Hottest U.S. housing markets cooling

Hottest U.S. housing markets cooling
Sales plunge more than 15% in five leading states
E-mail | Print |  | Disable live quotes By Rex Nutting, MarketWatch
Last Update: 4:30 PM ET May 15, 2006


WASHINGTON (MarketWatch) -- Existing home sales are down more than 15% in five states that have had the hottest housing markets, the National Association of Realtors said Monday.
Sales have dropped 22.2% year-over-year in Arizona, 19.2% in California, 18.2% in the District of Columbia, 15.7% in Florida and 15% in Nevada, the real estate group said.
Nationally, sales of existing homes fell 2.1% year-over-year in the first quarter. Sales in 26 states were above the levels of a year earlier. Sales fell in 21 states and the District of Columbia. Data were not available for three states.
The hot markets now are New Mexico, Louisiana, Montana and Mississippi, with sales up more than 15% in each of those states.
Meanwhile, the industry group said median home-price appreciation has slowed in the nation's 149 major metropolitan areas to 10.3% year-over-year from 13.6% in the fourth quarter of 2005.
Of the 149 metro areas, median sales prices are up by double-digit percentages in 60 areas. Prices have fallen in 16 metro areas, including Boston.
The hottest cities remained hot. Home prices were up 38.4% year-over-year in Phoenix, slightly cooler than the 48.9% price gains seen in the fourth quarter. Prices were up 34% in Orlando, Fla., down from 42% in the fourth quarter.
Home price appreciation cooled in all four regions. In the West, prices are up 12% in the past year compared with an 18.9% gain the previous quarter. Prices are up 6.7% in the Midwest, 6.6% in the South and 6.6% in the Northeast.  
Rex Nutting is Washington bureau chief of MarketWatch

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Builders' confidence falls to 11-year low
Contractors have negative outlook on market for first time since late 2001
E-mail | Print |  | Disable live quotes By Rex Nutting, MarketWatch
Last Update: 4:44 PM ET May 15, 2006


WASHINGTON (MarketWatch) -- U.S. home builders have turned negative on the housing market for the first time since just after 9/11, the National Association of Home Builders and Wells Fargo said Monday.
The NAHB/Wells Fargo housing market index, a builders' sentiment gauge, fell six points in May from a revised 51 to 45, the lowest level since June 1995, the industry group said. The index shows more builders say the market is "poor" than say it's "good."
The index has fallen 23 points in the last seven months. A year ago, the index was at 70.
"Rising mortgage rates, deepening affordability issues and the retreat of investors/speculators from the marketplace are prompting single-family home builders to further adjust their perspective" on the market, the NAHB said in a press release.
The industry group expects new home sales to fall 12% this year from the record 1.28 million in 2005. They expect housing starts to fall about 7% from 2005's record 2.07 million.
The movement in the index is "not inconsistent with the orderly cooling-down process we're projecting," said David Seiders, chief economist for the builders.
Despite the sharp decline, builders are still more optimistic about sales over the next six months than they are of current sales.
In May, builders' assessment of current single-family home sales fell to 50 from 55. The assessment of future sales dropped to 54 from 59. The assessment of traffic of prospective buyers dropped to 32 from 39. All three subindexes were at their lowest levels since mid-1995.
Builders in the West remained the most confident, with the index falling eight points to 60. The index fell three points in the Northeast to 47, two points in the Midwest to 30, and six points in the South to 51.
On Tuesday, the Commerce Department will report on April housing starts. Economists are looking for a small increased to about 1.97 million annualized starts from 1.96 million in March. See Economic Calendar.
It used to be that the builders' index tracked housing starts quite closely, but the relationship has broken down in this decade. Starts have been much stronger than would be implied by the builders' index.
In a separate release Monday, the National Association of Realtors said sales of existing homes were down 2.1% in the first quarter from the same quarter a year earlier. Five of the once-hottest state markets cooled substantially. Meanwhile, median prices for existing homes sold in the first quarter were up 10.3% from the first quarter of 2005, down from a 13.6% increase in the fourth quarter. See full story.  
Rex Nutting is Washington bureau chief of MarketWatch

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Home price appreciation cooled in all four regions. In the West, prices are up 12% in the past year compared with an 18.9% gain the previous quarter. Prices are up 6.7% in the Midwest, 6.6% in the South and 6.6% in the Northeast.  

