Case-Shiller Index Shows Sharpest Home-Price Declines in Sun Belt

Some information on the declining housing market and how the different regions are doing, from the Wall Street Journal:

December 30,2008
Home prices continued to drop as the economic downturn deepened further in October, according to the S&P/Case-Shiller home-price indexes, a closely watched gauge of U.S. home prices, with home prices in the Sun Belt continuing to be hit hardest.

“The bear market continues; home prices are back to their March 2004 levels,” said David M. Blitzer, chairman of S&P’s index committee. He added that both composite indexes and 14 of the 20 metropolitan areas are reporting new record declines. As of October, the 10-city index is down 25% from its mid-2006 peak and the 20-city is down 23%, Blitzer Said.

The indexes showed in prices in 10 major metropolitan areas fell 19% in October from a year earlier and 3.6% from September. The drop marks the 10-city index’s 13th straight monthly report of a record decline.

In 20 major metropolitan areas, home prices dropped 18% from the prior year, also a record, and 2.2% from September.

Month to month decliners were led by Detroit, which fell 4.5%, and San Francisco, which dropped 4.2%. Atlanta, Charlotte, Detroit, Minneapolis, Tampa and Washington had their largest monthly declines on record.

For the seventh-straight month, no region was able to avoid a year-over-year price drop. Phoenix and Las Vegas were again the worst performers, with drops of 33% and 32%, respectively, from a year ago. San Francisco, Miami, Los Angeles and San Diego followed, with declines between 27% and 31%.

Year-over-year, Dallas and Charlotte again had the best relative performance, with declines of 3% and 4.4%, respectively.

Three new markets joined the group of areas posting double digit declines from a year ago – Atlanta, Seattle and Portland showed drops of 11%, 10% and 10%, respectively.

Cleveland and Denver showed slight improvement in their year-over-year returns compared with last month’s report.

The Case-Shiller data came a week after a government report that sales of previously occupied homes plunged, dropping 8.6% in November, as the median price slid 13%, and the largest drop since the survey began in 1968. New home sales fell 2.9% in November; their fourth drop in a row, and prices remained below year-earlier levels.

The glut of housing remains as credit stays tight and the economic outlook remains bleak as mounting job losses have added more stress to U.S. households. Even intensified efforts to help borrowers stay in their homes have made little headway.

Source: Wall Street Journal, Kerry Grace

As you look at the graph for “Homes and PUD’s (Planned Unit Developments) Median Sales Price January thru November 2005-2008” it gives a thumb nail sketch of current market conditions heading into the last month of the year. However, instead of comparing this year to last year, as in a “year over year” comparison, it compares the median sales price for the 3 previous years up to 2008. What I like to do to add some historical perspective to the information and achieve more reliable data over time is to also AVERAGE the 3 previous years and compare that median price average to the same period for the yare 2008. When this is done we discover that our comparative depreciation to date is -14%. But when we consider the “year over year” comparison between 2007 and 2008 in median sales price for the same period we notice a strikingly similar figure of -15% depreciation.

This is not bad when we consider that California is experiencing more than double this depreciation rate on a year over year basis for the same time period in the year 2008 and the fact that Santa Barbara homeowners enjoyed approximately 295% appreciation between the years 1996 and 2005. This appreciation was historically unprecedented and could not be sustained.

Santa Barbara is a world renowned city with a unique economic base and after a period of adjustment it will be back.

Graph Source: Gary Woods

30-YEAR FIXED RATE FALLS TO AT LEAST A 37-YEAR LOW

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.19 percent with an average 0.7 point for the week ending December 18, 2008, down from last week when it averaged 5.47 percent. Last year at this time, the 30-year FRM averaged 6.14 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

The 15-year FRM this week averaged 4.92 percent with an average 0.7 point, down from last week when it averaged 5.20 percent. A year ago at this time, the 15-year FRM averaged 5.79 percent. The 15-year FRM has not been lower since April 1, 2004, when it averaged 4.84 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.60 percent this week, with an average 0.6 point, down from last week when it averaged 5.82 percent. A year ago, the 5-year ARM averaged 5.90 percent.

