Royal Shell Real Estate Wins Awards

December 12 2016
ROYAL SHELL REAL ESTATE WINS AWARD
FORT MYERS, Fla. — The Lee Building Industry Association has named Royal Shell Real
Estate as the Residential Brokerage Firm of the Year for 2016. The nonprofit
organization’s Industry Achievement Pinnacle Award honors Royal Shell for its
management capabilities, customer relations, ethical behavior, community involvement
and excellence in the residential building industry.
Royal Shell Real Estate, the largest and No. 1 independent brokerage in Southwest
Florida, recorded more than $1.2 billion in listings and sales in the first 10 months of
2016. It also was involved in 60 percent of the top-five home sales in Lee County in
2015.
“Achieving a prestigious Pinnacle award is a testament to our agents and staff’s
diligence every day in exceeding clients’ expectations while raising the bar for
excellence,” said Michael Polly, Vice President of Real Estate Operations.
Another honor came this summer when Royal Shell Real Estate was named Best Real
Estate Agency in the residential category in Gulfshore Business Magazine’s 2016 Best of
Business Readers’ Poll.
The brokerage also opened its first Cape Coral office in November, which is the
company’s 15th in Southwest Florida. Royal Shell also has an office in Ocala and four in
western North Carolina, bringing the total number of offices to 20.
Royal Shell Real Estate handles properties of all types, including primary and secondary
residences, seasonal homes and investment properties, while its rental department
focuses on leveraging owners’ investments for maximum return.
Royal Shell Real Estate began primarily as a Sanibel and Captiva island-based company,
and over the years has opened multiple offices in Lee, Collier and Marion counties. The
business differs from other real estate companies in that they hand-select only the
area’s top Realtors® to join the team.

All Signs Point to a Strong Summer.

Keeping you updated on the market! For the week of June 1, 2015

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MARKET RECAP All Signs Point to a Strong Summer Though a holiday-shortened week, it was a solid week nonetheless. Home prices continue to march to higher ground. The S&P/Case-Shiller Home Price Index posted a very solid and slightly higher-than-expected 1.0 % gain in March. Higher prices were seen in all 20 of the markets Case-Shiller follows. Year over year, the Case-Shiller index is up 5%. New home sales also continue to move higher. Sales were up 6.8% to 517,000 units on an annualized rate in April. Supply rose slightly in the month, to 205,000 new homes, but supply relative to sales fell to 4.8 months from 5.1 month. The upside of low supply is that it will encourage builders to bring more homes to markets. We've seen this in recent months in the increase in starts. Rising prices will also encourage more building. The median price of a new home was up 4.1% to $297,300 for April. Year over year, the median price is up a strong 8.3%. The good news on new home sales was a welcomed balance to the disappointing news on existing home sales last week. That said, we expect existing home sales to gain traction through the summer months. The news on pending home sales supports our optimism. Up four-consecutive months, pending home sales jumped a much higher-than-expected 3.4% in April following an upward revised 1.2% gain in March. Pending home sales are up 14% year over year, and are far ahead of final sales of existing homes, which are up only 6.1%. The Pending Sales Index – at 112.4 – is as high as it has been since May 2006. We should see existing homes trend higher over the next few months. Mortgage rates also continued to move higher, but only by a couple basis points. That said, depending on what part of the country you reside, the highest rates of the year were prevalent this past week. The good news is that mortgage rates appear to have plateaued, and are showing little inclination to move higher.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Personal Income (April)	Mon., June 1, 8:30 am, ET	0.3% (Increase)	Important. Income growth remains anemic and is hurting the starter-home housing market.
Construction Spending (April)	Mon., June 1, 10:00 am ET	0.8% (Increase)	Important. Residential construction continues to drive overall construction spending. This bodes well for the housing outlook.
Mortgage Applications	Wed., June 3, 7:00 am, ET	None	Important. Purchase activity continues to point to sales growth in coming months.
Employment Situation (May)	Fri., June 5, 8:30 am, ET	Unemployment Rate: 5.4% Payrolls: 218,000 (Increase)	Very Important. Low wage growth will push any interest-rate increases further into the future.

