The drop means the number of people losing their homes will start to fall. But some pain from the crisis is sure to persist. Because millions of people are already in foreclosure, deeply discounted houses will put pressure on home prices for years.

“Housing is on a path to recovery,” said Mike Larson, a real estate analyst with Weiss Research. “It’s going to be a very long, gradual process.”

In high-foreclosure cities like Las Vegas, Phoenix and Miami, homes have lost roughly half their values from their peaks. But a report Friday from the Mortgage Bankers Association showed Nevada, Arizona and Florida had some of the biggest declines in new delinquencies.

The figures probably mark “the beginning of the end” of the crisis, said Jay Brinkmann, the trade group’s chief economist.

However, more than 15 percent of homeowners with a mortgage have missed at least one payment or are in foreclosure, a record. Worse, nearly half of all delinquent borrowers were at least three months behind on their payments, up from a typical level of less than 20 percent.

“The bad news is that we still have a big problem,” Brinkmann said. “The good news is it looks like it may not get much bigger.”

That’s because the percentage of borrowers who missed just one payment on their home loans fell to 3.6 percent in the October-to-December quarter from 3.8 percent in the third quarter, according to the Mortgage Bankers Association. That decline was even more surprising because delinquencies usually rise at that time of year due to higher heating bills and holiday spending.

In another encouraging sign, the number of borrowers who had missed at least one payment but were not yet in foreclosure also fell for the first time since the beginning of 2007.

Banks are delaying the foreclosure process, traditionally between four and six months, as they evaluate borrowers for help under the Obama administration’s $75 billion mortgage-relief effort. It lowers borrowers payments to as low as 2 percent for five years and extends loan terms to as long as 40 years.

But experts warn that hundreds of thousands of borrowers will not be eligible or will not complete the process. So far, only 116,300 borrowers out of 1 million who enrolled have had the terms of their mortgages changed permanently.

Despite the government’s efforts, there may be 6 million foreclosed homes that are put on the market over the next three years, according to Barclays Capital.

Timing is key. If banks unload them suddenly, “it will be much more detrimental to the housing recovery than if it’s a slow, gradual bleed,” said Michelle Meyer, a Barclays economist.

On Friday, Obama announced that housing agencies in the five hardest-hit states of Arizona, California, Florida, Michigan and Nevada will receive $1.5 billion in financial rescue money.

It will go to local programs to help unemployed homeowners, “under water” borrowers who owe more than their home is worth, or to give lenders incentives to assist borrowers with second mortgages. The programs will need to be approved by the Treasury Department.

“Government alone can’t solve this problem,” Obama said. “But government can make a difference.”

In a briefing with reporters, administration officials acknowledged that the effort was just a small one. But they said it could help develop broader national solutions. “What we’re trying to do here is foster innovation,” said Herbert Allison, an assistant Treasury secretary.

Sarasota real estate market remains hot as temperatures cool

The Sarasota real estate market remained hot in November 2009 with overall sales nearly 86 percent higher than November 2008.  Total sales stood at 578 in November, mirroring last month’s total of 574 and much higher than the 311 sales reported in November 2008. The breakdown was 417 single family homes and 161 condos sold last month.
 
The fall has proven to be a busy one for many local Realtors®, and the trend doesn’t seem to be slowing down. Pending sales stood at 793 in November, just below last month’s total of 839, and far higher than last November, when only 504 pendings were reported. The statistic is a strong indicator for the next two or three months of sales, as pending sales are an indicator of current buyer activity. Some experts had predicted pending sales might slow because of the uncertainty over the extension of the first-time homebuyer’s tax credit. But that fear has proven unfounded in the Sarasota market.

 The tax credit was extended and expanded to include many other homebuyers on Nov. 6, so the home buying sales rush could easily continue through the season and the first quarter of 2010. The recent statistics continue to point to a local market in a prolonged recovery period.
 
The median sale prices for single family homes and condominiums have apparently stabilized after the extended drop experienced in 2008. The median sale price for single family homes actually jumped by approximately 6 percent to $162,500 from October’s level of $151,000. The median was only 4.4 percent below the November 2008 median sale price of $170,000.
 
The condominium median prices continue to see-saw, dropping to $178,750 in November after rising to $220,000 in October. In September 2009, the median was only $162,500. In November 2008, the median sale price was $195,000, which is very near the median condominium sale price for the 11 months of 2009 ($198,500).
 
