Case-Shiller: July Home Price Growth Hits Lowest Pace in 12 Years

Posted in Market Outlook by Michigan Real Estate Expert on September 26th, 2019

Case-Shiller July Home Price Growth Hits Lowest Pace in 12 YearsCase-Shiller’s National Home Price Index reported U.S. home prices grew by 3.20 percent year-over-year in July; as compared to year-over-year home price growth 0f 3.00 percent posted in June. Cities with the highest rates of year-over-year home price growth were Phoenix, Arizona with 5.80 percent year-over-year home price growth. Las Vegas, Nevada had 4.70 percent year-over-year home price appreciation and Charlotte, North Caroline bumped Tampa, Florida from the top three cities with home price appreciation of 4.60 percent. Tampa, Florida posted 4.50 percent year-over-year home price growth in July.

Home Price Growth Stalls In West

14 cities had higher home price gains than in June and Seattle, Washington was the only city in the 20-City Index to post lower home prices. Analysts said that after years of rapid and unsustainable growth in home prices on the West Coast coupled with economic expansion and job growth in areas with lower home prices. July readings for home-price growth in western cities that posted double-digit price growth percentages in recent years were far lower. Home prices in Portland, Oregon rose 2.50 percent year-over-year; Los Angeles, California home prices rose 1.10 percent and San Francisco, California posted year-over-year home price growth of 0.20 percent.

High Home Prices Ease Demand Caused By Low Supply Of Homes For Sale

As home prices in many markets skyrocketed, would-be buyers were sidelined by affordability cash buyers and strict mortgage loan requirements. With home prices stabilizing and mortgage rates at near-record lows, more buyers will likely enter the market. This would increase demand on already slim supplies of homes for sale and cause home prices to rise at a faster pace than they have in 2019. Current rates of home price growth remain higher than current inflation and wage growth, but are low enough to encourage home buyers who were previously unable to keep up with rapidly rising home prices.

Seven cities posted higher rates of home price growth year-over-year in July as compared to readings for year-over-year home price growth from June 2018 to June 2019. The National Association of Realtors® said that sales of pre-owned homes were higher in July for the first time in months. The supply of available homes tightened in June; this trend is expected to boost home prices as demand for homes increases.

 

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NAHB: Home Builders Remain Confident

Posted in Market Outlook by Michigan Real Estate Expert on September 18th, 2019

NAHB Home Builders Remain ConfidentThe National Association of Home Builders Housing Market Index shows steady builder confidence in housing market conditions. September’s index reading of 68 was one point higher than August’s reading. Any reading over 50 indicates that most home builders surveyed view housing market conditions as favorable. August’s original index reading was adjusted upward by one point.

Component readings for the Housing Market Index were mixed. Builder confidence in current market conditions rose two points to index reading of 75; this was the highest reading year-over-year. Builder confidence in home sales over the next six months fell by one point to 70. The gauge of buyer traffic in single-family housing developments held steady at 50. Readings for buyer traffic seldom exceed 50; September’s reading suggested higher builder confidence than the numerical reading suggested.

Average New Home Size Decreases, Builders Confident In Housing Markets

In recent months, builders have focused on producing larger homes, which has limited the number of affordable homes available to middle-income and first-time home buyers. High demand for homes caused by slim inventories of homes for sale and factors including competition with cash buyers sidelined would-be buyers. Home builders scaled down the size of new homes by 4.30 percent during the second quarter of 2019. This trend is expected to encourage potential home buyers into the market as lower home prices and mortgage rates combine to encourage more buyers into the housing market.

Lower Home Prices And Mortgage Rates Increase Affordability

Analysts and real estate pros have long said that the only way to ease demand for homes is by building more homes within all price ranges. Builders did not immediately respond to calls for more homes, but if current builder confidence and a new focus on building affordable homes continues, high demand for homes and short supplies of available homes may ease toward evenly balanced market conditions, but the unknown factor is mortgage rates. If they rise, affordability will be challenged and buyer interest in new homes could slow.

New home prices typically fall as peak buying season ends. Current trends toward building smaller homes, low mortgage rates and lower home prices combined to provide more choices and affordable options for home buyers. If general economic conditions remain strong, more home shoppers could become homeowners.

 

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Should You Brace For A Potential Market Downturn Next Year?

Posted in Real Estate by Michigan Real Estate Expert on August 27th, 2019

Should You Brace For A Potential Market Downturn Next YearDon’t panic, a looming recession may be good news for those wanting to sell their homes. The experts say this recession may happen in 2020, so there is still plenty of time to make plans for how to deal with a potential economic downturn.

