Real Estate Information Archive

When trying to gain insight into a market, it is important to parse what people do as much as what they say. The stock market is often a good starting point to parse what people are doing as opposed to what they are saying.

We think three particular stock investments offer insight into what investors are doing with their money regarding housing: the iShares FTSE NARIET Residential Plus Capped Index (REZ), the iShares Dow Jones U.S. Home Construction ETF (ITB), and the SPDR S&P Home builders ETF (XHB). These investments cover homebuilders, home improvement stores, construction material, furnishings, and other ancillary businesses attached to the housing market.

For most of the year, these investments have been mostly flat to slightly down, but have been rallying over the past month. What we find most telling, though, is the short interest – a measure of the number of investors who bet these shares will fall. Short interest is extremely low, and has been falling. This tidbit of information suggests to us that fewer investors are bearish on housing in general, and that many more investors (compared to last year) believe the worst is behind us.

Courtesy of 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.

Popular financial media can be a good contrarian indicator. When headlines scream one thing, the opposite is more likely to follow.

We see the phenomenon repeatedly. After an extended stock-market rally, a slew of business stories arise to explain why the stock market has likely hit a permanent high. After the stock market has undergone an extended decline, multitudes of stories arise to question the sustainability of capitalism.But as predictably as day follows night, the trends these articles ride soon reach an apex, and markets move in the opposite direction.

Over the past two years, a slew of articles have lambasted homeownership. Many of these articles centered on why we would become a renter society or why homeownership was a relic of the twentieth century.

These anti-ownership writers were emboldened by the drop in homeownership rates, which had been pushed up to 70 percent during the height of the boom. The percentage rate had recently dropped to 66. Now it appears to be reversing. The Census Bureau reports that the nation's seasonally adjusted homeownership rate rose to 66.1 percent, suggesting the decline has abated, if not reversed.

A drop in the homeowner percentage was to be expected: Homeownership has hovered around the mid-60s for decades, so the decline was a matter of returning to the mean. That said, it was unlikely to go down any further. Most of us overwhelmingly prefer to own than to rent, and most of us (especially those with children) prefer the suburbs to the city.

We suspect more people will want to own when they are convinced price declines are over. On that front, Clear Capital reports that home prices increased again at a 0.6 percent rate in October. Year-over-year, though, Clear Capital reports a 2.8 percent decline.

We are always quick to point out that all real estate is local, and many local markets are showing significant improvement. Home prices in Cleveland increased 6.2 percent in September; Texas (which technically isn't local, but the news is encouraging nonetheless) saw housing starts jump 24.2 percent in September; Miami saw existing home sales hit a five-year high, surging 15.1 percent in September.

In other words, markets continue to clear, and we find it encouraging not only that lower prices have promoted more home buying in many markets, but also that firming prices suggest the worst of the discounting is over. This process should stimulate even more buyers to step forward.If it does, buyers are hitting the mortgage market at the right time. The European Union's continued travails with Greek debt have created a surge in U.S. Treasury security buying, which has helped lower mortgage rates over the past week.

However, this, too, could easily pass. Payrolls have been firming over the past couple months, which points to a strengthening economy. What's more, financial crises, like the one in Europe , that seem intractable often turn out to be quite ephemeral instead. Therefore, we still think it's risky to wait and hope for much lower mortgage rates.  

Courtesy of 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.

It might be a little stale, but data from S&P/Case-Shiller show home prices continue to stabilize across the nation. Specifically, Case-Shiller's August home price index shows no change. That said, the index points to a slight price contraction going forward. But this really isn't news; recent data from Clear Capital, Zillow, and other data aggregators already show some price weakness in September.

The pricing weakness is likely due in part to aggressive discounting by homebuilders trying to spur demand. The strategy appears to be working. Sales of new homes jumped 5.7 percent in September to an annual rate of 313,000 units. This rise in sales volume, in turn, pushed down supply to 6.2 months at the current sales rate –the lowest supply level in 18 months.

That's the good news. The bad news for homebuilders is that the median national home price is down 3.1 percent to $204,400, posting a third-consecutive monthly decline. What's more, year-over-year price contraction is 9.9 percent –the steepest yearly decline since the recession.

Some of the sting on new home prices is mitigated by the fact that most of the discounting occurred in the West and South: in other words, in the overbuilt regions in Florida, Arizona , and California . It is still possible these regions will continue to skew price data into 2012.

