The big question for home buyers and sellers today is: "Where are home prices headed?" People want to know if now is a good time to buy or sell, or if they should wait. We all need to stay on top of trends in real estate values -- so what's a good way to analyze the situation?
Yale economist Robert Shiller states it bluntly: "If you look at the trend in rents to see where housing prices are headed, you're looking at the right measure." Shiller is the co-developer of the S&P Case/Shiller Home Price Indices that monthly track residential real estate values nationally and in 20 metro areas.
Traditionally, people have been willing to pay a modest premium to own a home rather than rent it. Recent studies report that in 1999, rents averaged 87% of the after-tax mortgage payment for houses and condos of similar size in the same neighborhood.
When home prices took off, this percentage changed. By mid-2006, rents had fallen to less than 60% of after-tax mortgage payments. In some markets, owners were paying twice as much as renters for a similar property in the same neighborhood. In a few places, owner monthly payments were three times average rents.
The 87% ratio of rent to ownership cost for 1999 is a good benchmark because it stayed around that level throughout the 1990's and the steep rise in home prices hadn't really begun.
With that as our guide, we can conclude that home prices at last appear to be stabilizing. By the end of October 2009, rents on average were up to 83% of ownership costs!
Conditions vary from market to market, so check your own area. But with historically low mortgage rates, plus the homebuyer tax credit, this is a great time to be buying or selling.
Wednesday, February 24, 2010
Monday, February 22, 2010
National Real Estate News
Builders are jumping on the recovery bandwagon, as January Housing Starts beat consensus estimates, heading UP 2.8% to an annual rate of 591,000 units. Single-family starts are now 35.6% up from their low a year ago. Total new building permits dropped a tad in January, but single-family permits were up 0.4% for the month and UP 48.2% from a year ago.
The trend indicates more improvement ahead. Permits for single-family homes are 7.4% higher than starts in states requiring building permits, well above the historical norm. Many observers feel home building is in the early stages of a serious rebound. Supporting this, the National Association of Home Builders reported builder confidence higher in February, going from 15 to 17 points, 8 points up from a year ago.
Although the Fed will stop buying Mortgage Backed Securities (MBS) at the end of March, some analysts now feel this may not cause mortgage rates to rise much, if at all. That's because Fannie Mae and Freddie Mac recently announced their plan to buy up to $200 billion in delinquent loans from their own MBS and pass-through pools. Friday, the Mortgage Bankers Association (MBA) reported the percentage of delinquent home loans shrank in Q4. MBA chief economist Jay Brinkmann feels that fewer new problem mortgages could be signaling the "beginning of the end" of the foreclosure crisis. Let's hope so...
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
The trend indicates more improvement ahead. Permits for single-family homes are 7.4% higher than starts in states requiring building permits, well above the historical norm. Many observers feel home building is in the early stages of a serious rebound. Supporting this, the National Association of Home Builders reported builder confidence higher in February, going from 15 to 17 points, 8 points up from a year ago.
Although the Fed will stop buying Mortgage Backed Securities (MBS) at the end of March, some analysts now feel this may not cause mortgage rates to rise much, if at all. That's because Fannie Mae and Freddie Mac recently announced their plan to buy up to $200 billion in delinquent loans from their own MBS and pass-through pools. Friday, the Mortgage Bankers Association (MBA) reported the percentage of delinquent home loans shrank in Q4. MBA chief economist Jay Brinkmann feels that fewer new problem mortgages could be signaling the "beginning of the end" of the foreclosure crisis. Let's hope so...
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
Friday, February 19, 2010
Inflation Concerns in the Future
The Consumer Price Index is a very closely watched report as it is one of the leading indicators of inflation. In January the CPI rose by .2%, less than the .3% expected. This left the year over year CPI at 2.6%, below expectations of 2.8%. The more closely watched Core CPI fell by .1%, below expectations of a .1% rise. The last time the Core CPI showed a negative monthly reading was 28 years ago.
While inflation is virtually non-existent right now, things can change down the road. There is much talk about inflation amongst Fed officials, economists and the media. There are many different opinions surrounding the topic. Whenever there is an abundance of money being pushed into the system, one must worry about inflation resulting.
