UF: Floridians’ Confidence Keeps Growing

Florida’s consumer confidence keeps inching higher, according to a University of Florida monthly survey. In June, state consumer confidence rose one point from May to 82 in June – another post-recession high.

June is the fourth consecutive month to show a rise in the sentiment of Floridians.

Four of the five components measured in the survey went up, while one remained the same. Respondents’ overall opinion that they’re better off financially now than a year ago rose three points to 70, while their belief that their personal finances will improve a year from now remained at 82.

Their outlook for U.S. economic conditions over the coming year rose two points to 83. The survey-takers’ long-term view for the nation’s economic health over the next five years rose one point to 83.

Finally, the survey shows that consensus of whether now is a good time to buy a big-ticket item such as a television went up two points to a post-recession high of 93.

“The last time perception of current buying conditions reached this level was April of 2007,” said Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “That was the beginning of the collapse in the housing market.”

Several things help explain Floridians’ current optimism. The stock market reached record highs by early June. In addition, the state’s May unemployment rate was 7.1 percent compared with the national 7.6 percent figure.

This decline from April’s 7.2 percent jobless figure occurred as Florida’s labor force was increasing, which meant it was due to an increase in jobs, McCarty said. Home prices have also kept rising. The median price for an existing single-family home is $171,000; the last time it was that high in Florida was September 2008.

Most consumers still aren’t registering any fears about the effects of sequestration, McCarty said. They’re more concerned that interest rates may rise now that the Federal Reserve has said it may reduce the amount of Treasury bonds and mortgage-backed securities it’s been purchasing to spur the economy, a fear McCarty considers “overstated” because changes, if any, will occur very gradually.

“It’s also worth noting that conditions are not the same as they were in 2008 when the Fed began making these purchases,” McCarty added. Though the current housing market is being helped by lower interest rates, there has also been a low rate of new construction and an increase in population. These two factors led to pent-up demand.

Even if current home sale prices decline a bit, McCarty thinks there’s little to worry about. “The underlying quality of loans is now very different from 2008,” he said. Current home buyers typically have good credit scores and put 20 percent down on their homes, both of which reduce the likelihood of another massive number of foreclosures like the ones that led to the last recession. “The Fed has seen the economy through dangerous economic times,” McCarty said, “but the economy is now operating normally. There was nothing normal about 2008.”

 






© 2013 Florida Realtors®

New Home Sales Hit Fastest Pace in 5 Years

Sales of new homes rose in May to the fastest pace in five years, a solid gain that added to signs of a steadily improving housing market.

New home sales rose 2.1 percent last month compared with April to a seasonally adjusted annual rate of 476,000, the highest level since July 2008, the Commerce Department reported Tuesday.

The median price of a new home sold in May was $263,900, up 3.3 percent from a year ago.

Sales of new homes remain below the 700,000 annual rate that’s considered healthy by most economists. But the pace has increased 29 percent from a year ago.

Analysts say the housing recovery is looking more sustainable and should continue to boost economic growth this year, offsetting some drag from higher taxes and federal spending cuts.

The sales gains in May were led by a 40.7 percent increase in the Midwest followed by a 20.7 percent gain in the Northeast. Sales were also up 3.6 percent in the West but they fell 9 percent in the South.

The inventory of unsold homes rose 2.5 percent to 161,000 in May, the highest level since August 2011 but still just 13 percent higher than the record low for inventories set in July 2012. Prices of new homes have been rising in part because more people are bidding on a limited number of homes.

The National Association of Realtors reported last week that sales of previously occupied homes surpassed 5 million in May. It was the first time that’s happened in 3 1/2 years.

Sales of previously owned homes rose to an annual rate of 5.18 million in May. The last time sales had exceeded 5 million was in November 2009, a month when the pending expiration of a home-buying tax credit briefly inflated sales.

Steady hiring and low mortgage rates have encouraged more people to buy homes. And with demand up, prices rising and few homes on the market, builders have grown more optimistic about their prospects, leading to more construction and jobs.

