by The KCM Crew on January 30, 2012

• Warren Buffet is seen by many as the greatest investor of our time. When he speaks, people listen. Like anyone else in his position of influence, he is criticized by some for using his bullhorn to promote his own business agendas at times. That makes it very interesting when we occasionally learn of how he privately advises those closest to him.

Such a situation occurred this week. Debbie Bosanek, Warren Buffet’s secretary of 37 years, recently purchased a second home in Surprise, Arizona.

In an article in the Omaha World Herald, Mrs. Bosanek discussed her reasons for purchasing a second home and the personal advice she received from Mr. Buffet.

“I just thought it was time to buy a home. Warren tells me that it will be the best opportunity in my lifetime. Mortgage rates are low and prices have dropped dramatically…I share Warren’s view about the future of America, and we believe that our country will do just fine. I’m happy to make this investment.”

The greatest investor of the last century privately has told the people closest to him that buying a home right now “will be the best opportunity in [their] lifetime”.

That’s good enough for us. How about you?

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

Distressed homes made up 32 percent of sales in December, according to NAR’s existing home sales report for the month.
Foreclosed home sales closed at about 22 percent below market rate in December, a discount 2 percent higher than that recorded a year earlier.

Investor demand remains steady with 21 percent of homes sold in December going to investors after this category of buyers took 19 percent of purchases in November and 20 percent one year ago.

Cash sales – commonly linked to investors – made up 31 percent of December’s existing-home sales. This rate was 28 percent in November and 29 percent a year ago.

Purchases by first-time home buyers declined in December – both from the previous month and the previous year. First-time home buyers accounted for 31 percent of purchases in December, down from 35 percent in November and 33 percent in December 2010.

Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.

“The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.

However, listed inventory is only part of the equation, and according to CoreLogic’s latest numbers, shadow inventory stands at about 1.6 million.

Regardless, Dales believes sales will rise this year. “Housing still won’t contribute much to GDP growth over the next few years, but at least it will no longer subtract from it,” Dales says.

By: Carrie Bay 

 

CoreLogic’schief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.In the first release of CoreLogic’s new MarketPulse newsletter Wednesday, Fleming explained his rationale for such an assessment.

He notes that housing is an industry with long business cycles. Regional housing recessions have typically taken anywhere from three to five years to find their bottom, and Fleming says the national housing recession has behaved similarly in that it has bounced along a bottom for the past two years.

Fleming points out that housing affordability is rising dramatically due to a combination of home price deflation and rock-bottom mortgage rates. In fact, he says, after adjusting for inflation, this has been a “lost decade” for housing as prices are the same as at the beginning of the millennium.

“The time is right in 2012 for prices to begin growing again,” Fleming said, “and housing affordability will put a floor under any further significant declines.”

Fleming says he will be watching the spring and summer buying season closely for positive signs of demand.

 

Clear Capital’s report shows U.S. prices declined 0.4 percent in December on a quarter-over-quarter basis as markets gave back some of the gains of the summer buying season.

December’s quarterly assessment is the first cooling off after six monthly reports from Clear Capital showed minimal quarterly gains. In fact, the company says the most recent six months of the year saw national home prices flat, posting a decline of just 0.1 percent over the second half of 2011.

The 2.1 percent price decline over 2011 marked the smallest year-end change in either direction since the market gained 1.7 percent in 2006, according to Clear Capital.

Regional trends revealed a bit more price variability. The Northeast’s meager 0.1 percent yearly gain led the nation, comparing favorably to declines of 1.3 percent, 3.0 percent, and 4.4 percent turned in by the South, Midwest, and West, respectively.

While changes in prices across the U.S. were mild for 2011, there were notable extremes at the positive and negative sides of the market, Clear Capital says.

Four metros posted price declines greater than 10 percent. Atlanta, Georgia, led the way with 18.3 percent shaved off its home values in 2011, followed by Seattle, Washington, which posted a 15.1 percent annual decline. Birmingham, Alabama, and Detroit, Michigan, also rode the markets down with 11.1 percent and 10.8 percent price drops, respectively.

