The Great Reports Keep Coming In

Once again, we have a very up beat report on the Real Estate Market.  All factors are pointing up:  Builder Sentiment, Barclay's 8% improvement in Home Sales in 2013, Mortgage Rates staying low.

Without doubt, the noted pressure on interest rates could dampen 8% growth.  Yet, as noted, the "cheap" house is a thing in the past as values are increasing.

Keeping you updated on the market! For the week of December 24, 2012 MARKET RECAP The numbers were a little sluggish, but the outlook continues to improve. We're talking about the new-home market, where housing starts eased 3% to 861,000 units on an annualized basis in November compared to October. The good news is that permits rose 3.6% to 899,000 units. The up trend in permits bodes well for robust housing activity early in the new year. Not surprisingly, home-builder sentiment has been rising with the new-home market. Home builders are reporting the best industry conditions since early 2007. Improving conditions, in turn, have lifted the NAHB/Wells Fargo Home Builders Sentiment Index to 47 for December – the eighth-consecutive monthly increase. The sentiment index's breakeven point is 50, so once the index hits 51 more builders believe the outlook for the industry is positive instead of negative. The index hasn't been over 50 in nearly eight years, and it has been as low as eight as recently as early 2009. The fact home-builder sentiment remains below 50 is a reminder of how deep and how penetrating the housing bust was, and how long the slog has been to climb our way back to normalcy. The good news for both the housing industry and the overall economy is that there is plenty of upside left in the recovery. The average rate of starts over the past 45 years has been roughly 1.5 million units on an annualized basis. We still have a long way to go before we reach that average rate. But could the mortgage market derail the recovery? We ask because over the past two weeks concerns have risen over rising lending rates. The Mortgage Bankers Association reported purchase applications were down for the week of December 14. The MBA points to rising mortgage rates as the culprit. To be sure, rates were up for most mortgage products. What's more, the yield on the 10-year Treasury note has continued to rise; this, despite the Federal Reserve expanding monetary efforts to lower rates. We mentioned in last week's commentary that the Fed is a key player in maintaining low interest rates, but it's not an omniscient player. The Fed has intervened to an unprecedented extent in the mortgage market, but that doesn't mean market participants won't work to thwart the Fed's efforts. A growing number of participants are worried about price inflation. Economic Indicator Release Date and Time Consensus Estimate Analysis Mortgage Applications Wed., Dec. 26, 7:00 am, ET None Important. Purchase applications slowed on rising rates, but the long-term trend remains positive. New Home Sales (November) Thurs., Dec. 27, 10:00 am, ET 384,000 (Annualized) Important. Sales are expected to resume an upward trajectory after regressing in October. Consumer Confidence Index (December) Thurs., Dec. 27, 10:00 am, ET 69 Index Important. Confidence is steady and firm, with improving home-buying plans an important positive. Pending Home Sales Index (November) Fri., Dec. 28, 10:00 am, ET 102 Index Important. Recent index gains are raising expectations for positive economic contributions from the housing sector. A Very Merry Outlook   A housing-analysis report issued by the financial services firm Barclays received considerable media attention this past week; principally because the report offered a very favorable outlook on housing. Barclays sees home sales increasing 8% in 2013. It also sees housing starts for the first quarter of 2013 expanding to 944,000 units on an annualized basis before expanding to 973,000 units in the second quarter. Barclays also expects home prices to rise and mortgage rates to remain low through 2013. We generally agree with Barclays' assessment (though mortgage rates holding today's levels is the weak link). We have a bullish outlook on housing for 2013, much like we had for 2012. There is a downside to this bullish outlook, though. As prices rise and more distressed inventory is removed from the market, the home affordability index will fall. In fact, recent NAR data show the index is already moving lower, as the CNBC/NAR graph below reveals. For the past six months, we've been warning that the most affordable, best-value deals are quickly evaporating. We see that trend continuing through 2013. What's more, we see the market tilting in favor of sellers. Therefore, we offer this caveat: for buyers who continue to wait, the cost of waiting will very likely rise.

New Home Sales--Remember Local Market Counts

Well...the news can't always be gangbusters.

But don't be too disappointed about New Homes missing the national consensus on housing starts.  No doubt the Housing Market is dictated by the local market.

In Hampton Roads, new home neighborhoods are starting to pop up and are seeing good activity.   In the past week, I had two buyers looking at new homes neighborhoods in Chesapeake and Virginia Beach.  

