Home Prices

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Why U.S. Home Prices Have Been on a Tear

By , Associate Editor, Money Morning -

In another sign the housing recovery is genuine, home prices soared the most in more than seven years in April in 20 U.S. cities.

The S&P/Case-Shiller index, released today, climbed 12.1% from April 2012, marking the biggest year-over-year increase since March 2006, and rose 2.5% from March to April.

“The recovery is definitely broad-based," David M. Blitzer, chairman of the S&P's index committee, said in a news release. "Recent economic data on home sales and inventories confirm the housing recovery’s strength."

Experts cited an improving job market, low mortgage rates, high demand and a shortage of housing on the market.

Meanwhile, new home sales rose a bit less than expected in May but climbed a whopping 29% compared with May of last year.

All 20 cities in the S&P/Case-Shillert index, which includes metropolitan areas, showed year-over-year increases in home prices.

San Francisco posted the biggest gain, 23.9%, followed by Las Vegas, at 22.3%. Atlanta, Detroit, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, Seattle and Tampa showed double-digit gains.

Homebuyers in Bidding Wars

Home prices in Dallas increased 7.4%; in Washington, D.C., 7.2%; and in Cleveland, 4.8%. The smallest increase was in New York, at 3.2%.

Even with the increases, home prices aren’t rising fast enough to price buyers out of the market. Indeed, competition for homes has led to bidding wars in some places, including Los Angeles, Boston, San Francisco, Seattle, Washington, New York, Miami and Phoenix.  

And home prices haven’t even approached levels seen during the housing bubble.

Celia Chen, an analyst with Moody's Analytics, told Money Morning that home prices still remain 26% below peak bubble levels.

“The recovery’s alive and well,” Jed Kolko, chief economist at the real estate site Trulia.com, told Money Morning. “Prices continue to rise, new home sales are up and delinquencies and foreclosures are falling.”

Higher prices have also rescued many underwater homeowners.

Kolko noted an extraordinary statistic: It’s cheaper to buy than to rent in the top 100 U.S. housing markets.

At the same time, the inventory of houses available for sale has begun increasing as higher prices have prompted more homeowners to list their homes and more homebuilders to construct new homes.

And one of the nation’s largest homebuilders, Lennar Corp. (NYSE: LEN) reported today it beat analysts’ estimates for the three months through May as prices and sales increased.

Lennar Chief Executive Officer Stuart Miller said on a conference call today he wasn’t too concerned about rising interest rates.

“Interest rates are moving higher in the context of economic improvement,” Miller said. “We’re looking at a supply shortage, so that means that even in the context of rising rates and a better economy, we’re likely to see price increases and rental increases.”

Last week, a new survey of homebuilder confidence from Wells Fargo Bank and the National Association of Home Builders reached its highest level since 2006, and housing starts climbed 6.8% in May and 28.1% year to date.

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Why You Can't Trust Bob Toll's Prediction of 20% Home Price Increases in 2013

By , Chief Investment Strategist, Money Map Report -

Bob Toll, Executive Chairman of Toll Brothers (NYSE: TOL) , recently told Reuters that home prices are going to jump 20% in 2013 and another 25-30% in 2014.


But before you decide to pile into real estate, you might want to think about his statement for a moment.


It's not that there's anything wrong with Mr. Toll, nor even his prediction. He is a seasoned executive for one of the most respected homebuilders in the country.


It's why he made this prognostication - and what he stands to gain from it - that bothers me.


Here's what I mean...

Foreclosures Continue to Stymie Housing Recovery

By , Contributing Writer, Money Morning -

Banks seized more homes in August than in any month since the housing bubble burst in 2007, even as the number of homes entering the foreclosure process dropped for the seventh month in a row, according to data compiled by RealtyTrac Inc.

In all, banks repossessed 95,364 properties last month, up 3% from July and an increase of 25% from August 2009, RealtyTrac said. August was the ninth month in a row that the rate of homes seized by banks increased on an annual basis. The previous high was in May.

Additionally, almost one-quarter of all U.S. home closing transactions involved properties that were in some stage of mortgage distress and sold at a 26% discount on average in the second quarter.

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Moribund Housing Market Threatens to Kill Economic Recovery

By , Contributing Writer, Money Morning -

The weak housing market, which has traditionally led the U.S. economy out of recent recessions, this time may put an end to the economic recovery.

Existing home sales plummeted by a record 27% to their lowest level in 15 years in July and inventories soared, the National Association of Realtors (NAR) reported yesterday (Tuesday). Home re-sales, which account for 90% of the total market, dropped to an annual rate of 3.83 million in July. And inventories rose to 12.5 months from 8.9 months in June, putting them at their highest level in more than a decade.

"Historically, July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun told The Wall Street Journal. "The question is whether this pause is a temporary pause."

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Question of the Week: Investors Preparing for Double-Dip Recession

By , Associate Editor, Money Morning -

The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.

"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast last Sunday.

Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy into a new recession.

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We Want to Hear From You: Are You Preparing for a Double-Dip Recession?

By , Associate Editor, Money Morning -

The "pause" button has been hit on the U.S. economic recovery, fueling worries that we're headed for a double-dip recession.

"We're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession," Former U.S. Federal Reserve Chairman Alan Greenspan said in an interview on NBC's "Meet the Press" broadcast Sunday.

