The Market will Stabilize — But Don’t Expect Boom

By Jenifer B. McKim Globe Staff / January 2, 2011

The Massachusetts housing market will remain stable in 2011, with no dizzying ascents or dramatic drops. 

With home buyer tax credits of up to $8,000 long gone, the new year should see more natural balance between supply and demand. An improving economy should entice more potential buyers to take the plunge, while sellers, who have been waiting out the downturn, put homes on the market in hopes of stronger prices and better bargaining power.

Foreclosures, meanwhile, will slow in 2011 as the number of struggling homeowners decreases, either because they have already lost their properties or were helped by the improving economy. Between January and November of last year, foreclosure petitions, the first step in the home seizure process, declined. That will translate into fewer homes taken this year.

Still, the climb will be slow and long. Home sales, which slowed significantly during the second half of 2010, should pick up slightly in the spring, but will still be restrained by tight credit, tougher lending standards, and lingering economic uncertainty. Interest rates, which hit historic lows in 2010, won’t set any new records. But they should not spike over the next year.

Home values won’t budge much either. Prices in Massachusetts are largely anchored by the relatively small inventory, which creates competition among home buyers. In the past, that has led to quickly rising prices. But overall housing prices will be restrained by the large number of foreclosed homes heading into the market, especially in the suburbs and rural areas of the state.

The state housing market, of course, is an amalgamation of smaller and diverse local markets. Homeowners in Boston’s downtown and higher priced suburbs, where values held up relatively well during the recession, should see some lift in sales and prices as wealthier residents grow increasingly comfortable spending again. Lower income communities, however, will still struggle because of stricter lending requirements that will deter many first-time and moderate-income home buyers.

Massachusetts homeowners were hurt less by the national housing downturn that wiped out billions of dollars in home equity. Nationally, median home prices dropped by more than 30 percent in the downturn, compared to 20 percent in Massachusetts. Since hitting bottom in 2009, home values here have increased by about 7 percent — with some dips and surges along the way.

Most housing industry analysts do not expect 2011 to provide any surprises, but then again, few predicted the recession in 2008. Paul Willen, a senior economist at the Federal Reserve Bank of Boston, said it’s difficult to predict the exact moment when buyers will stop worrying that homes will lose value and start to panic that values will rise rapidly, leaving them priced out of the market.

“The minute it happens, it is sort of a surprise,’’ he said. “Unexpected things happen in the housing market a lot more than they should.’’

Jenifer B. McKim can be reached at jmckim@globe.com.

© Copyright 2011 Globe Newspaper Company.

Home Affordability Remains Strong

According to NAR chief economist Lawrence Yun, the housing market has clawed its way back to a point of near stability, with the pace of new foreclosures easing, sales moving toward historically normal levels, and prices on a national basis gaining modestly.

At the same time, affordability remains strong. He said all of the price excesses from the housing bubble have been squeezed out. In San Diego, for example, buyers today would pay $1,564 a month in mortgage payments for a house that at the height of the boom would have cost them $2,833 a month.

Source: REALTOR Magazine

Mortgage Rate Sinks to 4.32 Percent

Mortgage Rate Sinks to 4.32 Percent

Average interest on 30-year fixed mortgages fell this week to 4.32 percent, matching the lowest level on record. Interest on 15-year loans, meanwhile, declined to 3.75 percent, setting an all-time low.

Investors have been flocking to the safety of Treasury bonds since the spring, which has driven down their yields and helped to keep rates at or near the lowest levels in decades.

Source: Boston Globe (10/01/10)

Home Sales Rise in Some Communities

Observers at a loss to explain why downward trend doesn’t hold

By Megan Woolhouse, Boston Globe, Aug. 26, 2010

Housing sales plunged to a 20-year low in July in Massachusetts, but tell that to buyers in Cohasset. // Real estate agent Tom Hamilton sold a $2 million beachfront cottage in July. And last week two Boston couples signed contracts on homes in the town, for an additional $2 million in sales. No wonder this week’s report that home sales in Massachusetts for July plunged 26 percent didn’t ring true for Hamilton.

“When I saw the sales numbers, I said, ‘That is completely inconsistent with the July we had,’ ’’ Hamilton said. “Business is good. Business is very good.’’

Cohasset is among a handful of Greater Boston communities that bucked a state and national trend and reported increased home sales during the month of July, compared with the same period last year, according to Warren Group, which tracks real estate data. Single-family home sales in Cohasset were up 130 percent in July, and in Norwood, up 117 percent. Bedford, Hingham, and Winchester were among a few other towns that notched notable upward sales figures.

