Existing-home sales finally on rise

Sales of previously owned homes rose 0.5 percent in October over the previous month -- the first increase since last February, according to a report from the National Association of Realtors. It's now at a seasonally adjusted annual rate of 6.24 million sales. However, sales are still down 11.5 percent from the 7 million-unit level of last year.

Inventories of unsold homes increased 1.9 percent to 3.8 million units in October. That represents a 7.4-month supply, the largest months' supply since April, 1993.

New-home sales stabilizing

Sales of new single-family home is down, but there are strong signs of stabilization and a strengthening market ahead, according to figures released by the U.S. Commerce Dept. “The new-home sales report by the government is in line with what builders have been reporting, that the market correction in terms of sales is largely behind us and the current market is stabilizing,” said David Pressly, president of the National Association of Home Builders.

“A variety of market measures indicate that home sales now are stabilizing following a substantial correction from the unsustainable highs reached last year. Aggressive sales efforts by builders, combined with historically low mortgage interest rates and solid growth in employment and household income, have buoyed housing affordability in recent months,” he said.

Mortgage rates down

Long-term mortgage rates have lowered for the fifth consecutive week, according to a report issued November 30 by Freddie Mac, a major buyer of existing home mortgages. The rate for a 30 year, fixed-rate mortgage averaged 6.14 percent with an average 0.4 point (fees) on that date.

“Mortgage rates are drifting lower bringing long-term rates to levels below those of this time last year,” said Frank Nothaft, Freddie Mac's chief economist. “Mortgage applications for home purchase in November have remained healthy, due largely to the droop in rates and softening in home prices in some areas.”

No change in maximum mortgage levels

The conforming mortgage loan limits for next year will remain the same as this year, it was announced by the Office of Federal Housing Enterprise Oversight. The maximum conforming loan limit for single-family mortgage will remain at $417,000 – unchanged from this year.

The conforming limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy, and usually relates to what consumers can borrow from lenders. Loans over the conforming limit are termed “jumbo loans” and typically carry a higher interest rate than conforming loans, thus increasing the monthly payment for borrowers and making affordability a worsening problem.

Real estate leaders in high priced areas, such as coastal California and areas on the east coast, are very unhappy with the announcement. They were hoping for higher limits that would make home buying more affordable in their markets.

Seniors to drive a booming market

A recently completed study on the future home buying market points to a rapid growth in purchases by seniors, as baby boomers enter that category. Also, there will also be a dramatic increase in home purchase transactions by minorities. However, there are a couple of key factors that will have a major impact of the future housing market that are not clearly defined at this point. It's yet to be determined at those factors will shape up and influence the future market.

One of those pending factors relate to decisions to be made by aging baby boomers regarding their retirement home. Will most of them decide to remain in their established area or move to a totally new community? Another f actor is where the increasing number of minorities will decide to settle.

The study, commissioned by Mortgage Bankers Association, found that the overall U.S. population will experience a rapid aging as boomers grow older. At the same time, the nation will absorb large numbers of young recent immigrants. Different regions of the country will have different demands for housing driven by the relative impacts of aging in place versus migration within the country and from abroad. For example, suburban areas will gray faster than urban areas due to boomers aging in place. And there will always be a flow of retirees moving to warmer sun-belt areas.

“It's been said that demographics are the future that has already happened and demographic changes are one of the most powerful forces impacting the residential and commercial real estate and real estate finance markets,” said Doug Duncan, MBA's chief economist. “The real estate industry needs to appreciate these important trends. Our study provides an insightful analyses of current statistics and valuable projections regarding how these trends will likely play out in the years ahead.”

About 30 percent of young households now move each year to a new residence. That percentage slides down to 4 or 5 percent for people in older age groups. Therefore, household mobility that has been a major driver of home sales will fall off as boomers age, the study report concluded.

More rental apartments to be built

There's a steadily growing demand for rental apartment units, and a decreasing supply of available units. Builders are taking note of these factors and are responding by planning new construction projects.

“Good economic conditions – particularly growth in the job market – are driving demand in the rental apartment market,” said David Seiders, chief economist for the National Association of Home Builders. “But the rental market is also benefiting from a light supply. For-sale condos have accounted for a large share of multifamily housing starts over the last few years at the same time that a sizeable number of apartment units were being converted to condos.”

Profile of today's home buyer

In another study, this one by the National Association of Realtors, it was revealed that 36 percent of all home buyers are first-time buyers, down from 40 percent a year ago. The primary reason for the decline is the growing problem of affordability.

The percentage of single female home buyers moved to its highest level on record, with 22 percent of all buyers being single women. That's up from 21 percent a year ago and 14 percent in 1995. The percentage of single men remained the same as a year ago at 9 percent. The NAR study also noted that sellers have their homes on the market for a median time of six weeks, an increase from the four-week median a year ago. The typical home sold for 98 percent of its listing price, down from 99 percent last year.

About 12 percent of sellers surveyed for the NAR study said they sold their home without the use of a real estate agent. It should be noted that this proportion is found to be considerably higher in other studies. The use of the Internet in seeking a home was used by 80 percent of home buyers, but 85 percent said they used a real estate agent as a source for information about homes for sale, according to the NAR report.

Homes becoming more artistic

Homes are expressing the creative tastes of their owners in very unique ways. Wall murals, specials materials and textures, art creations on garage floors and driveways – these are a few ways owners are turning their homes into custom designed venues of art.

An increasing number of professional artisans throughout the country are finding a lucrative business niche in creating murals on walls of bedrooms, family rooms, dens. They are usually specifically designed for the homeowner's family, often incorporating personal elements such as a family pet or art that reflects a favorite hobby or activity.

Some homeowners use high-end plastering and texturing techniques to resurface walls and ceilings to add an artistic feel to their homes. Artist-craftsman Steve Selos specializes in this field. The process is much the same as was used by plaster craftsmen centuries ago. It's been developed and finessed in recent years to meet the demands of contemporary designers and architects.

Even a crowded and messy garage can be transformed into an artistic delight. There are now many firms that specialize in creating new and creative surfaces on garage floors and driveways. The cost for their surfaces varies of course with the size and type of surface desired, but typically it's about $4 per foot. There is usually from 500 to 600 square feet in an average home garage. Firms and artisans are offering these services at points nationwide.

Remodeling projects to avoid

Many homeowners launch home improvement or remodeling projects with the primary objective of increasing the value of the property. A recent study determined the projects that are least likely to enhance a home's value.

Building large addition to a house, making it twice as big as other homes in the neighborhood could be counter-productive, it was noted. It pays to make improvements or additions consistent with other nearby homes. An improvement that is specifically keyed to the owner's special interests could be a flop financially. Luxury features such as a spa or tennis court will probably cost more than it increases the home's value The addition of a pool is one of the worst investments. That can even reduce the value of a home.

Structural repairs, such as fixing cracked foundations, rewiring, replacing the roof and new plumbing will also cost more than can be recouped when the home is sold. It would be more feasible plan smaller, cosmetic projects.

Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, carried in about 230 U.S. newspapers – along with freelance features.  Reproduction of this report, in part or entirety, is prohibited without the express permission of the author. E-mail: storyjim@aol.com.