Real Estate Information Archive

Higher prices bring in more supply; more supply leads to lower prices.

This is how things are shaping up in the new-home market. Sales jumped 7.9% to an annual rate of 421,000 units in August. The number of new homes for sale rose 6,000 for the month. Supply stands at five months, a considerable improvement over the 4.6-month supply that prevailed a year ago.

More supply – more new homes – means pricing pressure. The median new home price slipped 0.7% to $254,600 in August, marking the fourth-consecutive monthly decline. This follows the news on existing-home sales, which showed a slight downtick in the median price to $212,100.

Over the past couple months, we've been warning that price appreciation will likely slow. The latest data from the S&P/Case-Shiller Home Price Index support our contention. Case-Shiller's 20-city index shows price growth slowed to 0.6% in July, down from 0.9% in the prior two months.

Trends don't last in perpetuity, so a slowdown in price-appreciation was (is) inevitable. Because trends don't last in perpetuity, we pounded the table hard in 2010 and 2011 for buyers to get in the game. We were adamant back then because we expected the downward price trend to soon reverse course, which it did.

We expect price-appreciation growth to continue to slow. More supply will come to market, because more sellers will see slowing price growth and will want to capture gains. In turn, their actions will further slow price-appreciation growth.

That said, if anyone is waiting for slow-to-no price growth, he or she needs to keep in mind that any money saved on a purchase price could easily be offset by higher financing costs.

 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.

One of the more recurring laments over the past few years has centered on tight, rigid lending. We've all known someone who should have received financing, but didn't because lenders were too risk averse.

One upside of an improving market is a willingness to accept more risk, and we are seeing more risk acceptance in the mortgage market. Down payment requirements are easing, while fewer borrowers are being turned down on credit scores alone.

Piggyback loans have also resurfaced, as have stated-income loans. On the latter, far too many self-employed people have been excluded from the mortgage market. Fortunately, that's changing, which means more people are added to the pool of home sellers and buyers. More participants lead to more robust and more stable markets.

Even subprime loans are coming back to serve a market of borrowers who have healthy incomes but who suffered a short sale or credit hit when the market imploded in 2008 and 2009.

To be sure, we all want a more accommodating mortgage-lending market. The good news is we are making progress in that direction.

 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.

Mortgage Rates Take a Breather

You would think mortgage rates would need a breather after experiencing their biggest jump in 26 years. In little more than a month, rates on most lending products have risen at least a full percentage point.

This past week, it was all quiet on the mortgage front. Rates were mostly staid, as concerns over the Federal Reserve “tapering” its purchases of mortgage backed securities (MBS) waned. As we’ve noted frequently in the past, the Fed's demand for these securities keeps yields low, which, in turn, keeps mortgage rates low.

We've also reported over the past few weeks how rising rates have taken the steam out of refinances. Steam continues to escape: Refinances dropped another 16% last week and are at their lowest level since July 2011. The refinance percentage of market activity has dropped to 64%, which is the lowest percentage since May 2011.

Purchase activity remains relatively robust in comparison, falling 3% for the reported week. But when the longer term is considered, we find purchase activity is up 12% year over year. Despite the spike in mortgage rates, home affordability remains high. The good news is that higher financing costs haven't materially dampened enthusiasm to buy and finance a home.

The question is how long will affordability remain high?

Prices have moved considerably higher, to be sure. CoreLogic's latest home price index shows home prices nationally posted a 15 th consecutive monthly increase in May. The latest increase pushes the year-over-year increase to 12.2%, the largest annual increase in over seven years.

What's more, it appears we can look forward to additional price gains. Clear Capital forecasts the housing market could outperform historical average price gains by 4% to 5% for the remainder of 2013.

Prices are obviously an important variable in affordability. Rising prices will make homes less affordable. Indeed, price gains have lowered affordability in many local markets ( San Francisco and New York City come immediately to mind). On the other side of the coin, price gains have pulled many owners with negative equity into positive territory.

Rising prices are also helping to alleviate the supply shortage. Home inventory is up 16.7% year to date, and will likely continue to rise with rising home prices. A basic economic law states supply rises and falls with prices; rising prices induce more supply to come to market. That's exactly what we are seeing today.

But more supply will eventually slow price growth. That's not a bad thing. Today's double-digit price gains are unsustainable, because they far exceed economic growth. Yes, prices are starting from a deep hole in many markets, but eventually price growth must moderate, lest we find ourselves in another housing bubble.

A sustainable price-growth rate is one that matches inflation and economic growth. A rate above that is sustainable for only a limited time, usually no more than two or three years.

For now, keep in mind that higher home prices and higher lending rates will eventually impact affordability. We might sound like a broken record on this point, but it's worth repeating: waiting is the risk in this market.

 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.