REALTORS® expect 1 percent rise in Calif. home sales

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) released its 2012 Housing Market Forecast this week during CALIFORNIA REALTOR® EXPO 2011 in San Jose. The forecast calls for California home sales and median price to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction.

Making sense of the story

• The forecast for California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.
  
  
• “Discretionary sellers will play a larger role in next year’s housing market,” said C.A.R. President Beth L. Peerce. “Those who held off selling in 2011 may list their homes in 2012, thereby improving the mix of homes for sale compared with the last few years. Additionally, distressed sales will remain an important segment of the overall market as lenders continue to work through the foreclosure process.”
  
  
• The California median home price is expected to increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast. Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.
  
  
• View a video of C.A.R. Vice President and Chief Economist Leslie Appleton-Young discussing the 2012 Housing Market Forecast.
  
  
• “2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market

C.A.R. releases its 2012 Housing Market Forecast

California home sales and median price are predicted to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction, according to C.A.R.’s “2012 California Housing Market Forecast” released Tuesday.

The forecast, which was presented today by C.A.R. Chief Economist Leslie Appleton-Young during her luncheon at CALIFORNIA REALTOR® EXPO 2011, says that California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.

The California median home price will increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast. Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.

“2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said Appleton-Young. “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market.”

When will home prices spring back?

(MONEY Magazine) -- It was with some trepidation that Stephanie Kim and her husband, Brendan, 40 and 42, put their Chicago townhouse on the market in June. While the place was in great shape, prices in their city were off 8% from 2010 -- and of the 30 similar homes in the area listed the previous year, only nine had sold.
And yet there was an offer on the house almost immediately; the sale closed two months later at just $15,000 under the $650,000 asking price. "We thought it would take a lot longer to sell," says Stephanie.

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Nationwide, the U.S. housing market remains deep in the doldrums and economists expect prices to fall another 5% to 10% in many places. And yet some sellers, like the Kims, are seeing signs of a turnaround.

Send The Help Desk your questions about home prices.

In a few of the hardest-hit areas, such as Detroit, homes have become so cheap that it no longer makes sense to rent.

In other places, like Los Angeles, price drops haven't stopped, but they've slowed, and homes are selling faster. Plus, even if your area is still hurting, your neighborhood might be on its way back.

When the rebound arrives, desirable zip codes will see price jumps first, says David Stiff, chief economist for housing research firm Fiserv Case-Shiller. "Real estate is always local, but these days it's hyperlocal," says Chicago broker Scott Berg.
To estimate where your own house lies on the recovery spectrum, answer the following questions.

HOW FAST ARE NEARBY HOMES SELLING?

While it's a good sign when price drops slow down, inventory levels are actually a better gauge of where your market is headed, says David Crowe, chief economist for the National Association of Home Builders.
That's because monthly home-value numbers are skewed by seasonal fluctuations, and prices are usually the last thing to budge when a market turns the corner.

What to do: Ask a realtor to tell you the number of listings now on the market in your area and the number of homes sold over the past year.
Let's say there are 100 listings and there were 240 sales last year, or an average of 20 per month. That equals a five-month supply, which is considered stable. More than six months and it's a buyer's market, says Crowe; less than three and sellers probably have the upper hand.

IS BUYING CHEAPER THAN RENTING?

People are more likely to buy homes when the payment on a loan is below what they'd pay to rent a similar home.
The number to calculate is the price-to-rent ratio, or the price of a home divided by one year's rent on a comparable one. In general, it's cheaper to buy when the price-to-rent ratio is below 15, although some places, such as San Francisco, have higher ratios even in soft markets.

What to do: Compare your neighborhood's price-to-rent ratio with what it was before the housing boom. You can find historical sale price info on Trulia.com; your realtor should be able to give you information on rental rates from a few years ago.

WHAT'S THE FORECLOSURE FACTOR?
Not surprisingly, a decrease in foreclosure filings is often an encouraging sign. But the official data aren't entirely reliable. "In some markets the year-over-year change is artificially low because of processing delays," says Rick Sharga, senior vice president with RealtyTrac.

What to do: RealtyTrac.com can tell you if the official level of distressed sales is rising or falling (just plug in your zip code).
To suss out the hidden foreclosure factor, take a close look at the homes in your neighborhood. Distressed owners tend to fall behind on lawn cutting and house painting long before a foreclosure, says Crowe. If you see several places in disrepair, don't expect your home value to rise soon.

