The S&P Case-Shiller Home Price Indices for April indicate that the housing recovery gained ground.
In April 2013 average home prices tracked in the Case-Shiller 10 and 20-city Composites increased by 11.60 and 12.10 percent year-over-year. On a month-to-month basis, the Composites increased by 2.60 and 2.50 percent respectively.
According to David M. Blitzer, Chairman of the S&P Dow Jones Indices’ Index Committee, the 10-and 20- City Composites experienced their largest month- to- month gains since their inception: “Thirteen cities posted month- to-month gains of two percent or more, with San Francisco leading with a month-to-month gain of 4.90 percent.”
The 10-and-20 City Indices reported the highest year-over-year gains in home prices since 2006. Cities where home prices gained more than 20 percent year-over-year included Atlanta, Las Vegas, Phoenix and San Francisco. Phoenix posted its 12th consecutive month of double-digit increases in home prices while San Francisco home prices increased year-over-year by an average of 23.90 percent. Home prices increased year-over-year in 19 the 20 cities included in the 10-and 20 City Composites, with home prices in Detroit remaining flat.
Mortgage Loan Requirements Showing Signs Of Loosening
Mr. Blitzer also noted that according to the most recent Fed Senior Loan Officer Opinion Survey, some lenders are beginning to relax credit requirements for mortgage loans. This good news, along with the availability of adjustable-rate mortgage loans is expected to help with maintaining affordability and providing access to homes for more buyers.
According to the S&P Case-Shiller 10-and-20 City Composites, home prices fell approximately 26 to 27 percent from their highest in June 2006 to their lowest in March 2012. As of April 2013, average home prices had recovered by 13.10 percent for the 10-City Composite and 13.60 percent for the 20-City Composite.
More Reports Show Ongoing Housing Recovery
The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, reported that home prices increased an average of 7.40 percent year-over-year as of April 2013, and rose by 0.70 percent between March and April 2013. While this data fell short of an expected month-to-month increase of 1.10 percent, Average FHFA home prices were 11.70 percent below their peak in April 2007.
FHFA bases its report on sales of homes financed with mortgages owned or securitized by Fannie Mae and Freddie Mac.
The U.S. Commerce Department reported that sales of new homes reached a five-year high in May, the highest level since July 2008. May sales increased 2.10 percent between April and May 2013 to a seasonally-adjusted annual rate of 476,000 homes. This represents a year-over-year increase of 29 percent from May 2012.
While rising mortgage rates and home prices may slow demand for homes, economists don’t believe that either factor will halt the housing recovery. A good next step is to give me a call, or to shoot me an email, to talk about about current home values and loan options in and around South Orange County.
Interest Rates Begin Their Ascent
By Kevin Budde, of Prime Lending, June 25th, 2013
“On Wednesday, June 19th, the Federal Open Market Committee met and released to the markets their intentions to limit their $85 Billion a month subsidy of interest rates. Since that date mortgage backed securities have risen approximately one-percent causing a selloff in the stock market and disruption to buyers wanting to purchase or refinance.
There is a big concern with real estate agents and homebuyers as to the overall effect and if the recent Case-Shiller Housing Report of a 12.1% increase April over April will be dampened. There is a saying that the best way to judge the future is to examine the past.
The chart below is a 38 year history of the 30 year fixed rate mortgage average in the United States. Coincidently, I started my career in the mortgage business 38 years ago so I have personally experienced the effects of the ups and downs of the interest rates on this chart. In 1981, I personally had a 15.25% mortgage and thought it was a good deal at the time. After all, rates were 17.5%”
“Look at 2003 to 2008 and you will see, during the boom years of the housing bubble, interest rates were in the 6% range. From 2009 to now you can see how rates declined due to the Federal Reserve Board easing to assist with the housing crisis. As the housing market continues to recover over 2014 and 2015 interest rates will return back to the 5% to 6% range as the subsidy is removed from the system.
