Market Analysis Archives - First Preston HTFirst Preston HT

25June

Real Estate Values Driven by Walkability

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Home prices have continued to grow over the past year. The Case-Shiller Index noted an increase of 10.8% in home prices year-over-year ending in April. One of the factors that has been linked to the rise appears to be a city’s walkability.

George Washington University School of Business and Smart Growth America joined together to release a report ranking the walkability of 30 of the largest cities in the US. They concluded there is a distinct correlation between real estate values and walkability for both residential and commercial properties. Chris Leinberger, Research Professor of Urban Real Estate at GWU commented, “Walkable, urban for-sale housing is by far the most expensive housing in the country. The range, depends on the market, between 40% and 200% greater than driveable, suburban housing. Twenty-five years ago that relationship didn’t exist because walkable (cities back then) was not valued.”

The younger generation of Millennials tend to prefer transportation via car ride-shares, walking, bike shares and rapid transit in an effort to be more environmentally conscious. Washington, D.C. was ranked number 1 as the most walkable city. Those cities boasting more walkable neighborhoods have seen home real estate values bounce back quicker and higher than those with less.

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29May

Home Prices Rise in March

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Just when you thought home prices couldn’t go any higher they are still pushing limits. The S&P/Case-Shiller composite index recorded a 0.9% rise in March on a seasonally adjusted basis. Economists had expected the index to report a 0.7% increase.

Although the index reported a year-over-year home price increase of 12.4% (well above Wall Street’s appraisal) this was down slightly from February’s year-over-year data of 12.9%. As mortgage rates drop again, the housing market could see more growth and higher prices still.

March’s slight drop in year-over-year data reveals that home prices could be moderating. Markets like Las Vegas, San Francisco, and Los Angeles have reported significant slowdowns. Chairman of the index committee at S&P, David Blitzer, said, “Annual price increases for the two composites have slowed in the last four months and 13 cities saw annual price changes moderate in March. The National Index also showed decelerating gains in the last quarter.” It will be interesting to see over the next few months how much higher prices can go and even if they will or not.

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18April

Best Markets for First-Time Homebuyers

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Spring is in the air and with that brings the beginning of home buying season. Everyone knows the three most important things about real estate are location, location, and location. So what are the best markets for first-time homebuyers to purchase in?

Realtor.com compiled a list of the top 10 markets for first-time buyers to purchase residential property in and based it on median listing price, inventory, unemployment rate, and age of inventory:

Pittsburgh, PA
Tampa – St. Petersburg – Clearwater, FL
Philadelphia suburbs in New Jersey
Fort Worth-Arlington, TX
Orlando, FL
Jacksonville, FL
Philadelphia suburbs in PA
Dallas, TX
Raleigh-Durham Chapel Hill, NC
Phoenix-Mesa, AZ

Steve Berkowitz, CEO of Move, Inc. the operator of realtor.com said, “As we head into home buying season, these markets show favorable conditions for first-time buyers, which is encouraging because these buyers are crucial to the housing market. First-time buyers have a widespread impact on the local housing markets. In transitioning from renters to owners, new buyers pay property taxes and other fees and taxes associated with home ownership that benefits local schools and services.”

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4April

Housing Market Thawing Slowly as Supply Increases

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The Federal Reserve’s recent two-day policy meeting painted a picture of sluggish growth in the economy for the first quarter of the year, mostly attributed to colder than normal weather which hindered economic activity. Federal Reserve Chair, Janet Yellen, commented on labor conditions being tougher in some ways now than in any other recession and stressed the Fed’s “extraordinary commitment” to aid recovery in the form of massive bond-buying and super-low interest rates for some time to come. The economic data has not been improving as quickly as many would have hoped for but there have been some positive reports that still point to a rebound. This should have a positive impact on the housing market. It’s time to put the first quarter behind us now and look for signs of growth during the second quarter in jobs, home supply, and home prices.

The U.S job’s report released Friday helped paint a brighter picture for the coming months. The economy added 192,000 new jobs during March and the unemployment rate held at 6.7 percent according the Bureau of Labor Statistics. These numbers came in around consensus but still do not point to a robust rebound. Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said, “Undoubtedly, there was some catch up in hiring following the inclement weather this winter. Still, the underlying hiring trend is encouraging, with more good news expected this spring and summer.” As the employment picture brightens up, this will help strengthen the housing market as more people will look to purchase homes.