In many parts of America, especially in popular cities, the real estate markets are super hot for sellers. Home sales are coming in at prices that are record highs. For sellers in these hot markets, it might be time to sell. For buyers, able to wait until next year, the prices may come down.

What The ‘Experts’ Say

A Pulsenomics survey of 100 real estate market experts says that the pressures on the economy, which are negative, are not coming from the housing market this time. In fact, the Federal Reserve announced it will not make any changes until 2021, so the financial market supporting home loans will be coasting along pretty much as it is now.

The damage to the U.S. economy is coming from the delayed effects of the tariffs. Whether one agrees or disagrees with the tariffs is not the issue. The tariff changes that already went into effect, will have an economic impact next year or the year after.

Economists use the analogy of observing a big, slow-moving tidal wave. Scientists can see it coming from miles away. If those potentially affected by the danger pay attention to the warnings soon enough, they may have a chance to get out of the way.

Half the experts see the tariffs having a significant impact in 2020. Most of the other half see it coming in 2021. Nobody thinks the recession will hit before the end of 2019.

Summer 2019 – Selling Time

Home sales toward the end of summer are usually the strongest when compared to other times of the year. After returning from vacation, and before school starts, it is a popular time to look for a home when the weather is still nice outside.

Next Year 2020 – Buying Time

If a recession hits in 2020, then home sales prices may go down due to lowered demand. Again, this may be helpful for buyers who wait until next year to buy a home.

Conclusion

It is interesting to see that any possible recession will not be caused by the housing market this time. Real estate experts think that the housing market will price-in the effect of the recession up to one year ahead of when it hits.

If there are plans to sell a home, such as going into retirement and wanting to downsize or buy an RV for a happy retirement traveling, now may be an opportune time to consider selling.

If there are plans to buy a home and there is no rush, just take the time to work with your real estate agent to get a good deal and wait for a possible overall economic slowdown to get a better price. And be sure to contact your trusted home mortgage professional to discuss your financing options.

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Case-Shiller: Home Prices Growth Slows in March

Posted in Market Outlook by Michigan Real Estate Expert on August 1st, 2019

Case-Shiller: Home Prices Growth Slows in MarchHome price growth slowed again in May according to Case-Shiller home price indices. Home price growth slowed for the 14th consecutive month to its lowest rate in 12 years. Case-Shiller’s National Home Price Index showed 3.40 percent growth year-over-year in May as compared to April’s year-over-year reading of 3.50 percent.

Las Vegas, Nevada held its first place position in the 20-City Home Price Index for highest year-over-year home price growth rate at 6.40 percent; Phoenix, Arizona held second place with a year-over-year home price growth reading of 5.70 percent. Tampa, Florida home prices grew by 5.10 percent year-over-year in May.

Home Price Growth Rates Fall In West Coast Cities

West coast cities that posted double-digit annual home price gains in recent years posted less than two percent growth in home prices in May. Seattle, Washington was the first city to post negative home price growth with a negative year-over-year reading of -1.20 percent in May. San Francisco, California home prices rose by 1.00 percent year-over-year and home prices in San Diego, California grew 1.30 percent year-over-year.

This trend suggests that home prices were topped out in terms of affordability as buyers looked elsewhere for larger selections of homes at affordable prices.

Analysts predicted a plateau in home price growth and did not expect steep declines in home prices. Steady growth in wages and jobs could help to ease affordability challenges for home buyers. Lower mortgage rates provided additional opportunity for first-time and moderate income home buyers, but home price growth needs to ease further to help would-be buyers conquer affordability concerns. Shortages of homes for sale are most pronounced for lower-priced homes, where demand is largest. Higher demand for homes during the peak selling season could boost prices in popular metro areas.

If you’re in the market for a new home or interested in listing your current property, please contact your trusted real estate professional.

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The Community Reinvestment Act Explained In Simple Terms

Posted in Real Estate by Michigan Real Estate Expert on July 23rd, 2019

The Community Reinvestment Act Explained In Simple TermsThe federal government adopted the Housing and Community Development Act in 1977, and the Community Reinvestment Act (CRA) portion was designed to prompt lending institutions to provide mortgages for low- and moderate-income Americans. The underlying reasoning for the CRA was to discourage discriminatory lending practices that inhibited low-income communities and neighborhoods.

Over the years, its regulations have been revised to improve effectiveness. During the early 1990s, upwards of five changes were made and more following the 2007 financial crisis. With the country currently in the midst of an economic comeback, the Office of the Comptroller of the Currency announced that it favored making changes to the rules that govern lending under the CRA. These changes could have a significant impact on the real estate market.

