Real Estate Information Archive

Anchoring can be a difficult psychological trait to overcome. By that, we mean the inclination to believe that the past will either return or be will maintained in the future.

Anchoring occurs frequently in the investment world. Investors buy a stock, see it's share price cut in halve, and yet despite poor prospects, they'll continue to hold, believing that it's inevitable their purchase price will again prevail.

We see the same phenomenon in the mortgage market. Many potential borrowers believe it's inevitable that mortgage rates will again hit multi-decade lows of a few months ago. Tomorrow will somehow present yesterday's opportunities.

This isn't to say yesterday's prices can't return, but yesterday isn't today: the outlook and the variables influencing today's market are decidedly different. Today, we are looking at stronger economic growth and stronger residential construction across most of the United States. Neither variable bodes well for lower lending rates.

The point we want to emphasis is to keep focused on the future, and the variables – Federal Reserve tapering, job growth, rising consumer spending, higher housing demand and construction – that will prevail in the future. With the future in mind, it's becoming increasingly difficult to make a case for a lower-rate lending environment.

 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.

Fed Chairman Settles Mortgage Markets

After sprinting a full percentage higher over the past two months, the 30-year fixed-rate mortgage has finally taken a breather. Last week, the bellwether loan was staid, holding near the prior week's rate. This week, the rate actually fell a few basis points.

Lending markets have finally settled down, and for this we can thank Federal Reserve Chairman Ben Bernanke, who assured credit-market participants the Fed is unlikely to taper QE3 in the near future. This means the Fed will continue to purchase long-term U.S. Treasuries and mortgage-backed securities.

In short, mortgage rates have likely plateaued for the near future, which gives frantic buyers some breathing room.

The interesting lesson in the mortgage-rate surge is that it failed to materially impact the purchase market. Indeed, the four-week purchase-application trend held steady. What's more, the latest data from the Mortgage Bankers Association show purchase applications actually rose 1% last week.

Purchase applications are obviously related to home sales and building activity. On the latter, there's concern rising rates could translate into falling activity because of falling consumer demand. The latest data on housing starts, released Wednesday, raised a few eyebrows, and a few concerns.

Housing starts were down significantly, dropping 9.9% to 836,000 units on an annualized basis in June. After the news was released, we ran across a number of comments forecasting the end of the housing recovery. Upon closer inspection, though, it appears housing's imminent demise was highly exaggerated.

We say that because the drop in starts was lead by the smaller and more volatile multifamily component, which declined 26.2% in June after rising 28.2% in May. In contrast, the larger and more stable single-family component slipped a modest 0.8% for the month after rising 0.5% in May.

It's informative to consider the longer-term starts trend; by this measure, the residential construction industry looks quite healthy. Over the first   half of 2013, multifamily starts are up nearly 34% from the same year-ago period, while single family starts are up 20%. These are meaningful increases in activity and tell us we've come a long way in a short time.

Moreover, there is plenty of room left to run. Starts remain low when viewed from a historical perspective. From 1959 through 2000, roughly 1.5 million housing units were started annually. (And keep in, the population was meaningful smaller back then.)

So, yes, we've come a long way on residential construction, but we still have long way to go. This suggests that housing will remain healthy and will remain a key economic driver for at least the next couple years.

And even if mortgages continue to climb, we think that's unlikely to change.

 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.

Last week, we mentioned that Federal Reserve monetary policy is, in essence, closely tethered to job growth: The Fed won't reign in loose monetary policy and low interest rates until the unemployment rate is around 6.5%.

The problem, as we noted, is that the unemployment rate is a moving target. Yes, unexpectedly strong job growth can occur, as what occurred in June, with payroll growth hitting 195,000 for the month, roughly 25,000 higher than most estimates. At the same time, unemployment held steady at 7.6% because more people have entered (or re-entered) the job market.

So it would appear the Fed would be firmly committed to holding interest rates low for the foreseeable future until 6.5% unemployment is achieved.

It's becoming more likely that's not the case. The minutes from the latest meeting of Federal Reserve policymakers show that half want to wind down quantitative easing (money printing, low interest rates) by the end of the year.

Given the unimpeded rise in interest rates over the past two months, it's become obvious many credit-market participants are expecting the Fed to wind down sooner than later.