Greenspan touched off speculator interest in a double-dip downturn when he announced that a further decline in home prices could push the economy toward a new recession.

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The Housing Market Still Wobbly Despite May's Home Price Improvement

By , Contributing Writer, Money Morning -

The S&P/Case-Shiller index of home prices increased more than forecast in May, but the combination of a now-expired government tax credit, skyrocketing foreclosures and deteriorating consumer confidence is expected to keep a lid on the housing market in the second half of 2010.

Home prices in 20 major U.S. cities climbed 4.6% from May 2009, the biggest year-over-year gain since August 2006. However, analysts say the increase was artificially buttressed by seasonal factors and the residual impact of the homebuyers' tax credit.

"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year" doesn't show that the housing market "is in any form of sustained recovery," David M. Blitzer, chairman of S&P's index committee told The Wall Street Journal. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level."

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Taxpayers' $3.7 Trillion Bailout Hasn't Saved the U.S. Housing Market

By , Associate Editor, Money Morning -

The amount of taxpayer dollars directed at the Troubled Asset Relief Program (TARP) continues to grow but with little economic progress being made, particularly in the housing market.

Total taxpayer support for the mortgage market rose by $700 billion in the past year to $3.7 trillion, Neil Barofsky, the Special Inspector General for TARP, said his quarterly report to Congress.

"Indeed, the current outstanding balance of overall Federal support for the nation's financial system...has actually increased more than 23% over the past year...the equivalent of a fully deployed TARP program - largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases," said Barofsky.

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Housing Market Wobbling without Tax Credit Crutch

By , Contributing Writer, Money Morning -

The housing market has struggled to rebuild since its 2007 collapse, and its recovery is on even shakier ground now that a tax credit for first-time homebuyers has expired.

Nearly one-third of all U.S. home sales in the first quarter involved properties that were in some stage of mortgage distress, according to RealtyTrac Inc.. And homes on the market that were in the process of foreclosure sold at an average discount of 27% in the first quarter, which does not bode well for new inventory coming onto the market.

"We're clearly creating more properties that will be sold at distressed prices than the market is absorbing," Rick Sharga, RealtyTrac's senior vice president for marketing, told Bloomberg News in an interview. "The discount will probably stay between 25% and 30% as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market."

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Are You Worried About Stocks? The U.S. Housing Market Should Be Your Real Concern

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

According to the latest reports on the U.S. housing market, the 96,400 homes hit with default notices last month were 7% less than in April and 22% less than in May 2009.

And that's not all. Foreclosure auctions were scheduled for the first time on 132,680 properties last month - 4% fewer than the month before and 16% fewer than in May a year ago, according to the Irvine, California-based RealtyTrac Inc.

In fact, foreclosure filings of all types - default notices, scheduled auctions and bank repossessions - were reported on 322,920 U.S. properties in May, a decline of 3%. All told, this latest report seems to have painted a picture of a gentle and steady recovery for the embattled U.S. housing market.

Unfortunately, these figures are quite deceptive - as is the reassuring portrait they helped create. Despite the apparent improvement in the foreclosure figures, there exist some dangerous undercurrents that threaten to further drag down U.S. housing prices - as well as U.S. investors.

To discover the "real" state of the U.S. housing market, read on...

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Cost to Fix Fannie Mae and Freddie Mac May Reach $1 Trillion

By , Contributing Writer, Money Morning -

The cost to fix Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the government-backed mortgage companies that bought or guaranteed three-quarters of all U.S. home loans last year, could run as high as $1 trillion, according to a report by Bloomberg News released yesterday (Tuesday).

The minimum amount required to keep them afloat will be $160 billion, or $15 billion more than they have already drawn from an unlimited line of government credit granted to keep the home mortgage market functioning. That exceeds the amount already spent on bailouts for American International Group Inc. (NYSE: AIG), General Motors Co. or Citigroup Inc. (NYSE: C).

"It is the mother of all bailouts," Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry told Bloomberg.

Fannie and Freddie own or guarantee 53% of the nation's $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Their books are loaded with millions of bad loans, and delinquencies are on the rise.

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Question of the Week: Readers Respond to Money Morning's U.S. Housing Market Query

By , Associate Editor, Money Morning -

On one hand, housing market reports released last month showed that prices and sales are up from a year ago. The Standard & Poor's Case-Shiller Home Price Index showed a 2.3% year-over-year increase in March prices. And the National Association of Realtors said sales of previously owned homes rose 7.6% from March to April - a five-month high - and were up 22.8% from April 2009.

"A majority of the markets have seen price gains recently," said Lawrence Yun, chief economist at the National Association of Realtors. "A return to old-fashioned responsible lending and buying will help the housing market avoid disruptive and painful bubble-bust cycles."

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We Want to Hear From You: How Do You Feel About the U.S. Housing Market?

By , Associate Editor, Money Morning -

Housing market reports released last week showed that prices and sales are up from a year ago. The Standard & Poor's Case-Shiller Home Price Index showed a 2.3% increase in prices for March on a year-over-year basis, and the National Association of Realtors said sales of previously owned homes rose 7.6% from March to April - a five-month high - and were up 22.8% from April 2009.

The median existing single-family home price was $173,400 in April, up 4.5% from a year ago.

Government-incentive programs offering tax credits to buyers have helped bolster the U.S. housing market in recent months. First time homebuyers were eligible for an $8,000 tax credit if they signed a contract by April 30.

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