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Welcome to the Market Matters Advisory, your weekly guide to responding to the market.
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January Home Sales Jump 21%
2009
Sales of existing single-family homes increased dramatically during January compared to year-ago levels as a growing number of prospective buyers who had been sitting on the sidelines jumped into the market to take advantage of exceptional values, the Southland Regional Association of Realtors® reported.
A total of 518 single-family homes changed owners throughout the San Fernando Valley, up 21.0 percent from January 2008.
Housing resale activity follows a pattern established in September of 2007 when the market hit bottom, leveled off for several months and has been climbing higher virtually every month since.
"Eventually prices will rise again, but right now the most favorable pricing in years is the grease that's oiling the housing market's wheels," said Ana Maria Colon, the 2009 president of the Association.
'Within a short time of hitting the market, the best of the properly priced properties get vacuumed up and disappear off the market, often with multiple buyers competing with each other."
Even with continuing problems landing a home loan to finance the purchase, Colon said activity clearly has picked up from just a few months ago with buyers scurrying from listing to listing in search of the most favorable bargain.
Sales of existing condominiums, which had languished as buyers generally favor single-family homes when the price is within reach, showed a similar pattern with resale activity picking up as prices moved lower.
A total of 166 condos sold during January, up a whopping 58.1 percent over a year ago.
"Prices that have not been seen since 2003 are bringing buyers out in numbers," said Jim Link, the Association's chief executive officer. "But the key to true, ongoing improvement of the housing market will be when consumers have confidence in the overall economy and lenders begin to write loans to qualified buyers.
"Interest rates remain very favorable, but lenders are still reluctant to write loans," Link said. "Will the Obama Administration's economic and housing stimulus packages help? Only time will tell."
While some people object to aiding existing owners stave off foreclosure, Colon said she believes efforts to help keep people in their homes benefits everyone.
"Be thankful that you're not in the same position," she said, "and realize that helping your neighbors keep their homes preserves your property value and is an essential step toward stabilizing the economy and the community."
In the meantime, a growing number of buyers realize that properties that just a short while ago were priced well beyond their budget now are within reach.
The January single-family median of $350,000 was down 24.7 percent from 12 months ago and off about 1 percent from December. The record high of $655,000 came in June 2007.
The condo median price fell at a faster clip then homes, off 48.4 percent from a year ago with a median price of $190,000 - a number last seen in 2002. The condo record-high median price of $41 5,000 was set in February 2006.
Pending sales suggest the market is gathering momentum. A total of 1,045 escrows were open at the end of January, up a dramatic 62.8 percent from a year ago and 14.3 percent higher than December.
Colon and Link said that despite public perception that the inventory is huge, the number of active listings is limited enough to soon begin to impact prices, especially as demand rises and the number of properties receiving multiple offers soars.
"Owners that do not have to sell right now are keeping their properties off the market," Colon said. "That means the inventory is limited because the number of foreclosures and short sales, which dominate current activity, in the San Fernando Valley is not as high compared to other regions of Southern California."
Active listings continued to fall with 4,750 active listings reported during January throughout the San Fernando Valley, down 31.4 percent from a year ago or more than 2,178 listings lower.
At the current pace of sales, that represents a 6.9-month inventory, only slightly on the high side of the 5- to 6-month supply that represents a balanced market.
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Foreclosure “crisis” is overblown
Although the national foreclosure rate rose 79 percent between December 2006 and December 2007, the rate was still only 1.033 percent of all homes. This is a regional problem, not reflective of the overall real estate market.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Foreclosure statistics are rarely presented in context. Because about 30 percent of homes are owned free and clear, only seven-tenths of 1 percent of all homes were in foreclosure last year.
• If you rank the top 100 foreclosure areas identified by RealtyTrac as reported by MSN Money, only 34 areas had foreclosure rates above the group average.
• Fifty-one areas had foreclosure rates of 1 percent or less.
