Jim Guido's Blog

A closely watched survey reported Tuesday that U.S. single-family home prices declined in September. This report  highlight’s  the fragility of a market as it struggles to get back on its feet.

As reported by The S&P/Case Shiller composite index, 20 metropolitan areas fell 0.6 percent from August on a seasonally adjusted basis.

Prices in August were also revised to show a decline of 0.3 percent after originally being reported as unchanged.

The broader trend here is that it appears that home prices over the last few months continue to get weaker.

This ties in with the current consumer attitude that has gotten a lot of more negative, particularly when it comes to making a long-term commitment, such as buying a home.

The index has leveled off in recent months and analysts are hoping the market is at least stabilizing.

Also over the last year home prices in most cities drifted lower, but the plunging collapse of prices seen in 2007-2009 appears to be behind us. Any chance for a sustained recovery will probably need a stronger economy.

The  report also pointed out that third quarter prices were down 1.2 percent from the previous quarter on a seasonally adjusted basis and were down 3.9 percent from the third quarter a year ago.

Compared to a year ago, price declines in the 20 cities continued to improve in September and were down 3.6 percent after a year over year decline of 3.8 percent the month before.

The California Association has reported that California’s housing market displayed a glimmer of recovery during October as pending sales increased for the sixth consecutive month.

The number of open escrows, a measure of future sales activity, jumped 11 percent in October from a year earlier and rose 3 percent from September.

It appears that home sales are likely to be up in the next couple of months. The report states that they are  not anticipating a decline in sales but they’re  not looking for any sort of a dramatic increase.

Home sales statewide this year should be in the 490,000 range and  California is grinding through sales at a pretty decent clip.

The association’s report came on the same day that the National Association of Realtors reported an annualized sales rate of 4.97 million homes in October, up 1.4 percent from September and 13.5 percent from a year ago.

Sales in the west rose 4 percent to an annual pace of 1.19 million in October, which is 15.5 percent higher than a year earlier.

It was also reported that sales in California increased 8.5 percent from a year earlier and rose 1 percent from September to an annualized rate of 493,240 properties.

It was also noted that the conforming loan limit just went back up to $729,500, which could stimulate activity at the higher end of the market.

Another good sign is that some lenders are moving quicker in approving short sale transactions.

Sales of distressed properties also appear to be stabilizing, according to the association.

Last month, foreclosed or abandoned properties accounted for 44.8 percent of sales, up from 44.5 percent in September but down from 46.1percent a year earlier.

The number of Americans who bought previously occupied homes fell in September and home sales are on pace to match last year’s dismal figures which was the worst in 13 years.

As reported by The National Association of  Realtors on Thursday home sales dropped 3 percent last month to a seasonally adjusted annual rate of 4.91 million homes. That is well below the 6 million that economists say is consistent with a healthy housing market.

The recent housing market has been hobbled by foreclosures, weak demand and falling home prices. As reported, last years  4.91 million previously occupied homes sold was the lowest level since 1997.

First-time home buyers accounted for 32 percent of all sales which was the same as August. First-time buyers are critical to a housing recovery because their purchases of low and moderately priced homes allow sellers to move up to more expensive homes.

Homes at risk for foreclosure moved down to 30 percent of sales, from 31 percent in August. Many of the sales went to investors, who are buying homes under $100,000. Their purchases made up 19 percent of all sales last month, down slightly from 22 percent in August.

With the large number of unsold homes and foreclosures on the market it is sending prices lower and hurting sales analysts are reporting.

Many people are reluctant to purchase a home even with the lowest mortgage rates in history and that has a impact on sales figures. Many economists say home prices will keep falling, by at least 5 percent, through the rest of the year. Many forecasts don’t anticipate a rebound in prices until at least 2013.

With the high rate of foreclosures it has made re-sold homes much cheaper than new homes. The median sales price dropped nationwide to $165,400 in September from August. A new home is now roughly 30 percent higher than the price for a previously occupied home which is almost twice the normal markup.

This trend is even affecting homes that are under contract and near closing as they are falling apart at the last minute. Contracts cancellations also remained high in September, with 18 percent of Realtors saying they had at least one contract scuttled. That’s unchanged from August and a record high.

Homes sales fell across most of the country. In the Northeast, sales rose 2.6 percent. But they declined 0.9 percent in the Midwest, 2.6 percent in the South and 8.8 percent in the West.

The glut of unsold homes increased slightly in September to 3.48 million homes. At last month’s sales pace, it would take 8.5 months to clear those homes. Analysts say a healthy supply can be cleared in six months.

California home sales and median price are predicted to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2012 California Housing Market Forecast”.

The forecast for California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.

Despite the run of unforeseen global events in the first half of this year that slowed the overall economy, 2011 home sales are projected to essentially remain unchanged from last year. Looking ahead, the fundamentals of the housing market – such as low mortgage rates, high housing affordability, and favorable home prices – are expected to continue, but at this point, a strong housing recovery will depend on consumer confidence, job creation, and the availability and cost of home loans.

Discretionary sellers will play a larger role in next year’s housing market and those who held off selling in 2011 may list their homes in 2012, thereby improving the mix of homes for sale compared with the last few years.  Additionally, distressed sales will remain an important segment of the overall market as lenders continue to work through the foreclosure process.

The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast.  Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.

2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market.

“The most likely scenario is for the modest recovery to continue, and this should push sales up slightly next year by 1 percent and maintain levels that are significantly higher than those recorded during the depths of the housing downturn.

“The wild cards for 2012 are many, including federal, fiscal, monetary, and housing policies; the contentious political climate during an election year; and the strength of the U.S. economic recovery,” said Appleton-Young.