Real Estate Information Archive

The Trend Finally Ends

The run of lower lending rates has come to an end, at least for the time being.

Mortgage rates across most offerings and jurisdictions rose this past week. Bankrate.com's survey showed an average rate of 4.48% on the 30-year fixed-rate loan, five-basis points higher than the previous week. As to be expected, Freddie Mac's survey also showed a rise. It's data show the 30-year loan averaged 4.28%, which is also a five-basis-point increase. (The surveys differ because of methodology and average discount and origination points.)

Market participants point to two factors in the turnaround in rates: New Federal Reserve chair Janet Yellen and an encouraging economic report from China.

On the former, Janet Yellen reassured Congress this week that the economy continues to grow despite some softness. This means the Fed is unlikely to back away from tapering its purchases of mortgage-backed securities (MBS) and U.S. Treasury notes and bonds.

Over the past two months, the Fed has reduced its purchases by $10 billion each month. The Fed is expected to continue along this measured path – reducing purchases $10 billion each month – until it ceases. As we've noted frequently in the past, these note and bond purchases have helped keep mortgage rates low.

On the latter, China excited financial markets with an upbeat export report, which eased concerns of a possible global recession. This inspired investors to cycle out of haven investments – like Treasury notes and bonds and MBS – and cycle into riskier investments, like stocks. Money leaving the haven investments puts upward pressure on mortgage rates.  

For anyone concerned that rates will establish a new trend – up – we see little reason to worry. Five percent on the 30-year loan is still unlikely for the foreseeable future.

Despite the Fed chair chatting up the economy, things still aren't all that great. The employment numbers for January were particularly disappointing. The economy added 113,000 new jobs for the month, but this was far below the 180,000 many economists were expecting. Job growth remains stubbornly sluggish.

Interestingly, the unemployment rate actually fell to 6.6%, even though the participation rate increased slightly to 63%. Lower-than-expected job growth coupled with a higher participation rate would lead you to believe the unemployment rate would have at least remained constant, if not risen. Instead it fell, which is bit confusing to say the least.

The outlook for gross domestic product (GDP) growth is also vague. Some Fed officials still expect GDP to grow at a 3% rate this year. The private sector is a little more circumspect. The Wall Street bank Goldman Sachs has lowered its first quarter 2014 GDP estimate to 1.9% from 2.3% on an annualized rate. Anything below 3% is nothing to cheer about.

In short, there is no clear beacon to where the economy is headed. This leads us to believe that borrowers should still act to lock in today's low rates, but they've got some time to do so.

Courtesy of Jessica Regan.

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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.

So far, 2014 has been tough on stocks. Most major stock-market barometers are down, and down significantly. The Wilshire 5000 Composite Index , which encompasses nearly the entire U.S. stock market is down nearly 5% for the year.

So what does the stock market have to do with housing?

Most of us own stocks – either directly, through mutual funds, through a 401(k), or through an individual retirement account (IRA). What happens in the stock market effects our wealth position. Therefore, the stock market has a wealth effect: when the stock market goes up we feel more wealthy; when it goes down we feel less wealthy. How we feel impacts buying decisions, particularly for big-ticket items like homes.

It's plausible that the recent slowdown in housing activity is correlated at least somewhat with the recent down-drift in stock prices. People are hesitant to jump in the housing market when they see the stock market slump. They feel a little poorer, so they tend to resist the urge to take the plunge on a big-ticket item.

Of course, housing activity isn't dependent solely on the stock market, but the stock market does provide some insight to the outlook on the overall economy. The good news is that stock market has improved over the past week. Now we would like to see the stock market sustain recent gains and see those gains lead to more economic growth, and, of course, growth in housing activity.

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.

When Prognostications Go Slightly Awry

At the beginning of the year, we predicted that mortgage rates would end the year higher. Specifically, we predicted the 30-year fixed-rate loan would be quoted above 5%. To be sure, the year is still young. We're only into the first full week of February, but so far mortgage rates have been countering our opinion.

For the fifth-consecutive week, mortgage rates again drifted lower. On the national scene, Bankrate.com's survey shows the rate on the 30-year loan dropped seven basis points to 4.43%. Freddie Mac's survey shows the average rate on the same loan at 4.23%, nine basis lower from the previous week.

