Matrix Blog

Many homebuyers are being more creative, taking more risks in getting into the housing market. [According to SMR Research 38.1% of home buyers put less than 5% of the purchase price down, up from 30.6% in 2000. [USA Today]](http://www.usatoday.com/money/perfi/housing/2005-08-16-megamortgages-usat_x.htm) Piggy back financing, obtaining a line of credit simultaneously with the house purchase to put 20% down to avoid PMI insurance, has also been rising. SMR says 48.2% of buyers used piggy backs up from 19.9% in 2001.

[Americans now shoulder record levels of housing debt — more than 8 percent of homeowners spend at least half their income on their mortgage. [Washington Post]](http://www.washingtonpost.com/wp-dyn/content/article/2005/05/29/AR2005052900972_pf.html)

So What?

Well, as more people increase their borrowing risk, foreclosure rates rise.

Foreclosure.com published a list, by state, of [foreclosure inventory available for sale in August. [Valuation Review: Pd. Sub.]](http://www.valuationreview.com/pub/news/headlines/4148-1.html?type=pf) There was a 3% increase from 90,611 units in 93,440.

Sample media foreclosure coverage from around the country:

[Texas Up 6.6% from July to August 2005 [San Antonio Bus Journal]](http://sanantonio.bizjournals.com/sanantonio/stories/2005/09/05/daily23.html)

[Massachusetts Up 29% from August to August 2004 [RISMedia]](http://www.rismedia.com/index.php/article/articleview/11685/1/1/)

[Georgia Up 4.4% from June to July 2005 [Realtor.org]](http://www.realtor.org/rmoDaily.nsf/AllStories/083105#0694FE914)

See previous post: [PMI Gets You In The House: Now Get Rid Of It](http://matrix.millersamuel.com/?p=85)

Tags: NAR, National Association of Realtors

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[The Justice Department [DOJ] is suing the National Association of Realtors. [Reuters]](http://today.reuters.com/PrinterFriendlyPopup.aspx?type=bondsNews&storyID=uri:2005-09-08T184002Z_01_N08267296_RTRIDST_0_PROPERTY-REALTORS-UPDATE-2.XML)

The NAR created a bylaw in 2003 that allowed members to opt out of sharing their listings with online real estate brokerage firms. The DOJ wants the rule struck down because it discourages competition and hurts the consumer. [The NAR had been negotiating with the DOJ and had modified the rule but not to DOJ’s satisfaction.[Valuation Review: Paid Subscription]](http://www.valuationreview.com/cgi-bin/udt/um.logon?client_id=appraisalintelligence&return_url=/pub/news/headlines/4141-1.html)

DOJ states that the original rule:

prevents consumers from receiving the full benefits of competition and threatens to lock in outmoded business models and discourage discounting

and the revised rule still:

discriminated against “brokers who use the Internet to more efficiently and cost-effectively serve home sellers and buyers.”

Besides going after NAR for limiting competition, the DOJ seems to go after the broker business model, saying the rule was forcing the use of a dated business model.

Tags: NAR, National Association of Realtors

1 Comment

With the [drop in mortgage rates that started in early August](http://www.mortgagenewsdaily.com/972005_Mortgage_Rates.asp), it comes as no surprise that [mortgage applications are now starting to rise](http://money.cnn.com/2005/09/07/real_estate/mortgage_aps.reut/index.htm)

The next thought that comes to mind is whether or not home sales will follow. Sales activity seemed fairly brisk in New York, althought the [NAR’s Pending Home Sales Index [Note: PDF]](http://www.realtor.org/Research.nsf/files/PHS0507.pdf/$FILE/PHS0507.pdf) showed modest declines in all regions except the south. The idea here is that contracts are the better indicator of the current state of the real estate market. However, this is more of an informal survey from their members. It is still behind the market since they have only report through mid-July.

With Katrina and higher oil prices, it will be interesting to see what happens in September. I’m thinking good thoughts.

I will probably get a little annoyed if interpretation the the next round of housing data does not consider that August is usually one of the seasonally slowest times of the year for housing sales. Hence the infamous, seasonal adjustment should be applied. See [Lies, Damn Lies, And Government Statistics: Part I](http://matrix.millersamuel.com/?p=65)

One other thought is the idea of using mortgage applications in predicting home sales. There is an interesting article published from the Dallas Fed [Can Mortgage Application Help Predict Home Sales?[Note: PDF]](http://www.dallasfed.org/research/er/1996/er9604c.pdf) Its a bit dry but my sense is that the mortgage app data really lags too much to be an effective predictor of home sales without a lot of tweaking.

Tags: Pending Home Sale Index, Hurricane Katrina, PHSI, NAR, National Association of Realtors

Comments Off on Mortgage Apps Rise As Rates Fall: Will Home Sales Rise Too?

Greenspan said today that the US housing boom is sure to end eventually and there should be a drop in home prices.

[Webmaster’s Note: I’m am fairly certain most people do not believe the housing boom will go on forever so tell us something we don’t know.]

A weakened housing market would take the punch out of an inflation threat and therefore the pressure off the Fed to keep raising short term rates. Consumer spending is reported to account for 70% of the US economy and this driven largely by the ability to tap home equity.

