Housing Helping Economic Growth.

Housing Helping Economic Growth. Image courtesy of jscreationzs / FreeDigitalPhotos.net

The recovering housing market is partially responsible for spurring economic growth, according to a recent Federal Reserve report. Eleven of the 12 districts included in the Fed survey say they are experiencing “modest to moderate” economic growth, while the 12th district, Dallas, reports “strong” growth.

“Residential real estate and construction activity increased at a moderate to strong pace in all reporting districts,” the Fed said in its Beige Book, which is based on anecdotal reports from 12 regional banks. “Manufacturing expanded in most districts since the previous report.”

Housing construction and home prices have shown improvement in the past year, the Fed notes. Consumer spending also has increased, and hiring is holding steady in most areas. The housing recovery has also led to a rise in the production of lumber, materials, and construction equipment, the Fed notes.

“Housing activity and prices seem likely to continue to recover, notwithstanding the recent increases in mortgage rates, but it will be important to monitor developments in this sector carefully,” said Fed Chairman Ben Bernanke in testimony Wednesday before lawmakers. The Fed has made moves in recent years through a bond purchases program that has helped to keep mortgage rates near historical lows. Rates have been rising in recent weeks as the Fed announced that it would be scaling back its program later this year.

Source: “Fed Survey Shows Growth Mostly Modest Across U.S.,” The Associated Press (July 17, 2013)

New Home Starts Take an Unexpected Dive.

New Home Starts Take an Unexpected Dive. Image courtesy of suphakit73 / FreeDigitalPhotos.net

Builders started construction on fewer new homes than expected in June, and permits for future construction also fell, the Commerce Department reported Wednesday.

Housing starts fell nearly 10 percent last month to the lowest level since August 2012. Housing permits—a gauge for future home construction—dropped 7.5 percent, posting a second consecutive month of declines. The report follows an industry index that showed builders’ confidence about the new-home sector was at its highest level since 2006.

Some economists weren’t alarmed by the June decline in housing starts, attributing it to wet weather that pushed off construction projects in many parts of the country. The drop was also moslty present in the volatile multifamily housing sector, where starts fell 26.2 percent. Single-family home construction—the largest segment of the index—had a much more mild decline of 0.8 percent.

With builder confidence so high, several housing analysts say they expect housing starts to pick up in July.

“Since builders are under-supplying the market, inventories are likely to get leaner in the months ahead, and prices are likely to accelerate,” Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Reuters. “This will bring more builders into the market.”

Source: “Housing Starts Fall to 10-Month Low,” Reuters (July 17, 2013)

Home Refinancing Demand Slips to 2-Year Low as Rates Rise.

Home Refinancing Demand Slips to 2-Year Low as Rates Rise. Image courtesy of phanlop88 / FreeDigitalPhotos.net

Mortgage rates are on the rise, prompting fewer home owners to refinance their mortgages, but the increase doesn’t appear to be deterring home buyers yet.

The lower Home Refinancing demand caused overall mortgage applications to drop 2.6 percent last week, the Mortgage Bankers Association reported Wednesday. The MBA’s survey covers about 75 percent of the residential mortgage market.

Meanwhile, loan applications for home purchases — viewed as a leading indicator of future home sales — inched up slightly by 0.5 percent for the week ending July 12.

Mortgage rates were at a two-year high last week, with the 30-year fixed-rate mortgage averaging 4.68 percent — the highest level since July 2011, the MBA reports.

Source: “Higher mortgage rates push refinancing applications to 2-year low,” Reuters (July 17, 2013)

Home Builders Haven’t Felt This Upbeat Since 2006

Home Builders Haven’t Felt This Upbeat Since 2006. Image courtesy of imagerymajestic / FreeDigitalPhotos.net

Home Builders continue to feel more optimistic about the direction of the recovery for newly built single-family homes. Home Builders confidence rose six points in July to 57, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Any number above 50 indicates more builders view conditions as good than poor.

The index gauges builders’ perceptions on single-family home sales, sales expectations for the next six months, and buyer traffic. The gauge for current sales condition rose to its highest level since early 2006, and the index’s measurements for prospective buyers and sales expectations for the next six months rose to the highest levels since late 2005. The latest report also showed improvements in builder confidence has expanded across every region of the United States.

“Home Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” says NAHB Chief Economist David Crowe. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”

Source: National Association of Home Builders

Century 21 ranks in the top three in Customer Satisfaction

Century 21 ranks in the top three in Customer Satisfaction. Image courtesy of Ambro / FreeDigitalPhotos.net

Prudential Real Estate ranked the highest in customer satisfaction in three out of four home buyer and seller segments, according to the latest J.D. Power Home Buyer/Seller Satisfaction study of the nation’s largest real estate companies.

Rankings for home-buying satisfaction are based on four factors: agent/salesperson, real estate office, closing process, and a variety of additional services. Home-selling satisfaction is also based on those four factors, plus marketing.

