Home Prices Rise in Most Metro Areas; Majority Show Modest Gains

The vast majority of metropolitan areas showed rising or stable home prices in the third quarter with most experiencing modest gains compared with a year earlier, despite a broad decline in existing-home sales, according to the latest quarterly survey by the National Association of Realtors (NAR).

In the third quarter, 93 out of 150 metropolitan statistical areas show increases in median existing single-family home prices from a year earlier, including six areas with double-digit annual gains and another 21 metros showing increases of 6 percent or more; 54 had price declines, and three were unchanged. Regionally, prices rose in both the Northeast and Midwest, as did the national condo price.

Lawrence Yun, NAR chief economist, says the data underscores the fact that all real estate is local. "Some metro areas are hot while others are experiencing localized problems," he says. "The report also shows that home prices in the vast midsection of America, from the Appalachians to the Rockies, are affordable and, perhaps, even undervalued.

"This quarterly metro home price report is the most meaningful long-term series available on price performance because it looks at all of the available transactions in a given area," he adds. "Unlike other home price series that are based on county records and mortgage securities, which are collected well after the actual transaction date, NAR has the most timely information directly from multiple listing services. We also report actual market prices rather than just the percentage changes so people can compare housing values around the country."

Even with most areas showing improvement, a disruption in higher priced sales impacted the national median existing single-family home price, which was $220,800 in the third quarter, down 2.0 percent from the third quarter of 2006 when the median price was $225,300. The median is a typical market price where half of the homes sold for more and half sold for less.

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Video: Hurricane Proof Housing

In this video from Wall Street Journal Online, watch how a university and an insurer have teamed up to test the impact of blowing wind on housing with giant fans.

Hurricane insurance and housing survival took on even more importance following the devastation of hurricanes Katrina and Rita in the summer of 2005. Those storms laid waste to much of the U.S. Gulf Coast region and shook the insurance industry. Some insurers have looked at no longer insuring homeowners in Gulf Coast states.

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Baltimore Inner-city Homes Unsafe for Young Children, Hopkins Study Finds

Infants and young children living in Baltimore’s inner-city homes are at risk for serious perils, including fires, falls and poisoning, according to a small but revealing study from the Johns Hopkins Children’s Center. A survey of 32 urban homes and their residents found that many lacked functioning fire alarms, staircase gates and safe storage for medications, researchers report in the August issue of Pediatrics. Fires, falls and poisonings are the top causes of childhood home injuries in Baltimore.

The study found that:
• 97 percent of homes had smoke detectors but only half had a working one on each level of the home.
• None of the homes had staircases blocked correctly.
• Only 17 percent of homes had adult medications stored safely in a locked place.
• Nearly two-thirds of the homes had staircases too narrow and banister design that wouldn’t allow a gate to be fitted across the top of the stairs; one-third would not accommodate a gate at the bottom of the stairs.
• Nearly 20 percent had recognized environmental hazards such as using a gas stove to heat the home.
• Two of the 32 homes had exposed wires in the walls.
• Two homes had broken banisters or railings.

Not using home-safety devices such as stair-blocking gates, fire detectors and medicine-cabinet locks makes these homes dangerous for youngsters, researchers say. Barriers include poverty and the structural design of older urban homes that often doesn’t allow for proper installation of such devices, they point out.

“There are many factors that come into play here, and parental knowledge and financial situation are just part of the problem,” says study lead author Kimberly Stone, M.D., M.P.H., a pediatrician at the Johns Hopkins Children’s Center. “Clearly, the design of older urban homes and the lack of uniform measures to ensure home safety also play a role.”

Study participants—32 low-income, mostly unemployed pregnant women or mothers of children younger than 1 year from inner-city Baltimore—received information on safety products and practices and were given coupons to buy fire alarms, stair gates and medicine-cabinet locks. Researchers then interviewed the mothers about their home-safety practices and visited their homes to observe first-hand the use of safety products. Researchers found that parents tended to over-report their use of fire and smoke alarms, stair gates and cabinet locks, and many failed to use or install these products correctly. The study, albeit small, probably reflects patterns typical of Baltimore City’s impoverished urban pockets, researchers suspect.

