Texas - Last in Downturn - First Out - Says Moody's Economy.com..

Moody’s Economy.com and Fiserve Lending Solutions predict Texas home prices will level off ahead of the U.S. average.

Texas cities went into the home market downturn later than many throughout the country and will level off ahead of the U.S. average, according to the analysts.

• Houston has one of the smallest expected home price declines in the country at 0.2 percent. Analysts expect the city’s home price decline to bottom out in third quarter 2009.
• Austin’s peak to bottom home price is expected to fall by 1.3 percent, hitting bottom in fourth quarter 2009.
• Dallas–Fort Worth’s price decline will come to 1.1 percent and bottom out in third quarter 2009.

• Create and save 3.5 million jobs, rebuilding America, making us more globally competitive and energy independent, and transforming our economy.
• Give 95 percent of American workers an immediate tax cut.
• Invest in roads, bridges, mass transit, energy efficient buildings, flood control, clean water projects, and other infrastructure projects.
• Restore science and innovation as the keys to new American-made technology, preventing and treating disease, and tackling urgent national challenges like climate change and dependence on foreign oil.
• Invest quickly into the economy.
• Help first-time homebuyers and strengthens the housing market by enhancing the current credit for first-time home purchases with the removal of the repayment requirement.

Congress today approved a $790 billion economic stimulus bill that includes a modest expansion of a first-time homebuyer tax credit and restores to $729,750 the upper loan limit in high-cost areas for Fannie Mae, Freddie Mac and FHA loan guarantee programs.

Voting along party lines -- no House Republicans supported the bill, and only three voted for Senate passage -- lawmakers are approved nearly $1 trillion in new spending and tax cuts championed by the Obama administration as needed to save or create 3 million to 4 million jobs.

The vote in the House was 246-183, with seven Democrats voting no, while the 60 votes needed to clear procedural hurdles in the Senate came with the support of Republicans Arlen Specter of Pennsylvania and Olympia Snowe and Susan Collins of Maine.

Democrat Sherrod Brown cast the deciding vote to make the bill law when he returned from a trip to Ohio Friday evening. Brown had returned to his home state where his mother died this week.

Obama was expected to sign HR 1, the American Recovery and Reinvestment Act of 2009, as soon as it reaches his desk.

Real estate, home builder and mortgage-lending trade groups were hoping for more incentives to jump-start homebuying -- such as a $15,000 tax credit for all homebuyers, approved by the Senate in an earlier version of the bill.

The compromise bill increases the $7,500 limit on an existing tax credit for first-time homebuyers to $8,000, extends its sunset from July 1 to Dec. 1, and eliminates a requirement to repay the credit (unless a home is resold within three years).

The loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs, which were bumped back down to $625,500 in high-cost areas on Jan. 1, were restored to the temporary $729,750 approved by Congress a year ago in the Economic Stimulus Act of 2008.

Fannie and Freddie's conforming loan limits -- which began 2008 at $417,000 -- were allowed to stretch to 125 percent of the median home price in high-priced housing markets for much of last year. That was intended to be a temporary measure to address the high cost of non-conforming "jumbo" loans after the collapse of the private-label secondary mortgage market in August 2007.

The $729,750 limit expired on Jan. 1, and Fannie, Freddie and FHA are currently permitted to guarantee loans of up to 115 percent of the median home price in high-cost markets, with a cap of $625,500 (that's 150 percent of the $417,000 conforming loan limit). HR 1 will restore the limit to 125 percent of median home price in high cost markets, up to $729,750, for the remainder of 2009.

FHA began 2008 with a $200,160 "floor" loan limit in normal markets and a maximum loan limit of $362,790 in high-cost markets. As part of the Economic Stimulus Act, Congress increased FHA's floor limit to $271,050 in normal markets and the upper limit in high cost areas to $729,750. That move helped increase the Federal Housing Administration's share of purchase mortgage originations from less than 4 percent in 2006 to 21 percent in September.

The compromise bill also provides $200 million for the U.S. Department of Agriculture's Rural Housing Insurance Fund. Although that funding will support $11.5 billion in single-family housing loans, it's less than half the $500 million proposed in the earlier House version of the bill.

The USDA Rural Housing Service provides loan guarantees and a smaller number of direct loans with down payments as low as zero percent to homeowners in rural areas who do not exceed the program's income requirements.

In negotiations between House and Senate leaders, the $5.2 billion the House had earmarked for community development block grants and a neighborhood stabilization program was also slashed to $3 billion. Of that, $2 billion is earmarked for the neighborhood stabilization program, which helps states, local governments, and nonprofits purchase and rehabilitate foreclosed, vacant properties.

The bill will also allocate $1.5 billion for a homelessness prevention fund that will provide short-term rental assistance, housing relocation, and services for families who may become homeless due to the economic crisis.

While the stimulus bill may have fallen short of the expectations of some housing industry groups, the Obama administration is promising more foreclosure-prevention efforts as part of an ongoing financial stability plan for banks. The White House announced today that it will provide more details next week about a comprehensive housing plan to help borrowers avoid foreclosure.

Treasury Secretary Timothy Geithner this week said the program will provide $50 billion for foreclosure prevention from the $700 billion Troubled Asset Relief Program (TARP), and left open the possibility of expanding an existing $600 billion Federal Reserve program to drive down mortgage rates through the purchase of mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.

The White House said President Obama will discuss the administration's housing plan at a speech Wednesday in Phoenix.

Dallas-Fort Worth’s home price declines should bottom out in the third quarter of this year and will be a fraction of the nationwide losses, according to a new forecast.

Nationwide, the fall in house prices will be more than 36 percent from the peak in 2006, according to the new report by analysts Economy.com and Fiserve Lending Solutions.

