There's good news for the local housing market for the month of October; Things didn't get worse. Sales prices, the number of closings, inventory and other significant statistics all measured about the same as previous months, if not better by the slightest of margins in some cases. Here's a rundown of the positive and the negative, drawn from statistics provided by the Greater Albuquerque Association of Realtor's Web site, www.ambr.org.
Sales prices
The good: Where sales prices for existing, detached homes had been falling month over month for most of the year, October saw a creep upward. The median sales price - the price at which half the homes sell for more and half for less - was $189,417 compared to September's $189,750. The bad: That's still a 5 percent decline in price from October 2007.
Homes on the market
The good: The number of homes for sale dropped from 6,181 in September to 5,962 last month. Buyers continue to have an abundance of choice. The bad: That's still about a nine-month supply of homes, meaning the market remains saturated. Buyers continue to be hesitant, if not near paralysis.
New listings
The good: Sellers placed 1,411 home up for sale in October, down from 1,502 in September, 1,668 in August and 1,882 in July - meaning fewer homes are being added to the already high inventory. The bad: Fewer sellers are entering the market. (However, that is typical for this time of year.)
Days on the market
The good: The average number of days it takes for a home to sell has dropped to 72, down from 74 the previous two months. The bad: That's hardly a drop, and those numbers remain at historic highs. (Days on the market are calculated from the time the home is up for sale to the time a sale is pending; in previous years it was calculated from the day placed on the market to the day of closing.)
Closings
The good: The number of closings are only down slightly, and it's normal for sales to fall off in the colder months. The bad: Closings are down. There were 511 sales of existing, detached homes in October, down from 604 in September.
Albuquerque Journal - November 9, 2008
BURST BUBBLE
Speculators make up 20 percent of foreclosures in the metro area, which leaves us faring much better than other places.
Story by Richard Metcalf
Homeowners facing foreclosure have doubled in the Albuquerque metro area over the past year, but not all of them stand to lose the roof over their heads. One in every five houses going into foreclosure appears to be owned by real estate speculators, according to Irvine, Calif.-based RealtyTrac. They bought the houses on speculation that an easy profit could be made on a resale. Nationwide, speculative home buying was much more common. Close to one out of every three houses going into foreclosure appears to be speculator-owned, RealtyTrac reported. The Albuquerque metro ranked 86 out of 100 cities tracked by RealtyTrac in the third quarter, with one out of every 415 households in some stage of foreclosure. A year earlier in the third quarter of 2007, the rate was much better at one in every 880 households. "We have seen an increase in our foreclosure numbers from the start of the year," said Glenn Wertheim president and CEO of Albuquerque-based Charter Bank and Mortgage. "But they're coming up from really historic low levels." Bill Verant, director of New Mexico's Financial Institutions Division, said, "We're not a hot area where you typically see speculation although, yes, we have had some. All that speculation and investor activity is concentrated in those states where we see the problems now." Eighteen of the top 20 cities for home foreclosures were in the Sun Belt states of Arizona, California, Florida an Nevada. Home prices in most of those 18 cities doubled between 2002 and 2006 - the housing bubble years - driven in part by speculative buying. RealtyTrac said 20 percent of the homes going into foreclosure in the metro have owners with different addresses in the third quarter - an indication that the houses are owned by speculators. As a result, roughly 167 of the 836 homes with foreclosure filings were likely speculator-owned in the metro during the third quarter. In the third quarter of 2007, the metro saw only 372 houses with filings. Speculators bought the houses during the bubble, when demand was high and prices were climbing. Their plan was basically to turn around and sell the house for a profit. The plan went awry when the mortgage meltdown turned critical in mid-2007. Nationwide, an average of 31 percent of the houses in foreclosure had owners with different address, the research firm said. The speculative buying is generally believed to have started in California, then moved east to fast-growing cities like Las Vegas, Nev., and Phoenix as investors searched for lower home prices with potential for big jumps in value. "They thought, "There's too much competition here, we need to find a new market,"" said Jim Folkman of the Home Builders Association of Central New Mexico. "They came to Albuquerque, but fortunately not long before the market collapsed. They didn't do too much damage." Local home prices rose at less than half the pace of the so-called "hot" markets in 2002-06. So when the housing