Wednesday, May 29, 2013

Home Prices Post Strongest Gains in 7 Years

Source:  CNN Money
@CNNMoney 
May 28, 2013 

U.S. home prices posted their strongest gains since 2006, as the housing recovery continued to gain steam.


home prices peakPrices on the S&P/Case-Shiller national index rose 10.2% in the first quarter, according to the latest report.

That marked the fourth consecutive quarter of year-over-year gains, says David Blitzer, head of S&P's index division. 

The strong gains over the past year may be a bit of a statistical mirage, according to Robert Shiller, a Yale economist and co-founder of the index. Foreclosure sales are down, he said, and since foreclosures sell at a steep discount, that's boosted average home prices. 

But eventually the proportion of foreclosure sales will stabilize, and that will make annual price gains less dramatic. 

There's another factor arguing against continued price gains, according to Shiller. Home prices are already at what he considers "normal" levels, adjusted for inflation. Even the steep housing downturn only took prices to where they would have been if they hadn't skyrocketed during the bubble.

Index co-founder Karl Case worries about the pace of new-home construction, which slowed in April. New construction is a big driver of GDP, he said, so that may be a sign that the economic recovery is flagging. 
 
Both economists, however, are still cautiously optimistic for two main reasons. First is the fact that near-record low mortgage rates have made home buying more affordable. The second is all the pent-up demand in the housing market after years of sluggish sales. 

Phoenix recorded the largest year-over-year price spike, with a 22.5% jump. San Francisco prices rose 22.2% and Las Vegas prices grew 20.6%. New York, at just 2.6%, saw a modest annual increase. To top of page

Housing Bubble: Is There a New One Forming?

Courtesy of Keeping Current Matters/The KCM Blog
Posted: 29 May 2013 04:00 AM PDT


783773_thumbnailThe housing market is recovering so nicely that it has caused some to wonder whether a new housing bubble is forming. Today, we want to explain that the fear of a new pricing bubble in real estate is unwarranted.

Trulia revealed some great data on this point in a recent blog post. They explained that, even with the recent price increases, national home prices are still 7 percent undervalued. Trulia explained:
“Home prices nationally remain undervalued relative to fundamentals and much lower than in the last bubble. That’s why today’s price gains are actually still a rebound, not a bubble.”
Prices are below their fundamental value in the vast majority of the country (91 of the 100 largest metros). Even in the parts of the country that are now overvalued they come nowhere near the percentages we saw in 2006-2007. For example, let’s look at the two markets that are most overvalued today. In Orange County, California prices are currently overvalued by 9%. In 2006, prices in the region were overvalued by 71%! The second most overvalued market today is Austin, Texas at 5%. Texas real estate prices did not skyrocket as they did in many other parts of the country during the last boom. Austin prices were shown as being 12% overvalued at the time.

Again, prices are still undervalued in 91% of markets and, even in the markets that are overvalued, they are nowhere near the numbers of the 2006-2007 bubble.

Jed Kolko, Trulia’s Chief Economist, explained:
“So are we in bubble territory? No. Bubble-phobes can rest easy. Even with recent sharp home price increases, prices are still low relative to fundamentals and are far below bubble levels.”
Dr. David Stiff, chief economist for CoreLogic Case-Shiller agreed in a recently released report on prices:
“Even if double-digit price appreciation were to continue in former bubble metro areas, there is no reason to believe that new home price bubbles are forming. That’s because single-family homes in these markets are still very affordable, even after last year’s large price gains.”

Three reasons there will NOT be another bubble

Prices are determined by the ratio between supply and demand. Here are three reasons a bubble will be avoided.
  1. Supply is beginning to increase. A lack of inventory is creating a market of multiple bids which has caused prices to rise. The National Association of Realtors (NAR), in their latest Existing Home Sales Report, revealed that the months’ supply of inventory has increased from 4.3 to 5.2 months since January.
  2. Demand will decrease in certain demographics. For an example, investors have been a large part of the housing market over the last several years. As prices continue to rise, a certain percentage of these buyers will back off.
  3. As mortgage rates increase, buyers will be able to afford less. The Mortgage Bankers Association, Fannie Mae and NAR have all projected an increase in mortgage rates over the next year. Buying power will decrease as borrowers can no longer afford the same price point as monthly payments will increase.
For these reasons, we believe the fear of a new housing bubble are currently unfounded.