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Banks' mortgage demand weakens

E-mail | Print |  | Disable live quotes By Robert Schroeder, MarketWatch
Last Update: 2:31 PM ET May 15, 2006


WASHINGTON (MarketWatch) -- U.S. banks reported moderately weaker demand for residential mortgages over the past three months, the Federal Reserve said Monday.
Out of banks surveyed by the Fed, almost 39% said demand for mortgages was weaker, while 42% said it was about the same.
By contrast, 17% said mortgage demand was somewhat higher in the last three months.
Published quarterly, the Fed's senior loan-officer survey polls 57 domestic banks and 19 foreign banks about lending trends.
Of the respondents, 11% said they'd eased home mortgage lending standards, while only 1.9% said they'd tightened them somewhat.
Meanwhile, 21% of banks said demand for commercial real estate loans got stronger over the past quarter. Only 16% of banks reported moderately weaker demand for those loans, while 63% said demand stayed the same.
More banks tightened their standards for approving applications for commercial real estate, the report showed. While 8.8% of respondents tightened somewhat, 7% eased standards, the Fed report showed.  
Robert Schroeder is a reporter for MarketWatch in Washington.

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"There is vulnerability in a lot of cities where home prices have boomed a lot more than rents or construction costs," Shiller said. Still, forecasting home prices is notoriously dicey for economists because home values aren't explained well by fundamentals such as building costs, population and interest rates.
The indexes behind the CME housing derivatives use a repeat-sales technique that attempts to minimize the effect of the mix of homes being bought and sold.
For example, larger homes are typically purchased in the summer months, giving the appearance of rising home prices, Shiller said. Additionally, there are changing preferences for homes or condominiums which can also distort the averages, and home improvements also need to be factored in.
"Our approach tracks the price of individual homes that have been resold, so if the index goes up 5%, it's because a house was sold and sold again for 5% more," Shiller explained.
How they work
The Chicago Merc introduced cash-settled futures and options based on housing markets in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, as well as a weighted composite index.
The contracts are priced by multiplying the index value by $250; the average contract size for the various cities is roughly $55,000, although they vary by region, according to Sayee Srinivasan, associate director of research and product development at the CME. He said the exchange is considering adding contracts for other booming real-estate markets such as Phoenix and Orlando.
"The futures markets like volatility, so the contracts based on the most volatile housing markets might see the most volume," Srinivasan said.
For each region, there are four contracts, which expire on a quarterly basis, so there are currently contracts for August 2006, November 2006, February 2007 and May 2007.
Although the contracts have only been trading for a very short period, most of the interest is looking further out on the curve with the May 2007 contracts getting the most action initially, said Fritz Siebel, senior broker at Traditional Financial Services Inc.
There could be demand for longer-dated contracts, something the CME is considering if the existing contracts prove popular enough.
Siebel noted the early interest has been in derivatives based on hot West Coast markets in San Diego, Los Angeles and Las Vegas, and also Miami on the East Coast.
Other ways to hedge housing
Other exchanges list contracts based on U.S. real estate or are developing derivatives based on home prices as the housing market loses steam. The Philadelphia Stock Exchange trades cash-settled options based on the Philadelphia Housing Index.

Online derivatives exchange HedgeStreet Inc. has also thrown its hat into the ring with low-cost contracts that follow single-family home-price data from the National Association of Realtors in Chicago, Los Angeles, Miami, New York, San Diego and San Francisco. The exchange recently announced it expects to unveil a contract for Boston soon as well.
Finally, the Chicago Board Options Exchange says it plans to launch futures contracts based on median prices in the NAR's existing-home sales data. The CBOE, which has reached a licensing agreement with the NAR, says the futures will track the median sales prices in the U.S. overall, and four regions in the country: Northeast, South, Midwest and West.
Investors have grown increasingly nervous about the U.S. housing market after the multiyear boom and as 30-year mortgage rates hit their highest levels in roughly four years.
Several public home builders have recently scaled back their 2006 profit forecasts on sagging sales, rising inventories and higher labor and materials costs. Through Friday's close, the Philadelphia Housing Index was off 55% year to date.  
John Spence is a reporter for MarketWatch in Boston.

