Wednesday, May 31, 2006

FIRST QUARTER STATE EXISTING-HOME SALES EASE

WASHINGTON (May 15, 2006) – Existing-home sales, including single-family and condo, remained historically high in the first quarter but have experienced a downtrend since hitting a record in the third quarter of last year. Even so, 26 states showed increases in sales activity from a year ago, according to the National Association of Realtors®.

The latest report on total existing-home sales shows that the seasonally adjusted annual rate* was 6.80 million units in the first quarter, down 2.1 percent from the 6.94 million-unit level in the first quarter of 2005.

The biggest increase was in New Mexico, where existing-home sales rose 26.2 percent from the first quarter of 2005. Louisiana’s first-quarter resale pace rose 22.9 percent from a year earlier, while Montana experienced the third strongest gain, up 17.5 percent. Six other states recorded double-digit sales increases from a year ago. Twenty-one states and the District of Columbia experienced declines. Complete data for three states was not available.

David Lereah, NAR’s chief economist, said rising interest rates have dampened sales. “A steady rise in mortgage interest rates has slowed home sales in higher cost areas, yet job growth in some moderately priced markets is boosting sales in other areas,” he said. “The net effect is a modest decline in home sales for the nation as a whole, but sales remain historically strong and are providing a solid underlying base for the overall economy.”

View Quarterly Data

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.24 percent in the first quarter, up from 6.22 percent in the fourth quarter; it was 5.76 percent in the first quarter of 2005.

NAR President Thomas M. Stevens from Vienna, Va., said the sales pattern is expected to level out. “We project home sales may soften a little further before picking up in the fourth quarter, but we’re not looking for any significant changes in the market moving forward,” said Stevens, senior vice president of NRT Inc. “This should provide stability in the market so that buyers and sellers will be on a fairly level playing field in most of the country.”

Regionally, the strongest performance was in the South, which reported an increase of 2.3 percent to an existing-home sales pace of 2.71 million units in the first quarter in comparison with a year ago. After Louisiana, the strongest increase in the South was in Mississippi, up 17.3 percent from the first quarter of 2005; resales in North Carolina rose 17.0 percent; Arkansas and Tennessee also posted double-digit sales increases.

In the Midwest, existing-home sales rose 1.1 percent to a 1.56 million-unit annual sales level from the first quarter of 2005. Indiana led the region, up 10.4 percent from a year earlier, followed by Iowa, up 9.0 percent, and Ohio, with an increase of 6.2 percent.

The Northeast recorded an existing-home sales pace of 1.12 million units in the first quarter, down 2.9 percent from a year earlier. Sales activity in Maine rose 4.6 percent from the first quarter of 2005, Rhode Island increased 2.0 percent and New York sales declined 2.2 percent.

In the West, the existing-home sales level of 1.41 million units was 12.4 percent below the first quarter of 2005. After New Mexico and Montana, the best performance the region was in Utah where existing-home sales rose 12.7 percent from a year earlier; Hawaii sales increased 6.3 percent while Alaska rose 5.9 percent.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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* The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Minor revisions have been made to quarterly seasonally adjusted annual sales rates for 1999 through 2005. Each May, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data based on the most recent findings. Normally, revisions are for the past three years, but these revisions include some adjustments back to the benchmark year of 1999.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

Tables of state resale rates, percent changes and some historic data are available at the site below under Research – click on Existing-Home Sales, then State Existing-Home Sales.

Article offered by the NAR

Tuesday, May 30, 2006

NO COST MORTGAGE MAY BE UNWISE IN TODAY'S MARKET
No-cost mortgages are popular with home buyers who are trying to scrape together enough cash to buy a home. Now that the cost of mortgage money is rising, it makes sense to re-evaluate this financing strategy.

To say that a mortgage has no costs is a bit of a misnomer. The borrower pays few if any upfront fees to originate a no-cost mortgage. But the upfront fees, like points, are added to the cost of the mortgage. The cost is reflected in a higher interest rate.