That said, we remain convinced that prices and sales in many parts of the nation will continue to claw forward. Our conviction is bolstered by news on gross domestic product, which improved to an annual growth rate of 2.5 percent in the third quarter. We were particularly encouraged to see more business investment lead by durable goods orders. We mentioned in a previous edition that business investment is just as important as consumer spending to sustained economic growth. The consumer recovered long ago, and now it appears the business investor is recovering as well.

We think this is good news for housing heading into 2012. More economic spending and investing will mean more jobs and less unemployment. Employment, more than anything, is what's needed to pull us out of our doldrums.

What does this encouraging news on GDP growth mean for mortgage rates? An improving economy will mean more demand for loanable funds and possibly rising consumer prices. Admittedly, the economy has improved slower than most (including us) believed it would. But recent events in Europe suggest the Greek debt crisis won't destroy Europe 's banks and the surge in stock market activity points to more risk taking and more economic activity down the road.

In short, the market is leaning toward higher mortgage rates. Next week's data on employment will be key to getting a better idea on where rates are headed.

Courtesy of 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.

What a difference a month makes. In September, homebuilder mood was in the doldrums, where it has been for most of the year. In October, that mood turned noticeably positive, with the homebuilder index jumping four points to 18 – the highest posting in nearly 18 months.

There is still a long way to go before homebuilders approach the heady days of a few years ago, but at least the market is progressing. Builders began work on an annual rate of 658,000 houses in September, a 15-percent increase over August's starts and the most since April 2010. Much of the increased activity was centered on multifamily homes, which surged 51.3 percent. However, work on single-family homes also increased, 1.7 percent, to an annual rate of 425,000 units.

The National Association of Home Builders, which compiles data for the homebuilder index, warns that builders face pricing pressure from foreclosed properties. The good news is that foreclosures appear less onerous than they did a year ago. At the same time, homebuilders are adding to supply at a record low rate. In other words, the economics of home building are much more encouraging than they were earlier in the year.

The economics of the existing-home market continue to adhere to the recent past. Total inventory declined 2 percent to 3.48 million homes at the end of September, with the sales rate declining 3 percent to 4.91 million units. This came as no surprise; August's sales were exceptionally strong and a slight drop off in the sales pace was expected.

Homes that were purchased over the past two months have been financed with mortgage rates that were prevalent during the youth of the purchaser's parents. In the past couple weeks, though, rates have been trending higher and are up around a quarter percentage point from where they were a fortnight ago. That said, mortgage financing is still a very good deal.

But will mortgage financing become a better deal? Many in the industry think so. We are less sure, especially when factoring in growing price inflation. Overall producer prices are up nearly 7 percent this year, while the core rate, which excludes energy and food, is up 2.5 percent. On the consumer side, overall prices are up 3.9 percent, while core prices are up 2 percent.

The Federal Reserve is trying to hold mortgage rates low by buying longer-term Treasury and mortgage-agency debt. Problem is, the market has been pushing back in recent weeks, as evinced by the spike in 10-year U.S. Treasury note yields. Bottom line, the falling mortgage-rate trend is much less a sure thing than it was a month ago.

Courtesy of 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.

New home sales continue to skim bottom, but at least they are not burrowing lower. New home sales posted at an annual rate of 295,000 units in August, which actually beat the consensus estimate for 288,000 units.

Pricing is the new and more troubling issue. Year-over-year, new home prices have been holding firm or improving in many markets. It appears that trend has reversed, at least at the national level. In August, the national median price fell 7.7 percent to $209,100, while the national average price dropped 8.5 percent to $246,000.

The supply of new homes remains low at a mere 162,000 units. However, supply relative to sales has risen to 6.6 months at the current sales pace compared to 6.5 months in July. To say the sledding has been tough for homebuilders over the past two years is to understate the obvious. Unfortunately, it appears the sledding won't get any less tough any time soon.

The sledding could also be getting a little tougher for existing home sales. The NAR reports that fewer buyers signed contracts to purchase existing homes in August, as the pending home sales index fell 1.2 percent to 88.6. We were encouraged by the spike in existing home sales in August, but we don't believe that spike will materialize into a sustained higher sales trend – at least for the near future.

This isn't to say we are down on housing. At least one supply concern appears to be improving – shadow inventory. CoreLogic reports that residential shadow inventory declined to 1.6 million units in July, which represents five months of supply at the current sales pace. The encouraging news here is that over 300,000 units have been removed from the market over the past year.

