California home prices near 4-year high:

California home sale prices came close to a 4-year high in July, with the pace of sales year-over-year growing for the fourth month in a row, the CALIFORNIA ASSOCIATION OF REALTORS® reported.

Making sense of the story

• The median home price in July for an existing single-family home was $333,860 last month, up 4.2 percent from $320,540 in June and nearly 13 percent from a year ago, when the median home price in California was $296,160.
  
   
• July’s median home price was the highest since August 2008, when it was $352,730.  July also marked the fifth consecutive month that the median price increased month-over-month and year-over-year.
  
   
• Sales in July rose to an annualized pace of 529,230 homes, an increase of 15.3 percent compared with last July.
  
   
• California’s housing inventory was nearly flat in July, with the index of existing, single-family homes at 3.4 months compared with 3.5 months in June.  However, July’s inventory was down from a revised 5.6-month supply in July 2011.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A 7-month inventory is considered normal.

Homebuilder Sentiment Hits 5 Year High: 

U.S. homebuilder sentiment rose in August to its highest level in more than five years, a fresh sign that the battered housing market is turning the corner, data from the National Association of Home Builders showed.

The NAHB/Wells Fargo Housing Market index gained to 37 this month from 35 in July, the group said in a statement, topping economists' expectations for it to hold steady with last month.

It was the highest level since February 2007 and the fourth month in a row sentiment has improved. The index has surged by more than 20 points since last summer.

In a separate report, the Commerce Department reported that  new permits for building homes rose 6.8 percent in July to a 812,000 unit pace, the highest rate since August 2008.

In another positive sign for housing, the University of Michigan's U.S. Consumer Sentiment Index improved in early August to its highest level in three months.

Layer upon Layer, economic news keeps stacking up to support a stronger housing market.

Finally, it is time to buy a house:

Buying real estate is a good long-term investment for many reasons, some of which have only become apparent in recent weeks.
Making sense of the story

• Housing prices rose sharply in May compared with April.  The S&P/Case-Shiller Index, a closely watched real estate index, rose 2.2 percent in 20 of the nation’s big cities.  Prices rose more than 3 percent in Chicago, Atlanta, San Francisco, and Minneapolis.
• Nationally, the increase was the first in seven months.  More importantly, the increase matched other data and evidence this spring that foreclosures slowed and inventories were shrinking.  Economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.
• In addition, interest rates on 30-year fixed mortgage have tumbled below 3.5 percent.  For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.

Housing starts also rose in June, and for those who can afford to invest in property, rents continue to rise.  Prices are at a 10-year high.  Real estate website Trulia found that it is cheaper to buy than rent in each of the nation’s 100 biggest metropolitan areas.

In most of U.S., buying beats renting after only three years:

Zillow analyzed the "breakeven horizon" in more than 200 metros and 7,500 U.S. cities to determine how many years it would take before owning a home becomes more financially advantageous than renting the same home. In more than three-quarters (75 percent) of metros analyzed, a homeowner would break even after three years or less of owning a home.

All possible costs associated with buying and renting were incorporated into the analysis, including down payment, mortgage and rental payments, transaction costs, property taxes, utilities, maintenance costs, tax deductions, and opportunity costs, while adjusting for inflation and forecasted home value and rental price appreciation.

In some metro areas where home values fell dramatically during the housing recession, home buyers break even after less than two years of owning a home. The Miami-Ft. Lauderdale metro is among the most favorable for buying, with homeowners breaking even after only 1.6 years of living in the home.  However, in the San Jose metro, where home values are among the highest in the nation, a buyer must commit to living in their home for 8.3 years before they will break even.

However, within metros, there is often a sizeable variance from one community to the next. For example, in Mill Valley, Calif., just north of San Francisco, homeowners can break even after 8.8 years, while in similarly-priced Menlo Park, south of the city, they must live in the home for 14.1 years.

Metros where it takes more than five years to reach the breakeven point accounted for 7 percent of the 224 metros covered by the report. The metros with the longest breakeven horizons are San Jose, Calif. (8.3 years), Oak Harbor, Wash. (7.2 years), Santa Cruz, Calif. (7.1 years), San Luis Obispo, Calif. (6.3 years) and Salinas, Calif. (6.3 years). The metros with the shortest breakeven horizon are Memphis, Tenn., Miami-Ft. Lauderdale, Fla., Salisbury, Md., Red Bluff, Calif., Mobile, Ala., Tampa, Fla. and Fernley, Nev. (all tied at 1.6 years).  

For renters, buying a home pays off after three years on average


A new analysis by real estate website Zillow shows that, on average, a renter thinking about buying a home will reach what it calls the “break-even horizon,” after just three years.  The break-even horizon compares what it would cost to buy or rent the same home in a number of U.S. markets over time.

Making sense of the story

• The analysis takes into account a host of factors potential buyers should think about when considering a home purchase, including the down payment, mortgage and rental payments, buying and selling costs, property taxes, utilities, maintenance costs, and tax deductions.  The analysis adjusts for inflation and forecasts home value and rental price appreciation.

• Zillow said that the data should help homeowners get a rough and immediate sense of whether buying makes sense in a particular area in relation to their financial situation.
• Additionally, many analysts believe that a housing bottom has been reached, which may help renters determine if now is the right time to buy. However, analysts also say they are not expecting home prices to return to the same levels as during the real estate bubble.
• There is also some concern about the strength of the housing recovery, with home sales slowing in June as inventory remained tight and buyers paid higher prices. At the same time, rents are rising, housing affordability is at record levels, and mortgage interest rates remain very low.  These factors are prompting many renters to consider homeownership.

Home Prices Rise for Fourth Straight Month: 

Home prices rose for the fourth month in a row in May, suggesting the recovery in the housing market continued to gain traction.

The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.9 percent in May from April on a seasonally adjusted basis, topping economists' expectations for a 0.5 percent gain.

On a non-seasonally adjusted basis, prices fared even better, jumping 2.2 percent. Compared to a year ago, price declines moderated to slip 0.7 percent, the smallest drop since the last time year-over-year prices rose in September 2010.

The housing market, which collapsed during the 2007-2009 recession, has been a relative bright spot in the economy this year.  Mortgage rates continue to hover near all-time lows, Consumer Confidence is up and many Realtors are reporting a shortage of supply as home inventory levels continue to fall.  All of these factors point towards some positive momentum in the housing sector.

California Homeowner Bill of Rights signed into law:

California Governor Jerry Brown signed into law yesterday the Homeowner Bill of Rights to help struggling Californians keep their homes. This law aims to avoid foreclosure where possible to help stabilize California's housing market and prevent the other negative effects of foreclosures on families, communities, and the economy. The new law will generally prohibit lenders from engaging in dual tracking, require a single point of contact for borrowers seeking foreclosure prevention alternatives, provide borrowers with certain safeguards during the foreclosure process, and provide borrowers with the right to sue lenders for material violations of this law.

Making sense of the story

• The Bill of Rights prohibits “dual track” foreclosures that occur when a mortgage servicer continues foreclosure while also reviewing a homeowner’s application for a loan modification.
• Under the new law, homeowners must be provided with a single point of contact when negotiating a loan modification.
• It expands notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure.
• Additionally, the bill allows injunctions against foreclosure until violations are corrected and permits civil penalties against servicers that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law.
• These new laws make California the first state in the nation to take provisions in the National Mortgage Settlement, which covered the nation’s five largest mortgage loan servicers, and apply those rules to all mortgage servicers.

The law will go into effect January 1, 2013.