Mortgage Rates Only Slightly Lower After Weak Employment Data

Feb 7 2014, 3:10PM

Mortgage rates were finally lower today, but the drop was modest given that it was the product of a weak jobs report–typically a bigger market mover.  Additionally, when viewed against the past three straight days of weakness, today only got us back to Wednesday’s levels.    The most prevalently quoted conforming 30yr fixed rate for the very best borrower scenarios (best-execution) remains at 4.375% for the most part though 4.25% and 4.5% are both fairly close.  When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.04% today.

Throughout January, rates were moving lower with purpose.  This continued into early February to a point where we were left to consider whether this was a market-based correction that had run its course or potentially just the first phase in a bigger move lower.

Any time rates are approaching those sorts of “crossroads levels” ahead of a report like the Employment Situation, we can infer some indecision on the part of financial markets as well as the hope that the important report will provide guidance.  In that regard this week has ended in somewhat of a frustrating fashion.

While the numbers were weaker, and while this did help rates improve a bit today, the movement didn’t do anything to clear up the indecision.  In other words, rates had been approaching a fork in the road and the jobs report did not clearly indicate which path has been chosen.  When that happens, we move on to the next major potential dose of guidance.  Fortunately, we don’t have to wait long this time as the most likely event will be Janet Yellen’s first congressional testimony next week.  In terms of lock/float risk, ideally, we’d want to be seeing a stronger response to weak jobs data in order to perceive a higher probability that rates continue lower unassisted.


Loan Originator Perspectives




“Lender pricing isn’t much better this morning despite the weak employment data and gains in MBS. With the employment data behind us now I think floating is the way to go. The employment data has been weakening as has some other data of late. Weaker economic data is good for mortgage rates.” -Victor Burek, Open Mortgage

“Yesterday I said lock, and while there has been a small “token” of improvement, I think that was and still is the best piece of advice. We appear to be at the low end of the current range and we’ll need significant data or equity market sell off to further our cause. On the other hand, we could start seeing a tick upward in rates, simply as a course of action with no data. Lock ‘em up is still the best advice.” -Brent Borcherding, Capital M Lending

“This is proof that the market is rigged. Maybe not, but I guess it will take 3 bad jobs reports in row for the reality to get traded. Weather is once again the excuse for low numbers. If this is the result of a bad number, then we would have gotten killed had numbers been on target and Dec revised higher. Lock while we’re still near 3 month lows as any excuse for stocks to rebound is on the table and that hurts bonds.” -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434

“January’s NFP report disappointed today, which helped us recoup the past several days’ losses. Pricing improved by around .25% for most loans. Not anticipating further huge gains soon, looks like rates are settling into the current range.” -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

“As much of the advice given over the week leading up to todays always important NFP report, many of us felt it would not be as important with the weather as a viable reason to point a finger if it was a poor number. We got just the poor number that usually leads to a large rally. The number helped cut into the losses from Wednesday or Thursday, but it still wasn’t enough for a big rally or a move lower in best execution rates. I still recommend locking at application moving forward as it feels it will take something very big to push lower lows in rates and we are already at or near the lowest rates seen in months.” -Steve Chizmadia, Mortgage Consultant MLO#244902, American Capital Home Loans


Today’s Best-Execution Rates

  • 30YR FIXED - 4.25% -4.375%
  • FHA/VA – 3.75%
  • 15 YEAR FIXED -  3.25-3.375%
  • 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

  • The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
  • Tapering ultimately happened on December 18th, 2013.  Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn’t make for another immediate spike higher.
  • Rates moved gradually higher into the end of 2013 and began to move gradually lower into the beginning of 2014, helped along by a weak employment report on January 10th.  This report raised doubts as to whether or not the Fed would continue tapering asset purchases at the same pace, but it was ultimately a flare up in emerging markets and weakness in stocks that fueled bond-market positivity and allowed rates to hit 2014 lows on the same afternoon the Fed reduced asset purchases by another $10bln.
  • With that in mind, further interest rate resilience in the face of tapering only looks limited by ability of emerging markets and equities to continue being weak.
  • (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

Quantum Properties Accepts Bitcoin For Condo Deposits

The Huffington Post B.C.  |  Posted: 01/17/2014 11:03 pm EST  |  Updated: 01/21/2014 8:10 pm EST

quantum properties bitcoin

A Fraser Valley-based developer is tapping into digital currency to provide more options for buyers.

Quantum Properties in Abbotsford is B.C.’s first real estate developer to accept Bitcoin for deposits on its condos, Business in Vancouver reported.

And while no buyers have used the currency to purchase a home, the company wants to be innovative, CEO Diane Delves told the newspaper.

“I like to keep up with current trends,” she said. “Why not get in on it?”

Bitcoin is a form of Internet money that allows peer-to-peer purchases online. It appeals to consumers because it removes a middleman such as a central bank or credit card company, and it permits anonymity in online payments.

