Posts in Market Update
The National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI) rose in July.
Home builder confidence in the market for newly constructed single-family homes rose six points to a reading of 57. NAHB reports that this was the third consecutive rise in the HMI and its highest reading since January 2006.
Three components used in compiling the HMI reading include current sales, which gained five points for a reading of 60. Confidence in prospective buyer traffic rose from 40 to 45, and sales expectations for the next six months rose from a reading of 60 to 67.
HMI: All Regions Post Gains
Regional data reflected gains in builder confidence for all U.S. geographic regions. Regional data is based on a three-month rolling average of builder confidence in each region.
The Northeast gained four points for a reading of 40; the Midwest gained eight points for a reading of 54. The South gained five points for a reading of 50, and the West gained three points for a reading of 51.
Readings of more than 50 indicate that more builders view conditions as good than poor. NAHB Economist David Crowe indicated that growing confidence is driven by factors including lower prices for building materials and more buyers vying for fewer available homes. A shortage of building space and available existing homes is improving markets for new homes.
Housing Starts Decline In June
In spite of growing home builder confidence, housing starts for June fell to their lowest level in nearly a year. Regional weather conditions contributed to the dip in housing starts, which surpassed June 2012 housing starts by 10.40 percent.
June's housing starts fell to 836,000 on a seasonally-adjusted annual rate, and fell shy of economist's expectation of 950,000 housing starts. Expectations were based on May's original tally of 914,000 housing starts, which was revised upward to 928,000 on Wednesday.
The S&P Case-Shiller Home Price Indices for April indicate that the housing recovery gained ground.
In April 2013 average home prices tracked in the Case-Shiller 10 and 20-city Composites increased by 11.60 and 12.10 percent year-over-year. On a month-to-month basis, the Composites increased by 2.60 and 2.50 percent respectively.
According to David M. Blitzer, Chairman of the S&P Dow Jones Indices' Index Committee, the 10-and 20- City Composites experienced their largest month- to- month gains since their inception: "Thirteen cities posted month- to-month gains of two percent or more, with San Francisco leading with a month-to-month gain of 4.90 percent."
The 10-and-20 City Indices reported the highest year-over-year gains in home prices since 2006. Cities where home prices gained more than 20 percent year-over-year included Atlanta, Las Vegas, Phoenix and San Francisco. Phoenix posted its 12th consecutive month of double-digit increases in home prices while San Francisco home prices increased year-over-year by an average of 23.90 percent. Home prices increased year-over-year in 19 the 20 cities included in the 10-and 20 City Composites, with home prices in Detroit remaining flat.
Mortgage Loan Requirements Showing Signs Of Loosening
Mr. Blitzer also noted that according to the most recent Fed Senior Loan Officer Opinion Survey, some lenders are beginning to relax credit requirements for mortgage loans. This good news, along with the availability of adjustable-rate mortgage loans is expected to help with maintaining affordability and providing access to homes for more buyers.
According to the S&P Case-Shiller 10-and-20 City Composites, home prices fell approximately 26 to 27percent from their highest in June 2006 to their lowest in March 2012. As of April 2013, average home prices had recovered by 13.10 percent for the 10-City Composite and 13.60 percent for the 20-City Composite.
More Reports Show Ongoing Housing Recovery
The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, reported that home prices increased an average of 7.40 percent year-over-year as of April 2013, and rose by 0.70 percent between March and April 2013.
Wednesday's Federal Open Market Committee (FOMC) statement indicates the Federal Reserve's commitment to keeping long term interest rates and inflation under control.
The Fed will continue monitoring inflation, but does not expect inflation to rise more than 0.50 percent above its target rate of 2.00 percent over the next one to two years.
Ongoing monitoring of inflation and unemployment, as well as developing economic news, will guide the Fed in its future determinations concerning policy for its present iteration of quantitative easing (QE3).
Currently, the Fed purchases $85 billion of treasury securities and mortgage –backed securities each month with the goal of keeping long-term interest rates lower.
This includes mortgage rates, which can assist homebuyers with qualifying for mortgage loans in an environment of increasing home prices. Other goals include stabilizing the labor market, and limiting inflation.
Job Growth To Be Determining Factor On Fed Interest Rate Action
The statement also noted that the Fed will keep its interest rates between 0.00 and 0.25 percent, until the Fed sees the national unemployment rate fall below 6.50 percent.
While noting that the housing sector is improving, the Fed stated concerns about ongoing high unemployment rates. Jobs are a key aspect to supporting the economy, as 70 percent of the U.S. economy involves the purchase of goods and services by consumers.
