Real Estate Information Archive

The news is understandably slow the week between Christmas and New Year's Day. The most notable release was last Friday's news on new home sales, which rose to an annualized rate of 315,000 units in November, a 1.6-percent gain over October.To be sure, we have a long way to go until we reach the normalized construction rate of 1.5-million units per year. Nevertheless, we expect the new-home market to gain pace in 2012. After all, there are only 158,000 units in inventory. Even at the current slow sales pace, this equates to a record low six-month supply.

Over the past three years, new-home construction has fallen far below historical norms and also below the level needed to keep pace with population growth. The fact is our country gains roughly 2.7 million people and one million new households annually.

You might not see supply as a problem. We are all familiar with the glut of distressed properties. Indeed, Bank of America expects eight million distressed homes to come to market over the next four years. These homes, we've so often heard, will continue to depress new home construction.

We view B-of-A's outlook with a skeptical eye. There is a likely prospect that many of these distressed properties will simply go away. Destruction is too frequently overlooked in many supply projections. A house is not a permanent structure. Many are destroyed by fire, wind and flood each year. Many more are lost through simple decay and abandonment. Based on U.S. Census data, 300,000 homes are lost annually. That number will surely rise in years to come.

In short, the math – low inventory plus more households minus more home destruction – suggests to us a rebound in new-home construction. We are not alone in this contention, either. Wells Fargo projects that housing starts will continue to rise each year for the next five years before reaching once again the normalized construction rate of 1.5-million units annually by 2017.

Of course, projections are one thing, betting on those projections is another. Here, we see an encouraging trend. Big money is starting to wager on housing. The Wall Street Journal reports that many large hedge funds are investing billions in housing-related investments. Other investors have followed suit. Shares of homebuilders are up 30 percent over the past three months, making them one of the best performing investments in the 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.

Lower prices and still-low mortgage rates continue to create traction in the existing-home market.The pending home sales index is the latest in a series of recent data releases that prove that economic laws continue to hold: lower prices stimulate demand. On that front, lower prices helped lift the index 10.4 percent to post a 93.3 reading in October. The positive takeaway here is that recent gains portend strong existing home sales for November and December and a positive sales trend heading into 2012.

New home sales have also trended higher in recent months, moving up 1.3 percent to an annualized sales rate of 307,000 units in October. The median price of a new home eased 0.5 percent month-over-month to $212,300, but the year-over-year rate turned positive, at plus 4.0 percent. The news on supply was even more encouraging, with inventory falling to 6.3 months at the current sales rate – the best reading since April 2010 when government tax credits were stimulating sales.

To be sure, pricing remains a bugaboo for new and existing homes in many markets. Lower prices do clear inventory, but they also tend to hinder participation, as more potential buyers are reluctant to buy what they perceive they are buying a depreciating asset.

But severe discounting remains confined to specific markets, notably Atlanta, Phoenix, and Las Vegas. The latter two metropolitan areas continue to post new lows. For much of the nation, though, the severe discounting that occurred from 2007 through 2009 appears to be a thing of the past. Most of the nation should continue to experience price stability, with only minor to modest discounting in selected markets.

The Federal Reserve made news last week that could impact any discounting of mortgage rates. The Fed, along with the world's major central banks, acted to provide cheap-dollar funding to European banks crippled by the debt crises that plague the Mediterranean European countries. In short, the Fed and its European confreres staved off a possible financial collapse in Europe that could have spread to the United States.

Investors responded to the central bankers' unprecedented action by moving out of U.S. Treasury securities and into stocks. The Dow Jones Industrial Average surged 4.2 percent on Wednesday to post its biggest gain since March 2009. Treasury yields also moved higher, with the yield on the 10-year Treasury note, the benchmark investment for 30-year fixed-rate loans, rising to 2.1 percent. Mortgage rates, in turn, moved higher across most financing options.

Here's something to keep in mind: Treasury yields and mortgage rates tend to rise with the stock market. If stocks continue to rise, more money will leave fixed-income investments, like Treasury securities, which could pressure mortgage rates to go higher. December tends to be a strong month for stocks, which means December could also be a month for rising 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.

News was relatively scarce this past week due to the Thanksgiving Day holiday, but what news was released was, for the most part, encouraging.

The news on existing home sales was particularly encouraging. Sales rose to an annual rate of 4.97 million units in October, which easily beat the consensus estimate for 4.8 million units. The bump up in sales helped drop inventory to an eight-month supply compared to September's 8.3-month supply. Year-over-year, inventory levels have dropped nearly three months.

Existing home sale prices were a little softer than we had expected, with the national median home price easing 2 percent month-over-month to $162,000. Discounting was prevalent in condo sales, but much less so in the single-family detached segment.

