On December 20, 2013, in Economist Commentaries, by Ken Fears, Manager, Regional Economics and Housing Finance Policy
With the end of 2013 closing in, it is time to take stock of the impact from the strong 2013 housing market.
Home price growth was robust in 2013 compared to 2012 and is currently forecast by NAR Research to finish the year 11.3% stronger.
This improvement is important for the market as it has created equity for homeowners, boosted buyer confidence, and pulled many underwater homeowners into positive equity positions.
A borrower who purchased a median priced home[1] in 2004 and held it for nine years, the current median tenure of a homeowner according to NAR’s annual Profile of HomeBuyers and Sellers, would have $28,114 in equity from the combined benefit of price appreciation and paying down the mortgage principle.
A borrower who bought a median price home in 2012 would have more than $23,000 in equity. It is important to note that borrowers who purchased in 2006 and 2007 at the peak of the market and thus those who experienced the sharpest price declines are now nearly in positive equity. A person who purchased in 2006 and owned through 2012 (not pictured) would have been underwater by roughly $28,200, but by 2013 this gap was down to $4,700.
Continued price growth in 2014 will help to further ameliorate this gap. Homeowners who purchased since 2007 are in positive equity. Even through the visitudes of the great recession, for most homeowners housing remains an effective vehicle for building equity and wealth. [1] With a 10% downpayment at the prevailing average 30-year fixed mortgage rate Ken Fears, Manager, Regional Economics and Housing Finance Policy
Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.
Friday, December 27, 2013
Monday, December 16, 2013
This Weeks Market Info
Why is the Fed FOMC Meeting this week such a big deal?
This week all eyes are on the Federal Open Market Committee meeting, as the market waits for the Federal Reserve’s tapering decision. Both the FOMC policy statement and its up-to-date economic and market projections will be released on Wednesday at 2 p.m. EST, followed by Fed Chairman Ben S. Bernanke’s press conference at 2:30 p.m. EST.
This week all eyes are on the Federal Open Market Committee meeting, as the market waits for the Federal Reserve’s tapering decision. Both the FOMC policy statement and its up-to-date economic and market projections will be released on Wednesday at 2 p.m. EST, followed by Fed Chairman Ben S. Bernanke’s press conference at 2:30 p.m. EST.
Why is this all such a big deal? In the real estate world, we are watching to see if the Fed begins tapering – the term used for cutting back on the purchases of Treasuries and MBS (Mortgage Backed Securities) that constitute the current round of quantitative easing, known as QE3. To oversimplify it, if the Fed begins tapering, it will likely drive mortgage rates up further.
So why is the Fed looking to taper these purchases now, and how likely is it that they will do so on Wednesday?
It all has to do with the health of the economy - the Fed needs to stop QE3 sometime, and it appears that the economy is showing enough signs of strength that now would be the time to begin. Specifically, how swiftly the Fed cuts its QE purchases will depend a lot on the evolution of the labor market. The Fed announced its most recent round of QE in September of last year, and it has been buying $85 billion a month since January ($45 billion in Treasuries, $40 billion in MBS). Recent economic data has shown signs that the economy is improving, and that jobs are stabilizing. Economic stability and improvment is exactly what the Fed has been waiting for to pull the trigger on tapering (which they did NOT do in September's meeting).
So what to do now?
Be prepared for lots of interest rate volatility this week as the markets work to stay ahead of the Fed moves and speculation abounds. Keep in close communication with your favorite Mortgage Loan Professional and have them keep you abreast of what happens throughout the week,
It all has to do with the health of the economy - the Fed needs to stop QE3 sometime, and it appears that the economy is showing enough signs of strength that now would be the time to begin. Specifically, how swiftly the Fed cuts its QE purchases will depend a lot on the evolution of the labor market. The Fed announced its most recent round of QE in September of last year, and it has been buying $85 billion a month since January ($45 billion in Treasuries, $40 billion in MBS). Recent economic data has shown signs that the economy is improving, and that jobs are stabilizing. Economic stability and improvment is exactly what the Fed has been waiting for to pull the trigger on tapering (which they did NOT do in September's meeting).
Be prepared for lots of interest rate volatility this week as the markets work to stay ahead of the Fed moves and speculation abounds. Keep in close communication with your favorite Mortgage Loan Professional and have them keep you abreast of what happens throughout the week,
Last Week's Mortgage Rate Recap
Mortgage Rates Currently Trending: NEUTRAL
Last week saw rates remain mostly flat, with most lenders worsening rebate pricing (the cost to obtain a rate or the credit the lender gives you towards your closing costs when selecting a rate) as MBS (Mortgage Backed Securities) sold off a net loss of -35 basis points. Most consumers would have seen their offered mortgage rate remain the same, but would have gotten a lower amount as a credit towards closing costs or would have paid a little bit more to obtain the same rate. The week started with a nice bounce back from the lows we experienced the week before. Wednesday was a bad day for rates as the MBS market sold off, giving back the gains from Monday and Tuesday. Thursday continued the sell off slightly, until we saw a reversal and a positive day for pricing on Friday. It's important to note that since November 18th, we've lost about 230 basis points in the MBS market, meaning that traders have priced themselves towards a Fed tapering.
