Bill MerrenSenior Loan OfficerPrime Lending
5575 S. Durango Drive #110Las Vegas, NV 89113Office:(702)897-0153Mobile:1(866)743-8556Fax: (877)215-3212
The big question for home buyers and sellers today is: "Where are home prices headed?" People want to know if now is a good time to buy or sell, or if they should wait. We all need to stay on top of trends in real estate values -- so what's a good way to analyze the situation?
Yale economist Robert Shiller states it bluntly: "If you look at the trend in rents to see where housing prices are headed, you're looking at the right measure." Shiller is the co-developer of the S&P Case/Shiller Home Price Indices that monthly track residential real estate values nationally and in 20 metro areas.Traditionally, people have been willing to pay a modest premium to own a home rather than rent it. Recent studies report that in 1999 rents averaged 87% of the after-tax mortgage payment for houses and condos of similar size in the same neighborhood. When home prices took off, this percentage changed. By mid-2006, rents had fallen to less than 60% of after-tax mortgage payments. In some markets, owners were paying twice as much as renters for a similar property in the same neighborhood. In a few places, owner monthly payments were three times average rents.The 87% ratio of rent to ownership cost for 1999 is a good benchmark because it stayed around that level throughout the 1990's and the steep rise in home prices hadn't really begun. With that as our guide, we can conclude that home prices at last appear to be stabilizing. By the end of October 2009, rents on average were up to 83% of ownership costs! Conditions vary from market to market, so check your own area. But with historically low mortgage rates, plus the homebuyer tax credit, this could be a great time to be buying or selling.... Have a great month
For the week of February 22, 2010 – Vol. 8, Issue 8
Nikki PurpleSenior Loan Officer8975 S. Pecos Road #7BHenderson, NV 89074702-897-0153702-219-6966877-234-1709
INFO THAT HITS US WHERE WE LIVE Builders are jumping on the recovery bandwagon, as January Housing Starts beat consensus estimates, heading UP 2.8% to an annual rate of 591,000 units. Single-family starts are now 35.6% up from their low a year ago. Total new building permits dropped a tad in January, but single-family permits were up 0.4% for the month and UP 48.2% from a year ago. The trend indicates more improvement ahead. Permits for single-family homes are 7.4% higher than starts in states requiring building permits, well above the historical norm. Many observers feel home building is in the early stages of a serious rebound. Supporting this, the National Association of Home Builders reported builder confidence higher in February, going from 15 to 17 points, 8 points up from a year ago. Although the Fed will stop buying Mortgage Backed Securities (MBS) at the end of March, some analysts now feel this may not cause mortgage rates to rise much, if at all. That's because Fannie Mae and Freddie Mac recently announced their plan to buy up to $200 billion in delinquent loans from their own MBS and pass-through pools. Friday the Mortgage Bankers Association reported the percentage of delinquent home loans shrank in Q4. MBA chief economist Jay Brinkmann feels that fewer new problem mortgages could be signaling the "beginning of the end" of the foreclosure crisis. Let's hope so.
UP UP UP UP... YUP, stocks went UP four days in a row, which constituted all the trading days there were in the holiday-shortened week. Investors seemed to be responding to a cessation of fears coming out of Europe, encouraging economic data, good corporate earnings and the news from the Fed.The minutes from the Fed's January FOMC meeting stated economic conditions still warrant low interest rates, although their GDP growth estimate went from 3.0% to 3.2% for the year. Then Thursday, as reported in an Inside Lending Bulletin, the Fed raised its discount rate on emergency loans to banks by 0.25%, to 0.75%. The discount rate is not the Fed funds rate and the central bank said the increase does not "...signal any change in the outlook for the economy or for monetary policy...." Some analysts feel the Fed was just trying to appease inflation "hawks". The irony was, the CPI inflation reading came in the next morning below consensus expectations, up a scant 0.2%!Earlier in the week, the PPI reading on wholesale inflation came in a little higher than expected, but this was balanced by the good news on housing starts, plus better-than-expected earnings from John Deere, Merck, Kraft, Hewlett-Packard and Wal-Mart. Equally encouraging, industrial production went UP 0.9% in January, putting it up at an 8.9% annual rate for the last six months. More evidence that manufacturing is at the heart of this recovery. For the week, the Dow was UP 3.0%, to 10402.35; the S&P 500 was UP 3.1%, to 1109.17; while the Nasdaq climbed UP 2.8%, to 2243.87.Stocks went up for the week, so can you guess which way bonds headed? Correct. The FNMA 30-year 4.5% bond we watch ended down 69 basis points, closing at $100.22. Mortgage rates, however, still held at their historically low levels.
