New Home Sales Tumble 11.2%

From LA Times.com:

An unexpected drop in new home sales for the month of January, plus a plunge in mortgage applications to the lowest level in nearly 13 years, have renewed fears of another decline in housing prices.

Economists said the 11.2% tumble from December in new home sales -- the third consecutive monthly drop announced by the Commerce Department -- indicates that Congress' extension of a home buyer's tax credit late last year appears to be having little or no effect on consumer sentiment.

Economists surveyed by Bloomberg News had expected January new home sales to climb.

New home sales make up a much smaller share of the buying activity than sales of previously occupied homes. But the data are carefully watched by economists because construction can give a boost to an economy heading out of recession.

Analysts said the January numbers indicated that residential builders were probably in for a tough year as they continue to compete with steeply discounted bank-owned properties and consumers face depleted household incomes and heavy debt loads.

Read more here

New US Home Sales Surge in December

According to new data from the commerce department, home sales in the US jumped by 17.5% last month. This number shattered expectations of the modest 3.5% increase that many economists had expected. Hooray for more signs of recovery, now let’s keep it going!

From Yahoo! News:

The Commerce Department said sales jumped 17.5 percent to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November.

Economists polled by Reuters had forecast new home sales rising to a 300,000-unit pace in December from a previously reported 290,000 unit rate.

Compared to December last year, sales were down 7.6 percent. Overall 2010 sales dropped 14.4 percent to a record 321,000-unit rate.

Data last week showed a surge in sales of previously owned home in December, but progress could be frustrated by a glut of homes from an unrelenting wave of foreclosures. The housing market has remained on the margins even as the broader economy shows signs of gaining strength and broadening out.

Read More at Yahoo! News

Sales of U.S. Previously Owned Homes Probably Rose in November

According to new data, the sales of existing homes may have risen in the month of November. Good news for the housing industry, but we’re still a long way from those pre-recession numbers.

Bloomberg.com reports:

Purchases increased to a 4.75 million annual rate, up 7.1 percent from October, according to the median of 70 estimates in a Bloomberg News survey. Another report may show the U.S. economy expanded at a faster pace in the third quarter than previously estimated.

Lower prices and mortgage rates have made houses more affordable, which may keep supporting demand after the end of a government tax credit caused the industry to slump. At the same time, unemployment hovering near 10 percent is a reminder it will take years for housing to regain pre-recession levels.

“The earliest I see sound improvement is 2012,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. Even so, she said, “we’re going to see some gradual improvement in the demand measures for housing.”

The National Association of Realtors is scheduled to release the sales figures at 10 a.m. in Washington. Survey estimates ranged from 4.25 million to 5.2 million.

A tax credit worth as much as $8,000 boosted sales to a two-year high 6.49 million pace in November 2009, when the incentive was originally due to expire.

Read more here

Will Rising Mortgage Rates Spur Home Sales?

The historically low mortgage rates we’ve seen over the last year or so haven’t done much to spur home sales, but raising the rates might? Seems strange, but some experts are predicting that increasing rates might just push Americans into buying.

According to CNN.com, rates surged to a six-month high this past week after President Barack Obama and congressional Republicans agreed to extend tax cuts for two years.

Though the deal is still being debated in Washington, financial markets interpreted the development as likely to accelerate the economic recovery but also swell the budget deficit. Though the yield on the benchmark 10-year bond has retreated some, it has still increased 21 basis points this week.

Because yields on Treasuries, especially the 10-year bond, largely influence mortgage rates, borrowing costs for mortgages have suddenly gone up. The average rate for a 30-year fix loan increased to 4.61% in the week ended Thursday from 4.46% the previous week, following a fourth week of increases, according to Freddie Mac (FMCC). The average 15-year rate rose to 3.96% from 3.81%. These rates are the highest they've been since June.

This follows a period of historically low mortgage rates. But even though borrowing costs for new home loans are cheap, they haven't exactly spurred the kind of home buying that one would expect. What's more, lower rates haven't spawned much refinancing, since many home owners are stuck holding property valued at less than what they owe on their mortgages. The latest Case Schiller Index reported that home prices nationwide declined 2% during the three months ending in September, after rising 2.4% during the previous quarter. According to Zillow, home prices have lost $1.7 trillion in value in the past year.

