Housing Starts Increase But Trend Still Down

Housing starts increased by 7.2% from the prior month but are still well below pre-crash levels. Levels are close to record lows. Right now we have a surplus of housing inventory but consider the fact that not a lot of houses are being built and the population is increasing. Eventually we will need more inventory.

What does that mean? It's getting to be a good time to invest in real estate. Buy low and sell high. When everyone is ready to give up on an asset class is the time to begin eying it. My only caution with housing now is the fact that the mortgage interest deduction may become a casualty of budget cutting. If this happens, then housing prices could drop another 10-20% easily. That would make the bottom of the market.

Home Prices Still Falling

I took a bit of break from Blogging, hoping that a year was enough time for the market to come back and adjust. So, the other day I took a look at the Case Schiller numbers and saw that not much has changed at all.

Here's the headline:


Home Prices Off to a Dismal Start in 2011 According to the S&P/Case-Shiller Home Price Indice

Not very encouraging. Here's some info from the press release:

The 10-City Composite was down 2.0% and the 20-City Composite fell 3.1% from their January 2010 levels. San Diego and Washington D.C. were the only two markets to record positive year-over-year changes. However, San Diego was up a scant 0.1%, while Washington DC posted a healthier +3.6% annual growth rate

What were the worst performing cities? The usual suspects: Detroit, Atlanta, Miami, and Seattle. Now, Atlanta, Cleveland, Detroit and Las Vegas home prices are below their December 2000 levels.

Mortgage Rates Hit Record Low This Week

Rate are still coming down. Messr. Bernanke and company have done a good job killing the savings goose but they are doing great by the real estate industry. I don't know how much longer rates will drop so get it while you can. Press release below:

15-Year FRM Drops to Set Another New Low in Freddie Mac Survey History
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.78 percent with an average 0.7 point for the week ending November 25, 2009, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.97 percent. The 30-year has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent.

The 15-year FRM this week averaged 4.29 percent with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.18 percent this week, with an average 0.6 point, down from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.

The 1-year Treasury-indexed ARM averaged 4.35 percent this week with an average 0.7 point, unchanged from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent. The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

"Long-term mortgage rates eased for the fourth consecutive week to record levels," said Frank Nothaft, Freddie Mac vice president and chief economist." Interest rates for 30-year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year's peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage.

"House prices are slowly beginning to firm now. For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. [PDF] Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller® 20-city house price indexes."

Mortgage Rates Continue Falling

Mortage rates continued to fall this past week. According to BestCashCow:

"Mortgage rates have decended over the past three weeks, touching lows not seen since last April when the Fed began buying up mortgage backed debt. According to the BestCashCow rate tables, the average 30-year fixed rate mortgage is now below 5% at 4.901%. The fifteen-year fixed rate mortgage average is 4.373%, close to the all-time low.
What one hand giveth, the other taketh. And so it is that savers are subsidizing borrowers. I could provide a scathing commentary on this but will simply say that if you can't beat them, join them. If you are looking to buy or refinance, now is another great opportunity to do so.

Housing prices if anything are heading down. The near bankruptcy of the FHA and the glut of foreclosures is continuing to put massive pressure on housing prices. Now is a good time to buy.

Foreclosure Filings Surpass 300,000 for Eigth Month

Think the real-estate market is on the rebound. The foreclosure numbers sure don't paint a recovery picture. Today, RealtyTrac released numbers which show that foreclosures were above 300,000 for the eigth month in a row.

A Bloomberg article says:

A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.

In addition, foreclosures and government stimulated home purchases account for as much as 50% of home sales. The good news is that this may be the market clearing we need before prices can start to firm and even move up a bit. Still, home owners shouldn't expect the 20-30% price appreciations we saw earlier in the decade.

Housing Market on the Upswing

After falling back to 2003 levels, it looks like the housing market is on the upswing, led by low mortgage rates and the first time homebuyer credit. Data from the S&P Case Shiller index show that the level of decline has leveled off and prices have even increased in some cities.

The chart above depicts the annual returns of the 10-City and 20-City Composite Home Price Indices, declining 10.6% and 11.3%, respectively, in August compared to the same month last year. Nineteen of the 20 metro areas and both Composites showed an improvement in the annual rates of decline with August’s readings compared to July. Cleveland was the only exception.

So, if you're thinking of buying a home, now may be a good time.

I just noticed today that one of my favorite sites for financial info and bank rates just launched a section with mortgage rates, home equity rates, and auto loan rates. The site is BestCashCow and IMHO it provides the easiest best way to track cds, savings accounts, etc.

If you're looking to buy or refinance a home, you might want to check it out.
- Cindy