Bank-owned property sales and short sales are still accounting for almost half of the single-family home sales and a third of the condo sales in November, and still represent the biggest factor in the overall lower sale prices. For normal arm’s length sales the median sale prices are almost double the figures for the distressed properties.
 
“We are experiencing a very active real estate market during the early seasonal months, when our northern visitors and winter residents return,” said Bill Geller, 2009 SAR President. “Even during these times of higher unemployment and slower national economic activity, it’s very encouraging to see that the Sarasota area remains an attractive place to purchase a home. The statistical trends indicate the market is returning to health. Higher sales and pending sales, stabilizing prices, lower inventories – all of these numbers point to a return to a vibrant real estate market.”
 
While the inventory level rose slightly in November, from 6,226 to 6,261 properties on the market, it is still at the lowest level since late summer of 2005 and the years prior to the boom period from 2003 – 2005.
 
The “months of inventory” – the number of months it would take to sell all the available properties at the current sales rate – dropped to 14.6 months for condos. That’s the lowest figure in the past three years, and far lower than the 40.5 months reported in November 2008. The months of inventory is now 9.4 months for single family homes, slightly higher than October’s 9.3 months, but far lower than last year’s figure of 27.6 months. A figure of 6 months is considered to be a market in equilibrium between buyers and sellers.

For Assistance with Purchasing or Selling a Home, Contact Justin Shirley @ 941-448-4872

Fla.: Existing home, condo sales up in November

ORLANDO – Dec. 22, 2009 – Florida’s existing home sales rose in November, marking 15 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.

Existing home sales rose 61 percent last month with a total of 14,026 homes sold statewide compared to 8,694 homes sold in November 2008, according to Florida Realtors. Statewide sales of existing condos increased 111 percent last month compared to November 2008’s sales figure.

For the second month in a row, all of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales and higher condo sales in November. A majority of the state’s MSAs have reported increased sales for 17 consecutive months.

“The extended and expanded federal homebuyer tax credit will continue the positive momentum of the housing sector’s recovery – people will want to take advantage of this incredible, not-to-be-missed opportunity to buy a home of their own in Florida,” says 2009 Florida Realtors President Cynthia Shelton, CCIM, CRE, a broker and director of investment sales with Colliers Arnold in Orlando.

“For 15 months now, statewide sales of existing single-family homes in Florida have increased each month compared to the year-ago figures,” Shelton says. “The continued, gradual absorption of housing inventory will help stabilize home prices. National research notes that housing affordability is at its peak and the highest on record: Along with still-low mortgage rates, it means that the buying power of a typical family has never been better.”

Florida’s median sales price for existing homes last month was $139,000; a year ago, it was $158,200 for a 12 percent decrease. Housing industry analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in October 2009 was $173,100, down 6.8 percent from a year earlier, according to NAR. In California, the statewide median resales price was $297,500 in October; in Massachusetts, it was $287,000; in Maryland, it was $250,210; and in New York, it was $209,900.

According to NAR’s latest industry outlook, home sales are experiencing a pendulum upswing. “Keep in mind that housing had been underperforming over most of the past year,” said NAR Chief Economist Lawrence Yun. “The tax credit is helping unleash pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future. In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could register normal healthy levels.”

In Florida’s year-to-year comparison for condos, 4,889 units sold statewide last month compared to 2,320 units in November 2008 for an increase of 111 percent. The statewide existing condo median sales price last month was $104,400; in November 2008 it was $131,400 for a 21 percent decrease. The national median existing condo price was $172,900 in October 2009, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 4.88 percent last month, a significant drop from the average rate of 6.09 percent in November 2008, according to Freddie Mac. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s smaller markets, the Tallahassee MSA reported a total of 174 homes sold in November compared to 100 homes a year earlier for a 74 percent increase. The market’s existing home median sales price last month was $162,000; a year ago it was $170,00 for a 5 percent decrease. A total of 5 condos sold in the MSA in November, up 150 percent over the 2 units sold in November 2008. The existing condo median price last month was $110,000; a year earlier, it was $95,000 for an increase of 16 percent.