 

Is It Time for Prices to Take a Respite? Following price trends has never been easier. A few years ago, there was only one source – Case-Shiller. Today, there are numerous sources you can tap to get an idea of what home prices are doing in your neck of the woods. Trulia, CoreLogic, and Zillow are to name just a few. To be sure, rising prices can be a good thing for homeowners. Once someone becomes a homeowner, he or she generally owns an asset that appreciates over time (with proper maintenance, of course). The homeowner’s net worth increases with home equity. The homeowner can tap the equity for money to invest elsewhere or for current consumption. It's a virtuous circle. That said, you need to get into a home before you can enjoy the benefits of home-ownership. That's becoming a problem in many markets, particularly for first-time buyers. Prices in many markets have exceeded pre-bubble highs. Wage growth, on the other hand, still lags. This obviously makes it difficult for first-time buyers. A healthy housing market needs a continual influx of first-time buyers. Unfortunately, they are in short supply these days. At this point, we'd like to see further moderation in home-price appreciation. In addition, we'd like to see further price moderation coupled with more construction in the starter market. The coupling of these two objectives would help ensure the housing market remains healthy for years to come. Article courtesy of Patti Wilson, American Momentum Bank.

And Off the Cliff They Go!

MARKET RECAP And Off the Cliff They Go Last week, we mentioned that we would not be surprised to see a further reduction in mortgage rates, given the many conflagrations and overall rise of worry around the world. It appears that we were somewhat reserved in our expectations, because we didn't expect to see the drop in rates that occurred over the past week. Looking at the national numbers, we see Bankrate.com is reporting an average rate of 4.01% on the 30-year fixed-rate loan, which is a dramatic 17-basis-point week-over-week reduction. Freddie Mac's survey shows the national average on the 30-year loan is down to 3.97%, a 15-basis-point week-over-week drop. Today, mortgage rates are about as low as they've been in the past 18 months. That mortgage rates have fallen off a cliff in the past two weeks is no surprise, given that the yield on the 10-year U.S. Treasury note has also fallen off a cliff. If you want a good proxy for mortgage rates, follow the yield on the 10-year note. Risk aversion among financial market participants has certainly risen over the past month. Stocks, as most of us are aware, have experienced a harsh sell-off. The S&P 500 Index, which is composed of 500 of the United States' largest corporations, is down over 7%. That's a dramatic move. Because bonds – Treasury bonds in particular – are viewed as alternative investments (safer alternatives) to stocks, much of the money that has moved out of stocks has found a new home in bonds, which is why we've seen such a steep drop in yields. A weakening global outlook is the overarching concern these days. With economies interconnected like they've never been before, when one country's economy weakens it can impact another country's economy. To be sure, the United States' economy is chugging along fairly briskly, with gross domestic product (GDP) posting at 4.6% on an annualized rate in the second quarter. The problem is the rest of the world, particularly Europe, Japan, and China, are showing signs of running out of steam. This has investors in the United States worried: If the rest of the world sneezes, we could catch a cold, meaning the strong growth we've seen in recent months could prove fleeting. Now, toss in ISIS, Russian and European hostilities, and Ebola, and it's easy to understand why financial market participants are so risk averse these days. Low interest rates, including low mortgage rates, are the silver lining in these worrisome clouds. Given the level of uncertainty and fear permeating financial markets, we don't expect mortgage rates to move meaningfully higher in coming weeks. Many lenders view this as good news. We, on the other hand, are more circumspect, as we'll explain below.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Existing Home Sales (September)	Tues., Oct 21, 10:00 am, ET	5 Million Units (Annualized)	Important. Sales remain mired in purgatory; recent economic news suggests they will remain mired through the rest of 2014.
Mortgage Applications	Wed., Oct. 22, 7:00 am, ET	None	Important. Refinance activity has picked up, but flat purchase activity does not bode well for home sales.
Consumer Price Index (September)	Wed., Oct. 22, 8:30 am, ET	All Goods: 0.1% (Increase) Core: 0.2% (Increase)	Moderately Important. Consumer-price inflation continues to support low interest rates.
New Home Sales (September)	Fri., Oct. 24, 8:30 am, ET	455,000 Units (Annualized)	Important. Sales have turned sluggish. Given the plunge in buyer traffic, they could stay that way.

