Refuting the N & O- The other side of the story

For those of you who are tired of constantly reading or hearing negative news about the housing market, here are some facts about how our LOCAL market is doing. Not too bad if you ask me. I truly believe it is a great time to buy a house in the Triangle area.

Stacey Anfindsen Shares More Accurate Depiction of Market and Five Reasons Not to Panic Over Local Home Prices

In response to the main headline in the 10/27/08 N&O, I am presenting facts to contradict
the headline, which is yet another attempt to scare local readers by using data from selected national sources. The writer states five reasons; crashing home prices, investor speculation, complex investments, job losses and repeat delinquencies. I will respond to each of these to provide some local perspective.

1) When analyzing our market, I look at data from the counties of Wake, Durham, Orange and Johnston. Within this market, the average closed price of all housing is up 8% and the average closed price of resale housing is up 6%. House price appreciation, which compares the two most recent sales prices of the same house , is an area where the Triangle outperforms the national market. Our current rate of house price appreciation in the Triangle is just over 4%. This rate beats the state (+3.6%) and national rates (-4.5%).

2) The Wake County Revenue Department reported +/- 21,000 closed sales within the past 13
months. Roughly 5% of these sales were purchased by buyers from out of town, a huge difference compared to the 20% rate nationally.

3) It is almost impossible to track what percentage of local purchases were made via the subprime loan mechanism. Per the FHFA mortgage metrics survey for the second quarter of 2008, 17% of all outstanding mortgages in the U.S. are rated as subprime. Therefore it would be hard to argue that a majority of house purchases were made via this mechanism.

4) Job losses are real both nationally and locally. The Raleigh/Cary/Durham MSA did not have a workforce increase comparing 8/08 with 8/07 for the first time since the 8/01 versus 8/00 period.

5) The mortgage metrics survey reveals some additional information regarding the national mortgage market. They surveyed over 30 million outstanding loans in the Fannie Mae and Freddie Mac system and found that 98.6% of these loans were rated as current. They also state that foreclosure proceedings were initiated on 432 homeowners per day during the second quarter, a big difference from the 2,700 per day figure stated in the lead paragraph. There are currently +/- 14,000 listings within the four county area in TMLS. Roughly 3% of these listings are classified as foreclosure, bank or corporate owned. I have been tracking the residential market within the Triangle for over 20 years. The foreclosure market has always accounted for a very small percentage of activity.

Our current market can be summed up with my version of the good, the bad and the ugly;

The Good
-Third quarter closings were the 6th highest in history
-Current supply of 8 months is lower than national current supply of 11 months
-Average house price appreciation is superior to state and national rates
-Average re-sale sales price +6%, average overall sales price +8%, average list price +2%
-Houses priced correctly have sold in an average of 55 days

The Bad
-Overall inventory grew 7%, making 2 consecutive months of less than 10% growth
-Withdrawn listings increased 2% compared to 9/07

The Ugly
-29 consecutive months of inventory growth, 20 consecutive months of lower pending sales
-63% of all price points have an oversupply of housing product
-9/08 expired listings were 227% higher than 9/07 expired listings

A survey of Wake County house purchases where the house was purchased and then re-sold within the past 12 months reveals a median percent per gain of 0%. I think that is pretty impressive compared to what is happening in the national market.

As we have seen during 2008, our local market is not immune from happenings in the national
market. Our biggest challenges during the fourth quarter of this year and into next year are to grow the workforce and cut down on the number of price points with an oversupply of housing.


Raleigh Home Prices Stay Strong

More positive news about the local housing market from the Triangle Business Journal. With affordable interest rates and lots of choices, it is a great time to buy a home!

Home prices grew by 4.8 percent in the Raleigh area between the second quarter of 2007 and the second quarter of this year, new federal data say.

The figures, from the Office of Federal Housing Enterprise Oversight, tend to overstate the actual growth in home prices across the country. But they are useful on a comparative level, and by that measure, they place the Raleigh-Cary region at No. 13 among the nearly 300 areas tracked in terms of home price appreciation.

Prices in the Durham region, which also includes Orange County, grew by 4.1 percent, putting the region at No. 26 overall.

Nationally, OFHEO says, home prices slipped by 1.7 percent in the last year.
The OFHEO data have their limits. Specifically, they do not include homes with mortgages that can't be bought by government-sponsored enterprises Fannie Mae and Freddie Mac. That means most homes owned by subprime borrowers, the hardest hit part of the market, aren't included in the index – helping to make housing price declines look less severe in OFHEO data than in other indices.