Fed President Thomas Hoenig has recently expressed much concern over future inflation. He is so passionate about it, he has in his office a framed picture of a 500,000 German mark bill – which would have purchased a home in 1921, but due to sudden inflation, wouldn’t purchase a loaf of bread just two years later.
Real estate is an investment that has been utilized as a hedge against inflation. With future inflation concerns, low home prices, homebuyer tax credits, and historically low interest rates, now represents one of the best opportunities in history to purchase real estate!
~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com
While inflation is virtually non-existent right now, things can change down the road. There is much talk about inflation amongst Fed officials, economists and the media. There are many different opinions surrounding the topic. Whenever there is an abundance of money being pushed into the system, one must worry about inflation resulting.
Fed President Thomas Hoenig has recently expressed much concern over future inflation. He is so passionate about it, he has in his office a framed picture of a 500,000 German mark bill – which would have purchased a home in 1921, but due to sudden inflation, wouldn’t purchase a loaf of bread just two years later.
Real estate is an investment that has been utilized as a hedge against inflation. With future inflation concerns, low home prices, homebuyer tax credits, and historically low interest rates, now represents one of the best opportunities in history to purchase real estate!
~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com
Tuesday, February 16, 2010
National Real Estate News
The National Association of Realtors last Thursday reported existing home sales UP 27.2% for the last three months of 2009 versus a year earlier. This amounted to a seasonally adjusted annual rate of 6 million homes. -- a 13.9% increase over the third quarter's annual rate of 5.29 million homes. Clearly, buyers are taking advantage of the low mortgage interest rates and the tax credit that was extended and expanded by Congress.
The existing home sales increase from Q3 to Q4 occurred in 48 states and D.C., with 32 of those states showing double-digit gains. Year-over-year, sales were higher in 49 states and D.C., up by double digits in all but 3 states. Distressed property made up just 32% of Q4 sales versus 37% of sales a year ago.
The national median price of an existing single-family home, at $172,900, was down 4.1% year-over-year -- but that was the smallest price decline in over two years. Even better, out of the 151 metropolitan statistical areas studied, 67 of them showed a RISE in the median home price!
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
The existing home sales increase from Q3 to Q4 occurred in 48 states and D.C., with 32 of those states showing double-digit gains. Year-over-year, sales were higher in 49 states and D.C., up by double digits in all but 3 states. Distressed property made up just 32% of Q4 sales versus 37% of sales a year ago.
The national median price of an existing single-family home, at $172,900, was down 4.1% year-over-year -- but that was the smallest price decline in over two years. Even better, out of the 151 metropolitan statistical areas studied, 67 of them showed a RISE in the median home price!
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
Monday, February 8, 2010
Eastside Statistics - January, 2010
Current Residential & Condo listings - 3,742 (down 15.09% from last year)
New listings taken this month - 1,462
Pending sales this month - 723 (up 68.93% from last year)
Percent of listings that sold this month - 19.32%
Median closed sales price - Jan. ‘09, $447,500
Median closed sales price - Jan. ‘10, $445,000
Rate of appreciation = -0.56%
~ Courtesy of NWMLS
King County Statistics - January, 2010
Current Residential & Condo listings - 10,679 (down 11.27% from last year)
New listings taken this month - 4,312
Pending sales this month - 2,211 (up 47.40% from last year)
Percent of listings that sold this month - 20.70%
Median closed sales price - Jan. ‘09, $364,137
Median closed sales price - Jan. ‘10, $350,000
Rate of appreciation = -3.88%
~ Courtesy of NWMLS
New listings taken this month - 4,312
Pending sales this month - 2,211 (up 47.40% from last year)
Percent of listings that sold this month - 20.70%
Median closed sales price - Jan. ‘09, $364,137
Median closed sales price - Jan. ‘10, $350,000
Rate of appreciation = -3.88%
~ Courtesy of NWMLS
Snohomish County Statistics - January, 2010
Current Residential & Condo listings - 4,901 (down 12.40% from last year)
New listings taken this month - 1,924
Pending sales this month - 949 (up 42.07% from last year)
Percent of listings that sold this month - 19.36%
Median closed sales price - Jan. ‘09, $295,000
Median closed sales price - Jan. ‘10, $267,995
Rate of appreciation = -9.15%
~ Courtesy of NWMLS
New listings taken this month - 1,924
Pending sales this month - 949 (up 42.07% from last year)
Percent of listings that sold this month - 19.36%
Median closed sales price - Jan. ‘09, $295,000
Median closed sales price - Jan. ‘10, $267,995
Rate of appreciation = -9.15%
~ Courtesy of NWMLS
Northwest MLS members report a 28 percent increase in pending sales from last year
“More certainty” and “more stability” in the market contributed to a boost in activity during January, according to officials from Northwest Multiple Listing Service (NWMLS). Brokers reported an increase of nearly 27% in pending sales (purchase offers made and accepted, but not yet closed) from December and a 28% jump from twelve months ago.