bubble burst, the metro - as well as New Mexico as a whole - escaped the housing calamity playing out elsewhere in the Sun Belt. "The good news for New Mexico is we didn't see the rate of pace of high (home) appreciation seen in some of the hotter markets," Verant said. Bad in California Foreclosure filings - default notices, auction sale notices and bank repossessions - were up 71 percent nationwide in the third quarter compared to a year earlier, RealtyTrac reported. One out of every 165 households across the country saw some sort of foreclosure filing between July and September. The national rate, however, is heavily weighted by states like California, which alone accounted for 27 percent of the foreclosure activity in the third quarter, according to RealtyTrac. One in every 62 households saw a foreclosure filing. Florida was second with nearly 17 percent of the activity in the third quarter. One in every 67 houses saw a filing. California and Florida, along with Arizona and Nevada, saw home prices escalate amid loose mortgage lending during the housing bubble. Two other states with high foreclosure rates, Michigan and Ohio, face serious economic woes and high unemployment. All together, those six states accounted for more than 60 percent of foreclosure activity in the third quarter, RealtyTrac said. New Mexico is near the opposite end of the spectrum, ranking 38 among the 50 states for having high foreclosure rates. New Mexico had one out of every 719 households in some stage of foreclosure in the third quarter. Home values fall Cities with high foreclosure rates, particularly in the Sun Belt, have one thing in common: dramatic drops in home values. The California city of Stockton, a two-hour drive west of the Bay Area, has become a poster child for the housing bubble. The city of roughly 300,000 people had the highest foreclosure rate in the country with one out of every 27 households in the process during the third quarter, RealtyTrac said. During the 12 months ending in August, single-family median home prices in Stockton dropped 25 percent, according to the most recent California Building Industry Association repot. A similar scenario is playing out in the Phoenix metro area, where one out of every 47 households was in the foreclosure process during the third quarter. Filings had tripled from the third quarter of 2007 to the third quarter of 2008. At the same time, the median sales price of a single-family home dropped 37 percent in the city of Phoenix, 29 percent in Mesa and 23 percent in Scottsdale, according to Arizona State University's Realty Studies. The biggest problem with dropping sales prices is that a homeowner can end up owing more on his or her mortgage than the house is worth. The Albuquerque metro's residential market is seeing some of the same downward pressure on home prices. The median sales price of an existing single-family house dropped 5.4 percent to $193,025 in the third quarter compared to the same period a year earlier, according to the Greater Albuquerque Association of Realtors. Median means half of the houses for more and half for less. This year's decline in median home price is the first time since 2000.
Albuquerque Journal - October 26, 2008
Sellers shouldn't pull down their for-sale signs when fall hits
Agents say people buy year-round
By Brendel Hightower Detroit Free Press
DETROIT - Home sellers usually share this belief about fall: As the leaves come down, so should their For Sale signs.
But some real estate agents say removing a home from the market could be a mistake.
"Buyers don't have a month when they say they're going to buy. They buy when they need to buy, and that need happens 12 months out of the year," said Glen Silvenis of Re/Max Crossroads in Belleville, Michigan.
Agents say fall often brings out the more serious lookers who need to find a home right away. Additionally, there may be less competition because many sellers aren't willing to stick it out through fall and winter.
And with slipping home values, sellers run the risk of fetching a lower price for their home if they take it off the market and relist in the spring.
Agents say sellers should use fall as a time to regroup.
For starters, they should look at the price of their home - and whether it is competitive.
"Take a good, hard, honest look at what's on the market right now. You want your house to be the best value," said Patricia Phillips of Real Estate One in Southfield, Michigan.
Dana Johnson, an economist from Comerica Bank, agrees, noting that the economy will continue to be soft nationwide.
"You have to price things realistically," he said. "This continues to be a buyer's market."
Sellers should also use the off season to their advantage. Putting up fall decorations - like a wreath on the door - and setting a few mums on the porch can bolster a home's curb appeal, agents say.
Fall is also an ideal time to get rid of clutter and embark on self-improvement projects neglected during spring and summer. Agents suggest sellers tear down old wallpaper, update the carpet, paint and do a thorough cleaning. In pricier homes, sellers should consider higher-end upgrades like adding granite counter tops, wood floors and ceramic tiles.