“The take-home message for us as primary-care pediatricians is that we can’t simply ask parents if their homes are child-proof,” Stone says. “We need to be probing and ask specific questions about stair gates, fire alarms, medication storage, as well as about the state of repair and design of the home.”

The problem should be addressed on a macro level as well.

“We need to do more than hand out a free fire alarm and a pamphlet,” Stone adds. “We need legislators, housing authorities, landlords and manufacturers of safety products to step up to the plate and help ensure compliance.”

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Conference Board: U.S. Economy Will Benefit from Higher Bond Yields, Wage Increases, Rise in Short-Term Interest Rates

The Conference Board says that after a very long wait, long-term Treasury bond yields have begun to reflect a better outlook for the U.S. economy and the prospect that the next move in the federal funds rate will be up.

The forecast also shows a rise in short-term interest rates by 50 basis points in the second half of this year.

Manufacturing production is rising at about a 2% annual rate. Nondefense capital goods orders, a key investment indicator, have risen 20% in real terms since January. Much of the rest of the gain is in machinery orders. Although the pickup in orders is fairly broad-based, high-tech orders are somewhat lagging. High-tech orders, which should recover in the second quarter, are so closely related to the overall level of investment that it would be surprising if this sector didn't begin to rebound soon as well.

"The picture is a little less encouraging on the housing front," says Gail Fosler, executive vice president and chief economist of The Conference Board. Her analysis appears in StraightTalk, a newsletter designed exclusively for members of The Conference Board's global business network. "But progress is underway. Demand is slowly coming back to the market. Mortgage applications are up about 17% since the low point last August. And the drop in housing starts has been so sudden and dramatic that it has taken inventories down to close to historic averages-though still far above the levels common during the past 10 years."

But housing is a sector in which long-term forces are shaping the outlook as well as short-term cyclical events. The housing market has enjoyed a decade of strong (booming since 2000) conditions. The strength in housing received not inconsequential help from a long-term trend to lower mortgage rates, which have helped to offset higher housing prices to a great degree.

As a result, the "housing affordability index" has remained high and within a remarkably narrow range of about 120 to 140 since 1993. (An index reading of 100 means that a family earning the median income has enough money to qualify for a mortgage on a median-priced home assuming a down payment of 20%). Beginning in 2004, housing affordability began to plummet as both mortgage rates and house prices rose. The current reading is about 110, which given the definition of the index would not seem to be that low. But the reading is one of the lowest since 1990.

"This weakness in the U.S. housing market is not just a cyclical phenomenon but a response to some very important long-term trends," says Fosler. "Home prices outpaced average incomes, so there would be a downward bias in any event. As mortgage rates rise, the downward pressure on prices will persist. A surge in wages could solve this problem, but rapid
increases in wages would create other problems like inflation that the Federal Reserve would have to address with higher interest rates. While housing is not likely to be a drag on the U.S. economy in the second half of 2007 and 2008, it is also unlikely to make much of a positive
contribution for the foreseeable future."

Consumer spending has certainly been buffeted by slower housing prices and higher gasoline prices. The stabilizing force has been the tight labor market and rising wages. Earnings have slowed, but as in the last cycle, wages will begin to pick up again as growth accelerates and the unemployment rate remains low. Real wage and salary income has been growing at a 2% to 4% annual rate -- with ups and downs due largely to the ebb and flow of gasoline prices. The inflation-adjusted growth of consumer spending has remained generally in the 3% to 4% range since 2003. But retail activity has been hard hit by the housing slowdown. These trends explain why the retail sector and particularly the home-improvement retailers have been under so much pressure.

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Realtors: Soft Home Sales To See Gradual Upturn

Home sales are projected to move in a relatively narrow range with a gradual upturn becoming more pronounced by the end of the year, according to the latest forecast by the National Association of Realtors (NAR).

Lawrence Yun, NAR senior economist, says the market is relatively soft.

