Real Estate Information Archive

Easing Into 2015

We like where home price are headed. That is, they are easing. They have assumed a more steady and sustainable rate of growth.

Recent price data from Black Knight supports our contention. Black Knight follows completed transactions in more than 18,500 U.S. ZIP codes. For October, prices were up 0.1%, on average. Year over year, they were up 4.5%. This is much closer to historical growth rates.

Mortgage lending rates are also easing into 2015. The 30-year fixed-rate loan is still regularly quoted below 4%, which is no surprise. The yield on the benchmark 10-year U.S. Treasury note hovers around 2.2%. This is nearly 100 basis points less than where it was a year ago. The 10-year note is showing no inclination to move higher. Mortgage rates are also showing no inclination to move higher.

Unfortunately, homes sales are easing into 2015 at too languid a pace.

In November, existing homes sales sank 6.1% to 4.93 million units at an annualized rate. The number of units sold on a monthly basis has yet to pick up pace. We are still at the same annualized rate we were at this time last year.

As for new home sales, they too, are easing into 2015. November new home sales were down 1.6% in November, to an annualized rate of 428,000 units. As with existing home sales, the sales pace is on par with where we were a year ago. 

Home sales had been showing some life going into the fourth quarter, but the readings on November have been a disappointment. We were expecting better.

That said, we still like the longer-term outlook on both housing and mortgage financing. Yes, sales are flat, but the continued gains in economic growth and employment will prove salutary. (This is a theme we've pounded on frequently over the past six months.) Gears will eventually mesh and sales will move higher.

Financing available to a wider swath of the population will help. Lending – mortgage and consumer – is heading in the right direction. Lenders are more willing to make loans, and consumers are more willing to take them. That's a sign of growing confidence in the economy.

We were one of the few voices promoting housing and mortgage lending in the dire days of 2009. We were proven correct: Housing indeed recovered.

These aren't dire days by any stretch of the imagination, though sometimes they are frustrating days. The good news is that housing is as poised as it has been in years to lead the economy forward. The funk will be broken.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Actually, Things Aren't All That Loose

Last week, we mentioned that Fannie Mae and Freddie Mac introduced a new program to buy mortgage loans with down payments as low as 3%. For borrowers to qualify for 3% down they'd need a FICO score of at least 620. They'd also have to prove their income, assets and job status, and purchase private mortgage insurance. Of course, this is all within the norm.

Fannie and Freddie's new mortgage program inspired a spurt of head shaking and finger wagging from media outlets : Could low down payments lead to another housing boom and bust? Could another mortgage bubble form?

We don't see booms and busts or bubbles in our future. For one, housing sales and purchase mortgage financing is still muted from a historical perspective. Lending standards are still high, and you can argue still too high. (Fed Chair Yellen stated that she was surprised that the housing recovery has not been more robust and indicated that it is because of tight credit markets.) This is reflected in the dearth of first-time home buyers. The NAR reports that first-time home buyers account for just 33% of all home purchases. That's the lowest level in 27 years.

Given the strength in employment and the economy, there is no reason for lenders not to reach out on the risk curve. There is also no reason for regulators to dissuade lenders from not extending credit to riskier buyers – if intelligently done.

Most of us vividly remember what occurred in 2008 and 2009, so everyone is sensitive to market disconnects. Are lending standards too loose? Not by a long shot. The benefits of easing credit standards far outweigh the risk of another bubble at this point in the recovery.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Sentiment Up, Starts Flat, Rates Fall

Home builders remain upbeat. The National Association of Home Builders Sentiment Index posted at 57 for December. This is a point lower than the 58 reading posted in November, but is still the sixth-consecutive reading above 50. (A posting above 50 indicates more optimism and less pessimism.)

Home builders appear to be viewing the market farther afield. For the here and now, the data are not particularly encouraging. Housing starts posted at 1.028 million units on an annualized rate for November. This is in line with expectations, but the pace of starts is off 7% compared to this time last year.

