Real Estate Information Archive

Will They or Won't They? (We Again Ask)

We're tired of writing about the Federal Reserve. We suspect that you're tired of reading about the Fed. But the Fed matters – to both the housing and mortgage markets – so we have no choice but to press on. 

Recent events had pointed to the Fed standing back from raising the federal funds rate in September. Specifically, economic growth remains anemic.  Gross domestic product (GDP) for the second quarter came in weaker than expected, at 2.3%. Most economists were expecting growth to post closer to 3%. 

Weakness was particularly pronounced in nonresidential fixed investment, which fell 0.6%. Commentators frequently focus on consumer spending when commenting on economic growth. To be sure, spending is important, but so is investment, because investment lays the foundation for future consumption: You have to produce in order to consume in the long run.  Production, which investment funds, paves the way for consumption.

When the disappointing GDP figures were released last Thursday, the yield on the 10-year U.S. Treasury note drifter lower by 15 basis points. In turn, rates on most mortgages, particularly the 15- and 30-year loans, drifter lower. Depending on the market, sub-4% on the 30-year loan could be had. 

But over the past day or so, yields and rates have drifted higher. One of the Federal Reserve's presidents, Dennis Lockhart, opined publicly this week that the economy could handle an increase in the fed funds rate in September. (The fed funds rate is the rate banks lend to each other overnight. It's a short-term rate, but it tends to filter through to the long end of the curve.) 

So what do private-market participants think will happen?

As for private-market traders, those who bet on interest-rate movements, the futures market has priced in a 50% chance the Fed will raise the fed funds rate next month. Last week, futures were priced at a 33% chance. So who knows what next week will bring. 

We remain skeptical that anything happens in September: Economic growth is still weak, while the U.S. dollar is still strong. Against most currencies, the dollar has appreciated significantly. A rate increase will only further strengthen the dollar against other currencies. For many multinational corporations, this is an issue. A stronger dollar makes exports more expensive and can result in significant currency-exchange losses when money is repatriated from overseas. We could see some additional push-back against a rate increase. 

With that said, we wouldn't be surprised if a rate hike occurs. The Fed may have to move to raise rates simply to maintain credibility. (You can drag people along only so far before they revolt.)  The impetus, then, is for rates to rise. (Keep in mind, they can rise without or without the Fed's blessing.)  Therefore, we're likely looking at the floor on mortgage rates. The mortgage rates we see today could be the best rates we see for quite a while.

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.

Chinese stocks experienced a hard sell last week. A couple of that country's major market indices dropped over 10% over a couple of trading days. The sell-off in Chinese stocks lead to a buy-in of traditionally haven investments, like the 10-year U.S. Treasury note, which saw its yield drop by nearly 15 basis points. Of course, as the 10-year note goes, so go mortgage rates, which have eased over the past two weeks.

If China's stock market remains weak, odds favor the Federal Reserve sustaining from raising the federal funds rates in September. The next meeting of the Fed's Federal Open Market Committee (FOMC) occurs September 17, and many market participants anticipate the first rate increase since 2006. We are somewhat less anticipatory.

We still think a rate increase is in the more distant future. China is one reason; our own economic growth is another. Gross domestic product (GDP) was negative in the first quarter. What's more, growth for the second quarter is expected to be positive, but weak. In addition, the U.S. dollar remains strong against most major currencies. An interest-rate increase will further raise the perception of a strong dollar, thus pressuring it to appreciate even more.

With that said, we could be wrong on the Fed come September, but even if we are, that doesn't mean long-term lending rates will rise. On the other hand, they could rise even if the Fed continues to hold the fed funds rate at current levels. China, not the Fed, could be the key factor in interest rates over the next couple months.

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.

Is Short-Term Volatility a Long-Term Worry?

Things have gotten a bit bouncy of late. The velocity of up-and-down movements in housing data has certainly increased in recent weeks.

Home prices are an example. Last month, the S&P/Case-Shiller Home Price Index showed prices were mostly up in the 20 metropolitan districts it follows. This month, prices are somewhat more scattered.