Forbes.com - September 29, 2008
Where Home Prices Are Likely To Rise
Believe it or not, in the future people will be buying and selling homes. Some of them will even make a profit.
It's not so crazy an idea. Consider Albuquerque, N.M. The mid-sized Southwestern city has experienced housing price declines since a peak in the third quarter of 2007, job growth has been flat, and housing starts are expected to fade by 45% through the end of 2008. Nevertheless, it's a city that home builders and economists are bullish about for 2010 and beyond.
According to analysts at Moody's Economy.com, Albuquerque's job growth through 2012 is projected at an average annual rate of 1.6%, fueled in large part by its low costs and local business expansion. Housing starts in the city are expected to reverse course in 2009, growing by 26.6%, according to the National Association of Home Builders (NAHB). This means builders have high hopes for 2010 and 2011, when those homes will be completed and on the market.
It's the same story in several other cities: more tough times to come in the short term, but potential for a recovery and a rise in prices in the long term.
Behind The Numbers To determine where house prices are expected to rise next, Forbes.com looked at projections for housing starts from the NAHB and job-growth figures from Moody's Economy.com, for the 100 largest metro areas in the U.S. The estimates are based on the cost structures of business in the respective cities and the composition of the local economies.
Housing start projections from the NAHB may seem like wishful thinking. Trade-association economists often view their own industry through rose-colored lenses. The National Association of Realtors (NAR), for example, has developed a reputation for its positive outlooks despite negative numbers.
But the NAHB data are filled with laggards, signifying some realistic thinking. Housing starts in Las Vegas are expected to drop by 32% in 2008 and actually get worse in 2009, falling by a further 43%. In overbuilt, highly leveraged Phoenix, starts are predicted to fall 50% this year and descend another 11% more in 2009.
Because houses take six months to two years to build, that means home builders aren't expecting profits in the Vegas or Phoenix market until past 2011.
"These are some of the most overbuilt markets," says Robert Denk, an economist at the NAHB. "There are some markets that got really out of hand and they're going to be in trouble for a couple years still." He cites Cape Coral, Fla., as the poster child of overbuilding exuberance. "They built 10 years of housing in two years."
The prognosis isn't as bad elsewhere.
Texas On The Rise? Centex, one of Texas' largest homebuilders, has been stung by overextension into Michigan and Colorado, as well as big bets on the vacation-home market in Texas. In July, the builder reported losses of $150 million. There's a bright spot, however.
San Antonio and Austin, Texas, have largely avoided the real estate crash, with price increases of 2.5% and 4.1% in year-over-year terms, respectively, according to the NAR. This is driven in part by the fact that the two markets are expecting building slowdowns of 24.7% and 28.2%, respectively, through the end of the year, as home builders are bearish about the remainder of 2008 and 2009 in the sales market or cannot find financing. Builders as a whole are taping their wounds and cutting back production, adopting a wait-and-see approach to home prices in the coming year.
But for the start of 2010 and into 2011, builders expect a more vibrant market for sellers. For homes built in 2009, which would come off the conveyor belt in 2010 and 2011, the NAHB forecasts a 9.6% increase in Austin and a 20.9% increase in San Antonio above 2008 levels. Much of that has to do with expected job growth in all non-farm sectors.
Recovery In Obvious Places At this point, it's clear the subprime contagion won't be contained in the next year, based on the acceleration of home price drops and foreclosures nationwide. But when the bad vintages of loans finally come off the books, the cities where prices are expected to rebound are largely those with vibrant economies.
"The logic is pretty straightforward," says Mark Zandi, chief economist at Moody's Economy.com. "People will spend as much on housing as their income will allow them. House prices are very closely tied to household income over the long run when you look at business cycles."
newmexico.bizjournals.com September 11, 2008
Albuquerque Avoids Real Estate Rollercoaster
The stories are plentiful: A California home listed at $7 million finally sells for $3.5. A Florida developer auctions off his completed but vacant condominiums at cost. Family homes sit on the market for months, bearing unrealistic bubble-era price tags.
