Average home-sale prices in South Central Pennsylvania continued to improve in the first quarter of 2007, rising to the highest first quarter level in recent years.
According to Central Penn Multi-List, Inc., the average price of homes rose up to $177,208, compared to the average cost of $173,953 in the first quarter of 2006.
Average first quarter prices have grown 31 percent since 2002.
“The South Central Pennsylvania residential environment truly is the definition of a healthy housing market,” says Jerrod Paterson, President of the Greater Harrisburg Association of Realtors.
Despite some of the troubles encountered of late by Pennsylvania mortgage brokers and lenders, “The fact that home-sale prices continue to rise steadily reinforces the overall strength of our market,” he said.
Powered by low Pennsylvania mortgage rates, the number of housing sales in the first quarter was 2,281, nearly equal to the 2,300 units sold in the first quarter of 2006.
The number of units sold in the past quarter actually surpassed the first quarter of 2005, which saw 2,090 sold. The number of units sold ensured that 2007 boasted the second best Q1 sales in the last six years - a far cry from the mortgage woes being experienced elsewhere in the U.S.
The number of active listings in the area rose slightly to 2,899, compared to 2,793 active listings at the end of the fourth quarter of 2006. Listings averaged 63 days on market. In the first quarters of 2005 and 2006, times averaged 58 and 54 days, respectively.
“Overall, housing units are selling and average listing times continue to float around 60 days,” Paterson said. “Those statistics coupled with the increase in the average sale price solidify the fact that our housing market is still very strong.”
Across the nation, home sales continued to rise in February. According to statistics compiled by the National Association of Realtors, existing-home sales in February increased 3.9 percent from January.
While February 2007 total sales were still slightly lower than February 2006, the increase in February 2007 was the largest increase in nearly three years. Low mortgage loan costs continued to play a large role.
“While the national housing market is showing signs of a rebound after months of declining sales, the Central Pennsylvania housing market continues to build on the strength solidified over the last six years,” says Robert D. Fox of RE/MAX Premier Properties in Hershey.
“The strong market is just one more reason why it’s a great time to buy a home.”
SOURCE: Central Pennsylvania Business Journal
Ricky Boone is a Trevose mortgage broker whose customers typically have poor credit, many of them seeking loans for 100 percent of the value of their property.
The subprime-mortgage scare changed all that.
A borrower with a credit score of 580 - on a scale of 400 to 800 - can no longer get 100 percent financing, he said.
“Nobody will buy it,” he said of the investors that used to buy such subprime loans from mortgage companies. “People now looking to buy houses, they are going to have to have more down payment money,” said Boone, president of Excel Capital Funding Inc.
So far, the scare has been limited to the subprime market, which includes people with credit scores of about 620 and lower. That market represented about 19 percent of the overall mortgage business a year ago, but it is projected to fall 30 percent this year, according to the Mortgage Bankers Association.
That is squeezing subprime home mortgage brokers such as Boone.Wall Street’s concern moved from simmer to boil after a major subprime lender, New Century Financial Corp., warned this month that it would not make new loans because its bankers had cut off credit. Investors worried that more lenders would fail, with subprime borrowers falling behind on their bad credit mortgages in the fourth quarter at the highest rate in four years.
Even though three lenders Boone was using have shut down, and others are changing their guidelines every day, he did not buy into the fear that the subprime market was going away.
“They are tightening up right now, and it’s going to be like that for six or eight months. Then it will come back. It always does,” said Boone, who has been in the mortgage business for 18 years.
Most mortgages are sold by the original lender and incorporated into securities bought by pension funds and other investors. Demand for such securities has plummeted with rising default rates.
Moody’s Investors Service, the debt-rating agency, said yesterday that it would change the way it rates bonds backed by the riskiest mortgages.
For now, worry that the subprime rattles will spread into the broader mortgage market is keeping Wall Street on edge and rousing lawmakers in Washington.
