Posted by David Bennett
Wed, 28 Jun 2006 01:39:00 GMT
Thirteen markets have more than 50% chance of price declines
Tuesday, June 27, 2006
By Glenn Roberts Jr.
Inman News
The San Diego-Carlsbad-San Marcos, Calif., market is one of those facing the greatest risk of home-price declines.
Thirteen real estate market areas have more than a 50 percent chance of falling house prices within two years, and eight of those areas are in California, three are in Massachusetts, one is in New York and one is in New Jersey, according to a quarterly report by PMI Mortgage Insurance Co., a subsidiary of The PMI Group Inc.
Twenty-five metropolitan areas had increasing risk of price declines, compared to the previous quarter, while 20 had decreased risk, the PMI U.S. Market Risk Index also revealed.
"Certainly the coastal markets have been the highest-risk markets pretty consistently, said Beth Haiken, a PMI Group spokeswoman. Some markets in Florida and the Washington, D.C., area have gradually climbed on the risk index list, she noted.
Price appreciation from first-quarter 2005 to first-quarter 2006 has dropped into the single digits for three of the 10 top high-risk markets, including San Diego, 7.7 percent; Boston, 5.7 percent; and Providence, R.I., 9.5 percent.
For the previous quarterly index, Boston was the only market area with that distinction, Haiken said.
Those major real estate markets at the greatest risk of a price decline, according to the index, are San Diego-Carlsbad-San Marcos, Calif.; Nassau-Suffolk, N.Y.; Boston-Quincy, Mass.; Santa Ana-Anaheim-Irvine, Calif.; and Sacramento-Arden-Arcade-Roseville, Calif.
Sacramento made its appearance in the top-five riskiest markets for the first time.
"We’re seeing some continuing high risk and deceleration. On the other hand we’re seeing continued very high appreciation in a lot of areas," she said. "The other thing that’s really working to balance things out is the underlying labor market fundamentals. Employment growth continues to be strong."
Six markets had price appreciation above 20 percent from first-quarter 2005 to first-quarter 2006, including Phoenix at 31.1 percent; Orlando, Fla., at 27.7 percent; Fort Lauderdale, Fla., at 25.7 percent; and Miami at 24.7 percent.
The index relies on past house-price growth and statistics for employment, unemployment, local income and interest rates in the largest metropolitan statistical areas and metropolitan statistical area divisions. An index rating of 500 or more indicates a 50 percent or greater risk of home-price declines in the next two years, while an index rating of 100 suggests a 10 percent probability of falling house prices.
The top-five riskiest markets have index ratings between 585-599. The average index score for the 50 real estate markets studied was 288, which is a 70-point increase compared to first-quarter 2005. But this average score is up just one point from the previous quarterly index.
Newark, N.J., and Miami led the list of real estate markets for the highest quarterly gain in risk. Both cities jumped 32 points in the index, with Newark rising to a score of 459 and Miami rising to a score of 359.
The Las Vegas metro area led the nation with 6.23 percent employment growth this year compared to 2005, according to the report, followed by Phoenix, Ariz., at 6 percent; Orlando, Fla., at 4.5 percent; Fort Lauderdale, Fla., at 4.4 percent; and Seattle, Wash., at 4.3 percent.
Employment declined in four market areas, including Detroit, Mich., down 1.1 percent; Milwaukee, Wis., down 0.8 percent; Warren-Troy-Farmington Hills, Mich., down 0.6 percent; and Cleveland, Ohio, down 0.1 percent.
Home-price appreciation has slowed in about 34 major real estate markets across the country but is still positive in all of the nation’s 50 largest markets, PMI reported.
The decline in appreciation was steepest in Las Vegas, dropping to 14.5 percent for the period from first-quarter 2005 to first-quarter 2006. That is down 15.6 percent when compared to the appreciation rate of 30.1 percent from first-quarter 2004 to first-quarter 2005.
The year-over-year appreciation rate dropped 15.3 percent in the San Diego metro area and fell 11.4 percent in the Sacramento area.