IS YOUR AREA PRIMO?
As buyers return, they'll naturally grab places with shorter commutes and better schools and amenities.
The Kims' townhouse, for example, was located in Chicago's South Loop area, near Lake Michigan and museums. "Buyers are cherry-picking," says Sharga. You won't buck the larger market trend entirely, but once things are cranking in your favor, your home will pop first.

Existing Home Sales Up Strongly:

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the National Association of Realtors®. Monthly gains were seen in all regions.

Total Existing Home Sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

Mistakes housing investors make

With traditional investments delivering low returns, some are considering buying rental housing. However, potential investors should do their homework and avoid the following common mistakes.
Making sense of the story

• Investing in real estate right now can be profitable, if everything goes as planned. Rents are increasing in many areas, and more properties may be coming on the market.
  
  
• Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
  
  
• Traditionally, investors rented out properties for 1 percent of the purchase price per month. However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
  
  
• While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out. Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts.
  
  
• Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
  
  
• Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent. Evicting tenants can take several weeks.
  
  
• It’s also important to remember that owning a rental is not the same as owning a home. An owner may put up with flaws in a home that a renter wouldn’t tolerate. Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

Fannie Mae releases August consumer indicators

Nearly 80 percent of Americans (78 percent) say the economy is on the wrong track and 27 percent believe home prices will go down over the next year, according to findings from Fannie Mae’s August National Housing Survey. Additionally, 22 percent of Americans polled expect their financial situation to worsen over the next year – the highest levels of pessimism for both indicators since August 2010. For the third consecutive month, Americans reported they expect home prices to decline over the next year. On average, Americans expect home prices to decline by 0.5 percent, compared with an expected decline of 0.3 percent in July.

While 69 percent of respondents say it is a good time to buy a home, only 9 percent of those polled say it is a good time to sell one's home.

The number of Americans who expect their personal financial situation to worsen over the next year increased for the fourth month in a row, rising to 22 percent in August compared with 20 percent in July.

Foreclosure starts driven higher by Bank of America

Foreclosure filings and foreclosure sales increased in August throughout the majority of areas covered by ForeclosureRadar. Foreclosure starts – the first notice filed, either a Notice of Default or Notice of Trustee Sale depending on the state – rose in every state, and appears to have been primarily driven by Bank of America and related entities, where foreclosure starts rose 116 percent from July to August, according to the report. Wells Fargo and US Bank also saw increases in foreclosure start filings, while filings by JP Morgan Chase and Citibank were essentially flat.

Notice of Default filings increased 69.5 percent in California, to the highest level in a year. Notice of Trustee Sale filings were up more moderately, rising 6 percent month-over-month, but down 23.6 percent year-over-year. Cancellations were nearly flat, up just 1.9 percent from July.

Activity on the courthouse steps increased in August, with Properties Sold Back to Bank (REO) increasing 12.3 percent from the prior month. Properties Sold to Third Parties rose 9.9 percent month-over-month and 10.8 percent year-over-year. Time to Foreclose increased to 333 days in August, 49 days longer than a year ago

Refinancing 'Stimulus' Is No Slam Dunk:

The U.S. is caught up in "refi" madness.

Among the measures President Obama may unveil in his major policy speech this week is a plan to make mortgage refinancing easier, so more households can benefit from ultralow rates. Various proposals for this have been circulating for some time; last June, Morgan Stanley dubbed its version a "Slam-Dunk Stimulus."

But there is a catch. Many mortgage holders aren't able to refinance because they can't afford the fees, no longer qualify for a loan or their mortgage is more than the home is worth. As a result, refi activity has been fairly weak despite the 4.3% average rate for a 30-year, fixed-mortgage.

On Wednesday, the Mortgage Bankers Association will release its weekly mortgage application data; as of last week, its refi index was down 33% from the same period a year ago and even further below peak refi activity in 2003.

This despite the fact that more than three-quarters of borrowers with a mortgage backed by Fannie Mae or Freddie Mac had a rate of 5% or more as of June, according to one recent policy proposal.

Hence the desire for government intervention. The hope is it could benefit as many as 30 million households and free up $20 billion to $70 billion a year by reducing interest payments, according to various proposals.

