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A Tale of Two Markets

Tuesday, February 3, 2015
by Don Roth

First, the good news: Sales of new homes came in at 481,000 units on an annualized rate for December. This was the best December since 2007. What's more, it appears builders were selling with little discounting. The median price of a new rose 2.2% to $298,100. Year over year, the median price is up 8.2%. At the current sales pace, 5.5-months worth of inventory is on market. Inventory below six months is considered normal.

Now for the not-so-good news: The struggles in the existing-home market continue. ThePending Home Sales Index decreased 3.7% to a 100.7 reading in December. Compared to December 2013, the index is actually up, but if we go back two years, it's flat. According to NAR chief economist, Lawrence Yun, prices and inventory are still an issue. The former is up, but the latter remains down.

Of course, there is the usual caveat: All markets are local, so national numbers frequently fail to capture local reality. It is interesting, though, that the new-home market at the national level is more fundamentally sound from a historical perspective than the existing home market. This suggests to us that the dearth of first-time buyers still weighs on the existing-home market.

Despite the mixed data, we still think 2015 will shape up positively for housing – new and existing. Rates are obviously favorable. In addition, the economy continues to grow and to create more jobs. Home prices also continue to rise, but at a more normalized rate. All these variables taken together point to more housing activity 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

Harrisburg PA Mortgage Market Recap – February 3, 2015

Tuesday, February 3, 2015
by Don Roth

It’s  a Central Banker's World; We Just Live in It

We've devoted a good deal of space over the past few months discussing central banks and monetary policy. We've focused on ours – the Federal Reserve – and theirs – the European Central Bank (ECB). These are the two most important central banks in the world.

Usually, we'd focus on matters purely housing or mortgage related – sales, prices, mortgage rates, underwriting rules, etc. Thing is, the Federal Reserve and the ECB have taken center stage. These institutions have never been as influential as they are today.

It's all about the money.

The Federal Reserve was responsible for flooding the U.S. economy with new money after the housing-market collapse in 2008. The Fed injected nearly $4 trillion through quantitative easing (QE) – buying Treasury notes and bonds and MBS with newly issued money. A drop in mortgage rates and new money flowing into housing were the intended consequences. Mortgage rates fell and housing prices rose.

We mentioned last week that the ECB had torn a page from the Fed's playbook. It will implement its own version of QE. It might seem a stretch for the European Union's central bank and its monetary policies to influence U.S. markets, but they do.

The yields on U.S. debt instruments are higher than those on European debt instruments of similar vintage and quality. This means more European money flows into U.S. debt. Prices rise and yields fall. Today, the yield on the 10-year U.S. Treasury note – an influencing instrument for 30-year fixed-rate mortgages – is below 1.8%. Not surprisingly, rates on the 30-year mortgage remain well below 4%. (Historically, the 30-year loan has averaged two percentage points more than the 10-year note.)

The ECB's commitment to easy money and low interest rates will also influence Federal Reserve policy. The best guess among most economists is that the Fed will begin raising the fed funds rate – an influential short-term rate – in June. The ECB's new monetary policy puts that guess on shakier ground. It appears more likely to us that the Fed will push back raising the fed funds rate unit the third quarter.

With all this new money sloshing around in the world's economies, it's extraordinary that consumer price inflation has failed to take off. In the United States, consumer price inflation runs below 2% annually. In Europe, deflation, not inflation, is the greater concern. Money remains in high demand. That's reflective of heightened uncertainty.

Our best guess is that interest rates in general and mortgage rates in particular will hold current lows through the first quarter. Unless there is a blockbuster jobs reports or an unexpected surged in economic growth, there is simply no reason for rates to rise. That said, it's always worth remembering that markets are marked by trend-reversing surprises. Therefore, there are no guarantees.

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.

Displaying blog entries 11-12 of 12

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