We're not quite ready to throw in the towel on our initial prediction. There are still 11 months left in the year. After all, we were right when we predicted the Federal Reserve would begin backing away from the U.S. Treasury and mortgage-backed-securities (MBS) markets. When that occurred, interest rates should have began to rise. Instead, the opposite occurred.

Last week, we mentioned there were extenuating circumstances that lead to lower interest rates, namely concerns about emerging markets that had investors seeking the haven of U.S. government debt. Similar circumstances continue to impact our lending markets to this day, only in a slightly different incarnation. This past week, Russia and Argentina suffered minor currency crises, which motivated even more investors to seek shelter in U.S. government debt.

Economic growth in China, the world's second-largest economy, further muddied the outlook for our own economy. China, in short, is struggling to maintain its high level of economic growth. Even though China is on the other side of the globe, it impacts our economic outlook because no country is an island anymore: economies and markets are interconnected. Enough U.S. companies do business in China so that a slowdown in China could hinder our own economic growth.

We've said more times than we can count that economic growth and job growth are the lead variables to sustaining a healthy housing market. We understand the desire for low mortgage-lending rates, but we would trade today's low rates for more growth, particularly job growth, in a heartbeat. Low interest rates simply lack the ”oomph” they carried a couple years ago.

We say that because despite mortgage rates falling over the past month, purchase applications still are unable to develop a sustained upward trend. The Mortgage Bankers Association's latest survey shows purchase applications were down 4% after posting a couple weeks of tepid gains. We understand that cash purchases are important contributors to housing sales, but the majority of buyers till use a mortgage to finance their purchase. Unfortunately, prospects for a pick up in new- and existing-home sales look discouraging for the near term.

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.

For the past year (if not longer), we've been preaching that economic growth, not interest rates will drive housing. To be sure, it was encouraging to see purchase-application activity pick up on lower rates. Unfortunately, cash is still king. The NAR's latest sales data show cash buyers comprised 32% of existing home sales in December. Therefore, a 2% uptick in purchase applications isn't as meaningful as it would have been a decade ago.

Whether mortgage rates are lower or higher, they don't appear to have much impact on home sales these days. Sales of existing homes bounced back in December from a very weak November, but not by much. Sales for the month came in at 4.87 million units, which is about where they were 18 months ago. Unfortunately, sales remain significantly below where they were this past summer. Interestingly, during that time, mortgages rates were rising as monthly sales were rising. Source: Econoday

For this coming week we'd like to see the Federal Reserve's data show stronger economic growth. In addition, we'd like to see that data supported by strong fourth-quarter-2013 GDP growth. If strong economic growth is supported with strong job growth, a 5% rate on the 30-year loan will still be an affordable rate in the grand scheme of things.

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.

Defying Consensus Estimates

We, along with most everyone else , believe interest rates will rise in 2014. If you were to ask most mortgage bankers where the rate on the 30-year fixed-rate loan will be on Dec. 31, 2014, you'll likely get a response of 5% or above.

To be sure, the year is still young, but mortgage rates have defied the majority opinion by trending down, not up. This past week, rates were either steady or slightly down across the board. Bankrate.com's weekly survey shows an average rate of 4.56% on the 30-year loan. Freddie Mac's survey shows the 30-year loan averaging 4.39%, two basis points lower than last week.

Depending on your local market, the rate on the 30-year loan has dropped from 10-to-15 basis points in this new year. Rates have dropped despite the Federal Reserve announcing it was reducing its purchases of mortgage-backed securities.

We're not terribly surprised mortgage rates have been falling. At the beginning of the year, the 10-year U.S. Treasury note was yielding above 3%. As we write, the yield is below 2.8%. (To get a rough idea of where the 30-year fixed-rate mortgage is headed, follow the yield on the 10-year Treasury note, which you can readily find at most financial portals .)

The upside of lower mortgage rates has been an uptick in both refinance and purchase application activity. The Mortgage Bankers Association 's latest survey shows refinance applications were up 10% last week, while purchase applications were up 2%.

The downside is that lower rates have come tethered to lower job growth. We mentioned last week that we were sorely disappointed in the December payroll numbers. Job growth for the month was far below expectations.