Case-Shiller reports surprising price weakness in many markets. Specifically, home prices declined in 12 of the districts it follows. When the numbers are tallied, the index shows a 0.2% decline for May. This is on top of a downward revision in April's numbers. Year over year, the rate of price appreciation has eased to 4.9%.

Activity pertaining to new home sales could be a contributing factor in Case-Shiller's numbers. New home sales can be volatile, and sales were certainly volatile in June. Sales plunged a surprisingly steep 6.8%, posting at 482,000 units on an annualized basis. What's more, revisions erased 40,000 new home sales from the prior two months.

The good news is that the price of new homes are holding steady, with the median price posting at $281,800, a 0.5% monthly increase. Price appreciation will likely remain anemic, though. There are an estimated 215,000 new homes on the market. At the June sales pace, the current supply rises to 5.4 months compared to 4.8 months in June. More supply coupled with slowing sales points to slowing price appreciation at the national level.

Of course, what happens at the national level frequently has no bearing at the local level. Markets are segmented by location and by property type. Price appreciation in many markets has stagnated at the higher echelons. Lower down, price appreciation remains brisk. That's an issue for new potential home owners (younger people). Homeownership rates remain stubbornly low. In fact, the homeownership rate for the second quarter of 2015 fell to 63.4%, the lowest rate since 1967. Much of the decline can be traced to a dearth of first-time owners.

The obvious question is, are higher mortgage rates dragging the market down?

Existing home sales for June were surprising strong, but a change in mortgage rates lags in the existing-home-sales data. New home sales are reported when the contract is signed; existing home sale are reported when the transaction closes. If higher mortgage rates are an issue, we should expect to see a slowdown in existing home sales for July and August.

We suspect that higher mortgage rates aren't the issue. The Mortgage Bankers Association reported that purchase applications were up again last week. Year over year, purchase activity is up 18%. If we focus on just new-home purchase activity, we find that activity is trending hire.

In short, we view recent volatility in home sales and prices as being similar to a case of indigestion. No need to worry, because this, too, shall pass.

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 you follow the stock market, you're aware that there is no shortage of bubble talk. Since the market bottomed in March 2009, stocks have gone mostly up. The S&P 500 Index, the most followed market barometer, has tripled over the past six years. The latest run nearly matches the run during the Internet boom in the 1990s. That boom went bust in 2000, and stock prices were nearly cut in half in the ensuing two years.

Over the past few weeks, Chinese stocks have lost over 30%. This has investors thinking a similar sell-off could occur here. We don't think it will, but the prospect of a stock-market sell-off conjures a question: How would a sell-off impact housing?

A rising stock market increases the wealth effect – a theory that when people feel wealthier they spend more. People invested in stocks have certainly felt wealthier in recent years. At the same time, home sales and construction activity have trended higher. It appears housing and stocks are positively correlated.

It's not so clear cut, though. No doubt that when people feel wealthier they upgrade their lifestyle, such as by trading up to a larger home. But the correlation between stocks and housing can be fuzzy. After the sell-off in stocks in 2000, housing activity actually rose. Many investors burned in the stock market wanted a new asset class; housing was that asset class.

To be sure, stocks might tank, but that doesn't mean housing will tank with it. We think housing is sufficiently sound to stand on its own independently of the stock market. That said, we'd prefer not to find out.

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.

All-cash buyers continue to retreat into the background. RealtyTrac reports that all-cash purchases dropped to 24.6% of all single-family and condo sales in May. This is down from 28.5% in April. As recently as February 2011, all-cash purchases accounted for over 42% of all sales.

A normal, stable home market is driven by owner-occupied buyers. An owner-occupied market is a market where buyers look to a house as a home, not as a profit center. Stability and predictability rein in such a market.

Stability and predictability extend to price appreciation, which should return to a normalized historical rate in more markets. Normalized price appreciation, in turn, should generate more inventory, particularly for young and first-time buyers. Most investment properties are taken from starter-home inventory. The trend to more owner-occupied buyers is good news for young people entering the market.