"We’d reached a point where prices had gotten too far away from economic fundamentals," said Mark Milner, chief risk officer for PMI Mortgage Insurance Co., in a statement.
"This quarter’s data signals that in many areas the expansion of the housing balloon has slowed substantially. The risk index also shows that slowing price appreciation is balanced by underlying economic strength. In the absence of an unexpected economic shock, this makes a gradual cooling of the market the most likely outcome."
Affordability increased slightly in 19 markets, including five in Texas and six in the Midwest, PMI reported. Fort Worth-Arlington, Texas, was the most affordable area on the list, followed by Indianapolis-Carmel, Ind. The least affordable market area in the latest index was Fort Lauderdale, Fla., followed by Riverside, Calif., and Los Angeles.
Those metro areas with the lowest risk rating include Pittsburgh, Pa., at 57 (a 5.7 percent risk of home-price decline within two years); Indianapolis-Carmel, Ind., at 58; Memphis, Tenn. (including areas in Mississippi and Arkansas), at 61; Cincinnati-Middletown, Ohio (including areas of Kentucky and Indiana), at 64; and San Antonio, Texas, at 65.
Haiken said that while the survey is intended to measure short-term price risk, long-term home ownership generally leads to a positive return on investment. "(Some consumers) have had almost a day-trader mentality recently about real estate," she said, noting that those who are looking for a quick buck could face short-term volatility in market conditions. "In the long term it’s been a very good investment," she added.
An "Economic and Real Estate Trends" report released by PMI today contains an analysis by economist Charles A. Calhoun on possible best-case and worst-case home-price scenarios for four metro areas: Boston, Los Angeles, Pittsburgh and Houston.
For Boston and Los Angeles the analysis suggests "the strong likelihood of positive house-price appreciation over the next 10 years," while in Pittsburgh the data suggests "much lower expected appreciation, and very little chance of either very high or very low rates of appreciation."
Meanwhile, the data suggests that Houston will have positive appreciation on average, but at a lower rate than Boston or Los Angeles.
A separate article in the report suggests that alternative mortgage products such as 40-year and 50-year mortgages "hold some benefit over more risky alternatives, such as piggyback loans, interest-only loans and option adjustable rate mortgages.
Posted in Riskiest real estate markets in coastal areas
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Posted by David Bennett
Wed, 28 Jun 2006 01:35:00 GMT
Despite improvement, current outlook mixed
Tuesday, June 27, 2006
Inman News
The Conference Board today reported that its Consumer Confidence Index, which had decreased in May, posted a slight increase in June. The index now stands at 105.7, up from 104.7 in May.
Although the expectations index edged up to 87.6 from 85.1 last month, the present situation index decreased for the second consecutive month, down to 132.7 from 134.1 in May, according to The Conference Board.
"The slight bounce-back in confidence this month was a result of the moderate improvement in consumers’ expectations," said Lynn Franco, director of The Conference Board Consumer Research Center. "Despite the up-tick, consumers remain concerned about the short-term outlook. Furthermore, the present situation index lost ground for the second consecutive month, a signal that the economy is shifting into lower gear heading into the second half of this year."
Consumers’ overall assessment of current conditions, while favorable, declined again in June, according to The Conference Board. Those claiming conditions are "good" declined to 26.8 percent from 28.5 percent. Those claiming conditions are "bad" eased to 14.9 percent from 15.2 percent. Labor market conditions were mixed. Consumers saying jobs are "plentiful" decreased to 28.1 percent from 29.1 percent, while those claiming jobs are "hard to get" decreased to 19.9 percent from 20.2 percent.
Consumers’ outlook for the next six months, which had deteriorated in May, improved moderately in June. Those expecting business conditions to worsen decreased to 11.8 percent from 12.9 percent. Those expecting business conditions to improve increased to 16.8 percent from 16.5 percent.
The outlook for the labor market was also somewhat more optimistic, as those expecting more jobs to become available in the next six months increased to 15.6 percent from 14.8 percent in May. Those expecting fewer jobs declined to 17 percent from 18 percent. The proportion of consumers anticipating their incomes to increase in the months ahead remained virtually unchanged at 17.1 percent.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Posted in Shifting economy impacts consumer confidence
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Posted by David Bennett
Tue, 27 Jun 2006 14:07:00 GMT
HUD Official: ‘If the Deal Looks Too Good to Be True, It Is.’
