Several recent indicators for the real estate industry are pointing to a market that is on the mend and entering recovery mode.

Housing experts’ predictions for the new year tend to center around a market stabilizing before entering a gradual, albeit very slow, recovery. However, the tone is more upbeat than it has been in years for the housing market.

Here are a few of the signs that are showing the market moving in a more positive direction:

Home sales: Existing home sales are expected to increase 12 percent this year, following a 2 percent jump last year, Moody’s Analytics predicts. The signs are already showing: In November, pending home sales — a gauge for future home buying — reached its highest level in 19 months, the National Association of REALTORS® reported. (Read more.)

New-home market: Coming off of what could be considered the worst year for new-home building ever recorded, the sector is expected to bounce back this year. New-home sales and starts were already showing a rebound in the last few months of 2011. Moody’s is predicting that single-family housing starts will increase 37 percent this year, and new-home sales will soar 74 percent.

Housing stocks: Investors are starting to get optimistic about the possibility of a rebound too, and are turning to home builder stocks. These equities have recently outperformed the broader stock market and the S&P 1500 homebuilding index has increased 38 percent since mid-October, USA Today reports.

Consumer confidence: With mortgage rates at record lows and housing affordability high, about 71 percent of Americans say now is a good time to purchase a home. Also, more Americans are optimistic that home prices will rise over the next year — about 26 percent say prices will rise in 2012, an increase of 4 percent over the last survey, according to Fannie Mae’s December National Housing Survey

Source: “Housing Outlook Is More Upbeat,” USA Today (Jan. 15, 2012) and “Consumers More Confident, Survey Says,” Deseret News (Utah) (Jan. 16, 2012)

The apartment vacancy rate is at its lowest level since late 2001 as the rental market continues to soar, according to the latest fourth-quarter data by Reis Inc.

As demand increases, the vacancy rate for apartments dropped in the fourth quarter to 5.2 percent compared to 6.6 percent a year prior.

“Multifamily property has been the star of the real-estate sector for more than a year, generating profits for landlords but headaches for renters struggling with the economic downturn,” an article in The Wall Street Journal notes. “Demand has swelled from people being foreclosed out of their houses as well as those unable or unwilling to buy.”

Landlords are also raising their rents. Asking rents moved up 0.4 percent in the fourth quarter, averaging $1,064 a month nationwide — compared to $1,026 in 2009. New York City continued to have the highest rent in the country at $2,876 a month.

Meanwhile, as the rental market takes off, builders are rushing to play catch up in building new units to meet the demand. In 2011, Zelman & Associates estimates that more than 173,000 units were started, and about 225,000 and 280,000 starts are expected in 2012 and 2013.

Source: “Apartment-Vacancy Rate Tumbles to 2001 Level,” The Wall Street Journal (Jan. 5, 2012) [Log-in required.]

The worst for the housing market may finally be over, according to housing experts in a recent article in Kiplinger. After median home price have dropped nearly 40 percent nationwide, a rebound is taking shape — although, housing experts say, the market may stay flat for awhile before gradually ticking up.

According to housing experts in a recent Kiplinger article, here are some predictions for the real estate market in the coming year:

Home prices stabilize: Mark Zandi, chief economist at Moody’s Analytics, predicts that home prices nationwide may still drop another 3 to 5 percent in 2012, but the new year will most likely finally bring a leveling off of home prices before gains start to take shape in 2013. When markets do begin to stabilize in the new year, “price appreciation tends to spread unevenly, creating a lot of confusion about where the recovery is occurring and when,” David Stiff, chief economist at Fiserv Case-Shiller, told Kiplinger. “Even within a single city, more desirable neighborhoods will stabilize first, while prices in other neighborhoods may fall at a rapid pace.”

Housing affordability high: Housing affordability — the ratio of median home prices to median family income — will likely remain at record levels in 2012. Homes in many cities are “substantially undervalued,” the Kiplinger article notes. That may even lead to a mini bubble with double-digit spikes in prices, such as an increase of 10 to 15 percent in a given year in some markets, housing experts say.

