March sees a big bounce in sales. Will it hold?

Great fanfare was being made over the March housing industry statistics as positive numbers came in across the board. Yet the celebration remains contained as everyone waits to see what happens once the tax credit finally expires.

Nevertheless, there was reason to cheer the feeling that a modest level of confidence has been restored. Some of the positive stats included:

• New home sales jumped nearly 27% (from a record low in February). Although, the Midwest saw only a 4.3% increase in typically low key fashion.
• In the Cincinnati area, existing home sales were up 14% year over year. Sales rose 16% nationally for the same period.
• Local pending sales were over 30% higher in March.
• The average sales price rose to $152,287 for all Cincy MLS residential closings
  
• The inventory absorption rate for the Cincinnati area took a huge drop from over 13 months in February to 8.6 months for March - that's even with the expected increase in March inventory as new sellers come into the Spring market.
  

(See the full set of Cincinnati MLS based stats for March)

About the only negative in March was that distressed sales (short sales and foreclosures) were 35% of sales nationally, but even that percentage is down from prior months.

April numbers will likely continue the positive trend. However, new home sales figures may be the number to watch. Since there is a lead time involved with new construction it could act as a leading indicator of the market, post tax credit. If the numbers there hold up then you'll probably hear a big sigh of relief.

Mortgage delinquencies fall. Will foreclosures follow?

The subprime loan 60-day delinquency rate saw its first decline since 2006 in March. The rate fell from 46.9% to 46.3%. Not exactly an earth shattering decline, but nevertheless noteworthy. (Before starting a steady rise in 2006, the delinquency rate was 6.2%.) This follows a "seasonally adjusted" quarterly decline for all types of mortgages in February according to the Mortgage Bankers Association.

While some rates of delinquency are still showing an increase, this could represent a turning point for future foreclosures. If the delinquency rate has finally peaked, what might this mean for the market at large?

• The foreclosure rate has been projected to peak anywhere from the end of 2010 to early 2012. If delinquencies continue to fall, then foreclosures may peak towards the earlier part of that range.
  
• RealtyTrac reported the slowest rate of increase in 4 years for foreclosures in their April newsletter. However, the number of foreclosures is projected to be near 1.6 million homes in 2010 and again in 2011 before starting to drop off in 2012.
  
• Distress sales are expected to remain more than 30% of the market through 2011, putting continued pressure on home prices (estimates of a 5% decline over the next year or two is anticipated in some of the hardest hit areas).
  

New mortgage modification programs are being implemented every few weeks to try and reduce the number of overall foreclosures, but the impact so far has been limited and some say only delays the inevitable. The rate of recovery in the jobs market will also play a significant role in how quickly delinquency rates, and foreclosures, fall. Those caveats aside, we may now begin to see the worst of the market correction is behind us - but with a long slog ahead before a return to "normal" conditions.

Hidden costs lurk in a stuffy attic

A recent experience during a sale reminded me once again how homeowners unknowingly cost themselves money (and create potential health issues) by overlooking proper ventilation in attics.

I've previously noted how the Cincinnati area is full of homes where the upper level gets significantly warmer than the main level, prompting homeowners to jack up the AC more than necessary. The main culprits is that many homes have 1) insufficient ventilation to clear hot air from the attic, and 2) lack enough insulation to keep the conditioned air from escaping into the attic.

In the most recent encounter with a ventilation problem, the insufficient ventilation was compounded by bathroom fans venting into the attic rather than out of the house. This combination likely created an ideal climate for mold to begin growing on the roof sheathing. Not only does this create a potential health hazard, the normal lifetime of the roof can be compromised. So, in this case, not only does the homeowner have to spend a significant amount for cleaning up the mold situation, but was potentially causing a shortened roof life along with additional expense to heat and cool their home.

This situation is not as unusual as you might think and is not limited to multiple story homes. There are plenty of ranch houses that lack sufficient airflow as well. In many homes, the only ventilation are one or two passive vents or a ridge vent on the rooftop that are supposed to work in tandem with air coming from soffit or gable vents. Unfortunately, the soffit or gable vents have often been covered up (e.g,. when siding was added or boarded up to keep animals out).

If this sounds like a situation that could exist in your home, here's some suggestions:

• Ideally, have a roofing or other building professional check the airflow in your attic to determine if it is sufficient for the home and identify corrective actions.
• Check that vents have not been inadvertently covered by siding or other items.
  
• Add attic fans to help draw hot air out if appropriate. I'm personally fond of solar fans which can be installed without the need to run electric wiring to the attic and don't have any operational expense.
  
• Ensure proper attic insulation and air sealing between the attic and living space. This is critical when using powered ventilation that could pull conditioned air out of the house.

Visit these sites for more information about proper attic ventilation in your home:

• Deer Park Roofing ventilation guide
  
• EnergyStar do-it-yourself guides

February housing a see-saw ride

February sales were full of ups and downs as the market tried to find some balance. Some of the local highlights include:

• Sales down by 17%
• Average price up by 13%
• Lender-controlled sales down by 15%
• Housing supply up by 1.5 months
• Average days on market down 11%
• Pending sales up by 8%

(Click to see local charts.)

If you were looking for the market to gain a more solid footing locally, there wasn't much to go on. The weather was likely a factor in causing some sales slowdown, but there are still enough areas of concern that no one is ready to say that the market has fully stabilized.

One indicator to keep an eye on in March and April will be the inventory levels. After seeing inventory to sales levels work their way down last year, the rate has popped back up significantly (13.4 months in February compared to < 12 at this time last year). While it may be a temporary blip on the radar, a sustained high level will begin pressuring prices once again and - as noted above - the average sales price has been one of the positive statistics we've seen.

On a national level, the news was somewhat similar. Existing sales slipped slightly on a monthly basis, but were 7% higher than Feb. '09. Inventory levels actually increased from January whereas the local inventory rate dropped slightly month over month.

New home sales remained bleak, falling 2.2% to a new record low, but most continue to see this as a good thing as it is the only way to clear out the existing inventory.

One trend that has gotten a bit more news recently: the number of households has actually fallen as more families are living in multi-generational homes and singles are doubling up whether buying or renting. This is no doubt related to the extended recessionary period and high unemployment rates. The question will be how long this trend continues.