A flat pattern in home sales activity should continue for the next couple months before improving over the summer, according to the latest forecast by the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. “Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas,” he said. “As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available.”

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said additional costs in many markets are hindering a recovery. “Our members are telling us that more buyers are looking at homes but are slow in signing contracts, and that’s contributing to the weakness in pending home sales,” he said. “In many cases buyers are waiting for greater access to affordable credit, especially in higher cost areas, but some are disappointed with what appears to be unnecessarily restrictive lending requirements. The good news this week is there is some discussion toward relaxing some of the burdensome lending practices.”

The PHSI in the Northeast jumped 12.5 percent in March to 80.8 but remains 15.4 percent below a year ago. In the South, the index slipped 0.1 percent to 84.9 and is 26.7 percent lower than March 2007. The index in the West declined 1.4 percent in March to 91.2 and is 9.5 percent below a year ago. In the Midwest, the index fell 10.4 percent in March to 74.1 and is 22.3 percent below March 2007.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun said. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.

Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa. On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales.

“Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income and jobs,” Yun said. “It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that.”

New-home sales are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.

The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009. NAR’s housing affordability index is expected to rise 10 percentage points to 127.0 for all of 2008.

Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.3 percent in 2009. The unemployment rate is projected to average 5.3 percent in 2008 and 5.5 percent next year.

Inflation, as measured by the Consumer Price Index, is seen at 3.4 percent this year and 2.2 percent in 2009. Inflation-adjusted disposable personal income is forecast to grow 1.2 percent in 2008 and 3.0 percent next year.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for April will be released May 23; the next Forecast / Pending Home Sales Index will be released June 9.

SAN FRANCISCO (MarketWatch) — Commonly cited measures of U.S. home prices are overstating the degree to which the vast majority of Americans’ home values have declined in the last year, producers of two of the most widely tracked indexes acknowledged this week.

Top officials with the National Association of Realtors and Standard & Poor’s, which issues the S&P/Case-Shiller Home Price Index, agreed this week their monthly reports are giving imprecise readings of price changes at all levels — national, state and regional — due to rare market conditions that are skewing survey results.

The NAR reported last week that U.S median home prices fell 7.7% in March from a year ago. The decline resulted largely from a market anomaly — a steep decline in costlier home sales due to tighter lending standards and high jumbo-mortgage rates, coupled with a foreclosure-driven spike in cheaper homes.

“If there are a lot more homes sold on the low end and fewer on the high end, the median price is bound to drop dramatically,” NAR Chief Economist Lawrence Yun said. “In normal times, a median price would reflect typical homeowner equity changes, but these are not normal times. The jumbo (mortgage) market is frozen and the buying activity is more concentrated in lower-value homes.”

The S&P/Case-Shiller index, which Tuesday posted a 12.7% decline for February, is skewed for two reasons of its own — it tracks just 20 major markets, many among the hardest hit, and its “repeat sales” survey by design pulls in individual homes both bought and sold in the last few years. Many of those are now being dumped by distressed homeowners and investors who bought at peak market prices and face higher mortgage-rate adjustments.

A widespread problem

The misleading home-value figures are just one example of recently sketchy readings of the U.S. economy. U.S. consumer-confidence readings, for instance, have been wildly divergent.

The Conference Board’s closely tracked index Tuesday showed confidence falling in April to its lowest since the eve of the U.S. invasion of Iraq in March 2003. A University of Michigan survey incorporated in the U.S. Index of Leading Economic Indicators last week rang in at its lowest level since November 1982 –when the country was suffering through 10.8% unemployment and the worst recession since the Great Depression.

That 26-year-low confidence mark grabbed headlines nationwide while the Conference Board number that many economists find equally reliable drew far less media attention. Not one journalist who contacted Conference Board Communications Director Frank Tortorici’s office Tuesday inquired why there was such an astounding discrepancy, he said.

NAR’s Yun said the financial media is seizing on gloomy numbers and providing little analysis or historical perspective. He freely admits NAR’s readings aren’t accurately reflecting what’s happening with home values for the overwhelming majority of Americans.  “Like any economic measure, it can be imprecise, and it is especially so now,” Yun said.

Grim reapers

As reported Tuesday, the S&P/Case-Shiller Home Price Index’s12.7% decline in February was the largest drop since its creation in 2001. Despite that index’s limited seven-year history, the Associated Press reported that home prices “plunged by a record” percentage and “at their fastest rate ever.”

The glaring discrepancy in this case is that 17 of the 20 metro areas posted record annual declines, and yet 78% of the 330 metropolitan regions that NAR tracks reported price increases in the latest period — and that despite the acknowledged downward bias in current price readings.

S&P Index Committee Chairman David Blitzer acknowledged his organization’s overall and metro-market readings paint an incomplete picture. For that reason, he said, the report now charts price changes in 17 of the markets at three specific levels - low-, mid- and high-priced homes — to provide a clearer assessment.

In the high-priced San Francisco area in February, for example, homes priced below $512,000 fell 32% in value from a year ago, while homes priced from $512,000 to $750,000 fell 21% in value and those over $750,000 fell 6%.

