South Orange County Blog from Bob Phillips

Sales volume in priciest O.C. ZIP codes up 16 percent in September

From Jonathan Lansner, O.C. Register Staff Columnist, 10/22/2015

Illuminated House With Pond In Foreground

Orange County housing’s upper crust finished the summer in style.

In September, home sales in the county’s 27 priciest ZIP codes – neighborhoods where the median sales price run from $722,500 to $3.65 million – were up 16.3 percent compared to a year ago, according to CoreLogic data.

Countywide, 3,282 Orange County residences sold, up 15 percent from a year ago. Orange County’s median selling price for all residences was $615,000 in the period, up 5.3 percent compared to a year ago.

In the nine Orange County ZIP codes with median selling prices above $1 million, sales totaled 222 homes, up 20 percent compared to a year ago. The most expensive ZIP codes were Newport Coast 92657 and Newport Beach 92661 at $3.65 million.

Other noteworthy trends in CoreLogic’s September report:

• Gains were not universal. Prices were up in 55 of 83 Orange County ZIP codes compared to the previous year. Sales volume rose in 63 of the 83 ZIPs.

• The latest countywide median price is 4.7 percent below the all-time high monthly price of $645,000 set in June 2007.

• Median selling price for resales of single family homes was $679,750 – up 4.6 percent from a year ago and 7.4 percent below the all-time high monthly price of $734,000 set in June 2007.

• Resale condos’ median selling price was $430,000 – up 7.9 percent from a year ago, yet 8.5 percent below the all-time high monthly price of $470,000 set in March 2007.

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Why October is the Best Time to Buy a House

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Posted by Staff Reporter at Realty Today (media@realtytoday.com) on Oct 05, 2015

Buying a house is no walk in the park. There are many things to consider, not to mention your bank account. But if you’re in the house-hunting phase in your life, now may be the time to make the call. Specifically, this month.

RealtyTrac recently conducted a research to find out when is the best time to make a house purchase. Analyzing more than 32 million real estate transactions since 2000, they discovered that most buyers have gotten the best deals during the month of October. During this month, the average sales price turned out to be less than 2.6 percent than the estimated full market value of the property.

This may be attributed to the fact that around this time, families are focused on getting their kids settled into the school season. Moving to a different location will disrupt this schedule, so there’s less competition in the market. This means sellers are more likely willing to negotiate.

Also, according to Time, a property’s wear-and-tear issues likely surface around fall, as temperatures drop. It’s important to inspect a home’s insulation, heating and drainage systems to make sure you are getting the right price for the house.

In contrast, RealtyTrac found out that the worst month to buy a house if you’re on a tight budget is in April, where prices soar at 1.2 percent. ( End of article.)

From Bob Phillips:  Actually, any time between now and January 15th should be a great time to buy a house, before the buyers return in droves by February.

Thinking of buying? Drop me an email ( BobPhillipsRE@gmail.com ) or give me a call, ( 949-887-5305 ) and let’s talk about your best options.

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What’s Ahead For Mortgage Rates This Week – September 28, 2015

Whats Ahead For Mortgage Rates This Week September 28 2015Last week’s scheduled economic news included reports on new and existing home sales, the FHFA House Price Index, weekly reports on mortgage rates, and new jobless claims. The week finished with a report on consumer sentiment.

Existing Home Sales Fall as New Homes Sales and Home Prices Rise

The National Association of Realtors reported that home sales for pre-owned homes fell in August. Analysts expected sales of existing homes to reach a reading of 5.52 million sales on an annual basis, but the actual reading was 5.31 million existing homes sold as compared to July’s reading of 5.58 million pre-owned homes sold. Rising home prices were cited as a primary reason for the drop in sales.

FHFA’s House Price Index for July reflected the trend of rising home prices; July’s reading was 0.60 percent as compared to June’s reading of a 0.20 percent increase in home prices associated with homes with mortgages owned by Fannie Mae or Freddie Mac.