The Fed also repeated its position to evaluate the efficacy of its quantitative easing program; if the agency finds that the program is not achieving their desired objectives, changes to the program can be expected.
While a clear majority of FOMC members voted to keep current policies intact, one member voted against this course of action citing the potential for continued quantitative easing at current levels to fuel inflation.
The bottom line for today's statement is that the Fed continues its "wait and see" position concerning quantitative easing and low federal interest rates.The committee also re-asserted its intention to gradually reduce quantitative easing when it's time for a change.
Last week's positive employment reports were good news for the economy, which typically causes mortgage rates to rise, but mortgage rates ended the week lower.
As of Thursday, Freddie Mac reports that the average mortgage rate for a 30-year fixed rate mortgage was 3.63 percent with borrowers paying their closing costs and 0.8 percent in discount points.
The average mortgage rate for a 15 year loan was 2.79 percent with borrowers paying their own closing costs and 0.8 percent in discount points.
Strong Retail Sales Show Consumer Confidence Improving
In other economic news, retail sales for February surpassed Wall Street expectations and grew by 1.1 percent against predictions of 0.5 percent and January's reading of 0.1 percent.
Retail sales account for 70 percent of the U.S. economy and growing retail sales are a strong indicator of economic recovery, which generally causes mortgage rates to rise as bond prices including Mortgage Backed Securities fall.
With this strength in the retail sector, it may be a good time to consider locking interest rates for purchase and refinance transactions.
Results of Treasury auctions held Tuesday, Wednesday and Thursday were mixed.
Tuesday's auction of 3-year notes saw average demand, Wednesday's auction of 10-year notes was strong, and Thursday's auction of 30-year bonds drew a weak response.
Financial Reporting Strong Across Multiple Indices
The Producer's Price Index (PPI) for February met expectations at 0.7 percent and exceeded January's level of 0.2 percent.
The Consumer Price Index (CPI) for February came in at 0.7 percent and exceeded expectations of 0.5 percent and January's reading of 0.0 percent.
The Core CPI, which excludes food and energy sectors, demonstrates the impact of high fuel prices on the CPI with its lower numbers.
The Core CPI for February is 2.0 percent higher than for February 2012.
Upcoming Federal Reserve Meeting May Bring Interest Rate Changes
The Federal Reserve is not likely to modify its bond purchase program until the inflation rate reaches 2.5 percent.
When you are looking to buy a home, it is important to keep in mind that no real estate price is set in stone.
There is always room for negotiation, and with the right techniques you may end up saving thousands of dollars on your dream house.
However, it can be tricky to get the right reaction when you are negotiating.
Here are a few tips that will help you to haggle your way to the best deal.
Find Out The Seller's Motivation
If they really need to move and sell the property, it will be easier to convince them to negotiate on price or other deal points.
For example, they might be relocating for a job or the house might be close to foreclosure, which would give them the motivation to sell quickly at the price you offer.
Investigate How Long The Property Has Been On The Market
If the seller has been trying to sell the home for several months or longer, they will be much more receptive to competitive offers than a seller who just put their house up for sale last week.
Research Comparable Properties
Find out the price of recently sold properties in the same area that are comparable to your prospect.
This will give you an idea of how much you should bid on the house.
Knowledge is power in any type of negotiation, so arm yourself with as much information as possible.
Keep Your Cool
Even if you are absolutely head-over-heels in love with a property, refrain from showing your excitement to the seller.
You could lose any advantage you might have in negotiation if you let the seller and their agent know how much you really want the property.
Be careful not to bid too low. Sometimes sellers are offended by low ball offers and will refuse to work with you afterward.
Last week's jobs report -- a combination of the Department of Labor's Non-farm Payrolls Report and Unemployment Rate -- provided investors and job seekers with unexpected good news.
Job growth for February handily exceeded most economists expectations of 160,000 by adding 236,000 new jobs.
According to the Bureau of Labor Statistics, employment increased in business and professional services, construction and healthcare:Business and professional services added 73,000 jobs Construction added 48,000 jobs. Of these, 17,000 jobs were for residential construction. Healthcare added 32,000 jobs
Since September, construction employment has risen by 151,000. This increase in construction jobs may point to a strengthening in the home building sector.
Stronger home building numbers may lead to increasing home prices for sellers and property appreciation for home owners.
Strong Jobs Numbers Help Stock Market Rally, May Spur Higher Mortgage Rates
Retail has added 252,000 jobs over the past year. Hiring in retail suggests that consumers are spending more, which is a strong indicator of economic growth.
