Home Sales to Hold Steady

Daily Real Estate News  |  March 6, 2008 NAR:
The volume of existing-home sales is expected to remain stable through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

Lawrence Yun, NAR chief economist, says many buyers have been waiting for higher mortgage loan limits.

“The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions,” he says. “Therefore, a notable rise in home sales can be anticipated in the second half of the year.”

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8.

“This additional sign of a stabilizing market is encouraging, and our members are telling us there’s been a pickup in shopping activity,” Yun says. “Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers.

Market Forecast

Existing-home sales are forecast to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half. With a weak first half, total sales for 2008 are projected at 5.38 million, but are then seen to rise 3.5 percent to 5.6 million in 2009. The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009.

A pattern of disparate price performance continues around the country with a roughly even split between up and down markets. Recently released data for the fourth quarter shows strong price gains in markets such as the Kennewick-Richland-Pasco area of Washington; Topeka, Kan.; and Atlantic City, N.J.

At the same time, many areas that have lost jobs are showing price declines.

“Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace,” Yun says. NAR’s housing affordability index is forecast to rise 14 percentage points to 127 in 2008.

New-home sales should decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009. Housing starts, including multifamily units, will probably fall 25.1 percent to 1.01 million this year, and then continue to slip another 2.7 percent to 987,000 in 2009.

“As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half,” Yun said. “That will permit a quicker return to balanced market conditions in many local areas.” The median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.

A Look Across the Region

Across the United States, the PHSI in the:

• West: jumped 13 percent in January to 93.8, but remains 12.7 percent below a year ago.

• Midwest: rose 0.6 percent to 85.2, but is 13.3 percent lower than January 2007.

• Northeast: declined 4.1 percent in January to 69.6 and is 28 percent below a year ago.

• South: fell 6.1 percent in January to 89.5 and is 23.8 percent below January 2007.

Other Market Indicators

The 30-year fixed-rate mortgage, which has moved erratically in recent weeks, is expected to hover around 5.8 percent most of the year, and then rise to an average of 6.3 percent in 2009.

Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.4 percent in 2009. The unemployment rate is projected to average 5.4 percent in 2008 and 5.5 percent next year.

Inflation, as measured by the Consumer Price Index, will probably be 3.2 percent this year and 1.5 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.4 percent in 2008 and 3.1 percent next year.

Source: — REALTOR® magazine online

For more economic news and research reports, visit NAR’s Research division at REALTOR.org.

