Case-Shiller: Home Prices Lower in November

Posted in Real Estate by Michigan Real Estate Expert on January 31st, 2019

Case-Shiller Home Prices Lower in NovemberHome price growth continued to struggle in November, with Case-Shiller’s 20-City Home Price Index moving from October’s reading of 5.30 percent annual growth to 5.20 percent growth in November. This was the lowest reading since January 2015.

Las Vegas, Nevada remained first in home price growth rate with a year-over-year home prices growth of 12 percent. Phoenix, Arizona’s year-over-year home price growth rate was 8.10 percent and Seattle, Washington held third place with a year-over-year home price growth rate of 6.30 percent.

Las Vegas’ large year-over-year growth in home prices was attributed to the city’s ongoing recovery from the recession when home prices tanked in southern Nevada. Cities including Denver, Colorado, San Francisco California and Seattle, Washington saw steep declines in home price growth rates as compared to past peak home price growth fueled by post-recession recovery.

Challenges to home price appreciation were no surprise as slim supplies of available homes and high buyer demand created buyer competition and fewer choices of available homes. Affordability continued to discourage first-time and moderate income buyers.

David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices said, “The pace of price increases is being dampened by declining sales of existing homes and weaker affordability. Sales peaked in November 2017 and have drifted down through 2018. Affordability reflects higher prices and increased mortgage rates through much of last year.”

Affordable Homes Hard To Find Amid Slim Supply

First-time home buyers accounted for about 32 percent of home sales in November; their market share has not increased in recent months. First-time buyers typically look for pre-owned homes that cost less than brand new homes.

Healthy job growth and record unemployment rates could encourage potential buyers, but buyers were sidelined by short supplies of available homes and concerns about mortgage rates and overall economic trends. Analysts said that recently falling mortgage rates may not have been enough to encourage buyers who continued to face high demand for fewer homes and strict criteria for mortgage approval.

Positive indicators for housing markets included stable inflation and the Fed’s decision not to rise its target interest rate range; this was expected to help slow rate increases on consumer credit including mortgage loans.

If you are in the market for a new home, please be sure to consult with your trusted real estate agent and your trusted home mortgage professional.

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NAHB: Home Builder Confidence Grows After Lowest Level in 3 Years

Posted in Real Estate by Michigan Real Estate Expert on January 17th, 2019

NAHB Home Builder Confidence Grows After Lowest Level in 3 YearsAfter two months of declining builder confidence, the National Association of Home Builders Housing Market Index gained two points in January with a reading of 58. Component readings of the HMI were also higher with builder confidence in current market conditions rose two points to an index reading of 63. Builder confidence in housing market conditions over the next six months rose three points to 64.

The index for buyer traffic in new housing developments rose one point to 44. While index readings above 50 indicate positive market conditions, the index reading for buyer traffic is typically lower than 50.

Lower Mortgage Rates Compel Home Buyers to Act

Falling mortgage rates contributed to the uptick in home builder confidence, but affordability continued to impact first-time and moderate-income home buyers. Robert Dietz, NAHB chief economist, said: “Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry level of the market.”

Analysts suggested that builders could consider offering deeper discounts and incentives to buyers to increase sales of new homes. Homes not sold during November and December added to current inventories of new homes available, which provides home buyers with more choices and less competition for homes.

Home Builders Expect More Buyer Traffic

Lennar Corporation, a major home builder said that increased buyer traffic indicated that 2019 home sales would increase and that improving economic conditions were expected to improve housing market conditions and home sales in 2019.

Builders expect to face continued headwinds in 2019; affordability tops the list, but relatively low inventories of homes in some areas dampen buyer enthusiasm. Single-family housing starts are also expected to be lower than the long-term yearly average. As economic conditions improve for would-be home buyers, a slim supply of homes and high home prices present obstacles to buyers.

Your trusted real estate agent is one of your best partners in your next home buying or selling transaction. Be sure to contact them to discuss market conditions in your area.