Sales of newly built homes reached the highest level since early 2008 in August, evidence that demand for housing is strengthening heading into the fall. Home builder sentiment is at its highest level in nearly a decade according to a survey earlier this month from the National Association of Home Builders

Mortgage Rates Fall

Freddie Mac reported that average mortgage rates fell on Thursday; the rate for a 30-year fixed rate mortgage was 3.86 percent; the average rate for a 15-year mortgage was 3.08 percent and the rate for a 5/1 adjustable rate mortgage  dropped by one basis point to 2.91 percent. Discount points were 0.70, 0.60 and 0.50 percent respectively.

Jobless Claims Also Rise As Consumer Sentiment Fell.

The number of Americans seeking unemployment benefits rose slightly last week yet remained at a low level consistent with solid job growth. The Labor Department says weekly applications for jobless aid rose 3,000 to a seasonally adjusted 267,000. The four-week average fell to a 15-year low last month.

The University of Michigan says consumers lost confidence for the third straight month in September, worried about bad news about the global economy. Consumer sentiment index fell to 87.2 this month, lowest since October 2014 and down from 91.9 in August. Richard Curtin, Chief Economist for the survey, said consumers are worried about signs of weakness in the Chinese economy and continued stresses on Europe’s economies.

What’s Ahead

This week’s economic reports include Pending Home Sales, the Case-Shiller Home Price Index, Core Inflation, ADP Employment and the government’s Non- farm Payrolls report. The national unemployment rate and Consumer Confidence Index for September are also slated for release this week.

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What’s Ahead For Mortgage Rates This Week – September 21, 2015

Whats Ahead For Mortgage Rates This Week September 21 2015Last week’s economic releases included several reports related to housing. The Wells Fargo/ NAHB Housing Market Index achieved its highest reading in nearly 10 years. Housing Starts dipped in August and Building Permits issued in August exceeded July expectations. The week’s big news was actually no news. The Fed’s Federal Open Market Committee decided not to raise interest rates. Fed Chair Janet Yellen followed up on the FOMC statement with a press conference and said that the Fed is not yet ready to raise rates, but that a majority of FOMC members are prepared to raise rates before year-end.

Inflation Rate Remains Well Below Fed Benchmark

The Federal Reserve has set a goal of reaching an inflation rate of 2.00 percent as one of several considerations for raising the target federal funds rate that currently stands at 0.00 percent to 0.250 percent. The Consumer Price Index for August fell from July’s reading of 0.10 percent to -0.10 percent in August. Lower prices were driven by lower fuel costs. The dip in consumer costs was the first since January.

The Core Consumer Price Index, which excludes volatile food and energy sectors, was unchanged at 0.10 percent in August, which matches analyst expectations and July’s reading.

NAHB: Home Builder Confidence Hits Highest Level in Nearly 10 Years

The Wells Fargo/NAHB Housing Market Index reached its highest reading since November 2005 with a one-point increase to a reading of 62 in September. Readings over 50 indicate that a majority of builders are confident about housing market conditions. September’s reading was the highest since November 2005, when the NAHB Housing Market Index achieved a reading of 68.

Housing Starts Lower, But Building Permits Rise

The Commerce Department reported that August housing starts fell to a seasonally-adjusted annual reading of 1.13 million starts against projections of 1.16 million starts and 1.16 million housing starts in July. Residential building permits were higher in August with a reading of 1.17 permits issued for residential construction and 1/13 million permits issued in July.

Mortgage Rates Rise

Freddie Mac reported that mortgage rates rose across the board last week. The rate for a 30-year fixed rate mortgage rose by one basis point to 3.91 percent. The average rate for a 15-year mortgage also rose by one basis point to 3.11 percent and the average rate for a 5/1 adjustable rate mortgage also rose by one basis point to 2.92 percent. Discount points averaged 0.60 got 30-year fixed rate mortgages, 0.70 percent for 15-year mortgages and 0.50 percent for a 5/1 adjustable rate mortgage.

What’s Ahead

Next week’s scheduled economic news includes reports on new and existing home sales, FHFA’s House Price Index, along with regularly scheduled weekly reports on new jobless claims and mortgage rates.

