California house sales up, prices down

California home sales posted an increase both on a monthly and annual basis in November, marking the fifth consecutive month of year-to-year sales increases, according to figures released today from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Meanwhile, the statewide median price of an existing, single-family detached home sold in California rose 1 percent compared with October, but declined 5.2 percent compared with a year earlier.

Making sense of the story

• Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted 503,570 units in November, up 2.1 percent from a revised 493,140 in October, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.
  
  
• November home sales also were up 2.3 percent from the revised 492,040 units sold during the like period a year ago. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the November pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
  
• The November statewide median price of an existing, single-family detached home sold in California was $280,960, up 1 percent from $278,060 in October but down 5.2 percent from the $296,480 median price recorded for November 2010.
  
• The Unsold Inventory Index for existing, single-family detached homes was 5 months in November, down from 5.3 months in October and down from a 6.2-month supply in November 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Builder confidence rises for the third consecutive month

Builder confidence in the market for newly built, single-family homes edged up two points to 21 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December. This marks a third consecutive month in which builder confidence has improved, and brings the index to its highest point since May 2010.
“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” said NAHB Chief Economist David Crowe. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”

Each of the HMI’s three component indexes registered a third consecutive month of improvement in December. The component gauging current sales conditions rose two points to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May 2008.

New Home Sales Continue To Rise:

Investors cheered yet another U.S. report showing signs of improvement in the housing market.

The Commerce Department report showed US new home sales rose for the third straight month in row, increased by 1.6% to a seasonally adjusted annual rate of 315,000 from October.

Even as the pace of gain was smaller than 2.6% forecast by economists, investors took comfort in that housing data released in recent days have started to show stabilization, and given that the housing market is one of a major contributors to the economy, it could provide some support for the economic growth next year. New homes account for just a fraction of the housing market, but they have a big impact on the economy. Each new home built creates roughly three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Home bargains abound, but willing lenders are rare breed

Faced with finicky lenders, would-be home buyers are increasingly turning to family members, friends, and even strangers they meet online. While this is understandable, given the abundant bargains on the market, they also present significant risks.
Making sense of the story

• So-called peer-to-peer lending sites, such as Prosper and Lending Club, say demand for home-related financing is on the rise. In September, Weemba, a social-networking site, launched a platform to connect lenders directly with prospective home buyers and other borrowers.
  
  
• Despite historically low mortgage rates, traditional lenders remain reluctant to provide mortgages to anyone with less than stellar credit. And, in certain markets, lenders are requiring down payments of more than 20 percent of the home’s purchase price.
  
  
• Borrowers taking loans from family members – so-called intrafamily loans – save on interest since family members are likely to charge less than the banks. Additionally, parent lenders can earn a higher return from their child’s interest payments than they would on a certificate of deposit or money-market fund. Under federal law, on a loan of more than nine years, parents must charge at least roughly 2.8 percent, in most cases.
  
  
• Consumers who prefer to look for loans beyond the family can apply at peer-to-peer lending sites. If approved for a loan after a screening by the companies, applicants may then receive money from investors.
  
  
• However, these alternative routes to financing can be expensive for borrowers. Rates at Lending Club run from around 7 percent to 28 percent. At Prosper, rates run roughly 7 percent to 35 percent. The companies say these rates, which are fixed, are higher than traditional mortgage rates in part because their loans are unsecured.

Job Claims, Factory Data Suggest Recovery Picking Up Steam:

Government reports on weekly jobless claims, manufacturing activity and inflation offered fresh evidence the U.S. economic recovery is picking up steam. 
New U.S. claims for unemployment benefits dropped to a 3 1/2 year low last week, a government report showed on Thursday, suggesting the labor market recovery was gaining speed. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.

A gauge of manufacturing in New York State showed growth accelerated in December to its highest level since May as new orders improved, the New York Federal Reserve said in a report on Thursday. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. The gain in December added on to improvement last month that pulled the index out of a five-month contraction.

Wholesale prices rose a modest 0.3 percent last month, as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.

Most economists say they think inflation has peaked and will slowly decline next year. That's because prices for oil and many agricultural commodities have fallen from their highs this spring. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods.

Lower price growth means consumers will have more buying power, potentially boosting consumer spending. The jump in gas and food prices earlier this year limited the ability of consumers to buy other goods, thereby slowing the economy.

Consumer spending rebounded in the July-September quarter as prices eased. The stronger spending helped increase growth to an annual rate of 2 percent from a slight 0.9 percent in the first half of the year. Economists expect consumer spending to rise again in the last three months of this year and think growth could top 3 percent. Federal Reserve policymakers, like many private economists, predict inflation will fall next year. That would give the central bank more latitude to hold down interest rates and potentially take other steps to stimulate the economy.

Tame inflation, improved manufacturing, increased consumer demand and super-low mortgage rates all add up to big positives for the housing market.

Consumer concerns stabilize in November

Home price expectations moved from negative to positive territory in November for the first time in six months, according to Fannie Mae’s November National Housing Survey. Respondents to the survey said they expect home prices to increase by 0.2 percent over next year. “Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Most Americans expect no improvement in their personal financial situation in the next 12 months and will likely remain wary about undertaking the significant financial obligation associated with homeownership until their view of their income, expenses, and job security heads in a more positive direction.”

Highlights from the survey include:

• Nearly a quarter (22 percent) of respondents expect home prices to increase over the next year (up 3 percentage points since last month), while 22 percent say they expect home prices to decline, down 1 percentage point since last month. Fifty-three percent say prices will stay the same, a 2 percentage point drop from October.
• Approximately one-third of Americans say that mortgage rates will go up over the next 12 months, down 3 percentage points from October and a return to the level seen in September.
• Sixty-eight percent of respondents say it is a good time to buy a home (down by 1 percentage point since last month), and just 10 percent say it is a good time to sell, unchanged from the previous two months.

Fannie, Freddie Mac complete nearly 2 million foreclosure-prevention actions

Foreclosure-prevention actions by Fannie Mae and Freddie Mac increased in the third quarter of 2011, according to a report by the Federal Housing Finance Agency. Since entering conservatorship in 2008, the GSEs have taken nearly 2 million foreclosure-prevention actions and completed 1 million loan modifications.
According to the FHFA report, the increase in completed foreclosure prevention activity in the third quarter was driven primarily by loan modifications and repayment plans. Two-thirds of all borrowers who received loan modifications in the third quarter had their monthly payments reduced by more than 20 percent. Additionally, the GSEs' cumulative refinancings through the Home Affordable Refinance Program (HARP) increased 11 percent during the third quarter to nearly 928,600 loans.