Most major Texas cities - including D-FW - went into the home market downturn later and will level off ahead of the U.S. average, the analysts say.

The just-released “Housing in Crisis: When Will Metro Markets Recover?” report predicts that “nearly 62 percent of the nation’s 381 metro areas will experience double-digit, peak to trough declines in housing prices.

The worst total price declines are – no surprise – in some California and Florida markets.

Houston is one of the cities with the smallest expected price decline of 0.2 percent.

“Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view,” the forecast concludes. “Although the end of the housing downturn may be in sight, this has been a debilitating correction.”

A new forecast from Fiserv Lending Solutions and Economy.com predicts that the worst of the U.S. home value decline may be over in some markets. Here's a look at peak to bottom price decline estimates for selected markets and forecast trough quarters.

Market Price drop Bottom
U.S. -36.2% 4Q2009

THE WORST DECLINES
Naples, Fla. -70.1% 4Q1010
Merced, Calif. -69.6% 4Q2009
Salinas, Calif. -67.9% 4Q2009
Modesto, Calif. -67.4% 2Q2010
Stockton, Calif. -67.15 4Q2009

SMALLEST PRICE DROPS
Houston -02% 3Q2009

MAJOR TEXAS CITIES
Austin -1.3% 4Q2009
Corpus -1.6% 2Q2009
Dallas -1.1% 3Q2009

SOURCE: Economy.com; Fiserve Lending Solutions

Dear Fellow REALTOR®,

Here's our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury's package holistically, in compliment with each other - mostly because that's how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.

So here's what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES's thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

In addition, we preserved what we have - which some tend to forget is always on the table when these negotiations start up again - mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

We did make a run at the $15,000 credit -- and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of 'what we are willing to give up to get a $15,000 tax credit' and kept the debate again, on how much it should be. It's pretty hard to complain when they give you what you ask for and you lose something you never had.
While we study the Treasury specifics on their major role in providing the rest of the housing solution -- there is much more to come and we are working diligently with the Administration to help 'unclog the pipeline' and get capital flowing into housing again.

Sincerely,

Charles McMillan, CIPS, GRI
2009 NAR President

“Banking in Texas is healthy,” said Texas Banking Association (TBA) President & CEO Rick Smith.

“Deposits are up, loan demand is good, and foreclosure numbers have actually declined in the state from the year before. Many of our banks are experiencing record profits.”

Among the reasons for the strong banking climate, according to the TBA, are banks did not make subprime mortgage loans, the economy is healthy compared to other states, Texas is the fastest-growing state in the nation, bankers learned valuable lessons from the problems of the late 80s to early 90s when several financial institutions failed, there was no rapid inflation in home prices, foreclosure numbers are low, and home equity borrowing authority is limited in Texas.

The facts about Texas real estate

Texas home sales prices

* Median sales price (half of all homes sold are priced higher and half are priced lower) in December 2008: $140,900, down 4% from December 2007
* Median sales price for 2008 (full year): $146,900, unchanged compared to 2007
* Average sales price in December 2008: $183,600, down 6% from December 2007
* Average sales price for 2008 (full year): $191,700, unchanged from 2007
Source: Real Estate Center at Texas A&M University

Sales prices in states that had rapid rises and drops in values

* California median sales price in November 2008: $285,680, down 41.8% from November 2007
* Arizona average sales price in December 2008: $192,908, down from $313,000 in December 2007
Sources: California Association of REALTORS®, Arizona Regional MLS

Home prices appreciation

* The average home sales price in Texas has increased $15,600 from December 2004 to December 2008
* Home price appreciation in Texas has not fallen below zero in the last 16 years

Texas home sales

* Total sales in 2008: 231,556, down 16% from 2007
* Months of inventory (how long it would take at the current rate to sell all homes on the market) in December 2008: 6.3 months
* Months of inventory in December 2007: 5.6 months
Source: Real Estate Center at Texas A&M University

Mortgage rates

* 30-year fixed-rate mortgages for the week ending Feb. 6, 2009: 5.19%
* 15-year fixed-rate mortgages 5.00%
Source: Mortgage Bankers Association

* 30-year fixed-rate mortgages in August 2008: 6.48%
* 30-year fixed-rate mortgages in October 1981: 18.45%
Source: Freddie Mac

Loan amount with an $800 payment on a 30-year 5.22% loan: $145,854
Loan amount with an $800 payment on a 30-year 6.48% loan: $126,832
Loan amount with an $800 payment on a 30-year 18.45% loan: $51,818

Foreclosures

* Texas was 24th on the list of foreclosure rates for 2008
* Nevada (highest foreclosure rate on the list) had a foreclosure rate seven times higher than in Texas
* Florida (2nd on the list) had a foreclosure rate four times higher than in Texas
* More than 40% of all foreclosure filings in the U.S. occurred in California and Florida
* The 2008 foreclosure rate in Texas was up 13.84% compared to 2007 and up 14.96% compared to 2006
* Arizona’s 2008 foreclosure rate was up 203% from 2007 and up 655% from 2006
Source: RealtyTrac

* Texas added 153,700 jobs from December 2007 to December 2008.
* While sales prices in California, Florida, Nevada, Arizona, and other states have had rapid rises and drops in values, Texas prices have remained relatively steady.

President Barack Obama signed into law the $787 billion stimulus package.

The plan, aimed at lifting the economy out of recession, intends to create millions of jobs and boost consumer spending by pumping money into infrastructure projects, health care, renewable energy development and conservation. Obama said the plan, which includes tax breaks for American workers and dispenses billions of dollars to states, will be watched by a team of managers to make sure money is spent "wisely and well."

"I don't want to pretend that today marks the end of our economic problems. Nor does it constitute all of what we have to do to turn our economy around. But today does mark the beginning of the end," the president said.