“Most of the loans are made to existing homeowners who are being essentially fooled into consolidating their credit cards into one of these ridiculous mortgages,” such as a $10,000 home repair wrapped up in a $45,000 home improvement loan, said lawyer Irv Ackelsberg, who has been a longtime critic of the subprime industry, of Langer & Grogan P.C., of Center City.
Lenders were racing to keep the mortgage and housing boom going with new sorts of mortgages, such as interest-only home loans, loans with payments that did not even cover interest, and so-called “stated-income” loans, for which borrowers did not even need a job.
“You would see month after month, quarter after quarter, these subprime-mortgage companies getting more and more aggressive,” said Michael Dougherty, a managing member of Choice Mortgage L.L.C., of Mount Laurel.
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The Federal Home Loan Bank of Pittsburgh has allocated $24.2 million for affordable housing in 2007.
The donation includes $17.15 million for the Affordable Housing Program, $7.64 million for the First Front Door lower-income home ownership grants program - in order to everyone to have the chance to qualify for various mortgages - and $1 million for a pilot housing rehabilitation grants program.
With assets of $77.4 billion, FHLBank Pittsburgh, one of 12 government-sponsored enterprise created by Congress in 1932 to provide a steady stream of low-cost housing finance, serves 334 financial institution members across Delaware, Pennsylvania and the West Virginia housing markets.
FHLBank’s 2007A AHP funding round is now open and applications from project developers are being taken until March 29.
The 2007B funding round will open in August and close on September 27. Since 1990, the AHP has distributed approximately $125 million in grants for the construction or rehabilitation of more than 22,000 rental and owner-occupied affordable housing units.
The First Front Door program (formerly the Home Buyer Equity Fund) has been available to lower-income first-time home buyers since 1997. The program provides $3 in grant money for every $1 contributed by qualifying home buyers to help meet down payment and closing costs. The program takes applications on a rolling basis through participating FHLBank financial institution members in local communities. The $7.64 million applied to First Front Door in 2007 includes about $1.6 million carried over from 2006.
The Allentown Morning Call reports that the number of homes sold in the Lehigh Valley region of Pennsylvania continued to fall last month.
The rate of home appreciation slowed to 1 percent from the year before, and homes stayed on the market longer than the previous year.
The January statistics confirm trends that began last year, as Pennsylvania mortgage costs began to overwhelm buyers in the region.
Home sales fell by 3.5 percent in 2006, while the average days on market lengthened.
The Lehigh Valley remains attractive to home buyers, however, particularly those relocating from New Jersey, where the market is much more expensive.
A New Jersey mortgage, after all, will often set buyers back several hundred thousand more in some cases, given the Garden State’s proximity to New York City.
But real estate agent associations say the Lehigh Valley market is simply in the process of reverting to normal, after the white-hot sales atmosphere of 2004 and 2005.
Rather than tanking, Pennsylvania home prices in this region are starting to re-adjust to where they should be. The average price of a pre-existing home in Lehigh and Northampton counties was $215,000 in January.
Buoyed in large part by affordable home loan costs, that’s up 1 percent from the year before, according to data compiled by the Lehigh Valley Association of Realtors.
The number of homes sold fell by 16 percent, compared with the same period last year. This marks the eighth consecutive month that home sales fell in the Lehigh Valley.
SOURCE: Allentown Morning Call
New statistics show 527 Luzerne County, Pa., property owners lost their homes and businesses in 2006 because they defaulted on their mortgages, according to the Times-Leader.
Another 758 faced foreclosure but managed to avoid it via postponements or cancellations, usually by taking steps to pay off the debt. It’s not much of an improvement from 2005, when 550 properties were lost out of 1,527 Pennsylvania mortgage foreclosure notices.
But the county still has reason to celebrate. The decline, though slight, goes against last week’s news about a national spike in foreclosure filings. Filings also went up statewide.
RealtyTrac released a study saying that more than 1.2 million foreclosures were filed nationwide in 2006, up 42 percent from the previous year.
