The Weekly Real Estate Report

Why Are Rates Not Going Up?

After a good hike in long-term rates during the second half of 2013, just about every analyst in the country seemed to be sure that this was just the first phase of rate increases to come. After all, rates were the lowest in a generation and the increase we witnessed last year still put rates in very, very attractive territory. Jobs growth started accelerating during the second half of the year and the systems were ready to fire on all cylinders while the recovery finally got into full gear. Then came the long, cold and hard winter. So we understand that factor. Once again, the recovery halted and rates came down.
But this factor has passed. Job growth has heated up again and the stock market is at all time highs. The Federal Reserve has been slowing their purchases of treasury bonds and home loans in an effort to slow down fiscal stimulus and they are meeting this week with most observers feeling that rate hikes will be coming in early 2015. The question remains, why aren't rates going up in response to all of these factors? We could take the easy way out by saying that predictions of the future are futile and while this is true, we believe there are other factors at work.

Certainly one factor encompasses the political tensions around the world. Ukraine, Syria, Libya, Iraq and Gaza are all spots of conflict right now. The tragedy of a passenger jet being shot down just demonstrates how dangerous these situations are. When the world erupts, while our economy has not been as stable as we would like -- it is still a haven of safety compared to the rest of the world. When there is unrest, Treasuries are still a choice for those who are looking for safety in a world of conflict. While this factor does not completely explain why rates are not rising right now, there is no doubt that this factor is important and it also explains why predictions are futile. Next week, in addition to the analysis of the Fed meeting and the employment data, we will talk about one other factor contributing to low rates. 

Sixty-seven percent of consumers say they're planning a home renovation within the next six months, according to realtor.com®'s Home Improvement Survey of more than 1,500 home owners. They're planning to spend more money on their renovations than last year, the survey found. The most common budget range for home improvements was between $2,001 and $5,000. Eighteen percent of respondents who say they plan to renovate before the end of the year are budgeting $10,000 to $20,000 on their renovation. Respondents indicated that these are the most popular areas of the home to renovate: the kitchen (61%), bathrooms (59%), backyards or patios (33%), and the exterior of the home (32%).  "With 32% of consumers planning to spend money on improving the look and feel of their homes, home buyers should think about purchasing homes that require renovations," says Barbara O'Connor, chief marketing officer for Move Inc., the operator of realtor.com®. "By considering these kinds of homes, buyers open themselves up to more affordable options and the ability to renovate their homes to fit their specific needs and tastes." Source: Move, Inc.

Want to know exactly what employees relocating to a new housing market for a job are looking for in their next home? Cartus, a provider of domestic and global relocation services, recently surveyed 267 brokers who specialize in working with relocating employees to find out the most important home characteristics for those clients. These were the top three items transferees identified as most important to have in their next home: A larger home than their former residence (70%); new construction (64%); and single story (37%). Meanwhile, transferees identified the following amenities as the most important in their next home:

·         Upgraded kitchen: 91%

·         Master bedroom on first floor: 60%

·         Finished basement: 44%

·         Pool/spa: 23%

·         Outdoor kitchen: 11%

·         Smart-home technology (such as control via phone/tablet for heat, electricity, electronics, media, security, etc.): 10%

·         Media room/home theater: 7%

·         Fitness room: 4%

When it comes to relocation, transferees ranked location near a specific school district and less than a 30 minute commute to work as two key items of importance. “A job transfer is a major life change for employees and their families, and finding a home that fulfills their needs is important and enables the employee to transition to the new job efficiently and with little disruption to family lifestyles and routines,” says Gerry Pearce, executive vice president, broker and affinity services for Cartus. Source: RISMedia

