Us Housing Crisis

New US home sales spike in February
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: March 25 2009 13:24 | Last updated: March 25 2009 14:58
http://www.ft.com/cms/s/0/5125dae4-193f-11de-9d34-0000779fd2ac.html


Sales of new homes in the US rebounded from a record low in February rising for the first time in seven months as falling prices succeeded in luring buyers to the market.

New home sales climbed by 4.7 per cent last month from January after plunging by a revised 13.2 per cent the previous month. The results beat economists’ expectations of a 2.9 per cent fall. Meanwhile the median price of a new home fell to $200,900 in February from $206,800 the month before.

The positive housing figures along with surprisingly good data on durable goods orders lifted US stocks on Wednesday. In mid-morning trading the Dow Jones Industrial Average picked up 2.36 per cent to 7,841.17, the S&P 500 index rose 2.19 per cent to 823.97 and the Nasdaq Composite index gained 2.18 per cent to 1,549.54.

Compared with a year ago, home sales and prices remain extremely depressed. Year-on-year new home sales were off by 41.1 per cent last month and median prices were down by 18.1 per cent. The improved results on Wednesday remain the second worst on record.

But recent housing data has lifted hopes that the stricken US housing market could be approaching a bottom. On Monday the National Association of Realtors said home resales rose by 5.1 per cent to an annual rate of 4.72m in February from the month before. On Tuesday the Federal Housing Finance Agency estimated a better-than expected 1.7 per cent rise in US home prices in January from the previous month. And last week the commerce department reported that housing starts grew for the first time in eight months.

“Activity no longer appears to be plunging,” said Paul Dales, US economist at Capital Economics.

Housing inventory remains high, however, as the supply of new homes narrowed to 12.2 months in February from a record high of 12.9 months in January. That glut signals that home prices are likely to fall further in the warmer months to come.

Separately on Wednesday, official figures showed that US companies increased their spending on durable goods for the first time in seven months in February, defying expectations, in a welcome return to capital investment spurred by defence spending.

The commerce department said that US durable goods orders jumped by 3.4 per cent to $165.6bn in February from the month before, rebounding from a revised drop of 7.3 per cent in January. Economists predicted that orders would fall by 2.5 per cent, prolonging the record slump.

Excluding volatile orders for transportation goods, new orders rose by 3.9 per cent. They were up by 1.7 per cent after factoring out defence orders, which jumped by 35.3 per cent after plunging by 40.6 per cent the prior month.

The January revision stole some of the lustre from the overall number as the commerce department originally reported a decline of 4.5 per cent. Analysts were cautious not to take too much hope from the surprise rise, as companies have been working to clear stocks amid the eroding demand.

Although the closely-watched core capital goods orders figure – the clearest sign of future capital spending - rose by 6.6 per cent in February, the January revision of a 11.3 per cent decline disappointed.

“In short, the first rise in orders since September is welcome but it is much less impressive than it looks at first sight and it cannot possibly last,” said Ian Sheperdson, chief US economist at High Frequency Economics.

The manufacturing sector has been suffering from weakness at home and slowing growth abroad. Over the year, orders of durable goods in February were off by 28.4 per cent. Last week the Federal Reserve said that US industrial production fell for the fourth month running in February, dropping by 1.4 per cent. Industrial output was off by 11.2 per cent compared with the same month in the prior year and fell to its lowest level since 2002.

Transportation orders climbed by 2 per cent last month after falling by 11.9 per cent in January. Orders for general machinery and computers and electronics also reversed course, rising by 13.5 per cent and 5.6 per cent, respectively.

Unfilled orders for durable goods fell again in February. The 1.3 per cent monthly decline was the fifth in a row, signalling that factories will continue to face constraints.

“We strongly doubt that the February gains represent anything more than statistical noise in these often volatile data, particularly given that large downward revisions are often associated with ongoing declines,” said Joshua Shapiro, chief US economist at MFR. “The recent trend has been quite poor, indicating an ongoing collapse for capital spending.”





Freddie Mac survey says mortgage rates fall to lowest in 38 years after Fed aids market
ALAN ZIBEL
Copyright 2009 Associated Press
9:47 AM CDT, March 26, 2009
http://www.chicagotribune.com/classified/realestate/financing/sns-ap-mortgage-rates,0,1466492.story


WASHINGTON (AP) — Rates on 30-year mortgages fell this week to the lowest level on record after the Federal Reserve launched a new effort to assist the staggering U.S. housing market.

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.85 percent this week, from 4.98 percent last week. It was the lowest in the history of Freddie Mac's survey, which dates back to 1971 and was down a full percentage point from a year ago.

The previous record low of 4.96 percent was set in the week of Jan. 15. Rates fell after the Fed last week said it will pump $1.2 trillion into the economy in an effort to lower rates on mortgages and loosen credit.

Rates on 30-year mortgages traditionally track yields on long-term government debt.

Though the yield on the benchmark 10-year Treasury note initially plunged by about 0.5 percentage points after the Fed's move, lenders did not pass the entire drop on to borrowers. Bond yields rose after worries about what some saw as lackluster demand at a government debt auction Wednesday.

"There was a honeymoon effect initially" after the central bank's announcement, said Greg McBride, senior financial analyst with Bankrate.com. "The reality of large government deficits and the need for substantial government borrowing is setting in with investors."

