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August 21, 2009
By THE ASSOCIATED PRESS
Filed at 2:23 p.m. ET
NEW YORK (AP) — Home resales in the Northeast recorded its fourth straight monthly gain in July, mirroring the national numbers that show the housing market is on the mend.
The nine-state region registered 105,000 home resales last month, up nearly 17 percent from June and 4 percent higher than a year ago, the National Association of Realtors said Friday.
The median price was still down, tumbling 15 percent to $236,700 from the year before.
Nationally, sales of existing homes edged up about 5.6 percent in July from the previous year, without adjusting for seasonal factors, while the U.S. median sales price slid more than 15 percent to $178,400.
After a dismal first half of the year, prices in the Northeast have finally fallen enough to lure back buyers, said Jonathan Miller, president and chief executive of real estate appraisal and consulting firm Miller Samuel Inc. in New York.
The looming expiration of a federal tax credit is also feeding the sales rush, he said. First-time buyers must complete their deals by the end of November to get a tax credit of 10 percent of the sales price, up to $8,000. The real estate industry is lobbying Congress to get the credit extended.
”The credit has played a critical role. It’s on par with Cash for Clunkers,” Miller said, referring to the hugely successful government program that offers up to $4,500 to shoppers who trade in cars for more fuel-efficient models.
Six of nine major Northeast cities tracked in the Associated Press-Re/Max Monthly Housing Report showed annual gains in home sales in July. The report analyzed sales transactions in the metropolitan statistical areas recorded by all real estate agents, regardless of company affiliation.
Pittsburgh and Philadelphia both registered a less than 2 percent drop, but the New York suburban area posted a steep decline in annual sales. Volume there plunged 20 percent, but month-over-month, it recorded a 3.3 percent gain. The median price fell 7 percent to $413,500.
Foreclosures there have ticked up as job losses and wage cuts hit the area, which is largely dependent on the hobbled financial industry.
”There’s still a certain amount of fear out there, but the market has picked up since earlier this year,” said Kevin O’Shea, a real estate agent with Home of Westchester Inc. in White Plains, N.Y.
New England cities showed the largest sales increases in July, with Augusta, Maine, leading the way. Home sales there jumped 19 percent from a year ago.
The reason? First-time homebuyers are flocking to anything priced under $150,000, said Don Plourde of Coldwell Banker Plourde in Waterville, Maine. They’re motivated by the federal tax credit and an extra state credit of up to $5,000 or 4 percent of the mortgage amount.
”The more the word gets out, the more people are thinking now is a great time to buy,” he said.
Foreclosures still are a thorn there, making up more than one in four sales, Plourde said. That pulled the median price down more than 9 percent to $135,000 from the year before.
Distressed sales also are battering Providence, R.I., the worst. The median price there dropped 13 percent from the year before to $205,000, the most in the Northeast.
”Foreclosures are killing us,” said Chet Szafranski, a real estate agent with Keller Williams Realty in Cranston, R.I.
After a brief respite, foreclosures started piling up again in the second quarter, the worst of it in downtown Providence. The suburbs are faring better. Sales volume in July increased nearly 9 percent from a year before in Providence.
In Boston, one of the first markets to fall into the housing slump, sales perked up by 6 percent in July, while the median price fell 3 percent to $342,750.
Buyers are flocking to downtown homes priced in the $400,000-$500,000 range and suburban properties in the mid-$300,000s, said Bart Foster, an agent with The ERA Norton Group in Summerville, Mass.
”The tax credit is helping people get off the fence,” he said.
Pittsburgh was the only region to boast an annual gain in price. The median house sold for $136,250 in July, up almost 4 percent. Sales still edged down by less than 2 percent.
The Steel City never saw an out-of-control housing boom like other parts of the country, so house prices there have remained steady, said George Hackett, president of Coldwell Banker Real Estate in Pittsburgh. The federal tax credit also has left a mark on the metro.
”We’ve got tens of thousands of homes perfect for the first-time homebuyer and we’ve taken advantage of that,” Hackett said. ”That’s been a good program here.”
In Focus: Regional and State Housing Trends
By Ken Fears, Manager, Regional Economics NAR
Although every market is unique they share similar demographic, economic, and migration fundamentals. Consequently, some trends repeat themselves around the country to varying degrees. Foreclosures are having a substantial impact in some markets, while unemployment is the primary concern in other locations. This article highlights some of the broader patterns that are making an impact on regional housing markets.
Foreclosures
Even in the best of times a small number of homeowners fall behind on their mortgage payments, in some cases resulting in foreclosure. Since the beginning of 2007, however, the foreclosure rate has risen in every state in the country. The initial wave of foreclosures resulted from a confluence of financially vulnerable borrowers using risky loans to finance home purchases in areas where prices had escalated rapidly over a long period of time resulting in an environment of weak affordability. This pattern is certainly evident in a large part of the West — California, Arizona, and Nevada – but it occurred to an extent in any market where there was a long period of price increases that eroded affordability.
Some states have fared better than others. Foreclosures have been a problem in a significant part of the Midwest – particularly Michigan, Ohio, Indiana and Illinois. Contributing to this was the loss of thousands of manufacturing jobs.
This permanent loss of jobs resulted in high unemployment and elevated foreclosure rates as well as slack housing demand even before the current recession. High foreclosure rates were exacerbated by increased access to risky loans in 2005 and 2006 followed by more recent mass employment layoffs. Foreclosures have also risen in other areas of the Midwest, Mid Atlantic, Northwest, Southeast, and Northeast, but not to the same extent as in the Sun Belt – particularly Florida – and Rust Belt markets.
