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WASHINGTON (AP) – Sales of existing homes plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years.

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.

The weakness in sales translated into further pressure on prices. The median price—the point at which half the homes sold for more and half for less—fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.

The 8 percent decline in sales was bigger than the 4.5 percent decline that had been expected.

Analysts blamed the bigger-than-expected slump on the turmoil that hit credit markets and mortgage markets in August as worries increased over rising mortgage foreclosures.

Those worries resulted in a drying up of the availability of so-called jumbo mortgages, loans over $417,000, which are particularly important in high-cost areas such as California.

“Mortgage problems were peaking back in August when many of the September closings were being negotiated and that slowed sales notably in higher priced areas that rely more on jumbo loans,” said Lawrence Yun, senior economist for the Realtors.

By region of the country sales were down 10 percent in the Northeast, 9.9 percent in the West, 7 percent in the Midwest and 6 percent in the South.

The slowdown in sales meant that the inventory of unsold homes rose to 4.4 million units in September. At the September sales pace, it would 10.5 months to eliminate the overhang of unsold homes, a record length of time.

Economists are worried that the huge levels of unsold existing and new homes will put further downward pressure on prices.

Yun said that the price declines should be put into perspective in that they are occurring after a five-year housing boom which pushed prices up to record levels.

He forecast that prices will decline by about 1.5 percent this year. That would be the first annual price decline on Realtors’ records going back four decades.

The troubles in housing have been a drag on overall economic growth, increasing worries that the housing slump and related credit market troubles could become so severe that they will push the country into a recession.

However, many private economists believe that the Federal Reserve, which cut a key interest rate for the first time in four years last month, will continue cutting rates in a campaign to make sure that the weakening economy does not tumble into a full-blown recession.

Analysts said the price declines will worsen in coming months until inventories are reduced to more sustainable levels. Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted that the housing troubles will prompt the Fed to cut rates by a quarter-point at its meeting next week.

“The housing crunch is accelerating. The Fed can’t stand by and watch,” Shepherdson said. Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Sales of new family homes in the US fell 8.3% in August to its slowest rate in more than seven years, a Commerce Department report has shown.
New home sales fell to an annual pace of 795,000 – from July’s 867,000 – worse than analysts had been expecting.

The average sales price of a new home also fell 8.3%, to $225,700 (£111,500) – the lowest since January 2005.

Analysts say that such weak data will give the US Federal Reserve more reasons to cut interest rates again.

The Commerce Department also said that there were 529,000 new homes for sale in August, a 1.5% drop from July.

It would take 8.2 months to sell those properties at the current sales pace, the department said, up from the 7.6 months reported in July.

Analysts say that tight credit conditions – making it harder for people to get mortgages – are continuing to dent the market for house sales, which is already weak.

The housing slowdown and decline in credit availability have triggered worries that the economy could go into a recession – a worry which was behind the Fed’s move to cut interest rates from 5.25% to 4.75% earlier this month.

Source: BBC.co.uk

For some investors in Mexico condos, greed turns to regret

PLAYAS DE ROSARITO, Mexico — The ripples of the U.S. real-estate boom began washing up on the shores of this beach town a few years ago. Californians, feeling flush from the steep run-up in housing values stateside, pulled equity from their primary homes and snapped up vacation properties in northern Baja California as if they were buying $10 lobster dinners.

Ground zero was this midsized community about 20 miles south of Tijuana, where developers sold hundreds of condominiums on spec. Most jacked up their prices as their projects filled, fueling a sense of urgency among U.S. buyers to get in while the getting was good.

“We nearly had … fistfights” over choice units, said Michael Coskey, sales director of the Residences at Playa Blanca, a 274-unit development under construction north of Rosarito whose average condo is priced at $500,000. “We were all appealing to people’s greed.”

Greed has turned to regret for some investors who now can’t sell their Mexican properties.

Upward of 40 percent of the condos in some northern Baja projects were purchased by flippers who intended to resell them even before construction was finished. Their aim was to pocket a fast profit in an area where prices had been appreciating 20 percent to 30 percent annually in recent years.

But with contagion from the U.S. subprime mortgage debacle spooking many would-be purchasers and credit drying up, the Baja real-estate market is flagging. Speculators are starting to sweat.

Californian Chris Romero’s biggest worry two years ago was missing out on the action. He had his eye on a $200,000, two-bedroom condo in a project called La Jolla Real in Rosarito.

