Nov 15, 2011 | Housing Analysis
Foreclosed homes are a hot market throughout Massachusetts — and supplies are ramping up.
According to foreclosure-tracking firm RealtyTrac, October’s foreclosure filings rose 7 percent to 231,000 filings nationwide.
A “foreclosure filing” is any one of the following foreclosure-related events : A default notice on a home; a scheduled auction for a home; or, a bank repossession of a home. Because of this definition, a single home can account for up to 3 foreclosure filings — one from each category.
Because of this, we may glean more relevant insight into the foreclosure market by separating RealtyTrac’s foreclosure report into “event types”.
- Default Notices : Up 10% from September 2011; Down 31% from October 2010.
- Scheduled Auctions : Up 8% from September 2011; Down 38% from October 2010.
- Bank Repossessions : Up 4% from September 2011; Down 27% from October 2010.
These breakdowns suggest that, although improved as compared to last year, the foreclosure market is growing. At least, it’s growing in some parts of the country. We can’t forget that — like everything real estate — foreclosures are a local phenomenon.
In October, just 4 states accounted for more than half of the country’s foreclosure filings. Those four states — California, Florida, Michigan and Illinois — represent just 26% of the U.S. population.
Even on a per household basis, the figures remain disproportionate :
- Top 10 Foreclosure States : 1 foreclosure per 341 households, on average
- Bottom 10 Foreclosure States : 1 foreclosure per 7,434 households, on average
The nationwide foreclosure rate was 1 foreclosure per 563 households.
As a Fitchburg home buyer, foreclosures are worth watching. They account for 18% of home resales nationwide and, in some markets, can be bought at steep discounts versus a comparable “non-distressed” home. That is part of their appeal, in fact.
But just because foreclosed properties can be a “deal”, it doesn’t mean you should rush to buy one. Buying a foreclosed home from a bank is different from buying a non-foreclosed home from a “person”. The contracts and negotiation process are different, and foreclosed homes are sometimes sold as-is.
“As-is” means “this home may have defects”.
Therefore, if you plan to buy a foreclosed home, talk with a real estate professional first. You can learn a lot about the housing market online, but with respect to writing an offer on a property, you’ll want an experienced agent on your side.
Oct 28, 2011 | Housing Analysis
Nationwide, fewer homes are going under contract to sell.
According to the National Association of REALTORS®, the Pending Home Sales Index fell 5 percent last month. September marks the fourth consecutive month in which the index has dropped.
The Pending Home Sales Index is a monthly index which measures the number of homes under contract to sell, but not yet closed. As such, it’s among the few “forward-looking” housing indicators; a data set meant to predict future home sales.
80% of homes under contract close within 2 months so, if the September Pending Home Sales Index is to be believed, we should expect home sales to decline through October and November.
And that’s before we account for cancelled contracts.
Also from the National Association of REALTORS®, we learn that 18 percent of homes under contract failed to close in September. This is double the failure rate from September 2010 and it, too, should drag Existing Home Sales volume lower this fall.
On a seasonally-adjusted, regional basis, the Pending Home Sales Index fell everywhere.
- Northeast Region: -4.7% from August
- Midwest Region : -6.2% from August
- South Region : -5.5% from August
- West Region : -2.1% from August
For home buyers and sellers in Fitchburg , though, regional data remains too broad to be useful. Housing markets are local, meaning that each block on each street on each city has its own distinct economy. When 9 states are grouped into a single “region”, it’s neither helpful nor relevant to people making buy/sell decisions.
That said, the Pending Home Sales Index remains important because it’s about housing, and housing is a keystone of the U.S. economic recovery.
The market looks ideal for buyers. Home prices are rising, but slowly; and mortgage rates remain near rock-bottom levels. Home affordability is high and should remain that way for the next few weeks.
If you’re shopping for a home, it’s an excellent time to go under contract.
Oct 27, 2011 | Housing Analysis
Home builders continue to sell homes and work through inventory.
According to data from the Census Bureau, the number of new homes sold in September jumped 6 percent from the month prior, beating analyst expectations. On a seasonally-adjusted, annualized basis, buyers in Massachusetts and nationwide closed on 313,000 newly-built homes last month.
It’s the highest reading since April and a major reason why the available number of new homes for sale is shrinking.
As compared to September 2010, there are 19% fewer homes for sale nationwide. At today’s sales pace, the complete new home inventory would be “sold out” in 6.2 months – the quickest sell-out pace since the April 2010 federal home buyer tax credit expiration.
It’s no wonder builder confidence is rising. (more…)
Oct 26, 2011 | Housing Analysis
The August 2011 Case-Shiller Index was released this week. On an monthly basis, 10 of 20 tracked markets worsened. On an annual basis, valuation degradation was worse.
Only Detroit and Washington, D.C. posted higher home values in August 2011 as compared to August 2010, rising 2.7% and 0.3%, respectively.
However, the index has been moving in the right direction. Since bottoming out in March of this year, the Case-Shiller Index is up nearly 4 percent.
As home buyers and sellers in Worcester , though, we have to remember that the Case-Shiller Index is a flawed product; its methodology too narrow to be the final word for housing markets.
The Case-Shiller Index has 3 main flaws.
The first Case-Shiller Index flaw is its relatively small sample size. Although it’s positioned as a national housing index, Case-Shiller data represents just 20 cities nationwide, and they’re not even the 20 most populous U.S. cities. For example, cities like Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10) are excluded from the Case-Shiller Index findings.
By contrast, Minneapolis (#48) and Tampa (#55) make the list. (more…)
Oct 21, 2011 | Housing Analysis
Despite fewer homes for sale nationwide, the number of home resales remains steady.
According to data from the National Association of REALTORS®, on a seasonally-adjusted, annualized basis, September’s Existing Home Sales eased by 150,000 units, falling to 4.91 million units nationwide.
An “existing home” is a home that’s been previously occupied and, despite last month’s drop, September’s sales volume remains the second-highest on record since April 2011.
This statistic is noteworthy for two reasons :
- There are 9.9% fewer homes available for sale as compared to 12 months ago
- Contract “failures” are twice as high as compared to September 2010, now averaging 18 percent nationwide
A contract failure is typically the result of homes not appraising for the purchase price; mortgage denials in the underwriting process; and, insurmountable home inspection issues. (more…)
Oct 20, 2011 | Housing Analysis
Headlines in newspapers can be misleading — especially with respect to housing figures. Media coverage of the most recent Housing Starts data serves as an excellent illustration.
Wednesday, the Census Bureau released its September Housing Starts report. In it, the government said that national Housing Starts rose 15 percent in September as compared to August 2011, tallying 658,000 units on a seasonally-adjusted annualized basis.
The September reading is the highest monthly reading since April 2010, the last month of last year’s home buyer tax credit.
The sudden surge in starts is big news for a housing market that has struggled of late, and the press was eager to carry the story. Here is a sampling of some headlines:
- U.S. Housing Starts Rise 15%, Hit 17-Month High (MarketWatch)
- Home Building Jumps 15% in September (ABC)
- New Construction Surges In September (LA Times)
These headlines are each accurate. However, they’re also misleading.
Yes, Housing Starts did surge in September, but if we remove the “5 or more units” grouping from the Census Bureau data — the catgory that includes apartment buildings and condominium structures — we’re left with Single-Family Housing Starts and Single-Family Housing Starts rose just 1.7 percent last month. (more…)