“The homes that had the biggest run-up and biggest run-down more often than not are the least-expensive homes,” said Blitzer, S&P’s managing director of portfolio services.

Yun said the S&P/Case-Shiller Index is flawed because “if you focus on down markets you’re going to get a downward price. We are disappointed that its very limited market coverage gets such attention.”

Conversely, Blitzer said the NAR figures are faulty because “it’s well understood that a median is subject to sharp swings in the sample. The only plus is that it’s easy to compile using inexpensive computing resources. If I had 88 years of data, I wouldn’t want to change (methodologies) either.”

In both cases, pockets of severe price declines in local markets are skewing figures, Yun said. If homeowners want to determine their property’s value, it’s never been more critical to take the measure of recent sales by home-price level in their town or city neighborhood.

“Just like saying the average nationwide temperature today is 57 degrees doesn’t tell you anything, the same is true for real estate prices,” Yun said. “The only way to tell what your own home is really worth is to look at local-market conditions, do Internet research and utilize professionals (such as licensed appraisers) to help determine the value of your home.”

The financial press is worried that they might have gone too far — paralyzing the nation into recession by piling on housing. So they’re finally beginning to question the indexes where they get their data, and whether the news is really as bad as it seems. Slowly but surely, headlines are changing from Don’t Buy A Home Now to Is It Time To Buy?

We said it here first on Realty Times — that consumers aren’t getting the full story. Indexes can be misleading because of the locations, prices, types of housing, and rates of increase they track.

In late April, Robert Shiller, founder of the Case-Shiller Index, announced that there was a good chance housing prices would fall further than the 30 percent drop during the Great Depression.

Shiller has plenty of reason to be negative — he makes money when people buy housing hedge funds, licensed with data obtained through his company Macromarkets LLC.

Now, finally, one brave journalist is writing that Case-Shiller is flawed.

In his story “Home-price data has its flaws,”Chris Plummer of MarketWatch slammed both Shiller’s Index and the Associated Press for being “Grim Reapers.”

For the first time, S&P Index Committee Chairman David Blitzer “acknowledged his organization’s overall and metro-market readings paint an incomplete picture.”

No kidding. The Index covers only 20 markets, heavily weighted to the most volatile metros in the nation.

Plummer also lampooned the AP for writing that “‘despite that index’s limited seven-year history, home prices ‘plunged by a record’ percentage and ‘at their fastest rate ever.’”

He also notes, “The glaring discrepancy in this case is that 17 of the 20 metro areas posted record annual declines, and yet 78 percent of the 330 metropolitan regions that the NAR tracks reported price increases … .”

Bravo, Plummer. But the rest of the financial press still has a long way to go.

When Shiller says home prices are going to fall 30 percent, not one reporter who covered the story asked this simple follow-up question: “Bob, during the worst part of the Great Depression, one in four people were out of work. Our unemployment rate is a little over 5 percent. So what’s going to drive home prices that low?”

Instead, no one did even the minimum Wikipedia search to find out what conditions were really like 75 years ago.

What that means is not only are the indexes misleading - the reporting is worse.

Right now we have mortgage interest rates three points below historical norms. We have housing inventories five months greater than balanced markets. Combine that with unemployment that is a half percent lower than the recession of 2003, and you have excellent homebuying conditions.

Stop listening to the media. Go buy a home.

471 Slalom Drive in Peak 7. 

Amazing value at $194 per square foot for this 6 bedroom 5 bath log sided home with 3 living areas and an oversized 2 car garage.  This quiet setting offers fantastic views of the Continental Divide and is within 5 miles of Breckenridge and the base of Peak 8 ski resort.$1,149,900.

In order to get the full benefit of your 1031 exchange, you must buy and take title to a property equal or greater in value than the one you sold. In addition, if you use your IRA in your purchase it will need to take title to the property for the percentage it is buying. Specifically, that portion bought with IRA money must be titled in the IRA’s trust name.

So how do you make both these requirements work? First, the exchange portion must at least equal what you sold for. For example, if you sold for $300K and buy for $400K, you must take title to at least $300K of your new property as the replacement part of your exchange; the IRA can take title to the remaining $100K. Keep in mind that your proceeds from your old property may not be enough to cover your $300K purchase so you will need to make up the difference with a loan or with your own cash, but either way, your IRA can only buy the excess part of the property. In other words, the most IRA proceeds you could use in our example would be the $100K.

And an important thing to remember when thinking about using your self directed IRA to help purchase your replacement 1031 property is to talk to your IRA custodian; it could be that your plan does not even allow for real estate purchases.

  The seller did an extensive remodel in 2005, which included new electrical, heating, and plumbing sys­tems. There is also a newer gas furnace, a newer water well, as well as a newer septic system engineered for a four bedroom home, which would allow for building an addition.

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Other features of this property include a tiled utility/mud room with a clothes washer and dryer, and a utility sink. There is also a covered porch, and a garage with a shop. Extra insula­tion throughout keeps utility costs low. This home currently has two bedrooms, and one bathroom, but there is lots of room to expand.

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