Home prices post strongest growth since 2006

By Inman News
Inman News®

Demand for homes grew faster than the inventory of homes for sale in July, helping push the national median price of existing homes up for the fifth month in a row despite a modest increase in sales that fell short of some analysts' expectations.

The National Association of REALTORS® said today that the national median price of existing homes was up 9.4 percent from a year ago in July, to $187,300 -- the strongest annual gain since January 2006. The last time the national median home price posted five consecutive months of annual gains was January to May of 2006.

Sales of existing homes -- resales of single-family homes, townhomes, condominiums and co-ops -- were up 2.3 percent from June to July, to a seasonally adjusted annual rate of 4.47 million. That's a 10.4 percent increase from a year ago.

"Mortgage interest rates have been at record lows this year while rents have been rising at faster rates," said NAR Chief Economist Lawrence Yun in a statement. "Combined, these factors are helping to unleash a pent-up demand."

Yun said sales "could easily be much stronger" -- in a more "normal" range of 5 million to 5.5 million per year -- if not for "abnormal frictions" such as tight lending standards and shrinking inventory.

Although the number of existing homes on the market was up 1.3 percent from June to July, to 2.4 million, that represents a 6.4-month supply of homes at July's faster pace of sales, down from 6.5 months of supply in June. And looking back a year, listing inventories were down 23.8 percent, when there was a 9.3-month supply of existing homes for sale.

Analysts generally consider a six-month supply of existing homes to be a healthy balance of supply and demand. More than that indicates that sellers significantly outnumber buyers, which puts downward pressure on prices.

"The total supply of housing inventory appears to be balanced in historic terms but there are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers," Yun said. "The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers."

Although first-time buyers accounted for 34 percent of purchases in July, up from 32 percent in June, in a normal market they account for 40 percent of purchases, NAR said.

Writing on the blog Calculated Risk, Bill McBride noted that while the annual rate of sales in July was slightly below expectations of 4.5 million, "those focusing on sales of existing homes, looking for a recovery for housing, are looking at the wrong number. For existing-home sales, the key number is inventory -- and the sharp year-over-year decline in inventory is a positive for housing."

Source: National Association of REALTORS® via Calculated Risk blog.

Overseas buyers snatching up pricey homes

Though U.S. home sales to foreign buyers declined slightly in the year through March 2012, a preference for more expensive homes pushed the total sales volume of international sales up by 24 percent, according to an annual report from the National Association of Realtors.

NAR's 2012 Profile of International Home Buying Activity includes results from 1,745 member respondents surveyed in April 2012. The survey covered purchases of U.S. residential real estate by international clients in the 12 months through March 2012. International clients were divided into two groups: foreign buyers with permanent residences outside the U.S., and buyers who are recent immigrants of less than two years or temporary visa holders residing in the U.S. for more than six months.

In the year through March 2012, each group accounted for an equal number of international sales, a total of 206,192, or 4.7 percent of overall home sales in that year. That total is down 2.2 percent from 2011, when international sales made up nearly 4.9 percent of overall sales.

At the same time, however, the median sales price of homes preferred by global buyers rose to $400,000, compared with $315,000 the year before. By contrast, the median sales price for home sales overall -- both international and domestic buyers -- declined 2.6 percent to $212,183 in the 2012 report.

That increase in the median price of foreign purchases resulted in a 24.2 percent rise in total sales dollar volume for international sales, to $82.5 billion, up from $66.4 billion in the year through March 2011. That $66.4 billion figure has been revised downward from the $82 billion originally reported last year as a result of adjusted home sales figures.

In December, NAR "rebenchmarked" its sales statistics going back to 2007, correcting assumptions that had led the trade group to overestimate home sales by 14 percent.

International sales figures for 2010 were also adjusted as a result. Sales volume for international sales in the year through March 2010 was $53.4 billion, NAR told Inman News. That means sales dollar volume in 2011 rose by about as much as in 2012: 24.3 percent.