 

Mortgage Rates Down, Will Housing Follow? The drop in mortgage rates has fueled a surge in refinance activity. Last week, the Mortgage Bankers Association reported that refinances were up 11% week over week. When the MBA reports on this week's activity (next week), we expect to see continued strong demand. It's been a different story for purchase activity. Last week, the MBA's purchase index was down 1%. Year over year, the purchase index is down 4%. This is not good news, especially when you consider that cash sales are dropping as a percentage of overall sales, and will likely continue to do so. Now, we get the report that home builder sentiment is dropping too. The National Association of Home Builders' (NAHB) sentiment index dropped to 54 in October, which is a considerable decline from the 59 posted in September. Home builders, like a lot of other people, are feeling less sure of themselves these days. We hope the drop is a one-off reading, but time will tell. Falling interest rates, as we note above, are an indicator of falling confidence and rising risk aversion. This is why we don't get terribly excited when rates continually fall. To be sure, falling rates are good for refinance business, but for the overall health of housing and mortgage lending, we need to see a pick up in purchase activity. For that to occur, we need more confidence and less risk aversion. This, we believe, will be reflected in rising interest rates. So if we cheer-lead on occasion for rising rates, it's not because we favor rising financing costs, it's because we favor more business and consumer confidence and more economic growth. Article Courtesy of Patti Wilson, American Momentum Bank.

One Confounding Market

MARKET RECAP One Confounding Market At the beginning of the year we mentioned that with stronger job growth would likely come higher interest rates. We certainly have stronger job growth. After a lull in August, job growth returned with a vengeance in September, with payrolls increasing by 248,000. This marked the seventh month of 200,000+ monthly job gains in the past eight months. The unemployment rate is now down to 5.9%. We anticipated stronger job growth back in January, and that's been the case. So you can say that we got the equation half right. The other half – rising interest rates – we quite frankly got wrong. More jobs and more economic growth would lead to more loan demand and rising inflation expectations, and thus, higher interest rates. At the beginning of the year, 5% on the 30-year fixed-rate mortgage seamed a real possibility by the time we reached this time of the year. But here we are in the early days of October and the rate on the 30-year loan is down to a 16-month low. Indeed, Bankrate.com's latest survey shows the national average dropped nine basis points week over week to 4.18%. Freddie Mac's survey shows the national average down to 4.12%, a seven-basis-point week-over-week decline. The good news is that lower rates have spurred mortgage demand. The Mortgage Bankers Association data show refinance activity increased 5% last week, while purchase activity increased 2%. When the MBA reports on this week's activity (next week), we expect the percentage gains to be even higher. So what's the skinny on mortgage rates? They were actually trending higher through most of August. Market participants were focused on Federal Reserve language that suggested that rates (all rates) could start moving higher sooner than most market watchers anticipated. But the most recent release of Fed meeting minutes (released this Wednesday) reveals Fed officials aren't so eager to get interest rates moving higher. The following sentence lifted from the minutes supports our contention: “The costs of downside shocks to the economy would be larger than those of upside shocks because, in current circumstances, it would be less problematic to remove accommodation quickly, if doing so becomes necessary, than to add accommodation.” Fed officials even went as far as to stress "patience" in waiting for interest rates to rise. They are concerned with weak global economic growth and a stronger U.S. dollar. Rising geopolitical risk, such as what's occurring in Russia, the Middle East, and in Hong Kong also have the Fed on edge. Here in our own backyard, a few structural issues remain. Though overall job growth has been robust for much of the year, the labor participation rate and unemployment rate among 25-to-54 remains a concern . There are still too many people in this important demographic who aren't working. At the same time, many of those who are working are dealing with stagnating wage growth. So, it appears sub-5%, if not sub-4.5%, on the 30-year fixed-rate loan will be with us for some time to come.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., Oct. 15, 7:00 am, ET	None	Important. Refinance activity will get a boost on new year-low lending rates, but purchase activity remains anemic.
Producer Price Index (September)	Wed., Oct. 15, 8:30 am, ET	0.2% (Increase)	Moderately Important. Price inflation in most segments of the economy remains a non-issue.
Home Builder Sentiment Index (October)	Thurs., Oct. 16, 10:00 am, ET	59 Index	Important. Sentiment has moved meaningfully higher in recent months, but sluggish sales could temper enthusiasm.
Housing Starts (September)	Fri., Oct. 17, 8:30 am, ET	1.017 Million (Annualized)	Important. Starts remain elevated, but we'd like to see more activity in the single-family component.