The decline in foreclosures surprised Ryan Foy, who oversees the sales in the Luzerne County Sheriff’s Office because the county’s foreclosures grew in 2005. Continued decline seems possible in 2007 because only 250 new filings have been scheduled for Pennsylvania real estate transactions in February and April.
“That’s low,” Foy said.
Foy speculates that the county property buyers and mortgage lenders may be more conscious about the borrower’s ability to pay. He also believes many a mortgage lender may be paying more attention to the appraisals used to help determine how much money is loaned, so buyers can recoup enough to cover the loan amount if they sell.
There’s a lot of money at stake for lenders.
The amount of mortgage owed in the county’s 2005 filings was $95.9 million, and $81.9 million was overdue in the 2006 filings, Foy said.
But other less controllable factors also play into defaults, such as employment loss, illness and divorce, he said.
Real estate market gluts in less desirable areas have also prevented property owners from unloading buildings they can’t afford.
He believes a few two-property owners have landed in foreclosure in recent years because they took out a second mortgage loan on multiple properties to obtain cash and then defaulted.
National experts also attribute rising foreclosures in part to interest-only mortgages and variable-rate loans that caused some payments to balloon.
Though pleased that fewer people are losing their homes, Sheriff Barry Stankus said the number of foreclosures is still a concern. He estimates his office handled around 360 sales per year when he became sheriff in 2000.
He blames the economy and property owners’ difficulty juggling their mortgage payments with medication, heating bills, car payments, food and taxes.
Usually a home loan lender will reclaim ownership at foreclosure sales, which are commonly known as sheriff sales. However, Foy said more outside parties are also purchasing them to occupy or as an investment.
For example, 63 properties were purchased by parties not associated with home mortgage companies in 2006. In the study, Pennsylvania ranked 19th in states with the highest foreclosure rate increases from 2005 to 2006.
The state had 38,333 foreclosures in 2006, up 34 percent from 2005, according to RealtyTrac, which is a marketplace for foreclosure properties. Past reports showed that the state had a 14 percent increase in sheriff sales between 2000-2003.
The state Department of Banking has been trying to make Pennsylvania home loan lenders more aware of their responsibilities and has been lobbying for legislative reforms, said Dan Egan.
“I think the most important thing the department wants to get across to consumers is the importance of doing your homework and shopping around. Contact more than one lender or mortgage broker, compare offers and make sure you completely understand what it is you’re agreeing to when you sign the papers,” Egan said.
It wasn’t the best of years, but it wasn’t the worst either.
That’s the summation of the Philadelphia suburbs, where home prices saw a rebound in December after falling for three straight months prior to that. Home prices in 2006 actually rose 6.4 percent from 2005 — not bad for a market in the midst of what’s widely considered to be a slump.
Some homeowners continue to do nicely. Marianne and Chris Zoto ended up selling their Doylestown townhouse in June for $475,000 — or a whopping $200,000 more than they paid in 2003 — and moved up to a new single-family home in nearby Fountainville for $510,000.
The Zotos doubled their living space for a slight increase in the size of their Pennsylvania mortgage.
“Every day we say we got lucky,” said Marianne Zoto.
The Zotos may have caught the tail end of the housing price wave that drove values higher throughout the area in recent years. Houses in the same Doylestown neighborhood are now going for as little as $375,000.
Others looking to sell as the 2007 home-selling season is set to begin believe the Pennsylvania housing market has definitively turned against them.
“It’s a buyer’s market right now, not a seller’s market,” Stacy Gallagher, who has been trying to sell her Warwick townhouse for three months, and has cut her asking price for the three bedroom house from $229,000 to $219,000, and is close to accepting an offer for $206,000, said.
It’s hard to characterize the housing market in the entire area as good, bad or flat. Success or failure in any real estate sale is entirely a function of the situation of an individual homeowner.
The Zotos, for instance, could be perceived as having done well in selling their house whether they received $475,000 — a $200,000 gain — or “only” $375,000, which would still have been a $100,000 gain.