The point we need to emphasize is that waiting for 3.5% 30-year fixed-rate mortgages will likely mean waiting for quite a while. At this point, 5% is the more likely future rate, which makes today's rates, in the mid-4% range, look attractive in comparison.

 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 Hit Two-Year High

We know more than a few people who are smacking themselves on the forehead these days, frustrated they didn't take advantage of the mortgage rates that prevailed two months and 75-basis points ago.

Frustration stems from holding out for another 25-basis point drop. You may know it by the popular idiom “penny wise, pound foolish:” Hope to save 25-basis points, but loose 75-basis points in the process.

Of course, no one knows with certainty where mortgage rates are heading, but whenever a market has been in a sustained trend, and mortgage rates were in a sustained downward trend for years, the probability grows that each successive day will bring a reversal of that trend. (Economists refer to this phenomenon as Minsky's “Financial Instability Hypothesis.”)

To be sure, mortgage lending rates are higher, but not unreasonably so. Today's rates still remain attractive from a historical perspective.

The good news is that there have been a few positives associated with rising rates. Though they have slowed refinance activity considerably, they have prompted more homebuyers into action, for fear rates could go higher still. We're not surprised; we've noted many times in the past that anticipation rules people's actions.

With all the focus on mortgage rates over the past few weeks, it's worth noting that the housing market nationally is as healthy as it has been in years.

CoreLogic's latest data on distressed properties reveal just how healthier the market has become. The inventory of properties in a state of foreclosure fell 29% year over year in May, which means fewer than 2.3 million mortgages – or 5.6% of home loans – remain seriously delinquent. This is the lowest level since December 2008.

At the same time, Lender Processing Services data show the number of borrowers who remain underwater fell 47% from the first quarter of 2012 to the first quarter of 2013, which means the percentage of underwater borrowers has dropped to 14.7% of all active loans. This, too, is a multi-year low.

Rising home prices and rising consumer demand for homes will continue to reduce distressed inventory and lift more homeowners into positive equity. When stronger job growth is factored in, we're looking at a very healthy outlook for both existing- and new-home sales over the next 12 months.

With that said, many pundits remain focused on rising mortgage rates, but we believe unduly so. As long as the economy continues to improve and create jobs, the housing market will continue to improve regardless if rates rise.

We were in the minority a year ago when we said mortgage rates were no longer the key variable in the recovery. It appears we were right on that account.

 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.

Sales of new and existing home are gaining momentum: More supply is coming to market and prices continue to rise. On the latter, the S&P/Case-Shiller Home Price Index shows prices up 1.7% in its 20-city index month over month; the year-over-year rate is exceptionally strong, at plus 12%.

But will rising mortgage rates derail the recovery?

We don't think so. Many people have the perception that rising mortgage rates lead to lower (or at least less growth) in home prices. The rationale goes that rising mortgage rates lower affordability, so home prices fall to compensate for higher financing costs.

The perception was recently refuted in the New York Times. Douglas Duncan, chief economist at Fannie Mae was quoted to say, “There’s no strong correlation between interest rates and home prices.”

Mortgage rates rose sharply in the late 1970s, but home prices continued to rise too. In the 1990s, rates were relatively flat and home prices continued to move higher. In 2007 and 2008, both mortgages rates and home prices fell. In 2013, rates have increased and so, too, have home prices. In other words, there really isn't much of a correlation.

To be sure, mortgage rates matter, but they're less important than many people believe. Job and economic growth are by far the more important variables, and both have been improving in recent months.

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.

The Power of Expectation

Mortgage rates continue to be the lead story in the financial press, and for good reason – rates are up a full-percentage point over the past month and are now at July 2011 levels.

It's understandable that the spike in mortgage rates would slow refinance activity. Indeed ,that's been the case: Refinances have dropped considerably over the past month, and the latest weekly data show yet another drop, with activity falling 5%. Refinances are now at a two-year low, and their percentage of overall lending has dropped to 67%.

Purchase activity is a different story: Purchases were up, rising 2% from the previous week. Total purchase applications are actually up 16% year over year, indicating homebuyers have yet to be put off by rising mortgage rates.

We've written frequently about expectations. If buyers expect lower prices, they'll frequently (but not always) wait for lower prices. We saw a lot of that behavior when mortgage rates were trending lower. Many borrowers, especially on the purchase end, would wait and wait and wait. (Refinancers were more willing to act, knowing if rates continued to drop they could refinance again.)

