Friday, December 18, 2009

Fewer homebuyers calling off contracts

Denver Business Journal - by Paula Moore

Cancellation rates for buyer contracts on newly built homes were down by half in late 2009, and the rate of home shoppers who buy was up, indicating an improving Denver-area housing market.

The improvements in new-home sales were driven largely by the federal government’s first-time homebuyer tax credit, which provides as much as $8,000 toward the cost of a home, according to housing experts.

Weekly cancellations in November and December averaged roughly 22 percent, compared to 40 percent to 45 percent for the same months of 2008, according to housing industry data provider Metro-study Inc. of Houston.

“Contracts spiked in October because of buyers’ anticipation of the tax credit’s expiration in November,” said John Covert, Metrostudy director for Colorado and New Mexico. “People were feeling anxious.”

The U.S. Congress extended the first-time homebuyer tax credit, which was set to expire Nov. 30, in early November and added a $6,500 credit for existing home-owners wanting to buy a home. Both credits expire April 30, 2010, and home sales must close by June 30.

“The conversion rate of people who walk in and sign a contract has gone up,” said Roger Reinhardt, executive vice president of the Home Builders Association of Metro Denver (HBA). “That’s a good sign.”

The conversion rate is the amount of people in a week who go into a builder’s sales office and end up signing a purchase contract. If 1,000 people meet with a builder in a week, for example, and 100 of them sign purchase contracts, that’s a 10 percent conversion rate.

Metro Denver’s weekly home-sale conversion rate increased to nearly 6 percent in December from roughly 5 percent for the same month of 2008 and 4 percent one year earlier, according to Metrostudy.

“The conversion rate of buyer traffic into sales contracts … has been higher in 2009 than in the previous three years, and it’s almost entirely due to the first-time homebuyer tax credit,” Covert said.

But the federal tax credit isn’t the only reason why more homebuyers are signing purchase contracts and closing the deals this year.

“We had a lot of lookie-loos a few years ago — people who were looking for a new home because they felt they should be — but those people are gone,” Covert said. “People out there looking now are motivated to buy; they’ve got credit.”

Homebuilding analysts expect metro Denver’s new-home market to remain challenging in 2010, but they think this region is in a better position to rebound than are many others. That’s partly because local builders are being disciplined — building to meet demand, rather than doing a lot of speculative construction.

“Housing starts are likely to go up next year, even if demand stays the same, because we’re out of inventory,” Covert said.

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Tax credit drives surge in home sales

Denver Post

Tax credit drives surge in home sales

By ALAN ZIBEL AP Real Estate Writer

Posted: 12/22/2009 12:17:19 AM MST

Updated: 12/22/2009 02:39:18 PM MST

Click photo to enlarge

... (Chart shows the 10 best and worst housing market sales percent change for August 2009 from...)

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WASHINGTON—Extraordinary government efforts to stabilize the housing market are paying off. What happens when the help runs out is anyone's guess.

Sales of previously occupied homes surged in November to the highest level in nearly three years, spurred by federal subsidies for starter homes and a massive Federal Reserve push to drive down mortgage rates.

The strong figures were driven by a race to take advantage of a tax credit of up to $8,000 for first-time homebuyers. The credit has since been extended to next spring, but the government initially planned to end it Nov. 30.

"It was like the end of the world," said real estate agent Stephanie Somers of Re/Max Access in Philadelphia. "All the first-time buyers converged onto that one month."

The pace of home sales is now up 46 percent from its bottom in January and still 10 percent shy of its peak from four years ago, according to data released Tuesday by the National Association of Realtors.

The real estate recovery depends not only on taxpayer dollars but also on the health of the economy at large, which grew at a less robust pace in the third quarter than previously thought.

The economy grew at a 2.2 percent annual pace from July to September, down from an initial reading of 2.8 percent, the government said Tuesday.

Experts think the economy is even stronger now than it was last quarter, but they expect it to ebb again early next year. And that's when the tax credit will wind down and the Fed plans to stop buying mortgage-backed securities, which could raise mortgage rates.

Whether the real estate rebound can continue without the help remains to be seen.