 

Low Rates as Far as the Eye Can See... That's Not Necessarily Good News Many of our colleagues remain convinced that low-interest rates are vital to rejuvenating home sales (particularly in existing homes) and keeping housing starts on an upward trajectory. But we think that boat has long sailed. We say that because low interest rates are indicative of the issues we mention above: geopolitical upheaval, slow global economic growth, and weakness in employment growth in a key U.S. demographic. In addition, low rates are indicative of banks that are flush with cash and simply aren't seeing the opportunities to put that cash to use. Bloomberg reports that banks have accumulated so much cash that deposits exceed loans by a record amount. Banks make money lending, and are motivated to make loans when the opportunity arises. Instead, they've been plowing money into low-yield Treasury securities. That tells us two things: A dearth of lending means there is still a dearth of economic growth. On the other side of the coin, bank demand for Treasury securities will help keep interest rates – mortgage rates included – low. When Federal Reserve officials begin to back off their cautious talking points and begin to talk up the economy, interest rates will rise. But that will be a good thing, because we'll have an economy marked by more opportunities that can support higher interest rates and a more market-driven lending environment. Article courtesy of Patti Wilson, American Momentum Bank.

An Important Prognostication Comes to Fruition

Keeping you updated on the market!
For the week of

October 6, 2014

MARKET RECAP An Important Prognostication Comes to Fruition Predicting the direction of interest rates over the past two years has been an exercise in futility. One would have had better success predicting the flight path of a butterfly than the direction of interest rates. History has certainly proved to be an unreliable guide. We've been considerably more sapient on housing prices. At the beginning of the year, we expected the rate of price appreciation to slow in many, if not most, markets. Our rationale was predicated on the fact trees don't grow to the sky. Double-digit year-over-year price gains are simply unsustainable. Given sufficient time, momentum peters out. Four years appears sufficient enough. As we head into the waning months of 2014, price appreciation in many markets has indeed throttled back palpably. The widely followed S&P/Case-Shiller Home Price Index again shows slowing price growth in the 20 metropolitan regions it follows. H ome prices were down 0.5% month over month in July. This marks the third-consecutive monthly decline, and is the steepest monthly decline since November 2011. Year over year, prices are still up 6.7%, but the rate of appreciation has been falling through most of 2014. We expect the rate of decline to continue, because we are seeing stagnating prices, and even price declines, in more markets. Case-Shiller's data show that prices in 14 of its 20 metropolitan regions declined in July. As for the remaining six markets, three showed no gain, and three showed modest gains, with Las Vegas leading the field at 0.3%. Zillow has taken to predicting future Case-Shiller index releases, and, like us, Zillow sees the rate of price appreciation further abating. Zillow sees modest