Real Estate Information Archive

We’ll Believe It When We See It

June 15 came and went, and it came and went as we expected it would, with the Federal Reserve again postponing raising the federal funds rate.

It’s like deja vu all over.

To start 2015, we predicted that the Fed would not raise interest rates that year.  We weren’t foiled until December, when the Fed raised the target range on the fed funds rate by 25 basis points.

We then started 2016 by expressing skepticism that the Fed would raise the fed funds rate within the first six months. We’ve been proven correct.  Now, we wouldn’t be surprised if we went the entire year without a rate increase (though we could well be foiled again in the later months).

We’re not alone in our skepticism. Traders in federal funds rate futures contracts aren’t giving 50/50 odds of a rate increase until December.  These same traders – who can be a schizophrenic lot – entered 2016 giving 50/50 odds for a June rate increase.

In testimony before Congress this past Tuesday, Fed Chair Janet Yellen gave pretty much the same reasons we’ve been giving for holding off on a rate increase: Stagnating domestic economic growth, subdued economic growth with our primary trading partners, a strong U.S. dollar, weak commodity prices, and the recent slowdown in payroll growth.

It has become apparent that the Fed’s crystal ball is no more clairvoyant than the crystal ball of anyone who spends time monitoring financial markets. Just a few months ago, the Fed said everything was on the mend and that rate increases would come in short order. (Actually, the Fed foreshadowing rate increases is a new convention. Before the 2008 financial crisis, the Fed didn’t tell it just did.)

That said, interest rates have trended higher. The yield on the 10-year U.S. Treasury note gained nearly 14 basis points this past week. As the yield on the 10-year note goes, so, too, go mortgage rates.  Quotes on the 30-year fixed-rate loan have hit a two-week high.

This isn’t a total surprise.  Last week, we mentioned that the rumor (or the anticipation of news) moves markets more than the news itself.  When it became apparent that the Fed would raise rates in December, rates moved higher.  When the Fed actually raised rates, rates drifted lower.

This go around, rates dropped when it became apparent the Fed would not raise rates.  When it didn’t raise rates, rates moved higher.  Market participants frequently buy the rumor and sell the news.

Until we’re proven wrong, we’ll stick with the status quo: Low mortgage rates for now and for the indefinite future.

Information provided by 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.

You may have noticed that mortgage rates have moved higher over the past week. Depending on the lending product, you may have seen a five-to-10 basis point increase in the rate quoted this week compared to the rate quoted the prior week.

What’s going on?

Last Wednesday, the Federal Reserve released the minutes of the latest meeting of its chief policy makers. It appears that talk of raising interest rates has been amplified. The minutes show that there was a strong bias among the 17 participants for a June hike (June 15 is the next meeting) in the federal funds rate if the conditions warrant it. A few of the participants were even ready to raise the federal funds rate last month.

We frequently turn to futures traders to gauge what the market anticipates. As of now, traders in federal funds rate futures contracts are pricing the contracts for a 37.5% chance of a rate hike next month. These same traders are pricing a 61% chance the hike will occur in July if it doesn’t occur in June.

As for us, we still think that it’s more likely the Fed won’t raise rates. Economic growth remains sluggish. We don’t think the Fed will want to risk derailing the one reliable growth engine – housing. What’s more, the more dovish policy makers continue to cite downside risks to the economy and downside risks to their inflation target.

That said, we are a minority opinion. Many market watchers are concerned that the Fed is preparing for a rate hike. This could create rate volatility and raise the pressure for higher mortgage rates over the next few weeks.

Float or lock? All we can say is that locking wouldn’t necessarily be a bad idea.

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.

Housing: The New Growth Market

Things are shaping up nicely as we head into summer.

Sales of existing homes once again ratcheted a notch higher. For April, sales rose 1.7% to 5.45 million units on an annualized rate.  The sales trend shows that monthly sales are occurring at the highs that were posted last fall.

We’re seeing more sales, but we’re not seeing more discounting.  To the contrary, the median price of an existing home rose 5% to $232,500 for April.  Year over year, the median price is up 6.3%. The fact that we are seeing more sales while prices hold firm bodes well for sales as we head into summer.

