Dallas Fed: Texas Housing Starts Rise

According to the Federal Reserve Bank of Dallas, the Texas economy continues to expand, although at a slow pace, with employment growing at a 0.1 percent annual rate in September. Texas home sales fell in September, but single-family permits and housing starts rose. Texas exports inched up in August, and manufacturing activity increased in October, according to the Texas Manufacturing Outlook Survey’s production index.

Housing starts in Texas rose 13.4 percent in September after falling 0.5 percent in August. September starts were up 24.2 percent from last year. Texas existing-home sales decreased by 2.1 percent in September and are up 11.8 percent year over year. Home inventories remain at 7.1 months. Texas single-family housing permits rose 2.6 percent from August to September.

Home Prices Rise, Again

Data through August 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices showed increases of +0.2 percent for the 10- and 20-City Composites in August versus July.

Ten of the 20 cities covered by the indices also saw home prices increase over the month. In addition, 16 of the 20 MSAs and both Composites posted improved annual returns compared to July’s data; Los Angeles and Miami saw no change in annual returns in August; and Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory. The 10- and 20-City Composites posted annual returns of -3.5 percent and -3.8 percent versus August 2010, respectively. At -8.5 percent, Minneapolis posted the lowest year-over-year return, but has
improved in each of the last three months. Detroit and Washington DC were the only two cities to post positive annual returns of +2.7% and +0.3% respectively.

In August 2011, the 10- and 20-City Composites recorded annual returns of -3.5 percent and -3.8 percent, respectively. Both Composites and 16 MSAs – Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington DC – saw their annual rates improve in August compared to July.

“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “And even though the annual rates are largely improving, 18 MSAs and both Composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-City Composite is down 3.5 percent and the 20-City is down 3.8 percent compared to August 2010.

Home Values Tread Water, Dallas Remains Flat in August

Home values in the United States showed minimal monthly appreciation in August of 2011, according to the Zillow® Real Estate Market Report(i). The Zillow Home Value Index(ii) increased 0.1 percent from July to August. On a year-over-year basis home values declined 4.5 percent to $172,600. Home values have fallen 28.3 percent since they peaked in June 2006.

Regionally, 68 of the 157 metropolitan statistical areas (MSAs) covered by Zillow experienced monthly home value appreciation, though minimal in many areas. Most notably, two of the hardest hit markets, Detroit and Ft. Myers, Fla., have now seen five and nine consecutive months of appreciation, respectively. Seventy-four markets saw home value depreciation and 15 markets, including Los Angeles, Dallas and Miami-Ft. Lauderdale, Fla., remained flat.

The foreclosure liquidation rate, which measures the number of homes lost to the bank, stayed steady at around 9.2 out of every 10,000 homes foreclosed in August. This is down from the rate of 10.9 out of every 10,000 homes in October 2010, before the robo-signing lawsuits slowed the pace of foreclosures in most states. However, foreclosure liquidations remained high in many of the hardest hit metros in California, Nevada, and Arizona. In Las Vegas and Phoenix more than 30 out of every 10,000 homes were liquidated in August.

"Due to the robo-signing controversy, the pace of foreclosure liquidations has been slower than it would be otherwise, which is impacting home value trends positively. Eventually the pace will pick up again, putting more bank-owned homes into local markets and putting additional downward pressure on prices," said Zillow Chief Economist Dr. Stan Humphries. "We remain encouraged about the organic stabilization in home values that we have been seeing absent the federal home buyer tax credits, but we remain concerned about the impact that recent economic turmoil and continued weak economic indicators will have on future home sales and home value trends."

"At this point, we maintain the expectation that a definitive bottom will not occur until 2012 at the earliest."

2010 Census Shows Second Highest Homeownership Rate on Record Despite Largest Decrease since 1940

Texas has 22.3 percent increase.

The U.S. Census Bureau today released a 2010 Census brief, Housing Characteristics: 2010, that shows the homeownership rate is the second highest on record, behind only 2000, since homeownership data collection began in 1890. However, the rate decreased by 1.1 percentage points to 65.1 percent between 2000 and 2010. The decrease is the largest since the period from 1930 to 1940.

Housing Inventory Grew the Most in South and West

The national housing inventory increased by 15.8 million units, or 13.6 percent, from 2000 to 2010. The housing inventory increased in all states during the decade but grew faster in the South and West than in the Midwest and Northeast. The South grew 17.9 percent to 50.0 million units and the West grew 17.3 percent to 28.6 million units. In contrast, the Midwest grew by 9.3 percent to 29.5 million units and the Northeast grew by 6.6 percent to 23.6 million units.

All of the states with the largest percentage increases in housing units were in either the West or the South: Nevada (41.9 percent), Arizona (29.9 percent), Utah (27.5 percent), Idaho (26.5 percent), Georgia (24.6 percent), Florida (23.1 percent), North Carolina (22.8 percent), Colorado (22.4 percent), Texas (22.3 percent) and South Carolina (21.9 percent).

No states in either the Midwest or the Northeast experienced a percentage change in housing inventory greater than the national increase of 13.6 percent. In the Northeast, housing units in Pennsylvania (6.0 percent), New York (5.6 percent) and Rhode Island (5.4 percent) increased less than both the nation and the Northeast as a whole (6.6 percent). West Virginia had the lowest percentage increase of any state at 4.4 percent.

