Real Estate

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.

Case-Shiller Price IndexAs 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.

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26March

Key Indicators Point to Possible Pickup in Housing

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some growthThe U.S. housing sector has faced some challenges over the past several months with a colder than normal winter taking center stage in the minds of many.  It seems as though spring couldn’t come soon enough.  Inventories have remained tight, home affordability is still low, and home sales haven’t ticked up as quickly as most had hoped for.  But with warmer temperatures ahead and the economy slowly improving, some key indicators show housing could start to see some growth in the coming months.

Homebuilder confidence rose slightly in March, signaling a pickup in housing.  The National Association of Home Builders/Wells Fargo Index of builder confidence climbed to 47 from 46 in February.  The Index gauges builder perceptions  as “good,” “fair” or “poor” as it relates to current single-family home sales and sales expectations for the next six months.  Although this number rose less than anticipated by economists, it’s a positive sign when taking into account that February’s reading was the biggest drop on record thanks to snowstorms, fewer prospective buyers shopping, and market and labor shortages.  Readings below 50 indicate survey respondents reported more poor market conditions than good.  The index’s components were mixed in March. The component gauging current sales conditions increased one point to 52 and the component measuring buyer traffic increased two points to 33. The component gauging sales expectations in the next six months dropped one point to 53.

U.S. weekly job claims for unemployment benefits increased by 5,000 two weeks ago but this number was lower than expected.  The four-week moving average of new job claims which help to smooth out volatility, fell by 3,500, the lowest level since last November.  Reported claims dropped 14,000 from February to March, pointing to further proof of job growth improvement.  If this trend continues, housing should reap the positive benefits from increased hiring. People who have a steady income are more likely to consider purchasing a home.  On Wednesday, Janet Yellen, the new Federal Reserve Chair, said harsh weather played an important role in the economy’s weakness during the first quarter and added that labor market conditions continue to improve.

Manufacturing also had some positive news to report citing faster than expected growth in February.  ISM’s (Institute for Supply Management) U.S. manufacturing index rose to 53.2 from 51.3 in January. Readings for this index above 50 are a sign of expansion.  Russell Price, senior economist at Ameriprise Financial Inc. in Detroit and, according to Bloomberg data the best ISM index forecaster over the past two years,  commented, “Manufacturing remains a bright spot for the economy.  There’s still a sizable amount of pent-up demand in the consumer and corporate sectors.”  This bodes well for the housing industry which has been facing pent-up demand.  As manufacturing for housing supplies picks up, more homes should be constructed.

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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.

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4March

New Home Sales Reach 2008 Highs

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render of rising arrowGood 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.

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10February

New Home Sales Pull Back, Along with Other Things

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graph in a paper with wooden housesThe 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.

28January

Technology for Real Estate: Discover Which Companies are Tracking You on Facebook

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tug of war shutterstock_63561718With free or paid apps and some websites, there’s a delicate balance between enjoying the  application  and protecting your privacy. Technology for real estate practitioners has exploded with hundreds of cool apps and devices within the last 5 years.

For most successful real estate professionals, social media is not an option; it’s a key strategic marketing tool and an efficient way to connect with your sphere of influence.  

Have you ever downloaded a free app or visited a site that offered to allow access via  your Facebook login? Happens all the time, right? Your login gives that entity access to your Facebook profile. It allows them to park inside your Facebook account, harvesting your information for years or decades, until you eject them. Years of your info can be mined and sold as the result of one login.  

Here’s a quick way to find out which apps are tracking you, what info they are collecting and how to stop them.

To see which apps are tracking you:

  1. Open your Facebook page, click on the settings icon at the top and far right of your screen. From the drop-down menu select “settings”.
  2. Locate and click the   “Apps “  icon inside the settings menu . (Usually on the left of the screen.)
  3. Notice the resulting list of apps that are “signed into your account”.
  4. At the bottom of the list notice and click the “Show All Apps” link. This will reveal the remainder of the list of apps that are tracking you.
  5. To the right of each app’s name, there is an “edit” function and an “X” mark.
  6. Click on the edit function to see what the app knows about you.  Adjacent to the “Your basic info (?) “  bullet point,  click the question mark to learn more details about data points being shared.
    •  I learned that the first app I clicked has my email address, profile picture, gender, user ID, list of friends, and “any other information which is rated public.”
    •  I noticed these statements, “ This app may post on your behalf, including status updates, photos and more. This app can also access posts in your News Feed.”
    • Check the settings for each app and modify any unwanted access by clicking the edit function to limit access or click the “X” icon to end the app’s access to your account. The app may stop working for you; so weigh your options prior to making your edits.

