A U.S. housing recovery like never before?

April 18, 2013 By Leave a Comment

April 16, 2013

ALEX CARRICK

Chief Economist, CanaData

U.S. new home starts in February were 917,000 units, seasonally adjusted and annualized (SAAR), according to a joint press release from the Census Bureau and the Department of Housing and Urban Development.

The monthly level of housing starts has been above 900,000 units for three months in a row. Within that period, their monthly high was 982,000 units reached in December of last year.

On a month-to-month basis, February 2013’s level was almost even with January 2013 at +0.8%, but it was a much more impressive +28% when compared with February of last year.

Additionally, the latest building permits figure — which is a leading indicator, by a month or two, for starts — was quite encouraging. The number of residential permits issued in February was 946,000 units SAAR, an increase of 5% versus January and an uptick of 34% when compared with February 2012.

It’s possible the importance of housing’s recovery to the overall U.S. economy is being underestimated. Gross domestic product (GDP) projections for 2013 mostly lie between +2.0% and +2.5%, after a +2.2% performance in 2012.

An upward creep in taxes, higher medical costs for employers, plus jobs cuts and furloughs in the public sector are being blamed for keeping growth lower than it might otherwise be. Still, there are some forecasters who think +3.0% is attainable and the main reason will be better residential construction. The ripple effects (i.e., “multipliers” and “accelerators” in economic jargon) of a stronger homebuilding sector are enormous.

There are no guarantees, but this argument may have validity. Consider that the current recovery in housing starts will have a magnitude never seen before in the U.S. economy.

A look at historical data from the Census Bureau is revealing. Going back to 1959, when the statistical series begins, there has never been another period of decline nearly as steep as between January 2006 and April 2009. Within that interval, starts plunged 80% from a pre-recession peak of 2.273 million units SAAR to a bottom of only 478,000 units.

Only bungee jumpers had ever experienced that kind of descent before and lived to tell about it.

Economic events are often governed by a pendulum that swings back and forth to establish equilibrium. Sometimes, the duration of the movement in one direction or another can be a long time coming. A perfect example is the recovery in NASDAQ stock prices since the dot.com collapse. They still haven’t returned to their prior peak. But they are finally showing that such an eventuality isn’t totally out of the question.

U.S. home starts don’t have to make it all the way back to 2.3 million units to have a huge impact. Their average level of 940,000 units in the three most recent months is nearly double the volume to which they sank in the trough. Even if they only return to the lower end of a “normal” range of 1.5 million to 1.7 million units — which some forecasters are saying will happen by the end of next year — they will have more than tripled since their most recent low.

In the U.S., there have traditionally been two sub-sectors with exceptional influences on the overall economy — automotive demand and residential construction. Bringing the analysis up to date, those two might now be augmented by a third major player, the high-tech sector.

In Canada, where the economy is smaller and therefore more factors can assume larger roles in the overall results, the number of sub-sectors that can create an out-sized influence may be a little larger — auto production, energy exports, residential construction and start-ups or completions of mega projects in non-residential construction.

Economics 101 provides the following advice on how to move an economy out of a recession. Step number one, cut interest rates in order to stimulate the housing sector. It’s taken a long time south of the border, but the standard framework for recovery is finally taking hold.

And what a recovery it might be. Simply consider all the side effects of stronger housing starts. Remember in what follows, that improved activity levels reap a harvest of greater profits and more employment.

Suppliers of building products will realize a pick-up in sales. The Home Depots, Reno-Depots and Lowe’s of this world and their close cousins will benefit.

Further back in the supply chain are sawmills and cement manufacturers. Softwood lumber producers are already seeing prices for their output that have escalated dramatically.

The railroad and trucking industries move building products to wholesalers, retailers and other customers.

New homes have to be heated and cooled, bringing in the energy utilities.

Governments will receive more property taxes from new subdivisions.

Lawyers, real estate agents and mortgage brokers will smile more.

Let’s not forget the banking community. Sales of more new homes will mean greater mortgage business, contributing to better earnings. (In Canada, a decline in new home starts is expected to eat into banking sector profits this year.)

Stronger housing starts will also mean more retail sales by storekeepers who supply furniture, appliances, television sets, stereos, lighting fixtures, plumbing supplies, cabinetry, carpeting, drapes, blinds, dishes, silverware, paintings, paint and the list goes on and on.

The better housing sector alone will be a big boon to the U.S. economy. But it’s not just housing that’s picking up smartly south of the border.