But by the time the then-Diamond Bar, Calif., resident was ready to commit, the developer had raised the pre-construction price to $250,000.

Instead of folding, Romero doubled down, handing over a $120,000 down payment to lock up two units — one for $238,000, the other for $270,000 — before prices increased again. The retiree and his wife reckoned they would sell the less expensive one just before closing and use those profits to help finance the other.

“The market was booming,” said Romero, 60.

No more. With the development nearing completion, he’s finding buyers scarce and competition fierce. Rosarito is littered with so-called “resale” units whose owners are looking to unload them. Romero is offering a $5,000 bonus to anyone who can bring him a buyer. His $290,000 asking price is “negotiable.” And he’s willing to provide financing.

More inventory is on the way. About 7,000 condominiums are in the pipeline from Tijuana to Ensenada, with another 5,600 in the planning stages, according to the Association of Resort Developers of Baja California. The average price is about $300,000, but some luxury units run into the millions.

Developers say that’s still a bargain compared with oceanfront property in the U.S. Still, some people say prices here soared more quickly than was rational in an area known for budget motels and cut-rate seafood.

“Everybody was going for the $500,000 condo, the Bellagio,” developer Ramon Toledo Arnaiz said. “The fuel was from speculators.”

Flippers who can’t find buyers will have to come up with the cash to honor their contracts or secure Mexican mortgage financing at rates as high as 12 percent.

Those who can’t close the deals risk forfeiting their down payment, often 30 percent of the purchase price.

“The ones who bought multiple units are going to be in real deep doo-doo,” said real-estate agent Roberta Giesea, owner of Baja4U Properties. “The market has slowed way down.”

Speculators likewise are smarting in Puerto Peñasco, also known as Rocky Point, a beach resort in Sonora state 60 miles south of the Arizona border on the Sea of Cortez.

Egged on by soaring real-estate prices at home, Arizonans snatched up Puerto Peñasco condos at “crazy” prices that topped $1 million for some penthouses, according to Dee Brooks, owner of Twin Dolphins Real Estate in Rocky Point.

She said many flippers haven’t been able to sell their units. Meanwhile, the rental market is so saturated that most can’t cover their costs by leasing their properties.

With the Arizona market cooling, some investors don’t have enough equity remaining in their U.S. homes to close on their Mexican condos, nor can they get financing in a tightening credit market.

Brooks said she had dozens of listings from “desperate” sellers, some of whom might have to walk away from their properties if they can’t find buyers to bail them out. She figures prices on some units will have to fall at least 25 percent for her to move them. Owners are in denial.

“They call me up crying, but what can I do?” Brooks said. “I can’t perform a miracle. The market is slow. I’m not going to be able to get them the money they want.”

It’s not just buyers who got caught up in the frenzy. Some northern Baja developers paid top dollar for oceanfront lots where they built luxury homes with million-dollar-plus prices. Some of those houses are languishing unsold, according to real-estate agent Kerry Kay Sims, president of Baja Relocation.

“The real-estate market in California was so strong and so crazy that it was like they were stoned on it,” Sims said. “The thinking was that somebody will pay no matter how high the price is. ... Conditions have changed.”

You wouldn’t know it from motoring along the coastal toll-road than connects Tijuana with Rosarito.

Billboards in English beckon prospective home buyers to purchase a slice of the good life. Flags flutter in the sand at oceanfront real-estate sales offices. Clanking cranes and roaring earth-movers are busy clearing new building sites.

One of the most closely watched projects is the Trump Ocean Resort Baja north of Rosarito. The Trump Organization, headed by Donald Trump, is a partner in the development, which will include more than 500 luxury condominiums, upscale restaurants and a spa.

Builders recently broke ground on the resort’s first tower, whose condo prices range from $279,000 to $3 million — or more than $500 a square foot on average. That’s about double the going rate around Rosarito.

Yet, nearly 80 percent of the tower’s 230 units have been sold, according to project spokesman Brendan Mann.

Pre-sales are slower in the second tower, with only about 80 of an estimated 200 units sold. Still, Mann said a June sales event yielded $45 million in contracts in just five hours.

Market turbulence represents opportunity, according to Mann, who said investors know that Trump has a proven track record and the deep pockets to ride it out.

Indeed, concern is rising among some Baja real-estate veterans that some undercapitalized projects might fold — taking purchasers’ deposit money with them and scaring off future investors.