Laura Glass with Landmark Bank Mortgage

The Real Estate Report April 24, 2013

Benefits of a Slow Down Right now the markets are warily eyeing a possible slowdown in the economic recovery. While we can't tell you if we are indeed in the middle of another pause, we can tell you that we are already reaping some benefits of even the hint of a pause. What are these benefits? Oil prices, interest rates and gold prices have all fallen. It is easy to see the benefits of lower gas prices and rates with regard to the economy. Lower gas prices give consumers more money to spend. Lower rates encourage refinancing as well as home and automobile purchases. The real estate and auto industries were already in recovery mode before interest rates eased back. For example, in March nearly 1.5 million cars and trucks were sold, a number not seen since May 2007. In addition, housing starts broke the 1.0 million mark in March, the strongest performance since June of 2008. On the other hand, why should we care that gold prices are dropping? Of the three, the move in gold has been much steeper than oil or rates. When the financial crisis hit five years ago, there was a threat that the financial system would collapse and move us into a depression. Gold soared in response to this threat. Even during the recovery -- every time we had a pause -- gold prices stayed strong because there was a threat of a double dip recession. Today, there is a possibility of a pause, but gold prices are weak. Is it because we are no longer worried about our economy slipping back into recession or is it because countries in trouble like Cyprus could be selling their stores of gold? In either case, we can say that gold is falling back at a time in which the economy continues to grow at a pace which will not ignite inflation. That is the best type of growth possible. Lower energy prices, lower interest rates and positive economic growth are a strong combination. Of course, we all wish that the economic recovery would become even stronger. However, there are benefits to a moderate recovery -- especially if it does not come with the threat of a recession around the corner or inflation down the road.   The Home Affordable Refinance Program — a government refinancing program for underwater home owners — will be expanded for another two years, the Federal Housing Finance Agency announced. HARP was originally set to expire Dec. 31, 2013, but will now be extended to the end of 2015. "More than 2 million home owners have refinanced through HARP, proving it a useful tool for reducing risk," says FHFA acting director Edward DeMarco. Home owners eligible to apply for refinancing under HARP must have a Fannie Mae- or Freddie Mac-backed mortgage that was guaranteed on or before May 31, 2009, must be current on their loan, and must have a current loan-to-value ratio more than 80 percent. Source: Chicago Tribune If you are interested in finding out whether you could benefit from a HARP refinance, which is designed for homeowners that are underwater on their home loans -- contact us. Home ownership and rental demand may both get an uptick as a large number of immigrants are expected to enter the United States and call it home by 2020, according to a new study sponsored by the Mortgage Bankers Association’s Research Institute for Housing America. The study makes projections to the year 2020 on the growth of U.S. home owner households headed by immigrants. The number of foreign-born home owners continues to grow bigger each decade, according to the report. For example, the number of foreign-born home owners rose 800,000 from 1980 to 1990; by 2.1 million from 1990 to 2000; and then by 2.4 million from 2000 to 2010. For the 2010 to 2020 period, researchers project that number to rise 2.8 million. The home ownership rate has particularly grown among the Hispanic immigrant population. In 1990, Hispanic immigrants had a 15 percent home ownership rate, which grew to nearly 53 percent in 2010. By 2020, Hispanics’ home ownership rate is expected to rise above 61 percent, according to researchers. The states with the greatest demand from the foreign-born on home ownership are California and New York. The report was prepared by Dowell Myers, professor of the Population Dynamics Research Group at the University of Southern California School of Policy, Planning and Development; and Senior Research Associate John Pitkin.“Immigrants are an important and growing source of demand that has bolstered housing markets in recent decades,” Myers said. “Growth in housing demand in recent decades has been more stable among foreign-born than native-born households. This is because increases in native-born demand have been subject to large swings in the size of cohorts reaching ages 25 to 34, the most common age of entry to the housing market. Rising numbers of foreign-born households are driven by the continued increases in homeownership rates achieved as immigrants settle longer in the United States,” Pitkin said." Source: The Mortgage Bankers Association The number of listings on the market increased 2.36 percent in March from the previous month — possibly an indication that sellers are becoming more willing to put their homes on the market as asking prices increase, according to housing data from realtor.com. While the data shows a month-to-month inventory increase, inventories are still down 15.22 percent compared to last year. The median age of the inventory continues to drop year-over-year by 12.35 percent, the amount of time homes are sitting on the market has fallen by 20 days since February, according to realtor.com. The median age of inventory of for-sale listings was 78 days in March. “The next three months will be significant in determining the impact of the recovering housing market,” says Steve Berkowitz, chief executive officer of Move Inc. Median list prices have increased year-over-year in a greater number of the 146 markets realtor.com tracks. Source: RIS Media All rights reserved Laura Glass