John L. Scott Real Estate
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New Home Sales Trends
New Home Sales Manager Comments on Statistical Data of the Local Boise/Meridian/Nampa/Caldwell Markets
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Friday, June 12, 2009

HUD Secretary Shaun Donovan announced on May 29, 2009, a program that will allow first-time buyers who use FHA financing to apply the $8,000 federal first-time buyer tax credit toward loan closing costs. In a speech, he announced that FHA-insured loans would allow buyers to turn the credit into cash toward loan costs.

The HUD press release issued May 29, 2009 is published below in in full...

U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan Announces New FHA Loan Permits Using $8,000 First-Time Buyer Tax Credit Toward FHA Loan Closing Costs

WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. Click here to read the FHA's new mortgagee letter.

"We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.

According to estimates by the National Association of Home Builders, the Administration's homebuyer tax credit will stimulate 160,000 home sales across the nation - 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.

Posted by Mike Pennington at 6/12/2009 6:48:00 PM

Our report is completed for May 2009. And I am happy to inform that amidst the doom and gloom, there is still a positive direction for the market.

With regards to single family resale homes, we have seen closings grow from 183 units in January to nearly double that, at 363 units in May. This surpasses May of last year by 12 units.

Average home prices jumped by $8,000 for Resale homes.

Canyon County and Ada County resale closings have risen consecutively for 5 straight months. Canyon County has more than doubled its closings from 74 units in January to 170 units closing in May. These are very promising numbers!

Ada County Resale inventory has dropped as well as Canyon County. This is the most important element in the overall recovery of the housing market. Supply and Demand!!! The trend for closings will continue for resale homes, as the pending sales are up for the 5th straight month.

Distressed property inventory is holding steady for Resale. The increase in sales has kept these numbers in check.

We have a slightly different scenario for New Home sales. Both counties are down with regards to closings. There are two challenges for new homes: higher than normal levels of resale homes and the shear absence of new sellable inventory. Many of the new homes left are the unwanted children. Much of the most desirable homes are gone and banks are still not willing to ease restrictions on builders at this time. This is helping to feed the resale market! For the builders that are in a position to put inventory up, they will possess a distinct advantage if they have done their homework and put the right product up, at the right price, in the right location.

We will probably see Ada County New Home inventories drop below 500 units. Canyon County could drop below 200 before the year’s end. I do not even have records that go back far enough to show inventories at this level. We would have to comb through the records at the MLS and maybe find levels this low somewhere in the early to mid 1980’s.

We are running at a 5 month supply of New Homes for both Ada & Canyon County. This is hard to believe given our current market conditions. In spite of this, pending new home sales are up by 43 units. A good portion of this is most likely build jobs! Most of the distressed New Homes have been cleaned up!

We are very fortunate compared to other parts of the country. I believe Moody’s is correct in their assessment of Idaho. We will become healthier quicker than most of our Western neighbors. Idaho is still a great place to live and what has always drawn people to Idaho, and the Treasure Valley, continues to bring people and investments here!

We simply need to survive as we are in a recovery and we are making good progress. There is hope out there!!!   

If you would like a copy of this report, please e-mail me at mikepe@johnlscott.com.          

Posted by Mike Pennington at 6/12/2009 6:31:00 PM
Friday, May 22, 2009

I had the opportunity to attend the ACAR Agent to Agent program this week with, guest speaker Paul Hiller, of the Boise Valley Economic Partnership, Mr. Hiller went over the list of the projects they are working on to bring companies and jobs to the Boise Area. There are 29 projects and 15 are ranked #1, as companies that are more likely to land in the Treasure Valley. We are on their short list! Most communities would do well to have a total of about 12 potential projects and we have 29! With over 10,000 potential jobs from this list, we are easily in a position to land a good number of these jobs.

There are two projects especially promising! Project #4 and project #16 on their list are both Solar Module Mfg. companies. #16 on the list, Apex, is engaged in talks with Micron about their MPC plant in Nampa. They are discussing the possibility of a joint partnership and Apex is very pleased with their talks to date. This represents 1000-1500 jobs, exactly where we desperately need them.

I asked Paul Hiller about the troubles in California and how that would affect Idaho. He said they are already in talks with companies from the Silicon Valley and expect that area to be a very rich environment for new prospects for the Treasure Valley. There is already venture capitalists for high tech industries looking very hard at the Treasure Valley.

Although we will continue to tough it out for a while longer, the future is very bright for our Valley. The things that have always been appealing about our area still exist: mild weather, great recreation, low crime, low cost of living, and overall quality of life. We need to continue to work together to look for opportunities and how to survive in the short term. Long term we are in good shape. Many other parts of the country will take far longer to recover from this economic downturn.

We are very fortunate to live where we do! So put away the sharp objects and dump the “Chicken Little Mentality” and we will survive these challenging times. The key is to be pro-active and be willing to change. I hope this news helps!     

