The Pending Home Sales Index, a forward-looking indicator based on signed contracts, increased 0.3 percent in September 2012 to 99.5, up from 99.2 in August. Moreover, the September 2012 PHSI was 14.5 percent higher than the same period a year ago. Year-over-year, the PHSI has increased for 17 straight months.
The National Association of REALTORS® (NAR) reported monthly increases in the September PHSI for the Northeast, South and West, but a 5.8 percent decrease in the Midwest. This decrease is consistent with the 37.3 percent monthly decrease in new home sales in the Midwest reported yesterday. NAR reported strong year over year PHSI increases in the Northeast, Midwest and South, but only a small increase of 0.8% in the West.
If contracts closed at the same time they were signed, this graph would be the correspondence between sales and the PHSI. So the PHSI is a good indicator of what will likely happen to existing home sales when the contracts close in coming months. We anticipate that the October and November existing sales data will reflect today’s pending sales report, suggesting that existing home sales are likely to rise, but perhaps at a slower rate than in recent months.
Improved year-over-year existing home sales suggest a stronger demand for remodeling as well. Today’s PHSI release comes out on the same day that the NAHB Remodeling Market Index (RMI) reached 50, the highest level since the third quarter of 2005.
Additionally, there is some concern that some short sales are being accelerated into 2012 due to the looming expiration of the cancelled debt tax exclusion for principal residences. Unless Congress acts, at the end of the year, any mortgage debt forgiven as part of an existing home sale will become taxable income. This tax provision likely increased existing home sales in 2012.
Wednesday, October 30, 2013
Great Spaces: Jessica Simpson Sells in 90210
Great Spaces: Jessica Simpson Sells in 90210
Pop singer, wearer of Daisy Dukes and television personality Jessica Simpson is selling her California home for just under $8 million.
The recently renovated Hamptons-inspired home was built in 1991 and spans 5,500 square feet with five bedrooms and six bathrooms. The home also includes a media room, a commercial-grade kitchen, an office and library, a gym, a stone courtyard with a koi pond and a swimming pool.
Beyond her musical career, Simpson starred in films “Blonde Ambition,” “Major Movie Star,” and “The Dukes of Hazzard.”
Listed for: $7.995 million
Tattoo Star Sells Gothic-style Mansion
Tattoo artist and celebrity persona Katherine von Drachenberg (also known as Kat Von D) has listed her gothic-style pseudo castle in the Hollywood Hills for $2.5 million.
The gated compound was built in 1927 and includes gothic features such as a turret entry with an arched door, decorative wrought-iron stair rails, and a series of arches opening the second floor halls to the landing below.
With four bedrooms, 4.5 bathrooms and 4,148 square feet of living space, this home is sure to please anyone’s dark side. We’re unsure of where Kat is going, but we assume it’s somewhere with new husband—DJ and producer—Deadmau5, who proposed to the tattoo queen via Twitter. They wed on August 10 in an underwater-themed wedding, because, why not?
Listed for: $2.5 million
Thursday, October 24, 2013
Central Banks Drop Tightening Talk as Easy Money Goes On
The era of easy money is shaping up to keep going into 2014.
The Bank of Canada’s dropping of language about the need for future interest-rate increases and today’s decisions by central banks in Norway, Sweden and the Philippines to leave their rates on hold unite them with counterparts in reinforcing rather than retracting loose monetary policy. The Federal Reserve delayed a pullback in asset purchases, while emerging markets from Hungary to Chile (CHOVCHOV) cut borrowing costs in the past two months.
“We are at the cusp of another round of global monetary easing,” said Joachim Fels, co-chief global economist at Morgan Stanley in London.
Policy makers are reacting to another cooling of global growth, led this time by weakening in developing nations while inflation and job growth remain stagnant in much of the industrial world. The risk is that continued stimulus will inflate asset bubbles central bankers will have to deal with later. Already, talk of unsustainable home-price increases is spreading from Germany to New Zealand, while the MSCI World Index of developed-world stock markets is near its highest level since 2007.
