The Scottsdale Blog

Foreclosures Affect Neighbors

by John O'Leary

As per the following post, if you have a neighbor who falls behind on their mortgage payments and the bank forecloses on them, it can have a negative affect on the property value of your home.

Foreclosures Reshape Neighborhoods
Neighborhoods riddled with foreclosures quickly develop other kinds of problems.

In fact, one foreclosure will shave up to 1.5 percent off the value of the other homes on the same block, according to research by Dan Immergluck, associate professor of city and regional planning at Georgia Institute of Technology.

Other costs are harder to measure, but municipal governments, police departments, and neighbors observe that empty homes give rise to an increase in thefts and may encourage drug dealers and even violent criminals to take advantage of the situation.

As homes fall into foreclosure, a neighborhood frequently turns more transient, analysts say. Investors often buy homes in foreclosure and rent them out if they can't sell them.

"You end up with a very fragmented community," says home owner Ann Fulman of Atlanta. "When investors buy them and turn them into rental property … folks come in [who] don't have the means to keep up the place."

In the Atlanta suburbs of Gwinnett County, the police department recently created a Quality of Life unit to address problems often associated with foreclosures. Working with other government agencies, the unit targets such issues as building-code enforcement, vagrancy, and graffiti.

Source: USA Today, Noelle Knox (04/13/07)

Potential Annual Drop in Home Prices Nationally

by John O'Leary

The following article highlights some of the pressures affecting housing prices nationally including sub-prime lending and tightening credit standards.

clipped from money.cnn.com Real estate group sees 0.7% decline in 2007, first annual drop since it began keeping track. By Chris Isidore, CNNMoney.com senior writer NEW YORK (CNNMoney.com) -- The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began keeping track nearly 40 years ago. In its latest monthly forecast, the real estate group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less. The subprime mortgage mess led the group to cut its sales forecast as well, by 100,000 to 6.34 million homes, a pace that would be about 2 percent below the 6.48 million existing homes sold in 2006. The group cited problems some buyers may have getting financing.

Prices in U.S. Returning to Normal

by John O'Leary

If you read this entire story, just five paragraphs more than is clipped here, you will notice a number of areas including Tucson, Arizona, dropping below previous levels of overvalued status.

clipped from www.realtor.org “A market returning to normal” is the way Global Insight, a privately held global information company, describes the current housing market, based on the most recent U.S. Housing Valuation Analysis. The Housing Valuation Analysis — a joint effort by Global Insight and National City Corp. — examines the top 317 U.S. real estate markets using data from the Office of Federal Housing Enterprise Oversight. Taking into consideration differences in population density, household incomes, and interest rates, the analysis determines what home prices should be and how much current prices deviate from that norm. — By Camilla McLaughlin for REALTOR® Magazine Online Daily Real Estate News  |  March 30, 2007

Survey: Home Prices Depreciate for the Year

by John O'Leary

On the National Housing News front, Standard & Poors released a report showing that prices of single-family homes dropped in January compared to a year earlier. Apparently it takes them seven weeks to analyze the data...

clipped from www.foxnews.com NEW YORK —  Prices of single-family homes across the nation depreciated in January compared to a year ago, the worst results in more than 13 years, a housing index released Tuesday by Standard & Poor's showed. The data underscored disappointing sales data released by the government on Monday. The S&P/Case-Shiller composite index showed a drop of 0.7 percent from a year ago in the price of a single-family home based on existing homes tracked over time in 10 metropolitan markets. In January 1994 the index dropped by 0.9 percent compared to January 1993, S&P said.