Metro Areas Have More Homeowners while Major Cities Have More Renters

As a percentage of the entire national inventory, more than a third of all owner-occupied homes (38.3 percent) and renter-occupied homes (35.6 percent) were in the South. The homeownership rate in the Midwest was 69.2 percent, followed by the South (66.7 percent), the Northeast (62.2 percent) and the West (60.5 percent). Homeownership rates decreased in each region from 2000 to 2010.

West Virginia (73.4 percent) and Minnesota (73.0 percent) had the highest homeownership rates in 2010 as well as 2000. The states with the next highest homeownership rates in 2010 were Michigan (72.1 percent), Iowa (72.1 percent), and Delaware (72.1 percent). As in 2000, New York had the lowest percentage of homeowners at 53.3 percent.

All but one metropolitan area had more homeowners than renters in 2010. With a homeownership rate of 49.5 percent, Manhattan, Kan., was the only metro area where renters outnumbered homeowners. In 2000, five metro areas had more renters than homeowners.

The metro areas with the highest homeownership rates can be found primarily in Michigan and Florida, where each had three metro areas in the top 10. Monroe, Mich., had the highest percentage of owner-occupied units at 79.8 percent, followed by Punta Gorda, Fla. (79.7 percent), Holland-Grand Haven, Mich. (78.2 percent), Bay City, Mich. (77.8 percent) and Barnstable, Mass. (77.4 percent).

While homeowners were the majority in most of the nation's metro areas, they were outnumbered by renters in many of the country's largest cities, including the four most populous cities. This was similar to 2000. In New York, renters made up 69.0 percent of households, followed by Los Angeles (61.8 percent), Chicago (55. 1 percent) and Houston (54.6 percent).

Similar to metro areas, homeowners were the majority in most of the nation's counties. Homeowners outnumbered renters in all but 1.5 percent of the 3,143 counties and equivalent areas in the country. The counties with the highest homeownership rates were Keweenaw County, Mich. (89.8 percent), Sumter County, Fla. (89.7 percent), Alcona County, Mich. (89.6 percent), Morgan County, Utah (89.1 percent) and Powhatan County, Va. (88.5 percent).

Despite most counties having a majority of homeowners, many saw a decrease in the homeownership rate and an increase in renter occupancy. The largest percentage point increases in renter occupancy were in Loving County, Texas (19.8), Manassas Park, Va. (13.2), and Madison County, Idaho (10.9). Only 14 counties had more than a 5 percentage point increase in their homeownership rates.

Every region and all but three states experienced a percentage point increase in their gross vacancy rate during the decade. Nevada led all states with both the largest percent increase in total housing units and the largest percentage point increase in the gross vacancy rate. Only three states, New Mexico (-0.9), Wyoming (-0.2) and Hawaii (-0.1), experienced a decrease in their gross vacancy rates.

Vacant Units

Many of the states with the highest homeowner vacancy rates also had the highest rental vacancy rates in 2010. The homeowner vacancy rate is the proportion of homeowner inventory that is unoccupied and "for sale," and the rental vacancy rate is the proportion of the rental inventory that is unoccupied and "for rent." Of the top 10 states with the highest homeowner vacancy rates, eight were also in the top 10 for rental vacancies: Alabama, Arizona, Florida, Georgia, Michigan, Nevada, North Carolina and South Carolina.

Data on vacant units and homeownership rates are collected for several different Census Bureau surveys in addition to the 2010 Census, including the Housing Vacancy Survey and the American Community Survey. Noticeable differences in results occur because of differences in data collection methods. For example, the 2010 Census measured occupancy status as of April 1, 2010, while other surveys measure the status of a sampling of units at the time a field representative conducts the interview.

New Survey: Homeowners Expect Declines

One an almost certain retirement vehicle, Rasmussen Reports has released the results of a national telephone survey shows that 40 percent of U.S. homeowners now expect their home’s value to go down over the next year-- the highest level of pessimism to date.

Just 13 percent expect the value of their home to go up over the next year. In the longer-term, there's a bit more optimism. Thirty-six percent expect their home’s value will go up during the next five years

The survey of 753 Homeowners was conducted on September 15-16, 2011 by Rasmussen Reports.

Beige Book: Dallas District Sees Increase in Home Sales

Reports from the twelve Federal Reserve Districts indicated that economic activity continued to expand at a modest pace, though some Districts noted mixed or weakening activity. The St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts all reported either modest or slight expansion. 

Residential real estate activity remained weak overall, although a few Districts noted some slight improvements. Contacts in the Boston, Atlanta, Minneapolis, and Dallas Districts reported an increase in home sales over the previous year's weak levels; however, the uptick in the Atlanta District was concentrated mainly in Florida. The remaining Districts all reported stable or slower sales from the previous survey period, with several citing greater economic uncertainty as the primary cause. 

Both the New York and Philadelphia Districts reported that a growing backlog of foreclosures in New Jersey continued to weigh down the housing market. Home construction was down or stagnant in most Districts, with the exception of Minneapolis and Kansas City. However, several Districts indicated an improvement in home remodeling activity, and the New York, Philadelphia, and Cleveland Districts reported increased demand for multi-family housing projects. 

Home prices were flat to slightly down in several Districts, although New York said prices in many areas edged higher but remained below year-ago levels. Contacts in the Boston District reported competitive pricing by sellers with even lower prices negotiated by buyers, but in the Cleveland District many builders have shifted away from discounting. Inventories were elevated or rising in the Boston, Atlanta, and Kansas City Districts, particularly for existing homes, and demand for apartment rental space increased in the San Francisco and Dallas Districts.

