Tuesday, June 09, 2009

An article about housing recovery...

Found this one today (but it was published last Friday) and thought it had a few interesting things to comment on.

Read the whole thing here.

Some bits and commentary below...

A nascent recovery
Commentary: Overlooked signs the U.S. housing market is turning

That is the title of the article and before I go on I want to make clear that what I copy below perhaps won't have exact relevance to our local Kingman market, but still I sense there may be some items to look for.

Spurred by markdowns up to 80% from market highs, first-time buyers and investors both American and foreign descended en masse in the last three months on San Francisco's hardest-hit hinterlands as Wall Street and the economic climate improved. They're picking clean the Delta region's banked-owned inventory as soon as properties hit the market and are engaged in unprecedented bidding wars even on short sales.

Obviously the article is taking on what is happening near a location near San Francisco in California. Yet our own inventory of foreclosure properties here in Kingman is being picked as well, maybe not to the point of being picked clean but as I reported on in my Listings Report for May -- foreclosed listings are at the lowest level since I've been reporting on that sort of data.

I'm aware of multiple offers being put in on some foreclosed listings, but haven't heard the same thing about short sales in this area yet (doesn't mean it isn't happening though).

After spending most of the 1990s in the $250,000 range, the median-priced home that was sold in the seven-county San Francisco area rose to a staggering $850,000 by its May 2007 peak. It since fell to a low of $399,000 in February -- a 53% drop in just 21 months -- before posting its first monthly gain in March, albeit a 1% uptick. The median is expected to continue rising at a healthy clip in months ahead since it's now at the level of nine years ago, before the bubble began inflating.

The median priced single family home in Kingman has dropped 53% in pretty much the same time period as reported above.

I'm not as optimistic about the median price rising at a healthy clip in the months ahead though, but would love to be wrong about that.

California's statewide inventory of unsold homes -- based on the number on the market divided by the present monthly sales rate -- stood at a 15.2 months supply in February, 2008. That figure was down to 5.8 months in March, near the historic average.

At one point in Kingman I believe I reported that we may have had darn near close to 20 months of inventory on the market, and now my data says we are down in the eight to nine month range. Meanwhile for the foreclosure market has a little over a months worth of inventory.

The specter of rising foreclosures -- born now of the recession rather than just overleveraged subprime borrowers -- is the wild card in future health of the U.S. housing market and the economy by extension.


And in an overlooked report that belies the first-quarter delinquency numbers, defaults on privately insured mortgages -- where borrowers are more than 60 days behind -- fell 3% in April and were down 24% from a record 106,482 in February, the trade group Mortgage Insurance Companies of America reported Friday.

I'm not sure what to make of that, but I hope it is correct and continues.

Most importantly for gauging the strength of the nationwide market is how conditions are improving in the most-depressed regional markets.

With those markets now stabilizing, banks are no longer anxious to dump real-estate owned properties, as houses in their foreclosure portfolios are called, fearing they'll get appreciably less three months from now for their foreclosed properties.

As a result, they'll be more judicious about the pace at which they release foreclosures onto the market. The new goal: To maximize the value of supplies in hand rather than unload it helter-skelter and torpedo the housing market like they did while they were shell-shocked by the devastation they'd wrought.

With the banks themselves now somewhat more stable, they'll also be less likely to want to part with their "toxic assets" knowing the most-scorched, still-serviceable mortgages will be the most valuable on a credit-risk markup once the economy recovers. In fact, the price stabilization in the most-depressed U.S. markets will allow a clearer valuation of the toxic assets we now all hold by virtue of bank bailouts -- a modicum of certainty that will hasten the overall recovery.

And there is the key from the beginning of this slide and the massive influx of foreclosures that led to the conditions we see today. The key being the day would (or will at least) come when banks consider not only competing amongst themselves to sell off their inventory... but also compete again against the traditional seller.

I'm not saying that it is happening right here, right now... it is just a sign worth looking for. With reduced levels of foreclosed inventory clearly visible in our market the sign might just be visible if not now then perhaps soon.

Last bit...

Homeowners in most of America know by their own property's value that the spike in U.S. median home values was driven in considerable measure by soaring prices and volume in major markets, especially in California, Florida, Nevada and Arizona. By virtue of their climates and economic-growth rates, those four states have been on the extremes of the U.S. boom-and-bust housing cycle since the 1950s.

You can't discount how critical an upturn in those states will be, considering they account for 46% of foreclosures nationwide. If foreclosures there are more quickly consumed as they're starting to be now -- fueled in part by foreign buyers who recognize their value -- we'll all reap a return on our bailout money a lot faster.

"The banks are getting smarter and realizing that if they don't sell it in a short sale, they lose more money going the foreclosure route," Barbee said.

Adds Sharga: "The banks will be very particular and thoughtful about how they'll release new foreclosures, because they know now how flooding the market will have a disastrous effect."

Something to keep an eye on anyway.

Still waiting for that other shoe to drop?? Well then, keep an eye on interest rates. Not out of the woods yet, but nonetheless a decent article worth considering.

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