As for mortgage rates, the decline has also stopped, at least for now. In the past week, rates increased a few basis points across most offerings. Many economists pointed to Europe for a general rise in interest rates. It appears that Greece is moving farther away from defaulting on its debt.US Treasury securities have been a haven for many investors who fear the prospect of a Greek (and possible European Union) collapse. Over the past few weeks, volatility has been high in many of the maturities, including the influential 10-year Treasury note that has been bouncing around in a 30-basis point range. If the news in Europe continues to improve and if our own moribund economy starts showing new vigor, we can easily see that 30-point band shifting higher. Therefore, we advise locking to anyone unwilling to take risks for a few extra basis points.

Info courtesy of Jessica Regan.

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 Federal Reserve's latest strategy to kick-start the economy has been dubbed “Operation Twist” by pundits, but it's causing many people to shout. When the Fed announced its intentions to purchase $400 billion in long-term bonds on Wednesday, the Dow Jones Industrial Average immediately dropped 250 points. Then on Thursday, the Dow dropped 400 points more. In short, financial markets aren't impressed.

We aren't impressed either. The real issue is general uncertainty in too many sectors of the economy, and, ironically, certainty with interest rates. In fact, we think that the promise of low interest rates extending far into the future will do more harm than good, because now even more people are motivated to move to the sidelines to wait for mortgage rates to fall further still.

We expect to see a pick up in refinance activity, and we look forward to the business, but we would like to see more purchase activity. We remain convinced that the prospect of rising, not falling, rates and more accommodating underwriting standard are what's needed to stimulate purchase activity today.

Information courtesy of Jessica Regan.

We like it when people think outside the box. Radar Logic, a data and analytic firm, has sent a proposal to Washington on a loan-restructuring plan we find intriguing.

Mortgage News Daily offers an example of Radar logic's plan in practice: A loan with an original balance of $190,000 has been paid down to $186,000, then goes into default. A foreclosure occurs and a subsequent sale of the REO property nets $99,000. The loss suffered by the lender would be $87,000. Under Radar Logic's plan, a restructuring occurs based on borrower information and the appraised value of the home to produce a new loan of $125,000. The restructuring would result in a loss of $61,000 for the lender, but a 26-percent larger recovery.

So what's the incentive for the lender? The restructured loan would also include an equity participation certificate (EPC). While the homeowner would be granted a portion of the appreciation rights, the lender would hold an equity position through the EPC in anticipation of appreciation of the underlying collateral.

There are a couple obvious risks: 1) Radar Logic's contention that its plan will reduce the perception of over-supply and prices rise fails to materialize; and 2) the borrower defaults on the restructured loan. That said, at least Risk Logic is thinking, and we like that.

Information courtesy of Jessica Regan.

We've gone down the higher-inflation, higher-interest rate road many times in the past, only to find ourselves doubling back. There is an interesting trend occurring with banks, though, that could persuade us to go down it once again.

One of the more vocal criticisms of banks is that they haven't been lending as much as they should. There is some validity to the criticism; banks have been squirreling away a higher amount of reserves with the Federal Reserve, which has attenuated loan supply and, therefore, money supply, thus keeping inflation in check.

Data released by the Federal Reserve show this period of containment appears to be ending. In other words, excess bank reserves are leaking into the economy and money supply is growing. Because we operate in a fraction-reserve banking system, which means one dollar can be sufficiently leveraged to produce nine more, more reserves put to work can quickly raise inflation pressure.

This all might seem abstruse to the layperson unfamiliar with the intricacies of the Federal Reserve and fractional-reserving banking. All we are saying is that it is folly to write off price inflation and the possibility of higher mortgage rates, because there is no “normal” when it comes to financial markets.

Information courtesy of Jessica Regan.

Perseverance is a virtue, and the nation's home builders are displaying plenty of perseverance, even if they are not necessarily displaying it happily. The home builders' housing index remained unchanged in August, at a depressed level of 15. Components for present sales and buyer traffic inched higher, but home builders still aren't expecting any noticeable improvement in sales over the next six months.

The market for new-home sales might not be improving, but it doesn't appear to be worsening either. Housing starts dipped slightly in July, but continue to hover around 600,000 units per year, which is actually a higher level than what was seen six months ago. Unfortunately, the new-home market will likely remain anemic until we see a significant uptick in employment numbers.

Weak job growth is also taking a toll on existing home sales. July sales failed to live up to expectations, falling 3.5 percent to a 4.67 million annual rate. The good news is that prices remain stable nationally, with the median price holding near $174,000 and the average price holding at $224,000. Month-over-month, the price trend has been positive, though it is still slightly down year-over-year.