J.D. Power revealed the following rankings of real estate companies:

First-time home buyer satisfaction rankings

1. Prudential Real Estate
2. RE/MAX
3. Century 21

Repeat home buyer satisfaction rankings

1. Prudential Real Estate
2. Century 21
3. RE/MAX

First-time home seller satisfaction rankings

1. Prudential Real Estate
2. Keller Williams
3. RE/MAX

Repeat home seller satisfaction rankings: 

1. RE/MAX
2. Century 21
3. Prudential Real Estate

“Real estate companies remain challenged in adapting their customer service approach to best meet the needs of first-time home buyers and sellers,” says Christina Cooley, director in the diversified services industry practice at J.D. Power. “They need to educate these customers by explaining the current state of the market, discuss foreclosure and short sale transactions, and walk them through every step of the closing process. Those real estate companies that are best able to adapt to specific customer scenarios and their resulting expectations and needs are much more likely to be successful in achieving customer satisfaction loyalty.”

The study also revealed that customers tend to be more loyal to their real estate company than to their sales agent.

Source: J.D. Power

‘Boomerang Home Buyers’ Are Staging a Comeback

‘Boomerang Home Buyers’ Are Staging a Comeback. Image courtesy of smarnad / FreeDigitalPhotos.net

“Boomerang Home Buyers”—former home owners who have gone through a short sale, foreclosure, or bankruptcy in the past few years and are saving up for a down payment to purchase a home again—are coming back. They’re expected to flood markets in some of the hardest hit areas for short sales and foreclosures in the coming years. For example, Boomerang Home Buyers are predicted to account for nearly one in every five home sales in the metro Phoenix area this year—double the projected U.S. rate.

Rising rents and the desire to own again now that the economy is more stable are driving many Boomerang Home Buyers to re-enter the market. They also want to jump in before interest rates and home prices climb too much higher.

But how soon they can jump back in will depend on the type of loan they had as a previous home owner. For example, boomerang buyers who had FHA loans may need to wait only three years if they can prove that a hardship, such as job loss or death of a wage earner, led to their foreclosure or short sale.

Borrowers have typically been required to wait five to seven years to qualify for another loan, but mortgage giants have begun to change their rules to allow home owners who underwent a foreclosure or short sale to qualify sooner. Those who underwent a short sale will likely qualify the soonest. However, not all lenders are participating, so borrowers will need to shop around.

Freddie Mac’s wait time is usually four years following a short sale or deed-in-lieu, and seven years after a foreclosure. Fannie Mae may require a seven-year wait for a foreclosure, but only a two-year wait following a short sale as long as the borrower can provide a 20 percent down payment.

The following markets have the highest share of Boomerang Home Buyers, according to John Burns Real Estate Consulting:

• Riverside-San Bernardino, Calif.: 4.1% (percentage of all U.S. boomerang buyers in 2013)
• Los Angeles: 3.7%
• Phoenix: 3.6%
• Chicago: 2.5%
• Atlanta: 2.4%
• Las Vegas: 2.12%
• Washington, D.C.: 2.1%

Source: “New Wave of Buyers Ready to Hit the Real Estate Market,” The Examiner (July 15, 2013) and“Phoenix housing market sees ‘boomerang buyers’ sooner than expected,” The Arizona Republic (July 14, 2013)

Mortgage Rates Continue to Rise, Fed Eases Fears

Mortgage Rates Continue to Rise, Fed Eases Fears. Image courtesy of Salvatore Vuono / FreeDigitalPhotos.net

Mortgage rates moved higher again this week as speculation continued about whether the Federal Reserve will end its future bond purchases, which have kept rates at historical lows, Freddie Mac reports in its weekly mortgage market survey. But remarks by Federal Reserve Chairman Ben Bernanke on Wednesday may indicate that the Fed won’t be ending its program immediately.

On Wednesday, Bernanke said that unemployment is still high and inflation too low. He said the Fed would not raise short-term rates until the unemployment rate reaches 6.5 percent. The jobless rate is currently 7.6 percent. The Fed has been buying $86 billion a month in government bonds to hold down long-term interest rates, which have helped mortgage rates in recent months reach all-time lows.

Freddie Mac reported the following national averages with mortgage rates for the week ending July 11:

• 30-year fixed-rate mortgages: averaged 4.51 percent, with an average 0.8 point, rising from last week’s 4.29 percent average. A year ago at this time, 30-year rates averaged 3.56 percent.
• 15-year fixed-rate mortgages: averaged 3.53 percent, with an average 0.8 point, increasing from last week’s 3.39 percent average. Last year at this time, 15-year rates averaged 2.86 percent.
• 5-year adjustable-rate mortgages: averaged 3.26 percent, with an average 0.7 point, up from 3.10 percent last week. Last year at this time, 5-year ARMs averaged 2.74 percent.
• 1-year ARMs: averaged 2.66 percent, with an average 0.5 point, holding steady from last week’s average. A year ago at this time, 1-year ARMs averaged 2.69 percent.

Source: Freddie Mac and “Bernanke: Economy still needs Fed stimulus,” The Associated Press (July 10, 2013)