Shadow inventory has weighed heavily on prices for the past three years, but this market is also improving. Standard & Poor's, citing improvements in third-quarter default and liquidation rates, lowered its estimate of the time it will take to reduce excess stock to 45 months from 47 months. That's still a lot of inventory, but the goods news is that we are making headway.Federal Deposit Insurance Corp. data also point to an improving distressed-property market. The FDIC reports that inventory held by private banks dropped for the fourth-straight quarter to $50.4 billion worth of properties at the end of September, a 1.5-percent decline compared to the previous quarter and a 5-percent decline from a year ago.

There was some negative news on the economy, but it wasn't as negative as many news outlets led us to believe. Gross Domestic Product was downgraded to 2.0-percent annualized growth from a previously stated 2.5 percent. When we dug into the numbers, we found that the downgrade was much ado about little; the revision was mostly attributable to a $13-billion decrease in inventory investment.Last week, we mentioned the good news that fixed-asset investment is trending higher. This week, we are glad to note that consumer spending continues to trend higher. Personal consumption grew 0.1 percent for October, which might seem insignificant, but October's consumption follows a very strong 0.7 percent increase in September.

We haven't seen much improvement in mortgage rates over the past two weeks, which has resulted in a slowdown in refinance activity. That could be about to change. The recently revamped Home Affordable Refinance Program (HARP), with higher loan-to-value ratios and appraisal waivers for qualified buyers, is sure to spur refinance demand. In fact, more than 1 million borrowers are expected to benefit from the new HARP.This means a change in the demand/supply paradigm. When demand for borrowing increases, mortgage rates tend to rise, not fall. We advise our clients (especially clients who already qualify for a refinance under the current rules) not to wait for the new HARP rules to kick into gear.

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 Market Debate It's no secret that a lot of mortgage lending is in government-backed loans. Nationally, Fannie Mae, Freddie Mac, and the FHA back nine in 10 new mortgages. The federal government is looking to pull back and see if more private investors and lenders can be lured into the market.

There are legitimate concerns with a prospective federal pull back. There is the possibility of reduced available credit, thus leading to fewer sales and lower home prices. We've already seen some reduction in volume in higher priced homes when limits on loans backed by Fannie and Freddie declined at the beginning of October.

There is also the concern that sellers will find that fewer potential buyers qualify to purchase their properties. Less liberal down payments and lower loan limits could also hamstring trade-up buyers who want to tap their home equity as a down payment for their new residence.

Here's the conundrum: If we went to return to a more market-driven lending environment, we have to attract private investment, which means rates would have to rise. Private lenders and investors require a greater return than public sources of funds. It's worth noting, though, that many private lenders are flush with money they could put to work. What's more, private lenders and investors will add diversity to the market, which it is currently lacking.

The point is, we can see the mortgage market changing. We can't say whether it will be a net positive in the short term, but we think it raises the uncertainly level enough for borrowers to seriously consider taking advantage of the mortgage market as it is today.

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.

Homebuilders remain in a state of suspended negative animation, and most of them believe their situation is unlikely to improve any time soon. The homebuilders’ sentiment index posted at 14 for September. It has ranged between 13 and 17 for the past year. Fifty is the split between optimism and pessimism, so there is a long way to go before sentiment changes.

At least the decline in housing starts appears to be moderating. Starts posted at an annual rate of 571,000 units in August, a 5-percent drop from July's numbers. Many media outlets blamed weather – Hurricane Irene in the Northwest and South – for the decline. The good news is that permits for future construction were up 3.2 percent, suggesting a slight improvement for starts in September and possibly beyond.In contrast, existing-home sales showed significant improvement, surging 7.7 percent to an annual rate of 5.03 million units in August. The burst in sales drew supply down by 3 percent to 3.577 million units, dropping supply to 8.5 months from 9.5 months in July.

It appears some additional discounting and bargain hunting among investors was occurring in the existing-home market. The median sales price fell 1.7 percent to $168,300 in August, while the average price slumped 1.6 percent to $216,800. Investors accounted for 22 percent of sales, up from 18 percent in July. This suggests to us that foreclosed properties are being absorbed and taken off the market.Despite the August decline in median and average existing-home prices, we remain convinced the worst is over, though our optimism remains tempered. We are not expecting a surge in home prices any time soon; then again, neither are most housing experts. MacroMarkets surveyed 111 experts and the consensus is for prices to grow at a 1.1-percent annual rate through 2015. It's not a growth rate to get excited over, to be sure; then again, it's not a negative growth rate either.

We are also not expecting a surge in mortgage rates. In fact, rates continue to set new multi-decade lows. As you may have heard, the Federal Reserved announced it will start buying longer-term US Treasury and mortgage-backed securities. The goal is for the Fed to purchase $400 billion worth of securities with maturities between 6 and 30 years by June 2012 in order to further lower long-term borrowing rates.This means low mortgage rates will be with us for a while. The 30-year fixed-rated mortgage is usually priced two to two-and-half percentage points above the yield on the 10-year Treasury note. The yield on that security tumbled to a mere 1.75 percent on Wednesday. Some 30-year mortgage loans are already being quoted below 4 percent.