Independent agent Brian Flock said several condo developments were behind schedule, owners at others were having trouble getting their titles and buyers in some developments were being hit with unexpected charges.

“It’s just obvious that some (developers) are desperate for cash,” Flock said. “My biggest concern is that the unsound developments will damage the whole market.”

After four futile months of marketing her condo, Judy Dinnel just wants out. She and her husband planned to flip a two-bedroom unit in a project called Riviera de Rosarito that they bought last year during pre-construction for $330,000.

At their $369,000 asking price, the Avila Beach, Calif., couple would barely break even, after paying commissions plus a $10,000 bonus they’re offering agents to move the unit.

It won’t be easy. More than 40 percent of the project’s condos are back on the market, according to the listings on the development’s Web site.

To protect their $100,000 down payment, the Dinnels are considering taking an 11 percent loan from the developer until they can find a buyer. Those payments will run $3,300 a month — more than double the monthly payment on their California residence.

“We will be strapped,” said Dinnel, 51. “We’ll have to cut back on everything. ... I’m losing sleep.”

Texas Gulf Coast Online reports the Top 10 reasons why the Texas Coast real estate market will boom to record levels in early 2008.

The evidence that Texas Gulf Coast Online has uncovered which predicts a real estate boom for the Texas Coast is supported by several facts that make the argument convincing.

Baby Boomers from thriving Houston/Dallas/San Antonio/Austin are coming in mass starting in 2008

Investors from California/Florida are now turning to Texas

Huge capital projects in Beaumont area for energy plants – 3.6 billion

Federal Spending on the Border Security Fence – 3 billion, construction starts in fall 2007 for Texas

Strong rental demand for coastal properties for massive local and growing populations within driving distance to the coast

Texas Exports to Booming China’s economy are skyrocketing

New high-end developments transforming the resort markets to accommodate all the new and different buyer profiles.

State expenditures to improve and protect the coastlines with beach replenishment, geo-tubes and other major coastal initiatives already funded or soon to be funded

The affordable prices for Texas coastal property and steady appreciation rates. We are 1/3 of California’s and half price of Florida’s median pricing for ocean front property and our newer products are on par

Consumer Confidence Index Climbs to a Six-Year High and Insurance companies are now returning to the Texas Coastal markets

The study also includes comments from some of the major developers and real estate agencies on the Texas Coast.

When asked where buyers on the Texas Coast are coming from, Alice Donahue, owner of the leading real estate brokerage for the Texas Gulf Coast, says, “What we are seeing are sophisticated buyers who are retiring within the next few years and want the ’sun, sand and water.’ The Texas Gulf Coast offers this plus much, more!”

According to Edith Personette, owner of a leading marketing agency for the Texas Gulf Coast, “people buying along Galveston are many empty nesters who want a place an hour away from Houston – many still very active executives or business owners – some perceive they may keep for retirement. They are primarily driven by closeness to Houston and reasonable prices.”

Texas Gulf Coast Online also talked to major developers in the area such as Jim Hayes, Senior Partner of Crown Team Texas, and Jeff Lamkin, Senior Partner of Sea Oats Group Atlanta, to find out some of the environmental/political issues developers face when trying to build along the Texas coast.

According to Jim Hayes, “New development on the Texas Gulf Coast requires a wetlands delineation that is performed by a professional and must be approved by the Corp of Engineers. The Delineation report can take about 2 months to produce and then take from 9 months to several years to get approved.”

Jeff Lamkin shared that, “it is important to be mindful of the environmental issue along the coast. On Mustang Island in particular there is an incredible dune system and a stable (non-eroding) beach. These are 2 critical factors that cannot be overlooked when purchasing beach property. In the good ole’ days people would bulldoze a path straight through the dunes – modern developers recognize the importance of these dunes and guard them as protection from the weather.”

Read more about the study at: Texas Gulf Coast Online

Foreclosure filings across South Florida continue to rise, as hopes for a housing recovery have fizzled.

The number of people behind on their mortgage payments in July almost tripled in Broward County from a year ago, from 517 to 1,430, according to Plantation-based Realestat.com. In Palm Beach County, the number more than tripled from 298 to 1,063.

While actual foreclosure sales aren’t increasing as fast, experts say lenders, court clerks and lawyers are having a hard time keeping up with all the filings. They expect a significant surge by the end of the year as more adjustable-rate mortgages come due.

