Real Estate Information Archive

Trends Are Beginning to Reverse

For most markets, the trend has been down in 2016: stocks, mostly down; commodity prices, mostly down; interest rates, mostly down; home sales, mostly down. Home prices have been the noticeable exception. They've trended mostly up, and continue to do so. The latest price data from CoreLogic show prices up 6.9% nationally.

That said, things have been changing up a bit in recent days. Stock prices have moved higher, as have commodity prices. Oil prices, in particular, have rallied strongly. You may have noticed gasoline prices at the pump are higher today than they were a couple weeks ago.

Interest rates have certainly picked up pace. Within the past week, the 10-year U.S. Treasury note has seen its yield rise 15 basis points.  As the 10-year note goes, so, too, goes mortgage rates. Rates have risen to where they were a month ago. Rates are still low compared to the start of 2016 – the 30-year loan is still priced well-below 4% for best execution – but they have moved noticeably higher over the past week.

Higher rates will take some steam out of the refinance market. Last week, refinances were already down 7%, according to Mortgage Bankers Association data. We're sure we'll see another drop when the MBA reports for this week. That's no surprise; refinances are much more interest-rate sensitive than purchases.

As for purchases, we still see steady volume. The MBA reports applications were off 1%  last week.  But year over year, applications are up 27%. Mortgage activity suggests we should see robust housing activity this spring, though the start might be a little sluggish. The pending home sales index was actually down 2.5% for January.

Since the beginning of the year, we've been saying that low interest rates would hold through the first quarter of 2016. We still have a month to go, but we still think rates will remain accommodating. There is a caveat to our outlook: keep an eye on oil and stock prices. If they continue to trend higher, there is a good chance mortgage rates could hitch along for the ride.

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.

If we would have asked this question a couple months ago, “yes” would have been the obvious answer.  It seemed a fait accompli – a done deal. Traders were certainly betting that way. After the Federal Reserve raised rates in December, federal funds rate futures contracts were priced for another rate increase by March, and then for a couple more thereafter.

Today, it looks less like a done deal. Traders are giving low odds for another rate increase this year. In fact, they're giving only a 34% chance of another increase for December. For a rate increase before then, they're giving even lower odds. This tells us that most market participants don't believe that the Federal Reserve will follow through on its plan to implement more rate increases.

Of course, that can change in a heartbeat.  If commodity prices (again lead by oil) and global stock prices continue to rise, you can be sure the Fed will be emboldened to move forward on interest rates. Therefore, we once again have to counsel, don't take today's low lending rates for granted.

 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.

An Important Economic Driver Is Sputtering

Residential investment is a meaningful contributor to gross domestic product (GDP). The National Association of Home Builders estimates residential investment contributes 5% annually to GDP. That's roughly $85 billion.

Unfortunately, housing's contribution to GDP has waned in recent months, at least when focusing on investments in starts. January's data show that starts posted at 1.099 million on an annualized rate. This is a 3.8% reduction from December's tally, and a disappointment compared to the 1.185 million most economists were expecting.

The start rate has been declining for the past three months. It's unlikely we'll see much of pick-up in the near future. Permits for single-family homes increased an anemic 1.6%. Multi-family permits rose 2.1%. (Of course, multi-family includes a lot of apartment rental construction, which doesn't do much for sales and mortgage lending activity.)

Builder optimism, not surprisingly, correlates with starts. The NAHB home builder sentiment index dropped three points to 58 this month. This is the lowest reading since May 2015. The good news is that optimism continues to outrun pessimism. (A reading below 50 would mean pessimism is the predominate sentiment.) Demand really isn't the issue; creating supply is. Builders cite a dearth of qualified labor and available lots for the slowdown.

Last week, we mentioned that we expected to see a pick up in lending activity when the Mortgage Bankers Association reported numbers for that week. On that front, refinances continue to roll in.  They were up 16% week over week. Unfortunately, purchase activity disappointed. Purchase applications were down 4%.

