Low mortgage rates trump the job market during recessions. The last recession was in 2001 and the Fed was cutting rates and mortgage rates were falling. Home sales then began to rise strongly.
Past deep housing recessions were accompanied by prolonged job losses and rising interest rates. We have falling interest rates today.
The economy added about four million jobs over the last two years. Household formation is about half of what it should be given the employment growth, which indicates that many buyers are sidelined right now.
When the housing market begins to recover, this usually signals the start of an economic recovery.
Today's low interest rates will lessen the pressure on foreclosures. Rising affordability assures higher home sales and home prices. Furthermore, low rates lessen the burden on existing homeowners with ARMS because the resets are not as financially painful.
The bottom line -- We have historically low interest rates and we will likely avoid recession (but the economic expansion will be slow in 2008). The high interest rates that have characterized past recessions are nowhere in sight.
Information from the National Association of Realtors
Saturday, June 28, 2008
Friday, June 27, 2008
May Existing-Home Sales Show Modest Gain
WASHINGTON, June 26, 2008
Existing-home sales increased in May with buyers responding to lower home prices, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.0 percent to a seasonally adjusted annual rate 1 of 4.99 million units in May from a level of 4.89 million in April, but are 15.9 percent below the 5.93 million-unit pace in May 2007.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”
The national median existing-home price2 for all housing types was $208,600 in May, down 6.3 percent from a year ago when the median was $222,700.
Lawrence Yun, NAR chief economist, said there’s still a lot of inventory in the market. “The large supply of homes on the market clearly favors buyers, and it should take several months to draw the inventory down,” he said. “Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets. Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices.”
Total housing inventory at the end of May fell 1.4 percent to 4.49 million existing homes available for sale, which represents a 10.8-month supply3 at the current sales pace, down from a 11.2-month supply in April.
Although conditions remain mixed around the country, unpublished snapshot data shows a number of areas are experiencing much higher sales activity than May 2007, including Sacramento, the San Fernando Valley and Monterey County in California; Sarasota, Fla.; and Battle Creek, Mich.
“Keep in mind that the volume of home sales is the primary driver of economic activity that is tied to housing,” Yun said. “It’d be premature to say the improvement marks a turnaround. The market is fragile, so a first-time home buyer tax credit and a permanent raise in loan limits would be important steps to get the housing engine humming.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.04 percent in May from 5.92 percent in April; the rate was 6.26 percent in May 2007.
Single-family home sales rose 1.6 percent to a seasonally adjusted annual rate of 4.41 million in May from 4.34 million in April, but are 14.5 percent below the 5.16 million-unit pace in May 2007. The median existing single-family home price was $206,700 in May, which is 6.8 percent below a year ago.
Existing condominium and co-op sales increased 5.5 percent to a seasonally adjusted annual rate of 580,000 units in May from 550,000 in April, but are 24.6 percent lower than the 769,000-unit level a year ago. The median existing condo price4 was $223,400 in May, down 2.1 percent from May 2007.
Regionally, existing-home sales in the Midwest rose 5.5 percent in May to a pace of 1.16 million but are 16.5 percent lower than a year ago. The median price in the Midwest was $165,300, which is 0.7 percent below May 2007.
In the Northeast, existing-home sales rose 4.6 percent to an annual rate of 910,000 in May, but are 15.0 percent below May 2007. The median price in the Northeast was $278,000, down 2.4 percent from a year ago.
Existing-home sales in the West increased 2.0 percent to an annual pace of 1.02 million in May, but are 12.8 percent below a year ago. The median price in the West was $286,600, which is 16.0 percent lower than May 2007.
In the South, existing-home sales slipped 0.5 percent to an annual rate of 1.91 million in May, and are 17.0 percent below May 2007. The median price in the South was $175,000, down 4.3 percent from May 2007.
1. The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2. The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the geographic composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
3. Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases (e.g., condos were 9.5 percent of transactions in 1998, 8.5 percent in 1990 and only 6.1 percent in 1982).
4. Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for June will be released July 24, and the next Forecast/Pending Home Sales Index is scheduled for July 8.
Information provided by National Association of Realtors
Existing-home sales increased in May with buyers responding to lower home prices, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.0 percent to a seasonally adjusted annual rate 1 of 4.99 million units in May from a level of 4.89 million in April, but are 15.9 percent below the 5.93 million-unit pace in May 2007.
NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.”
The national median existing-home price2 for all housing types was $208,600 in May, down 6.3 percent from a year ago when the median was $222,700.
Lawrence Yun, NAR chief economist, said there’s still a lot of inventory in the market. “The large supply of homes on the market clearly favors buyers, and it should take several months to draw the inventory down,” he said. “Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets. Foreclosures and short sales appear to be a larger part of the market, particularly in California, and are creating a drag on current home prices.”
Total housing inventory at the end of May fell 1.4 percent to 4.49 million existing homes available for sale, which represents a 10.8-month supply3 at the current sales pace, down from a 11.2-month supply in April.
Although conditions remain mixed around the country, unpublished snapshot data shows a number of areas are experiencing much higher sales activity than May 2007, including Sacramento, the San Fernando Valley and Monterey County in California; Sarasota, Fla.; and Battle Creek, Mich.