© 2009 Florida Realtors®

(Foreclosures Fall.. And Florida Looks like this.. Life is Good & Getting Better)

Foreclosure filings fall 8% in November

WASHINGTON (AP) – Dec. 10, 2009 – The number of homeowners on the brink of foreclosure fell in November, the fourth straight monthly decline, as mortgage companies evaluated whether borrowers were eligible for help.

Nearly 307,000 households, or one in every 417 homes, received a foreclosure-related notice in November, down 8 percent from a month earlier, RealtyTrac Inc. said Thursday. Banks repossessed about 77,000 homes last month, down slightly from October.

Millions of borrowers are still being evaluated for the Obama administration’s foreclosure prevention effort. States are also trying to delay the foreclosure process, temporarily lowering foreclosure numbers.

But the foreclosure crisis is likely to get worse before it gets better.

“We don’t really believe the underlying problems have been resolved,” said Rick Sharga, senior vice president at the Irvine, Calif.-based foreclosure listing service. Many borrowers, he said, “simply aren’t going to qualify” for help.

Foreclosure filings were still up 18 percent from a year ago, and a new wave is expected next year as unemployment remains high and borrowers fall out of loan modification programs.

Nevada posted the nation’s highest foreclosure rate, followed by Florida, California, Arizona and Idaho. Rounding out the top 10 were Michigan, Illinois, Utah, Maryland and New Jersey.

Among cities, Merced, Calif. had the highest rate, with one in 83 homes receiving a foreclosure filing. It was followed by fellow California cities Stockton and Modesto, and Cape-Coral-Fort Myers, Fla.

Las Vegas, which had been No. 1 on that list for four-straight months, fell to No. 5. Nevada recently adopted a program that requires mediation before banks can seize a property.

Nationwide, a report Wednesday showed only about 10,000 homeowners received permanent loan modifications this fall under the Obama administration’s mortgage relief plan, more evidence of serious failings in the government’s effort.

Elizabeth Warren, chair of a watchdog panel, told reporters that the program is “not working” and that it had failed to make a dent in the record level of foreclosures. More than 14 percent of homeowners with a mortgage are either late on their payments or in foreclosure, and that number is expected to keep rising as unemployment remains stubbornly high.

The Treasury Department is expected to release updated figures Thursday, but data through October showed that fewer than 5 percent of homeowners who completed the trial periods had their mortgage payments permanently lowered to more affordable levels.

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete the required paperwork, including proof of income and a hardship letter.

Copyright © 2009 The Associated Press, Alan Zibel, AP real estate writer

WASHINGTON (AP) – Dec. 16, 2009 – Construction of new homes, helped by better weather, rebounded in the U.S. in November following a setback in the previous month.

The gain is a hopeful sign that the housing recovery is continuing, a development viewed as critical to lifting the overall economy out of recession.

The Commerce Department says construction of new homes and apartments rose 8.9 percent in November to a seasonally adjusted annual rate of 574,000 units. The gain represented strength in all areas of the country although the increase was slightly lower than economists had expected.

Applications for new building permits were also up, rising 6 percent to an annual rate of 584,000 units, a stronger showing than economists predicted.

Copyright © 2009 The Associated Press, Martin Crutsinger

Justin Shirley
CEO
Shirley International Realty
941.448.4872
www.JustinShirley.com

 

Florida’s consumer confidence rises as economic fears ease

GAINESVILLE, Fla. – Sept. 30, 2009 – Belief that a national economic recovery is under way boosted Florida’s consumer confidence three points to 74 in September, according to a new University of Florida survey.

“I think Florida consumers are buying into the argument that the worst of the recession is over and we have avoided a complete meltdown,” says Chris McCarty, survey director of UF’s Bureau of Economic and Business Research. “Once again, they have surprised us with a higher-than-expected index.”

This month’s three-point rise follows a four-point revised increase in August. Of the five components that make up September’s index, three rose, one declined and one was unchanged. Perceptions of personal finances now compared with a year ago remained unchanged at 44, only five points above its all-time low of 39 in December. Expectations about personal finances a year from now fell three points to 81.

In contrast, perceptions of U.S. economic conditions over the next year rose three points to 75, while expectations about economic conditions over the next five years rose five points to 86. Perceptions of whether it is a good time to buy big-ticket items, such as appliances and cars, rose nine points to 84.

