Case-Shiller: Home Prices Fall Again

Standard & Poor’s S&P/Case-Shiller Home Price Indices for January 2008 continue to show home prices declining to record levels.

The 10-City index fell 11.4 percent from January 2007. The 20-City index dropped 10.7 percent. Again, both indices reached record lows.

Home prices are declining significantly across the country, with 19 of the 20 cities in the index showing depreciation in home values. Only Charlotte, North Carolina reported a year-to-year price increase with a modest 1.8 percent gain. Miami and Las Vegas had the worst declines, each shedding 19.3 percent of value from last year.

The Atlanta decline also increased, from 3.4 to 4.8 percent.

Photo: Impacto, originally uploaded by Xosé.

NAR: Increase in Existing Home Sales

According to the National Association of Realtors, existing home sales rose unexpectedly in February, increasing 2.9 percent. It was the first increase in home sales in seven months.

Driving this increase were two factors: changes from January to February typically measure seasonal differences only, and the median sales price plummeted 8.2 percent from last year.

Home inventory remains high, with close to ten months of properties on the market.

As an Atlanta real estate lawyer, I have often counseled my clients not to read too much into the NAR’s statistics, or at least the NAR’s interpretation of their statistics.

But what conclusions can be drawn from their latest report?

First: housing is far from staging a recovery. While there was a modest increase in January to February sales, this is more likely attributable to seasonal factors, and not an actual improvement in the underlying market itself. In fact, sales of existing single-family homes were down 22.9 percent from a year ago. That’s a lot of houses.

Second: the drop in home prices as measured by the NAR has almost doubled from last month. January’s year-over-year prices fell 4.6 percent. February prices dropped 8.2 percent to $195,900.00.

It was recently reported that the majority of homeowners were in denial about home values, with three out of four believing that their home had gained or its retained value over the past year. The rapid decline in prices reported by the NAR may indicate that sellers are finally recognizing that homes aren’t worth what they used to be, and they are pricing more aggressively to compete with each other and the surging number of foreclosures.

These motivated sellers, who may be finally reducing prices drastically just to get homes sold, are your competition, and the successful investor is the one who is best able to turn market conditions to your favor.

Photo: down, originally uploaded by lomokev.

Mixed News: Foreclosures

RealtyTrac, the online marketer of foreclosure properties, has just released their report detailing nationwide foreclosure filings in February.

Last month, foreclosures fell 4% from January’s levels, but there was a 60% increase from February 2007.

As a closing attorney for real estate investors, we are definitely seeing the effects. More and more of our clients are buying REO properties and funding those acquisitions with hard money. We’ve also seen a dramatic increase in the number of short sales prior to foreclosure.

What we’re seeing less of these days: mortgage reinstatements.

The RealtyTrac report seems to indicate that all of the recent governmental efforts to help borrowers avoid foreclosure aren’t really helping.

Again, investors should plan on these levels of foreclosures continuing for the foreseeable future.

Photo: R ------------------------------------> L, originally uploaded by johanna.

FED: Home Equity Drops Below 50%

American homeowner’s percentage of equity in their homes has fallen below 50% for the first time since 1945, reaching a low of 47.9% in the fourth quarter of 2007.

The current amount of equity held by Americans in their homes: 9.65 trillion dollars.

More evidence of the difficulty in the housing market: Moody’s is estimating that 10.3% of homes will have zero or negative equity by the end of March.

Blamed for the increasing slide in equity are cash-out refinances, HELOCs and 100%-financed sales.

For the real estate investor, this latest reading on the US housing market should be viewed positively. It’s one of the few indicators that there is still a lot of equity out there for the investor who is capable enough to get out and find it. It may not be in pre-foreclosures, or in expired listings, but it’s out there, and there’s $9.65 trillion dollars of it out there.

Photo: empty, originally uploaded by Northern Country Boy.

Pending Sales Flat, Foreclosures Soar

The monthly National Association of Realtor pending home sales numbers are out, and they’re unchanged from last month. The index remains at 85.9 for the month of January and is the same figure that the NAR reported for December. It’s also the second-lowest reading on record.

The NAR also updated its market forecast. The group, known for being overly-optimistic, is projecting a 1.2% decline in median home prices, with a 6.1% decline in home prices alone. A modest turnaround in the second half of the year, however, is predicted.

As a closing attorney who works with investors, I expect price deterioration to continue for the foreseeable future, and real estate investors should adjust their investment strategies accordingly.

In separate, but not unrelated news: the Mortgage Bankers Association is reporting that foreclosures hit an all-time high in the last quarter of 2007. According to the MBA, two percent of all mortgages are in foreclosure.

Photo: More not so functional arrows, originally uploaded by Yolande....