Earlier, I mentioned some other pillars of the U.S. economy. Autos sales have improved nicely. Many high-tech firms are experiencing a renascence as evidenced by the surge in NASDAQ equity prices. There is an energy boom underway in a number of states. And an unprecedented amount of money has been made available by the Federal Reserve.

The politicians give the impression they’re still trying to gum up the works. But there is a great deal of underlying strength in the economy that will continue to march forward, with new home starts riding point.

Wouldn’t it be lovely — and a refreshing change — if whatever happens in Washington turns out to be irrelevant?

Courtesy of your Arcadia Real Estate Agent

Filed Under: Arcadia Real Estate Agent, Brettany Harrison, Brian Peralez, Housing Market Tagged With: , , , , , , , , , , , , , , ,

Real estate showing signs of new life

March 28, 2013 By 2 Comments

 

By Jane K Dove on March 28, 2013

Some green shoots appear to be pushing up to bring the first hints of new life to Lewisboro’s real estate market.

Sales for 2012 and the first quarter of 2013 are up and the median home price has stabilized instead of declining.The Ledger sat down last week with Houlihan Lawrence Associate Broker Mary Anne Condon, a longtime expert on our town, to review the numbers and discuss what they mean.

2012 recap and comparisons

“For all of 2012, we had 116 sales, compared to 97 in 2011,” she said. “This represents the highest level since the economic downturn began. One hundred-sixteen are the most homes sold since 2007, when 131 changed hands. However, the 116 sold in 2012 is well below the 2004 peak, when 189 homes were sold at the height of the real estate boom.”

Ms. Condon said the still modest though improving sales are a reflection of several factors, including tough mortgage approval standards, requirements for significant down payments, and the need for impeccable credit.

“Fortunately, today’s buyers are typically well-qualified and have the 20% down payment that is now typically required,” Ms. Condon said.

A “for sale” sign adorns the front yard of a home on Church Tavern Road in South Salem. Home sales in Lewisboro are up for 2012 and the first quarter of 2013, and the median home price has stabilized. (Photo Matt Spillane)

On the price side, 2011 saw the lowest median house price in 10 years — $560,000. “But 2012 saw an uptick to $610,000,” Ms. Condon said. “This is a positive sign, but still well below our 2007 all-time high median price of $825,000.”

“The 2012 median was impacted by the fact that a number of more expensive properties were sold in 2012. So everyone’s home price did not go up an automatic 8.9% in 2012. The typical house price is still close to flat year-to-year.”

Comparing median prices in adjacent towns, Bedford had a 2012 median price of $745,000 and Pound Ridge came in at $777,500.

“Again, these prices are still way below the peak of the local market in 2007,” Ms. Condon said.

Prices ranged widely in 2011, from a low of $185,000 for a short sale in South Salem to a high of $2.3 million for a 10-acre estate with pool and tennis court in Waccabuc. A waterfront home on Lake Truesdale commanded a sale price of $1,551,000.

“A significant amount of sales activity in 2012 was at the lower end,” Ms. Condon said.

She cited numbers that showed 40 of the 116 houses sold in 2012 coming in at under $500,000. By comparison, the “boom year” of 2007 had only 15 homes sold at under $500,000. “As prices go upward, sales drop off,” she said.

Property tax impact

When asked by The Ledger what impact Lewisboro’s high property taxes had on the marketability of its homes, Ms. Condon said taxes are always a factor in the purchase of a home.

“When a buyer is looking at a home, they consider the entire monthly cost, which includes both their mortgage and their property taxes,” she said. “Most homeowners write out a single check to their bank each month and look at the two numbers added together to determine how much they can afford to spend. Taxes do matter. Currently Lewisboro’s are higher than those on properties in adjacent school districts.”

Ms. Condon said many buyers still seek out homes in the Katonah-Lewisboro school district because of its good reputation.

“But if the taxes are too high, they may find the house they want is simply out of reach,” she said.

Lewisboro tax assessor Lise Robertson told The Ledger that current taxes on a $500,000 Lewisboro home average $14,000. On an $850,000 home they come in at $23,800.

Current quarter

Ms. Condon said she believed 2013 would prove to be a stronger real estate year than 2012 if new numbers hold up.

“For the first quarter of 2013, we have had 19 sales and another 22 are in contract, with a median list price of $511,000,” she said. “The first-quarter median sale price so far is $620,000, an insignificant change from 2012’s figure of $610,000.”

“As an optimist, I believe the rest of the year will continue to show improvement. The stock market is dong very well and jobs reports are better. Overall, people just seem to be feeling better about the economy, and on a national basis, house prices are going up and builders are getting back to building.”

Ms. Condon said she expected interest rates to remain at historically low levels, another boon to the market.

