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Posts Tagged ‘market’

Up, Up, and Away

Rates on the Rise, But Sales Remain HOT

Mortgage rates spiked over the last two weeks. In fact, since the end of April, the average rate on a 30-year fixed rate mortgage increased by nearly 25%.

Pressure From The Fed Kept Rates Low

The Fed had helped keep mortgage rates low through a bond purchase program called Quantitative Easing (QE for short). But, recent announcements by Fed Chairman Ben Bernanke signaling a slow down or end to QE spooked the market.

Mortgage rates jumped and have continued to rise since those announcements.

Real Estate Market Continues Hot Streak

Despite rising rates, the real estate market remains hot. Realtors continue to be overwhelmed with activity and many sellers are seeing multiple offers near or at asking price.  Homestead’s numbers are no different. After an incredible year of growth in 2012, we have seen a 30% year over year increase in closings. And, despite the jump in interest rates from April to June, our new orders have not slowed.

Homestead’s growth is both a function of a strong market and of our strong commitment and passion to making the closing process easier for our customers and clients. Our values of caring, empathy, flexibility, loyalty and a hands-on, education based approach have cemented a loyal following of Realtors and do-it-yourself sellers.

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February might have been a great month! The National Association of Realtors will release its existing-home sales data tomorrow and many analysts are already predicting strong numbers. Bloomberg reports that home purchases climbed in February to the highest level in almost two years. New construction, on the other hand, shows a more mixed message. Today, the Commerce Department reported that housing starts fell in February but permits for future construction jumped to their highest level in over 3 years.

Unsold Inventory, Low Prices and The Drag on the Economy

Unsold inventory and lost equity continue to be a drag on our economic recovery. Despite steady improvement in both new construction and existing homes, an oversupply of unsold homes continues to keep prices down and slow the recovery. (U.S. Housing Report Shows Uneven Growth, N.Y. Times, March 20, 2012). This oversupply also includes the vast “Ghost Inventory” of distressed properties, such as short sales, foreclosures, and REOs.

These depressed prices and the loss of homeowner’s equity both caused the economic crisis and is slowing the recovery. The decline in home values (prices) has restricted borrowing power, further slowing the recovery. Indeed, many people are unable to tap the value of their home by refinancing or selling. As an unexpected consequence, our economic recovery has been strongest in areas that did not have severe price drops, reports Amir Sufi, professor of finance at the University of Chicago. (Measuring Housing’s Drag on the Economy, New York Times, February 24, 2012). Likewise, the recovery has been weak in states like Arizona, California, Florida, and Nevada – states hit with the larges housing price declines.

Thus, the improvement in home sales is the first piece of good news. A full economic recovery, however, may require more than strong numbers in new and existing home sales. It will likely require more robust recovery in home prices.

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