On the other side of the coin, people tend to be spurred into action by rising prices. They don't want to pay more tomorrow for what they can get cheaper today. We've seen that in the purchase market over the past month. Home prices have been rising steadily over the past 18 months, but now mortgage rates are rising too. More borrowers (and most lenders, for that matter) don't expect to see a return to the ultra-low rates of a couple months ago. Many believe the trend has shifted and rising rates are the new norm.

We think rising rates are the new norm too. We say that because credit markets are much more sensitive to the Federal Reserve and the prospect of it curtailing its mortgage-backed securities (MBS) purchases.

When the Fed curtails (or even hints at curtailing) its purchases, interest rates will rise, which means today's bond investors will suffer losses. (When interest rates rise, the price of fixed-income investments like bonds fall.) Obviously, these investors don't want to suffer losses, so they'll sell if they think demand for bonds and fixed-income securities will fall.

Of course, we can't predict with certainty whether mortgage rates will move higher in the near future. After all, a significant macro event – a major terrorist attack, a large bankruptcy, a European bank run – could spur money to flow back into haven investments, like U.S. Treasuries and MBS.

That said, we see higher rates and more volatile rates as the likely scenario. For this reason, we continue to say that waiting is the real 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.

Are Happy Days Here Again?

For homebuilders that appears the case.

The NAHB/Wells Fargo Homebuilder Sentiment Index surged eight points to post a 52 reading for June. This is the largest gain since 2002 and pushed the index above 50, where it hasn't been since 2006. (Fifty is the demarcation between general optimism and general pessimism, which means overall homebuilder sentiment now lists toward optimism.)

One hardly need be a genius to understand why homebuilders are eagerly anticipating the future: New-home inventory remains at multi-decade lows, while prices for this inventory are rising at a brisk pace. According to homebuilder feedback, average selling prices have risen 11% this year.

Few situations will boost a seller's spirits more than to see strong pricing combined with limited inventory. That's the definition of a sellers' market.

What's more, homebuilders still have room to expand supply at a robust pace. Over the past 50 years, homebuilders have averaged 1.5 million starts (single and multifamily). This year, they are expected to start one million units; next year, they are expected to start 1.3 million units.

New-home demand has also spurred pricing gains in many markets. Prices nationally have clawed back to 2003 levels, but they still remain 28% below the July 2006 peak.

Strong price gains have conjured thoughts of another housing bubble. Double-digit price increases can't go on indefinitely. What's more, the higher an asset price rises, the harder it tends to fall.

That said, affordability is a mitigating factor, at least according to Standard & Poor's, which estimates that housing is still 8% undervalued based on the price-to-income ratio. Historically, the typical median home costs four times as much as the median annual income. It's now at a 3.7 multiple.

At the same time, the household debt service ratio remains near a 30-year low, while the homeowner mortgage obligation is at a 15-year low at 8.25% of disposable income. During the bubble years, the mortgage obligation averaged 11% of disposable income.

It's worth remembering that rising prices stimulate more supply to come to market. More supply, in turn, will slow price appreciation. That's a good thing, because double-digit price gains are unsustainable. Next year, we wouldn't be surprised to see price growth moderate to mid- to low-single digit rates, which are sustainable rates.

But what about the elephant in the room – mortgage rates?

To be sure, lending rates are up significantly over the past six weeks, but are still cheap from a historic perspective. As we noted last week, rising rates have spurred more buying and refinances. If you believe the best rates are behind us (and we do), you don't want to wait in a rising-rate environment.

 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.

The 4th of July will be here before you know it. If you don’t have a huge amount of time to decorate with all things red, white and blue, don’t stress! You can still celebrate Independence Day in style by doing a quick patriotic project or two.  These DIY decorations are so easy that they can be done in four minutes or less.

Here are six 4th of July decorations that we salute:

1. Fireworks placemats. Take plain white or beige fabric placemats and give them some 4^th of July bang. All you need is fabric paint, a paper plate and a clean kitchen scrub brush. First, dump out a quarter-sized bit of the paint onto a paper plate. Then, dip the bristles of the scrub brush into the fabric paint and press the bristles firmly onto the fabric. Overlap colors to create your own fireworks display! Tip: To make smaller fireworks, just use a smaller brush.

2. Painted mason jars. If you already have red, white and blue spray paint in your craft room or garage, this project is for you! Simply take three mason jars and paint them. You can paint each jar a different color or turn them into a makeshift American flag. To do this, paint one blue and tape off straight lines with painters tape (to make red and white stripes) for the other two.

