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The tax credit brought a lot of buyers out last fall and again this spring, which gave a real shot in the arm to real estate. While that heightened volume cannot be sustained, home sales and prices still remain higher than last year due to interest rates at historically low levels and the lowest home prices seen in years. A monthly survey of 54 metropolitan areas reveals that closed transactions in June 2010 were 5.6% higher and prices 3.5% higher than during June 2009.

“There’s no question, the tax credit has had a significant impact on this market,” said RE/MAX CEO Margaret Kelly. “No one can predict the future, and we may still see a slight pull back, but for right now it appears that housing is holding its own, hopefully on the road to a sustainable recovery.”

Transactions – Year-Over-Year Change
Buyers trying to make the closing deadline for the tax credit may have pushed sales higher for June with a 7.2% rise from May in addition to the 5.6% gain over last year. Sales were especially strong in the Northeast—Boston and Hartford saw 23% more sales than last year, Providence was up 21% and Philadelphia was higher by 27%. An equal number of metro areas, 27, had increases and decreases in closed transactions year over year.

Median Sales Price – Year-Over-Year Change
Responding to demand, home prices appear to be stabilizing and slowly inching higher. In the survey’s 54 metro areas, the year-over-year change in median sales price was 3.5%, with 27 metros headed up, 25 lower and 2 unchanged. The weighted average of all median sales prices for June was $211, 530.

California experienced the most dramatic increase in prices—median prices in San Francisco rose almost 18% higher than June 2009 levels, Los Angeles prices were 10% higher and San Diego prices were 9% above the same time last year.

Days on Market – Average of 54 Metro Areas
Besides price, most home owners are concerned about how long it will take to sell their home. For the homes that sold in the survey’s 54 metro areas, the average number of days it took from listing to signed contract was 81, slightly lower than the 83 day average in May and the 89 day average in June 2009.

Months Supply of Inventory – Average of 54 Metro Areas
The inventory of homes on the market in June rose slightly from May, up only 1.2%, but down 5.8% from June 2009. In the survey’s 54 cities, the average months supply of Inventory was 8.5 months, which remains unchanged from May. This means that at the current rate of sales, the average metro would eliminate its inventory of homes for sale in eight and a half months. However, a six month supply is considered a market balanced equally between buyers and sellers.

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Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.

Economists participating in a recent NAHB Construction Forecast Conference Webinar agreed that the housing market is on the road to recovery, but cautioned that several factors could contribute to a bumpy ride in the coming months.

“Home buyer tax credits clearly did their job and got people back into the marketplace,” said NAHB Chief Economist David Crowe, who also served as moderator of the webinar.

With the expiration of the tax credits in April, Crowe said the housing momentum is being carried forward by low interest rates, pent up household formations, stabilizing prices and budding employment growth.

However, many factors continue to drag on housing at this time–including the critical shortage of credit for new and existing projects, competition from short sales and foreclosures and regional economic disparities.

The availability of acquisition, development and construction (AD&C) financing remains a major concern as the industry moves forward, Crowe said. “Builders still tell us that credit is extremely tight. Banks are saying not so much. That gap is an indication that something is broken, at least when it comes to residential construction.”

NAHB is forecasting 552,000 single-family starts in 2010, up 25% from last year’s 445,000 level, which was the lowest annual output since 1959 when the government began collecting this data.

Suffering from an acute shortage of available financing and a significant shadow inventory of homes lost to foreclosure that are competing against normal inventory, Crowe said that multifamily housing starts are expected to lose further ground this year, falling 18% to 93,000 units, before rebounding to 150,000 units in 2011.

Crowe anticipates that nationwide home prices will remain flat this year and post a modest increase in 2011 and that mortgage interest rates will continue to stay low, barely breaking 6% by the end of this year, and not rising much above that level through 2011.

The road back to normal levels of residential construction will be longer for some states than others. By the end of 2011, the top 20% of the states will see their production levels back to normal. Those states include Texas, Oklahoma, Montana, Wyoming, Tennessee, Louisiana, Mississippi, Alabama, Arkansas and Kansas. The previous boom markets in California, Arizona, Florida and Nevada, along with the Great Lake states of Michigan, Indiana, Ohio, Illinois and Wisconsin that were hit by deep cuts in auto production and manufacturing, will be the last ones to recover.

Housing Demand Reflects Job Growth
Like his co-panelists, Mark Zandi, chief economist of Moody’s Analytics, said that housing will improve as the job market does. He forecast that the economy will average monthly job gains of 125,000 this year, 250,000 in 2011 and 300,000 in 2012.

Mirroring anticipated employment growth, Zandi expects GDP to rise 3% this year, approximately 4% in 2011 and closer to 5% in 2012.

