Market Trends and Condition

Data for the first quarter of 2011 has just been released for the S&P Case Shiller Home Price Index, and it’s not pretty. Prices dropped another 4.2% from the last quarter of 2011. It fell 3.6% in that 2010 final quarter. This first quarter 2011 number is a post recession low, and the annual decline was 5.1% from the first quarter of 2010. That’s a pretty clear double-dip for home prices.
19 of the 20 metropolitan areas tracked were down, with only Washington, D.C. showing a 1.1% increase. It was also the only metropolitan area that showed an annual increase, which was 4.3%. In March 2011, twelve cities hit new index lows:

-Atlanta
-Charlotte
-Chicago
-Cleveland
-Detroit
-Las Vegas
-Miami
-Minneapolis
-New York
-Phoenix
-Portland
-Tampa

U.S. HOUSE PRICE FALL BEATS GREAT DEPRESSION SLIDE

The ailing US housing market passed a grim milestone in the first quarter of this year, posting a further deterioration that means the fall in house prices is now greater than that suffered during the Great Depression. The brief recovery in prices in 2009, spurred by government aid to first-time buyers, has now been entirely snuffed out, and the average American home now costs 33 per cent less than it did at the peak of the housing bubble in 2007. The peak-to-trough fall in house prices in the 1930s Depression was 31 per cent – and prices took 19 years to recover after that downturn.

What kind of annual population growth rate should one look for when looking to invest in a specific area?

Over at money.cnn.com, there is an article about foreclosures, and the first sentence puts you on alert for some big numbers:

“There’s a three year inventory of homes in foreclosure for sale, and that’s devastating home prices.”

Here are the bullet points:
-Foreclosures represent 45% of sales in California and Arizona.
-Nationwide, foreclosures in the first quarter represented 28% of all existing home sales.
-The average REO is selling for about 35% less than comparabe non-REO properties.
-In New York State, the discount for REOs is more like 53%.
-In the first quarter, the REO discount was approaching 50% in Illinois, Ohio, and Wisconsin.
-Short sales were selling at an average 9% discount to comparables.

Recent media coverage of several rent-vs-buy ratios show that the tide is turning in many urban areas toward a more favorable climate for buying than renting. Historically low interest rates and prices down over 40% nationally makes the ratios turn toward buying vs renting.

One report states that 29 major urban areas are now showing that buying is a better choice than renting. Moody’s reports that it’s still cheaper to rent in the majority of urban areas. Since the financial crisis began, more than 3 million households have moved to renting. One report estimates that another 3 million or more are expected to do so by 2015. All told, nearly 38 million households are renters.

Found this article from Les Christie May 31, 2011

NEW YORK (CNNMoney) -- Home prices hit another new low in the first quarter, down 5.1% from a year ago to levels not reached since 2002.

It was the third straight quarterly drop for the S&P/Case-Shiller national home price index, which was released Tuesday.

Prices are now down 32.7% from their peak set five years ago.

Home prices continue on their downward spiral with no relief in sight," said David Blitzer, spokesman for Standard and Poor's.

The index covers 80% of the housing market, and this month's report confirmed "a double-dip in home prices across much of the nation," said Blitzer.

Move, Inc. just announced the results of a national survey of real estate investors. The primary news bullet is that investors are expected to outnumber traditional home buyers by three to one for the next two years. Other data and market information received from investors in this survey include:

-Investors expect competition for the best deals from retail buyers, especially first time home buyers.

-Investors expect to prevail in this competitive environment due to the problems retail buyers will have in getting mortgages.

-43.5% of investors expect it to get more difficult to snag bargains in the coming months.

-While 22% expect prices to rise in the next six to twelve months, 53% expect prices to remain relatively flat.

In an article at fortune.cnn.com titled “Winners of the rental economy,” those who are benefitting from the flight to rental and aversion to buying homes right now include:

--Builders and Developers

Builders are starting to cash in on the higher demand for rental apartments. One estimate is that apartment construction will pick up to at least 160,000 units this year, mostly in urban areas along the East Coast. This is a big increase over the average 90,000 new units constructed each year since 2009.

With an improving job picture for younger workers, apartment demand is increasing, especially when the housing market news is keeping first time home buyers out of the market. Add in of course the people who have lost their homes in foreclosure, and rental demand is up.

Home prices drop into double-dip territory. As I have been saying for months, home prices are going backward into the double dip territory. You can read the entire article here:

http://www.msnbc.msn.com/id/43222187/

Poor economic conditions and an oversupply of foreclosures are going to keep this problem with us for years (2014 is my estimate). Can you make money in this climate? Sure, but you need to know what you are doing.

Many real estate investors are aware of the FHFA (Federal Housing Finance Agency) and the Standard & Poors Case-Shiller Home Price Indexes. There’s another reporting company out there, Altos Research. Here’s how they describe their function and their monthly report product:

“This report identifies housing market trends across the country and it looks at statistics on over one million properties currently listed for-sale in 26 metropolitan statistical areas (MSAs): Atlanta, Austin, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Houston, Indianapolis, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, Salt Lake City, San Diego, San Francisco, San Jose, Seattle, Tampa, and Washington, DC.”