Housing: Doom, Gloom & Hope?

Luxury home prices are stumbling in London
International Herald Tribune – 1 July 2008

The average price of houses and apartments in London’s nine most expensive neighborhoods fell 1.7 percent in June from a month earlier…That cut the annual increase to 7.5 percent, down from a peak of 38 percent in August…Knight Frank said prime residential sales in London are down 60 percent from last year…London is still better off than the rest of the country…British home prices to decline 6.3 percent in June from a year earlier, the largest drop since November 1992…The one part of the London market least affected by the decline are homes costing more than £10 million…values are still 23 percent higher than a year ago…

British economy falling into American-style slump
International Herald Tribune – David Jolly – 3 July 2008

According to Nationwide Building Society…housing prices have fallen for eight straight months. In June, they fell 6.3 percent from a year earlier, the biggest drop since 1992, taking the price of a “typical” British home down to £172,415, or about $343,000 – a decline of more than £13,500 from the top of the market.

The British central bank said Monday that mortgage approvals in May were at the weakest level on record – only 42,000 for all of Britain, down from 58,000 in April.

As the housing market sputters, consumers have retrenched. Shares in Marks & Spencer, the iconic British retailer regarded as a bellwether of the domestic economy, plunged more than 25 percent in two days after it reported a sharp decline in sales.

House prices won’t recover until 2015, ex-MPC expert warns
Telegraph – Edmund Conway, Economics Editor – 5 July 2008 via Calculated Risk

Families must wait until 2015 for the property market to start booming again, according to Stephen Nickell, who heads up the unit which advises the Prime Minister on housing planning…”severe rationing” of mortgages was preventing first time buyers from taking advantage of falling house prices, preventing affordability from improving…data from the Land Registry showed…that property sales have halved in the past year…London, Rutland and Wales were particularly affected as buyers abandoned the home market in the face of higher mortgage and financing costs…In the capital sales of homes below £200,000 fell by more than 60 per cent, a further sign that first time buyers remain trapped outside the housing market…Experts said the figures were likely to deteriorate even further in the coming months, since house prices have fallen even further since March…

Luring Affluent Renters in Manhattan
New York Times – Vivian S. Toy – 29 June 2008

“We definitely have seen a shift in the dynamic of the marketplace,” said David J. Wine, a vice chairman at the Related Companies, which owns and manages about 5,000 rental units in New York City. “ The frenzy of a year or two ago has abated, and we’re seeing renters be a lot more thoughtful in their rental decisions.”…Landlords have adjusted accordingly…“A lot of landlords were getting ready to increase rents for the busy season, but they’re finding that those projected rents aren’t attainable,” said Daniel Baum, the chief operating officer at the Real Estate Group New York… No one anticipated having problems on the rental side, and it’s definitely forcing property owners to take a second look at marketing and to rethink their pricing.”…Market-rate rents have continued to rise, but the rate of growth is nowhere near the double-digit increases that landlords got in recent years…the incentives being offered in the prime summer rental season are a clear sign of a weaker rental market….Market-rate rental buildings offering incentives tend to be clustered in specific neighborhoods, including the financial district, Harlem, Washington Heights and areas in the far eastern or western edges of Manhattan.

Price-to-Rent Ratio Update
Calculated Risk- 3 July 2008

Looking at the price-to-rent ratio…the adjustment in the price-to-rent ratio is probably more than half way complete as of Q1 2008 on a national basis…Some combination of falling prices, and perhaps rising rents, will probably push the ratio back towards 1.0. By this measure of housing fundamentals, it appears that Miami has correct about 2/3 of the way to the eventual bottom, Los Angeles about half way, and New York about 40%.

Endless Winter
Econobrowser – 28 June 2008

…In a typical year, the number of homes sold each month in March through May would be 40% higher than in December. Nine years out of 10, the rate would be at least 20% higher. This year? Only 9%… December 2007 was itself down 38% from December 2006 and down 50% from December 2005.

Why no spring? This graph from Peter Hooper may have something to do with it.

Real Estate Outlook: Resales Up, Rate Dip
Realty Times – Kenneth R. Harney – 3 July 2008

They’re not overwhelming yet, but definite signs of improvement continue to pop up in real estate around the country…Sales were up by 2 percent nationally in May, and up 5.5 in the Midwest and 4.6 percent in the Northeast…Condo sales also jumped 5.5 percent nationwide…even in some of the hardest hit local markets — Sarasota on the Gulf Coast of Florida, for example, and Sacramento California and Battle Creek Michigan…in the toughest local markets that means deeply-discounted and distressed properties coming out of foreclosure now look like excellent deals to bargain hunters…But there are other signs of light as well…found home values actually increased in two major regions in the U.S…Prices continue to rise in Texas, Louisiana, Arkansas, Oklahoma, Kentucky, Tennessee and Mississippi. Dozens of metropolitan markets in the mid section of the country never participated in the boom, and they are showing steady increases in prices… Mortgage rates took a surprise dip last week…Personal consumption…rose by four tenths of a percent in May. That’s the largest gain since December of 2006…we could be on the verge of a turnaround in the months ahead.