One Thing Explains Why Home Prices Are Rising In Some Cities And Falling In Others #housing #realestate

The Case-Shiller Home Price report is out, and the 20-city index climbed 4.31 percent year-over-year, beating expectations.

However, some cities saw stronger price gains than others.  And some cities, like Chicago and New York, saw prices decline.

So, what’s behind this?

One key reason for the discrepancy is the legal process for foreclosing on a home, explains Bank of America Merrill Lynch’s Michelle Meyer.

“Broadly, states with a non-judicial process witnessed a sharper decline in home prices at the beginning of the downturn, but are currently enjoying price appreciation,” said Meyer recently to Business Insider. “This is due to a more efficient disposition of delinquent supply, leaving lean inventory in many markets.

“In contrast, states with a judicial process, such as Florida, Illinois, and New York, are still struggling to clear the pipeline of distressed loans. As a result, home prices in the Chicago and New York metro areas have continued to edge lower.”

Meyer sent us this chart when we asked her for her chart of the year.  It shows the breakdown of foreclosure inventory into states with a judicial vs. non-judicial foreclosure process.


CoreLogic, which tracks foreclosure activity, reports that foreclosure activity in October continues to be high in the judicial states.  Below is a chart comparing the two types of states


Home prices expected to rise 3.1% in #2013 #housing

More than 100 economists, real estate experts and investment and market strategists project home prices will rise by 3.1% in the new year, up from the forecast of 2.4% in September, according to December 2012 Zillow Home Price Expectations Survey.

Home prices are also expected to increase by 4.6% for 2012, which up from the former  forecast of 2.3% in September. The panel also reported that home prices are projected to rise by more than 3% annually through 2017.

“An organic recovery in the housing market really took hold in the latter half of 2012, and this improvement is echoed in some of the most optimistic price projections we’ve seen in years from this group,” said Zillow Chief Economist Dr. Stan Humphries.

He added, “Record levels of affordability and an improving overall economic picture have really helped buoy the market and have us well positioned for continued growth, albeit slightly slower, in 2013 and beyond.”

For 2013, price change projections range from 4.9% among the most optimistic quartile to 0.8% among the most pessimistic, on average, Zillow said.

The survey is based on the expected path of the Standard &Poor’s/Case-Shiller U.S. National Home Price Index for the next five years.

Home prices continued to rise in October with prices up 4.3% annually within the 20-city composite index produced for the Standard & Poor’s/Case-Shiller Home Price Indices, which posted results on Wednesday.

The 2 Big Ways The Fiscal Cliff Is A Problem For The #Housing #Market

Housing is considered a bright spot in the U.S. economy. But the fiscal cliff – over $600 billion in tax and spending provisions set to expire at the end of the year – could deliver a blow the housing recovery.

screen shot 2012-11-20 at 9.47.20 amBank of America’s Michelle Meyer writes that the hosing market is exposed to the cliff in two ways.

First, policies that impact growth and that could potentially send the economy in to a recession or create uncertainty could weigh on housing demand and construction.

Second, policymakers also need to hash out how they intend to support the housing and mortgage market.

“Tax policies for housing and the government’s role in the mortgage market are up for debate. The biggest concern is removing or reducing the mortgage interest tax exemption, which costs the Treasury about $80bn a year. Homeowners with a mortgage can deduct interest payments from household income if they chose to itemize allowable expenses. If homeowners do not itemize, they can take the “standard” deduction, which is up to $11,900 for couples and $5,950 for singles. About two-thirds of the population takes the standard deduction.

Those who chose to itemize have large mortgage payments and/or other deductions such as charitable contributions; this mostly captures the upper income cohort. Of those who itemize deductions, 90% earn more than the median income.1 This means that if the mortgage tax deduction was removed or phased out it would hit the higher priced markets disproportionately. Home prices would have to adjust lower as effective mortgage payments would be higher.”

Meyer doesn’t anticipate any changes immediately but expects them to be part of the ‘grand bargain’. She thinks the high-priced housing market would be most affected.

She projects that home prices will increase 3 percent in 2013, and that housing starts will increase 25 percent to an average of 975,000.

Read more:

Millennials Will Have A Hard Time Entering The #Housing #Market

rentorownIn this day and age, the 18- to 34-year-old crowd have lived up to their reputation as perpetual renters. Most blame the trend on the housing crisis, which led so many homeowners to downsize and stunted the home buying power of younger consumers.

But whatever trauma the Great Recession had on the minds of millennials, it hasn’t stymied their hopes for owning a home of their own one day, a new study shows.

Real estate tracker Trulia found more than 90 pecent of millennial renters plan on buying a home in the next two years.

The question is whether they’ll find what they’re looking for. The housing inventory has been far from stellar lately, down 23 percent since last year and a whopping 43 percent since 2010, Trulia estimates.



“Many [Millennials] think today’s low prices and low mortgage rates will last,” says Jed Kolko, Trulia’s Chief Economist. “They may be in for sticker shock if the cost of homeownership has returned to normal levels by the time they’re ready to buy.”

Then there’s the affordability factor to consider. People in their 30s saw their wealth diminished the most during the recession, a recent Pew study found, and the underemployment rate is estimated at more than 15 percent.

