Bobbing to the Surface

By now we feel the need to explain the term “underwater.” Eight years ago, virtually everyone knew its meaning, since many were experiencing it first-hand. Underwater: owing more money on a mortgage than the house is worth.
It was one of the more widespread results of the 2008 housing crash and the ensuing plunge in home prices. By the third quarter of 2009 more than a quarter of homeowners with a mortgage had lost all equity in their home. Homeowners in this position were far more likely than their neighbors to be delinquent on their mortgages and to fall into foreclosure. They were also unable to sell their homes unless they brought cash to the closing table or convinced their bank to allow a short sale, i.e. take less than was owed on the mortgage. Before government programs such as the Home Affordable Refinance Program (HARP) began, they were unable to refinance into the prevailing record low-interest rates.
In the latest of its quarterly reports on negative equity, CoreLogic says 1 million homes gained positive equity over the 12 months ending in March. While 3.1 million homes remained underwater–still a big number–that is only 6.1% of mortgaged homes; an annual decline of 24%. Homeowner equity nationwide rose by $750 billion on an annual basis.
Underwater: thankfully now a fading memory for most.
Fed Raises Interest Rates
As anticipated, the Federal Reserve’s Open Market Committee (FOMC) raised the fed funds rate for the third time in six months on Wednesday. The quarter-point hike brings the benchmark rate to 1-1.25%. One more increase is expected this year and perhaps three to four in 2018. We shall see.
Black Knight Financial Services says the first quarter of 2017 was a bad one for refinancing; originations fell 45% compared to the last quarter of 2016. However, the recent easing of rates (they remained below 4% this week), may change the outlook.
With interest rates below 4%, the number of homeowners that could benefit from refinancing has risen to the highest level so far this year, to 4.4 million, 1.6 million more than in mid-March.
The company calculates that those in the “financeable pool” could save an average of $260 each month on their mortgage payment. Roughly 2.5 million of them would save between $100 and $300 and nearly 700,000 could chalk up savings of $400 a month or more.
Are you in that pool? Call or email to find out.
Posted on June 16, 2017 at 4:53 pm
Greg Timms | Category: Economical Updates | Tagged , , , , , , ,

On The Brink

Last week we reported that the rate of homeownership remains stagnant. This week we learned of a new survey from the Gallup people that seems to show that could be on the brink of change–maybe even massive change. The survey, conducted among both homeowners and non-homeowners, indicates that more than half of the latter don’t plan to stay that way.
Forty-nine percent of those who don’t currently own one said they expect to buy a home within the next five years, (10% within one year) and another 20% have a ten-year plan. That leaves only 28% with no current intention to buy. When Gallup conducted the same survey in April of last year, 38% of respondents were content with their status quo.
As might be expected, these homeowners-in-waiting are clustered on the low end of adulthood. Fifty-two percent of 18 to 34-year-olds have a five-year window (for more than half, that window is a year) as do 58% of those aged 35 to 54. Less than a third of non-homeowners 55 years or older have homebuying plans.
Let’s hope they can find a home to buy. Gallup says the homeowners it questioned were prepared to stay put. Only 4% expect to sell within 12 months and another 20% within five years. Nearly two-thirds say they won’t be moving “in the foreseeable future.”

April Jobs Report Raises Hopes
The only hard economic numbers this week were those for employment in April. They were much better than those for March (which got even worse in the retelling.) The Labor Department said there were 211,000 new jobs created during the month and the unemployment rate ticked down to 4.4% the lowest rate since 2001. The March report originally reported a dismal 98,000 new jobs; that number was revised down this month by another 19,000.
The chicken and the egg has long been a “thing” in real estate–should a homeowner find a new home before he sells the old one or vice versa. Freddie Mac’s blog this week suggests a variation. When it comes to home buying, the house or the mortgage?
Experts agree, Freddie says, that you should fit your mortgage to your finances, not to a house. The key is knowing, not just to know how much mortgage you can afford, but if your budget can cover expenses for upkeep, utilities and major repairs like a new furnace.
In other words, before there is either a chicken or an egg, there is a need to get a handle on your finances. It’s what we do–give us a call.
Posted on May 12, 2017 at 8:14 pm
Greg Timms | Category: Economical Updates, Real Estate News | Tagged , , , , , ,

