Conditions remain uneven around the country, but some areas that are showing healthy gains in pending home sales from a year ago include many Florida and California markets; Providence, R.I.; Lansing, Mich.; Oklahoma City; and Las Vegas.

By the Region

Here’s what the PHSI showed across the country:

• South: jumped 7.8 percent to 95.9 in October but remains 2.9 percent below a year ago.
• Northeast: rose 0.6 percent to 68.1 but is 14.1 percent below October 2007.
• Midwest: declined 4.3 percent to 79.7 in October and is 6.8 percent below a year ago.
• West: fell 8.7 percent to 103.7 but is 17.4 percent higher than October 2007.

The Economic Forecast

New-home sales: for 2008 should total 486,000 this year, decline to 393,000 in 2009 and then grow to 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.

Existing-home sales: looking at middle-ground assumptions, existing-home sales are forecast to total 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010.

Home prices: “Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun says. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.” NAR’s housing affordability index is likely to remain quite favorable, averaging 138 in 2009.

Unemployment rate: is estimated at 7.2 percent in the first quarter, rising to 8.3 percent by the end of 2009.

Inflation: as measured by the Consumer Price Index, is seen at 0.7 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.5 percent in 2009.

GDP: Yun expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year – lifted by a home sales recovery.

“Given the critical role of housing in an economic recovery, we’re confident sufficient stimulus will be offered to bring more buyers to the market,” he says.

Could a Drop in Interest Rates Help?

The 30-year fixed-rate mortgage will probably decline to 5.6 percent in the first quarter, rise slowly to 6 percent by the end of 2009, and average 6.2 percent in 2010.

NAR President Charles McMillan says he’s hopeful about considerations by the U.S. Treasury to help the housing market.

“Efforts to bring down mortgage interest rates demonstrate a clear understanding of the role housing plays in stabilizing the economy,” McMillan says. “We’re very encouraged by all of the proposals getting serious consideration in Washington to help home buyers. More sales will stabilize home prices by bringing down inventory, and would lessen foreclosure pressure.”

Source: NAR

In the third quarter, 28 out of 152 metropolitan statistical areas showed increases in median existing single-family home prices from the same quarter in 2007; four were unchanged and 120 metros experienced declines. NAR’s track of metro area home prices dates back to 1979.

NAR President Charles McMillan said price comparisons in many areas are like apples and oranges.

“A very large proportion of distressed home sales are taking place at discounted prices compared to more normal conditions a year ago,” McMillan says. “It’s very challenging to understand proper valuation, given the differences between distressed sales and a larger share of traditional homes in sound condition.“

Foreclosure Impact

Distressed sales — foreclosures and short sales — accounted for 35 to 40 percent of transactions in the third quarter, pulling down the national median existing single-family price to $200,500, which is 9 percent lower than the third quarter of 2007.

A year ago, when there were significantly fewer distressed transactions, the median price was $220,300. The median price is where half of the homes sold for more and half sold for less.

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 remain 7.7 percent below the 5.46 million-unit pace in the third quarter of 2007.

Lawrence Yun, NAR chief economist, says conditions continue to range widely.

“A pattern of sharply higher sales in areas with large price declines is well established,” Yun says. “Affordability conditions have consistently been a major factor in driving sales. Historically during recessions, buyers have responded to incentives and it’s important for government to keep that in the forefront of stimulus decisions.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 6.32 percent in the third quarter from 6.09 percent in the second quarter; the rate was 6.55 percent in the third quarter of 2007. Last week, Freddie Mac reported the 30-year fixed fell to 6.14 percent.

Strongest Sales Gains

The largest sales gain during the third quarter was in Arizona, up 28.3 percent from the second quarter, followed by California which rose 28.1 percent and Nevada, up 26.2 percent.

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.

“These areas have seen some of the strongest sales gains with some reports of multiple bidding,” Yun says.

The largest single-family home price increase in the third quarter was in the Elmira, N.Y., area, where the median price of $105,000 rose 12.5 percent from a year ago. Next was Decatur, Ill., at $93,400, up 8.7 percent from the third quarter of 2007, followed by the Bloomington-Normal, Ill., area, where the third-quarter median price increased 8.1 percent to $168,400.

