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Wednesday, May 15, 2013
Delinquencies are Down
Lots of great information again in Jim's update on market. As noted in yesterday's post, Hampton Roads looks to match to overall upbeat in home sales and price data.
We have nothing but good news!!!!
Keeping you updated on the market!For the week of May 13, 2013
The Trend Remains Our Friend
Of course, the trend we speak of is home prices, which continue to move higher. Not only that, they continue to move higher at a rate few commentators would have proffered when gauging the market this time last year.
To wit, CoreLogic's latest report shows home prices nationwide, which includes distress properties, increased 10.5% year over year in March. This was the highest year-over-year increase since March 2006.
It doesn't appear the trend is likely to reverse in the near future. CoreLogic's Pending Home Price Index indicates that prices are expected to post a 9.6% year-over-year gain for April, with prices rising 1.3% for the month.
To be sure, housing markets are local markets, and prices in many local markets are not accelerating at the national rate, but it's quite extraordinary to be experiencing price gains that were prevalent during the height of the housing boom.
Now, this doesn't mean another bubble is set to burst; many markets are rising from a considerably lower base than what prevailed in the early 2000s. That said, these price gains – especially in regions that far exceed the national average – should prompt us to view the market with a more discerning eye; value and price tend to move in opposite direction.
We've mentioned in the past that rising home prices will lift more owners into positive equity, thus prompting more of them to list their home. It's an economic maxim that higher prices lead to more supply, and that appears the case today.
Calculatedriskblog.com reports that for-sale inventory is up 12.2% for the year, a notable improvement over 2011 and 2012, when the peak increase was only 5%. More inventory should lead to more sales activity.
The trend in mortgage delinquencies and foreclosures also portends better days ahead. The Mortgage Bankers Association reports home loans that were at least one month late or in the foreclosure process dropped to 10.3% of mortgages in the first quarter, down from 11.25% in the fourth quarter and 11.33% from the first quarter of 2012. This trend demonstrates a more robust and more resilient lending environment.
At the same time, mortgage rates continue to hold multi-decade lows. For this, we can again thank the Federal Reserve, which continues to purchase $40 billion in agency mortgage-backed securities each month, thus creating a demand that has helped keep rates low.
Though our record at predicting mortgage rates has been spotty, to say the least, it's worth noting that it appears more likely the Fed will cease purchasing mortgage-backed securities sometime in 2014. When the purchases stop, mortgage rates are sure to rise.
In short, this might be the perfect time to buy a home: prices are rising from a low basis, and buyers can finance their purchase with a low-cost loan. How long the perfect time lasts is anyone's guess, but we wouldn't be surprised to see something give – perhaps the price trend or low mortgage rates – by early 2014.
Release Date and Time
Wed., May 15, 7:00 am, ET
Important. Purchase activity points to rising interest from owner-occupied buyers.
Home Builders' Index (May)
Wed., May 15, 10:00 am, ET
Important. Sentiment has plateaued due to credit and inventory concerns.
Consumer Price Index (April)
Thurs., May 16, 8:30 am, ET
All Goods: 0.2% (Decrease) Core: 0.2% (Increase)
Important. Basic goods are exhibiting elevated price inflation, though it's still within the Federal Reserve's target range.
Housing Starts (April)
Thurs., May 16, 8:30 am, ET
Important. Momentum in starts has slowed on a shortage of material and labor and tight credit standards.
A Favorable Composition
It's no secret that investors (rental-housing buyers) are responsible for much of the housing-market gains we've experienced over the past couple years. This has prompted many pundits and commentators to opine that we are turning into a nation of renters.
We don't believe it because many polls (from Freddie Mac and others) show people overwhelming prefer to buy than to rent, so we are encouraged to see the rise in purchase-application activity, which recently hit a three-year high.
We also like the beneficial social aspect of owner-occupied buyers. Neighborhoods composed principally of buyers tend to be more stable, because a neighborhood of owners instills a sense of community. If there are problems, neighbors are more willing to band together to seek a solution. Renters, in contrast, tend to be more transitory, and more prone to leave, so problems are more prone to fester.
Property upkeep is another benefit. Neighborhoods of renters have less tendency to maintain their home and the surroundings. After all, it's not their property. In addition, because the landlord is frequently absent, there is no one around to pick up the slack should renters become negligent in upkeep.
This isn't to bash renters or landlords, but we think it's beneficial to property values and to community cohesiveness to see a pick up in owner-occupied activity.