The median price of a new home plunged in September by the largest amount in more than 35 years, even as the pace of sales rebounded for a second month.

The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005. It was the lowest median price for a new home since September 2004 and the sharpest year-over-year decline since December 1970. The weakness in new home prices was even sharper than a 2.5 percent fall in the price of existing homes last month, which had been the biggest drop on record.

The price decline for new homes came while the sales pace picked up, rising by 5.3 percent to a seasonally adjusted annual rate 1.075 million homes. It marked the second consecutive increase in sales following three months of declines.

The declines in prices served to underscore the severity of the correction in the once-booming housing market, which had seen sales of both new and existing homes soar to record levels for five consecutive years, propelled by the lowest mortgage rates in more than four decades.

This year, with mortgage rates rising through midsummer, sales have cooled considerably, with housing expected to trim more than a percentage point from overall growth in the last half of the year.

The debate is whether the slowdown will be enough to push the country into an outright recession. The Federal Reserve, recognizing the weakness in housing, halted a two-year string of interest rate increases in August and left rates unchanged for a third straight meeting on Wednesday.

The Fed, however, gave no indication that it planned to start cutting rates because of the weakness in housing, saying it was still concerned that inflation remained too high.

The 5.3 percent rise in new home sales in September followed a 3.8 percent rise in August and was the biggest one-month gain since an 8 percent increase in March. However, sales had fallen for three straight months from May through July.

The rise in sales last month was led by a 23.9 percent jump in the West. Sales were also up 6.9 percent in the South. However, sales fell by 34.5 percent in the Northeast and were down 6.3 percent in the Midwest.

In other economic news, the government said that orders to U.S. factories for big-ticket manufactured goods, powered by a huge jump in demand for commercial jetliners, soared in September by the largest amount in more than six years.

The Commerce Department reported that orders for durable goods rose by 7.8 percent last month to $226.7 billion. The increase followed two consecutive months of declines and was the biggest gain since June 2000.

The improvement was more than triple the 2.3 percent gain that Wall Street had been expecting, but virtually all of the strength came from a giant 183.2 percent increase in orders for commercial aircraft. Outside of transportation, orders were up a far weaker 0.1 percent.

In a third report, the Labor Department said the number of newly laid off workers filing claims for unemployment benefits rose by 8,000 last week to a seasonally adjusted 308,000. That increase was in line with expectations.

The September 7.8 percent increase in factory orders followed declines of 0.1 percent in August and 2.8 percent in July. Despite last month’s jump, analysts believe that the factory sector is slowing under the impact of a weakening overall economy.

The economy began the year with growth at a sizzling pace of 5.6 percent at an annual rate but saw that slow to 2.6 percent in the spring and analysts believe overall economic growth in the just-completed July-September quarter slowed even further to around 2 percent or less. The government will report the actual third quarter figure on Friday.

For September, transportation orders rose by 27.6 percent as the big jump in demand for commercial aircraft offset a 6.1 percent drop in orders to automakers, who have been struggling recently under the impact of weak sales of trucks and sport utility vehicles.

The rise in commercial airplane orders had been expected, given that Boeing Co. booked new orders for 175 planes, up from 30 in the prior month.

http://www.TheHomeBuyingCenter.com

California Home-Loan Defaults Rise to 4 1/2-Year High By Daniel Taub

Oct. 18 (Bloomberg) — California home-loan defaults rose to their highest level in four and a half years in the third quarter as lower sales of houses and condominiums and slowing price gains made it harder for homeowners to sell and pay off mortgages.

Banks and other lenders sent 26,705 default notices to California homeowners in the third quarter, more than double the 12,606 sent a year earlier and up 28.3 percent from the second quarter, La Jolla, California-based DataQuick Information Systems said today in a statement.

Homeowners are having a harder time getting out of debt by selling, DataQuick said. Home prices in Southern California last month had their smallest year-over-year increase in almost a decade, and San Francisco Bay Area prices dropped for the first time in four and a half years.