Georgia has moved from easiest place to commit mortgage fraud to third in the nation
RISMEDIA, June 27, 2006—(KRT)—Georgia has moved from the easiest place to commit mortgage fraud to third in the nation, U.S. Housing and Urban Development officials said here Thursday.
"Georgia was until recently the best place to commit fraud, but that has changed," Bob Young told about 650 lending, mortgage and real estate professionals at a seminar. The state dropped to no. 3 in 2005 as a result of what Young said were "aggressive efforts at the state level."
Young, former Augusta mayor, is Southeast director for HUD. He spoke at the daylong symposium on mortgage fraud at the Savannah International Trade and Convention Center.
Despite successes in Georgia and South Carolina, Young said such fraud is one of the fastest growing crimes in the country.
Mortgage fraud is broadly defined as providing false or incomplete information to a financial entity to obtain a loan it would not otherwise have provided if given correct information.
In HUD’s Atlanta-based Southeast region, Florida and North Carolina remain among the top five states in the nation for mortgage fraud, Young said.
FBI figures show the number of pending cases nationally has doubled over the past three years.
Last year, losses reported by federally regulated banks topped $1 billion, he said.
In a time of increasing home ownership – more than 70 million Americans now own their homes – there are more opportunities for mortgage fraud to occur. Young also said more than half of all minority families own their own homes.
"However, this same environment of prosperity has also brought out the crooks who would turn an American’s dream of home ownership into a nightmare through mortgage fraud," Young said.
"Mortgage fraud is a criminal enterprise and it directly affects all home owners," he said.
But Brian Montgomery, assistant secretary for housing-federal housing commissioner, said Thursday afternoon mortgage fraud is not an equal-opportunity crime.
"Sadly, anyone can be taken advantage of (but) it seems to be happening disproportionately to African Americans and Latinos," Montgomery said.
The theme of the seminar was that the best defense to fraud is an educated consumer.
"If the deal looks too good to be true, it is," he said. "Potential home owners should do their homework."
He said the crime is limited only by the creativity of the criminal mind.
"Exactly how much mortgage fraud is in America is very, very hard to pinpoint," Montgomery said.
"It curls your toes to see some of these schemes."
ADDITIONAL HUD RESOURCES:
A "Your Door to Homeownership" public education program directed at first-time minority home buyers targets black and Hispanic communities in an effort to have 5.5 million minority families own their own homes by the end of the decade. Visit the FHA Web site at www.fha.gov
HUD’s law institute is part of its 2006 Fall Conference Oct. 16 in Atlanta. E-mail hdli@hdli.org or call (202) 289-3400.
FHA Resource Center’s The Knowledge Base is a new tool to answer questions presented by consumers and lenders. Visit http://answers.hud.gov, or visit www.hud.gov/local.
Copyright © 2006, Savannah Morning News, Ga.
Distributed by Knight Ridder/Tribune Business News.
Posted in HUD - Mortgage Fraud
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Posted by David Bennett
Tue, 27 Jun 2006 13:14:00 GMT
Study Redefines How We Talk About U.S. Cities
With the lines between city and suburb and even rural areas increasingly blurred, the National League of Cities, in conjunction with the Metropolitan Institute at Virginia Tech, recently analyzed nearly 1,000 U.S. cities to come up with classifications that will be helpful to policy makers, particularly in their examination of local land use.
Re-examing traditional perceptions of city types, “From Meltingpot Cities to Boomtowns: Redefining How We Talk About America’s Cities,” found that today’s cities can be divided into six groups:
- Spread Cities. The most prevalent type of city in the country, accounting for a full 41% of municipalities, these have average populations in the 50,000-65,000 range, low densities of about 2,880 per square mile, few households with children and few immigrant residents (less than 10%). Examples of spread cities are Greenville, S.C.; Pinellas Park, Fla.; and LaCrosse, Wis.