Commercial real estate conditions remained weak or little changed in most Districts, although some improvements were noted by New York, Minneapolis, and Dallas. Commercial real estate activity was sluggish in the Boston, Cleveland, Richmond, Atlanta, Kansas City, and San Francisco Districts. 

However, San Francisco noted some areas have benefited from technology sector growth, and Boston noted investor demand for prime office buildings remained strong. New York said office vacancy rates declined noticeably in the Buffalo and Rochester metro areas and modestly in Manhattan and Long Island. Lower commercial rents helped push down vacancy rates in the Kansas City District, and the Dallas District noted strong demand for leased space in Houston due to solid energy activity. 

Commercial construction was characterized as weak or limited by Cleveland, Atlanta, Chicago, and Kansas City, although Atlanta noted some strength in the healthcare sector. St. Louis described conditions as mixed, with some improvement in education and energy-related construction, while Minneapolis District contacts reported an increase in small retrofitting projects and rebuilding in flood-damaged areas. The Chicago District noted continued strength in industrial construction, particularly in the automotive sector. Credit for commercial development remained an obstacle for small retailers in the Richmond District, although Boston said aggressive competition among lenders led to reduced borrowing rates.

Is “Traditional” Avoided Like the Plague?

I was out for a stroll this morning and noticed an interesting catch phrase on a real estate sign, “anything but traditional.” Sure it could refer to operations and attitude, but my guess is they wouldn’t have chosen the phrase if traditional was a hot feature in homes.

If you’ve been out looking for homes you may have noticed finding a traditional-looking home with lots of walls doors and square symmetrical spaces can be difficult. More often there are big, open spaces, multi-purpose rooms, built ins and large windows.

This all makes it difficult to find places to put stuff. A traditional home can accomodate lots of things because there are lots of walls and spaces in corners, between windows, in hallways and atop stairways. There just isn’t a lot of room for stuff in many of the homes being built now.

I don’t think its necessarily that home buyers want to be minimalists, the open spaces don’t offer places for too many things even though there may be more space over-all. It would be nice to see a traditional form come back to home building.

Luxury Home Sales Outperform Others

Gloomy news that July sales of existing homes dropped 25.5 percent year-over-year has overshadowed new statistics showing summer sales of million dollar plus homes significantly outperformed other price ranges.

“Luxury homebuyers have been buying this summer,” said Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing (ILHM). “After waiting in the wings, many affluent buyers spent the summer shopping for value and snapping up trophy properties.”

Statistics would indicate that she’s right. According to The National Association of Realtors (NAR), for 2009 million-dollar and above home sales were just 1.2 percent of total sales or about 61,500 sales nationally. In July 2010, million dollar plus market share was up to 1.9 percent. While sales of homes in the $500,000 and above range rose dramatically in June, the million-dollar-plus market segment was the only price range in July showing positive growth compared to last year. “The mix of what is selling has shifted in favor of homes priced at $750 and above,” added Moore-Moore.

NAR’s report that July’s median sales price increased 0.7 percent  year-over-year may be more a function of increasing sales of expensive properties relative to other price ranges than an indicator of across-the-board home price appreciation.

According to the ILHM National Luxury Market Report -- which does a weekly analysis of luxury homes for sale in more than 30 major markets -- after a dramatic rise in upper-tier inventory, which started in January of this year, the numbers of luxury homes for sale has declined about 5 percent  since the beginning of July. Along with a decrease in inventory, there has been a decline in asking prices. Forty three percent of luxury homes currently on the market have had at least one reduction in asking price over the last 90 days. An additional 19 percent  have been pulled off the market and subsequently re-listed.

“While I wouldn’t say the luxury market is in recovery,” said Moore-Moore, “ the growing market share of luxury sales relative to total sales, a slight downward trend in inventory, and sellers who are more realistic about price are factors shifting the affluent into a buying mode.”

RE/MAX Says Home Sales Remain Flat

The July 2011 RE/MAX National Housing Report, which surveyed 53 U.S. metropolitan areas, shows signs of a continuing, but uneven, recovery in the housing market. After rising for two straight months, Home Sales fell 12.7 percent in July when compared with sales in June, following a traditional summer trend. However, for the first time in six months, Home Sales were higher than one year ago, up an impressive 13.1 percent from July 2010. Strict lending standards, bad appraisals and concern about the economy all contributed to lower-than-normal sales in July. 

Many lenders are already using the lower GSE and FHA loan limits set to take effect on September 30. Home Prices were even and inventory levels continued to fall for a thirteenth straight month.

“The fact that July home sales were higher than a year ago, and by such a significant amount, gives us reason for great optimism,” said Margaret Kelly, CEO of RE/MAX, LLC. “And now that prices have risen for four of the past five months, the housing market is beginning to show definite signs of

recovery.”

In the last 12 months, only January and July had Home Sales higher than the previous year. January was up fractionally and July was up a solid 13.1 percent from July, 2010. Both investors and traditional home

buyers became more skittish about the economy in July, perhaps due to the Debt Ceiling debate. 

Traditionally, June sales are the highest of the year, with a slight drop in July. Overall, sales were 12.7 percent lower in July than in June. However, 45 metro areas experienced more sales than in July of last

year including: Des Moines, IA +49.9 percent, Omaha, NE +46.8 percent, Milwaukee, WI

+37.7 percent, Providence, RI +32.4 percent and Wichita, KS +29 percent.