We weren't terribly surprised to see a drop in purchase activity. Though mortgage rates were near a one-year low, other variables weighed on the market. Global financial markets remain in distress, as they have been for most of this year.  Our own stock market has had a rough February. We can't overlook commodities; oil hit a 14-year low last week.

The good news is that the mood in the financial markets has improved over the past week. Stocks have rallied. Commodity prices, oil in particular, have moved higher. This points to a more optimistic outlook for global growth.

Of course, when optimism rises, so do lending rates. We've seen the yield on the 10-year U.S. Treasury note rise nearly 15 basis points this week. Mortgage rates have trended higher. This isn't a negative, though. Rising rates are tethered to rising financial-market expectations and rising consumer confidence.

We've been saying for the past month that an improved economic outlook outweighs low mortgage lending rates in sustaining housing. We still believe that's the case. We believe that there's no reason to fear a rising-rate environment, if we are entering one. Rising rates point to more positives than negatives.

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 introduced and discussed the yield curve and how it has historically been a reliable predictor of recessions last week. (In review, the yield curve is simply a plot of all the government securities – one-month through 30-years.)

We were interested to see how the recent drop in yields has impacted the yield curve.  Our concern was that the drops have been concentrated on the long-end of the curve – five years and out.  If that occurred, the yield curve would show signs of flattening. This wouldn't be desirable because it could portend bad things to come.

That good news is that with the exception of the one-month T-bill and the one-year T-note, yields have been relatively uniform in falling.  As we noted earlier, we would like yields to cease falling, because that would indicate expectations for more economic activity.  Sluggish activity remains an overhang.

That said, the yield curve looks healthy and normal. This suggests there is still reason to view 2016 with optimism, which we do. Though global economic activity has slowed in recent month, it appears a recession isn't imminent.

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.

And They Keep Going Lower

Last week, we asked “how low can they go?” We find out this week that they can go lower.

Of course, we're referring to mortgage rates. The trend in rates remains downward sloping, which is no surprise. Over the past five days, the 10-year U.S. Treasury note chipped off another 15 basis points, which means the yield on this influential long-term lending benchmark is below 1.75%.  The rate on a prime conventional 30-year mortgage will hover two percentage points higher (give or take a few basis points) than the yield on the 10-year note.

Most of the national mortgage surveyors report best rate execution on a 30-year conventional mortgage below 3.7%. This is about it where it was this time last year. We see similar drops in the 15-year loan and, to a lesser extent, the 5/1-year ARM.

Lower lending rates have been good for business. The Mortgage Bankers Association's latest survey shows refinances up 16% week over week. A meaningful gain was also reported on purchase applications, which were up 7%.  When the MBA reports for this week, we expect to see a further increase in weekly activity.

Low rates are a nice stimulant, at least for the short term. But as we mentioned last week, we really don't like the idea of the 30-year fixed-rate mortgage hanging this low indefinitely. The problem is that low rates frequently come encumbered with discouraging economic news.

Indeed, that's the case. Stocks around the world continue to sell off; commodity prices continue to fall. Oil is the number one commodity everyone focuses on, and it has recently been quoted below $28/barrel. This is good news when we fill up at the gas station. It's less welcomed news for U.S. oil producers, many of whom are drowning in debt that they can no longer service.

Stocks and commodities are trending lower over fears the world's major economies – including our own – are slowing, and could slow to the point of recession. Investors, in turn, have taken haven in U.S. Treasury securities and other government debt. Bloomberg reports that $7 trillion of sovereign government debt, roughly 30% of all government debt worldwide, now yields a negative interest rate. This means many investors aren't even seeking a return; they're simply seeking a place to warehouse their cash.

So, yes, low rates are nice, but an improved economic outlook would be even nicer.  After all, we are one big inter-dependent economic family.  For now, it appears today's low mortgage rates will remain.

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.

