What Happens When Interest Rates Rise?

Freddie Mac released its U.S. Economic and Housing Market Outlook for June showing the effects rising interest rates are having on certain markets around the country and the overall housing recovery.

Overall, however, mortgage interest rates would have to rise to 7 percent before the U.S. median-priced home would be unaffordable to a family making the median income in most parts of the country.

Outlook highlights

• Interest rates for 30-year fixed-rate mortgages have risen about 0.5 percentage points over the past several weeks and are expected to hover around 4 percent during the second half of 2013.

• With rising mortgage rates, expect a sharp decline in refinance volume in the second half of this year; refinance originations are expected to total about $1.1 trillion in 2013, down from $1.5 trillion in 2012.

“The recent upturn in interest rates is sparking fears among some that the nascent economic and housing recoveries will be choked off before they produce sustained growth,” says Frank Nothaft, Freddie Mac vice president and chief economist. “However, with the exception of high-cost markets – primarily San Francisco south to San Diego, and Washington, D.C., north to Boston – which are already challenged with affordability, house prices in most of the country are very affordable.”

 





© 2013 Florida Realtors®

U.S. Ethnic Groups Value Homeownership

Do Americans from different backgrounds hold the same vision and attitude when it comes to homeownership? Better Homes and Gardens Real Estate released national findings from a survey of the three largest population groups within the U.S. – 400 Caucasians, 400 African Americans and 400 Hispanic Americans ages 18 and older.

The survey indicates that Americans from the three ethnic groups are far more alike than different when it comes to many perceptions and behaviors surrounding the homebuying process. However, when it comes to considering family ties and origins when buying a home, there are key differences.

“It’s important that we understand all that we can about our consumers to best serve them, and that includes understanding them not only from a cultural standpoint, but with regard for their individual values, aspirations and needs,” says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate LLC.

Key findings

We’ve got high hopes: All groups surveyed are optimistic about the next generation of homeowners, and a majority believes their children or future children will have a home of their own before the age they did (Hispanic 78%; African American 74%; Caucasian 56%).

Homeowners also believe that their children’s homes will be the same size or bigger than theirs (Hispanic 90%; African American 83%; Caucasian 73%). Each group surveyed views homeownership as an overarching lifelong goal. In fact, homeownership is considered to be the biggest indicator of status by all groups: African Americans (78%), Hispanics (78%) and Caucasians (65%).

Each of the groups believes that a home is not simply an indicator of success; it is a long-term investment and a wise one. More than any other group, Hispanics are planning ahead for homeownership and prioritizing this dream over retirement. More than half of the Hispanics (52%) surveyed who do not currently own their own home say they are focused on saving for a downpayment compared to 46 percent of African Americans and 44 percent of Caucasians.

“The white picket fence” prevails: The majority of individuals from every ethnicity surveyed lean largely toward the suburbs: 59 percent of African Americans, 55 percent of Caucasians and 50 percent of Hispanic Americans selected the suburbs as their preferred location.

Love thy neighborhood: When asked to choose between living in their dream home in a neighborhood they are not fond of, or residing in their dream locale in a home they don’t love, each of the three groups was split almost equally down the middle. A slight majority of respondents (56% Caucasian; 50% African American; 50% Hispanic) said they would rather live in the neighborhood of their dreams, even if they are not head over heels in love with their house.

Home is where you started: Many homeowners want to live close to where they grew up – but how close is “close”? For a majority of Hispanics (56%) and African Americans (53%), this means staying within the same state they grew up in. Caucasians (56%), however, prefer to remain in the same broad region of the country where they grew up. In fact, 1 in 3 Hispanics prefer that their ideal home is located within the town they grew up in, while only 20 percent of Caucasians share the same sentiment.

We’re going to need a bigger house: The multi-generational American home is proliferating. In fact, it is likely to occur in all ethnic groups surveyed. Results show that 63 percent of Hispanics and 59 percent of African Americans will likely have their parents, grandparents or other extended family members living with them at some point. Only 43 percent of Caucasians share these sentiments.

House hunting has also been impacted by the increasing likelihood of multi-generational family units. According to survey results, 89 percent of African Americans, 89 percent of Hispanics and 88 percent of Caucasians who anticipate such living arrangements would look for features that could accommodate additional family members such as separate “in-law” quarters.

