U.S. Economy: New-Home Sales Climb 11%, Most in Eight Years

Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize.
By: Courtney Schlisserman and Bob Willis: Bloomberg.com
Sales increased to a 384,000 annual pace, higher than every forecast in a Bloomberg News survey and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade.

Deutsche Bank Securities Inc. and Goldman Sachs Group Inc. economists said today’s figures signal an end to the slide in home construction and sales. While that means the drag on economic growth will turn to a stimulus in the second half of the year, property values are likely to continue falling and rising unemployment will temper the recovery, analysts said.

“We’re barely past the housing bottom, this thing is still fragile,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. “It’s not premature to talk about home prices bottoming - it’s somewhere in the next three to six months. There is light at the end of the tunnel.”

Builders’ stocks jumped, with the Standard and Poor’s Supercomposite Homebuilding Index gaining 2.3 percent. The broader S&P 500 Stock Index was up 0.1 percent at 980.35 at 10:10 a.m. in New York. Treasuries, which fell earlier in the day, remained lower, with benchmark 10-year note yields rising to 3.75 percent from 3.66 percent at last week’s close.

Construction Recovers

The Commerce Department earlier this month reported that builders began work on 582,000 residential properties at an annual rate in June, the most since November. Home construction has subtracted from U.S. gross domestic product every quarter since the start of 2006.

The jump in sales signals the U.S. economy is on the way to recovery, said Rebecca Blank, under secretary for economic affairs at the Commerce Department.

“Across the board this is good news,” Blank, formerly a fellow at the Brookings Institution in Washington, said in an interview. “It’s what you would expect to see at the beginning of a recovery.”

Standard Pacific Corp., the U.S. homebuilder that gets most of its revenue from California, is among companies seeing stabilization. It’s net loss, the 11th consecutive drop, narrowed to $23.1 million in the second quarter from $249 million a year earlier, the Irvine, California-based company said last week. Revenue fell 29 percent.

Smaller Losses

“While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run,” Chief Executive Officer Ken Campbell said in a July 22 statement.

While prices continue to fall, the pace of the decline is easing. The S&P/Case Shiller index of 20 major metropolitan areas tomorrow may show property values fell 17.9 percent in May from a year earlier, according to the median forecast in a Bloomberg survey. The measure was down 18.1 percent in the 12 months ended April.

“In terms of residential investment and home sales and housing starts, I think it has” bottomed, said Jan Hatzius, chief U.S. economist at Goldman Sachs in New York, referring to the housing slump. “We still have a period of declines ahead of us” in prices, he also said.

The decline in prices and a drop in mortgage rates have started to lure buyers even amid the surge in unemployment, which reached a quarter-century high of 9.5 percent in June.

Economists’ Forecasts

Economists had forecast new home sales would rise to a 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May’s reading up to a 346,000 rate from a previously reported 342,000.

The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Last month’s value compares with $219,000 in May.

Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold properties fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.

Foreclosure filings reached a record in the first half of the year, providing competition for homebuilders and pushing down the value of all houses. Also, rising unemployment, which economists forecast will top 10 percent by early 2010, threatens to restrain any recovery in housing.

Fed Efforts

Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent.

Fed Chairman Bernanke said July 21 that the economy is showing “tentative signs of stabilization” and the “decline in housing activity appears to have moderated.”

Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration’s economic stimulus plan. Purchases have to be completed before Dec. 1.
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Energy efficiency incentives likely to grow

An unprecedented push by the U.S. government to widen rewards for energy-conscious homeowners is underway. An example: FHA loans offering 5% larger mortgages to buyers who plan on making renovations.
By: Kenneth R. Harney: latimes.com
You're probably familiar with some of the federal government's incentives for home energy efficiency - heftier tax credits for solar panels, solar water heaters, geothermal heat pumps, heavy-duty insulation, windows, air conditioning and the like.

But these are just the beginning of an unprecedented push by the government that's getting underway for energy conservation in housing.

At the Department of Housing and Urban Development, a new generation of mortgages designed to encourage energy efficiency is being rolled out, starting with Federal Housing Administration loans that offer 5% larger mortgages to people who plan on making energy-efficiency improvements.