For example, another widely cited barometer of housing prices, the Standard & Poor’s/Case-Shiller index, said home prices fell by 15.4 percent nationally in the second quarter from a year earlier.

That 20-city index does not provide data on Raleigh housing, though they also provide some indication that North Carolina home prices are holding up better than most. Charlotte showed the lowest drop in prices among the 20 cities tracked, with home prices there falling just 1 percent from June 2007 to June 2008.


Housing Bill Summary

There is a "radio station" that everyone listens to whether they know it or not... WII-FM (Whats in it for me?). With the recent coverage of the "housing bill" being debated by members of Congress, I find many consumers asking me "What's in it for me?" How will I benefit from this housing stimulus package?

Here is a summary provided by the National Association of Realtors showing some of the benefits to consumers...

HR 3221, the Housing and Economic Recovery Act of 2008
National Association of REALTORS® Summary
(as of 7/24/08)

H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the House on July 23rd by a vote of 272-152. The Senate must now approve the language adopted by the House. The Senate is expected to approve the bill on Friday, July 25th or Saturday, July 26th. The President has said he will sign the bill. It includes:

· GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

· FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).

· Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).

· FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.

· Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.

· VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

· Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision does will be effective from October 1, 2008 through September 30, 2009.

· GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.

· Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.

· National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.

· CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.

· LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.

· Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.


Housing Crisis is Over!

Here is a great article recently featured in the Wall Street Journal. For the past year I have remained optimistic about our local housing market. We live in a wonderful area and although the total number of sales dropped, home values remained slighlty above the previous year's prices. For those of you trying to "time" the bottom of the market, you are smack dab in the middle of it! This article will help reassure you that NOW is definitely a great time to buy a home.

The Housing Crisis Is Over

May 6, 2008

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in NY

Water Watch

We now have 330 days of water in Falls Lake. The lake is 85.6% full.


Water Watch

We currently have 293 Days of Water left in Falls Lake- we are at 75.9% full. Stage 2 restrictions will be lifted when Falls Lake reaches 90% full. Please note that the number of days may not correlate to percentage of water in the lake...why? How many days of water would make the lake full?

That question cannot be determined because how the number of days is determined. The formula for number of days is based on volume of water in the lake divided by the weekly usage average. So if the usage goes down, the number of days remaining can go up or if the usage goes up the reverse will occur whether it rains or not.

Stay tuned...


Built to Scale- An Article from The News and Observer

This is a very timely article about a home built in Five Points specifically designed to stay within the current streetscape and scale of the neighborhood. This is a HOT topic in Raleigh...non-profit groups are rallying behind their respective sides (private property rights vs. neighborhood conservation) and the city council is being faced with a challenging decision. If people would concentrate on better design and use of space, like they talk about here, I think both sides would win!

Built to scale
A small bungalow turns into a roomy modern home without overwhelming its space

By Michael Wagner, Correspondent

Robert and Jennifer Barker were looking for lots of space when they bought a 1,000-square-foot bungalow in Raleigh's Five Points. But rather than tear it down and erect another cookie-cutter design, they chose to renovate and build an addition -- satisfying both their need for more room and their respect for this historic neighborhood.

Raleigh architects Brett Hautop and Chad Parker of Vernacular Studio created a spacious home that belies its quiet, streetside presence. Building off the original shotgun style bungalow, built in 1930, the house retains its original street profile with its traditional gabled roof. What's entirely new is the flat-roofed, two-story, 2,400-square-foot addition in back and the entry court that joins the two volumes into a single home.

The result is a house that is entirely modern in its aesthetic yet fits seamlessly into its surroundings. It is a powerful statement about the value of retaining the characteristics that make this neighborhood special while enjoying the benefits of contemporary living.
The house sits in the heart of Raleigh's teardown district, a swath in which developers are razing older structures and replacing them with homes three, four and even five times their size.

Read More at:

Rain Barrels- An Easy way to Conserve Water

-From the folks at

Collecting rainwater for use during dry months in rain barrels or other depositories is an ancient and traditional practice. Historical records show that rainwater was collected in simple clay containers as far back as 2,000 years ago in Thailand, and throughout other areas of the world after that. With the rising price of municipal water and drought restrictions now facing much of the United States during the summer months, more and more homeowners in our own modern society are turning to the harvesting of rainwater to save money and protect this precious natural resource.

