May 28, 2017

New Home Sales Fall Sharply; House Prices Rise

Sales dropped 13.4 percent to an annual rate of 394,000 units, the Commerce Department said on Friday.

The reading, which was well below economists’ expectations, could be a sign that a recent surge in mortgage rates is weighing on the economy, although the data is often subject to large revisions.

The report could weaken the case for the U.S. Federal Reserve to reduce its support for the economy by trimming monthly bond purchases later this year.

“The higher mortgage rates are having an impact on the housing market,” said Scott Brown, chief economist with Raymond James in St. Petersburg, Florida. “That makes tapering (bond purchases) somewhat less likely.”

The government revised sharply lower its estimate for new home sales in May and June.

Yields on U.S. government debt dropped sharply and the dollar weakened following the release of the data, a sign that some investors were scaling back bets that the Fed would trim its $85 billion in monthly bond purchases next month.

Mortgage rates have risen sharply since May on bets that the Fed would soon begin tapering its bond purchases. The stimulus program is designed to lower interest rates to make it easier for businesses to expand and take on new workers.

The housing market, which has been a major drag on the U.S. economy since the 2007-09 recession, appeared to turn a corner early last year when home prices began to rise.

Last month, the median price for a new home sale rose to $257,200, up from $237,400 in the same month of 2012.

There have been indications that higher borrowing costs are having only a limited impact on the overall housing market.

Sales of existing homes, a much larger category than new homes, surged to a three-year high last month. Some analysts speculated, however, that home buyers rushed into the market to lock in mortgage rates before they rose further.

Construction of new homes has accelerated over the last year, and the inventory of new homes for sale increased by 4.3 percent in July from June.

Rising inventories could slow the rapid and arguably unsustainable price gains seen over the past year. If that occurred in step with a moderate rise in interest rates, the overall housing market could become healthier in the long term.

“(In) the end it will make it the housing recovery a more durable one,” said Lindsey Piegza, chief economist with Sterne Agee Leach in Chicago.

At July’s sales pace it would take 5.2 months to clear the houses on the market, up from 4.3 months in June. A supply of six months is normally considered a healthy balance between supply and demand.

(Reporting by Jason Lange; Additional reporting by Richard Leong in New York; Editing by Paul Simao)

Article source: http://www.nytimes.com/reuters/2013/08/23/business/23reuters-usa-economy.html?partner=rss&emc=rss

U.S. Housing Sales and Prices Remain Weak

A separate report on Tuesday showed home prices in major American cities rose for the second straight month in May. But after adjusting for seasonal buyers, prices actually fell in a majority of markets.

The Commerce Department said sales of new homes fell 1 percent in June to an annual rate of 312,000. That’s less than half the 700,000 new-home sales that economists say is typical in healthy markets.

Sales fell to record lows in the Northeast and West. The median price of a new home rose to $235,200 in June, up 5.8 percent from May, according to the Commerce Department report.

Last year was the worst for new-home sales on records dating back a half century, but through the first six months of this year, sales are lagging behind last year’s totals.

In June, new-home sales fell to record lows in the Northeast and West. The median price of a new home rose to $235,200 in June because of the influx of spring buyers. The median price is not adjusted for seasonal factors.

The Standard Poor’s/Case-Shiller home-price index said May prices increased in 16 of the 20 cities tracked for an average of 1 percent. Over the past 12 months, prices have fallen in 19 of the 20 cities tracked.

Housing remains the weakest part of the American economy. High unemployment, larger down payment requirements and tougher lending standards are preventing many people from buying homes. And some potential buyers who can clear those hurdles are holding off, worried that home prices have yet to bottom out.

Last year was the fifth straight year that new-home sales fell. That followed five straight years of record-high sales, when the housing market was booming.

Still, all home sales are weak. Sales of previously occupied homes fell for a third straight month in June and are lagging last year’s sales of 4.91 million homes sold last year, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.

While new homes represent less than one-fifth of the total housing market, they have an outsize impact on the economy. Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

Article source: http://feeds.nytimes.com/click.phdo?i=24e1a83fc84d01631d9f54bcab19a173

Mortgages: A Guide for the Co-op Neophyte

Most Americans live in owner-occupied single-family houses. In Manhattan, the minority own rather than rent, and they own in multifamily buildings. Many of those apartments are co-ops, a singularly New York phenomenon. Except for a handful in cities including Washington and Chicago, market-rate co-ops are in New York. (Some places also have “limited-equity co-ops,” for which affordability rules govern sales.)

In the first quarter of this year, there were 1,430 co-op sales in Manhattan, compared with 964 condominium sales, according to a survey by Prudential Douglas Elliman. The average co-op price was $1.05 million; the median price (the midpoint, at which half the sales were for more and half for less) was $642,500, because lower-priced studios and one-bedrooms made up a much bigger share of the market than $1 million-plus luxury units.

In a co-op, owners hold stock in a corporation and have proprietary leases that permit them to live in their apartments. In a condo, residents own their units and share ownership of common facilities.

The biggest difference, from a buyer’s perspective, “is the lack of the right of alienation,” said Neil B. Garfinkel, a partner with the law firm Abrams Garfinkel Margolis Bergson. That’s the legal term for being able to rent or sell your property to whomever you choose. In a co-op, the board of directors has the right to turn down a buyer for any reason except those deemed discriminatory under fair-housing laws.

“Co-ops have always had the ability to reject,” Mr. Garfinkel said, “and the largest reason they would reject would be based on financial considerations. They never changed that, even in the crazy days of 110 percent financing. So, anecdotally at least, there have been significantly less defaults in the co-op marketplace.”

Co-op boards want to see “strong employment history, strong income and liquid assets,” said Shirley Hackel, an executive managing director of Warburg Realty. Boards disregard bonuses and commissions when weighing financial status, and they want to see low ratios of debt to income.

The difference between boards and banks was especially marked during the housing bubble, but in the last few years, lenders have become more conservative. “I used to say boards are much tighter and stricter than any bank,” Ms. Hackel said, “but I can’t say that anymore, because the banks have tightened up.”

Plenty of lenders are comfortable with co-ops — not only big banks, but also portfolio lenders, thrifts and credit unions, said Sari Sardell Rosenberg, a managing director of the Manhattan Mortgage Company. All review the building as well as the borrower, she said, examining its finances over several years. Since the financial crisis, lenders have insisted that buildings meet criteria like having sufficient insurance. For a while, that gummed up deals, but most Manhattan co-ops now conform with those rules, she said.

Loans insured by the Federal Housing Administration do not cover multifamily co-ops, Ms. Rosenberg said. But that is moot, because the big advantage of F.H.A. loans is a low down payment, and co-op boards often require even more than the 20 percent down that banks want these days. There are co-ops that require as much as 50 percent down, she said, and some on Fifth and Park Avenues allow only all-cash deals.

As with any loan, prepare to document your finances. “Typically,” Ms. Rosenberg said, “what I need from you is what the board will need from you. But I don’t need letters of reference telling how wonderful you are. We just care if you pay your bills on time.”

Article source: http://feeds.nytimes.com/click.phdo?i=a77c50ffc2ecb570c4e87412211f65dd