Fannie Mae Offers New Low-Income Purchase Credit

Fannie Mae Offers New Low-Income Purchase Credit

FSBO Sellers Regret Not Having an Agent

FSBO Sellers Regret Not Having an Agent

Note to Seniors: The Kids Don’t Want Your House

Note to Seniors: The Kids Don’t Want Your House

U.S. Households Need $115K/year for Median-Priced Home

U.S. Households Need $115K/year for Median-Priced Home

White House Announces Homeownership Actions

White House Announces Homeownership Actions

First-Timers’ Need 13% More Income this Year

First-Timers’ Need 13% More Income this Year: Nationally it’s 13%, but in Fort Lauderdale it’s 28% – the highest in the U.S. In Miami, a first-time buyer needs to earn 25% more than they did a year ago.

Supreme Court Ruling Backs Private Property Rights

Supreme Court Ruling Backs Private Property Rights

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.

A Very Positive Sign on the Housing Front

Keeping you updated on the market! For the week of May 25, 2015

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MARKET RECAP A Very Positive Sign on the Housing Front We have a slightly different take on the world than most market commentators. Most commentators focus on consumption as the driving force behind the market. We focus more on production. To be sure, everything that is produced is produced to be consumed itself or to be used to produce something for final consumption. But consumption is always preceded by production. You have to produce before you can consume. For this reason, we put a little more weight on housing starts – production – than most. We were encouraged to see that housing starts blew past most economists' estimates in April. Specifically, starts rose to 1.135 million on an annualized rate. This is the highest monthly rate of starts in many years. More good news is found when you dig deeper into the data. The important single-family segment posted at 733,000 starts, 16.7% higher than in March. Permits, which portend future starts, rose 3.7%. We expect to see starts maintain this elevated level through the summer months. Granted, the surge in starts was partly attributable to downtime in March due to lousy weather. That said, the surge is more than weather driven. There is legitimate rising demand for new homes. This is reflected in home builder sentiment, which continues to maintain a 50-or-higher reading. The latest survey shows builder sentiment posted at 54 in May. Anything above 50 is positive. This is another reason we expect starts to maintain these elevated levels. A new home sale precedes an existing home sale. Existing home sales were disappointing, but not egregiously so. Sales were down 3.3% to 5.04 million on an annualized rate in April. Limited supply remains the bugaboo, particularly in the starter market. Young people still find it difficult to grasp the bottom rung. We remain confident, though, that entrepreneurial activity will eventually rectify this problem.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
New Home Sales (April)	Tues., May 26, 10:00 am ET	490,000 (Annualized)	Important. The pick up in starts points to stronger new home sales through the summer season.
Mortgage Applications	Wed., May 27, 7:00 am, ET	None	Important. Rising rates have taken some steam out of purchase activity, but activity should pick up when borrowers realize higher rates are the new normal.
Pending Home Sales Index (April)	Thurs., May 28, 10:00 am, ET	1.0% (Increase)	Important. The uptrend in contracts points to rising sales activity heading into summer.
Gross Domestic Product (1st Quarter 2015)	Fri., May 29, 8:30 am, ET	1.0% (Annualized Decrease)	Important. Contracting economic activity in the first quarter is one important reason the Fed will not move to raise interest rates.

 