These figures demonstrate a trend toward economic recovery and added a last-minute boost to last week's stock market rally.
Rising stocks generally cause bond prices including MBS to fall and mortgage rates to rise.
The seasonally adjusted employee participation rate declined by 0.40 percent year over year; in February 2012, the seasonally adjusted was participation rate was 63.9 percent; in February 2012, the participation rate was 63.5 percent.
The Unemployment Rate for February came in at 7.7 percent; this was lower than Investor expectations of 7.8 percent and January's unemployment rate of 7.9 percent.
The seasonally adjusted unemployment rate has decreased by.60 percent from 8.3 percent in February 2012.
Unemployment Rate Lowest Since December 2008
Long-term unemployment of 27 weeks or more accounted for 40.2 percent of February's unemployed.
8 million workers are employed part time due to scheduling cutbacks or because they could not find full time work.
Mortgage rates and the major stock market indices rose last week in response to a strong jobs report and lower national unemployment rate.
The Department of Labor's Non-farm Payrolls report for February surpassed expectations with 236,000 new jobs reported against expectations of 170,000 new jobs expected by Wall Street.
This stronger than expected showing in jobs numbers points to a stronger economy and may lead to less pressure to hold mortgage interest rates lower.
The Dow Jones Index also reached record levels last week. This strong stock market performance is to be expected with better than expected employment reports.
February's numbers also exceeded January's reading of 157,000 new jobs added to the economy.
Lower Unemployment Rates Help Economy, May Push Interest Rates Higher
The Unemployment Report for February also provided good news as February's reading dropped to 7.7 percent from January's unemployment rate of 7.9 percent.
While good news, it's important to bear in mind that the Fed has established and unemployment rate of 6.5 percent as a benchmark for ceasing its monetary stimulus program.
The Federal Reserve released its Beige Book Report for March on Wednesday, and summarized reports from its 12 districts by noting modest to moderate economic improvement in 10 districts and slower economic growth in 2 districts.
Residential real estate markets are improving in most districts with home prices rising and inventories of available homes shrinking.
This news, coupled with last week's rising mortgage rates is further emphasizes the upward trend in home prices in many areas and the rising cost of financing or refinancing a home.
While rising home prices are good for the economy, they impact affordability of homes, particularly for first-time home buyers.
Busy Upcoming Week In Financial News
Next week has a busy calendar of scheduled economic news; here are a few highlights:Tuesday, Wednesday and Thursday: Treasury Auctions Wednesday: Retail Sales, and Retail Sales without Auto Sales Thursday: Producers Price Index (PPI) and Core PPI (PPI without volatile food and energy sectors) Thursday: Weekly Jobless Claims, Consumer Price Index (CPI) and Core CPI (without food and energy sectors) Friday: Consumer Sentiment
It will be interesting to see how or if Consumer Sentiment reacts to recent signs supporting progress toward economic recovery.
The Standard and Poor’s Case-Shiller Home Price Indices released February 26 show strong growth in the majority of 20 cities and corresponding metro areas tracked during 2012.
The S&P Case-Shiller Home Price Indices measure home prices nationally and locally by compiling data from individual indexes including a 10-City Composite Index, a 20-City Composite Index, and a 20-Metro Area Index that includes metro areas for each of the 20 cities used in the 20-City Composite.
Metro Areas Show Nearly Universal Growth
19 of 20 metro areas showed higher home prices in Q 4 2012 with the New York metro area showing a decrease in home prices; this could be due in part to the impact of Hurricane Sandy.
The Atlanta and Detroit metro areas saw Q4 2012 Atlanta home prices increase by 9.9 percent year-over year, while Detroit home prices rose by 13.6 percent as compared to Q4 2011.
Home prices in the Phoenix Metro area improved by 23 percent compared to Q4 2011 for the highest year-to-year increase of all metro areas in 2012.
The 10 and 20 city indices and national home price composite improved as well.
The 10 and 20-city composites have gained approximately 8 to 9 percent since reaching their most recent lows in March of 2012; current readings indicate that home values have returned to autumn 2003 levels, but remain about 30 percent lower than they were at their peaks in June and July 2006.
On a month-to-month basis, both the 10-and 20- city composite Indices returned to positive readings with each rising by 0.2 percent, which recovered last month's losses of 0.2 and 0.1 percent respectively.
The national home price composite is determined from information taken from the 9 geographic divisions established by the U.S. Census Bureau.
It rose by 7.3 percent year-to-year, but fell short of the Q3 2012 reading by 0.3 percent.