Mortgage applications surged last week, mostly from borrowers looking to refinance and save money on their monthly payment. The Mortgage Bankers Association said Wednesday its weekly application index climbed more than 30 percent for the week ended March 20.

Nearly 80 percent of applications came from borrowers seeking to refinance home loans at lower rates, rather than purchase homes.

In Freddie Mac's survey, the average rate on a 15-year fixed-rate mortgage dropped to 4.58 percent this week, down from 4.61 percent last week.

Rates on five-year, adjustable-rate mortgages fell to 4.96 percent, compared with 4.98 percent last week. Rates on one-year, adjustable-rate mortgages rose fell to 4.85 percent, from 4.91 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for all mortgages in Freddie Mac's survey except for one-year adjustable mortgages, which had an average fee of 0.6 point.










US home resales show surprise rise in February
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: March 23 2009 15:22 | Last updated: March 23 2009 15:22
http://www.ft.com/cms/s/0/6897af6a-17bc-11de-8c9d-0000779fd2ac.html


The pace of sales of existing US homes rebounded from a 12-year low in February as first-time buyers were lured by bargains as distressed sales chopped prices further.

Home resales rose by 5.1 per cent to an annual rate of 4.72m in February from the month before, the National Association of Realtors said on Monday, but were down by 4.6 per cent year-on-year. The median price of an existing home fell by 15.5 per cent on the year to $165,400, although it inched up from January’s median price of $164,800.

The results were better than the economists’ expectations that home resales slid further last month. The data are notoriously volatile, however, as existing home sales jumped 6.5 per cent in December.

The glut of housing inventory also climbed last month, rising 5.2 per cent to 3.8m. That represents a 9.7 month supply at the current pace of sales, the same rate as January.

According to Lawrence Yun, NAR chief economist, distressed sales accounted for 40-45 per cent of sales in February. He claims these homes are selling at 20 per cent below normal market prices. Half of all home sales were from first-time buyers in lower price ranges.

In February, the number of default notices, auction sales and bank repossessions jumped 30 per cent compared with the same month last year, according to figures from RealtyTrac, and home prices have fallen 27 per cent since their 2006 peak. Economists argue that this is good news, as foreclosure sales clear the market and transfer homes to people that can afford them.

“While distressed sales continue to account for a huge chunk of overall activity, part of the market clearing process is that distressed properties must be sold, so the fact that this is occurring is good,” said Joshua Shapiro, chief US economist at MFR. “Still, it certainly depresses prices, and there are plenty more foreclosed – or soon to be foreclosed - homes in the pipeline.”

Existing sales rose across the US, increasing by 15.6 per cent in the northeast, 6.1 per cent in the south, 2.6 per cent in the west and 1 per cent in the midwest. The recovery in the west was particularly welcome as listing prices rose for the first time in three years.

In spite of continued falling home prices, the US housing sector has begun to show renewed signs of life. Last week commerce department figures showed housing starts grew for the first time in eight months, rising 22.2 per cent from January to an adjusted annual rate of construction of 583,000 units in February.

“We think there’s a good chance the post-Lehman collapse in activity is now over, though a sustained recovery is still a long way off,” said Ian Sheperdson, chief US economist at High Frequency Economics.







Chicago home sales sink 40%, prices fall 27%
Illinois' housing market remained deeply troubled in February, with home sales down by 27.8 percent from a year ago.
By James P. Miller
Copyright © 2009, Chicago Tribune
11:09 AM CDT, March 23, 2009
http://www.chicagotribune.com/business/chi-biz-chicago-home-sales-prices-march23,0,6882813.story


The state's housing market remained deeply troubled in February, with home sales down by 27.8 percent from the year-ago month -- and home prices down by a punishing 20.8 percent, a trade group reported Monday.

In the city of Chicago, the Illinois Association of Realtors reported February home sales tumbled a whopping 40.4 percent to just 841 sales from 1,412 a year earlier. And the median price dropped 27.4 percent to $218,250 from $290,000 in the year-ago month.

Statewdie, the associated said sales of single-family homes (including condominiums) swooned to 4,678 last month, from 7,058 in February of 2008.

The median statewide price -- the price, that is, at which half the sales were higher and half lower -- fell to $141,000 from $177,950 a year earlier. In part, the decline underscores how sellers have been dropping their asking price in response to weakening demand. But prices are also under pressure because an increasing number of home sales are foreclosed properties, in which lenders have taken houses back from borrowers who couldn't make their mortgage payments; such forced sales typically yield a lower selling price than sales conducted by homeowners do.

"Even though conditions are good for buyers," the Realtor association said, noting current low interest rates and the depressed home prices, "job losses in Illinois and record-low consumer confidence has kept potential home buyers waiting on the sidelines for signs of improvements in the overall economy."

Association President Pat Calan said "reducing unsold inventories and the downward pressure on prices from distressed home sales will go a long way toward stabilizing home prices," and will eventually lead to a recovery in the currently disastrous housing market.

In the city of Chicago, the association reported, February home sales tumbled a whopping 40.4 percent to just 841 sales from 1,412 a year earlier. And the median price dropped 27.4 percent to $218,250 from $290,000 in the year-ago month.