Monday, December 26, 2011

Real Estate Outlook: Existing-Home Sales Rise

Mortgage debt is up. Defaults, which had been on the decline, were also on the rise in November. This latest report comes from Standard & Poor’s/Experian indices.

The default rate had dropped to 2.08 percent this October from 3.06 at the same time last year. Second mortgage defaults were also down, dropping to 1.29 percent from 1.8 percent a year earlier.

Yet, defaults were up for the month of November for five major metro markets that are tracked.

Los Angeles led the pack at a November increase to 2.53 percent from 2.15 the month earlier.

The Miami market saw a default rise to 4.47 from 4.16 percent in October.

"These are two markets where we have seen some recent weakness in other housing statistics," said David Blitzer, managing director and chairman of the index committee for S&P Indices. "Again, while there may be some cause for concern if this upward trend continues. Other recent housing statistics point to the same relative weakness, so these statistics align with the overall current picture of the economy." The year over year decline in mortgage defaults currently stands at around 34%.

"Nationally, consumers continue to gradually improve their financial condition," said Blitzer. "Debt-service ratios, the proportion of disposable income that goes to paying debt, continues to decline."

With these improved financial conditions, consumers are returning to the market. Existing-home sales rose in November according to the National Association of Realtors. These sales rose 4.0 percent from October. Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. "Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 - a genuine sustained sales recovery appears to be developing," he said. "We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans."

Sales could be higher if not for contract cancellations that still plague the market. Cancellations are the result of changes in employment status, failed home inspections, decline mortgage applications, and appraisals coming in below contract prices.

Regionally, the largest rise was seen in the Northeast, where existing sales rose 9.8 percent. This is 7.7 percent above year ago levels.

The Midwest saw a 4.3 percent rise, gaining double-digits of 15.7 percent over last year.

The West rose 3.6 percent in November and the South was up 2.4 percent.

Keeping pace with the good news of existing-home sale rises, the latest U.S. Commerce Department reports that the production of new single-family homes was up 9.3 percent in November.

"While we still have a long way to go back to normal, the latest numbers are one more indication that housing is slowly turning the corner," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "In scattered markets across the country, buyers who have long sat on the sidelines are starting to take advantage of today’s very attractive prices and interest rates, while others are making the move to a new apartment. This nascent trend would be stronger if not for the very restrictive lending environment that continues for both building and buying new homes."

Published: December 26, 2011

Source: Carla Hill Realty Times

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