"Today's advantageous market conditions have drawn more and more foreign buyers to the U.S. in recent years, signaling how desirable and profitable owning property in this country can be," said NAR President Moe Veissi in a statement.

"Low housing prices, a good inventory condition and increased buying power with today's exchange rates help attract international clients."

In the 2012 report, 27 percent of REALTORS® reported working with international clients, about the same as last year. Of those REALTORS®, nearly nine in 10 reported working with five or fewer international clients.

Four states accounted for 51 percent of international purchases in the U.S.: Florida (26 percent), California (11 percent), Arizona and Texas (7 percent each).

Source: NAR 2012 Profile of International Home Buying Activity.

At the local level, a recent Inman News report, "10 Hot Spots for Global Homebuyers," highlighted the 10 most popular areas in the U.S. for foreign buyers based on public records between May 2011 and January 2012. Six were in Florida, and the remaining markets were in Arizona, New York, Hawaii and Nevada.

Five countries accounted for 55 percent of international transactions in the 2012 report: Canada (24 percent of international sales), China (11 percent), Mexico (8 percent), India and the United Kingdom (6 percent each).

Source: NAR 2012 Profile of International Home Buying Activity. 

"Proximity to the home country, the presence of relatives, friends and associates, the convenience of air transportation, and climate and location appear to be important considerations to prospective buyers," the report said.

Just over half of respondents with international clients, 55 percent, reported their global buyers were referred from friends and previous clients as well as other foreign and domestic sources. About a fifth obtained their international clients via websites and online listings.

Fifty-one percent of international clients said the most important factor influencing their purchase was their view that U.S. real estate was a "profitable" or "secure" investment. Forty percent said "desirable location" influenced their purchase the most.

"Foreign buyers recognize that owning a home in the U.S. has many benefits, both financial and social," Veissi said.

"Many purchase property as an investment, vacation home, or to diversify their portfolio. In addition, many recent immigrants view homeownership as an important accomplishment. They believe that being a homeowner is one of many ways they become established in the U.S. and attain stability, security and a sense of community."

Just under half, 45 percent, of international buyers purchased homes for $250,000 or less. That's down from 54 percent in 2011 and seems to indicate a trend toward higher price ranges. Percentage-wise, international sales of homes valued at more than $1 million jumped the most, to 10 percent, from 5 percent in 2011.

Source: NAR 2012 Profile of International Home Buying Activity. 

"The international client is typically wealthier than the domestic buyer and is looking for a property in a specialized niche, for example, a larger property suitable for multigenerational living, or a property that establishes the individual's presence and standing in the community," NAR said.

Nearly a third of REALTORS® with international clients reported those clients did not complete a sale. The reason cited by nearly half of respondents was the cost, taxes and insurance related to purchasing a U.S. property. Nearly four in 10 said their clients "could not find a house." Obtaining financing was a problem in just over a quarter of cases. The majority of foreign buyers, 62 percent, paid in cash, unchanged from 2011.

4 ways distressed homeowners can start fresh

By Tara-Nicholle Nelson
Inman News®

Clearly, thankfully, the market is looking up. Way up, actually.

In many markets, tales of multiple offers and a dearth of homes vis-à-vis the numbers of buyers who want them are becoming commonplace. Now, many analysts point to the banks' intentional decision to keep many foreclosures off the market as artificially driving this demand.

But if you're a seller on today's market, the dynamics underlying the demand are much less important than the fact that your chances of getting your home sold at a good price are better than they have been in a long, long time.

The news for buyers is not all bad, either: For the first time in a long while, buyers are not faced with the double-edged sword prospect of buying into a declining market; appraisals are coming in at the agreed-upon purchase price; and mortgage rates are still uber-low (fingers-crossed).

But with all this fresh market optimism, there is an ugly elephant in our collective room, which is that many, many homeowners and former homeowners are still dealing with the lingering remnants of the subprime market mess and the real estate recession. Many are still upside down, still struggling to make the too-high payments on loans left over from the last peak of the market or trying to recover financially and otherwise from a recession-era foreclosure or short sale.

