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Pending Home Sales Show Another Gain

Pending home sales have increased for the second consecutive month, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, a forward-looking indicator, rose 4.3 percent to 82.3 based on contracts signed in August from a downwardly revised 78.9 in July, but is 20.1 percent below August 2009 when it was 103.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said the latest data is consistent with a gradual improvement in home sales in upcoming months. “Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”

Although Yun expects a continuing steady rise in home sales from favorable affordability conditions and some job creation, he cautioned any sudden rise in mortgage rates could slow the recovery. “Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates,” he said. “Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”

The PHSI in the Northeast declined 2.9 percent to 60.6 in August and remains 28.8 percent below August 2009. In the Midwest the index rose 2.1 percent in August to 68.0 but is 26.5 percent below a year ago. Pending home sales in the South increased 6.7 percent to an index of 90.8 but are 13.1 percent below August 2009. In the West the index rose 6.4 percent to 101.1 but remains 19.6 percent below a year ago.

The Fabulous Front Porch

Lure buyers from the curb with an inviting front porch.

By Kristine Hansen

When Lisa Sevajian, a real estate professional recently listed a home, it was the front porch that nabbed a buyer.

"All three potential buyers knew they were buying it before they even saw the inside," she says. Sevajian had added bamboo flooring and a ceiling fan to the porch. "It looks like indoor living space but it's a porch." The home sold the first weekend it was listed — and for more than the asking price.

For another listing she again played up the porch. Staging the 6-foot-wide farmer's porch, which ran the span of the house, with quality furnishings enticed potential buyers to check out the home. "Whether it's in Miami or Boston, people want a front porch for that extra living space," Sevajian says.

"I'm glad to see the revival of the front porch," says Bryce Sanders, sales associate at Halstead Property in New York, who admits his region — dominated by high-rises — is not an area with many front porches. He applauds Seaside, Fla., one of the country's first New Urbanism communities, with the revival of the concept. "It brought back the idea of the porch," he says.

This renewed interest in having a front porch dovetails with a want for compactly designed and pedestrian-friendly communities, the kind of blocks where you chat with neighbors. A row of front porches encourages those casual conversations.

Today's ideal-sized porch, says John Norquist, president of the Congress for New Urbanism, is one where you can comfortably sit in a rocking chair. "A pseudo-porch really doesn't work. Dimensions matter. Modest-size streets and small lot sizes are ideal so people can stroll to each house comfortably. The idea of walking to the corner store is doing well in the current economic downturn," he says. "If the streets are too big or too wide, that can take away from the neighborhood feeling.

"Generally, porches are considered an asset," Norquist adds. "There's no real downside to porches." About 40 years ago, he says, home owners spent more time in their back yards, and upgraded those areas with intensity, in part to create a private space away from the street and surrounding houses. "All the social space was in the back yard," he says. Now he's noticing a shift in older homes where front porches are added and integrated into the design, offering not only curb appeal but an extra space to congregate.

"When you talk to people about neighborhoods, their favorite neighborhoods in the United States are comprised of front porches that are part of the design," says Tim de Noble, dean of the college of architecture, planning, and design at Kansas State University in Manhattan, Kan. He's noticing more and more front-porch designs in new-home construction projects.

Front porches provide the best of both worlds: privacy and community. "They make great communal sense," he says. "We can become isolated as we retreat farther and farther back in the house." Yet it also provides a "sense of separation" between the indoor living space and the street.

A front porch also provides ecological advantages. "Because the windows are protected, you don't have to close everything down to keep the sun out. The porch provides that gasket of environmental relief," de Noble says.

Like all home design, the range of styles runs the gamut, from traditional to contemporary and a lot of eclecticism in between. But one thing is for sure: There's a desire to bring the indoors outside (with comfy furnishings) and let the cool breezes from outdoors waft inside.

"Patio furniture has morphed into higher-quality furniture, even at Target, for a luxury-resort feel," Sevajian says. "We're also seeing a lot of gas lamps within the last 18 months.

" Robert Cohen, president of Meyda Custom Lighting, has even noticed chandeliers — mostly wrought iron — on front porches. The company's Craftsman series of outdoor lighting, those made from brass and copper, continues to do well, but he's also seeing a draw towards Victorian- and mission-style lighting. "I don't think there's any one design theme going on these days," Cohen says.

Renovating a home's front porch can definitely boost its chance of selling, which is what Sevajian found in Massachusetts. "It absolutely adds value to the house and makes it more saleable as you have more living space," she says.

Lighting is a part of that equation. "We use varying levels of brightness to create an elegant look," says Brandon Stephens, vice president of marketing at NiteTime Décor, which designs custom lighting for homes' outdoor spaces. Projects range from $1,200 to $50,000, with the average job running around $4,000. A recent client survey revealed that the No. 1 reason for buying a home is its curb appeal, in which lighting plays a huge role.

"The name of the game is to provide a warming, welcoming atmosphere on the front porch," Stephens says. Lately he's noticing more sconces on porches that result in a "figure-8 shadow," or softer, light.

For homes on the market, adding lighting to the porch, he says, can double the viewing time as many people shop for houses or do drive-bys after work when it's dark outside.

In a time where financial concerns are pushing people away from the thought of expensive vacations or trading up for a larger house and instead opting for home improvements, more care is being put into the adjacent outdoor spaces, too.