This Week's Mortgage Rate Forecast
Mortgage Rates Forecast: VOLATILE, and heavily dependent on Wednesday's FOMC announcement
This week is going to prove to be volatile and hard to predict, both before the Fed's FOMC announcement on Wednesday, as well as after depending on what the Fed announces. There is a large consensus
that the Fed will announce their intent to begin tapering. If that does occur, we may very well see more selling off in MBS, even though the market has already been pricing that in. If the Fed announces that they are not yet ready to taper, as happened in September, the market should reacti very positively and MBS pricing will improve along with mortgage rates.
BOTTOM LINE: It is very important this week to stay in contact with your Mortgage Loan Professional, especially on Wednesday when the Fed makes their announcement. If they announce tapering, be prepared for rates to go up slightly. If they announce they will not yet taper, it is likely that rates improve anywhere from .125% to .250%. The only way to stay ahead of lenders who will raise interest rates when that happens is to stay in close contact with your LO who is monitoring the market in real time with an institutional grade Wall St. data feed. Be prepared for volatility later this week.
Saturday, December 7, 2013
Home sales "chugging along," as recovery continues
Brokers expect prices, mortgage rates to rise in 2014
December 4, 2013
-
NWMLS
The latest figures from Northwest MLS show year-over-year gains in inventory (up 4.8 percent), pending sales (up nearly 1.6 percent), closed sales (up 5.3 percent) and median selling prices (up 4.86 percent).
Brokers reported 6,624 pending sales (mutually accepted offers) of single family homes and condominiums during November, improving on the year-ago total of 6,522 for a 1.56 percent increase.
Closed sales across the 21 counties in the report outgained the volume of a year ago by 283 transactions, rising from 5,333 completed sales to 5,616 for a gain of 5.3 percent.
The median selling price on last month’s closed sales increased 4.86 percent, from $258,500 to $271,061. The condominium portion of those sales had double-digit price gains, jumping 14.2 percent. In King County, where 60 percent of the condominium sales occurred, prices were up 17.4 percent, rising from $204,500 to $240,000. Snohomish County condo prices shot up 19.7 percent from twelve months ago.
For single family homes (excluding condominiums), the median sales price was $280,000 area-wide, up about 4.1 percent. King County’s volume of closings dipped slightly compared to a year ago (down 2.9 percent), but prices increased more than 7.5 percent. The median selling price for single family homes that sold last month in King County was $414,000; a year ago it was $385,000.
OB Jacobi, president of Windermere Real Estate, believes the slowing pace of home prices, “is “actually a good thing,” saying, “As we saw in years past, continual double-digit price appreciation leads to boom and bust cycles that none of us want to relive.”
Similarly, fewer distressed sales bode well for the market, according to Northwest MLS director Darin Stenvers. “The real estate industry is supported by reduced rates of short sales and foreclosures, thus returning almost all markets to a healthy position for consumers. Rising home values have helped sellers who wish to avoid the long drawn-out and painful short sale process,” stated Stenvers, the office managing broker at John L. Scott in Bellingham.
In most cases Stenvers said those sellers are able to repair their credit in a short time, and maybe even re-enter the marketplace with more affordable budgets. “Foreclosures and the percent of short sales have sent a clear message to buyers that the market is stable and they can feel confident in their investments,” Stenvers suggested.
MLS director John Deely agreed. With rising prices, the number of homeowners with negative equity continues to shrink, he noted, citing data from the Case Schiller index. “Many sellers do not realize they have gained back substantial equity and that we are close to the peak values of the Seattle market,” said Deely, the principal managing broker at Coldwell Banker Bain in Seattle.
Commenting on recent activity along with expectations of a holiday season slowdown, some brokers noted there are multiple ̶ and sometimes, unrealized ̶  advantages to buying and selling homes as the year winds down. “Waiting will not provide much benefit,” suggested Mike Gain, CEO and president of Berkshire Hathaway HomeServices Northwest Real Estate in Seattle.
MLS director Frank Wilson agreed. He believes it will be more expensive to buy a home during 2014. “Slow but steady price appreciation, upward pressure on interest rates and increased costs of getting a loan will all work to decrease the buyer’s purchasing power,” said Wilson, the branch managing broker and Kitsap District manager for John L. Scott in Poulsbo.
