[Trulia] Price Reduction Report – February 2010

February 22, 2010 | 12:00 pm | |


[click to open report]

Trulia released its Price Reduction Report for February 2010 and press release

After several years of significant price reductions, the amount of the deductions have been showing a decline. However, since there isn’t seasonal data to trend (the series started in mid-2009), we can only use this to confirm what we have already observed. California was one of the first market areas to see sharp price decline so sellers don’t have much more distance to travel to reach market and therefore they are at the bottom of the list. The months before the expiration of the tax credit program saw a rise in the amount of seller price declines. The subsequent renewal saw a sharp reversal of the pattern.

Major Metros in California Experience Biggest Decreases in Home Price Reductions SAN FRANCISCO February 16, 2010 – Trulia.com (www.trulia.com), smart real estate search to help you make better decisions, today announced that 21 percent of homes currently on the market in the United States as of February 1, 2010 have experienced at least one price cut. This represents the second straight month of home price reductions at this level, the lowest level since Trulia started tracking price reductions in April 2009, and a significant decrease since November 2009, when 26 percent of homes had at least one price reduction. The total dollar amount slashed from home prices dropped to $22.6 billion compared to $28.1 billion in November, a 19 percent decrease. The average discount for price-reduced homes continues to hold at 11 percent off of the original listing price.

California Seeing Less Reductions

Of the top 50 major U.S. cities*, only seven had price reduction levels at 30 percent or higher in February 2010, down from 21 in November 2009. Eight cities have seen a decline by more than one-third, and five of those cities are from the state of California: San Francisco, Oakland, Sacramento, San Jose, and San Diego.

Tax Credit is Skewing Seller Behavior

The trend, in fact, is pretty clear – it’s what to make of it that’s the question. The months leading up to the pending expiration of the home buyer tax credit last fall saw a rising trend line of price reductions, here and across the country.



[Surety Bonds] Some States Are Cracking Down On Appraisal Management Companies

February 21, 2010 | 5:30 pm | |

Since appraisal management companies are now responsible for the super majority of appraisals being ordered through lenders for mortgage purposes due to HVCC and AMCs are not a regulate institutions, the consumer is exposed more than ever to the potential for low quality appraisals, continuing to undermine the public trust in the appraisal profession. I suspect trend this has the potential to push errors and omissions insurance rates higher and provide more exposure to the mortgage lending system.

I firmly believe that 5-7 years from now we will be looking back to today’s AMC trend and will be saying: “if we only did something about it.”

Admittedly I know very little about surety bonds and this is no sales pitch or a solution to the AMC problem. I am more interested in understanding ways to protect the consumer against negligence and instill confidence in the appraisal process. To require AMCs to pay for surety bonds in order to operate in a state sounds like it provides an easier way for consumers to go after AMCs for negligence. Feedback or suggestions welcome.

According to Wikipedia, a surety bond is a contract among at least three parties:

  • The obligee – the party who is the recipient of an obligation,
  • The principal – the primary party who will be performing the contractual obligation,
  • The surety – who assures the obligee that the principal can perform the task

I was contacted by Jay Buerck of SuretyBonds.com who wrote provided the following post on surety bonds and appraisal management companies. He indicated that 6 states brought about new AMC legislation last year and it is expected to grow in the coming years. His article is simply trying to make everyone aware of this fact.

States nationwide are introducing tougher oversight and regulation of appraisal management companies. The push is part of a growing effort to bring more consumer protection and transparency to the home-purchasing process.

In all, six states: Arkansas, California, Nevada, Louisiana, Utah and New Mexico ó ushered in new AMC legislation in 2009. Industry officials expect another 15 to 20 states to consider adopting similar measures this year.

Appraisal management companies are becoming increasingly important because of sweeping changes to regulations for home valuations nationwide. The stricter regulations are geared toward boosting consumer safety and stabilizing the housing market.