But that money isn't likely to provide much of a stimulus. For one, there is no guarantee it will be spent; balance-sheet impaired households may pay down debts or boost savings. And, even if people did spend every penny, even $70 billion would still amount to less than 0.5% of the nation's $15 trillion gross domestic product.

Bloomberg  News

Many mortgage holders aren't able to refinance because they can't afford the fees, no longer qualify for a loan or their mortgage is more than the home is worth. Above a foreclosure sign in Phoenix, Ariz.

True, shoring up household finances has benefits.

"What we're doing is restructuring household balance sheets," says Columbia Business School Professor Chris Mayer, co-author of one policy proposal.

The quicker debt burdens can be lowered, the better for the economy's long-term health.

Such a program isn't without cost, though. Banks and other investors currently holding mortgage bonds would suffer. The taxpayer, through Fannie and Freddie, would also take an up-front hit. And, should any program also include debt forgiveness, there would be significant moral hazard.

While a mass refi program may offer some economic relief, it is certainly no cure-all.

Write to Kelly Evans at kelly.evans@wsj.com

Home prices seen picking up in 2012:

Home prices are seen ticking up modestly in 2012, according to a Reuters poll released on Friday.

Existing home sales are expected to improve modestly. The forecasts from the poll are consistent with expectations the housing sector will continue to limp along in a weakened state for years to come.

A recovery in the housing market is dependent on improvement in the labor market and broader economy, analysts said.

"One of the big concerns is you've got a lot of homes where the mortgage holder is still underwater and most of those homeowners will continue to make payments," said Brown.

"It gets to be a problem, however, if somebody loses their job, somebody gets sick, there's a divorce or something where the home has to be sold."

U.S. home prices -- as measured by Standard & Poor's/Case-Shiller 20-City Composite Home Price Index -- will fall 3.8 percent for the year, before stabilizing and gaining 0.8 percent in 2012, according to the median forecast of 22 economists in the Reuters poll taken over the past week.

The expectations were improved from the previous Reuters housing poll in June, which forecast prices would fall 5.0 percent this year and rise just 0.5 percent next year.

The forecasts for the changes in the home price index for this year had a wide range, from a decline of 14.0 percent to a gain of 0.1 percent. The forecasts for 2012 had a smaller gap, from a decline of 6.0 percent to a gain of 4.0 percent.

Of 28 economists polled, 14 said that prices had either already hit bottom this year or would by the fourth quarter. Twelve respondents said prices won't reach a trough until 2012, while one forecast 2013 and one expected it would take until 2014.

In the third quarter, the pace of existing home sales is expected to come in at a 4.78 million annualized rate and will edge up to 4.95 million in the fourth quarter. Sales of previously owned homes were at an annual rate of 4.67 million units in July, according to data from the National Association of Realtors.

Economists saw the rate of home sales coming in at 5.1 million for both the first and second quarter of next year.

"New foreclosures peaked in 2009, but the inventory of foreclosed homes will decline only slowly," said David Berson, chief economist at mortgage insurer PMI Group.

Spring buying pushed home prices up for a third straight month in most major U.S. cities in June.

The Standard & Poor's/Case-Shiller home-price index showed Tuesday that prices increased in June from May in 19 of the 20 cities tracked. Prices rose 3.6 percent in the April-June quarter from the previous quarter. Neither of those numbers is adjusted for seasonal factors.

Getting a fair appraisal in a tough market:

Since the real estate market took a downturn, some people have complained they couldn’t buy, sell, or refinance a home because an appraiser used bank-owned (REO) or short-sold homes as comparables in the valuation process, which dragged down the value of their home. While using REO and short-sold properties can lower the value of a home, some homeowners are upset that their county assessor will not use these properties as comps for their property taxes.
Making sense of the story

• In California, some assessors will consider distressed sales when looking at comps, but it varies widely by county, neighborhood, and house. In general, assessors will always look at non-distressed sales first and if there are enough, disregard REO and short sales. However, if there are not enough standard sales, or the home is in an area dominated by distressed sales, the assessor likely will take these properties into account.
  
  
• Under Proposition 13, property is assessed upon a change in ownership at its fair market value. That is usually the same as the sale price. However, with distressed property, the sale price may not equal fair market value.
• Between changes of ownership, assessors can raise values only by an inflation rate, not to exceed 2 percent per year, plus the value of major improvements or additions.
  