Read more here

5 Signs the Economy is still Struggling

With the November elections just a few weeks away, some politicians want Americans to believe that the U.S. economy is recovering. However, according to a report from Rutgers University, over half of American taxpayers believe the economy has undergone a fundamental and lasting change. Yesterday, I posted this blog entry taking a look at some of the signs of economic recovery, however, not all signs are good. There are also plenty of reasons to still be concerned about the economy.

Auto Sales

We all know that the three main American automakers have been struggling for years. Despite federal funds, the companies are having ongoing problems. Some economists estimate that U.S. automakers must charge an additional $2,000 per vehicle because of labor costs, and high medical and retirement benefit expenses. With this additional overhead, it has become almost impossible for American automakers to stay competitive. Compared with August of 2009, auto sales have decreased by 21% over the past year, and between July and August of 2010, sales fell by 5%. These disappointing numbers have led many economists to call for another Cash-for-Clunkers program, or another type of financial incentive to purchase a new car.

Unemployment

It is impossible to ignore unemployment problem in this country, with thousands of jobs being lost every month. According to the Labor Department the economy lost 100,000 jobs in August, which increased the unemployment rate from 9.5% to 9.6%. The ongoing unemployment problems are commonly cited as the main delay in economic recovery, and although we might see seasonal job creation over the next few months, many experts predict that we will not see any significant employment gains until 2012.

Home sales

Earlier in the year the housing market was showing some signs of improvement, but after the housing credit expired in June, home sales decreased quickly. In July, home sales were down over 25% compared with July of 2009. To make matters worse, home values are also continuing to plummet. Experts are even predicting another 5 to 10% decline in house prices over the next few months. Fortunately, as Neil Irwin or the Washington Post explains, housing activity has already decreased so much that it would be hard for it to hurt future economic recovery. Between 2006 and 2009 home sales fell from 2.3 million annually to under 500,000. This sudden drop was a major strain on the economy, but even if construction levels decrease further it is very unlikely to have the same impact on our economy as the collapse between 2006 and 2009.

Local Double Dips

One of the largest fears about the U.S. economy is the possibility of a double-dip recession. Most economists agree that this is unlikely on the national level. However, many state and local governments are at a serious risk of slipping into a second, more severe recession. Several government agencies across the country are facing unbalanced budgets, and have turned to drastic tax increases to generate revenue. Many economists suggest that these tax hikes could have a negative impact as consumers are left with less money to spend in their local economy.

Bank Failures

Last month the Federal Deposit Insurance Corporation (FDIC) announced that 829 financial institutions (or 1/10th of the banks in this country) were on their problem list. These banks are on the edge of going under, and there have already been 118 bank failures this year. There were 140 total bank failures in 2009, and it does not look like this trend is going to stop anytime soon. The problems facing financial institutions in the U.S. has a significant impact on the overall economy. When banks are struggling lending becomes more difficult, between April and June loan and lease balances fell another 1.3%. Until businesses have easier access to credit, unemployment problems will persist and the economy will continue to struggle.

Tax Deal Fuels New-Home Sales

According to the Wall Street Journal, sales of homes soared last month with buyers rushing to take advantage of the expiring federal tax credit. On Wednesday the Commerce Department announced that sales of “new single-family homes rose 14.8% from the prior month to a seasonally adjusted annual rate of 504,000.”

Demand for new homes had also surged in March, when sales climbed 29.9% from the prior month. Sales in April were 47.8% higher than a year earlier.

The recent surge was likely the result of expiring government incentives, which provided an $8,000 tax credit for first-time buyers and a $6,500 credit for repeat homeowners. Contracts for those homes had to be signed by April 30. Buyers have to complete purchases by June 30.

The housing market is stabilizing after both sales and prices plummeted during the recession. Sales of existing homes, a far bigger number than newly built homes, jumped 7.6% in April, the National Association of Realtors said earlier this week.