But in most communities in Massachusetts and across the United States, housing sales have either come to a standstill or dropped dramatically, following the expiration of the federal home buyers tax credit. The magnitude of the decline in sales was so great and so unexpected that many housing specialists and economists worry it might signal a broader slowdown in the US economy.

Of course, the July report represents only one month of sales, and Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University, cautioned against reading too much into the numbers. For many communities, the overall increases were relatively small and occurred in a housing market that is changing month to month.

“You’re only seeing an increase from what were relatively low sales levels,’’ Bluestone said of the growth.

Moreover there is no obvious pattern to the sales figures. Neighboring communities with similar characteristics, such as strong school systems, had vastly different selling climates in July. While Winchester was up 30 percent, nearby Lexington, for example, saw a steep 35 percent decrease in single-family home sales in July, from 54 to 35.

The differences between the two communities can be more nuanced. For example, Sven Anderson, a Remax broker who sells in both towns, said Lexington properties tend to be on bigger lots and newer than those in Winchester. Lexington has more homes for sale, which afford buyers more time to decide. In Winchester, he said, homes come up for sale less frequently, so when they do, they go quickly.

He is not surprised by Winchester’s attraction, saying its compact size, amenities, and proximity to Boston, including two train stations that can whisk commuters into North Station, are easy selling points.

“It gives us an insulated world,’’ Andersen said. “You’re not in Newton, where it’s big and there are all these little villages, like Waban or Newton North.’’

In Newton, single-family home sales in July dropped 29 percent, to 67 from 95 sales.

Yet the Newton real estate market isn’t exactly hurting. The city spent about $200 million on a new high school, one of the most expensive in Massachusetts, and the median price for a single-family home remains a hefty $775,000.

“Newton has always been one of these places with a steady flow of people who want to live there,’’ said Alex Coon, market manager for Redfin.com, a real estate company. “People are willing to spend $700,000 on a house there that’s worth $120,000 just 12 miles away.’’

Neighboring Brookline, meanwhile, experienced a 20 percent increase in July sales — 24 sales this year compared with 20 last year.

Coldwell Banker realtor Eric Glassoff said he has sold a steady stream of condos and homes in the last eight years. He believes it is because Brookline is close to the Longwood medical area and has a steady supply of doctors looking for housing. There are also students, college professors, and young professionals who seek out the area, he said, because of its bustling shops and easy access to public transportation.

“Brookline is unique,’’ Glassoff said. “It’s pretty close to being recession-proof.’’

And some towns that had a cool July remain nonetheless a hot destination for buyers. Coon cites Arlington, which for the past several years has been especially attractive to first-time home buyers able to spend between $500,000 and $800,000 for a house. While demand for homes there remains high, Coon said, he noted that sales in July dropped to 35 from 49 a year earlier.

“The numbers are tricky,’’ Coon said. “There’s a lot of schizophrenia in the marketplace and everything is moving in a bunch of different directions.’’

Megan Woolhouse can be reached at mwoolhouse@globe.com.

Why Buy Now?

Lower property values are making homeownership more attractive than renting in many markets throughout the country. Paying for a mortgage is now less expensive than renting in many large metropolitan areas, including Miami, Las Vegas, Phoenix and Washington, D.C., as well as smaller cities like San Antonio and Fresno, California.

Buyers have the upper hand as sellers are cutting prices on nearly one quarter of U.S. homes listed for sale in June 2010 according to the real estate website Trulia.com. That’s up 9% from the previous month and represents a total price reduction of about $27 billion.

Lower mortgage rates are the result of the current recession. What does this mean for your clients? On a 30-year fixed-rate loan amount of $200,000 at 5%, the interest paid over the life of the loan is $186,512. That brings the total loan payments to $386,512. At 6%, the amount of interest paid rises to $231,676, a 24% increase. At 7%, it’s $279,018, a 49% increase.

Investment opportunities abound as mortgage rates and home prices have dropped dramatically since March 2008. This has created one of the best buyer affordability conditions with the percentage of median household income needed to pay the mortgage on a median priced home at a 30-year low.

(Courtesy of Bill Mark, Propsepct Mortgage)

Boston Condo Sales Pick Up

Source: Boston Globe, July 26, 2010

By: Jennifer B. McKim, Boston Globe Staff

Adding to evidence that Boston’s downtown condominium market is thawing, sales surged by 30 percent in the second quarter of this year, compared with the same period in 2009, according to data released yesterday.

Adding to evidence that Boston’s downtown condominium market is thawing, sales surged by 30 percent in the second quarter of this year, compared with the same period in 2009, according to data released yesterday.

