Resale prices, sales expected to drop 6% this year

Resale prices, sales expected to drop 6% this year
The National Association of Realtors trade group forecasts that resale home prices and sales will both fall about 6 percent this year compared to 2007. After peaking at a record 6.48 million resale home sales in 2006, this pace dropped 12.8 percent to 5.65 million in 2007 and is projected to drop to 5.31 million this year and then rise 5 percent to 5.58 million in 2009, according to the forecast report. The median price of resale homes is expected to fall from $218,900 last year to $205,300 this year, and to rise 4.3 percent to $214,100 next year.

The previous NAR forecast report, released in June, anticipated a 6.4 percent drop in the median resale home price and a 4.5 percent annual drop in resale home sales this year compared to last year. Single-family new-home sales are expected to plunge 32.3 percent this year and 3.4 percent next year, following a 26.3 percent slide in 2007 and an 18.1 percent drop in 2006, with new-home prices dropping 3.2 percent this year and rising 5.3 percent in 2009.

Pending sales index falls in May
An index that gauges pending sales of resale homes, based on contracts signed in May, dropped 14 percent compared to the same month last year and was down 4.7 percent compared to April 2008. The Pending Home Sales Index rating in May was below Wall Street expectations. Regionally, the index dropped 22.1 percent in the South, 16.4 percent in the Northeast and 13.8 percent in the Midwest while rising 2 percent in the West in May 2008 compared to May 2007. The index was down 7.1 percent in the South, 6 percent in the Midwest, 2.9 percent in the Northeast and 1.3 percent in the West in May 2008 compared to April 2008. Lawrence Yun, NAR’s chief economist, said in a statement, "The overall decline in contract signings suggests we are not out of the woods by any means."

FHA expansion plan back on track in Senate
A proposal to expand Federal Housing Administration loan guarantee programs by $300 billion to help troubled borrowers refinance into more affordable loans is moving toward a Senate vote this week after a 76-10 vote Monday to limit debate on the bill.

The FHA expansion plan — which the Congressional Budget Office has estimated could help 400,000 borrowers at a cost of $680 million over 10 years — is part of the sweeping "Housing and Economic Recovery Act of 2008." The bill would also create a new regulator for mortgage financers Fannie Mae and Freddie Mac and assess them more than $700 million a year to provide affordable housing and cover the cost of expanding FHA loan guarantees.

Ten Republicans voted against moving forward on the bill Monday, with presidential candidates John McCain, R-Ariz., and Barack Obama, D-Ill., among the 14 senators who did not cast votes. The bill passed a similar procedural vote on June 24, only to be delayed by a failed attempt by Sen. John Ensign, R-Nev., to attach an amendment providing tax breaks for renewable energy. If approved by the Senate this week, the bill faces a veto threat by President Bush.

Before the bill reaches the president’s desk, it would also have to be reconciled with competing legislation in the House. While the Senate bill would not allow Fannie and Freddie to purchase or guarantee single-family mortgages larger than $625,000, the House proposes to make permanent a temporary increase in the conforming loan limit to $729,750 set to expire at the end of the year.

OFHEO: Fannie and Freddie finances are sound
The federal regulator that oversees the safety and soundness of mortgage financers Fannie Mae and Freddie Mac said Tuesday that a proposed change in accounting methods will not force the companies to raise $75 billion in additional capital.

A report by Lehman Brothers speculated that a proposed revision of rule FAS 140 by the Financial Accounting Standards Board might force Fannie and Freddie to raise billions in additional capital. The report helped send shares of the government-chartered companies into a tailspin on Monday, as investors worried that the companies would raise capital by issuing common stock and dilute the value of existing shares, Reuters reported.

James Lockhart, director of the Office of Federal Housing Enterprise Oversight, said Fannie and Freddie are "prudently" growing their purchases and guarantees of mortgage loans, and that it was "hard to imagine" what prompted investors’ panicked sell-off Monday, Reuters reported.

Both Fannie and Freddie "are classified as adequately capitalized," Lockhart said in an interview on CNBC. "They have raised significant capital — Fannie has raised close to $15 billion — and going forward that should allow them to ride out the problems of the past years and underwrite this year what should be a very profitable book of business. Freddie has already agreed to raise $5.5 billion more, and we expect them to raise that before the summer is out."

Kids get burned in mortgage meltdown
First Focus, a children’s advocacy organization, reports that about 2 million children will be directly affected by foreclosure during this mortgage crisis, according to a report that appeared in the Los Angeles Times. The article notes that kids’ education can suffer when foreclosure pulls them away from their familiar schools, and children can also lose access to services, and their physical and mental health can be compromised.

Rents climb in Q2
Real estate research firm Reis Inc. reports that apartment-complex vacancies were unchanged in the second quarter while rents rose 1.1 percent, the Wall Street Journal reports, which was down from 1.3 percent rent growth in the same quarter last year. Rents dropped in four of 79 markets tracked by Reis, according to the article, and these markets all had home-price declines: Detroit; Miami; Palm Beach, Fla.; and Ventura County, Calif.

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