It is a common belief in many parts of the world that water is an infinite resource to exploit as needed, but as the saying goes, "you don’t know the value of water until the well is running dry." This is especially true in arid parts of the U.S. where most of the municipal water comes from overstressed underground aquifers. Whereas rainwater is considered a renewable natural resource, many aquifers are being "mined," that is, communities are drawing out more water than the aquifer naturally receives to recharge it.
As drought and aquifer mining begin to call attention to an increasing water crisis, people are seeking ways minimize impact on their municipal water supplies. Rain barrels can be part of the solution. Just look outside your window the next time it rains and imagine all the water that’s running down your driveway being put to beneficial use in your home and garden!

The Freshwater Facts
To illustrate how important and how limited a resource freshwater is in our world, consider the following. More than 70 percent of the Earth's surface is covered by water, but only 2.5% of this supply is considered fresh water. The rest is found in the form of salt water in the oceans. Of the fresh water that exists, most is locked up in glaciers and ice caps. Water can also be found in the form of clouds and humidity in the soil. That leaves us 3/10 of 1 percent found in the form of lakes, rivers and streams. Unfortunately, much of this small amount of freshwater is in danger of drying up through desertification or becoming so contaminated that it cannot be used for human consumption. Changing our habits of water use can help to abate this growing problem.

Why Harvest Rainwater with Rain Barrels?
Besides helping the environment, an obvious reason for harvesting rainwater is to save money. Depending on the size of your house and the amount of rainfall in your area, you can collect a substantial amount of rainwater with a simple system. This extra water can have a significant impact on your water bill. The use of rainwater combined with the domestic use of grey water can further increase your savings. Even if you live in a rural area and have your own well, the fact that rainwater is a naturally soft water may be enough to justify harvesting rainwater. (Keep reading for information on how to calculate the potential volume of rainwater you can collect.)Rainwater stored in rain barrels has many uses. Some people find it mostly useful for watering their landscapes and gardens. Others find uses within the house as well. Rainwater can also be used for drinking but requires special treatment with a filtration system. Note that many cities require the filtration system for drinking water to be certified and the water to be tested on a regular basis. You do not need a filtration system for landscape uses. You can use it directly from your rain barrel on your garden.If you’re harvesting rainwater with rain barrels to use for watering your landscaping, the rainwater can help to improve the health of your gardens, lawns, and trees. Rain is a naturally soft water and devoid of minerals, chlorine, fluoride, and other chemicals. For this reason, plants respond very well to rainwater. After all, it’s what plants in the wild thrive on!

Rainwater from Rain Barrels Makes Your Garden Smile
Since the rain water is usually collected from the roofs of houses, it picks up very little contamination when it falls. You’ll of course want to keep your roof clean of debris and potential contaminants to maximize purity. The material your roof is made of is also important in how much contamination the water will carry (see Safe Rainwater Harvesting Catchments). The chemicals and hard water from many of our municipal water systems can produce an imbalance in the soil of your garden. Chemical fertilizers, fungicides, pesticides, and drought can also disrupt the balance and harmony of the soil. This imbalance causes trees and plants to weaken and makes them more susceptible to disease.
Trees and plants have an efficient immune system that allows them to fend off diseases and other invaders as long as they have a healthy soil environment and aren't stressed by other factors such as drought. Trees and plants rely on fungus, bacteria, and nematodes to help them absorb the minerals and nutrients they need. Trees and plants depend on a fungal root system called mycorrhizae. Mycorrhizae attaches itself to tree and plant root hairs and extends the root hair system.
Mycorrhizae uses some of the plant's energy, but provides the plant with minerals it can't otherwise absorb. In healthy soil, the mycorrhizae of one tree connects with mycorrhizae of other similar trees. When you look at your garden, visualize it as a vast interconnected community of trees, plants and tiny critters that live in the soil, all interacting and affecting each other. Thus, the type of water you use in your garden will affect the health of this intricate community.And speaking of community, one of the best reasons to start harvesting rainwater with rain barrels is that if you teach and encourage others to do the same, you will help to spread the culture of rainwater collection and in turn help your larger community and the environment. It is always important to remember that every living thing on the planet needs water to survive so we as humans must expand our idea of community to the plants and animals that surround us.