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Welcome to the bottom: Housing begins slow rebound
2009-08-01
It was -- note the past tense -- the worst housing recession anyone but survivors of the Great Depression can remember. Muzi.com News 10092461-1 (muzi.com)From the frenzied peak of the real estate boom in 2005-2006 to the recession's trough earlier this year, home resales fell 38 percent and sales of new homes tumbled 76 percent. Construction of homes and apartments skidded 79 percent. And for the first time in more than four decades of record keeping, home prices posted consecutive annual declines. Muzi.com News 10092461-2 (muzi.com) A staggering $4 trillion in home equity was wiped out, and millions of Americans lost their homes through foreclosure. Muzi.com News 10092461-3 (muzi.com) Now take a deep breath and exhale. The worst is over. Muzi.com News 10092461-4 (muzi.com) By every measure, except foreclosures, the housing market has stabilized and many areas are recovering, according to a spate of data released in the past two weeks. Nationwide, home resales in June are up 9 percent from January, on a seasonally adjusted basis. Sales of new homes have climbed 17 percent during the same period. And construction, while still anemic, has risen almost 20 percent since the beginning of the year. Muzi.com News 10092461-5 (muzi.com) Even home prices, down one third from the top, edged up in May, the first monthly increase since June 2006. Muzi.com News 10092461-6 (muzi.com) "The freefall is over," says Dean Baker of the Center for Economic and Policy Research. Muzi.com News 10092461-7 (muzi.com) The problem is that, Baker, like many economists, expects the housing market will "be bouncing around the bottom" for the second half of the year. Muzi.com News 10092461-8 (muzi.com) There are also real threats that could poison this budding recovery. The unemployment rate, which is 9.5 percent, is expected to surpass 10 percent, leaving even more homeowners unable to pay their mortgages. Mortgage rates could rise, making homeownership less affordable. And the federal tax credit for first-time homebuyers, which as lured many into the market, is set to expire on Nov. 30. Muzi.com News 10092461-9 (muzi.com) "As long as jobs are being lost, regardless of all the federal programs out there to help the borrowers, you're still going to have problems in the housing market," says Steve Cumbie, executive director of the Center for Real Estate Development at the University of North Carolina's Kenan-Flagler Business School. Muzi.com News 10092461-10 (muzi.com) True, but when you've got bidding wars for foreclosures in places like Las Vegas, Phoenix and Los Angeles, it's time to call the bottom. Muzi.com News 10092461-11 (muzi.com) • Northeast Muzi.com News 10092461-12 (muzi.com) Nobody knows the power of a dollar like New Yorkers. Muzi.com News 10092461-13 (muzi.com) After home on Long Island sat on the market for four months recently, the sellers' real estate agent told them to drop the price from the mid-$600s to $599,000. The house sold the next weekend. Muzi.com News 10092461-14 (muzi.com) In Merrick, about 30 miles east of New York City, homes are starting to sell "as long as they're priced right," the agent said. Muzi.com News 10092461-15 (muzi.com) In January, with the ground and financial markets still frozen, few would have believed that the worst of the housing crisis in the Northeast would turn around within six months. Muzi.com News 10092461-16 (muzi.com) But the evidence is clear: home resales in the region in June hit a seasonally adjusted pace of 820,000, up 28 percent from the beginning of the year. Sales of new homes were also up slightly and construction in the region more than doubled. Muzi.com News 10092461-17 (muzi.com) Even the median sales price of $249,400 in June was up 10 percent from January and was off just 6 percent from year-ago levels, according to the National Association of Realtors. Muzi.com News 10092461-18 (muzi.com) "We certainly had our share of problems, but overall the severity of what happened here was far less" than what happened elsewhere, says Michael Lynch, an economist with IHS Global Insight. Muzi.com News 10092461-19 (muzi.com) Pittsburgh has the region's strongest home market in terms of sales and prices because the city saw less of a housing bubble and the area has 7.7 percent unemployment rate that is below the national rate. Muzi.com News 10092461-20 (muzi.com) One of the weakest markets, by contrast, was Providence, R.I., where a jobless rate of 12 percent exacerbated the city's foreclosure crisis. Too many residents took out risky subprime loans they couldn't afford when the interest rates spiked within a few years. Today, more than one in 10 homeowners with a mortgage in the state is at least one month behind or in foreclosure. Muzi.com News 10092461-21 (muzi.com) The Northeast, more than any other region, felt the full force of the credit crisis that reshaped Wall Street. Manhattan's real estate market, long immune from price declines, tanked this year as tens of thousands of people lost their jobs. Muzi.com News 10092461-22 (muzi.com) Prices of for-sale apartments plunged in the second quarter by the largest amount in decades. Prices have fallen, on average, between 13 and 19 percent, according to four reports published recently by real estate firms. Muzi.com News 10092461-23 (muzi.com) Northeast states: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont Muzi.com News 10092461-24 (muzi.com) Data compares June vs. January and June vs. June 2008: Muzi.com News 10092461-25 (muzi.com) Home resales: up 28 percent; down 5 percent Muzi.com News 10092461-26 (muzi.com) Median price: $249,400, up 10 percent from January; down 6 percent Muzi.com News 10092461-27 (muzi.com) New home sales: up 3 percent; down 11 percent Muzi.com News 10092461-28 (muzi.com) New home construction: up 113 percent, down 68 percent Muzi.com News 10092461-29 (muzi.com) Mortgage delinquencies as of March: 10.4 percent Muzi.com News 10092461-30 (muzi.com) Regional outlook: The region should experience "a nice rebound in home construction" over the rest of the year, according to IHS Global Insight, an economic research firm. Sales for new and existing homes are likely to rise. Just don't expect your home's value to shoot up. Rising unemployment will lead to more foreclosures, and that will keep a lid on prices. Muzi.com News 10092461-31 (muzi.com) • South Muzi.com News 10092461-32 (muzi.com) The real estate market in the South remains one of extremes. Muzi.com News 10092461-33 (muzi.com) On one end, are oil-rich cities in Texas, Arkansas and Oklahoma that nearly skirted the housing recession altogether. Tipping the scale on the other side are foreclosure-ridden areas in Atlanta and swaths in Florida where prices are still falling annually by double digits. Muzi.com News 10092461-34 (muzi.com) Taken as a whole, home resales in the 17-state region rose 10 percent in the first half of this year on a seasonally adjusted basis, and are off just 4 percent from June of last year, according to the National Association of Realtors. Muzi.com News 10092461-35 (muzi.com) "Generally speaking, the rate of decrease, both in sales and prices, has started to bottom," says the University of North Carolina's Cumbie. "But that doesn't mean it's going to come roaring back." Muzi.com News 10092461-36 (muzi.com) Mass layoffs at Bank of America and Wachovia, for example, have taken their toll in their home state of North Carolina. Home price declines in Charlotte accelerated this year, and home resales in June were off nearly 30 percent from last year. Muzi.com News 10092461-37 (muzi.com) Home and apartment construction, a key economic engine, will also vary widely across the region. Parts of the South, notably Florida and Atlanta, were vastly overbuilt during the housing boom. So construction in the region rose a meager 7 percent in the first half of the year, the lowest of the four regions, according to the Commerce Department. Muzi.com News 10092461-38 (muzi.com) There was little reason for builders to start laying new foundations. New home sales fell 2 percent from January to June, the only region in the country to post a decline. Muzi.com News 10092461-39 (muzi.com)
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