The key factor driving housing demand is jobs, said Zandi. “We’re not going to get home sales unless we have jobs. Here the prospect is good. Business balance sheets are in good shape and improving rapidly. These are pre-conditions for better job growth and we should see the job market steadily gain traction.”

Zandi forecast that overall housing starts will total 700,000 units this year, close to 1 million in 2011 and about 1.7 million by 2012, which he describes as close to trend and consistent with demographics in a normal functioning economy.

Driven largely by the high foreclosure rate, Zandi expects that home prices will continue to fall modestly in 2010, down about 5% on a national average. He calculates that the difference between supply and demand is approximately 750,000 units annually, and it will require until the end of 2011 to work off this extra inventory.

“The good news,” he said, is “as the job market improves, so will household formations and demand. So I anticipate we will work off the excess inventory more quickly than the two-year period.”

He added that most of the housing surplus is regionally concentrated in Florida, around Atlanta, along the South Carolina coast, in Las Vegas, Phoenix, and Tucson and in the central valley of California.

Consumers Fuel Recovery
Taking the most bullish approach to the ongoing recovery, Chris Varvares, president of Macroeconomic Advisers, LLC, forecast that GDP will rise 3.7% this year and that housing starts will total 750,000, well above the Blue Chip Economic Indicators consensus of 690,000.

“Personal consumption expenditures are making a very solid recovery,” said Varvares. “Residential investment is going from a drag to a contributor. The difference between our forecast and the consensus is the strength in personal consumption and housing.”

Although the huge number of foreclosures on the market are accounting for about 300,000 to 400,000 fewer starts than there otherwise would be, Varvares said the fundamentals still point to a solid trajectory for housing.

“With prices stabilizing, demand is picking up and we expect builders to respond. By the end of 2011, we expect about 1.2 million housing starts. This suggests we can have recovery in starts this strong while simultaneously working down excess housing inventory.”

The panelists were in unanimous agreement on a number of areas–the Federal Reserve will likely continue to keep interest rates near rock bottom levels at least through the end of the year; the chance of a double dip recession is extremely slim; and policymakers will need to take action within the next two years to increase revenues and cut spending to rein in the burgeoning structural deficit.

For more information, visit www.nahb.org.

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings

Nationwide housing starts rose 5.8% to a seasonally adjusted annual rate of 672,000 units in April 2010 as the deadline for an important home buyer tax incentive arrived, according to figures released by the U.S. Commerce Department.

“While some of the starts activity noted in the report reflected homes for which buyers had just signed a contract at the tail-end of the tax credit program, the rest was probably tied to builders replenishing their inventories in preparation for the post-tax credit era,” said Bob Jones, Chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “That said, builders are maintaining a cautious attitude with regard to new building as the economy and housing markets slowly recover.”

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“The government’s latest numbers indicate that production of new single-family homes got a substantial boost in April as the tax credit program wrapped up and builders worked to resupply their depleted inventories,” agreed NAHB Chief Economist David Crowe. “As our latest surveys have indicated, builders are anticipating that factors such as low mortgage rates, attractive prices and the recovering employment market will replace the tax credit as incentives to buy. Meanwhile, the drop-off in building permits in April indicates that builders are working down the inventory of permits pulled in the previous month and taking care not to get ahead of the market. Builders also continue facing difficulty in obtaining project financing, which will limit the pace of a housing recovery.”

Single-family housing starts surged 10.2% to a seasonally adjusted annual rate of 593,000 units in April, the strongest rate since August of 2008. Meanwhile, multifamily starts posted an 18.6% decline to a 79,000-unit rate, offsetting a big gain posted by that sector in the previous month.

Permit issuance, which can be an indicator of future building activity, declined 11.5% overall to a seasonally adjusted annual rate of 606,000 units in April. This reflected a 10.7% decline to a 484,000-unit rate on the single-family side and a 14.7% decline to a 122,000-unit rate on the multifamily side.

Three out of four regions posted solid gains in new housing production in April. Combined single- and multifamily starts rose 23.9% in the Northeast, 16.7% in the Midwest and 7% in the South. The West registered a 13.3% decline.

Conversely, permit issuance was down in three out of four regions in April. The Northeast posted a 7.4% decline, the South registered a 14.3% decline and the West posted a 16% decline. Permit issuance remained unchanged from the previous month in the Midwest.

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings

Home values in most U.S. markets continued to decline in the first quarter of 2010, as the Zillow Home Value Index fell 3.8 percent year-over-year, and 1 percent quarter-over-quarter, to $183,700. However, home values in several large California markets show signs of having reached a bottom, according to the first quarter Zillow Real Estate Market Reports.

Housing market conditions varied across the country, and home values in most markets (106 of the 135 tracked by Zillow) continued to decline on a year-over-year basis.