For example, if you qualify for a $300,000 FHA mortgage, the FHA might now be able offer you an additional $15,000 if the extra money is used to substantially lower the property's annual energy consumption.

HUD Secretary Shaun Donovan wants the FHA to offer additional incentives. One of the possibilities: Give loan applicants credit on their qualifying incomes for a home loan in exchange for documentable savings in annual energy expenditures.

Meanwhile, the House of Representatives has passed a massive energy conservation and emissions control bill. Though the American Clean Energy and Security Act is better known for its more controversial "cap-and-trade" carbon emissions program, the bill also contains a section devoted to creating incentives for consumers and federal agencies to build and finance energy-efficient dwellings.

Among the key housing-related provisions in the bill:

* The FHA is directed to insure a minimum of 50,000 new energy-efficient mortgages during the coming three years. An energy-efficient house is defined as one in which energy consumption is reduced by 20% following renovations.

* Fannie Mae and Freddie Mac are directed to develop mortgage products and more flexible underwriting guidelines to reward energy-conscious borrowers and builders.

The two companies also would be required to help establish a secondary market for energy-efficient and location-efficient mortgages for moderate- and lower-income home buyers. The new generation of loans would increase the qualifying incomes of applicants by at least one dollar for every dollar of projected energy savings from renovations, green construction or efficient design.

Similar concessions on loan applicants' incomes would be extended for properties located in areas close to employment centers or mass transit lines. No concessions would be made for homes in far-flung neighborhoods that eat into family incomes because of long commutes, which would add to carbon emissions.

* Real estate appraisers would be required to take energy improvements and the money they save into account as they value houses. For example, if you spent $30,000 on a series of major upgrades, an appraiser would need to consider the annual cost savings in energy produced and the effect, if any, on market value. States would require licensed appraisers to undergo additional professional training to equip them for their new energy-efficiency valuation responsibilities.

* Federal financial regulators would be directed to support the establishment of privately run "green banking centers" inside banks and credit unions. The centers, which presumably could be unmanned kiosks or staffed offices, would help consumers understand how best to obtain financing for energy-conserving home improvements, second and primary mortgages, and energy audits and ratings.

HUD would also be authorized to conduct "renewable energy home product expos" to educate the public about the latest technologies and financing concepts.

* State governments would be required to ensure that homeowners whose energy technologies allowed them to get "off the grid" - no longer fully dependent on utilities to provide them power - are not denied property hazard coverage by insurance companies.

With all this emphasis on energy efficiency and reduction of real estate-related emissions, is there any evidence that home buyers will take part? Will they use mortgages that encourage energy efficiency or even pay more for houses that are loaded with the latest energy-saving technologies? The jury is out because much of this is prospective and hasn't yet been signed into law.

But maybe there's going to be some extra green in green.

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Home Resales, Leading Index Probably Rose: U.S. Economy Preview

Home resales in the U.S. probably rose in June and a gauge of the economic outlook improved, signaling the recession may soon be over, economists said before reports this week.
By: Shobhana Chandra: Bloomberg.com
Purchases of previously owned homes climbed to an annual rate of 4.83 million, the highest level since October, according to the median of 57 estimates in a Bloomberg survey before the National Association of Realtors’ report on July 23. Figures tomorrow may show the index of leading indicators climbed for a third consecutive month.

Mounting evidence that housing is stabilizing is bolstering forecasts that government stimulus efforts will gain traction in coming months and lift the economy from the worst slump in five decades. Other reports may show rising joblessness is weighing on Americans’ moods, tempering optimism about any rebound.

“The end of the recession could be pretty close,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We’re getting near the bottom in housing. It’ll still be a very gradual recovery for the economy, with a labor market that’s very weak.”

Reports last week corroborated that the housing slump, now in its fourth year, is dissipating. Housing starts unexpectedly jumped in June to the highest level since November as construction of single-family dwellings climbed by the most since 2004. Building permits, indicating future construction, rose the most in a year.

