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Home sales down; so are home prices

By Katy Stech (Contact)

The Post and Courier

Thursday, December 11, 2008

Home numbers
$202,702: Median price year-to-date, down 3% from first 11 months of 2007. The median price for November alone was $185,503.
8,199: Number of homes that have been sold year-to-date. That’s down 24% from the same period of 2007.
8,503: Number of single-family homes on the market
1,825: Number of condominiums or co-op units on the market
105: Average days on the market for house that sold in November

First, the bad news.

Charleston-area home sales plunged a dramatic 46 percent last month compared to the same month last year, marking the steepest year-over-year slide since the local housing slump began.
Only 435 homes sold during November, a figure so low that the Charleston Trident Association of Realtors, which tallies the figures, couldn’t find a lower monthly sales number in its database, which dates to 2003.
But the good news is that the sales drop came with a slide in home prices, which means that Charleston real estate has become relatively more affordable.
The median price of homes sold last month fell 7 percent to $185,503, the lowest monthly level since April 2005.
Home prices in that range were typical during 2004 and 2005, but the housing boom that followed pushed prices well beyond the $200,000 threshold.
Figures released Wednesday by the Realtors group show that the bulk of homes sold last month were priced between $100,000 and $249,000. Only 48 homes priced above $400,000 changed hands.
“If you’re renting or a newly married couple or you’ve relocated, clearly this is a better time to buy a house than last year,” said Frank Hefner, a research economist at the College of Charleston. “But will prices keep dropping? That’s anyone’s guess.”
The slide in prices has led some buyers to question whether they’ll ultimately overpay for their property, he said. Additionally, the global financial crisis has further crippled consumer confidence, shaken job security and restricted the flow of home financing to buyers with questionable credit history.
“We can still say ‘Thank goodness we’re not Las Vegas’ — we’ll always be able to say that — but we’re not insulated just because we’re not doing as badly as other places,” Hefner said.
While the dismal home sales tally isn’t encouraging for the local real estate industry, some agents said they’re seeing buyers take advantage of the falling prices.
David Wertan of Re/Max Advanced Realty recently helped an Upstate couple buy a small Johns Island condominium as a second home at a dramatically reduced price.
“It sold for $95,000 and it’s gorgeous,” he said. “Those opportunities just haven’t been there in the last four to five years.”
Wertan said he doesn’t expect a rush back into real estate, not even from investors or first-time buyers. Instead, the recovery will be gradual, he said.
His Upstate clients, for example, have already shown their condo to a friend who is now thinking of buying a neighboring unit.
Wednesday’s numbers don’t reflect buyers who were encouraged by the recent drop in interest rates. Some local real estate agents said they’ve seen an increase in showings and buyer interest since the rates began falling last week.
The number of homes for sale in the Charleston area remains at record levels. As of Wednesday, a total of 10,462 homes were available, which is more than double the amount that local real estate experts say is healthy for the region.
“You’ve got a lot of foreclosures coming on the market,” said Jana Bantz, an agent with Summerville-based Prudential Southern Coast Real Estate. “That’s contributed to it, and there’s quite a number of homes that need to be reduced (in price). If those prices came down, I think we’d see a drop in inventory.”
Reach Katy Stech at 937-5549 or kstech@postandcourier.com  

  

Treasury weighs action on mortgage rates

Plan would aim to buoy housing market by forcing down the cost of loans

Video

By David Cho, Zachary A. Goldfarb and Dina ElBoghdady

The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal.

Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government’s program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans.

These securities would be purchased primarily from Fannie Mae and Freddie Mac, the financing giants that buy most mortgages from U.S. lenders, according to sources who spoke on condition of anonymity because the plan has not been finalized.

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The cost of the plan and source of funding remain unclear. One possibility is for the Treasury to raise money by issuing bonds to the public at 3 percent interest. This could allow the government to turn a profit because it would be buying securities that pay 4.5 percent.At a meeting attended by the Treasury’s Interim Assistant Secretary for Financial Stability Neel Kashkari and the National Association of Realtors in mid-November, senior Treasury officials said they were optimistic that subsidizing lower mortgage rates with taxpayer dollars would help revive the housing market, sources said.Treasury officials told the Realtors that the plan could be a more effective way to help homeowners than focusing efforts solely on borrowers who are struggling to meet their monthly payments, the sources said. Democratic lawmakers have been advocating a proposal to modify the mortgages of distressed homeowners.A source said Treasury officials suggested at the meeting that the Realtors start a grass-roots campaign to press the mortgage rate plan with lawmakers.Treasury officials described the situation as fluid and said the plan was still being finalized, according to people in contact with the department. The officials expressed concerns yesterday that premature disclosure of the plan could prompt Americans to put off buying homes and hold out for a better rate, sources added.

Treasury spokeswoman Brookly McLaughlin said she would not comment on the matter.

Key to solving financial crisis
Treasury Secretary Henry M. Paulson Jr. has said that a recovery in the housing market is key to solving the financial crisis. Such a rebound would restore confidence in the banking system and support the value of troubled assets backed by mortgages.

Though he has said a mortgage modification plan proposed by Federal Deposit Insurance Corp. Chairman Sheila C. Bair could help the housing market, Paulson has expressed concerns about whether it would reward borrowers who bought houses they couldn’t afford. Bair’s plan would use tens of billions in federal funds to modify adjustable-rate mortgages for several million financially troubled homeowners.

The initiative under review at the Treasury would be an alternative. Borrowers would have to meet standards set by Fannie Mae, Freddie Mac or the Federal Housing Administrations that include documenting their income, sources said. Fannie and Freddie were put under government control in September. The Treasury plan would not apply to refinances.

Any efforts by the Treasury to lower rates on new mortgages would work in concert with a Federal Reserve plan announced last week to buy $500 billion worth of existing mortgage-backed securities issued by Fannie Mae and Freddie Mac, and $100 billion worth of those companies’ debt.

The Fed was pleasantly surprised that 30-year fixed mortgage rates fell by as much as three-quarters of a percentage point in anticipation of their program. Homeowners rushed to refinance. Cheaper monthly payments may bolster consumer spending, the most important component of U.S. economic activity.

‘Short-term windfall’
News of the Treasury plan spread quickly through the markets. Shares of home builders rose. At Long & Foster, the Washington area’s largest real estate brokerage, top brass informed agents that they should gear up for increased demand from potential buyers.

“This is going to be a short-term windfall that everybody needs to jump on,” said Dave Stevens, the firm’s president and chief operating officer and a former Freddie Mac official. The move by the Treasury certainly would mean “interest rates will drop,” he added.

But it is unclear whether lower mortgage rates will spark home buying, which is a weightier decision for ordinary people than refinancing a loan.

There are also questions about how much the Treasury would spend to buy down the mortgage rate. One industry source said another idea being pushed by trade groups calls for the Treasury to spend $50 billion of its $700 billion financial rescue package to reduce the fees, or points, that home buyers pay when they want a lower rate for a mortgage.

Yesterday, the average rate on a 30-year fixed-rate mortgage increased slightly to 5.75 percent yesterday, up from 5.54 the previous day, said Keith Gumbinger, a vice president at research firm HSH Associates.

“What’s not known is the timing of the purchasing of the mortgage-backed securities and how quickly money will be pumped into the marketplace and that matters as to how low the mortgage rates will go,” Gumbinger said.

Staff writer Neil Irwin contributed to this report.

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