Existing-home sales declined on the heels of a strong gain in September as uncertainty and economic concerns increased in October, according to the NATIONAL ASSOCIATION OF REALTORS®.
Existing-home sales—including single-family, townhomes, condominiums and co-ops—fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October from a downwardly revised pace of 5.14 million in September. Sales and are 1.6 percent below the 5.06 million-unit level in October 2007
Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007.
Condominium and co-op sales eased by 1.8 percent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 percent below the 625,000-unit pace a year ago.
Lawrence Yun, NAR chief economist, said consumer hesitation is understandable.
“Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.”
Regional Data
Midwest. Existing-home sales in the Midwest fell 6.0 percent in October to a pace of 1.10 million and remain 9.1 percent below October 2007. The median price in the Midwest was $149,400, down 6.7 percent from a year ago.
—NAR
Sunday
Slow Mortgage Start ...
The federal government's latest effort to help financially distressed homeowners is getting off to a slow start.
Lenders filed just 42 applications to refinance troubled mortgages under the federal Hope for Homeowners program in the two weeks after the program's Oct. 1 launch, according to the Federal Housing Administration. Some estimates have suggested that it could eventually help as many as 400,000 homeowners.
The program allows mortgage companies to refinance delinquent borrowers into affordable, government-backed loans, provided the mortgage company writes down a portion of the loan balance. To qualify for a new loan, homeowners must agree to share future appreciation with the federal government. In addition, the new loan amount -- including a 3% upfront mortgage insurance premium -- can't exceed 90% of the current appraised value, which is likely to mean a significant reduction in the loan balance....more
Lenders filed just 42 applications to refinance troubled mortgages under the federal Hope for Homeowners program in the two weeks after the program's Oct. 1 launch, according to the Federal Housing Administration. Some estimates have suggested that it could eventually help as many as 400,000 homeowners.
The program allows mortgage companies to refinance delinquent borrowers into affordable, government-backed loans, provided the mortgage company writes down a portion of the loan balance. To qualify for a new loan, homeowners must agree to share future appreciation with the federal government. In addition, the new loan amount -- including a 3% upfront mortgage insurance premium -- can't exceed 90% of the current appraised value, which is likely to mean a significant reduction in the loan balance....more
Local real estate outlook...
The Chicago real estate market has moved up in an annual popularity contest, but it still gets a lukewarm reception from investors.
Chicago ranks 10th for commercial and multifamily residential investment in the 2009 "Emerging Trends in Real Estate" survey released last month by the Urban Land Institute and PricewaterhouseCoopers LLP. That's up from 12th in the 2008 survey.
Critics cite a glut in office space and coInvestors are concerned about Chicago's overbuilt condo market, which is having a negative spillover effect on apartments as more condo investors, unable to sell their units, rent them out instead. About 28% said they would buy into the local apartment market.ndominiums as big negatives for the market, while fans like the transportation and infrastructure and the buzz surrounding the city's 2016 Olympics bid.
Respondents gave Chicago a rating of 5.1 on a 9-point scale, down from 5.5 in the 2008 survey and the lowest score since 1994. With the economy heading into a recession and the credit markets locked up, investors gave most big markets lower ratings than they did in the last survey.
Chicago's "not doing great, but it's doing much better than other Midwestern markets," says Jonathan Miller, principal author of the "Emerging Trends" report....more
Crains Chicago Business
Chicago ranks 10th for commercial and multifamily residential investment in the 2009 "Emerging Trends in Real Estate" survey released last month by the Urban Land Institute and PricewaterhouseCoopers LLP. That's up from 12th in the 2008 survey.
Critics cite a glut in office space and coInvestors are concerned about Chicago's overbuilt condo market, which is having a negative spillover effect on apartments as more condo investors, unable to sell their units, rent them out instead. About 28% said they would buy into the local apartment market.ndominiums as big negatives for the market, while fans like the transportation and infrastructure and the buzz surrounding the city's 2016 Olympics bid.
Respondents gave Chicago a rating of 5.1 on a 9-point scale, down from 5.5 in the 2008 survey and the lowest score since 1994. With the economy heading into a recession and the credit markets locked up, investors gave most big markets lower ratings than they did in the last survey.
Chicago's "not doing great, but it's doing much better than other Midwestern markets," says Jonathan Miller, principal author of the "Emerging Trends" report....more
Crains Chicago Business
Saturday
2009 Economic Outlook
The U.S. economy has entered a recession and will contract for the next three quarters, and the recovery, from the second half of 2009, will be tepid. The unemployment rate will peak at 6.7 percent by midyear next year before steadily heading down. However, existing home sales will be rising despite challenging economic times.
The most important factor driving home sales is affordability. With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. This 93 percent of working households (rather than 95 percent during good economic times) respond to incentives. Added measures, from the first-time homebuyer tax credit to a larger number of mortgage loans qualifying to be purchased by Fannie and Freddie and through the FHA program, will further bring homebuyers to the marketplace.
