Last week’s economic news supported the general outlook for moderate economic growth. Housing related news included the National Association of Home Builders / Wells Fargo Housing Market Index for April and Housing Starts for March.
NAHB: Builder Confidence Holds Steady Amid Concerns
The NAHB/Wells Fargo HMI for April ticked upward by one point to a reading of 47 against the March revised reading of 46. Home builders surveyed expressed concerns about high home prices, a lack of available lots for development and a labor shortage. Some desirable markets have been held back due to low inventories of available and/or affordable homes.
Builders surveyed for the HMI were asked to rate three components used in compiling the monthly index; these include current market conditions, market conditions expected over the next six months, and buyer foot traffic in newly built homes. April’s readings were 51, 57 and 32 respectively.
Readings for current market conditions and buyer foot traffic were unchanged from March, but builder confidence for market conditions in the next six months rose by four points.
Any reading above 50 indicates that more builders are confident about market conditions for newly-built single-family homes than not.
Housing Starts Pick Up After Winter Storms, But Fall Short Of Expectations
March Housing Starts rose by 2.80 percent at a seasonally adjusted annual rate of 946,000 starts as compared to expectations of 990,000 and February’s reading of 920,000 housing starts, which was revised from 907,000 starts.
The March reading represented a 5.90 percent decrease from March 2013, and is consistent with concerns expressed by home builders surveyed for the NAHB HMI for April.
Building permits issued for March were also lower by 2.40 percent at a rate of 990,000 permits issued. This slippage was largely due to the falling rate of building permits issued for apartment construction.
Higher home prices and mortgage rates along with inconsistent (but improving) labor markets were cited as reasons for builder pessimism, but analysts said that projects delayed by severe weather are expected to pick up in the coming months.
Mortgage Rates Fall, Discount Points Hold Steady
Last week’s average mortgage rates fell across the board according to Freddie Mac’s weekly Primary Mortgage Market Survey. The rate for a 30-year fixed rate mortgage fell by seven basis points to 4.27 percent. 15-year mortgages had an average rate of 3.33 percent as compared to the prior week’s reading of 3.38 percent. 5/1 adjustable rate mortgages had an average rate of 3.03 percent, down from 3.09 percent the previous week. Discount points were unchanged at 0.70, 0.60 and 0.50 percent respectively.
Fed Chair Upbeat In New York Speech
Federal Reserve Chair Janet Yellen struck a positive note in a speech given before the Economic Club of New York last Wednesday. She indicated that the Fed and many economists expect a return to full employment and stable prices by the end of 2016. Analysts characterized Yellen’s speech as upbeat on economic recovery and inflation, while “dovish” on monetary policy.
Ms. Yellen reiterated the Fed’s intention to monitor current and developing economic situations before making changes to its current monetary policy. She acknowledged that “twists and turns” in the economy could occur, and that Fed policy would shift as needed to address changes.
The Fed also released its Beige Book Report last Wednesday. This report indicated that the economy is recovering in most areas of the U.S.
This week’s scheduled economic news includes Leading Economic Indicators, Existing Home Sales for March, FHFA House Price Report for February and New Home Sales for March. The University of Michigan Consumer Sentiment report for April rounds out this week’s news.
An article by Colin Robins, from DSNews.com, April 17th, 2014:
The California Association of Realtors (CAR) reported 367,000 closed escrow sales of existing single-family detached homes, seasonally adjusted at an annualized rate. March marked the fifth straight month with sales below the 400,000 level, and the eighth month of declining sales on a year-over-year basis.
According to the group, “The statewide sales figure represents what would be the total number of homes sold during 2014 if sales maintained the March pace throughout the year.”
Sales increased from February by 1.4 percent, but were down 12.3 percent from March 2013.
“While the demand for housing was up from February, the market is taking a hit from lower housing affordability compared to a year ago, which led to a decline in home sales from last year,” said CAR president, Kevin Brown. “Moreover, concerns over tighter lending standards and increased borrowing costs are also contributing factors to the sluggish market as they both negatively impact the bottom line of home buyers who obtain financing through mortgages.”
