This last spring new-home sales jumped 16 percent — the biggest percentage increase since 1993 — but despite the positive news, sales and construction activity may not have hit bottom yet because the U.S. Census Bureau reported new single-family home sales rose from a seasonally adjusted annual rate of 844,000 in March to 981,000 in April.
This data flies in the face of predictions of doom and the lowering of prices around the country. It seems that this cycle will seem more like a dip than a wave because the information on prices flew around the market via the Internet, causing people to adjust their behavior and modify their listings.
Another way to look at things is as follows. Any time inventory disappears, homes that come on a healthy market disappear fast, which takes down the average listing time. What happens is, then people put inventory back on the market at higher prices. Inventory disappears when the average time on listing goes higher than around 60-70 days. People keep watching the right indicators – waiting for the bottoming out of inventory.
Realty Trac released its May 2007 U.S. Foreclosure Market Report on June 12, showing a total of 176,137 foreclosure filings – default notices, auction sale notices and bank repossessions – during the month of May, were up 19 percent from the previous month and up nearly 90 percent from May 2006. Home sales prices were falling, with a saturated supply of for sale signs. All this pushes new homes prices down.
Ultimately it is the responsibility of the broker or loan officer to determine if the borrower can indeed make the monthly payments. Loan officers encouraged people to exaggerate their ability to pay for many of these default loans, and lenders simply allowed these loans to be funded, though highly suspect. Investors, companies and people who buy the loans from lenders, also suspended disbelief, that overleveraged people with weak credit histories deserve a loan, and bought the collateralized debt obligations that the loans are based on. Many loans are packaged into large CDO packages designed to spread the risk and allow single large transactions instead of hundreds or thousands of single loan purchases.
Mortgage brokers and banks typically start their interviews with those seeking a home mortgage lender by asking about the person’s credit in general, then working their way to the critical question: What is your Social Security Number (SSN)? They need to do it this way because the rate sheets are divided between credit and collateral. When looking at credit, most mortgage brokers take three things into account: credit – meaning the probability that a borrow will pay up; collateral which is the value of the property which ultimately acts as a guarantee of last resort for most loans; and monthly payment capacity.
However there are new companies such as Dogtor Paco, Inc. doing what’s is known as the frictionless loan, which starts off with mortgage quotes and moves quickly to the loan application and an electronic submission. The conditional letter of approval (CLA) details the steps to close the loan. If the initial submission is denied, Dogtor Paco will help users select and resubmit to alternative banks that will do the loan. The goal here is to lock the loan transaction to processing within two hours after the start of the loan application.
Kristin Gabriel
http://www.articlesbase.com/finance-articles/why-new-home-sales-predictions-were-wrong-206495.html
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Water Over Gold · April 1, 2010 at 1:08 am
Are you getting tired of "surprising" falls in home sales etc.?? Why is it surprising?
When unemployment continues to got up, it’s not what the "experts" expected. (Which makes one wonder why they’re "experts…) When all their economic predictions are wrong, it’s surprising EVERY SINGLE TIME.
Well I’m not really that surprised at this point. Are you??
http://news.yahoo.com/s/ap/20091028/ap_on_bi_go_ec_fi/us_new_home_sales
WASHINGTON – Sales of new homes dropped unexpectedly last month as the effects of a temporary tax credit for first-time owners started to wane.
The Commerce Department said Wednesday that sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a pace of 440,000.
It was the first decline since March. Sales in September were off 7.8 percent from a year ago. Despite the surprising decline, the market is up 22 percent from the bottom in January, though down more than 70 percent from the peak in July 2005.
The median sales price of $204,800 was off 9.1 percent from $225,200 a year earlier, but up 2.5 percent from August’s $199,900.
The drop in sales was driven by a nearly 11 percent decline in the West and a 10 percent drop in the South. Sales rose 35 percent in the Midwest and were unchanged in the Northeast.
The report reflects contracts to buy homes, not completed sales. It has been taking longer to close a transaction this year because it’s taking longer to get approved for a mortgage and to have a property appraised.
tecolote………….."meaning they believe their own bullshit."
Yes, it would appear that is exactly what happened. Thanx.
El Tecolote · April 1, 2010 at 6:10 am
Because the media saw a ray of hope for the Obama Administration when they saw that there was an upturn in home sales. They expected that trend to continue, so they could somehow point to something good that Obama must have done. They were surprised when it turned out to be a flash in the pan, meaning they believe their own bullshit.
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Zap · April 1, 2010 at 6:12 am
To be honest, I think these guys just pipe the air into the organ…they say anything that provides an avenue for their "partners", who deal and trade on the market, can profit.
Just like those stock and bond ratings agencies…they get paid BY the companies that they rate…talk about manipulating a market.
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rare2findd · April 1, 2010 at 6:14 am
Well ~~ either you can afford to purchase a new home or you can’t. It’s as simple as that. Everyone is not unemployed. And it makes little difference how many can afford a home considering the number of people who have lost their homes, or are about to.
this country is still in trouble.
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