While we have experienced historical lows in interest rates over the last 3 years, it’s hard to say in a relative terms, interest rates are bad, when you review this chart“.
Kevin Budde, of Prime Lending has been one of my preferred lenders for more than 25 years. I wholeheartedly recommend his team, here in South Orange County.
From Jed Kolko, of Business Insider
Texas Governor Rick Perry has been touring the country, urging companies to move to Texas for low taxes and business-friendly regulation.
Perry’s right that Texas has been growing like crazy, adding jobs and population even at a time when the national economy has written.
But he’s not exactly right about why.
I sat down with Jed Kolko, Chief Economist at Trulia, to discuss the biggest reason people move from California to Texas: Cheap housing.
Click below for the video, from BusinessInsider.com:
Comments by Fed chairman Ben Bernanke after Wednesday’s FOMC meeting caused havoc in financial markets as investors anticipated the potential effects of any rollback of the Fed’s policy of quantitative easing (QE). Chairman Bernanke said that the Fed may begin reducing its $85 billion monthly purchase of Treasury securities and MBS toward the end of this year.
The chairman made it clear that any decision concerning QE would be based on careful review of current and developing economic conditions. QE is intended to keep long-term interest rates low; any reduction of the QE securities purchases could cause mortgage rates to rise.
Economic News Bodes Well For Housing
The week’s other economic news included more good news for housing. The NAHB/WF Housing Market Index for June came in ahead of expectations at 52, which surpassed the expected reading of 45 and May’s reading of 44. Any reading over 50 indicates that more builders surveyed believe that housing market conditions are positive.
Tuesday was busy for economic news. The Consumer Price Index for May rose from April’s reading of –0.40 percent to +0.10 percent in May, which was below expectations of +0.20 percent.
The Department of Commerce released its Housing Starts Report for May; the reading for May missed expectations of 953,000 housing starts and came in at 914,000 which exceeded April’s 856,000 housing starts. Increasing the number of available homes could help steady recently increasing home prices, but existing homes remain in short supply in many areas.
Fed Expects Moderate Improvement Continuing For Economy
Wednesday’s news involved the Fed’s FOMC meeting and press conference. The Fed stated after the meeting that it expects moderate improvement in economic condition and noted that housing, which was a primary cause of the economic downturn, is now leading the economy’s recovery.
Freddie Mac reported that the average rate for a 30-year fixed rate mortgage fell from 3.98 percent with 0.7 percent discount points to 3.93 percent with borrowers paying 0.8 percent in discount points. The average rate for a 15-year fixed rate mortgage fell from 3.10 percent to 3.04 percent with 0.7 percent in discount points for both weeks. Investor response to the Fed’s mention of possibly reducing its QE program is likely to send mortgage rates up next week.
The National Association of REALTORS® released its Existing Home Sales report for May. Existing home sales came in at 5.18 million and beat projections of 5.00 million and April’s sales of 4.97 million existing homes.
Increasing sales of existing homes is good news as demand has exceeded supplies of existing homes in recent months. High demand drives up home prices and impacts affordability along with rising mortgage rates.
What’s Ahead For This Week
Next week’s scheduled news includes a number of housing related reports, FHFA Home Prices, the Case-Shiller Home Prices Report and New Home Sales are set for release Tuesday.
The Gross Domestic Product Report comes out on Wednesday. On Thursday, data for weekly jobless claims, consumer spending and pending home sales will be released.
Friday brings the Chicago Purchasing Managers Index and the Consumer Sentiment Index.
The data released in these reports will continue to inform the Fed’s decision-making with regard to bond purchasing and interest rate policy. It’s possible though, following the aggressive market sell-off activity from last week, that we may see a softening in long-term rates over the course of this week.
Selling a House? 5 Reasons You Should Do It Now
by THE KCM CREW on JUNE 17, 2013
Many are talking about why now is a great time to buy a home. Today, we want to look at why it might also be an opportune time to sell your house. Here are the Top 5 Reasons we believe now may be a perfect time to put your house on the market.