Why the Fed Doesn't Really Matter at This Point Here we are in the waning days of May and it appears highly unlikely the Federal Reserve will move to raise the federal funds rate in June. At the beginning of the year, June was the month most everyone pointed to for the first increase in nearly 10 years. We were skeptical then, and we repeatedly stated our skepticism in subsequent months. Our skepticism was well founded. In the latest policy meeting minutes (from late April) officials said in the most explicit terms yet that they're unlikely to raise the fed funds rate in June. After watching the economy stumble through the winter, many at the meeting were doubtful the criteria for a rate increase would be met. The fed funds rate is supposed to have a cascade effect. Once it starts to rise, all other rates eventually rise too. But as we know, longer-term interest rates have been rising without prompting from the Fed. The yield on the 10-year U.S. Treasury note frequently posts above 2.25% these days. The rate on the 30-year fixed-rate mortgage loan is frequently quoted above 4%. We think investor sentiment has changed. Investors are no longer willing to buy bonds – Treasury bonds in particular – that offer a negative real yield (a yield that does not compensate for inflation). Though the yield on all bonds and notes in the U.S. is nominally positive, many fail to maintain purchasing power over time when inflation is factored in. Consider it this way: If you earn 1% on your savings and consumer price inflation is running at 2%. After a year, you're 1% in the hole. You've lost purchasing power. Investors have been willing to put up with negative real interest rates because the Fed was continually driving interest rates lower through quantitative easing. The Fed stopped quantitative easing in October (though it continues to reinvest the proceeds of maturing bonds into new bond purchases.) Investors know the Fed won't drive yields any lower. Last month, we warned that markets can change, and change in a hurry. That has certainly happened with the sharp rise in interest rates in general and mortgage rates in particular. Could we see 3.75% on the 30-year fixed-rate loan a month from now? Anything is possible, but what's possible isn't the same as what is probable. Article courtesy of Patti Wilson, American Momentum Bank.

A tough yet honest conversation with a seller

I recently went on a listing appointment where I needed to have a tough conversation with the prospective Seller's.  Their home is fairly new and is in a lovely sub-division.  The area has continued to show positive appreciation and substantial growth.

 

As I toured their absolutely lovely home and was given a spreadsheet of the many, many upgrades to the home, I knew that a tough conversation was looming.  Although the home was stunning, the amount of upgrades to the home were way more than they could ever hope to recover right now based on the market report for their neighborhood.  It is one of those sick feelings that you dread having.

 

The price per square foot Sold average in this particular neighborhood is about $100 s.f.  With their upgrade list which exceeded the actual purchase price of the home, they were hoping to see it listed at $135 s.f.  It pained me to see the love and care that they had put into this home but at this time the market could not bear at that price per s.f.

 

I explained to them that even if we listed the home at their desired price and received an offer, if it didn't appraise then they would be re-visiting the price at some point.  Even if a cash offer came in, most buyers are savvy and would still not desire to pay way over market value in any neighborhood.

 

I encouraged them to go ahead and have an appraisal done prior to listing the home.  Hopefully they will see the writing on the wall from a third party.

 

The lessons here are:

• Unless you plan to stay in your home forever, consider your upgrades before you do them as you may not get back what you put into them if you decide to sell.
• Know what the current market value is for your home.  If you put in upgrades that you feel bump your value up way over what the neighborhood can bear, understand that you most likely will not see this investment returned.
• Realize that situations do change in our lives and what we planned on doing may very well have to change quickly.  

Upgrades are a good thing but only if they are consistent with keeping your home valued with the current market rate.  Have a licensed agent who knows your area consult with you prior to putting in some hefty upgrades.  You may decide to re-think some of them.

Having a tough conversation with a Seller is necessary when you are being honest, know the market and don't want to leave them with false hope.  The conversation is necessary and hopefully the homeowners will take the time to get an appraisal and then to re-think if they even desire to sell.  

Study: Owners still overestimate their home’s value

 

DETROIT – April 14, 2015 – Appraiser opinions of values were higher than homeowner estimates in 17 of the 27 metro areas (63 percent) measured by Detroit-based Quicken Loans.
Even though a majority of metros have higher appraisals than homeowners' estimates, however, the overall average finds owners continue to think their property is worth a bit more than an appraiser's estimate.
Home Price Perception Index (HPPI)
Nationally, appraiser opinions were lower than homeowner estimates by 0.40 percent in March. In February, appraiser opinions were only 0.13 percent lower than homeowner estimates.
This slight change in the national HPPI was consistent with most metro areas examined, nearly all of which saw little perception change from the month prior. Seventeen of the 27 metro areas analyzed are still seeing appraiser opinions higher than homeowner estimates.
Although the difference is minor, Tampa, Florida's HPPI value turned negative in March, meaning, on average, appraiser opinions are now greater than homeowner estimates.
"While the national HPPI shows appraiser opinions trailing those of homeowners, it is encouraging to see the gap at such a narrow margin," says Quicken Loans Chief Economist Bob Walters.However, "homeowners in a majority of the nation's largest markets can take solace in the fact that their home may have more equity than they realize."
For charts and background information on the HPPI, visit Quicken's website.
© 2015 Florida Realtors®  

