The end is not yet in sight. The housing market continues to be down and it may be awhile before it picks up steam again. According to the RPX monthly housing report by New York-based Radar Logic, composite prices in the 25 metropolitan areas in August fell to 0.8 percent, the largest dip recorded for the first half of the year since the 2008 bust. Transaction count in the 25 metropolitan areas slipped 5.2 percent in August. On a year-to-year basis, home prices were down 4.7 percent.
“We continue to see the negative effects of the supply/demand imbalance in housing,“ said Michael Feder, president and CEO of Radar Logic, in a press release. Industry experts blame unemployment, strict lending practices, foreclosures and anxiety among first-time buyers for the gloomy show. It could be awhile before the market gathers momentum again.
NAR Offers Recommendations to Officials
The National Association of Realtors® shot off a letter to President Obama, the Congress and administration officials, outlining recommendations, which they believe would help jump-start the housing market. “It’s no secret our nation’s housing markets remain depressed and continue to suffer,” the letter said. “While no one thought the crisis would carry on long, markets are slowly recovering and are in need of immediate policy solutions to address the myriad challenges in order to stabilize housing and support an economic recovery.”
The proposal urges politicians to oppose measures that would jeopardise the industry’s recovery and to make housing the top priority in the domestic agenda. Among the recommendations are making the Qualified Residential Mortgage rule less stringent and restoration of higher conforming loan limits supported by the Federal Housing Administration and the government-sponsored enterprises, and preserving home ownership tax benefits such as the mortgage interest reduction.
Other suggestions include aggressive steps toward loan modifications and approval of short sales to reduce foreclosures, changes to rehabilitation and investor financing programs. NAR is also asking the federal government to continue its active role in the secondary mortgage market. Would lawmakers pay heed to the advice? Keep an eye on this space.
New Home Sales Rise in September
Sales of new single-family homes rose at their fastest pace in five months in September, according to Reuters. But prices continue to drop, the Commerce Department report cited by Reuters said. When seasonally adjusted, sales jumped 5.7 percent to a 313,000-unit annual rate. Midwest numbers show a sharp decline, but the market had a stellar performance in the South. Analysts polled by Reuters and Bloomberg were expecting sales at a 300,000-unit rate. The increase in volume is a good sign, but builders have yet to pull out the champagne.
The median sale price on a new home slipped 3.1 percent last month, the lowest since October 2010. On a year-to-year basis median price was down 10.4 percent in September, the report said. “Up slightly is faint praise,” said Robert Dye, chief economist at Comerica Inc. in Dallas, to Bloomberg. “We’re still under the black cloud of high foreclosures and depressed prices. We’re still bouncing along the bottom in terms of new homes.”
Home Prices Dived in August
According to the Federal Housing Finance Agency, home prices slid 4 percent in August. Poor showing of a 7.6 percent dip in the Western regions, including Colorado and Arizona, contributed to the negative numbers. California followed close behind with a 6.8 percent slump in prices. When compared to the glory days of the industry in 2007, prices are down 19 percent, according to a Bloomberg story. The dismal home prices have increased the anxiety for consumers already jittery about the economy and the housing market. According to Bloomberg, the federal government said this week that it will allow homeowners to refinance their mortgages regardless of declining values on their homes. It’s a good move, but there will be more intervention needed to help the market recover.
A separate report by the National Association of Realtors® released this week showed that the number of contracts to buy existing homes fell 4.6 percent. Lower prices and borrowing costs failed to support demand, according to a Bloomberg story. Economists were expecting a 0.4 percent gain.
“Sales continue to bump along the bottom,” Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, told Bloomberg “A meaningful recovery in sales will likely not occur until the mountain of foreclosures and pending foreclosures clears.”