month-over-month growth of 0.1% for August, which will drag the year-over-year tally down 5.7%. Of course, all real estate markets are local markets, and a national average very likely has no direct correlation to our neck of the woods. That said, the national number is composed of local numbers. When more local numbers trend in the same direction, the national number will follow. Slowing home-price appreciation will slow the rate that negative equity turns to positive equity. On the other side of the coin, slowing price appreciation should help home sales, which have still yet to establish momentum. Unfortunately, momentum is unlikely to be established in the immediate future. The Pending Home Sales Index fell 1.0% to 104.7 in August from 105.8 in July, and is now 2.2% below August 2013. New lower mortgage rates could provide relief. Rates have been trending down for the past two weeks, which corresponds with the recent stock-market sell-off. The S&P 500 Index is down roughly 4% since hitting an all-time high on Sept. 19. Much of the money flowing out of stocks has flowed into bonds, which is lifting bond prices, and lowering interest rates – including mortgage rates. We would not be surprised to see this trend continue over the next couple weeks.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Consumer Credit (August)	Tues., Oct. 7, 3:00 pm, ET	$19 Billion (Increase)	Moderately Important. Credit use has been rising in recent months, which reflects rising consumer confidence.
Mortgage Applications	Wed., Oct. 8, 7:00 am, ET	None	Important. Purchase activity has remained steady, but a move up is needed to offset fewer cash buyers.
Federal Reserve FOMC Meeting Minutes	Wed., Oct. 8, 2:00 pm, ET	None	Important. The economy is improving and inflation remains dormant, but sluggish wage growth will enable the Fed to hold interest rates low.
Import Prices (September)	Fri., Oct. 10, 8:30 am, ET	0.5% (Decrease)	Moderately Important. Falling oil prices and European price deflation will keep domestic inflation in check.

 

Millennials to the Rescue? A few weeks ago, we noted the uplifting news that millennials are still very much interested in homeownership. Since then, we've run across a plethora of articles focused on millennials and housing. (Though when you search for a certain subject, you are sure to find it.) Many of these articles position millennials as saviors. Without millennials, there is little upside left in housing, so the reasoning goes. We don't see it that way. Though we'd love to see more millennials enter the housing market as owners, they are still only a subset of the overall ownership market. What's more, their support is mostly concentrated in lower-priced homes. More important than millennials, baby boomers, gen-x, or any particular demographic is the overall health of the economy. On that front, the data we've seen on the overall economy is encouraging. The latest gross domestic product (GDP) data show growth at a robust 4.6% annualized rate. This is good news for everyone, and should serve as tight backstop to housing, which is why we see no backsliding. To be sure, we welcome millennials, but we don't need to be rescued by them. Rising economic growth will lift all demographic groups.

Article Courtesy of Patti Wilson, American Momentum Bank.

The News only gets better for Housing!