Hopefully this article will help users to strike the perfect  balance between enjoying your favorite apps and protecting your privacy.

For more information or detailed screen shots of the instructions above, check out a great article from Business Insider, written by Jim Edwards. 

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

22January

The Housing Market in 2014

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It is the start of a new year which comes with  new predictions of what the housing market will experience over the course of the next 12 months.  A look back at the housing market in 2013 showed a road to recovery, albeit slow.  Forecasts for 2014 don’t seem to be overly optimistic so far. Pressure from higher interest rates, more rigorous credit qualification standards, and tight housing supply make the 2014 outlook a more challenging one.

HousingMarketWeak residential mortgage origination results  for  the fourth quarter were recorded  by Wells Fargo and JP Morgan Chase. Therefore analysts expectations for 2014 are being revised downward.  The Mortgage Bankers Association (MBA) lowered its mortgage origination projections for 2014 by $57 billion to $1.12 trillion.  Mike Fratantoni, chief economist for MBA, commented, “Despite an economic outlook of steady growth and a recovering job market, mortgage applications have been decreasing—likely due to a combination of rising rates and regulatory implementation, specifically the new Qualified Mortgage Rule.” A large portion of the reduction is refinance applications which are now estimated to decrease 60 percent this year from last year.

Mortgage rates are expected to rise above 5 percent this year which could put further pressure on the housing market.  The MBA has lowered its 2014 projections relating to purchase originations to $677 billion down from $711 billion that was previously forecast.  All-cash purchases still make up 32 percent of the housing market according to November readings from the National Association of Realtors (NAR).  This number is up from October.

Home builder confidence fell in January following a steep rise in December.  “Rising home prices, historically low mortgage rates and significant pent-up demand will drive a continuing, gradual recovery in the year ahead.  However, the pace of the recovery could be stronger were it not for rising construction costs and inaccurate appraisals that are keeping some home sales from going through,” said NAHB Chief Economist David Crowe.

There is some good news surrounding the housing market according to Patrick Newport of IHS Global, “Builders are facing the headwind of rising construction costs, but buyer traffic has held up well despite rising mortgage rates. After hitting a plateau in the middle of 2013, the market for new homes is poised for a stronger 2014.” It will be interesting to see how the housing market adjusts throughout the year and whether or not it ends up stronger than 2013.

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10January

Home Prices Reach for the Stars

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Temperatures across the U.S. are plunging and have left many cities frozen in ice and snow.  One thing not plunging is home prices.  The housing market has continued to experience rising prices along with rising mortgage rates leading to a decline in purchasing power.  Rising home prices and rates deal a double blow to affordability.

According to the S&P Case-Shiller Home Price Index, which follows 20 large cities in the U.S., home prices rose 13.61 percent year-over-year and increased .18 percent from the month of October to November.  Las Vegas had the largest year-over-year gain of 27.05 percent while New York and Cleveland tied for the smallest gain of 4.9 percent.

HomePriceReachUpCoreLogic’s most recent home price report for November 2013, reported home prices (including distressed sales) rose 11.8 percent year-over year.   November’s increase in home prices is the 21st straight month of year-over-year growth.  CoreLogic reports home prices gained 0.3 percent (excluding distressed sales) in November versus October.  CoreLogic economist Mark Fleming said in the release, “The housing market paused as expected in November for the holiday season with very low month-over-month appreciation.”

 According to CoreLogic data, 2013 was the best year for rising home prices in the past 8 years.  It is projected that  2013 year-end results will  show an overall  jump of 11.5 percent.  “It’s too early to tell if the marginal dip in the annual pace of house price inflation in November marks the start of the slowdown in price gains that we are expecting.  But we are confident that annual price gains will not remain in double-digit territory for much longer,” Capital Economics’ Paul Diggle commented.

This is positive news for potential home buyers  still waiting to get into the game.  Mortgage rates dipped to around 4.5 percent last week and many economists doubt this will hinder home sales in the short term (as noted in several  recent blogs).  Rates are still historically low.  Due to the recent pull back in mortgage rates, refinances ticked up 5 percent last week.  Overall refi activity is down 69 percent from a year ago when rates were more than a percentage point lower.

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.