Everybody’s inundated and overwhelmed,” said David Dweck, founder of the Boca Real Estate Investment Club. “Sales are taking longer to get to the courthouse steps.”

Circuit Court Judge Jeffrey Colbath handles all foreclosures in Palm Beach County. He devotes a day and a half a week to the 7,000 cases in his division but says he might have to set aside even more time in the months ahead.

“There are a lot of different stories that lead people into my world,” Colbath said Friday. “The worst of it has not come yet.”

Last month, Broward’s foreclosure sales increased 70 percent from a year ago, from 224 to 381. Such sales were flat in Palm Beach County, with 183 in July compared with 187 a year ago.

Deerfield Beach foreclosure lawyer Brian Rosaler said he’s working seven days a week, often into the night, to keep up with all the filings.

“In Broward, they can’t get the cases clocked in fast enough,” he said. “All of us involved in this, we’re working our tails off.”

Experts mostly blame the trouble on adjustable-rate mortgages made to borrowers who bought houses and condominiums that shot up in value during the housing boom from 2000 to 2005. People who secured those risky loans found out that they couldn’t afford the monthly payments once interest rates rose.

Increases in property taxes and insurance rates throughout the region also have made it difficult to pay the monthly mortgage.

“A lot of people got into more house than they could afford,” said Lewis Goodkin, a Miami-based housing analyst.

People with late mortgage payments that result in foreclosure filings are behind by at least 90 days and have been notified by their lenders that they intend to take back the homes.

Some of those owners avoid foreclosure by selling the properties themselves or working out deals with their lenders. But that’s becoming harder to do as the housing slump lingers and borrowers face increasingly tight credit standards.

Concerns about problems facing subprime lenders have rocked Wall Street this year. The companies, which make loans to people with poor credit, were accused of fueling the housing boom.

Dozens of lenders nationwide have closed as borrowers default on loans. Just this week, American Home Mortgage Investment Corp. of Melville, N.Y., announced plans to shut down, becoming the second-largest residential lender to fail this year after Irvine, Calif.-based New Century Financial Corp.Many foreclosed homes will go back on the market, adding to the glut of properties. Palm Beach and Broward counties have roughly triple the number of homes for sale now compared with two years ago, according to the Miami-based Keyes Co.

As a result, some experts who had predicted a housing rebound this year now insist it won’t happen until later in 2008 or even 2009.

“In October, more adjustable-rate mortgages are coming due,” said Marc Thomashaw, a vice president of Realestat.com. “I expect much higher foreclosure numbers early next year because of that.”

A downturn in U.S. house price growth has not hit other property markets around the world, figures show….

Global house prices are rising by 9.6 percent per year on an unweighted basis, compared to 9.63 percent a year ago, according to the Knight Frank global house price index.

Latvia still tops the global property price growth list, surging ahead at an annual 61.2 percent.

Estonia and Bulgaria take second and third place in the latest index, based on growth in the first quarter of 2007: there, prices are rising at 24.5 percent and 22.6 percent per year respectively.

The UK ranks ninth with growth of 12.6 percent, while Canada, Singapore, South Africa, Norway and Lithuania are also faring well, with each experiencing double-digit growth.

But house price inflation in the U.S. has dropped to 4.7 percent from 12.5 percent a year ago.

The U.S. market has been hard hit in recent months by a crisis in the sub-prime mortgage market.

Negative territory in some countries

Subprime loans, the riskiest part of the U.S. mortgage market, serve borrowers with poor credit histories at higher interest rates.

Default rates have risen in recent months amid falling prices and slower sales in the U.S. housing market.

Elsewhere, however, the picture is worse. House price growth is in negative territory in five other countries — Italy, Switzerland, Japan, Germany and Sweden — according to the Knight Frank figures.

The German market, however, is seeing something of a turnaround; while prices are now lower than they were 12 months ago, they have risen 1.8 percent on the last quarter of 2006.

Despite reports of a property downturn, the Spanish market is also bearing up, with annualised growth of 7.2 percent compared to 12 percent in the first three months of last year.

May 8 (Bloomberg)—U.S. home price declines this year are going to be steeper than earlier forecast because of the drop in subprime mortgage lending and the adoption of stricter loan standards, the National Association of Realtors said.