For those folks -- a huge, if silent, number -- here are four routes to a fresh slate:

1. Sell. Fact is, the vast majority of underwater homeowners who could stay put did. Walking away was very much the exception and not the rule. The result? There are hundreds of thousands of homeowners out there with homes that lost value during the recession who are still holding on to subprime loans that have long since reset. While these loans' rates tend to be low, if you had a short-term, interest-only, adjustable-rate mortgage in 2005 or 2006, chances are good that your payment actually increased steeply when you were required to begin paying the principal.

For sellers who have scrimped and saved, taken on second jobs, rented out rooms or allowed important expenses like property taxes or other bills to go unpaid in order to make a too-high mortgage payment, the current market dynamics may present a good opportunity to divest of an unsustainable mortgage obligation by selling or even short-selling the place.

Buyers are out en masse and prices are on the rise, meaning that you might not be as upside down as you were last year or the year before. Banks are moving short sales through much more quickly and efficiently than in years' past (though never as quickly or efficiently as we'd hope).

The income tax exemption on debt forgiven through a short sale is still valid through the end of this year (an extension is probable, but by no means guaranteed).

If you know or believe that your current home is simply too expensive for you to afford with financial integrity, and there is no end in sight, talk with a local agent and a tax professional about how you might be able to get a clean slate by selling the home.

2. Settle old seconds and HELOCs. If you lost a home to foreclosure in a nonrecourse state and you had a second mortgage or home equity line of credit, it's entirely possible that your second is still a lingering debt. (Your first mortgage can foreclose and repossess the home, leaving the second mortgagor holding nothing but paper.) Many second-mortgage holders are not actively collecting on these loans, but they simply stay on your credit reports and eventually rear their ugly heads when the time comes for you to try to qualify for a car or a mortgage.

Some recommend bankruptcy as an expedient way of extinguishing these loans for little or nothing, but the blemish bankruptcy leaves on your credit may defeat the purpose of getting rid of the old loan in the first place. I've been talking with some of these banks and servicers, and many of the banks will settle these unsecured second mortgages or home equity lines of credit for as low as 10 or 20 percent of the outstanding balance.

Contact the servicer of your former home's second or HELOC to discuss a settlement. Again, the taxes you would normally pay on the forgiven debt will be exempt through the end of this year, for most borrowers, so if you can settle this soon, it's in your best interest to do so. If you don't know what bank or servicer even manages this loan (many are sold and resold), check your credit report and seeing who is reporting the debt, if anyone, or take out your old documents with the loan number and researching the trail starting with your original servicer.

3. Check your credit reports and dispute expired derogatories. It might be hard to believe, but the first foreclosures from the last real estate recession began happening circa 2005-2006, so they are set to be timing off of credit reports right about now. If you had an early-recession foreclosure or short sale, check your credit reports now to ensure that they are being reported correctly, or not at all, if the seven-year expiration time frame has run. In fact, even if your short sale or foreclosure was not that early, it may make sense to pull your credit reports and understand how things are being reported and the impact these items are having on your credit score. You might be surprised, in one direction or the other.

4. Refinance and lock in low rates. If you lost value in your home during the recession, it might have been nearly impossible to refinance it to take advantage of lower rates and bring your payment down. With sales prices on the upswing and rates still low, though, you may have a new opportunity to refinance a "bad" loan and lock it in a today's uber-low rates.

How long will you be underwater?

By Jack Guttentag
Inman News®

About 16 million homeowners owe more on their mortgage than their homes are worth, which means they are "underwater." So long as that condition continues, they have no equity that can be used to help finance the purchase of another house.

On the contrary, they can't sell the house without digging into their pockets to pay the difference between what they owe and what they can realize from the sale net of expenses.

But time heals most wounds, and negative equity is no exception. The principal component of the monthly mortgage payment reduces the loan balance by the same amount.

