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Homes at Lake Tahoe are becoming more affordable for the first-time home buyer for the first time since 2001, but it’s unlikely to last long.
Homes in the lower-priced segment of the Tahoe market are in demand, a first-quarter existing homes sales report by Chase International shows.
“Lakewide, the units in single-family homes are up by 15 percent from the same time last year,” said Sue Lowe, senior vice president and corporate broker for Chase International. “We are just seeing little to no inventory in homes under $500,000 around most of the lake.”
Click this link to read the full article in the Reno Gazette Journal.
The Treasury department recently released Supplemental Directive 12-02 officially extending the term of all Making Home Affordable programs – including Home Affordable Modification Program (HAMP), Home Affordable Foreclosure Alternatives Program (HAFA), the Unemployment Program (UP), and Second Lien Modification Program (2MP) through December 31, 2013. The program extensions come on the heels of the expansion and extension of the Home Affordable Refinance Program or HARP, also through December 31, 2013.
April 13, 2012
While many markets continue to languish with more price declines and so-so sales, one real estate sector is red hot, and you might be surprised at which one it is.
Even with the economy just starting to pull out of the doldrums, the luxury market has come roaring back in recent months according to experts, and that could signal good things ahead for U.S. real estate.
“There is very little inventory, which is driving a lot of activity,” says Richard Smith, president and CEO of Realogy Corp., a global provider of real estate and relocation services. “You’re getting multiple offers and quick sells. It’s not uncommon in New York City to see a co-op or an apartment go on the market and two days later it’s gotten 10 offers and it’s sold. That’s becoming pretty typical of New York City.”
Other high-end markets in Boston, Greenwich, Conn., the Hamptons, and Miami, Fla., are seeing increased activity as well, Smith says.
Even far from the hustle and bustle of major city centers, real estate watchers have seen luxury markets heat up. In Bozeman, Mont., ERA broker owner Robyn Erlenbush has already seen the same number of closings and pending sales three months into 2012 as she did halfway through 2011.
“There’s great energy in our market,” she says.
Why are buyers suddenly scooping up more high-value properties? Lack of selection does play a role, but sellers have also become savvier when it comes to pricing their properties. On the flip side, would-be buyers have become more realistic about prices as well, sensing that they aren’t likely to drop much farther.
“These are high-end buyers that have been sitting on the sidelines for long enough and pricing is not going to get any better,” Smith says. “These are people who are smart enough to know that you can’t really call the bottom of the market—you can get close, but if you miss it, prices start escalating pretty quickly.”
[Read: Michelle Obama Remains Consistently Popular.]
The uptick in buyers plunking down mega-bucks for mega-mansions could bode well for the broader market, Smith adds. While it’s not likely the average Joe looking to buy a $200,000 home in Columbus, Ohio, will take his cues from multimillionaires purchasing second homes in the Hamptons, it could give more credence to the idea that the housing market could be on the mend.
“If I’m in a market and I see the very high-end buyers grabbing the headlines, it tells me that people who are astute investors—when you’re buying a $30 million property, you’re probably pretty astute—think things are starting to improve,” Smith says. “Is there a bleed-over effect? Probably.”
Foreign buyers have given some luxury housing markets such as Miami a shot in the arm, Smith and other experts say, with healthy interest hailing from locales as diverse as Russia, China, Canada, and Brazil.
[See the latest political cartoons.]
“We have an influx of Russians because it’s like their winter Riviera,” says Coldwell Banker Realtor Jill Eber, who specializes in luxury real estate, adding that current “bargain” prices have given foreign buyers incentive to move into the American housing market, especially popular vacation spots such as Miami.
Her colleague, Realtor Jill Hertzberg agrees. “Many of them are buying very big properties. You can’t buy a single-family home in the middle of Moscow on a gorgeous waterway,” she says.
And Hertzberg doesn’t think the resurgence of activity in the luxury market is a flash in the pan. “I think it’s going to sustain,” she says. “It’s definitely continuing.”
mhandley@usnews.com
Twitter: @mmhandley
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Media Contact: Katie Shaffer
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Chase International Reports
Market Beginning to Rebound
~Significant Improvement seen in lower-segment of Tahoe market~
Zephyr Cove, Nev. (April 9, 2012) – First quarter home sales at Lake Tahoe show an improved market compared to last year’s numbers for the same period, according to a quarterly report released by Lake Tahoe-based real estate firm Chase International. One noticeable and positive statistic was an impressive 15 percent increase in units sold around the lake, with the lower end of the market jumping 18 percent.
