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The first quarter of 2012 was the best first quarter for real estate in five years, and pending contracts suggest that the second quarter of 2012 will be the best second quarter in five years, NAR Chief Economist Lawrence Yun said this morning at the Residential Economic Update during the NAR Midyear Legislative Meetings & Trade Expo.

Moreover, he said the second half of this year could be even better than the first, in part because of continued increases in rental costs and record affordability of homes. “Renters are getting squeezed, and they don’t want to rent anymore,” Yun explained. “This could be the year we see the release of pent-up demand.”

Home prices have been skipping along the bottom for about a year now, Yun said, a trend that has drawn investors into the market. These investors have helped housing through a couple of difficult years and partly mitigated the dysfunctional mortgage market.

“Right now is the time to buy low,” he said. “Investors are coming in to take advantage. Second homes started to recover nicely last year because of investors.”

However, home values are poised for a rebound as more traditional buyers move back into the market, Yun said. In fact, this has already started to happen in areas such as Phoenix and Miami, which have seen year-over-year (March 2011 to March 2012) double-digit percentage increases in home prices.

As real estate improves, consumer psychology around home ownership will change, he added. Coupled with the recent — if relatively modest — job growth and stock market gains, conditions are right for a sustained housing recovery.

Future Challenges

Nonetheless, there are issues that could restrain a turnaround in housing. Mortgages are still too hard to come by, the shadow inventory — while declining — remains historically high, and price inflation is rising “above the Fed’s comfort level,” Yun said.

To address that last problem, the Federal Reserve will likely raise rates in 2013 and 2014. Yet Yun contends a modest rise in interest rates wouldn’t necessarily be a bad thing for the housing market. That’s because an increase in rates would cause financial institutions to focus their mortgage servicing departments on purchase loans instead of refis.

The biggest challenge, though, remains the murky political and regulatory environment, particularly the repeated threats from legislators and policymakers to alter or eliminate the mortgage interest deduction. Additionally, the country is racing toward a “fiscal cliff” on Jan. 1, 2013, the date by which a compromise federal budget must be approved. If this is delayed, there will be automatic government spending cuts, which would probably create a fallout effect in the financial markets.

U.S. Migration Patterns

In a presentation preceding Yun’s, Fed Economist Raven Molloy went over data that showed migration within the United States had fallen across practically all demographic categories since the 1980s. This has significant implications for real estate, as a decline in the number of people moving around within the country can translate into a decline in home-purchase activity.

There were no sharp moves downward in internal migration during the recession, which suggests the trend is not connected to the housing market or macro-economic cycles, Molloy said. If this was the case, migration would likely increase in the next few years as the job market improves and household formation picks up. Instead, it could remain flat or fall as the economy recovers.

In his presentation, Yun said this trend, which doesn’t have a clear source, is a problematic development.

“It’s troubling,” he said. “We want to have a very dynamic society where people can move up and trade up.”

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Building permits in April 2012 were at a seasonally adjusted annual rate of 715,000, down 7.0 percent from the revised March rate but up 23.7 percent from April 2011. Housing starts in April 2012 were at a seasonally adjusted annual rate of 717,000, up 2.6 percent from March’s revised estimate and up 29.9 percent from April 2011.

Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 715,000. This is 7.0 percent below the revised March rate of 769,000, but is 23.7 percent above the revised April 2011 estimate of 578,000.

Single-family authorizations in April were at a rate of 475,000; this is 1.9 percent above the revised March figure of 466,000. Authorizations of units in buildings with five units or more were at a rate of 217,000 in April.

Privately-owned housing starts in April were at a seasonally adjusted annual rate of 717,000. This is 2.6 percent above the revised March estimate of 699,000 and is 29.9 percent above the revised April 2011 rate of 552,000.

Privately-owned housing completions in April were at a seasonally adjusted annual rate of 651,000. This is 10.0 percent above the revised March estimate of 592,000 and is 20.1 percent above the revised April 2011 rate of 542,000.

Single-family housing completions in April were at a rate of 489,000; this is 11.4 percent above the revised March figure of 439,000. The April rate for units in buildings with five units or more was 158,000.

