Economic Update - Housing Treads on the Bottom?

Economic Update - Housing Treads on the Bottom?
Jul 24, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

Could spring 2009 have been the housing bottom everyone has been waiting for since the pop of the bubble? Residential real estate specialists hope so. According to the National Association of Realtors, U.S. existing home sales were up 3.6 percent in June to an annualized rate of 4.89 million. That's more than economists were predicting, and the most since October 2008.

Buyers who have the wherewithal seem to be taking advantage of prices driven lower by foreclosures, relatively low interest rates, and the first-time buyer tax credit. Even places such as central Florida, as well as southern and northern California--markets hit pretty hard by the popping of the bubble--showed sales increases.

Residential sales may be upticking, but values aren't moving in that direction very much. The Federal Housing Finance Agency reported this week that U.S. home prices were up 0.9 percent in May when compared with April, though that's a national average that obscures continuing declines in markets with high foreclosure rates, such as Las Vegas. The U.S. national average home price is down 5.6 percent from May 2008.

In other residential news, the Federal Reserve proposed new rules on Thursday that would change the way mortgage brokers operate. The key provision would ban the practice of compensating brokers based on the terms of the loan, including the rates. This idea has been kicking around for a while now, but in more flush times the mortgage brokers have made a lot of money that way, and have successfully put the kibosh on such restrictions.

Commercial real estate didn't have such a good week, with Moody's Investors Service reporting that office, retail and apartment property prices--to the extent that there's a market--dropped 7.6 percent from April to May. The only good news in that was that the drop from March to April was a record-breaking 8.6 percent. Commercial property is currently down nearly 35 percent from its bubble peak in the fall of 2007. according to Moody's.

The news out of New Jersey on Thursday--that is, mass arrests for corruption--had a real estate component in the form of a former real estate developer turned informant, who reportedly paid thousands in bribes to various officials who are now in the jug. In any case, Hoboken, Ridgefield and Secaucus (at least) will probably be looking for new mayors soon.

Wall Street had another up day on Thursday, with the Dow Jones Industrial Average ending over 9,000 points--up 2.12 percent--for the first time since very early this year. The S&P 500 was up 2.33 percent and the Nasdaq gained 2.45 percent.