Strength in starts was found in the volatile multi-family component, which was up 6.7%. Unfortunately, the more-important single-family component was down 5.4%. Looking to the future, housing permits were down 5.2%.

In recent months, housing numbers have oscillated perceptibly. October was relatively good but November was not. When we take a longer-term perspective – over the past six months – we see housing growth that has been flat to moderately positive.

Given where mortgage rates have trended lately, we could see housing activity begin to trend more positively. Rates have been dropping for the past six weeks, and are now down to levels last seen 18 months. Bankrate's survey, which tends to lean toward the high side, showed the 30-year fixed-rate mortgage averaged 3.94% over the past week. Freddie Mac's survey showed the 30-year loan averaged 3.8%.

Moreover, it doesn't appear rates will be heading for higher ground in the near future. In the minutes from the latest meeting of Federal Reserve governors, Chair Janet Yellen indicated that language switch to "patience" from "considerable time" on the federal funds rates does not indicate a change in Fed policy.

In other words, the Fed has no intentions to raise interest rates in the near future. Many market watchers don't think anything will change on the rate front until the second half of 2015. Inflation remains low, and is unlikely to move higher given the drop in energy prices. And despite a strengthening economy, there are still enough lagging sectors to keep rates low.

Our New Year's predictions on home prices, the economy, and job growth have turned out as we expected. As for mortgage rates, we were off base. This time last year we were expecting 5% on the 30-year loan by this time. As things stand now, we see nothing to move rates higher any time soon.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

2014 has seen significant improvement in housing. We think there is plenty of room for housing to move higher when the market is viewed from a historical perspective.

Private real estate investment, for one, is still at levels that existed a decade ago. The same is true of household real estate value as a percent of GDP and mortgage debt as percent of GDP. The market is running sub-optimally. That means there is still plenty of upside to capture.

It's also worth remembering that we are a growing country. There are more people than a decade ago. Our population increases year over year. Millenials in particular are a fertile source of pent-up housing demand. Contrary to many accounts , young people still want to buy a home. With the job outlook continually improving, many more of them will.

What's more, a rising tide will lift all ships. We expect to see more activity in all segments of the market. We expect not only to see more people enter the market, but we expect to see more buying and selling within the different price segments.

In short, we look forward to 2015, and we would not be surprised if it turns out to be one of the best years for sales and lending that we've seen in over a decade.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The Strong Get Stronger

The jobs keep coming. Better yet, they keep coming at a faster pace.

Job growth was much stronger than nearly everyone expected in November. Payrolls for the month jumped 321,000 . At the same time, job numbers for October and September were revised up by 44,000. More of us are not only working, but we are earning more doing so. Average hourly earnings spiked 0.4% in November after edging up 0.1% in October.

At the beginning of the year, we said 200,000-or-more monthly job growth was key to a sustained recover. Job growth for the year has exceeded our expectations. All but one month reported over 200,000 in new jobs, while two months posted over 300,000 new jobs.

Job growth and economic growth go hand-in-hand. On the latter, many economists have ratcheted up their gross domestic product (GDP) growth expectations.

The U.S. Commerce Department believes final GDP growth will post at 4.6% at an annual rate for the third quarter, up from 3.6%. The economists at JPMorgan Chase see GDP growth posting at 4.4%, up from 4.3%. Barclays upped its final estimate to 4.2% from 4.1%. Annualized GDP growth above 4% is considered strong.

The growth we're seeing in the waning months of 2014 certainly gives us reason to anticipate 2015. Indeed, we expect 2015 to be a breakout year for housing. In addition to continued economic growth, home prices will continue to rise, though at a rate that will likely revert to historical norms. This is good news because it means market expectations will be better calibrated with market reality.

When it comes to lending reality, we're seeing a sustained pick up in purchase-mortgage activity. Last week, the Mortgage Bankers Association's weekly survey showed purchase applications were up again. Over the past two months, purchase applications have trended generally higher.