HOMES, CONSUMERS, Q4 GDP... The week gives us more takes on housing, with New Home Sales on Wednesday and Existing Home Sales Friday. There are two looks at the consumer mindset as well, with Consumer Confidence on Tuesday and the University of Michigan Consumer Sentiment Index on Friday. Also Friday is the second GDP estimate for Q4, showing positive economic growth coming out of the recession. The week ends on another key manufacturing measure --the Chicago PMI.
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
By BEN FELLER
LAS VEGAS (AP) - President Barack Obama is unveiling $1.5 billion in housing help, a boost timed to his appearance in the city with the worst foreclosure crisis in the nation.
Obama's move, detailed by aides in advance of his town hall here Friday, is the latest by a White House determined to show it is helping families rebound from a deep recession. The downturn is taking an election-year toll on Obama's party as voter frustration builds.
Obama was to announce that housing finance agencies in the five hardest-hit states in the housing crisis will receive $1.5 billion to help spur local solutions to the problem. Those five are Arizona, California, Florida, Michigan and Nevada.
The policy wrinkle comes during a two-day Western trip with different agendas for the president. He will be back in town-hall mode, a venue that aides say allows him to connect with people and distance himself from the messy process of Washington governing.
The president is also out to help vulnerable senators protect their seats and, in turn, gain as much legislative leverage as he can.
At the town hall and a business speech he will be lending his support to Senate Majority Leader Harry Reid of Nevada, a top 2010 election target of Republicans.
Obama's political involvement comes as the Democrats' command of the Senate grows shakier, jeopardizing the president's agenda. The tide of change that Obama rode to office is threatening to slam against his own party.
The first day of the trip was all politics. Obama campaigned Thursday for Sen. Michael Bennet of Colorado in Denver, then held a $1 million fundraiser for Democrats in Las Vegas.
Reid is one of Obama's allies, despite a flap over the president's tendency to refer to Las Vegas as a symbol of imprudent spending, which has the city's mayor fuming at the president.
For Obama, slowing the foreclosure rate is a key step in the recovery of the overall economy. Millions of people have lost their homes because they couldn't afford the mortgages anymore, and millions lost jobs because of the associated slowdown in new home building.
Reid's state leads the nation in home foreclosures; Las Vegas was the metro area with the highest foreclosure rate in January, with one in every 82 homes receiving such a filing.
The money for the new rescue effort will come from the $700 billion financial industry bailout program, according to a senior administration official who spoke anonymously Thursday night because the formal announcement had not been made.
Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Initially, subprime mortgages were mostly the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.
Obama will cap his Las Vegas trip with a speech to the city's Chamber of Commerce before returning to Washington later Friday.
---
Associated Press writers Darlene Superville and Adrian Sainz contributed to this report.
More sales, higher prices projected in coming year
New-home sales in Las Vegas are projected to increase to about 5,400 in 2010 and the median price should be close to $220,000 by the end of the year, a slight bump from December's median of $216,000, housing analyst Dennis Smith said Thursday.
The president of Las Vegas-based Home Builders Research reported his year-end data and 2010 projections in his first housing webinar, which replaces his annual housing outlook previously held at various locations around the city.
New-home prices fell 13.2 percent in 2009 and are down from a high of $330,900 in 2006.
"I think we're going to see a slight increase," Smith said. "I'm not saying we'll see a huge jump, but by the end of the year, I think we'll be looking at closer to $220,000 than $210,000. The only thing that could change this is a flood of (foreclosure) inventory, the 'silent inventory' everybody talks about."
Las Vegas has the fifth-highest foreclosure rate in the nation with one out of 119 households in some stage of foreclosure filing, according to Irvine, Calif.-based RealtyTrac.com.
Bank of America plans to release about 500 foreclosure homes a month in Nevada, and that's OK, Smith said. The market can absorb those.
"We've been hearing about this for over a year and it hasn't happened yet. I don't hear that banks are dumping a bunch of foreclosures on the market. Obviously, that could change. My best guess is the number of foreclosures will remain manageable as far as affecting prices," said Smith, who's been tracking the Las Vegas housing market for 22 years.