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What is the Multifamily Market in 2019 Looking Like?

Posted in Real Estate by Michigan Real Estate Expert on January 8th, 2019

What is the Multifamily Market in 2019 Looking LikeA growing supply of housing, volatility in the marketplace and risks in the development process all affected the multifamily market in 2018. In 2019, these three factors will continue to move the needle.

The Housing Supply

Markets like Boston, Seattle and Nashville are growing supply faster than demand. From 2015 to 2017, developers were building like crazy and landlords were enjoying rent increases of 5-7% year over year. They built too much, and the peak has showed itself. Only top markets like Atlanta and Charlotte can justify their cost of living increases. The rest will likely see slower growth and possibly losses in rent values and occupancy rates.

Market Volatility

Secondary markets are experiencing problems in their local economies, which is driving away the multifamily market. Fewer jobs means less security. Most multifamily clients are looking for stability, and they move into and out of markets based on that. Experts are predicting a consolidation of these families into larger markets.

Interest Rates

The volatility in the market has been accompanied by higher interest rates, which makes money harder to borrow. The seller’s market has held out for so long that a turnaround was almost inevitable, and most experts agree that the current trend is more than just a short term hiccup. We are looking at a real market correction.

The Effect

These three variables come together to create a multifamily market that is looking better for buyers than it has in a long time. Entrants into the market who have been waiting for a price dip began to see it in the latter part of 2018. All signs point to this price trend continuing into 2019.

Just as important as price is location. Although multifamily units will probably be in high supply in secondary markets, these units will be more difficult to fill. What you may see is a consolidation towards markets like Atlanta and Charlotte from multifamily buyers as well as renters.

You may also see speculators who choose to purchase in secondary markets and wait for a turnaround. In both cases, you can probably expect a more balanced overall landscape that will eventually stabilize into market values that are anywhere from 10 to 35% off peak.

Contact your trusted real estate professional to help you navigate the housing opportunities in 2019 for your local market.

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FOMC Raises Key Rate, Forecasts 2 Rate Hikes in 2019

Posted in Real Estate by Michigan Real Estate Expert on December 26th, 2018

FOMC Raises Key Rate, Forecasts 2 Rate Hikes in 2019During its post-meeting statement, the Federal Open Market Committee of the Federal Reserve announced that its target range for the Fed’s key interest rate would increase one quarter percent to 2.25 to 2.50 percent. While this rate hike was not expected by the Executive branch, it met analyst expectations.

FOMC said in its customary post-meeting statement that members expect to make two interest rate hikes in 2019 as compared to three rate hikes in 2018 and the Committee’s original forecast of three rate hikes in 2019. Given current economic conditions, the Fed forecasted only one rate hike for 2020.

Hawks And Doves: Federal Reserve Leaders Differ On Interest Rate Projections

Six FOMC members indicated support for three rate hikes in 2019 and the FOMC statement cited a need for future interest rate hikes while some economists expected that no mention of potential rate hikes would be included in the statement. Fed Chair Jerome Powell said, “Policy at this point does not need to be accommodative. It can move to neutral.”

FOMC’s statement cited “cross currents” impacting the economy, but expects “solid growth next year, declining unemployment a healthy economy.” The Fed specifically listed strengths in labor markets, household spending and a healthy economy influenced the committee’s decision to raise the Fed’s benchmark interest rate range.

Recent volatility in global affairs and the economy prompted FOMC to say that they would be reviewing ongoing global economic and financial developments and assess their implications for the global economic outlook.

Fed Chair Jerome Powell: Fed Is About To Embark On A Delicate Balancing Act

Chairman Powell said that current economic conditions have helped the Fed meet its dual mandate of maintaining maximum employment and stable economic growth, for which the Fed has set a benchmark of two percent annual growth for inflation. Current inflation is lower than expected and unemployment is near record lows. The Fed faces balancing interest rate increases with closely monitoring economic “cross currents”.