Housing supply has been on the rise since January, an important factor in getting the housing market to thaw out and eventually start booming. The noted monthly supply in February was up slightly from January’s five month supply, citing 5.2 months of supply. Six months of supply is considered a healthy housing market. As more homes are built to increase inventory numbers, analysts believe this will help spur growth in the housing market. Homeowners looking to sell their property will have an easier time looking for a new residence, which should encourage sales and purchases.

As discussed in previous blog posts, the continued increase in home prices have made this a seller’s market, but have priced some potential buyers out of the market. While prices have continued to grow, they are increasing at a decreasing rate (January noted a slight drop of 0.08% in the Case-Shiller 20 City Home Price Index). This points to a possible retreat in gains, reflecting a more normal range in prices over the next few months. This will open the door to more market participants and will help get some momentum behind the housing market.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

13March

Housing Geared Up to Grow this Spring

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The mercury is rising and springtime is just around the corner. Regions hit hard by winter storms are starting to thaw and analysts are predicting the housing market will do the very same in coming months. A tight housing supply continues to keep home prices high making this undoubtedly a seller’s market. The overall housing market for the year is positioned for continued growth.

Housing industry and home construction real estate concept as two gears or cog wheels shaped as family residential structures as an icon of neighborhood cooperation and community network connections. Demand for housing is still strong and expected to stay this way through the spring according to some analysts. The Conference Board, a nonprofit association of businesses, found the percentage of consumers who intend to buy a home within the next six months is the highest it has been since 2000. One reason for this rising demand is young people who are still facing a tough job market. A housing analyst with Moody’s Analytics predicts the economy will expand enough this year to enable these young people to move out of their parent’s home. While they may mostly rent, a decrease in vacancy rates should put upward pressure on rental prices prompting interested home buyers who currently rent to make a real estate purchase.

The rise in home prices is great news for millions of homeowners who have been underwater on their mortgage. Rising values should encourage owners to put their property on the market, helping to ease the tight housing supply. CoreLogic reported almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid 2013. Zillow estimated even more borrowers are back above water, citing 3.9 million homeowners. Chief Economist Stan Humphries, of Zillow stated in a recent release, “We’ve reached an important milestone as negative equity has fallen below 20 percent nationwide, which has helped free up marginally more inventory and contribute to further stabilization of the market.”

During the past year, existing home and condo sales have increased 11 percent almost topping the highest level in four years. The National Association of Realtors (NAR) predicts sales will remain about the same during this year.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

4March

New Home Sales Reach 2008 Highs

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Good news surrounding the housing market was released this week. It looks like the effects from abnormally cold weather hasn’t kept the housing market down as formerly suspected. January sales of new single-family homes was reported at a seasonally adjusted annual rate of 468,000 units. This number showed a huge jump in sales, surging to a 5 ½-year high since July 2008.

Previously reported, December home sales were down 7 percent from the month prior. This number was revised upwards from 414,000 to 427,000 sighting just above a 3 percent increase. This revision equates to only a 4 percent drop in new home sales in December showing that the housing market might not have been hit as hard by the cold temperatures as mentioned last week.

The 9.6 percent jump in new home sales in January exceeded what economists had forecast; 400,000 units. The Northeast, which has been bearing the brunt of the cold weather, actually recorded a 73.7 percent increase, hitting a seven month high. The South reported a five-year high sighting a 10.4 percent rise in sales. Sales in the Midwest dropped 17.2 percent and the West recorded an 11 percent increase.

New home sales numbers reported from the Commerce Department are based on signed contracts with the house being in any stage of construction. Existing home sales data is provided by the National Association of Realtors (NAR) and they report once the sales contract has closed. Given this difference, new home sales usually lead existing home sales by a month or two as it can take 30-60 days for a closing on a house to occur. Pending home sales, which are also reported on from time-to-time in this blog, overcome the lagging effect of existing home sales and center around existing home sales where the contract has been signed but not currently closed.