The major mortgage servicers are getting their house in order, as foreclosures have accelerated in the past month. RealtyTrac reports that mortgage servicers started foreclosure on more than 78,800 properties in August, a 33-percent increase from July levels.

Most of us were aware that the foreclosure lull was only a temporary reprieve. That said, the growing rate of foreclosures has revived concerns over excessive inventory. The Cato Institute, an economic think thank, estimates an oversupply of three million houses, about a million more than actually demanded.

With so much inventory on the market and more to come, pricing becomes an issue: More supply means lower prices, which, in turn, means more negative equity. Concerning the latter, CoreLogic estimates that nearly 11 million properties, roughly 22.5 percent of all U.S. homes, were worth less than the underlying mortgage in the second quarter of 2011.The prospect of more price depreciation and more negative equity has increased calls for more government action. Problem is, efforts to date have had only marginal benefits or have had negative unintended consequences: Cato reports that government efforts to revive housing have helped the most expensive markets while actually depressing prices in the cheapest markets.

At this point, it might be best to let the market run its course. We’ve noted in past editions that when prices fall, demand increases, then prices increase. We've seen this economic truism at work to encouraging effect in a few hard-hit markets. The Orlando Regional Realtor Association reports that the median price for homes in its area has increased 15.1 percent year-over-year.

We've also often noted that real estate is local. The national numbers on foreclosures and negative equity can be big and scary, but they also carry no relevance to any one particular market.Mortgage rates are another matter; they tend to adhere closely to a national average. Rates at the national level dropped a few basis points this past week on most mortgage products.

There are many reasons for the drop in mortgage rates. One of the more interesting is a rumor that the Federal Reserve is contemplating purchasing longer-term Treasury securities (such as the 10-year note) to drive down long-term interest rates, which would help keep mortgage rates low. Because markets are forward looking, it is possible that the market is getting a jump on the Federal Reserve.

We've been in the minority in questioning the economic benefits of ultra-low mortgage rates. Our rationale is that low rates, and the anticipation of even lower rates, are delaying buying and refinancing decisions today. Our rationale isn't unfounded. Richard Fisher, president of the Federal Reserve Bank of Dallas , believes low rates are limiting economic growth because businesses have an incentive to delay borrowing for expansion. They see no reason to act today if interest rates are expected to stay low tomorrow. We see the same effect in housing.

Information courtesy of Jessica Regan.

When transactions are your livelihood, it can be difficult to muster a smile when there are fewer of them. There were fewer transactions in existing-home sales, which fell 3.8 percent to a 4.8 million annualized rate in May. Supply on the market, at 3.72 million units, is falling, but not enough relative to the sales pace, as inventory rose to 9.3 months versus April's 9.0 months.

Price stabilization was the positive takeaway, with the median sales price rising to $166,500. Another plus is that sales of single-family homes, the central component in the report, fell at a slower rate at 3.2 percent. Floods and tornado-ravaging storms in the Midwest were mitigating factors. Blaming the weather is often the easy way out, but this time it appears valid.

Sales of new houses also fell for the first time in three months, by 2.1 percent to a 319,000-unit annualized pace in May, showing that the industry continues to struggle to gain momentum. The good news is that prices continue to rise, with the median price inching up to $222,600 from $217,000 in April, while inventory continues to fall, with supply dipping to 6.2 months from 6.3 months.

Sales are down, but prices are up, which suggests to us that the days of simply giving away homes are over (even with the putative 1.8 million homes in shadow inventory). MacroMarkets, an economic data compiler, surveyed real estate experts on home-price trends. The consensus estimate was for an average annual growth rate of 2 percent, which MacroMarkets co-founder Robert Shiller opined “will not inspire a lot of consumer confidence.”

We disagree, because price growth isn't price contraction. Two percent average-annual growth on a $200,000 home means the home is worth more than $220,000 after five years. What's more, home equity will grow as the mortgage is amortized. Five years is a long time, and no one can know with certainty what the average annual rate of appreciation will be. Given the low price of homes today, though, we would not be surprised to see homes appreciate at a rate greater than 2 percent annually.

Now, we would like to see mortgage rates start to rise. Without artificial support from the Federal Reserve, interest rates would naturally move higher. That's not bad; the market needs to get back to equilibrium – with more private mortgage money and private mortgage-backed securities, so we can have more choices and more lending alternatives. A rising-rate environment also implies that there are other positive things happening in the economy.

Mortgage rates continue to hold historical lows. Low rates coupled with stable-to-rising prices in many parts of the country point to a near-perfect storm of a market for buying residential or investment real estate.