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Bedford Corners Real Estate | Southeastern and Northeastern Metros Rank Lowest on Home Value Forecast List

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While California and Texas markets dominate the top tier of the latest Home Value Forecast ranking, the bottom of the list includes Southeastern and New York City retional metros that could miss the housing recovery in the months to come due to high inventories and low employment.

“Home Value Forecast has been pointing out for the past year that most of the fundamental factors for a recovery in home sales activity and prices are falling in place. However, the residential real estate market has always had a strong psychological component driven by consumer confidence,” said Tom O’Grady, CEO of Pro Teck Valuation Services. “In this month’s release it is interesting to see how prices reflecting current consumer confidence and longer term market fundamentals like employment track one another, the later always anchoring consumer perception from straying too far.”

Pro Teck Valuation Services’ December Home Value Forecast (HVF) Update explores the relationship between home prices and market fundamentals such as employment predicting that many of the hardest hit markets still show more upside. As the housing inventory has been gobbled up, pushing prices up, activity has slowed and these CBSA’s have dropped off HVF’s Top 10 rank.

According to the HVF contributing editors, swings in sentiment toward the real estate market result in the tendency for home prices to oscillate above and below what they think is a central value for each market.

“During periods of great exuberance, these swings can carry prices far above sustainable values as we saw during the most recent bubble period,” added O’Grady. “Similarly during times of extreme pessimism, these swings can move prices below intrinsic values as we have seen in the past several years. Such behaviors also may help explain why home sales and prices are not reacting in late 2012 the way history would suggest based on historically low interest rates.”

One of the primary drivers in Home Value Forecast’s home price forecast models is employment. December’s update delves into the strong correlations back to the early 1970s of annual percent changes of single family home price and total employment for the Sacramento metro. As HVF reported in August, Sacramento is particularly interesting because home prices overshot on the downside after the market peak in 2006.

“When home prices are rising, home buyers assume that they will keep rising, and when prices are declining, buyers assume that they will continue declining,” O’Grady said. “Rising home prices lift not only consumer confidence, but business confidence as well. They also increase homeowner net worth and encourage those buyers who have been sitting on the fence to purchase. These new buyers lead to higher turnover rates, reinforcing the existing trend.”

This month’s Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by our market condition ranking model. The rankings are run for the single family home markets in the top 200 CBSAs on a monthly basis to highlight the best and worst metros with regard to a number of leading real estate market indicators, including: sales and listing activity and prices, MRI, days on market, sold-to-list price ratio and foreclosure and REO activity.

“Three of the top ranked metros are located in Texas while another three are in Southern California. The former are markets which really did not exhibit bubble conditions during the nationwide run up and, thus, did not need to experience a meaningful housing price correction,” said Michael Sklarz, Principal of Collateral Analytics and contributing author to Home Value Forecast. “The California markets fall into the category of markets which did overshoot on the downside and attracting home buyers looking to take advantage of very favorable prices.”

December’s top CBSAs include:

Santa Ana-Anaheim-Irvine, CA

Dallas-Plano-Irving, TX

Bethesda-Rockville-Frederick, MD

Austin-Round Rock-San Marcos, TX

Seattle-Bellevue-Everett, WA

Oxnard-Thousand Oaks-Ventura, CA

Salt Lake City, UT

Minneapolis-St. Paul-Bloomington, MN-WI

Los Angeles-Long Beach-Glendale, CA

Houston-Sugar Land-Baytown, TX

“The bottom-ranked metros also represent an interesting mix with four being in the greater New York-New Jersey-Connecticut area. There also are four in the Southeast with new additions to the ranking including the metros of Little Rock and Knoxville. Most of the bottom-ranked have double-digit months of remaining housing inventory,” added Sklarz.

