The Houston Real Estate Market Opens 2009 With Weakened Performance as the US recession drags on
FORECLOSURES DRIVE HOME PRICES DOWN, RENTAL DEMAND IS RISING.
HOUSTON — (Feb 17, 2009) — Property sales throughout the greater Houston area stayed in negative territory during the first month of 2009, reflecting the lingering effects the nation’s recession is having on consumer confidence. Overall January property sales fell 26.4 percent compared to January 2008, and sales of single-family homes declined by 22.7 percent, according to new monthly data compiled by the Houston Association of REALTORS® (HAR).
The average price of a single-family home in Houston dropped 12.8 percent last month to $164,922 compared to January 2008. At $127,850, the January single-family home median price – the figure at which half of the homes sold for more and half sold for less – fell 8.5 percent year-over-year. January marked the fourth consecutive month of price declines.
Much of the pricing drop can be attributed to an increase in foreclosure sales, which typically sell below market prices. In January 2009, foreclosures made up 34.0 percent of all single-family home sales in the Houston area compared to 25.0 percent one year earlier. The median price for foreclosure sales reported in the MLS tumbled 23.0 percent from $104,000 to $80,500 on a year-over-year basis. The median price of traditional, non-foreclosure single-family homes dropped just 1.0 percent from $157,000 to $155,500.
Sales of all property types in Houston for January totaled 3,240, off 26.4 percent compared to January 2008. Total dollar volume for properties sold during the month was $530 million versus $817 million one year earlier, a 35.1 percent decline.
January brought a continued escalation in demand for rental properties, with leases of single-family homes up 4.8 percent and townhouses/condominiums up 24.6 percent on a year-over-year basis. This suggests that consumers who otherwise might purchase a home are instead opting to lease in order to enjoy the feel of homeownership without the financial obligations associated with a mortgage.
“ Passage of the economic stimulus package will by no means trigger a home buying frenzy, but eliminating the repayment provision in the first-time home buyer tax credit will help bring buyers to the market and further reduce housing inventory,” said Vicki Fullerton, HAR chair and broker of record at RE/MAX of The Woodlands & Spring. “Restoring consumer confidence is vital to healing our economy, and Congress and the president have just taken an historic step toward initiating that process.”
January Monthly Market Comparison
The month of January brought Houston’s overall housing market negative results when all listing categories are compared to January of 2008. Total property sales and total dollar volume fell, as did average and median single-family home sales prices.
However, the number of available properties, or active listings, at the end of January fell 12.9 percent from January 2008 to 44,178. That is 430 more active listings than December 2008 and considered an indication that inventory levels remain balanced.
Month-end pending sales – those listings expected to close within the next 30 days – totaled 3,216, which was 24.7 percent lower than last year and suggests another month of declining sales for February. The month’s inventory of single-family homes for January came in at 5.7 months, down 4.1 percent from one year earlier and unchanged from December, which marked the lowest level of 2008. The national month’s inventory of single-family homes is approximately 10 months, according to the National Association of REALTORS® (NAR).
Single-Family Homes Update
At $164,922, the average sales price for single-family homes dropped 12.8 percent from January 2008, when it was $189,143. The median price of single-family homes in January was $127,850, off 8.5 percent from one year earlier. That compares to the national single-family median price of $174,700 reported by NAR. These data continue to demonstrate the higher value and lower cost of living that prevail in the Houston market.
Additionally, January sales of single-family homes in Houston came in at 2,827, down 22.7 percent from January 2008 and accounting for the 17th consecutive monthly drop. Year-over-year sales of single-family homes priced at $80,000 and below rose 11.2 percent in January, fueled largely by foreclosure-related transactions.
HAR also reports existing home statistics for the single-family home segment of the real estate market. In January 2009, existing single-family home sales totaled 2,367, a 19.6 percent decrease from January 2008. At $147,646, the average sales price for existing homes in the Houston area fell 14.5 percent compared to last year. The median sales price of $117,000 for the month was also down 8.6 percent from one year earlier.
Townhouse/Condo Update
The number of townhouses and condominiums sold in January fell compared to one year earlier. In the greater Houston area, 203 units were sold last month versus 348 properties in January 2008, translating to a 41.7 percent decrease in year-over-year sales.
The average price of a townhouse/condominium dipped to $153,773, down 3.2 percent from one year earlier. The median price dropped 2.1 percent to $125,000 from January 2008 to January 2009.
Lease Property Update
Demand for single-family and townhouse/condominium rentals increased again in January. Single-family home rentals rose 4.8 percent in January compared to a year earlier, while year-over-year townhouse/condominium rentals were up 17.0 percent.
Houston Real Estate Milestones in January
Sales of single-family homes priced at or below $80,000 increased 11.2 percent, driven largely by foreclosure activity;
Single-family home rentals rose 4.8 percent;
Townhouse/condominium rentals increased 17.0 percent;
Month’s inventory of single-family homes remained unchanged from December 2008, holding at the lowest level since March 2007 (5.7 months) and nearly half the national average of approximately 10 months;
Active listings fell 12.9 percent, representing a balanced supply of housing inventory.