The number of condos sold was 849, compared with 653 between April and June the year before, according to Listing Information Network, a Boston firm that tracks real estate.

But median selling prices overall slipped by 3.6 percent, to $443,500, in the quarter.

Sales in luxury buildings — defined as those with amenities such as valet and concierge services — increased by 9 percent to 121 sales in the second quarter, compared with the 2009 quarter, according to the data. Prices in the high-end slice of the market also rose, to a median of $665,000. That was 11.8 percent above the median price during the same period last year, when the real estate market was especially grim.

John Ranco, a senior broker at Gibson Sotheby’s International Realty in Boston, said the report corresponds to what he is experiencing in his office. “We’ve seen a loosening up of the higher-end price points,’’ Ranco said. “It was a market that was totally frozen last time last year.’’

Debra Taylor Blair, president of Listing Information Network, said the new data represent the third consecutive quarter of sales growth in the downtown market, which includes the Back Bay, Beacon Hill, the South End, and South Boston. The report does not include sales for Dorchester, Mattapan, or Roxbury.

“I feel that is the magic number that says yes, we are really coming out of the slump,’’ Taylor Blair said of the three straight quarters of improving numbers. It is particularly good news for some of the area’s new luxury developments, which have been saddled with many vacant units over the past several years.

Wayne Lopez, sales and marketing director for the midtown building 45 Province, said prospective buyers are more convinced that the economy is on the upswing. In the past two months, buyers have signed contracts for six units, he said, at prices ranging from $600,000 to more than $2 million. That is significant progress for a 137-unit building that has sold about 20 percent of its condos since opening last year. “Confidence has resumed,’’ Lopez said.

At FP3, a 92-unit condo complex in Boston’s Fort Point Channel neighborhood, 15 units were sold during the first six months of this year — up from zero sales during the first six months of 2009.

Joseph Laurano, director of operations for developers Berkeley Investments, attributed the movement to a change in marketing strategy as well as improvements in the economy and continuing low interest rates. The building is now 60 percent sold. “Folks on firm financial footing view now as an opportunistic time to purchase urban real estate,’’ Laurano said.

Jenifer B. McKim can be reached at jmckim@globe.com.

Mortgage Rates Sink To Lowest Level On Record

Source: Banker and Tradesman, June 25, 2010

Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinanced loans.

The average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week, mortgage company Freddie Mac said Thursday.

That’s the lowest point since Freddie Mac began tracking rates in 1971. The previous record of 4.71 percent was set in December. Rates for 15-year and five-year mortgages also hit lows.

Mortgage rates have fallen over the past two months as nervous investors have shifted money into the safety of Treasury bonds. The demand for Treasurys has caused Treasury yields to fall. And mortgage rates tend to track the yields on long-term Treasurys.

Yet the falling rates have yet to spark a home-buying boom — or energize the economy. New-home sales collapsed in May after homebuying tax credits expired. The economy also remains under pressure from high unemployment. And many people don’t qualify under tightened lending rules.

“As long as prospective homebuyers are still concerned about their jobs and financial well-being, many will be reluctant to take the plunge, even though affordability has never been better,” said Greg McBride, senior financial analyst with Bankrate.com.

Low rates throughout the economy also hurt one group of Americans: savers. Puny rates are especially hard on people living on fixed incomes who are earning next to nothing on their savings.

Lending activity remains sluggish. Mortgage application volume dipped 6 percent last week from a week earlier, according to the Mortgage Bankers Association. Refinancing activity fell 7 percent. And mortgage applications to buy homes slipped 1.2 percent.

Many Americans owe more on their mortgages than their homes are worth — often called “under water” — and can’t refinance. The Obama administration has launched programs to help borrowers refinance if they owe up to 25 percent more than their home’s value and have loans owned or guaranteed by mortgage giants Freddie Mac or Fannie Mae.

About 291,000 homeowners have participated as of March. Yet that’s a small fraction of the nearly 15 million homeowners who are under water, according to Moody’s Economy.com, and cannot refinance. In hard-hit areas in Nevada and Florida, for example, home prices have fallen 50 percent or more from their highs. Record-low rates can’t rescue those homeowners.

“It’s not the desire to refinance; it’s the ability to refinance,” Chris Brown, a loan officer with Trinity Mortgage Co. in Orlando, Fla. “A lot of the people who can already have.”

Given the costs of refinancing, some mortgage experts say a refinancing can be worthwhile if you can shave at least 0.75 percentage point from an existing rate. Others suggest waiting until you can lower your rate by at least a point.