ECB Embraces QE: Why We Should Care

Keeping you updated on the market! For the week of January 26, 2015

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MARKET RECAP ECB Embraces QE: Why We Should Care It's probably best to begin by defining acronyms. The ECB is the European Central Bank, the European Union's (EU) equivalent to our Federal Reserve. QE refers to quantitative easing. QE is something our Fed commenced in 2008 and ended late last year. QE, of course, refers to a central bank buying bonds and other assets, which it pays for with new money, thus injecting new money into the economy. The end result of QE, as we know from experience, is lower interest rates, including lower mortgage rates. From 2008 to 2013, the rate on the 30-year loan dropped three percentage points to 3.5%. The 30-year loan isn't quite that low today, but it's close: Bankrate.com has the 30-year loan averaging 3.81%; Freddie Mac has it averaging 3.63%. Will mortgage rates hold current levels? Many economists believe the Fed will begin to raise the federal funds rate in the second half of 2015. Raising the fed funds rate raises lending costs to banks. Interest rates, therefore, are prone to rise. In the past, this is how it all played out. But today isn't like the past. QE is a relatively new phenomenon. It was new when the Fed undertook it in 2008. It is new when the ECB undertakes it this March. European QE is expected to run through September 2016. By then, the ECB is expected to have injected another 1.1 trillion euros into Eurozone economies. How far European interest rates will fall is anyone's guess. As it is now, interest rates in Germany, Europe's economic powerhouse, are already very low. A 10-year German bond yields roughly 45 basis points. The U.S. Treasury equivalent yields roughly 1.8% – more than four times the German bond. So what does this mean to us? We think that we'll see continued strong demand for U.S. Treasury and mortgage agency debt. Relative to European government debt, U.S. Treasury debt looks attractive. We're already seeing strong demand for U.S. dollars. A year ago, it took $1.36 to buy one euro. Today, it takes $1.14. We expect that many of these dollars will flow into U.S. financial assets, including long-term U.S. debt. The ECB's QE should help hold U.S. interest rates down, all things constant. But we have to offer a caveat: all things aren't constant. Mortgage demand is again on the rise. The MBA reports that applications increased 14.2% last week. The MBA's refinance index was up was up 22%, the purchase index was up 3%. Over the past year, we've seen underwriting standards on conventional loans ease. As for government loans, HUD's 50-basis-point reduction of PMI premiums on FHA loans have helped lift demand. If demand continues to rise, it's possible mortgage rates could rise to take advantage of rising demand. That said, we expect today's low interest rates to hold through the first quarter of 2015. But as it is with interest rates, there are no guarantees. So we see little upside to procrastinating.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
New Home Sales (December)	Tues., Jan. 27, 10:00 am, ET	448,000 (Annualized)	Important. Sales should trend higher on rising construction and strong job growth.
Mortgage Applications	Wed., Jan. 28, 7:00 am, ET	None	Important. Sustained low rates should raise demand for mortgage financing.
Pending Home Sales Index (December)	Thurs., Jan. 29, 10:00 am, ET	0.5% (Increase)	Important. Sales look poised to move higher on rising home-purchase affordability.
Gross Domestic Product (4th Quarter 2014)	Fri., Jan. 30, 8:30 am, ET	3% (Annualized Increase)	Important. The U.S. will continue to have the strongest economic growth among Western developed countries.

 

Still Up for New Housing Home builders were slightly less optimistic in January compared to the previous month. The NAHB/Wells Fargo Housing Index dipped to 57 from 58 in December. Fifty is key, though. A reading above 50 means builders view the outlook favorably. The good news is sentiment has consistently held above 50 for the past 12 months. We're not surprised confidence remains elevated. Housing starts increased 4.4% to 1.089 million units on an annualized basis in December. Single-family housing starts were particularly strong, rising 7.2% to 728,000 units on an annualized basis. History leads us to believe that starts should continue to trend higher. Housing starts and completions had an outlier surge after the bursting of the tech bubble in 2000. The surge continued to 2007. As we know, single-family starts and completions then fell off a cliff and bottomed in 2011. Activity remains below the historical annual average of around one million single-family starts. In other words, we have plenty of room to run. Factor in basic economics, and there is even more reason to be optimistic. A dearth of new supply coupled with increased demand and inexpensive financing options points to a very good year for new home sales. Article Courtesy of Patti Wilson, American Momentum Bank.