Two other indicators of activity fell -- inventory and sales prices. There were 3,915 fewer active listings of single family homes and condominiums in the NWMLS system compared to a year ago, a drop of about 10.3%. Sales prices area-wide for January’s closed sales declined about 4.8% from year-ago figures. (The NWMLS service area covers 21 counties.)
“We anticipated there would be improved sales in the first-time buyer market and are encouraged to see activity gaining ground in the higher price ranges as well,” observed NWMLS director Joe Spencer, the president and COO of John L. Scott Real Estate. He cites historically low interest rates, great affordability, and the home buyer tax credits as factors for “helping push us into a more stable market,” and noted he expects to see this momentum continue in the coming months.
Currently, there is about a 6.1 months supply (ratio of houses for sale to houses sold). Economists consider a supply of 3-to-6 months to be a balanced market.
“The market has definitely picked up, with more interest and action by buyers,” reports Dick Beeson, broker/owner of Windermere Commencement Associates in Tacoma and a member of the NWMLS board of directors. “Sellers are expecting better results this year than last year, but not necessarily higher prices,” he remarked.
Short sales and tax credits may be skewing some of the data, according to industry insiders. “The short sale inventory continues to climb yet many banks are starting to get their act together and actually making it easier for agents and buyers to get faster answers to their offers,” Beeson said. “Shorter closing times are good for everyone,” he stated.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), believes the tax credit is skewing market data. Commenting on NAR’s report of December activity, which showed a 10.9 percent jump in pending sales from December 2008 and 1.0 percent increase from November, Yun said “There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded.” Noting December was the fifth highest monthly tally in two years, Yun stated “These swings are masking the underlying trend, which is a broad improvement over year-ago levels.”
Beeson said the fast-approaching tax credit deadline is expected to boost activity in the next few months. “This year will be better than last because of more certainty in the market,” he remarked.
Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30 to finalize the transaction to qualify for a tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Two other indicators of activity fell -- inventory and sales prices. There were 3,915 fewer active listings of single family homes and condominiums in the NWMLS system compared to a year ago, a drop of about 10.3%. Sales prices area-wide for January’s closed sales declined about 4.8% from year-ago figures. (The NWMLS service area covers 21 counties.)
“We anticipated there would be improved sales in the first-time buyer market and are encouraged to see activity gaining ground in the higher price ranges as well,” observed NWMLS director Joe Spencer, the president and COO of John L. Scott Real Estate. He cites historically low interest rates, great affordability, and the home buyer tax credits as factors for “helping push us into a more stable market,” and noted he expects to see this momentum continue in the coming months.
Currently, there is about a 6.1 months supply (ratio of houses for sale to houses sold). Economists consider a supply of 3-to-6 months to be a balanced market.
“The market has definitely picked up, with more interest and action by buyers,” reports Dick Beeson, broker/owner of Windermere Commencement Associates in Tacoma and a member of the NWMLS board of directors. “Sellers are expecting better results this year than last year, but not necessarily higher prices,” he remarked.
Short sales and tax credits may be skewing some of the data, according to industry insiders. “The short sale inventory continues to climb yet many banks are starting to get their act together and actually making it easier for agents and buyers to get faster answers to their offers,” Beeson said. “Shorter closing times are good for everyone,” he stated.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), believes the tax credit is skewing market data. Commenting on NAR’s report of December activity, which showed a 10.9 percent jump in pending sales from December 2008 and 1.0 percent increase from November, Yun said “There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded.” Noting December was the fifth highest monthly tally in two years, Yun stated “These swings are masking the underlying trend, which is a broad improvement over year-ago levels.”