Vancouver became the first city to host a Bitcoin ATM after a kiosk was installed at a downtown Waves Coffee in October 2013. Quantum Properties’ Vancouver office islocated next door, Global News reported.

While popular, the currency’s value has shown some vulnerability. The price of Bitcoin crashed in early December after China’s central bank told financial institutions that the currency was not real.

Delves, however, doesn’t seem concerned by any sudden drops in value.

“We’re not going to expose ourselves to undue risk, so we will probably convert a lot of the Bitcoin into Canadian dollars,” she told The Abbotsford News.

Quantum Properties’ projects include Mahogany at Mill Lake, a luxury high-rise in Abbotsford, where 78 units are for sale; Orchid Riverside Condo Homes in Port Coquitlam, which is currently under construction; and Abacus Uptown in Abbotsford, where there are 68 homes are on the market.

The company, however, is not the first B.C. business to jump in on Bitcoin fever., a Vancouver-based eyewear business, became the first major Canadian e-commerce retailer to accept the currency earlier this month, The Vancouver Sun reported.

That decision came after the Montreal Economic Institute warned that Bitcoin lacks the legal framework needed to become mainstream.

Home Buying Season Isn’t Over

Nov 19, 2013


By: Team

The U.S. housing market is in a completely different position than this time last year, with solid price increases, steady inventory and strong demand continuing well into the fall season, according to’s National Housing Trend Report for October 2013.

Median U.S. home prices in October were relatively unaffected by the usual seasonal patterns, with a 7.57 percent increase year over year. National inventory is stabilizing after the dramatic declines seen earlier this year, although the nation still is experiencing significant supply shortages. Most notably, median age of inventory – a leading indicator of demand – is down 11.32 percent from last year, demonstrating resilience to seasonal changes and stabilized inventory.

“Instead of the usual seasonal slowdown, October data show the 2013 fall market moving at a fast pace,” said Errol Samuelson, president of “Inventory has returned to last year’s levels, but prices continue to strengthen and homes are moving significantly faster compared to this time last year.”

“This demonstrates that the overall strength of the national housing market is determined partly by inventory availability,” said National Association of Realtors Chief Economist Lawrence Yun.  “We expect rising home price conditions to continue through the balance of the year.”

Key Market Indicators for October 2013

October 2013 Year-over-Year Percentage Change Month-over-Month Percentage Change
Number of Listings 1,905,064 -1.51 percent -0.71 percent
Median Age of Inventory 94 days -11.32 percent 1.08 percent
Median List Price $199,000 7.57 percent -0.25 percent


National Perspective:

    • After six months of steady improvement, housing supplies are now just 1.51 percent lower than they were one year ago, which signals a greater balance between demand and supply.
    • Median age of inventory is down 11.32 percent from last year, and rose slightly from 93 days last month to 94 days in October. This suggests that properties continue to turn over quickly in contrast to the usual seasonal patterns, and despite increasing prices and stablizing inventory.
      • Median list prices are 7.57 percent higher than where they were one year ago. Monthly prices fell slightly in October, but remained resilient against the usual seasonal patterns and stabilizing inventory.

Market Highlights:

    • The report’s October figures identified several markets with rapid turnover, some at roughly half of the national median “days on market” figure of 94 days. Oakland remains the national leader at just 30 days. Only Washington, DC has shortened its age of inventory from September; the rest have increased time on market, while Phoenix remained flat.

Metropolitan Areas with the Shortest Median Days on Market

October 2013

Oakland, CA


San Francisco, CA


San Jose, CA


Denver, CO


Stockton-Lodi, CA


Washington, DC-MD-VA-WV(DC)


Phoenix-Mesa, AZ


Detroit, MI


Sacramento, CA


Seattle-Bellevue-Everett, WA














The report also highlighted two other sectors of individual market health.

      • Widespread Price Increases  ­– Detroit continues to lead the country in year-over-year list price increases, followed by markets in California and Nevada.  Eighty-five percent of the 146 markets covered by reported year-over year increases in list price, with just 19 markets showing price declines in October.
      • Market Inventories Shift – Decreases are steady and increases are on the rise. The number of markets where inventories were down by 5 percent or more on a year-over-year basis continued its steady decline, dropping from 102 markets in June to 65 markets in October. At the same time, inventory grew in more than twice the number of markets in October (49) compared to June (22), and the number of markets with inventories that are up by at least 5 percent over the year rose from 15 markets in June to 30 markets in October.