Refinancing into a mortgage carrying a lower interest rate reduces the interest portion of the monthly mortgage payment, thereby increasing the principal component and the rate at which the balance is paid down.

Although underwater borrowers generally can't qualify for a refinance, those fortunate enough to have their mortgages held by Fannie Mae or Freddie Mac comprise an important exception. The government's Home Affordable Refinance Program (HARP) permits negative equity, though borrowers must be in good standing to be eligible.

The other component of negative equity, depressed home prices, also appears to have turned the corner. Prices have begun to rise again in some areas in which the houses listed on the market have fallen short of demand from purchasers. It is plausible that within the year home prices in most areas will again be on the rise.

It is now time for underwater borrowers to start planning to get their heads above water. To help in that process, Chuck Freedenberg and I have designed two calculators designated 2d and 2e on my website. The first shows the borrower's equity in the property month by month for any combination of the various factors that affect changes in equity. These include the interest rate, property appreciation rate, and extra payments. Some examples are shown in the table.

Changes in Negative Equity with Initial Loan Balance of $200,000, Property Value of $150,000 and Monthly Payment of $1,300

Factors Affecting Change in Equity			Month When Equity Reaches:
Interest Rate	Appreciation Rate	Extra Payments	0	10%	20%
6%	0	0	122	148	170
6%	1%	0	98	123	147
6%	1%	$50	89	112	134
6%	2%	$50	74	95	116
6%	2%	$100	68	88	108
4.5%	0	0	79	99	117
4.5%	1%	0	67	86	104
4.5%	1%	$50	63	80	97
4.5%	2%	$50	55	71	87
4.5%	2%	$100	52	67	83

The table shows, for different combinations of interest rate, appreciation rate and extra payments, when the borrower will no longer be underwater, which is the month when equity hits zero. The table also shows how long it will take before equity hits 10 percent, at which point the borrower who is otherwise qualified will be able to refinance, and 20 percent where a refinance won't require mortgage insurance.

Borrowers may want to raise their targets to cover the expenses of whatever action they plan. If the goal is to sell the house, for example, they will need positive equity of 5-7 percent to cover sales costs. This is easy to find with the calculator.

The second calculator is designed for underwater borrowers who want to know how much extra they have to pay each month to reach a target equity level within a specified period. For example, the borrower paying 4.5 percent in the example above wants 10 percent equity in five years and believes his house will appreciate at a rate of 1 percent a year. The calculator tells him he must pay an additional $315.50 every month for 60 months to reach his objective. If his house does not appreciate, he has to pay $418.05.

While the calculator tells you what you must do to reach your objective, it doesn't tell you how to develop the commitment and determination to see it through. I am working on that.

Mortgage rates head deeper into record territory

By Inman News
Inman News®

Mortgage rates headed deeper into record territory this week as rumblings from Europe continue to make the guaranteed bonds that fund most mortgage loans look like a safe bet to investors.

Fears that the European debt crisis will derail the global economic recovery may also be weighing on would-be homebuyers, as demand for purchase loans slipped last week, with applications back down to levels seen a year ago.

Economists at Fannie Mae said in a monthly outlook report released today that they continue to see "a number of threats that could dampen growth" this year, including "substantial risk that investors will lose confidence in the ability of Europe to solve its problems over the intermediate term."

Recent elections in Greece and France indicated "waning public support for austerity, igniting fears that the sovereign debt crisis could develop into a more significant credit crisis that could spill over to countries around the globe," Fannie Mae economists Doug Duncan and Orawin T. Velz said.

With the U.S. again approaching its debt ceiling, there's also uncertainty over whether the lawmakers here will reach a long-term budget agreement and forestall more than $1 trillion in automatic spending cuts set to begin taking effect at the end of this year.

With Republicans demanding spending cuts and Democrats angling for tax increases, the debate over raising the debt ceiling is "likely to weigh heavily on financial markets and consumer confidence, potentially dampening growth late in the year," Duncan and Velz said.