Beeson said the fast-approaching tax credit deadline is expected to boost activity in the next few months. “This year will be better than last because of more certainty in the market,” he remarked.
Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30 to finalize the transaction to qualify for a tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
National Real Estate News
The Pending Home Sales Index recovered from its November slump, increasing 1.0% in December, putting it 10.9% over its level of a year ago. National Association of Realtors (NAR) chief economist Lawrence Yun sees "...a broad improvement over year-ago levels. December activity was the fifth-highest monthly tally in two years." The slump was attributed to the rush before November to grab the tax credit set to expire at the end of that month.
We now know the tax credit was extended to buyers who can sign a contract by April 30 and close on the home by June 30. It's also been expanded, adding a $6500 credit for repeat buyers to the $8,000 credit for first timers. The NAR's Yun estimates 2.4 million households should take advantage of the credit this year.
The NAR also released their adjusted overall outlook for this year and next. They estimate existing home sales will grow from 5.19 million in 2009 to 5.66 million in 2010 and 5.7 million in 2011. They see new home sales growing from 375,000 in 2009 to 446,000 in 2010 and 637,000 in 2011. They believe prices have bottomed, projecting a 3.4% hike in the median price for existing homes to $179,800 this year and then a 4.3% rise to $187,500 in 2011. New homes should go up 3.7% this year to a $221,300 median price and then 4.7% in 2011 to $231,700.
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
We now know the tax credit was extended to buyers who can sign a contract by April 30 and close on the home by June 30. It's also been expanded, adding a $6500 credit for repeat buyers to the $8,000 credit for first timers. The NAR's Yun estimates 2.4 million households should take advantage of the credit this year.
The NAR also released their adjusted overall outlook for this year and next. They estimate existing home sales will grow from 5.19 million in 2009 to 5.66 million in 2010 and 5.7 million in 2011. They see new home sales growing from 375,000 in 2009 to 446,000 in 2010 and 637,000 in 2011. They believe prices have bottomed, projecting a 3.4% hike in the median price for existing homes to $179,800 this year and then a 4.3% rise to $187,500 in 2011. New homes should go up 3.7% this year to a $221,300 median price and then 4.7% in 2011 to $231,700.
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
Friday, February 5, 2010
Unemployment Reports Cause Major Volatility
The jobs reports were released today and the numbers were both good and bad… depending on which survey you are looking at!
Analysts were expecting to see a gain of 15,000 new jobs created. Instead, the report showed a loss of 20,000 jobs. At the same time, the unemployment report was released at 9.7%, down from 10.0% just a month ago. Unemployment numbers for both October and December have been revised considerably worse as well.
Both the stock and bond markets have been trying to make up their mind as to how to react to this information, causing great volatility in the markets today. On January 19th, the Dow was at 10,725, and is currently down to 9,974. Mortgage bonds started out the day down 25 basis points and have since turned around and at one point were up by 19 basis points…a nearly 50 point swing in one day!
Volatility may be more prevalent in the weeks ahead as the Fed purchasing of mortgage backed securities comes to an end. We have been warning for several weeks now that higher rates are likely on the horizon. If you or someone you know is in the market to purchase or refinance, don’t miss out on these rates!
~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com
Analysts were expecting to see a gain of 15,000 new jobs created. Instead, the report showed a loss of 20,000 jobs. At the same time, the unemployment report was released at 9.7%, down from 10.0% just a month ago. Unemployment numbers for both October and December have been revised considerably worse as well.
Both the stock and bond markets have been trying to make up their mind as to how to react to this information, causing great volatility in the markets today. On January 19th, the Dow was at 10,725, and is currently down to 9,974. Mortgage bonds started out the day down 25 basis points and have since turned around and at one point were up by 19 basis points…a nearly 50 point swing in one day!
Volatility may be more prevalent in the weeks ahead as the Fed purchasing of mortgage backed securities comes to an end. We have been warning for several weeks now that higher rates are likely on the horizon. If you or someone you know is in the market to purchase or refinance, don’t miss out on these rates!