But according to research done by Avi Shama, a professor at the Anderson School of Management at the University of New Mexico, in the Albuquerque residential market, the highs are not so high, nor the lows so low.
"We have not gone through the yo-yo years of 2005 to 2007," says Shama, the Rutledge Professor Emeritus of Management. "In keeping with the nature of Albuquerque, things go very slowly up and rather slowly down. So, compared to the nation, it's a market without a lot of overhang of houses and, relatively speaking, a healthy demand."
Shama, a real estate afficionado - in his spare time, he's studied real estate law, appraisals and management, as well as tested to become a broker - recently decided to apply several national research techniques to the local residential market.
All four approaches he employed revealed homes in the city are currently overpriced by only about 15 percent (or $36,000 for the average priced home) as compared to their affordability before the real estate bubble and the ensuing housing crisis. This compares to estimates of more than 30 percent for home prices in Phoenix and Las Vegas.
Shama's research was based on approaches used by Columbia University's School of Business and Moody's Economy, using home prices, supply of homes, demand for homes, mortgage rates, income and home rental prices, during the past eight years.
"Even though I used different methods, they all revealed the Albuquerque market was overpriced by the same amount [14 to 17 percent]," says Shama, "which was reassuring that things are not out of hand."
The methodology and results were as follows: Mortgage rates approach = Overpriced by: 16 percent
Historically, the rate for a 30-year first mortgage loan for 80 percent of the purchase price has been 1.6 percent above the prevailing rate of a 10-year U.S. Treasury note. By this standard, today's mortgage rate should be 5.6 percent instead of 6.5 percent, which prospective home buyers are now charged by lenders. (Lenders charge the extra .9 percent to reduce the risk they are taking to make loans in uncertain times.)
This difference translates to an increase of 16 percent in the mortgage rate. Put simply, a buyer buying an average home priced at $240,000, who qualified to get a mortgage for 80 percent ($192,000) before the financial crisis began in 2007, would now qualify for a loan of only $161,280.
Ratio of home prices to per capita income approach = Overpriced by: 17 percent
This ratio results in the number of years of work it takes to earn as much as the cost of a home. The ratio was calculated using home price data from the Greater Albuquerque Assn. of Realtors, and per capita income from census data. In the pre-bubble years of 2000-2003 this ratio was 5.42. During the bubble years of 2004-2007 this ratio averaged 6.36. The difference between the two ratios is .94 years, and means that the average Albuquerque home now costs an additional 11.28 months of work. This means, on average, an Albuquerque home now costs 17 percent more than it did before the bubble.
Ratio of home prices to rent approach = Overpriced by 14 percent
Owner-occupied homes and comparable rented homes are close substitutes. As a result, this ratio shows the number of years of rent money that it takes to recoup the price paid for a home. The smaller the ratio, the more attractive it is to buy rather than rent.
According to RealtyTrac.net, the home price-rent ratio in Albuquerque averaged 12.5 in 2000-2003. It went up to an average of 14.2 in 2004-2007. The difference of 1.7 between the ratios means that home prices in Albuquerque in 2004-2007 were higher by about 14 percent than prices in 2000-2003; a 5 percent decline in home prices in the first two quarters of 2008 did not change this picture, because the ratio was coming down from a high of 15.7 in 2007. In fact, in the peak year of 2007, Albuquerque homes were overpriced by 25.6 percent, compared to home prices in the pre-bubble years.
Supply-demand ratio approach =Time to sale: +2.02 months
This ratio is an indicator of the balance between sellers and buyers. It is widely accepted that a ratio of six, indicating a six month supply of homes, reflects a balance between supply and demand. Any number higher than six suggests oversupply.
According to the Greater Albuquerque Assn. of Realtors, in July, 2007 this supply-demand ratio was 5.36 months, compared with 7.38 months in July, 2008. The difference of 2.02 months means that in 2008, on average, sellers have to wait an additional 2.02 months to sell their homes. To move inventories faster, sellers must reduce prices; so far this year home prices in Albuquerque declined by about 5 percent. By comparison, nationwide the supply-demand ratio is 11 months, suggesting much larger declines may be coming.
"If there's any burst of the bubble here, it will not be severe," Shama says, "because the bubble years were so moderate."
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