It was fascinating to see the activity the new home sites were experiencing.  With lots available in present releases still be limited to 10 or fewer, the buyers seemed to want to jump to get preferred lot before that lot was gone.

Kind reminds of The Eagle's song, Hotel California, with that line "We haven't had that spirit here since nineteen sixty nine".  Though it has not been since 1969, this attitude in buyers has been not seen for a few years.

Jim is so right...it is all about the rates right now.  These historic rates won't be here forever.  So sitting on the sidelines is not the way to play the game right now. 

Keeping you updated on the market! For the week of December 3, 2012 MARKET RECAP The news was disappointing, but not terribly so. We are referring to the dip in new-homes sales for October. The Commerce Department reports sales came in at an annual rate of 368,000 units last month, which was 17,000 shy of the consensus estimate for 385,000 units. Pricing was also a minor disappointment. The median price for a new home dipped 4.2% to $237,000. This marked the second-consecutive month of price weakness. Disappointing, yes, but hardly a cause for concern. Year over year, new-home prices are up 5.7%. Given the scant supply of homes, we don't see a backsliding trend developing. The number of new homes for sale is still only 147,000, representing a 4.8-month supply at the current sales pace. The longer-term perspective is another reason to remain optimistic. New-home sales have averaged 361,000 per month on an annual-rate basis through October. In other words, sales are on pace to increase 18% this year. What's more, we have plenty of room left to run. Even with the double-digit sales increase, 2012 will be the third-lowest sales year since the Census Bureau began tracking new home sales in 1963. It's also worth remembering that this year's average sales rate is still below the 375,000 average rate of sales in 2009. Most estimates we've seen (which are likely conservative) expect new-home sales to double within the next couple years. This would put the annual sales pace closer to historical norms, which is around 1 million sales on an annualized rate. Though new-homes sales disappointed in October, the trend in overall pricing – new and existing homes – remains strong. Most private data providers show prices increasing in more markets. This past week, Case-Shiller's home price index showed prices rose 0.4% in the 20 cities it follows. This was the sixth-constrictive month of price gains, with gains sweeping across all 20 cities. The trend in purchase applications is also encouraging. Rising applications point to rising home sales. Rates continue to make new historical lows (albeit by a couple basis points) each week. Low rates contribute to a high-affordability index. Low mortgage lending rates are an important variable in the home-purchase equation, but they are not the overriding variable. The above chart shows brisk sales even with lending rates 300 basis points higher than they are today. In other words, low lending rates have done about all they can do to stimulate sales. At this point, the key variables for a sustained housing recovery are economic growth and more credit-worthy borrowers having access to credit. Economic Indicator Release Date and Time Consensus Estimate Analysis Construction Spending (October) Mon., Dec. 3, 10:00 am, ET 0.4% (Increase) Important. Rising residential real estate construction is spurring overall economic growth. Mortgage Applications Wed., Dec. 5, 7:00 am, ET None Important. Purchase applications continue to point to stronger home sales. Unemployment Situation (November) Fri., Dec. 7, 8:30 am, ET Unemployment Rate: 8.0% Payrolls: 25,000 (Increase) Very Important.Financial markets are looking for a sustained trend in job creation growth. Consumer Credit (October) Fri., Dec. 7, 3:00 pm, ET $12 Billion (Increase) Moderately Important. Expanding credit use reflects higher consumer confidence. An Ode to Diversity When people contemplate what went wrong in the housing bubble, they frequently point to lending: subprime loans, interest-only loans, negative amortization loans, and securitization were the helium that inflated the bubble. That's not really true, nor fair. These products have been around for years and had served the borrowing public well. The problem was really the misguided belief that an asset – housing in this case – can only rise. The chief problem today, and a primary impediment to the housing recovery, is excessive regulation, which is limiting choice. A recent report from FBR Capital Markets points to a regulatory environment that is “plain vanilla” in that it favors the 30-year fixed-rate loan above all others. Now, there is nothing wrong with the standard fixed-rate mortgage products, but other mortgage products have their place. Indeed, you could argue that taking an interest-only loan to purchase a Phoenix-based home late in 2011 was a savvy business move; the buyer would have tied up little of his own capital to purchase a bargain-basement asset that has since appreciated strongly. Many regulators and even more mortgage-industry participants have called for the need for more private mortgage investors to enter the market. For that to occur, though, these investors need the freedom to offer products that will satisfy a wider swath of borrowers needs, while also enabling them to earn a profit. We think 2013 will become the year of diversity: that is, a more diverse, heterogeneous mortgage lending market with more private investors. We say that because economic growth impacts regulation, and we see economic growth in 2013. Generally, the higher the growth, the more accommodating the regulators. We look forward to a strong 2013, and a stronger, more flexible mortgage lending market. If

Housing...Market Savior!!!!!