MARKET RECAP The News Gets Only Better for Housing Everything is coalescing nicely for a sustainable uptrend. Last week, we reported that new-home starts and home-builder confidence continued to gain momentum. This week, new-home sales gained momentum, though it might not seem so on first blush. New-home sales for July came in at 412,000 units on an annualized rate. This was slightly below expectations, but sales for June and May were revised higher by a total of 28,000 units. The market is still trending in the right direction. Lack of inventory has hampered new-home sales over the past year, but that should be less of an issue moving forward. Starts have ramped up, and that's reflected in more inventory. Supply of new homes increased to 205,000 units compared to 197,000 in June, which pulls up the monthly supply to six months at the current sales rate. Moderating price appreciation will also help sales. The median price of a new home fell 3.7% to $269,800 in July. Year over year, the median price is up only 2.9%. That year-over-year price gains are slowing is no surprise. The S&P/Case-Shiller Home Price Index has been reporting slower year-over-year gains in recent months. For the latest month, June, Case-Shiller shows the year-over-year increase for its 20-city index slowed to 8.1% versus 9.3% for May. Month over month, prices actually decreased in 13 of the cities Case-Shiller follows. Slowing price appreciation will bring both new supply to market and increased buyer interest. The former will be less motivated to hold for a higher price; the latter will be motivated to buy into a more stable pricing market. Existing-home sales are expected to improve in coming months. The Pending Home Sales Index posted a strong 3.3% increase in July. The monthly gain easily exceeded top-end expectation, and points to rising sales through 2014. We see nothing but better days ahead. Next Friday, another monthly jobs report will be issued. So far the economy has racked up six-consecutive months of 200,00+ monthly payroll increases. We expected a seventh month when the report for August is released. The consensus estimate is for 223,000 new jobs for the month. We would not be surprised to see more. Job creation should continue at a brisk pace because the economy is almost certainly on the mend. Gross Domestic Product (GDP) growth was revised this week to 4.2% for the second quarter, up from the original estimate of 4.0%. All signs point to GDP growth maintaining this pace through the third and fourth quarters. Now all we need is purchase-mortgage activity to trend higher. Perhaps a trend is in the works: Purchase activity was up 3% for the Aug. 22 week.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Construction Spending (July)	Tues., Sept. 2, 10:00 am, ET	1.5% (Increase)	Important. Rising residential construction spending is good for both the housing sector and overall economy.
Mortgage Applications	Wed., Sept. 3, 7:00 am, ET	None	Important. Purchase activity has picked up in recent weeks. Still, a trend has been difficult to form.
Productivity (2nd Quarter 2014)	Thurs., Sept 4, 8:30 am, ET	2.4% (Increase)	Important. Increase productivity is another indicator of an improving economy.
Employment Situation (August)	Fri., Sept. 5, 8:30 am, ET	Unemployment Rate: 6.1% Payrolls: 223,000 (Increase)	Very Important. Better-than-expected job growth hasn't moved interest rates this year, but the possibility still exists.

 

How Low Can They Go? This is really quite extraordinary. We have strong job growth, accelerating economic growth, the Federal Reserve withdrawing from the Treasury debt and mortgage-backed security markets, and yet mortgage rates continue to fall. Bankrate.com's latest survey shows that the national average on the 30-year fixed-rate mortgage is as low as it has been in the past year. Freddie Mac's survey shows the 30-year loan at a similar low. We have to confess that we've been wrong on the direction of interest rates this year. But we've been right on the variables that should have lead to higher interest rates: more job growth, more economic growth, less Federal Reserve support. When these variables are factored in, interest rates are supposed to trend higher. Turmoil in Russia and Ukraine could be serving as a counterweight, but these events alone shouldn't keep rates in check. Low consumer-price inflation – here and in most of the developed world – is likely the overriding variable. Here in the States, we have the potential for an inflation surge, but most of the developed world doesn't. Economies are so intertwined these days that low inflation and low growth in less robust economies could very well be holding inflation in check in the United States. As for how low mortgage rates can go? We didn't think we had snowballs chance in summer of discussing 4% on the 30-year loan deep into August. But now sub-4% on the 30-year loan is entirely plausible.

Article courtesy of Patti Wilson, American Momentum Bank.