“There is a significant belief out there that mortgage fraud played a significant role in the meltdown in the housing market, and any unregulated entity that is out there presents the possibility for mortgage fraud to creep back into the system,” Scott DiBiasio, manager of state and industry affairs for the Washington, D.C.-based Appraisal Institute, a global association of real estate appraisers, told Insurance Journal this winter. “I think legislators recognized that this was a gaping loophole that needed to be corrected.”

Taking consumer protection a step further, Arkansas became the first state to add a surety bond requirement to its appraisal management statutes. The new legislation requires that AMCs post a $20,000 surety bond with the stateís real estate appraiser board.

Surety bonds are essentially three-party agreements that ensure businesses or people follow all applicable laws and contracts. A surety bond also provides consumers and tax payers who are harmed by the business with an avenue of financial recourse.

Most of the new AMC legislation requires companies to make sure their appraisals are in line with the Uniform Standards of Professional Appraisal Practice. Theyíre also responsible for ensuring they use certified and licensed appraisers only.

There are also some financial disclosure and transparency requirements in some states.

“We need to have and the public deserves to know who owns, operates and manages these appraisal management companies,” DiBiasio said. “I think the $20,000 surety bond is really there to provide some minimal protection to consumers.”


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[A Better Finish] 4Q 2009 Long Island Market Overview Available For Download

January 28, 2010 | 10:36 am | | Reports |


[click to view report]

The 4Q 2009 Long Island Market Overview that I author for Prudential Douglas Elliman was released today.

Other reports we prepare can be found here.

Charts with the 4Q 2009 will be available online later today.

An excerpt

…There were more sales in the fourth quarter than in any quarter over the past two years as purchasers took advantage of the firsttime buyer federal tax credit program, increased affordability and low mortgage rates. There were 5,935 sales in the fourth quarter, 34.1% more than 4,427 sales in the same period a year ago and 5.9% more than 5,603 sales in the prior quarter. The current pace of sales has doubled from the low point in the first quarter of 2009, when there were 2,872 sales, but still remained 22% below the peak of 7,607 sales during the third quarter of 2004, the height of the housing boom. Listing inventory declined as a result of the increase in the number of sales. There were 19,450 listings, 6.2% below 20,730 listings in the prior year quarter and 12.3% below 22,170 listings in the prior quarter…

Download 4Q 2009 Long Island Market Overview



[NAR] Existing Home Sales Plunge…As Expected

January 25, 2010 | 10:11 pm | |


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Last month home sales spiked as first time home buyers rushed to take advantage of the tax credit before the November 30 expiration and no one was sure that the credit would be extended. As a result, the December sales reflect the sharpest decline in existing home sales in 40 years.

From the NAR press release for existing home sales:

After a rising surge from September through November, existing-home sales fell as expected in December after first-time buyers rushed to complete sales before the original November deadline for the tax credit.

fell 16.7 percent to a seasonally adjusted annual rate1 of 5.45 million units in December from 6.54 million in November, but remain 15.0 percent above the 4.74 million-unit level in December 2008.

NAR couched the bad news with a sprinkling of good news:

  • 5,156,000 existing-home sales in 2009, 4.9 percent higher than the 4,913,000 transactions recorded in 2008; the first annual sales gain since 2005.
  • National median existing-home price for all housing types was $178,300 in December, 1.5% higher than 2008

The worry here is not about the 16.7% decline – the concern is the removal of the tax credit as a stimulus for demand. I’m not advocating one way or the other – I am merely observing that housing does not yet stand on its own two feet so calling a bottom or a recovery is a mischaracterization.


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[Pending Home Sales] Tax Credit Wild Card? M-O-M Down 16%, Y-O-Y Up 15.5%

January 6, 2010 | 12:43 am | |


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NAR released their November 2009 Pending Home Sales Index which ended a 9 month string of increases.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell 16.0 percent to 96.0 from an upwardly revised 114.3 in October, but is 15.5 percent higher than November 2008 when it was 83.1.