Note: regularly tracks real estate data and develops monthly reports featuring the number of listings, median age of inventory and median list price across the U.S. and in specific markets, as well as provides year-over-year and month-over-month changes. These reports are the only ones pulled directly from the database, where 90 percent of listings are updated every 15 minutes from more than 800 MLSs. National data in October reflects an adjustment in inventory of approximately 1 percent compared to previous months, reflecting an update in four southern California markets identified by’s enhanced auditing protocols and attributed to a system change in data collection earlier in the year. regularly reviews and updates historical data to provide the most accurate and comprehensive market information available.

Banks abandon mortgage preapprovals

What the decline of preapprovals means for homebuyers

By AnnaMaria Andriotis

The mortgage preapproval, for years a crucial step in the home-buying process, is losing its luster with lenders, new data shows.

A mortgage preapproval is a written commitment lenders give to buyers that states the maximum size home loan they can get as well as the likely interest rate. Buyers rely on preapprovals to make sure they’re shopping for a home that’s in their price range. But new federal data suggests lenders are scaling back on preapprovals. Among the top 25 mortgage lenders, just 29,912 preapprovals resulted in mortgages that borrowers received to purchase a home last year, according to data released last month by the Federal Financial Institutions Examinations Council. That’s down from 101,626 in 2007, before the housing downturn. Preapprovals accounted for 4% of purchase mortgages that were originated by these lenders last year, down from 9% in 2007.

The bank that rejects the most mortgages

In addition, preapprovals—which have traditionally been considered one of the first steps to getting a home loan—did not precede any of the mortgages doled out to home buyers by 14 of the largest 25 lenders last year. “The popularity of preapprovals is quite low,” says Mike Lyon, vice president of mortgage operations at Quicken Loans. (The mortgage lender had 598 preapprovals result in mortgages last year, down 43% from 2007, according to this government data.)

Andy Dean Photography /

The demise of the preapproval comes at a delicate time for home buyers. As competition heats up, bidding wars are becoming the norm; for prospective buyers to stand out to sellers, they often need to show proof that they have lined up financing and are ready to proceed with the transaction, says Jim Gaines, research economist at Texas A&M University’s Real Estate Center. Preapprovals provide that evidence to sellers, and buyers who lack them will have a hard time getting a home that has many offers on it. Preapprovals may also provide some leverage to buyers who are competing against all-cash buyers, who accounted for 32% of existing-home sales in August, up from 27% a year prior, according to the latest data from the National Association of Realtors. Because they don’t need a mortgage, all-cash buyers often make lower offers on homes; a home buyer with a higher offer and a preapproval could beat them out, says Gaines.

Bernanke gives home buyers a breather

To be sure, this government data may not encompass all preapprovals. The numbers are released under the Home Mortgage Disclosure Act, which requires lenders to submit their mortgage and preapproval numbers to the federal government. Some lenders say they don’t submit data for their preapprovals because they don’t meet the federal definition. The official criteria include a written commitment to give a home loan for a certain period of time, with the caveat that approval can change only for a few reasons including a change in the home buyer’s financial standing or some other conditions that could derail a sale, like a report of termites in the home.

Housing experts, however, say the decline in preapprovals is largely due to dwindling competition among mortgage lenders for new clients. Prior to the recession, lenders used preapprovals as way to attract would-be borrowers. Buyers who had this commitment from a lender were more likely to turn to this company when they were ready to get the actual mortgage, says Keith Gumbinger, vice president at mortgage-info site In that way, preapprovals became a revenue source for lenders. Since the recession, many lenders have shut down, and that has decreased competition for buyers, he says.

Separately, lower-than-expected appraisals of homes have resulted in fewer preapprovals, says Gumbinger. Preapprovals are usually given before buyers identify the home they want to buy. When the home’s appraisal is determined to be lower than the purchase price the buyer and seller agreed to, the lender often requires the buyer to come up with the extra cash to make up the difference; buyers who are unable or unwilling to do so walk away, and the preapproval ends up derailed.

Housing markets about to get squeezed

Several banks, including Chase and Bank of America, say rather than preapproving home buyers, they’re mostly doing pre-qualifications. With pre-qualifications, lenders inform borrowers of the size of the loan they can qualify for based on their stated income and assets as well as an initial credit check. Historically, pre-qualifications were the first step buyers would take before shopping, which was then followed by a preapproval when they became serious about a specific home they wanted to purchase.

To give buyers a better idea of where they stand, Chase says it provides a more detailed prequalification program through which buyers get a “conditional approval” that usually lasts 90 days, which they can share with the seller. The bank says this type of approval differs from the federal definition of a preapproval because it is not a written commitment; instead, its commitment is often delivered after verifying borrowers’ income, employment and the home’s appraisal. Similarly, a Bank of America spokesman says the bank wouldn’t approve a buyer until the home is appraised and the borrower’s financial condition is fully vetted.

A prequalification doesn’t provide the same leverage to buyers though as an official preapproval. Pre-qualifications are typically based on average mortgage rates rather than the rate that’s close to what the borrower would actually get. Also, most lenders can rescind a prequalification, whereas a preapproval is a commitment that usually lasts two to three months.