"Points" is a term lenders use for the mortgage origination fee. One point is equal to 1 percent of the mortgage amount. So, if you pay one point to originate a mortgage for $500,000, you will pay $5,000 cash to the lender at closing.

There is an inverse relationship between points and the mortgage interest rate. The more points you pay, the lower the interest rate. One point is roughly equal to a quarter percent on the interest rate. If you were to pay one point, you'd buy the interest rate down 0.25 percent in relationship to a borrower who chooses to pay no points. For a no-point loan, your interest rate will be approximately 0.25 percent higher.

A no-cost mortgage was an attractive option when interest rates on fixed-rate financing were under 6 percent. Now that rates are moving higher, paying points may make more sense, particularly if you're buying for the long-term.

For example, let's say you're trading up to a home that you plan to own 20 years or so until your children are in college. You're financing the purchase with a $500,000 mortgage.

For one point, the interest rate will be 6 .25 percent with a monthly payment of $3,078.60. The zero-point option will cost 6 .5 percent with a monthly payment of $3,160.35--a difference of $81.75 per month, or $918 per year. If you opt to pay one point, you will need to keep paying on the mortgage for approximately five years and two months to break even when compared to the cost of the no-point mortgage.

HOUSE HUNTING TIP: To arrive at the break-even point when comparing a no-point loan to one with points, divide the points, or $5,000 in this example, by the annual difference in monthly payment, or $918. The result is the length of time in years that you need to keep the loan to make it worthwhile to pay points.

In the above example, there is an advantage to paying points for a lower interest rate if you keep the loan for over five years. The longer you keep the loan, the bigger the savings. In today's market, buying for the long term is a good strategy.

Paying upfront points also can be advantageous to home buyers who will benefit from a tax deduction. Points paid on a purchase mortgage are tax-deductible in the year of purchase by homeowners who itemize deductions on their federal tax return. Talk to your tax advisor for advice on whether you'll benefit tax-wise by paying points.

Keep in mind that paying points can be an unnecessary expense for buyers who purchase for the short term. You would also come out ahead with a no-point loan if interest rates were to decline over the next few years. In this case, you could refinance into a lower interest rate mortgage.

THE CLOSING: If you're short of cash and there are a lot of homes for sale that aren't moving quickly, you might ask the seller to pay points for you. This strategy will have less chance of success in a market where listings are selling quickly.

Dian Hymer is author of "House Hunting,

Tuesday, May 16, 2006

U.S. Single-Family Home Prices Cooled in the First Quarter

Prices for single-family homes in metropolitan areas cooled in the first quarter, but many metro regions are still showing double-digit annual gains, according to a survey released Monday by the National Association of Realtors.

In the first quarter of 2006, the median price for an existing single-family home was $217,900, a 10.3% increase over a year earlier. That pace of appreciation is down from the fourth quarter of 2005, when home prices rose 13.6% compared with the same period a year earlier.

A NAR economist said increased home inventories have reduced price pressures. "With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices," said David Lereah, NAR's chief economist.

Looking ahead, Lereah said he expected "most areas will be returning to normal rates of price growth in the single-digit range," when second quarter data is reported.

Still, while single-family prices are cooling nationally, some metro areas are still showing strong price growth.

Of the 149 metro areas surveyed by NAR, 60 regions had annual price growth in the double digits, while 16 showed price declines.

Several Florida regions showed surging prices over a year ago, with the Gainesville, Ocala and Orlando areas posting gains over 30%.

Condominium prices showed smaller prices gains than single-family homes in the first quarter, up 5.2% from a year earlier. The national median price for an existing condo was $224,100 in the first quarter.

Increasing inventories are also responsible for the slower price growth in the condo market, according to NAR President Thomas M. Stevens.

By Benton Ives-Halperin
From Dow Jones Newswires