Signs of Stability

The National Association of Home Builders/Wells Fargo index of builder confidence increased this month to the highest level since September.

One reason for the projected increase in home resales is that prospective buyers are taking advantage of the plunge in prices caused by the foreclosure crisis. Filings reached a record in the first half of 2009, according to RealtyTrac Inc., an Irvine, California-based seller of default data. More than 1.5 million properties got a default or auction notice or were seized by banks in the six months through June.

The New York-based Conference Board’s leading index, which points to the direction of the economy over the next three to six months, rose 0.5 percent last month after a 1.2 percent increase in May, according to the survey median.

The jump in building permits was probably one of the biggest contributors to the predicted gain in the leading index, economists said. Fewer jobless claims and higher stock prices were also likely drivers.

Stocks Rise

Stocks have gained on optimism an economic recovery is at hand. The Standard & Poor’s 500 Index is up 39 percent since reaching a 12-year low on March 9.

A July 24 report may show the Reuters/University of Michigan final index of consumer sentiment fell in July after four consecutive gains, economists predicted. A preliminary reading dropped to the lowest level since March.

The U.S. has lost about 6.5 million jobs since the recession began in December 2007. Economists in a separate survey taken by Bloomberg this month predicted the jobless rate will reach 10 percent by year-end from 9.5 percent in June.

Federal Reserve officials thought the economy was “still quite weak and vulnerable to further adverse shocks,” according to minutes of their June meeting released last week. Even so, the report also said “the economic contraction was slowing and that the decline in activity could cease before long.”

Companies seeing an improvement include CSX Corp., the third-largest U.S. railroad. Jacksonville, Florida-based CSX reported second-quarter profit that topped analysts’ forecasts, and said demand for hauling most freight is stabilizing. Railroad traffic is considered an economic bellwether.

“We’re seeing pretty good stabilization in our markets,” Chief Executive Officer Michael Ward said in an interview last week. “We don’t see any further deterioration, and we see some incremental improvement in the near future.”



Bloomberg Survey

================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
LEI MOM% 7/20 June 1.2% 0.5%
Initial Claims ,000’s 7/23 18-Jul 522 560
Cont. Claims ,000’s 7/23 11-Jul 6273 6390
Exist Homes Mlns 7/23 June 4.77 4.83
Exist Homes MOM% 7/23 June 2.4% 1.3%
U of Mich Conf. Index 7/24 July F 64.6 65.0
================================================================
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Using the Rout in Housing to Lower Taxes

New Tools Help Owners Get Reduced Valuations; Saving Big in New Jersey
By: M.P. MCQUEEN: WSJ.com
Kim Davidson lives in Bonita, Calif., a San Diego suburb hit hard by tumbling property values. Earlier this year, she made the best of a bad situation and appealed her tax assessment. The county reduced her annual tax bill by more than $1,000 to $3,500.

“I did the whole thing online and walked [my application] down to the mailbox, and a month and a half later, I learned I saved all that money,” says Ms. Davidson, a 44-year-old account manager for a business consulting firm, who purchased the home last year. “It was incredible.”

Tens of thousands of homeowners across the country are trying to wring something positive from an epic real-estate crash. In Cuyahoga County, Ohio, which includes Cleveland, hit hard by rising unemployment and foreclosures, nearly 23,000 property owners applied for property-tax reductions this year, up from an annual average of 1,700. Appeals in California’s Sacramento County soared to 12,000 in 2008 from a typical rate of 1,800 a year earlier.

The number of property owners seeking a tax reduction in Clark County, Nevada, which includes Las Vegas, soared to 6,000 this year from about 1,000 annually in recent years. About three-quarters of those who filed appeals succeeded in having their valuations lowered, most by 30% to 40%, county officials say. The county already had reduced valuations across the board for the vast majority of its residential property owners, says Michele Shafe, assistant director of the Clark County Assessor’s office. She said staffers had to work overtime and Saturdays to keep up with demand for reassessments.

Many of the Nevada appeals came from homeowners in recent developments. “That is where people were paying $400,000 for homes that are now worth maybe $150,000,” Ms. Shafe says.