“But I would advise my sellers not to expect a quick rebound to the good old days,” she said. “Buyers are still very cautious and want a deal. They come into our office armed with information about the complete financial histories of the homes they want to see and are ready to drive a hard bargain.”

Ms. Condon said it could be a long time, if ever, for Lewisboro to see prices like those in the frenzied years of the real estate boom.

“That might be an anomaly we never see again, but I can say for sure that right now, things are definitely looking better and the market is slowly coming back to life.”

All figures used here are from the Westchester-Putnam Multiple Listing Service.

Courtesy of your Arcadia Real Estate Agent

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US housing starts rise

March 20, 2013 By Leave a Comment

By Christopher S. Rugaber THE ASSOCIATED PRESS

WASHINGTON —  U.S. builders started more homes in February and permits for future construction rose at the fastest pace in 4-1/2 years. The increases point to a housing recovery that is gaining strength.

The Commerce Department said Tuesday that builders broke ground on houses and apartments last month at a seasonally adjusted annual rate of 917,000. That’s up from 910,000 in January. And it’s the second-fastest pace since June 2008, behind December’s rate of 982,000.

Single-family home construction increased to an annual rate of 618,000, the most in 4-1/2 years. Apartment construction also ticked up, to 285,000.

The gains are likely to grow even faster in the coming months. Building permits, a sign of future construction, increased 4.6 percent to 946,000. That was also the most since June 2008, just a few months into the Great Recession.

And the figures for January and December were also revised higher. Overall housing starts have risen 28 percent higher over the past 12 months.

Separately, a private report showed the number of Americans with equity in their homes increased last year. That suggests one of the biggest drags from the housing crisis is easing and could clear the way for more people to put homes on the market.

“The road ahead for housing is still, so far, looking promising,” Jennifer Lee, an economist at BMO Capital Markets, said in a note to clients.

The pair of positive housing reports helped drive early gains on Wall Street. But stocks edged lower later in the day as investors awaited the outcome of a vote on an unpopular bailout plan in the European nation of Cyprus. The Dow Jones industrial average was down 35 points in afternoon trading.

Housing starts jumped in the Northeast and Midwest, while they fell in the South and West. Permits rose in the South, West and Midwest, falling only in the Northeast.

The U.S. housing market is recovering after stagnating for roughly five years. Steady job gains and near-record-low mortgage rates have encouraged more people to buy.

In addition, more people are seeking their own homes after doubling up with friends and relatives in the recession. That’s leading to greater demand for apartments and single-family homes to rent.

Still, the supply of available homes for sale remains low. That has helped push up home prices. They rose nearly 10 percent in January compared with 12 months earlier, according to CoreLogic, the biggest increase in nearly seven years.

Higher prices mean that more Americans have equity in their homes. Last year, about 1.7 million Americans went from owing more on their mortgages than their homes were worth to having some ownership stake, CoreLogic reported Tuesday. That benefits both home owners and the broader economy.

When homeowners have some equity stake, it makes it easier for them to sell or borrow against their homes. Still, 10.4 million households, or 21.5 percent of those with a mortgage, remain “under water,” or owe more on their home than it is worth.

The number of previously occupied homes for sale has fallen to its lowest level in 13 years. And the pace of foreclosures, while still rising in some states, has slowed sharply on a national basis. That means fewer low-priced foreclosed homes are being dumped on the market.

Those trends, and the likelihood of further price gains, have led builders to step up construction. Last year, builders broke ground on the most homes in four years.

Homebuilders have become much more confident over the past year.

Courtesy of your Arcadia Real Estate Agent

Filed Under: Brettany Harrison, Brian Peralez, Bussiness, Market, Mortgage Tagged With: , , , , , , , , , , , , , ,

4 reasons your home isn’t selling

January 22, 2013 By Leave a Comment

Even in recovering markets, listings must be priced right and properly marketed

BY DIAN HYMER, MONDAY, JANUARY 21, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=32385181" target="_blank">Price reduced</a> image via Shutterstock.
Price reduced image via Shutterstock.

There’s a buzz in the air. The real estate market has improved and may be on the road to recovery.

But the improvement in the housing market is not treating all home sellers equally. Some well-priced listings in prime locations are selling within a couple of weeks. In other areas, it still takes months to sell, and prices haven’t fully stabilized.

There are several factors that could be keeping your home from selling. One is the state of the local housing market. Residential real estate is a local business. National trends, while informative, don’t necessarily apply to the state of the market in your neighborhood.

Other factors include: the list price; the condition of your property; or lack of broad marketing exposure.

