May 22, 2012 | Housing Analysis
Falling mortgage rates and stagnant home prices are making a positive effect on home affordability nationwide. Never before in recorded history have so many homes been affordable to households earning a moderate annual income.
Last week, the National Association of Home Builders reported the Home Opportunity Index at 77.5 — its highest reading of all-time. The index indicates that more than 3 of every 4 homes sold last quarter were affordable to households earning the national median income of $65,000.
Last quarter marks the 12th straight quarter — dating back to 2009 — in which the index surpassed 70. Prior to this run, the index had never crossed 70 even once.
That said, like most real estate statistics, the Home Affordability Index has a national purview. National data is of little value to homeowners in specific cities such as Worcester County area , or in specific neighborhoods.
Last quarter, home affordability varied by region.
In the Midwest, for example, affordability was highest. 7 of the top 10 most affordable (more…)
May 18, 2012 | Federal Reserve
The Federal Open Market Committee released its April 2012 meeting minutes this week, revealing a Federal Reserve in the ready in the event additional monetary stimulus is needed.
The Fed Minutes function much like the minutes from a business meeting; or, condominium association meeting, for example. It’s a detailed review of the conversations and debates between FOMC members, and is typically published 3 weeks after a Federal Reserve meeting.
The Fed Minutes is a follow-up statement on the FOMC’s more well-known, post-meeting press release. It’s also much more lengthy.
Whereas the April 25, 2012 press release totaled 444 words, the Fed Minutes spanned 6,618.
Those extra words are important, too, because the detail offered within the Fed Minutes lends insight into how our nation’s central bank views the U.S. economy, its strengths and weaknesses, and its threats.
From the Fed Minutes, some of the Fed’s comments includes :
- On employment : Unemployment may remain elevated through 2014
- On housing : Tight underwriting is “holding down” the housing market
- On rates : The Fed Funds Rate should remain low until late-2014
There was also substantial talk about Europe and its role in the U.S. economy. Notably, U.S. financial institutions have been actively reducing their European exposure to contain damage in the event of a full-blown economic crisis abroad.
This has had the net effect of lowering mortgage rates in Worcester County area. Mortgage bonds often benefit from economic uncertainty.
In addition, because several Fed members acknowledged a willingness to add new stimulus to the U.S. economy, mortgage markets are accounting for the possibility it could happen. It’s unclear whether stimulus would be added after the Fed’s next meeting, or at some point later in the year, or at all.
The FOMC has its next scheduled meeting June 19-20, 2012.
May 17, 2012 | Housing Analysis
The new construction housing market continues to improve.
One day after the National Association of Homebuilders reported a 5-year high in homebuilder confidence, the U.S. Census Bureau reports that single-family housing starts rose 2 percent for the second straight month last month.
In April, on a seasonally-adjusted, annualized basis, the government reports 492,000 single-family housing starts. A “housing start” is a home on which ground has broken.
In addition, March’s single-family housing starts were revised higher. What was previously reported as a three percent loss was re-measured and changed to a 0.2% gain.
The April tally marks a six percent increase over the one-year moving average and, along with the March revision, suggests that the springtime housing market may have just been seasonal.
In March, a number of reports suggested a housing retreat :
- Existing Home Sales slipped 3%
- New Home Sales slipped 7%
- Homebuilder Confidence fell 4 points
Since then, though, low mortgage rates and affordable home prices appear to have sustained the new construction market, which now appears poised for a strong 2012.
As one mark of proof, active buyers of newly-built homes in Massachusetts and nationwide are scheduling “model home” showings at the fastest pace since 2007. The burst of foot traffic high has builders upping their sales expectations for the next 6 months.
A scenario like this would normally lead new home prices higher, but the pressure for prices to rise may be offset by the amount of new home supply coming online.
In addition to a rise in Housing Starts, the Census Bureau also reports that, in April, the number of Building Permits for single-family homes rose 2 percent to move to its second-highest level since March 2010 — the month preceding the end of the 2010 federal Home buyer tax credit.
86 percent of homes break ground within one month of permit issuance.
It’s unclear whether housing is on a steady path higher, but there’s a growing body of evidence that suggests the market bottom has already passed.
May 16, 2012 | Housing Analysis
Homebuilder Confidence is on the rise once again.
After a brief dip in April, the National Association of Homebuilders reports that the Housing Market Index rose 5 points in May to 29. The increase marks the sharpest climb in homebuilder confidence on a month-to-month basis in 10 years, and raises the index to a 5-year high.
The Housing Market Index is scored from 1-100. Readings above 50 indicate favorable conditions in the single-family new home market overall. Readings below (more…)
May 15, 2012 | Mortgage Rates
Home affordability is receiving a boost from across the Atlantic Ocean this spring.
For the third time in as many years, a weakening Eurozone is pushing May mortgage rates to new lows throughout Worcester County area and nationwide.
The story centers in Greece and begins in 2010.
2 years ago, it was uncovered that successive Greece governments had purposefully misreported the nation-state’s economic statistics in order to meet European Union standards. The fraudulent data had permitted Greek governments to spend beyond their means while hiding deficits from EU auditors.
The realization that Greece was heavy in debt with little means to repay its creditors resulted in a massive bailout from the IMF and the rest of the Eurozone nations. The terms for Greece said that, in order to receive its €110 billion aid package, Greece would be required to enact strict spending controls.
This is known as “austerity” and the deal was met with outrage by the Greek public. There’s been general social unrest ever since and, on May 6 of this year, Greece held a special “early election” to elect all 300 members to its legislature.
No party won majority in the elections.
7 different groups garnered seats in the parliament last week with anti-austerity groups faring well. It’s spurred concern that Greece will end its bid for fiscal restraint, and that Greece may choose to leave the 17-nation Eurozone.
The uncertainty surrounding Greece is helping U.S. mortgage rates (more…)