Low mortgage rates: Helping to keep affordability high, low mortgage rates are expected to continue on in 2012 — at least the first part of the year, economists predict. The 30-year fixed-rate mortgage, the most popular among home buyers, has been hovering under a 4-percent average the past few weeks, staying in record low territory. Rates are expected to stay between 4 to 5 percent in 2012, predicts Guy Cecala, publisher of Inside Mortgage Finance, an industry publication.

Sales increases: The National Association of REALTORS® has already been showing a tick up in sales taking shape with increases in existing-home sales during the summer and early fall of 2011. High inventories of homes continue to flood the market but a drastic slowdown in new-home building the past three years is “gradually easing the surplus,” the Kiplinger article notes.

Foreclosures: Foreclosures remain the problem and still plague many markets. After a slowdown with lenders processing the paperwork, foreclosures have began to pick up once again. About 1.84 million home loans are 90 days or more delinquent and 2.17 million have finished the foreclosure process but aren’t up for sale yet, according to RealtyTrac data. Alex Villacorta, director of research and analytics at Clear Capital, told Kiplinger that he predicts regardless of the downward price pressure caused from foreclosures, overall home prices won’t fall as long as lenders bring additional foreclosures to the housing market at a steady pace.

Source: “What’s Ahead for Home Prices in 2012,” Kiplinger (January 2012)

Median list prices nationwide have risen 4.05 percent on a year-over-year basis, according to November housing data of 146 metro areas from Realtor.com. Fewer cities are reporting year-over-year list price declines, “suggesting a growing optimism on the part of sellers about 2012 market conditions,” according to Realtor.com.

So where have prices risen the most in the last month? The following are the 10 cities that saw the largest median list price increases from October to November.
1. Central Fla.-Regional Statistical Area

Month-to-month median increase: 5.63 percent

Year-over-year increase: 14.27 percent

Median list price: $169,000
2. Phoenix-Mesa, Ariz.

Month-to-month increase: 4.46 percent

Year-over-year increase: 10.54 percent

Median list price: $164,700
3. Miami, Fla.

Month-to-month increase: 3.60 percent

Year-over-year increase: 29.50 percent

Median list price: $259,000
4. Tampa-St. Petersburg-Clearwater, Fla.

Month-to-month increase: 3 percent

Year-over-year decrease: -2.50 percent

Median list price: $144,200
5. New York, N.Y.

Month-to-month increase: 2.71 percent

Year-over-year decrease: -2.57 percent

Median list price: $379,000
6. Fort Myers-Cape Coral, Fla.

Month-to-month increase: 2.69 percent

Year-over-year increase: 21.63 percent

Median list price: $224,900
7. Iowa City, Iowa

Month-to-month increase: 2.50 percent

Year-over-year increase: 3.02 percent

Median list price: $204,900
8. Tucson, Ariz.

Month-to-month increase: 2.41 percent

Year-over-year increase: 2.41 percent

Median list price: $174,000
9. Sarasota-Bradenton, Fla.

Month-to-month increase: 2.13 percent

Year-over-year increase: 16.56 percent

Median list price: $240,000
10. West Palm Beach-Boca Raton, Fla.

Month-to-month increase: 1.86 percent

Year-over-year increase: 15.26 percent

Median list price: $219,000

By Melissa Dittmann Tracey for REALTOR® Magazine’s Daily News

Existing-home sales were down in September on the heels of a strong gain in August, but remain well above a year ago, according to the National Association of REALTORS®.

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 3.0 percent to a seasonally adjusted annual rate of 4.91 million in September from an upwardly revised 5.06 million in August, but are 11.3 percent above the 4.41 million unit pace in September 2010.

Lawrence Yun, NAR chief economist, said the market has been stable although at low levels, and there is plenty of room for improvement. “Existing-home sales have bounced around this year, staying relatively close to the current level in most months,” he said. “The irony is affordability conditions have improved to historic highs and more creditworthy borrowers are trying to purchase homes, but the share of contract failures is double the level of September 2010. Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable — this speaks to an unfulfilled demand.”
Market Issues

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.11 percent in September, down from 4.27 percent in August; the rate was 4.35 percent in September 2010.