The bottom CBSAs for December were:

Little Rock-North Little Rock-Conway, AR

Virginia-Norfolk-Newport News, VA-NC

Newark-Union, NJ-PA

Cleveland-Elyria-Mentor, OH

Edison, NJ

Knoxville, TN

New York-White Plains-Wayne, NY-NJ

New Haven-Milford, CT

New Orleans-Metairie-Kenner, LA

Greenville-Mauldin-Easley, SC

via realestateeconomywatch.com

Fitch: Regional Problems Hamper Recovery | Bedford Corners Real Estate

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In addition to banks’ tight mortgage lending standards that were criticized by Federal Reserve Chairman Ben Bernanke two weeks ago, Fitch also said continued recovery in residential real estate prices will require regional improvements.

Meaningful improvement is likely to be hampered by slow foreclosure processing in judicial. The judicial process governing liquidations in states, including New Jersey and New York, may add more than six months to the timeline. While home prices in those states fell less than in many others during the downturn, both have seen prices erode in the past year.

Meaningful improvement in housing is also being hindered by regional unemployment rates said the Fitch ratings service in an article that originally appeared as a post on the Fitch Wire credit market commentary page.

On Nov. 20, the Bureau of Labor and Statistics released unemployment data showing the Pacific region continued to report the highest jobless rate at 9.5 percent, while the lowest was the West North Central at 5.6 percent. Just two of the regions reported statistically significant unemployment rate changes. The rate in the South fell by 0.2 percent and the West by 0.1 percent.

The service said that at the national level, tight residential lending practices must be loosened before a meaningful recovery can take root. While tight underwriting practices were appropriate after the collapse in the subprime mortgage market, at a speech last week, Federal Reserve Chairman Ben Bernanke said “it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.”

via realestateeconomywatch.com

Freddie Mac Economist Sees New Households Outpacing Apartment Boom | Bedford Corners Real Estate

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In his 2013 forecast, Freddie Mac’s chief economist, Frank Nothaft, sees more than a million new households bolstering housing starts, driving apartment vacancy rates down to ten year lows and outpacing the boom in new apartment construction.

“The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive. This has been a big change from a year ago, when some analysts worried that the looming ’shadow inventory’ would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery,” Nothaft says.

Here’s how Nothaft sees the coming year:

  • Next year some regions will post faster house price gains, while some will be stagnant or see value loss fof the year, but overall, the housing recovery continue to strengthen property values and most U.S. house price indexes will likely rise by 2 to 3 percent, according to 2012 forecast from Freddie Mac’s chief economist,
  • Look for fixed-rate mortgage rates to remain near their 65-year record lows for the first half of 2013 then begin rising a bit in the tail end of next year, but staying below 4 percent. In the single-family market, this means homebuyer affordability should remain very high in 2013 for those with good credit history, stable income, and sufficient savings.
  • Household formation will be up. Unemployment, while still high, will likely drift down toward 7.5 percent; the resulting job and income gains will facilitate household formations – meaning that more members of the boomerang generation who have been living in their parents’ basements should start to move out. Look for net growth of 1.20 to 1.25 million households in 2013. These gains will help drive more housing construction and reduce vacancy rates further. Housing starts should be up around the 1.0 million pace (seasonally adjusted annual rate) by the fourth quarter of 2013.
  • Vacancy rates have been trending lower for much of the past three years because household formations have outpaced new construction. To illustrate, in 2012, net household formations through the third quarter totaled 1.15 million but completions of newly built homes (both rental and for sale) were just under 700,000; the difference is made up by a reduction in vacancies. This trend will continue in 2013 and could bring total vacancy rates down to levels last seen a decade ago. While this is good news for property owners, tenants will likely see rents rise a bit faster than prices on all other goods.
  • Refinance activity accounted for the bulk of residential lending in 2012 and will account for the bulk of it in 2013, too. But, simply put, we’ve seen the peak in refinancing. Homeowners who obtained a loan with a low mortgage rate in 2012 or refinanced through the Home Affordable Refinance Program are unlikely to refinance in 2013. Next year’s likely pickup in home sales won’t be enough to offset the coming drop in refinance activity. Consequently, total single-family originations will probably drop by about 15 percent in 2013. On the other hand, permanent financing on newly built apartment buildings, a pickup in property transactions, and refinancing of loans exiting “yield maintenance” terms are expected to increase multifamily lending by about 5 percent.
via realestateeconomywatch.com