Construction of new homes also is picking up. Starts for single-family homes rose 10.2% in April from March, the fourth-straight monthly rise, Commerce said earlier this month.

Continue reading at WJS.com…

Real Estate's New Problem: Not Enough Homes

From CNNMoney.com:

Can it be possible? Despite the housing bust and high foreclosure rates, in some areas real estate agents are complaining that they don't have enough homes to sell.

There is currently an eight-month supply of homes on the market -- meaning that, at the current sales pace, it would take eight months to run through the backlog.

That's still a lot compared to the six-month supply that is expected in a normal market, but it is much better than it was. In March, there were nearly 2% fewer homes on the market than there were a year ago, and 21.7% fewer than the record of 4.6 million in July 2008.

In some areas, supplies are even bidding-war tight. In Denver, for example, supply has fallen to 5.7 months from 6.2. In Phoenix it has declined to 4.5 from 5.2; and in San Francisco inventory has halved, to 3.2 months from 6.5 last March.

In California, almost all cities have a short supply of single-family homes. That's especially true in the lower-priced categories, according to Leslie Appleton-Young, chief economist for the California Association of Realtors.

Tax credit end not deterring US homebuyers

While the homebuyer’s tax credit certainly gave the real estate market a jump, according to a new survey, the end of the credit may not be an end to increased sales. Consumer confidence in the housing market has increased along with home prices, which as this Reuters article explains, are both a good sign for the future of real estate.

Among consumers shopping for homes, 65 percent said the end of the tax credits will have little or no effect on their interest in purchasing a home, according to the survey, which was conducted by Prudential Real Estate and Relocation Services, part of Prudential Financial (PRU.N).

But 90 percent of the consumers believe that the tax credits have helped both first-time home buyers and the U.S. housing market overall.

Eligible borrowers must sign contracts by April 30 and close on their loans by June 30 to qualify for the tax credits, which include $8,000 for first-time buyers and $6,500 for home owners buying a new residence.

Consumers remain unsure about the direction of the housing market, but are optimistic about real estate values, with 46 percent expecting prices in their area to increase over the next year. Just 12 percent expect prices to decline, the survey found.

Sales of New Homes Soar With Help of Tax Credit

According to Christine Hauser of the New York Times, the housing industry in this country is showing improvement largely because of the federal homebuyer tax credit. On Friday the Commerce Department announced that sales of new homes rose in March to their highest levels since last summer.

Over all, the sales of new single-family houses in March were up nearly 27 percent at a seasonally adjusted annual rate of 411,000 units, the Commerce Department reported. The increase, which was against a revised rate of 324,000 for February, exceeded expectations.

“In simple terms, housing is a bargain again, and buyers are responding,” Michael D. Larson, a real estate and interest rate analyst at Weiss Research, wrote in a research note. “That is unambiguously good news for the market going forward.”

On Thursday, the National Association of Realtors said that sales of previously owned homes had also exceeded expectations, rising 6.8 percent. The monthly rise in sales of new homes was the biggest since April 1963, when it was 31.2 percent, Mr. Larson said.

Economists said the figures suggested that buyers were taking advantage of an $8,000 government tax credit that was scheduled to expire at the end of the month.

But there were other factors beside the tax credit, like an increase in builder optimism and housing starts, that helped push sales higher. Mr. Larson said he expected to see continual improvement in construction activity.

Continue reading at NY Times.com…

New Home Sales Fall to Record Low

A government report released Wednesday showed that the sales of new homes at fell to a record low in February. It is believed to be the outcome from all of the foreclosed homes and a weak economy with high unemployment.

New-home sales fell 2.2% to a seasonally adjusted rate of 308,000 last month, compared to an upwardly revised annual rate of 315,000 in January, the Census Bureau said. What’s crazy is that “this is the lowest rate since the government began keeping records in 1963 and marked the fourth straight month of declines.”

Economists expected February sales to rise to an annual rate of 315,000. New-home sales were down 13% from February 2009. New-home sales fell in every region of the United States, except the West region, which saw a 20.8% jump in new-home sales. The Northeast was hardest hit, with a 20% decline in February. Most likely effected by weather.