The typical seller purchased their home six years ago and is experiencing net equity gains. The national increase in value since the third quarter of 2002 is 18.3 percent, which is a median gain of $31,000. Even with the current downward price distortion, 90 percent of metro areas are showing six-year price gains.

Median third-quarter metro area single-family home prices ranged from an affordable $65,800 in the Saginaw-Saginaw Township North area of Michigan to $650,000 in the San Jose-Sunnyvale-Santa Clara area of California. The second most expensive area was San Francisco-Oakland-Fremont, at $615,700, followed by Honolulu at $615,000.

Affordable markets include the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $74,300, and South Bend-Mishawaka, Ind., at $88,000.

The Condo Market

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 metro areas – showed the national median existing-condo price was $210,800 in the third quarter, down 7.1 percent from $227,000 in the third quarter of 2007. Sixteen metros showed annual increases in the median condo price and 41 areas had price declines.

The strongest condo price increases were in the Dallas-Fort Worth-Arlington area, where the third quarter price of $149,900 rose 11.1 percent from a year earlier, followed by Bismarck, N.D., at $148,000, up 11 percent, and the Houston-Baytown-Sugar Land area, where the median condo price of $134,100 rose 8.1 percent from the third quarter of 2007.

Metro area median existing-condo prices in the third quarter ranged from $112,600 in the Greensboro-High Point, N.C., area to $456,300 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was the New York-Wayne-White Plains area of New York and New Jersey at $324,000, followed by Honolulu at $322,000.

Other affordable condo markets include the Indianapolis area at $113,500 and the Cincinnati-Middletown area of Ohio, Kentucky and Indiana, at $117,300 in the third quarter.

Market Snapshot by Region

Here’s how existing-home sales fared across the country:

• West: rose 13.1 percent in the third quarter to an annual rate of 1.15 million and are 12.4 percent above a year ago. The median existing single-family home price in the West was $266,300 in the third quarter, which is 21.4 percent below the third quarter of 2007. The only reported metro price increase in the West was in Farmington, N.M., at $193,600, up 1.7 percent from a year ago.

• Midwest:existing-home sales rose 2.7 percent in the third quarter to a pace of 1.15 million but remain 10.6 percent below a year ago. The median existing single-family home price in the Midwest declined 5.5 percent to $159,900 in the third quarter from the same period in 2007. After Decatur and Bloomington-Normal, the next strongest metro price increase in the Midwest was in the Wichita, Kan., area, where the median price of $125,300 was 5.5 percent higher than a year ago, followed by Champaign-Urbana, Ill., at $146,400, up 2.7 percent.

• South: sales slipped 1.4 percent in the third quarter to an annual rate of 1.87 million and are 13.8 percent lower than the same period in 2007. The median existing single-family home price in the South was $174,200 in the third quarter, down 3.7 percent from a year earlier. The strongest price increase in the South was in the Tulsa, Okla., area, at $139,800, up 5.1 percent from a year ago, followed by Amarillo, Texas, with a 4.2 percent gain to $128,300, and the New Orleans-Metairie-Kenner area of Louisiana at $166,800, up 4.1 percent.

• Northeast: sales declined 1.6 percent in the third quarter to a level of 863,000 units and are 11.7 percent below a year ago. The median existing single-family home price in the Northeast fell 6.5 percent to $267,700 in the third quarter from the same period in 2007. After Elmira, the strongest price increase in the Northeast was in the Trenton-Ewing, N.J., area, at $342,500, up 4.2 percent from the third quarter of 2007, followed by Buffalo-Niagara Falls, N.Y., with a median price of $114,200, up 3.0 percent.

“Coming on the heels of positive sales activity in September, Florida’s existing home sales are once again above year-ago levels in the third quarter,” says 2008 FAR President Chuck Bonfiglio. “Despite lending restrictions and the difficulties of finding affordable credit, we’re seeing buyers take advantage of homeownership opportunities in the current market – buyers who want to make a long-term investment in their future. And, more than ever, people are turning to Florida Realtors to find the professional expertise, knowledge and friendly guidance they need to make the complex process of buying or selling their home go more easily and smoothly.”