As been frequently noted in this blog(how did I know?) and Jim's Mortgage Update, the housing market has strengthened throughout 2012.  Only given areas of the country(like Northeast) are still suffering depressed values....most of us are seeing upperward pressure on prices.

So now, in Jim's notes, you will see the terms "Savior" attached to the housing industry as relates to the U.S. economy as it struggles with mortgage financing restrictions and uncertainty on the budget agreement.   It was bound to happen....good things are continuing to happen!!!

Read and enjoy.  Question and contradict(is so inclined).















Keeping you updated on the market!

For the week of
November 19, 2012



MARKET RECAP


All the hype and hoopla that centered on shadow inventory and its ability to depress the housing market earlier this year seems a little overdone in retrospect.

Indeed, shadow inventory has almost become a non-issue these days, and heading into 2013 it will likely become even less of an issue. We say that because the Mortgage Bankers Association reports mortgage delinquencies hit a four-year low in the third quarter. At the same time, the foreclosure inventory rate fell 20-basis points, posting the lowest quarterly drop since the MBA began surveying the market.

The delinquency and foreclosure trend has actually been on the decline since peaking two years ago. We expect it will continue to decline through 2013, and very likely beyond.There are a number of reasons we think distressed properties won't spoil the recovery.

For one, negative equity is declining. Zillow reports that negative equity declined 30% in the third quarter of 2012, the largest percentage decline Zillow has ever reported.

The decline in negative equity is the corollary to rising home prices. Over the past year, we've continually, and almost without fail, reported on rising home prices. Keeping the streak alive, we report this week that Zillow's data show home values rose 1.3% in the third quarter compared to the second quarter, with the national median home price rising to $153,800.

A dearth of inventory will keep home prices rising, and thus further reduce the negative-equity overhang. New-home inventory is at record lows. The National Association of Realtors will report existing-home inventory next week, and most industry watchers are expecting inventory levels will be down sharply year over year in October. Low supply plus rising demand equals rising prices.

The current interest-rate environment should continue to ensure a minimum level of demand going forward. We are all aware that mortgage lending rates are at multi-decade lows, and that's unlikely to change through 2013.

Underwriting is the more pressing issue these days. Lending standards remain tight, particularly with lower-rated borrowers. A less diverse lending environment is one reason they remain restrictive. Private investment has yet to return in mass following the financial-sector meltdown in 2008.

Risk aversion is another reason. Lenders are rightfully concerned with the costs Obamacare will impose on the economy next year. They are also concerned with the fiscal cliff, which would mean tax-rate hikes and spending cuts. It also appears more likely that Europe could fall into recession. If that occurs, the probability rises that the United States could fall into recession too.

The fiscal cliff is the most oppressive concern these days. Democrats and Republicans have attempted to pound out various compromises. We've heard some chatter that the mortgage income tax deduction is on the table. One bipartisan plan would limit the deduction to $25,000 worth of mortgage interest annually. Other proposals include eliminating the deduction for taxpayers earning $250,000 or more, ending the deduction on second homes, and even ending the deduction entirely (this last option is unlikely).

In short, there is a heckuva lot of uncertainty in the financial markets today. Until some of the uncertainty is removed, we can expect mortgage rates to remain low, but we can also expect for underwriting standards to remain elevated.

Economic Indicator Release        Date and Time        Consensus  Estimate            Analysis

Existing Home Sales(October)    Mon., Nov. 19,     4.8 Million(Annualized) Important.sales momentum, but
                                                  10:00am,ET                                               the trend is being held in check
                                                                                                                     by low inventory.


Home Builder Index(November)Mon., Nov. 19,      42 Index                       Important. Strengthening
                                                 10:00am, ET                                               demand and new construction 
                                                                                                                    projects continue to lift builder
                                                                                                                    sentiment


Housing Starts(October)           Tues., Nov. 20,       835,000 (Annualized)    Important.The surge in starts
                                                8:30 am, ET                                                  points to housing as a leading
                                                                                                                     economic driver in 2013.