  
• Under Prop. 8, owners who think the market value of their property has fallen below its assessed value can ask for a temporary reduction to the fair market value.
  
  
• Homeowners who think their homes are worth less than the assessed value can usually ask their assessor for an informal review. If they are still not satisfied, they can file a formal appeal with their county’s assessment appeals board by Sept. 15 or Nov. 30, depending on the county.

Obama administration releases August Housing Scorecard

HUD and the U.S. Dept. of the Treasury released its August Housing Scorecard last week.
Included in the report are detailed assessments for the 10 largest mortgage servicers participating in the Making Home Affordable Program with results from the second quarter of 2011. In addition to providing greater transparency about servicer performance in the program, the servicer assessments are intended to set a new industry benchmark for disclosure around servicer efforts to assist struggling homeowners, while prompting them to correct identified deficiencies.

More than 5 million mortgage aid arrangements were started between April 2009 and the end of July 2011. In July, more than 28,000 additional homeowners received a permanent modification through the Administration's Home Affordable Modification Program (HAMP); more than 790,000 homeowners across the country have now received a HAMP permanent modification with a median payment reduction of 37 percent. To date, homeowners in permanent modifications have realized aggregate savings in monthly mortgage payments of nearly $7.8 billion.
The Servicer Assessments summarize performance for the 10 largest Making Home Affordable participating servicers from reviews largely conducted throughout the second quarter of 2011 on three categories of program implementation: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance. Although some improvements have been made, based on the reviews for this quarter, Bank of America, NA and J.P. Morgan Chase Bank, NA remain in need of substantial improvement. Both servicers were subject to withholding of financial incentives under the program based on results from the first quarter and will continue to have their incentives withheld until their performance improves.

While Ocwen Loan Servicing, LLC and Wells Fargo Bank, NA were both found to be in need of substantial improvement in the first quarter of 2011, compliance activities conducted to follow up on their progress and assess other areas of program implementation found that both mortgage servicers have corrected identified deficiencies from the first quarter. Both servicers were found to be in need of moderate improvement in the second quarter.

When income is freelance

After the financial market downturn in 2008, getting approved for a mortgage loan became even more difficult. Combine that with the fledgling economy, which left many people turning to freelance work, and the challenges involved in qualifying for a home mortgage increase exponentially. However, with a little extra work, home buyers using freelance work as proof of income still can qualify for a new loan.
Making sense of the story

• Borrowers who earn most of their income on 1099s should be prepared for extra preparation, paperwork, and discussion of their financial standing when applying for a mortgage.
  
  
• It’s important that independent contractors show that their income is stable and increasing. For some, that may mean declaring all their income on their tax returns, and not, say, carrying anything over to the next year, even if it means paying more taxes.
  
  
• Consistency in income is key, so those applying for a mortgage this fall or winter should be prepared to provide proof for year-to-date income.
  
  
• To increase the chances of getting a mortgage approval, borrowers should pay off other debts, including balances on credit cards.
  
  
• Pinpointing the source of the down payment also is helpful. If the down payment will be a gift from a relative, borrowers are advised to submit an account statement showing the funds are available and awaiting the home purchase. Same goes for borrowing from a 401(k).
  
  
• Freelancers also should be prepared for a more in-depth analysis of their ability to repay the debt. Submitting tax returns from the last three years and explaining any significant differences in income is advised

California housing production declines from year earlier:

California housing production declined 45 percent in July compared with a year earlier, and posted the lowest monthly permit total since January of 2009, according to the California Building Industry Association. Statistics compiled by the Construction Industry Research Board (CIRB) show that permits were pulled for 2,248 total housing units in July, down 45 percent from the same month a year ago and down 53 percent from June, representing the lowest monthly permit total since January of 2009 when 2,104 permits had been issued. Permits for single-family homes totaled 1,436, down 30 percent from June 2010 and down 39 percent from the previous month, while multifamily permits totaled 812, down 61 percent from a year ago and down 67 percent from June.

Mike Winn, CBIA’s president and CEO, noted that in addition to dismal economic conditions, CIRB attributed some of the decline to secondary effects of the costly green building code changes and fire sprinkler mandates that went into effect on Jan. 1.

“Permits that had been applied for back in December to avoid the costly new regulations had not actually been issued yet and needed to be issued by July 1,” said Winn. “This caused more permits to be issued through the end of June which could account for some of the decline in July, according to CIRB’s analysis.”