One-year Treasury-indexed ARMs averaged 4.94 percent this week with an average 0.5 point, down from last week when it averaged 5.09 percent. At this time last year, the 1-year ARM averaged 5.51 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
"Interest rates for 30-year fixed-rate mortgage rates fell for the seventh consecutive week, moving these rates to the lowest since the survey began in April 1971," said Frank Nothaft, Freddie Mac vice president and chief economist. "The decline was supported by the Federal Reserve announcement on December 16th, when it cut the federal funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant."

Source: Freddie Mac

C.A.R. GREEN TIP OF THE WEEK: Confused About Plastics?

You’re not alone. Experts have reached a consensus and recommend that you avoid these varieties – identified by a triangle and number on the bottom of most containers – for the following reasons:

-Polyvinyl Chloride (PVC) commonly contains di-2-ethylhexyl phthalate (DEHP), an endocrine disruptor and probable human carcinogen, as a softener.

-Polystyrene (PS) may leach styrene, a possible endocrine disruptor and human carcinogen, into water and food.

-Polycarbonate contains the hormone disruptor bisphenol-A, which can leach our as bottles age, are heated, or exposed to acidic solutions.
Unfortunately this is used in most baby bottles and five-gallon water jugs and in many reusable sports bottles.

Realtors Tell Congress Increased Housing Demand Critical to Stabalize Markets, Slow Foreclosures

Critical to boosting the economy is the need to stem the rising tide of foreclosures and boost homebuyer confidence in the housing market, the National Association of Realtors told Members of Congress today. In a letter sent to Congress, NAR advocates prompt action by Congress and the current administration to pass a housing stimulus package to help stabilize the housing market, setting the stage for the U.S. economy to begin recovery.

“As home values continue to decrease in many markets and job losses escalate, homeowners needing to refinance their mortgage or sell their home are left with few options and are sometimes forced to walk away from their mortgage responsibilities,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “This increased inventory further fuels decreases in home values exacerbating the housing and economic crisis, not to mention the crisis to many families and communities.”

NAR tells Congress that to stop the downward cycle a deferral mortgage interest buy-down program is needed and should come from the Treasury Department’s Troubled Asset Relief Program. “The buy-down program would complement the loss mitigation elements of TARP and provide an incentive to buy homes, which will reduce the housing inventory. This in turn will stabilize home values, lessen foreclosure pressure, boost home sales activity and breathe new life into our nation’s economy,” said McMillan.

Last month NAR shared suggestions for rebuilding the housing market with Congress and the administration, and encouraged the Treasury Department to incorporate parts of its Four-Point Plan for stimulating and stabilizing the housing market. “Housing has always led our economy out of downturns, and lower interest rates coupled with foreclosure mitigation are key ingredients to stabilizing the housing markets and preserving homes and communities,” McMillan said.

NAR urged the government to ensure that safe and affordable mortgages are available throughout the nation. This requires that the higher loan limits passed in the economic stimulus bill earlier this year be made permanent. It is also imperative that the federal government ensure there is sufficient capital to support mortgage lending not only in strong markets but also in tumultuous ones as we are currently experiencing. Additionally, NAR has been pushing for the $7,500 tax credit for first time homebuyers be extended to all homebuyers and that the repay feature be eliminated.

NAR estimates that lowering the interest rate by 1 to 2 percentage points can result in as many as 700,000 additional home sales. “Stabilizing the housing market will lead to a greater economic recovery,” said Lawrence Yun, NAR chief economist.

NAR urged Congress to not delay action but to implement the federal interest buy-down proposal and other elements of its Four-Point Plan. “We must all work together to make sure we never find ourselves in a situation similar to the current unstable situation with foreclosures rising and people losing the homes they worked so hard to buy,” said McMillan.

Mary Trupo, Realtor.org