Housing Update From WSJ

Todays WSJ had a decent article on housing, ‘Housing Glut Gives Buyers Upper Hand’. Seems like certain parts of the country are in for a bumpy ride. Here are some excerpts.

*A quarterly survey of housing conditions in 28 major metropolitan areas by The Wall Street Journal showed that the inventory of unsold homes at the end of 2006 was up substantially in nearly all of the markets from the already plentiful level of a year earlier. The biggest increases were in the metro areas of Miami-Fort Lauderdale, Orlando, Tampa and Jacksonville, Fla.; Phoenix; and Portland, Ore. (Unlike the other cities, Portland had a lean supply of homes a year before.)

*Some of the biggest gluts of new homes are in Florida, Phoenix and the outer suburbs of Washington, D.C., says Ivy Zelman, a Cleveland-based housing analyst for Credit Suisse Group. Many of the gluts are due to frantic building of condominiums over the past few years. The supply of condos listed by real-estate agents is up 86% from a year earlier in the Las Vegas metro area, 43% in Washington, D.C., and 21% in the Northern Virginia suburbs of Washington. In Florida’s Miami-Dade and Broward counties, the listed condo supply has more than doubled from a year earlier.

In Miami-Dade, the number of existing condos on the market is enough to last 27 months at the current sales rate, says Jack McCabe, a real-estate consultant in Deerfield Beach, Fla. The oversupply will grow, he says, as about 8,000 condos are expected to be completed this year and 12,000 in 2008.

“It’s going to get bloody down here,” Mr. McCabe says. He estimates that condo prices in Miami-Dade fell between 8% and 10% last year and will drop 20% in 2007. Eventually, he predicts, hedge funds and other investors will step in to buy surplus condos in bulk at huge discounts.

*In California’s San Diego County, developers have more than 10,000 condos available for sale in new buildings, projects under construction or properties being converted from rentals, says Peter Dennehy, a senior vice president at Sullivan Group Real Estate Advisors, a consulting firm based there. He says that supply is enough to last more than 20 months at the current sales rate. That number excludes several thousand condos being offered for resale by speculators and others.

Mr. Dennehy estimates that condo prices have fallen at least 15% to 20% in the county over the past year, though it’s hard to measure price changes because sellers often give incentives such as free upgrades or help with closing costs that aren’t reflected in the price.

*Some of last year’s strongest housing markets now are showing signs of cooling a bit. In the San Francisco Bay area, the median price paid for new and resale homes in December was $612,000, up just 0.5% from a year earlier, according to DataQuick. But prices fell in parts of the Bay Area; they were down 6.3% from a year earlier in Sonoma County and down 5.1% in Solano County, DataQuick says.

One of California’s weakest markets last year was the Sacramento area. Anthony Graham, an analyst at Trendgraphix Inc., a provider of housing data, says sellers of previously occupied homes there have had trouble competing with the huge discounts and incentives offered by builders.

Mr. Graham expects average home prices in the Sacramento metro area to fall between 6% and 8% this year, but believes the market will begin to recover modestly by the fourth quarter, assuming that home builders continue to cut their production.

*In Atlanta, where the housing market began to soften in August, business started picking up again in December, says Lewis Glenn, president and chief executive of Harry Norman, Realtors. “There’s more negotiation,” and builders are cutting prices and offering concessions, such as buying down the borrower’s mortgage rate, he says.

*In Scottsdale, some sellers are cutting prices by 10% or more, says Dale Pavlicek, sales manager for the Coldwell Banker Residential office there. “There are a lot of vacant homes on the market,” he says. Sellers who bought in the past year or two are barely breaking even or are coming to the closing table with money to pay off their mortgage and other costs, he adds.

*In Manhattan, big bonuses recently doled out by Wall Street firms will help support the market in this year’s first half, says Jonathan Miller, chief executive officer of Miller Samuel Real Estate Appraisers in New York. But a rash of new condo developments will help moderate prices. He expects price increases this year to average 5% to 6% in Manhattan. On Long Island, he believes prices are likely to be flat to slightly higher this year.

*Houston remains one of the nation’s more buoyant housing markets, supported by job growth in the energy industry. Rob Cook, chairman of the Houston Association of Realtors, says the supply of homes on the market is enough to last about six months at the current sales rate — what he calls a “balanced” market. Prices are rising only modestly, though, because Texas has plenty of room for new construction. “We just keep expanding out farther and farther,” Mr. Cook says.

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