Mortgage Applications              Wed., Nov. 21,       None                            Important.Applications spiked
                                                7:00 am, ET                                                 on the return of Northeast
                                                                                                                    borrowers, but week-to-week
                                                                                                                    purchase activity remains
                                                                                                                    volatile


Housing as Savior

Times certainly change. Until early this year, most pundits and commentators were lamenting how housing was a drag on the economy. No more, housing is now looked at in many circles as the savior that will get the economy going. The great investor Warren Buffett, for one, sees housing growth stimulating the economy (and he is investing in housing and banking accordingly).

While its growth has been far from parabolic, housing has been the one constant this year. Equity markets, commodities, Europe, and our own domestic economy have displayed fits of volatility and stagnation. Housing in contrast, has continually pushed forward.

This is very good news, and better than most people appreciate. Residential fixed investment accounted for 0.33% of one percentage point of GDP growth (a sixth of its growth) during the third quarter of 2012, up from 0.19% in the second quarter, and up from 0.03% in the year-ago quarter. Housing is obviously a big contributor to economic growth.

Housing is also a big contributor to consumer confidence. Many people don't understand the stock market or the European debt crisis or the fiscal cliff, but everyone understands housing. As housing goes, so goes consumer confidence. Considering the direction housing is going, that's a strong positive indicator of how things could go in 2013.

Housing On Way Up in Hampton Roads

More GREAT NEWS!!!

Straight from the Real Estate Network for Hampton Roads are stats that show inventories and buyers match up.  This is a recipe for improving values and continuing tight inventory.  If you have been considering a move, you might want to strike before the interest rates start following the home prices.

Read and be impressed!!!

Region’s Real Estate Supply No Longer Outpacing Demand


(Virginia Beach, Virginia – November 2012)

Promising real estate trends in Hampton Roads continued through October 2012, with double

digit percentage increases in year-over-year residential settled sales and under contracts. Residential

active listings also experienced a double digit percentage decrease, thereby lowering the month’s supply

of inventory.

October 2012 saw a 13.8% year-over-year increase in residential settled sales. This marks the

eighth time this year that settled sales have increased year-over-year. Suffolk and Portsmouth

experienced the largest gains of 42.3% and 25.6% respectively. Of the seven major cities (Chesapeake,

Hampton, Newport News, Norfolk, Portsmouth, Suffolk, and Virginia Beach) Norfolk and Newport News

were the only two not to experience year-over-year increases and saw declines of 9.9% and 5.9%.

The number of residential under contract sales was up 26.1% in October 2012 when compared to

the same time last year. This is the highest year-over-year increase the market has experienced since

January 2012 when the number of pending sales grew 32.9%. Suffolk and Virginia Beach experienced

the largest year-over-year increases at 100% and 29.8% respectively. Hampton and Newport News were

the only major cities not to experience an increase, with declines of 12.3% and 1.4% year-over-year.

Residential listings for sale continue to decline and were down 12.1% overall when compared to

October 2011. Each of the major seven cities experienced year-over-year drops in active listings.

Chesapeake and Virginia Beach showed the largest declines of 21.9% and 19.9% respectively, with

Portsmouth experiencing the smallest decline of 5.9%. This drop in the number of active listings in the

market has led to a significant drop in month’s supply of inventory – now at 6.79 months as compared to

8.44 months in October 2011. In the supply and demand equation, this lowering of inventory bodes well

for the median sales price, which was $199,000 in October 2012, up 5.4% from $188,780 in October

2011.

Distressed homes (homes that are banked owned or short sales) continue to have an impact on

the region. Although the number of distressed active listings has dropped 25 units year-over-year, they

still account for 26.8% of all residential active listings in October 2012, vs. 24.3% in October 2011. This

may suggest that buyers are purchasing more non-distressed listings. Distressed homes comprised

28.3% of all residential settled sales in October 2012. Though this is up 2.9% from last month, distressed

residential settled sales are down 4.8% from October 2011.

October 2012 Highlights

Listings

Residential active listings decreased, 12.15% year-over-year, to 10,993 (October 2012) from 12,514 (October

2011).

Under Contract (Pending) Residential Sales

Total residential under contract sales increased by 26.16% when compared to October 2011 (1,765 vs. 1,399).



Sales

Total property sales and total residential sales increased when compared to October 2011 showing increases of

13.09% and 13.89% respectively.

Inventory

There is currently 6.79 months’ inventory of residential homes on the market in the Hampton Roads area, a

decrease from last month (6.94) and down 19.54% from September last year when it was 8.44 months.