Several members of the Federal Reserve committee that determines the central bank's monetary policy are worried that uncertainty over the budget could lead businesses to defer hiring and investment, according tominutes of the committee's last meeting in April.

Although housing sales appeared to be losing steam at the end of the first quarter, Fannie Mae economists are sticking to their projections that total home sales will increase by a little more than 7 percent this year, and that housing starts will jump nearly 20 percent.

Modest economic growth, and uncertainty about the European debt crisis and the U.S. budget talks, should at least serve to keep interest rates low, Fannie Mae economists said. They expect rates on 30-year fixed-rate mortgages to rise slowly back toward 4 percent by the end of the year.

Freddie Mac's weekly Primary Mortgage Market Survey showed rates on 30-year fixed-rate mortgages averaged 3.79 percent with an average 0.7 point for the week ending May 17, down from 3.83 percent last week and 4.61 percent a year ago. That's a new low in Freddie Mac records dating to 1971.

For 15-year fixed-rate loans, rates averaged 3.04 percent with an average 0.7 point, down from 3.05 percent last week and 3.8 percent a year ago. That's a new low in records dating to 1991.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.83 percent with an average 0.6 point, up from 2.81 percent last week but down from 3.48 percent a year ago. Rates on five-year ARMs hit an all-time low in records dating to 2005 of 2.78 percent during the week ending April 19.

For one-year Treasury-indexed ARM loans, rates averaged 2.78 percent with an average 0.5 point, up from 2.73 percent last week but down from 3.15 percent a year ago. Rates on one-year ARMs hit an all-time low in records dating to 1984 of 2.72 percent during the week ending March 1.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase mortgages fell a seasonally adjusted 2.4 percent during the week ending May 11 compared to the week before.

Demand for purchase mortgages was down 1 percent from a year ago.

There was a 13 percent increase in applications to refinance from the week before, with 28 percent of applicants seeking loans through the Home Affordable Refinancing Program (HARP), which is targeted at underwater borrowers.

In their monthly economic outlook, Fannie Mae economists said the latest numbers show "some loss of momentum" in housing activity late in the first quarter.

After a "robust gain" in January, existing-home sales fell in March for the second consecutive month. Although first-quarter existing-home sales were much stronger than a year ago, they remained below the pace seen during the first three months of 2010, when federal homebuyer tax credits were still in place.

"Housing will continue to face many challenges," Duncan and Velz said. While the Census Bureau's latest housing vacancy survey suggests that the inventory of homes available for sale or rent is shrinking, it also shows a continued rise in the number of vacant homes held off the market.

"Combined with the still elevated number of seriously delinquent loans, the current environment indicates that the shadow inventory will remain an issue for the housing recovery in coming years," Fannie Mae economists said.

"The overhang of the shadow inventory will continue to weigh on home prices."

Although low mortgage rates are "one positive for the housing market," lending standards for mortgages remain tight, they noted.

Fannie Mae's latest survey of consumer's views of housing market conditions, conducted in April, showed some improvement in sentiment among buyers and sellers.

The survey found that on average, Americans expected home prices to increase by 1.3 percent over the next year, up 0.4 percentage points from March and the highest value recorded in the survey's two-year history.

Although 71 percent of those surveyed said it's a good time to buy, only 15 percent thought it was a good time to sell. And 32 percent of those surveyed said they would rent if they were going to move, up 2 percent from March and the highest level since November 2011.

New Freddie Mac CEO takes pay cut

Freddie Mac's new chief executive officer, former JPMorgan Chase & Co. executive Donald H. Layton, will make just a fraction of what his predecessor did.

Layton -- who retired from JPMorgan Chase in 2004 as head of the company's financial services unit, which included the fourth-largest mortgage firm in the U.S. -- has resigned his position on the board of American International Group (AIG) to take over at Freddie Mac, where he will earn a base salary of $600,000 a year, the mortgage giant said in a regulatory filing.