Chairman Powell said the Fed expects the median rate of economic growth to slow to 2.30 percent in 2019 as compared to 2018’s rate of 3.00 percent. The National Unemployment rate is expected to fall from its current rate of 3.70 percent to 3.50 percent by the end of 2019. Mr. Powell said that no course of action is predetermined and that Fed leaders will monitor economic and global developments on an ongoing basis.

 

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4 Housing Market Trends To Expect In 2019

Posted in Real Estate by Michigan Real Estate Expert on October 26th, 2018

4 Housing Market Trends To Expect In 2019Just like Fantasy Football players try to predict who will score the most touchdowns, pass for the most yardage and win the Super Bowl, people with an eye on the real estate market also engage in speculation. Like sports fans, expectations are often driven by statistics from the previous season.

That being said, these are some of the important housing market trends buyers and sellers can expect in 2019.

1: New Construction To The Rescue (Sort Of)

The 2018 housing shortage has been well documented. The inventory shortfall has driven up listing prices and created a powerful seller’s market. The law of supply and demand would indicate that the construction sector will ramp up new home building in 2019.

Materials and labor costs are relatively modest when compared to new homes selling for approximately $150 per square foot on average. Home prices are expected to rise throughout 2019 creating more opportunity for construction outfits to build custom and spec houses. It is unlikely that new construction will keep pace with the high demand for homes. But buyers can expect more availability and custom-design options by working directly with builders.

2: Millennials Will Drive The Housing Market (Again)

In 2018, the full presence of Millennials was felt in the housing industry. There are now an estimated 75 million adults who fall into the demographic and they were reportedly responsible for upwards of 34 percent of all recent single-family home sales. Millennial home buyers were significantly responsible for higher than usual competition for starter homes in 2018.

At the older end of the spectrum, many are now in their mid-30s and fully engaged in careers. At the younger end, many are graduating from college and looking for starter homes as they enter the workforce. With more looking to buy first homes and others trading up, sellers would be wise to remain keenly aware of what Millennials want. Having grown up immersed in technology, Smart homes, and other integrated technologies tend to be attractive to this class of buyer.

3: Waiting May Result In Higher (But Still Low) Rates

The Federal Reserve continues to roll out interest rate increases against the fast-growing economy and employment stability. This did not come about unexpectedly and should not frighten off home buyers.

The Fed dropped rates to historic lows in 2008 after the Great Recession hit in an effort to stimulate growth. These days, business is thriving and there are reportedly 7 million unfilled jobs. All this good news means that the Fed will likely continue its planned increase throughout 2019. However, rates are likely to remain relatively low and buyer friendly.

4: Economy Expected To Remain Robust

To say we live in unusual times would be something of an understatement. The country has been embroiled in a series of tariff wars and trade negotiations many thought would cripple the GDP. The exact opposite seems to have occurred.

With the NAFTA deal now being redone as the USMCA, trade with Canada and Mexico are expected to be more beneficial for American businesses and wages. The administration is currently reworking a trade deal with the EU and a zero-tariff goal is on the table. The U.K. is in the midst of Brexit and a more beneficial trade agreement is expected there as well.

In terms of the dust-up with China, manufacturers appear to have simply shifted their output to other plants to avoid paying hefty tariffs. The price of goods appears to be staying low and the U.S. Business Confidence Index remains over 100 percent. These trends seem to overwhelmingly favor the American economy and housing market in 2019 and beyond.

Whether you are buying or selling, your trusted real estate professional is aware of the trends in your area and ready to help you find success with your real estate transactions.

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Foreclosure Rates Expected To Dip Below 12-Year Low

Posted in Real Estate by Michigan Real Estate Expert on October 19th, 2018

Foreclosure Rates Expected To Dip Below 12-Year LowThe record-setting pace of the U.S. economy continues to positively impact the housing market and home foreclosures now stand at an astonishing 12-year low.