• Foreclosure rates actually fell in 14 of the top 100 foreclosure areas.
 The New Yorker
Home Economics
As many as 15 million homeowners now owe more on their mortgages than their homes are worth. Homeownership isn't building wealth for these people, James Surowiecki editorializes.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Interest rates on home equity lines of credit are far below the rates of most credit cards, so homeowners who are able to tap those lines for emergencies accumulate less debt than renters forced to charge expenses at higher rates. A $30,000 home equity loan is running at about 5.75 percent this week, according to Bankrate.com.
• Overall, the median net worth of a lower-income homeowner is more than 13 times that of a renter with comparable income, according to Harvard University’s Joint Center for Housing Studies.
• Ownership is forced saving. Typically, payments in the first few years of a mortgage are applied to interest. As time passes, however, more and more of each payment is applied to the outstanding loan amount, accumulating equity that can be recaptured, if needed, through an equity line of credit or when the house sells.
 National Public Radio
Bernanke Warns of More Foreclosures, Despite Aid
More home foreclosures are coming, Federal Reserve Chairman Ben Bernanke warned on Tuesday. A “vigorous response” is needed.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Although high concentrations of foreclosures can be found in certain communities, these neighborhoods are not representative of the state as a whole. Foreclosure rates vary widely between neighborhoods, cities and counties.
• The declining home prices that have resulted from the large numbers of foreclosures in some areas have put entry-level homes within reach of many would-be home buyers who couldn’t afford homes in previous markets.
• There are several private and public initiatives already underway or in the works to help distressed home buyers.
In other news:
Tips on upcoming news stories, especially those that warrant a closer look.
 CBS 2 / KCAL 9
CBS 2 / KCAL 9 in Los Angeles is interviewing C.A.R. Treasurer Beth Peerce about pricing a home to sell. The segment is scheduled to air between 5 p.m. and 6 p.m. Thursday, March 6, 2008.
Here's what to tell consumers.
• The first $250,000 to $500,000 in capital gains from the sale of an owner-occupied home is excluded from taxation. Owners also are able to deduct local and state property taxes. There are very few comparable tax breaks for renters, and the few that exist are mostly restricted to low-income families.
• Owners reap the costs and rewards of their own behavior. Those who maintain a house well or make improvements to it will be rewarded when it’s time to sell. That gives both owners and neighbors a strong incentive to invest in their homes, according to a report from the Federal Reserve Bank of Philadelphia. Landlords reap either the cost or rewards of tenant behavior in a rental unit.
• More and more corporations are eliminating pension funds and shifting the burden of retirement saving to employees through 401(k) plans, which carry a degree of risk. Those who own their homes outright are in a much better position to stretch a fixed income in their retirement years.
Questions? Comments? Contact MarketMatters@car.org .
For archived copies of the Advisory, please click here.
Below are the latest real estate news headlines for buyers and sellers.
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How Can It Be Wrong
It Was Inspected By The City.
A common misconception about new and remodeled homes is that construction is error-free when the city has given its stamp of approval. Building defects are rarely the fault of a negligent inspection. The blame (or responsibility) belongs to the builder or contractor.
State law: Municipal/city building inspectors cannot be held liable for negligence. In the case of Harshbarger v. City of Colton (January 28, 1988), the Court of Appeal ruled that the city was immune from liability providing that a public entity is not liable for an injury caused by negligent or intentional representation by an employee for failure to make an adequate inspection of property.
Municipal codes: Section 104.2.6 of the Uniform Building Code states “The building official charged with the enforcement of this code, acting in good faith and without malice in the discharge of the duties required by this code or other pertinent law or ordinance shall not thereby be rendered personally liable for damages that may accrue to persons or property as a result of an act or by reason of an actor the omission in the discharge of such duties.”
Section 109.1 of the Uniform Building Code states “Issuance of a certificate of occupancy shall not be construed as an approval of a violation of the provisions of this code.”