“The inventory in the lower segment of the market is disappearing around the lake,” said Susan Lowe, corporate vice president for Chase International. “Even though the average and median price has gone down from the first quarter last year (which saw many lakefront sales during that 2011 period and which we have not seen this year), the market is showing signs of recovery because the supply is vanishing.”
The Chase International 2012 first quarter report also shows dips around the lake overall in regard to sales prices from one year ago, which is reflected by the median price of a home in Lake Tahoe which is now $317,000 and the average home price which is $623,645, down 25 percent and 31 percent respectively.
Truckeeis showing signs of recovery overall but especially for real estate sales over the $1 million mark. Specifically, theTruckeemarket stats report a whopping 175-percent increase in units sold over $1 million from four sales at this time last year, to a notable 11 sales this year.
The condominium market aroundLake Tahoeexperienced declines for all segments of the Tahoe market. The number of total condo units sold was down 18 percent. Average prices are down 35 percent and the median price is down 7 percent.
Headquartered in Lake Tahoe, Nevada since 1986, with eight offices in the region (Zephyr Cove, Glenbrook, Incline Village, Tahoe City, Squaw Valley, Truckee, South Lake Tahoe and Reno) and one in London, England, Chase International and its exclusive affiliations handles a large share of the country’s property. A recognized leader in the world of real estate, Chase International continues to grow. With 240 professional Realtors® boasting an array of industry certifications and the highest volume per sales agent in the area, Chase International successfully represents homes at all price levels. For more information about Chase International, visit www.chaseinternational.com.
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by Steve Harney on April 10, 2012
I truly believe that now is one of the greatest times in American history to buy a home whether it is a primary residence, a vacation home, or an investment. Cynics may believe I speak highly of the benefits of owning real estate simply because I am in the industry as a speaker and lecturer. I want to prove that I believe in the advice I have given to our readers.
Yesterday, my wife and I were absolutely thrilled to receive the mortgage commitment on the small condo we are buying in South Beach, Florida. We are looking forward to enjoying our winters in Miami in the future. We are also excited that the condo will be able to be passed down to our children and eventually their children; enhancing our lifestyle and building family wealth at the same time. That’s exciting!!
By JONATHAN R. LAING
After falling 34% over the past six years, U.S. home prices will soon bottom. They could turn back up by spring 2013.
It hit with the ferocity of an Old Testament plague, wiping out large populations of homeowners in the U.S. Five million of the country’s 76 million mortgage holders have lost their homes to foreclosure or lender-ordered short sales since 2006, and an estimated 14 million more owe more on their homes than their properties are currently worth. In all, some $7.4 trillion in homeowners’ equity has been destroyed, according to Mark Zandi, chief economist at Moody’s Analytics, and more than two million jobs in the home-building industry disappeared.
At year end 2011, the S&P/Case-Shiller National U.S. Home Price Index fell to a record low, 33.8% below the boom peak level, recorded in 2006′s second quarter. The descent has been all the more hideous in such once-manic markets as Las Vegas, Phoenix and Miami, which, according to the Case-Shiller 20-City Composite Index, have fallen 61%, 55% and 51%, respectively, from their high-water marks.
Everyone has shared the pain. The negative wealth effect from the price decline both contributed to the virulence of the Great Recession and crimped the subsequent recovery.
At year end 2011, the S&P/Case-Shiller National U.S. Home Price Index fell to a record low, 33.8% below the boom peak level, recorded in 2006′s second quarter. The descent has been all the more hideous in such once-manic markets as Las Vegas, Phoenix and Miami, which, according to the Case-Shiller 20-City Composite Index, have fallen 61%, 55% and 51%, respectively, from their high-water marks.
Everyone has shared the pain. The negative wealth effect from the price decline both contributed to the virulence of the Great Recession and crimped the subsequent recovery.
Everyone has shared the pain. The negative wealth effect from the home-price decline contributed to the virulence of the Great Recession.
Yet as grim as these year-end readings appear to be, there are signs that the long nightmare for American homeowners is in its terminal stage, and that, maybe, just maybe, home prices will bottom and begin to turn by the spring of 2013—if not before. Certainly, the economy is doing better these days—the sine qua non for improved demand for housing. Jobs numbers have been up sharply three months in a row, leading to a jump in consumer confidence of late.
The near-record low in mortgage rates and concomitant slide in home prices has made houses and condos stunningly affordable (although stiff underwriting standards have made getting home loans more difficult). This is captured in the National Association of Realtors Housing Affordability Index, which measures how much purchasing power a median-income family needs in order to buy a median-priced home, using conventional mortgage financing.