Many homes nationwide were last appraised prior to the housing crash and are valued for tax purposes at levels higher than today’s home prices. “If you have a three-year period between assessments and the last one was in 2007, your assessment is still at the top of the market,” says Jacqueline Byers, director of research for the National Association of Counties in Washington, D.C.

Homeowners who want to appeal their assessment in many cases can handle the process themselves, although it’s important to be prepared before going in front of an appeals board, tax experts say. People who want help can hire a property-tax consultant or attorney, but should expect to pay a fee, often 25% to 50% of the amount saved in the first year. And enlisting the service of a real-estate appraiser can cost up to several hundred dollars.

There are also a growing number of local and national online services that use automated property-valuation models to help consumers determine whether they may be able to reduce their property taxes. Initial evaluations are often free at these sites, which include EasyTaxFix.com and LowerMyAssessment.com. For a fee of $50 to $100, users can obtain forms with data already filled in and instructions on how to appeal, and a list of recent sales of comparable properties. Ms. Davidson of Bonita used EasyTaxFix.com to help with her appeal.

Such online services may be able to give you a convenient ballpark estimate of whether your home is overassessed. Tax officials say these sites’ results can be supplemented with information from other sources, such as local real-estate agents. Government tax officials also warn that scam artists have been trolling developments in California and elsewhere touting phony property-tax reduction services in direct mailings.

Nick Osnato, a real-estate appraiser in Egg Harbor Township, N.J., says he conducted his own appeal in March and succeeded in getting his tax assessment lowered by $30,000, saving him about $150 a month in property taxes.

“I looked for sales of homes that were the same size as mine, with the same lot, but that had a lower assessment. That’s it,” he says. Mr. Osnato estimates home values in New Jersey are down between 10% and 20% from a year ago, depending on the area.

Winning an appeal mainly requires producing enough evidence to convince the tax assessor or an appeals board that your property assessment is based on inaccurate or outdated information, or is unfairly high compared to similar properties. In some areas, homeowners have as little as two weeks to file a notice of appeal after receiving their tax bill, but 30 to 60 days is more common. That means homeowners have to be ready to scramble when the tax bill comes.

Check on whether you qualify for special property-tax reduction programs such as special exemptions for people age 65 and over. Then, examine property records for inaccuracies, especially square footage. The assessor keeps on file a property record-card that contains your lot number, zoning category, address, sales records, land value and dimensions, as well as significant features as recorded by the town appraiser. Check it closely for errors, including inaccurate descriptions of the property (say, a three-car garage instead of two). Also check whether significant defects like a leaky basement, which could lower the value of the property, are on record. Nowadays, many municipalities put this information online.

While you are at it, check the assessor’s math, particularly with respect to assessment formulas. Some areas use full-market value, replacement value or sales price. Others use a fraction of the market value.

Next, locate three to five comparable properties and check your property against them, making adjustments for differences. Sales data are available from your local government, or a licensed real-estate agent.

“Look for disparities that cannot be explained away, like the age of other properties or better lot configuration, or view. If those things can’t explain why the assessment is so much higher than others, you may have grounds to appeal on equitability,” says Pete Sepp, spokesman for the National Taxpayers Union, an advocacy group.

If you think your property value is unfairly high, your next step is to contact your local assessor. If the property information on record is inaccurate, the assessor may be able to lower your assessment without a formal appeal. But if an appeal before an appeals or equalization board is necessary, you will have to produce evidence to support your complaint. Bring an appraiser’s report, if you have one, and records of comparable sales along with any other supporting documentation, such as photos, a surveyor’s report and contractors’ estimates. If your appeal is turned down, additional appeals usually are heard by a state court.

For more information about how to file an appeal, a brochure is available for $6.95 from the National Taxpayers Union at www.ntu.org.

Experts say there are few drawbacks to applying to reduce your tax assessment. However, if you made additions and improvements to your home that were never properly recorded with your town—usually through a building permit—you might not receive a reduction, and could conceivably face an increased assessment.

