Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum

RISMEDIA, October 26, 2009—Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors®. Existing-home sales–including single-family, townhomes, condominiums and co-ops–jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units in September from a level of 5.10 million in August, and are 9.2% higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.

Lawrence Yun, NAR chief economist, said favorable conditions matched with a tax credit are boosting home sales. “Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

Even with the improvement, Yun said the market is underperforming. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said. “We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy. Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”

Early information from a large annual consumer study to be released November 13, the 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows that first-time home buyers accounted for more than 45% of home sales during the past year. A separate practitioner survey shows that distressed homes accounted for 29% of transactions in September.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said affordability conditions remain historically high. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market,” he said. “Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average,” McMillan said.

Total housing inventory at the end of September fell 7.5% to 3.63 million existing homes available for sale, which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0% below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.06% in September from 5.19% in August; the rate was 6.04% in September 2008. The national median existing-home price for all housing types was $174,900 in September, which is 8.5% lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4% to a seasonally adjusted annual rate of 4.89 million in September from a pace of 4.47 million in August, and are 7.7% above the 4.54 million-unit level in September 2008. The median existing single-family home price was $174,900 in September, which is 8.1% below a year ago. Existing condominium and co-op sales jumped 9.7% to a seasonally adjusted annual rate of 680,000 units in September from 620,000 in August, and are 9.7% above the 561,000-unit pace a year ago. The median existing condo price was $175,100 in September, down 11.7% from September 2008.

Northeast
Regionally, existing-home sales in the Northeast increased 4.4% to an annual level of 950,000 in September, and are 11.8% higher than September 2008. The median price in the Northeast was $234,700, down 7.0% from a year ago.

Midwest
Existing-home sales in the Midwest jumped 9.6% in September to a pace of 1.25 million and are 7.8% above a year ago. The median price in the Midwest was $147,600, which is 1.0% below September 2008.

South
In the South, existing-home sales rose 9.0% to an annual level of 2.06 million in September and are 10.8% higher than September 2008. The median price in the South was $153,500, down 7.6% from a year ago.

West
Existing-home sales in the West surged 13.0% to an annual rate of 1.30 million in September and are 5.7% above a year ago. The median price in the West was $219,000, which is 15.0% below September 2008.

Breaking News: Senate Plans to Extend and Expand $8000 Home Buyer Tax Credit

RISMEDIA, By Alan J. Heavens, Corey Boles, John D. McKinnon ,October 30, 2009—(MCT/The Wall Street Journal)-The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers, a boost the housing industry believes will help it pull out of its two-year-old downturn.

While its passage remains uncertain, the agreement would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000, housing-industry sources said. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.

Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan are in full support of the Senate’s proposal to both extend and expand the first-time homebuyer tax credit and called on Congress to approve key housing measures that include the tax credit. “We welcome efforts taken by Congress to extend the First-Time Homebuyer Tax Credit for a limited period. This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide,” said Secretaries Geithner and Donovan. “In extending the credit, we urge Congress to include strict measures to combat tax fraud and protect responsible homeowners.”

The current tax credit did little for the new-home market in September, the Commerce Department recently reported—news that took many industry analysts by surprise. Sales fell 3.6% from August and 7.8% from September 2008. Industry observers had expected a fifth consecutive monthly increase in new-home sales, believing that the tax incentive for qualified first-time buyers—credited with 357,000 sales of previously owned homes so far this year—would do the trick. Instead, sales of typically more expensive newly built houses slipped. “The decline in new-home sales seems to us to be more a function of the attractive pricing available on resales in the current environment than a reflection of weakening demand,” said Michael Feder, president of Radar Logic in New York, which tracks the market.

“Since hitting rock bottom in March, demand is up 20 percent,” said Joel L. Naroff of Naroff Economic Advisers in Holland, Pa. For Naroff, the robust rise in existing-home purchases—9.2% year over year in September—indicated that the housing market was not faltering. “Maybe the issue is supply, which fell to its lowest level in 27 years,” he said. “Builders, at least those left standing, have been making sure they don’t have any houses sitting around, and they have been very successful in controlling inventories.”

IHS Global Insight economist Patrick Newport echoed that, noting new-home inventories “sank for the 29th straight month to their lowest level since November 1982.” Naroff maintained housing has recovered enough to stand without the tax credit, but Newport said that if the credit were not extended and expanded, housing demand would take a hit, and home sales would drop.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real estate market a bigger boost while preventing real estate investors from benefitting. While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor.

THE first season of “Million Dollar Listing,” a reality series on Bravo that follows real estate agents in Hollywood and Malibu, Calif., was broadcast two years ago, and already feels like material from a time capsule. Spending much of its time on lingering shots of canyon villas and beachfront condos, the show captured a giddy period in which a cash-strapped seller could list a shabby 1960s contemporary in the Hollywood Hills for close to $1.3 million, get an offer above asking price, and still debate whether to make the deal.