"The housing market recovery can't continue if the overall recovery in the economy doesn't persist," said Michelle Meyer, an economist with Barclays Capital.

While prices for homes in many parts of the country are still falling, analysts said the tax credit clearly helped the volume of sales.

"In the short run, it's an effective stimulus," said John Ryding, chief economist at RDQ Economics. "If you give someone money to spend on something, they will spend it."

With April 30 as the new deadline, experts forecast sales will drop during the winter and pick up again in the spring. Without the looming deadline, "buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.

About 2 million homebuyers have taken advantage of the credit so far, the Realtors group said. It expects 2.4 million more to use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record.

Overall, sales of existing homes rose 7.4 percent in November to a seasonally adjusted annual rate of 6.54 million, up from 6.09 million in October. That was far stronger than the 6.25 million forecast by economists surveyed by Thomson Reuters.

The inventory of unsold homes on the market shrank about 1 percent to 3.5 million. That's a healthy supply of about six and a half months' worth, the smallest in three years.

That home prices are still falling shows one government housing program, an effort to get lenders to prevent foreclosures by lowering monthly payments for hundreds of thousands of borrowers, isn't working as well as the Obama administration would like. Only about 31,000 borrowers have completed the process so far.

In the meantime, high unemployment is causing homeowners to default on their loans in record numbers. Banks are unloading foreclosed homes, driving prices down in many areas, particularly Arizona, California, Florida and Nevada.

Nationwide, the median sales price was $172,600 in November, down 4 percent from a year earlier, but flat from October.

Many experts warn that lenders have millions of properties in the foreclosure pipeline that have yet to come on the market, suggesting prices could fall even further. Plenty of traditional sellers are also keeping their homes off the market.

"When they start thinking they can sell them, we could see a surge in homes for sale," wrote Joel Naroff, president of Naroff Economic Advisors.

In the meantime, homebuyers can take advantage of record-low mortgage rates, deeply discounted prices and federal incentives. Besides the tax credit for first-time buyers, owners who have lived in their homes for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, they have to sign a purchase agreement by April 30.

Real estate agent Tim Surratt of Grenwood King Properties in Houston said activity has remained healthy this month, even only days before Christmas. "The window to purchase where the prices are right and the interest rate is right is closing," he said.

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AP Economics Writer Jeannine Aversa in Washington and AP Real Estate Writers J.W. Elphinstone in New York, Alex Veiga in Los Angeles and Adrian Sainz in Miami contributed to this report.

Read more: http://www.denverpost.com/business/ci_14046898#ixzz0bHPdnD52

Home resales surge to nearly 3-year high

MSNBC.com

Home resales surge to nearly 3-year high

Sales spurred by original expiration of tax credit for first-time buyers

The Associated Press

updated 9:02 a.m. MT, Tues., Dec . 22, 2009

WASHINGTON - Home resales surged last month to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from the worst downturn since the Great Depression.

Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to expire Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.

The Realtors estimated that about 2 million homebuyers have taken advantage of the credit so far and forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record jump.

Sales are now up 46 percent from the bottom in January, but down 10 percent from the peak more than four years ago.

The median sales price was $172,600, down 4.3 percent from a year earlier, and up 0.2 percent from October.

"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there."

November sales rose 7.4 percent to a seasonally adjusted annual rate of 6.54 million, from a downwardly revised pace of 6.09 million in October.

Sales had been expected to rise to an annual pace of 6.25 million, according to economists surveyed by Thomson Reuters.

The inventory of unsold homes on the market fell about 1 percent to 3.5 million. That's a healthy 6.5 month supply at the current sales pace, the lowest level in three years.

Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.

Postponing the deadline could mean sales will drop during the winter months and recover in the spring.

"Buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: http://www.msnbc.msn.com/id/34521144/ns/business-real_estate/

business

Colorado bill aims at abandoned properties' sale time

The measure to be introduced next year would allow homes to be occupied more quickly.

By Margaret Jackson
The Denver Post

Posted: 12/23/2009 01:00:00 AM MST

A bill to be introduced in the state legislature next year would cut in half the time it takes lenders to sell abandoned properties.