Robert Chambers, administrator of the Cuyahoga County Board of Revision, which handles appeals in the Cleveland area, says the most common mistake homeowners make is failing to bring enough evidence about the house.

“Most of the time if a person is denied, it is because of lack of evidence,” Mr. Chambers says. “They say here is a similar bungalow or ranch, but they don’t adjust for age, square footage, etcetera, which is everything that a certified appraiser must do,” he says.

He suggests refraining from using a hearing as a forum to vent your rage at high taxes. “You are filing a legal affidavit that says the auditor’s value is wrong and I have evidence to show you that,” he says.
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Foreclosure scams targeted in U.S., state and local crackdown

Under Operation Loan Lies, 189 lawsuits, cease-and-desist orders and other legal actions have been filed in 20 states.
By: Nathan Olivarez-Giles: latimes.com
In Southern California, prosecutors have moved against 14 firms and 21 people.

For Rene Ruelas, the calls came faster than weeds sprouting in the yard of an empty house.

Foreclosure was looming for the Buena Park home that Ruelas shared with his wife, Rose, and four children. The longshore mechanic was headed into his fourth month without a paycheck because of a workers' compensation dispute as he recovered from his second knee surgery in a year. He was desperate.

"They made it seem so simple," he said of the telephone solicitations that began late last year. "They said they were given my information from the bank and that I just had to pay the money upfront and they'd do all the footwork."

Ruelas said he paid about $4,000 over five weeks to a company that never even contacted his lender to modify his home loan.

Now Ruelas and his family are on the cover of a DVD the Federal Trade Commission is sending out in an effort to curb the calls and mailers that have helped dupe hundreds of thousands of homeowners out of hundreds of millions of dollars.

The DVD - along with a flurry of lawsuits - was unveiled Wednesday as a part of Operation Loan Lies, a nationwide crackdown by federal, state and local authorities on those who prey on homeowners desperate for mortgage relief.

"At the moment, there are more scammers than there are government officials going after them," California Atty. Gen. Jerry Brown said at a news conference in downtown Los Angeles. "There are more of these rats coming out of these holes than we can stomp on, but we'll keep doing the best we can."

Although the announcement was made Wednesday, the operation has been underway for weeks, FTC Chairman Jon Leibowitz said.

So far, 189 lawsuits, cease-and-desist orders and other legal actions have been filed in 20 states as a result of Operation Loan Lies, officials said.

In Southern California, prosecutors have taken legal action against 14 companies and 21 people accused of running loan-modification scams that ripped off thousands of struggling homeowners looking to avoid foreclosure.

In documents filed in U.S. District Court in Los Angeles and Orange counties, Brown and the FTC alleged that the California firms charged $500 to $5,500 in upfront fees, often promising to get lenders to modify mortgages to make payments more affordable - and never delivered.

For a upfront fee of $3,500, one alleged victim was promised a 40% reduction in her mortgage principal and a $2,000 reduction in her monthly payment by U.S. Homeowners Assistance, one of the lawsuits said. After learning in April 2008 that her loan modification request had been denied, the woman discovered that the Irvine company had forged her signature and falsified her financial information, the suit said.

Leibowitz said that homeowners should be wary of loan consultants requiring payment before services are performed. Federal and California lawmakers are working on rules to block loan modification services from demanding upfront payments.

Hundreds of thousands of homeowners have been victimized by loan modification scams, Leibowitz said, estimating monetary losses in the hundreds of millions of dollars. And the fraudulent schemes are more rampant in Southern California than in any other part of the U.S., he said.

"Part of the reason why we're out here today is because California consumers have been among the most hard hit and also because a lot of these malefactors are based in Orange County," Leibowitz said. "It's one of the hotbeds of mortgage scam activity."

Brown and the FTC are demanding millions in civil penalties and restitution for homeowners as well as permanent injunctions to prevent the defendants and companies from offering mortgage-relief programs.