HOUSE HUNTING TIP: Today’s buyers don’t overpay. They need to be convinced that the price you’re asking for your home is a fair market value.

The housing market is pulling out of the worst recession since the Great Depression. This is fresh in buyers’ minds. There are plenty of buyers who think this is the right time to buy, but they’re not inclined to make offers on overpriced listings.

Sellers often wonder why buyers won’t make an offer at a lower price if they think the list price is high. Buyers don’t want to waste their time making an offer if the seller is unrealistic. Making an offer takes a lot of time and emotional energy. Most buyers who have the wherewithal to buy a home don’t have time to waste.

There are “bottom feeders” who give sellers lowball offers below market value hoping to get lucky. These buyers also won’t pay over the asking price. They want a bargain. You can do better than that if you price your home right for the market.

Here are clues that your listing might be priced too high. You don’t receive any showings, or you receive showings but no repeat showings. Buyers usually look at a listing more than once before making an offer. Another possibility is that buyers look at your home and then buy another listing that is priced more in line with the market.

Let your real estate agent know that you want to hear feedback from buyers who have seen your home. If they like the house but not at the price you’re asking, that’s a clear indication that you should adjust the price if you want to sell.

Some sellers have false expectations about the current picked-up market. In some areas, the improved market means that homes are taking less time to sell, not that prices have increased.

In other markets, like Phoenix, prices have jumped approximately 25 percent from a year ago but are still way below where they were at the peak of the market. If prices dropped 50 percent in your area, they need to increase 100 percent to get back to where they were before the decline.

For instance, if your home was worth $100,000 in 2006 and dropped 50 percent in value and then increased 50 percent of the lower value, it would be worth $75,000. It needs to increase 100 percent ($50,000 plus $50,000) to recoup your loss.

The condition of your home will influence the market value. You need to lower the price to account for deferred maintenance or a dated decor, or take care of these issues so that you can present your home in move-in condition. You’ll then attract more buyers and sell for more.

It’s always possible that your home has not been properly marketed. Ask your listing agent to provide you with copies of all advertising. More than 88 percent of today’s homebuyers use the Internet to find a home.

THE CLOSING: Make sure your listing is receiving wide Internet exposure, including a lot of good-quality photographs.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

Courtesy of your Arcadia Real Estate Agent

Filed Under: For Sale, Lending, Market Tagged With: , , , , , , ,

Fed missed the housing bust

January 21, 2013 By Leave a Comment

By

JILL SCHLESINGER /

MONEYWATCH/ January 20, 2013, 5:52 PM

CHIP SOMODEVILLA/GETTY IMAGES

(MoneyWatch) Who would want a detailed, public record of our business decisions? Unfortunately, if you are an esteemed Fed governor, you must confront your exact words from meetings that occurred 5 years ago. The central bank released 1,566 pages of transcripts from each of the Fed’s eight monetary policy meetings in 2007, which is customary. What is not customary, of course, is that 2007 was the year that one would have hoped that our most esteemed bankers would have gotten the drift that there was something rotten in the nation’s housing market.

Clearly Chairman Ben Bernanke would like to take back this January 2007 comment: “The housing market has looked a bit more solid, and the worst outcomes have been made less likely.” Or his June remarks, which may have been a “bit” of an understatement: “A bit of cooling in the financial markets might not be an entirely bad thing.” Bernanke is not alone in his misjudgment of the economic and financial industry landscape. Outgoing Treasury Secretary Tim Geithner, who in 2007 was the NY Fed president, said “Direct exposure of the counterparties to Bear Stearns is very, very small compared with other things.” Oops!

 

There was one Fed governor who nailed the situation. Janet Yellen, who at the time served as the San Francisco Fed president, expressed the danger that loomed in June 2007: “I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector. The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst.”

 

Yellen’s prescience is reminiscent of Brooksley Born, the late 1990s chairman of the Commodity Futures Trading Commission, who was the only regulator who saw the danger of over-the-counter derivatives, the vehicles that a decade later would contribute to the financial crisis. The big difference in 2007 was that Yellen was not the lone voice and she was not bullied by her colleagues.

 

Still, Yellen could not rally the other central bankers to her cause. In September 2007, she reiterated her concerns: “A big worry is that a significant drop in house prices might occur in the context of job losses, and this could lead to a vicious spiral of foreclosures, further weakness in housing markets, and further reductions in consumer spending. … at this point I am concerned that the potential effects of the developing credit crunch could be substantial.” Yellen is currently the Vice Chair of the Board of Governors of the Federal Reserve System and if she was seen as a potential successor to Ben Bernanke prior to this release, these comments beef up her chances in a big way.