Back in the previous recession, the economy shed nearly 2 million net jobs from 2001 to 2003. All the while, existing home sales rose from 5.2 million to 6.2 million just as jobs were being cut. New home sales likewise rose from 900,000 to 1.1 million. Mortgage rates were falling and housing affordability was rising during these years. The 2 million job cuts were painful, but the economy still had 130 million job hOn the economic front, recession in itself is not a positive for the housing market because there are fewer job holders. But if a recession is accompanied by rising housing affordability, then home sales can trend higher - as is now. A prolonged deep recession, however - certainly a possibility in light of the most severely tested financial market stress since the Great Depression - can dampen consumer confidence and put up barriers to home buying.
An early indication that buyers are responding to incentives was the solid jump in the pending home sales in August to the highest level in over a year. The biggest increases were in areas with rising affordability from sharp reductions in home prices in California, Nevada, and Florida. The expansion will broaden to other markets where home prices have markedly fallen, including Rhode Island, Virginia, and Minnesota. Existing home sales, therefore, will likely breakout from the narrow trading range of 4.8 to 5 million of the past 12 months to 5.2 million by the year end and to 5.4 million in 2009. Even with the improvement, the next year's sales level will still be well below the 7.1 million peak sales achieved with rampant speculative buying in 2005.
The Bottom Line
Put it all together and what do we have? A recovering economy will help consumer and business spending to turn the corner and the economy to move to a self-sustaining pace. But it requires a catalyst to get things started. The tumbling housing market and subprime mortgage defaults have caused financial markets to freeze and have pushed the economy into a recession. However, recent rising home sales and some sustained momentum will bring the economy back into the fold. Rising home sales will also thin out the housing inventory and begin stabilizing home prices. The credit market will start to unfreeze once home prices have passed bottom. Simply, the economy will not recover without a housing market recovery.
Fortunately, policymakers and both Presidential candidates clearly recognize the need to get the housing market moving. The two housing stimulus bills (homebuyer tax credit and higher loan limits), $700 billion Treasury plan and the Federal Reserve's actions are designed to assure steady mortgage flow and help revive the housing sector. With it, the economy will expand and create jobs. America and its exceptional ingenuity always find a way to move past crises and back to economic prosperity.
Lawrence Yun, Chief Economist
The most important factor driving home sales is affordability. With home prices falling in many parts of the country and mortgage rates still near historic lows, affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. This 93 percent of working households (rather than 95 percent during good economic times) respond to incentives. Added measures, from the first-time homebuyer tax credit to a larger number of mortgage loans qualifying to be purchased by Fannie and Freddie and through the FHA program, will further bring homebuyers to the marketplace.
Back in the previous recession, the economy shed nearly 2 million net jobs from 2001 to 2003. All the while, existing home sales rose from 5.2 million to 6.2 million just as jobs were being cut. New home sales likewise rose from 900,000 to 1.1 million. Mortgage rates were falling and housing affordability was rising during these years. The 2 million job cuts were painful, but the economy still had 130 million job hOn the economic front, recession in itself is not a positive for the housing market because there are fewer job holders. But if a recession is accompanied by rising housing affordability, then home sales can trend higher - as is now. A prolonged deep recession, however - certainly a possibility in light of the most severely tested financial market stress since the Great Depression - can dampen consumer confidence and put up barriers to home buying.
An early indication that buyers are responding to incentives was the solid jump in the pending home sales in August to the highest level in over a year. The biggest increases were in areas with rising affordability from sharp reductions in home prices in California, Nevada, and Florida. The expansion will broaden to other markets where home prices have markedly fallen, including Rhode Island, Virginia, and Minnesota. Existing home sales, therefore, will likely breakout from the narrow trading range of 4.8 to 5 million of the past 12 months to 5.2 million by the year end and to 5.4 million in 2009. Even with the improvement, the next year's sales level will still be well below the 7.1 million peak sales achieved with rampant speculative buying in 2005.
The Bottom Line
Put it all together and what do we have? A recovering economy will help consumer and business spending to turn the corner and the economy to move to a self-sustaining pace. But it requires a catalyst to get things started. The tumbling housing market and subprime mortgage defaults have caused financial markets to freeze and have pushed the economy into a recession. However, recent rising home sales and some sustained momentum will bring the economy back into the fold. Rising home sales will also thin out the housing inventory and begin stabilizing home prices. The credit market will start to unfreeze once home prices have passed bottom. Simply, the economy will not recover without a housing market recovery.
Fortunately, policymakers and both Presidential candidates clearly recognize the need to get the housing market moving. The two housing stimulus bills (homebuyer tax credit and higher loan limits), $700 billion Treasury plan and the Federal Reserve's actions are designed to assure steady mortgage flow and help revive the housing sector. With it, the economy will expand and create jobs. America and its exceptional ingenuity always find a way to move past crises and back to economic prosperity.
Lawrence Yun, Chief Economist
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