"We're finding ways to enjoy what we do have," says Sevajian. "It's all part of the idea that people don't want to spend as much money, and it ties into the 'staycation' idea if you have more yard space."

A Fresh Look at Rent vs. Buy

Source: Brett Arends

"Why on Earth would you buy down here when you can rent?" asked a friend of mine in Miami Beach not long ago. "Buying is so over."

He promptly moved to Manhattan for work reasons–and bought a $1 million loft on the Upper West Side.

Note the typical behavior. People want to buy when prices are up, and turn more wary when they've collapsed. Logically it makes no sense. Research out Thursday adds some hard numbers.

Real estate website Trulia.com has looked at major real estate markets across the country and asked: Is it cheaper to buy, or to rent?

By Trulia's math my friend was moving in exactly the wrong direction.

Rent in Manhattan: Home prices there are way too high, says Trulia. (Ditto San Francisco.)

Buy in Miami. And Phoenix. And Las Vegas. And most of the other places that have been flattened by the crash. Homes there are cheap compared to rents.

The cross-over point is about 15 times annual rent, the company believes. In other words, as a rough rule of thumb, homes are probably fairly valued in a city when they cost about 15 times a year's rent. So, for example, if you're paying $10,000 a year to rent a place, think twice about buying a home that costs more than $150,000. Dean Baker, economist at the Washington, D.C. think-tank The Center for Economic and Policy Research, came to a similar conclusion in research on the subject in recent years. Fifteen times is the historic average, he said.

So what's the multiple in New York right now?

About 32 times, says Trulia. The average two-bedroom condo or townhouse in New York city costs about 32 times as much to buy as it does to rent. Other major markets over 20 times include Seattle (24 times), San Francisco (22 times) and Portland, Ore. (22 times).

On the other hand Miami list prices are now about eight times annual rents, says Trulia. Phoenix is about 10 times and Las Vegas about 11.

Trulia's data need to be taken with some caveats.

Trulia looked at list prices rather than actual transaction prices, so its figures for prices may be too high.

Furthermore drawing the cut-off point at 15 times rents may be on the low side.

Mr. Baker, in conversation yesterday, said that figure assumes that you're only going to stay in your home for the typical seven years. If you stay a lot longer, he says, the transaction costs of buying and selling become less and less important. That makes owning more attractive.

Nonetheless the Trulia analysis seems directionally correct. Work done by the C.E.P.R. last year came to similar conclusions: Namely that markets like New York and the California coast remained expensive compared to rents, while the hardest hit markets now look cheap.

And Trulia's research emphasizes two points that are absolutely spot on.

First, homeowners need to look first and hardest at present cashflow. The cult of homeownership made no sense. If renting is much cheaper than buying, think seriously about it.

Second: The markets that have fallen the furthest now look like good places to buy, while those that seem to be "safest" aren't. As the saying goes: There is no such thing as a "safe" investment, merely one whose risks are not yet apparent. It's a principle that a lot of people forget time and again.

Does Moving Up Make Sense?

These questions will help you decide whether you’re ready for a home that’s larger or in a more desirable location. If you answer yes to most of the questions, it’s a sign that you may be ready to move.

1. Have you built substantial equity in your current home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.

2. Has your income or financial situation improved? If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.

3. Have you outgrown your neighborhood? The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you’d like to be closer to your job or live in a different school district.

4. Are there reasons why you can’t remodel or add on? Sometimes you can create a bigger home by adding a new room or building up. But if your property isn’t large enough, your municipality doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.

5. Are you comfortable moving in the current housing market? If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.

6. Are interest rates attractive? A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.

Pending Home Sales Show Healthy Gain

Pending home sales rose in February, potentially signaling a second surge of home sales in response to the home buyer tax credit, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 8.2 percent to 97.6 from a downwardly revised 90.2 in January, and remains 17.3 percent above February 2009 when it was 83.2. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, says the improvement is another hopeful sign. “The rise in buyer contact activity may signal the early stages of a second surge of home sales this spring. The healthy gain hints home prices are continuing to flatten,” he says. “We need a second surge to meaningfully draw down inventory and definitively stabilize home values.”

Pending home sales by region:

• Northeast: the index rose 9.0 percent to 77.7 in February and is 18.9 percent higher than February 2009.
• Midwest: jumped 21.8 percent to 97.9 and is 18.7 percent above a year ago.
• South: increased 9.2 percent to an index of 107.0, and the index is 17.5 percent higher than February 2009.
• West: the index fell 4.8 percent to 98.0 but is 14.6 percent above a year ago.

Source: NAR

Americans Still Prefer To Own Than Rent

Despite the challenges facing the housing market, 65 percent of Americans would still prefer to own a home rather than rent, according to a Fannie Mae national housing survey.

In addition, 43 percent of respondents cite safety as a key reason to buy, while 33 percent are motivated to buy because they perceive schools to be better in neighborhoods where most homes are owned by their residents.

The survey results released Tuesday show that both buyers and renters are more cautious than they used to be. About 23 percent of renters say they will buy a home, but later than they once hoped.

A full 70 percent said they believe buying a home continues to be one of the safest investments available. This compares to 74 percent who think putting money into a bank account is safe. Only 17 percent believe buying stocks is a safe investment.

Also, 60 percent believe that it will be harder for them to get a mortgage to purchase a home than it was for their parents.

Source: Fannie Mae National Housing Survey (04/06/2010)