“It is worth noting that the two index components that gauge perceptions of personal finances both now and in the future are flat or down,” McCarty says. “All of the increase is in perceptions of future economic conditions, and in the perception that if you have the money, it’s a good time to buy.”

There are some signs that the economy is improving, he says.

Once again, the median price of a single-family home is virtually flat compared with the previous month, and up for the year, suggesting that housing prices in many areas of Florida have bottomed out, McCarty says. Although foreclosures are still high, the rate seems to be declining.

In other good news, inflation and, in particular, gas prices remain low overall compared with a year ago, McCarty says. In the past few years, gas prices have dominated the consumer confidence index. In addition, the stock market is still up for the year and at least for now appears stable.

“On the negative side, unemployment remains at 10.7 percent for Florida,” McCarty says. “This number is not expected to improve much until next year, and it could still get worse. Florida lost population this past year and could do so again as the underlying problems that prevent people from moving are still in place.”

Tourisms both domestically and internationally also are down as consumers trim discretionary spending, McCarty said. Programs such as Cash for Clunkers at least temporarily lifted retail sales, but sales tax revenues in Florida have dropped 10 percent from a year ago.

“In the near term, we expect consumer confidence to decline at least a point or two as the holiday season nears and stimulus programs like Cash for Clunkers and rebates for first-time home buyers expire,” he says. “The discussion about health care reform will be at center stage this fall, and may affect confidence if the plans involve increased payments from the middle class.”

Also of economic concern is that, at some point, extended unemployment benefits will run out, putting more pressure on the unemployed. In the long term, consumers need to be prepared for the inevitable drawing back of stimulus money from the economy, McCarty says.

The U.S. government effectively printed money to avoid a depression, and at some point most of the money will have to be withdrawn from the economy to avoid inflation and a very weak dollar, McCarty says. When that happens, interest rates will rise dramatically.

“We also have to think about how the Florida economy will adjust moving forward,” he says. “It is likely that discussions about off-shore drilling will receive much more attention as Florida looks for industries to replace those dependent on population growth.”

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for September was conducted from 412 responses. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year.

© 2009 Florida Realtors®

Rates on 30-year home loans dropped below 5 percent for the first time in four months, but still remained above this year’s record low, Freddie Mac said Thursday.

The average rate on a 30-year fixed mortgage was 4.94 percent, down from 5.04 percent last week, Freddie Mac said. The last time the 30-year home loan averaged less than 5 percent was the week ending May 28, when it was 4.91 percent.

Rates hit a record low of 4.78 percent hit in the spring, and remain appealing for people interested in buying a home or refinancing.

On Thursday, the National Association of Realtors said the number of signed sales contracts rose for the seventh straight month in August, as homebuyers rushed to take advantage of a tax credit for first-time owners that expires in November.

“Low mortgage rates are helping to stabilize home sales,” said Frank Nothaft, Freddie Mac’s chief economist.

But borrowers may want to consider the Federal Reserve’s announcement last week that it is slowing down a program intended to lower mortgage rates and boost the housing market. Analysts say mortgage rates should remain low for now but could eventually move higher, and homeowners who want to refinance mortgages shouldn’t delay.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed mortgage fell to 4.36 percent from 4.46 percent last week, according to Freddie Mac. This week’s rate on 15-year mortgages was the lowest since Freddie Mac started tracking it in 1991.

Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, down from 4.51 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.49 percent from 4.52 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year mortgages, and 0.6 point for 15-year and five-year loans. The fee averaged 0.5 point for one-year mortgages.

Copyright 2009 The Associated Press. All rights reserved

July new U.S. home sales up 9.6 percent

WASHINGTON (AP) – Aug. 26, 2009 – Sales of new U.S. homes surged 9.6 percent in July, another sign the housing market is climbing back from the historic bottom it reached early this year. The monthly increase was greater than expected and the fourth in a row and it was spurred by a decrease in the price of homes.

The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. Sales are now up more than 30 percent from the bottom in January, but are still off from the frenzied peak four years ago.

The median sales price of $210,100, however, was down slightly from $210,400 in June and was off 11.5 percent from year-ago levels. Prices are still up from March’s low of $205,100.

Last month’s sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units.

In an effect similar to the government’s “Cash for Clunkers” program to stimulate auto sales, homebuyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify.