Contract failures were reported by 18 percent of NAR members in September, unchanged from August; they were 9 percent in September 2010. Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.

NAR President Ron Phipps said access to credit is unbalanced. “All year we’ve been discussing the fact that many creditworthy home buyers are being denied mortgages,” he said. “On top of that, loan limits have been lowered, which means buyers of higher priced homes, including many in more expensive housing markets, now have to pay a higher interest rate for a jumbo mortgage than buyers who can qualify for a conventional loan. We need to remove the roadblocks to a housing recovery — not place more obstacles in the way of financially qualified buyers.”
Who’s Buying? What’s Selling?

All-cash sales accounted for 30 percent of purchase activity in September, up from 29 percent in August and 29 percent also in September 2010; investors make up the bulk of cash purchases.

Investors purchased 19 percent of homes in August, down from 22 percent in August; they were 18 percent in September 2010. First-time buyers accounted for 32 percent of transactions in September, unchanged from August; they were also 32 percent in September 2010.

The national median existing-home price for all housing types was $165,400 in September, down 3.5 percent from September 2010. Distressed homes — foreclosures and short sales typically sold at deep discounts — accounted for 30 percent of sales in September (18 percent were foreclosures and 12 percent were short sales), down from 31 percent in August and 35 percent in September 2010.

Total housing inventory at the end of September declined 2.0 percent to 3.48 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, compared with an 8.4-month supply in August.

Single-family home sales fell 3.6 percent to a seasonally adjusted annual rate of 4.33 million in September from 4.49 million in August, but are 12.2 percent above the 3.86 million-unit level in September 2010. The median existing single-family home price was $165,600 in September, down 3.9 percent from a year ago.

Existing condominium and co-op sales rose 1.8 percent a seasonally adjusted annual rate of 580,000 in September from 570,000 in August, and are 5.6 percent above the 549,000-unit pace one year ago. The median existing condo price was $163,800 inSeptember, which is 1.0 percent below September 2010.
Around the U.S.

Regionally, existing-home sales in the Northeast rose 2.6 percent to an annual level of 790,000 in September and are 6.8 percent above a year ago. The median price in the Northeast was $229,400, down 3.3 percent from September 2010.

Existing-home sales in the Midwest slipped 0.9 percent in September to a pace of 1.09 million but are 17.2 percent higher than September 2010. The median price in the Midwest was $137,400, which is 1.4 percent below a year ago.

In the South, existing-home sales declined 2.6 percent to an annual level of 1.89 million in September but are 10.5 percent above a year ago. The median price in the South was $144,400, down 3.0 percent from September 2010.

Existing-home sales in the West fell 8.8 percent to an annual pace of 1.14 million in September but are 10.7 percent higher than September 2010. The median price in the West was $207,400, which is 4.5 percent below a year ago.

“The falloff in Western sales from a surge in August was expected because many lenders had lowered mortgage loan limits over concerns that sales wouldn’t close before the higher loan limits expired at the end of the September,” Yun said. “Given the concentration of higher cost housing in the West, particularly in California, many buyers were motivated to close in the months leading up to the changeover while they could still get low interest rates on conventional mortgages. Unless Congress reinstates the higher limits, the overall housing market recovery will be slower than it otherwise could be, and will hold back the broader economic recovery.”

Source: NAR

Nationwide, 2.19 million homes were listed for sale at the end of September, a drop of 20 percent compared to a year earlier, and marking the lowest level on record since REALTOR.com began tracking housing inventory data in 2007.

All 146 markets that REALTOR.com tracks saw housing inventory fall year-over-year, except for Denver and El Paso, Texas. Listings were down by 49 percent in Miami, 48 percent in Phoenix, and 46 percent in Orlando, Fla.

But while reduced inventories usually help lift prices, in the current real estate market, housing prices are staying flat or declining. That’s because demand remains soft, housing experts say.

Real estate professionals told The Wall Street Journal that inventories are shrinking because some home sellers have decided to take their homes off the market instead of trying to sell at a steep discount. Banks are also moving more slowly at repossessing foreclosures, which has reduced the supply of foreclosed properties on the market — albeit a temporary decrease, many experts note.

