Economists Grow More Optimistic About Housing’s Outlook

DAILY REAL ESTATE NEWS | FRIDAY, AUGUST 29, 2014

The strengthening job market has more economists gaining confidence about the direction of the housing market over the next two years, according to a newly released Reuters poll of 29 housing analysts, including investors and economists.

What’s more, economists expect home resales to continue to inch up in 2015, reaching 5.29 million by the second quarter of 2015.The economists surveyed expect existing-home sales to increase to 5.25 million units in the first three months of 2015. Currently, existing-home sales stand at 5.09 million. In May, the economists surveyed had expected much slower gains at 5.1 million expected in the first quarter of 2015.

The job market is why most of the economists are starting to change their tone about housing’s outlook. For the last six consecutive months in July, employers added more than 200,000 jobs.

"Low mortgage rates and improving labor market dynamics should remain conducive to gradual growth in the housing sector," Gennadiy Goldberg, a strategist at TD Securities, said in a recent note to clients.

The housing analysts surveyed expect mortgage rates to rise more slowly than they originally thought in May. Still, they do expect rises are looming with expectations that the Federal Reserve will slowly begin to increase its benchmark interest rate around the middle of next year. The Fed has held the benchmark interest rate near zero since 2008.

The economists polled expect the 30-year, fixed-rate mortgage to rise to 5.25 percent in 2016. That is a slight drop from the 5.68 percent average they had predicted in the May poll.

The 30-year fixed-rate mortgage is currently averaging 4.10 percent, according to Freddie Mac.

Nevertheless, the economists say the housing recovery likely won’t be derailed by a gradual increase in mortgage rates.

"If a rise in mortgage rates comes with a stronger economic recovery, the housing market will be able to absorb it," Alexander Lin, an analyst at Bank of America Merrill Lynch, told Reuters.

Source: “Stronger Hiring Boosts Outlook for U.S. Home Sales: Reuters Poll,” Reuters (Aug. 27, 2014)

Home Sales in 2013 Rise to Strongest Level in 7 Years

Daily Real Estate News | Friday, January 24, 2014

   

The housing market has been experiencing a “healthy recovery” over the past two years, with home sales last year rising to the highest level since 2006, according to the National Association of REALTORS®' latest housing report.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates, and a large pent-up demand driving the market,” says Lawrence Yun, NAR’s chief economist. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

Existing-home sales rose 1 percent in December 2013 compared to November and reached a seasonally adjusted annual rate of 4.87 million.

Existing-home sales for all of 2013 reached 5.02 million sales, 9.1 percent higher than 2012, and the largest rise since 2006 when sales were at 6.48 million at the close of the housing boom, NAR reports.

Home prices were also on the rise in 2013, up 11.5 percent over 2012, with a median existing-home price of $197,100 last year compared to $176,800 in 2012. It was the strongest gain in home prices in a year since 2005, when home prices rose 12.4 percent, NAR reports.

NAR President Steve Brown says that with job growth expected this year, home sales should hold despite rising home prices and higher mortgage rates.

“The only factors holding us back from a stronger recovery are the ongoing issues of restrictive mortgage credit and constrained inventory,” Brown says. “With strict new mortgage rules in place, we will be monitoring the lending environment to ensure that financially qualified buyers can access the credit they need to purchase a home.”

Housing Recovery Regional Snapshot

Here’s a look at how existing-home sales fared in December and for the year across the country:

• Northeast: Existing-home sales fell 1.5 percent in December but remain 3.2 percent higher than December 2012. Median price: $239,300, up 3.6 percent from year ago levels
• Midwest: Existing-home sales dropped 4.3 percent in December and are 0.9 percent below year ago levels. Median price: $150,700, 7 percent higher than December 2012.
• South: Existing-home sales rose 3 percent in December and are 4.6 percent higher than December 2012. Median price: $173,200, up 8.9 percent from a year ago.
• West: Existing-home sales increased 4.8 percent, but are 10.7 percent below a year ago. Median price: $285,000, up 16.0 percent from December 2012.

By REALTOR® Magazine Daily News

Home Prices Signal Recovery May Be Here

NEW YORK (CNNMoney) -- A sharp boost in home prices during the spring could signal a recovery in the long-suffering U.S. housing market, according to an industry report issued Tuesday.
  
The S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, climbed 6.9% in the three months ended June 30 compared to the first three months of 2012.

"We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change," said David Blitzer, a spokesman for S&P, in a statement. "The market may have finally turned around."

Two other key indexes covered in the S&P/Case-Shiller report also showed gains. The 20-city index was up 6% for the quarter and the 10-city index rose 5.8%.

National prices were up 1.2% compared with a year earlier, and the 20-city and 10-city indexes also gained year over year. It was the first time all three measures showed positive annual growth rates since the summer of 2010, when generous tax credits for homebuyers were in place.

There have been several positive industry reports over the past several weeks. In July, new home sales were 25% better than a year earlier; existing home sales gained 10% year over year; and developers applied for 30% more residential building permits.
  
The steep increase in home prices "feels really good after six years of straight down," said Mark Zandi, chief economist of Moody's Analytics.
  
He cautioned that the results may overstate the case for the housing recovery a bit. The mix of homes being sold has changed lately, with fewer repossessed homes on the market. Those sell at big discounts to conventionally sold homes and had been propelling prices downward.
  
The home price improvement is expected to have a positive impact on foreclosure rates, according to Michael Fratantoni, vice president for research and economics for the Mortgage Bankers Association.
Foreclosures have already been falling and could drop some more if the upswing in home prices continues.
  
As home values increase, home equity rises, and fewer mortgage borrowers will be underwater, owing more than their homes are worth. That will give them an asset to tap should they run into a tight financial patch.
  
An improving housing market will also give homeowners more confidence in the investments they've made in their homes.
  
"There has also been a lot of concern about strategic defaults," said Fratantoni. "That should ease now. When home prices go up, people have a financial incentive to hold onto their homes and they're less likely to walk away."
  
Rising prices are likely to push potential homebuyers off the fence, where many have been waiting out the price decline, according to Doug Duncan, chief economist for Fannie Mae.
  
"Their perception that we hit the bottom takes out the risk of buying into a falling market," he said. "That should increase demand, particularly if they also believe that mortgage rates have reached a bottom as well."
  
Each of the 20 cities covered in the report recorded a gain in June, compared with a month earlier. Detroit prices jumped 6% for the month, the most of any city. Minneapolis prices climbed 4.8% and Chicago prices rose 4.6%.
  
In Phoenix. home prices were 13.9% higher in June than 12 months earlier, the highest gain of any of the 20 cities covered.
  
Several cities were still in negative territory year over year, including Atlanta, where they were off 12.1%. New York prices were down 2.1% on an annual basis, and Las Vegas prices were 1.8% lower.
  
For Zandi, all the positive news on housing carries over to the rest of the economy.
  
"Housing is beginning to act as a tailwind for the recovery," he said.