Coming off a GDP growth rate of 4.1 percent and a historic bull stock market run, everyday Americans appear to be benefiting from one of, if not the strongest economies in decades. According to data compiled by CoreLogic, mortgage delinquency rates continue to improve and are already at the lowest levels in 12 years.

Building on last year’s national trend, foreclosures and mortgages more than 30 days past due declined to 4.2 percent in May. Other analytics show that mortgages at some stage in the foreclosure process also dipped by.02 percent from May 2017 to 2018. With a low 5-percent national foreclosure rate, the industry enjoys its best forecast since September 2006.

Some Housing Markets Lag Behind

While the country appears to be immersed in an economic revival, areas impacted by severe weather and hurricanes have not quite shaken off their impact.

“Serious delinquency rates continue to remain lower than a year earlier except in Florida and Texas, the hardest-hit states during last year’s hurricane season, CoreLogic president and CEO Frank Martell reportedly said.

There are also regions unaffected by hurricanes that are also lagging behind the strengthening conditions, according to research by ATTOM Data Solutions.

  • Foreclosures increased in eight states and the District of Columbia through the first half of 2018.
  • The District of Columbia suffered the worst foreclosure rate in the nation with a 60-percent increase over 2017.
  • Foreclosures increased in only 28 of 217 metropolitan housing markets studied. Oklahoma City topped the list with a 22-percent uptick.
  • Through June 2018, New Jersey endured the highest state foreclosure rate, with.99 percent of all properties in foreclosure.

According to ATTOM, Atlantic City, Trenton, Philadelphia and Chicago topped the list of total foreclosures during the first half of 2018.

2019 Foreclosure Predictions

History makes an excellent teacher and the wildfires destroying California communities are expected to negatively impact home ownership.

“While the strong economy has nudged serious delinquency rates to their lowest level in 12 years, areas hit by natural disasters have had increases,” CoreLogic chief economist Frank Nothaft reportedly said. “The tragic wildfires in the West will likely lead to a spike in delinquencies in hard-hit neighborhoods.”

“As an example, the wildfire in Santa Rosa last year destroyed or severely damaged more than 5,000 homes,” Nothaft reportedly said. “Delinquency rates rose in the aftermath, and in the ensuing months we observed home-price growth accelerate and sales decline. We will likely see the same scenario unfold in fire-ravaged communities this year.”

While America’s collective hearts go out to the families displaced by the California wildfires, the positive economic trends are expected to continue in much of the country.

CoreLogic’s Nothaft predicts foreclosure and delinquency rates to decline even further. Heading into 2019, positive numbers could upstage the current 12-year low and reach levels not seen in upwards of 15 years.

Contact your trusted real estate professional to learn about the market trends in your area.

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U.S. Wage Increases Could Help Home Buyers

Posted in Mortgage by Michigan Real Estate Expert on October 18th, 2018

U.S. Wage Increases Could Help Home BuyersThe struggle to achieve the American homeownership dream often feels like it happens in a vacuum. Everyday people work hard, save money and polish up their credit to get a low mortgage rate.

But there are powerful forces at work that are far beyond each person’s control. And until recently, the gap between American wage growth and rising home prices was widening. According to data coming out of the U.S. Department of Labor, unemployment recently hit a 49-year low and wages are enjoying the greatest uptick in nearly a decade. That is good news for prospective home buyers.

American Wages On The Rise

The 2018 economic news has seemed like one long greatest hits album. Historic-low unemployment for African-Americans and Hispanic-Americans has spurred confidence among these groups and the national unemployment has been steadily under 4-percent. The stock markets are booming, and the GDP growth has been impressive.

But there has been some frustration over stubborn wages that haven’t kept pace with other metrics. A report following stagnant salaries in February pointed to no slow down between rising home prices and wallowing pay rates. The growth rate was reportedly a modest 0.1 percent gain in February and that put Americans behind the curve in terms of buying homes.