This measure stood at 206 in January, which meant that the typical family has more than double the income needed to purchase an average home. That reading is more than twice the 102.7 at the peak of the bubble in July 2006.
MUCH OF THE HOME-PRICE DECLINE in the past six years has been fueled by the distress sales of foreclosed properties, which typically sell at discounts of 30% or more to dwellings in the conventional sales market. Distressed sales, along with vacant houses and condos awaiting a sale, trash property values for all the other homes in the immediate area.
These forced sales have weighed heavily on overall market prices that are typically reported on a metropolitan-area basis that includes cities, surrounding communities and exurbs, which are a good distance from downtown. Within many metropolitan statistical areas, a bifurcated market has developed in which a pricing recovery already is under way in communities and neighborhoods far from the areas still reeling from past excesses of subprime mortgages and predatory lending.
This phenomenon is showing up in the statistical service CoreLogic’s Home Price Index, which nicely separates distressed from nondistressed sales. Indeed, for all of 2011, prices fell 4.7% nationally from the previous year’s level. Excluding distressed sales, however, home prices dropped just 0.9%.
Of greater moment, perhaps, CoreLogic data show that nondistressed-sales prices rose 0.2% month over month in December 2011 and 0.7% in January 2012. Could this be an augur of better times to come?
Absolutely, in the opinion of Karl Case, professor emeritus at Wellesley College and one of the progenitors of the Case-Shiller indexes, launched in 2002. “If you drill down in the numbers by zip code in the Boston area, as I have done, you find that more desirable, affluent neighborhoods like Back Bay and Beacon Hill are doing just fine now—while, say, Fall River is still in the dumps and dragging down the entire Boston Metro area,” he asserts.
This bifurcated market is seen all across the country. While the Nob Hill neighborhood in San Francisco never saw values drop drastically and is now recovering nicely, Stockton, Calif., remains in the dumps. It’s a tale of two cities elsewhere, too. The Santa Monica real-estate market is doing fine, while the desert towns to the east are still suffering. And, in the Miami environs, South Beach is strengthening; Hialeah, Fla., isn’t.
Then there are areas that have been so depressed that the only direction now seems to be up.
In fact, woebegone Detroit was the only place in the latest Case-Shiller National Index to show an annual increase for December. True, the price increase was a skimpy 0.5%, but that was lots better than the 12.8% slide notched by the Atlanta area for 2011. And the only two metro areas that showed month-over-month gains in December were Miami, up 0.2%, and Phoenix, up 0.8%.
TO BE SURE, PLENTY OF headwinds remain for home sales. Unlike the stock market, home prices display much long-term momentum and inertia. Prices, all other factors being equal, tend to move in their past direction, and lenders, chastened by recent experience, remain tight with mortgage credit. Going through the home-loan application process these days is like undergoing a financial colonoscopy. In contrast, during the salad years of the housing boom, banks were shoving money at borrowers, with few questions asked.
The biggest impediment to a turn in the home market remains the so-called shadow inventory of some 3.671 million homes, according to estimates by Mark Zandi of Moody’s Analytics: those that remain somewhere in the foreclosure pipeline. Payments on some are 90-plus days delinquent; others are already lender-owned properties, known as REOs (real estate owned), that haven’t yet been listed for sale.
This inventory sits atop a market for existing-home sales that this January reached an annual pace of 4.5 million units. Moody’s Zandi, for one, finds particularly worrisome the recent $26 billion settlement of charges, alleging malpractice in home foreclosures, reached by 49 state attorneys general and the five largest lenders and mortgage servicers in the U.S. If nothing else, as a result of this, the shadow inventory will hit the home market far faster than it would have otherwise.
“While I feel better about U.S. home prices than I have in six years, I do think that a pickup in foreclosure and short sales could push U.S. home prices down another 5% this year, before the market bottoms next spring,” says Zandi. (In a short sale, the lender and homeowner agree to sell the home at a loss with the proceeds going to the lender in lieu of an actual foreclosure.)
Others are more sanguine.
Eleven forecasters surveyed this year by the Federal Reserve Bank of Philadelphia predicted, on average, that the Case-Shiller National Index would fall by just 0.2% this year—and that it would rise 1.2% in 2013. Even if the decline were to reach Zandi’s 5% level in 2012, it would be off such a low price base as to be almost imperceptible.
If the market bottoms out early next year, as Barron’s expects, any recovery is liable to be somewhat tepid for a while. Buyer psychology has been shredded by the housing bust: The notion of housing as investment, rather than shelter and a wasting capital good, has been destroyed. Meanwhile, lots of sellers, anxious to downsize or liquidate, remain in the wings, ready to pile into the market at the first sign of a rebound.