Later next week, we'll get an idea if December's employment numbers were simply an anomaly that's unrelated to the economy. Preliminary data point to gross domestic product (GDP) growing 3% on an annualized rate for the fourth quarter of 2013. Let's hope that growth is moving ahead at least that much. If growth meets or beats exceptions, December's weak job numbers will likely have been a one-off aberration, and not the start of a new trend.

The Federal Reserve will also influence interest rates this coming week. Fed officials are scheduled to convene on Tuesday. On Wednesday, we'll be privy to what they discussed. Most likely, we'll hear that the Fed still supports holding interest rates low into the distant future. But for the immediate future, rates could still rise or fall depending on the Fed's outlook on the economy.

The bottom line is that we expect to see some volatility in mortgage rates over the coming week, with most of it occurring on Wednesday and Thursday.

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.

Do lenders prefer higher or lower interest rates? The answer isn't straightforward. Higher lending rates translate to higher income as long as the rate at which a lender borrows (generally a short-term rate) to fund a loan remains unchanged. On the flip side, higher rates lead to lower lending activity.

We still think higher lending rates are in our best interest long term. We've noted many times that higher rates are reflective of the two important market variables we mention above – economic growth and job growth. Both can easily compensate for higher rates. If job growth is accompanied with rising wages, home affordability remains relatively unchanged.

Higher rates also lead to more accommodating lending standards. We'll all agree that standards are tight today, possibly overly so. But Federal Reserve data lend credence to our assertion: When rates were rising last year, lending standards showed a measure of easing. This makes sense; higher rates lead to more profitable lending opportunities. What's more, the risk of lending to lower credit-quality borrowers is mitigated by price-appreciating collateral.

So rising rates are a mixed blessing, but a blessing that in the grand scheme of things will prove beneficial.  

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.

Can We Trust the Numbers?

We'd like to think we can, but we have to ask, even if we ask tongue-in-cheek: Are these numbers real and do they reflect the state of the economy?

We're referring to the employment numbers released last Friday, which we found to be highly unusual and very surprising. According to the Bureau of Labor Statistics , the unemployment rate dropped to 6.7%, the lowest it has been since the Bush Administration. That's the good news, and news we can understand, given strong economic growth in the waning months of 2013.

The bad news – and the news that left us scratching our heads – is that payrolls increased by a mere 74,000 in December, which fell far short of the consensus estimate for 193,000. Even more disconcerting, many of the new jobs – 55,000 – were in retail, which tends to be a lower-compensated segment of the economy. We were, quite frankly, expecting job growth to hover near 200,000, especially when considering payrolls increased 241,000 (revised up from 203,000) in November and 200,000 in October. We thought elevated monthly job growth would coincide with gross domestic product , which had risen through most of 2013.

But at least the unemployment rate is falling, you might reason. This is a point of contention among economists, because it's falling on falling labor participation . Those working or seeking work has dropped to 62.6% of the population, the lowest since 1978. As recently as 2008, the labor participation rate was at 66%. Many market commentators fret over the low labor participation rate. But there appears to be a mitigating factor: There is evidence the lower participation rate is related to a higher retirement rate. If that's the case, today's flaccid labor participation rate is less dire than first appearances might lead us to believe.

Employment and economic growth is a recurring theme in these pages because of their importance to the housing and mortgage markets. We've said repeatedly that we'd love to see more jobs and more economic growth, even if they lead to higher lending rates.

The upside to disappointing job growth is falling mortgage lending rates, which is what happened this past week. Bankrate.com reports the average rate on the 30-year fixed-rate mortgage dropped nine basis points to 4.57%. Freddie Mac's survey shows the average rate on the 30-year loan fell 10 basis points to 4.41%.

The sizable drop in mortgage rates over the past couple weeks has ignited application activity, which we're glad to see. The Mortgage Bankers Association's latest survey shows that refinance activity jumped 11% last week. More important, purchase applications increased 12%. The surge in purchase applications leads us to believe that job growth for December was an aberration. After all, a loan is frequently contingent on the borrower being employed.

So if the December job numbers prove to be an aberration, then today's lower lending rates are likely an aberration, and also a window of opportunity. If the January job numbers move up to the 200,000 range, you can be assured mortgage lending rates will move up with them. Recent positive economic reports, along with our instincts, lead us to believe January's payroll numbers will be closer to 200,000 than 100,000.

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.