Deely attributes the threat of interest rate hikes with spurring some activity in the midst of the holidays. “In 2014 the big question is not if interest rates will rise but when. This concern appears to be encouraging buyers to continue their home search during this holiday season, defying the seasonal slowdown,” he observed.
MLS spokespeople also point to inventory shortages in some areas as another challenge for buyers.
“As we approach the holiday season when we typically experience the seasonal slowdown, the housing market is showing signs of stability and resilience,” said Gain, but added, “Even though November’s new listings were up 10.1 from a year ago, and pending sales were up 1.6 percent, the lack of inventory is holding sales down.”
Many Seattle neighborhoods are still experiencing high demand for listings, noted Gary O’Leyar, designated broker and co-owner of Prudential Signature Properties. “Although the pace of the in-city Seattle market has leveled off somewhat, we are still seeing many instances of multiple offers due to high demand in several of the most sought-after neighborhoods,” he commented.
Multiple listing service figures underscore O’Leyar’s report. Most of the MLS map areas comprising Seattle show only around 1.5 months of supply – well below the 4-to-6 months many industry analysts say indicates a “balanced” market.
Tight inventory is not limited to Seattle. “Once again, this year we will be heading into the New Year with shortages and low inventory of homes for sale in the price ranges where 90 percent of the sales activity is taking place,” said Lennox Scott, chairman and CEO of John L. Scott Real Estate.
Scott and others believe sellers who are thinking of selling could benefit by listing now instead of waiting for the expected ramp-up of activity in January. “Traditionally, the number of new listings coming on the market during the holidays declines at a higher rate than buyer demand, thereby making the buyers-to-new-listings ratio advantageous for sellers.”
Mike Gain agreed, referring to a checklist his company uses that outlines advantages of listing a home during the holiday season. Among the benefits it cites are “decked halls look great,” “only serious buyers are out,” and “the process will be quicker.”
“All in all, the real estate market is chugging along nicely thanks in part to the health of our local economy,” observed Jacobi. Rising interest rates are playing a part in motivating buyers as well, he added. It’s typical to see housing sales slow during this time of year because of the holidays, he acknowledged, but even so, he said “sales are still strong.”
Wilson said Kitsap County’s momentum is “slowing a bit,” but noted cumulative figures for the year show the volume of pending sales is up 14 percent. As for prices, he seemed satisfied with Kitsap’s modest increases compared to double-digit jumps elsewhere. “We are happy to let the Seattle market steal that limelight,” he declared, noting Kitsap’s affordability advantage as a result of the differences.
Looking ahead, brokers tend to agree positive momentum will continue, but hurdles such as unrealistic sellers, new loan regulations, and threats to purchasing power remain.
“The market is poised for another solid year in 2014, but buyers are “out of breath,” said Dick Beeson, noting attention is diverted to holidays and national uncertainties. “If we could just get buyers off fences and sellers’ expectations in line with 2013 pricing not 2005, we’d be just fine,” he quipped. Beeson, the principal managing broker at RE/MAX Professionals in Tacoma, also worries about “the poor job market” in many parts of the state that aren’t faring as well as Seattle. “Without a strong job market, housing sales eventually show down,” he noted.
New loan regulations are also troublesome, according to Beeson. “If anything will kill a good market, tightening the money supply will,” he emphasized.
Asked about his projections, Wilson said he thinks 2014 will be more of the same. “We are in a familiar cycle in which buyers in 2015 will be saying….I wish I would have bought a home back in 2013.”
O’Leyar has a similar outlook. “I think the ‘wild cards’ for the 2014 Greater Seattle real estate market will be the Federal Reserve’s policy decisions and stricter lending standards.” He believes both factors could shrink the number of buyers. He also expects a leveling off of price appreciation, but continued strong demand due to the robust nature of Puget Sound’s vibrant economy.