Home Builders Take Flight; Mortages Remain Grounded

MARKET RECAP Home Builders Take Flight; Mortgages Remain Grounded Home builders are feeling as chipper as they have all year. The National Association of Home Builders (NAHB) reports that its sentiment index hit 55 this month. In other words, sentiment is more optimistic than pessimistic. The NAHB also reports a “noticeable” rise in serious buyers. Noticeable is a vague word, but what we see in the hard numbers of housing starts makes it appear true. Starts surged to an annualized pace of 1.093 million units in July, a 15.7% increase from the 945,000 units in June. Even more encouraging, single-family starts picked up pace to 656,000 in July, an 8.3% increase over June. What's more, single-family starts are expected to hold at these higher levels. This is good news because single-family starts pack the most punch economically. They produce the most spillover effect – to lumber, construction materials, furniture stores, home-improvement stores, and on and on. The impact can be felt throughout the economy. Our bread might be mostly buttered through the sale and financing of existing homes – because there are many more of them – but in terms of contributing to economic growth, new-home activity is where it's at. Now, what we would like to see are more homes – new and existing – financed with a mortgage. Unfortunately, we still see insufficient mortgage activity. The latest interest rate down-draft has pushed mortgage rates down to their lowest level of the year. The rate on the 30-year fixed-rate loan hovers just above 4% in many markets. This has helped lift refinances. Data from the Mortgage Bankers Association show refinance applications were up 3% last week. Unfortunately, purchase applications were down 0.4%, and are at a six-month low. Purchase applications are up for new homes, which is no surprise; new single-family homes are rarely investment properties. The existing-home market for purchase applications continues to lag, though, and points to stagnating sales growth. We understand that conforming mortgage standards remain too strict for many people's liking, but we've noted frequently throughout 2014 that credit availability is on the rise. What's more, data from the Federal Reserve show more lenders are willing to lend to more people. Potential home buyers are a bit too conservative in our opinion. To be sure, memories of the housing boom and subsequent bust still linger. But this market is much healthier than it was five years ago, and that's a message that can't be over-emphasized.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
New Home Sales (July)	Mon., Aug. 25, 10:00 am, ET	435,000 (Annualized)	Important. The monthly rate of sales should continue to improve based on recent home-builder data.
S&P/Case-Shiller Home Price Index (June)	Tues., Aug. 26, 9:00 am, ET	9% (Year-Over-Year Increase)	Moderately Important. The rate of price appreciation continues to slow in more markets.
Mortgage Applications	Wed., Aug. 27, 7:00 am, ET	None	Important. Purchase activity still shows no sign of picking up.
Pending Home Sales Index (July)	Thurs., Aug. 28, 10:00 am, ET	1.0% (Increase)	Important. Existing home sales continue to flounder on low inventory.

 

Renting v. Owning Over the past couple years, we've read a plethora of articles like this recent one at Business Insider that extol the virtues of renting. Most of the articles focus on expenses, liquidity, and mobility. On these metrics, renting appears to have the advantage. But when we read these articles, it frequently becomes apparent the writer isn't observing the complete picture. Full expenses can be tricky to capture. Buying a home includes closing costs, moving expenses, utilities, and maintenance. With renting, you have moving expenses and utilities. Maintenance is generally covered by the landlord. But the big picture must be considered: Renters move more frequently than buyers. They incur more moving expenses and frequently forfeit a good chunk of their damage deposit with each move. Liquidity is also a considered a drawback of owning. You can't sell your home as efficiently as you can sell a share of stock. True enough, It does take time and additional cost to sell a home at the market price. This lack of liquidity is an issue, but it isn't as onerous as we are lead to believe. A properly priced home, which reflects market price, will move in short time. Liquidity, in turn, impacts mobility. The time it takes to buy and sell a home impedes your ability to move as freely as you want. But pro-renters frequently fail to mention that as soon as they sign that one-year lease, their mobility is seriously impeded unless they are willing to incur considerable costs. But if we look at two homebodies, we really see the advantage in buying: A buyer and a renter move into a home with no intention of moving. P&I for the buyer is $1,000 per month with a 30-year fixed-rate mortgage; the renter pays $1,000 in rent and signs one-year leases. Let's say rent increases an average of 3% annually Thirty years from now, the buyer pays his final year of $1,000 in P&I; the renter pays $2,427 in monthly rent. In the 31 st year, the buyer owes no P&I, but the renter now pays $2,500 in monthly rent. When the big picture is considered, owning comes out ahead more often than people are lead to believe. Article courtesy of Patti Wilson, American Momentum Bank.