Despite some lenders’ ads, refinancing is never free. A fee normally goes to the mortgage broker or lender. There are also fees for title insurance, a new appraisal, document processing and other charges. Often, mortgage brokers or lenders create the appearance of a “no fee” mortgage by adding the costs to a total loan amount or by charging a higher interest rate.

People considering refinancing should factor in such fees. They should also calculate how many months it would take to recover them. For those who expect to stay in their home for two years or less, the fees might outweigh the savings from a lower rate.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate, even within a given day.

Rates on 15-year fixed-rate mortgages fell to an average of 4.13 percent. That was the lowest on records dating to September 1991. It was down from 4.2 percent a week earlier.

Rates on five-year adjustable-rate mortgages averaged 3.84 percent, down from 3.89 percent a week earlier. That was also the lowest on Freddie Mac’s records, which date back to January 2005 for such loans.

Average rates on one-year adjustable-rate mortgages fell to 3.77 percent from 3.82 percent. That was the lowest average since May 2004.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year, 5-year and 1-year loans. The average fee for 15-year loans was 0.6 of a point.

Mass. Housing Market Posts Strong May

Source: Boston Globe, June 22, 2010

Globe Staff

Massachusetts home and condominium sales rose sharply in May, lifted by a federal tax credit for home buyers that is being phased out, the Massachusetts Association of Realtors reported this morning.

According to the association, the Massachusetts housing market had its largest May increase since the association began tracking monthly data. The big question, of course, is what will happen to the market when the tax credit is no longer providing an incentive to potential home buyers.

In any case, there were 3,911 detached single-family homes sold in the Bay State this May, a 31.5 percent increase from the 2,975 homes sold the same time last year, the association said in a press release.

The median selling price for single-family homes in May was $299,000, a 4 percent increase when compared with $287,500 in May 2009; it was the seventh straight month of year-over-year gains, the association said.

The May condominium market in Massachusetts was up 32.4 percent to 1,635 units sold. In May 2009, there were 1,235 units sold. Condominium median selling prices in May were down 1.1 percent from $265,000 in 2009 to $262,000 in May 2010, the first drop after five straight months of year-over-year gains, the association said.

“May is the first month with closings that came from contracts signed in April, the final month to qualify for the home buyer tax credit,” association president Kevin Sears said in a statement. “However, some buyers who previously met all the qualifications for the tax credit might not be able to close by the June 30th closing deadline for various reasons. We urge Congress to immediately extend the tax credit deadline for those buyers already in the pipeline. It would be terrible for those buyers if they were not able to complete the purchase in time to claim the credit.”

The Warren Group, a Boston firm that tracks real estate activity, issued a separate report on the local housing market. The report included a statement from the firm’s chief executive, Timothy M. Warren Jr.

“The increase in May sales volume isn’t a huge surprise,” Timothy Warren said. “The residential real estate market is still feeling the effects of the homebuyer tax credit because buyers who want to take advantage of the expired tax credit have until the end of June to close their deals.”

Local Home Sales Surge by Double-Digit Percentages

Source: Boston Globe, May 25, 2010

Globe Staff

The Massachusetts housing market posted strong gains for April, according to two separate reports released this morning.

Single-family home sales in Massachusetts jumped 45.8 percent in April when compared to April of 2009, and condominiums sales jumped 55.7 percent, said the Warren Group, a Boston company that tracks real estate activity.

“The median price for single-family homes sold in April rose 7.1 percent to $285,000 from $266,125 a year ago,” the Warren Group said. And the median condo price “climbed 5.5 percent to $253,000 in April from $239,900 during the same month in 2009.”

The group’s report included a statement from chief executive Timothy M. Warren Jr., who said: “The surge in sales activity continued in April. Single-family home sales have increased year-over-year for 10 straight months and median home prices have been on the rise for five months. There is more confidence about a turnaround in the housing market, but concerns remain about foreclosure activity and unemployment, which are still high.”

The Massachusetts Association of Realtors also issued a report on local housing sales for April. While the association has a different method for measuring housing activity, its results were similar to those of the Warren Group’s.

Sales of Massachusetts single-family homes and condominiums had “near-record increases” in April compared to the same time last year, helped by a special home owners’ tax credit, the Massachusetts Association of Realtors reported.

“The median selling price for single-family homes in April was $295,000, an increase of 7.3 percent compared to $275,000 in April 2009,” the association said in a press release. “This is the sixth straight month of year-over-year gains. On a month-to-month basis, the April median selling price was up 5.4 percent from $280,000 in March 2010.”

