June 2010 Marketclick – National Overview
Life After Housing Incentives
At the National Association of REALTORS® midyear conference recently, top housing economists cautiously predicted an imminent housing recovery, lifted by the improving jobs outlook and economic expansion.
The caveat is how jobs will impact foreclosures.
Lawrence Yun and Mark Zandi, chief economists for the NAR and Moody’s Economy.com, respectively, agreed that jobs will continue to increase over the coming year, but the economists parted ways when it came to housing.
While both agreed that mortgage interest rates will remain historically low, the availability of jumbo loans will improve, and home sales will rise over the next few years, Yun believes that foreclosures will be even with demand, at about 30 to 40% of all sales transactions through the end of the year.
Zandi disagreed, anticipating that foreclosures will rise later in 2010 before easing in 2011. “Whether home prices weaken is unclear, but it will take two more years to work off excess housing inventory at the current sales pace,” he said.
Yun is more optimistic, believing that prices will rise 2 to 3% this year, and that a housing shortage could be felt as early as two to three years, due to construction and household formation falling below long-term trends.
More jobs are available
The National Association of Home Builders says it believes employment will grow through 2010 and 2011, reducing the unemployment rate to around 9.3% from the current 9.7%. Many returning jobs will be in construction.
The Labor Department announced the best news in ages – more jobs were created in March 2010 than in the last 14 months. Private sector hiring increased 4.8%. Layoffs have supposedly fallen to levels not seen since before the recession. Employers added 290,000 jobs in April, the most in four years.
The economy expanded 3.2% in the first quarter, the third straight quarter of growth, says the Commerce Department, which could lead to more jobs.
Housing Risks Lower
First quarter foreclosure activity is already falling in 14 of the top 20 U.S. metros, according to RealtyTrac, from a year ago.
And the PMI risk index was also positive – with 42 of the largest 50 markets demonstrating diminished mortgage lending risk. Fitch Ratings also said last week that late payments on “Alt-A” loans fell for the first time in four years, as borrowers caught up on payments or were able to modify their loans to more favorable terms.
Life after tax credits
While housing conditions were very favorable for first-time and move-up buyers receiving federal tax credits that ended April 30, 2010, they’ve actually improved in May.
Mortgage interest rates are actually better now than they were, below 5% for a 30-year, fixed-rate conventional loan. And in spite of the end of the tax credits, the pace of mortgage applications is higher in May 2010, says the Mortgage Bankers Association.
Luxury buyers are also jumping back in the pool. Jumbo loans are at their best rates in years – as low as 5.7% for 30-year fixed rates, which means luxury home buyers have more options than paying cash.
Laurie Moore-Moore, founder and CEO of the Institute for Luxury Home Marketing, explains that some buyers aren’t waiting for better terms – they’re paying cash for well-priced fine properties. She says she is hearing anecdotally that luxury home sales are higher across the country. “Fine home buyers are adding luxury real estate as a portfolio play,” says Moore-Moore.
It will obviously take some areas longer than others to see signs of improvement in the housing market, but one thing is certain. Prices will rise on sales volume. If more people have jobs, and are able to form households, more real estate will ultimately be absorbed.
Blanche Evans is CEO of Evans Emedia, Inc. and publisher of The Evans Ezine. As an award-winning journalist, Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and twice recognized as one of the industry's most "Notables."
Negotiating Tip 114: Retreat Negotiations
March 29, 2019
Negotiating Tip 113: Activating Our Opponent
March 28, 2019
Negotiating Tip 112: Misconceptions
March 27, 2019
2020 Real Town The Real Estate Network