31December

Home Mortgage Applications Hit 13-year Low

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Applications DownAs 2013 winds to a close, economic conditions have made large strides since the beginning of the year.  2013 Definitely had its fair share of headwinds surrounding the economy, job market and housing market.   Stock markets experienced strong gains the past few days, reaching new highs.  Home prices have increased and foreclosure rates are on the decline.  One thing holding the housing market back however is home mortgage applications.

According to the Mortgage Bankers Association (MBA), U.S. home mortgage applications fell for the  second consecutive week,  hitting a 13-year low, dropping 6.3 percent from the week prior,  December 20th.  Rising mortgage rates might be scaring away some potential home buyers.  The 30-year fixed mortgage rate averaged 4.64 percent last week.  Rates have steadily increased in response to the Federal Reserve’s decision to begin tapering asset purchases by $10 billion a month.

“Following the Federal Reserve’s taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008.  Purchase application volume was weak too, continuing to run more than ten percent below last year’s pace. Notably, government purchase application volume is almost 25 percent below where it was at this time last year, with the larger drop compared to conventional purchase likely due to the increase in FHA premiums over the course of the year,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.

As rates continue to tick up, the number of refinances will drop accordingly.  Refinances as a percentage of total mortgage activity, dropped to 65 percent from 66 percent in the week prior .  The MBA’s seasonally adjusted index of refinancing applications dropped 7.7 percent.

Reported November new home sales numbers offered more attractive data than application numbers.  Signed purchase contracts for new  homes dropped slightly but this was after October’s data was revised up 25 percent.  Squaring “the near highest level of new home sales in years with a multiyear low in mortgage applications to buy a home continues to tell me that investors are beginning to get their feet wet in the new home space with the goal of renting these homes out,” analyst Peter Boockvar of the Lindsey Group said. “The secular shift to renting should continue.”  When Boockvar broke down the numbers by region in the U.S. he noted, “The South is surging; the rest of the nation is not.  If you back out the South October surge, the numbers are in line with the tepid demand since July, when [mortgage] rates surged.”

With 2014 right around the corner, it will be interesting to see what the new year holds for the housing market.

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24December

Oh Come, All Ye Taper

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The long awaited final Federal Reserve meeting of the year and concluding meeting for Bernanke’s term has arrived.  Thursday the Federal Reserve released the news that it would finally begin to taper quantitative easing, albeit a slight taper, signaling the Federal Reserve is seeing signs of growth and strength in the job market.  Federal Reserve officials stated they would taper bond purchases from $85 billion a month to $75 billion.  How will this affect you and the housing market?

TaperBondsAs the Federal Reserve slows its printing press in light of the taper, rates are likely to increase, meaning homebuyers will pay more for home loans in the form of mortgage rates and business loans will cost more as well.  Current 30-year fixed rates are hovering around 4.57 percent and will probably head higher.  Ellen Haberle, an economist at the online real-estate brokerage Redfin commented, “Homebuyers aren’t going to be happy.  In the weeks ahead, mortgage rates are likely to reach or exceed 5 percent.”  It is important to note these rates are still at historic lows even though they are starting to climb.  Analysts believe this is not enough to halt the housing market recovery.  “It’s a better economy that gets people to buy houses,” said senior financial analyst at Bankrate.com, Greg McBride.

In most recent housing data the fear of a taper seems to have vanished.  Housing starts soared to a six-year high, jumping 22.7 percent in November according to the Commerce Department.  This was the biggest increase since January 1990 and the highest level of starts since February 2008.  Starts for multi-family homes jumped 26.8 percent and have risen strongly during the recovery as demand for rentals remains high for those unemployed or unable to qualify for a home loan.

Homebuilder confidence this month was positive and builders were optimistic regarding current sales conditions, forward looking sales and potential homebuyers.  The National Association of Home Builders monthly sentiment index (HMI) increased 4 points, its highest level since August.  “This is definitely an encouraging sign as we move into 2014.  This indicates that an increasing number of builders have a positive view on where the industry is going,” says NAHB Chairman Rick Judson, a homebuilder from Charlotte, N.C.

Now that there is more certainty in the housing market and the economy, businesses and consumers can make more educated decisions concerning hiring, taking out loans and making large purchases.  Craig Strent, CEO of Apex Home Loans in Rockville, MD, stated, “Mortgage interest rates generally hate the idea of uncertainty, so this definitely brings some certainty in terms of the Fed showing their cards as far as the direction of rates.”

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.