Mortgage Rates Stumble in Feeble Economy
House 02

Mortgage rates retreated this week as investors grew anxious over weaker-than-expected economic data and escalating tensions in Syria.

The benchmark 30-year fixed-rate mortgage fell to 4.62% from 4.74% last week, according to the national survey of large lenders. The mortgages in this week’s survey had an average total of 0.35 discount and origination points. One year ago, that rate stood at 3.8%. Four weeks ago, it was 4.59%.

The benchmark 15-year fixed-rate mortgage fell to 3.66% this week, compared to 3.75% last week, and the benchmark 5/1 adjustable-rate mortgage fell to 3.615 from 3.69%. The benchmark 30-year fixed-rate jumbo fell to 4.77% from 4.88%.
Weekly national mortgage survey
Results of’s Aug. 28, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week’s rate: 4.62% 3.66% 3.61%
Change from last week: -0.12 -0.09 -0.08
Monthly payment: $847.84 $1,192.56 $751.09
Change from last week: -$11.88 -$7.36 -$7.44

Add this table to your page ‹› get code

The drop brings rates closer to where they were before last week’s spike, when rates reached their highest levels in more than two years.

“Mortgage rates had increased a fair amount over the last 60 days. A pullback was inevitable,” says Bob Walters, chief economist for Quicken Loans.

Bad news pushes rates down

Weak economic news and concerns over the situation in Syria have helped keep a lid on rates this week, Walters says.

U.S. orders for long-lasting manufactured goods, such as cars and appliances, fell by 7.3% in July, the Commerce Department said this week. New-home sales plunged 13.4% in July, the Census Bureau reported. And pending home sales declined 1.3% in July, according to the National Association of Realtors.

“Bad economic news is good for interest rates,” Walters says. That’s because they cause nervous investors to seek safety in U.S. Treasury and mortgage bonds. Increased demand for bonds tends to result in lower mortgage rates.

The decline in home sales could be a reflection of higher mortgage rates, some industry observers say.

“The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown,” says Lawrence Yun, NAR’s chief economist. “However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West.”

Despite the recent adjustment, mortgage rates are still 1 percentage point higher than they were in May.

Where are rates headed?

Homebuyers may get a short break on rising interest rates for now, mortgage professionals say. “Mortgage rates should ease through mid-September,” says Dan Green, a loan officer for Waterstone Mortgage in Cincinnati. “There’s little reason for rates to rise.”

Investors remain anxious about a potential U.S.-led attack on Syria and concerns over use of chemical weapons by President Bashar al-Assad’s government.

“The recent escalation of tensions in the Middle East has caused a flight to quality, where traders sell stocks and buy safer bonds,” Walters says.

It’s possible that the tension in Syria will push rates a little lower in coming days, but don’t bet on it.

“Rates falling one-eighth of a percentage point won’t change your life,” Green says.


Courtesy of your Arcadia Real Estate Agent

Housing recovery continues to heat up

Despite uncertainties, housing has found its footing

Christina Mlynski
August 13, 2013 4:06pm
Regardless of an inadequately housing supply, rising home prices reacting to strong demand and difficult lending environment, market expectations remain bullish on housing.

Nonetheless, housing is in its early stages of recovery and panelists at the Bipartisan Policy Center’s conference believe it’s not time for the Federal Reserve to take their foot off the bond-buying gas pedal just yet.

“There is a cyclical and structural nature to the problem,” explained Paul Weech of Housing Partnership Network.

He added, “We haven’t solved for the underlying structural problem and if we revert back to the norm, we still have millions of homes trying to get back in the full market recovery.”

One of the major factors still impacting the housing market is underwriting standards.

Fannie Mae senior vice president and chief economist Doug Duncan pointed out that there is a high correlation between the business cycle and the credit cycle, which will ultimately lead to an established fixed floor of the credit box.

“If in the regulatory process we can establish a fixed floor then we’ll change fundamentally the level of housing,” Duncan explained.

Looking to the future state of housing, experts agreed that immigration will play a significant role in the housing recovery.

Data taken from 2012 and estimated through 2050 shows that the economy will have 15 million less workers if the immigration rate continues, meaning less people in the housing market and less people paying into their entitlements, Duncan noted.

Another group of Americans that will affect the future of housing is the baby boomer generation, which is the fastest growing age group.

Many have a desire to remain in a home, but want to be mobile. As a result, homebuilders are trying to find new ways to accommodate these needs as well as attract first-time homebuyers to market.

Conine Residential Group president Kent Conine explained that homebuilders are introducing new innovations and productions into the marketplace.

For instance, Conine is in the process of developing a system in which seniors sell their current homes and downgrade to plain vanilla property, which will allow them to travel, while still maintaining a home.