Builders and real estate agents are pressing Congress for that credit to be extended. If it isn’t, sales could reverse their upward trend. But still, the economy is healthier now, so sales are unlikely to fall back to the lows of last winter, even if the credit is discontinued, said Wells Fargo economist Adam York,

“People don’t have the sense of panic and dread,” about their futures, he said.

As sales rise, that’s likely to make builders more confident about getting going on new projects, and that’s likely to eventually lead to more jobs in the construction industry, which has been hurt badly by the recession.

“These are crucial elements of a sustainable recovery,” David Resler, chief economist at Nomura Securities, wrote in a research note.

Each new home built creates, on average, the equivalent of three jobs lasting one year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.

There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current sales pace, that represents 7.5 months of supply – the lowest since April 2007. The decline means builders have scaled back construction to the point where supply and demand are coming into balance.

Copyright © 2009 The Associated Press, Alan Zibel, AP real estate writer.

(When Small Business Loans Double over the course of the 1st Quarter 2009, that is a Very Positive Sign for Economic Recovery)

What shape is the recovery in?

NEW YORK – Aug. 14, 2009 – With the launch of an economic recovery all but certain this year – many experts say it’s already begun – the debate among pundits has turned decidedly alphabetical. In other words, what letter will the rebound resemble – U, V or W?

Typically, sharp downturns like the current one yield equally rapid, or V-shaped, upswings. But the worst recession since the Great Depression has been anything but typical, with housing and credit markets devastated. In a USA TODAY survey, 63 percent of economists said the recovery will be slow and gradual, or U-shaped.

Yet 37 percent said it will be moderate or fast. And a smattering of experts say the rebound will look like a W, with a precarious economy sliding back into recession before turning around for good. USA TODAY presents the case for each scenario:

Consumers aren’t spending
Sharp downturn followed by slow and gradual rebound

Most economists, including Federal Reserve Chairman Ben Bernanke, predict a slow and gradual upturn. To be sure, the telltale recovery signals have been flashing green lately. Factory output and new orders grew last month at the fastest pace in two years. The government’s cash-for-clunkers program has lit up a moribund vehicle market.

And with inventories of stores and manufacturers depleted, factories must soon ratchet up production just to restock.

But most experts say the recovery will be muted, largely because consumers are in no mood to open their wallets. They’ve lost $13 trillion of wealth in the recession’s housing and stock market crashes and appear determined to sock away any extra cash they have, says Mark Zandi, chief economist of Moody’s Economy.com. The savings rate jumped to 5.2 percent in the second quarter from a low of 1 percent before the crisis. Consumer spending accounts for 70 percent of the economy.

Meanwhile, the 9.4 percent jobless rate is keeping consumers “focused on necessities like food” and medicine, says Sung Won Sohn, economics professor at California State University.

Two underpinnings of a robust recovery – the housing and auto markets – are suffering from deep-seated problems that won’t soon fade. About 1.8 million in excess housing units built during the real estate bubble ensure a tepid rebound in housing starts, Zandi says. Foreclosures continue to rise. And vehicle sales have been hampered by a credit crisis that’s made it tough for consumers and businesses to get loans. It will take time for banks to feel comfortable lending again. While the cash-for-clunkers program has juiced sales lately, that will mean fewer sales next year, Zandi says.

“It’s hard to see how the economy can get going if people and businesses can’t borrow money,” Zandi says. He predicts anemic growth of 1 percent to 2.7 percent over the next year.

Hiring will ignite recovery
Dramatic tumble produces a similarly sharp upswing

Despite unusual obstacles in the housing and credit markets, some economists say traditional economic dynamics should still win the day, with the steep downturn producing a sharp rebound. Or at least a moderate one.

Businesses have cut their workforces far more than falling customer demand required in an effort “to get ahead of the curve,” says Ken Mayland, president of ClearView Economics. “They’re beyond lean, they’re understaffed,” he says. “They’ll have to start re-employing people faster than in past recessions” just to restock.

Rising employment should boost consumer spending.

Also, despite the massive drop in household wealth, the S&P 500-stock index is up 47 percent since its early March nadir. That should embolden consumers to open their pocketbooks wider than some predict, says Dean Maki, chief U.S. economist at Barclays Capital. So while Maki says the savings rate will stay high, that shouldn’t prevent consumer spending from rising at least moderately as well. Another boost to spending will come from incomes lifted by growing production and a housing construction rebound, he says.