That we also see more existing homes coming to market also points to strong summer sales. Existing-home inventory was up a stout 9.2% for April, lifting the total number of homes for sale to 2.14 million. But even with this increase, inventory still runs low. The number of existing homes for sale in April were 3.6% lower than the number that prevailed a year ago. All in all, though, the April report on existing-home sales was a very encouraging report.

The same can be said for the report on new-home sales. The report was very encouraging. Indeed, it was even more than very encouraging. Our initial response was “WOW.”

April new-home sales posted at 619,000 units on an annualized rate. That’s a 16.6% monthly increase – the highest monthly increase in 24 years.  April’s numbers blew out all other monthly numbers since the housing recovery took hold a few years ago.  What’s more, the April report showed a 39,000 net upward revision in sales in the previous two months.

The trend in pricing makes the surge in new-home sales all the more startling.  Builders had been discounting to move inventory in recent months. That certainly wasn’t the case in April: The median price of a new home soared 7.8% to a record high of $321,000.

On the lending side, we find that the trend in mortgage applications also portends better days ahead.

Purchase applications moved higher last week, increasing 5% from the prior week. Purchase- application activity is running 17% higher than it was a year ago. This is an impressive gain that points to a strengthening housing market.

This latest round of housing and lending data support a contention that we’ve had all along.  Entering January, we predicted that 2016 could be the strongest year for home sales and lending that we’ve seen in over decade.  Our prediction is looking more likely to come to fruition.

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.

We certainly hope that stock-market investors don’t sell in May and then go away. A deep decline in stock prices could be a negative for us because it would mean a reduction in accumulated wealth.

The less wealthy you feel, the poorer you feel. This appears obvious, but when people feel less wealthy they tend to dig in and spend less. The first items they target for spending cuts are the big-ticket items – automobiles and homes. (People frequently label homes as investments, but that’s not true. A housing investment generates cash flow through either rent or a flip. An owner occupied house is an asset, but not an investment. It is a consumption purchase.)

When the stock market sold off hard in 2000 and 2008, we saw a marked decrease in home sales and lending activity. Potential home buyers felt less wealthy, and the big-ticket items were the first items to be deleted from the “buy” list.

The good news is that housing returned with a vengeance (even despite the price depreciation that occurred in 2007 through 2009). Many investors turned to homes as a store of value and source of cash flow instead of stocks.

That said, the stock market has been teetering on wobbly legs of late. Let’s hope it regains its strength.   Should stock prices tumble, you can be sure that the repercussions will be felt in our neck of the woods.  That, we can do without.

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.

Sell in May and Go Away?

There’s a stock market bromide that goes “Sell in May and go away.” The gist of the bromide is to sell your stock holdings in May and then repurchase them in November. The strategy, so we’re told, enables you to avoid the months where stocks have historically suffered their most punishing losses.

For us, it’s the opposite – sell in May and keep selling to November. (Actually, keep selling through April, but why quibble?).  Home sales generally trend higher starting in May and peak in either September or October.

The good news is that we’ve got a jump on the prime selling season. Existing home sales were up strongly in March and the momentum is expected to hold in April.

As for new homes, sales growth has been respectable, but not spectacular, this year. Home builder optimism, in turn, has plateaued in recent months. The Wells Fargo/NAHB Sentiment Index posted at 58 for May. This is the fourth-consecutive month the index has posted at 58. This isn’t bad, but builders aren’t quite as optimistic as they were six months ago.  Buyer traffic remains an issue; builders don’t see enough of it. The dearth of first-time buyers remains a drag on overall traffic growth.

Despite sentiment plateauing, home builders are still willing to move ahead. Housing starts and permits trended higher in April. Starts rose 6.6% to 1.172 million units on an annualized rate. Permits rose 3.6% to 1.116 million units. Year over year, though, starts and permits are both down, with starts falling 1.7% and permits falling 7.2%.  Keep in mind that starts have historically averaged 1.5 million units annually.

But there is a mitigating factor: Most of the weakness is in the multi-family segment, which have been on a tear over the past five years.  Single-family units continue to trend higher.  Year over year, single-family starts are up 3.3%; permits are up 8.4%. 

