Financial life in a big town

The value of U.S. homes fell by 12.1 percent in the second quarter from a year earlier, but the rate of decline shrank for the first time since prices began to fall in 2007, real estate website Zillow.com said on Tuesday.

Even so, stabilization of the hard-hit housing market, which is seen as key to an economic recovery in the United States, is not yet in view, with mounting foreclosures and a high level of “underwater” mortgages still posing threats, Zillow said.

U.S. home values posted their 10th consecutive quarterly decline, falling to $186,500 on the Zillow Home Value Index, according to the second-quarter Zillow Real Estate Market Reports.

The report encompass 161 metropolitan areas and covers value changes in all homes, not just those that have recently sold.

Home values in the first quarter had fallen by 12.4 percent from the prior-year period.

But distress signals tracked by Zillow remain high, suggesting that for most U.S. metropolitan areas housing prices have not yet hit bottom.

“While we are encouraged by the increasing sales in many markets and the overall improvement in the rate of decline of the Zillow Home Value Index, I hesitate to be overly optimistic for the near future,” Stan Humphries, Zillow’s chief economist, said in a statement.

“Foreclosure resales are buoying overall sales numbers, but their low prices are keeping home values down,” he said.

Sales of previously foreclosed homes accounted for 22 percent of all home sales nationally in June, and 29 payday loan online.2 percent of homes sold for less than the original purchase price, the report showed.

“Reports of increasing mortgage defaults signal that foreclosures are likely to increase again and peak in mid-2010,” Humphries said.

Increasing unemployment and high rates of negative equity should spur even more foreclosures, which will add to the already-high level of for-sale inventory that needs to be cleared before values begin to rise, he said.

In the second quarter, 23 percent of all owners of single-family homes with mortgages were “underwater,” meaning the amount owed on their mortgage exceeded the value of the home. That compared to 22 percent in the first quarter, Zillow said.

Negative equity has been one of the biggest banes for many homeowners, making them unable to refinance their loans and preventing some from selling their homes.

Nationally, the number of home sales in June fell 23.7 percent versus a year earlier, but June sales were up 3.8 percent over May. Additionally, in 39 markets home sales increased year-over-year, including Miami-Fort Lauderdale, Los Angeles and Phoenix, the report showed.

FLOOD OF FORECLOSURES LOOM

With the housing market showing strength in some regions, more supply may be in the pipeline. 

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New Zealand house prices rose for the third month in July, signaling the property market is recovering and may help the economy emerge from a recession.

Prices rose 0.7 percent from June and have gained 1.3 percent from a low in April, Quotable Value New Zealand Ltd., the government valuation agency, said in an e-mailed report.

Reserve Bank Governor Alan Bollard last month kept the benchmark interest rate at a record-low 2.5 percent and said he is unlikely to raise borrowing costs until late 2010. Rising consumer confidence, housing demand and immigration are helping New Zealand recover from its worst recession in three decades.

“There are signs that more vendors are putting their properties on the market,” Glenda Whitehead, valuation manager at Wellington-based Quotable Value, said in the report. “This is perhaps in response to reports of shortages of listings and signs that values have stopped declining lowest fee payday loans.”

House prices slumped last year amid a credit crisis and a plunge in consumer confidence. By March, prices were 9.3 percent lower than a year earlier. In July, prices were 5 percent lower than a year earlier, today’s report showed.

New Zealanders are more optimistic about the housing market, with 27 percent of 600 people surveyed in July saying they expect prices will rise, ASB Bank Ltd. said in a report last week. Sixty-four percent said it was a good time to buy a home.

Annual immigration growth accelerated to the highest level in more than two years in June, while house sales rose 40 percent. Consumer confidence rose to an 18-month high in the second quarter, according to a survey by Westpac Banking Corp. and McDermott Miller Ltd.

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A major furniture retailer has been thrown a financial lifeline by its largest investor as the company announced a stunning plunge in sales and profit, saying it is taking immediate steps to turn the business around.

The Brick Group Income Fund, which owns The Brick furniture store chain, said today that Fairfax has agreed to issue a $25 million letter of credit to the Brick’s largest lender.

The Fairfax letter of credit will be to "backstop" additional letters of credit to certain suppliers, the fund said.

The move came as the company reported sales had plunged 27.6 per cent in its latest quarter, due partly to problems keeping inventory in stock.

The company said it lost $146 million in the quarter.

The new financing gives the company "the necessary financial flexibility and capital resources to manage our business as we move into the second half of the year," president and chief executive officer Bill Gregson said in a statement.

Gregson, who joined the firm July 10, said the retailer would move quickly to improve "shortcomings" in four areas: including its in-stock position, marketing and advertising, sales force levels and cost controls.

"What is most encouraging is that in the first half of the year, which was arguably the worst since the Great Depression, and which is also our slowest half of the year, and in a period where we had significant out-of-stocks that negatively impacted our sales, we used only $16 million in cash from operations free online credit report. This can be recaptured in the second half and we expect positive cash from operations for the year even before the positive effects ofthe changes we have already begun to implement," Gregson said.

In the three-month period ending June 30, sales fell 27.6 per cent to $255.7 million.

Sales at stores open more than a month fell a stunning 32.4 per cent, the retailer said, however, that negative trend began to improve in July.

Higher sales of its financial services were more than offset by declines in the retail segment, the company said.

The company lost $146 million, compared to a modest $7.5 million gain in the same period a year earlier.

The Fairfax financing will "significantly increase our borrowing capability" Gregson added, calling it a "vote of confidence" in the company that would help it become cash-flow positive in the second half of the year.

The transaction requires an amendment to the Brick’s agreement with its lender, GE Canada Financial Holding Company.

The Brick recently cut its monthly cash distribution to unit holders in half, to five cents month, to preserve cash.

Amounts drawn on the Fairfax line of credit will be subject to a 15 per cent rate of interest.

The agreement is good for six months and can be extended for another six.

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Citing weak demand for coal used to fuel power plants, Patriot Coal Corp. will shut a mine in southern West Virginia and eliminate 314 jobs.

Employees were notified that they’ll lose their jobs as of Oct. 5, Creve Coeur-based Patriot said in a statement.

The mine being closed produces about 2.5 million tons of coal a year. It is part of a complex that also includes an underground mine.

The recession and cooler weather across parts of the country have led to a decline in electricity demand. In response, coal producers have shut or idled mines and slashed budgets free business cards.

“Our strategy is to concentrate production at lower-cost mining complexes,” Patriot CEO Richard M. Whiting said in a statement. “By ceasing operations at this higher-cost surface mine, Patriot will keep valuable permitted reserves in the ground until the market yields more favorable pricing and margins.”

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** Metropolitan statistical area Source: FDIC

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