On the reverse side, many homebuilders are going back into the inner cities to tear renovate properties in the hopes of enticing first-time homebuyers into the market.

“While it’s far from where it needs to be, housing is improving,” stated Realogy Holdings Corp. chairman and chief executive officer Richard Smith.

He concluded, “If given a little nudge from regulators and Congress to put in some definitive rules, housing has only one way to go, up.”


Courtesy of your Arcadia Real Estate Agent

Housing supply catches up with demand


Prices expected to balance out month to month

Megan Hopkins

Those fearing the housing bubble apocalypse can finally breathe — it looks like home prices may begin to move laterally on a month-over-month basis moving forward.

While the median cost per square foot rose 14.9% year-over-year in July, inventory fell by almost 16% in the same period. Meanwhile, on a monthly basis, the median list price per square foot held steady from June to July, while the number of homes listed for sale increased.

The stagnant list price month-over-month is an indicator that the inventory supply is beginning to catch up with demand, according to the latest report from Movoto Real Estate.

Higher mortgage rates coupled with increased inventory will stunt price appreciation, slowing the quickly rising pace of home prices.

This goes hand-in-hand with the latest CoreLogic (CLGX)Case-Shiller report which states that slowly, as more and more homeowners consider selling their homes to lock in capital gains, the pressure that has been driving prices upward will subside. The report predicted that price appreciation will start to decelerate in 2014.

Currently, the real estate market is mixed, the report suggests. While sellers would be smart to list their homes in order to take advantage of the increase price per square foot, homebuyers would be wise to keep an eye on the monthly change in list price per square foot. June to July marked the first time this year that the price did not increase, which could imply the market is loosening, putting more power back into the hands of buyers, Movoto noted.

In 36 of the 38 cities tracked by Movoto, the median list price per square foot increased, up 14.9% year-over-year. The July 2012 median list price per square foot sat at $157; at the end of July, the median price jumped to $181.

However, before July, the median list price per square foot rose for six consecutive months, a negative sign for potential buyers looking to strike a deal. Fortunately for buyers, July put a stop to the price increase. While this is a good sign for homebuyers, data from Movoto indicated that there has been little change in the price between June and July over the past two years.


Inventory remained significantly below year-ago levels, down 16.2% from July 2012. However, on a monthly basis, inventory rose slightly more than 4% from June to July. According to Movoto, this is to be expected upon entering the busy part of the home-buying season when buyers are more likely to buy a home.


“To place this in perspective, during the same time in 2012 and 2011, inventory declined across the cities we track, which is a good sign for perspective buyers going into the second half of this year,” Movoto wrote in the report.

Courtesy of your Arcadia Real Estate Agent

1 in 3 buyers would bid above asking price

Trulia: 1 in 4 buyers would pay seller’s closing costs

Inman News
Staff Writer

Jul 25, 2013

One in 3 buyers are willing to bid higher than a home’s asking price, according to a survey conducted by Trulia in partnership with Harris Interactive.

That was just one of several other findings of the survey that appear to show that homebuyers are feeling the squeeze of market conditions that are significantly altered from those of a year ago. At the same time, they capture improved sentiment towards the housing market.

Today’s tight home inventory appears to be pushing some buyers to use aggressive tactics to beat out competing buyers, the survey found. In addition to a third of buyers being willing to make above-market offers, 1 in 4 said that they would offer to pay a seller’s closing costs.

“Tight inventory means slim pickings for buyers. Even though inventory is starting to expand, and rising home prices should bring more for-sale homes onto the market, people who actually want to buy within the next year are feeling the pressure of competing buyers and limited inventory,” wrote Trulia Chief Economist Jed Kolko in blog post about the survey.

Also seemingly a symptom of today’s limited housing stock, homebuyers who plan to buy within the next year said that finding a home that they like is their biggest worry.

And highlighting two other defining characteristics of today’s market, consumers who said they might buy someday indicated that their two greatest fears were that mortgage rates and home prices would rise further.

Article continues below

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But in a sign that people’s attitudes towards homeownership have recovered significantly since the downturn, 60 percent of respondents said that they thought homeownership is one of the best long-term investments they could make, up from 47 percent two years ago.

Courtesy of your Arcadia Real Estate Agent

Inventory shortages ease data shows 4.3 percent growth in listings from May to June

Teke Wiggin Staff Writer

Inventory shortages that constrained home sales this spring are beginning to ease, with the number of homes listed for sale trending upwards in June, according to data, The Wall Street Journal reports.

The total number of listings rose by 4.3 percent from May to June, to 1.9 million homes. While that’s down by 7.3 percent from the same time a year ago, inventory was off 18.6 percent year over year in February, the newspaper said.

Real estate industry observers have speculated that home price gains might spur more homeowners to put their properties up for sale — and for builders to break ground on more new homes.