Some optimists point to more basic economic principles. Consumers have been putting off purchases of everything from cars to appliances, leaving a storehouse of pent-up demand, says Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. The population continues to grow 1.1 percent a year. And the positive economic news, along with rising stocks and gas prices that have fallen from their $4-a-gallon peak, should buttress consumer confidence, Rupkey says. The economic stimulus will likely provide an additional bounce when most of the money is spent next year, optimists say.

The economy “is kind of like a beach ball underwater,” Rupkey says. “It wants to bounce back.”

What’s more, automobile and housing sales have fallen so low that a return to even modest levels would mean a 10 percent to 20 percent increase and a V-shaped upswing, Mayland says. He projects the economy will expand at a fairly vibrant 4 percent clip in 2010, with unemployment peaking later this year.

Banks are still tightfisted. But Maki says the recovery will likely be driven by higher-income households and businesses “that don’t need credit or are still able to get it.”

More pain before the gains
Recovery cut short by recession, then a second rebound

A small group of experts believes the nation will endure an unusual W-shaped, or “double-dip,” recovery in which the economy falls back into recession before growing again.

That’s what happened in the early 1980s when the economy soared the first few months of 1981 following a recession, before the Federal Reserve raised interest rates to head off inflation. That put the brakes on the recovery, setting off another, more severe downturn.

Steve Hanke, professor of Applied Economics at Johns Hopkins University, predicts a similar pattern this time. Besides keeping a key interest rate near zero, the Fed is spending $1.75 trillion to buy government securities in a bid to keep mortgage and other loan rates low.

The massive liquidity, plus rising commodity prices, will increase inflation, says Hanke, who is also a fellow at the conservative Cato Institute. Meanwhile, Hanke believes the central bank will be loath to raise interest rates to stave off inflation in 2010, because doing so could tamp down what he says will be a weak recovery in an election year.

As a result, he says, the Fed “will wait too long” and then be forced, perhaps in 2011, to raise interest rates sharply, sending the economy back into a tailspin.

Wells Fargo economist Mark Vitner also believes a W-shaped recovery is possible, but for a different reason. The economy, he says, should grow at a fairly robust 3.4 percent in the third quarter as manufacturers boost output to replenish stocks. But he says it will likely hit a wall in the first quarter, with little customer demand to keep production up, higher state and local taxes that crimp spending and the expiration of the cash-for-clunkers program. Vitner thinks the economy will slow to a 1.8 percent crawl in the first quarter but could actually shrink before mounting a second, tepid recovery.

Copyright © 2009 USA Today. All rights reserved.

WASHINGTON – Aug. 4, 2009 – Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of 91.3 in May; and it’s 6.7 percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was July 2003.

“Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines,” says Lawrence Yun, NAR chief economist. “Activity has been consistently much stronger for lower priced homes. Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by Nov. 30.”

The Pending Home Sales Index in the Northeast rose 0.4 percent to 81.2 in June and is 5.8 percent above a year ago. In the Midwest the index increased 0.8 percent to 89.9 and is 11.6 percent above June 2008. The index in the South jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago. In the West the index rose 2.9 percent to 100.4 but is 0.2 percent below June 2008.

NAR President Charles McMillan is hopeful that a recently elevated level of contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise,” he said. “This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we’ll see an even closer relationship between contract activity and closed transactions.”

McMillan said NAR is continuing to press the appraisal issue. “We have asked Congress and the Federal Housing Finance Agency to immediately implement an 18-month moratorium on the new appraisal rules to further address unintended consequences of the new guidelines,” he said.

NAR’s Housing Affordability Index remains very favorable. The affordability index stood at 159.2 in July, down from record peaks in recent months but it remains 36.6 percentage points above a year ago. Under these conditions, the typical family would devote 15.7 percent of gross income to mortgage principal and interest, well below the standard allowance of 25 percent.

The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

“A monthly rise in home prices and somewhat higher mortgage interest rates led to a modest decline in affordability in June, but it was still the sixth highest index on record dating back to 1970,” Yun said. “Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales.”

A median-income family earning $60,700 could afford a home costing $289,100 in June with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was much higher than the median existing single-family home price in June, which was $181,600.

Yun expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.”

© 2009 FLORIDA ASSOCIATION OF REALTORS