The 2007 median price for an existing home likely will drop 1 percent to $219,800 from 2006, compared with its earlier forecast of a 0.7 percent decline, the Chicago-based association said in a report today. It now projects the median price for new homes to fall $100 to $246,400, the first decline since 1991, from its previous estimate of a 0.4 percent increase.

Record-high defaults by subprime borrowers, those with flawed or insufficient credit histories, have prompted mortgage lenders to limit the number of people who qualify for a home loan, according to the realtors’ report. At the same time, unemployment is down and household incomes are up, which should help bring a housing recovery in 2007’s third and fourth quarters, the group said.

If it weren't for a favorable economic backdrop, housing would probably have a hard landing,'' Lawrence Yun, the group's senior economist, said in the report.We see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.’’

Sales of previously owned homes, 85 percent of the market, probably will total 6.29 million this year, the group said, less than the 6.34 million it called for on April 11. New home sales probably will fall to 864,000, lower than the 904,000 in the month- ago forecast, the association said.

2008 Recovery

In 2008, home resales probably will increase to 6.49 million, the highest since the record 7.08 million sold in 2005, the group said. New-home sales probably will total 936,000 next year, the highest since 2006.

This year mortgage rates probably will be lower than 2006, the report said. The average U.S. rate for a 30-year fixed home loan probably will be 6.4 percent, down from 6.5 percent last year, the association said.

Unemployment probably will average 4.6 percent this year, unchanged from 2006’s six-year low, and inflation probably will fall to 2.5 percent from 3.2 percent. Disposable personal income, adjusted for inflation, will rise 2.6 percent, matching last year’s gain, the group estimated.

The U.S. median price for a previously owned home has not declined since the real estate trade group began keeping records in 1968, despite regional declines. The last time the national median declined probably was during the Great Depression in the 1930s, Yun said.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net .

UK property investors – which may include first time home buyers looking to invest for the first time – considering a move into the US property market, should opt for locations such as Florida and New York, an expert has claimed.

According to Paul Collins, a representative from BuyAssociation, Florida remains a popular holiday and investment destination for Britons, a location which may be attractive to first time home buyers looking to invest abroad.

New York was also identified as a potential holiday hotspot for British travellers to the US.

“There may be a rise in the number of visitors to the traditional holiday destinations, as people rush to take advantage of the favourable exchange rates,” said Mr Collins.

Presently, the dollar is trading at more than $2 against the pound.

“It is also worth keeping an eye on apartments in cities around the country, as good condos in metropolitan areas are often easier to rent out,” he added.

Other areas such as Phoenix and Las Vegas were also identified as potential investment locations.

The National Association of Realtors on Wednesday said it expects the national median price for existing homes to drop for the first time since the trade group began keeping records in the late 1960s.

In an interview with NAR spokesman Walter Molony, the group also lowered its 2007 sales forecast for new and existing homes. Tighter lending standards and the continued fallout from the subprime mortgage market are to blame, Molony said.

NAR is forecasting a 0.7 percent dip in 2007 for the national median price for existing homes after a 1 percent gain last year.

The national median new home sale price is projected to rise 0.4 percent after a 1.8 percent gain last year, according to the association.

However, NAR forecasts a 14.2 percent decline in new home sales compared to its previous estimate of a 10.4 percent slide.

The group estimates that existing home sales will fall 2.2 percent this year, compared to a previous forecast of a 0.9 percent decline.

Property in the £5million plus bracket in Prime Central London has shown a 50% growth in value during the past 12 months, according to the latest research published by Savills.

Lucian Cook, Director of Savills Research, said: “London now has assumed the position of the real estate capital of the world with an increasingly footloose international community of the super rich competing to buy rare properties. Demand is coming from a wide range of sources at this end of the market with, for example, the Chinese and Indians now vying with western Europeans, UK and Russian buyers for these premium properties.

Across all price brackets in Prime Central London, growth for the first quarter of the year alone was 8.8%, which equates to year on year growth of just over 27.5%.

Cook said: “Whilst as a general rule of thumb the more expensive the house, the greater the increase in value, there is growth right across price bands. By way of example, a £1m property has increased in value by some £900 per day in prime central London since the beginning of the year”.

As a result, Savills now expect their forecast for annual house price growth in Prime Central London for this year could be exceeded.

Cook added: “Whilst many commentators considered our forecast of 15% growth to be bullish at the end of last year, the signs are that, unless there is a real change in current market conditions it will turn out be conservative and we may be forced to review our forecast.”

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