The yield on the 10-year U.S. Treasury note continues to hang near 2%. Not surprisingly, the 30-year fixed-rate mortgage continues to hang below 4%. As we mentioned last week, 2% on the 10-year note gets us sub-4% rate quotes on the 30-year loan.

Given the way the stock market has performed to start 2016, we expect mortgage rates to hold these lows for some time. Many investors are wary of stocks; wary investors take refuge in Treasury securities. The money that flows into these securities raises their price and lowers their yield. Because mortgage bonds take their cue from Treasury securities – the 10-year note in particular – investors are willing to accept lower-rate mortgages.

Stock-market risk perception runs high, which means risk aversion runs high. That's good news for us, because we are able to avail ourselves of low-rate financing. We're seeing mortgage rates we haven't seen in seven months. But keep in mind, it will take only a couple of sustained stock-market rallies for risk perception to change and for money to flow out of bonds and into stocks.

A big bounce in the stock market could easily lead to a big bounce in mortgage rates.

 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.

Chalk it up to the January Effect

Our mood may have been a little too dour to start the New Year.  Maybe it's the time of year. January is something of a down month: The December holidays and all the festivities they engender are behind us. The days are short and there is really nothing to look forward to. Negative news, which there has been a surfeit of lately, tends to get amplified.

January is finally winding down, and the latest data releases are winding up – positively. Home sales, which we've been down on lately, have reemerged with a vengeance.

Existing home sales unexpectedly soared, increasing 14.7% to 5.46 million on an annualized rate, in December. The surge was strong enough to turn a negative into a positive. Total sales for 2015 posted at 5.26 million, 6.5% higher than the 4.94 million posted in 2014. But if December sales would have held at November's pace, sales for the year would have finished down.

That said, existing home sales still face near-term headwinds: Low supply continues to plague the market, as it has for the past two years. Total homes for sale fell to 1.79 million in December from November's 2.04 million. Supply relative to sales dropped to only 3.9 months. Supply is as low as it has been in nearly 11 years. It might be tough for sales to hold December levels as we head into spring.

Fourteen and seven must be the magic numbers for December. Existing home sales rose 14.7%, and so did new home sales. Specifically, new home sales increased 14.7% for 2015. There were 501,000 new homes sold last year compared to 437,000 in 2014. As for monthly numbers, we see new home sales were up 10.8% to 544,000 on an annualized rate in December compared to November.

As with existing home sales, supply could limit future new home sales. Supply did rise by 6,000 in December to 237,000, but supply relative to sales fell back to 5.2 months from 5.6 months.

Pricing could also be a limiting factor to sales growth. Prices continue to plow ahead in most major markets. Case-Shiller's 20-city index rose 0.9% in November.  All 20 cities Case-Shiller follows reported monthly gains. Year over year, Case-Shiller's index shows prices up 5.8%.

Of course, all markets are local markets, and a few local markets can skew the national average. Portland home prices are up 11.1% year over year, followed by San Francisco at 11% and Denver at 10.9%. Washington DC, at 2.1%, Chicago, at 2.0%, bring up the rear, but these rates of price appreciation are closer to historical norms. Therefore, they're more sustainable.

One month's worth of sales data doesn't make a trend, but it's a start. The uptick in purchase applications, which increased 5% last week, does lift our spirits and gives us good reason to anticipate the spring selling season.

 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.

Last week, we surmised that if the yield on the 10-year U.S. Treasury note dropped to 2% or lower, we'd see the 30-year fixed-rate mortgage quoted regularly below 4%. The yield on the 10-year note dropped 15-basis points over the past week and is below 2%.

Mortgage-backed securities take their cue from the 10-year note. Therefore, mortgage rates (longer-term rates, specifically) take their cue from the 10-year note. Lenders today are regularly quoting the 30-year loan on top-tier scenarios below 3.9%.