We're not disparaging investment buyers. They were vital to the recovery. Without someone – mostly investors – to halt the slide, we'd be a few years behind in the progress we've made to date. That said, normalcy needs to eventually take over to sustain the market. Fortunately, normalcy has taken over in 2015.

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.

Jobs Report Puts Rate Hike on Hold

It looks like September is off the table. Last week, Federal Reserve Governor Jerome Powell speculated that September might bring the first increase in the federal funds rate since 2006. That appears unlikely. Indeed, most Wall Street traders point to December as the “new” earliest date for a rate increase.

Though only one month's worth of data, the June employment report is a contributing factor to the push back. On the surface, everything appears sound. The economy created another 223,000 jobs. It's always good news when the economy creates 200,000+ new jobs a month. It's also good news when the unemployment rate falls, as it did last month. The unemployment rate dropped to 5.3% from 5.4%.

When you did a little deeper, though, you find the news is somewhat less cheery. Average hourly earnings continue to stagnate. For the month, the average rate was $24.95, the same as in May. Year over year, wages are up 2%. This is on par with annual wage growth since the recession ended five years ago. During a recovery, wages usually grow at a much strong rate.

As for the unemployment rate, it's somewhat misleading. Fewer people are in the workforce. The participation rate – the share of working-age people wanting to work – decreased to 62.6% in June, the lowest since October 1977. To be sure, aging baby boomers are leaving the workforce, but there is also a swell of working-age people who've left the workforce out of frustration.

When you take a lackluster jobs report and add to it the events in Greece, December becomes the odds-on choice for a fed funds rate increase. (We still think 2016 is more likely.) That said, the fed funds rate mostly influences short-term rates. Credit-market participants have taken over long-term rates, and they are on the rise.

With everything going on with Greece (namely Greece's inability to meet its debt obligations and its possible expulsion from the European Union), U.S. Treasury rates would normally fall. Investors faced with heightened uncertainty usually pour into U.S. Treasury debt. That hasn't been the case this go-around. The yield on the 10-year Treasury note continues to hold near 2.4%. Because the 10-year note influences mortgage rates, the 30- and 15-year fixed-rate loans continue to hold near 2015 highs.

Fortunately, higher long-term lending rates haven't taking any steam out of housing. Momentum remains strong. The Pending Home Sales Index was up 0.9% for May, which beat most estimates. The latest increase pushes the index up to 112.6, the highest it's been since 2006.

The prospect of even more home sales in the face of higher lending rate is testament to the underlying strength in housing. We expect strength to be maintained into early autumn, and likely beyond.

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 residential rental market has been on a tear since the housing bubble burst seven years ago. Nationwide, rents have been rising at double the inflation rate. Rent is now a real burden to many renters. Roughly half the renters in the country pay more than 30% of their income to landlords.

This is good news for the long-term outlook for housing. The rental market will push more frustrated renters into homeownership. We don't think it can be any other way. Admittedly, many people like to be free of the responsibility of homeownership, but only to a point. If you are continually subjected to 5% annual rent increases, the benefits of renting quickly dissipate. In turn, the benefit of a stable shelter budget grows significantly in stature.

Young people are getting the message. The percentage of first-time buyers continues to rise and comprised 32% of the market in May compared to 27% last year. The unrelenting upward trend in rents should lead to an unrelenting upward trend in first-time buyers.

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.

Home Sales Defy Conventional Wisdom

Homes sales and mortgage rates are supposed to be negatively correlated: when one is up, the other is down.

That's not always true. The connection between home sales and mortgage rates has frequently been tenuous. Yes, there are times – like a few years ago – when falling rates spur sales activity. At other times, such as the late 1970s, homes continued to sell despite soaring mortgage rates. Many variables in addition to mortgage rates coalesce to form a home-sales trend.

There is no denying that mortgage rates have trended higher over the past three months.Rates were flat over the past week, but they continue to hold near 2015 highs. Despite rates holding near highs, purchase mortgage activity moved higher. Purchase mortgage applications were up another 1% last week. This pushes the year-over-year gain to 18%.