A stubborn job market is what is said to of kept pressure on the housing market. The U.S. unemployment rate stood at 9.7% last month, after unexpectedly falling in January, suggesting that the economic recovery could be gaining steam. But, "the economy, while recovering, is still not full speed ahead," said Hoffman.

In regards to new homes, the Census Bureau estimated that 236,000 new homes hit the market in February.

In November, Congress extended and expanded an $8,000 tax credit for first-time home buyers, which also allows some repeat buyers to qualify for a $6,500 credit. Buyers have until April 30 to qualify for the credit.
New-home sales saw a surge of activity when home buyers thought the November tax credit would expire, but retreated after the extension.

Although February's data was "a bit disappointing," Hoffman says the real test will come during peak home buying season in the spring.

"The real story will be if no one knocks at the door for a new-home in an environment of record low mortgage rates, a home buyer's tax credit and a recovering economy," said Hoffman. "If they don't, then it's lights out." Read the full article here: New-home sales fall to record low from CNNMoney.com.

Battle on the Home Front

The ABA Journal put together an-depth piece on families and individuals dealing with foreclosure, bankruptcy, and debt settlement because of the recession. The article starts by telling the story of Paul Vachon and his wife, who were forced both file for bankruptcy and let their house foreclose without any other options.

For 12 years, Paul Vachon lived with his wife and son in a four-bedroom bungalow in one of the nicer suburbs of Detroit. And he had a good job, selling higher-end furniture.

Then, in mid-2007, the U.S. economy collapsed. Detroit was hit particularly hard, as was Vachon’s business. “People in the area, if they are worried about the future of the auto industry,” he says, “are much less likely to spend $700 to $800 for a bedroom set.”

Soon Vachon, 50, had trouble paying his bills. “I was falling behind each month,” he says. “My wife and I were cutting back on our expenses, but I had to keep going into my savings to pay my mortgage. Then my savings ran out.” He says the bank started sending threatening letters after he missed his mortgage payment in February 2008.

Vachon says he couldn’t get the bank to seriously consider a modification of his mortgage loan, and he couldn’t ask any other lenders to refinance his mortgage because the market value of his house had plummeted to less than the value of his home loan.

In the face of their mounting finan­cial burdens, Vachon and his wife, Sheryl, filed for bankruptcy in February. It was a bitter pill.

Continue reading at ABA Journal.com…

Report on Home Sales Gives Wall Street a Push

Some good news for the housing industry arrived today with the announcement that sales of previously occupied homes jumped 3.6 percent last month. According to the National Association of Realtors, “sales rose at a seasonally adjusted annual rate of 4.89 million last month, above the 4.84 million units analysts had been expecting. That further encouraged market hopes that housing, and in turn the overall economy, are recovering.”

Due to the good news on the housing front, the U.S. stock market also saw some improvements. According to the New York Times the down topped 9,000 today, the first time it has gone so high since January 2^nd. I’ve included a clip of their story on the topic below.

The Dow Jones industrial average was up 148 points or 1.7 percent. The Dow last closed above 9,000 on Jan. 2. The index had been up 24 points ahead of the report. The Standard & Poor’s 500-stock index gained 16 points, or 1.7 percent, while the Nasdaq was 32 points, or 1.7 percent, higher.

Stocks had already been rising after another batch of generally positive earnings reports.

Earlier, the Ford Motor Company surprised the market with a second-quarter profit of $2.3 billion, due mainly to a huge gain for debt reduction, while the drug maker Wyeth, the cigarette maker Philip Morris International and the candy maker Hershey all raised their profit forecasts.

A report from UPS, however, was less upbeat. The world’s largest shipping carrier said its second-quarter profit plunged 49 percent as sales tumbled. The company also issued third-quarter guidance below analysts’ forecast.

Also on Thursday, the government reported a bigger-than-expected rise in new jobless claims, though the report was distorted by the timing of auto plant shutdowns.

The Labor Department said the number of new claims for unemployment benefits rose by 30,000 last week to a seasonally adjusted 554,000 — above analysts’ estimate of 550,000.

However, total unemployment benefit rolls fell to the lowest level since mid-April.

Continue reading here…