Home sales rose for the 11th consecutive month according to the National Association of REALTORS® Existing Home Sales Report for January. This is the first time this has occurred since the period between July of 2005 and May of 2006.
National Average Home Price Up Over 12% Annually
The national average home price in January was $173,600, which is 12.3 percent higher than for January 2012.
Calculated on a seasonally-adjusted annual basis, Existing Home Sales data is compiled using completed sales of single family homes, condominium units and co-ops.
January's existing home sales rose by 0.4 percent to 4.92 million sales nationally as compared to December's revised annual rate of 4.90 million sales nationally.
National sales of existing homes increased by 9.1 percent as compared to January 2012.
Regional Home Sales Support Housing Recovery
Regional home sales for January suggest more good news for housing markets. Seasonally- adjusted annual home sales rose in all regions of the U.S. except in the West, while median home prices rose for all regions.
Northeast: Home sales were up by 4.8 percent in January to 650,000 sales, which is 12.1 percent more homes sold than for January 2012. The median home price rose by 2.4 percent from January 2012 to $230,500.
Midwest: Annual home sales in January increased by 3.6 percent to 1.16 million; this is 17.2 percent higher than for January 2012. The median home price in the Midwest rose to $131,800, an increase of 8.6 percent as compared to January 2012.
South: Home sales were up by 1 percent to 1.96 million sales in January; this represents a 14.0 percent increase in annual sales as compared to one year ago. The average home price for the South was $152,100, an increase of 13.4 percent over January 2012.
West: Home sales fell by 5.7 percent to an annual rate of $1.15 million.
The Virginia Beach real estate market has started to recover from the downturn over the last few years in many areas of the country, and more people are thinking about buying a new place to live.
With this new energy in home buying, an interesting trend seems to be developing.
Instead of going for larger homes, which was an overwhelming trend in years past, many people are choosing micro-dwellings.
What is a micro-dwelling?
There are a number of different styles of micro dwellings being built. This is a relatively new concept for homes in the United States and individual creativity abounds in this space.
The most common factor in micro-dwellings are their size. They tend to be less than 500 square feet of living space.
Some densely populated metropolitan areas like San Francisco and New York City are planning apartments as small as approximately 300 square feet!
Think this shrinking of real estate space applies only to multi-family dwellings?
Think again. You can also find tiny single-family homes — some of which are even portable.
If you're still not convinced, read on to discover a few of the factors drawing buyers to smaller living spaces.
A lower price tag - The cost of these homes can be significantly less than that of standard homes, which means you may not have a large mortgage over your head for the next 30 years.
More free time - A smaller house means less cleaning. Who isn't on board with that idea?
Less clutter - If your home is less than 500 square feet, you have to get rid of everything you don't absolutely need.
Mobility - Many of these tiny homes are equipped with wheels or built-on trailers, so moving is no longer the stressful and expensive undertaking it used to be.
The National Association of Homebuilders recently released its Improving Markets Index for the month of February.
The report attempts to identify U.S. metropolitan areas in which the economy is improving, demonstrating "measurable and sustained growth".
259 U.S. markets are qualified as "improving" this month, a 17-market jump from the month prior and includes participants from all 50 states as well as the District of Columbia.
Experts point to improving market conditions in at least one market in all 50 states as a strong indication that the housing recovery is gaining substantial momentum.
This increasing momentum may suggest that now may be a very good time to purchase a home. Virginia Beach is also seeing a strong housing recovery as the total number of active listings is staying low and in some cases causing a multi offer situation. Now is a great time to invest in real estate.
Compared to September 2011, when there were just 12 improving metro market areas, the widespread positive movement indicates how conditions are steadily improving nationwide.
So what qualifies a market as "improving"? The NAHB uses strict criteria.
First, the group gathers data from the three separate, independent sources :Employment growth from the Bureau of Labor Statistics Housing price appreciation from Freddie Mac Single-family housing permits growth from the U.S. Census Bureau.
Next, for each of the above data sets, the National Association of Homebuilders separates for local data in each U.S. major metropolitan area.
And, lastly, armed with data, the NAHB looks for areas in which growth has occurred for all three data points for six consecutive months; and for which the most recent "bottom" is at least six months in the past.
In this way, the Improving Market Index doesn't just measure housing market strength -- it measures general economic strength.
Of the 22 markets added to the Improving Market Index in November, the following cities were included : Chico, California; Columbus, Georgia; Fort Wayne, Indiana; Topeka, Kansas; and Wenatchee, Washington.