1.) Demand Is High
Homes are selling at the fastest pace since November 2009 when the market spiked in response to the home buyer tax credit. The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed that monthly sales increased 9.7% over the same month last year. Total sales have been above year-ago levels for 22 consecutive months. There are buyers out there right now (buyer traffic is 31 percent stronger than a year ago) and they are serious about purchasing.
2.) Supply Is Beginning to Increase
Total housing inventory last month rose 11.9% to 2.16 million homes for sale. This represents a 5.2-month supply at the current sales pace, compared with 4.3 months in January. Many expect inventory to continue to rise as more sellers escape the shackles of negative equity. Selling now while demand is high and before supply increases may garner you your best price.
3.) New Construction Is Coming Back
Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. These ‘shiny’ new homes will again become competition as they are an attractive alternative for many purchasers.
4.) Interest Rates Are Rising
According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year mortgage have shot up to 3.98% which represents a jump of more than ½ point since the beginning of the year. Even those trying to be the voice of reason on this issue are projecting higher rates. For example, Polyana da Costa, senior mortgage analyst atBankrate.com said:
“Rates are unlikely to keep going up so quickly and should remain below 5%.”
Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.
5.) It’s Time to Move On with Your Life
Look at the reason you are thinking about selling and decide whether it is worth waiting. Is the possibility of a few extra dollars more important than being with family; more important than your health; more important than having the freedom to go on with your life the way you think you should?
You already know the answers to the questions we just asked. You have the power to take back control of your situation by putting the house on the market today. The time may have come for you and your family to move on and start living the life you desire. That is what is truly important.
The Federal Open Market Committee (FOMC) of the Federal Reserve decided to continue its current policy of quantitative easing (QE) based on current economic conditions. The Fed currently purchases $40 billion in mortgage-backed securities (MBS) and $45 billion in Treasury securities monthly.
Objectives for the QE program include:
- Keeping long term interest rates, including mortgage rates, low
- Supporting mortgage markets
- Easing broader financial conditions
FOMC repeated its position of evaluating QE policy based on inflation, the unemployment rate and economic developments.
Members of the FOMC determined that keeping the federal funds rate between 0.00 and 0.25 percent until the following conditions are met:
- National unemployment rate reaches 6.50 percent
- Inflation is expected not to exceed 2.50 percent within the next one to two years
- Longer term inflation expectations are “well-anchored.”
Committee members agreed to consistently review labor market conditions, inflationary pressures and expected rates of inflation and other financial developments for determining their course of action on QE.
In its post-meeting statement, FOMC asserted that any changes to current QE policy would be taken in consideration of longer range goals for maximum employment and an inflation rate of 2.00 percent.
Fed Chairman Gives Press Conference
After the FOMC statement, Fed Chairman Ben Bernanke held a press conference which provided details about the future of QE and how the Fed will “normalize” its monetary policy. Chairman Bernanke noted that as QE is reduced and eventually stopped, the Fed will not be selling its MBS holdings.
This is important, as demand for MBS is connected to how mortgage rates perform. If the market is flooded with MBS, demand would slow, and prices would fall. When MBS prices fall, mortgage rates typically rise.
According to Chairman Bernanke, the FOMC does not see any immediate reason for changing its purchase of Treasury securities and MBS in the near term, but will continue to monitor conditions. Using the analogy of driving a car, the chairman indicated that the Fed’s intent regarding QE and the federal funds rate would be better compared to easing up on the accelerator rather than putting on the brakes.
Chairman Bernanke also characterized benchmarks cited in connection with increasing the federal funds rate as “thresholds, and not triggers.” This suggests that even if national unemployment and inflation reach Fed targets, that other economic conditions occurring at that time could cause the Fed to alter its plan for raising the federal funds rate.
The Fed chairman said that during Wednesday’s FOMC meeting, 14 of 19 participants did not expect changes to the federal funds rate until 2015, and one member didn’t expect a change until 2016.