With the latest CoreLogic Home Price index showing a 12.2 percent year-over-year gain in home prices in May, the recent uptick in listings — though bolstered by a normal seasonal increase — suggests that these market reactions may be starting to play out.

“No one wants to sell at the bottom, but prices have now been rising for more than a year and by more than 30 percent in some markets — triggering some homeowners to lock in those gains, including those who have been underwater,” said Jed Kolko, chief economist at listing portal Trulia.

But while home value appreciation may be coaxing some to sell, National Association of Realtors Chief Economist Lawrence Yun said in a statement last month that growth in home supply will primarily depend on an increase in construction.

“The housing numbers are overwhelmingly positive,” Yun said about May home sales, which NAR said hit their highest level since November 2009. “However, the number of available homes is unlikely to grow, despite a nice gain in May, unless new home construction ramps up quickly by an additional 50 percent. The home price growth is too fast, and only additional supply from new homebuilding can moderate future price growth.”

A recovery in construction activity is already beginning to take hold, Kolko noted.

“Even though inventory peaks in the summer and drops off later in the year, buyers should have more to choose from next spring and summer than they had this year,” he said.

Courtesy of your Arcadia Real Estate Agent

US Housing Market Strengthens

Published on:

Tuesday, July 16, 2013
Written by:
Global Property Guide
  • The S&P/Case-Shiller report for the first quarter indicates strong growth in the U.S. housing market as prices increase and foreclosures continue to fall. Consumer confidence and construction are both gaining steam and all 20 major cities are showing improvement. Data collected from the U.S. Census Bureau and the Federal Housing Finance Agency also show signs of a strong recovery, and even homebuilder sentiment is up, according to the National Association of Homebuilders. Experts are confident the growth will continue thanks in part to a strengthening economy and increases in the country’s GDP. For more on this continue reading the following article from Global Property Guide. 

Boomtime is back! U.S. house price rises are accelerating, consumer confidence is at a five-year high, construction activity is picking up, and foreclosures and delinquency rates are falling.

During the year to end-Q1 2013, the S&P/Case-Shiller seasonally-adjusted national home price index soared by 10.17% (8.31% in real terms), the biggest year-on-year increase since Q1 2006, according to Standard & Poor’s.  Quarter-on-quarter (q-o-q), the national home price index rose by 3.94% (3.3% in real terms) in Q1 2013.

All 20 U.S. major cities registered strong year-on-year house prices increases in March 2013. Pheonix recorded the highest annual house price increase, of 22.4%, followed by San Francisco (22.2%), Las Vegas (20.6%), Atlanta (19.1%) and Detroit (18.6%).

The Federal Housing Finance Agency (FHFA)’s house price indices were also encouraging. The U.S. seasonally-adjusted purchase-only house price index rose by 6.73% (4.93% in real terms) y-o-y to Q1 2013, the largest annual rise in house prices since Q2 2006. On a quarterly basis, the index increased by 1.95% (1.32% in real terms) in Q1 2013.

In April 2013, the median sales price of new homes sold in the U.S. increased by 14.9% y-o-y to US$271,600, according to the U.S. Census Bureau.

During the first four months of 2013, the total number of houses sold in the U.S. rose by 26.4% y-o-y to about 153,000 units, based on figures from the U.S. Census Bureau.  Demand started to pick up in 2012 when the number of houses sold increased by 16.8% to 368,000 units from the previous year.

Construction activity is also on the rise. In 2012 from a year earlier:

  • The number of house building permits authorized soared by 32.9% to 829,700 units
  • The number of housing units started rose 28.2% to 780,600 units
  • The total number of housing units under construction increased by 27.5% to 532,500 units

U.S. home builder sentiment rose 7.3% from the previous year in May 2013, according to the National Association of Home Builders.

Foreclosures and home repossessions are also falling, partly due to the increased efforts by the government and state lawmakers to delay property seizures. In California, a new law prohibits lenders from pursuing foreclosure while the borrower is still renegotiating his loan terms.

  • The total number of foreclosures completed dropped 16% to 52,000 units in April 2013 from the same period last year, according to data analytics firm CoreLogic. In addition, foreclosure inventory fell by 24% y-o-y to about 1.1 million homes in April 2013.
  • Home repossessions in the U.S. dropped by 32% y-o-y in April 2013, according to foreclosure listing firm,RealtyTrac Inc. Lenders repossessed 34,997 houses in April 2013, the lowest level since July 2007./li>

The market is likely to remain strong.  “The housing market continues to squeak out gains from already very positive conditions,” said National Association of Realtors (NAR) chief economist Lawrence Yun.

The U.S. economy grew by 2.2% in 2012, after real GDP growth rates of 1.8% in 2011 and 2.4% in 2010, according to the U.S. Bureau of Economic Analysis (BEA). Economic growth is expected to be 1.9% in 2013, and 2.8% in 2014, based on projections by the Organization for Economic Cooperation and Development (OECD).