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What’s Ahead For Mortgage Rates This Week – September 14, 2015

Whats Ahead For Mortgage Rates This Week September 14 2015A short week after the Labor Day Holiday provided a slack schedule for economic news. Bloomberg reported that residential investment for the second quarter of 2015 represented 3.34 percent of the Gross Domestic Product. Compared to the long-term average reading of 4.56 percent, analysts said that the Q2 15 reading suggested pent-up demand in the housing market that could help propel the economy through any setbacks that could occur when the Fed raises rates.

Pent-Up Housing Demand a Plus when Fed Raises Rates

Job openings rose in July to 5.75 million as compared to June’s reading of 5.32 million. This is a positive indicator for the economy and for the housing sector, as consumer confidence in terms of buying a home typically relies on stable employment and a strong labor sector.

While economic indicators are looking good for housing construction, analysts note that a shortage of construction workers could affect construction of new residential units. Analysts said that children born during the 1980’s will lead the next wave of first-time home buyers, with millennials following. This trend could last for the next 10 to 15 years and is expected to bolster housing markets.

More lenient mortgage lending requirements and rising confidence among home builders were also cited as positive indicators for housing.

Mortgage Rates Mixed

Freddie Mac reported that average fixed mortgage rates rose by one basis point to 3.90 percent for 30-year fixed rate mortgages and 3.10 percent for 15-year mortgages. The average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.91 percent. Average discount points for a 30-year fixed rate mortgage were unchanged at 0.60 percent and rose to 0.70 percent for 15-year fixed rate mortgages and to 0.50 percent for 5/1 adjustable rate mortgages.

Job Openings Rise as Weekly Jobless Claims Fall

July job openings rose to 5.75 million from June’s reading of 5.32 million; this was the highest number of available jobs since records have been kept. Analysts said that the high number of job openings clearly indicate that the labor force is not able to supply the workers needed by employers. Jobs available range from professional to service related work; this suggests a universal trend rather than hiring challenges within specific job areas.

Hiring activity fell in July to 4.98 million from June’s reading of 5.18 million. July separations also fell, which suggests that employers are having problems finding skilled workers and are holding on to experienced workers.

Weekly jobless claims fell to 275,000 from the prior week’s reading of 281,000 new jobless claims.

What’s Ahead

Next week’s scheduled economic reports include Retail Sales, Consumer Price Index and Core CSI along with the NAHB Wells Fargo Housing Market Index, Commerce Department reports on housing starts and building permits. The Fed’s Federal Open Market Committee will issue its customary statement on Wednesday, followed by highly-anticipated press conference by Fed Chair Janet Yellen.

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What’s Ahead For Mortgage Rates This Week – August 10, 2015

Whats Ahead For Mortgage Rates This Week August 10 2015This week’s scheduled economic news includes reports on construction spending, a survey of senior loan officers, and reports on labor markets including ADP private sector jobs, the federal government’s reports on non-farm payrolls, core inflation and the national unemployment rate.

Construction Spending Slows, Loan Officers Survey Suggests Growing Confidence

Construction spending fell in June after the May reading was revised upward to 1.89 percent from the original reading of 0.90 percent. Spending for residential construction rose by 0.40 percent, while non-residential construction spending remained flat. The seasonally-adjusted annual outlay for construction was $1.06 billion in June.

Analysts continue to note a trend toward construction of smaller residential units including condominiums and apartments, with an emphasis on rental properties. This supports reports that would-be homebuyers are taking a wait-and-see stance to see how factors including rising home prices, fluctuating mortgage rates and labor market conditions perform.

According to a survey of senior loan officers conducted by the Federal Reserve, mortgage lenders reported that mortgage applications increased during the second quarter and indicating that financial constraints on consumers may be easing. According to the survey of 71 domestic banks and 23 foreign-owned banks, 44 percent of respondents reported moderate increases in loan applications, while only 5 percent of survey participants reported fewer loan applications.