‘Go Wild’
“We are undoubtedly seeing these central bankers go wild,” said Richard Gilhooly, an interest-rate strategist at TD Securities Inc. in New York. They “are just pumping liquidity hand over fist and promising to keep rates down. It’s not normal.”
Normal or not, that’s been the environment now for five years after monetary authorities fought to protect the world economy from deflation and to hasten its recovery. In the advanced world, central banks drove interest rates close to zero and ballooned their balance sheets beyond $20 trillion through repeated rounds of bond purchases, a policy known as quantitative easing.
The economic payoff has been limited. The International Monetary Fund this month lopped its forecast for global economic growth to 2.9 percent in 2013 and 3.6 percent in 2014, from July’s projected rates of 3.1 percent this year and 3.8 percent next year. It also sees inflation across rich countries already short of the 2 percent rate favored by most central banks.
Central bankers are on guard to keep low inflation from turning into deflation, a broad-based decline in prices that leads households to hold off purchases and companies to postpone investment and hiring.
‘False Start’
“There is a concern at central banks that what we’re seeing is another false start in their economies,” said Michala Marcussen, global head of economics at Societe Generale SA in London. “We now need to see two to three months of better numbers before they’re willing to contemplate an exit again.”
After flirting for months with the idea of curtailing stimulus, the Fed said in September it would continue purchasing $85 billion of bonds a month, citing the need to see more evidence that theU.S. economy will improve.
That came less than two weeks before a 16-day U.S. government shutdown that postponed releases of key data the Fed is relying on to guide its policy decisions. The Fed’s strategy also took a hit from this week’s news that employers added fewer workers to payrolls than projected in September.
The Fed will wait until March before slowing the pace of its third round of quantitative easing, according to the median estimate of economists in an Oct. 17-18 Bloomberg survey.
Same Place
‘If you look at where we are economically, versus where we were a year ago, we’re virtually in the exact same place,” Gary D. Cohn, president of Goldman Sachs Group Inc., said yesterday in a Bloomberg Television interview with Stephanie Ruhle. “So if quantitative easing made sense a year ago, it probably still makes sense today.”
That leaves central banks elsewhere likely to maintain a bias toward easing. Moving to tighten before the Fed is ready to do so would drive up currencies against the dollar, to the detriment of exports, said Derek Holt, vice president of economics at Bank of Nova Scotia in Toronto.
The Bank of Canada, citing “uncertain global and domestic economic conditions,” yesterday omitted language it used in previous decisions referring to the expected “gradual normalization” of its benchmark rate, now at 1 percent.
‘Low Level’
The Riksbank kept its rate at 1 percent today and said it sees it at 1.15 percent in the fourth quarter next year, versus 1.25 percent in September. “The repo rate needs to remain at this low level until economic activity is stronger and inflation rises,” it said. Norway left its benchmark rate at 1.5 percent today, a month after signaling it will move toward tighter policy as house prices and consumer debt hover at record levels.
The Philippines also held its rate at a record low 3.5 percent to support Southeast Asia’s fastest growing economy as inflation stays within the central bank’s targeted range.
“There’s an easy-money bias across global central banks that probably will persist until about March or April,” said Holt. “The Fed’s decisions complicated the exit strategies for a lot of central banks.”
If the Fed’s delay extends the decline in the dollar, then the Bank of Japan and the European Central Bank also are more likely to add fresh stimulus, Fels said in an Oct. 20 report. The ECB is likely to offer banks another round of cheap, long-term loans in the first quarter, while the BOJ may ease more to offset a 2014 consumption tax increase, Citigroup Inc. economists said in a report yesterday.
Emerging Markets
The dollar has declined 1.1 percent against a basket of 10 leading global currencies in the last month, according to the Bloomberg U.S. dollar index.
Some central banks in emerging markets are already acting. Chile unexpectedly lowered its benchmark rate by a quarter point to 4.75 percent on Oct. 17, pointing to weaker growth, inflation and the global outlook. Israel surprised analysts on Sept. 23 when it cut its key rate a quarter point to 1 percent, the lowest in almost four years.