Housing prices still continue to ramp up. The Case-Shiller composite index reported a 0.8 percent increase in prices in December from the prior month, which was higher than economists predicted. Year-over-year, the index reported a 13.4 percent rise. Higher costs of labor and construction materials have been attributed to the increase in home prices.

As we move closer to the spring season it will be interesting what the trend in new home sales along with existing and pending home sales will be.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

10February

New Home Sales Pull Back, Along with Other Things

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The equity market’s quick sprint out of the gate since the New Year seems to have tripped over a rock and new home sales seem to be on the same downward path. The beginning of January experienced positive growth in the markets and upbeat predictions surrounding the economy. However, in the past week, events and expectations have shifted in the opposite direction quickly. Since the beginning of the year, the Dow Jones Industrial Average has plunged 4.39 percent and the S&P 500 has sunk by 2.93 percent, as of the end of January.

This past Wednesday, the Federal Reserve announced a further cut back on its stimulus efforts by another $10 billion dollars, sighting the economy looks strong enough to expand on its own. This lack of availability of liquidity to the emerging markets is taking a toll on their respective currencies, resulting in a flight to quality for most investors. These larger macro-economic events are spilling over into housing and affecting U.S. consumers that are in the market to purchase a house.

New home sales have continued to deteriorate considerably over the last few months due to tight credit qualifications and upward pressure on prices. Traditionally the new home sales market has been composed of 40 percent first time home buyers and 10 percent cash investors. This composition has evolved now to 27 percent first time home buyers and 30 percent cash. As new home prices increase, this inevitably knocks lower income consumers out of the market while catering to those on the high-end.

The FHA product that many first time home buyers utilize has become more expensive, further keeping first time home buyers out of the market. Qualifications have also become more rigorous. Mark Hanson, a California-based housing analyst commented, “In reality, new home sales to me is simply the best gauge of ‘end-user’ demand, which of course is hugely important. But the persistent divergence between new sales and existing highlight just how powerful the ‘transitory’ investor trade has actually been.”

Recently reported new home sales in December fell more than expected, dropping 7 percent to a seasonally adjusted annual rate of 414,000 units. Additionally, November’s new home sales were revised down by 19,000 units. Some economists believe part of this drop reflects a drag due to the cold weather that most of the country experienced last month. On a positive note, new home sales for December 2013 were up 4.5 percent from December 2012.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

22November

Mortgage Applications Dwindle

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Prospective Fed Chairman, Janet Yellen, continues to ensure members of the Senate Banking Committee that she favors robust QE measures until the economy and labor market can exhibit strong growth. She told the panel on Thursday “I consider it imperative that we do what we can to promote a very strong recovery.” This has helped to send the equity markets soaring to new record highs but strong improvements elsewhere remain to be seen. While the Fed believes the asset purchases have been nursing the economy back to health, the housing market has flat-lined or in some cases started to retract.

Notably in housing, mortgage applications continued to dwindle from the prior week’s report. Applications dropped 1.8 percent according to the Mortgage Bankers Association (MBA) for the week of November 8^th. The prior week’s report was revised down from -7 percent to -2.8 percent. These numbers come of the heels of a higher 30-year average fixed mortgage rate for conforming loans of 4.44 percent compared to 4.32 percent in the prior week. The 30-year fixed mortgage rate averages for Jumbo loans and FHA backed loans also experienced increases that reached monthly highs.

Home builder confidence was reported flat due to rising construction costs this month. The recent spike in interest rates over the last few months has hurt mortgage applications and construction costs are affecting the housing supply. Other factors besides interest rates are influencing home buyers. Rick Judson, NAHB Chairman, said in a release, “Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road.”

The number of people looking to purchase a home dropped half a percent according to the purchase index put out by the MBA which is typical in a rising rate environment. Interest rates are still historically low but the continued uncertainty from the Fed and Washington will continue to keep home buyers on the sidelines until more clarity can be seen. The high unemployment numbers also add to the problem. Inevitably this will hurt mortgage application numbers as home buyers sit on the sidelines.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

31October

Construction Spending and Home Prices Take Off

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Homebuilder sentiment was recently reported to be weakening, but U.S. spending on construction isn’t being held back by this news. During the month of August, construction spending almost hit a 4-1/2 year high due to increases from both the private and public arenas, according to the Commerce Department. The increase was .6 percent when compared to the month of July. July’s figures were revised to a number more than double the original estimate. These positive numbers show that there’s hope for growth in the third quarter this year.

