“Thus, the key to timing housing’s recovery depends primarily on when these first-time buyers decide it is safe to buy a house,” Kim concluded.

Pending home sales soared more than 10% in October and remain above year-ago levels, in a hopeful sign for the nation’s housing market, according to the National Association of Realtors.

The rest of the story… NAR Pending home sales surge in October

Here’s the latest news on the state of the real estate market from the UCLA Anderson economists. While this is encouraging news I have to temper these expectations a bit. While I certainly don’t have all the data they have I am more conservative with my expectations for the recovery of real estate prices. Nonetheless, this is just another indication that we are getting closer to the bottom of the real estate price trough.

Take a look at the video and let me know what you think.

Remember, this is a great time to be a buyer. Sellers that currently have their home on the market during this time of the year are selling because they really need to sell. There are deals to be made. Let me know if you need some help identifying those deals either as an owner occpied home or as an investment property that creates great cash flow.

Have a great day,

JIM

Federal Reserve Chairman Ben Bernanke said the central bank may consider purchasing more mortgage-backed securities to help further stabilize the economy and the troubled housing sector if growth is insufficient in coming quarters.

Speaking at a press conference following the most recent monetary policy decision from the Federal Open Market Committee, Bernanke said the Fed has taken the aggressive actions necessary to try and stimulate growth.

The central bank began buying longer-term Treasurys in early October to supplement the reinvesting of principal payments from mortgage-backed securities back into agency MBS that began in late 2010.

Bernanke said the FOMC noticed growth so far in the second half of 2011 has been “less strong” than committee members projected a few months ago.

He said the market volatility created by the European debt crisis continues to drag on any economic recovery stateside, and shrinking consumer confidence also bodes poorly for the struggling U.S. economy.

In late September, Republicans lawmakers sent Bernanke a letter asking him to persuade the FOMC to not initiate another economic stimulus package similar to other quantitative easing efforts.

The Fed chairman said “politics is politics” and the central bank tries to stay non-partisian and out of the debate, as it’s important it stay free from political pressures to meet its dual mandate.

He also questioned the validity of some criticisms of the actions the central bank has taken since the American financial crisis began.

Bernanke said he’s sympathetic with some of the sentiment of the Occupy Wall Street protest, as he, too, is “dissatisfied with the state of the economy.” But he wonders if some of the concerns about the Fed’s role in the recession and lagging recovery is “based on misperceptions.”

The Fed “had to step in and help stabilize the financial system in 2008″ as large banks and investment firms crumbled, he said.

In conjunction with Bernanke’s speech, the Fed released economic projections for gross domestic product growth, unemployment and personal consumption expenditures. FOMC members now project 2011 real GDP growth of 1.6% to 1.7% for 2011, down from prior estimates of 2.7% to 2.9%. The economy expanded at an annual rate of 2.5% for the third quarter, which was up from growth of 1.3% in the second quarter.

The committee predicts GDP growth of 2.5% to 2.9% next year, with growth of 3% to 3.5% in 2013 and between 3% and 3.9% the following year. The estimates for 2012 and 2013 are down from previous projections.

Bernanke said the Fed expects the unemployment rate to decline to between 8.5% and 8.7% for the fourth quarter from 9.1% currently. On Friday, the Labor Department announces nonfarm payroll data for October and most analysts expect the rate to hover near 9% as it has for most of 2011.

The FOMC now forecasts an unemployment rate of 8.5% to 8.7% for 2012 and 7.8% to 8.2% for 2013, higher than prior estimates of 7.8% to 8.2% for next year and 7% to 7.5% the following year.

Bernanke said unemployment may drop to between 6.8% and 7.7% by the fourth quarter of 2014, although that will still be “too high.”