“Keep in mind that the volume of home sales is the primary driver of economic activity that is tied to housing,” Yun said. “It’d be premature to say the improvement marks a turnaround. The market is fragile, so a first-time home buyer tax credit and a permanent raise in loan limits would be important steps to get the housing engine humming.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.04 percent in May from 5.92 percent in April; the rate was 6.26 percent in May 2007.
Single-family home sales rose 1.6 percent to a seasonally adjusted annual rate of 4.41 million in May from 4.34 million in April, but are 14.5 percent below the 5.16 million-unit pace in May 2007. The median existing single-family home price was $206,700 in May, which is 6.8 percent below a year ago.
Existing condominium and co-op sales increased 5.5 percent to a seasonally adjusted annual rate of 580,000 units in May from 550,000 in April, but are 24.6 percent lower than the 769,000-unit level a year ago. The median existing condo price4 was $223,400 in May, down 2.1 percent from May 2007.
Regionally, existing-home sales in the Midwest rose 5.5 percent in May to a pace of 1.16 million but are 16.5 percent lower than a year ago. The median price in the Midwest was $165,300, which is 0.7 percent below May 2007.
In the Northeast, existing-home sales rose 4.6 percent to an annual rate of 910,000 in May, but are 15.0 percent below May 2007. The median price in the Northeast was $278,000, down 2.4 percent from a year ago.
Existing-home sales in the West increased 2.0 percent to an annual pace of 1.02 million in May, but are 12.8 percent below a year ago. The median price in the West was $286,600, which is 16.0 percent lower than May 2007.
In the South, existing-home sales slipped 0.5 percent to an annual rate of 1.91 million in May, and are 17.0 percent below May 2007. The median price in the South was $175,000, down 4.3 percent from May 2007.
1. The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2. The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the geographic composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
3. Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases (e.g., condos were 9.5 percent of transactions in 1998, 8.5 percent in 1990 and only 6.1 percent in 1982).
4. Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for June will be released July 24, and the next Forecast/Pending Home Sales Index is scheduled for July 8.
Information provided by National Association of Realtors
Thursday, June 26, 2008
The Truth About Home Prices and Recessions - Part 1
A few facts often overlooked by media reports
While it's true that the median price of an existing single-family home actually did drop by 1.4% in 2007, it's important to put this into context. Over the previous six years - the typical length of time an owner stays in one home - the median price has risen nearly 40 percent. Those owners just gave back just about two percentage points of that gain, still leaving them with a very handsome appreciation rate.
Mortgage interest rates today are hovering around 6 percent - about the same as they were 40 years ago. Interest rates on both fixed-rate and adjustable-rate mortgages have been trending down. Falling rates do not portend a recession.
Interest rates on jumbo loans, however, (those over the Fannie Mae and Freddie Mac loan limit) remain well above conventional mortgage rates. Therefore, it isn't surprising that the share of single-family homes selling for more than $500,000 (many of which would rely on jumbo loans) fell to 12.4 percent of transactions in December 2007, from 14.2 percent a year earlier. This could also account for some of thedrop in the median price last year.
...more to come tomorrow......
Information from the National Association of Realtors
While it's true that the median price of an existing single-family home actually did drop by 1.4% in 2007, it's important to put this into context. Over the previous six years - the typical length of time an owner stays in one home - the median price has risen nearly 40 percent. Those owners just gave back just about two percentage points of that gain, still leaving them with a very handsome appreciation rate.
Mortgage interest rates today are hovering around 6 percent - about the same as they were 40 years ago. Interest rates on both fixed-rate and adjustable-rate mortgages have been trending down. Falling rates do not portend a recession.
Interest rates on jumbo loans, however, (those over the Fannie Mae and Freddie Mac loan limit) remain well above conventional mortgage rates. Therefore, it isn't surprising that the share of single-family homes selling for more than $500,000 (many of which would rely on jumbo loans) fell to 12.4 percent of transactions in December 2007, from 14.2 percent a year earlier. This could also account for some of thedrop in the median price last year.
...more to come tomorrow......
Information from the National Association of Realtors
Wednesday, June 25, 2008
Home Ownership is a Great Financial Investment.
Home Ownership has been ---- and continues to be....one of the best financial investments.
- Americans on average still believe buying a home is a good investment. Nine out of ten consumers consider home ownership to be a sound financial decision.*
- Given the leverage in purchasing a home, the average return on a 5% down payment over 10 years is usually three to five times greater than stock market returns.*
- If you bought a house six years ago, it would be worth 24% more today.*
- Real estate has delivered the most consistent positive return over any investment over the last 40 years.*
* Information from the National Association of Realtors.
Tuesday, June 24, 2008
Now Is The Best Time To Buy A Home!
I just got back from a seminar on the current real estate market. And wow.......it
was informative. It appears that the media has been reporting information about
how bad our current real estate market is.
The year 2007 was the 5th best year on record. In fact, it was very similar to the home
sales gains experienced in 2002, when consumers were very confident about the
market.
Home prices are down. Inventory is up. And interest rates are among the lowest in
many years.
So any of you who have been on the fence about whether or not it was time to buy
a home......get off of the fence. NOW is the best time.
was informative. It appears that the media has been reporting information about
how bad our current real estate market is.
The year 2007 was the 5th best year on record. In fact, it was very similar to the home
sales gains experienced in 2002, when consumers were very confident about the
market.
Home prices are down. Inventory is up. And interest rates are among the lowest in
many years.
So any of you who have been on the fence about whether or not it was time to buy
a home......get off of the fence. NOW is the best time.
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