Is Sub-4% the New Norm?

Keeping you updated on the market! For the week of January 12, 2015

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MARKET RECAP Is Sub-4% the New Norm? Nearly everyone believes the Federal Reserve will raise the influential federal funds rates this year. The fed funds rate has been held near zero for the past five years. This rate matters because it influences other lending rates. With so much chatter about the Fed raising interest rates this year, you would think rates would begin to rise in anticipation of the event. That's hardly been the case. The yield on the 10-year U.S. Treasury note has steady declined over the past year, and was recently quoted below 2%. As the 10-year note goes, so frequently goes the 30-year fixed-rate mortgage (and other fixed-rate term loans). Sub-4% on the 30-year loan has been the norm in recent months. Bankrate.com's national survey, which tends to be higher than many local quotes, shows the 30-year loan averaged 3.85% this past week. That's the lowest it has been in 20 months. Though the Fed might want to see rates rise, that simply hasn't been the case, at least for longer-term loans. This is extraordinary when you consider the U.S. economy has produced new jobs at a monthly rate of 200,000+ through 2014. Consumer-price inflation just might keep all rates low through 2015. Falling oil prices have kept inflation risk at bay. Consumer-price inflation remains below 2% in the United States, and will likely remain below 2% through the first half of 2015. Meanwhile in Europe, deflation, not inflation, is the overarching worry. The European Central Bank (ECB) recently admitted that inflation will likely spend a large part of 2015 in negative territory. Eurozone inflation, 2% at the beginning of 2013, has drift lower since. Consumer-price inflation was below 1% for all of 2014. Today, you can find European bonds that actually pay a negative rate of interest. The two-year German bond is quoted at a negative 0.12%. The price on the five-year German bond has risen to drive the yield down to zero. If the choice is between a negative interest rate, like in Germany, or a nominally positive rate, like in the United States, many investors will choose the latter. This means more foreign money will likely flow into U.S. Treasury notes and bonds. This flow of money, in turn, will raise prices on U.S. notes and bonds and lower their yield. We do offer a caveat on our outlook: Interest rates are akin to predicting the flight path of a butterfly. It's impossible to know where it is going at all times. But given recent events, we would not be surprised to see mortgage rates flutter at today's lows through the first quarter of 2015.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., Jan. 14, 7:00 am, ET	None	Important. Activity remains subdued, but the plunge in interest rates should spur demand.
Retail Sales (December)	Wed., Jan. 14, 8:30 am, ET	0.1% (Increase)	Moderately Important. Overall sales growth has moderated because of fewer dollars spent on gasoline.
Import Prices (December)	Wed., Jan. 14, 8:30 am, ET	2.5% (Decrease)	Important. Falling oil prices will keep inflation risk muted.
Consumer Price Index (December)	Fri., Jan. 16, 8:30 am, ET	All Goods: 0.3% (Decrease) Core: 0.2% (Increase)	Important: When food and fuel are stripped out, overall consumer prices are rising, though remain within the Fed's goals.

 

Housing's Comparative Advantage Ultra-low mortgage rates are making homes more affordable. At the same time, the lending market is becoming more accommodating. Insurance premiums are being reduced on FHA loans. This means even cheaper financing will be available to a wider swath of potential home buyers. Home-price appreciation is also moderating, and homes are appreciating at a more reasonable rate. Rent-price increases, on the other hand, are making it more expensive for people to rent. Data from Zillow show that rents have grown at twice the pace of income over the past 14 years. Zillow expects rents to outpace home-price appreciation over the next year. This means homeownership will become even more appealing in 2015. We've always believed most people prefer to own than rent. There is something about owning a home than can't be replicated by renting. Peace of mind is found in being able to paint the walls and drive a nail wherever you want without worrying about a security deposit. Pride of ownership really does have value. But more than anything, ownership gets people off the price escalator. Rent never ceases to rise. When a home is bought and financed with a fixed-rate loan, what was paid last year will be paid this year, and years after that (property taxes and insurance aside). When low lending rates are combined with the comparative advantages of ownership, there is no reason to not like the outlook for housing in 2015.