The Eckerman Group
Real Estate and Wealth Building Education
info@theeckermangroup.com

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Home buyers and refinancers applying for a mortgage are being caught off guard in what all lenders are asking for when approving a loan.

The Wall Street Journal reports an incident where a borrower was even asked for a copy of her divorce decree — from two years ago — and asked to explain a deposit of about $200 into her bank account when applying for a mortgage.

Lenders are being more careful in who they issue a loan to nowadays, tightening underwriting standards and carefully documenting applicants’ finances and ability to repay the loan.

Practically nothing is off the table these days when it comes to what a lender may ask for. Lenders may question any deposits to bank accounts, increases in a borrower’s income, and any disputed balance over a late payment, even if it was from years ago. Some lenders are even requesting college transcripts and diplomas in verifying employment history.

Any credit inquiries on a person’s credit invites red flags and more questions from lenders, Rhonda Porter, a loan officer in Seattle, told The Wall Street Journal.

“I have customers who know they’re a strong [borrower], and they’re still asked for documentation,” Porter says. “Some of them get their feathers ruffled.”

Some borrowers — particularly refinancers — are getting so frustrated by the extra paperwork and questions that they are increasingly just stopping the process, according to news reports.

Stella Adams, a fair housing advocate in North Carolina, says banks need to lighten up. Banks should return to “solid, old-fashioned underwriting” standards that were used prior to the housing boom and stop making it so difficult for people to get financing.

The Eckerman Group
Real Estate and Wealth Building Education
info@theeckermangroup.com

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Statistics released today by the Greater Las Vegas Association of REALTORS® (GLVAR) show existing home prices in April increased for the third straight month while the supply of homes listed for sale continued to shrink.

The local housing inventory, which was already tightening throughout 2011, began to contract more rapidly after Oct. 1, 2011, when a new state law known as AB284 took effect, requiring lenders to prove they have all the necessary documents in place before proceeding with a foreclosure. Since Oct. 1, Kelley said there has been a dramatic drop in the notices of default lenders file to begin the foreclosure process and in the number of bank-owned homes put on the market in Southern Nevada.   Even with fewer homes to sell, Kelley said existing home sales remain ahead of the record pace set in 2011, when GLVAR reported that 48,186 existing properties were sold in Southern Nevada.

According to GLVAR, the total number of local homes, condominiums and townhomes sold in April was 3,924. That’s down from 4,388 in March, but still up from 3,902 total sales in April 2011.

Compared to March, single-family home sales during April decreased by 9.9 percent, while sales of condos and townhomes decreased by 13.5 percent. Compared to one year ago, home sales were up 3.3 percent, while condo and townhome sales were down 9.7 percent.

As for prices, GLVAR reported the median price of single-family homes sold in April was $127,900, up 4.0 percent from $123,000 in March, and up 2.3 percent from $125,000 one year ago. Kelley said it was the first time since April of 2010 that single-family home prices had increased for three consecutive months. Meanwhile, the median price of local condominiums and townhomes sold in April was $59,900. That’s down 1.8 percent from $61,000 in March and down 0.2 percent from one year ago.

The total number of homes listed for sale on GLVAR’s Multiple Listing Service again decreased from March to April, with a total of 17,884 single-family homes listed for sale at the end of the month. That’s down 1.7 percent from 18,200 single-family homes listed for sale at the end of March and down 20.3 percent from one year ago.

GLVAR reported a total of 3,836 condos and townhomes listed for sale on its MLS at the end of April. That’s down 1.7 percent from 3,901condos and townhomes listed at the end of March, and down 27.8 percent from one year ago.