3. Layered centerpieces. Head out to your local supermarket and pick up three jars of sprinkles: one red, one blue and one white. Gather up a few small vases or glass containers, and pour each color of sprinkles into the vase, one color at a time. This will create a beautiful, layered centerpiece display for your table! Place a few tall candles inside for some patriotic lighting. Tip: If you don’t have time to run to the store, use white rice and dye it with food coloring.

4. Decoupage tin cans. Cover various size cans (coffee cans work great for this) in scrapbook paper. Cut out your decorative paper so it fits evenly when wrapped around the jar, and then lightly coat the tin with spray adhesive. Adhere the paper to the tins. That’s it! Add water and flowers for a quick vase, or fill each tin with eating utensils for a buffet-style display.

5. Patriotic printables. Few things are faster than clicking the print button. If you’re looking for quick 4^th of July art, you can find fun, patriotic printables online, and most are free or super cheap. We especially like this one from eighteen25. All you need to do is find one that fits your style, hit print and then frame it.

Last week we delved into the Federal Reserve and “tapering.” Specifically, we explained why we thought the Fed was unlikely to materially reduce its purchases of mortgage-backed securities (MBS) this year.

Mortgage rates have risen on the precept that the Fed was indeed shifting its policy toward purchasing fewer MBS. Lower Fed demand for MBS, would, in turn, lead to higher yields in order to increase more private-buyer demand. Last week we mentioned that reduced MBS supply may have played a role in reduced Fed purchases.

We can add a couple more reasons why think the Fed's appetite for MBS hasn't diminished: For one, employment and wage growth is still anemic. The Fed has hinted that it won't materially alter quantitative easing (buying MBS and U.S. Treasuries) until the unemployment rate drops to 6.5%; it's currently at 7.6%. In addition, manufacturing has weakened in recent months, which suggests economic growth also has room for improvement.

We'll have more insight into the Fed's “ tapering ” leanings this coming Wednesday after the board of governors meeting and the subsequent press conference. We expect that the Fed won't announce any material changes to its policies. Therefore, we don't expect mortgage rates to move materially higher. You'll note in the above Bankrate.com graph, rates have been plateauing.

With that said, we don't expect rates to move materially lower either, so the risk of waiting remains.

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 lending rates were once again the lead story in housing, as well as in many media outlets.

In many markets, rates are up 60 basis points or more over the past six weeks. This means potential borrowers and new home buyers are facing financing rates unseen since April 2012.

Interestingly, rising rates actually had a stimulative effect on mortgage activity last week, according to Mortgage Bankers Association data. The MBA's latest activity report shows that both refinances and purchases were up 5%. For most of the past month, refinance activity was declining at a double-digit weekly rate, while purchase activity was mostly flat lining.

We're not surprised to see an uptick in purchase activity; expectations govern behavior. If potential borrowers believe higher rates are in the future, they'll act today to beat the increase. If they are fence sitting, their expectations of lower rates will keep them there, but a change in expectations (exceptions of higher rates, to be specific) will prompt them into action.

We admit to being slightly surprised (and pleasantly so) at the reversal in refinance activity. With mortgage rates holding so low for so long, it's easy to take for granted that everyone who could take advantage of a refinance has. That's obviously not the case. And even though financing rates are higher for refinances, expectations still play a role.

The good news is that more homeowners are in a position to refinance. CoreLogic reports that the number of underwater homeowners has dropped below 10 million for the first time in more than three years. That's a significant improvement over the 12.1 million who were underwater at the end of 2011.

Of course, these homeowners have been floated by the relentless increase in home prices that's occurred over the past year. CoreLogic's data show prices up nationally 12% year over year in April. Moreover, the numbers from most housing-data providers corroborate CoreLogic's numbers.

Despite higher rates, we expect refinance and purchase activity to remain robust. We also expect housing activity to rise: Higher prices will draw more inventory into the market. Above-water homeowners (and even submerged owners who don't have to bring money to the table) are more willing to list their home. As we know, lack of inventory has restrained sales growth over most of 2013.

We've frequently stated that today's higher lending rates aren't necessarily to be feared, especially when placed within an historical context: It wasn't all that long ago when a 6% 30-year fixed-rate loan was considered a bargain.

 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.