Modernization of the Community Reinvestment Act

Critics of the CRA say that it has failed to keep pace with the emerging technologies readily available in the low- to moderate-income communities it was designed to serve. Falling behind in this capacity reportedly inhibited the worthy goal of the policy.

Organizations such as the American Bankers Association are said to be in favor of modernizing the CRA. This group continues to press regulators to bring resources into the technology era. Improved technological resources appear to be critical elements to meeting community borrowing needs and improving banking transparency.

Another aspect of the CRA some feel has trailed behind the times is that not all lending institutions are subject to CRA guidelines. If the goal of the CRA is to give low- and moderate-income families a fair shot at the American dream of homeownership, other financial organizations may need to come under the CRA umbrella. A greater CRA borrowing pool is likely to increase residential and commercial buying.  

How The CRA Helps Communities Build Wealth

The current administration has made some hay about pushing policies that centralize ownership in community members’ hands. Several of the potential rule changes to the CRA point to improved home and business ownership within low- and moderate-income communities. In essence, the changes are a kind of throwback to the days when the person who owned the local bakery, breakfast restaurant and hardware store lived within the community.

If successful, the discussed policy shift would encourage residents to buy residential and commercial real estate where they live. In some sense, the administration appears to be shielding living, breathing communities from the widespread corporate takeovers that occurred in the 1990s and early 21st Century.

Critics seem to worry that tinkering with guidelines may lead to quantity over quality lending. However, proponents see a long-term plan to revitalize communities by restoring and increasing localized property ownership.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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NAHB: Housing Market Index Rises 1 Point in July

Posted in Market Outlook by Michigan Real Estate Expert on July 17th, 2019

NAHB Housing Market Index Rises 1 Point in JulyHome Builder sentiment rose one point in July according to the National Association of Home Builders Housing Market Index. 2019 builder confidence in housing market condition continued to fall short of 2018 levels. July’s Housing Market Index reading of 65 was one point higher than June’s reading.

Component readings also rose one point each. Builder confidence in current housing market conditions rose to 72; the reading for builder confidence in market conditions for the next six months rose to 71. Builder confidence in buyer traffic in new housing developments rose to an index reading of 48; buyer traffic readings seldom exceed the neutral reading of reading of 50.

2019 Builder Confidence Is Lagging Behind 2018 Readings

Year to date, builder confidence index readings averaged 63 as compared to a reading of 67 in 2018 and 68 in 2017. Ongoing headwinds affecting builders were familiar concerns over materials prices and shortages of buildable lots and labor. Analysts said that builders remain leery of building to many homes after having large inventories of unsold homes after the Great Recession.

Builders also noted that increasing regulation and local building codes are impacting some areas. Builders are under pressure to produce affordable homes, but are log-jammed by “not in my backyard” zoning restrictions when they apply to build mixed developments of single and multi-family homes.

There may be good news on the horizon. Oregon passed state legislation banning exclusively single-family zoning. Depending on population, local jurisdictions will be allowed to build duplexes and larger multi-family units. If other states and communities follow Oregon’s lead, builders may find new options for building multiple units on lots formerly zoned for single family homes. Building affordable homes would help to ease housing shortages and ease demand for homes.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted home mortgage and real estate professionals. 

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New York Penthouse Sells For $238 Million – Is This A Real Estate Bubble About To Burst?

Posted in Real Estate by Michigan Real Estate Expert on July 16th, 2019

New York Penthouse Sells For $238 Million - Is This A Real Estate Bubble About To BurstThe most expensive home sold in America, so far, was a New York penthouse that sold for $238 million in January 2019. It is on the top of a building that overlooks Central Park. The 26-story luxury condo building designed by Robert A. M Stern is nearly all sold out.

Who Has That Kind Of Money?

The proud buyer of the penthouse is Ken Griffin. His net worth is estimated to be $9.6 billion. He is the founder of the Citadel hedge fund. Griffin is 50 years old. A few days before buying the NYC penthouse, he closed on a home in London that overlooks St. James Park near Buckingham Palace. For that 200-year-old home, he paid just a paltry $122 million.

Griffin’s New York penthouse is 22,000 square feet of ultra-luxury living. It sold for more than twice the amount of the second palace record-holder in America. That is a penthouse on the One57 building, which sold for $100.5 million in 2014.

Boom Or Bust?

One might think that a penthouse sale setting a new almost unfathomable record would indicate a vibrant bullish market in New York residential real estate. Well, not exactly. It did raise the median sales price of a residential sale in New York City to over $1 million from being below this amount at the end of 2018. Prior to this sale, the median price was trending lower.