Firms named in the California suits included U.S. Homeowners Assistance (also known as Statewide Financial Group Inc.); We Beat All Rates; U.S. Homeowners Preservation Center; U.S. Foreclosure Relief Corp. (also known as Lighthouse Services and California Foreclosure Specialists), based in Orange; Home Relief Services, with offices in Irvine, Newport Beach and Anaheim; RMR Group Loss Mitigation, with offices in Newport Beach, Orange, Huntington Beach, Corona and Fresno, and its lawyers at Shippey & Associates and Arthur Aldridge; United First Inc., based in Los Angeles; Payment Relief Services Inc. of Costa Mesa (also known as Mercury Financial Services Corp.); and Living Water Lending of Newport Beach.

Representatives for the accused companies and individuals did not return requests for comment.
Twenty-three state and local agencies from 18 states are working with the FTC under the effort, and that number is expected to grow dramatically by the end of the year, Leibowitz said.

The Ruelas family was lucky. The FTC directed them to free counseling offered by the U.S. Department of Housing and Urban Development, which helped save their home of 13 years.

"The only thing real in that deal was my money on the table," Ruelas said. "Everything else was a lie. What matters is that we still have our house and hopefully I'll return back to work next month."
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Southland home sales highest since late ’06; median price up again

Southern California home sales rose in June to the highest level in 30 months as the number of deals above $500,000 continued to climb.
DQNews.com
June’s sales gain, plus another rise in the region’s median sale price, indicate buyers responded to price cuts on mid- to high-end homes and found it easier to secure financing for pricier abodes, a real estate information service reported.

A total of 23,262 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 12.0 percent from 20,775 in May and up 29.0 percent from a revised 18,032 a year ago, according to San Diego-based MDA DataQuick.

Sales have increased year-over-year for 12 consecutive months.

June’s sales were the highest for that month since 2006, when 31,602 homes sold, but were 17.7 percent below the average June sales total since 1988, when DataQuick’s statistics begin. June sales peaked at 40,156 in 2005 and hit a low last year.

Foreclosures remained a major force in June, but their impact on the resale market eased for the third consecutive month.

Foreclosure resales – homes sold in June that had been foreclosed on in the prior 12 months – represented 45.3 percent of Southland resales last month, down from 49.7 percent in May and down from a peak 56.7 percent in February this year. Last month’s level was the lowest since foreclosure resales were 43.7 percent of resales in July 2008.

As the influence of deeply discounted foreclosures in lower-cost areas has waned in recent months, sales in higher-cost housing markets have increased and accounted for a greater share of total transactions.

Resales of single-family houses priced $500,000 and above rose to 19.6 percent of all existing houses sold in June, up from 18.0 percent in May but still down from 29.2 a year ago. The last time the $500,000-plus market made up more than 19 percent of sales was last October, when it was 19.9 percent. Sales of $500,000-plus houses dipped to as little as 13.4 percent of sales in January this year.

The recent shift toward higher-cost markets contributing more to overall sales has put upward pressure on the region’s median sale price – the point where half of the homes sold for more and half for less. The median dived sharply over the past year not just because of price depreciation but because of a shift toward an unusually large share of sales occurring in lower-cost, foreclosure-heavy areas.

The median price paid for all new and resale houses and condos sold in the Southland last month was $265,000, up 6.4 percent from $249,000 in May but down 26.4 percent from $360,000 a year ago. It was the second consecutive month in which the median rose on a month-to-month basis. Before May’s 0.8 percent increase over April, the median hadn’t risen from one month to the next since July 2007.

Last month’s median was the highest since it was $278,000 last December, but it stood 47.5 percent below the peak $505,000 median reached in spring and summer of 2007.

“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum. Sales in many higher-cost neighborhoods couldn’t have gotten much lower, so this recent uptick in activity should come as no surprise. The recession and problem mortgages are fueling more high-end distress, hence more high-end ‘bargains.’ What’s missing, still, is a wide-open financing spigot for the would-be buyers of these more expensive homes,” said John Walsh, DataQuick president.

There were signs last month that credit was flowing a bit more easily for high-end buyers: The share of Southland purchase loans above $417,000 rose to 14.8 percent in June, the highest since it was 15.6 percent last August. “Jumbo” mortgages needed to buy pricier homes have been more expensive and much harder to obtain since August 2007, when the credit crunch hit. Before then, nearly 40 percent of Southland sales were financed with jumbo loans, then defined as over $417,000.