Some banks surveyed reported easing mortgage approval standards, but fewer lenders eased standards than in the first quarter. Further supporting growing confidence among lenders, the Fed survey also reported that large banks were easing consumer credit standards for auto loans and credit cards.

Mortgage Rates Fall, Jobless Claims Rise

Freddie Mac reported that average mortgage rates fell across the board last week with the average rate for a 30-year fixed rate mortgage lower by seven basis points to 3.91 percent; the average rate for a 15-year fixed rate mortgage fell by four basis points to 3.13 percent, and the average rate for a 5/1 adjustable rate mortgage was unchanged at 2.95 percent. Discount points for all loan types were unchanged at 0.60 percent for 30 and 15-year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

Weekly jobless claims rose from the prior week’s reading of 268,000 new claims to 270,000 new claims, which matched analysts’ expectations. In other labor-related news, the government reported a national unemployment rate of 5.30 percent in July; this was unchanged from June’s reading.

The ADP employment report for July showed fewer jobs were available in the private sector. June’s reading showed that private sector jobs grew by 229,000 jobs; July’s reading fell to 185,000 private sector jobs. According to July’s Non-farm Payrolls report, 215,000 new jobs were added in July as compared to expectations of 220,000 jobs added and June’s reading of 231,000 new jobs added.

The Federal Reserve’s Federal Open Market Committee (FOMC) is closely monitoring job growth and inflation rates as it contemplates raising the target federal funds rate. Core inflation grew by 0.10 percent in June; which was consistent with May’s reading and expectations. The FOMC recently cited the committee’s concerns about labor markets and lagging inflation. The Fed has set an annual growth rate of 1.65 percent for inflation for the medium term; this benchmark is part of what the Fed will consider in any decision to raise rates.

What’s Ahead

This week’s scheduled economic reports include reports on retail sales and consumer sentiment in addition to usual weekly reports on mortgage rates and new jobless claims.

 

 

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Orange County Housing Report: Here We Grow Again!

Part of the normal summer housing cycle, the active inventory continues to grow without pause.

Increase of inventoryA Growing Inventory: the active inventory has grown by 42% since the beginning of the year.

Quietly, one house at a time, the active inventory has been growing. In order for the inventory to rise, homes have to come on the market faster than they are coming off. Homes come off the market for one of two reasons: either they are placed into escrow or a seller opts to pull their home off of the market. So, in order for the inventory to blossom from 5,000 homes at the beginning of 2015 to 7,116 homes today, homes have to sit on the market without success.

But how can that occur when we have heard so much about the extremely hot market this year? Quite simply, too many overzealous homeowners inaccurately priced their homes outside of reality and sat on the market until they came to their senses. It’s no wonder that 10% of the housing inventory in Orange County reduces their asking price each and every week.

Don’t get me wrong; the market is a lot stronger this year compared to last year. There were a similar number of homes placed on the market so far this year compared to last year, but the active inventory last year was 6% higher. The inventory was higher because demand was not as strong during the Spring Market. When fewer homes are placed into escrow, the inventory rises.

In spite of the robust market, the inventory is still rising. A hotter market is not a free pass to price a home wherever a seller wishes. Those sellers realize the error in their ways after sitting on the market without reviewing a single offer. Now that summer is almost over, the Orange County housing market is beginning its annual transition into the Autumn Market. Have you seen more Open House directional arrows at busy cross streets? That’s a definitive sign that there are fewer buyers in the marketplace, that homes are not selling as quickly, and that too many homes are not priced accurately.

April 9th of this year was the absolute peak of the spring selling season.  The expected market time was at 1.81 months, or 54 days. The market was a very hot seller’s market and prices were rising, homes were flying off of the market, and offers were coming in above the listing price. Since then, the inventory has grown by 27%, 1,792 homes, and demand has dropped by 13%, or 409 pending sales. When supply rises and demand drops in housing, the expected market time that it would take for the average home to be placed into escrow rises, the higher the expected market time, the slower the overall market. It has climbed to 2.64 months, or 79 days, moving from a deep seller’s market to a slight seller’s market.