The Better Homes and Gardens Real Estate Survey was conducted by Wakefield Research among 1,200 Americans between Dec. 7 and Dec. 26, 2012, using an email invitation and an online survey. Quotas were set to ensure reliable and accurate representation of the populations. For the interviews conducted in this study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 4.9 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

 





© 2013 Florida Realtors®

Why You Should Hire a Realtor in 65 Seconds

Rate on 30-Year Mortgage Jumps to 3.81%

Average U.S. rates on fixed mortgages jumped this week to their highest levels in a year, signaling slightly higher costs for homebuyers. But rates still remain low by historical standards.

Mortgage buyer Freddie Mac said Thursday that the average rate for the 30-year loan rose to 3.81 percent, up from 3.59 percent last week. That’s still not far from the 3.31 percent rate reached in November, the lowest on records dating to 1971.

The average on the 15-year loan rose to 2.98 percent, up from 2.77 percent last week. The record low of 2.56 percent was reached in early May.

Mortgage rates are rising because they tend to follow the yield on the 10-year Treasury note. The yield rose to 2.17 percent on Tuesday, its highest level in 13 months. It has since fallen slightly to 2.11 percent in early trading Thursday. Still, that’s up from 1.63 percent at the start of the month.

Yields on the benchmark note are rising because investors are selling government bonds. That’s largely because minutes of the Federal Reserve’s last meeting showed several policymakers favored slowing the Fed’s bond purchases, perhaps as early as this summer.

The Fed’s $85-billion-a-month in Treasury and mortgage bond purchases have pushed down long-term interest rates. When it slows the bond purchases, interest rates are likely to tick up. That would decrease the value of bonds with lower yields.

Cheaper mortgages have helped boost home sales this year and strengthen the housing recovery.

Sales of previously occupied homes and newly built homes both rose in April. And a report Thursday showed the number of Americans who signed contracts to buy homes in April reached a three-year high, suggesting completed sales will increase again in the coming months. There is generally a one- to two-month lag between a signed contract and a completed sale.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year mortgages edged up to 0.8 point from 0.7 point last week. The fee for 15-year loans was unchanged at 0.7.

The average rate on a one-year adjustable-rate mortgage slipped to 2.54 percent from 2.55 percent. The fee for one-year adjustable-rate loans rose to 0.5 point from 0.4.

The average rate on a five-year adjustable-rate mortgage increased to 2.66 percent from 2.63 percent. The fee held steady at 0.5.







Copyright © 2013 The Associated Press, Marcy Gordon, AP business writer.

U.S. Home Prices Rise 10.9% – Most Since 2006

U.S. home prices jumped 10.9 percent in March compared with a year ago, the most since April 2006. A growing number of buyers are bidding on a tight supply of homes, driving prices higher and helping the housing market recover.

The Standard & Poor’s/Case-Shiller home price index released Tuesday also showed that all 20 cities measured by the report posted year-over-year gains for the third straight month.

And prices rose in 15 cities in March from February. That’s up from only 11 in the previous month. The monthly figures aren’t seasonally adjusted and may reflect the beginning of the spring buying season.

Prices rose in Phoenix by 22.5 percent over the past 12 months, the biggest gain among cities. It was followed by San Francisco (22.2 percent) and Las Vegas (20.6 percent).

New York City had the smallest year-over-year increase at 2.6 percent, followed by Cleveland at 4.8 percent.

“Rising home prices may begin to alleviate a lack of housing inventory … by encouraging more homeowners to put their properties on the market,” said Maninder Sibia, an economist with Economic Advisory Service, in a note to clients. “The housing market is clearly improving.”

The index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The March figures are the latest available.

The U.S. housing market is steadily recovering, buoyed by solid job gains and near-record low mortgage rates. Sales of new homes rose in April to nearly a five-year high. And sales of previously occupied homes ticked up in April to the highest level in three and a half years.

Despite the gains, a limited number of homeowners are putting their houses on the market. That’s helped lift home prices. And it’s made builders more willing to ramp up construction. Applications for building permits rose in April to the highest level in nearly five years.