But numbers coming out of the second quarter jobs report point to a 10-year high wage increase. The Bureau of Labor and Statistics reported wages are rising as employers compete to fill positions and the 12-month increase stands at 2.9 percent through August.

These are key numbers that may put a smile on potential home buyers’ faces.

  • Wages rose 0.5 percent in the second quarter of 2018.
  • Through August, wages rose 2.9 percent over the previous 12-month period.
  • Private industry compensation increased by 2.9 percent.
  • Government compensation increased by 2.3 percent, down from 2.6 in 2017.
  • Sales jobs gained by 3.5 percent.
  • Transportation jobs increased by 3.4 percent.

Experts are also claiming that setbacks from hurricanes likely blocked wage growth from topping the 2.9 high in 2009.

Where The Housing Market Stands

There’s little doubt that the surging economy put a higher number of Americans in position to purchase homes. However, inventory has remained well behind demand and that created a seller’s market with rising listing prices. But home prices are coming within reach for more people in 2018 and possibly 2019 market.

Since bottoming out in 2102, today’s home prices reportedly stand at about 6 percent higher than they were at their 2006 peak. That is not necessarily an indication that another housing bubble exists. Rather, the uptick in home prices is a natural reaction to an inventory shortage and economic growth.

The optimistic news for prospective home buyers is that wage growth appears to be gaining on home costs. As the gap closes, it’s likely that more and more people will be financially able to secure the American Dream of owning a home.

If you are in the market for a new home, be sure to contact your trusted real estate professional!

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Case-Shiller: Home Prices Hit 11-Month Low in July

Posted in Real Estate by Michigan Real Estate Expert on October 3rd, 2018

Case-Shiller Home Prices Hit 11-Month Low in JulyHome price growth slowed to its lowest pace in nearly a year according to the Case-Shiller Home Price Indices. National home price growth averaged 6.00 percent year-over-year as compared to 6.20 percent growth in June.

The 20-city home price index rose 0.10 percent in July to a seasonally adjusted rate of 5.90 percent year-over-year. Slowing home price growth was attributed to buyer fatigue and rising inventories of available homes.

Las Vegas Home Price Growth Tops 20-City Home Price Index

Las Vegas, Nevada topped the 20-City Home Price index with a year-over-year home price growth rate of 13.70 percent. Las Vegas home prices crashed during the recession but continued to recover as the economy improved.Seattle, Washington home prices rose 12.70 percent year-over-year in July; San Francisco, California held third place in the 20-city Home Price Index with year-over-year home price growth of 10.80 percent. Five cities posted higher home price growth rates than in June.

Freddie Mac Predicts Further Slowing In Home Price Growth For 2018 And 2019

Prior to the release of July’s Case-Shiller data, Freddie Mac analysts said that home buyer budget limitations coupled with more homes for sale caused home price growth to slow. Freddie Mac projected home price growth of 5.50 percent for 2018 and 4.50 percent growth in 2019.

FHFA, the agency that oversees Fannie Mae and Freddie Mac, released its home price index for July and reported lower home price growth in July. After posting steady year-over-year growth rates of 6.80 percent for April, May and June, July home price growth dipped to 6.40 percent. Data in home price data reported by FHFA includes homes connected with mortgages held or guaranteed by Fannie Mae And Freddie Mac.

While slower growth in home prices are good news for potential home buyers, rising mortgage rates, strict mortgage credit requirements and competition with cash buyers continue to create headwinds for home buyers who depend on mortgage financing to fund their home purchases.

For the greatest market advantage, be sure to contact your trusted real estate professional if you are interested in buying a new property or considering listing your current property.

 

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Real Estate Remains A Strong Wealth Management Investment

Posted in Real Estate by Michigan Real Estate Expert on October 2nd, 2018

Real Estate Remains A Strong Wealth Management InvestmentA young long-haul trucker driver once took an elder’s advice and invested all of his money into real estate. Even though he was seldom at home to enjoy the fruits of his labor, he hired a property management company to handle the properties. The advice that stuck with the driver was simple. “They’re not making any more of it, land that is.”

