Archive for the ‘Market Conditions’


Stocks go up…what’s in store for rates

The roller coaster ride continued with the Dow Jones Industrial Average exploding up 889.35 points or 10.88% in trading today.  Much of this was due to stocks being on clearance and in anticipation of a possible .75% rate cut by the Fed tomorrow.  A .5% cut is virtually guaranteed and some expect a larger cut that would take the target rate under 1% for the first time. 

As we have talked about in the past, often times money will flow into stocks and out of bonds and vice versa.  The price and demand of mortgage backed bonds on Wall Street is the ONLY thing that moves long term mortgage rates.  So right now, mortgage rates are being pounded a bit.  However, if we see a dramatic cut in the Fed Funds Rate tomorrow you can bet  at some point we will see investors begin to move back into mortgage back securities (MBS’s).  The result for MBS’s could very well be a nice rally, higher yields and most importantly lower 30 year fixed mortgage rates.   Stay tuned!

Take a peek at the chart below showing daily activity over a the past 3 months for Mortgage Backed Securities.  Up equals lower mortgage rates and down means….well we don’t like down J  As you can see there has been a TON of volatility as this market starts to heal.

 

Pending home sales stronger!

WASHINGTON, October 08, 2008

Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.

Lawrence Yun, NAR chief economist, said home buyers were responding to improved affordability. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region,” he said. “It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”

The PHSI in the West surged 18.4 percent to 109.5 in August and remains 37.8 percent above a year ago. In the Northeast the index jumped 8.4 percent to 79.8 and is 2.0 percent higher than August 2007. The index in the Midwest rose 3.6 percent to 84.5 in August and is 6.6 percent above a year ago. In the South, the index increased 2.3 percent to 96.0 but is 2.1 percent below August 2007.

Yun notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”

At the bottom yet???? I can’t honestly say we’ve hit the bottom but with sales at teh highest level in over 24 months we may be close. Like Stocks (ever try to time a stock purchase and sale?) we really won’t know until after we’ve made the move higher. I watch the market weekly to ensure I have the latest information and help my clients make good decisions that can save them thousands….if they’re listening!

 

Good News and Bad News

The good news-

Pending sales of U.S. resale homes rose 8.8 percent in August compared to the same month last year, the National Association of Realtors reported today, rising to the highest level since June 2007.

The index offers an indication of future sales, as it measures the volume of signed contracts for sales transactions that have not yet closed — sales are typically finalized within one or two months of signing, though some deals fall through before the transactions are closed.

“It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales,” said Lawrence Yun, NAR chief economist, in a statement.

NAR’s Pending Home Sales Index reached 93.4 in August — an index level of 100 is equal to the average level of contract activity in 2001, which was the first year to be examined for the index and first of five straight record years for sales of resale homes.

Regionally, the index rose 37.8 percent in the West, 6.6 percent in the Midwest, 2 percent in the Northeast and sank 2.1 percent in the South in August compared to the same month last year. The nationwide index rose 7.4 in August compared to July.

The bad news-

Sales of U.S. resale homes are projected to fall 10.9 percent this year compared to 2007, with the median price dropping 8.3 percent, according to the latest National Association of Realtors forecast.

That forecast has been revised downward several times during the course of the year in response to the nation’s economic downturn — back in January, the group has predicted that sales of resale homes would rise slightly this year and that prices would hold steady compared to 2007.

The sales projection has actually been revised upward since the group’s previous forecast, released last month, which anticipated an 11.4 percent year-over-year drop in sales. NAR’s previous forecast called for the median price of resale homes to fall 7 percent this year, which is less than the drop anticipated in the forecast released today.

The anticipated drop to 5.04 million sales of resale homes this year would be the third straight year of decline — sales dropped 12.8 percent in 2007 and 8.5 percent in 2006. NAR expects that sales of resale homes will rebound next year, rising 7.5 percent.

New single-family housing starts are expected to fall 36.9 percent this year to 660,000 starts and another 18.1 percent in 2009, following a 28.6 percent decline in 2007 and a 14.6 percent decline in 2006.

New single-family sales, meanwhile, are expected to drop 28.2 percent this year to 503,000 and to drop another 6.2 percent in 2009, following drops of 26.3 percent in 2007 and 18.1 percent in 2006.

The median resale home price is expected to be $200,700 in 2008 and to rise 2.8 percent next year, while the median new-home price is expected to drop 5.1 percent this year to $234,500 and to rise 2.6 percent next year.

Consumer confidence is expected to be 64 this year and 73 in 2009, a substantial drop from 103 in 2007. Unemployment is expected to rise to 5.7 percent this year and to reach 6.6 in 2009.

 

 

Have the home prices hit bottom?

Have the home prices hit the bottom? How will we know? Is it the media that will tell you? Will you buy your home at the bottom or will you see the prices go up and then buy? These are all important questions to ask yourself if you’re thinking about buying or selling a home.

After all my years in real estate I’ve seen the ups and downs and the secret is, not all properties hit rock bottom at the same time. Many properties and areas have already hit bottom which means homes in those areas have already been purchased. Somebody else got the deal.

Some properties will never hit bottom; the sellers will simply remove them from the market and re-list then in better, more expensive times. I like to describe the market like this: If I threw a handful of small balls in the air they would not all hit the ground at the same time. They’d all bounce at different times, just like individual house prices.

This is where a full-time, professional REALTOR comes in handy. REALTORS like myself watch home sales in our market areas and are able to give you the proper advice. Do you listen to the media for your advice? I’ve had several clients recently tell me they’ve “heard that the market was really bad” which if you’re talking as a seller it may look that way. If you’re a buyer you are now buying your home at a GREATLY REDUCED price from a few years ago…even a few months ago.

Has anyone in the media told you we’ve had larger numbers of sales in the last 3 months then in the last 24 months? I guess that wouldn’t be “new worthy” but that’s exactly what has happened. If you’re thinking about buying or selling a home please invest your future in a full-time REALTOR that takes their profession serious. Not someone that got into the business during the boom thinking they could get rich and never learned the important lessons of a down market.

Call me for more information on the current market conditions or simply listen in to my monthly podcast at www.ThePhoenixRealEstateAdvisor.com and click “Podcast”.

Overview of the future of real estate

If you’re looking for a high-level answer to the question- when will the market rebound - then you might find this video interesting. You’ll watch Lawrence Yun speak at the recent leadership summit and talk about the current and future of the real estate market. It’s a long video but there’s a lot of good information that you may find interested.

Lawrence Yun, Senior Vice President and Chief Economist, NAR
An overview of the economic environment and its implications for real estate.