Home prices jumped upward as well, reversing a February decline to land on a 7.7 percent increase for March. March’s price was 14.9 percent higher than prices from March 2013. Prices have increased on a year-over-year basis for two full years, with 21 straight months of double-digit annual gains.
Housing inventory tightened in March, with the available supply of existing, single-family homes for sale slipping to four months.
“While housing inventory has loosened since last year, it’s still below what’s considered typical in a normal market,” said CAR VP and Chief Economist, Leslie Appleton-Young. “Many of the listings continue to be priced above what the market will bear and are not moving. As such, even with improved home prices over the past year, new listings are lagging because would-be sellers who have limited options on where to move are hesitant to put their properties on the market.” ( End of Colin’s article.)
From Bob Phillips: I plugged in a photo of a guy with a quizzical look on his face because – to me – the headline word “jump” used by the author didn’t seem to match the article. To me, there were a few ups & downs, but I sure didn’t detect a “jump” either in the number of sales, or in prices. “Nudge”, maybe, even “move”, but not a “jump”.
To me, the current market in South Orange County seems fairly mixed, with no discernible movement, or pattern. I’m seeing more of a balance, between buyers and sellers, with no distinct advantage, for either. I would call it either normal, or possibly neutral, but definitely not jumping, for anyone.
When it comes to selling your home and getting the best selling price you can, there are certain tactics and methods you can employ to ensure that this wish becomes a reality.
Avoiding the commonly made mistakes that end up lowering the value of your home and discouraging people from viewing it is ultimately the key in getting top dollar, as well carrying out the showings and sale of your home in a professional manner.
Listen to the professionals, and make sure you employ these real estate sale methods to get your desired number on your home sale.
Listing Tactic: Adding A Buffer
Always dependent on the type of market you find yourself in, a common and successful tactic in getting the price you really want for your home is adding a buffer on the list price.
This means that if you want $500,000 for your home, you should list your home somewhere around $510,000 to $520,000 to allow for some negotiating room. Even if you’d prefer not to negotiate, the majority of buyers will always assume that you have room to come down on the price, and will put in their offers accordingly.
Overpricing: Avoid At All Costs
With that being said, you don’t want to overprice your home too much so as to discourage potential buyers from looking at it, or to put your home outside of a financial bracket. Make sure you speak to your trusted real estate advisor on exactly what the right list price should be to obtain your desired value.
Increase Desire: Have Your Home LOOK like It’s Been Staged
In order to get the price you want for your home, you need to make a good impression on prospective buyers. A professional staging service cleans out most of the distractions from the home, making it look more open and attractive – but you can achieve the same effect. Ask your agent for suggestions to make your property look more attractive to buyers, which can dramatically increase the amount of interest you receive on your home, perhaps even creating multiple offers – which is the best situation a home seller can be in!
Appeal To Online Shoppers With Professional Photos
With so much of today’s modern real estate shopping happening online, you want to ensure that your home has a strong online presence with professional photos and a digital floor plan available to prospective buyers. Also make sure that all information online is full and complete, and presents your home in the best light possible.
Always Say Yes To Open Houses And Showings
Especially in a hot market, you want to ensure that you leave your home empty for your real estate agent on weekends so that they can hold it open to the public. This is especially important early on in your list date so that the buyers on the market who are ready to make a move can see your house right away.
You should also apply the same importance to showings, and ensure that each showing request is promptly responded to with an easy “yes.”
Lastly, Hire a Full Time Agent With a Lot of Local Experience
In South Orange County, I, Bob Phillips, have over 37 years of successful experience in marketing listings which have been entrusted to me – usually for top dollar! I offer superior service, for a more than competitive fee. ( A discounted system similar to Redfin’s, but with a local touch.)