On the positive side, Dayton, Ohio, enjoyed 11.5 percent annual price growth in 2011. The next two strongest performers came from Florida, with Orlando and Miami laying claim to 6.7 percent and 5.6 percent price gains, respectively. (Please note that Miami and Fort Lauderdale are considered included in the Miami metro. AW)

Each of the markets with double digit declines saw an increase in the percentage of sales that were REOs, while declines in REO saturation helped buoy the top performing markets to positive price growth in 2011.

Nationally, Clear Capital says REO saturation reached a new yearly low at the end of 2011 at 24.8 percent.

Clear Capital expects 2012 to play out much like the last half of 2011, with only a very subtle price change at the national level. A minimal decline in the beginning of the year is expected to turn into a meager gain by year’s end, the company explained.

At a more granular level, half of the 50 major metro markets included in Clear Capital’s study are expected to post gains for the year, with individual metros experiencing the full gamut of price movement, from double-digit growth to double-digit drops.

DSN.com

Racked by the devastating foreclosure crisis, Florida ranks third in the U.S. in mortgages that are being formally repossessed by banks.  Home and condo values are declining in the over-whelming majority of the Sunshine State, despite an increase in sales. But Miami is a major exception to the deescalating market.

International buyers from South America and Europe are paying cash for more than half of all home and condo purchases in the Miami area, sending the values of properties higher. The states largest metropolitan area has transformed into a rare exception for the U.S. housing market in the depths of the worst crash since the Great Depression.

However, the volume of home and condo sales is rising in almost all of Florida as the state recovers from the hardest housing crash since the 1920s prior to the Great Depression. Miami is projected to experience increasing home and condominium sales through 2012 on housing inflation forecast to be 6.4%. Condo prices are expected to rise the most.

The foreclosure crisis has riddled the economy in major sections of Florida, including Fort Myers, which has had one of the highest foreclosure rates in the nation for more than three years. Troubled homeowners, many of whom have lost their jobs and who have been unable to reach agreements with their banks to modify mortgages are leaving their homes abandoned in Fort Myers and neighboring Cape Coral, departing to find work elsewhere. Fort Myers is forecast to lose another 6.8% in home prices in 2012.

Fort Lauderdale is projected to witness growing sales, especially in the vacation home market with prices forecast to rise a slim 3.2% for the year. Naples, however, is expected to sustain a tougher market in the new year as its sells off the bloated inventory of foreclosures and bank assisted short sales before reaching any sort of stabilization. Naples is forecast to suffer deflation of 4.3% for the year.

City	Forecast
Miami	6.4%
Tampa	− 5.3%
Orlando	− 5.2%
Tallahassee	− 4.6%
Jacksonville	− 4.4%
Fort Myers	− 6.8%
Fort Lauderdale	3.2%

Naples

− 4.3%

Destin

6.1%

In larger Tampa, home and condo prices will continue to decline even asnear record low mortgage rates drive an increase in sales. The over-built Tampa market is sustaining the foreclosure crisis with a massive volume of troubled properties, which will pressure property values 5.3% lower in 2012.

In Orlando the housing market has made a devastating impact on the local economy, where more than one out of four homes is projected to be foreclosed or sold by the banks in short sales. The foreclosure crisis has sent home prices reeling and they aren’t projected to rise for a number of years. Orlando is forecast to sustain an additional 5.2% in housing deflation in 2012.

Further north, Jacksonville is experiencing better sales but only because of falling prices, which are projected to decline with no end in site for the collapse to end. High unemployment in Florida and little hope for improvement in the current economy have sidelined many home buyers. As a result, Jacksonville home prices are forecast to decline 4.4% in 2012.

In the state capital, Tallahassee sales have increased but not enough to save the market from its historic making fall projected to reach another 4.6% deflation in home values in 2012. But that won’t be close to the decline that one of the finest resort markets in the country, Destin is forecast to suffer as it recovers from the crash with 6.1% in housing deflation in 2012