“With the dollar much weaker in recent days and weeks, you’ll see central banks that were reluctant to ease start to do that now,” said Thierry Wizman, global interest rates and currencies strategist at Macquarie Group Ltd. in New York. “They can be less worried about capital flight if the Fed isn’t tightening policy, and the strength in their currencies is probably imparting some disinflation into their economies, giving them a window to cut rates.”
Forward Guidance
Hungary, Latvia, Romania, Serbia, Sri Lanka, Egypt and Mexico have also eased since the start of September although Indonesia, Pakistan, Uganda and India tightened, with the latter softening the blow by relaxing liquidity curbs in the banking system at the same time. Chinese policy makers have also been draining cash from the financial system.
Even those central banks with limited room to act are using so-called forward guidance to deter investors from betting on an imminent increase in rates. The ECB vows to keep its main rate at 0.5 percent for an “extended period” and the Bank of England is pledging to maintain its benchmark at the same level at least until unemployment falls to 7 percent, which it doesn’t expect to happen for three years. The Bank of Japan is trying to expand its monetary base by 60 trillion to 70 trillion yen ($720 billion) to bring inflation up to 2 percent.
Fed Policy
The Fed also depends on forward guidance as a policy tool. Officials have repeated in every policy statement since December that their target interest rate will remain near zero “at least as long as” unemployment exceeds 6.5 percent, so long as the outlook for inflation is no higher than 2.5 percent.
“It’s hard to look around and see much changing on the rate front,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York, who forecasts the average interest rate in developed economies to hold close to the current 0.40 percent for another year.
The cheap cash may come at a price that policy makers will have to pay later if it inflates asset bubbles. Germany’s Bundesbank said this week that apartments in the country’s largest cities may be overvalued by as much as 20 percent. In the U.K., BOE officials are rebutting suggestions of a housing bubble. Asking prices in London jumped 10.2 percent in October from the prior month, Rightmove Plc said Oct. 21.
BOE Governor Mark Carney today unveiled a revamp of the central bank’s money-market operations to widen access and cut the cost of liquidity insurance to the financial system. The BOE will expand the range of collateral it accepts in its facilities and offer money for longer periods on cheaper terms, Carney said in a speech in London.
Cool Demand
Swedish and Norwegian property markets are also proving a concern to their central bankers, and policy makers in New Zealand and Singapore have already sought to cool demand. Meantime, U.S. stocks are heading toward the best year in a decade with about $4 trillion added to U.S. share values this year.
“The bubble conditions are going to remain in place,” Michael Ingram, a market strategist at BGC Partners LP in London, told Bloomberg Radio’s Bob Moon yesterday. “We could well see further stimulus.”
For now, such concerns are being overridden by a need to enhance economic expansion. The U.S. unemployment rate, at 7.2 percent in September, is still only the lowest since November 2008 and joblessness is 12 percent in the 17-nation euro area.
“Whatever their official mandates, central bankers are supposed to safeguard a nation’s real income,” Karen Ward, senior global economist at HSBC Holdings Plc in London, said in an Oct. 21 report. Labor markets from the U.S. to U.K. suggest “we shouldn’t fear a rapid withdrawal of global liquidity any time soon.”
Half of Nation's Foreclosed Homes Still Occupied
NEW YORK (CNNMoney)
Foreclosure sounds like the end of the line, but actual eviction can take months or years -- even after the bank has repossessed a home.
RealtyTrac estimates that 47% of the nation's foreclosed homes are currently occupied. The percentage actually tops 60% in some hot housing markets, like Miami and Los Angeles.
Those still living in repossessed homes include both former owners and renters. Either way, their time in the homes is mortgage and rent free.
To arrive at its estimate, RealtyTrac compared its database of foreclosed homes with postal records showing whether mail was still being collected and whether change-of-address forms had been filed.
Even when occupants leave voluntarily, old owners typically take about two months to vacate.