Real Estate Outlook: Change Anticipated
The national economic headlines continue to be bearish, but some of the underlying fundamentals for real estate are pointing to better days ahead.
Take home mortgage rates: Last week thirty year fixed rates dropped below the seemingly-unbreakable five percent barrier for the first time on record, according to the Mortgage Bankers Association.
New thirty year loans went for an average 4.89 percent, while fifteen year loans were just above 4.6 percent.
Equally important, the outlines of the Obama administration’s and Congress’s plans to turn around the housing markets just became clearer. Tops on their list: Ending the foreclosure epidemics in some parts of the country through ambitious new programs designed to rework the terms of hundreds of thousands of mortgages that are now unaffordable.
In a letter to Congress last week, Lawrence Summers, Obama’s nominee to head the National Economic Council, said the incoming administration plans to use portions of the remaining $350 billion in “TARP” — or “Troubled Asset Relief Program” — money to rework monthly payments for what Summers called “responsible home owners” now facing economic challenges in the recession.
Though Summers did not go into detail, the program is likely to be based on FDIC chairman Sheila Bair’s proposed “mass-modification” concept that the Bush administration rejected last Fall.
Versions of that program might include widespread principal write-downs — outright reductions in home owners’ mortgage balances — and guarantees to lenders in the event borrowers re-default.
The Obama administration is also likely to institute an immediate ban on all foreclosure actions, possibly for three months, and is certain to enact bankruptcy reform legislation allowing judges to modify mortgage terms to forestall foreclosures.
Why’s this important for anyone involved in real estate? The key to stabilizing local markets, say most economists, is reducing the numbers of new foreclosures and other distressed-price transactions.
Foreclosures lower property values in surrounding neighborhoods, wherever they occur. That discourages potential buyers — who don’t want to plunge in as long as prices are still declining.
If the new administration and Congress can successfully reduce the numbers of new foreclosures, there’s an excellent chance that the current combination of low prices and record low mortgage rates can have the effect they should be having: Spurring new sales.
Add in still another factor: Congress may create a new and improved tax credit — one that’s not repayable and covers all home purchases, not simply first-time buyers — and we just might be looking at a FAR more positive outlook than a lot of people could imagine.
HomelessNation.org
Those who are homeless are shut out of two environments, not just one. They have no home and no home page.
One award-winning website champions solutions to online exclusion as important steps toward ending off-line homelessness.
“HomelessNation.org is a digital home for those who have none,” said Chris Aung-Thwin, National Coordinator for the website, created by and for the homeless, to normalize their lives. “This is the one place they can come, and feel safe and secure — and they can leave something behind. When you do not have a home, you have nowhere for anything. Here they can leave their identify, their pictures and friends, and come back and it is all still there for them.”
As proof that HomelessNation.org is on to a good thing, it recently won two prestigious awards for innovation:
- The Canadian New Media Awards (CNMA) singled out Homeless Nation for its Award for Excellence in Social Media Websites;
- The Society for New Communications Research (SNCR), a global nonprofit think tank dedicated to the advanced study of the latest developments in new media and communications, honoured nonprofit Homeless Nation for Excellence in New Media Creation/Social Media Production.
Homeless Nation (HN) was created out of a determination to give voice to those who would otherwise, figuratively and literally, be left on the cutting room floor.
Incorporated as Homeless Street Archives, the dream became an online reality as www.homelessnation.org in 2006. Since then, HN outreach workers bring donated computers and internet access into shelters and drop-in centres across Canada. Free computer and internet training is available for those who’d like to express themselves through digital tools. HN has more than 60 nonprofit partners, including youth groups and Native Friendship Centres. Ongoing community and street events expose the homeless and homed to the advantages of online community connections, including:
- Resource lists for shelter, food, health care and legal assistance sources in provinces and territories.
- Missing person profiles to help friends and family reconnect.
HN operates outreach in Montreal, Vancouver and Victoria, but has had to suspend programs in Toronto and other centres since, in spite of proven success and international recognition, funding is a challenge.
“We ran a three-year pilot with [the federal government's] HRDC and exceeded expectations and won awards, but now the ‘space coach’ is turning into a pumpkin,” said Aung-Thwin. “It was wonderful to win those awards, but we are frustrated.”
He explains the value of investing in Homeless Nation since costs are kept to a minimum by partnering with existing community groups, and HN offers community-improvement services which are in demand from cities across Canada and the US.
Too many people take their homes and internet access for granted. In the 18th and 19th Centuries, and into the 20th Century, homelessness was met with “you brought it on yourself” indignation and puritanical patronizing. In the first decade of this century, previously well-off individuals and families are realizing, that in spite of their plans to be homed, they are perilously close to sub-standard housing or homelessness. In Vancouver, affordable housing is in Olympic peril. In Calgary, working homeless struggle with the complications of maintaining personal hygiene and good nutrition while living on the street, and dealing with standard workplace stresses. The stories repeat themselves across the nation.
