Pre-Owned Home Sales Fall in Dallas

A large interactive map posted on the Dallas Morning News web site this morning shows a huge swatch of varying shades of red throughout the city. Pre-owned home sales for the second quarter of 2011 have dropped some 12 percent. One noticeable exception indicated by a patch of deep green in the center is Oak Lawn, which logged at six percent increase. The biggest drop-35 percent-was in Euless. The price differential between Oak Lawn and Euless is much smaller, however. Prices in Oak Lawn dropped two percent compared to four percent in Euless. 

See the interactive map

Is Fugi a Place in Washington State?

Not to be confused with Fuji apples, these delicious Fugi apples are found only at Albertson's on McKinney Avenue. Or maybe they are confused with Fuji apples. 

Dallas Gets Gilt

The Gilt Groupe, like other flash-sale online fashion retailers, is nearly four years old. Thanks to its deep-discounts, luxury and bargains finally came together for online shoppers. Yet now, for me anyway, the glitter has faded somewhat. The initial excitement began to subside after the same merchandising appeared many times in many different sales-- and worst of all on many occasions the only one that you want is sold out for your size.

Gilt City, on the other hand, provides a different business model with location-based deals. Unlike Groupon, where shoppers buy deep discount coupon but can redeem it within a fairly large time range, Gilt City hosts events that only happen at certain time at a specific venue. Groupon users go to restaurants to dine themselves, mixed with other customers who may pay twice as much as they do for the same meal. Yet at Gilt City, those events are exclusive and voucher-only. Everyone mingles together, like a party.

Gilt City has finally arrived in Dallas. Although the official launch date is in August, it has assembled quite some impressive events to court Dallas savvy shoppers. Starting this week, each day features a different event from free movie screenings (before the opening date) to restaurant events. Almost all events have sold out.

Yesterday, we stopped at Billy Reid store, recently relocated from North Park Mall to Highland Park Village, where the Gilt City was hosting an exclusive member-only event with small bites and gift cards.

The store is not big-- at least not as big as it used to be in North Park Mall. But with Victorian chairs, taxidermy and old photos, it has an unpretentious charm like an old Southern house. Only 50 members were lucky enough to get the voucher - a not-surprising result from an online store which is famous to create the buzz by starting each sale of limited items at noon time each day.

A local event planning company was charged with food and spirits. Small bites are certainly an understatement in Texas where everything is big. Deviled eggs and mini cherry pies pleased those who count calories of each meal while macaroni and pulled pork on biscuits helped those who would spend the next two hours (from 6 p.m. to 8 p.m.) checking every rack in the store.

Alcohol can help spur purchases and bourbon and spiked iced tea sufficed in this category. The food, wine and music (there was also a guitar singer) made one almost feel it was not a sale event, but some summer party at an old friend’s house.

For this particular event, it cost 15 dollars to get the voucher. A generous one-hundred-dollar (virtual) gift card was given to each attending member. As one can expect, the participants are young and many speak foreign languages. Shoes seem popular so do accessories such as ties and belts. (For the pricing, the boutique store is on par with the rest of the stores in the Highland Park Village, so that it was not difficult at all to spend the entire amount of money on the gift card.

It should also be noted that Billy Reid is mainly a men's clothing store. There was only one rack of women clothes, while the rest of the store is devoted to men's staples: shirts, jackets and shoes. Thus it was quite amusing to see the shopping difference between single bachelors and married couples. It reminded me that a friend of mine lamented Dallas women are too obsessed with their looks.

Apparently, they are also obsessed with their husbands’ looks.

More News On the Souring Taste for Homeownership

Two more items have appeared in the expanding parade of articles that appear to be mounting evidence that the importance placed on owning a home just isn't what it used to be. The latest Housing Market Insights report from Morgan Stanley indicates high rates of mortgage delinquency, foreclosures and liquidations are turning homeowners into renters. In addition a Treasury Department White Paper spells out that it the role of the Federal Government in the housing market is changing from increasing the number of homeowners to providing housing options.

This appears to be playing out in the marketplace. A separate new report from housing search engine HotPads indicates prices on rental properties grew 6.7 percent in June.

Morgan Stanley analysts expect the trends to continue. They say GSE reform, Dodd-Frank securitization rules, mortgage interest deduction reform, continued home price declines and a long workout period for distressed homes, will likely make it harder to buy an owner-occupied home.

"As such, we believe that the U.S. will become a Rentership Society, in which the homeownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come."

June Existing-Home Sales Slip Nationally, Improve in Texas Cities

Existing-home sales eased nationally in June as contract cancellations spiked unexpectedly, although prices were up slightly, according to the National Association of Realtors®. The numbers were better in the Dallas Metro with the median price increasing year-over-year and a .4 percent increase in price and a 3.1 percent increase in sales over June, 2010. I the same period, Houston experienced a 1.6 percent increase in price and a .3 percent drop in sales. San Antonio did the best among Texas Cities cited in the report with a 3.6 percent increase in price and a 1.6 percent increase in sales. 

Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single-family home sales were stable while the condo sector weakened.

Total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 0.8 percent to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain 8.8 percent below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit.

Lawrence Yun, NAR chief economist, said this is an uneven recovery. “Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” he said. “The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.”

Yun cited other factors in the sales performance. “Pending home sales were down in April but up in May, so we may be seeing some of that mix in closed sales for June. However, economic uncertainty and the federal budget debacle may be causing hesitation among some consumers or lenders.”

The national median existing-home price for all housing types was $184,300 in June, up 0.8 percent from June 2010. Distressed homes3 – foreclosures and short sales generally sold at deep discounts – accounted for 30 percent of sales in June, compared with 31 percent in May and 32 percent in June 2010.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.51 percent in June, down from 4.64 percent in May; the rate was 4.74 percent in June 2010.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said home sales should be higher. “With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales,” he said. “Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal, safe standards in the not-too-distant future, but the tardiness of this process is holding back the recovery.”

Phipps added that lower mortgage loan limits, due to go into effect on October 1, already are having an impact. “Some lenders are placing lower loan limits on current contracts in anticipation they may not close before the end of September. As a result, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage,” he said.

Total housing inventory at the end of June rose 3.3 percent to 3.77 million existing homes available for sale, which represents a 9.5-month supply4 at the current sales pace, up from a 9.1-month supply in May.

All-cash transactions accounted for 29 percent of sales in June; they were 30 percent in May and 24 percent in June 2010; investors account for the bulk of cash purchases.

First-time buyers purchased 31 percent of homes in June, down from 36 percent in May; they were 43 percent in June 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in June, unchanged from May; they were 13 percent in June 2010.

The balance of sales was to repeat buyers, which were a 50 percent market share in June, up from 45 percent in May, which appears to be a normal seasonal gain.

Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.24 million in June, but are 7.4 percent below a 4.58 million pace in June 2010. The median existing single-family home price was $184,600 in June, up 0.6 percent from a year ago.

Existing condominium and co-op sales fell 7.0 percent to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18.0 percent below the 646,000-unit level a year ago. The median existing condo price5 was $182,300 in June, up 1.8 percent from June 2010.

Regionally, existing-home sales in the Northeast fell 5.2 percent to an annual pace of 730,000 in June and are 17.0 percent below June 2010. The median price in the Northeast was $261,000, up 3.1 percent from a year ago.

Existing-home sales in the Midwest rose 1.0 percent in June to a pace of 1.04 million but are 14.0 percent below a year ago. The median price in the Midwest was $147,700, down 5.3 percent from June 2010.

In the South, existing-home sales increased 0.5 percent to an annual level of 1.86 million in June but are 5.6 percent below June 2010. The median price in the South was $159,100, down 0.1 percent from a year ago.

Existing-home sales in the West declined 1.7 percent to an annual pace of 1.14 million in June and are 2.6 percent below a year ago. The median price in the West was $240,400, up 9.5 percent from June 2010.

Are There Any Rungs Left on the Housing Ladder?

A new report from PIMCO highlights some of the demographic changes that are helping to swing the preference of Americans from home owners to renters. The report, Are There Any Rungs Left on the Housing Ladder?, suggests graduates with large student loans and older Americans retiring may not hold the idea of owning a home in high esteem. They also simply may not be able to afford it.

Rod Dubitsky, an analyst with PIMCO, says first-time homebuyers are struggling financially and are likely to be long-term renters. At the same time older homeowners are less likely to upgrade into larger homes or invest in second properties. "All of this suggests downsized housing choices — one home instead of two, rent rather than own, smaller place rather than large. These choices could serve to reduce the dollars committed to housing investment," Dubitsky says.

Mortgage Bankers Say Homeownership Rates Could Drop Further After "Unsustainable Jump" During Last Decade

The drop in the homeownership rate from an all-time high of 69.2 percent in 2004 to 66.4 percent in the first quarter of 2011 reflects a decline from unsustainable levels to something closer to historical averages, according to a study released today by MBA's Research Institute for Housing America (RIHA). While the homeownership rate may have bottomed out, it could fall another one or two percentage points because of tightened credit and other factors, the paper says.

Titled "Homeownership Boom and Bust 2000 to 2009: Where Will the Homeownership Rate Go from Here?," the study was conducted by professors Stuart Gabriel of UCLA's Anderson School and Stuart Rosenthal of Syracuse University. They found that the increase in the homeownership rate in the middle of the last decade extended to all age groups but was most pronounced among individuals under age 30. These increases coincided with looser credit conditions that enhanced household access to mortgage credit, along with less risk-averse attitudes toward investment in homeownership. Following the crash, these trends have reversed and homeownership rates have largely reverted to the levels of 2000.