Prices
Not surprisingly, prices have fallen sharply in those areas where there are large concentrations of foreclosures; notably in California, Arizona, Florida, but also in parts of Michigan and Ohio where price declines are in excess of 40 percent from their peak levels during the housing boom to the second quarter of 2009.
Prices have been most resilient in those markets that were last to join the housing boom like those in Texas (Dallas, Austin, Amarillo, Beaumont, and Houston), Utah (Salt Lake), and Oklahoma (Oklahoma City and Tulsa). Similarly, smaller Northeast markets such as Reading (PA) Pittsburgh, and Upstate and Western New York (Buffalo, Syracuse, Elmira, Rochester, and Binghamton) and many markets in the Midwest and upper South like Raleigh-Cary, Durham, Little Rock, Springfield (IL), Omaha, Topeka, and Madison have seen more modest price declines in the range of zero to 10 percent. These markets did not experience the sharp, headline-making price increases and thus were less exposed to lending and foreclosure problems.
The performance of high priced markets on the East coast like New York City, Providence, Boston, and Washington, DC is somewhere in the middle. While prices in these areas have certainly declined from their peaks, those declines have not been as sharp relative to markets with high concentrations of foreclosures. The price declines in these markets tend to reflect sharp declines in peripheral areas, while more central and established neighborhoods have only witnessed modest declines, if any.
There is some hope on the horizon. Significant price declines provide potential buyers with the confidence to get in the game and take full advantage of buying opportunities. Interestingly, the sharp price declines in the Sun Belt that led to strong increases in sales in Florida, California, Nevada and Arizona during the first quarter have continued into the second quarter. Sales in these states have jumped between 20 percent to nearly 80 percent over the four-quarter period ending in June. This trend is spreading. According to NAR’s most recent quarterly state sales figures, 37 states showed a month-to-month increase in the second quarter, up from 15 states in the first quarter. To be sure, most areas still have large housing inventories, but demand will eventually catch up, stabilizing prices. A few areas are already reporting multiple offers on some properties. Still, many buyers remain “on the fence” — awaiting a solid signal that home prices and the economy have finally bottomed out. So, while home sales are improving in a majority of states, on a national basis, sales are still below the five-million unit mark.
Jobs
Prices are not the only factor intimidating would-be buyers. Nearly every market in the country has felt and is feeling the impact of a bigger problem; a large loss of jobs. Steep job cuts have softened housing demand. The recession has also contributed directly to a second wave of foreclosures as homeowners who bought a home while still on sound financial footing can no longer afford payments when faced with a loss in income due to unemployment.
Just as with home prices, those areas that experienced the early and protracted economic expansion have felt the sharpest contractions in employment. The initial wave of lost jobs was largely confined to the construction and mortgage finance sectors. But following the financial market melt-down last fall, firms started cutting jobs in nearly every industry in anticipation of slack consumer demand in the future. As of May’s employment report (as this report is being written), only a handful of markets spread across Texas, Washington and North Dakota are on a firm job footing. Most markets in the Midwest and Southwest lost jobs at a rate of 2 percent compared with a year earlier.
The Northeast has fared slightly worse with job losses averaging 2 percent to 4 percent over the 12-month period ending in May of 2009. The hardest hit markets are in Southern California, Nevada, Florida, and Oregon where sharp contractions in the tourism and manufacturing sectors have had a strong impact. Recent restructuring of the troubled auto industry has resulted in large cuts to employment in Michigan and Ohio.
Job losses have contributed to softening home prices in those areas that did not share in the housing boom. Job losses lead to slack demand for housing, consequently swelling inventory levels. Slack demand and higher inventory puts downward pressure on prices, thus making it difficult for other homeowners to refinance.
Regional differences remain pronounced. The factors that caused the regional recessions in the Sun Belt and Rust Belt are different from the factors that pushed healthy regional markets into the housing recession. Consequently, different markets will exit the housing recession at different times and on unequal footing. But variations exist in markets in the same state and even within markets. As is often said “all real estate is local.” Affordability and demand are driven by local prices and the local fundamentals that generate them. Prices and sales may continue to stagnate or decline in some markets, while others will define a bottom, skip along it, or even begin a modest recovery. What is certain is that the housing picture tomorrow will be vastly different from what we see today or saw over the last 10 years.Housing Trends
September 11th Deadline
More than 25,000 Long Island homeowners will be subject to upping their homeowners insurance with additional flood insurance next month.
Congress ordered FEMA (Federal Emergency Management Agency) to redraw flood prone area maps and are set to go into effect by mid September.
Nassau County homeowners have until September 11th and Suffolk County homeowners have till the 25th to buy flood insurance at a reduced rate before the maps that reflect the new floodplain areas become official.
” To spare homeowners from the shock of rates up to $2000 a year the rules permit homeowners in new areas to purchace insurance until the new maps become effective at the old, lower rate…”
NOTE TO HOME SELLERS AND HOME BUYERS:
Those lower rates stay in effect even after the new maps become effective. Sellers of homes with the new insurance coverage with the lower rate MAINTAIN the lower rate and the policy can be TRANSFERRED to the buyer.
BUYERS of homes without flood insurance face premiums of $1500 to more than $2,000 a year just for that portion of their homeowners coverage.
AFFECTED AREAS:
IN SUFFOLK COUNTY:
HUNTINGTON TOWN
ASHAROKEN
AMITYVILLE
SPAGAPONACK
and BABYLON TOWN
IN NASSAU COUNTY:
the remainder of the CITY OF LONG BEACH not already in the flood zone.
most of NORTH WOODMERE
parts of OCEANSIDE
parts of ISLAND PARK
parts of VALLEY STREAM
Visit these websites for Nassau and Suffolk to find if your area is effected. Make sure you have your POP UP BLOCKER ENABLED.