We expect purchase activity to continue to trend positively. With growth comes more willingness to lend. Lenders and regulations naturally become more willing to reach further out on the risk curve, thus creating a larger pool of potential buyers. (To wit: Fannie Mae and Freddie Mac recently introduced new programs that allow borrowers to put only 3% down for a mortgage.)

This market is extraordinary in that we have strong economic growth coupled with low interest rates. Despite last week's strong jobs report, mortgage rates have actually drifted lower. The 30-year fixed-rate mortgage is still regularly quoted below 4%.

With that said, we shouldn't expect mortgage rates to remain at these levels if growth continues to steam ahead at the current rate. One day the Federal Reserve will move to lift interest rates. Growth sustained at the current rate means that day will come sooner than later.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The economy continues to hum along. What's more, it continues to hum along at a higher pitch than most economists had expected. Gross Domestic Product (GDP) – the value of all goods and services – was revised up to an annual growth rate of 3.9% in the third quarter. The consensus estimate called for GDP to be revised to show 3.2% growth.

Within the GDP data, the trends in private investment were particularly encouraging. Both nonresidential fixed investment and residential fixed investment ratcheted higher. This is good news because more investment today leads to more consumer spending tomorrow.

We're not particularly surprised that economic growth is picking up. After all, the economy has been producing new jobs at the rate of 200,000+ per month for most of 2014.

On the other hand, interest rates are a surprise. When economic growth ratchets higher, so, too, do interest rates. This time around is different, though. Interest rates continue to remain subdued. The 10-year U.S. Treasury note continues to hover around 2.3%. This is the low-end of the range that has prevailed through 2014. At the same time, mortgage rates remain low. The 30-year fixed-rate mortgage continues to vibrate around 4%.

We have rising GDP growth coupled with low interest rates. What's more, growth should continue to rise, while rates should remain low. We say that because consumer-price inflation remains very subdued.

So, we have the best of both worlds – strong growth and low lending rates. This unique paradigm suggests housing should get off to a strong start in 2015.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The Big View

The holidays are a nice respite. Things slow down a bit, which allows us to stand back and take in the big picture.

We like what we see, because the big picture includes steady improvement in housing. As we reported last week, housing sales are trending higher. In addition, more sales are being financed with a mortgage. That we are seeing more purchase applications is a sign of more owner-occupied buyers. These buyers have always been the key drivers of the housing market.

Recent trends in home prices point to more buyer interest and more inventory from which to choice.

On the pricing front, S&P/Case-Shiller's closely followed 20-city price index rose 0.3% month over month for September. Year over year, the index is up 4.9%. This is the slowest pace of year-over-year price growth since October 2012. This is actually good news because we are seeing the pace of price appreciation return to historical norms, and historical norms are sustainable norms.

That said, price appreciation is still found in most local markets. Of the 20 markets in Case-Shiller's index, 18 showed price gains for the month.

We expect home prices to continue to appreciate in most markets Case-Shiller follows. We say that because we remain confident in the economic outlook. Fortunately, many consumers apparently share our perspective.

Consumer confidence , overall, remains encouraging. Though down slightly in November, confidence has been on the rise through most of 2014. Better yet, consumers remain upbeat on the outlook for job creation. The latest data from the Conference Board show more people view the job market favorably. This, in turn, points to another favorable employment report next week. (Look for another month of 200,000-or-more new jobs for November.)

The positive data on jobs, housing, and mortgage lending over the past six months gives us even more reason to be thankful this time of year. The good news is that we don't expect this sense of gratitude to abate any time soon.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

We suspect one day they will, but we doubt that day is imminent.

We've done an about-face on interest rates compared to our outlook at the beginning of the year. Back in January, we thought the 30-year fixed-rate mortgage would be approaching 5% by now. That hasn't been the case. Today, it appears 5% lies somewhere on the distant horizon.

We say that because the Federal Reserve has affirmed that it has no intention of raising the federal funds rate (the important rate banks lend short-term to each other). What's more, the Fed continues to plow money from maturing Treasury and mortgage-backed securities into new issues. Though quantitative easing (QE) officially ended last month, the Fed continues to support the mortgage market. We are still looking at a very accommodating low-rate monetary environment.

