Housing Market at a Glance: Signs the bottom is now.

Signs of Stabilizing Housing Market

Based on First Quarter 2007, Housing data shows a broad stabilization. Essentially, the existing-home market is stabilizing in a broad cyclical trough and moving in the right direction, with a modest gain from the fourth quarter. During the real estate boom, conditions changed fairly rapidly. Observers now need to be a bit more patient to see a slow, gradual recovery, which should start in the second half of this year. In the West, the existing-home sales pace of 1.28 million units fell 11.9 percent from the first quarter of 2006. After Wyoming, the best performance in the region was in Colorado where sales rose 0.8 percent from a year earlier. The median existing single-family home price in the West was $336,200 in the first quarter, down 1.8 percent from a year ago. The strongest increase in the West was in the Salem OR area, at $221,600, up 15.6 percent from the first quarter of 2006.

Housing Projections NationallyNational Association of Realtors expects the following in home sales this year:

• Existing-home sales are likely to total 6.29 million this year and 6.49 million in 2008, compared with 6.48 million last year.


• New-home sales are projected at 864,000 in 2007 and 936,000 next year, lower than the 1.05 million in 2006.


• Housing starts should total 1.46 million units this year and 1.52 million in 2008, down from 1.80 million last year.

If it weren’t for a favorable economic backdrop, housing would probably have a hard landing. As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.”The 30-year fixed-rate mortgage should rise slowly to 6.5 percent by the fourth quarter, NAR predicts. Last week, Freddie Mac reported the 30-year rate was 6.16 percent. We’ve already seen this in comparing March 2007 numbers with April 2007 numbers in Fast Facts.The national median existing-home price is forecast to slip 1 percent to $219,800 this year, and then rise 1.4 percent in 2008. The median new-home price is expected to be essentially unchanged at $246,400 in 2007, and then rise 2.2 percent next year.



New Home Sales Surge in April Nationally

Sales of new single-family homes jumped 16.2 percent in April, the largest increase in 14 years, but the median price fell 11.1 percent, marking the largest one-month decline on record, according to the U.S. Commerce Department.
''What you're seeing is the blue-light special,'' says Pat McPherron, an economist with Moody's Economy.com. ''The only way this market is going to move is by price cutting.''The strength in new-home sales was led by a 27.8 percent increase in the South. Sales were also up in the West by 8.5 percent and in the Northeast by 3.8 percent. In the Midwest, sales fell 4 percent. Meanwhile, April's median new-home price of $229,100 made the record books as the largest-ever month-over-month decline, as well as the biggest year-over-year drop (10.9 percent) since 1970.

Northern Los Angeles County Focus
Home sales decreased 27.8 percent in April in California compared with the same period a year ago, while the median price of an existing home increased 6.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

As of print time, the Southland Regional Association of Realtors, whose area covers San Fernando and Santa Clarita Valleys, has not released April 2007 data. Data from the prior quarter shows that single-family home prices over the quarter have dropped 3.3% versus last March (down 6.4% for the 1st quarter overall) in the Santa Clarita Valley and that inventory increased 14.6% from last year – representing a 5.5 month supply, which is considered a balanced market, where both the buyer and seller have influence on prices and transactions. In San Fernando Valley, prices down 1% versus last March and inventory up 27.6% to a 5.2 month supply.

In the Antelope Valley, the Greater Antelope Valley Association of Realtors notes active listings rose about 67% from May 2006 to May 2007 with an 8% decrease in list price. The latest sold stats available are for First Quarter 2007, showing Units sold decreased 58% 2007 from 2006 and Sales Price increased 4% 2006 to 2007.

Expectations
The LA Times in its article of May 16 states “Southern California home sales plunged to a 12-year low in April, suggesting that the region's real estate slump is far from over.” I believe this conclusion is contrary to the data shown from my discussions with California Assocaition of Realtors economist Robert A. Kleinhenz. His data shows that we are at a nadir in home prices and to expect a strengthening market by 2008.

It shows how hard it is to get good information through all different sources vying for our attention. It sometimes frustrates me to see premature conclusions that are different from how I see the market. But only time will tell.

I have supporting documentation from Dr. Kleinhenz for his statements and the latest trends from the Valleys from Southland Regional Association of Realtors available – just email me.

Mortgage rates are already showing increases through May (see Fast Facts column), but they are still at historically low levels. The Federal Reserve, which sets short-term interest rates, are meeting at the end of June. Most analysts believe they will not change rates at least through the fourth quarter of 2007. Remember Federal Reserve rates do not directly affect mortgage rates, which are adjusted in step with U.S. Treasury Bonds and other bond rates.

Courtesy: National Association of Realtors, REALTOR® Magazine Online, The New York Times (05/25/07), Los Angeles Times (05/16/07)