According to the Washington Post, Layton's predecessor, Charles E. "Ed" Haldeman Jr., earned $3.8 million in compensation in 2011. Freddie Mac's CEO when the company was placed under conservatorship, Richard F. Syron, was slated to earn $18.3 million in compensation in 2007, the Post reported.

Karen Shaw Petrou, managing partner of Federal Financial Analytics, told the Post that pay limits imposed by lawmakers make it difficult to find executives to head up Freddie Mac and its sister company, Fannie Mae.

"You have to be really public-spirited to do it," Petrou told the Post.

Layton continues to receive deferred compensation from JPMorgan Chase, which services more than 1 million mortgages for Freddie Mac and has underwritten billions in company debt.

In order to avoid potential conflicts of interest, Layton "has agreed to recuse himself in specified circumstances from acting upon matters directly relating to JPMorgan Chase that may be considered by Freddie Mac's board of directors or presented to him in his capacity as Freddie Mac's chief executive officer," Freddie Mac said.

JPMorgan Chase is the second-largest servicer of Freddie Mac loans, collecting payments or otherwise administering 1.28 million mortgages with an aggregate unpaid principal balance of more than $203 billion.

In addition, JPMorgan Chase sold approximately $40.2 billion in single-family loans to Freddie Mac in 2011 and $7.92 billion in single-family loans to Freddie Mac in the first quarter of 2012.

JPMorgan Chase also has $1.5 billion of interest rate swaps with Freddie Mac, and since January 2011 has served as the underwriter for $11.6 billion of Freddie Mac's debt securities and $35.3 billion of Freddie Mac's mortgage-related securities.

NRT taps Gorman to head strategic operations

NRT LLC, the nation's largest real estate brokerage company, has created a new position -- senior vice president of strategic operations -- and named an executive who oversaw merger and acquisition activities for parent company Realogy Corp. to fill it.

M. Ryan Gorman "was the driving force" behind Realogy's Title Resource Group's acquisition of Texas American Title Company, Cartus' acquisition of Primacy Relocation, and NRT's acquisition of Coldwell Banker Preferred in Philadelphia, the company said in announcing his new role. Gorman also contributed "significant strategy" work for Realogy brands and franchisees.

 
M. Ryan Gorman

Gorman "has repeatedly shown exemplary business acumen and strategic vision both in his efforts to grow Realogy's business and in the numerous successful mergers and acquisitions he has executed over the past few years," said Realogy Corp. CEO Richard A. Smith in a statement.

In his new role, Gorman will lead NRT's overall strategic growth and competitive analysis functions, to ensure the brokerage "is positioned to take full advantage of the recovering housing market," NRT said.

Gorman will also have operational responsibility for growing NRT's commercial, insurance, real estate owned (REO), property management and rental businesses, as well as overseeing its mortgage, title and home warranty services partnerships.

Before joining Realogy in 2004, Gorman held advisory and principal investment roles with PricewaterhouseCoopers, Credit Suisse and The Blackstone Group. He graduated with honors from the Wharton School of the University of Pennsylvania.

Pimco Housing Bear Kiesel Says It’s Time to Start Buying

By John Gittelsohn - May 4, 2012

Mark Kiesel, the Pacific Investment Management Co. managing director who sold his home in 2006 when he deemed the market a bubble, says it’s time to buy.

“I was one of the most negative on housing,” Kiesel said in a telephone interview. “I finally came to the conclusion housing is looking pretty decent.”

Enlarge image

Rising rents make housing an attractive purchase for investors compared with the low yields of such alternatives as U.S. Treasury bonds. Photographer: Scott Eells/Bloomberg

Kiesel said he bought a house in Newport Beach, California, where Pimco is based. Today he published a credit market note titled “Back In” on the firm’s website in which he writes, “I’m not sure U.S. housing prices have bottomed -- only time will tell -- but there are many more positives today than there were six years ago when I sold my house.”