“Price appreciation is evaporating,'’ Andrew LePage, a DataQuick analyst, said in an interview. “That gives people fewer options to get out of a pinch.'’

California sales mirror a national trend. U.S. new-house prices will fall this year for the first time since 1991 and existing homes will have the smallest gain ever, the National Association of Realtors said last week.

In California, more default notices were sent in the third quarter than any time since the first quarter of 2002, when 30,225 default notices were sent, the research company said. The number of default notices sent to homeowners has averaged 32,653 on a quarterly basis since DataQuick began tracking the data in 1992.

Notices of defaults are the first step in foreclosing on a home. Most homeowners stop the foreclosure process by bringing their mortgage payments current, refinancing or selling their homes to pay off what they owe.

Losing Homes

Still, about 19 percent of homeowners who were in default earlier this year lost their homes to foreclosure in the third quarter. That’s up from 6 percent a year earlier, DataQuick said. The year-ago number was lower than normal because rising prices and strong demand for homes at the time allowed owners to sell more easily, LePage said. Since 1992, when DataQuick began tracking numbers, the monthly median was 21.8 percent.

At the NeighborWorks HomeOwnership Center in Sacramento, California, the not-for-profit group’s 12 workers are spending an increasing amount of time helping homeowners whose loans are in default, rather than focusing on the agency’s goal of counseling people before they buy homes, Executive Director Pam Canada said.

“Certainly, over the last year, we’ve had an increase in the number of calls and requests for help from people who don’t see the light at the end of the tunnel,'’ Canada said. Such requests have risen 50 percent in the past year, she said. When prices were rising, “the home was always the place to go for financial salvation. They could always sell and get out from under their loan. That’s not happening anymore.'’

Newer Loans

The median age of the home loans that went into default in the third quarter was 14 months, according to DataQuick. More than half the loans were originated in 2005. Newer loans are more likely to go into default because smaller price rises have prevented owners from building up equity in their homes, making it harder for them to take out additional loans to bring payments current, DataQuick’s LePage said.

On primary mortgages, homeowners were five months behind on their payments on a median basis when their lenders started the default process. Borrowers owed a median $9,829 on a median $306,000 mortgage.

On a loan-by-loan basis, mortgages were most likely to go into default in Fresno, Merced and Riverside counties, and least likely to go into default in Marin, Napa and San Francisco counties in the third quarter. The percentage of mortgages in default historically has been higher in lower-cost inland areas than in pricier coastal markets, DataQuick said.

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SACRAMENTO, Calif. — Local foreclosure rates are skyrocketing as the real estate market continues to cool, and hundreds of Northern California families are suddenly seeing their homes going on the auction block. 

At the Sacramento County Courthouse, it used to be that foreclosure auctions happened once a week. Now, several times a day homeowners are seeing their American dream turn into a nightmare. 

In Sacramento County during the second quarter of this year, the number of homes going into foreclosure stood at 1,866. That compares to 857 forclosures for the same time last year — an increase of 118 percent.

“People cash out all the equity in their homes and perhaps they don’t change their spending habits. And they consolidate all their bills and credit cards into their homes,” foreclosure auctioneer Kelly Palmer said. 

Elsewhere, foreclosures are up 74 percent in Stanislaus County, 87 percent in San Joaquin County and 116 percent in Placer County. 

Alexis McGee of the investor services agency Foreclosures.com said many homeowners who find themselves falling behind on their mortgage payments should not try to refinance, but rather simply try to sell. 

“There’s a total time line from the beginning of the notice of default to the actual day that the house goes back to the bank of about four months. That four months gets eaten up rather quickly if you spend all that time shopping for a loan,” McGee said. 

Mortgage experts said former owners are often in denial until someone shows up ordering them to move. 

So, does this mean the housing bubble has burst? 

McGee still describes it as a leaking bubble but said her description will change if a year from now foreclosure rates have doubled again.

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