"The question of why homeownership rates are falling now is really a question of why they were so high during the middle of the last decade," said Gabriel. "From the late 1960s to the mid-1990s, U.S. homeownership rates were relatively stable between 64 and 65 percent. Our findings suggest that the boom and bust in homeownership rates over the last decade was driven in part by an initial relaxation of credit standards followed by a tightening of credit with the onset of the 2007 financial crash. Evidence also suggests that households headed by people in their 20s and 30s were willing to take more risk with respect to homeownership in the boom years, followed by a return to a more conservative approach after the crash."

"How much more might the homeownership rate fall? The answer depends on uncertain forecasts of attitudes towards homeownership and changes in the credit market and economic conditions," concluded Rosenthal. "If underwriting conditions and attitudes about investing in homeownership settle back to year-2000 patterns and, if the socioeconomic and demographic traits of the population look similar to those of 2000, then the homeownership rate may have bottomed out and will not decline further. If, instead, household employment, earnings and other socioeconomic characteristics over the next few years remain similar to those in 2009, then homeownership rates could fall by up to another 1 to 2 percentage points beyond 2011. Those declines are likely to be greatest in cities and regions in which house prices were most volatile in the last decade."

Key findings from the study include:

-A combination of changes in mortgage credit standards and attitudes towards investment in homeownership likely contributed to much of the boom and bust in homeownership over the decade. As credit conditions loosened in the first part of the decade, many people of all ages who would have remained renters instead became homeowners. With the financial crash, the recession, and tighter credit conditions, homeownership rates have fallen back to levels close to those of 2000 for most age groups.

-Changes in the population's socio-demographic composition and economic attributes also served to lower homeownership rates between 2000 and 2009. For all household heads age 20 to 80, demographic-socioeconomic shifts pushed homeownership rates down by roughly 2 additional percentage points over the period. These effects were notably different across demographic groups, however. For example, among individuals 25-35 years old, shifts in their demographic-socioeconomic attributes pushed homeownership rates down by nearly 5 percentage points over the 2000-2009 period. For African Americans the analogous value was only roughly 1 percentage point.

-Individuals appear to have been more risk-seeking in their approach to home buying in the first half of the last decade. This changed to a more risk-averse posture following the real estate meltdown.

-Between 2000 and 2009 there was a one percentage point increase in the homeownership rate. But, were it not for the shifts in access to homeownership through easier credit and the changes in socioeconomic conditions, the homeownership rate would have actually fallen between 2000 and 2005, rather than increasing.

-Homeownership is deeply embedded in American culture and long has been a symbol of economic achievement in the United States. The recent sharp decline in the homeownership rate has symbolic as well as tangible adverse effects on the economy, with home sales and construction activity remaining near all-time lows," said Michael Fratantoni, Executive Director of RIHA and MBA's Vice President of Research and Economics. "This is another in a series of studies that RIHA has issued on the issues of household formation, borrower attitudes after the recession and homeownership. Single- and multifamily lenders, other participants in the real estate finance industry, and policymakers can utilize this research and assumptions on homebuyer behavior and credit availability to form their own forecasts regarding the likely path of the homeownership rate and implications for the mortgage market going forward."

The paper relies on individual-level data from the 2000 census and the 2005 and 2009 American Community Surveys (ACS) to assess housing choice and uses 34 control variables to analyze the underlying drivers of homeownership. The paper is divided into three parts: an assessment of the underlying drivers of homeownership, an ex-post analysis of the boom and bust in homeownership during the 2000s, and a discussion of what may lie ahead for U.S. homeownership rates.

Residential Construction Numbers Up

The Commerce Department’s U.S. Census Bureau today released data on new residential construction for June 2011. Housing starts surged 14.6 percent in June, easily surpassing private-sector expectations of a 2.7-percent increase. Permits for new housing units also beat expectations, increasing 2.5 percent in June following an 8.2-percent jump in May. Private-sector analysts had expected a 2.3-percent drop in permits from May to June.

“While today’s new construction report is encouraging, the housing market remains fragile,” U.S. Commerce Secretary Gary Locke says. “If America fails to meet its obligations, it would lead to a sharp decline in household wealth and higher mortgage rates, which would profoundly damage the housing market’s recovery. Now is the time for members of both parties to make tough choices and take a balanced approach to solve this problem, so we can focus on getting more Americans back to work.”

Zaguan on a Sunday

Brunch at Zaguan Latin Bakery and Cafe provides a good change of pace for a Sunday morning. Located on Oak Lawn Avenue in a strip plaza, Zaguan also provides outdoor seating which some were taking advantage of despite the high temperatures. The picture menu was helpful for first timers like us not knowing what to order. We also asked the waitress and both ended up with what she says is one of the most popular items, the Cachapa with beef and cheese. Served with plantain chips or a fruit cup, I could see why this would be popular- it's delicious! We also had to try a bakery item and chose the cherry pasteles. You may also note the free samples of bread provided on the counter.

2604 Oak Lawn Avenue