The statewide existing-home median sales price was $185,400 in the third quarter; a year ago, it was $233,200 for a decrease of 20 percent. In 2003, the third-quarter statewide median sales price was $163,700, which reflects an increase of about 13.3 percent over the five-year period. The median is a typical market price where half the homes sold for more, half for less.

Twelve of Florida’s metropolitan statistical areas (MSAs) reported increased sales of existing homes in the third quarter compared to the same three-month-period a year ago, while seven MSAs also showed gains in condo sales. A number of local markets have reported increased sales activity over the past few months, according to FAR.

Florida Realtors continued to report positive signs for the state’s housing sector in the third quarter, including an increase in pending home sales (based on contracts signed but not closed) and a slower rate of expansion of inventory levels in some areas.

To gain insight into current trends in Florida’s real estate industry, the University of Florida’s Bergstrom Center for Real Estate Studies conducts a quarterly survey of industry executives, market research economists, real estate scholars and other experts. According to the third quarter 2008 survey, the investment outlook for various types of properties remains steady. “People who have responded to our surveys have not lost their faith in Florida as a place to be and a place to invest,” said Dr. Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies. “We have 40 pages of comments from our respondents, and although the dominant theme is the disruption of financing, perhaps the second theme, as one person put it, is people being on the sidelines with full pads and helmets just waiting to jump back in.”

Over the long term, Florida stands to benefit from the migration of new residents, particularly as baby boomers age, Archer said, adding that the Sunshine State’s mild climate and outdoor amenities continue to make it an attractive retirement destination.

In the year-to-year quarterly comparison for condo sales, 9,472 units sold statewide for the quarter compared to 9,680 in 3Q 2007 for a 2 percent decrease. The statewide existing-condo median sales price was $160,000 for the three-month period; in 3Q 2007, it was $196,000 for an 18 percent decrease.

Continuing low mortgage rates remain another favorable influence on the housing sector. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 6.32 percent in third quarter 2008; one year earlier, it averaged 6.55 percent.

The latest industry outlook from the National Association of Realtors® (NAR) cautions the housing sector likely faces disruptions from the still-stabilizing credit market. “Inventory remains high, and price declines are pressuring owners,” said NAR Chief Economist Lawrence Yun. “Additional housing stimulus would stabilize prices more quickly, which in turn would bring faster stability to Wall Street. Removing the repayment feature on the first-time buyer tax credit and permanently raising loan limits would bring more buyers into the market and further reduce inventory.”

© 2008 FLORIDA ASSOCIATION OF REALTORS

“It has been a long road, but today we can finally announce a better way to buy homes in America,” says HUD Secretary Steve Preston. “Consumers need and deserve to know what they’re getting themselves into before they sign on the dotted line. After carefully considering the concerns of consumers and the different businesses in the housing sector, we have developed an approach that empowers the average family to shop for the most appropriate loan to meet their needs.”

Last March, HUD proposed reforms to the longstanding regulatory requirements of the Real Estate Settlement Procedures Act (RESPA), and last May, HUD extended the rule’s comment period. HUD received approximately 12,000 comment letters following the proposal of its new RESPA rule. In considering those comments, HUD says it made considerable modifications. For example, HUD originally proposed that settlement agents read a closing script at the closing table and that a copy be provided to borrowers. HUD ultimately discarded the script in favor of a new page on the HUD-1 Settlement Statement that allows consumers to compare their final loan terms and closing costs with those listed on their Good Faith Estimate.

The new Good Faith Estimate should clearly answer the following consumer concerns:

• What’s the term of the loan?
• Is the interest rate fixed or can it change?
• Is there a pre-payment penalty should the borrower choose to refinance at a later date?
• Is there a balloon payment?
• What are total closing costs?

To view the new standardized GFE and HUD-1documents, click on the following links:

New Good Faith Estimate: http://www.hud.gov/utilities/intercept.cfm?/content/releases/goodfaithestimate.pdf
HUD 1 Settlement Statement: http://www.hud.gov/utilities/intercept.cfm?/content/releases/hud-1.pdf

© 2008 FLORIDA ASSOCIATION OF REALTORS®