Lowest New Home Sales in 7 Years

by John O'Leary

Rex Nutting of MarketWatch reported today that sales of new homes fell in February to a 7 year low.

clipped from www.marketwatch.com ECONOMIC REPORT February's inventories of unsold houses at a 16-year high New-home sales fall to seven-year low WASHINGTON (MarketWatch) -- Sales of new homes unexpectedly dropped in February to the lowest level seen in nearly seven years, while inventories of unsold homes rose to a 16-year high, suggesting that the nation's housing market was softening heading into the vital spring buying season. Sales of newly constructed single-family houses unexpectedly slowed again in February, falling 3.9% to a seasonally adjusted annual rate of 848,000, the lowest level since June 2000, the Commerce Department reported Monday. Sales were down 18.3% compared with February 2006.  Read the full report. "Housing still has some distance to fall," wrote Phillip Neuhart, an economist for Wachovia, in a research note.

Sales Increase With Lower Prices

by John O'Leary

Here is a story that ties in to my post from this morning.

clipped from money.cnn.com March 23 2007: 2:43 PM EDT By Chris Isidore, CNNMoney.com senior writer NEW YORK (CNNMoney.com) -- Sales of existing homes posted the biggest jump in nearly three years in February, though sellers got the gains the way Detroit automakers spur sales - by cutting prices. The National Association of Realtors said Friday that home sales rose 3.9 percent last month to an annual rate of 6.7 million from a revised 6.4 million pace in January. It was the biggest percentage increase since March 2004. Economists surveyed by Briefing.com had looked for a slowdown to a 6.3 million pace. But even though sales rose from January, the pace was still down 3.6 percent from February 2006.

3.9 Percent Jump in Existing Home Sales

by John O'Leary

Some good news out of the National Association of Realtors - Existing home sales rose by 3.9 percent in February in the United States.  Mild weather was credited for spurring home buying.  This was the largest rise in sales since March of 2004.  The annual rate using February's data would be 6.9 million units.

Credit Suisse Comments on the Housing Market

by John O'Leary

On Monday, March 12th, Ivy Zellman of Credit Suisse who is a veteran homebuilding analyst said:

"40% of the mortgage market is at risk of fallout from tightening credit and increased regulatory scrutiny"

The point above is referring to the "subprime" and "Alt-A" market.  Subprime loans are for persons with blemished or limited credit histories thus the loans will carry a higher risk for the lender and a higher rate of interest for the borrower.

An additional statement in her report reads as follows:

"We remind investors that the headwinds from deteriorating credit will impact supply and pricing conditions, as well as incremental demand. With delinquency and foreclosure rates continuing to rise, we believe this will result in more supply hitting the market throughout the year. In addition, we estimate that current inventory figures released by the NAR [National Association of Realtors] could ultimately be 20% higher, when homes currently in the foreclosure pipeline hit the resale market."

My comment here is to watch for the impact of the "supply hitting the market".  With record levels of home inventories in the Scottsdale and Phoenix housing market the addition of foreclosed properties may extend this buyer's market further than some expect. 

Foreclosures to skyrocket in 2007?

by John O'Leary

More bad news for the housing market.  There are estimates being discussed in the real estate circles nationally that 2007 may bring as many as 1.5 million foreclosures!  This figure was given last week by University of California-Berkeley economist Ken Rosen.  Another estimate was for up to 2 million foreclosures.  Additionally, estimates are that up to 100,000 people might lose their jobs in the housing industry.

The foreclosures would increase the inventory of home for sale while the ramifications of losses to the financial industry would equate to further tightening credit.

Read the full story by Bob Ivry with Bloomberg News

Local market forces at work also

by John O'Leary

The following article by Ellen Kratz of Fortune draws attention to the fact that although there are national trends in real estate, especially in light of interest rate swings, many of the forces at work in the real estate markets are local in nature.

Some valid points - here is her article...

David Lereah, chief economist for the National Association of Realtors, is ready to call a bottom. But some markets still face corrections.

NEW YORK (Fortune) -- Equity-addicted homeowners have long hung on David Lereah's every word. As chief economist for the National Association of Realtors, he's responsible for tracking the closely watched sales of existing U.S. homes.

He's also seen as a booster for the housing boom. But after five years of record volume and price growth, sales dropped by 8.4 percent last year while prices rose by a measly 1.1 percent nationwide.

Read the rest of the article by Ellen Kratz here »