Article Courtesy of Patti Wilson, American Momentum Bank

The Year That Was; The Year That Will Be

Keeping you updated on the market! For the week of December 29, 2014

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MARKET RECAP The Year That Was; The Year That Will Be Our 2014 outlook for the housing and mortgage markets wasn't perfect, but it was close. At the beginning of the year, we thought we would see a slowdown in home-price appreciation. That's been the case when you look at the national numbers. The rate of appreciation today compared to a year ago has slowed appreciably. The market has returned to single-digit year-over-year gains. This is good news, because we're returning to historical – and sustainable – appreciation rates. Twelve months ago we also thought we'd see a pick up in the labor market and in economic growth. That, too, has occurred. The economy continues to generate 200,000-or-more new jobs each month. This is no surprise when you consider that the economy itself has picked up pace and is growing at a rate unseen for nearly eight years. Lest we puff out our chest too much, mortgage rates were our big miss. That lending rates are this low given current job growth and economic activity seems implausible. Surely, strong growth would lead to rising rates, but it hasn't. Mortgage rates are lower today than they were a year ago. We were calling for 5% on the 30-year fixed-rate loan heading into the waning days of 2014. We are nowhere near that; sub-4% on the 30-year loan is the going rate. As for the future, we like what we see. We think price appreciation will continue to moderate in more markets, though we think price appreciation will prevail. Overall, the market will continue to push ahead. We are confident housing prices will continue to move forward because the economy will continue to move forward. Reasonable estimates have U.S. gross domestic product (GDP) growing just above 3% in 2015. Based on these estimates, we think job creation will continue at a robust pace – at least at a pace of 200,000+ new jobs per month through the first half of next year. Whether rising economic activity will lead to more sales activity is tougher to discern. We think it will... if we see more interest in the lower-price market segment. There is still a dearth of activity among the younger demographics. If younger buyers return, then 2015 could turn out to be the best year in sales volume since before the 2009 recession. But could rising mortgage rates spoil the party? They could, though given recent statements , the Federal Reserve is in no hurry to see rates rise. Therefore, we think rates will remain muted through at least the first quarter of 2015. Then again, we offer a caveat: Markets are anticipatory entities. Rates will start moving higher long before the Fed officially begins to raise rates. Scuttlebutt moves markets. A year ago, we were bullish on housing, and we were right to be so. Our stance hasn't change, and we don't expect it will for some time. Bottom line: we like this market, and we remain bullish.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
S&P/Case-Shiller Home Price Index (October)	Tues., Dec. 30, 9:00 am, ET	4.5% (Year-Over-Year Increase)	Important. Price growth is trending lower, and it should continue to do so into 2015.
Consumer Confidence Index (December)	Tues., Dec. 30, 10:00 am, ET	94 Index	Important. Rising confidence points to sustainable economic growth.
Mortgage Applications	Wed., Dec. 31, 7:00 am, ET	None	Important. Purchase activity remains muted, but new government initiatives could spur demand.
Pending Home Sales (November)	Wed., Dec. 31, 10:00 am, ET	103.5 Index	Important. Sales remain flat, and will likely remain flat into early 2015.

 

Real Estate or Stocks? The question of real estate or stocks was recently presented by CNBC. Unfortunately, they didn't get the answer right because they didn't get the question right. They compared residential owner-occupied real estate with publicly traded stocks. The two are not alike: one is an investment and one isn't. Though frequently referred to as an investment, residential owner-occupied real estate is really an asset. There is a distinction. An investment is expected to generate cash flow. An asset that is not an investment doesn't generate cash flow. Nevertheless, both can appreciate. That said, residential real estate can be an investment, and frequently is. If it is bought as rental property, it will generate periodic cash flow. It will also generate terminal cash flow, at the end of the holding period, such as when bought to flip. Returning to CNBC, they compared home prices to an S&P composite stock index dating back to 1890. Stock prices have increased 2.03% on average annually since then. Home prices have increased 33 basis point annually. It appears stocks win. The comparison is misleading. If the comparison were residential real estate investments – rentals and flips – real estate would compare much more favorably. When treated properly as an investment, residential real estate bought to rent holds up well compared to stocks. So residential real estate or stocks? It depends. If you need a home in which to live, the long-term return won't be as good as a broad-based index of stocks. Then again, we all need a place to live. The good news is that maintained owner-occupied real estate appreciates over time. The same can't be said for most other assets – cars, clothes, furniture, and jewelry. As for rent, it always goes up. The right answer is that it can be worthwhile to own residential real estate as an abode and as an investment. And, yes, it can also be worthwhile to own stocks.