Phoenix leads the recovery!

During the U.S. housing boom (1996-Q1 2006), all 20 main U.S. cities experienced spectacular house price rises. Los Angeles registered the biggest house price rise of 268.1%, followed by San Diego (250.1%), San Francisco (227.8%), and Miami (214.6%).

In Q2 2006, house prices started to fall. From Q2 2006 to Q4 2011, the S&P/Case-Shiller composite-10 home price index plunged 34%. Of the ten largest U.S. metro areas, Phoenix registered the biggest drop (down 55.5%), followed by Detroit (-44.4%), San Francisco (-41%), Los Angeles (-40.6%), and San Diego (-39.9%).

Now Phoenix is leading the recovery. Phoenix house prices rose 18.8% y-o-y to August 2012, its fourth consecutive month of double-digit y-o-y house price increases. Seventeen of the 20 largest cities in the U.S. saw house price rises in August, from a year earlier. Only three cities have seen their house prices fall during the year to August 2012—Atlanta (-6.1%); New York (-2.3%); and Chicago (-1.6%).



Housing boom
(Jan 1996 – Mar 2006)
Housing crash, global crisis
(Apr 2006 – Dec 2011)
August 2012
New York
Los Angeles
San Diego
San Francisco
Source: S&P

During the year to August 2012, the Mountain region registering the biggest house price increase of 11.4%. Other strong regions include the Pacific (8.1% y-o-y), West South Central region (5.3%), South Atlantic region (4.6%) and the West North Central region (4.4%).

Demand rising again fast

Demand for houses is rising. The number of houses sold (seasonally-adjusted) during the first eight months of 2012 rose 20.8% compared with the same period last year, according to the U.S. Census Bureau.

January to August 2012 houses sales (compared to same period last year):

  • Western region: sales up 37.6%
  • Northeast: sales up 27.1%
  • Midwest: sales up 18%
  • South: sales up 13.5%

The ratio of houses for sale to houses sold in August 2012 was 4.6 – down from 6.6 the same month last year.

The total number of new houses for sale was at a record low at the end of August 2012, at 143,000 units. About 55.9% of the new houses for sale are in the Southern region, 19.6% in the West, 13.3% in the Midwest, and 11.2% in the Northeast.

Residential construction strongly rising

Residential construction has begun to turn around.

  • For the first three quarters of 2012, the total number of new privately owned housing units completed increased 8.9% from the same period last year, to 462,100 units, according to the US Census Bureau.
  • The total number of housing starts increased 26.7%, to 582,500 units during the year to September 2012.
  • The total number of houses under construction rose by 13.2% y-o-y to 4,275,300 units during the first nine months of 2012.

From 1990 to 2007, the total number of housing starts averaged 1.5 million units per year. However due to the global crisis, housing starts fell to 1.1 million units in 2008, 794,400 units in 2009, 651,700 units in 2010 and 584,900 units in 2011.

In the second quarter of 2012, the U.S. housing inventory increased 0.4% to reach 132.72 million. Of these, 86% were occupied, and the remaining 14% were vacant. About 66% of the occupied housing units were owner-occupied; the other 34% were rented.

Delinquency rate stabilizing, foreclosures falling

The residential real estate delinquency rate has stabilized, another clear signal of a housing market recovery. In Q3 2012, 42 U.S. states showed a drop in delinquency rates. California and Arizona, two of the hardest hit by the global financial and economic crisis, showed the best year-on-year results. However, the national delinquency is still exceptionally high compared to the 1.39% delinquency rate registered in Q4 2004. The delinquency rate of outstanding residential real estate loans was 10.61% in Q2 2012, down from 10.69% in Q2 2011, according to theUS Federal Reserve System.

In addition, the total number of foreclosures (default notices, scheduled auctions, and bank repossessions combined) in September 2012 fell to their lowest level in five years, at 180,427 units, according to RealtyTrac.

“The five-year low, combined with the fact that the year-over-year decrease in foreclosures was in its twenty-fourth straight month, is evidence that we´re past the worst of the foreclosure crisis,” said RealtyTrac vice president Daren Blomquist.

In Q3 2012, San Francisco had seen the biggest drop (-36%) in foreclosure activity from a year earlier, followed by Detroit (-31%), Los Angeles (-29%), Phoenix (-27%) and San Diego (-26%).

“Two-thirds of the nation’s largest metros posted decreases in foreclosure activity in the third quarter,” said Blomquist.

Mortgage interest rates falling

The U.S. Fed’s key rate remained unchanged at 0.13% in October 2012, having been cut in December 2008. The rate can hardly fall further.

The fed funds rate peaked at 5.25% in August 2007.