Stenvers expects 2014 will be another year of stabilization and recovery for home and condo sales around the Pacific Northwest, and points to upticks in new home construction and commercial leasing as positive signs for job creation.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 21,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state. Statistical Summary by Counties: Market Activity Summary – November 2013
| Single Family Homes + Condos |
LISTINGS | PENDING SALES |
CLOSED SALES | MONTHS SUPPLY |
|||
| New Listings |
Total Active |
# Pending Sales |
# Closings |
Avg. Price |
Median Price |
||
| King |
2,051
|
4,876
|
2,617
|
2,244
|
$452,285
|
$379,202
|
1.86
|
| Snohomish |
900
|
2,451
|
1,010
|
833
|
$308,095
|
$288,000
|
2.43
|
| Pierce |
1,042
|
3,384
|
1,131
|
878
|
$226,932
|
$205,000
|
2.99
|
| Kitsap |
289
|
1,356
|
325
|
255
|
$279,993
|
$220,000
|
4.17
|
| Mason |
90
|
650
|
77
|
59
|
$206,297
|
$158,000
|
8.44
|
| Skagit |
132
|
720
|
143
|
138
|
$281,745
|
$247,750
|
5.03
|
| Grays Hbr |
118
|
737
|
76
|
79
|
$123,733
|
$122,500
|
9.70
|
| Lewis |
99
|
669
|
83
|
64
|
$153,627
|
$140,000
|
8.06
|
| Cowlitz |
87
|
434
|
92
|
79
|
$154,093
|
$140,000
|
4.72
|
| Grant |
81
|
487
|
52
|
47
|
$173,182
|
$162,225
|
9.37
|
| Thurston |
301
|
1,176
|
302
|
262
|
$235,437
|
$220,000
|
3.89
|
| San Juan |
15
|
366
|
25
|
21
|
$633,405
|
$450,000
|
14.64
|
| Island |
106
|
661
|
112
|
99
|
$321,670
|
$245,000
|
5.90
|
| Kittitas |
58
|
382
|
63
|
53
|
$257,200
|
$206,750
|
6.06
|
| Jefferson |
46
|
385
|
39
|
49
|
$283,883
|
$265,000
|
9.87
|
| Okanogan |
26
|
427
|
35
|
25
|
$214,150
|
$169,500
|
12.20
|
| Whatcom |
200
|
1,283
|
236
|
199
|
$294,779
|
$260,000
|
5.44
|
| Clark |
50
|
216
|
42
|
51
|
$261,352
|
$242,000
|
5.14
|
| Pacific |
30
|
379
|
34
|
32
|
$118,672
|
$84,625
|
11.15
|
| Ferry |
6
|
64
|
3
|
2
|
$106,750
|
$106,750
|
21.33
|
| Clallam |
44
|
325
|
63
|
66
|
$206,891
|
$162,625
|
5.16
|
| Others |
82
|
633
|
64
|
81
|
$220,263
|
$192,000
|
9.89
|
| MLS TOTAL |
5,853
|
22,061
|
6,624
|
5,616
|
$334,831
|
$271,062
|
3.33
|
(Totals include King, Snohomish, Pierce & Kitsap counties)
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | |
| 2000 | 3706 | 4778 | 5903 | 5116 | 5490 | 5079 | 4928 | 5432 | 4569 | 4675 | 4126 | 3166 |
| 2001 | 4334 | 5056 | 5722 | 5399 | 5631 | 5568 | 5434 | 5544 | 4040 | 4387 | 4155 | 3430 |
| 2002 | 4293 | 4735 | 5569 | 5436 | 6131 | 5212 | 5525 | 6215 | 5394 | 5777 | 4966 | 4153 |
| 2003 | 4746 | 5290 | 6889 | 6837 | 7148 | 7202 | 7673 | 7135 | 6698 | 6552 | 4904 | 4454 |
| 2004 | 4521 | 6284 | 8073 | 7910 | 7888 | 8186 | 7583 | 7464 | 6984 | 6761 | 6228 | 5195 |
| 2005 | 5426 | 6833 | 8801 | 8420 | 8610 | 8896 | 8207 | 8784 | 7561 | 7157 | 6188 | 4837 |
| 2006 | 5275 | 6032 | 8174 | 7651 | 8411 | 8094 | 7121 | 7692 | 6216 | 6403 | 5292 | 4346 |
| 2007 | 4869 | 6239 | 7192 | 6974 | 7311 | 6876 | 6371 | 5580 | 4153 | 4447 | 3896 | 2975 |
| 2008 | 3291 | 4167 | 4520 | 4624 | 4526 | 4765 | 4580 | 4584 | 4445 | 3346 | 2841 | 2432 |
| 2009 | 3250 | 3407 | 4262 | 5372 | 5498 | 5963 | 5551 | 5764 | 5825 | 5702 | 3829 | 3440 |
| 2010 | 4381 | 5211 | 6821 | 7368 | 4058 | 4239 | 4306 | 4520 | 4350 | 4376 | 3938 | 3474 |
| 2011 | 4272 | 4767 | 6049 | 5732 | 5963 | 5868 | 5657 | 5944 | 5299 | 5384 | 4814 | 4197 |
| 2012 | 4921 | 6069 | 7386 | 7015 | 7295 | 6733 | 6489 | 6341 | 5871 | 6453 | 5188 | 4181 |
| 2013 | 5548 | 6095 | 7400 | 7462 | 7743 | 7374 | 7264 | 6916 | 5951 | 6222 | 5083 |
Copyright © 2013 Northwest Multiple Listing Service
ALL RIGHTS RESERVED
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