The expected market time is marching its way to three months. When it is between three and four months, it is a balanced market, one that does not favor a buyer or seller. At its current level, sellers are able to call the shots, but appreciation has slowed to a crawl. Without appreciation, proper pricing is vital in order to succeed. At this point, sellers wishing to stretch the price will simply sit on the market until they finally wake up to the reality that they are overpriced and will attract no offers.

Success today can be achieved a lot swifter with the sound strategy of pricing a home as close to its Fair Market Value. This cannot be determined by any online tool or valuation calculator, as they can be off by 20%, or even more. Instead, it is best to utilize the expertise of a seasoned REALTOR®, an expert who is able to take into consideration location, condition, upgrades and amenities, carefully comparing a home to the most recent pending and closed sales activity to determine the price.

The bottom line: price is the determining factor in successfully selling and stretching the price is a strategy that will not work for the remainder of 2015.

Active InventoryThe inventory increased by 7% in the last month.

The active inventory increased by 469 homes in the past month and now totals 7,116. October of 2014 was the last time the inventory was above the 7,000 home mark. Last year at this time the inventory totaled 8,057 homes, 941 more than today, with an expected market time of 3.16 months, or 95 days. That’s 16 additional days compared to today.

From here we can expect the listing inventory to continue to grow through the end of the summer before turning lower in September as fewer homes come on the market and sellers start to throw in the towel with both the Spring and Summer Markets in the rearview mirror.

DemandDemand decreased by 9% in the past month.

Demand, the number of new pending sales over the prior month, decreased by 271 homes in the past month and now totals 2,698 homes, its lowest level since February. Demand will remain at these levels for the remainder of summer before it downshifts again after the kids go back to school.

Last year at this time there were 149 fewer pending sales, totaling 2,549. The year over year difference has diminished substantially. On July 2nd there were 492 more pending sales compared to 2014, 20% more. The current difference is the smallest since February, just 5%. 

Distressed Breakdown: The distressed inventory increased by 12 home in the past couple of weeks.

The distressed inventory, foreclosures and short sales combined, increased by 12 homes in the past two weeks, but for the month it is actually down by nine. Year over year, there are 31% fewer distressed homes today. With a sharp turnaround in prices in the past few years the number of distressed homes has fallen appreciably. Only a few percent of all mortgaged homes are upside down. During the Great Recession, the number was as high as 25% of all mortgage homes. The distressed market has been reduced to an asterisk of the current Orange County housing scene.

In the past two weeks, the foreclosure inventory increased by 10 homes and now totals 68. Less than 1% of the inventory is a foreclosure. The expected market time for foreclosures is 51 days. The short sale inventory increased by 1 homes in the past two weeks and now totals 139. The expected market time is 48 days. Short sales represent just 2% of the total active inventory. ( End of Report.)

This report is from my longtime friend, Steven Thomas, Orange County’s own real estate market guru, and the above is his latest “Orange County Housing Report” which can be found at ReportsOnHousing.com

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What’s Ahead For Mortgage Rates This Week – August 3, 2015

Whats-Ahead-Mortgage-RatestLast week’s scheduled economic reports included the Case-Shiller 20 and 20-City Index reports, pending home sales data released by the National Association of Realtors® and the scheduled post-meeting statement of the Federal Reserve’s  Federal Open Market Committee.

Case-Shiller: Home Prices Growing at Normal Pace

The Case-Shiller 20-City Home Price index for May reported that year-over-year home prices grew by 4.40 percent year-over-year. S & P Index Committee Chair David M Blitzer said that home prices are increasing gradually by four to five  percent a year as compared to double-digit percentages seen in 2013. Mr. Blitzer said that home price growth is expected to slow in the next couple of years as home prices have been growing at approximately twice the rate of wage growth and inflation, a situation that is not seen as sustainable.

Denver, Colorado led the cities included in the 20-City Index with a 10 percent year-over-year growth rate for home prices. San Francisco, California followed closely with a year-over-year gain of 9.70 percent and Dallas Texas posted a year-over-year gain of 8.40 percent.