We have to concede that we are somewhat nervous as we head into summer.  Gross domestic product growth (GDP) has ground to a halt. To be sure, GDP is by far an incomplete measure of how the economy is doing, but it does capture headlines and it does influence behavior. We’d like to see a little more growth.  The latest reading on GDP doesn’t even show the economy growing 1% annually.

Job growth – particularly in the private sector – is the greater concern, though. Last month, new jobs posted well under 200,000. A couple more months of sub-200,000 job growth and we might have to ratchet down our expectations for home sales and purchase mortgage lending.

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.

Mortgage rates have drifted higher over the past two weeks. Many loan products are now quoted 10-basis points or more above quotes given in mid-April. Rising rates have crimped purchase-loan activity. Purchase applications were down 2% last week, according to the Mortgage Bankers Association.

Mortgage bond prices and U.S. Treasury prices have drifted lower on a dearth of bad news. In turn, yields have drifted higher. Commodity and oil price are on the rise (as you’ve likely noticed at the pump).  Rising prices is generally viewed as a good sign because demand is picking up and rampant price deflation is unlikely. There’s also little global discord. For the moment, most of us are getting along; markets are settled.

The current ethos is priced into the market. The news is unlikely to get much better, but it could get a little worse.

In fact, we’ve seen bond prices inch up and bond yields inch lower this week. Mortgage quotes have also inched lower. So, what’s going on? Financial markets are slightly unsettled over recent events in the technology sector. The world’s largest company, Apple Inc., missed on quarterly revenue and earnings estimates this week. The news likely had a few institutional investors selling Apple shares and buying low-risk bonds.

Overall, though, there isn’t much bad news, but what bad news there is should hold interest rates at their current levels. The party is still on.

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.

A Mixed Market at Best

Though still positive, home builder sentiment has plateaued in recent months. This was a point we noted last week when the NAHB’s sentiment index was released. We’re not surprised that sentiment has plateaued, given that starts have plateaued.

Now, it appears that new-home sales have also plateaued. March sales posted at 511,000 units on an annualized rate, which is on the low-end of most expectations. The consensus estimate among economists was for sales to post at 525,000 units.

Somewhat surprisingly, pricing still hasn’t gained traction. Discounting is prevalent. The median price of a new home dropped 3.2% in March to a median $288,000, Year over year, the median price of a new home is down 1.8%.

The median price is a national number, which may or may not apply to the local market. We’re finding that pricing remains tight in lower-end homes. The discounting appears to be occurring mostly in the upper echelons. Many potential first-time buyers, particularly younger first-time buyers, are still having a rough go of it if a new home is their preferred choice.

That said, the new-home market is approaching equilibrium. Sales relative to supply has improved to 5.8 months. Supply at six months relative to sales is considered the norm.

The good news is that existing-home sales are gaining traction. Sales rose 5.1% to 5.33 million units on annualized rate in March. The sales spike wasn’t entirely unexpected. February was a sour month, with sales down 7.3%.  Even with a lousy February, existing-home sales for the quarter were up a respectable 4.8%. Better yet, single-family homes led the charge, with sales up 5.5% last month. 

As for pricing, the median price of an existing home rose 5% to $222,700. Of course, this, too, is a national number.  Western markets, led by San Francisco, Denver, Portland, and Seattle, continue to show the strongest price gains. We haven’t seen all the data, but we suspect that much of the price appreciation is concentrated in the lower end of the market, which can be high. The lower end of the market in many West Coast states is priced like the higher end of the market in other markets across the country.

That said, there’s good reason to remain upbeat as we head into the summer months. The market today has a Goldilocks feel about it: not too cold, not too hot, just about right.  That’s how a healthy market should feel.  Exuberance is nice in small doses; depression is always lousy, regardless if the dose is large or small. We prefer an even keel over the extremes. This is what we have today.

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.

Getting to the heart of a complicated financial matter in a few paragraphs is no easy feat, but we’ll try. After all, interest rates are an important variable in housing and lending.  It’s a good idea to understand how the Federal exerts its influence on our lending rates.