The July 2011 RE/MAX National Housing Report shows that Home Prices in July were just 0.18 percent lower than in June, while the year-over-year decrease of 4.6 percent is the smallest the survey has recorded in 6 months. On a monthly basis, prices have now risen for four of the past five months.

There were 11 metro areas that recorded higher prices in July than in the same month last year, most notably: Detroit +14.3 percent, Birmingham, AL +9.8 percent, Des Moines, IA +7.7 percent, Orlando, FL +5.5 percent and Pittsburgh, PA +4.4 percent.

The average Days on Market for homes sold in July was 88, down just two days from the June level. July marks the first month since September, 2010 that the Days on Market figure has been below 90. 

The July average is identical to September, 2010, when the average Days on Market was also 88. Days on Market is the average number of days from listing to receipt of a signed contract. Perhaps due to fewer foreclosure properties coming on the market, the 53 metro areas surveyed in the July, 2011 RE/MAX National Housing Report had an average Months Supply of Inventory of 7.2, which is up slightly from the 6.9 mark registered in June, but down significantly from the 9.3 mark seen in July

2010. 

Overall inventory continued a 13-month trend to lower levels. Inventories were 5.3 percent lower in July from June, and down 17.1 percent from July, 2010. The Florida markets continue to see the largest annual drop in inventory: Miami, FL -52.5 percent, Tampa, FL -37.3 percent, Phoenix, AZ -35.6 percent, Los Angeles, CA -32.4 percent and Chicago, IL -26.9 percent.

Existing-Home Sales Down in July but Up Strongly From a Year Ago

Existing-home sales declined in July from an upwardly revised June pace but are notably higher than a year ago, according to the National Association of Realtors. Monthly gains in the Northeast and Midwest were offset by declines in the West and South.

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 3.5 percent to a seasonally adjusted annual rate of 4.67 million in July from 4.84 million in June, but are 21.0 percent above the 3.86 million unit pace in July 2010, which was a cyclical low immediately following the expiration of the home buyer tax credit.

Lawrence Yun, NAR chief economist, said there is a tug and pull on the market. “Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” he said. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.55 percent in July, up from 4.51 percent in June; the rate was 4.56 percent in July 2010. Last week, Freddie Mac reported the 30-year fixed rate dropped to 4.32 percent.

Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were unchanged in July, reported by 16 percent of NAR members. In addition, 9 percent of Realtors report a contract was delayed in the past three months due to low appraisals, and another 13 percent said a contract was renegotiated to a lower sales price because an appraisal was below the initially agreed price.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said an unacceptably high number of potential home buyers are unable to complete transactions. “For both mortgage credit and home appraisals, there’s been a parallel pendulum swing from very loose standards which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction,” he said.

“Beyond the tight credit problems, all appraisals must be done by valuators with local expertise and using reasonable comparisons – it doesn’t make sense to consistently see so many valuations coming in below negotiated prices, often below replacement construction costs,” Phipps said.

In an environment following a large price correction, Phipps said a price negotiated between a buyer and seller would appear to be a fair market price. “Banks frequently request numerous sales comparisons, well beyond the customary three comps used in the past, with little consideration that some of those properties may be discounted foreclosures used to valuate a traditional home in good condition,” he said. “To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices.”

The national median existing-home price for all housing types was $174,000 in July, down 4.4 percent from July 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 percent of sales in July, compared with 30 percent in June and 32 percent in July 2010.

Total housing inventory at the end of July fell 1.7 percent to 3.65 million existing homes available for sale, which represents a 9.4-month supply4 at the current sales pace, up from a 9.2-month supply in June.

All-cash sales accounted for 29 percent of transactions in July, unchanged from June; they were 30 percent in June 2010; investors account for the bulk of cash purchases.

First-time buyers purchased 32 percent of homes in July, up from 31 percent in June; they were 38 percent in July 2010. Investors accounted for 18 percent of purchase activity in July compared with 19 percent in June and 19 percent in July 2010. The balance of sales was to repeat buyers, which were a 50 percent market share in July, unchanged from June.

Single-family home sales declined 4.0 percent to a seasonally adjusted annual rate of 4.12 million in July from 4.29 million in June, but are 21.5 percent above the 3.39 million level in July 2010. The median existing single-family home price was $174,800 in July, down 4.5 percent from a year ago.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 550,000 in July, and are 17.3 percent above the 469,000-unit pace one year ago. The median existing condo price5 was $168,400 in July, down 4.0 percent from July 2010.

Regionally, existing-home sales in the Northeast rose 2.7 percent to an annual level of 750,000 in July and are 19.0 percent above July 2010. The median price in the Northeast was $245,600, down 6.8 percent from a year ago.

Existing-home sales in the Midwest increased 1.0 percent in July to a pace of 1.05 million and are 31.3 percent above a year ago. The median price in the Midwest was $146,300, down 2.9 percent from July 2010.

In the South, existing-home sales declined 1.6 percent to an annual level of 1.84 million in July but are 19.5 percent above July 2010. The median price in the South was $152,600, which is 2.2 percent below a year ago.

Existing-home sales in the West fell 12.6 percent to an annual pace of 1.04 million in July but are 16.9 percent above a year ago. The median price in the West was $208,300 down 7.1 percent from July 2010.