To date, some US economists believe the [“wealth effect” of housing](http://matrix.millersamuel.com/?p=62) are offsetting the [negative influence of rising oil prices. [Note: Paid Subcr.]](http://www.realestatejournal.com/columnists/housetalk/20050826-fletcher.html?rejpartner=mktw) [The ability to pull equity out of the housing sector has helped consumers maintain discretionary spending despite rising oil prices.](http://home.nzcity.co.nz/news/default.asp?id=54345&cat=1052)

[Besides rising oil prices, labor costs are expected to rise](http://quote.bloomberg.com/apps/news?pid=10000103&sid=aXYJrQPCX40w&refer=news_index) keeping pressure on the Fed to raise short term rates.

The Fed believes that home prices will continue at their brisk pace through the third quarter, [before easing in the final quarter of the year.](http://futures.fxstreet.com/Futures/news/afx/singleNew.asp?menu=latestnews&pv_noticia=1125094993-e04f0f08-38013)

[Here’s a great article written last May called “Don’t Buy Housing Bubble Propaganda”](http://biz.yahoo.com/ts/050526/10225437.html?.v=3) by the webmaster of one of the best economic blogs out there: [Big Picture](http://bigpicture.typepad.com/)

The author discusses mortgage rates and changing demographics better than any article I have read on this topic. One item of particular interest: More than 80% of all stock purchases are speculative. [According to the NAR](http://www.realtor.com), housing is currently at 23% which seems to pale in comparison, doesn’t it?

Tags: Alan Greenspan, Realtor.com, NAR, National Association of Realtors

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Investors are the wild card of the current housing boom [Note: Subscription]. The NAR released a report last spring that said [23% of all homes purchased in 2004 were for investment and an additional 13% were vacation homes](http://www.realtor.org/PublicAffairsWeb.nsf/Pages/SecongHomeMktSurges05?OpenDocument). Presumably, ratio of investors to owner occupancy will be even greater in 2005.

Here lies the problem for investors…

The rental market has taken a large hit over the past 4 years as lower mortgage rates have converted would-be renters into buyers. The free flow of capital stimulated rental development up until the past year, when it switched to condo development as prices rose rapidly. Now [the increase in investor activity may drive down rents [Note: Subscription]](http://www.realestatejournal.com/propertyreport/residential/20050815-simon.html?rejcontent=mail), placing more pressure for investors to sell quickly and not hold out for a higher price.

Tags: NAR, National Association of Realtors

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The recurring theme across the US is an increase in the number of sales and sales prices. NAR’s existing home sale report saw a record pace in the number of sales. West Virginia drew top honors with the largest gain in sales activity over the past year.

In addition to volume, housing prices have been rising nationwide. [Condos seem to be leading the way in Massachusetts [Note: Subscription]](http://www.masslive.com/business/republican/index.ssf?/base/business-0/1124178866282500.xml&coll=1).

Around the country housing prices and exist-home sales are setting records or near record levels but the rate of appreciation seems to be easing across the country.

Regional articles: [Wisconsin](http://www.madison.com/wsj/home/biz/index.php?ntid=50766&ntpid=1)
[Minneapolis](http://twincities.bizjournals.com/twincities/stories/2005/08/15/daily17.html?jst=b_ln_hl)
[California](http://www.rednova.com/news/general/209083/southern_california_home_prices_rise_to_new_record/)
[Southern California](http://www.latimes.com/business/la-fi-homes16aug16,0,762231.story?coll=la-home-business)
[Wisconsin](http://www.jsonline.com/homes/buy/aug05/348904.asp)
[Upstate New York](http://www.uticaod.com/archive/2005/08/17/news/7168.html)

Tags: Existing Home Sales, NAR, National Association of Realtors

Comments Off on What Else is New? Existing-Home Sales Hit Records, But…

NAR: Housing Affordability Index Down in Second Quarter, Still Favorable

Affordability was largely favorable in the second quarter but higher home prices and mortgage rates more than offset the increase in family income. The West Region shows both higher prices and more highly leveraged transactions. Kansas had the highest affordability for home ownership.

NOTE: This table shows the approximate home price a family earning the specified income could afford making a 20 percent downpayment, with no more that 25 percent of gross income for principal and interest payments. Variables include the type of loan and interest rate.

While the national median sales price of a US home was reported to be $218,900 in June 2005, there was great disparity in the 4 regions covered: Northeast, Midwest, South and West.

• Northeast $247,500 (21.8%)
• Midwest $174,500 (16.2%
• South $190,900 (20.6%)
• West $322,200 (30.9%)

The West saw an 85% higher median sales price in June than the Midwest did. Not only does the West region have the highest housing prices, but has the highest payment level as a percentage of income, roughly 50% more than the other regions.

A urban development think tank [ranked housing affordability](http://www.demographia.com/db-usafford1970r.htm) by state using median sales price and median household income for 1970 and 2000. They contend that denser urban areas that control growth generally have higher prices.

Kansas was the most affordable place to own a home in the US. Hawaii was the least affordable, nearly 2.7 times that of Kansas.

Tags: Kansas City, Affordability, NAR, National Association of Realtors

Comments Off on Its Still the Wild West; Kansas on the Cheap

According to a study released Tuesday by the Center for Housing Policy

Surging housing prices are putting the dream of a home beyond the reach of middle and low-income workers in many cities around the country

The center is an advocate for affordable housing.

Home ownership has seen significant expansion over the past 10 years with Fannie Mae now claiming that 69% of Americans own their homes.

Wages have held flat for community workers and aren’t likely to rise in the near future. The median home price is consistent with that of the National Association of Realtors [Note: PDF].

Tags: NAR, National Association of Realtors

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