Media Advisory 5/22/08

Thursday, 22 May 2008

First-time buyers find silver lining in foreclosure cloud

More than a third of Los Angeles County families had the income needed to purchase a starter home in the first quarter, a 66 percent increase over a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® reported Tuesday. The affordability figure is the highest since 2003 and was heralded as a hopeful sign for the troubled Southern California real estate market.

MAKING SENSE OF THE STORY FOR CONSUMERS

Dramatically lower home prices and a .56 percent drop in interest rates are behind the improvement in the Association’s First-time Housing Affordability Index. A year ago, LA County households needed an income of $100,000 to qualify to buy a home costing $496,120, which is 85 percent of the area’s median home price, assuming a 10 percent downpayment at an interest rate of 5.65 percent. In the first quarter of 2008, entry-level buyers in the county could qualify to buy a home costing $390,450 with an income of $74,320.
First-time buyers and those seeking homes under $500,000 are behind a 22 percent increase in home sales in the six-county Southern California region between March and April, according to a report issued Monday by DataQuick Information Systems. The report said two-thirds of homes sold were priced at less than $500,000.

C.A.R. VP and Chief Economist Leslie Appleton-Young said she expects to see the affordability index continue to improve as additional foreclosures coming on the market keep prices at a level where more families can afford to buy.

To read the full story, please click here:

http://www.dailynews.com/news/ci_9328073

The Associated Press

SoCal home sales jump in April but still lag year-ago period

Southern California homebuyers stepped off the sidelines in April, snatching up foreclosures and homes priced under $500,000 at a rate that was 22 percent higher than in March but down 19 percent from April 2007 and the lowest level since 1995, according to DataQuick Information Services.

MAKING SENSE OF THE STORY FOR CONSUMERS

The median home price for the six-county region was $385,000, unchanged from March but down 24 percent from an April 2007 peak of $505,000. April marked the first time in eight months that the median price did not decline.

Sales were strongest in areas hit hardest by foreclosures: Riverside County (where sales increased month to month for the first time in two years), Lancaster, Chula Vista, Anaheim, Lake Forest and Victorville experienced the strongest rebounds. Two-thirds of homes sold during the month in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were priced under $500,000. About 38 percent of the homes sold were in foreclosure at some point during the previous year, up only 2 percent from March but sharply higher than the 5 percent reported a year ago. In Riverside County, 53 percent of sales involved troubled properties.
The credit crunch, potential for a recession, and uncertainty over when foreclosures will peak caused DataQuick analysts to remain cautious. Lack of financing for high-value homes continues to be an issue and could forestall a recovery if the trend persists. In April, only 15 percent of Southern California home loans were above $417,000, down sharply from the same period a year ago.

To read the full story, please click here:

http://ap.google.com/article/ALeqM5h_DkmV9N0qyf2vfd5bqwsVnBh0JgD90OUO9G0

The Associated Press

Forecasters see weak economy even if housing, credit improve

The worst of the housing downturn and credit crunch may end this year but unemployment will rise and the economy will continue to weaken and fall into a short-lived and shallow recession, according to a survey released by the National Association for Business Economics (NABE).

MAKING SENSE OF THE STORY FOR CONSUMERS

56 percent of economists surveyed believe the U.S. already is in a recession or will enter one this year, up from 45 percent in February. Economic growth also will slow from a projected 1.8 percent in February to 1.4 percent in the current survey – well below last year’s 2.2 percent growth figure and next years projection of 2.3 percent growth. If correct, the new prediction for 2007 will mark the slowest growth since the 2001 recession. Weakness in the housing sector was cited as the most significant factor in the slowing economy.
The group remains hopeful that the housing downturn will hit bottom in 2008 but predict that prices will continue to fall into 2009. Economists were equally divided in their opinion of which quarter of 2008 would see a bottom for home sales.
The group said it expects the credit crunch to soften later this year, opening the door to some improvement in the housing sector. They expect the Fed to maintain interest rates through the rest of 2008 but believe it could increase key rates from 2 percent to 3 percent by the end of 2009.

To read the full story, please click here:

http://ap.google.com/article/ALeqM5ipl_WNYXj_wwvEKRgqcFHWu_4sQgD90ORCOG1

The New York Times

Senate leaders agree on housing aid

The U.S. Senate said it has agreed on legislation to help homeowners avoid foreclosure by creating an affordable housing fund that will enable Fannie Mae and Freddie Mac to offer about $500 billion in foreclosure rescue funding in the program’s first year. Observers expressed optimism that the Bush administration will support the effort because it does not involve direct funding by taxpayers. The Senate proposal would tighten regulation of Fannie Mae and Freddie Mac and create a new regulator, the Federal Housing Finance Agency, which would be empowered to take action in the event the two quasi-government companies experience future liquidity problems.

MAKING SENSE OF THE STORY FOR CONSUMERS

Earlier this month, the House approved a similar bill. Under both plans, lenders would be allowed to limit their foreclosure losses by reducing the principal balance of loans to homeowners at risk of default and foreclosure. The primary beneficiaries would be homeowners with certain kinds of high-cost adjustable rate mortgages, who would be allowed to refinance to a more stable fixed-rate mortgage insured by the Federal Housing Administration.
Under the House bill, it is estimated that as many as 500,000 mortgages may be refinanced over the next five years at a cost to taxpayers of $2.7 billion. The Senate version, which would help the same number of borrowers, shortens the plan to three years and reduces the cost to about $500 million, with costs to come from a new Affordable Housing Fund that would collect about half a cent on every dollar in mortgages purchased in the secondary market by Fannie Mae and Freddie Mac.
The bill also would set a new Fannie Mae/Freddie Mac conforming loan limit of approximately $550,000 in high-cost markets, up from the current $417,000 limit. The limit has been temporarily increased to $729,250 in the most expensive markets as part of February’s economic stimulus package.

To read the full story, please click here:

http://www.nytimes.com/2008/05/20/business/20housing.html?_r=1&th&emc=th&oref=slogin

In Other News…

Bloomberg.com

Fannie Mae to drop down payment rules in worst areas

To read the full story, please click here:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRvoZOztbEcs&refer=home

Christian Science Monitor

Housing woes lure back bold buyers

To read the full story, please click here:

http://www.csmonitor.com/2008/0516/p01s10-usec.html

Los Angeles Times