Forbes reports that the current economic trends are not normal. Usually, the NYC real estate market goes up when the stock market is up. However, the NYC residential real estate is down in spite of the robust economy.

Properties selling for top-dollar at prices that are hard to imagine could be a sign of a real estate market collapse. In general, the NYC residential market has been in a steady decline over the past year. The lowest number of closings in a decade happened during the first quarter of 2019.

Investor Uncertainty

There is a general sense of uncertainty for residential buyers in NYC, where the average one-bedroom condominium sells for over $1 million. Uncertainty makes potential buyers take longer to decide on making a home purchase in the Big Apple.

Add to this uncertainty, there is the new “mansion tax” that was approved by New York City as part of its budget in April 2019. The mansion tax is now 1% on residential sales of $1 million or more that goes up to a maximum of 4.15% on homes sales of $25 million and up.

Did you just do the math? Griffin would have paid $9.87 million for the new mansion tax if he waited until April 2019 to buy his penthouse. So maybe he feels like he got a bargain by saving nearly $10 million on the purchase?

Summary

In spite of the record price for the penthouse sale in NYC, the residential market continues to soften. The new mansion tax is not going to help sales either. Unless you have money to burn, as Griffin does, it may not be the best time to invest in residential properties in NYC if you hope to make a return on your investment when selling them.

Your trusted real estate agent is well-informed about the market trends in your area. Be sure to set up an appointment if you are in the market for a new property.

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Case-Shiller: Annual Home Price Growth Slows for 13th Consecutive Month

Posted in Market Outlook by Michigan Real Estate Expert on June 27th, 2019

Case-Shiller Annual Home Price Growth Slows for 13th Consecutive MonthCase-Shiller’s 20-City Home Price Index for April showed further declines in home price growth with 2.50 percent year-over-year home price growth as compared to March home price growth of 2.60 percent. New York City home prices held steady month-to-month and Seattle, Washington’s home prices were unchanged year-over-year after posting 13 percent home price growth in 2018.

The top three cities with the highest rates of year-over-year home price growth were Las Vegas, Nevada with 7.10 percent growth; Phoenix, Arizona followed with 6.0 percent growth and Tampa, Florida reported 5.60 percent home price growth. All three cities were hard-hit during the recession. While U.S. home prices are rising, they aren’t rising as fast as in prior years. The fastest home price growth rates remained in single digits as compared to double digit home price growth rates posted in recent years.

Changing geography played a role in this year’s home price growth as San Francisco, California, Portland, Oregon and Seattle, Washington fell to sun-belt cities east of the west coast. Astronomical home prices and pronounced shortages of homes in many west coast cities caused home buyers to seek affordable homes elsewhere.

The Case-Shiller 10-City Home Price Index posted a year-over-year gain of 2.30 percent in April as compared to its March reading of 2.20 percent. Analysts said that slower gains for home prices indicated more normalized price conditions, but noted that home price growth remains about 1.50 percent ahead of inflation.

Buyers Benefit from Slower Home Price Growth, More Available Homes

First-time and moderate income home buyers were sidelined by competing investors and cash buyers as home prices rose quickly, but may find it easier to compete as market conditions achieve a balance of advantages to home buyers and sellers.

The flip side of easing home price growth may be that prospective buyers who are leery of buying at peak market prices will put off buying homes. Low mortgage rates continued to boost affordability and decreasing shortages of homes provided buyers with more options. Homebuyer sentiment is likely to vary according to economic trends, regional and personal circumstances.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

 

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What’s Ahead For Mortgage Rates This Week – February 16, 2016

Posted in Market Outlook by Michigan Real Estate Expert on February 16th, 2016

Last week’s economic events included weekly releases on new jobless claims, mortgage rates and testimony by Fed Chair Janet Yellen concerning the Federal Reserve’s monetary policy. Here are the details:

Mortgage Rates, New Jobless Claims Drop

Freddie Mac reported that average mortgage rates fell across the board last Thursday, with the rate for a 30-year fixed rate mortgage seven basis points lower at 3.65 percent. The average rate for a 15-year fixed rate mortgage was six basis points lower at 2.95 percent, and the average rate for a 5/1 adjustable rate mortgage was two basis points lower at 2.83 percent. Discount points averaged 0.50 percent for 30 and 15 year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

Lower mortgage rates may encourage first-time and moderate income home buyers to enter the market, although slim supplies of available homes and rising home prices have caused ongoing concerns about affordability in many markets.

