With third-quarter home sales and prices off considerably from a year ago and builder sentiment flatlining, industry groups hope Congress will pass legislation quickly to stem the tide.
According to the National Association of Realtors, four out of five metropolitan areas recorded lower home prices in the third quarter from a year earlier, while sales of existing homes fell in 32 states from the second quarter.
To jumpstart sales and stabilize prices, NAR recently signed off on a real estate stimulus proposal that includes a temporary $7,500 tax credit for all buyers, with no repayment requirement, and a temporary federal buy-down of mortgage rates to 4.5 percent or less.
The group’s plan also calls upon the federal government to make permanent the temporary increase in FHA, Fannie Mae and Freddie Mac loan limits to $729,750 in high-cost areas. The limits are scheduled to roll back to $625,000 on Jan. 1.
Lawrence Yun, NAR’s chief economist, said in a press statement, "Historically during recessions, buyers have responded to incentives and it’s important for government to keep that in the forefront of stimulus decisions."
NAR said that the large amount of foreclosures and short sales (roughly 35 to 40 percent of third-quarter transactions) pulled the national median price of an existing single-family home down 9 percent from the third quarter of 2007, from $220,300 to $200,500.
The steepest declines in single-family home prices in the third quarter were in three California markets: the Riverside-San Bernardino-Ontario area, where the median price of $227,200 dropped 39.4 percent from a year ago; followed by Sacramento-Arden-Arcade-Roseville at $212,000, down 36.8 percent from the third quarter of 2007; and San Diego-Carlsbad-San Marcos, where the price dropped 36 percent to $377,300.
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate of 5.04 million units in the third quarter, up 2.6 percent from 4.91 million units in the second quarter, but still 7.7 percent below the 5.46 million-unit pace in the third quarter of 2007, NAR said.
Builder confidence in the market for newly built single-family homes plunged in November as worsening problems in the financial markets, job market weakness and overwhelming uncertainty about the economy continued to negatively impact consumer behavior, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI sank five points to 9, the lowest level recorded since the series was created in January of 1985.
"Today’s report shows that we are in a crisis situation. If there’s any hope of turning this economy around, Congress and the administration need to focus on stabilizing housing," said NAHB Chairman Sandy Dunn, in a press statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it’s going to take some major incentives to bring them back. Beyond the work that is being done to help reduce foreclosures, Congress must immediately incorporate such incentives for qualified buyers in a new economic recovery package."
NAHB, which supports expanding the first-time home buyer tax credit and providing a government buy-down of mortgage interest rates for home purchasers, said both policies were successful in the 1970s in "stimulating home buyer demand, and could get housing and the national economy moving again."
Two out of three of the HMI’s component indexes declined in November, with scores below 50 indicating that more builders view sales conditions as poor than good. The index gauging current sales conditions fell six points to 8, which was a new record low. Likewise, the index gauging traffic of prospective buyers fell four points to 7 — also a record low. Meanwhile, the index gauging sales expectations in the next six months held firm from the previous month at its record low of 19.
Every region posted declines in builder confidence in November. The Northeast, South and West each registered five-point declines to 11, 11 and 6, respectively, while the Midwest registered a six-point decline to 7.
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