He's projecting about 45,000 resales this year, nearly identical to the 44,885 recorded resales he counted in 2009. The median price for resales will edge up 3.3 percent to $127,000 in 2010 and climb another 5.6 percent in 2011 to $134,000, based on a stable inventory of 8,500 homes on the market.
Las Vegas Realtor Steve Hawks said he respectfully disagrees with the analyst's forecast.
"No way prices are going up," Hawks said. "Interest rates are going up, which will cause the average person to qualify for less home, which means sellers have to lower prices. And the new FHA (Federal Housing Authority) guidelines are knocking out about half of the FHA buyers that were looking in '09, and then job losses from government agencies start to hit this year with the budget cuts. But the good news is sales volume should be just as high as '09."
One of the key housing indicators is building permits, which decreased 37 percent to 3,850 in 2009. However, they steadily rose from a low of 179 in January 2009 to 355 in December. Permits were running around 20,000 a year in the late 1990s and peaked at 32,879 in 2004.
Smith said he's fairly confident permits will increase by about 500 this year and climb above 5,000 in 2011.
"We've got other builders re-entering the market and the local builders that went away ... I called it hibernating ... they're ready to get back in the picture," he said.
When will permits get back to 20,000?
"I don't know when we'll get to 10,000," Smith said. "I don't see a lot of speculative building out there that would create more standing inventory. If the smaller and private builders are having a hard time finding financing, it'll be a long time before they're overbuilding again in Las Vegas."
John Restrepo of Restrepo Consulting Group said Las Vegas has unfortunately been one of the hardest-hit housing markets and is lagging the national recovery.
He's concerned about a Credit Suisse report showing quite a boost in the number of Alt-A and option ARMs, or adjustable-rate mortgages, due to reset this year and into 2011.
"We haven't seen the full ramification of that," Restrepo said. "Try to refinance? Maybe they can't because of declining values. That has an effect on consumer confidence and that's important to us."
Contact reporter Hubble Smith
For the week of February 1, 2010 – Vol. 8, Issue 5
INFO THAT HITS US WHERE WE LIVE The week began with December Existing Home Sales dropping 16.7%. Some observers felt this was the result of uncertainty over the homebuyer tax credit, scheduled to expire at the end of November. The tax credit was, as we now know, extended into this year, but it wasn't announced soon enough to help December sales. Nonetheless, Existing Home Sales are UP 15.0% over a year ago. And the median price of an existing home is now $178,300, UP 1.5% over a year ago and the best year-over-year comp since 2006. Finally, inventories are now down to 3.29 million, their lowest reading since March 2006.Wednesday, New Home Sales were reported at a 342,000 annual rate, down 7.6% for December. But inventories are now at 231,000, 59.6% below their mid-2006 peak and at their lowest level since 1971, when the population was two thirds its size today. The Case-Shiller index of home prices in the 20 biggest markets went up a seasonally-adjusted 0.2% in November. This was the sixth month in a row the index gained and prices increased in 14 of the 20 markets. The FHFA price index for homes bought with conforming mortgages went up 0.7% in November, its fifth advance in the last seven readings.According to Freddie Mac's weekly Primary Mortgage Market Survey, mortgage rates inched down for the fourth week in a row. But prospective homebuyers and owners looking to refinance should note that the Fed reiterated its intention to end mortgage bond purchases on March 31. Experts feel this will make rates head up a bit.
STILL SLIPPING... There were plenty of good things to consider last week, but investors chose to dwell on the negative tidbits instead. This sent stocks down for the third week in a row, making January the worst month for the markets since February 2009. The week began with Apple reporting its most profitable quarter ever. Microsoft and SanDisk also made the tech sector look good by beating earnings estimates, but Wall Street worried about the companies' cautious outlooks. Oh well. We even saw Consumer Confidence UP in January for the third month in a row!At its meeting last week, the Fed left the funds rate at 0% to 0.25% and altered the language of its policy statement to be more bullish on the economy. But there was one dissenting vote against keeping the rate low, which investors fretted over. That evening, President Obama's State of the Union message didn't include too many specifics on how he would help boost the economy. Stocks slid Thursday. December durable goods orders were up only 0.3%, but taking out transportation, they were UP 0.9% for the month and UP 11.9% annually for the last six months. History shows that once businesses begin investing more in equipment ("durable goods"), payroll gains soon follow.Friday we got the terrific news that the U.S. economy grew in Q4 of last year at a 5.7% pace, the fastest GDP growth rate in six years. Pessimistic observers seem scared to admit the economy is in fact improving, commenting that inventories accounted for a large part of Q4 growth. In fact, final sales, which is GDP excluding inventories, are UP at an accelerating pace for three straight quarters! The Chicago PMI, expected to decline, instead increased, showing growing strength in Midwest manufacturing. And the employment index came in at the highest level since 2005, reporting its first positive number since 2007.But for the week, the Dow dipped 1.0%, to 10067.33; the S&P 500 slipped 1.6%, to 1073.87; while the Nasdaq was down 2.6%, to 2147.35.In addition to sliding stocks bringing new money into the bond market, we had month-end buying helping to push prices up. The FNMA 30-year 4.5% bond we watch ended UP 9 basis points for the week, closing at $101.03. Mortgage rates are still historically low, according to the most recent Freddie Mac report.