Additionally, negative equity across the country remained high, with 23.3 percent of single-family homes with mortgages underwater, up from 21.4 percent in the fourth quarter of 2009. Foreclosures reached a new peak in March, with more than one out of every 1,000 (0.11 percent) U.S. homes going into foreclosure during the month.

Home values in several large California markets – the Los Angeles, San Diego, San Francisco, Santa Barbara and Ventura MSAs – have stabilized significantly in the past year, marking what may be a bottom. Home values in those markets have risen significantly for at least the past 10 months, after values in all five markets reached a low point in April or May 2009. Although home values could fall again, it is more likely, given current conditions, that they will remain above their lowest level reached last year than fall below.

“It’s a very positive sign that several large markets have hit what appears to be a tentative bottom in home values,” said Zillow Chief Economist Dr. Stan Humphries. “While this is no guarantee that home values there will not fall again, it is more likely than not that they will remain above their lowest point last year.

“However, we continue to have concerns about other factors playing out in markets across the country. We suspect that the homebuyer tax credits are, for the most part, stealing demand from later this summer, rather than creating new demand. Even with the tax credits in place during the first quarter, inventory levels were rising, and home values continued to decline at a steady clip, rather than steadying. Because of these factors, we believe national home values are more likely to reach bottom in the third quarter of 2010, rather than in the second quarter, as we had hoped. When we do get there, we expect the high rates of negative equity and foreclosures to keep national home value appreciation near zero for some time, possibly as long as five years.”

Foreclosure re-sales across the country remained high in March, making up more than one-fifth (22.2 percent) of all U.S. home sales. Foreclosure re-sales also made up the majority of sales in several MSAs, including the Merced, Calif. MSA (66.3 percent) the Madera, Calif. MSA (63 percent) and the Modesto, Calif. MSA (61.7 percent). Additionally, one-third (32.4 percent) of home sales nationwide sold for less than what the seller originally paid.

The full national report, in its interactive format, is available at www.zillow.com/local-info on Monday, May 10. Additionally, in most areas data is available at the state, metro, county, city, ZIP and neighborhood level.

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Check out Valerie Fitzgerald Beverly Hills Real Estate Listings

We got some encouraging news last week about March existing-home sales increasing almost 7% from their levels in February, which leaves many of us wondering how soft the housing market is.

Unfortunately, a deeper look at the numbers from the National Association of Realtors reveals that inventory of for-sale homes also increased. Despite the higher number of sales, more homes were added to the market in March than were sold.

This figure shows the overall inventory of homes on the market. A second figure shows the balance between homes sold each month, and the net of homes added or withdrawn each month (so, if more homes are added to the market than are withdrawn or sold, the number will be positive – see below for more detailed methodology).

While the fact that March sales numbers are increasing is undoubtedly a positive sign, the time series shown in the second figure does make one at least ponder whether the market is currently capable of clearing itself of inventory without paying people to buy homes (i.e., the home buyer tax credit. Most of our traction in working down inventory levels came in the late summer/fall of last year when home sales were spurred by the threat that the tax credits were going to expire. Before and after that period, the addition of new inventory for sale usually outpaced sales, keeping inventory levels flat or rising.

This dynamic is being driven by the significant amount of “pent-up supply” in the market right now, that is, the pool of homeowners who have wanted to sell their homes in the past three years but, because of market conditions, either didn’t try or were unsuccessful. Our last estimates of the size of this group of homeowners were that 8% of homeowners indicated they were very likely to try to sell their homes in the next twelve months if they saw signs of improvement in their local markets. These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there’s a hint of good news.

We’ll very likely see another mini-frenzy in home sales as we approach June (when the current tax credits are set to expire), although I doubt the boost will be as large as we saw last fall. The ability of this purchased demand to push inventory levels down will be challenged by the flow of new listings into the inventory pool, something that happens each spring and summer.

It will be bad if we don’t make much headway in pushing down inventory levels through June, because we will undoubtedly see a reduction in home sales on a monthly basis in July and August (the “payback” of the tax credit seen from shifting demand that would have occurred in those months forward into the pre-July period). This mid-summer drop-off will likely increase inventory levels so, if we haven’t been successful in pushing them down before then, we’ll likely end up with more inventory on the market than we have now, even after what is likely to be a robust home buyer season in the spring and summer.

A few more details about how we arrived at the numbers in Figure 2: The formula used to arrive at the net number of homes added or withdrawn was: March inventory – February inventory + Number of homes sold in March. If no new homes were added or withdrawn from the inventory in a given month, then the difference between the inventory levels in March and February would equal the number of home sales in the current month and this net number would equal zero. Additionally, all statistics used in this analysis were from the National Association of Realtors March existing-home sales report.

Copyright© 2010 RISMedia

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Check out Valerie Fitzgerald Beverly Hills Real Estate Listings