Home prices that have fallen 35 percent from their mid-2006 peak and mortgage rates of less than 4 percent are helping make it a good time to buy, said Kiesel, who is global head of the corporate bond portfolio management group at Pimco. Other signs the housing market is turning around include foreclosure filings dropping to levels last seen in 2007 and sales of new and existing homes that have begun to increase as rising rents boost the relative affordability of purchasing, he said.

“For those of you renting or on the sidelines, I recommend you at least consider getting ‘back in’ and buying a house,” he wrote in the note. “The future is hard to predict, but U.S. housing is healing and is probably close to a bottom.”

‘More Light’

Barclays Plc (BARC) analysts also said today that a housing recovery is emerging. The industry “will contribute modestly to U.S. economic growth in the coming quarters,” Vincent Foley, Michael Gapen and Cedric Morris wrote in a note titled “More Light, Less Tunnel.”

Economists including Mark Zandi of Moody’s Analytics Inc., Bank of America Corp.’s Michelle Meyer, CoreLogic Inc.’s Mark Fleming and Chris Rupkey of Bank of Tokyo-Mitsubishi UFJ said last month that housing prices are close to a trough.

While the housing market is showing signs of recovery, many people continue to struggle. Mortgage modifications have been started for more than 5.9 million U.S. homeowners from April 2009 through the first quarter, including 19,940 who began plans in March with President Barack Obama’s Home Affordable Modification Program, the U.S. Department of Housing and Urban Development reported today.

Pimco, which oversees the world’s largest mutual fund, had $1.77 trillion in assets under management as of March 31. The company’s Total Return Fund, which had a record $258.7 billion as of April 30, increased its allocation in mortgages to 53 percent, a 5 percentage point gain, during the first quarter, according to the company’s website.

‘Had No Idea’

Kiesel declined to disclose details about his new home or how much he paid, except to say it’s in Newport Beach, a coastal community about 44 miles (70 kilometers) south of Los Angeles. The purchase price of his new home, which he’s moving into next weekend, was about one-third below what he would have paid for it at the top of the market -- about the time he sold his last property in May 2006.

“I had no idea that would end up being the peak,” he said in the telephone interview. “No one knew back then. It was basically luck.”

Kiesel sold his last home after concluding that excess construction by homebuilders and easy lending standards set the stage for a crash.

“Housing is the next Nasdaq bubble,” he said in a June 2006 interview with Bloomberg, a month before U.S. home prices reached their peak, according to the S&P/Case-Shiller index of values in 20 U.S. cities. “It’s not just houses that will be for sale. You’re going to see financial assets for sale over time, and ultimately corporate bonds.”

As recently as December, Kiesel said he would hold off buying because he expected prices to keep falling through 2013.

Unemployment Declines

The U.S. unemployment rate in April was 8.1 percent, down from 8.5 percent in December. Lenders have begun to loosen the reins on credit as bank balance sheets have improved, a trend that will boost investment throughout the economy, Kiesel said.

The U.S. manufacturing, technology, chemical, automotive and energy industries have recovered to the point that they’re driving housing demand in states including Texas and North Dakota, Kiesel said. In such cities as Miami and Phoenix, home prices have fallen so much that foreign buyers seeking bargains have bought enough property to start a price recovery, he said.

Phoenix’s median price rose 13 percent in March from a year earlier amid a shrinking supply of foreclosures and other homes priced at less than $100,000, DataQuick, a San Diego-based real estate research company, reported today.

Increase in Rent

In Kiesel’s case, buying became more attractive after the owner of the residence he was leasing wanted to raise his rent 10 percent, he said.

“I remember balking at that,” he said. “Basically, landlords finally have pricing power.”

Rising rents make housing an attractive purchase for investors compared with the low yields of such alternatives as U.S. Treasury bonds, Kiesel said. Housing “is the ultimate inflation hedge if you buy cheap,” he said.

The expectation that values will rise has reduced the inventory of homes listed for sale as owners hold off to sell at higher prices later, Kiesel said. That made it hard to find a property worth buying, he said.

“All the good stuff is taken,” he said. “What finally brought me back was finally finding a decent property.”