Price trends in producer and consumer goods, on the other hand, have been decidedly up. Consumer prices, in particular, have been moving perceptively higher. Consumer prices were up 0.5 percent in July and are up 3.6 percent year-over-year. This exceeds the Federal Reserve's 2 percent annual price-inflation target.

Many economists have raised concerns of a growing inflation threat. Credit markets, on the other hand, are showing no concerns. In fact, over the past week, the 10-year Treasury note – the baseline investment for 30-year fixed-rate mortgage loans – is down over 25 basis points and is yielding below 2.10 percent, an all-time low.

Prime 30-year fixed-rate mortgages are usually priced 2.25 to 2.5 percentage points above the 10-year Treasury yield. Not surprisingly, interest rates on these loans are also approaching an all-time low. This tells us that the state of the economy, not inflation, is the overriding concern of credit investors.

Can mortgage rates go lower still? Yes, they can, but will they do so is another matter. Timing markets is impossible, which is why we advise borrowers to lock if they are happy with their rate and payment schedule. We then advise them to cease following mortgage rates. After all, there is no sense in self-inflicting frustration when you are perfectly happy with the deal you received.

Harrisburg PA Real Estate Market Update brought to you by Jessica Regan, GMH Mortgage:

"It's d éjà vu all over again,” or so goes one of Yogi Berra's more famous malapropisms. There is a whiff of appropriateness to it, because home prices and foreclosures are reoccurring themes.

This week, the news on home prices was mixed, but encouraging. Zillow reported that home values were up 0.4 percent for the second quarter of 2011 compared to the first, but down 6.2 percent year-over-year, with the average home valued at $171,600.

The National Association of Realtors also reported a year-over-year decline. According to the NAR, the median sales price of existing homes fell 2.8 percent to $171,900 in the second quarter compared to the same year-ago quarter. The good news is that the NAR's data show prices trending modestly higher in recent months.

The question is, will the price trend continue? Foreclosures are the elephants in the room. RealtyTrac reported that foreclosures fell 35 percent, hitting a 44-month low, in July compared to the same year-ago period. In most markets that would be good news, but not necessarily in this one; the drop is attributed to banks still working through last year's servicing fiasco. Many market watchers are expecting a surge in foreclosures that could plague housing through 2012.

If there is a foreclosure surge, it will likely be regional. RealtyTrac also reported that 73 percent of foreclosure activity has been concentrated in a few states: California, Florida, Georgia, Michigan, Illinois, Nevada, Arizona, Ohio, and Wisconsin. The aggregated numbers might appear dire, but that doesn't mean that any one market is necessarily weakening.

Speaking of one market (actually, a number of smaller markets), overbuilt Florida is showing observable improvement. Existing home sales in the Sunshine State are up year-over-year. The median sales price has improved 17.3 percent, to $94,000, from the first quarter to the second. Florida has suffered home-price depreciation as much as any state, but lower prices spur demand, which helps stabilize prices. It's simple economics, and it's working.

The economics of mortgage rates are anything but simple. A few of our colleagues have been lamenting Standard & Poor's downgrade of U.S. Treasury debt, believing higher rates are on the horizon. We're not so sure. Mortgage rates are tightly tethered to 10-year Treasury-note yields. The current yield on these notes has dropped below 2.2 percent, lower than the yields in early 2009, and for the past 50 years. Investors obviously aren't concerned.

Much hoopla was made of the news that the Federal Reserve plans to hold short-term rates close to zero until 2013. But the Fed doesn't control the longer end of the market, which is influenced by the general level of economic uncertainty, credit worthiness of borrowers, time preference, and risk aversion. Sentiment and perceptions of these variables can change, and they can change on a dime, as the recent collapse of stock prices shows.

In short, we don't think mortgage rates are rising soon, but we'd be hesitant to play the rate game just to save a few extra basis points.

We've reworded Yogi Berra's quote into a question because of the volatility and hard sell-off in stocks. Could we possibly be setting ourselves up for a repeat of a decade ago? If you'll remember, many investors sold stocks in late 2000 and early 2001. A lot of that money was then funneled into real estate.

Admittedly, many people were subsequently burned by poor decisions – namely paying and borrowing too much. But as the sting of these losses subsides and stock losses accumulate, it's not outside the realm of possibility for money to cycle back into value-priced real estate. One of the overlooked benefits of real estate is that prices aren't continuously updated, so investors aren't whipsawed emotionally with real estate like they are with stocks.

This isn't to say that we expect a cascade of dollars to flow into real estate, but it's worth noting that investments compete with each. Given recent action in the stock market, the real estate market is looking quite a bit better in comparison.