REAL ESTATE MARKET WATCH WITH JOEY

 

25 SEPTEMBER 2015 

I’m pleased to bring you heartening news about our regional (tri-state) real estate market.  According to a spokesman for TREND, our local multiple listing service, year-to-date sales are about 14% above those in 2014’s corresponding period.  Our area is actually on pace to hit about 75,000 sales by year’s end.  If we make that number, it would not only represent the highest volume of real estate transactions since 2007; it would also bring us back to the number of sales (75,000) the tri-state region was averaging in 2000 and 2001, just before the most recent real estate bubble/bust cycle began.  In other words, we are fast approaching a normal market.  Hallelujah!

 

6 MAY 2015 

There is only good news to report about local residential real estate dynamics thus far in 2015.  You will recall that last year terrible weather compromised sales activity in the first quarter although by the close of 2014 we did manage to end up with the same volume of sales as in 2013.  This year, by contrast, sales got off to a strong start, which pundits expect to lead to an even stronger market here in the second quarter of 2015.   

Comparing March’s performance this year to March’s numbers in 2013 (a better gauge than March 2014 given the weather’s negative impact on sales then), we can see good progress: 

            Settled sales are up 7% this March over March 2013, 

            Pended sales are up 9% this March over March 2013, 

            The median sold price is 3% higher this March than in March 2013. 

Year-to-date comparative statistics are even more impressive because the median sold price is 4.8% higher thus far in 2015 than in the equivalent period in 2013.

With robust activity here in the earlier part of 2015, we could see sales climb 7% higher by year’s end than they were two years ago.  That would put us close to the kind of sales volume we were enjoying BEFORE the Bubble Years and subsequent financial implosion.

 
9 JANUARY 2015

When was the U.S. home ownership rate anomalous:  during the housing Bubble or before and after it?  The answer is during the Bubble:  except for that brief period, which ended in 2006-2007, the home ownership rate has hovered around 64% for the last several decades.   

Despite the striking stability of that figure over time, efforts are currently afoot, again—only seven years after the mother of all real estate industry meltdowns—to stimulate demand for home ownership by relaxing down payment requirements, mortgage insurance premium requirements, and credit requirements.  Already last October the regulator of Fannie Mae and Freddie Mac announced the companies would back mortgage loans to borrowers with down payments of a mere 3%.  Now comes word that the Federal Housing Authority (FHA), which doesn’t make loans but does insure lenders in case of defaults on mortgage loans involving modest down payments (3.5% in its case), is reducing the mortgage insurance premium it charges borrowers from 1.35% to 0.85%.  The move will save a typical home buyer using FHA financing around $900 per year on a $200,000 loan but will place the FHA’s stretched capital reserves at risk.  It was only two years ago, 2013, that the FHA required a $1.7 billion bailout after suffering losses during the post-Bubble financial crisis.   

Whether the relaxation of standards for entry-level buyers will produce the desired market stimulus remains to be seen.  On the luxury housing front, meanwhile, interest-only loans--a villain in the subprime mortgage crisis--are staging a comeback.  According to the Wall Street Journal, in 2014 about 15% of all jumbo mortgages were nonqualified loans, meaning they did not meet government standards designed to lower the risk of default.  This year the percentage of nonqualified jumbos is expected to swell to 25%, with interest-only loans comprising the biggest factor in the anticipated increase.

Except for the creeping erosion of sound lending practices intended to prevent another housing crisis from ever occurring, the residential real estate industry in the U.S. is relatively healthy.  Having hit bottom in 2011, experienced a mini-boom of pent-up demand in 2012-2013, and gotten onto a trajectory of slow but steady growth in 2014, the market is poised for continued modest improvement in 2015.  One wild card is the Fed:  if, as seems likely, it raises interest rates by mid-year, we may see a surge in sales activity by buyers anxious to purchase before rates can rise further.