The New York City real estate market -- though real estate tax revenues fell during the first nine months of the budget year.
Real property transfer taxes fell 12.7% and mortgage recording tax collections dropped 20.1%, Reuters reported. The New York City, which has already lost jobs on Wall Street in the wake of the subprime crisis, could lose another 36,000 jobs, the city's labor department reported last week.
Eli Broad, the co-founder of KB Home, told Bloomberg TV yesterday that home prices could fall another 20%. Here's a link to the story. That is an absolutely enormous amount when you consider that prices have already fallen a bunch. Today the Standard & Poor's/Case-Shiller Home Price Index for February was released. It showed that the 20-city index fell 12.7% from a year earlier and is down 14.8% from its all-time high in July 2006.
I'm guessing that the execs at KB Home aren't real happy with Eli Broad, because who's going to buy a house now if they think that Broad is right about where prices are heading? I don't know how many shares of KB Home that Broad himself still owns, but it can't be too many because he doesn't appear on the list of holders of 5% or more of KB Home shares in the latest SEC filing.
^^^^^^^
Trivia: KB Home was founded in 1957 in Detroit as Kaufman & Broad Building Company
Home production in California is grinding to a halt. The number of single-family home permits dropped 61% to 8,189 during the first quarter of this year compared to the same period in 2007, according to an April 25 report from the California Building Industry Association.
To put it in perspective, 35,329 single-family home permits were issued in california during the 1st quarter of 2005.
These days building new homes makes little sense with so many foreclosed homes competing for buyers. Builders are waiting for the market to turn around, said Alan Nevin, the builder group’s Chief Economist.
“It basically is a case where builders have more or less decided not to build," Nevin said. "They are almost viewing this as being custom home builders to the extent that they almost won’t start a new home until somebody has bought it.”
The red hot Canadian housing market has shown tremendous resilience even as home prices on its southern border tumble. But a new Canadian Real Estate Association report indicates that the market is losing steam.
The price of an average Canadian home climbed 5.5% in the first quarter of 2008 compared to a year earlier -- the smallest annual jump since the fourth quarter of 2001. And first-quarter sales dropped 13% from a year ago.
The U.S. median existing home price, by contrast, fell 8.2% in February from a year earlier to $195,900.
"Canada’s six-year housing market boom is officially over," Doug Porter of BMO Capital Markets told CBC.
The March report on housing construction was even worse than economists expected. Starts on construction of homes fell twice as much as expected. They dropped 11.9% in March from February, leaving them at their lowest point since 1991. A big part of the decline was starts on multifamily dwellings, which tend to fluctuate a lot. Analysts say the number to pay attention to is the decline in starts on single-family homes. That was off 5.7% from February, making it the 12th monthly decline in a row. Believe it or not, single-family starts in March were 63% below their record level of January 2006, when they were going at an annualized rate of 1.84 million.
David Rosenberg, North American economist for Merrill Lynch, says this is "turning out so far to be among [the] worst housing cycles in recorded history."
Amid such gloom, it might seem strange that a new Reuters/Zogby poll has found that a majority of Americans think this is a good time to buy a house. But the two things aren't necessarily contradictory. The steep drop in housing construction is reducing the oversupply of unsold homes, which will eventually lead to a firming of prices. I'm not saying that the bottom for housing prices is here or near, but the pain suffered by carpenters today is going to translate into gain for homeowners sometime in the future.
I wrote a story for the magazine last week about the surprisingly low prices I saw at an auction of foreclosed property in Los Angeles. One home that had sold two years ago for $887,000, went for $285,000 for example.
I had a nice chat before the article was published with Celeste Hammond, a professor of real estate law at John Marshall Law School in Chicago. She reviewed a sales contract from another auction company, although I believe the terms are much the same. Hammond said it was an incredibly one-sided contract, written entirely in favor of the sellers.
Among other things, there were no contingencies for inspections or financing. If you discovered the home was structurally unsound after you were the high bidder and backed out, you could lose your deposit. Same was true if you brought your own financing to the deal and it fell through.
Hammond said these auctions were really for professional investors only. Given the deals that were being done—properties were trading for about 60% of their most recent asking price—I’d hate to think no one else should bid. But buyers definitely need to do their homework.
Damned if you do, damned if you don’t. That’s how presidential candidate John McCain must feel after announcing his own plan to fix the housing mess today. McCain proposed allowing homeowners with high-interest, adjustable rate loans taken out after 2005 to trade for a safer, 30-year loan, with government backing. The cost of the plan was estimated at up $10 billion.
Candidates Hilary Clinton and Barack Obama have already supported federally-funded bailout funds. Clinton called McCain’s proposal a “warmed over, half-hearted version of the very plan he criticized, to help families restructure mortgages to save homes and keep housing prices from falling further.”
Maude Hurd, president of the housing advocacy group Acorn said: “With a national mortgage delinquency rate approaching six percent, now is not the time for dipping toes in the kiddie pool,” said Hurd. “We need solutions of a great enough scope to meet the enormous challenges we face, like Chairman Barney Frank’s proposal to refinance up to $300 billion worth of risky mortgages into affordable, fixed-rate mortgages. Bush and McCain’s baby steps aren’t going to get it done. The banks must sacrifice, not just homeowners.”
Hurd went on to note that Airzona has been among the worst states hit by the crisis. In February, the state saw a 210% increase in foreclosure filings, to 9,650 properties. It was the fourth-hardest hit state in the nation, according to realtytrac.com.
Well, at least everyone’s agreeing on something, sort of.
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