If Gallagher gets $206,000, that’s still a sizable 37 percent gain over the $150,000 she paid five years ago, and a big deal as far as her mortgage loan payments are concerned.
“If you’ve been in the market for a while, you’ve seen the benefits of (price) appreciation,” said Ryan Sweet, Pennsylvania analyst for Moody’s Economy.com in West Chester.
But first, sellers have to find a buyer. And it’s clear that at the moment — as through much of 2006 — that is taking longer.
“Now, it’s almost like a stalemate … in the game of real estate chess,” said Herman Petrecca, a real estate agent with ReMax Associates in Warminster.
The number of days on market in the 43 municipalities of Central and Upper Bucks and Eastern Montgomery counties rose 32 percent in the last year, to 53 days, according to multiple listing service data provided by Prudential Fox & Roach. In December alone, the average jumped to 70 days from 43 days in December 2005 — a 63 percent increase.
The number of homes sold in the area fell 14 percent in 2006, to about 5,000. In December, the number of sales was off 8 percent, to 344. In contrast, the state’s home prices held up, despite weakness late in the year.
Average prices fell in September, October and November when compared to the same months in 2005. But prices rebounded and rose 4.3 percent in December to $315,000 — near the area’s all-time average high of $320,000 reached in several summer months in 2005 and 2006.
December’s strong price performance joined with price increases in the first eight months of the year to boost the year’s average prices 6.4 percent to $309,000, up from an average of $290,000 in 2005.
The area’s strength in pricing supports the view of experts that the Philadelphia region, unlike other parts of the country, did not experience the home price bubble sparked by massive amounts of bad credit mortgage deals and record-shattering home sales.
“The Philadelphia area isn’t nearly as vulnerable” as other regions, said Tim Schiller, senior economic analyst at the Philadelphia Federal Reserve Bank. “The concept of a housing bubble, that’s a myth in our area.”
To a large measure, whether a particular house will appreciate — and by how much — has a lot to do with how much it cost in the first place. Homes in the “middle” market, priced from $350,000-700,000, did best in the past year, rising an average of 1.9 percent in price.
Homes priced at less than $350,000 rose 0.6 percent, on average, while homes priced above $700,000 fell in price by nine-tenths of a percent.
Again, within any price range, whether a sale is seen as successful really depends on each seller’s specific situation. The factors that separate housing market winners from losers include:
- When you bought. “Anyone who bought in the 1-2 years and needs to sell, might find themselves taking a hit to the home equity,” Schiller said. People who have owned for a while will likely make money selling, even in a slow market.
- How you financed. “Clearly, anyone who’s got an (adjustable rate mortgage) has some tough times coming up,” said Schiller. That’s because mortgage rates have risen from their record lows earlier in the decade.
- How quickly you must sell. “People who want to sell fast are probably most subject to the whims of the market,” he said. Homeowners who can hold out for a while have a much better chance of fetching a good price.
As 2006 drew to a close, the Lehigh Valley (Pa.) economy continued to see strength on the employment front, tempered a bit by some increasing weakness in the Central Pennsylvania real estate market.
Home prices in the region fell in November for the first time in more than two years, according to the Allentown Morning Call. The average cost of an existing home in Lehigh and Northampton counties was $208,000, a drop of 2 percent from November 2005.
The dip in prices means homeowners who are trying to sell their properties might not be getting as much as they had hoped. Buyers, on the other hand, have their pick of properties in this Pennsylvania housing market, giving them a chance to make offers below the listing price.
Other key indicators are also pointing to a slowdown:
- The number of homes sold has fallen six consecutive months. Despite relatively low Pennsylvania mortgage costs, the number of homes sold in November fell 22 percent compared to the same month last year.
- Houses are lingering on the market. On average, properties are staying on the market for 47 days, or about seven weeks. A year ago, they were moving in less than six weeks.