~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com
National Real Estate News
The week began with December Existing Home Sales dropping 16.7%. Some observers felt this was the result of uncertainty over the homebuyer tax credit, scheduled to expire at the end of November. The tax credit was, as we now know, extended into this year, but it wasn't announced soon enough to help December sales. Nonetheless, Existing Home Sales are UP 15.0% over a year ago. And the median price of an existing home is now $178,300, UP 1.5% over a year ago and the best year-over-year comp since 2006. Finally, inventories are now down to 3.29 million, their lowest reading since March 2006.
Wednesday, New Home Sales were reported at a 342,000 annual rate, down 7.6% for December. But inventories are now at 231,000, 59.6% below their mid-2006 peak and at their lowest level since 1971, when the population was two thirds its size today. The Case-Shiller index of home prices in the 20 biggest markets went up a seasonally-adjusted 0.2% in November. This was the sixth month in a row the index gained and prices increased in 14 of the 20 markets. The FHFA price index for homes bought with conforming mortgages went up 0.7% in November, its fifth advance in the last seven readings.
According to Freddie Mac's weekly Primary Mortgage Market Survey, mortgage rates inched down for the fourth week in a row. Prospective homebuyers and owners looking to refinance should note that the Fed reiterated its intention to end mortgage bond purchases on March 31. Many experts feel this will make rates head up a bit.
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
Wednesday, New Home Sales were reported at a 342,000 annual rate, down 7.6% for December. But inventories are now at 231,000, 59.6% below their mid-2006 peak and at their lowest level since 1971, when the population was two thirds its size today. The Case-Shiller index of home prices in the 20 biggest markets went up a seasonally-adjusted 0.2% in November. This was the sixth month in a row the index gained and prices increased in 14 of the 20 markets. The FHFA price index for homes bought with conforming mortgages went up 0.7% in November, its fifth advance in the last seven readings.
According to Freddie Mac's weekly Primary Mortgage Market Survey, mortgage rates inched down for the fourth week in a row. Prospective homebuyers and owners looking to refinance should note that the Fed reiterated its intention to end mortgage bond purchases on March 31. Many experts feel this will make rates head up a bit.
~ Courtesy of Chuck Chrobak, Golf Savings Bank, 425.330.9657, CChrobak@GolfSavingsBank.com
Upcoming FHA Changes Announced
The Federal Housing Administration (FHA) has announced details of changes intended to strengthen its capital reserves which were reported to be headed into dangerously low territory late last year. The changes are designed to increase FHA’s income from borrowers while reducing its portfolio’s risk. The increased popularity of FHA in the absence of alternative products has resulted in FHA funding 30% of real estate transactions today.
Policy changes go into effect for case numbers assigned as of April 5th, 2010:
Upfront Mortgage Premium to be raised from 1.75% to 2.25%.
On a $300,000 loan, the .5% increase is equivalent to an extra $1,500 financed into the loan amount which will increase the borrower’s payment by roughly $8 month.
Allowable Seller Concessions reduced from 6% to 3%.
The current level exposes FHA to excess risk of inflated values.
Increased Enforcement of FHA Lenders.
Enhanced monitoring of lender performance and compliance with FHA guidelines and standards. HUD is pursuing increased legislative authority for enforcement.
Consumers with FICO scores below 580 must put 10% down.
Nothing lost here as most lenders already require a 660 minimum credit score for all borrowers. FHA is continuing to review its overall response to housing market conditions and evaluating lending standards.
If you have specific questions about the upcoming changes, please contact LoanCentral.
~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com
Policy changes go into effect for case numbers assigned as of April 5th, 2010:
Upfront Mortgage Premium to be raised from 1.75% to 2.25%.
On a $300,000 loan, the .5% increase is equivalent to an extra $1,500 financed into the loan amount which will increase the borrower’s payment by roughly $8 month.
Allowable Seller Concessions reduced from 6% to 3%.
The current level exposes FHA to excess risk of inflated values.
Increased Enforcement of FHA Lenders.
Enhanced monitoring of lender performance and compliance with FHA guidelines and standards. HUD is pursuing increased legislative authority for enforcement.
Consumers with FICO scores below 580 must put 10% down.
Nothing lost here as most lenders already require a 660 minimum credit score for all borrowers. FHA is continuing to review its overall response to housing market conditions and evaluating lending standards.
If you have specific questions about the upcoming changes, please contact LoanCentral.
~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com
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