"Overall housing levels are historically strong, but sales remain sluggish compared to the recent boom," he says. "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year. It's important to keep in mind that all real estate is local, and many markets are expected to have higher sales and strengthening prices during the second half of this year."

Existing-home sales are projected to total 6.18 million in 2007 and 6.41 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 860,000 this year and 901,000 in 2008, down from 1.05 million last year. Housing starts are likely to total 1.43 million units in 2007 and 1.49 million next year, below the 1.8 million recorded in 2006.

The national median existing-home price should ease by 1.3 percent to$219,100 in 2007 before rising 1.7 percent next year. The median new-home price will probably fall 2.3 percent to $240,800 this year, and then grow by 2.6 percent in 2008.

"We continue to experience a temporary distortion in comparing median existing-home prices," Yun says. "Because the sales volume has shifted from many high-cost areas to moderately priced markets, we're not getting a true apples-to-apples comparison. When you look at other measures, such as this week's price index from Freddie Mac which is based on repeat sales, overall home prices are rising slowly."

"Buyers today need to have a traditional view that housing as a long-term investment is an added benefit to their shelter expense. If so, that investment generally will build a nice nest egg over time, especially if they use a traditional mortgage instrument that reduces debt," Yun says.

The 30-year fixed-rate mortgage is likely to increase to 6.6 percent in the third quarter and then hover at that level through 2008.


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Catholic Charities Launches Campaign To Cut Poverty In Half

Catholic Charities USA today announced a new multi-year initiative to cut poverty in half by2020, urging Congress and the Bush administration to give a much higher priority to the needs of the poor in budget and policy decisions on issues such as health care, housing, nutrition, and economic security.

"Poverty is a moral and social wound on the soul of our country and threatens the health and economic well-being of both families and our nation," Rev. Larry Snyder, president of Catholic Charities USA, said at a briefing this morning on Capitol Hill. "We must marshal the strength andthe collective will of our nation to take on this tragedy that affects 37 million people who are living in poverty in one of the wealthiest nations in the world."

"The Campaign to Reduce Poverty in America is about who we are as a nation," Father Snyder said. "We must no longer ignore the injustice ofpoverty and the extreme in equality in America and instead must seize this opportunity to advocate for changes that promote human dignity and thecommon good."

The goal of Campaign to Reduce Poverty in America is to cut the poverty rate in the United States in half by 2020. Catholic Charities USA is leading a broad effort that will involve partners in social serviceagencies, the faith community, and other groups in a sustained effort to convince government officials of the importance of making systemic changes in government programs to help the poor and most vulnerable in our society.

With more than 275 years of experience in serving those living in poverty, Catholic Charities has a unique understanding of this growing problem and its devastating impact on families and the nation.

"Catholic Charities agencies provide help and offer hope to more than 7.4 million people each year, and in communities across the country, our agencies have been coping with a steady increase in demand for emergencyassistance, primarily among working families," Father Snyder said. "Each day, our agencies serve families who work hard but still do not earn enough to provide for their basic needs."

"Catholic Charities USA pledges its experience and resources to help reduce poverty in America. But, we can only succeed with the activeinvolvement of Congress and the administration. Only through partnershipsbetween government and community leaders like Catholic Charities, will we develop the capacity and the scale necessary to attack poverty in a comprehensive and sustained way," said Father Snyder.

Catholic Charities USA's Campaign to Reduce Poverty in America will urge Congress and the administration to improve programs and policies in four key issue areas: health care, affordable housing, nutritionassistance, and family economic security for the poor and vulnerable.

"Good government is about making choices and setting priorities that serve the common good, and we will work in partnership in this campaignwith Catholic organizations and other partners to encourage elected leaders to give greater priority to attending to the needs of the poorest and mostvulnerable persons in society," Father Snyder said. "Choices made in the federal budget process about what is funded -- and how to pay for it --must be judged by whether the life and dignity of families are protected or undermined."

Key components of the campaign will include sustained and comprehensive outreach to the administration and Congress as well as activities in local communities throughout the country on the need for action to reduce poverty, Catholic Charities says.


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