- The glut of homes on the market is slowing the pace of sales. The number of pending home sales — a measure of future buying activity — fell 25 percent. It was the lowest number of pending sales contracts since December 2003.
The jobs market, meanwhile, shows no signs of such weakening, resulting in home amongst officials that demand for home mortgages in the area may remain strong throughout 2007 and beyond.
Unemployment in the Lehigh Valley rose a negligible one-tenth of a percent, to 4.3 percent, in November, compared to the previous month, according to data compiled and released by the Pennsylvania Department of Labor and Industry.
Economists consider an unemployment rate of 5 percent to be as close to full employment as can be expected, realistically. That means any person who wants a job can get one, although not necessarily at high wages.
Several sectors — retail; education and health; trade, transportation and utilities — reported record employment. Compared to most of the U.S., the state contains an abundance of affordable housing.
Pennsylvania’s 3,000 mortgage lenders and brokers are officially on notice.
According to the Pocono Record, businesses in the mortgage industry are now beholden to State Banking Department guidelines for “acceptable” conduct.
Acting Banking Secretary Victoria A. Reider outlined the new policy in a letter Friday to mortgage brokers and lenders.
The guidelines — first published in December in the Pennsylvania Bulletin — offer examples and definitions of practices considered dishonest, fraudulent, illegal, unfair, unethical, negligent or incompetent.
The warning comes on the heels on a study released last month on subprime (or bad credit home loan) lending that predicts 2.2 million households nationally have or will lose their homes to foreclosure.
It also comes after word that Monroe County’s foreclosures last year topped 800 filings for the first time since 2003, when the Pennsylvania Banking Department commissioned a study on Monroe’s record default rate.
“This policy will help ensure that home buyers receive the highest level of service when they’re making these important decisions that will impact their financial futures,” Reider said.
Bad credit mortgages carry higher interest rates and less favorable terms than traditional home mortgages but are often used by borrowers who can’t qualify for lower mortgage rates.
Many bad credit mortgage products, said to account for nearly a quarter of all home loans, have sudden large jumps in interest rates that take effect a couple years after the loan is issued.
Some also have a prepayment penalty that prevents its borrowers from any home mortgage refinancing into a new loan without incurring costs that make it impossible to realize a savings.
Reider warns that companies that fail to conform to the new guidelines could face suspension, revocation or non-renewal of their licenses.
Several changes were recommended in a 2005 Banking Department report to the General Assembly on Pennsylvania mortgage foreclosures, conducted following release of its Monroe County study. The state report makes recommendations to curb abusive lending practices.
But the department and other state agencies aren’t doing nearly enough to stop abusive home sale practices, says one local homeowner activist.
“Gov. Rendell’s office should take immediate action to investigate and find remedies to protect homeowners who have continued to be victimized by the criminal element that perpetrates fraudulent practices involving innocent homeowners throughout Monroe County and Pennsylvania,” Pocono Homeowners Defense Association President Al Wilson said in a press release.
Wilson contends the abuses in home sales will continue until county and state law enforcement officials prosecute the perpetrators and put them in jail.
Riding higher than expected on increased sales in the fourth quarter, most of the Central Pennsylvania housing market continued to grow in 2006, despite reports of a declines throughout the Keystone State and across the U.S.A.
According to the Central Pennsylvania Business Journal, the average price of residential homes once again rose in the fourth quarter.
In the fourth fiscal quarter, the average cost of a real estate sale was $180,622, compared to the average cost of $170,644 in the fourth quarter of 2005.
Thanks in large part to low Pennsylvania mortgage costs, and coupled with increases in the first three quarters, 2006 proved to be the best year for residential home sales in the past six years.
“Our market enjoyed continued growth in 2006. While many are questioning the stability of the national real estate market, there is little doubt that here in South Central Pennsylvania, the market is in great shape,” says Jerrod Paterson, President of the Greater Harrisburg Association of Realtors.
The number of residential home sales recorded in the fourth quarter was 1,862, a 5.9 percent increase over the 1,753 sold in the fourth quarter of 2005. With increased sales in the fourth quarter, the number of units sold in 2006 increased 3.6 percent from 2005.