A pricing model recently developed by Goldman Sachs predicts a rise in nominal prices of a cumulative 30% over the next 10 years, for a real return of 1% annually, after adjusting for inflation. But if tax changes like the elimination of deductibility of mortgage interest materialize, long-term appreciation in home prices could hew more closely to inflation, with little in the way of real returns.
NONETHELESS, THE POSITIVES these days outweigh the negatives.
Take the daunting 3.7 million homes that Moody’s estimates is in the shadow inventory. Zandi points out that this foreclosure pipeline has been steadily shrinking since its peak of 4.53 million homes in the first quarter of 2010. The decline is primarily a result of a precipitous drop in loans entering the foreclosure channel.
The 30- and 60-day early-stage delinquency rate has been dropping like a stone for several years because of tightened mortgage-underwriting standards.
Likewise, Zandi expects that the shadow inventory could be reduced by at least 700,000, thanks to recent changes in Uncle Sam’s Home Affordable Modification Program to encourage lenders to reduce the principal on loans in early-stage default.
He also expects investment demand from all-cash buyers for homes in hard-hit areas like Nevada, Arizona, California and Florida to take lots of properties out of the shadow inventory. Rising rent rates make the strategy appealing to buyers seeking attractive cash returns while they await a turn in the market.
The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, is also encouraging them to make bulk sales to investors of their large portfolios of foreclosed properties.
CoreLogic’s chief economist, Mark Fleming, thinks that the size of the true shadow inventory—the number of homes that will reach the market as distressed sales—totals only about 1.6 million. Such transactions, which accounted for 28% of all existing home sales in December, won’t return to the record 33% they hit in February 2011, he adds.
The demand for housing could pick up markedly in the years ahead, just from population growth, or, in census lingo, household formation.
The Great Recession of 2008-09 sparked a collapse in household formation, as adult children postponed striking out on their own or moved back to their parents’ homes after losing, or failing to find, jobs.
The household-formation rate plummeted to 300,000 during 2008, from more than 1.7 million in 2005. But the Canadian economic research outfit BCA sees the U.S. rate surging to its historic annual average of around 1.3 million in the years ahead, boosting the demand for rental apartments first and then spilling into the housing market. BCA reckons that five million new households will have to be formed simply to return the ratio of households to population to normal levels.
Perhaps no one knows more about residential real-estate price trends then Yale economist Robert Shiller, the co-creator of the Case-Shiller indexes. He has studied prices going back many years, including those in one neighborhood in Amsterdam that has been around for literally centuries.
While he’s reluctant to predict definitively when the U.S. housing bust will end, he points to one leading confidence indicator that appears to be signaling a market turn—the National Association of Home Builders/Wells Fargo Housing Market Index.
This monthly survey seeks to capture shifts in builders’ perceptions of current and future market conditions and buyer traffic. The index has been on a tear of late, rising five months in a row and to its highest level since 2007. Home-builder stocks likewise have blasted off since the October 2011 stock-market low, with Beazer Homes (ticker: BZH) up some 167%, Toll Brothers (TOL), 81%, and the SPDR S&P Homebuilders exchange-traded fund (XHB) up 74%.
This confidence index, Shiller notes, topped out almost seven years ago, in the very month that he boldly predicted in a Barron’s article that the U.S. home market was on the verge of a monumental collapse that would see prices fall an inflation-adjusted 50% (“The Bubble’s New Home,” June 20, 2005).
“It’s amazing how on target that prediction was, since nationally the market is already down 40% in real terms,” Shiller said in a recent telephone interview.
The Yale economist isn’t sure why the builder-confidence reading has been such a good leading indicator. After all, the market for new homes even in strong years never accounts for more than 20% or so of all sales; existing houses and condos account for much more. And lately, the figure has sunk to around 6%. Perhaps home builders have a deeper insight into potential buyers’ psychology—although if their grasp of market conditions were that good, many of them wouldn’t have gone belly-up during the bust.
The Obama administration certainly hopes that housing is on the verge of a turn. So do the host of homeowners anxious to unload their properties. One very positive sign: The inventory of new and used homes is around a six-month supply, a decline from the peak in 2008 of more than 10 months.
That bodes well for continued economic recovery and could win President Barack Obama another four years in the White House. But for baby boomers who once hoped to retire on the proceeds of selling a home, the best advice may be: Don’t quit your day job.
Brian Sly
President
Brian Sly and Company, Inc.
Registered Investment Advisor and Consulting Corporation
73 Scenic Drive | Orinda, CA 94563
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