Real Estate Blog
Wednesday, November 04 2009
Real change has to stand the test of time. That’s why I remain guardedly optimistic about the housing recovery. We are still getting quite a few positive reports, such as the huge surge in existing home sales in September, peppered now and then by less favorable news, such as the disappointing level of housing starts in September. Similarly, there was good news on pending home sales for September, but a disappointing decrease in new-home sales. The bottom line is that the longer this healthier, more stable market can sustain itself, the more likely it is that it will continue to improve, until we eventually find ourselves back in a normalized market.
This month, I’d like to give you some graphics on the most important factors affecting real estate right now:
Mortgage Rates: Mortgage rates have been moving up and down within a narrow range for quite a few months, and they remain historically low. (See Exhibit 1.) According to Freddie Mac, the 30-year fixed rate is currently averaging 5.03%. Clearly, anyone even remotely considering buying should get out and look now. For several weeks, the number of mortgage applications has been rising and falling by double-digit percentages, depending on the movement of rates. There does seem to be a new sense of urgency in the air.
Part of the reason that rates are so low is the government’s program of purchasing mortgage-backed securities. That program is slated to end in March, and some experts predict that when it does, mortgage rates will quickly and drastically increase. The smart money says, buy before spring!
The American Dream: In spite of all the events of the last few years, from the housing bubble to foreclosures to bank failures, real estate remains the best way to build wealth. As Exhibit 2 shows, real estate makes up the largest portion of household assets, whether in a good year like 2002 or in a challenging year like 2008. The American Dream still lives.
Real Estate Is Local: I cannot stress enough that what is happening in Bismarck or Sarasota has little to do with what is happening in Belle Terre or Setauket. MLS figures are very positive. Our sales figures at many price points are up. For a good look at what has been happening in the Northeast in general, see Exhibit 3.
Foreclosures: Foreclosures remain a major factor. RealtyTrac found that for the third quarter of this year, foreclosure filings were up by 23% over the same period in 2008--a record high. July through September were the worst three months ever. Some experts predict another wave of foreclosures in late 2009 and into 2010.
Although it is a sad fact to note, the reality is that foreclosures do present opportunities for buyers.
Foreclosures are now affecting higher-end homes and even luxury homes, as pointed out by Chip Case of the Case-Shiller Home Price Index. (See Exhibit 4.) Mortgage delinquency rates in this group are way up, due largely to high unemployment figures.
Prices: The soon-to-expire $8,000 first-time homebuyer tax credit has done much to prop up sales. Unless the credit is extended, demand will be down, which will mean decreased sales, which will translate into reduced prices, even if only temporarily. However--and this is a big however--our local sales are no longer being driven by the existence of the credit. The credit initially spurred activity back in the spring, but now all parts of the market, from starter to luxury, are active.
As always, I am committed to keeping you abreast of market conditions. As a nationally recognized real estate expert with decades of professional experience, I’ll continue to provide updated, pertinent information. For additional data, visit my website at www.Ardolino.com, where you’ll also find my blog. If you need help understanding how the current market affects your own particular situation, call me at 631-941-4300 or e-mail: Michael@Ardolino.com
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