Some may think this data seems a little dated, as we are nearing the end of October. The government shutdown delayed the original release of this data, scheduled for October 1st. The private sector of construction spending increased by 1.2 percent to a five-year high leading the market to believe higher interest rates have not lowered builder confidence, nor has it slowed activity as previously assumed.

With lots of money being spent on building new homes (increasing supply) theory would imply prices would start to cool, but this has not been the case. Home prices have jumped more than 12 percent from a year ago making the affordability of buying a home more difficult. Household income growth, up only 3 percent year-over-year, has not kept up with the rise in home prices. Lawrence Yun, chief economist for the National Association of REALTORS® wrote in the September Sales report, “Affordability has fallen to a five-year low, as home price increases easily outpaced income growth. Expected rising mortgage interest rates will further lower affordability in upcoming months.”

For home buyers this could be a challenging environment. First time buyers tend to purchase lower-priced homes. If income growth is not keeping pace with home prices, they could get priced out of the market and be forced to put off their home purchase for the time being. The glimmer of hope in this situation is that fixed mortgage rates have dropped to a four month low (30-year fixed rate is 4.13 percent this week). This helps take a little pressure off the increasing home prices in regards to home affordability. In the long term if incomes don’t keep pace with home prices, construction spending may start to decline due to a lack of demand.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter.

17October

Boomerang Buyers | The Next Big Wave?

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Are “boomerang buyers” the missing link needed to accelerate the housing recovery? How many are eligible to purchase sooner as a result of recent changes to FHA guidelines and are they even interested in owning a home again? Could this impact the profitability model of reo-to-rental investors?

If interest rates remain low, the stage may be set to see a new wave of homebuyers take center stage. It is estimated that new FHA guidelines made it possible for 2.5 million former homeowners to re-enter the market two years earlier than expected. Often referred to as boomerang buyers the 2.5 million new prospective shoppers are former home owners who experienced foreclosure, short sale, or deed-in-lieu agreements between September 2010 and August 2012.

The August 15^th, FHA Mortgagee Letter 2013-26, entitled, “Back to Work—Extenuating Circumstances,” made it possible to shorten the required waiting period for former FHA borrowers from 3 years to as little as 12 months, given certain circumstances.

On October 4^th, Fannie Mae issued a major “Desktop Underwriter” upgrade announcement which will take effect November 16^th. The change may allow short sale (“preforeclosure sale”) participants to re-enter the market after just two years instead of seven. Many borrowers who underwent preforeclosure sales discovered afterward that credit bureaus recorded both a preforeclosure and a foreclosure sale; imposing a seven-year penalty (standard for foreclosures) instead of appropriately applying a 2 year wait. This correction alone may create an additional wave of eligible buyers sooner than expected. During the housing crisis, 4.8 million home-owners forfeited homes due to foreclosure and 2.2 million opted for short sales, as reported by RealtyTrac and cited by CNN Money.

Many of the 7 million former owners who underwent foreclosure, short sale or deeds-in-lieu early in the housing crisis, have already rebuilt their credit and their finances and are eligible to re-enter the market even under the former guidelines.

The question is will boomerang buyers re-enter the market or remain renters? So far this year one in ten homebuyers is a boomerang buyer. And that was prior to FHA and Fannie Mae announcements. According to research firm John Burns Real Estate Consulting, the pace has doubled since last year. According to the 2013 National Association of Realtors (NAR) National Housing Pulse Survey 51% of renters say that “eventually owning a home is one of their highest personal priorities.” Eighty percent of Americans believe that buying is a sound decision.

Boise, Idaho Broker Mike Edgar coaches boomerang buyers back to eligibility. He consulted with more than a dozen such buyers in 2012 and expects twofold growth this year.

The news from FHA and Fannie Mae could be the spark that millions of former owners hoped for and the lift the housing recovery needs.

For information on effective ways to manage institutional and individual portfolios nationwide, or to shop for real estate visit First Preston HT. Like us on Facebook. Follow us on Twitter .