Housing News

February '09 Real Estate Wrap Up

We review the past month’s property news.

Sales of resale homes in January dropped to a 12-year low to 5.3 percent according to the National Association of Realtors . The median price of these homes also plunged to 14.8 percent YoY. The Northeast was the most damaged with a 23.8 percent fall in sales followed by the Midwest with 16.7 percent, and the South with 15.9 percent. Interestingly, the West’s sales jumped by 29 percent.

New homes failed to be picked up by buyers as the U.S. Census Bureau revealed that sales fell down by 10.2 percent MoM in January. Unlike its performance in resale home purchases, the West saw the weakest market among the regions with a 28 percent decline. On the contrary, the Northeast managed to sell 27,000 more than the previous month, improving its sales by 20.5 percent.

The month’s ending mortgage applications rate improved by 9.8 percent YoY according to the Mortgage Bankers Association . The average contract price of the 30-year fixed rate mortgage increased to 5.07 percent from 4.99 percent.

The Case-Shiller Price Index reports the worst home values in its 21-year history. The December 2008 20-city composite index posted an average of 18.5 percent decline YoY. Phoenix and Las Vegas had the largest drops YoY with 34 percent and 33 percent respectively. Denver had the smallest loss in value with only 4 percent.

Pres. Barack Obama signed the stimulus bill last February 17 after ubiquitous debates whether his policies will be enough to provide short-term measures or only sink the country in depression. The law includes $4 billion in repairs and modernization of housing projects, $510 million of energy improvements in Native American housing programs, $1 billion worth of grants for community development projects, $1.5 billion aid to homeless families seeking rent, $2.25 billion, $100 million allocation for removing lead-based paints in low-income housing, $15 million for Dept. of Housing spending oversight, and a $50 million increase in government-sponsored mortgages provider conforming loan limits.

After Bernie Madoff, now comes Stanford Financial Group . The Houston-based investment company was charged with fraud and was put under the management of a receiver. On the last week of the month, the Securities and Exchange Commission finally declared the company’s operations as a “massive Ponzi scheme” after discovering that its affiliated company, Stanford International Bank, falsified bank statements to conceal its scam.

The Senate approves the first-time homebuyer tax credit that provides up to $8,000 in benefits. However, it’s not as easy as it seems to be. Only homes bought between January 1 and December 1, 2009 will be covered and homeowners need to stay in the house for at least three years. For a thorough discussion, click here for our previous post .

For the next 10 years, Denver, CO announced last month that it will be spending $15 million in buying properties near mass transit to create mass housing for its residents. The city has managed to find investors including U.S. Bank and Wells Fargo among others to build up to 3,000 affordable homes. According to the Denver Post, “A primary goal of the Transit-Oriented Development Fund is to preserve and expand affordable housing within a half-mile of existing and new rail service and a quarter-mile of frequent bus routes. Denver working families who earn between $20,000 and $50,000 annually spend 59 percent of gross income on housing and transportation costs, according to a 2006 study by the Center for Housing Policy.”

To provide affordable mortgage financing to buyers and refinancers of rental units, the Federal Housing Authority is temporarily suspending its ban against insuring loans on apartment properties that have not yet been completed but are already operating for at least three years. According to Kenneth Harney, “FHA financing often is much less costly than other mortgage sources and offers fixed rate terms up to 35 years. But to qualify under the agency’s basic ‘Section 223- F’ multifamily program projects must be deemed ‘fully operating and self sustaining,’ that is, they’ve got to have proven track records of rental income and sound management practices.”

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