Forget the old saw that all real estate is local. What's pummeling housing prices in your nabe is the same thing that's hurting them around the country: the credit crisis.
You know the drill - banks' troubles have made it harder for many home buyers to get mortgages, and those who do qualify have to pay more. A borrower with good credit and a 20% down payment recently got charged an interest rate of 6.7%, on average.
It's true that this rate is not historically high (rates often surpassed 9% in the early 1990s). But it's more than the 6.2% that the same borrower would have paid at the beginning of 2008.
The fact that mortgage rates have remained stubbornly elevated despite the government takeover of Fannie Mae and Freddie Mac leads some experts to believe that those rates are not headed down anytime soon.
Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of U.S. mortgage loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009.
But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer. Add it all up and you have another lousy year for real estate.
Home prices are down 20% nationwide since their peak in July 2006, according to the S&P/Case-Shiller home price index. Economist's expects another 20% decline in home prices next year.
The damage will likely hit even areas that have so far escaped many problems, such as New York City. It looks like we won't see the market turning until late 2009.
Showing posts with label home sales. Show all posts
Showing posts with label home sales. Show all posts
Monday, November 10, 2008
Wednesday, October 22, 2008
Apartment Sales Volume Down
The level of distress among apartment sellers is increasing rapidly, according to the latest Capital Trends Monthly report on the apartment sector, released by Real Capital Analytics (RCA). The continuing effects of the collapsed condo conversion market have elevated levels of distress since 2006, but the recent spike indicates that financial troubles beyond the failed conversions are starting to emerge. Over eight percent of recent apartment sales can be linked to a distressed seller, and this percentage has quadrupled over the past year.
By dollar volume, distressed apartment sales have ranged between four percent and six percent for much of the past year and peaked at just under 10 percent in fourth quarter of 2007. Recent trends indicate that a greater number of smaller properties are facing trouble. By either measure, the distressed sales are well above reported mortgage delinquency rates and indicate that pressure among all sellers is growing, according to the report.
Even so, the sales volume as well as number of sales in the apartment sector are both down by more than 50 percent. In the past 12 months, 4,430 apartment properties have been sold nationally, equaling $115.53 billion.
In fact, cap rates for closed deals ticked up slightly to over 6.5 percent while asking cap rates averaged 6.2 percent, underscoring the large gap in pricing that separates buyers and sellers, according to the RCA report. Meanwhile, the volume of apartment properties listed for sale exceeded closings again in August. Year-to-date, offerings have exceeded closings by a ratio of 1.5-to-1 nationally and are rising. The oversupply of property offerings in tertiary markets is even greater, although large inventories of properties for sale have recently started accumulating in primary and secondary markets as well, the RCA report finds.
At the beginning of September, closed sales in the third quarter totaled $4.5 billion, with another $6.5 billion reported in contract and the market was on pace to easily exceed the $9.3 billion in transactions recorded in the second quarter, according to this report. However, the uncertainty surrounding the takeover of Fannie Mae and Freddie Mac, followed by even greater upheaval on Wall Street has stalled the market. Reports are already surfacing of another wave of deals delayed, re-traded or called off. Sellers are also shocked and the seasonal surge in offerings that is typical each September has been modest.
By dollar volume, distressed apartment sales have ranged between four percent and six percent for much of the past year and peaked at just under 10 percent in fourth quarter of 2007. Recent trends indicate that a greater number of smaller properties are facing trouble. By either measure, the distressed sales are well above reported mortgage delinquency rates and indicate that pressure among all sellers is growing, according to the report.
Even so, the sales volume as well as number of sales in the apartment sector are both down by more than 50 percent. In the past 12 months, 4,430 apartment properties have been sold nationally, equaling $115.53 billion.
In fact, cap rates for closed deals ticked up slightly to over 6.5 percent while asking cap rates averaged 6.2 percent, underscoring the large gap in pricing that separates buyers and sellers, according to the RCA report. Meanwhile, the volume of apartment properties listed for sale exceeded closings again in August. Year-to-date, offerings have exceeded closings by a ratio of 1.5-to-1 nationally and are rising. The oversupply of property offerings in tertiary markets is even greater, although large inventories of properties for sale have recently started accumulating in primary and secondary markets as well, the RCA report finds.
At the beginning of September, closed sales in the third quarter totaled $4.5 billion, with another $6.5 billion reported in contract and the market was on pace to easily exceed the $9.3 billion in transactions recorded in the second quarter, according to this report. However, the uncertainty surrounding the takeover of Fannie Mae and Freddie Mac, followed by even greater upheaval on Wall Street has stalled the market. Reports are already surfacing of another wave of deals delayed, re-traded or called off. Sellers are also shocked and the seasonal surge in offerings that is typical each September has been modest.
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