“If you have fallen down and you’re in the depths of despair, how do you pick yourself up?,” said Aung-Thwin, explaining the HN philosophy. “How do you find the energy? This is not a fringe demographic. People run out of money. Once you don’t have a place to live, how do you get a job, shower for an interview…? We give the homeless the opportunity to find out more. The internet is how anyone finds anything, so we have to give that same opportunity to someone who is homeless.”
At homelessnation.org, everyone is welcome to join in the dialogue, and to debate social justice issues relevant to homelessness — which includes almost everything. Those blogging, posting videos, announcing events, reporting news, and talking about what’s current, appreciate having visitors communicate with them when they are @ home. Join in.
Interest Rate Buy-Down is Major Element of NAR Housing Stimulus Plan
By Bob Hunt, National Association of Realtors
At their recent meeting in Orlando, Florida, directors of the National Association of Realtors® (NAR) gave formal approval to NAR’s Housing Stimulus Plan. The plan, to be submitted to Congress in its lame-duck session, is designed to end the free-fall of values in the housing market. It aims to do this by providing sufficient incentives to get potential buyers “off the fence.” The plan has four points.
(1) Make the current $7,500 first-time homebuyer tax credit available to all homebuyers and, also, eliminate its repayment provisions.
(2) Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent. Currently, those limits have been raised to $729,750, but those are due to be reduced to $625,000 in 2009.
(3) Use funds from the $700 billion rescue plan (a.k.a. “the bailout”) to institute a temporary (probably two-year) federal mortgage interest buy-down program to lower rates to 4.5% or lower for a thirty-year fixed rate mortgage. This would apply to homebuyers purchasing new or existing homes up to $1 million in price.
(4) Permanently ban banks from engaging in real estate brokerage and management.
The support for this plan did not come without some controversy and the offering of alternative programs. Most of this centered around the third point, the interest rate buy-down proposal. There were those who urged that the target rate be more like 3% rather than the “4.5%, or lower”. It was argued that this lower number reflected what would actually be needed to stimulate buyer activity in a meaningful way. Moreover, it was pointed out that it would be easier to start with a lower number and compromise upward, if necessary.
Others argued that a government-backed interest rate buy-down program should extend to all residential mortgage borrowing (e.g. refinances) and not just be applicable to purchase mortgage originations. Advocates of this point argued that, although the proposed NAR plan would certainly stimulate home buying, it did nothing to help those who were currently having serious difficulty making their present mortgage payments. They felt that any stimulus program also needed to help prevent foreclosures.
As proposed, NAR estimates that the stimulus plan would cost approximately $100 billion per year, “a small price to pay” said Dale Stinton, CEO of the organization, “to stop the hemorrhaging.” However, if the interest buy-down provision were extended to refinancing existing troubled mortgages, that cost could reach numbers in the trillions of dollars.
Charles McMillan, newly-inducted 2009 President of NAR, has already met with senior U.S. Treasury officials to discuss the four-point plan. According to an NAR news release, the plan was received positively. However, Treasury representatives said “their authority under the Emergency Economic Stabilization Act (EESA) to use rescue funds for that type of market intervention is unclear.”
The news release went on, “To move its proposal forward, NAR committed itself to communicating the value of the buydown to members of Congress and asking lawmakers to clarify – through legislation or other appropriate means – Treasury’s authority for the intervention on interest rates.” The effort has already begun. On November 13, NAR issued a “call to action” to its million-plus members asking them to contact their federal representatives in support of the plan. By now, thousands have responded.
NAR members who are unclear about how to contact their legislators and/or what to say to them should contact their local association of Realtors® for assistance. Non-Realtor® citizens should weigh in on this as well. The depressed housing market is a central element of our current financial debacle. Things aren’t going to be fixed until the housing market stabilizes. NAR’s four-point program gives some promise of accomplishing that.
RE/MAX – The most powerful name in real estate joins with the Associated Press to produce a critical housing report
Through an exclusive agreement with the Associated Press, the newly created “RE/MAX National Housing Report” for the U.S. is being distributed to the news media on a monthly basis. The report for August was released on September 24, 2008. With extensive national distribution, the monthly report is bringing tremendous exposure for the RE/MAX brand.
The report is designed to fill the need for an accurate and comprehensive gauge of today’s real estate market. It’s unique because it provides data for all types of residential properties (single-family homes, condos and townhomes) and covers a large sampling of 60 metropolitan areas, representing all 50 states.
“We want to give the most thorough representation of the marketplace possible.” says Dave Liniger, Chairman and Co-Founder of RE/MAX International. “By including entire metropolitan areas in all 50 states, we hope our report will become the most complete guide to the overall health of our national real estate marketplace.”
The Associated Press will prepare news stories and informational, interactive graphics based on the monthly updates for use by its extensive broadcast, print and Internet subscribers.
“It’s critical at this point in time to have the most reliable information available,” Liniger says. “The consumer is anxious to know what this market is doing and where it’s headed. The RE/MAX National Housing Report will provide sales, inventory and price information that can help homebuyers and sellers get through this market.”
