(July 23, 2009 Release)
Highlights
• Existing home sales rose 3.6 percent to an annualized pace of 4.84 million in June. The annualized home sales in June is now only 0.2 percent below its pace from a year ago.
• June’s sales pace is more than slightly above its 3 month average of 4.76 million units.
• The West and South experienced a 6.4 percent and 4.0 percent increase, respectively, while the Northeast and Midwest experienced a 2.5 percent and 0.9 percent increase, respectively.
• It was reported that 31 percent of home sales were foreclosure and short sales in June, down from a 33 percent share in May.
• The median home price declined 15.4 percent from a year ago.
• The months’ supply of homes available for sale declined to 9.4 compared to 9.8 in May.
| Existing Home Sales (Mil, SAAR) | ||||
| June 09 | May 09 | 3 mo Avg | 1 year ago | |
| United States | 4.89 | 4.72 | 4.76 | 4.90 |
| % change | 3.6 | 1.3 | -0.2 | |
| Northeast | 0.82 | 0.80 | 0.80 | 0.86 |
| % change | 2.5 | 3.9 | -4.6 | |
| Midwest | 1.10 | 1.09 | 1.06 | 1.12 |
| % change | 0.9 | 9.0 | -1.8 | |
| South | 1.81 | 1.74 | 1.76 | 1.88 |
| % change | 4.0 | 0.0 | -3.7 | |
| West | 1.16 | 1.09 | 1.13 | 1.04 |
| % change | 6.4 | -5.2 | 11.5 | |
| Months’ Supply | 9.4 | 9.8 | 9.8 | 11.0 |
| Median Existing Home Prices (Ths, NSA) | ||||
| June 09 | May 09 | 3 mo Avg | 1 year ago | |
| United States | 181.8 | 174.7 | 174.4 | 215.0 |
| % change | 4.1 | 4.9 | -15.4 | |
| Northeast | 249.4 | 244.3 | 243.7 | 264.9 |
| % change | 2.1 | 2.8 | -5.9 | |
| Midwest | 157.0 | 147.1 | 147.6 | 172.8 |
| % change | 6.7 | 6.0 | -9.1 | |
| South | 163.2 | 157.5 | 156.2 | 185.3 |
| % change | 3.6 | 6.5 | -11.9 | |
| West | 214.8 | 207.0 | 208.7 | 286.0 |
| % change | 3.8 | 1.4 | -24.9 | |
Source: National Association of Realtors
Analysis
Existing home sales rose for the third consecutive month to an annualized pace of 4.89 million units. The June sales pace was predicted by a relatively strong pending home sales report in the prior month. The 4.89 annualized pace of sales is now above its 3 month of 4.76 average, suggesting that existing home sales is steadily drifting upward from its cyclical low of 4.49 million unit pace set in January. However, from a longer term perspective, existing home sales continues to hover in the 4.5 to 4.9 million unit range over the past 12 months. This is disappointing news given that mortgage rates are near cyclical lows and mounting foreclosures are biasing the existing sales numbers upward. Foreclosure sales made up 31 percent of total existing home sales for June. It is also clear that there continues to be a meaningful number of appraisal valuations that differ from contract prices which are forcing lenders to deny mortgage applications. These is contributing to a historically high fallout ratio from pending contracts to closings.
Unexpectedly, the inventory of homes available for sale in June dropped to 3.823 million compared to 3.937 million in April. An increasing number of households with children usually put their homes on the market during the Spring season (as the school session nears an end) so it is surprising to observe the inventory of homes for sale decline in June. Because of this drop, the months supply fell to 9.4.
It is possible that we have seen the worst in the housing marketplace. There is likelihood that the housing correction may be nearing its end and bottoming out. There are some positive influences for the housing sector. Mortgage rates are hovering near historic lows and are expected to remain at these levels for the remainder of the year. The fiscal stimulus package promises to have a positive impact on consumer confidence and spending patterns. And the foreclosure mitigation programs are expected to slow the pace of foreclosures, exerting downward pressure on housing supply.
However, on the down side, the economy remains in a recession, shedding a meaningful number of jobs on a monthly basis. Credit conditions also remain tight, keeping households who want to purchase homes out of the purchase marketplace. And home values continue to fall as evidenced by the 15.4 percent drop in the median home price, year over year. On balance, it will take time for the housing sector to recover. It is possible that January’s home sales pace represents a cyclical bottom for today’s housing recession, but the pace of home sales are expected to remain weak for the remainder of this year.
April 15th, 2012 at 8:20 am
There are two types of 203k FHA loans. The first is a streamline 203k and is for iprares from $5000 to $30,000 which is where this property would probably fall. The second is where the iprares are over $30,000. If the first type you can use a contractors estimated cost of repairing the needed items to ensure that the property is brought up to meet minimum standards. The contractor will also include a 10% buffer for any items that may occur or surface during the rehabilitation. If the house is old, the lender will require another 5% buffer, due to older properties require more work and when fixing some items it may actually lead to having to do something that was not anticipated originally. The lender will use a plan reviewer to review the contractors bid as it must be at retail costs, as to protect the lender if the contractor were to quit or the borrower were to fire them, due to lack of progress, as work must not cease for thirty days at any time. A hold back of ten percent per contractor draw is done, to further ensure that work is completed satisfactorily and the lender will use a 203k inspector to approve each draw, and generally there aren’t but five draws, but on much larger projects there could be more.Qualifying for the loan is the same, and the repair cost are added in to obtain the total acquisition cost, and the borrower’s down payment is based on that along with any financed closing costs. It is a great program because you don’t have to get a bridge loan or a home improvement loan, as this loan is both rolled into one. Not all lenders do this type of loan as it requires additional staffing and it can only be sold on the secondary market to a few investors or on a GNMA two pooling program therefore the interest rate or total APR will be a little higher than a non 203k loan. It is the only way to go when buying a house in as is condition at a lower than market price, as FHA will base the value on the after improved value, not the price you are paying to the seller. In some cases the iprares may exceed what the market value will support and the buyer would have to pay the difference, and any work done by the buyer cannot be funded from the reserves established by the lender and contractor. Typically the buyers will do some of the cosmetic work as FHA doesn’t require cosmetic work as a rule to meet their minimum property standards. I could write a book on this but will stop at this point as you probably have a general idea of how to proceed. Good Luck,