Tag Archives: homes

Catastrophe Worsens for Housing Market — Home Prices and Home Sales Fall Again

As Congress meets to bailout the financial industry and George Bush vies with Freddie Krueger for the nation’s archetypal face of visceral terror, the latest report from the Census Bureau shows that the housing catastrophe continues to get worse. 

Here’s the summary of the bad news:

  • New homes sales in August dropped to the lowest level since January 1991.
  • Home prices hit a four-year low. 
  • Inventory continues to rise, creating more downward pressure for home prices.

And here are some of the ugly new numbers:

  • New home sales had a seasonally adjusted annual rate of 460,000, down 11.5 percent from a revised 520,000 in July and down 24.5 percent from a year ago.
  • Only 39,000 new homes were sold in July, the lowest level since December 1991.
  • Prices for new homes were at their lowest level since September 2004.
  • The median price of a new home sold in August was $221,900, down 5.5 percent from $234,900 in July and down 6.2 percent from $236,500 a year ago.
  • 166,000 new homes came on the market in August, bringing total inventory to a seasonally adjusted 408,000, equal to 10.9-month supply, up from a 10.3 month supply in July.
  • New home sales fell 31.9 percent in the Northeast, 2.1 percent in the South and 36.1 percent in the West. Only the Midwest showed an increase in new home sales, up 7.2 percent.
  • Three out of four builders reported having to pay buyers’ closing costs or offer other incentives such as expensive features for free in order to maintain sales.

The housing market is so bad that the main cheerleader for an I-can-see-the-light-at-the-end-of-the-tunnel approach to the real estate crisis – the National Association of Realtors (NAR) – has finally admitted, albeit with NAR’s typical understatement of the obvious, that “the pendulum in the mortgage market has swung too far.”

But if you’re looking for a bright side to the nation’s residential real estate fire sale, NAR’s number one Pollyanna-in-Chief, economist Lawrence Yun, still has a bromide to offer.

“August sales reflect higher interest rates before the government takeover of Freddie Mac and Fannie Mae, and the sudden drop in mortgage interest rates over the past couple weeks is improving housing affordability,” Yun said. “With higher loan limits and a beefing up of the FHA program, all the mechanisms have been falling into place to increase mortgage availability.”

Yeah.  Right.

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Home Prices Fall Again — Down 15.8% From Last Year

According to the Standard & Poor’s/Case-Shiller Index, which measures the sale price of existing single family homes in 20 major metropolitan areas, prices fell another 0.9 percent in May 2008,  and were down 15.8 percent from May 2007.

File this information under “Tell Us Something We Didn’t Know.”

Actually, we knew it was bad, but we didn’t know it was this bad.

The Standard and Poors Report states that “For the second straight month, all 20 MSAs posted annual declines, nine of which are posting record lows and 10 of which are in double-digits. Both the 10-City Composite and the 20-City Composite are reporting record low annual declines.”

“Since August 2006, there has not been one month where we have seen overall price increases . . . For the month of May, markets that experienced large gains in the recent real estate boom continue to be the biggest decliners. Miami and Las Vegas were the worst performers returning -3.6% and -2.9%, respectively. On a brighter note, Charlotte and Dallas have recorded three consecutive months of positive returns. These two markets are also showing the smallest annual declines, with Charlotte own 0.2% and Dallas down 3.1% versus May of 2007. From a longer-term perspective, since January 2000, the best performing markets are Washington, Los Angeles, New York and Miami. The value of housing in Detroit is lower than it was in January 2000. Over the month, no region reported gains in excess of 1%. But for those that reported monthly declines, three were in excess of 2%.”

And with the credit market frozen, there is no end in sight to falling home prices and the housing crisis, now rapidly becoming the housing disaster.

Foreclosure Activity Up 53% Over June 2007

Default notices, auction sale notices and bank repossessions were reported on 252,363 U.S. properties during June 2008, a 3 percent decrease from the previous month but still a 53 percent increase from June 2007, according to the latest RealtyTrac Foreclosure Market Report.

The report also shows that one in every 501 U.S. households received a foreclosure filing during the month.