ANOTHER LOOK AT HOUSING AND JOBS... December Pending Home Sales will grab our attention on Tuesday, then Friday everyone will key on the January Employment Report. The consensus expects no change in the unemployment rate but does think we'll see some new jobs added. That would be great! The week will also bring us the important ISM read on manufacturing, plus personal income and spending numbers.
Nikki Purple
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INFO THAT HITS US WHERE WE LIVE December housing starts were reported down 4.0% last week. This put them at a 557,000 unit annual rate, a little below expectations. We did have a colder and wetter December than usual, with a good part of the East hit with the biggest snowfall ever recorded for the month. The drop in starts all came from single-family units, but they're still 27.7% above their January/February 2009 lows. Volatile multi-unit starts were up 12.2% for the month, following their 69.8% November rebound. Building permits, which are less effected by weather, were UP 10.9% in December, to an annual rate of 653,000 units, well above expectations. There was an 8.3% hike in permits for single-family units, which are up 48.5% over their January 2009 low. Over the past two months, the 18.5% gain in building permits is the largest in 20 years. In line with this, the National Association of Home Builders, which held its annual convention last week, reported that builders expect to start construction on 610,000 homes in 2010. That's UP 38% over last year!According to Freddie Mac's weekly Primary Mortgage Market Survey, mortgage rates dipped lower for the third week in a row. Fears of a stock market correction are moving money into mortgage bonds, which should keep interest rates down. But many experts still feel rates will head back up if the Fed sticks to its plan to stop mortgage bond purchases on March 31.
OOPS!... Last week featured a combination of unexpected developments -- Chinese credit tightening, Presidential sword-rattling over bank regulatory reform and doubts about Fed chairman Ben Bernanke's Senate confirmation. These surprises shook investors, sending all market indexes down for the week. But China was just raising interest rates to cool down an economy now growing at 10%. And the President's tough talk to bankers, plus Senators cooling on Bernanke, were seen by many as political efforts to appeal to people who don't like the Wall Street bailouts. Of course, all this happened after Republican Scott Brown took Ted Kennedy's Massachusetts Senate seat. Talk about surprises!Economic news included the Producer Price Index (PPI) going up 0.2% in December. This was a bit more than expected and raised inflation concerns at the wholesale level. But the Fed maintains it won't raise rates to control inflation until the labor market shows more signs of recovery. Last week didn't provide much encouragement there, with Initial Unemployment Claims up slightly, although Continuing Claims dropped below 4.6 million. The only encouraging words came from corporate pronouncements on Q4 earnings. Results were better than expected, as 47 of the 60 S&P companies reporting delivered upside results. These included biggies like Google, GE, McDonalds's and IBM. There were also winners in the financial sector, but investor uncertainty pushed stocks down overall. For the week, the Dow fell 4.1%, to 10172.98; the S&P 500 dropped 3.9%, to 1091.76; while the Nasdaq was off 3.6%, to 2205.29.Tanking stocks normally send bond prices skyward, but uncertainty about Bernanke and new bank regulations kept things in check. The FNMA 30-year 4.5% bond we watch did end UP 19 basis points for the week, closing at $100.94. Mortgage rates are staying at their historically low levels and, as noted above, average rates dipped in the most recent Freddie Mac report.
HOUSING, THE FED, GDP, THE PRES... This should be a super interesting week, highlighted by Monday's Existing Home Sales, Wednesday's New Home Sales, a meeting of the Fed and Advanced Q4 GDP. Everyone's looking for another positive GDP number, following the positive GDP we saw for the first time in Q3. Then Wednesday evening, we'll have the President's State of the Union message, which will no doubt grab everyone's economic attention.