October 2012 Summary

All Categories

October 2012 October 2011 Percent Change

Total Property Active Listings

13,618 15,323 -11.13%

Total Property Pending Sales

1,860 1,459 27.48%

Total Residential Pending Sales

1,765 1,399 26.16%

Total Property Sales

1,676 1,482 13.09%

Total Residential New Construction Sales

217 206 5.33%

Total Residential Sales

1,615 1,418 13.89%

Median Residential Sales Price

$199,000 $188,780 5.41%

Months’ Supply Inventory

6.79 8.44 -19.54%



* Total Property statistics include all property types (Residential, Commercial, Duplex, Apartment and Land & Farms), resale and new construction.


* Months’ Supply Inventory estimates the number of months it will take to deplete current active inventory based on the prior 12   Source:   Nancy May, Manager of Communications  REIN

Will FED QE3 push Mortgage Rates?

Hampton Roads has seen month over month improvement since June 2011 in both sales and prices in the lower price strata. No doubt the sliding from an inventory of 14,000 homes to approx. 10,000 homes has pressured home prices as more buyers come out to get the low 3.5% rates.

As you can see below, this trend is being experience broadly across the country and is evident in the numbers and the optimism in home builders.

A comment that must grab your attention is the commentary below on the Fed's $40 billion infusion into the equity markets via mortgage bond purchases.   Influx of funds may actually undergird the current mortgage rates, preventing them from falling farther.

Translated:  Rates are as low as they are going to be!!

So the time to act is NOW!

Keeping you updated on the market! For the week of  September 24, 2012 MARKET RECAP The argument that housing isn't in full-recovery mode continues to weaken. Look no further than the sentiment of those whose living depends on bringing new supply to market – the home builders. Confidence among builders has surged through 2012. A year ago, the builders were deep in the doldrums; their sentiment index was down to a very low 15. Today that index stands at 40. That's a remarkable change in sentiment. Optimism is no longer the exception; it's the rule. The upward trend in housing starts is no doubt a contributing factor to rising optimism. Since August 2011, starts have been on a steady upward trajectory. For August 2012, the trend continued to move higher, with starts advancing 2.3% to 750,000 annualized units. Single-family units paced the gain, improving 4.5%. To be sure, 2.3% advance isn't a spectacular, but slow and steady wins the race. Slow and steady also produces substantial advances over time. A year ago, starts were at 600,000 annualized units. Today, the pace in starts is up 25%. Sales of existing homes are also moving in the right direction, though the pace is a bit more volatile. For August, existing home sales improved 7.8% – posting the largest percentage gain in over a year – to an annual rate of 4.82 million units. The higher sales pace, in turned, tightened inventory to a 6.1-months supply. Existing home sales were helped by a slight drop in prices in some markets, which dropped the national median home sales price 0.2% to $187,400. Looking at the longer-term price trend, the national median home price is still up 9.5% year over year. At this point, the best course of action is to let the market recover on its own. The chart below reveals what can happen when good intentions interfere. The spikes in existing home sales that occurred in November 2009 and May 2010 were a reaction to the impending