As in past months, the number of available homes listed for sale without any sort of pending or contingent offer also dropped sharply compared to the previous month and year. By the end of April, GLVAR reported 4,162 single-family homes listed without any sort of offer. That’s down 15.1 percent from 4,901 such homes listed in March and down 63.4 percent from one year ago. For condos and townhomes, the 1,161 properties listed without offers in April represented an 8.9 percent decline from 1,275 such properties listed without offers in March and a decrease of 57.4 percent from one year ago. In April, GLVAR reported that 54.9 percent of all existing homes sold in Southern Nevada were purchased with cash. That’s up from 54.5 percent in March.  Meanwhile, 29.9 percent of all existing local homes sold during March were short sales, which occur when a lender agrees to sell a home for less than what the borrower owes on the mortgage. That’s up from 26.6 percent in March, but still short of the peak of 34 percent set in June 2010.

Bank-owned homes accounted for 36.9 percent of all existing home sales in April, down from 40.7 percent in March.

GLVAR reported that the median price of bank-owned single-family homes sold in April was $112,500, up 6.1 percent from $106,000 in March. The median price of single-family homes sold as part of a short sale in April was $120,000, down 0.8 percent from $121,000 in March. This month’s GLVAR statistics include activity through the end of April 2012. GLVAR distributes such statistics each month based on data collected through its MLS, which does not necessarily account for newly constructed homes sold by local builders or for sale by owners. Other highlights include:

The monthly value of local real estate transactions tracked through the MLS during April decreased by 5.5 percent for homes to nearly $508 million. For condos and townhomes, the total value of all sales in April was nearly $57 million, down 12.2 percent from March. Compared to one year ago, total sales volumes in April were up 3.7 percent for homes, but down 16.9 percent for condos and townhomes.

In April, 61.1 percent of all homes and 70.5 percent of all condos and townhomes sold within 60 days. That compares to March, when 58.8 percent of all homes and 66.6 percent of all condos and townhomes sold within 60 days.

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Home prices rose in March for the first time since last July, helped by tighter housing inventory, data analysis firm CoreLogic said on Tuesday.

CoreLogic’s home price index gained 0.6 percent from February, but was still down 0.6 percent compared with March a year ago.

Excluding sales of distressed properties, prices climbed 0.9 percent on a yearly basis. Homeowners in danger of foreclosure, or in “distress”, often sell their homes at significantly reduced prices.

“This spring, the housing market is responding to an improving balance between real estate supply and demand, which is causing stabilization in house prices”, Mark Fleming, chief economist at CoreLogic, said in a statement.

Of the top 100 statistical areas measured by population, 57 showed year-over-year declines, down from 65.

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With signs of a housing turnaround getting stronger, housing experts say buyers are finding several recent changes when they go to put in an offer on a home. A recent article at U.S. News & World Report highlights some of these changing “rules” for your home buyer clients:

1. Lowball offers won’t likely stick: Sure, deals are still around, but lowball offers that aren’t in line with comparable sales data are increasingly proving to be a waste of time. Buyers may be better off asking for seller concessions, such as closing cost assistance or making home repairs, rather than making offers way below the asking price. “Keep in mind that a lowball number may turn off the seller and close down any chance at negotiation,” the U.S. News & World Report article cautions potential buyers.

2. Get pre-approved: Getting a loan isn’t easy nowadays as lenders have tightened their credit standards in recent years. Serious buyers should check their credit and get pre-appoved for a loan to determine how much of a home they can even afford even before they start their home search.

3. Get realistic about the market: Real estate agents can show buyers comparable nearby sales to help educate them about local market conditions. Transactions from the last six months are the most important. Another important piece of information for buyers is knowing how long properties are staying on the market.

4. Expect some competition. Housing inventories are dropping in many areas and spurring an increase in demand. Home buyers may face increased competition for the home they want, particularly among short sales and foreclosed properties, in which they may be up against investors who are making all-cash offers. That’s why experts say it’s important bank-financed buyers know their financial situation in advance to better compete.

5. Conduct property research: Real estate agents will help guide clients on what all they need to do when they find a property they like, but one important step nowadays: Buyers should hire a title company to check for any liens or tax arrearages, the article notes. Housing experts also recommend hiring a home inspector, verifying the accuracy of the property line (by asking seller for the survey or having your own conducted), and make sure all necessary disclosures about the property, required by the state, have been made.

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Mortgage applications for purchase were up slightly as mortgage rates last week hovered near record lows.