By Buck Wargo
Friday, Jan. 22, 2010
The North Las Vegas ZIP code that includes the Eldorado residential development led the valley in foreclosures in 2009, according to statistics released by SalesTraq.
ZIP Code 89031 recorded 1,167 foreclosures, easily topping No. 2 on the list, 89108, in the city limits of Las Vegas with 902. The ZIP code is bounded by Rancho Drive, Washington Avenue and U.S. 95.
SalesTraq President Larry Murphy said the top 10 list is essentially the same from 2008 with the one addition, 89178 in Mountain’s Edge. It entered the list at No. 10 with 680 foreclosures.
Four of the highest-ranked ZIP codes were in the north valley and four were in the southwest. Two were on the east side. None were in Henderson.
Murphy has projected Las Vegas will have 26,000 foreclosures in 2010, an increase of about 2,000 over 2009. The valley had 25,288 foreclosures in 2008.
Look for this year to mirror 2006 with zero percent appreciation and home prices skipping along the bottom, housing analyst Larry Murphy said Thursday at his quarterly Crystal Ball presentation.
New-home sales will increase from last year's 5,184 closings, the fewest since 1985, but prices will continue to drop, the president of Las Vegas-based SalesTraq told about 200 real estate professionals at the Suncoast.
Last year, Murphy projected the median price of an existing home in Las Vegas could dip below $100,000, though he didn't think it would. He's reporting a median price of $120,000 in December, down 25 percent from December 2008.
The median price has leveled off since April, when it was $125,000.
"I told people we won't recognize the bottom the day or the month it hits," Murphy said. "It'll take six months to look back over our shoulder and say, 'I think that was the bottom.' I think we're going to see a year pretty much last like year."
Existing-home sales increased 57 percent in 2009 to 48,075 closings, while new-home sales decreased 48 percent. New-home median prices declined 20 percent to $212,883 in December.
Murphy expects to see 26,000 foreclosure homes hit the Las Vegas market in 2010, up a little from 23,981 in 2009, but not the "tsunami" of bank-owned homes some analysts are predicting.
"While foreclosures aren't going to go away in 2010, I don't see a wave of them coming. I see a steady stream," he said.
Irvine, Calif.-based RealtyTrac projected 3.1 million foreclosure filings in 2010, a 2.5 percent increase from 2.8 million in 2009.
"Banks own about 10,000 homes, by my count, that are not on the MLS (Multiple Listing Service)," Murphy said. "People say it's a conspiracy. We love a good conspiracy, but I think this is how long it takes to go through the process. How's that conspiracy been working out for them so far?"
With a median price of $116,900 for foreclosure homes, compared with $150,000 for a short sale, or sale for less than the mortgage balance, Murphy thinks banks will "wise up" and start approving more short sales this year. They'll account for roughly 15 percent of home sales in 2010, he said.
The trend toward "strategic defaults," or people walking away from their mortgage, will continue this year, Murphy predicted.
A home purchased for $300,000 during the boom period has lost about half its value, or $150,000 of negative equity for the homeowner. It will take 20 years at 5 percent annual appreciation to recover that loss.
Steve Bottfeld, principal of Marketing Solutions, said some economic indicators are improving in Las Vegas, including visitor volume, gaming revenue and home sales. 2010 is going to be a year of transition and new standards, he said.
"What will sell in 2010? Foreclosures and short sales," Bottfeld said. "What will prices be in 2010? We're really looking at very flat prices. Stable ... that's the word. Will prices go up? Not significantly. Will they go down? Not significantly. They're going to stay close to where they are. We're going to see slow but steady improvement."
Murphy said Las Vegas homebuilders built "way too many" homes in the first half of the decade, about 50,000 more than needed. There weren't as many people moving to Las Vegas as everyone thought and about one-fourth of the homes were purchased by investors and second-home owners.
"We built 38,000 homes in 2005 and we only needed 18,000. That's 20,000 too many," he said. "Now we need to build 50,000 too few homes and that's going to take some time. For the homebuilders out there, I wish I had better news."
The number of active subdivisions in Las Vegas Valley dropped to 230 by the end of last year, compared with 350 at the beginning of the year and 525 in January 2008.
Homes available for sale on the MLS has steadily declined from 23,803 in January 2008 to 10,262 in December, or a 2.6-month supply at the current sales rate, SalesTraq reported.
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
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