Last week, Federal Reserve Chairman Ben Bernanke cited the housing gains as a major reason the Fed’s economic outlook has brightened.

Still, mortgage rates have jumped in recent weeks. And they’re expected to rise further now that the Fed has signaled it plans to scale back its bond purchases this year if the economy continues to strengthen. A pullback in the bond purchases would likely send long-term borrowing rates up. Higher mortgage rates could slow some of the housing market’s momentum.

For now, a brighter outlook for housing has made builders more optimistic. The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 52, up from 44 in May.

That was the highest reading in more than seven years and the largest monthly increase in more than a decade. A reading above 50 indicates that more builders view sales conditions as good rather than poor.







Copyright © 2013 The Associated Press, Martin Crutsinger, AP economics writer. All rights reserved.

Foreign Buyers See U.S. as Profitable Investment

International home sales in the U.S. declined in the past year, but are at their second highest level in recent years and over six percent of total existing-home sales in value. According to the National Association of Realtors® 2013 Profile of International Home Buying Activity, interest in U.S. properties continues to grow, signaling that America continues to be regarded by international buyers as a great place to own property.

The survey, which asked Realtors to report their international business activity within the U.S. for the 12 months ending March 2013, showed that total international sales were $68.2 billion, down approximately $14 billion from the previous year. The decline is attributed to a number of temporary factors, including economic slowdowns in a number of major foreign economies, tighter U.S. credit standards and unfavorable exchange rates.

Of total international transactions, $34.8 billion (51 percent) were attributed to foreign buyers with permanent residences outside the U.S. and $33.4 billion (49 percent) were attributed to buyers who are recent immigrants or temporary visa holders residing for more than six months in the U.S.

“Foreign buyers are experiencing hurdles not only abroad, but also here in the U.S. when it comes to purchasing property,” says NAR President Gary Thomas. “Difficult economic conditions, particularly in Europe, have impacted foreign buyers, but several factors in the U.S. have also affected their purchasing power here. Tight credit standards have made financing challenging for immigrants, and low housing inventories have made finding a house difficult. However, none of these factors appear to be permanent.”

Foreign buyers continue to have a substantial interest in U.S. properties. Over a five year timeframe more than 70 percent of Realtors reported a constant or increasing level in the number of international clients contacting them.

Twenty-seven percent of Realtors said they worked with international clients this year. The most important factors influencing their purchases were the U.S.’s desirable location and the investment potential of the real estate market.

Realtors reported purchases from 68 countries, but five have historically accounted for the bulk of purchases: Canada (23 percent), China (12 percent), Mexico (8 percent), India (5 percent) and the United Kingdom (5 percent). These five countries accounted for approximately 53 percent of transactions, with Canada and China the fastest growing sources over the years.

Canadian buyers were reported to purchase properties with a median price of $183,000, with the majority purchased in Florida, Arizona and California. Chinese buyers tended to purchase property in the upper price ranges with a median price of $425,000 and typically in California. Sixty-two percent of Mexican buyers purchased property in California and Texas, with a median price of $156,250.

“Many factors influence foreign buyers’ decisions on where to purchase in the U.S., but the most important are proximity to home country, presence of relatives and friends, availability of job and education opportunities, and the climate,” says Thomas. “International buyers also differ on the type of desired property. Some are looking for trophy properties while others are interested in modest vacation homes.”

Five states made up 61 percent of reported purchases: Florida (23 percent), California (17 percent), Arizona (9 percent), Texas (9 percent) and New York (3 percent).

About half of foreign buyers preferred to purchase in a suburban area, while a quarter preferred a more central city/urban area. A majority purchased a detached single-family home and 63 percent used all-cash.

Based on the reported international transactions, the mean and median prices of purchases were higher when compared to purchase prices of domestic buyers. For the 12 months ending March 2013 the median international home price was $275,862, and for domestic buyers it was $179,867.

The types of homes purchased by international buyers frequently tended to be different from the types of homes purchased by domestic U.S. buyers. International buyers are more likely to be substantially wealthier and looking for a property in a specialized niche.






© 2013 Florida Realtors®

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.