Article courtesy of Patti Wilson, American Momentum Bank

Do Lower Oil Prices Lead to Higher Housing Demand?

Keeping you updated on the market! For the week of December 8, 2014

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MARKET RECAP Do Lower Oil Prices Lead to Higher Housing Demand?  The question is intriguing, given the steep decline in oil and gasoline prices over the past couple months. After all, less money spent on gasoline, the more money that can be spent elsewhere. Housing is elsewhere.  CoreLogic recently tackled the oil/housing question in a blog post by one of its senior economist Molly Boesel. The quick answer is that it appears that lower oil prices can lead to higher housing demand. A few variables come into play, though: number of miles driven; the actual price of gasoline; and for certain homeowners, the price of oil for heating fuel.  Number of miles driven and gasoline prices are most interesting. Data show that the lower gasoline prices fall, the more buyers are willing to move from urban centers into higher-priced homes. The key is that consumers need to believe that lower gasoline prices are sustainable over the long haul. The longer gas prices fall, or hold lower levels, the more willing consumers are to buy a home, particularly a suburban home.   Predicting oil prices, though, is as difficult as producing mortgage rates, maybe more so. Oil prices can hold low levels for an extended time, as in the 1990s. But oil prices are frequently spiky, and the spikes can be quite volatile. Oil priced at $65/barrel in one year can soon be $140/barrel the next.  In short, we are not banking on oil prices holding these low levels. But if they do, the good news is that housing is likely to be a beneficiary. As for good news in the present, mortgage purchase applications continue to trend higher.  The Mortgage Bankers Association's purchase index was up again last week, posting a 3% increase. Purchase activity has been gradually ratcheting higher over the past month. We are seeing more purchase activity despite a slight decrease in mortgage credit availability.  This suggests more buyers are entering the market, and they are getting credit.  Going forward, sustained lower oil prices would be nice, and so would a sustained rise in purchase application activity. The former gives consumers more money, the latter signifies the return to a more normalized lending market.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., Dec. 10, 7:00 am, ET	None	Important. Purchase activity continues to trend higher and portends rising overall housing sales.
Import Prices (November)	Thurs., Dec. 11, 8:30 am, ET	1.5% (Decrease)	Moderately Important. Lower oil prices will continue to depress the import-price index.
Retail Sales (November)	Thurs., Dec. 11, 8:30 am, ET	0.2% (Increase)	Moderately Important. Despite lower energy prices, sales in total dollars are rising. The good news is that more dollars are flowing to bigger-ticket items.
Producer Price Index (November)	Fri. Dec. 12, 8:30 am, ET	0.4% (Decrease)	Moderately Important.  Falling producer prices ensure interest rates will continue to hold today's low levels.

 

Where Do We Go From Here?  We're near the time of the year when people begin to gaze into their crystal ball. What should we expect for 2015? Bill McBride at CalculatedRiskBlog.com gathered estimates from a number of difference sources. So far, nothing is out of the ordinary. Most prognosticators see the recent past extending into the future. New home sales estimates range between 498,000 and 620,000 units on an annualized rate for 2015. (The NAR estimate is on the high end.) Total home starts range between 1.056 million and 1.3 million units on an annualized rate. (The NAR again offers the high-end estimate.)  On the price front, nearly everyone has throttled back price-appreciation expectations for next year. Estimates range between 2.4% and 5.2% annual price increases at the national level. (CoreLogic offers the high-end estimate.) This is no surprise. We've been saying since the beginning of 2014 that price appreciation will decelerate.  We expect it to continue to decelerate to within the range most analysts expect. This is, after all, a normalized range based on historical trends.  As for mortgage rates in 2015, CalculatedRiskBlog doesn't say.  But we see the rate on the 30-year fixed-rate loan hovering between 4.0% and 4.5% for the first quarter of 2015.  After that, it is hard to tell. Rates will depend on economic growth, job growth, wage rates, and inflation. If they are mostly up after the first three months, the Federal Reserve will start to talk up interest rates, which will lead to rates actually rising. Article courtesy of Patti Wilson, American Momentum Bank

The Big View.

