Remember Each Market is Different

• 
  A Difference In Opinion

As I share Jim Belote's Mortgage Matters, I very frequently am in solid agreement with the Market Recap provided.

For most points expressed below:

1. Pressure on Interest Rates to rise

2. Housing Market to continue to improve in 2014

3. Real Estate Investment is on rise

I am in total agreement.

Yet, Jim's report notes that price increases can't be sustained as values have risen with rare exception since 2009.  Though this 

has happened on a national basis, home values were flat or lower until mid 2010 in Hampton Roads.

Thus as a local market, the gradual increases values(4-6%) seen each of the past two years is very sustainable.  In fact, Hampton Roads is expected to continue a roughly 4% increase trend through 2018(as far as projections go for now).   

As always, National Trends or analysis based on given markets(California and Nevada for value increases) will not

match every or any given local market.  Influences or given trends may be true but never will there be perfect consistency.

Every real estate market is a local phenomenon.

Keeping you updated on the market! For the week of  January 6, 2014 MARKET RECAP Trends Persist Heading into 2014 Trends established in 2013 show signs of persisting into 2014... but for how long? Take home prices, which continue to move strongly higher. The latest edition of the S&P/Case-Shiller Home Price Index shows prices rose 1.05% in October. Year over year, prices are up 13.63% in the composite 20-city index to post the strongest year-over-year gain since February 2006. There are a couple points worth noting: First, the latest index reading is for October, so it's two-month in arrears. That said, price data from other providers point to continued gains in November and December. The Case-Shiller index will very likely show that 2013 was a very good year for home prices. It's also worth noting that there is some market rotation going on. Gains are no longer being paced by formerly depressed Phoenix and Las Vegas (where sales dropped to a five-year low in November). Instead, they are being paced by Detroit and Atlanta – markets that have been struggling until recently. This makes sense: Trees don't grow to the stratosphere and holes aren't dug to the center of the earth. There is a limit to how high or how low markets will go until they reverse course. With that in mind, the Case-Shiller index has performed exceptionally well over the past two years. Aside from a hitch in 2010, the index has been on a tear since January 2009. This is unprecedented. And as we've noted before, it's also unsustainable. Once the last of the depressed markets rally, we expect national price appreciation, as well as price appreciation in more local markets, to slow. We wouldn't be surprised to see that begin as early as the first quarter of 2014. The other major trend – rising mortgage rates – is showing signs of being sustained into 2014. Bankrate.com's national survey shows the rate on the 30-year fixed-rate mortgage rose six basis points to 4.69% in the past week. We're not surprised that rates moved higher, because the yield on the influential 10-year U.S. Treasury note is on the rise. In fact, the yield on the 10-year note is above 3%, the highest it has been in over two years. The 30-year loan historically trades two percentage points above the 10-year note. Simple math, therefore, points to a 5% rate on the 30-year loan. We'll likely see 5% prevail by the end of the year, or even by mid-year. On a more positive note, we see a trend reversal in existing home sales. After stagnating in the second half of 2013, sales should gain traction in 2014. We say that because we agree with NAR's chief economist Lawrence Yun and his assessment of the market. Says Yun, “ We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014.” We've expressed similar sentiments over the past few months. If our sentiment prevails, it's unlikely that markets will be derailed by higher lending rates and slowing home-price growth. Economic Indicator Release Date and Time Consensus Estimate Analysis International Trade (November) Tues., Jan. 7, 8:30 am, ET $39.9 Billion (Deficit) Moderately Important. The deficit is shrinking on stronger export growth driven by stronger economic growth. Federal Reserve FOMC Meeting Minutes Wed., Jan. 8, 2:00 pm, ET None Important. Expect additional information on the Fed's stance on quantitative easing. Consumer Credit (November) Wed., Jan. 8, 3:00 pm, ET $15 Billion (Increase) Moderately Important. Credit use is rising with consumer confidence and a more optimistic economic outlook. Employment Situation (December) Fri., Jan 10, 8:30 am, ET Unemployment Rate: 7.0% Payrolls: 190,000 (Increase) Very Important. Interest rates will move higher if job growth exceeds expectations. Yet Another Reason to Like This Market There is a common misconception that consumption is the prime driver of the economy. To be sure, consumption matters (because everything is made to be consumed), but production and investment shouldn't be overlooked. After all, production precedes consumption. You have to produce before you get paid with the money to consume. With that in mind, residential real estate investment (defined as investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales) matters. Investment goes hand-in-glove with production. The good news is that residential investment was up strongly in 2012 and 2013. The even better news, it still has a long way to go to reach historical norms. Demand for new investment should be strong through 2014, and very likely through 2015. Stronger residential investment isn't just good for us, it's good for the aggregate economy. Residential investment is a powerful contributor to gross domestic product (GDP) growth and employment. Housing activity contributes up 5% of GDP. The simple logic is that more investment activity will lead to more economic growth. The bottom line is that we look for another strong year for housing. As long as the economy continues to improve, rising lending rates won't alter our outlook.