expiration of the federal home tax credits. After November 2009 and May 2010, sales fell off a cliff. Future demand was simply pulled into the present, thus leaving a future void. Around September 2011, a slow, slightly volatile, uptrend formed. The good news is that the trend that formed in 2011 is genuine and sustainable. The trend in mortgage rates is less genuine, because the Federal Reserve has openly influenced the mortgage lending market. This week, mortgage rates did ease a couple basis points across most product offerings. Such a minor decrease suggests that rates really don't want to go much lower. Activity in the 10-year Treasury note also points to a rate bottom. When the Federal Reserve announced it would continue to buy mortgage-backed securities and Treasury securities last Thursday, the yield on the 10-year Treasury note actually increased (since then it's been moving marginally lower). Given the Fed's strategy to add $40 billion to the base money supply monthly, investor concerns could be shifting toward consumer price inflation and away from slow economic growth. If inflation becomes a front-burner issue, interest rates will be very hard pressed to go lower. Economic Indicator Release Date and Time Consensus Estimate Analysis Mortgage Applications Wed., Sept. 26, 7:00 am, et 380,000 (Annualized) Important. Lower lending rates fail to draw in more purchase activity. New Home Sales (August) Wed., Sept. 26, 10:00 am, et 4.6 Million (Annualized) Important. The upward trend in new home sales and construction are good news for the economic outlook. Gross Domestic Product (2nd Quarter 2012) Thurs., Sept. 27, 8:30 am, et 1.6% (Annualized Growth) Important. The upward revision in growth estimates is primarily due to the housing recovery. Pending Home Sales Index (August) Thurs., Sept. 27, 10:00 am, et 1.0% (Increase) Important. The trend in home sales is expected to improve through the end of the year. We're Only the Messenger Lenders make money lending, not by not lending. This might seem obvious, but lenders are often a lightening rod for frustration. “We can't we get my client qualified?” is a repeated complaint. We all know that we are not returning to the lending environment circa 2005, and that's a good thing. That said, we would like to go to a new lending environment, because the current one is too homogeneous (lacks diversity) and too formulaic. There are simply too many one-size-fits-all rules and regulations in today's lending market. Banks have to adhere to uniform new regulations set forth by the Dodd-Frank Act. They also have to adhere to international rules, known as Basel III, which impart strict capital requirements. More rules and tighter regulations, particularly ones that are uniform across the country, discourage lenders from venturing out past plain vanilla residential mortgages. If any business is forced to address increased regulation, mandated MBS repurchases, and increased litigation, that firm will tend not to venture far out on the risk curve. What we need are rules and regulations that account for risk-based pricing tailored to particular markets. North Dakota and New York are different markets with different borrower profiles. Instead of forcing lenders to adhere to a uniform standard, regulators should permit a variety of standards and pricing policies based on the risk and borrower characteristics of different metropolitan markets. Should that occur, today's clogged lending pipes would certainly flow more freely, allowing more funds to flow to more borrowers.