- The number of active listings in the area fell to 2,793, compared to 2,933 active listings at the end of the third quarter.
- Listings stayed on the market an average of 56 days, bringing the 2006 average to 50 days.
- In 2004 and 2005, listing times averaged 50 and 47 days, respectively.
“Overall, average listing times have not increased greatly, despite an increase in the number of active listings in 2006. This just shows that homes are still selling and the market is still improving,” Paterson said.
Across the nation, existing home sales have begun to bounce back from a slowdown in early 2006. Total existing-home sales in November increased 0.6 percent from October as home mortgage loans remained affordable and some of the excess inventory bogging down overheated markets was absorbed.
Many believe the housing market will continue to stabilize in 2007, including the National Association of Realtors, which cautiously predicts modest gains.
In this area, however, statistics are clearly showing that South Central Pennsylvania is not following the national market trends.
A strong market is just one more of the many incentives that attract people to this area - especially with the increasingly expensive markets in the Northeast, and what it costs to take out a New Jersey or New York mortgage relative to the lower cost of housing and living Central Pennsylvania.
The Cumberland Sentinel reports that after years of gains, the Pennsylvania real estate market cooled off considerably in 2006 as buyers grew hesitant at paying high home prices and investors left the market.
A growing economy, low Pennsylvania mortgage rates and new types of loans had fueled a decade-long housing boom, but declining affordability has put a dent in the market, especially in the eastern part of the state.
“There’s no more flipping,” said Austin Jaffe, chairman of the insurance and real estate department at Penn State University who analyzes housing data for the Pennsylvania Association of Realtors.
“It’s not the same psychology that you build a house and by the time you’re done with it, it’s time to flip it and do your next deal.”
While there are signs the housing market may be stabilizing, analysts say it’s still too early to say whether a bottom has been reached.
It’s not expected to be as bad in Pennsylvania, in part because the state didn’t experience the lofty gains seen places like Nevada, California and Florida. From 1995-2006, home prices in Pennsylvania rose by 41 percent after adjusting for inflation.
Nationally, prices rose by 58 percent.
“There is no bubble bursting here,” Jaffe said.
In the third quarter, Pennsylvania home sales fell by 4.5 percent By comparison, Nevada sales in the quarter fell by 38 percent, Arizona’s plunged by 36 percent and Florida’s by 34 percent.
Statewide, the median single-family home price in the third quarter came to $196,100, about the same as a year ago, and still affordable for those in search of home loans. In 2005, home prices rose by 2.7 percent over 2004.
But certain markets saw more pronounced slowing.
In the third quarter, median prices in northeastern Pennsylvania, the Lehigh Valley and the Philadelphia area rose by less than 4 percent. In 2005, those areas saw price increases of 16-18 percent.
The demand for homes in northeastern Pennsylvania had been partly fueled by buyers shut out of the more expensive New Jersey and/or New York market.
“People are willing to travel, to commute a great distance in order to get cheaper housing. That has bolstered the northern part of Pennsylvania,” said Celia Chen, director of housing economics at Moody’s Economy.com.
Western Pennsylvania has seen less dramatic slowing, because it hadn’t had as much of a run-up. In Pittsburgh, for example, home prices fell by 1.8 percent in the third quarter, compared with a 2.4 percent increase in 2005.
One of the most expensive markets in the state remains the Greater Philadelphia area, even though prices have fallen 10-15 percent this year. The Rittenhouse Square, Washington Square and Society Hill areas have fared better than some other sections. Overall, downtown seems to be recovering from its slump, experts believe.
“The buyers are coming back,” said Alan Reburn, senior vice president at Prudential in Devon.
Still, it takes some creative marketing for sellers in a slower climate. Even with home mortgage rates low, buyers can be more selective with the high levels of inventory available. It’s a good time to be looking for a home or condo in the Keystone State.