The supply of available homes jumped in April, but was still 14 percent below its level a year earlier.

Stan Humphries, chief economist at Zillow, a real estate data provider, said that the increase in the Case-Shiller index has been skewed higher by cities such as Phoenix and San Francisco. Fewer homes are available in those areas because many homeowners still owe more on their mortgages than their homes are worth. That makes it difficult to sell.

Still, even excluding those markets, home prices are rising steadily nationwide, Humphries said. The increases are “certainly confirmation that the housing market is experiencing a brisk recovery,” he added.

The housing recovery is creating more construction jobs and bolstering the economy in other ways. Higher home prices make homeowners feel wealthier and encourages them to spend more.

Rising prices also encourage more would-be buyers to purchase homes, before prices rise further. They also enable more homeowners to sell homes, by reducing the number of people who owe more on their mortgages than the homes are worth.

Prices have been increasing steadily since last summer. Still, they are about 29 percent below the peak reached in July 2006.

Banks have raised their credit standards since the housing bubble burst and are demanding larger downpayments. That’s made it particularly hard for potential first-time buyers to get a mortgage.






Copyright © 2013 The Associated Press, Christopher S. Rugaber, AP economics writer. All rights reserved.

Office Chat - Tim Shelton, Realtor

Office Chat by timsheltonrealtor on GoAnimate

Report: Where do Americans want to live?

A report from the Urban Land Institute (ULI) finds a strong influence from the U.S.’s growing demographic groups – Generation Y, African Americans and Latinos.

An overall view of the survey suggests that demand will continue to rise for infill residential development that is less car-dependent, while demand could wane for isolated development in outlying suburbs. Among all respondents, 61 percent said they would prefer a smaller home with a shorter commute to a larger home with longer commute. Fifty-three percent want to live close to shopping; 52 percent would prefer to live in mixed-income housing and 51 percent prefer access to public transportation.

Generation Y
Of the three major generations in the report (Gen Y, Gen X and Baby Boomers), Gen Y – the largest generation, the most racially and ethnically diverse, and the one not yet fully immersed in the housing and jobs market – is the generation likely to have the most profound impact on land use.

Fifty-nine percent of Gen Y said they prefer diversity in housing; 62 percent want a mix of shopping, dining and office space; and 76 percent place high value on walkability.

Sixty-three percent of the Gen Y respondents plan to move in the next five years, along with 63 percent of African Americans, 54 percent of Latinos, and 56 percent of those currently living in a large city.

The preferences of Gen Y are similar to those of people of color across all the generations. These different demographic cohorts are all growing in number, and together are creating a significant market shift toward compact, mixed-use development close to transit.

African Americans
Seventy-five percent of African Americans indicated a preference for mixed-use developments; 63 percent prefer mixed-income communities; and 56 percent prefer a mix of housing types. Seventy-seven percent desire access to public transit. Nearly half (47 percent) African Americans surveyed are part of Gen Y.

Latinos
Fifty-eight percent of Latinos prefer to live in a mixed-use community; 48 percent prefer mixed-income communities; and 50 percent prefer a mix of housing. More than half (54 percent) of Latinos surveyed are Gen Yers.

“We’ve entered an era in land use that will be defined by development that conserves land and energy, and which offers consumers plenty of options in where they live and how they get from one place to another,” says ULI Chief Executive Officer Patrick L. Phillips

Other survey findings

• In general, the lure of homeownership remains strong: Seventy-one percent of respondents said buying a home is a good investment despite the housing crisis and price declines.

• The quality of public transit is acceptable where it’s available: Of those with access to buses and trains, 75 percent rate the quality as satisfactory. However, half of those with no access to buses and trains were dissatisfied by this situation. Fifty-two percent of the population said that convenient public transportation was important to them.

• Safety and high-quality schools top the list of most sought-after community attributes: Ninety-two percent of all respondents ranked neighborhood safety as the most important attribute; good schools ranked as the second highest (79 percent).

• In seemingly contradictory responses, 72 percent of the survey participants said having space between neighbors is a priority; yet 71 percent placed a high value on being close to employment, schools and healthcare facilities; 70 percent rated walkability as a key attribute.

• Seventy-seven percent of the respondents reported using a car, truck or motorcycle nearly every day. However, 22 percent said they walk to a destination almost daily, and 6 percent said they take public transit.

