Washington, DC, November 21, 2011

Existing-home sales improved in October while the number of homes on the market continued to decline, according to the National Association of Realtors®.

Total existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 1.4 percent to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5 percent above the 4.38 million unit level in October 2010.

Lawrence Yun, NAR chief economist, said the market has been fairly steady but at a lower than desired level. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process,” he said.

“A higher rate of contract failures has held back a sales recovery. Contract failures² reported by NAR members jumped to 33 percent in October from 18 percent in September, and were only 8 percent a year ago, so we should be seeing stronger sales,” Yun added.

Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses. “Other recent factors include disruption in the National Flood Insurance Program, and lower loan limits for conventional mortgages, which paradoxically force some of the most creditworthy consumers to pay unnecessarily higher interest rates,” Yun said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.07 percent in October from 4.11 percent in September; the rate was 4.23 percent in October 2010.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said consumers can increase their odds of obtaining a mortgage by being aware of how credit scores are determined. “If you want to get a mortgage, don’t buy a car or take on new installment debt or credit cards,” he said.

“Pay all your bills on time, maintain old credit lines and don’t use more than 30 percent of your credit limit. Realtors® can help you understand the issues surrounding access to affordable credit, in addition to helping you find the right home and negotiate terms,” Veissi said.

An ongoing positive trend is a steady decline in the number of homes on the market. Total housing inventory at the end of October fell 2.2 percent to 3.33 million existing homes available for sale, which represents an 8.0-month supply³ at the current sales pace, down from an 8.3-month supply in September. Inventories have been trending gradually down since setting a record of 4.58 million in July 2008.

The national median existing-home price⁴ for all housing types was $162,500 in October, which is 4.7 percent below October 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – slipped to 28 percent of sales in October from 30 percent in September (17 percent were foreclosures and 11 percent were short sales); they were 34 percent in October 2010.

“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors® in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers. In addition, extending credit to responsible investors would help to absorb inventory at an even faster pace, which would go a long way toward restoring market balance.”

All-cash sales accounted for 29 percent of purchases in October, little changed from 30 percent in September and 29 percent in October 2010; investors make up the bulk of cash transactions.

Investors purchased 18 percent of homes in October, compared with 19 percent in September and 19 percent in October 2010. First-time buyers accounted for 34 percent of transactions in October, up from 32 percent in September; they were 32 percent in October 2010.

Single-family home sales increased 1.6 percent to a seasonally adjusted annual rate of 4.38 million in October from 4.31 million in September, and are 13.8 percent higher than the 3.85 million-unit pace one year ago. The median existing single-family home price was $161,600 in October, which is 5.8 percent below October 2010.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 590,000 in October but are 10.5 percent above the 534,000-unit level in October 2010. The median existing condo price⁵ was $160,300 in October, down 1.5 percent from a year ago.

Regionally, existing-home sales in the Northeast fell 5.1 percent to an annual level of 750,000 in October but are 1.4 percent above October 2010. The median price in the Northeast was $224,400, down 5.5 percent from a year ago.

Existing-home sales in the Midwest rose 2.8 percent in October to a pace of 1.10 million and are 19.6 percent higher than October 2010. The median price in the Midwest was $132,800, which is 4.7 percent below a year ago.

In the South, existing-home sales increased 2.1 percent to an annual level of 1.94 million in October and are 14.1 percent above a year ago. The median price in the South was $145,700, down 1.6 percent from October 2010.

Existing-home sales in the West rose 4.4 percent to an annual pace of 1.19 million in October and are 15.5 percent higher than October 2010. The median price in the West was $207,500, which is 1.6 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

http://www.realtor.org/press_room/news_releases/2011/11/ehs_oct

House Prices: Where They Will Be in the Spring

Disclaimer: This blog covers the national housing market as a whole. Please check with a local real estate professional to discover how the following information will impact your region. – The KCM Crew

Many sellers want to wait until the spring before putting their home on the market. This might be for any of several reasons:

1. They don’t want to be inconvenienced during the holiday season.
2. They believe that they will see more potential buyers and as a result will get a higher price.
3. In the northern part of the country, they might not want people walking through the snow and then into their house.
4. All of the above

In a normal real estate market, this may make sense. However, this market has been anything but normal. This spring will also see some abnormalities. The biggest difference will be the direction prices will take.

In years past, the spring market would favor the seller because increased demand would outpace any increase in supply: the number of houses coming onto the market would not be as great as the number of buyers newly entering the market. In most situations, when demand is greater than supply, prices increase.

The reason this spring will be different is that the supply of homes coming to the market will be dramatically impacted by foreclosure properties being released by the banks. Many believe this increase in inventory will far outweigh buyer demand. In situations where supply is greater than demand, prices decrease.

Will This Actually Happen?

