Real Estate Information Archive

We've reported frequently on the encouraging data on home prices. The most recent encouraging data comes courtesy of Zillow, which shows that home prices inched 0.1 percent higher in August, with the average home price moving to $172,600. Zillow's data also show that the national foreclosure rate dropped to 9.2 homes out of every 10,000 homes, down from 10.9 homes out of every 10,000 in 2010.

Unfortunately, the good vibes on pricing and foreclosures were tempered by a warning that foreclosures will accelerate once the controversial robo-signing imbroglio passes. In fact, Zillow believes foreclosure inventory will pressure home prices and that prices won't bottom until 2012 “at the earliest.”It's possible we could see national average and median home prices fall. Locally, prices could just as easily fall, stagnate, or rise. In fact, a rise might be more in the offing for many local markets. After all, national data is skewed by a few regions – Nevada , Arizona , Central Florida and Central California . Overall, we still see prices firming and rising in many markets, though that trend might not be reflected in national numbers.

As for mortgage rates, we can say categorically that they have been rising nationally and locally since last Friday, thanks in part to an employment report that showed the economy created more jobs in September than most economists had expected. In many markets, rates were up 20 basis points on the 30-year fixed-rate loan. This shouldn't come as a surprise; the yield on the 10-year US Treasury note – the foundation for long-term mortgages – has risen 35 basis-points over the past 10 days.

To be sure, mortgage rates could reverse course and return to the long-term down trend, but there is a real danger to a strategy predicated on returning to the long-term trend in a market that has been trending higher; that is the obvious: the short-term trend might not reverse.

Another danger is supply and demand. Falling mortgage rates do stimulate demand, but if supply isn't rising at an accommodating pace, there is no guarantee that an ultra-low mortgage rate will be filled. Loans, like all good and services, are rationed by price. If you can get a higher price for your product, you get it.In short, if someone is satisfied with his rate, the best strategy is to ignore the daily vicissitudes and lock. Regret is a tough emotion to overcome, particularly in a market that is showing signs of wanting to move higher.

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.

Sometimes we can't help think of the closing line of The Rime of the Ancient Mariner: “Water, water, every where, nor any drop to drink.” The line relates to the frustration of floating thirsty on an ocean of undrinkable water.

We say that because we feel a similar frustration at times: There is plenty of money everywhere, but not enough is being lent to worthy borrowers. The Federal Reserve reports that if underwriting standards were closer to 2003 levels and home equity wasn't an issue, an additional 2.3 million homeowners would have been able to refinance last year, a 50-percent increase above the 4.5 million borrowers who were able to refinance.

Fortunately, more people of influence are becoming sympathetic to our frustration. Eric Rosengren, CEO of the Boston Federal Reserve, recently said that he supports policies that would allow homeowners who are underwater on their mortgages to refinance. That's a good start, but there are also plenty of people living within their means with dinged FICO scores because of the recession who want and are deserving of a home and a loan.

If there is one cause we can all get behind as we head toward 2012, it is to support policies that allow us to lend to worthy credit risks and to people who would help generate the demand housing is sorely missing.

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.

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.

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.

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.

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.

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.

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.