Most Expensive Homes in the U.S. 2006: Midwest Lacey Rose, 06.19.06, 12:30 AM ET   If you’re looking for a bang for your buck--or several million bucks--head to the Midwest. For the third installment in our annual series on the priciest palaces for sale in the United States, we turned our attentions to the middle of the country. (We've already ranked the ten priciest in the country and the most expensive in the Northeast and the South.) Our findings? Super-luxurious residences are--gasp--relatively affordable between the coasts. In New York City, $15 million will buy you a ritzy co-op apartment, though not the most impressive in town; in Palm Beach, you can get a posh waterfront home, but don't expect it to come with much land. Yet in the Midwest, you can have it all--a lavish lakefront mansion, lots of property and nearly every luxurious extra imaginable. Click here to see the most expensive homes in the Midwest. The top ten most expensive homes in this region rang in between $13.5 million and $25 million. That may sound costly, but compare those homes to their counterparts in other locales. In the uber-pricey northeast region, the most expensive homes for sale came in between $47.5 million and $75 million. That's not entirely surprising--unlike with luxury real estate markets in other regions of the country, prices in the Midwest have remained relatively flat. Though the bottom price on our list was up from $12 million last year, the average price slid slightly, to $17.2 million from $17.4 million in 2005. It echoes what we're seeing throughout the Midwestern market. According to the National Association of Realtors, the median price of an existing home in the Midwest decreased 1.2% from April 2005 to April 2006. A big difference from other regions--the Northeast, West and South--where prices were up 5.6%, 4.8% and 3.4%, respectively during that time period. Some see things turning around in the Midwest, however. "The luxury market seems to have taken a bit of life very recently," says Didier Lepauw of Coldwell Banker Residential Brokerage, who has the listing for the most expensive home on our Midwest list. "Maybe the Midwest is finally being recognized as a great place." The residence, which is priced at $25 million, doesn't even come close to being ranked among the top ten in the country--indeed, it falls some $30 million short. That's startling when you consider the scenery, amenities and exclusivity of the lavish Lake Bluff, Ill., residence. This Georgian-style home, which is surrounded by 21 acres of land on the shores of Lake Michigan, was designed by renowned architect Benjamin Marshall, best known for his work on the Drake Hotel. In addition to the eleven-bedroom main house, the waterfront property offers a coach house and two guest apartments. The grounds, which were landscaped by designer Jens Jensen–known for his work on Henry Ford's home -- feature clay tennis courts, a swimming pool and formal gardens galore. "You don’t often get unique lakefront properties," says Geri Emalfarb of Baird & Warner, whose $22 million listing ranks second on our list. "And the buyers that are interested in these types of properties will wait until they come onto the market." While that may be the case, several of these impressive homes have lingered on the market, waiting for the right buyer to pounce--at the right price, of course. Click here to see the most expensive homes in the Midwest.

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Hot housing markets cooling: report

Economic strength is keeping risk of price declines at bayE-mail | Print | | Disable live quotes By Amy Hoak, MarketWatchLast Update: 6:20 PM ET Jun 28, 2006

(This update of a June 27 story reflects corrected risk scores for metropolitan markets. PMI Mortgage Insurance Co. on Wednesday issued the new figures.)

CHICAGO (MarketWatch) -- Some of the nation's hottest housing markets are cooling, but the strength of the economy is balancing the risk of home-price declines, according to PMI Mortgage Insurance Co., which released its U.S. Market Risk Index on Tuesday.

The average risk score for the country's largest metropolitan statistical areas was 288 in the first quarter, one point up from the last quarter and 70 points up from a year ago. During the quarter, 25 metropolitan areas saw increases in risk, while 20 saw decreases.

The index uses data from the Office of Federal Housing Enterprise Oversight, the Bureau of Labor Statistics and the PMI affordability index to assign 50 of the country's largest metropolitan areas a score from one to 1,000.

A score of 100 means the area has a 10% chance its home prices will decline over the next two years. Higher scores mean a greater risk of home-price declines in the future. The New Orleans area was left out of the quarter's results due to the impact of Hurricane Katrina.

"This quarter's data signals that in many areas the expansion of the housing balloon has slowed substantially," said Mark Milner, chief risk officer of PMI Mortgage Insurance Co., in a statement. The company is a subsidiary of the PMI Group Inc.

"The Risk Index also shows that slowing price appreciation is balanced by underlying economic strength. In the absence of an unexpected economic shock, this makes a gradual cooling of the market the most likely outcome," Milner added.

Thirteen metropolitan areas had risk scores higher than 500 -- indicating a 50% or greater risk of home-price declines in the next two years. The San Diego-Carlsbad-San Marcos, Calif., area had the highest risk, with a rating of 599. Newark, N.J., and Miami both had 32-point increases in risk over the quarter, landing at 459 and 359, respectively.