The drop in longer-term mortgage rates has lead to a surge in refinances. The latest survey from the Mortgage Bankers Association shows refinances up 19% week over week. That's the good news. The bad news is that the same survey shows purchase applications down 2% week over week.  The downtrend in purchase applications is another reason we're not expecting an immediate upturn in home sales. 

The stock market is key. It's also a threat. We could easily see a spillover into housing: Both sales and lending activity could start trending lower if stock prices don't start trending higher.

 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.

Still Stumbling Out of the Gate

2016 has hardly gotten off to an auspicious start, particularly if you own stocks.  Through the first two weeks of January, the S&P 500 has lost over 10% of its value. This is the worst start to a new year ever. 

If misery loves company, then the S&P has plenty of it. China's major stock barometer, the Shanghai Stock Exchange Composite, is down 16% year to date. Japan, Germany, and France have also experienced double-digit stock-market declines. In the United Kingdom, stocks are down almost 10%, but not quite. 

Around the world, investments are losing value, and they're not alone. Many asset groups are also losing value. (We distinguish investments from assets, in that investments generate cash flow.) Commodity assets – food stuff and industrial metals – continue to hit new multi-year lows. Then there is oil and natural gas, which also continue to trend lower. Oil prices are at a 13-year low. Though natural gas prices have rallied in recent weeks, they continue to hover near a 15-year low.

Not surprisingly, consumer price inflation (CPI) barely registers a blip these days. CPI for December showed a 1.0% monthly decline, which drops the annual inflation rate to a mere 0.7%. Energy lead the charge lower, posting a 2.4% monthly decline.

Housing continues to be the one positive sector in the economy. Unfortunately, even housing is showing signs of faltering.

Home builders remain optimistic, but just not as optimistic as they were in the second half of 2015.  The home builder sentiment index dropped to 60 in January. This is the third-consecutive monthly decrease.

Lower optimistic could simply be a reflection of fewer starts. Total housing starts for December were down 2.5% to 1.149 million on an annualized basis. Single-family starts bore the brunt of the decline, falling to 768,000 from 794,000 month over month.  Permits were the silver lining (somewhat). Permits came in at 1.232 million on an annualized basis. This beat expectations for 1.2 million permits, but they were still lower than the 1.282 million posted in November.

We've devoted a good deal of space to markets outside of housing and mortgage lending, and for a good reason. No market is an island. (The same can be said for any country.)

Our concern is that what's occurring in investment and asset markets could affect the housing market. Investments and assets produce a wealth effect: When investment and asset prices are appreciating, people feel wealthier and more confident. They're more likely to take on a big-ticket item – like a house.  The flip side is that when investment and asset prices are depreciating, people become more cautious. They're less likely to take on big-ticket items.

We're still bullish on housing, but we're also realistic. We wouldn't be surprised to see a further slowdown in national sales volume. We also wouldn't be surprised to see a slower pace of price appreciation (and even price depreciation) in more local housing markets. 

 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.

Five years ago, we repeatedly implored readers to keep the faith: Home prices would cease declining and would recover. We reasoned that 2010 (and 2011) was terrific time to enter the housing market - bargains abounded. You just had to keep your eye on the distant horizon.

The distant horizon is here. Times have certainly changed. Rising prices, not declining prices, is the overarching concern.  Many markets – Denver, Seattle, Washington D.C., Austin, Orange County, for instance – have seen home prices blow past previous highs.

Lack of new construction is a contributing factor to today's higher prices. Builders rightly throttled back after the 2008-2009 recession.  There was a glut of housing at the time; you don't add gasoline to a raging fire.

Today, there is a dearth of housing, which has held back both existing and new home sales.  Unfortunately, builders have yet to fully throttle up. Starts – around one million per year – are still far below the 1.6 million long-term annual average.  Policies more friendly to housing wouldn't be a bad thing at this point. After all, more supply would mean more affordable housing. More affordable housing, in turn, would mean more first-time buyers.

We understand many people don't like change (such as new housing in their neighborhood). But if failure to change means running off young first-time buyers, then failure to change means running off your 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.