House prices down 0.5%
According to the 10-City Composite Index of house prices released by real estate market data provider Altos Research, house prices declined 0.5% in September and 1.1% during the third quarter. The index is a measure of home prices based on summaries of metrics associated with active residential property listings. After bottoming out at $470,017 in January, it gradually increased to $509,030 in July before again declining and was $503,401 in September. Of the 26 markets Altos Research examines, asking prices increased in only five, including Los Angeles, which experienced a 1.5% increase, the largest of the 26 markets. Phoenix had the largest monthly decrease of 3.7%. Inventory also declined in 23 of 26 markets. All of the 26 markets except San Francisco had a median days-on-market of 100 or more in September. Miami had the slowest inventory turnover rate at 251 days. Altos said prices are likely to continue showing modest declines throughout the seasonally weak fall and w inter months of 2009, and that this year’s downturn would likely have been worse were it not for historically low mortgage rates and the first-time home buyer tax credit.
Initial jobless claims up
A consensus estimate of economists surveyed by Briefing.com had expected 515,000 new jobless claims, but the Labor Department announced that there were 531,000 initial jobless claims filed in the week ended Oct. 17, up 11,000 from an upwardly revised 520,000 the previous week. The 4-week moving average of initial claims was 532,250, down 750 from the previous week's revised average of 533,000. The government said 5,923,000 people filed continuing claims in the week ended Oct. 10, the most recent data available. That was down 98,000 from the preceding week's ongoing claims, and would -- if they are not revised -- mark the first time since late March that continuing claims were below 6 million. The figures do not include those who have moved to state or federal extensions, nor people who have exhausted their benefits. The 4-week moving average for ongoing claims fell by 59,250 to 6,030,750 from the prior week's revised average of 6,090,000. "Despite the relatively steady im provement in weekly claims since April, this also suggests that the employment market remains weak," said Jim Baird, analyst at Plante Moran Financial Advisors.
Foreclosures to slow in 2010?
University Financial Associates (UFA), a risk management firm based in Ann Arbor, Michigan, says that after a 30% climb over the last four years, foreclosures will decline in 2010. (In other news, the Titanic has stopped sinking…) Dennis Capozza, a professor of finance with the Ross School of Business at the University of Michigan and founding principal of UFA, suggests that a combination of a slowing of house price depreciation, a reviving economy, tighter underwriting of recent loans and the “burnout” of poor-performing vintages from three to five years ago. Every quarter UFA analyzes representative mortgage loans in the serviced portfolio of all outstanding mortgages and estimates the probability of prepayment and default in every month of the loan’s future life, according to the report. Analysts input loan-to-value ratios, credit scores and UFA’s own zip code level economic scores into the quarterly assessment. UFA collects zip code level analysis to extrapol ate a national forecast. “Working against the welcome decline in foreclosures is the steep increase in unemployment, which will interact with the large numbers of homeowners who are underwater to prevent even greater declines in foreclosures that could have been expected without high unemployment,” Capozza said.
7,000 people run out of unemployment benefits every day
Democrats in the Senate introduced a bill two weeks ago to lengthen benefits in all states by 14 weeks, with those who live in states with unemployment greater than 8.5% receiving an additional six weeks. Senate Republicans want to add several amendments, including paying for the increased benefits with stimulus funds rather than by extending a longstanding federal unemployment tax through June 2011. Senate Democrats took a step last night to limit the debate on the bill and steamroll it through as early as the end of next week. If it passes, the Senate legislation must then be reconciled with the House version, which extends benefits by 13 weeks for those living in high-unemployment states. Ain’t it grand when lawmakers stop worrying about who is going to pay for things?
Commercial real estate still suffering
Residential real estate and manufacturing sectors of the economy are reporting positive improvements, but commercial real estate remains one of the weakest sectors. According to the Federal Reserve Beige Book, recovery in that sector is unlikely for at least nine more months. The Beige Book is an economic indicator published eight times a year by the US central banking regulator. Commercial real estate conditions were described as either weak or deteriorating across all of the 12 districts measured in the report. The inability to obtain credit was cited as a problem for businesses wanting to purchase or build commercial space, leading to increasingly low demand and high vacancy rates. Public, nonresidential construction activity funded by federal stimulus projects provided a bright spot in the Cleveland, Chicago, Minneapolis, and Dallas districts, but gains were often offset by state and local government cutbacks.
Now on to our real estate investing educational arena...
Cities of the Future: Trends to Cash-In
The area of future studies remain a perpetual favorite among visionaries and investors alike; some enjoy the prospect of living life as it “could be” while others take a more pragmatic approach in an attempt to understand what it “would be”. Whatever your personal outlook, take a glimpse at the cities of the future to map your destination into the opportunity of tomorrow:
Small Town Revival: What the industrial age did for major cities like New York and Los Angeles, the Internet or age of information is likely to do for small town America. Without the need to be limited by time and space, a growing number of people are seeking small town convenience combined with amenities like hospitals, parks and recreational pursuits. It’s a trend likely to continue far into the foreseeable future especially in those areas most likely to appeal to Baby Boomers with relatively affordable cost of living ratios.
Grass Roots Government: While nation states are going global an equally powerful force is shaping the face of the nation…a back to basics grassroots movement whereby those with similar taste and style, hobbies and even political outlook find it expeditious to live in close proximity. Look for neighborhoods that reflect a shared purpose, lifestyle or outlook to attract like-minded people.
Downsized Flexibility: Frugal living combined with empty nest’s is creating a revived demand for smaller homes that use less energy and cost less to insurance and maintain. However, small shouldn’t be confused with conservative; consumers expect greater function and flexibility than ever. Luxury bathrooms, ultra-modern conveniences and outdoor amenities are only a few of the mandated expectations required to attract the ultra-chic buyers.
Leisure Means More: Whether it’s taking a walk in the park, going for a swim or simply the ability to take the dog out for a stroll, leisure is more meaningful than ever. People no longer want to settle for rest and relaxation two week out of the year while they spend hours every day sitting in traffic and fighting for parking. Look for areas that allow homeowners, renters or other buyers to integrate leisure opportunities into their daily life. Nearby parks, bike paths, museums, restaurants and other activities should be close and convenient.
Change of Shopping Habits: Amazon and eBay have changed the way America shops; what used to be considered a “risky” endeavor has become increasingly mainstream while strip plaza’s and malls continue to fight for their fair share of shoppers. Expect to see this trend continue far into the future with niche shopping becoming the rage of the future “in person” experience.
The Bottom Line: In much the same way that investors don’t want to buy properties near major manufacturing plants or industrial employers only to watch the company close and the town to slowly shrivel away; understand the long and short term potential for any property you purchase. In many instances you will want to sell quickly while occasionally it may make sense to hold a purchase over the long term. Learn to recognize the trends then use each to your advantage when working your short sales strategy.
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