More Good News on the Employment Front August 6, 2014

MARKET RECAP More Good News on the Employment Front Six in a row, which is the number of months payrolls have increased 200,000-or-more per month. The latest employment data show 209,000 jobs were created in July. At the same time, the unemployment rate inched up to 6.2% from 6.1%. More jobs and more unemployment? This phenomenon is the result of a higher labor participation rate. As more jobs become available, more people are compelled to enter the labor force. At the beginning of the year, we mentioned that job creation running at 200,000+ per month was key to sustaining the economy and housing. The good news is the economy is meeting our expectations for job growth. In time, we expect to see a spillover effect: Housing sales, construction, and investment will rise as people become more settled in their new jobs. Interestingly, strong job growth is holding little sway over interest rates. When job growth picks up, interest rates usually pick up with it. That hasn't been the case. Mortgage rates continue to hold near 2014 lows. Bankrate.com's latest survey has the national average on the 30-year, fixed-rate loan at 4.29%; Freddie Mac's survey has it at 4.14% To understand why mortgage rates remain low look no further than the yield on the 10-year U.S. Treasury note. Its yield is down to 2.4%. This bellwether security yields 60 fewer basis points than it did at the beginning of the year. Interest rates remain low because consumer-price inflation remains low. A rush to quality is another factor. Quality interest-paying investments (like bonds and notes) have gained additional support in recent months due to turmoil surrounding the Ukraine and Russia, and, separately, the Middle East. Investors have flocked to haven investments – like the 10-year Treasury note – to wait out the turmoil. Their demand, in turn, has helped keep interest rates in general, and mortgage rates in particular, low. Low rates are certainly good news for anyone seeking a mortgage these days. The fact that lending standards continue to ease is more good news. A recent survey of lenders by the Federal Reserve shows that lenders have indeed made credit available to more people. Then again, we've known this for some time. The MBA's Mortgage Credit Availability Index (MCAI) has risen substantially over the past nine months, and has trended higher over the past two years. Expect this important trend to continue because of falling mortgage delinquencies. The delinquency rate has dropped five-consecutive quarters and is at the lowest level since the fourth quarter of 2007, according to the MBA's National Delinquency Survey . An expanding economy, job growth, low interest rates, and available credit: This is the perfect storm for anyone considering a housing change. We suggest anyone interested in a home to take advantage of today's opportunities before the storm passes – and it will pass one day.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., Aug. 13, 7:00 am, ET	None	Important. Purchase activity remains frustratingly low, which means the housing market has yet to normalize.
Retail Sales (July)	Wed., Aug. 13, 8:30 am, ET	0.2% (Increase)	Moderately Important. Rising sales are reflective of an improving economy.
Import Prices (July)	Thurs., Aug. 14, 8:30 am, ET	0.1% (Increase)	Moderately Important. Import prices remain subdued and non-inflationary.
Producer Price Index (July)	Fri., Aug. 15, 8:30 am, ET	0.3% (Increase)	Moderately Important. Producer prices have increased in recent months, but the increase is due largely to volatile energy prices.

 

Why We Long for Normalization The Phoenix housing market provides an insightful, if not cautionary, tale. If you enjoy roller-coaster rides, then Phoenix is your kind of housing market. Over the past 10 years, Phoenix has seen a bubble followed by a bust followed by a strong upswing. According to data from Case-Shiller, Phoenix house prices bottomed in August 2011, traded flat for the remainder of the year, and then increased 23% in 2012 and 15% in 2013. Now it appears Phoenix has crested and could be headed down again. Overall housing sales dropped 17% year over year in July, according to the Arizona Regional Multiple Listing Service . Investors, who have driven Phoenix's market over the past couple years, appear to be loosing interest: Cash sales dropped to 25% of total sales in July compared to 43% a year ago. We imagine most people don't like roller-coaster rides in real estate. The whipsawing is much more painful when your wallet is involved. Volatility also tends to repel both buyers and sellers on the margin. Volatility raises uncertainty, and people don't want to feel uncertain when contemplating a big purchase like a house. Of course, we wish the best for Phoenix. But the key to Phoenix, and every other volatile housing market, is a return to single-digit annual price appreciation and a market driven by mortgage-financed owner-occupiers. Slow and steady always wins the race over the long haul, and always will in housing. Article Courtesy of Patti Wilson, American Momentum Bank.