From the Contractors State License Board (CSLB) (http://www.cslb.ca.gov/consumers/infocomplaint.asp):
Complaints within CSLB's jurisdiction involve alleged violations of the Contractors License Law. CSLB has jurisdiction over licensed and unlicensed contractors for up to four years from the date of an illegal act. Violations of the law by a licensed contractor may result in a citation or charges against the contractor that could lead to suspension or revocation of the contractor's license. Citations may contain civil penalties of up to $5,000 and/or orders of correction requiring the contractor to make repairs to your project or pay you to hire others to do so.
Section 7109 of the Business and Profession Code requires disciplinary action for “Willful disregard of plans and specifications, or failing to complete the job in a good and workmanlike manner.”
Section 7110 of the Business and Profession Code requires disciplinary action for “Willful disregard and violation of building laws.”
Swimming Pool Safety
WASHINGTON, D.C. – The U.S. Consumer Product Safety Commission (CPSC) has launched a prevention campaign as part of an intensified initiative to prevent tragic accidents.
Close supervision of young children is vital for families with a home pool -- and not just when outside using the swimming pool. A common scenario is that young children leave the house without a parent or caregiver realizing it. Children are drawn to water; not knowing the terrible danger pools can pose. Also, just because children know how to swim, doesn't mean they are safe. All children should be supervised every second while in and around the swimming pool.
The commission offers these additional tips to prevent drowning:
Fences and walls should be at least 5-feet high and installed completely around the pool. Fence gates should be self-closing and self-latching. The latch should be out of a small child's reach. Keep furniture that could be used for climbing into the swimming pool area away from fences.
- If your house forms one side of the barrier to the pool, then doors leading from the house to the pool should be protected with alarms that produce an 85 decibel when a door is unexpectedly opened.
Keep rescue equipment by the swimming pool and be sure a phone is poolside with emergency numbers posted. Knowing cardiopulmonary resuscitation (CPR) can be
Vacation-Home Sales Hit Record;
Investment Purchases Fall
By Amy Hoak
From The Wall Street Journal Online
A sharp drop in investment-home sales offset a record number of vacation-home purchases to bring down the overall number of second-home purchases in 2006, the National Association of Realtors reported.
Vacation-home sales rose 4.7% to a record 1.07 million homes in 2006 from 1.02 million in 2005. Investment-home sales fell 28.9% to 1.65 million homes in 2006 from 2.32 million in 2005, according to the group's annual survey of investment- and vacation-home buyers.
The share of second-home sales was 36% of all existing and new residential real-estate transactions in 2006, down from 40% of all sales in 2005, the group said. Primary-residence sales fell 4.1% in 2006 to 4.82 million from 5.02 million.
The median price of a vacation home was $200,000 in 2006, down 2% from $204,100 in 2005. Investment-home prices were also down, with the typical home costing $150,000 last year, down 18.3% from $183,500.
The profile of a typical vacation-home buyer in 2006 was someone 44 years old with a median household income of $102,200, according to the NAR. Typically, these vacation homes were a median of 215 miles from the owner's primary residence, though 42% of vacation homes were closer than 100 miles and 32% were at least 500 miles away.
According to the report, 79% of vacation-home buyers wanted the property as a vacation or family retreat, 34% wanted to use the property to diversify their investments, 28% planned to use it as a primary residence in the future, 25% were motivated by tax benefits, 22% intended for a family member or friend to use the property, 21% said they bought because they had extra money to spend, and 18% plan on renting the property to others.
The most popular location for the homes was in rural areas; 29% of the homes were purchased in the country. But 24% were located in resorts, 22% in a suburb and 10% in an urban area or central city. Sixty-seven percent of the homes were detached single-family houses, 21% were condos and 8% were townhouses or row houses.
Investment-home buyers were younger and earned less than vacation-home buyers.
Email your comments to rjeditor@dowjones.com.
-- May 02, 2007
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