NAR: Home prices and sales decline again

The median price of a home in the U.S. fell to $169,000, according to the National Association of Realtors.

By comparison, the median U.S. household income in 2007 was $50,233. This suggests a price-to-income ratio of about 3.36.

The steep slide in home price accelerated at a record pace during the first three months of 2009, according to an industry report issued Tuesday.

The national median home price of single family homes sold during the first quarter fell 13.8% to $169,000 year over year, and 6.2% compared with the last quarter 2008, according to the National Association of Realtors (NAR). That was the largest year-over-year decline in the 30-year history of the report. ...

Sales volume was weak as well. Homes sold at a 4.59 million annualized rate during the quarter, off 3.2% from the last three months of 2008 and down 6.8% from first quarter 2008. ...

"Where prices are down the sharpest, sales volume is up the most," said Mike Larson, a real estate analyst for Weiss Research. "In the post-bubble markets, we've seen more rationality come in." ...

Despite the increased affordability, Larson does not forecast a return to a normal market until the end of 2010. Until then, he said, "Buyers will continue to have the upper hand."

So, after two months of Realtor and news media spin claiming that sales were up, we find that sales for the entire quarter were actually down.

Postal Worker Steals Stamps To Pay Mortgage!

CNN reports that a "Postal authorities say a Michigan postal worker has admitted to stealing some $20,000 worth of first-class stamps since September and trying to sell them to online auction-site customers to help pay his mortgage. An arrest warrant has been issued for John Auito, 42, of Macomb, Michigan. Auito, a postal employee since 2003, resigned after investigators confronted him on April 30."

I wonder if he stole the 'forever' stamps as they would have a higher resale value. Now, that he in jail there will almost surely be a foreclosure.

Canadian vs. U.S. new home prices

From Rebecca Wilder's excellent News N Economics blog:

Congress shares the blame for the financial crisis

While politicians and the press are busy blaming bankers for all our current economic ills, The Economist says the government needs to share much of the blame:

Governments spent a fortune encouraging people to buy houses. That was a mistake they now risk repeating

BANKERS, frauds, predatory insurers: there has been a stampede to punish the villains of the global meltdown. Yet one culprit is not only rarely seen as an offender, but is also being cosseted and protected. Governments’ obsession about home ownership has contributed as much to the meltdown as any moustache-twirling financier.

The bust began in America’s housing market and soon spread to government-sponsored institutions created to increase home ownership, Fannie Mae and Freddie Mac. Part of the problem came about because of policy. In most rich countries the state subsidises private housing. ...

Government backing sucked money into housing, boosting prices. Since millions use their homes as collateral for general loans, the house-price boom also exaggerated the consumer boom while it lasted, and amplified the bust when that came. Perversely, public policy even undermined the very things governments were trying to encourage. Housing policy aims at boosting savings. Yet home-equity loans and “negative amortisation” mortgages boosted spending.

In their efforts to stem the financial crisis, governments have thrown money at everything, including housing. Some of this is justified, but they are making their ultimate task harder. The state should in the medium term be aiming to slash subsidies for housing. ... There is no argument for a tax break worth, in practice, ten times as much to the rich as to the poor.

The Economist has more on the subject here.

Suburbs are the wave of the future

Despite the occasional rantings of a few automobile-less Washingtonians in this blog's comments, suburban living is here to stay. Not only are people still choosing to live in the suburbs, but employers are increasingly opening up shop in the suburbs. (Think Tyson's Corner, Reston, Chantilly, etc.)

Despite the wishful thinking of urbanophile pundits and policymakers, central cities have little realistic chance to reclaim their pre-1950 role as the dominant arbiters of American life.

Short of a catastrophic change, the country will remain predominately made up of suburban, exurban and small town residents. Since 2000, more than four-fifths of metropolitan growth has taken place in suburbs and exurbs. Economically, we see a similar pattern. According to a recent Brookings Institution study of 98 large metropolitan areas, only 21% of employees work within three miles of downtown.

Zillow: 22% of homeowners are underwater

The percentage of homeowners underwater keeps rising:

Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.

U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold. ...

Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.

By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3 percent were underwater in the third quarter of last year, the reports showed.

Zillow says U.S. home prices have fallen 21.8% since the peak, while S&P/Case-Shiller says that as of Q4 2008 prices have fallen 26.7%. I don't know which source is more accurate.

Also, there's a new type of shadow inventory: people who would like to sell if the market improves.

Meanwhile, potential sellers appear to be holding back until evidence of an improved housing market. In a separate survey of homeowner sentiment, nearly one-third, or 31 percent, of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market, the reports showed. ...

"Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows," [Dr. Stan Humphries, Zillow vice president of data and analytics] said. "Moreover, the additional information we have this quarter on 'shadow inventory,' with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted."

"By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat. I'm doubtful that we'll see the bottom until 2010, and thereafter it's increasingly clear that we're likely to have a long bottom before we see meaningful recovery in home values," Humphries said.

The typical homeowner owns his house for about seven years. When you consider the fact that the housing market has been declining for almost 3-4 years (depending on whether you look at prices or sales), it's not surprising to see a buildup of homeowners who would like to sell when the market improves.

Our hero!

From Diana Olick:

Of course, "while pending home sales have historically been a one-month leading indicator to existing home sales, with a 71% correlation using a one-month lag," writes JP Morgan analyst Michael Rehaut, "we note that since October, the relationship has been more volatile. Specifically, Feb.’s Pending Home Sales rose 2.0%, but March Existing Home Sales fell 3.0%." Rehaut adds that rising unemployment and weak consumer confidence will keep these levels depressed through the year.

How to prevent bank-owned homes from falling into disrepair

This is a good idea. It can also push banks to drop homes to rock-bottom prices in order to sell them as quick as possible.

When will housing prices recover?

The view of First American CoreLogic economist Sam Khater:

I think, absolutely, the first chance for any kind of housing recovery is late 2010. We’ll see some bumps from the stimulus and the economy will look somewhat better than it really is. But we won’t see any housing bottom — and I’m talking prices — until late 2010. To me, the price is the most important thing.

Bank-owned homes being destroyed