If you put these tactics into your home selling plan, you will find that it will be much easier to obtain more interest from buyers. And with more interest, it will be much more likely that you will be able to obtain the price you want for your home.
An article from Brena Swanson, of HousingWire.com, April 15th, 2014:
All five national indices showed a drop-off for the second month straight in March, according to the latest report from the S&P Dow Jones Indices and Experian for the S&P/Experian consumer credit default indices.
Falling to the lowest rate since July, the national composite dropped to 1.20% in March, a decrease from 1.30% in February and a drastic decline from 1.50% in March. This is the lowest post-recession rate.
In addition, the first mortgage default rate was 1.13% in March, its lowest level since September 2006.
Second mortgages came in at 0.60% in March, down from 0.69% in February.
“Along with signs that the economy is improving, consumer credit default rates continue to gradually decline,” said David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices.
“Economic reports confirm these improving trends. Gains were made in consumer confidence and the labor market as a result of fewer applicants filing for unemployment benefits. Consumer default rates have stabilized at levels similar to those seen before the financial crisis,” the report explained. ( End of Brena’s article.)
From Bob Phillips: Bank owned properties ( REOs.) represent only 1% of the market in South Orange County. In addition, short sales represent about 3% of our local inventory. Two years ago, distressed houses – the combination of REOs and short sales – accounted for over 25% of our transactions! At the significantly lower prices of that time, 25% to 30% lower, they were being scooped up by investors, who were paying cash.
In today’s market, due to higher prices, investor activity has practically dried up, but interestingly, there are still a substantial number of cash transactions, just now in the medium to higher price ranges, instead of the entry level, and not so much of distressed properties. I attribute this to two factors that I can see. First, people moving down from really big houses – downsizing. Secondly, from foreign buyers.
Neither of those demographics make for a high percentage of buyers, though, and that’s one reason that the present housing market, here in South Orange County is just plodding along, without much upward price pressure. I wouldn’t be surprised for 2014 to be an extremely flat year, price wise, which is good for buyers who are still waiting in the wings.
Labor statistics were stronger, with job openings up and new jobless claims filed lower than expected.
Mortgage rates fell, and the University of Michigan’s Consumer Sentiment Index was higher than expected.
More Jobs Available, Fewer New Jobless Claims
The Bureau of Labor Statistics (BLS) reported that February job openings rose to 4.20 million, which exceeded January’s reading of 3.9 million jobs. New jobless claims were lower than expected with 300,000 new jobless claims filed against expectations of 316,000 new jobless claims and the prior week’s reading of 332,000 new jobless claims filed.
The Federal Open Market Committee (FOMC) of the Federal Reserve released minutes of its meeting held March 18 and 19. The minutes noted that payroll jobs expanded, but the unemployment rate remained elevated, and inflation was below the committee’s goal of 2.00 percent. Indicators of longer-run inflation expectations were seen as stable.
Severe winter weather was viewed as a cause for slowing economic activity. FOMC noted that it would be difficult to determine the effects of winter weather on the economy as opposed to slower economic growth caused by unemployment or other negative factors.
Housing Starts and Building Permits were lower, but FOMC noted the impact of winter weather on these reports. FOMC asserted its intention to continue reducing its monthly asset purchases by $10 billion per month as economic conditions permit.
The FOMC emphasized its commitment to continuous review of financial and economic news as it makes month-to-month decisions concerning asset purchases.
Mortgage Rates Fall, Consumer Sentiment Rises
Freddie Mac reported lower average mortgage rates last week. The rate for a 30-year fixed rate mortgage fell from 4.41 to 4.34 percent. The rate for a 15-year fixed rate mortgage dropped from 3.47 to 3.38 percent, and the rate for a 5/1 adjustable rate mortgage fell by three basis points from 3.12 percent to 3.09 percent.
Discount points were unchanged at 0.70, 0.60 and 0.50 percent respectively. Lower mortgage rates may encourage more buyers into the market as the spring and summer buying season gets under way.