 

Eventually, the Fed did recognize the magnitude of the problem, but as is often the case, the governors were late in their diagnosis and remedies. That’s why so many economists are worried about the central bank’s ability to withdraw its easy monetary policy when the U.S. economy improves. With the current low level of inflation (running below the Fed’s target of 2 percent on a year-over-year basis) and the high level of unemployment, the Fed will keep buying bonds and pushing money into the system until further notice. But will the Fed be able to predict when its time to stop?

 

Right now, economic growth is stuck in a low gear of about 2 percent annually, but when it reaccelerates, perhaps due to an uptick in global growth or a housing sector that perks up, the Fed could once again be behind the curve. When that happens, inflation will re-emerge; bonds will finally see the much-predicted sell-off; and the Fed will likely cringe when future transcripts are released.

 

This week, evidence of housing’s recovery will continue to trickle in. There’s little doubt that 2012 was the year that housing bottomed nationally. Prices were up about 6 percent; existing and new home sales rose by about 15 percent each; and housing starts increased 28.1 percent.

 

While this is good news, the housing crash created quite a hole. Prices are still down about 30 percent from the peak and even with the big jump in starts, 2012 ranks as the fourth lowest year since the Census Bureau started tracking starts in 1959 (the three lowest years were 2009 through 2011).

 

Meanwhile, the third straight week of gains brought two of the three U.S. stock indexes to their highest levels since December 2007. As the nation prepares for Inauguration Day, here’s a tidbit: President Obama’s first term was good for investors, with stocks up over 70 percent.

 

– DJIA: 13,649 up 1.2 percent on week, up 4.1 percent on year (4 percent below all-time high of 14,164, reached in 10/07)

– S&P 500: 1,485, up 1 percent on week, up 4.2 percent on year (5 percent below all-time high of 1,565, reached in 10/07)

– NASDAQ: 3,134, up 0.3 percent on week, up 3.8 percent on year (still a whopping 38 percent below all-time high of 5,048, reached in 03/00)

– February Crude Oil: $95.56, up 2.1 percent on week

– February Gold: $1,687, up 1.6 percent on week

– AAA nat’l average price for gallon of regular gas: $3.31

Courtesy of your Arcadia Real Estate Agent

Filed Under: Market, Mortgage Tagged With: , , , , ,

Housing Issues to Watch in 2013

December 17, 2012 By Leave a Comment

By Nick Timiraos

Home prices finally hit a bottom in 2012, well ahead of many predictions that called for continued price drops this year.

Prices were up 6% from one year ago in October, according to CoreLogic CLGX -0.26%, putting them on track for their best year since 2005. Housing starts, which hit a bottom three years ago, ramped up to their highest level in four years. Sales of new homes are running around 20% of last year’s levels, while existing home sales are up around 10%. Continued declines in homes listed for sale—particularly foreclosures—explain much of the improving price picture.

So will 2013 be the year of recovery or relapse? Evidence points more strongly to a continued rebound, albeit one that still has considerable headwinds and that varies from one market to another. This week, we’ll offer five areas of focus for 2013.

1. Don’t fear the shadow. For years, housing analysts have warned that a glut of delinquent mortgages—a so-called “shadow” inventory of eventual foreclosures—would overwhelm housing markets. That hasn’t happened.

On a national basis, the shadow inventory is still there, but it is slowly getting smaller. The number of homes that were 90 days or more past due or in foreclosure fell to around 3 million in October, down by more than 430,000 this year and nearly 1.3 million from the peak in 2010, according to Barclays Capital. Normally, there’s a “shadow” of around 800,000, which means the excess shadow supply stands at around 2.2 million.

Banks have slowed down their foreclosure processes and while those could ramp up in 2013, they’re unlikely to lead to a deluge of supply. Also, big declines in new construction over the past few years have pushed the current housing demand, however muted, towards absorbing the excess supply of foreclosed homes.

The shadow inventory is often discussed as a national phenomenon, but it isn’t really national anymore. States where banks have struggled to meet court-administered foreclosure processes have a significantly higher share of unresolved bad debt: around 5.9% of mortgages are in foreclosure in those judicial states, compared with fewer than 2% in nonjudicial states, according to Lender Processing Services.

Many housing markets “will swallow what foreclosures come to the market whole because we’re seeing inventory shortages develop, acutely,” says Jeffrey Otteau, president of appraisal firm Otteau Valuation Group in East Brunswick, N.J.

 

In New Jersey, which has the second highest foreclosure rate in the country, the bigger problem is that many foreclosures are concentrated in certain communities, particularly inner-city and rural areas. “Those markets are going to take it on the chin,” he says.