Keeping you updated on the market! For the week of December 1, 2014

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MARKET RECAP The Big View The holidays are a nice respite. Things slow down a bit, which allows us to stand back and take in the big picture. We like what we see, because the big picture includes steady improvement in housing. As we reported last week, housing sales are trending higher. In addition, more sales are being financed with a mortgage. That we are seeing more purchase applications is a sign of more owner-occupied buyers. These buyers have always been the key drivers of the housing market. Recent trends in home prices point to more buyer interest and more inventory from which to choice. On the pricing front, S&P/Case-Shiller's closely followed 20-city price index rose 0.3% month over month for September. Year over year, the index is up 4.9%. This is the slowest pace of year-over-year price growth since October 2012. This is actually good news because we are seeing the pace of price appreciation return to historical norms, and historical norms are sustainable norms. That said, price appreciation is still found in most local markets. Of the 20 markets in Case-Shiller's index, 18 showed price gains for the month. We expect home prices to continue to appreciate in most markets Case-Shiller follows. We say that because we remain confident in the economic outlook. Fortunately, many consumers apparently share our perspective. Consumer confidence , overall, remains encouraging. Though down slightly in November, confidence has been on the rise through most of 2014. Better yet, consumers remain upbeat on the outlook for job creation. The latest data from the Conference Board show more people view the job market favorably. This, in turn, points to another favorable employment report next week. (Look for another month of 200,000-or-more new jobs for November.) The positive data on jobs, housing, and mortgage lending over the past six months gives us even more reason to be thankful this time of year. The good news is that we don't expect this sense of gratitude to abate any time soon.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Construction Spending (October)	Tues., Dec. 2, 10:00 am, ET	0.5% (Increase)	Important. Rising residential spending points to rising home sales in coming months.
Mortgage Applications	Wed., Dec. 3, 7:00 am, ET	None	Important. Purchase activity is on the rise, which is an important development for the owner-occupied market.
Labor Productivity & Costs (3rd Quarter 2014)	Wed., Dec. 3, 8:30 am, ET	Productivity: 1.7% (Increase) Costs: 0.6% (Increase)	Moderately Important. Productivity outpacing costs is a positive for future wage growth.
Employment Situation (November)	Fri., Dec. 5, 8:30 am, ET	Unemployment Rate: 5.7% Payrolls: 230,000 (Increase)	Very Important. Strong job growth points to sustained housing growth.

 

The Best of Both Worlds   The economy continues to hum along. What's more, it continues to hum along at a higher pitch than most economists had expected. Gross Domestic Product (GDP) – the value of all goods and services – was revised up to an annual growth rate of 3.9% in the third quarter. The consensus estimate called for GDP to be revised to show 3.2% growth. Within the GDP data, the trends in private investment were particularly encouraging. Both nonresidential fixed investment and residential fixed investment ratcheted higher. This is good news because more investment today leads to more consumer spending tomorrow. We're not particularly surprised that economic growth is picking up. After all, the economy has been producing new jobs at the rate of 200,000+ per month for most of 2014. On the other hand, interest rates are a surprise. When economic growth ratchets higher, so, too, do interest rates. This time around is different, though. Interest rates continue to remain subdued. The 10-year U.S. Treasury note continues to hover around 2.3%. This is the low-end of the range that has prevailed through 2014. At the same time, mortgage rates remain low. The 30-year fixed-rate mortgage continues to vibrate around 4%. We have rising GDP growth coupled with low interest rates. What's more, growth should continue to rise, while rates should remain low. We say that because consumer-price inflation remains very subdued. So, we have the best of both worlds – strong growth and low lending rates. This unique paradigm suggests housing should get off to a strong start in 2015. Article courtesy of Patti Wilson, American Momentum Bank.