VARbuzz: Trulia: Buying 45% (!) cheaper than renting

No Surprise here!!!!  Yet  maybe you didn't know it was 45% cheaper!!!

Read, get off the fence and call your Realtor.    Hampton Roads...call 757 580-6546


VARbuzz: Trulia: Buying 45% (!) cheaper than renting

The Waiting Game is Over

Though there are numerous sources of mortgage information trends and how the mortgage market is seeing house trends, Jim's Mortgage Matters always provides a concise recap of the past week's direction in the broader "overtime perpsective".

As always a great insight!!  Yet the most important message is the last paragraph:

In short, there is no sure thing. Many borrowers are waiting on the sideline, anticipating lower lending rates. We think that's a dangerous game, because even if QE3 lowers lending rates, we doubt they will lower them by a significant margin. On the other side of the coin, rates could easily go higher if investor concern switches to inflation from slow economic growth.

With the Feds third round of purchases(QE3), too many are predicting bond rates will hold or slide, improving mortgage rates.  But as note here, any buyer waiting for lower rates could get a rude awakening if the rates begin to rise in the near term.

If you have been waiting for bottom, how hard of a bottom must you hit before it hurts because you missed it??  And you already may have in Hampton Roads.

Keeping you updated on the market! For the week of  September 17, 2012 MARKET RECAP Last week, we broached the possibility that the residential rental real estate market could be forming a bubble. We found it interesting, even if it were only coincidental, that the the Wall Street Journal ran a piece this week on institutions piling into single-family residential rental real estate. The Journal article featured a private-equity firm, Colony Capital, that has been buying single-family homes, refurbishing them, and then renting them. Colony has accumulated 3,600 homes, most purchased out of foreclosure. Business, so far, has been remunerative. Colony Capital isn't the only institutional player in single-family rentals. According to investment bank Jefferies & Co., big private-equity players Blackstone Group, Och-Ziff Capital Management, and Oaktree Capital have raised more than $8 billion to buy houses, which they plan to refurbish and rent. This flood of institutional investor money into the single-family rental market is a big reason we are less concerned about distressed shadow inventory than most market observers. A lot of demand has developed to soak up supply. Over time, that supply will continue to dwindle. The trend in multi-family residential rentals is also revealing. Data from the National Association of Real Estate Investment Trusts (NAREIT) show money flowing freely into this market as well. In fact, REITs that focus on multi-family residential properties have been some of the best performers in the real estate segment over the past year. The point we want to emphasis is that investors and market watchers should become more alert when markets heat up – and the rental real estate market is certainly heating up. More risk resides in the hot market, because the hot market doesn't stay hot forever. We reported a couple week ago that rents, which have been on a tear the past two years, are already showing signs of slowing. Trulia's data show rents rose 4.7% in August from a year ago, but that growth is lower than the 5.8% year-over-year growth reported in May. We obviously can't say for sure if a bubble is forming in the residential rental market, but we can say the bullish sentiment is starting to sound like the sentiment that prevailed in the single-family purchase market circa 2004. There is another reason we should maintain our perspective on rentals: People still prefer to own their own home, which is why we expect to see sustained growth in the owner-occupied market over the next couple years. Risk aversion is the impediment to more owner-occupied activity. The financial firm Redwood Trust recently issued a private jumbo mortgage-backed security. The security was backed by mortgages with an average FICO score of 771 and a loan-to-value ratio of 67%. Such issues have been the norm in recent years. We'd like to see more investor interest in more speculative mortgage-backed securities. More interest in more speculative issues would indicate more risk taking by investors and a more liquid, more inclusive lending environment. Economic Indicator Release Date and Time Consensus Estimate Analysis Home Builder Index (September) Tues., Sept. 18, 10:00 am, et 37 Index Important. Builder confidence continues to rise on greater sales and building activity. Mortgage Applications Wed., Sept. 19, 7:00 am, et None Important. Purchase applications remain volatile, suggesting choppy near-term sales volumes. Housing Starts (August) Wed., Sept. 19, 8:30 am, et 770,000 (Annualized) Important. Starts continue to move higher and are becoming a bigger contributor to economic growth. Existing Home Sales (August) Wed., Sept. 19, 10:00 am, et 4.6 Million (Annualized) Important.Sales are still trying to establish a sustained trend for 2012. What QE3 Means to Us QE3 sounds like a luxury British ocean liner; it's actually an abbreviation for a third round of quantitative easing, which itself is a euphemism for the Federal Reserve pumping more money into the economy. On Thursday, the Fed said it would implement QE3 in the near future. The mechanics of QE are straightforward: The Fed adds more money to the economy by buying mortgage-backed and U.S. Treasury securities from banks. The securities are paid for with new money the Fed conjures into existence. The Fed's demand for these securities drops the yield on these securities. These lower yields, in turn, are expected to produce lower mortgage lending rates, or at least sustain today's already low rates into the future.  At least that's the theory. The problem is that price inflation fears – due to the new money – can rise. Should investors' inflation fears trump Fed demand for the aforementioned securities, that means mortgage lending rates could actually go up, thus thwarting the Fed's intended outcome. In short, there is no sure thing. Many borrowers are waiting on the sideline, anticipating lower lending rates. We think that's a dangerous game, because even if QE3 lowers lending rates, we doubt they will lower them by a significant margin. On the other side of the coin, rates could easily go higher if investor concern switches to inflation from slow economic growth.

Fed ACTS

Update:   Feds just  authorized  QE 3rd repurchase of mortgage backed securities!!!

All reports indicate action taken to further pump up home sales.  As I have stated and Jim Belote in notes such as that below has stated, housing is a major contributor to our economy....not only house purchases but the complimentary appliance, furniture, lawn and garden purchases(along with hundreds of other impacts upon economy.

So the positive news keeps coming!!  Stock Market soared  200 points(DOW) with financial stocks leading the way.