FHA Releases New Mortgage Limits for California Counties

FHA Max Limits Include 14 CA Counties* FHA Press Release *WASHINGTON – Tens of thousands of California families could be eligible this year to purchase or refinance their homes using affordable, government-backed mortgages, thanks to the economic growth package signed into law by President Bush. The Economic Stimulus Act of 2008 will allow HUD’s Federal Housing Administration (FHA) to temporarily increase its loan limits and insure larger mortgages at a more affordable price in high cost areas of the country.“The Bush Administration is expanding the pool of eligible borrowers, enabling more American families to qualify for safe, affordable FHA-insured mortgage loans. These temporarily higher loan limits are a shot in the arm for communities trying to sustain property values, bringing much-needed liquidity to the mortgage market, while helping many current homeowners who desperately need to refinance,” said HUD Secretary Alphonso Jackson at a forum on how to prevent foreclosure at the Operation Hope Center in Los Angeles and a Hope Now Alliance event in Anaheim.Beginning tomorrow, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750. Overall, the change in loan limits will help provide economic stability to America ’s communities and give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas such as:Los Angeles County , San Francisco County , Orange County , and Santa Barbara County . Previously, FHA’s loan limits in these very high-cost areas were capped at $362,790.The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts up to 125 percent of the area median house price, when that amount is between the national minimum ($271,050) and maximum ($729,750). The new minimum and maximum loan limits are based on 65 percent and 175 percent of the conforming loan limits for Government-Sponsored Enterprises in 2008, which is $417,000. The FHA used a combination of existing government data sets and available commercial information to determine the median sales price for each area. The change in loan limits are applicable to all FHA-insured mortgage loans endorsed after HUD publishes the increased loan limits tomorrow, and it lasts until December 31, 2008 .By increasing loan limits nationwide, FHA will provide much needed liquidity and stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure, FHA’s refinancing product. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.“This is not an easy crisis to address, and there is no silver-bullet, but I know that we can help hundreds of thousands of people keep their homes, and we can calm the waters,” said Jackson .In January 2009, FHA’s maximum loan limit will return to $362,790, unless the U.S. Congress approves bipartisan legislation to permanently increase loan limits as part of the FHA Modernization bill, which is still awaiting final approval on Capitol Hill.“In January 2009 the loan limits will return to their previous setting,”Jackson said. “That is why we need to permanently raise the loan limits to an acceptable level that more accurately reflect housing prices nationwide. We also need to make the minimum down payment more flexible and create a fairer insurance premium structure. This will allow more families to use FHA.”FHA loan limits are based on the county in which the property is located. However, for properties located in metropolitan or micropolitan statistical areas, the limit is set at that of the county with the highest limit within the metropolitan or micropolitan area.The new temporary FHA loan limits for California are attached below.The full text of the Secretary’s remarks can be found on the HUD website.-###-HUD is the nation’s housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS.The Department also promotes economic and community development, and enforces the nation’s fair housing laws. More information about HUD and its programs is available on the Internet at<http://listener.bliemail.com/forwarder.aspx?ID=a7ce4bbc-f4e6-439c-b9c3-12c87f0c7c0b|http%3a%2f%2frs6.net%2ftn.jsp%3fe%3d001GPnSaxHALMI9V0m-SS_aDrDc9GjPPLxF764nDn3D98O3HU8HasMH4X4vcljEJJroGI2weVOCxAFTcXuMM7YBwg%3d%3d> www.hud.gov and<http://listener.bliemail.com/forwarder.aspx?ID=a7ce4bbc-f4e6-439c-b9c3-12c87f0c7c0b|http%3a%2f%2frs6.net%2ftn.jsp%3fe%3d001GPnSaxHALMLfalvNA5G0OJQdZAhCv-yTc2_iTBJOIL8MsnNYM0rnG9zRKsZKhdvV6JXfosypIhVdeASJRLMIaZLaujeErR2a> espanol.hud.gov. For more information about FHA products, pleasevisit<http://listener.bliemail.com/forwarder.aspx?ID=a7ce4bbc-f4e6-439c-b9c3-12c87f0c7c0b|http%3a%2f%2frs6.net%2ftn.jsp%3fe%3d001GPnSaxHALMLY6P5Am8cR-6cv87njBipB2zQ3VIQJyrQo7OTydYfIj5xjYdLT_9otCmzUR6qNTQ3NBvoPHuTrAg%3d%3d> www.fha.gov.

TEMPORARY CONFORMING LOAN LIMITS RELEASED FOR HIGH COST AREAS

Washington, DC – The Office of Federal Housing Enterprise Oversight (OFHEO) today released the maximum conforming loan limits that will be in effect through year-end as a result of The Economic Stimulus Act of 2008. That legislation permits Fannie Mae and Freddie Mac to raise their conforming loan limits in certain high-cost areas. The new jumbo limits are a function of median home prices as estimated by the U.S. Department of Housing and Urban Development (HUD).The maximum for temporary jumbo conforming loan limits, which apply to loans originated in the period between July 1, 2007 and December 31, 2008, are as high as $729,750 for one-unit homes in the continental United States . Two, three and four-unit homes have higher limits as well. Alaska , Hawaii , Guam and the Virgin Islands also have higher maximum limits. There are two data sources reflecting the new maximum limits. The first, on OFHEO’s Web site, available at www.ofheo.gov/media/hpi/AREA_LIST.pdf, reports only those counties and Metropolitan Statistical Areas (MSAs) that are affected by the new loan limits. Data for all areas are available on the HUD Web site at https://entp.hud.gov/idapp/html/hicostlook.cfm.Seventy-one Metropolitan and Micropolitan Statistical Areas are affected including 245 counties and cities not in counties. In addition, there are 21 counties outside of Metropolitan or Micropolitan areas that show increases, plus Guam and four municipalities in the Marianas Islands . The newly increased limits range from $417,500 in Greeley , Colorado to the highest of $793,750 in Honolulu , Hawaii

. In support of HUD’s calculation of county median home prices, OFHEO provided HUD rural house price indexes for 48 states. HUD used these indexes, which reflect price changes for homes outside of Metropolitan Statistical Areas, to estimate median prices in counties for which sales price data were sparse. OFHEO has made these indexes available at: /hpi_download.aspx.