Ethical Homes

The latest news on real estate in the metro DC area.

Market still slowing

• The NAR reports that national sales of existing homes were down for October, as signs continue to accumulate that the recent housing boom has reached its peak.
• The AP plays up the fact that this decline was larger than what had been expected for the month.
• Money/CNN notes that the drop in question is measured against September, which was the second strongest month for real estate sales in history, and that even the larger-than-expected decline resulted in numbers that would have been a record-breaking month for sales as recently as March 2005.
• Sandra Fleishman at the Washington Post points out that the apartment sales market slowed down nationally more than the market for single-family homes did—a development that my own analysis confirms holds true in the local market as well—but also notes that the local apartment sales market has nowhere near the worrisome levels of speculative activity that markets like south Florida or Las Vegas have experienced.
• Interestingly, the US Census Bureau also reported this week that sales of new homes actually rose in October (PDF), but most economists expect those numbers to be revised downwards significantly.
• Although the NAHB finds the October new sales data to be “bizarre” and not in line with what their own statistics show, builders in general do seem fairly sanguine about the slowdown, expecting as most economists do that the market will soon return to moderate, more sustainable growth.

Rates and Loans

• Rates continue to rise on loans; currently, I’m seeing rates at local lenders of about 6.250% for a conforming 30-year loan and about 5.875% for a conforming 3/1 ARM.
• Perhaps responding to concerns that continuing rate hikes could turn that market stabilization into an actual crash, the Fed issues a typically-dense statement that seems to indicate that interest rate increases won’t continue at the same pace as they have occurred recently.
• Fannie Mae and Freddie Mac raise their limits for 2006 on the size of conforming loans, which will also help to reduce some of the downward pressure on prices.
• The WSJ notes a decrease in the popularity of option ARMs, and has some good examples of the dangers that arise unwise use of such loans. For buyers who expect their incomes to increase significantly in the near future and investors looking to manage cashflow, though, interest-only loans and option ARMs continue to be a useful tool.

Regulatory and Legal Update

• A few months ago, I commented on a quarter-million dollar settlement against a Coldwell Banker affiliate for illegally steering consumers to affiliated vendors; Kenneth Harney notes that that action was just one of an unprecedented number of actions taken against unethical real estate companies by HUD and FDIC in 2005. Kudos to the feds for keeping a close watch on one of the seamier (and often unseen) sides of the industry.