Overall, applications increased 0.1 percent last week compared to a week earlier, with purchase applications seeing the largest increase, according to data from the Mortgage Bankers Association for the week ending April 27.

Mortgages for home purchases increased 2.9 percent last week and was 3 percent higher last week compared to the same week one year ago, according to MBA.

Meanwhile, applications for refinancings, which make up 72.6 percent of total applications last week, decreased 0.7 percent compared to the previous week.

Investor applications for mortgages have decreased slightly over the last few weeks, according to MBA. The share of applications for home purchases from investors during the month of March was at 5.7 percent, which is down from 6.1 percent in February. Meanwhile, purchase applications for second homes has held steady at 5.8 percent.

The Eckerman Group
Real Estate and Wealth Building Education
info@theeckermangroup.com

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Home buyers who want a bargain may want to act now because the housing market is in the midst of a turnaround, economists say.

Home prices have fallen and mortgage rates are hovering near record lows, pushing home affordability for the average family to record highs. Meanwhile, rents have been on the rise, making owning a home cheaper than renting in most areas of the country, according to recent surveys.

But the housing deals aren’t expected to stick around much longer.

An improving job market, a decrease in the number of home owners falling behind on their mortgage, and an anticipated improvement in access to mortgages is expected to help home prices start bouncing back by next year, economists say.

Investors eyeing profits in rentals also have been snapping up bank-owned properties, which Clear Capital’s Alex Villacorte attributes as helping to lead to an increase in prices on foreclosed properties. This “could have a significant impact on the market overall in terms of providing a rising floor to home values,” Villacorte told CNNMoney.

Some areas are already seeing prices rise. In Phoenix, housing prices have already increased 8.4 percent during the three months ending April 30, and Miami saw prices bump up 4.6 percent quarter over quarter, according to Clear Capital data.

“Stuff I was selling six months ago for $60,000 to $80,000 is now $90,000 to $110,000,” Tanya Marchiol, founder of Team Investments in Phoenix, told CNNMoney.

Loan Rates, Demand Predictions

Buyers may want to act more quickly because mortgage rates are expected to tick up slightly by the end of the year. The increase is being sparked by greater demand, says Doug Lebda, CEO of LendingTree. He predicts 30-year fixed-rate mortgages will inch up to 4.5 percent by the end of the year, which is still low, however, by historical standards.

The Mortgage Bankers Association is also predicting a big leap in mortgage loans next year. For this year, MBA estimates that buyers will take out loans totaling about $415 billion, but by 2013 that number is expected to nearly double to $706 billion.

The Eckerman Group
Real Estate and Wealth Building Education
info@theeckermangroup.com

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The U.S. Census Bureau of the Department of Commerce announced today that construction spending during March 2012 was estimated at a seasonally adjusted annual rate of $808.1 billion, 0.1 percent above the revised February estimate of $807.3 billion. The March figure is 6.0 percent above the March 2011 estimate of $762.6 billion.

During the first 3 months of this year, construction spending amounted to $171.2 billion, 6.7 percent (±1.6%) above the $160.4 billion for the same period in 2011.

PRIVATE CONSTRUCTION

Spending on private construction was at a seasonally adjusted annual rate of $531.9 billion, 0.7 percent above the revised February estimate of $528.1 billion. Residential construction was at a seasonally adjusted annual rate of $244.1 billion in March, 0.7 percent above the revised February estimate of $242.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $287.8 billion in March, 0.7 percent above the revised February estimate of $285.7 billion.

PUBLIC CONSTRUCTION

In March, the estimated seasonally adjusted annual rate of public construction spending was $276.2 billion, 1.1 percent below the revised February estimate of $279.1 billion. Educational construction was at a seasonally adjusted annual rate of $69.1 billion, 1.2 percent below the revised February estimate of $70.0 billion. Highway construction was at a seasonally adjusted annual rate of $77.0 billion, 0.8 percent below the revised February estimate of $77.6 billion.

The Eckerman Group
Real Estate and Wealth Building Education
info@theeckermangroup.com

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