It’s a new beginning in America’s home-buying market. More and more buyers are saying no to expensive and convoluted bank loans and paying cash instead for bargain properties.

The Wall Street Journal reports scores of bargain-basement deals being closed by cash-bidding buyers who feel the bottom has been reached in the market.

Where are they getting the cash from?  They are selling other investments like paintings, cars and jewelry.

For example, In Atlanta, 62-year-old piano teacher Virginia Hall-Busch paid cash for a 93-year-old three-bedroom, one-bath bungalow in scenic Stone Mountain, GA.

The property initially listed for $159,000, then dropped to $129,000 and then to $79,900. The piano teacher didn’t think her bid of $52,500 would be taken seriously. It was. She is the new owner.

In Miami Beach, Richard Stoker, a 73-year-old retired sales executive, paid cash for two condominiums and soon plans to close on a third. He is paying $1.8 million, $1.2 million and $1 million for properties that were initially listed for double those amounts.

The Stokers have a home in Potomac, Md., but spend most of the year in Florida. Stoker doesn’t plan to rent out any of his new properties. He tells the WSJ he and his wife will live in one with two dogs, his son might live in another and the third will house an older dog and guests.

Cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, according to an analysis from real-estate portal Zillow.com.

In the fourth quarter of 2006, they represented just 13% of deals. Meanwhile, downtown Miami prices rose 15% in 2010 from a year earlier, according to the Miami Downtown Development Authority.

The percentage of buyers in Phoenix paying cash hit 42% in 2010–more than triple the rate in 2008, according to Raymond James’s equity research division.

Nationally, 28% of sales were all-cash transactions last year, according to the National Association of Realtors. The rate was 14% in October 2008, when the trade group began tracking the measure.

The Federal Reserve reports that Americans increased their use of credit cards in December 2010 for the first time since August 2008.

Henry Schlangen

“Some of the cash purchases reflect a tight lending environment, where even people with good credit and ample down payments are sometimes turned away for conventional borrowing,” reports the WSJ.

“The rates are great but the underwriting is brutal,” said Henry Schlangen, an agent with real-estate firm Pacific Union International who buys and sells for clients, mainly in Napa Valley, CA.

Schlangen tells the WSJ, “They (lenders) hang these people upside down and shake them till they see what falls out of their pockets. So people are buying with cash and maybe they’ll ‘Refi’ later.”

Schlangen, who deals in higher-end properties such as vineyard estates, estimated that 95% of his deals last year were all-cash, up from about half in previous years.

“The deals that are consummating, these are buyers who feel they got a great deal,” he said. He notes the number of buyers from China are increasing.

Mohammed Siddiq

Cash buyers can often command 5% to 10% more off the asking price than a potential buyer using a mortgage, Mohammed Siddiq, a real-estate professional in Fort Lauderdale, FL, tells the WSJ.

Sellers prefer cash deals since they close more quickly and avoid risks such as a buyer’s job loss or a bank’s changing its mind, he says.

Nationally, it isn’t clear whether prices have bottomed.

The Case-Shiller index of housing prices in 20 cities showed a steep decline in prices until 2009, when they appeared to bottom and began to trend upward.

But in the second half of last year, prices began falling again. A Zillow index, meanwhile, never noted the uptick, reports the WSJ.

source article Real Estate Channel

Freddie Mac said Thursday the 30-year fixed-rate mortgage average fell to record low of 4.44% with an average 0.7 point for the week ending Aug. 12. In the previous period, the average was 4.49% …

This calls for a long term graph …

Click on graph for larger image in new window.

This graph shows the 30 year fixed rate mortgage interest rate based on the Freddie Mac survey since 1971.

The decline in mortgage rates is related to the weak economy and falling Treasury yields. Rates will probably fall again this week with the Ten Year Treasury yield down to 2.7%.

Note: this series only goes back to 1971. Mortgage rates were at or below 5% back in the 1950s.

Source Article

Historically the best leading indicator for the economy (and employment) has been housing. I’ve been writing about this for years. For a great summary paper, see Professor Leamer’s presentation from the 2007 Jackson Hole Symposium: Housing and the Business Cycle

For housing as a leading indicator, I use Residential Investment (quarterly from the BEA’s GDP report), and monthly data on Housing Starts and New Home sales from the Census Bureau, and builder confidence from the NAHB.

Two key points:

Existing home sales is not a leading indicator (sales of existing homes does not add to the housing stock).

This time could be different – the recovery could be led by exports and technology – but I’ll stick with housing.So here is a review of the three monthly leading indicators:

Housing Starts

Click on graph for larger image in new window.

Total housing starts were at 591 thousand (SAAR) in January, up 2.8% from the revised December rate, and up 24% from the all time record low in April 2009 of 479 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959). Total starts had rebounded to 590 thousand in June, and have moved mostly sideways for eight months.

Single-family starts were at 484 thousand (SAAR) in January, up 1.5% from the revised December rate, and 36% above the record low in January and February 2009 (357 thousand). Just like for total starts, single-family starts have been at about this level for eight months.

Housing starts are moving sideways …

Builder Confidence

This graph shows the builder confidence index from the National Association of Home Builders (NAHB).

The housing market index (HMI) was at 17 in February. This is an increase from 15 in January.

The record low was 8 set buy doxycycline online in January 2009. This is still very low – and this is what I’ve expected – a long period of builder depression. The HMI has been in the 15 to 19 range since May 2009.

More moving sideways …

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

New Home Sales

The Census Bureau reports This graph shows New Home Sales vs. recessions for the last 45 years.

New Home Sales in January were at a seasonally adjusted annual rate (SAAR) of 309 thousand. This is a record low and a sharp decrease from the 348 thousand rate in December.

And it would be generous to even call this “moving sideways”.

So these leading indicators suggest any growth will be sluggish and choppy.

Now some people might argue that housing starts and new home sales are about to increase sharply. Based on what? That seems unlikely with the large number of excess housing units (new and existing homes and rental units). See: Housing Stock and Flow

As I noted above, it might be different this time with exports and technology leading the way, but I’ll stick with housing as a business cycle indicator.

source article calculated risk

California Housing Losses By County and City