It’s true that home prices have been slowly rebounding, which will hopefully give sales a boost –– 22 percent of homeowners say they’ll likely sell in the next year –– and beef up the offerings. Today, 27 percent feel more positive about owning a home than half a year ago, while 19 percent say they’re more negative, according to Trulia.

It’s certainly not the overwhelming majority’s sentiment –– 72 percent still say homeownership isn’t their idea of the American Dream –– but it’s a hint that consumers’ optimism in the housing market might steadily be returning.

“Millennials have been shaken, not scarred by the housing bust,” says Kolko. “Nearly all of them want to own a home some day, if they’re not homeowners already.”

Fannie Mae predicts record-low mortgage rates entering 2013

MortgageBond_1Mortgage rates are anticipated to remain at an all-time low for the first half of 2013, then slowly rise during the second half of the year, although they will remain below 4%, reported Freddie Mac.

On the same day that Fannie Mae released its National Housing Survey, showing increased consumer confidence in the housing industry, Freddie Mac revealed its U.S. Economic and Housing Market Outlook for December.

The housing outlook predicts what some of the market features are expected to look like in 2013.

“The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive,” said Frank Nothaft, vice president and chief economist of Freddie Mac.

Property values are expected to gain strength with most house price indexes increasing as much as 3% next year.

Housing starts are expected to jump to a net 1.20 to 1.25 million household increase in 2013, with starts up around the 1 million annualized pace by the fourth quarter.

Vacancy rates should fall significantly for both apartments and single-family homes for sale, dropping to 2002 to 2003 levels.

The 2012 refinance boom will continue into early 2013, suggesting single-family mortgage originations may decline by as much as 15%, while multifamily lending is believed to rise approximately 5%.

“This has been a big change from a year ago, when some analysts worried that the looming ‘shadow inventory’ would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery,” said Nothaft.

Recovery slows in hardest hit #housing #markets

NewHomeSalesPhoenix and Sacramento, two of the markets hardest hit during the housing crisis, saw some of the strongest price appreciation nationwide as a result of undervaluation from the crash.

However, in the December Home Value Forecast, Pro Teck Valuation Services revealed that activity in these markets is slowing as the housing inventory remains low and home prices throughout the nation are rising.

“Home Value Forecast has been pointing out for the past year that most of the fundamental factors for a recovery in home sales activity and prices are falling in place. However, the residential real estate market has always had a strong psychological component driven by consumer confidence,” said Tom O’Grady, CEO of Pro Teck.

A recent survey by Trulia 

revealed that consumer confidence in homeownership is on the rise as the recovery continues.

“In this month’s release it is interesting to see how prices reflecting current consumer confidence and longer term market fundamentals like employment track one another, the later always anchoring consumer perception from straying too far,” said O’Grady.

O’Grady states that when home prices are on the rise, homebuyers believe they will keep rising; conversely, when prices are dropping, buyers think they will continue to decline. The current increase in home prices is a key factor behind pushing buyers who may be on the fence about homeownership, leading to higher turnover rate and reinforcing the existing trend.

The HVF also lists the ten best and worst performing metros with regard to a number of leading real estate market indicators such as sales and listing activity, days on markets and distressed sales activity.

“Three of the top ranked metros are located in Texas while another three are in Southern California.  The former are markets which really did not exhibit bubble conditions during the nationwide run up and, thus, did not need to experience a meaningful housing price correction,” said Michael Sklarz, principal of collateral analytics and contributing author to Home Value Forecast.

“The bottom-ranked metros also represent an interesting mix with four being in the greater New York-New Jersey-Connecticut area. There also are four in the Southeast with new additions to the ranking including the metros of Little Rock and Knoxville. Most of the bottom-ranked have double-digit months of remaining housing inventory,” added Sklarz.

Moving into 2013, it will be important for homeowners to continue the trend of increased consumer confidence.

Available Housing Inventory Is Collapsing

Tuesday economic releases:
• At 10:00 AM ET, Trulia Price & Rent Monitors for November. This is the index from Trulia that uses asking prices adjusted both for the mix of homes listed for sale and for seasonal factors.

Here is another update using inventory numbers from HousingTracker / DeptofNumbers to track changes in listed inventory. Tom Lawler mentioned this last year.

According to the for (54 metro areas), overall inventory is down 22 percent year-over-year and probably at the lowest level since the early ’00s.

This graph shows the NAR estimate of existing home inventory through October (left axis) and the HousingTracker data for the 54 metro areas through early December.

Since the NAR released their revisions for sales and inventory last year, the NAR and HousingTracker inventory numbers have tracked pretty well. HTearlyDec2012

On a seasonal basis, housing inventory usually bottoms in December and January and then increases through the summer. So inventory will probably decline a little further over the next month or so, before increasing again next year.

The second graph shows the year-over-year change in inventory for both the NAR and HousingTracker.HTEarlyDecYoY2012

HousingTracker reported that the early December listings, for the 54 metro areas, declined 21.7 percent from the same period last year.

The year-over-year declines will probably start to get smaller since inventory is already very low. It seems very unlikely we will see 20%+ year-over-year declines next summer, but it does appear that inventory will be very low in 2013.