As is stated in this update, the poor news about real estate in a national sense of late is not a surprise to most of us. It is sobering, though, to recognize how negative the foreclosure problems have proven to be for real estate sales. If real estate economists are predicting a slow 2011 with declining home prices--and they are--the primary reason is the foreclosure fiasco, not a sudden lack of interest in housing among consumers. We are facing the fact that foreclosures drag down real estate prices and the difficulty in closing sales of foreclosure properties slow the market. With little idea of how the real estate market might be faring if it weren't so dislocated by foreclosure problems, the public concludes that there truly is something wrong with real estate, even as we find signs of a strengthening recovery in the overall economy.

This will pass, of course. Meantime, we can take a degree of comfort in apparently improving jobs, income, spending and savings data.

Time to get the skis waxed and hit the Tahoe slopes, get some Pre-Christmas turns in.

Be sure to read the bottom portion of this summary for the National Comment on the Real Estate Market as it pertains to our little niche market in Incline Village Real Estate.

December 1, 2010

 KEY Economic  INDICATORS [11/30/10] 

 

Gold $1387.00/ounce [up]

Crude Oil(Brent) $86.76/brl [up]

U.S. Dollar to…

    Euro .7684 [up]

    Japanese Yen 83.67 [up]

6-mo Treasury Bill Yield 0.19%

10-yr Treasury Note Yield 2.80%

[6-month unchanged, 10-yr up 6 bps]

11th Dist Cost of Funds 1.663%[-]

30-yr Fixed-rate Mortgage 4.78%

15-yr Fixed-rate Mortgage 4.19%

1-yr ARM 3.70%

[HSH averages rates: 30-yr

up 2 bps;15-yr up 3 bps; 1-yr ARM down 5 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 11/19

  Overall

    728.8 (up 2.1%; down 14.4%

the week prior)

  Purchase Money Loans

    205.0 (up 14.4%; down 5%

            the week prior)

  Refinancing Loans

    3793.6 (down 1%; down 16.5%

the week prior)

 

Jobless Claims 11/20

    407,000 – prior week 439,000 – continuing claims at 4.182 m – lowest since July, 2008

 

Personal Income Oct

    Up 0.5% - personal spending up 0.4% - savings rate up to 5.7% - core prices unchanged

 

Conference Board Consumer Confidence Nov

    Up to 54.1 from revised 49.0 – Expectations component strong

 

Weekly Commentary

 “At the moment, almost a third of all houses being sold nationally are foreclosures and short sales.  In the Incline Village Real Estate market that number is hovering around 10-12% 

The housing bust won't really be over until that percentage falls sharply. [Mark] Zandi [of Moody’s Analytics] says that's likely to happen by the end of next year.” [NPR’s Planet Money]

 Recent housing data has been dismal. The Standard & Poor’s Case-Shiller Index, just released, indicated that home prices had fallen by 2% from October to November, and that prices were 1.5% lower than they were at this time last year. This is not a surprise to most real estate analysts. A market in which over a third of the transactions have involved properties at some stage of the foreclosure process cannot produce higher selling prices; and the damage has been exacerbated by the problems with closing the sales of foreclosure properties.

 In the prior week, we learned that the number of existing home sales fell by 2.2% from September to October, according to the National Association of RealtorsÒ. Celia Chen of Moody’s Analytics called the decline “anticipated,” predicting that “distress sales will drag down the median house price before it stabilizes in the second half of next year,” assuming foreclosures are no longer a big problem at that point.

 We also learned that sales of new homes were down by 8.1% in October. “It will be another year at least before the demand for new homes reaches anywhere near normal, and we expect new-home sales to be down slightly this year compared with 2009,” Ms. Chen says.

 The economic news over the past week was certainly not all dreary, however.  There was, for example, a significant decline in the number of new applications for unemployment insurance, suggesting an improving jobs picture. This, as most readers know, is crucial to developing a level of confidence that is conducive to home purchases. And the rise in the Conference Board’s Consumer Confidence Index—from a revised 49.0 in October to 54.1 in November—underscored the good news.

 Further, personal income rose at a surprisingly rapid 0.5% rate, boosted primarily by solidly higher wages and salaries. And personal consumption rose by 0.4%, a rate justified by the higher personal income. The good news continued with announcement of the month’s savings rate, which rose to 5.7%, even as retail sales were improving.

 Such signs of strengthening economic recovery lead us to wonder: Would the housing market be improving in similar ways if the foreclosure problems were behind us? In a year, we may know the answer to that question.