Gov. Bill Ritter and state legislators announced the bill Tuesday at a news conference at the Clements Community Center in Lakewood. The bill, to be co-sponsored by Reps. Jeanne Labuda, D-Denver, and Dianne Primavera, D-Broomfield, and Sen. Mike John ston, D-Denver, will allow homes to be occupied more quickly so they don't become a safety hazard, a magnet for vandalism and other crimes, or a drain on nearby property values.

"Abandoned properties turn a family-friendly neighborhood into a hazard for children," Ritter said.

Current law calls for a minimum four-month sale process, but many foreclosure sales take seven to nine months to complete.

Currently, when a lender submits the paperwork to start the foreclosure process, the title for the property is still with the mortgage holder, even if the home is abandoned. That means there is no one responsible for maintaining the property, because the homeowner is gone and the home does not yet belong to the lender.

The bill would allow the bank to take over a property faster, giving municipalities and homeowners associations someone to hold accountable for maintenance.

"Before, we didn't discriminate between abandoned and non-abandoned," Ritter said. "When someone moves out and abandons their property, there's no reason not to move (the time frame) up and move it up quickly."

Colorado is on track to top the record of 39,900 foreclosure filings set in 2007 as widespread unemployment makes it harder for borrowers to make their mortgage payments. New foreclosure filings statewide during the third quarter reached a record high of 12,468, according to a report released last month by the Colorado Division of Housing. New filings for the first nine months of the year were up 18 percent to 35,112.

The number of completed foreclosures grew to 5,618 in the third quarter, the second consecutive quarter- over-quarter increase. But the total number of completed foreclosures fell to 14,971 during the first three quarters, compared with 16,265 during the same period last year.

The legislation would complement the $5.8 billion federal Neighborhood Stabilization Program designed to help foreclosure-blighted neighborhoods.

"More folks are fighting hard to maintain their mortgages," Johnston said. "The next critical step is to protect neighborhoods."

Margaret Jackson: 303-954-1473 or mjackson@denverpost.com

Read more: http://www.denverpost.com/technology/ci_14052416#ixzz0b5LcQ1R3

Renovating doesn't pay off like it used to

By Les Christie, staff writerDecember 21, 2009: 7:15 AM ET

NEW YORK (CNNMoney.com) -- Home remodelers are getting less bang for their bucks. For the fourth straight year, renovation jobs have added less to resale values relative to their costs, according to an annual Remodeling Cost vs. Value Report released this week by the National Association of Realtors.

The average remodeling job cost $50,908 in 2009 and added $32,497 to the value of the home, a ratio of 63.8%. That was down from a cost-to-value ratio of 67.3% in 2008, when the average was $49,866 and the added value was $33,568.

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One common renovation, a mid-priced bath remodel, for example, runs an average of $16,142 and adds only $11,454 to the resale value of a house -- recouping just 71% of its cost. In 2008, the same job cost less -- $15,899 -- and typically added $11,857 to the home's value, recouping 74.6%.

The most financially successful jobs are smaller-scale, lower-cost renovations that improve the exterior appearance of homes. In this down real estate market, curb appeal is king.

"Once again, this year's report highlights the importance of a home's first impression," said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz.

Ron Phipps, a real estate broker in Rhode Island, said how the house looks from the outside is more important than ever.

"If you're driving down the street and the house doesn't have great appeal, it doesn't matter how nice it is inside," he said.

But here's the kicker: Clients are savvier than ever in their shopping. Even though the costs of home improvements are less likely to be returned on resale than they have been in prior years, sellers may still have to bite the bullet and do the remodeling if they want their house to sell at all, he said.

"It's kind of intriguing," said Phipps. "Buyers are using the unimproved houses to negotiate lower prices, but they wind up buying the remodeled homes."

So, if there are two similar houses in the area, buyers will use the listing price of the one that has not gone through a metamorphosis to get the seller of the renovated house to slash their price. Buyers want to pay for the caterpillar but get the butterfly.

Seller must play along if they want to make deals. "You get to sell the house more quickly if you do the renovations," Phipps said.

Biggest pay-offs

The major job that returns most in resale value is an upscale replacement of siding using fiber-cement. The job costs an average of $13,287 but increases home value by $11,112, or 83.6%. A vinyl siding replacement returns 79.9% of costs.