RealtyTrac, in their latest foreclosure report, explained:

“U.S. foreclosure activity has been mired down  since October of last year, when the robo-signing controversy sparked a flurry  of investigations into lender foreclosure procedures and paperwork. While foreclosure activity in  September and the third quarter continued to register well below levels from a  year ago, there is evidence that this temporary downward trend is about to  change direction, with foreclosure activity slowly beginning to ramp back up.

This will impact prices.

What Do Experts Believe the Impact Will Be?

Here are the pricing projections by several major entities:

• Zillow believes we will not see a bottom in prices until the first quarter of 2012.
• Standard & Poors thinks prices will drop %5 in the next few months.
• JP Morgan Chase believes prices will depreciate 6 to 7% over the next six months.
• Barclays says prices will fall 7% by the end of the first quarter of 2012.

Bottom Line

You may pay a hefty price for the convenience of not having your property on the market right now.

Wall Street Journal & Forbes: It’s Time to Buy A Home

We believe very strongly that now is the time to buy a home. Some will say we are just saying this to create real estate transactions and commissions. Because of that, today we will quote what those outside the real estate profession are saying to the people who look to them for financial advice.

The Wall Street Journal

Last week, in an article entitled It’s Time to Buy That House, the WSJ told their subscribers:

“It’s an excellent time to buy a house, either to live in for the long term or for investment income…Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”

In an article two weeks ago, MarketWatch.com (the on-line blog for WSJ) told their readers:

“Now could be the best time in history to buy a home.”

Forbes.com

In a report to their subscribers, Capital Economics reported that:

“The previous declines in house prices and the more recent drop in mortgage rates to record lows have created an unusual situation in which the median monthly mortgage payment is more or less the same as the median rental payment.”

Why is this important? Last week, Forbes explained to their readers:

“If rents simply kept up with inflation at a 3.2% annual increase, a $1,500 rent payment would cost that renter nearly $900,000 over the next 30 years. The same $1,500 payment made to their mortgage would be only $540,000 (because the payments don’t increase with inflation).”

They went on to explain the advantages of homeownership during retirement:

“Even with a dismal 1% growth rate over 30 years, a $300,000 property would appreciate well over $100,000 giving the homeowner an additional nest egg for retirement…

At a time when retirement is becoming much more challenging, an extra $400,000 (or likely more) can make a major difference not to mention the impact of NOT having to pay a mortgage.  How much less would you have to save for retirement if you didn’t pay the mortgage?”

Bottom Line

When the iconic financial newspaper and the iconic financial magazine say that it now makes financial sense to purchase a house, perhaps it’s time to buy a home.

New Jersey has a lot to offer to both residents and businesses. Specific to the real estate market, these offerings represent inherent advantages that have made New Jersey an attractive place to live and work over the long haul – and they are the foundation that provide confidence for the soundness of a long-term investment in New Jersey real estate. Check out some more information on the Garden State’s market advantages:

• Employment opportunities
• Great schools
• Tourism and the beaches
• Prime location
• Desirable neighborhoods

Great employment opportunities

A hub for the pharmaceutical industry, New Jersey has some great jobs to offer. Other strong industries in the state include telecommunications, chemical development, food processing, electric equipment, printing and publishing. New Jersey’s proximity to New York City and Philadelphia open a vast regional job market to residents, requiring only a short commute.

• New Jersey’s 2008 median household income was $70,378, an increase over the 2007 median income of $67,035. According to the U.S. Census Bureau, New Jersey had the 2nd highest median income in the nation in 2008 (behind Maryland at $70,545).

A-plus school systems

• New Jersey ranked 1^st in the nation in graduation rates.
Source: Diploma Count 2009, Education Week and Editorial Projects in Education Research Center

• New Jersey has seen 8 out of 10 high school graduates enter college after high school according to the New Jersey Department of Education statistics from 2005-2006.
Source: New Jersey Department of Education

• Historically, New Jersey invests in education and its children, and that commitment consistently attracts families with similar values to live in the state. As an example of that commitment, during the 2006-2007 academic year (the most recent data available) New Jersey ranked 2nd in the nation in per-pupil spending with an investment of $15,691 per elementary/secondary pupil.

Two words: Jersey Shore

New Jersey’s famous stretch of 127 miles of coastline serves as a getaway for state residents and visitors alike. From the tranquil, powdery beaches of Long Beach Island to the excitement of Atlantic City to the bustling boardwalks of Wildwood and Asbury Park, there is something for everybody on the Jersey Shore.

Tourism in New Jersey was a $35.5 billion industry in 2010.  Although down from the $37 billion figure in 2007, the 2010 figure did increase almost one percent over 2009.  Tourism is the third-largest industry in New Jersey after pharmaceuticals and chemicals. Source: NJ Department of State

According to the Department of State, visitation to NJ was up in 2010 by 4.6 percent, with 67.7 million tourists.  This was led by a 7.3 percent increase in leisure visits.