“June was the second straight month with more than a quarter million properties nationwide receiving foreclosure filings,” said James J. Saccacio, chief executive officer of RealtyTrac. “Foreclosure activity slipped 3 percent lower from the previous month, but the year-over-year increase of more than 50 percent indicates we have not yet reached the top of this foreclosure cycle. Bank repossessions, or REOs, continue to increase at a much faster pace than default notices or auction notices. REOs in June were up 171 percent from a year ago, while default notices were up 38 percent and auction notices were up 22 percent over the same time period.”

Nevada, California and Arizona continued to document the three highest state foreclosure rates in June.  Florida, Michigan, Ohio, Colorado, Georgia, Indiana and Utah were other states that made the top ten.

For the third month in a row, California and Florida cities accounted for nine out of the top 10 metropolitan foreclosure rates among the 230 metropolitan areas tracked in the report.

RealtyTrac noted that “Foreclosure filings were reported on 8,713 Nevada properties during the month, up nearly 85 percent from June 2007, and one in every 122 Nevada households received a foreclosure filing — more than four times the national average.”

“One in every 192 California properties received a foreclosure filing in June, the nation’s second highest state foreclosure rate and 2.6 times the national average.”

“One in every 201 Arizona properties received a foreclosure filing during the month, the nation’s third highest state foreclosure rate and nearly 2.5 times the national average. Foreclosure filings were reported on 12,950 Arizona properties, down less than 1 percent from the previous month but still up nearly 127 percent from June 2007.”

“Foreclosure filings were reported on 68,666 California properties in June, down nearly 5 percent from the previous month but still up nearly 77 percent from June 2007. California’s total was highest among the states for the 18th consecutive month.”

“Florida continued to register the nation’s second highest foreclosure total, with foreclosure filings reported on 40,351 properties in June — an increase of nearly 8 percent from the previous month and an increase of nearly 92 percent from June 2007. One in every 211 Florida properties received a foreclosure filing during the month, the nation’s fourth highest state foreclosure rate and 2.4 times the national average.”

“Foreclosure filings were reported on 13,194 Ohio properties in June, the nation’s third highest state foreclosure total. Ohio’s foreclosure activity increased 7 percent from the previous month and 11 percent from June 2007. The state’s foreclosure rate ranked No. 6 among the 50 states. Other states in the top 10 for total properties with filings were Arizona, Michigan, Texas, Georgia, Nevada, Illinois and New York.”

“Seven California metro areas were in the top 10, and the top three rates were in California: Stockton, with one in every 72 households receiving a foreclosure filing; Merced, withone in every 77 households receiving a foreclosure filing; and Modesto, with one in every 86 households receiving a foreclosure filing. Other California metro areas in the top 10 were Riverside-San Bernardino at No. 5; Vallejo-Fairfield at No. 7; Bakersfield at No. 8; and Salinas-Monterey at No. 10.”

“The top metro foreclosure rate in Florida was once again posted by Cape Coral-Fort Myers, where one in every 91 households received a foreclosure filing — fourth highest among the nation’s metro foreclosure rates. The foreclosure rate in Fort Lauderdale, Fla., ranked No. 9. LasVegas continued to be the only city outside of California and Florida with a foreclosure rate ranking among the top 10. One in every 99 Las Vegas households received a foreclosure filing in June, more than five times the national average and No. 6 among the metro areas.”

“Metro areas with foreclosure rates among the top 20 included Phoenix at No. 12, Detroit at No. 13, Miami at No. 15 and San Diego at No. 17”

RealtyTrac does not expect foreclosure activity to ease up until 2009.

Real Estate Values Per Square Foot Down More than 20% in Six Major Markets

Real estate prices continue to fall in most markets, according to Radar Logic Incorporated, a real estate data and analytics company that calculates per-square-foot valuations.

Among the key findings of the latest report from Radar Logic:

  • The broad housing slump continued as consumers showed persistent lack of confidence and difficulty in financing home purchases.
  • April 2008 continued to exhibit price per square foot (PPSF) weakness compared to last year in almost all markets. One MSA showed net year-over-year PPSF appreciation, one was neutral, and 23 declined.
  • The Manhattan Condo market showed a 3.6% increase in PPSF year-over-year coupled with an increase in recent transactions despite a modest decline of 0.7% in month-over-month prices.
  • Charlotte’s increase of 1.5% in year-over-year PPSF moved its rank among the 25 MSAs to number 1. This represents an increase over the 0.1% year-over-year PPSF appreciation last month.
  • Columbus showed year-over-year PPSF appreciation of 0.2% for April 2008, which is an increase from last month’s year-over-year decline of 4.3%.
  • New York declined 3.0% year-over-year in April 2008, its second decline in Radar Logic’s published history (beginning in 2000).
  • Sacramento, the lowest-ranking MSA, showed a 31.7% decline from April 2007, which is consistent with last month’s decline of 30.6%.