- Gold Coast Cities. The second most prevalent city type, these tend to be suburban communities in metropolitan areas with a population that is older (average median age of 38), wealthier (average median income of $62,000) and more educated (27% of people over 25 having a bachelor’s degree). Walnut Creek, Calif. in the San Francisco Bay area; Coral Gables, Fla. in the Miami area; and Wheaton, Ill. in the Chicago area are examples.
- Meltingpot Cities. These cities have populations of 75,000-100,000, are ethnically diverse (with 33% foreign-born residents), dense (an average 8,000 people per square mile) and have many families with younger children (47%). These cities are primarily located in the Pacific region and include cities like Hawthorn and Norwalk, Calif.
- Metro Centers. Representing 9% of American cities, these are large (more than 200,000 people), core cities in metro areas with a diverse population and an older housing stock (44 years old). Norfolk, Va. and Tacoma, Wash. are in this group.
- Boomtowns. With populations of 75,000-100,000, these are identified as rapid population growth cities, with new housing stock (21 years old), wealthy residents and families with children (43%). Gilbert, Ariz. and Broken Arrow, Okla. are examples of boomtowns.
- Centrevilles. With populations smaller than 50,000, these are primarily core cities in micropolitan areas with densities of 2,000 people per mile, the smallest in the study. They function similarly to principal cities of metropolitan areas, but they maintain their rural character. Paducah, Ky. and Richmond, Ind. are examples.
Among the reasons that prompted the study, the League said, were a diverse citizenry, shifting service demands and evolving economic structures at a time when policy makers and researchers need a more useful framework for understanding local challenges, discovering innovative strategies and identifying policy options.
Christiana Brennan, co-author of the report said, "There is no longer a ‘typical’ city, just as there are no helpful one-size-fits-all approaches to the varying issues that cities face. As a result, policy decisions or programs based on distinctions such as central city, suburb and rural, and metropolitan and non-metropolitan labels are not as useful to decision-makers and others attempting to understand and ameliorate local challenges."
For example, both Huntington Beach, Calif. and Henderson, Nev. are similarly sized suburban cities, with populations around 190,000. "But when you begin to look more closely at them, you can see how very different they are," Brennan said. "Huntington Beach, with its older, wealthy population is a Gold Coast city. Henderson is a residential Boomtown located at the edge of one of the fastest growing metropolitan areas in the country. They may be similar in size, but their service mix, goals and the people they serve are not. Local officials in each of these cities would probably take a very different approach to governing and to providing services and programs for their citizens," Brennan said.
There are 19,000 cities in the U.S. today.
Posted in Study Redefines How We Talk About U.S. Cities
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Posted by David Bennett
Tue, 27 Jun 2006 12:18:00 GMT
Sales of new single-family homes rose 4.6% to a seasonally adjusted, annual rate of 1.23 million units in May from a downwardly revised number in the previous month, according to figures reported by the U.S. Census Department today.
“If the sales gain in today’s report holds true, it’s likely due at least partly to the extra efforts that builders are making to attract the many potential buyers who are still out there,” said NAHB President David Pressly. “Many are stepping up incentives or trimming prices to help maintain sales volume.”
“That said, the May sales number seems a bit too good to be true, especially in view of the wide confidence intervals around these statistics. Furthermore, the latest results of NAHB’s builder surveys indicate weaker demand for homes coinciding with higher interest rates, deepening affordability issues and a retreat of investors/speculators from the market,” added NAHB Chief Economist David Seiders. “We don’t think the cooling process for housing is over yet, and we wouldn’t be surprised to see a downward revision to May’s numbers as well as some decline in coming months.”
Three out of four regions posted gains in the Census figures for new-home sales in May. The South had the strongest gain, 6%, followed by the West’s 5.3% increase and the Midwest’s 2.7% gain. Sales fell nearly 8% in the Northeast.
Meanwhile, the inventory of new homes for sale declined slightly in May to 556,000 units, equivalent to a 5.5-month supply at the current sales pace
Posted in New Home Sales - May
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