Posted by Mike Pennington at 5/22/2009 8:30:00 PM
Friday, May 15, 2009

 

It is great to see healing finally taking place in the market! We are still not where we need to be, but here is what we are seeing from the statistics…
 
In the resale arena we have almost doubled our monthly closings in both Canyon & Ada County from January ‘09. The average sales price continues to slip due to the high inventory levels. The levels are being kept high as a result of the short sale and foreclosure problem. Once those begin to wane, we will see a dramatic turn-around in resale inventory levels, as demand continues to increase and the new home inventory continues to decline. This will immediately impact values and we will once again see resale values grow! We now have had four straight months of growth in pending sales. April’s pending number of 1012 units is a 60% increase over January’s number. Inventories were fairly static. As far as the Short Sales, Foreclosures, & REO’s, you will see some fairly big declines. This is in part due to the discovery that MLS is showing some properties as both Short Sales and Foreclosures. This was unintentionally causing some properties to get counted twice as troubled units. Our numbers going forward will be far more accurate.
 
With regards to new homes there is also some encouraging news. Inventory levels continue to fall to record levels. Single family New Home inventory in Ada County has fallen to 559 units, down from 1225 units in Jan ’08. Canyon County stands at 290 units down from 653 units in January of ’08. These numbers will remain extremely low as banks are not very accommodating to builders in obtaining construction financing. These low inventories will also force some buyers back into the resale arena. Ada County has just logged their fourth straight month of increases in the average sales price of a new home. Canyon County continues to struggle as they have an inordinate amount of Short Sales and Foreclosures.
 
There is a real opportunity for builders who can obtain construction financing. With lot prices down, builders can once again build spec inventory and potentially realize a profit. However it is imperative that they conduct the necessary market research to minimize risk. Their real competition comes from the troubled properties in the resale market.
 
It appears the recovery is here but we still have a lot of work to do!     
 
Posted by Mike Pennington at 5/15/2009 11:42:00 PM
Monday, March 10, 2008

This is a very confusing time in our economy, and especially in the real estate market. We hear from the national media that values will continue to drop on homes and that we should wait to buy a home.

Interest rates are down and I want to buy, but I’m afraid and not sure what to do! That is what we are hearing from a number of people. It is a very important decision and there is a lot to consider.

First of all not all states and city’s are created equally. Every city or community has their own economy. The problem with these statements from the national media is that they do not tell us what is really happening in our own community. Even the local papers are quoting some expert in Washington D.C., New York or wherever! We need to know our local market. In the Treasure Valley we are very lucky as we have very low unemployment, a healthy commercial building climate, job creation and growth, low crime rates and mild weather, which all create an atmosphere where people want to live and move. We have been through a number of economic downturns in the economy and the Boise area always recovers quicker than the rest of the nation because of our underlying health economy.

The next big question a buyer has to ask themselves is how long do I plan to live in my next home? Real Estate is normally a long term investment. Most of the people who got caught up in the 2005 housing frenzy buying and flipping homes got hurt. It takes a very sophisticated buyer or investor to play in that environment. If we plan on living in our next home 4 years or more, the risk is very low.

The next question is whether I’m buying a new or existing home. Most generally the highest equity gains come in the first 4 to 5 years of a new home. Right now in the Boise area there are great opportunities. Builders have dropped prices dramatically. They are taking money to the bank to get rid of current inventory. The problem comes with the depleting new home inventories. Once the deals are gone, they are gone forever. The homes that will replace the old product will be more expensive. Cost of permitting and raw materials are going up. We are in a global economy and the demand for raw materials in on the rise. Foreign economies are placing heavy demands on building materials as well as oil. If you are thinking of buying or building a new home, DO NOT WAIT! Waiting will cost you money.

With regards to existing homes it will take a bit longer. The foreclosures and short sales are where some of the real deals are right now. However, we do not have the high inventory levels that we see in the larger cities and this supply of distressed sales will clean up soon. Then the full attention will be back on the existing inventories.

There is also one more major factor that gets overlooked, HAPPINESS! How do you place a price on that? Sometimes we get so wrapped up in finding a great deal we forget the most important part of the American Dream, being happy. If we find the ideal home, we can afford it, and it will make me or my family happy, then so be it. Do not let being a tough business person interfere with the most important aspect of home ownership, HAPPINESS!       

Posted by Mike Pennington at 3/10/2008 9:35:00 PM
Thursday, November 15, 2007

As a marketing manager and one who tracks statistical data for developers and builders, it is very encouraging to see the recent numbers. September of 2007 seems to be the month that we can call the bottom of the market. In October we have seen dramatic decreases in home inventories, especially in the new home arena. We have also seen a slight increase in sales and closings. Homebuyers need to understand that the really great opportunities in the marketplace will soon be gone! Especially in the new home market, where we will have about a 5.5 month supply of new homes in January of 2008. As the market climbs back up to normal levels, we will see the prices climb as well!  

Posted by Mike Pennington at 11/15/2007 11:56:00 PM
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