NAR attributes the drop as a pullback during November related to the uncertainty surrounding the extension of the first time home buyers tax credit which expired November 30th. However it was subsequently extended and expanded to include existing home buyers who have until the end of this April to sign a bonafide contract. We may trivialize the tax credit’s success in the NYC metro area because of the higher housing costs relative to $8,000 and $6,500 tax credits respectively but from my discussions with real estate agents around the country, it did appear to trigger a large portion of home sales in 2009.

What does the 16% drop suggest? More weakness to come?

Yes, but not in the coming months (remember this is a seasonally adjusted stat).

It signifies that the US Housing market doesn’t yet have its own set of legs. No credit = drop in sales.

The credit extension ends in April, the Fed begins their pullout from the purchasing of Fannie Mae mortgage paper, perhaps influencing mortgage rates higher.

The combination of high unemployment, rising mortgage rates and the expiring tax credit in the spring, combined with the elixir of rising foreclosures causes by sustained unemployment at high levels suggests housing sales will fall in second half 2009.

Housing in 2010: Stability in the first half, with more concern for the second half.


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[Sideways] 4Q 2009 Manhattan Market Overview Available For Download

January 5, 2010 | 11:51 am | | Reports |

The 4Q 2009 Manhattan Market Overview , part of a report series that we have authored for Prudential Douglas Elliman since 1994, was released today.

Other reports we prepare can be found here.

The 4Q 2009 data(coming later today) and a series of charts (available now).

Press coverage can be found here once we get around to uploading it. In the meantime….

An excerpt

……There were 2,473 sales in the current quarter, up 8.4% from the 2,282 sales in the prior year quarter and up 10.9% from the prior quarter. This level of activity was more than twice the 1,195 sales seen in the first quarter of 2009, which had been lowest level of sales in nearly 15 years. The return to more normal historical levels of sales activity was also reflected in the decline in inventory levels. There were 6,851 active listings at the end of the quarter, a 24.6% decline from 9,081 listings in the same period a year ago, but down 18.3% from 8,389 listings in the prior quarter….The second half of the 2009 Manhattan housing market reflected a new era, marked by the milestone Lehman Brothers Bankruptcy tipping point of September 15, 2008. Buyers, sellers and real estate professionals have slowly adopted to changes including stringent, if not irrational mortgage underwriting, elevated unemployment and layoffs, lower compensation, a sharp price correction, shadow inventory, first time home buyers tax credit, rising foreclosures, declining appraisal quality, expanding marketing times and a host of other challenges. While the increased level of sales in the second half of 2009 was encouraging, a true housing recovery will be marked by a meaningful decline in unemployment and greater consumer access to credit…….

Download 4Q 2009 Manhattan Market Overview

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[Not Really Counted] 1.7M Units In Shadow Housing Inventory

December 22, 2009 | 1:04 am | |


[click to open full report]

One of the by-products of the credit crunch has been the rise in shadow inventory. Within my own market stats, I consider shadow inventory all units that are complete or under construction but not yet offered for sale as condos (sometimes as cond-ops or co-ops). In many cases the developer was unable to sell the initial block of units offered and is therefore unable to release the units behind them.

The development stalls because the lender behind the developer usually prevents the units to be converted to rentals because the value of the project would fall considerably as a rental on their balance sheet, causing stress to their capitalization ratio.

The lender’s reluctance to make such a decision is referred to as:

  • pretend and extend
  • pray and delay
  • kick the can down the road
  • a rolling loan gathers no loss

First American CoreLogic tracks shadow inventory. They define shadow inventory as real estate owned (REO) by banks and mortgage companies, as a result of foreclosures and other actions, such as deeds in lieu, as well as real estate that is at least 90 days delinquent. They put the amount of shadow inventory at $1.7M in 3Q 09, up 54.5% from $1.1M a year ago.

Visible inventory, like the amount estimated NAR and Census every month, is estimated at $3.8M, down 19.1% from $4.7M last year.