In addition, 88 percent of N.J. visitors come from the following key origins: New Jersey, New York, Pennsylvania, Connecticut and Maryland.  Source: NJ Division of Travel & Tourism

Location, location, location

New Jersey’s proximity to New York City and Philadelphia make it a convenient place to live. These two metropolitan areas offer intangibles that are in constant demand for companies expecting a particular business environment and people wanting to live in the center of the action. Many national and international corporations are headquartered in New York and Philadelphia, offering numerous job opportunities. The cities are also rich in cultural attractions, including museums, theater, architecture, and historical landmarks, as well as sports, entertainment, culinary options and more. Numerous special events and conventions also take place in New York and Philadelphia every year, attracting businesses and international tourists.

New Jersey has extensive transportation infrastructure that makes commuting to these cities easy and convenient.

Great neighborhoods

From bustling streets to quiet country roads, New Jersey has a wide range of towns and neighborhoods. One commonality though that many have: they’re great places to live. Maybe that explains why Money Magazine named five Garden State towns in its 2011 list of “Top 100 Best Places to Live” in America:

http://www.realstorynj.com/nj-market-facts/njs-unique-advantages

It might seem counterintuitive, but increasing rental activity might be the medicine the ailing U.S. housing market needs to get back on its feet.

Virtually every corner of the industry has been languishing since the 2008 financial meltdown, and experts say even if the U.S. manages to contain the domestic impact of the ongoing financial crisis in Europe, the albatross of a weak housing market will continue to drag down the economic recovery stateside.

In short, there will be no economic recovery without a housing recovery.

Experts say the glut of vacant homes is one culprit holding back any meaningful improvements in the housing market. While it’s normal to have some vacant homes on the market, vacancy rates have skyrocketed over the past few years. Leaving out recreational and occasional-use homes, the rate stood at 7.9 percent according to 2010 Census data, significantly higher than during the bubble, says Jed Kolko, chief economist at real estate information website Trulia.

If nothing is done, the extra inventory will eventually work through the system as the economy gradually recovers and Americans’ financial situations improve, he says, but could more be done to speed up the process and help the housing market?

Some cities have considered bulldozing vacant homes to address excess supply, but the political viability of such a move is questionable on a larger scale. Perhaps more realistically, others have suggested introducing financial incentives for real estate investors to encourage them to purchase vacant homes and convert them into rentals. We’re seeing that to some extent now, says Patrick Newport, economist at IHS Global Insight, but not to the degree it needs to be to make a dent in the huge housing inventory.

But if more investors could be enticed to buy, it could help dry up the excess supply that continues to depress home prices and keep homeowners underwater on their mortgages.”Congress could give investors the incentive to buy vacant houses now by allowing them to write off the value immediately, as long as they hold on to the properties for some number of years and rent them out,” Peter Orszag, vice chairman of global banking at Citigroup and former director of the Office of Management and Budget under President Barack Obama, wrote in a recent Bloomberg column.

While the plan sounds appealing and the cost to taxpayers is relatively small according to Orszag, the geographic and employment trends that track vacancy rates across the country pose a problem–where vacancy rates are high, unemployment also tends to be high. “It might work for vacant homes in some areas, but much of this vacant housing stock is in areas where most renters don’t live,” Kolko says. “And they’re not in locations where there are employment opportunities.”

Reducing the number of vacant home on the market could help treat another disorder afflicting the housing market. Millions of Americans have negative equity in their homes, many of them facing foreclosure and unable to refinance mortgages at lower rates to free up cash. But if a decrease in supply pushes housing prices up, over time homeowners could potentially avoid foreclosure, recoup lost equity, and refinance their mortgages at lower interest rates.

The good news is that the population is growing and there’s a lot of pent up demand for housing. “Many young adults have been doubling up or living with parents,” Kolko says. “There’s also been so little new construction so there are very few brand new units.” The bad news is that without intervention of some sort, the housing market is likely to continue slogging along.

“The government has tried many things and none of them did all that much good,” Newport says. “It’s not clear that there’s that much more the government can do, but it can do something. If it could make it easier for homeowners to refinance that would be good for the housing market, too.”

http://finance.yahoo.com/news/How-Renters-Could-Save-the-usnews-1940879883.html?x=0

In the long term, New Jersey homes appreciate better than the nation as a whole.

The seven year appreciation rate (2002-2009) for New Jersey homeowners is 37.1 percent, more than five times the national rate of 7.1 percent.

Even with home prices reaching low points across the country, New Jersey’s unique advantages still make it a smart place to invest in real estate.

Garden State residents live in the home they buy for an average of seven years. Even during the current difficult economic climate, real estate in New Jersey can be a smart long term investment.
Source: 2008 Profile of New Jersey Home Buyers and Sellers