 

 

 

 

Courtesy of your Arcadia Real Estate Agent

Filed Under: Brettany Harrison, Brian Peralez, Market Tagged With: , , , , , ,

Housing gains boost Fed’s money easing as rally spurs growth

December 6, 2012 By Leave a Comment
In this Feb. 8 photo, two workers carry a window for a home under construction in a new subdivision by Toll Brothers in Yardley, Pa. A revival in the U.S. housing market is amplifying the impact of the Federal Reserve's efforts to spur the world's largest economy.

In this Feb. 8 photo, two workers carry a window for a home under construction in a new subdivision by Toll Brothers in Yardley, Pa. A revival in the U.S. housing market is amplifying the impact of the Federal Reserve’s efforts to spur the world’s largest economy. / ALEX BRANDON/AP
Written by
Jeff Kearns and Shobhana Chandra
Bloomberg News

A revival in the U.S. housing market is amplifying the impact of the Federal Reserve’s efforts to spur the world’s largest economy.

Home values boosted by record-low mortgage rates are helping improve the finances of both households and banks. That’s easing the flow of credit, providing a further boost to the housing market and the economy, say economists at Bank of America Corp. and Deutsche Bank AG.

“We’re in the very early stages of a reinforcing cycle,” said Michelle Meyer, a New York-based senior economist at Bank of America, the second-biggest U.S. lender by assets. “The Fed has been quite impactful.”

Meyer predicts monthly housing starts could exceed 1 million at an annual rate by the end of 2013, compared with 894,000 in October.Residential construction may add to economic growth this year for the first time since 2005, boosting gross domestic product by 0.3 percentage point, said Deutsche Bank’s Joseph LaVorgna. That contribution may double next year and reach 1 percentage point when related industries such as furnishings and remodeling are added, he said.

“The one thing missing from this economic recovery was a healthy contribution from housing, and we might finally be on the cusp of that,” said LaVorgna, chief U.S. economist for Deutsche Bank in New York, who predicts GDP may grow about 2.5 percent in 2013. “Housing is going to be integral to the economy. We’re assuming it continues to do some of the heavy lifting.”

The Fed in September announced it would buy $40 billion a month in mortgage-backed securities in its third round of so- called quantitative easing.

The central bank’s purchases of housing debt have helped drive borrowing costs to all-time lows. The average fixed rate on a 30-year mortgage was 3.32 percent last week, close to the prior’s week’s 3.31 percent that was the lowest on record, according to Freddie Mac.

U.S. home prices jumped 6.3 percent in October from a year earlier, the biggest increase since June 2006, data provider CoreLogic Inc. said today.

Combined sales of new and existing dwellings climbed to a 5.16 million annual pace in October, up 40 percent from July 2010, which was the lowest since comparable data began in 1999. The S&P/Case-Shiller index of home prices in 20 cities climbed 3 percent in September from a year earlier, the biggest gain since July 2010.

‘An Accelerator’

“Monetary policy is working,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas SA in New York. “What we’ve seen is a very robust housing recovery this year, particularly in prices. It’s kind of an accelerator for other sectors of the economy, consumption in particular.”

Stronger demand is boosting sales at builders such as Toll Brothers Inc., the largest U.S. luxury-home builder, which today said revenue jumped 48 percent to $632.8 million in the three months ended Oct. 31, while net contracts signed surged 75 percent.

The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers and PulteGroup Inc. among its 11 members, has climbed 77 percent this year, compared with a 12 percent increase for the broader S&P 500 Index. PulteGroup, up 171 percent this year, is the biggest gainer in the S&P 500.

The benchmark gauge of U.S. equities slumped 0.1 percent to 1,407.84 as of 3 p.m. in New York. The yield on the 10-year Treasury note retreated 0.01 percentage point to 1.61 percent

“If we can get ourselves into a positive, virtuous circle here with rising house prices, rising construction, improving employment, I think that part of that process will be easing of mortgage-lending conditions,” Fed Chairman Ben S. Bernanke said Nov. 20 in response to audience questions after a speech in New York.

The central bank’s efforts “are having the desired effects” by reducing mortgage rates, San Francisco Fed President John Williams said in a Nov. 14 speech, and the housing rebound “should be a key driver of economic growth.”

To be sure, housing is “far from being out of the woods,” in Bernanke’s words. Sales and prices are below pre-crisis levels, and about 20 percent of borrowers owe more than their homes are worth, Bernanke said in Nov. 15 speech in Atlanta. Residential investment now accounts for 2.5 percent of nominal GDP, down from a peak of 6.3 percent in 2005.