MBA Says Mortgage Applications Increased

Mortgage applications increased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending August 12, 2011.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3.6 percent compared with the previous week and was 13.5 percent lower than a year ago. The Refinance Index increased 8.0 percent from the previous week, but was 16.3 percent lower than the same week last year. The seasonally adjusted Purchase Index decreased 9.1 percent from one week earlier. The unadjusted Purchase Index decreased 10.1 percent compared with the previous week and was 1.1 percent lower than the same week one year ago.

“Unprecedented volatility in the stock market last week amid additional signs that the economy has slowed led to further drops in mortgage rates, with the 15-year rate reaching a new low for the MBA survey,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Purchase application activity fell sharply over the previous week, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment.”

Fratantoni continued, “Refinance application volume increased substantially for the week, although there was substantial variation across the market. In September MBA’s Weekly Applications Survey will transition to an expanded sample that covers 75 percent of the retail market rather than the current sample that covers roughly 50 percent of the retail market. That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50 percent for the week. The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines.”

The four week moving average for the seasonally adjusted Market Index is up 6.9 percent. The four week moving average is down 2.2 percent for the seasonally adjusted Purchase Index, while this average is up 10.1 percent for the Refinance Index.

The refinance share of mortgage activity increased to 78.8 percent of total applications from 75.6 percent the previous week, the highest the refinance share has been since November 2010. The adjustable-rate mortgage (ARM) share of activity decreased to 5.8 percent from 6.1 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.32 percent from 4.37 percent, with points decreasing to 0.87 from 1.07 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week. The 30-year fixed contract rate has decreased for three straight weeks and is at a new low for this year.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.47 percent from 3.52 percent, with points increasing to 1.08 from 0.96 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week. The 15-year contract rate is at lowest level in the history of this survey.

Most Single-Family Renters Will Continue to Rent Rather than Buy Their Next Home

Fannie Mae's latest quarterly National Housing Survey (NHS) finds consumer pessimism growing with concerns about job loss, as 64 percent of Americans surveyed during the second quarter saying the economy is on the wrong track, the most for any quarter since the inception of the survey in the first quarter of 2010. That pessimism continued to mount in July, with Fannie Mae's monthly survey finding that 70 percent now believe the economy is on the wrong track, and just 23 percent say the economy is heading in the right direction.

"Consumers are more cautious due to concerns over employment and household finances," said Doug Duncan, vice president and chief economist of Fannie Mae. "As a result, consumer spending, which accounts for about 70 percent of the economy, ground to a halt in the second quarter. Consumers are more hesitant to take on additional financial commitments, and a setback to confidence means a setback to the recovery of the housing market."

Job Security

• Twenty-six percent of American workers report being concerned about losing their job in the next twelve months. While 44 percent of concerned American workers report having a home mortgage (compared to 42 percent of all Americans), just 33 percent of them perceive their savings to be sufficient (versus 49 percent of those workers not concerned about losing their job).
• Forty-four percent of these workers say their household expenses have increased significantly over the past year, compared to 35 percent of workers not concerned about losing their job.
• Employed Americans concerned about job loss are more likely than all employed Americans to say it is a bad time to buy a home and they are more likely to say they would rent their next home.

Single-Family Renters

• More than fifty percent of renters report living in single-family homes.
• Despite just 23 percent of single-family renters saying that renting makes more sense than buying a home, 53 percent say they would continue renting if they were going to move.
• Seventy-three percent of single-family renters say it would be difficult for them to get a home mortgage, with 33 percent citing their credit history as the biggest obstacle to getting a home mortgage (versus 20 percent of multifamily renters).
• Compared to multifamily renters, single-family renters are younger and more likely to have children.

Minority Mortgage Borrowers

• Thirty-one percent of minority mortgage borrowers report being underwater compared to 23 percent of non-minority mortgage borrowers.
• Thirty-five percent of minority borrowers say they are making a great deal of financial sacrifice to own, compared to 20 percent of non-minority borrowers.
• Minority borrowers are more likely than non-minority mortgage holders to live in states with above-average levels of negative equity and are more likely to report lower family household incomes (44 percent say their family income in 2010 did not exceed $50,000, compared to 23 percent of non-minority borrowers).

The Fannie Mae Second-Quarter 2011 National Housing Survey polled homeowners and renters to assess their attitudes toward owning and renting a home, confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.

Duncan states, "Survey data make clear the relationship between home purchase demand and concerns about the stability of employment. Dissatisfaction about the direction of the economy and related employment fears are damping demand to buy homes and slowing the recovery. People who believe owning is a better deal than renting are nonetheless planning to rent, at least until things improve it would seem."

Other Survey Highlights

• Consistent with previous findings, most Americans think it would be difficult for them to get a home mortgage today (53 percent) and increases to 71 percent among renters.
• While 51 percent of Generation X Americans (age 35-44) say it would be difficult for them to get a home mortgage today, the number increases to 59 percent among Generation Y (age 18-34).
• Thirty-five percent of Pre-Baby Boomers (age 65 and older) say they know someone in their area or neighborhood who has defaulted versus 42 percent for Generation Y and 49 percent for Generation X Americans.
• Twenty-six percent of mortgage borrowers say they are underwater, compared with 23 percent in Q1.
• Underwater borrowers remain more likely to be stressed about their debt than all mortgage borrowers—42 percent of underwater borrowers say they are stressed about their debt, compared to 31 percent of all mortgage borrowers.
• Underwater borrowers are more likely to know someone who has defaulted on their mortgage—57 percent of underwater borrowers versus 49 percent of all mortgage borrowers and 43 percent of the general population.
• As in previous quarters, 2 out of 3 respondents support mortgage modifications, believing such programs help protect the economy and local communities from increased foreclosures and falling home prices.
• In line with previous quarters, 57 percent of Generation Y Americans (age 18-34) expect their personal situation to improve over the next year, compared to only 42 percent among Generation X (age 35-44) and 35 percent among Baby Boomers (age 45-64).

