My Real Estate Blog

Home Prices Decline 1.2%, Smallest Drop in Two Years

By Kathleen M. Howley

Feb. 25 (Bloomberg) -- U.S. home prices fell 1.2 percent in the fourth quarter from a year earlier, the smallest loss in two years, as a federal tax credit for homebuyers boosted demand.

Prices were down 0.1 percent from the third quarter, the Federal Housing Finance Agency said today in a report. The year- over-year drop was the smallest since a 1.1 percent decline in 2007’s fourth quarter, the Washington-based agency said.

Government stimulus programs including the homebuyer tax credit and a Federal Reserve program to buy mortgage-backed bonds lifted the real estate market in the closing months of 2009. A sustained recovery in housing faces hurdles that include mounting foreclosures and a weak labor market, said Thomas Lawler, a former economist with Fannie Mae who now is an independent housing consultant in Leesburg, Virginia.

“The government programs have helped to stabilize housing, but the market is still unbelievably fragile,” Lawler said in an interview. “Nobody knows what’s going to happen to all those properties in the foreclosure process.”

Prices in December slipped 1.5 percent from a year earlier. They rose 0.7 percent in the region that includes California, and 0.3 percent in the area of the country that includes Texas. Prices in New York, New Jersey and Pennsylvania fell 0.4 percent, while New England states had a 1 percent decline.

Credit Extension

Sales of existing homes jumped 14 percent in the fourth quarter to an annual rate of 6.03 million from 5.29 million in the previous three months, the National Association of Realtors said in a Feb. 11 report. The inventory of homes on the market dropped to 3.29 million in December, the lowest level in more than three years, according to the Chicago-based trade group.

President Barack Obama in early November extended the tax credit beyond its original Nov. 30 deadline. The new version keeps the $8,000 first-time homebuyer benefit and makes a smaller credit available to some move-up buyers. To qualify, buyers must have a signed contract on a property by the end of April and purchase it before July 1.

The Fed began buying $1.25 trillion of bonds backed by home loans last year in an effort to drive down fixed mortgage rates. The rate dropped to an all-time low of 4.71 percent during the first week of December, according to McLean, Virginia-based Freddie Mac. The program ends next month.

The U.S. economy grew at a 5.7 percent annual pace in the fourth quarter, the fastest in six years. Industrial production rose 0.9 percent in January as factories churned out more consumer goods and equipment, according to Fed data. The increase followed a 0.7 percent gain the prior month.

‘Quite Weak’

The jobless rate fell to 9.7 percent in January after reaching a 26-year high of 10.1 percent in October, according to the Bureau of Labor Statistics. It probably will average 9.8 percent in 2010, according to the median estimate of 66 economists surveyed by Bloomberg. That would be the highest yearly rate in government records dating to 1948.

“The job market remains quite weak,” Federal Reserve Chairman Ben Bernanke said in Congressional testimony yesterday. More than 40 percent of the unemployed have been out of work for more than six months, double the year-earlier share, he said.

Today’s report from the FHFA measures values using repeat data on individual properties without providing specific prices. The U.S. median home price was $172,900 in the fourth quarter, according to the National Association of Realtors.

California New-Home Production Rebounds in January, CBIA Announces

February 24, 2010

SACRAMENTO – New-home building in California rebounded in January from a year earlier, but homebuilding officials cautioned against calling it a recovery as the numbers for January 2009 were extremely low, the California Building Industry Association announced today.

“It’s great to see some positive activity in the homebuilding industry, but given the fact that we’re comparing this month to one of the lowest months on record doesn’t exactly bring a housing recovery to mind,” said Liz Snow, CBIA’s President and CEO. “Still, it’s nice to see some increase in homebuilding activity.”

According to statistics compiled by the Construction Industry Research Board (CIRB), permits were pulled for 2,979 total housing units in January, up 48 percent from the same month a year ago but down 18 percent from December. Permits for single-family homes totaled 1,908, up 50 percent from January 2009 but down 28 percent from the previous month, while multifamily permits totaled 1,071, up 45 percent from a year ago and up 11 percent from December.

Ben Bartolotto, Research Director for CIRB, noted that the monthly decreases from December to January were typical as January is usually one of the weakest months for housing starts. He also noted any enthusiasm for the year-over-year increases seen in January should be tempered with the fact that the numbers for January 2009 were extremely low and posted the lowest annual rate on record.

CIRB is forecasting a modest recovery for 2010 with permits being pulled for 52,000 total units, up slightly from the record-low 36,289 permits pulled in 2009.

Snow added that in order to capitalize on the strong start for 2010, lawmakers should enact the new homebuyer tax credit proposed under Governor Schwarzenegger’s jobs package as soon as possible to keep the positive momentum going.

“The tax credit proposal will give a much needed shot in the arm to the housing industry and help build on this momentum by stimulating the housing market, clearing out inventory, and reigniting job-generating home construction,” said Snow. “Recent studies show that a healthy housing industry is a prolific job and economic generator, contributing hundreds of thousands of jobs and billions of dollars to the state’s economy each year. Enacting the credit would go a long way towards putting more people back to work and jumpstarting a recovery in our overall economy.”

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The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals.

To reach distressed borrowers located outside of the initial target areas, Freddie Mac also is launching a separate Borrower Help Network consisting of eight national and local non-profit organizations.  Together they are launching a national phone campaign to make contact with delinquent Freddie Mac borrowers who have stopped responding to their lenders. Counselors will provide free counseling, and help borrowers explore and understand their mortgage modification options.

CAR-California Association Of Realtors