In terms of growing personal wealth, the real estate market may fluctuate, interest rates change, and the GDP can bounce like a ball. But, land is permanent. That may seem like a simplistic view of wealth management. Maybe it is. But that trucker retired early with multiple investment properties and a reasonably wealthy man.

His portrait in wealth management success highlights the notion that real estate remains a strong financial driver. The next logical question is whether or not now is the time to build a powerful real estate portfolio.

Current Market Conditions

Real estate investment does not necessarily follow the popular stock market thinking about buying low and selling high. In fact, investors such as the trucker had no plans to sell at all. That being said, the current real estate trends are widely considered a “seller’s market.” Are they really?

With Millennials and soon Generation Z buying up homes, inventory remains lower than demand. That naturally has resulted in an uptick in listing prices. Couple the supply and demand issue with a Fed raising rates and one might think this is a bad time to buy. Nothing could be further from the truth.

Buying rental properties are long-term investments. Buyers would be wise to do the math on how much the monthly mortgage, insurance, taxes and overhead measure against the potential revenue. Some property owners do their math based on 10 months rather than 12 to account for unexpected expenses. If the math works, it could be a valuable asset.

Real Estate Less Risky Than Stocks

Return on investment in real estate has the potential to far outpace stock buys. Consider that when you purchase a stock, things outside your control impact value and dividends. Think for a moment about how Elon Musk turned Tesla stocks into a roller coaster ride due to a few odd tweets and media interviews.

Owning property insulates investors from many external forces. Over time, rental revenue pays down the note. This allows owners the ability to siphon off money or leverage equity for additional real estate buys. With measured determination, your wealth management portfolio could include multiple properties that are paid off at retirement age. It worked for a truck driver who took some simple advice from an elder.

There’s little doubt that real estate remains a strong asset for increasing personal wealth. If you are considering a purchase, be sure to contact your trusted real estate professional as soon as possible.

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Fed Raises Key Interest Rate For 3rd Consecutive Time

Posted in Real Estate by Michigan Real Estate Expert on September 27th, 2018

Fed Raises Key Interest Rate for 3rd Consecutive TimeThe Federal Open Market Committee of the Federal Reserve announced that it raised the target federal funds rate to a range of 2.00 percent to 2.25 percent. This was the third consecutive increase in the Fed’s key interest rate and was the eighth time the Fed raised its key interest rate since 2015.

In its customary post-meeting statement, Committee members cited strong economic conditions and continued labor market growth coupled with historically low unemployment rates as a basis for raising the federal funds interest rate.

Fed Cites Steady Inflation, Healthy Household And Business Spending

Further economic conditions cited in the FOMC statement were steady inflation, which has held close to the Fed’s objective of two percent for a year. Projections on long-term inflation were “little changed” according to the statement.

FOMC’s statement explained how committee members make decisions about the target range for the federal funds rate. The Federal Reserve must make decisions based on its legislative mandate of achieving and maintaining maximum employment and an inflation rate at or near two percent.

The FOMC also considers measures of economic and labor conditions, pressures on inflation and projections on inflation. Committee members keep up-to-date on domestic and global economic developments.

After the FOMC statement was released, Fed Chair Jerome Powell gave a press conference.

Fed Chair: Economy Strengthening Without Need Of Fed Accommodation

Federal Reserve Chair Jerome Powell expressed confidence in current economic conditions and said that future rate hikes would help maintain the Fed’s goals and promote healthy economic growth. Mr. Powell said that future meetings of the Federal Open Market Committee would be guided by asking and answering the question of whether current monetary policy is set to achieve FOMC goals. Analysts interpreted Chair Powell’s comments as indicating that current economic conditions are as good as could be expected and that the Fed’s monetary policy decisions are working as planned.

 

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