The University of Michigan’s Consumer Sentiment Index for April rose to 82.60 percent against the March reading of 80.00 percent and the projected reading of 80.80 percent. If expectations prove correct, this week’s economic reports are expected to bring more good news.
What‘s Coming Up This Week
This week’s scheduled economic news includes Retail Sales for March, which are expected to show a gain, the Consumer Price Index which is expected to hold steady, and the Home Builder Index, which is expected to rise.
Projections for Housing Starts are also higher. Fed Chair Janet Yellen is set to give a speech in New York on Wednesday, and the Fed Beige Book report will also be released. This week’s economic reports will wrap up Friday with Leading Economic Indicators.
Nancy Zambell, an InvestorPlace Contributor, April 6, 2012
My parents were working people, with five children (deductions!), which meant they received a nice little check each year after filing their taxes. They didn’t have the benefit of a good tax adviser and didn’t understand that it was their money that Uncle Sam was returning to them, year-after-year. In fact, they were giving the U.S. government a tax-free loan!
Imagine what that $1,000 or so they received, annually, could have turned into had they been putting it away, instead of being so generous to Uncle Sam.
But that was then, and my folks weren’t any different than most people on our block. But in today’s world, with so much good (and often no-cost) advice, there’s almost no excuse for letting Uncle Sam have free use of your money. All it takes is a little calculation to determine how much less you should be paying in throughout the year so that you just about break even by Dec. 31.
For many people, it’s this simple: Let’s say you’re getting about $1,000 back every year from your tax refund. Divide that by 12, and you get $83.33 — the amount you should reduce your paid-in taxes by each month. Just call your payroll department, and they’ll give you the right form to do that. Wouldn’t it be better to have that $83.33 in your pocket, instead of lending it to the government each month?
That’s a great strategy for 2012. But if you’re expecting a refund from your 2011 taxes, let’s look at the worst and best ways to spend that windfall:
The 5 Worst Things to Do With Your Tax Refund
- Put it in your checking account, and spend it on a lot of little things. If you do that, you won’t have any idea where your money went.
- Go to Las Vegas or buy a lot of lottery tickets, to “leverage” your refund into bigger winnings. Bad idea. Need I say more?
- Use it for a down payment for something you should pay cash for (like a vacation, furniture, or swimming pool), and then taking on a financial obligation that you don’t need (exceptions: houses or cars).
- Lend it to a relative or friend. Consider those loans as gifts, because, chances are you won’t get your money back.
- Spend it all on a luxury vacation (unless you normally take luxury vacations and don’t have any other financial obligations).
Instead of wasting your refund, consider putting it to good use in the following ways:
The 5 Best Things to do with your Tax Refund
- Fund a six-month emergency stash. The challenging economy of the last few years took its toll on many folks, but those with an rainy-day fund fared much better than those who were already living paycheck-to-paycheck.
- Fund an IRA. If you don’t already have one, this would be a great start. If you’re under age 50, most folks can contribute up to $5,000 this year; over age 50, the “catch-up” contribution rises to $6,000. No matter your age, if you’re still working, saving for retirement is the one of the very best things you can do with any “windfall.”
- Start your own business. According to the Kauffman Foundation, more than 543,000 new businesses were created in 2011. If you’ve always wanted to have your own company, the improving economic period we’re in right now is the prime time to begin. If you can’t afford to do it full-time, start out slow.
- Invest. If you’re a beginner, start with an exchange-traded fund or a mutual fund. If you currently invest, put more money to work in your existing holdings or supplement your portfolio with some new additions.
- Start a 529 (college-investment plan) for your children or young relatives. I did this with my nieces and nephew when they were born, and so far, two out of the three have used the money to help fund their college years.
These are hardly the only great ideas for getting the most from your tax refund, but they’re my favorites. Bottom line — don’t waste the money. And for 2014, change your deductions so that you can turn that extra money in your paycheck into a greater stockpile each and every year — a seed that can grow into a worry-free retirement.