The total unsold inventory (which combines the visible and pending supply) was 5.5 million units in September 2009, down from 5.7 million a year ago. The total months’ supply was 11.1 months, down from 12.7 a year earlier. This indicates that while the visible months’ supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years, especially in the context of the current increase in home sales, which is in part due to artificially low interest rates and the homebuyer tax credit.

In other words, even with the surge in activity over the past several months, total inventory hasn’t changed all that much (I agree with Bob).

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Trulia Price Reduction Report December 2009

December 9, 2009 | 3:57 pm | |

Trulia, the listing search site, recently developed a Monthly Price Reduction report on the US housing market. Its intriguing because Trulia is able to aggregate this from a data set of millions of active listings – they have 80% coverage…plus the mapping presentation is amazing (way cool). (disclosure: I am on their industry advisory board)


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Here’s the press release and some highlights:

  • 22 percent of homes currently on the market in the United States as of December 1, 2009 have experienced at least one price cut, the lowest level since Trulia started tracking price reductions in April, 2009.
  • The total amount slashed from home prices also dropped from $28.1 billion in November to $24.7 billion in December, representing a 12 percent decrease.
  • The average discount for price-reduced homes slightly increased to 11 percent off of the original listing price compared to 10 percent in the previous four months.
  • The number of listings on Trulia also decreased by 9 percent from the previous month.

The trend over the past several months shows darker (higher price reductions) areas of inventory transitioning from September 2009 to December 2009. If its sensory overload, focus on Alaska to get my drift moving from the above chart down the post through the older charts. More discounting means that sellers are adapting to the new (lower) housing market. Less discounting in this market suggests that list prices are approaching market value when originally priced.

Other than a brief reprieve this month in discounting, which is likely due to the transition from the first time home buyers tax credit to the new program, listing prices are trending lower, perhaps “chasing” the market.

from the press release

“We saw some of the highest levels of reductions last month, as home owners raced to sell their homes in advance of the November 30 expiration of the tax credit,” said Pete Flint. “We are now seeing fewer reductions at the low end of the market as those sellers are increasingly in sync with market prices. With the expansion of the tax credit to repeat home buyers and extension to April 30, we expect to see an increase in price reductions at the higher end of the market in the first quarter of 2010.”

For the first time since Trulia started tracking price reductions in April 2009, one major U.S. city has reached 40 percent of listings with price reductions – Minneapolis. This is the second straight month that Minneapolis has held the top spot for highest percentage of price reductions.

Here’s an archive of prior month maps.


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[Tax Credit] Existing Home Sales Up 10.1% M-O-M, 23.5% Y-O-Y

November 23, 2009 | 4:01 pm | |

The National Association of Realtors released their October 2009 Existing Home Sale Report and the news was positive and kind of weird.

Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline.

It looks like the uptick in sales last month has been eliminated with the downward revision this month.

Existing-home sales

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

The number of sales was up 23.5% over the same period last year and up 10.1% from August. Both saw unusually sharp increases, caused by the expiration of the tax credit (and then renewal and expansion), falling mortgage rates, rising foreclosures (falling prices) and improved affordability.

If you remove the seasonality adjustment, the number of sales was up 20.8% over the same period last year and up 6.6% from August, still significant.

“It’s an impressive increase and shows a lot of pent-up demand for housing,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Buyers have enough confidence to take the plunge. The housing market recovery will be a durable one.

I’m not clear how the recovery is durable since it is solely dependent on artificially depressed mortgage rates, federal agency bailouts and tax credits.

Median existing home price

Prices continued to fall as there remained a large market share of foreclosures and lower priced properties and condos receive the most interest from buyers.

The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

Listing inventory continues to decline.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply2 at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.

Whats kind of weird about all of this good news, is that prices are falling,low end sales activity surged, market share of foreclosure sales remains high and high end housing market segments are the weak.

The NAR press release seems to couch readers in their anticipated sharp decline in sales over the winter.