The trend in purchase applications is particularly welcomed news, and not just for selfish reasons. Recent data point to a more-normalized market, with mortgage-financed purchases supplanting all-cash purchases. This means owner-occupied buyers are becoming more prevalent. We've noted frequently that a normalized housing market is marked by a high percentage of buyers who occupy their properties. A normalized market is also a sustainable market.

As for sales themselves, existing home sales jumped 5.1% to a 5.35-million annual rate in May. The year-over-year gain is encouraging, with sales up 9.2%. We haven't seen this run rate of sales in nearly a decade.

Existing home sales are moving higher despite the headwinds of continually rising prices. The median price for an existing home rose to $228.700, and is up 7.9% year over year. The good news is that rising prices are bringing more inventory to market. Homes for sale increased 3.2% to 2.29 million last month.

Though not quite setting a new multi-year high, new home sale s continue to progress as well. Sales were up 2.2% to an annualized rate of 546,000 in May. This is on top of a 27,000 upward revision in April. Sales gains appear to be motivated by some discounting, though. The median price of new home posted at $282,800, which is 1% lower than a year ago. New-home prices will likely pick up in coming months, given that inventory remains thin at 206,000 units.

To be sure, the correlation between mortgage rates and home sales can be tenuous. But if rates rise a enough, they can retard sales growth. Many market participants are focused on the Federal Reserve. The focus sharpened this past week after Federal Reserve Governor Jerome Powel l said that he sees the Fed raising the federal funds rates this September. What's more, this increase could be supplemented by an additional increase in December.

We've been in the minority opinion on the Fed and interest rates. Given recent economic growth, we are still unconvinced a Fed rate increase is in the cards. But if we are wrong, we think we will be OK. Recent moves in long-rates likely reflect a Fed rate hike. What's more, when the Fed moves to raise rates, the impact will be felt mostly on the short end of the yield curve, with short-term variable rates rising and longer-term rates holding near current levels.

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.

With home prices exceeding pre-bubble highs in many markets, more people are asking: Should we be concerned about another market bubble?

There are no guarantees, but this market looks significantly less frothy than it did in early 2008.

For one, mortgage-debt levels remain reasonable. Bank of America reports that mortgage debt as a percentage of real estate owned was at an all-time high of 63% just before the market-bubble burst. Today, it's down at 44%, which is a normalized and sustainable percentage.

A more obscure indicator also points to a bubble-free market. When markets get bubbly, they induce a tsunami of new participants. Using California as a proxy for the whole,CalculatedRiskBlog.com data show that the number of real estate agents peaked at the end of 2007. Today, the number of salesperson licenses is off 33.5% of the peak. The number is at March 2004 levels. In other words, people aren't blindly rushing into a perceived gold rush. That's a sign of market health.

In short, we don't see a market distorted by bubbles. To the contrary, we see a clearly sustainable 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.

Recent housing data also give the Federal Reserve reason to pause on raising interest rates.

The trend in negative equity appears to have turned and is on the rise. CoreLogic reports that negative equity increased to 10.8% of all mortgaged properties in the fourth quarter of 2014. In the third quarter, the percentage was 10.4%. Roughly 200,000 more homeowners find themselves in a negative-equity position.

Home builders are also growing more cautious. The NAHB sentiment index dropped two points to a 53 reading, an eight-month low. The traffic component of the index showed particular weakness, falling two points to 37, a nine-month low.

Lower builder optimism is reflected in fewer starts. Housing starts dropped to 897,000 annualized units in February. This is 17% below the revised January estimate of 1.081 million units and is 3.3% below the February 2014 rate of 928,000 units. Single-family housing starts were particularly disappointing, falling 14.9% to 593,000 annualized units.

Of course, one month doesn't make a trend and the national numbers can be meaningless to any local market. That said, the Federal Reserve does pay attention to national numbers. If housing slips into a funk on the national stage, you can be sure the word “patient” will reappear in Fed meeting minutes.

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.