Hurdles Remain

Builders sold fewer new homes than forecast in October and purchases were revised down for the prior month, showing the industry still faces hurdles such as an unemployment rate that’s stuck around 8 percent three years into the economic recovery.

Williams last month said the central bank will probably start buying $45 billion a month of Treasuries next year in addition to the current $40 billion of debt purchases. The policy-setting Federal Open Market Committee meets Dec. 11-12.

“The unemployment rate remains unacceptably high,” New York Fed President William C. Dudley said in a speech yesterday.

Still, for those with jobs, low interest rates are a boon. Among them are Danny and Pat Yorkovich, who decided to buy a bigger house after 18 years in their current residence. They signed a contract on a new, three-bedroom ranch-style home in Charlotte, North Carolina, in November.

“The interest rates were good,” said Danny Yorkovich, 44, who works as an office manager. “We didn’t owe anything on the home we had, and had been saving up and waiting for the right time to purchase.”

New-home sales ripple through the economy as buyers spend an average of $8,000 on household items, including furniture, appliances and landscaping, according to David Crowe, chief economist for the Washington-based National Association of Home Builders.

That’s benefiting companies like Atlanta-based Home Depot Inc., the largest U.S. home-improvement retailer, and Lowe’s Cos., the second-biggest, which both reported higher third- quarter profit as sales rose. Shares of Home Depot have climbed 53 percent this year, while Mooresville, North Carolina-based Lowe’s is up 40 percent.

Even those who aren’t moving are spending more on furnishing and remodeling, according to Robert Niblock, chief executive officer of Lowe’s.

“The bottoming of home values gives that homeowner psychological permission to spend on their homes again,” Niblock said in a Nov. 19 telephone interview.

Cutting Debt

Household finances are improving, putting consumer demand on a stronger footing. Americans have cut debt by $1.37 trillion from the peak in 2008, according to Federal Reserve Bank of New York data. Household indebtedness shrank by $74 billion to $11.31 trillion during the third quarter.

Lending tied to real estate is reviving. After six years of declines, home equity lines of credit will rise 30 percent to $79.6 billion in 2012, the highest level since the start of the financial crisis in 2008, according to Moody’s Corp.

The Fed’s record easing policy is “a very big part” of why banks are becoming more inclined to make home loans, Bernanke said Nov. 20.

The benefits of lower borrowing costs and the housing industry’s improvement are starting to accrue for both the broader economy and the Fed’s monetary policy, according to Guy Berger, a Stamford, Connecticut-based U.S. economist at RBS Securities Inc., one of the 21 primary dealers authorized to trade directly with the Fed.

“Housing is gumming up the economy and financial markets less than it was,” Berger said. “The housing market’s improvement does give a little bit more bang to the buck.”

 

Courtesy of you Pasadena Real Estate Agent

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Could Housing Be the Antidote to the ‘Fiscal Cliff’?

November 15, 2012 By Leave a Comment

By: Jeff Cox
CNBC.com Senior Writer

CHICAGO — At a time when most investment professionals are preoccupied with the fiscal peril in Washington, Liz Ann Sonders envisions an economic recovery that will be built, literally, with four walls.

Martin Poole | Stockbyte | Getty Images

Just as it helped trigger the Great Recession, housing also is serving as the lynchpin to growth ahead, said Sonders, chief investment strategist at Charles Schwab.

“People are still underestimating the impact that this is going to have,” she said at the Schwab Impact 2012 conference, where thousands of investment professionals are gathering to chart an uncertain future in financial markets. “What people are underestimating is the ripple effect of confidence.”

While its growth has been far from parabolic, housing has survived what Sonders described as “the third consecutive growth scare” this summer that centered not only on the European debt crisis but also on the slew of fiscal issues facing the U.S. (Read More: Housing Still Precarious in Obama’s Second Term)

The country is wallowing through another year of budget deficits in excess of $1 trillion and national debt that has exceeded the $16 trillion mark.

What’s more, if Congress and President Barack Obama fail to reach deficit-reduction targets, the nation faces going over what Federal Reserve Chairman Ben Bernanke has labeled the “fiscal cliff.”

That entails a round of tax hikes and spending cuts that automatically goes into effect in 2013 and, if not averted, likely would send the U.S. back intorecession.

Sonders said it’s vital to avoid the cliff, particularly at a time when housing is improving and as the U.S. can’t rely on developing economies for its growth. (Read More: ‘Fiscal Cliff’ Mess Is a ‘Grand Canyon’: Bill Gross)

 

 

“We are the cleanest shirt in a pile of dirty laundry,” she said in describing the state of the U.S. economy. “It’s not stellar growth, but certainly the trajectory has improved relative to the rest of the world.”