Fastest month-to-month home price growth in May was tied by Boston, Massachusetts, Cleveland, Ohio and Las Vegas, Nevada with each posting a monthly gain of 1.50 percent. May home prices remain about 13 percent below a 2006 housing bubble peak.

Pending Home Sales Down From Nine-Year Peak

According to the National Association of Realtors®, pending home sales dropped by 1.80 percent in June as compared to May’s reading. The index reading for June home sales was 110.3 as compared to May’s index reading of 112.3. This indicates that upcoming closings could slow; June’s reading represented the first decrease in pending home sales in six months. Lawrence Yun, chief economist for the National Association of Realtors®, cited would-be buyers’ decisions about whether to hold out for more homes available or to buy sooner than later will affect future readings for pending home sales.

Fed Not Ready to Raise Rates, Mortgage Rates Fall

The Fed’s FOMC statement at the conclusion of its meeting on Wednesday clearly indicated that Fed policymakers remain concerned about economic conditions and are not prepared to raise the federal funds rate yet. The FOMC statement did not provide any prospective dates for raising the target federal funds rate, which is currently at 0.00 to 0.25 percent, but the Fed continues to watch employment figures and the inflation rate.

Freddie Mac reported that mortgage rates fell last week, likely on news of the Fed’s decision not to raise rates. Average mortgage rates fell across the board with the rate for a 30-year fixed rate mortgage dropping by six basis points to 3.98 percent; the rate for a 15-year fixed rate mortgage dropped by four basis points to 3.17 percent and the average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.95 percent. Average discount points remained the same for fixed rate mortgages at 0.60 percent and fell from 0.50 percent to 0.40 percent for 5/1 adjustable rate mortgages.

What’s Ahead

This week’s economic calendar includes reports on consumer spending, core inflation and consumer spending. July readings on Non-Farm Payrolls and the national unemployment rate will also be released along with regularly scheduled weekly reports on new jobless claims and mortgage rates.

 

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Last Week’s Economic News in Review

Existing home sales outpaced expectations to hit an eight-year high, while new home sales were at a seven-month low. Meanwhile, lay-offs shrank to their smallest rate in more than 40 years.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops, increased 3.2 percent to an annual rate of 5.49 million in June, according to last week’s report from the National Association of Realtors. This was not only well ahead of the market expectation for a 5.4 million-unit pace, but marked the highest level in more than eight years.

“Buyers have come back in force, leading to the strongest past two months in sales since early 2007,“ NAR Chief Economist Lawrence Yun said. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.“

Looking at price, the median existing-home price for all housing types in June rose to $236,400, which is 6.5 percent higher than June 2014’s and surpassed July 2006’s peak median sales price of $230,400. Looking at inventory, the supply of existing homes at the end of June grew 0.9 percent to 2.3 million units available for sale. This put the inventory of existing homes available for sale at five months.

“Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers,“ Yun noted. “Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes.“

New Home Sales

While existing home sales skyrocketed, sales of new, single-family homes fell to an annual rate of 482,000 in June, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This was 6.8 percent below May’s revised rate of 517,000, and marked a seven-month low.

However, compared on an annual basis, June’s sales pace was 18.1 percent higher than June 2014’s estimate of 408,000. If anything, the experts advised against reading too much into new home sales, when other real estate activity — such as existing homes sales — was performing so much better.

“We should not get too worried about the signal from the new home sales data at this point,“ JPMorgan Economist Daniel Silver told the Reuters news service.

In terms of prices, the median sales price of new homes sold in June was $281,800, and the average sales price was $328,700. Looking at inventory, the estimated number of new homes for sale at the end of June was 215,000, which represented a 5.4-month supply at June’s sales rate.

Initial Jobless Claims

First-time claims for unemployment insurance benefits filed by recently unemployed individuals plummeted to a 40-year low. Initial jobless claims filed during the week ending July 18, dropped to 255,000, a tumble of 26,000 claims from the previous week’s total of 281,000, the Employment and Training Administration reported last week.