UNDER CONTRACT The new season of “Million Dollar Listing” stars Josh Flagg, in photo, and Madison Hildebrand, pictured with current listings this week.

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Stephanie Diani for The New York Times

Realtor Madison Hildebrand.

The current housing market, of course, is much gloomier, especially in Los Angeles, where inventory is up by roughly 60 percent compared with two years ago and the median listing price is down 20 percent from last year. Considering how emotionally fraught the subject of residential real estate has become, most fans of “Million Dollar Listing” probably figured the show, which was off the air last year, had gone the way of the subprime loan.

But this week a second season made its debut, and the channel has bravely stuck with the name and the format instead of steering the show in a more topical direction, like “Million Dollar Foreclosure.” Still, one wonders how a series that owed its popularity in large part to the go-go real estate market, and the national housing obsession that that market created, will be affected by the mortgage crisis.

“Obviously, the market is different today,” said Andy Cohen, the senior vice president for programming and production at Bravo. “But the cost of real estate in Malibu is still ridiculous. It’s like, O.K., this house isn’t selling for $17 million, it’s been reduced to $14 million.”

The series does show signs of retooling, however. For starters, the setting has moved away from Hollywood, where the market has cooled, to traditionally recession-proof areas farther west, like Beverly Hills and Bel Air, along with Malibu. Gone are the agents at the Hollywood offices of ReMax, a scrappy group that included Ray and Dia Schuldenfrei, an older, married team with a Burns and Allen repartee.

Season 2 revolves instead around three agents: Chad Rogers, Josh Flagg and the lone holdover from Season 1, Madison Hildebrand. None of them are over 30, and all are as focused on landing the next deal as they are with themselves. Mr. Rogers spends an inordinate amount of time on his hair and is given to making statements like, “I have a gorgeous girlfriend because image is everything in real estate.”

Mr. Flagg, meanwhile, is a man-child remarkably at ease with numbers containing lots of zeros. “Put in two, three million, sell this for nine — guaranteed,” he coolly tells one client.

(Now 22, Mr. Flagg may be less comfortable in moneyed circles after he was arrested last Thursday and accused of grand theft, several months after the season’s final episode was shot. The Los Angeles Police Department would not provide more details, but according to the celebrity gossip blog TMZ, Mr. Flagg is accused of stealing high-priced art in his capacity as an estate broker. Bravo had no comment, and David M. Baum, a lawyer for Mr. Flagg, said his client denies the accusations against him.)

Beverly Hills or not, market realities are evident in the first episode. One seller, an interior designer looking to unload his renovated condo, wants to party like it’s 2005, and Mr. Rogers must persuade him to be realistic about the asking price. The seller pouts, then pulls the listing. According to Mr. Hildebrand, unrealistic sellers are common these days, as are price reductions and slow turnarounds on high-end homes, even in Malibu. “Now the average time is eight months,” he said with a sigh the other day.

But the most noticeable change to “Million Dollar Listing” seems to be a shift in focus. In Season 1, the homes were the stars, while the agents were supporting players. Now it’s the reverse. Instead of tight shots of marble bathtubs, we get a tight shot of Mr. Hildebrand’s abs as he works out on the beach and tells us that he has “recently gone through a transition where I’m not close-minded to anything, be it a man or a woman.”

Randy Barbato, the show’s executive producer, said this change predated the sharp market downturn of the last several months and any diminishment of Americans’ interest in real estate that might have resulted. He just wanted more personal drama this season, and he pointed out that every episode still includes a deal.

Still, he acknowledged, the move to the city’s wealthiest enclaves does reflect the way property lust has evolved. Back when nearly anyone could get a loan, he said, “it used to be that you could almost touch the shingles” on houses shown on programs like his. Now, the attraction is more about fantasy. “Some properties should be there to long for, and not to have,” he added. That is why, this season, “the property is bigger and more delicious,” he said.

This is true to a point. In the premiere, Mr. Flagg gets a tip that Jay Bernstein, the former manager of Farrah Fawcett and Suzanne Somers, has died, and he shrewdly scores the exclusive listing to his house, a five-bedroom, seven-bath Spanish-style mansion that makes the Hollywood bungalows from Season 1 look like shacks. But house-obsessed viewers may wish for less of the subplot involving Mr. Flagg’s dentist, Dr. Sam, who tries unsuccessfully to buy the place for $3 million, and more shots of the interior, especially after learning that Clark Gable once used the place as a love nest.

If the show’s creators were concerned that viewers may have lost some of their appetite for “real estate porn,” as Mr. Cohen calls it, they needn’t have worried. With credit markets tight as a drum and many homeowners struggling to keep their houses, fleeting images of a hilltop mansion in Beverly Hills only provoke greater longing.