With renters, it can take a year or more. "If someone has a bona fide rental agreement, we have to abide by that," said Amy Bonitatibus, a spokeswoman for JP Morgan Chase.
One issue, according to Wells Fargo spokesman Tom Goyda, is that the eviction process can take months as it winds through the legal process. The timing varies widely based on local laws and the backlog of cases in individual courts.
Goyda said the bank has been trying to speed up the process by offering cash to prompt occupants to leave.
In addition, some states, like Alabama and Utah, have so-called redemption periods of up to a year during which former owners can get their home back if they can find the means to pay off their mortgages.
And banks may be in no rush to kick people out. They will take their time in markets with a lot of homes for sale and depressed prices. Plus, letting homeowners stick around can help protect homes from abuse.
"Although one thinks lenders take losses by not moving evictions forward, they're still faring better by keeping the properties occupied," said Pauliana Lara of the Consumer Action Law Group in Los Angeles, which works with homeowners to fight foreclosures. "Many foreclosed homes get vandalized or squatters move in." 
Families Blocked by Investors From Buying U.S. Homes
Home purchases by institutional buyers reached a record high in September and all-cash buyers accounted for almost half of sales as investors responded to rising demand from renters. Institutional purchases accounted for 14 percent of sales, according to a report today from RealtyTrac. That was the highest share since the real estate data firm began in 2011 to track transactions by that group, which it defines as buyers of 10 or more homes a year. All-cash sales rose to 49 percent from 40 percent in August and 30 percent a year earlier, a sign that rising mortgage rates since May have kept some people out of the market and that smaller investors are stepping up purchases.
“Both investors and traditional buyers are trying to snap up cheap homes before prices go higher, but the investors have the advantage of paying cash and not having to go through a convoluted mortgage process,” said Michael Hanson, a former Federal Reserve economist now working for Bank of America Corp. in New York. “People are being bid out of some markets because of investor demand.”
Wall Street’s influence on the residential real estate market is growing as the biggest investors, Blackstone Group LP and American Homes 4 Rent, have together bought about 60,000 homes across the country to benefit from low prices and rental demand from millions of former home owners who have lost properties through foreclosures.
The homeownership rate declined to 65 percent in the first half of this year from a peak of 69.2 percent in June 2004. The level is expected to stabilize at about 63 percent, adding more than 2 million households to the rental population, according to Morgan Stanley analyst Haendel St. Juste.
Pendulum Swings
Families are still able to live in single-family homes with a yard for their kids to play in, said Daren Blomquist, a RealtyTrac vice president. However, they’re sending their money to investor-landlords, rather than paying off a mortgage.
“The pendulum is swinging too far from the direction we saw during the run-up to the mortgage crisis,” Blomquist said in an interview. “Then, we tried to make everyone an owner. Now, we have people who have the income to pay a mortgage and have the desire to own a home who are stuck being renters.”
Blackstone has led hedge funds, private-equity firms and real estate investment trusts raising about $20 billion to purchase as many as 200,000 homes to rent after home prices plunged 35 percent from the 2006 peak.
Mortgage Rates
The ability of investors and cash buyers to outbid traditional home purchasers has grown after a spike in mortgages rates that began in May. The average fixed rate for a 30-year home loan jumped almost a percentage point to a two-year high of 4.58 percent in mid-October, according to data from Freddie Mac.
The average rate for a 30-year fixed mortgage dropped to 4.13 percent this week. It’s risen from 3.35 percent in May.
“There’s a tremendous pressure on inventory in the areas that are being dominated by investors,” said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage website. “People end up wanting to buy a home, but they can’t. All the homes have been converted into rentals.”
Daryl Dennis spends his days helping investors do that. A general contractor for Waypoint Homes, an Oakland, California-based real estate fund that buys more than 50 homes a month in the metro Atlanta market, Dennis oversees plumbers, painters and landscapers on about 20 single-family projects a month.