On a volume basis, 3,520 detached single-family homes sold in the Bay State this April, a 43.8 percent increase from the 2,448 homes sold the same time last year, the association added. “On a month-to-month basis, home sales were up 21.8 percent from 2,890 homes sold this past March. This is the second largest year-over-year increase since MAR has been tracking monthly data.”

Low interest rates helped along by the federal tax credit seem to be giving the market a lift. A federal program had provided first-time home buyers with an $8,000 tax credit, and existing owners who have been in their home for at least five consecutive years with a credit of up to $6,500. Buyers must have had a binding purchase contract by May 1 and be able to close on the home by June 30.

The April median selling price for a Massachusetts condo, meanwhile, rose 6.8 percent from $236,000 in 2009 to $252,000 in April 2010, the association said, as condo sales jumped sharply. The April condominium market was up 63.9 percent when compared to the same time last year, when 956 units were sold. In April 2010, the number of condos sold was 1,567.

“Similar to November, buyers in April made a big push to take advantage of the tax credit prior to its deadline, resulting in big sales gains compared to the same time last year,” association president Kevin Sears said in a statement. “If the key to stabilizing the market is continued activity, then the timing couldn’t be better to have interest rates starting to trend down.”

One more report that includes data on the local housing market is expected to be released later today. (Just before 10 a.m. today, an AP story noted that the Standard & Poor’s/Case-Shiller 20-city home price index for March posted a 0.5 percent drop from February. Prices in 13 of the 20 cities tracked by the index fell month over month. Only six metro areas recorded price gains. One, Boston, came in flat.)

To read a Globe story about local home sales for March, please click here.

Today’s print edition of the Globe includes a story on national sales for existing homes. To read that story, please click here.

Home Sales Jump on Tax Credit

By: REUTERS, May 24, 2010

WASHINGTON (Reuters) – Sales of previously owned homes rose more than expected in April to a five-month high as buyers rushed to close contracts before the expiry of a homebuyer tax credit.

The National Association of Realtors said on Monday sales rose 7.6 percent month-over-month to an annual rate of 5.77 million units, the highest since November, from a slightly upwardly revised 5.36 million-unit pace in March.

Analysts polled by Reuters had expected April sales to increase 5.6 percent to a 5.65 million-unit pace from the previously reported 5.35 million units in March. Sales were up 22.8 percent in the 12 months to April.

U.S. stocks briefly pared losses after the report, while prices for government debt were little changed. The U.S. dollar firmed against the euro.

“The upswing in April sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but there are other factors supporting the market,” said Lawrence Yun, chief economist at NAR.

Prospective homeowners had to sign contracts by April 30 to benefit from a federal tax credit for home buyers. They have to close the purchases by the end of June to qualify for the credit.

“The critical issue going forward is whether the housing market will be able to stand on its own legs without government support,” said Torsten Slok, a senior economist at Deutsche Bank in New York.

The tax credit has brought forward sales and a lull in activity is likely in the months ahead. Data from the Mortgage Bankers Association last week showed demand for loans to buy homes slumped to a 13-year low in the aftermath of the deadline to sign contracts.

Though the economy has now grown for three straight quarters following the worst recession in 70 years and mortgage rates remain near record low levels, the housing market’s recovery is being held back by painfully high unemployment and a tide of home foreclosures.

PRICES HIGHEST SINCE SEPTEMBER

Distressed transactions, of homes that were sold below their market value, accounted for a third of sales last month, with first-time buyers making up 49 percent, the NAR said.

The national median home price rose 4 percent from April last year to $173,100 — the highest since September.

Sales of single-family homes, the biggest segment of the market, rose 7.4 percent to an annual rate of 5.05 million units, also the highest since November. Condominium and co-ops jumped 9.1 percent to a 720,000-unit rate, a five-month high.

The inventory of existing homes for sale in April rose 11.5 percent to 4.04 million units, the highest since July, NAR said. At April’s sales pace, that represented a supply of 8.4 months compared with March’s 8.1 months.

Yun said it was unclear what was behind the surge in inventories, given that distressed properties accounted for only a third of sales last month. He said the housing price correction appeared to be over, though home values were unlikely to rise significantly because of the elevated level of inventories.

Separately, a measure of national economic activity last month rose to its highest level since December 2006, the Chicago Federal Reserve said. The Chicago Fed national activity index rose to 0.29 from 0.13 in March.

A reading above zero indicates the economy is growing above trend. However, the three-month moving average showed there was some economic slack, suggesting subdued inflationary pressure from economic activity over the coming year, the Chicago Fed said.

(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)