Keeping you updated on the market! For the week of  September 10, 2012 MARKET RECAP This lead in could be filed under “dog bites man,” because it's something most of us already know. We are referring to recent data from the National Association of Realtors that show the time to sell a home is shrinking. According to the NAR, the time to sell for traditional sellers is back within historic norms: the median time a home was listed fell to 69 days in July, down from 98 days a year earlier. Of course, national numbers often hold little meaning to any particular local market. In fact, the NAR's data range from one-third of the homes were listed for less than a month, while one in five homes was listed for at least six months. The positive takeaway is that more homes in more markets are selling at a quicker pace. What's more, that pace appears to be accelerating. The price of many homes listed for sale is also accelerating. Clear Capital reports that home prices are up 2.9% year over year in August. Clear Capital cites fewer REO properties coming to market due to new borrower-friendly legislation and the $25 billion lenders' settlement with the federal government. That's really only part of the story, though, and gives short sales the short shrift, because many lenders are simply finding it more remunerative to engage in short sales than foreclosure and REO sales. While we are on the subject of sales and prices, Trulia reports that national asking prices on for-sale homes, which precede actual sales prices by two or more months, increased 2.3% year over year in August. Gains were widespread, with 68 of the 100 largest metropolitan areas Trulia follows reporting price increases. Trulia's data are particularly encouraging, because they are a leading indicator of future home sales (where we are going is much more important than where we've been). Therefore, we would be surprised if home-price gains and the housing recovery were not to persist into fall. That said, lending could be the monkey wrench that grinds the recovery gears to a halt. Participation is the issue, and it is akin to the observation “water, water everywhere, but not a drop to drink.” Rates are low, but not enough borrowers are able to take advantage of them. We've mentioned many times over the past year that the issue isn't low lending rates at this point: it's a dearth of borrower-buyers. If only the same people can access credit at these low rates, these low rates become meaningless. A less restrictive lending environment would do much more to accelerate the recovery than historic low rates. Economic Indicator Release Date and Time Consensus Estimate Analysis International Trade (July) Tues., Sept. 11, 8:30 am, et $43.5 Billion (Deficit) Important. A weaker dollar is raising import prices. The trend could stimulate consumer-price inflation. Mortgage Applications Wed., Sept. 12, 7:00 am, et None Important. Purchase applications have again slowed, pointing to lower home-sale volumes. Producer Price Index (August) Thurs., Sept. 13, 8:30 am, et All Goods: 1.6% (Increase) Core: 0.3% (Increase) Important. Food and energy price increases are elevating producer inflation rates. Retail Sales (August) Fri., Sept. 14, 8:30 am, et 0.7% (Increase) Important. More retail sales points to increased economic growth. Is This the Next Bubble? An aspiring home owner who can't buy a home becomes a renter. Today's credit markets have forced many aspiring home owners to become renters. In turn, the rental market has caught fire. By some estimates, there are 2.1 million more single-family homes rented now than in 2006. It's a strong trend. Rents rose nationally 4.7% year over year in August, which builds upon the 5.8% year-over-year rise recorded back in May. In a few markets, Houston and Seattle most notably, rents are up 10% year over year. Buyers of rental homes (many paying with cash) have soaked up much of the inventory, and to be sure, that's a positive. But many of the people renting these properties would have preferred to buy them themselves, but they were precluded from buying because they were unable to secure financing. The market at this point is becoming too skewed toward rentals, which is driving up rents at an abnormally fast rate. This isn't a good thing, because abnormally fast-growing rates aren't sustainable rates. Should rents turn south, many of those investment properties will no longer be sound investments, particularly those bought late into the rising-rent trend. What's more, a neighborhood of rentals isn't as well maintained or holds its value like a neighborhood of owners. A neighborhood of rental homes tends to loose value over time; a neighborhood of owner-occupied homes tends to gain value over time. The point we want to emphasis is that we need a lending environment that encourages more of the latter; that is, more owner-occupied buying. To get that, we need a lending environment that encourages profitable, heterogeneous lending. We simply don't have that today. If you wish to unsubscribe, click on the link below and send the email. If this

SEE THE NEWS: MARKET IMPROVING

Stripped from the headlines....okay it was buried in the business news section on June 13th 

Yet another epistle of great news that the Real Estate Market is Turning Around!!!   The trends are positive:

   Rates below 4%

   Foreclosures and Short Sales down

   Home Values Improving!!!

Thank you, Josh Brown for getting the word out!

Region’s home sales and prices rise as foreclosures decelerate

By Josh Brown

The Virginian-Pilot

   Home sales rose in South Hampton Roads in May and prices ticked up after months of easing foreclosures, according to a report released Tuesday.

   The Real Estate Information Network, a Virginia Beach-based multiple-listing service, reported that 1,208 existing homes sold last month, up 5.5 percent from May 2011. Meanwhile, the median price was $198,000 in May, up 4.8 percent from a year earlier, the listing service reported.

   The report was more good news for the housing market, which in recent years has struggled to gain solid footing. May marked the third consecutive month of year-over-year increases in median existing home prices. The median is the point at which half of all sale prices were higher and half were lower. Until March, year-over-year median prices had not risen in South Hampton Roads since November 2010.

   D i st ressed s a les , which have played a major role in Hampton Roads in recent years, have been sliding as a percentage of all homes sold in recent months. Last month, foreclosures and sales by homeowners whose homes were worth less than their mortgage balances – known as short sales – accounted for 26 percent of all sales, down from 31 percent a year earlier.

   Foreclosures and short sales as a portion of all sales reached a high of 42 percent in March 2011.

   Last month, the number of homes for sale across the region rose to 11,802 – up slightly from April but down 18 percent from a year earlier, according to the report.

   Josh Brown, 757-446-2318, josh.brown@pilotonline.comt