Builder Confidence Unchanged in August

Builder confidence in the market for newly built, single-family homes held unchanged at a low level of 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today.

"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He noted that 41 percent of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.

"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," said NAHB Chief Economist David Crowe. "While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of three of the HMI's component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 – its highest level since March of this year – and the component gauging traffic of prospect buyers rose one point to 13 following two consecutive months at 12. However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month's revised number.

Regionally, the HMI results were mixed in August. While the Northeast posted a four-point gain to 19, the West registered a one-point gain to 15, the South held even at 17 and the Midwest posted a two-point decline, to 10.

Dunhill Homes Expands Footprint With Two New Communities in Dallas/Fort Worth

Dunhill Homes has successfully launched 7 new subdivisions in the Dallas and Houston markets in the last five months. In an economic environment marred by disappointing news, Dunhill Homes' expansion is refreshingly optimistic. The homebuilder has been on an expansionary spree in Texas after successfully launching two master-planned communities in Las Vegas. In July 2011 Dunhill added two new communities to its portfolio – The Retreat at Craig Ranch in McKinney and Ridgeview Farms in Northwest Fort Worth.

The Retreat at Craig Ranch is located within the master-planned community Craig Ranch in McKinney, Texas. This exclusive enclave allows residents a luxurious lifestyle with access to world class amenities and low maintenance homes. Residents of The Retreat have exclusive access to their own pool and a 9,000 sq. ft., 2-story clubhouse. Residents also enjoy the benefits of living within the Craig Ranch masterplan; social membership to the famous Craig Ranch TPC Golf Club and access to the Cooper Fitness Center & Spa. The Retreat, located at the intersection of Custer and Stacy Road, offers a wide range of plans starting in the low $200s.

Dunhill Homes' second community, Ridgeview Farms, is located in Northwest Fort Worth, adjacent to the booming Alliance Corridor and minutes from four major highways. Homeowners enjoy the luxury of a private amenity center with a playground, swimming pool and cabana. Dunhill Homes is offering several one and two story floor plans that range from 1,400 to over 3,000 square feet and start in the $140s.

All Dunhill homes are designed to surpass the industry standard on energy efficiency with features such as continuous air barrier and sealing, optimal HVAC with programmable thermostat, internal moisture management, soffit and static roof venting, and air pressure balancing. Each home is then inspected by an independent consultant or organization and assigned a HERS (Home Energy Rating System) rating.

Dunhill Homes is owned by Winchester Carlisle Companies which also launched another new home brand, Nathan Carlisle Homes, in July. Nathan Carlisle focuses on building exclusively for active adult homebuyers.

55+ Builders More Optimistic About Multifamily Rentals than New Home Sales

Builders in the 55+ housing market are significantly more optimistic about production and demand for multifamily rental units than they are for sales of single-family homes or multifamily condos, according to the latest 55+ Housing Market Indices that are compiled quarterly by the National Association of Home Builders (NAHB).

All of the components measuring production and demand for 55+ multifamily rental units increased significantly in the second quarter of 2011 compared to the same period a year ago.

In comparison, the 55+ Housing Market Indices for single-family units and multifamily condos were largely unchanged with increases from 12 to 13 and from 7 to 8, respectively.

“Like those in other age groups, many people in the mature-market sector are hesitant to buy,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “Among the factors keeping prospective home buyers on the sidelines are ongoing uncertainty about the economy and concerns about selling their existing homes. Low appraisals and tighter mortgage lending criteria are also constraining the market.”

The 55+ Housing Market Indices (HMI) for single-family homes and multifamily condos measure builder sentiment based on current sales, traffic of prospective buyers and expected sales six months in the future.

The 55+ Multifamily Rental indices measure current production, expected production six months in the future, current demand for existing rental units and expected demand six months in the future. In all of the 55+ Housing Market Indices, a number greater than 50 indicates that more builders view conditions as good than poor.

The 55+ Multifamily Rental indices showed increases from 15 to 28 in current production, from 16 to 29 in expected production six months in the future, and from 31 to 43 in current demand for existing units.

“Multifamily rentals are the strongest segment of the 55+ housing market at present,” said Nielsen. “The largest increase in a 55+ Multifamily Rental index was in expected demand six months in the future, which rose from 30 to 44,” he said. “An increase in demand is always good news, but this could also foreshadow a shortage of rental units in the future. Demand is already running ahead of production, and the continuing difficulty in obtaining credit to finance new construction could result in shortages down the road.”

Among the components of the 55+ Single-Family index, present sales were unchanged at 12, and expected sales increased one point from 17 to 18. Traffic of prospective buyers increased from 12 to 13.

The 55+ Multifamily Condo index components showed a slight increase – from 7 to 8 – in current sales. Expected sales six months in the future were unchanged at 10, and traffic of prospective buyers increased slightly from 5 to 7.

Active Senior Living

The Senior Cohousing Handbook, 2nd Edition: A Community Approach to Independent Living

Realtors Say Home Prices Took Another Hit

San Antonio, Texas

Median existing-home prices declined modestly in the second quarter with 27 percent of metropolitan areas experiencing price gains from a year ago, while state home sales declined from the second quarter of 2010, according to the latest quarterly report by the National Association of Realtors.