Weekly jobless claims were also lower. 269,000 new claims were filed as compared to estimated claims of 280,000 new claims and the prior week’s reading of 285,000 new jobless claims. This was the lowest reading in two months and suggests healthy labor markets as more workers find jobs. Readings lower than 300,000 new jobless claims indicate healthy jobs markets. The four-week rolling average of new jobless claims was lower by 3500 claims at 281,250 new claims filed. Analysts consider the four-week reading as a more accurate indicator of labor markets as it smooths out anomalies in weekly claims.

Yellen Testimony: Fed Won’t Change Course on Rates

Federal Reserve Chair Janet Yellen said that she doesn’t expect interest rate cuts in view of slowing economic indicators. In testimony before the House Financial Services panel, Chair Yellen indicated that although there are signs of slower economic conditions, there was still room for economic growth. She cited a strong labor market and strong consumer and business spending as indicators of economic expansion. Analysts interpreted Chair Yellen’s testimony to indicate that the Fed would not likely raise its target federal funds rate in March.

Chair Yellen said that monetary policy is not on a “preset course”. Federal Reserve press releases consistently state that policy makers review current and developing domestic and global economic trends as part of any decision to raise rates. In view of this, Chair Yellen’s testimony did not cover what could happen if future economic developments influence Fed policy. Recent concerns over volatile financial markets caused by the weakening in China’s economy were cited as examples of “downside risks” that could impact the Fed’s monetary policy.

Readings for Consumer Sentiment suggest that consumers are also watching economic developments. February’s reading decreased to 90.7 as compared to January’s reading of 92.0.

What’s Ahead

This week’s scheduled economic events include the National Association of Home Builders Housing Market Index, federal reports on housing starts and building permits. FOMC minutes and weekly reports on mortgage rates and new jobless claims will also be released.

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What’s Ahead For Mortgage Rates This Week – Feburary 8, 2016

Posted in Market Outlook by Michigan Real Estate Expert on February 8th, 2016

Whats Ahead For Mortgage Rates This Week Feburary 8 2016Last week’s scheduled economic news included reports on construction spending and several labor-related reports along with weekly reports on mortgage rates and new jobless claims. The details:

Construction Spending Higher in December

U.S. construction spending rose by 0.10 percent in December for a seasonally adjusted annual total of $1.12 trillion. The Commerce Department reported that construction firms spent 10.5 percent more than in 2014.Residential construction spending totaled $416.8 billion for 2015, which was 12.60 percent higher than in 2015.

Higher construction spending can be a double-edged sword, as it can indicate that builders are stepping up construction or that they are paying higher prices for labor and supplies. Builders have consistently cited labor shortages and slim supplies of buildable land as concerns. Short supplies of available homes impacted housing markets in 2015. Low inventories of homes drive up home prices and impact affordability for first-time buyers; these conditions eventually slow housing markets with fewer qualified buyers and home sales.

Fed Benchmarks Show Mixed Readings

The Federal Reserve consistently cites its goals of achieving maximum employment and an inflation rate of 2.00 percent as benchmarks for its decision to raise or not raise the target federal funds rate. National unemployment reached a new low of 4.90 percent in January against expectations of 5.00 percent and December’s reading of 5.00 percent. Inflation held steady with no increase in January; this offsets the good news concerning unemployment. Lower oil prices are holding inflation well below the Fed’s desired rate of 2.00 percent.

Mortgage Rates Fall, Jobless Claims Rise

Freddie Mac reported lower average rates across the board. The average rate for a 30-year fixed rate mortgage fell by seven basis points to 3.72 percent; the corresponding rate for 15 year mortgages fell six basis points to 3.01 percent and the average rate for a5/1 adjustable rate mortgage dropped five basis points to2.85 percent. Average discount points were 0.60, 0.50 and 0.40 percent respectively.

Weekly jobless claims rose to 285,000 new claims against expectations of 280,000 new claims and the prior week’s reading of 277,000 new jobless claims. While rising jobless claims could suggest a slowing jobs market, the low unemployment rate suggests otherwise.

Non-Farm Payrolls, ADP Payrolls Fall

According to the Bureau of Labor Statistics, non-farm payrolls added 151,000 jobs in January as compared to expectations of 180,000 jobs added and December’s reading of 262,000 jobs added in December. Analysts said that January’s reading is further evidence that a long-running decline in new jobless claims has ended.

ADP payrolls were also lower in January with 205,000 new jobs posted as compared to December’s reading of 267,000 private sector jobs added. Holiday hiring likely impacted higher readings in December, but time will tell if declining job growth is trending.

What’s Ahead

Next week’s economic reports include data on job openings, consumer sentiment and Fed Chair Janet Yellen’s Congressional testimony.

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