The Fed has been a central and pivotal figure since the 2008 financial crisis. It has moved to lower interest rates to levels rarely seen.

The usual way to lower rates is to simply move the range on the federal funds rate – a key overnight lending rate for commercial banks. The Fed influences the fed funds rate by adjusting the interest rate it pays banks on the reserves banks hold at the Fed.

Today, the Fed pays 50 basis points on these reserves, which was raised from 25 basis points in December. The fed funds rate, in turn, adjusts to reflect the rate the Fed pays on bank reserves.  No bank will lend for less than the Fed pays on reserves, so the fed funds rate adjusts to what the Fed pays on bank reserves.  Other lending rates adjust to the fed funds rate over time.

Buying and selling securities are other means to influence interest rates.

When the Fed buys a mortgage-backed security or a Treasury security, it pays with newly created money.  The Fed buys these securities from banks and primary dealers. The money is credited to the seller’s account at the Fed. This creates liquidity – more money to lend.  At the same time, the Fed’s demand for these securities raises their price and lowers their yield. Interest rates tend to fall.  The opposite occurs when the Fed sells securities; rates rise. Other interest rates take their lead from what is paid on these low-risk securities.

Mortgage rates tend to take their immediate lead from long-term Treasury securities, particularly the 10-year U.S. Treasury note.  The 30-year fixed-rate mortgage is typically quoted around two percentage points higher than the yield on the 10-year note. This is why we frequently refer to trends in the yield on the 10-year note to get an idea of where mortgage rates are heading.

So, if you want to get an idea of where mortgage rates are heading, keep an eye on the 10-year U.S. Treasury note yield (found readily at Yahoo Finance) and the effective federal funds rate (found at Bloomberg). Both will give you an idea of what to anticipate in our lending market.

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.

Starts Still Spinning Wheels

It’s encouraging to see that home builder sentiment remains positive. The Wells Fargo/National Association of Home Builders Sentiment Index posted at 58 in April.  This is the third-consecutive month the index has posted at that number. (A posting above 50 is a positive sign.)

Home builders are optimistic about the future, but for the present, activity has slowed. Housing starts fell a sharp 8.8%, to a 1.089-million annualized rate, in March.  Permits, which are indicators of where activity is heading, show similar weakness. They were down 7.7%, at a 1.086-million annualized rate, last month.

That said, the long-term trend remains positive. Starts are up 14.2% year over year. What’s more, there’s still plenty of room to grow. The long-term average annual start rate is 1.5 million. Starts could increase by 50% and that would bring us only to historical norms.

Mortgage rates remain accommodating to both home starts and sales.  They continue to hold near lows established a few weeks ago.  Best execution rates on the 30-year fixed-rate loan are still regularly quoted below 3.75% in many parts of the country. What’s more, rates show little inclination to move beyond the tight range they’ve held since the beginning of April.

The good news is that more buyers are taking advantage of low rates. Though purchase applications were off slightly last week, they are still up 17% year over year.  Purchase applications for new homes have been particularly robust. They were 17% for March, and that was a month-over-month increase.  Perhaps that’s the reason for builder optimism.

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.

You’ve no doubt noticed that mortgage rates have been on the rise. This has been the trend over the past 30 days.  We shouldn’t be surprised. The 10-year U.S. Treasury note yields 2% these days. That’s a yield it hasn’t offered in nearly two months. As the 10-year note goes, so go mortgage rates.

The good news is that conventional 30-year fixed-rate quotes are still mostly below 4%. As long as the economy continues to grow and businesses continue to create new jobs, we don’t see rising rates derailing housing’s multi-year upward trajectory.

But again, rates have been rising. We wouldn’t be surprised if they continue to rise.

Given recent upward trends in stock and commodity prices, along with a general sense the global economy is less likely to enter a recession, mortgages rates could easily move higher. What’s more, odds favor the Federal Reserve raising the federal funds rate again sooner than later. A month ago, traders in fed funds rate futures contracts were pricing a 30% chance of another rate hike in December. Today, they’re pricing for a 41% chance of another hike by June.

To be sure, trader sentiment can wax and wane with market sentiment. But it’s looking more likely that higher, not lower, mortgage rates reside in our future.

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.