The median existing single-family home price rose in 41 out of 151 metropolitan statistical areas1 (MSAs) in the second quarter from the same period in 2010, including four with double-digit increases; one was unchanged and 109 areas showed price declines. In the first quarter, 34 metro areas had posted gains from a year earlier.

Lawrence Yun, NAR chief economist, said home prices have been moderating. “Median home prices have been moving up and down in a relatively narrow range in many markets, which shows a stabilization trend,” he said. “Markets showing consistent price stability or increases are those with solid labor market conditions, such as in Washington, D.C.; San Antonio; or Fargo, N.D.”

Yun noted the median price measurement reflects the types of homes that are selling during the quarter and can be misleading at times. “The level of foreclosures, which can artificially depress median prices, can vary notably in given markets. The annual price gauge smoothes out the quarterly swings and has shown fairly stable price trends in most markets.”

He added the housing market should be stronger. “With home prices in a broad trough and historically low mortgage interest rates, high housing affordability conditions and rising rents could stimulate a more rapid sales recovery if banks get back into the business of lending to more creditworthy borrowers,” Yun said.

NAR’s Housing Affordability Index stood at 176.6 in the second quarter, the third highest on record after the first quarter of 2011 and fourth quarter of 2010. The index measures the relationship between median home price, median family income and mortgage interest rates; the higher the index, the greater household purchasing power. Record keeping began in 1970.

The national median existing single-family home price was $171,900 in the second quarter, down 2.8 percent from $176,800 in the second quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes,2 typically sold at a discount of about 20 percent, accounted for 33 percent of second quarter sales, down from 39 percent in the first quarter; they were 32 percent a year earlier.

Total state existing-home sales, including single-family and condo, declined 5.4 percent to a seasonally adjusted annual rate3 of 4.86 million in the second quarter from 5.14 million in the first quarter, and were 12.7 percent below a 5.57 million pace during the second quarter of 2010. June 2010 was the closing deadline for the home buyer tax credit.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the key to healthy housing is credit access. “It’s frustrating for many creditworthy potential home buyers to realize that when they’re ready to make a move, banks remain risk averse,” he said. “People with good jobs, long-term plans and who are willing to stay well within their means deserve an opportunity to realize their American dream of home ownership. When banks return to normal and safe but sensible lending standards, housing will be able to contribute its traditional share to economic growth.”

Yun clarified the point on economic growth. “The direction of the economy will be determined principally by the housing market recovery, and indications now are pointing toward only a modest recovery,” he said.

The share of all-cash home purchases was 30 percent in the second quarter, up from 25 percent in the second quarter of 2010. Investors, who make up the bulk of cash purchasers, accounted for 19 percent of second quarter transactions, up from 14 percent a year ago.

First-time buyers purchased 35 percent of homes, down from 46 percent in the second quarter of 2010. Repeat buyers accounted for a 56 percent market share in the second quarter, up from 40 percent a year earlier.

In the condo sector, metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $169,200 in the second quarter, which is 3.5 percent below the second quarter of 2010. Fourteen metros showed increases in the median condo price from a year ago and 40 areas had declines.

Regionally, the median existing single-family home price in the Northeast rose 2.0 percent to $245,600 in the second quarter from a year ago. Existing-home sales in the Northeast declined 4.6 percent in the second quarter to a level of 763,000 and are 19.9 percent below the second quarter of 2010.

The median existing single-family home price in the Midwest fell 5.4 percent to $139,800 in the second quarter from the same period in 2010. Existing-home sales in the Midwest were down 3.1 percent in the second quarter to a pace of 1.05 million and are 18.3 percent below a year ago.

In the South, the median existing single-family home price declined 2.7 percent to $153,000 in the second quarter from a year earlier. Existing-home sales in the South fell 3.4 percent in the second quarter to an annual rate of 1.89 million and are 9.9 percent below the second quarter of 2010.

The median existing single-family home price in the West declined 3.1 percent to $218,000 in the second quarter from the second quarter of 2010. Existing-home sales in the West dropped 10.8 percent in the second quarter to a level of 1.16 million and are 6.2 percent below a year ago.

Downtown Dallas Getting Third New Hotel

A former Railroad and later insurance office building will become a Homewood Suites Hotel. Build for the Texas and Pacific Railroad, the building at 1025 Elm Street has been purchased by Irving-based Lowen Hospitality Management. We're wondering if the facade, modernized by the United Fidelity Life Insurance Company in the 1959 will be restored to its 1918 appearance.

Downtown Dallas will also soon be home to a new Omni and Nylo hotel.

Despite Recent Declines, Home Prices Expected to Stabilize Across U.S. by Early Next Year

Fiserv, Inc. recently released an analysis of home price trends in more than 380 U.S. markets based on the Fiserv Case-Shiller Indexes. The indexes are owned and generated by Fiserv, the leading global provider of financial services technology solutions, and data from the Federal Housing Finance Agency (FHFA).

The double-dip drop in home prices that began last year continued into the first quarter of 2011, with prices falling in 302 out of 384 metro areas tracked by Fiserv Case-Shiller. The decrease, an average of 5.1 percent as compared to the first quarter of last year, was expected, as housing demand settled to a lower level following last summer's expiration of the home buyer tax credit. Price declines in the recent quarter were also driven by a jump in foreclosure sales, which were temporarily stalled by loan processing issues that surfaced at the end of 2010.