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[Seasonalized?, Annualized?] Pending Home Sales Index Up 8th Consecutive Month

November 2, 2009 | 7:00 pm | |

The National Association of Realtors released its pending home sale index results from September and the results were good as expected:

The Pending Home Sales Index, a forward-looking* indicator based on contracts signed in September, rose 6.1 percent to 110.1 from a reading of 103.8 in August, and is 21.2 percent higher than September 2008 when it stood at 90.9. The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006 when it was 112.8.

*Note: only forward looking in the context of closed sales.

Yun describes the actual contract activity as less than August but if adjusted for seasonality and annualize, its way up. Extrapolating like this makes me uncomfortable – yes its better news, but not with a solid foundation. Especially the inference that this is a continuing trend.

The uptick in activity was explained as a last minute rush to take advantage of the first time buyer’s tax credit. While its beginning to look like the tax credit will be renewed with income limits expanded, I suspect sales would fall sharply if it wasn’t. Stimulus is designed to prime the pump but it doesn’t feel like prime yet, especially over the next month or two when Case Shiller goes negative.


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[S&P/Case-Shiller Home Price Indices] August 2009 up 1.2% M-O-M, May Go Negative in September

October 28, 2009 | 9:50 am | |

The August 2009 S&P/Case-Shiller Home Price Indices report showed continued month over month improvement while the decline from the prior year same period continues to ease. Reporting on this report has been decidedly positive over the past 6 months, cited by many as evidence that housing has bottomed. The report shows that prices are at 2003 levels, which is consistent with my personal experiences with the systemic breakdown of the mortgage process. Back in 2003, the pressure came on the appraisal industry full bore to keep the pipeline full as underwriting restrictions became seemingly non-existent.

Here’s the press release.

My friend Barry Ritholtz over at Big Picture does a very interesting analysis on the high end of the market showing that it now only represents 10% of sales over $500k, a staggeringly small percentage. Barry and I are speaking on a panel today at The Realty Alliance.

Since CSI index is value weighted, the shift in the mix and surge in lower priced foreclosures will likely turn CSI negative in the near future, as early as next month.

In fact, the CSI press release suggest this and feels like our expectations are being managed a tad:

Once again, however, we do want to remind people of the upcoming expiration of the Federal First-Time Buyer’s Tax Credit in November and anticipated higher unemployment rates through year-end. Both may have a dampening effect on home prices.

Since residential housing indices trail the current market by about 4-5 months from “meeting of the minds” to actual reporting of the index (contract date => closing date => recording date => index reporting date) the people that work with this data already have a fairly strong impression of where the index will be next year and even the subsequent month.

If we can’t take the indices at face value when they show a decline, then perhaps the same ought to be true when the indices go positive? The take away here is there is no single barometer of the state of housing.

Here’s the 20-city index breakdown.

As I like to say: “The trend is your friend until it ends.”


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[NAR] Existing Home Sales Surge 9.4%, 45% Are First Time Buyers

October 23, 2009 | 11:08 pm | |


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Not surprisingly, existing home sales jumped this month. Here’s NAR’s existing home sales release and the data.

including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate1 of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

The NAR wants the tax credit to be renewed so that the housing market can experience a self-sustaining recovery.

In fact, its all about the tax credit.

Sales of existing homes surged in September as buyers raced to take advantage of the tax credit for first-time home buyers before it expires next month.

Nationwide, sales of previously owned homes jumped 9.4% in September to a seasonally adjusted annual rate of 5.6 million from a downwardly revised 5.1 million in August, the National Assn. of Realtors reported Friday.

A long time friend of mine in suburban Chicagoland, who is a successful real estate agent told me that three quarters of his business was prompted by the tax credit. If its not renewed, sales will fall sharply.

In other words, the take away from this report seems to be a bit of a false positive. The surge in sales was a release of pent-up demand from a stalled market in the beginning of the year. Everyone’s chiming in about how important the tax credit is to restore housing market activity.


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