As of October 2012, the average interest rate for 30-year Fixed Rate Mortgages (FRMs) was 3.38%, down from 4.07% the same month last year, based on figures released by Freddie Mac. Likewise, the average rate for 15 year FRMs fell from 3.35% to 3.69%, while the average rate for 5 year FRMs fell from 3.03% to 2.74%.

One-year adjustable rate mortgages (ARM) had an average lending rate of 2.59% in October 2012, down from 2.92% in October 2011.

Stimulating the housing market

A new mortgage relief plan, actually a revamp of the existing Home Affordable Refinance Program (HARP), was announced by President Barack Obama in October 2011, to stimulate the economy and to revitalize the housing sector.

HARP’s previous maximum loan-to-value (LTV) ratio has now been scrapped, and the 2% fees paid by some high-risk borrowers have been reduced or abolished, while HARP’s deadline has been extended to December 31, 2012.

To be eligible for the HARP refinance program:

  • The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  • The mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
  • The mortgage cannot have been refinanced under HARP previously, unless it is a Fannie Mae loan refinanced under HARP from March-May 2009.
  • The current LTV ratio must be higher than 80%.
  • The borrower must have no late payment in the past six months, and no more than one late payment in the past 12 months.

In another stimulus measure, the Federal Reserve Board said in September 2012 that every month, it would buy US$40 billion in mortgage-backed securities.

Mortgage market still shrinking

The U.S. mortgage market has been shrinking. In Q2 2012, the size of the mortgage market was equivalent to 84.4% of GDP, down from 103% of GDP in 2009, according to the Fed.

The total mortgage debt outstanding fell by 2.4% to US$13.216 trillion in Q2 2012, from the same period last year.

In Q2 2012, the homeownership rate (seasonally-adjusted) in the U.S. was 65.6%, the lowest since Q1 1997.

Rental vacancies falling

The median asking rent in the U.S. fell by 0.7% to US$716 per month from the previous quarter in Q2 2012, but was still 4.7% higher than the same period last year, according to the U.S. Census Bureau’s Housing Vacancy Survey.

In Q2 2012:

  • In the Northeast region, the median asking rent was 5.8% lower the previous quarter – but 1.5% higher than a year ago, at US$878 per month.
  • In the Midwest, the median asking rent fell by 1.3% q-o-q, but rose by 2% y-o-y to US$599 per month.
  • In the Southern region, the median asking rent rose by 1.4% q-o-q, and was also up 3.4% y-o-y, to US$669 per month.
  • In the West, the median asking rent rose by 6.5% q-o-q, and was also up 7.3% y-o-y, to US$911 per month.

The rental vacancy rate in the U.S. fell to 8.6% in Q2 2012, from 9.2% in Q2 2011, according to the U.S. Census Bureau.

Rents rising faster than house prices

The house price-to-rent ratio has been falling since 2008. From 2008 to Q2 2012, house prices have plunged deeply, while median rents have been more or less static, according to the U.S. Census Bureau.

A falling price-to-rent ratio is a signal that the market has good potential for recovery, in the long term.

Slowing economic growth

During the first quarter of 2013, the U.S. economy expanded by an annual rate of 2.4%, lower than the 3% average projection by economists.  Growth has mainly been fuelled by inventory accumulation, and by an increase in consumption and residential investment.

Economic growth is expected to slow to 1.9% for the full year 2013, but recover to 2.8% in 2014, according to theOrganization for Economic Cooperation and Development (OECD).
Growth is being slowed by the U.S. government’s increasingly contractionary fiscal policy, which includes hiking taxes starting January 2013, and cutting the federal budget in March 2013. In addition, the ongoing Eurozone debt crisis is also adversely affecting the U.S. economy.

The federal deficit is expected to fall to about US$642 billion by end-2013 from its nosebleed US$1 trillion-plus heights in 2012, as tax revenues soar, according to the Congressional Budget Office. As a result, the shortfall is projected to drop from 10.1% of GDP in 2009 to about 4% of GDP in 2013 and finally to just about 2.1% of GDP in 2015.

With increasing investor confidence, the national jobless rate dropped to a four-year low of 7.5% in April 2013, according to the U.S. Department of Labor.

The overall inflation rate slowed to 1.1% in April 2013 mainly due to lower gasoline prices, according to the U.S. Department of Labor, well below the Fed’s 2% target, and below the 2012 inflation rate of 2.1%, and 2011 rate of 3.1%. The muted inflation could bolster the case for the Fed to continue its monetary easing.

With the government’s recent belt tightening, the question now is whether the housing recovery will continue to power economic growth?

In our view the likely answer is, yes.  A house price collapse created the recession.  It is important not to underestimate the significance of the housing market as a major influence on the U.S. economy. The strong housing recovery is likely to buoy economic growth in the U.S. for the medium term.


Courtesy of your Arcadia Real Estate Agent