Speaking of positive equity, RealtyTrac reports that the universe of equity-rich properties, defined as equity 50% higher than what's owed, swelled to 9.1 million in the fourth-quarter of 2013 from 7.4 million in the previous quarter. On the other end of the spectrum, those deeply underwater – owing 25% or more than what the house is worth – declined to 20% in December from 25% at the start of 2013.

These two trends are obviously encouraging to our respective industries, but they're also important to the national economy. We say that because fewer people will view a house as an albatross. Many people have been reluctant to buy a house for fear if they need to move in a year or two, they'll be stuck with an asset that has lost value.

Today, people feel more secure because they don't believe their mobility will be compromised. This is obviously an important factor in bringing more people into the housing market.

This is also an important factor in economic growth. If someone buys a house in Denver and two years later is offered a better job in Chicago, that person needs to feel confident the house can be sold without incurring a loss. When people feel more mobile and more confident, they're more likely to take steps to improve their economic situation.

The perception of unimpeded mobility is crucial to maintaining a vibrant housing market. Thankfully, we should see more labor mobility in 2014, which will lead to a more vibrant housing market and a more vibrant economy.

 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.

Change Is on the Way

The most noteworthy change in 2014 is the confirmation of a new Federal Reserve chairperson. This past Monday it was made official: Janet Yellen now chairs the Federal Reserve.

In the course of a regular workday, few of us give the Federal Reserve much thought. But the Fed does matter; its policies are very influential to housing and credit markets, and to the economy as a whole. So the lead question is, is the new boss much different than the old boss?

For the immediate future the answer is “no.” Everyone is aware that the Fed under the old regime leader, Ben Bernanke, was foreshadowing a tapering, which came to pass. Starting this month, the Fed will purchase $75 billion in Treasury notes and bonds and mortgage-backed securities instead of $85 billion. We don't expect a further reduction until the unemployment rate falls below 7% and stays there.

At the same time, personal consumption expenditures (PCE) remain sedate, running at 1.2% on an annualized basis. PCE is the Fed's preferred measure of inflation, and it would like to see PCE running at 2% annually instead of 1.2%. Therefore, we don't expect the Fed to announce any rate changes, possibly until 2015.

So the Federal Reserve has changed chairpersons, but its current policies are unlikely to change.

With that said, we still see changes in the mortgage market. We see rates rising, to be specific. Even if the Fed wants to hold interest rates low, it can't mandate the rate at which market participants lend. Markets are anticipatory, and they are anticipating economic growth, which is why the yield on the 10-year Treasury note – a leading proxy for the 30-year fixed-rate mortgage – is now hovering at 3%.

This is why we expect a change in mortgage lending rates; “change” being a euphemism for higher mortgage rates in 2014.

A slowdown in home-price appreciation is another looming change. Admittedly, we've been talking about a price slowdown for some time, and yet the data from the major home-price aggregators has contradicted us. Are our eyes lying?

It's appearing less likely. The latest price data from Trulia show the year-over-year increase in asking prices slowed for the first time in nearly two years. Asking prices rose 0.4% month over month in December, and that translates to an 11.9% year-over-year gain. But in November the year-over-year gain was 12.2%.

2014 won't be a repeat of 2013, and that's a good thing. Yes, mortgages won't be quite as affordable and slowing home-price growth won't immediately lift as many homeowners into positive equity, but these negatives will be offset by big-picture gains in job growth and more economic activity – two themes we've been banging the drum on for the past six 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.

There is a common misconception that consumption is the prime driver of the economy. To be sure, consumption matters (because everything is made to be consumed), but production and investment shouldn't be overlooked. After all, production precedes consumption. You have to produce before you get paid with the money to consume.

With that in mind, residential real estate investment (defined as investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales) matters. Investment goes hand-in-glove with production.

The good news is that residential investment was up strongly in 2012 and 2013. The even better news, it still has a long way to go to reach historical norms. Demand for new investment should be strong through 2014, and very likely through 2015.

Stronger residential investment isn't just good for us, it's good for the aggregate economy. Residential investment is a powerful contributor to gross domestic product (GDP) growth and employment. Housing activity contributes up 5% of GDP. The simple logic is that more investment activity will lead to more economic growth.

The bottom line is that we look for another strong year for housing. As long as the economy continues to improve, rising lending rates won't alter our outlook.

 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.