Sonders points to a slew of indicators — builder confidence, home prices and household formation among them — to show that the real estate market is showing steady progress, albeit gradual.

The Census Bureau recently reported that 1.12 million new households were formed over the past year, a turnaround from the post-recession years though not yet fast enough to make up for the households lost during the downturn.

Household formation fell during the recession as many young adults moved back in with their parents, a trend that has begun to turn.

As for builder confidence, a popular index measuring sentiment is still at levels indicating a weak market, but on the other hand is at its highest level in more than six years.

“Just about every metric in housing is starting to turn here,” she said. “We’re finally having a surge in household formation. We have the right kind of supply and demand balance.”

Still, Sonders knows the economy faces a number of other challenges — the fiscal cliff and all the rest.

“I still see some concerns in the long term,” she said. “We have a lot of traction we have to get in the near term.”

COURTESY OF YOUR NUMBER ONE ARCADIA REAL ESTATE AGENT

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1.7 million new renters expected in next three years

November 7, 2012 By Leave a Comment

Posted by kpanchuk on 11/6/12 at 8:59am

The changing dynamics of today’s housing market could create 1.7 million new multifamily renters between now and 2015, Freddie Mac’s Multifamily Research Group said this week.

The government sponsored enterprise expects the homeownership rate to fall 1 to 2 percentage points if the slow economic recovery continues.

The nation’s expanding renter pool is the result of economic stress, high foreclosure rates and changing demographics, the research group asserted in a new study.

The takeaway from the study is that rental demand is only expected to rise in the coming years.

Individuals and families looking for homes to rent also increased in recent years as the pool of qualified homebuyers shrinks.

The single-family rental market has grown 16% since 2007, suggesting renting is popular across housing product types.

“The research supports the optimism that currently pervades the multifamily market,” said David Brickman, senior vice president of Freddie Mac Multifamily. “It confirms that multifamily is a bright spot in the real estate market and the economy more broadly, and it will likely continue to shine for quite some time.”

kpanchuk@housingwire.com

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Housing Market News: Existing Home Sales Down, Prices Up

October 23, 2012 By Leave a Comment

Learn more about the latest housing market trends for existing home sales, new construction and mortgage interest rates.

ARTICLE |  | BY ADRIANA REYNERI

Sales of existing homes slowed in the month of September, but prices rose for the seventh consecutive month, according to a report released today by the National Association of Realtors, which hails the data as continued signs of a genuine recovery for the housing market.

Total existing home sales fell 1.7 percent from August to September to a seasonally adjusted annual rate of 4.75 million, but the pace of sales was 11 percent higher than the 4.28 million rate for September 2011, according to the realtors group. The national median price for all types of existing homes – including townhomes, condominiums and co-ops – was $183,900 in September, a year-over-year increase of 11.3 percent from September 2011.

“Despite occasional month-to-month setbacks, we’re experiencing a genuine recovery,” Lawrence Yun, the association’s chief economist, said in a statement. “More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest.”

Distressed sales – homes in foreclosure or sold at deep discounts – made up nearly one-fourth (24 percent) of existing home sales in September, up from 22 percent in August but less than the 30 percent share for September 2011. Foreclosures sold at an average discount of 21 percent below market value in August, while short sales were discounted an average of 13 percent.

Total housing market inventory fell 3.3 percent in September to 2.32 million existing homes, a 5.9-month supply at the current sales rate. A year ago, the housing market had an 8.1-month supply of existing homes for sale.

“The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production,” Yun said. Home builders appear to be doing just that, according data released by the Commerce Department on Wednesday. Housing starts rose by 15 percent in the month of September, following a 4 percent increase in August. The spike in activity brings the current pace of home construction to a seasonally adjusted annual rate of 872,000, a 35 percent increase from September 2011. The number of new building permits issued, a forward-looking indicator, rose nearly 12 percent from August to September. Home builders also expressed increasing confidence in the housing market, according to data released by the National Association of Home Builders on Tuesday.

Home mortgage interest rates remain near record lows, according to Freddie Mac, which reported an average rate of 3.37 percent for a 30-year fixed-rate mortgage, just off the record of 3.36 percent, and a new average low for a 15-year fixed rate mortgage of 2.66 percent.  Affordable rates are encouraging some buyers to enter the housing market, but tight credit conditions are continuing to constrain sales, according to anlaysts.

 

COURTESY OF YOUR NUMBER ONE ARCADIA REAL ESTATE AGENT

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