Bank of America makes the most home purchase loans in Southern California with about 20 percent of the market. Wells Fargo has 10 percent of the market.

In lower-cost “starter” housing markets, many first-time buyers continued to choose government-insured FHA financing. Such loans were used to finance 36.8 percent of home purchases last month, down slightly from 37.4 percent in May but up from 19.7 percent a year ago.

Absentee buyers, including investors who will have their property tax bills sent to a different address, bought 18.6 percent of the Southland homes sold last month. That’s up from 16.1 percent a year ago but down from 19.5 percent in May. The monthly average since 2000: 15 percent. Southland homebuyers appearing in public records with “LLC” in their names, meaning a limited liability company (used by some investor groups), accounted for about 1.5 percent of June home sales (345 sales). That’s down from a high of 2 percent in April but still well above the average of 0.6% of monthly sales this decade.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The year-ago numbers for Orange County and the region have been revised to include a late data update.

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,193 last month, up from $1,052 the previous month, and down from $1,762 a year ago. Adjusted for inflation, current payments are 46.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 55.7 percent below the current cycle's peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains near record levels, while financing with adjustable-rate mortgages is near the all-time low but has recently edged higher. Financing with multiple mortgages is low, down payment sizes and flipping rates are stable, and non-owner occupied buying is above-average in some markets, MDA DataQuick reported.


Sales Volume Median Price
All homes Jun-08 Jun-09 %Chng Jun-08 Jun-09 %Chng
Los Angeles 5,678 7,636 34.5% $415,000 $320,000 -22.9%
Orange 2,538 2,958 16.5% $470,000 $418,000 -11.1%
Riverside 3,757 4,694 24.9% $275,000 $185,000 -32.7%
San Bernardino 2,215 3,438 55.2% $240,000 $140,000 -41.7%
San Diego 3,077 3,692 20.0% $370,000 $314,250 -15.1%
Ventura 767 844 10.0% $420,000 $365,000 -13.1%
SoCal 18,032 23,262 29.0% $360,000 $265,000 -26.4%
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Tips for Parents Buying Homes for Children

With home prices low, now could be a good time for parents to give their children a home or even an investment property.
REALTOR®Magazine
Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.

· Give a cash gift. Individuals are allowed to gift up to $13,000 per person in a
  given year without incurring gift tax. That means a couple could give their
  offspring and spouse $52,000 in a single year to go toward a down payment.

· Lend money. The government requires that family members meet or exceed minimum
  loan rates to avoid having the loan be considered a gift. The rates are currently
  low. One way to handle this is for parent to use the $52,000 gift exclusion to
  forgive both interest and principal.

· Use a trust. Set up a qualified personal residence trust, or QPRT. You’ll need an
  attorney to handle this transaction, but in a nutshell, parents put the home they
  want to give their children into a trust. At the end of a pre-set term, the home
  passes to the children with no taxes due.

Read more!

Pending Home Sales Show Uptrend

Pending home sales rise for fourth consecutive month with very favorable housing affordability and a first-time buyer tax credit boosting activity.
By: Walt Molony: NATIONAL ASSOCIATION of REALTORS®
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.

The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago. In the Midwest the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008. The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago. In the West the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he said. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan said sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he said.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. A Realtor® could offer guidance and information to help you with this process.”

NAR’s Housing Affordability Index2 remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun said.

The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

The first-time buyer tax credit also is benefiting the market. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun said.

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun said. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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1 The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

2 The Housing Affordability Index is a relative index where a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home, taking into account the relationship between median home price, average effective interest rate for loans closed on existing homes, and median family income. The higher the index, the better housing affordability is for buyers.

The calculation assumes a downpayment of 20 percent and a qualifying ratio of 25 percent of gross income for mortgage principle and interest payments. The index is a general gauge with conditions varying widely around the country. Affordability conditions are lower for first-time buyers with smaller downpayments and less income.

Monthly publication of the index began in 1981 with annual data calculated back to 1970.
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