The full report is posted on the Urban Land Institute’s website.
 





© 2013 Florida Realtors®

During a Hurricane

Here is Part 2 of this series:

If a hurricane is likely in your area, you should:

• Listen to the radio or TV for information.
• Secure your home, close storm shutters and secure outdoor objects or bring them indoors.
• Turn off utilities if instructed to do so. Otherwise, turn the refrigerator thermostat to its coldest setting and keep its doors closed.
• Turn off propane tanks
• Avoid using the phone, except for serious emergencies.
• Moor your boat if time permits.
• Ensure a supply of water for sanitary purpose such as cleaning and flushing toilets. Fill the bathtub and other larger containers with water.
• Find out how to keep food safe during and after and emergency.

You should evacuate under the following conditions:
If you are directed by local authorities to do so. Be sure to follow their instructions.

• If you live in a mobile home or temporary structure – such shelter are particularly hazardous during hurricane no matter how well fastened to the ground.
• If you live in a high-rise building – hurricane winds are stronger at higher elevations.
• If you live on the coast, on a floodplain, near a river, or on an island waterway.

Read more about evacuating yourself and your family. If you are unable to evacuate, go to your wind-safe room. If you do not have one, follow these guidelines:

• Stay indoors during the hurricane and away from windows and glass doors.
• Close all interior doors – secure and brace external doors.
• Keep curtains and blinds closed. Do not be fooled if there is a lull; it could be the eye of the storm – winds will pick up again.
• Take refuge in a small interior room, closet or hallway on the lowest level.
• Lie on the floor under a table or another sturdy object.
• Avoid elevators.

Before a Hurricane

With Tropical Storm Andrea hitting the Central Florida area today, I wanted to share with you some helpful information regarding hurricanes over the next few days.

To prepare for a hurricane, you should take the following measures:

• To begin preparing, you should build an emergency kit and make a family communications plan.
• Know your surroundings.
• Learn the elevation level of your property and whether the land is flood-prone. This will help you know how your property will be affected when storm surge or tidal flooding are forecasted.
• Identify levees and dams in your area and determine whether they pose a hazard to you.
• Learn community hurricane evacuation routes and how to find higher ground. Determine where you would go and how you would get there if you needed to evacuate.
• Make plans to secure your property:
• Cover all of your home’s windows. Permanent storm shutters offer the best protection for windows. A second option is to board up windows with 5/8” marine plywood, cut to fit and ready to install. Tape does not prevent windows from breaking.
• Install straps or additional clips to securely fasten your roof to the frame structure. This will reduce roof damage.
• Be sure trees and shrubs around your home are well trimmed so they are more wind resistant.
• Clear loose and clogged rain gutters and downspouts.
• Reinforce your garage doors; if wind enters a garage it can cause dangerous and expensive structural damage.
• Plan to bring in all outdoor furniture, decorations, garbage cans and anything else that is not tied down.
• Determine how and where to secure your boat.
• Install a generator for emergencies.
• If in a high-rise building, be prepared to take shelter on or below the 10th floor.
• Consider building a safe room.

Hurricanes cause heavy rains that can cause extensive flood damage in coastal and inland areas. Everyone is at risk and should consider flood insurance protection. Flood insurance is the only way to financially protect your property or business from flood damage.

New Home Sales Up Near Record: 2.3% in April

Sales of new U.S. homes rose in April to the second highest level since the summer of 2008 while the median price for a new home hit a record high, further signs that housing is recovering.

New-home sales rose to a seasonally adjusted annual rate of 454,000 in April, the Commerce Department said Thursday. That was up 2.3 percent from March and just slightly below January’s 458,000.

Both January and April had the fastest sales rates since July 2008.

The median price of a home sold in April was $271,600, the highest level on government records going back to 1993. The April price was 8.3 percent higher than in March and 13.1 percent higher than a year ago.

Steady job creation and near-record-low mortgage rates are spurring more Americans to buy homes.

With the April increase, sales are now 29 percent higher than a year ago, but sales are still below the 700,000 level considered healthy by economists.

