Smart Real Estate News & Commentary by Chris McLaughlin April 28, 2011
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NAR – pending home sales rise
March saw another increase in pending home sales, with contract activity rising unevenly in six of the past nine months, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI) rose 5.1% to 94.1 in March from a downwardly revised 89.5 in February. The index is 11.4% below 106.2 in March 2010; however, activity was at elevated levels in March and April of 2010 to meet the contract deadline for the home buyer tax credit. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
The PHSI in the Northeast fell 3.2% to 63.4 in March and is 18.4% below March 2010. In the Midwest the index rose 3.0% in March to 83.5 but is 16.6% below a year ago. Pending home sales in the South jumped 10.3% to an index of 110.2 but are 10.5% below March 2010. In the West the index increased 3.1% to 103.7 but is 4.1% below a year ago. Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement. “Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24% and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”
GNP slows
Gross domestic product, the broadest measure of the nation’s economic health, rose at an annual rate of 1.8%, the Commerce Department reported today. That’s a significant slowdown from the 3.1% growth rate in the final quarter of 2010. Most predictions for growth have fallen precipitously over the past several weeks as rising prices spooked forecasters. Economists surveyed by CNNMoney were predicting growth of 2.0% in the first quarter. But some estimates were as high as 4.3% just two months earlier. The sharp rise in oil prices in recent months was a major drag on growth. Besides cutting into the amount of money consumers had to spend on other items, the higher prices for imported oil caused a rise in the nation’s imports, which cut into GDP. The increase in imported goods shaved 0.8 percentage points off of growth by itself. Rising inflation on overall prices also took a bite out of growth. Since GDP is adjusted for inflation, higher prices mean the economy must grow at a faster pace just to keep up. Consumer prices were up at a 3.8% from a year earlier, according to the report, compared to a rise of only 1.7% in the fourth quarter. And the weak real estate market continued to weigh on the economy, as investment in homes and housing construction fell at a 4.1% pace in the quarter, while investment in non-residential real estate, such as offices, stores and factories, plunged by 29%. But economists are expecting the slowdown to be temporary — they still project full-year growth of 3.1% for 2011.
DSNews.com – Home ownership dropping
The U.S. Census Bureau reported yesterday that the homeownership rate dropped to 66.4% at the end of the first quarter. It’s fallen back to a level not seen since 1998. Analysis of the numbers shows that the housing bust has more than reversed the increase in homeownership gained during the boom. Economists at the research firm Capital Economics say the further decline in the homeownership rate in the first quarter “provides yet more evidence that Americans are now less able and less willing to buy a home.” Paul Dales, the firm’s senior U.S. economist, said, “Part of this fall is due to foreclosures and the combination of high unemployment and tighter credit conditions preventing households from getting on the property ladder.”
But, Dales added, “[I]t also seems likely that there has been a reduction in the desire to own a home now it’s clear that housing is not a one way bet.” At the same time, the homeowner vacancy rate fell to 2.6% from 2.7%, but Dales says this figures till remains above the long-run trend, suggesting that there is still too much supply. Two million of the homes up for sale were sitting empty during the first quarter and another 4 million empty properties were not even listed, he explained. “The inevitable consequence of low demand and high supply is lower prices,” Dales said.
Unemployment up
The number of initial claims rose to to 429,000 in the week ended Apr. 23, up 25,000 from the week before. It was the highest level in three months, and surprised economists, who were expecting initial claims to drop to 390,000 in the latest report. The 4-week moving average of initial filings– a number that tries to smooth out week-to-week volatility — also rose above the threshold to 408,500, up 9,250 from the previous week. The 8-week moving average, which is an even better gauge for the longer-term trend, also ticked above 400,000. In the government’s last monthly reading on the labor market, the unemployment rate fell for a fourth straight month in March to 8.8%, the lowest since March 2009, as the economy gained 216,000 jobs.
The Labor Department’s April job report is due at the end of next week. Meanwhile, the number of Americans filing for ongoing claims decreased 68,000 to 3,709,000 in the week ended April 16, the latest data available. That’s the lowest figure since September 2008, and below economists’ estimates for 3,690,000 continuing claims. Ongoing claims reflect people who file each week after their initial claim until the end of their standard benefits, usually after 26 weeks. The 4-week moving average for ongoing claims fell by 22,750 to 3,697,750.
Ryland’s loss grows
Homebuilder and mortgage lender Ryland Group posted a first-quarter loss of $19.5 million, or 44 cents per share, as the company continued to grapple with falling home sales and a real estate market flooded with competing foreclosures and existing home sales. The firm reported a loss of $14.3 million, or 33 cents a share, a year earlier. The builder, which also maintains its own mortgage finance group, failed to meet analyst expectations, with the average analyst expecting a loss of 31 cents a share. Ryland’s loss deepened as sales fell about 30% to $168.6 million for the first quarter, down from $241.9 million a year earlier.
Home sales fell 17.2%, with only 966 new orders reported in the first three months of 2011, compared to 1,167 a year earlier when the homebuyer tax credit was still in play coaxing buyers into the market. Ryland’s results for the quarter were hurt by pretax charges on inventory, valuation adjustments and other write-offs for the period. The company’s deepening loss comes at a time when homebuilders are struggling to attract new buyers. Moody’s Investors Service recently revised the ratings outlook for PulteGroup Inc. from positive to stable over concerns the homebuilder’s operating performance and the industry’s return to a more stable environment will take more than a year.
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Chris McLaughlin
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!
* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
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