Monday, May 27, 2013

Memorial Day 2013

All gave some... some gave all.
As we enjoy time with family and friends on this Memorial Day, let us be sure to take time to honor the memory of those who made the ultimate sacrifice to protect the freedoms we cherish.

And, as we remember those who died in service to our country, let us give thanks to those who are serving now and to all our Veterans for their past service to our country.


Memorial Day History
American Widow Project
The Origin of Sounding Taps 
You Tube Rememberance
Buglers at Arlington National Cemetery

Sunday, May 26, 2013

The Cost of Waiting to Buy

Courtesy of Keeping Current Matters/The KCM Blog

Experts have projected that U.S. home prices will appreciate by approximately 5% in 2013. The Mortgage Bankers Association, Fannie Mae and the National Association of Realtors have all projected that the 30-year mortgage rate will be at least 4% by the end of 2013. 

Experts have projected that U.S. home prices will appreciate by 5.4% in 2013. If we assume that prices will rise about the same 5% over the next twelve months, here is the difference a buyer will pay if they wait a year.

Note that prices for the metro Phoenix area have gone up and are expected to continue to go up MUCH more than the national average.  According to a May 26th article in USA Today, "Phoenix median homes prices were up 19% year over year in March, CoreLogic says."  The charts below would be VERY different for metro Phoenix.

Price Increase
If we assume that prices and interest rates will rise as projected,
here is the monthly difference a buyer may pay if they wait a year.

Increase in Cost

Latest Market Stats for Paradise Valley and Scottsdale

The latest market stats for PV and Scottsdale have been posted at my website.  These are current through April 2013.  May stats will be posted as soon as they are available.
 
Contact me if you would like stats for any other Metro Phoenix city or zip code.

Thursday, May 2, 2013

15-year Mortgage Rate Hits Record Low

Source:  CNN Money
@CNNMoney May 2, 2013: 

Mortgage rates dropped again this week, with the 15-year fixed-rate loan hitting a record low, according to a report from mortgage financier Freddie Mac.

 

The 15-year fixed rate fell to 2.56% from 2.61%. A year ago, it stood at 3.07.  The most popular mortgage, the 30-year fixed rate, came in at 3.35%, a drop of 0.05 percentage point and only 0.04 percentage point above its record low set the week of November 21, 2012. 

The rates provide a welcome boost to the housing market and to the overall economy, according to Frank Nothaft, Freddie Mac's chief economist. 

"Residential fixed investment added to overall economic growth over the past eight consecutive quarters and contributed more than 0.3 percentage points in growth over the first three months of this year," he said. "[N]ear record low mortgage rates should further drive the housing market recovery over the near term." 

The news came a day after the Fed announced that it would keep buying up to $85 billion in mortgage-backed securities and Treasuries a month. 

"There was a chance that the Fed would start to taper their purchases as summer approached," said Keith Gumbinger, of HSH.com, a loan information provider. "But that is starting to look less likely, given the still-soft state of the economy. Odds favor that the programs will continue until much later in the year, so mortgage rates should continue to be available at fantastic rates."

Low rates help existing homeowners even if they don't refinance their homes. Affordable loans boost homebuyer demand, sending home prices higher. They've recorded a 9% gain over the past 12 months, according to the S&P/Case-Shiller home price index. 

The added home values mean some homeowners will no longer be underwater on their mortgages and can cash in the extra equity should they run into a rough financial patch. They can also sell their homes without resorting to a short sale, in which the price paid is less than what they owe on their mortgages. That saves sellers from a big hit on their credit scores. 

If homeowners do refinance, they often choose 15-year, fixed loans. They are popular with borrowers seeking to shorten their loan terms -- saving themselves on total interest payments. The record low rates enable them to do that without increasing their monthly payments very much. 

Borrowers with three-year-old, 30-year fixed-rate loans at 5% would have a monthly payment of about $537 for every $100,000 borrowed, and would pay out a total of about $93,000 in interest over the course of the mortgage. Switching to a 15-year at 2.57% would increase the payment only to $670 a month but the total interest paid out would come to less than $21,000. 

Mortgage refinance applications rose 1.8% last week, according to the Mortgage Bankers Association, and account for about 75% of all applications for mortgages. To top of page