 The ten biggest declines in per-square-foot values from last year were in these markets:

Sacramento (-31.7%)

Las Vegas (-29.9%),

San Diego (-28.1%)

Phoenix (-25.6%).

Los Angeles/Orange County (-23.4%).

Miami (-22.4%).

St. Louis (-19.8%).

San Francisco (-19.7%).

Tampa (-16.6%).

Detroit (-16.1%).

You can read the full Radar Logic report here.

Major Law Firm Creates “Distressed Real Estate” Section as Crisis Deepens

In what could be a new and significant trend in American legal practice — and a sign that the real estate crisis is expanding — the prestigious Philadelphia-based law firm Ballard Spahr Andrews & Ingersoll LLP has announced that it is establishing a “distressed real estate” section. 

The firm’s “Distressed Real Estate Initiative” will involve at least 16 core lawyers in ten offices throughout the country, including those in Mid-Atlantic and Western locations hardest hit by the housing bust and the mortgage crisis, including Los Angeles and Las Vegas.

The purpose of the section, according to the firm, will be “to provide representation in acquisition, restructuring and bankruptcy matters.”

 “In this period of turmoil in the financial markets and economic uncertainty, new real estate opportunities and challenges present themselves,” said Michael Sklaroff, chair of Ballard’s Real Estate Department. “We stand ready to serve clients with respect to existing positions and also in assisting them in acquisitions and debt and equity investments in troubled projects.”

Ballard Spahr Andrews & Ingersoll was founded in 1886 and now employs more than 550 lawyers in twelve offices located throughout the mid-Atlantic corridor and the western United States.

When there is blood in the water, the sharks will appear.

Proof We’re in a Recession

Here’s proof that we’re in a recession: Starbucks is closing 600 stores.

According to the New York Times, “Starbucks said Tuesday that it planned to close another 500 underperforming stores and eliminate as many as 12,000 full- and part-time positions. The company, which now plans to close a total of 600 underperforming stores, will take related charges totaling more than $325 million. Most of the stores, which are company owned, will be closed by the end of the first half of its fiscal year, which ends September 2009, the company said. Starbucks estimated that total pretax charges associated with the closures, including costs associated with severance, would be $328 million to $348 million. The nation’s largest coffee chain said 70 percent of the stores targeted for closure have been open since the beginning of fiscal 2006. The job losses would represent about 7 percent of the company’s global work force.”

These closings are clearly fallout from the housing bust.  As the Times noted, Starbucks had “aggressively opened stores in areas like California and Florida, which have been hardest hit by the housing downturn. ”

The next time economists get together to discuss whether we’re really in a recession, they may have to meet somewhere other than the local Starbucks. 

It might be closed.

 

Home Prices Slip Again in Biggest Fall on Record

Home prices in 20 U.S. metropolitan areas fell in April 2008 by the most on record.

The Case-Shiller Index of 20 large cities for April 2008 shows housing price declines are accelerating, and are now falling at a rate of 15.3% from last year’s levels.

The report also showed that home prices fell 1.4 percent in April from a month earlier after a 2.2 percent decline in March.

There’s one bit of “good” news in the report: home price declines were less than expected.  According to economists surveyed by Bloomberg News, the index was forecast to fall 16 percent from a year earlier.

Not surprisingly, the housing bust continues to be most severe in previous boom areas in the West and Florida. 

Here are the markets where prices are falling fastest:

Las Vegas: -26.8%
Miami: -26.7%
Phoenix: -25.0%
Los Angeles: -23.1%
San Diego: -22.4%
San Francisco: -22.1%

Average of 20 large cities: -15.3%

The decline in home prices appears to be spreading.  Chicago showed a 9.3 percent decline and prices in New York City declined by 8.4 percent.  Charlotte, North Carolina, showed a decline for the first time.

According to Bloomberg.com, “One bright spot in the report was that more cities showed a gain in prices in April compared with the previous month. Houses in eight areas rose in value, compared with just two in March. Month-over-month gains were led by Cleveland and Dallas.”