David Stiff, chief economist at Fiserv, noted that continued economic weakness and uncertainty continue to weigh on markets. "The stabilization of housing markets depends greatly on household confidence in the strength of the economic recovery," he said. "Unfortunately, recent economic news has done little to build confidence. Weak job growth numbers in May and June, political wrangling over the Federal government debt ceiling, and the ongoing debt crisis in Europe have all increased pessimism. Households will not become more optimistic about housing markets until they are convinced that the job market is improving and that politicians will not allow debt problems to become new economic catastrophes."

Despite the weakness in housing markets, which remain a problem in nearly every region, Fiserv continues to project that home prices remain on track to stabilize by the end of 2012.

Stiff pointed to several positive trends. "Mortgage delinquency rates have been falling for more than a year. Foreclosure rates have started to decline. The flood of bank-owned sales, which has swamped many markets, will finally begin to recede this year as fewer houses enter the foreclosure pipeline. Meanwhile, housing affordability has nearly returned to pre-bubble levels," said Stiff. "Relative to family income levels, the average U.S. home is now only 5 percent more expensive than it was in 2000."

According to Fiserv and Moody's Analytics, these factors, when combined with economic growth forecast for the coming quarters, point to a broad-based recovery for housing that will begin in early 2012. Between the first quarter of 2012 and the first quarter of 2013, homes are projected to increase by an average of 2.7 percent, with gains in 365 out of 384 metro areas.

Other highlights from the latest Fiserv Case-Shiller Indexes include:

• Eight of the 10 worst performing markets in the 2011 first quarter had unemployment rates higher than the national average.
• Five of the 10 best performing housing markets in the last five years are in Texas, where the Midland and Odessa Metropolitan areas have seen house prices grow 42 percent and 30.3 percent, respectively, from the 2006 first quarter to the 2011 first quarter.
• The outlook for Florida is a study in contrasts. Four of the 10 metro areas where home prices are projected to grow the most between the first quarter of 2012 and the first quarter of 2013 are in Florida (Ocala; Palm Coast; Panama City-Lynn Haven-Panama City Beach; Palm Bay-Melbourne-Titusville). But the state is also home to six of the 10 markets projected to suffer the biggest home price declines over the same time period (Miami-Miami Beach, Kendall; Fort Lauderdale-Pompano Beach-Deerfield Beach; Naples-Marco Island; Crestview-Fort Walton Beach-Destin; Gainesville; Orlando-Kissimmee-Sanford).
• Four metro areas in Washington State (Tacoma; Kennewick-Pasco-Richland; Spokane; Olympia) are in the 10 markets projected to experience the highest home price increases for the 2011 first quarter to 2012 first quarter period.
• Six of the 10 markets that have suffered the greatest price declines from peak to the first quarter of 2011 are in California (Merced; Modesto; Salinas; Stockton; Vallejo-Fairfield; Bakersfield-Delano).

Zillow Reviews Bumpy Road Toward Stabilization

Home values in the United States fell 0.4 percent from the first to the second quarter of 2011, the smallest quarterly decline in more than four years, according to Zillow's second quarter Real Estate Market Reports. The Zillow Home Value Index fell 6.2 percent year-over-year to $171,600. Home values have fallen 28.8 percent since they peaked in June 2006.

Regionally, home values fell on a year-over-year basis in 142 of the 154 metropolitan statistical areas (MSAs) covered by Zillow and were flat in eight. In the short term, however, nearly two-thirds of MSAs (94 of 154) experienced home value appreciation, with the Zillow Home Value Index rising from the first to the second quarter.

Negative equity fell slightly to 26.8 percent of single-family homeowners with mortgages in the second quarter, down from 28.4 percent in the first. A homeowner is in negative equity when they owe more on their mortgage than their home is worth.

Meanwhile, the rate of foreclosure re-sales declined from its peak in March 2011, when 21.4 percent of all sales were foreclosure re-sales. In June, 19.7 percent of sales were foreclosure re-sales.

"While there are many positive signs in the second quarter, and it is clear the post-tax credit free-fall of home values is over, we're not out of the woods yet," said Zillow Chief Economist Dr. Stan Humphries. "It is very encouraging that two-thirds of markets in our report experienced home value appreciation, but we have to remember that this is coming on the heels of one of the worst quarters since the housing recession began.

"We expect a bumpy road ahead. There will be many ups and downs in home values before this is over, and we continue to expect a true bottom in 2012, at the earliest. There are still hazards in the form of a full foreclosure pipeline, high negative equity and fluctuations in demand."

While nearly two-thirds of markets showed appreciation from the first to the second quarter of 2011, far fewer have recorded a longer period of stabilization. Only 25 of the 154 MSAs covered in Zillow's Real Estate Market Reports showed two consecutive quarters of appreciation. Among those MSAs were Washington, D.C., where the median home value increased 1.7 percent from the first to the second quarter after increasing 0.2 percent from the fourth quarter of 2010 to the first of 2011; and Pittsburgh, where home values increased 2.8 percent from the first to the second quarter, and increased 0.1 percent from the fourth to the first quarter.

Fed To Keep Interest Rates Near Zero

The Federal Reserve Announced today it would seek to keep interest rates near zero into 2013.

The Fed says economic growth so far this year has been slower than expected, there's been a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Moreover, household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed.

In addition, downside risks to the economic outlook have increased. The Federal Open Market Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee reports it currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.