The news marked the lowest point for lay-offs since November 24, 1973’s total of 233,000 claims. The big driver for the substantial drop was likely lay-offs due to restructuring in the car industry, but there was no denying that lay-offs were in retreat.

“This week’s claims reading may have been exaggerated on the low side but there is certainly no sign of the labor market losing momentum,“ High Frequency Economics’ Jim O’Sullivan told the Wall Street Journal. “The message: Employment growth remains more than strong enough to keep the unemployment rate declining.“

The four-week moving average — considered a more stable measure of lay-off activity — fell to 278,500, a decrease of 4,000 from the previous week’s unrevised average of 282,500. This was still well below the 300,000-claim mark that indicates a healthy job market.

This week we can expect:

  • Monday — Durable goods orders for June from the Census Bureau.
  • Tuesday — Consumer confidence for July from The Conference Board.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; advanced second quarter GDP estimate from the Bureau of Economic Analysis.
  • Friday — Consumer sentiment for July from the University of Michigan and Thompson-Reuters Survey of Consumers.

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What’s Your Outlook on the Real Estate Market?

An article by Colin Robertson, of TheTruthAboutMortgage.com, 7/23/2015

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So here’s a true story. Yesterday, a good friend of mine asked the following question via text message: “What’s your outlook on the real estate market…we are looking to buy a place soon.”

That’s the exact message he sent over last night; there weren’t any emoticons by the way, sadly.

I saw the message but did my best to avoid answering it for about half an hour. Then I finally cracked and responded with the following:

“In a word, overpriced. But if you really want to buy a home that’s your deal. It’s not always about the investment.”

Now in the past I may have just left it at “overpriced,” but I’ve learned that such remarks are often met with resistance. I also don’t want to ruin anyone’s grand plans.

And it’s true, buying a home isn’t just about the investment. It’s not simply about timing the market and making a killer profit, that is, unless you’re a real estate investor.

For most people it’s a home. It’s a place to live. There are reasons to buy other than turning a profit.

So my outlook has changed, or perhaps broadened, to include benefits beyond making money.

But my point was basically that it’s not an ideal time to buy in terms of investment, but it could be a great time to buy a home if there’s one you really like and want to own.

At the end of the day, if he gets the home he wants, he’ll probably be happy, even if it doesn’t double in value in five years. Even if it flat lines or drops, he’ll probably still be happy if he truly loves the home.

And over time, he’ll surely build equity and come out ahead as home prices reach new heights.

National Median Sales Price Reaches All-Time High

Yesterday, the National Association of Realtors reported that the national median sales price reached an all-time high.

The price of a median existing home climbed to $236,400 in June, a 6.5% increase from a year earlier, enough to surpass the previous peak median sales price reached in July 2006 ($230,400).

For the record, the median sales price has increased year-over-year for 40 consecutive months, so yes, home prices have been on a tear.

Home sales have also been white-hot, with existing sales hitting their highest level in over eight years (February 2007).

Properties are also being scooped up faster than ever, with the average time on market only 34 days in June, down from 40 days in May, making it the shortest amount of time since NAR began tracking in 2011.

I also got word from a real estate agent friend that new home sales are picking up again. Recently, builders were offering discounts, but now that inventory is so low, they’re increasing prices and slashing discounts.

This is basically a testament to the supply/demand imbalance that is causing home prices to keep rising, and making bidding wars a common situation.

It’s for these reasons that I don’t love the current market as a buyer. At the same time, selling isn’t ideal either because there’s a good chance home prices will continue to increase.

In fact, if you look at real prices adjusted for inflation, home prices aren’t really at new all-time highs. In today’s dollars, the median would have to be closer to $260,000.

So buying because you love a home still makes sense today, as it always will. And you’ll probably do just fine if you can afford the home and stay in it for several years.

But if I had to take a side, I’d say that home prices are bloated and the competition is fierce. That certainly makes it a lot less attractive to buy today than in the very recent past. I’m taking a wait and see approach. ( End of Colin’s article.)

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