Keeping Current Newsletter - March 2009
Keeping Current Newsletter by Diane Moore Steelman, REALTOR, SRS NATIONAL It's all about PRICING! This is the first time in our history that we have seen a national pricing decline. To see the changes in pricing from first quarter to fourth quarter 2008, state by state, click here to go to the OFHEO Reports map. In states where prices have declined the most, sales are up. An estimated 29,458 new and resale houses and condos were sold in California last month. That was up 53.9% from January 2008. Sales have increased on a year-over-year basis for the last seven months. (Source: MDA DataQuick Information Systems 2/19/09) As prices come down, homes become more affordable. The National Association of Realtors defines the affordability index as the % of income necessary to qualify for a conventional loan covering 80% of a median-priced existing single-family home. The index rose to an all-time high of 158.8 in December. In July 2006, the index bottomed at 99. The percent of homes sold which were affordable to families earning the national median income has increased dramatically in the last year. Click here to see the Nationwide Housing Affordability table. There is a lot of pent up demand from those who have to relocate with jobs, want to move up, desire a change of school for their children, etc. Credit Suisse's index of home-shopping traffic jumped to 36.5 in January from 25.3 in December. However, buyers need to think they are getting a great deal before moving ahead with a purchase. (Source: Wall Street Journal 2/6/09) Mortgage Rates Foreclosures The first tier of foreclosures was subprime, then option ARMs and now jumbo prime. Over the last 12 months, the rate of deterioration in jumbo prime has exceeded all other products. Jumbo and option ARMs represent only 6% of outstanding mortgages based on loan count, but 17% based on unpaid principal balance. (Source: Lender Processing Services 2/09) Obviously, job losses are going to affect the number of foreclosures. The increase in job losses has been much more dramatic in the current recession than the ones in 1990 and 2001. Click here to view a Job Losses graph. Stimulus Package 1. The Home Affordable Refinance Program. Under this program, eligible borrowers may refinance loans that Fannie Mae or Freddie Mac own or guarantee. Homeowner-occupants must be current in payments and have loan to value ratios above 80% but not more than 105%. 2. The Home Affordable Modification Program. This is a $75 billion program with lender, investor and borrower incentives to make it work. The program is limited to homeowner-occupants who are at risk of default or are already in default and have loans below $729,750. 3. More Support for the GSEs. The GSEs, Fannie Mae & Freddie Mac, will receive a doubling of potential Treasury investment from $100 to $200 billion for each GSE to maintain their positive net worth. The plan also raised the cap on mortgages that the GSEs may hold in their portfolios by $50 to $900 billion. To see a more complete explanation of the Package go to: Stan Humphries, VP of data and analytics says that not as many people as you would expect will be helped in overheated markets. (Source: The Wall Street Journal 2/24/09) According to Ian Shepherdson, chief US economist at High Frequency Economics in Valhalia, New York, "The massive inventory overhang in the market and the surge in foreclosures mean prices will continue to fall rapidly. The administration's rescue plan will, in time, slow the rate of decline, but it won't happen immediately." (Source: Bloomberg.com 2/24/09) NORTH CAROLINA & WILMINGTON The Pollina Corporate Top 10 Pro-Business States study examines 29 factors relative to a state's efforts to be pro-business. For 2008, North Carolina was listed as #1 for being pro-business. Builder, in conjunction with Hanley Wood Market Intelligence, has published its list of the markets with the most potential. When the housing market stages its official recovery, the markets listed will likely lead the parade. Wilmington, NC, came in 14th in the list of markets with the most potential. NC State economist, Mike Walden, feels that the state has done well in transforming its economy to one featuring information technology, chemical products, food processing, transportation and banking. However, 20% of the state's economy comes from manufacturing compared to 12% nationally. This helped NC to grow faster during the good years, but sink lower during the recession. Manufacturing produces goods that consumers will postpone. But on the upside, when the recession is over, the pent up demand will cause manufacturing to take off. (Source: Star News 2/19/09) John Hinnant, executive director of Wilmington Downtown, Inc. says that, despite the slowdown, sales grew in downtown in 2008. The number of businesses located within a half-mile radius of Market and Front Streets, grew to 177 in 2008 from 130 in 2007. Retail sales for 2008 increased to $76.5 million from 2007's $53.2 million. (Source: Greater Wilmington Business Journal 3/6-19/09) MLS Statistics Pending: In the first 60 days of 2009, there were 432 closings and another 500 properties put under contract. Homes put under contract were up 14% in February over January. The pending index (under contract) has started to rise from 597 in December to the low 700s today. Listing inventory: The current listing inventory has a 99 unit increase from last month and about 180 units down from March 2008. There are 5,504 single family homes for sale in the MLS. List Price: The average list price of $405,922 is down by $3,385 from February 2009. Monthly average sold price: The monthly average sold price, $230,864, is down 5.3% from February 2008 and a 10% decline from year end 2008. 2003 $186,137 Median sold price: The median sold price is down 9.1% from last month. In the rolling 12 months (Mar 08-Feb 09), the median is $200,000, about the same as two years ago. Monthly sold units: February saw an increase in sold homes of 49 units from January 2009. Market absorption rate: The number of homes sold in February, 240, divided by inventory, 5,504, gives us a 22.9 month supply (not seasonally adjusted over the year). List to sold ratio: February has a 93.2% list to sold ratio. Seller concessions: We had 27.5% of sold properties report a sales concession for February. This is the highest since a 28% rate for March 2008. Days on market: The average days on market was about the same as last month ? 135 days. CAROLINA AND KURE BEACH There are currently 610 single family homes for sale, an 18 unit increase over February. The average list price is $474,896, a decrease of 1.6% over February. In February, there were 16 homes sold, divided by the homes available, leaving a 38 month supply. The average sold price for February was $320,344, compared to February 2008 of $347,200. Looking at the rolling 12 months, the average sold price has dipped from $415,797 to a current $358,898, a decrease of 13.7%. (Source: MLS Report, data pulled March 14, 2009)
There are still those who feel that their house is still holding its value or not decreasing as rapidly as other homes. Almost half of homeowners think their houses should be priced 10-20 % higher than their sales agents have recommended, according to a nationwide survey by HomeGain, Inc. However, a look at five indices demonstrates that home prices are continuing to fall. Click here to view the Prices ? Year Over Year table. Prices declined in 23 of 26 markets during January. A 10-city Composite Index was down 2.1% during the last month and 2.4% over the most recent three month period. This represents a substantial acceleration in listing price declines versus December, when the index fell just 0.4% for the one month period and 1.2% for the preceding three month period. (Source: Altos Research & Real IQ 2/9/09)
The rates are being kept artificially low by the Stimulus Plan and saw an 11 week decline. However, from January to February 26, 2009, they began to stabilize and creep up. Click here to see the 30 Year Fixed Mortgage Rates and click here for more Mortgage Rate information.
Nearly 61% of option ARMs originated in 2007 will eventually default, according to a recent analysis by Goldman Sachs, which assumed a further 10% decline in home prices. That compares with a 63% default rate for subprime loans originated in 2007. Goldman estimates more than half of all option ARMs outstanding will default. (Source: Wall Street Journal 2/6/09)
Here are the key elements of the Obama plan:
http://www.realtor.org/government_affairs/gapublic/homeowner_afford_stability_plan?lid=ronav0019
2004 $210,048
2005 $254,080
2006 $264,498
2007 $273,408
2008 $256,498