At the same time, consumer-price inflation remains muted. This means the Fed has the leeway to hold interest rates low. (The Fed had offered a 6.5% unemployment rate and 2% annual inflation as guideposts before raising rates. The Fed has certainly disregarded the former, with the unemployment rate now below 6%.)

Maybe interest rates will rise when GDP growth hits 6% annually and the unemployment rate hits 4%, as it did 15 year ago. If that drives the rate on the 30-year loan up to 6%, so be it. We'll take that trade-off any day.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

This past week, the Federal Reserve announced it would cease using new money to purchase longer-term Treasury securities and mortgage-backed securities (MBS). This has lead many market watchers to believe interest rates will start to rise. After all, reduced Fed demand will lead to higher yields.

It's not quite that simple. For one, the Fed will continue to reinvest the proceeds of maturing notes, bonds, and MBS into new notes, bonds, and MBS. The Fed has also said that it won't allow its portfolio of these holdings, which exceeds $4 trillion, to shrink until it starts raising short-term rates. This isn't expected to occur until the second-half of 2015 at the earliest.

In addition, banks are picking up the slack in demand. Recent rules approved by the Fed, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corp. leave banks about $100 billion short of the $2.5 trillion in easy-to-sell assets that they need to meet new liquidity standards. Treasury securities and MBS help banks meet the standards.

At the same time, supply of Treasury securities is expected to drop. A falling fiscal deficit will result in less Treasury-debt issuance going forward. According to the CBO , the deficit for 2014 – for the fiscal year that ended on September 30 – was $486 billion, $194 billion less than the $680 billion deficit recorded in 2013. That’s the lowest deficit since 2007.

In short, we don't expect a meaningful increase in mortgage rates for some time, possibly not until the second quarter of 2015.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Better Pricing Driving More Sales

We've frequently mentioned that a slowdown in home-price appreciation would help drive sales volume. So far, our thesis has proven correct.

New home sales surged to 467,000 units on an annualized rate in September. This was the best monthly display since July 2008.

Discounting by home builders was a key factor in driving volume. The median price of a new home dropped 9.7% to $259,000 in September. Before the decline, the year-over-year median price was trending higher. But now the median new-home price is actually 4% lower than it was this time last year.

New-home prices should stabilize going forward. Supply remains muted, with 207,000 new homes on the market. This means that supply relative to sales is at a reasonable 5.3 months.

It appears existing-home sales might start trending higher with new-home sales. The pending home sales index was up 0.3% in September. This isn't a monumental increase, but it does point to another monthly gain in existing-home sales for October. The year-over-year trend in the index is another subtle plus. It had spent most of 2014 in the red but is now back in the black with a 1.0% gain.

As for home prices, the S&P/Case-Shiller Home Price Index shows they were down in 12 of the 20 cities the index follows. In aggregate, this translates to a 0.1% index decline. This marks the fourth-consecutive monthly decline, which drives the year-over-year gain down to 5.6% compared to 6.7% in July. The downward trend will likely persist: Zillow projects the year-over-year gain will drop to 4.7% when Case-Shiller reports September numbers.

Continued improvement in gross domestic product (GDP ) growth should keep home sales moving forward through the end of the year. GDP growth decelerated in the third quarter, falling to 3.5% on an annualized rate, compared to the second quarter's 4.6% annualized rate. That said, 3.5% is respectable, and still beat the consensus estimate for 3.1% annualized growth. What's more, GDP growth at the current level should keep monthly job growth above the coveted 200,000 level.

Now, we just want to see an uptick in purchase-mortgage activity. Last week's numbers from the Mortgage Bankers Association weren't terribly encouraging. Purchase volume was down 5.0% for the October 24 week despite the fact rates remain low: sub-4% is still regularly quoted on the 30-year fixed-rate loan. What's more, rates are showing little inclination to move materially higher.

The question is, will mortgage rates remain sedated now that the Federal Reserve has ended quantitative easing?

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.