Adding a basement bedroom is also fairly cost effective, averaging $49,346 but adding $40,992 in value, an 83.1% return.

"Increasing livable square footage with a new deck or an attic bedroom is usually more valuable than just remodeling existing space," Phipps said.

The return on investment for some jobs varies greatly by region.

In New England, where winter are long and cold, vinyl window replacements reap a better return than they do in the warm South Atlantic region, where poorly insulated windows don't mean as much expensive heat leaking away.

So, although replacement windows cost more in New England -- an average of $11,155 -- they add $9,152 to home values there, recouping 82.3% of their cost. In the South Atlantic states, they cost $9,705 but add just $7,417 to home values, 76.4% of their cost.

On the other hand, buyers in the South Atlantic seem to reward sellers for adding living space more than they do in New England. Maybe thrifty Yankees hate having to heat those extra rooms.

Finishing a basement returns 84.4% of its $55,357 cost in the South Atlantic and only 64% of the $65,715 New Englanders spend for the job.

Among the remodeling jobs faring the worst in return on investment were large, upscale kitchen remodels. They cost an average of $111,794 in 2009 and added $70,641 in recoupable value, just 63.2%.

That was down a whopping 7.5 percentage points from their 70.7% return on investment in 2008 . At the height of the housing boom, in 2005, upscale kitchen renovations returned more than 80% of their costs.

"A lot of the things that, historically, had huge value, don't have as much today," said Phipps. "If you want to redo a kitchen, it may no longer make as much sense to use upscale appliances -- Viking ranges, Sub-Zero refrigerator. Buyers may not pay any more than they would for a home with GE appliances instead."

Of course, most remodeling jobs are done to please homeowners. Any increase in home value is a bonus, not an end in itself. But for anyone thinking of selling in the near term, keeping an eye on the bottom line is always a good idea.

Monday, December 21, 2009, 2:56pm MST | Modified: Monday, December 21, 2009, 10:01pm

Foreclosure sales down from 2008, but new filings up, in Colorado’s urban counties

Denver Business Journal - by Mark Harden

Foreclosure auction sales in urban Colorado counties declined 13 percent in the first 11 months of 2009 from the same period of 2008, the state Department of Local Affairs’ Division of Housing reported Monday.

But at the same time, new foreclosure filings rose 12 percent in the 12 urban counties covered by the report, officials said.

In Denver itself, new foreclosure filings changed only slightly between 2008 and 2009, while completed foreclosure sales fell 33 percent.

There were 36,628 foreclosure filings and 14,975 foreclosure sales from January through November this year in Colorado’s 12 urban counties, versus 32,744 filings and 17,160 sales in the same months of 2008, the new report said.

For November alone, foreclosure sales in the urban counties were down 0.5 percent from same month of 2008, to 1,512, while new foreclosure filings rose 11.8 percent, to 2,802, the state report said.

Both filings and sales declined between October and November of this year in the urban parts of Colorado, by 13.4 percent and 0.4 percent respectively.

“At this point, it appears very unlikely that the number of completed foreclosures will reach the totals set in 2007 and 2008,” Division of Housing spokesman Ryan McMaken said in a statement.

“November was a relatively light month for foreclosures, but with new foreclosure filings still up compared to last year, foreclosures will continue to be a challenge,” McMaken added.

The 12 counties covered by the report include the Denver metro area counties — Denver, Adams, Arapahoe, Boulder, Broomfield, Douglas and Jefferson — as well as El Paso (Colorado Springs), Larimer (Fort Collins), Mesa (Grand Junction), Pueblo and Weld (Greeley) counties.

For January through November of this year in the Denver metro area, new foreclosure filings rose the most in Boulder County (up 39 percent) and Broomfield (up 23 percent) from the same period of 2008.

There was almost no change in filings in Denver between 2008 and 2009 and only a 3 percent rise in Arapahoe County.

As for completed foreclosure sales, changes varied widely from a 126 percent increase in Boulder County to Denver’s 33 percent decrease and Adams County’s 22 percent drop.

Click here to download the full Division of Housing foreclosure report, including county-by-county tables.

mharden@bizjournals.com