Thirty-four markets experienced decelerating home prices over the year, with Las Vegas leading the group. Appreciation slowed to 14.5% in Las Vegas, down from 30.1% a year ago.

"We'd reached a point where prices had gotten too far away from economic fundamentals," according to Milner. "A return to a more normalized appreciation climate is a natural outcome."

Appreciation may be slowing in a number of markets, but it is still positive in the country's largest metropolitan areas -- with half of them maintaining appreciation rates in the double digits.

Other findings from the report include the following:

• Risk is concentrated along the coasts: Eight of the 13 highest risk areas are located in California and five are in the Northeast.
• Six markets saw appreciation of more than 20% over the year. Phoenix saw appreciation of 31.1%; Orlando, Fla., saw appreciation of 27.7%; Fort Lauderdale, Fla., saw appreciation of 25.7% and Miami saw appreciation of 24.7%.
• Four higher-risk markets saw appreciation drop into the single digits over the year. San Diego experienced 7.7% appreciation; Boston experienced 5.7% appreciation; Providence, R.I., experienced 9.5% appreciation, and Cambridge, Mass., experienced 5.2% appreciation.
• Affordability decreased in more than half of the largest metropolitan areas during the first quarter of 2006. Affordability increased slightly in 19 markets due to slower price growth; five of the markets were in Texas and six were in the Midwest.
• All but four of the largest metropolitan areas -- Detroit, Milwaukee, Cleveland and Warren, Mich. -- have seen recent employment growth. Las Vegas led the country in employment growth at 6.23% over the year, followed by Phoenix with 6.02%.

Below are the risk scores for the top 50 metropolitan areas, minus New Orleans:

• San Diego-Carlsbad-San Marcos, Calif., 599
• Nassau-Suffolk, N.Y., 589
• Boston-Quincy, Mass., 588
• Santa Ana-Anaheim-Irvine, Calif., 588
• Sacramento-Arden-Arcade-Roseville, Calif., 585
• Riverside-San Bernardino-Ontario, Calif., 583
• Oakland-Fremont-Hayward, Calif., 582
• Los Angeles-Long Beach-Glendale, Calif., 575
• Providence-New Bedford-Fall River, RI-Mass., 568
• San Francisco-San Mateo-Redwood City, Calif., 560
• San Jose-Sunnyvale-Santa Clara, Calif., 559
• Cambridge-Newton-Framingham, Mass., 537
• Edison, N.J., 536
• New York-White Plains-Wayne, N.Y.-N.J., 498
• Las Vegas-Paradise, Nev., 481
• Newark-Union, N.J.-Penn., 459
• Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla., 441
• Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va., 431
• Miami-Miami Beach-Kendall, Fla., 359
• Minneapolis-St. Paul-Bloomington, Minn.-Wis., 355
• Detroit-Livonia-Dearborn, Mich., 337
• Baltimore-Towson, Md., 307
• Tampa-St. Petersburg-Clearwater, Fla., 294
• Virginia Beach-Norfolk-Newport News, Va.-N.C., 278
• Warren-Troy-Farmington Hills, Mich., 184
• Orlando-Kissimmee, Fla., 179
• Phoenix-Mesa-Scottsdale, Ariz., 175
• Atlanta-Sandy Springs-Marietta, Ga., 165
• Denver-Aurora, Colo., 149
• Philadelphia, 130
• Chicago-Naperville-Joliet, Ill., 127
• St. Louis, Mo.-Ill., 112
• Seattle-Bellevue-Everett, Wash., 109
• Portland-Vancouver-Beaverton, Ore.-Wash., 108
• Milwaukee-Waukesha-West Allis, Wis., 108
• Kansas City, Mo.-Kan., 101
• Austin-Round Rock, Texas, 93
• Charlotte-Gastonia-Concord, N.C.-S.C., 87
• Houston-Sugar Land-Baytown, Texas, 83
• Dallas-Plano-Irving, Texas, 80
• Nashville-Davidson-Murfreesboro, Tenn., 71
• Fort Worth-Arlington, Texas, 69
• Cleveland-Elyria-Mentor, Ohio, 68
• Columbus, Ohio, 65
• San Antonio, 65
• Cincinnati-Middletown, Ohio-Ky.-Ind., 64
• Memphis, Tenn.-Miss.-Ark., 61
• Indianapolis-Carmel, Ind., 58
• Pittsburgh, 57