“The investors are ruling the market,” said Dennis, interviewed by phone while on the job at a project in Canton, Georgia, outside Atlanta. “The little guy can’t win if he’s up against a deep-pocket investor.”
Biggest Chance
The biggest chance for profit comes from buying bank-owned properties that often are sold in bulk, Dennis said. About 10 percent of September sales nationwide were properties that had been repossessed in foreclosures, according to the RealtyTrac report.
Las Vegas had the highest share of those sales, at 21 percent. In the California cities of Riverside and San Bernardino the share was 20 percent of the market, in Cleveland it was 19 percent and in Phoenix it was 18 percent, according to the report.
Atlanta was the top market for institutional investors, who accounted for 29 percent of all home purchases there in September, according to the RealtyTrac report. Las Vegas was second at 27 percent, followed by St. Louis at 25 percent, Jacksonville, Florida, at 23 percent, and Charlotte, North Carolina at 17 percent.
Flipping Houses
Adam Luesse is an investor in St. Louis who paid cash for five houses he turned into rentals. He also buys properties to renovate and resell at a profit, called flipping. He planned to list his latest flip, a two-bedroom home on the west side of the city, for sale today for $140,000.
“When financing became difficult, that pushed the entire lower tier of buyers into rentals,” Luesse said. “They either don’t have the down payment or they don’t have the credit score.”
Nationally, the median monthly rent was at an all-time high of $735 in the second quarter, according to U.S. government data. The rental vacancy rate, which measures the number of empty units, fell to 8.2 percent, the lowest since the first quarter of 2001.
The median price of a distressed residential property, meaning a property in foreclosure or a home already seized by a bank, was $112,000 in September, a discount of 41 percent from the $189,000 median price of a non-distressed property, according to the RealtyTrac report.
Foreclosed Properties
About 49 percent of homes were bought with cash, up from 40 percent in August and 30 percent a year earlier, the report said.
Investor demand for foreclosed homes has driven up prices at a pace not seen since the boom that ended in mid-2006. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006.
While real estate values nationally are still 21 percent below their peak, investors’ mass purchases are helping push up values in cities hardest hit by the property crash, with a 27.5 percent surge in Las Vegas and gains of 18.5 percent in Atlanta in July from a year earlier.
“The housing market is tilting in favor of deep-pocket institutional investors, especially in cities that were hard-hit with foreclosures,” said RealtyTrac’s Blomquist “These guys will pay as much as they need to get a property and that’s squeezing out families looking for a home to live in.”
To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.
Wednesday, October 23, 2013
September Demand Was Strong Despite Rate Hikes
Despite fears that higher mortgage rates could cripple a recovering housing market, the vital signs for housing remained remarkably good in September, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
While the new HousingPulse results reveal a continuing slowdown in homebuyer traffic among all groups - current homeowners, first-time homebuyers and investors - that started last spring, other indicators suggest the housing market was nevertheless quite strong in September.
For example, the time-on-market for non-distressed properties, a key driver of home prices, was at a four-year low of just 8.6 weeks in September, according to HousingPulse. This compared to 10 weeks or more during the spring months when mortgage rates were close to near-record lows.
The number of purchase offers on non-distressed properties, a strong indicator of housing demand, stood at a three-month average of 2.2 in September. This was off just slightly from the four-year high of 2.3 offers seen in the early summer months, HousingPulse results showed.
“The emerging slowdown in home purchases appears to be largely seasonal. September is yet another month where higher mortgage rates have had only a moderate effect on the housing market,” said Thomas Popik, research director for the HousingPulse survey.
Another key indicator of the strength of the housing market, the sales-to-list price ratio for non-distressed properties, was 97.5 percent in the September HousingPulse results. A year earlier, the sales-to-list price ratio was 96.1 percent.
The housing market also is continuing to see fewer distressed properties. The HousingPulse Distressed Properties Index, which reflects the share of home purchases involving real estate owned or short sales, fell to a four-year low of 24.6 percent in September based on a three-month moving average. A year ago the index stood at 35.7 percent.
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves approximately 2,000 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.
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