“The inventory is low, so it’s hard for buyers to find their dream home,” Joan Downing, a real estate professional in the Detroit area of Bloomfield Hills, Mich., told The Wall Street Journal. “That’s been our challenge more than anything: finding the inventory for the clients. Nobody’s complaining about the pricing or the interest rates.”

Source: “Slim Pickings Are Latest Headache for Home Sales,” The Wall Street Journal (Oct. 17, 2011)

Rick Sharga, executive vice president with Carrington Mortgage Holdings, says the housing market is in a “catfish recovery,” with the market hitting bottom this year but prices mostly remaining flat until 2014.

The looming shadow inventories of distressed properties are continuing to prevent prices from rebounding, he explains. Sharga, former senior vice president at RealtyTrac, says more than a million foreclosure actions failed to move forward this year due to delays, which will cause a delay in prices rebounding. Sharga made his comments during a talk at the Asian Real Estate Association of America conference last week in San Francisco.

About 800,000 REOs remain on banks’ books, with three-quarters of those not yet listed for sale, Sharga says. What’s more, an additional 800,000 homes are in foreclosure, and 1.5 million loans are delinquent, HousingWire reports.

Sharga says he expects monthly foreclosures to remain high through 2012, and REO inventories to stay elevated through 2013.

Source: “Housing Market Hit Bottom: Former RealtyTrac Exec,” HousingWire (Sept. 30, 2011)

More and more investors are pulling money out of retirement and saving accounts to use their own money to make mortgage loans to home buyers who banks reject. These hard-money lenders charge borrowers higher interest rates, but are becoming an answer for some home buyers who can’t get approved for a loan otherwise due to tighter credit restrictions.

Guy D. Cecala, publisher of trade publication Inside Mortgage Finance, says hard-money loans are up significantly from a few years ago.

Joey Messina, an attorney in Dallas, told The Wall Street Journal that he has funded 20 mortgages — ranging in size from $40,000 to $102,000 — in the past two years. The mortgages carry interest rates of 14 percent, which is more than double what most banks charge in interest.

Some borrowers in particular have had a harder time getting loans since the housing market crash and banks started tightening their lending requirements. For example, other investors and self-employed individuals who can’t fully document their incomes and home buyers with low credit scores may face the most hurdles from banks.

Hard-money lenders must abide by the same mortgage rules as traditional lenders. Still, the nonprofit housing organization NeighborWorks America cautions home buyers considering a hard-money loan to consult with an unbiased housing or credit counselor to analyze the rates and terms to make sure these loans don’t qualify as predatory subprime lending.

Source: “Investors Who Do a Few Mortgages on the Side,” The Wall Street Journal (July 21, 2011)

A Los Angeles County estate that once was the highest-priced home in the U.S. at $150 million has sold in an all-cash deal for $85 million–a 43 percent discount.

Belonging to Candy Spelling, the widow of famous TV producer Aaron Spelling, the 56,500-square-foot home–the biggest in Los Angeles County–had lingered on the market for two years at $150 million. The 4.7-acre Holmby Hills estate is about 1,500 square feet larger than the White House.

The home has sold at $85 million to British socialite Petra Ecclestone, daughter of the Ecclestone family which ranked 254th this year on Forbes’ list of wealthiest people, with a net worth of $4.2 billion. Ecclestone reportedly plans to use the estate part-time.

Determining an asking price on multimillion-dollar luxury homes can be difficult. “Generally speaking, you are not going to have matching comps because every estate is different when you get to that price range,” says Jordan Cohen, estates director for RE/MAX Olson & Associates.

The home boasts 123 rooms, including a flower-cutting room, a humidity-controlled silver storage room, and a basement bowling alley.

Considering the high list price, the home was thought to possibly set a new record for the highest home price sale in the U.S. However, that title still belongs to a transaction earlier this year in Silicon Valley, which set a record for the highest known price ever paid for a single-family home in the U.S. at $100 million.

Source: “Petra Ecclestone Buys Spelling Mansion for $85 Million,” The Los Angeles Times (July 15, 2011)