The strength in April was led by a 10.8 percent rise in sales in the West. Sales in the South were up 3 percent but sales fell 16.7 percent in the Northeast and were down 4.8 percent in the Midwest.

Sales of previously owned homes rose in April to a seasonally adjusted annual rate of 4.97 million, the highest level in 3½ years.

Greater demand, along with a tight supply of available homes for sale, is also boosting prices in most markets and encouraging more construction.

Applications for permits to build homes rose in April to the highest level in nearly five years. While construction of new homes and apartments slipped a bit in April, the drop came one month after construction topped 1 million for the first time since June 2008.

Higher prices tend to make homeowners feel wealthier. That encourages consumers to spend more, which accounts for 70 percent of economic activity.

Federal Reserve Chairman Ben Bernanke cited the revival in housing as a significant benefit of the Fed’s super-low interest rate policies.

“Higher prices of houses and other assets, in turn, have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment,” Bernanke said in an appearance before the congressional Joint Economic Committee.

Several major homebuilders have reported strong annual increases in orders for the first three months of the year, Ryland Group Inc., said that its orders in April jumped 59 percent from a year earlier.

Though new homes represent only a fraction of the housing market, they have a sizable impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the National Association of Home Builders.






Copyright © 2013 The Associated Press, Martin Crutsinger, AP economics writer

Fla.’s Housing Market Shows Strong Gains in April 2013

Florida’s housing market reported more closed sales, rising median prices, increased pending sales, more new listings and a lower inventory of homes for sale in April, according to the latest housing data released by Florida Realtors®.

“Buyer demand is rising, but the inventory of homes continues to be tight in many areas across Florida,” says 2013 Florida Realtors President Dean Asher, broker-owner with Don Asher & Associates Inc. in Orlando. “That’s putting some upward pressure on prices. April is the 16th month in a row that we’ve seen the statewide median sales prices increase year-over-year for both single-family homes and for townhome-condo properties.

“In another positive sign for Florida’s housing market, sellers received over 93 percent of their original listing price in April, whether they were selling a single-family home or a condo. Now is a good time for sellers who have been waiting on the sidelines to enter the market.”

Statewide closed sales of existing single-family homes totaled 20,662 in April, up 17.4 percent compared to the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department in partnership with local Realtor boards/associations. Closed sales typically occur 30 to 90 days after sales contracts are written.

Meanwhile, pending sales – contracts that are signed but not yet completed or closed – for existing single-family homes last month rose 31.9 percent over the previous April. The statewide median sales price for single-family existing homes last month was $165,000, up 14.2 percent from the previous year.

According to the National Association of Realtors (NAR), the national median sales price for existing single-family homes in March 2013 was $185,100, up 12.1 percent from the previous year. In California, the statewide median sales price for single-family existing homes in March was $378,960; in Massachusetts, it was $290,000; in Maryland, it was $241,413; and in New York, it was $220,000.

The median is the midpoint; half the homes sold for more, half for less. Housing industry analysts note that sales of foreclosures and other distressed properties downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Looking at Florida’s year-to-year comparison for sales of townhouse-condos, a total of 11,183 units sold statewide last month, up 13.6 percent compared to April 2012. Meanwhile, pending sales for townhouse-condos last month increased 22.7 percent compared to the year-ago figure. The statewide median for townhouse-condo properties was $128,000, up 16.4 percent over the previous year. NAR reported that the national median existing condo price in March 2013 was $178,900.

The inventory for single-family homes stood at a 5.2-months’ supply in April; inventory for townhouse-condos was at a 5.6-months’ supply, according to Florida Realtors.

“To a certain extent, the real estate story remains the same: prices and sales are up and inventory is low,” said Florida Realtors Chief Economist Dr. John Tuccillo. “We are also seeing a continued stabilization of the distressed property market with short sales down, and foreclosure and REO (real estate owned) sales essentially unchanged. But there is also a bit more to the story.”

He explained, “Because the government is selling foreclosed properties in bulk and also using online auctions, our sales numbers actually understate the vigor of the market. The increased importance of government sales in this market is reflected in the continuing fall in inventory in MLS listings.” MLS stands for multiple listing service.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.45 percent in April 2013; lower than the 3.91 percent average during the same month a year earlier.






© 2013 Florida Realtors®