Banner Week

As weeks go, one could probably call this a banner one. Three home price indices showed home prices continuing to accelerate and two of three reports on home sales were positive (even the third wasn’t that bad). Heck, even inventories increased a bit.
New home sales appear to have finally broken free of their persistent see-saw pattern and have now risen convincingly for three straight months. Sales in March increased by 5.8% from February and were up 15.6% compared to the previous March. The bump brought the annual rate of sales to 621,000 units, nearly tying the 622,000 unit pace set in July as the highest since the housing crash. It was also the first time since then that sales exceeded 600,000.
Highest Pace in Over 10 Years
Existing home sales started 2017 with a 3.23% gain only to fall back by more than that in February. Now sales are back in the black for the year with a 4.4% jump in March. The month’s seasonally adjusted annual rate of 5.71 million sales was the highest rate since February 2007 and puts sales 5.9% above those in March 2016.
Pending home sales were down 0.8%, but the National Association of Realtors (NAR) said it was still the third best month for purchase contracts in a year. Analysts had expected the pull-back after a 5.5% increase in February and given the way sales have yo-yo’d month to month.
Price Appreciation Continues to Rise
Just as CoreLogic did earlier in the month, Black Knight Financial Services, S&P Case-Shiller, and the Federal Housing Finance Agency (FHFA) all posted annual increases in their respective February price indices that were larger than those in January. The year-over-year appreciation ranged from 5.7% (Black Knight) to 6.4% in Case-Shiller’s National Index. The latter was 0.7% higher than Case-Shiller’s January number.
Higher prices are, of course, terrific news if you already own a house, but maybe this news is hopeful for prospective buyers as well. Increasing equity may allow, or incentivize some homeowners to sell. There is already a little movement; the inventory of existing homes increased 5.8% to 1.83 million in March, although that is still far below last year’s already tight supply. The number of new homes available for sale gained, by slightly more than 1%. Rising sales however, will put those inventories under increased pressure.

Fannie Mae announced some changes to underwriting to help those with student loan burdens more easily qualify for a mortgage. There are options for both buyers and refinancers, so check in and see how they might apply to your situation.

Posted on April 28, 2017 at 5:53 pm
Greg Timms | Category: Economical Updates, Real Estate Activity | Tagged , , , , ,

Trying To Keep Up

Residential construction continued its ragged attempts to keep up with demand. Permits for construction, which were down in February, posted a healthy increase in March while housing starts did the exact opposite.
Residential permits rose 3.6% to a seasonally adjusted annual rate of 1.26 million units, while housing starts dropped by 6.8% to 1.22 million. Despite that each measure has alternated gains and losses for months, the overall trend has been positive. Permits are running 17% higher than last year, and starts are up by 6.2%. Housing completions are also improving, rising almost 10% year-over-year to 1.09 million units. However, more than half of these, 621,000, are multi-family units.
In its housing forecast this week, Freddie Mac notes that its current projection is for 1.36 million housing starts this year, just slightly ahead of the actual March number. However, just keeping pace with growing demand and replacing existing housing stock will require 1.7 million new units.
Fannie Mae’s forecast echoed Freddie’s in predicting that the low level of available homes for sale, existing as well as newly built, will be a headwind for an otherwise promising spring market. Fannie also said the Fed’s favorite inflation indicator, the personal consumption expenditures (PCE) deflator, has now outpaced the Fed’s target of a 2.0% annual increase. This prompted Fannie’s economists to revise their earlier predictions about the Fed’s rate timeline. Instead of hikes in September and December, the company looks for the Open Market Committee to move in June and September.
Homes That Appreciate Faster
The National Association of Realtors (NAR) wondered why some homes appreciate more than the typical population- and inflation-driven 3% to 4% a year. After analyzing five years-worth of listings they found: Homes with an open floor appreciated the fastest, 7.4%, along with smaller homes (under 1,200 square feet) which had gains of almost twice that of homes over 2,400 square feet (3.6%). Prices of homes with two bedrooms rose more than a third faster than those with five or more.
Other features that brought more (eventual) bang for the buck were homes with fireplaces, patios, open floor plans, views of green space views, or a modern architectural style. Food for thought as you shop for a home this spring.
And note that mortgage rates just dove under 4%. Call or email for more information.
Posted on April 21, 2017 at 5:05 pm
Greg Timms | Category: Economical Updates | Tagged , , , , ,

It’s All About Inventories

Sales of new homes in January were every bit as good as those released last week for existing homes. There were an estimated 41,000 newly built homes sold during the month compared to 38,000 in December. On a seasonally adjusted annual basis that works out to a pace of 555,000 units, up 3.7% from December and 5.5% higher than in January 2016. Sales of existing homes had risen by 3.2% for the month and 3.8% year over year so the two reports together bode well for a strong spring market.

If we could, we would just leave it there. Our sense of duty, however, compels us to also mention pending home sales. They sort of took the bloom off the rose. The National Association of Realtors’ (NARs’) Pending Home Sales Index, a leading indicator of existing home sales for the upcoming two months, slipped 2.8% to the lowest level since last January and the December number was revised down to half its previously announced 1.6% gain. Because? Inventories of course.

The West is also looking a little weak and worrisome. Existing sales were up a strong 6.6% for the month although they had fallen in both November and December, but new home sales, strong in the other three regions, were down more than 4% and pending sales plunged by nearly 10% and were fractionally lower than a year earlier. Hopefully, it is just a blip.

That home prices are continuing to escalate was confirmed by the last two of the December reports. Case Shiller’s National Index was up 5.8% year-over-year compared to a 5.6% annual gain in November. Black Knight Financial Services said the annual increase of 5.7% in December tied with November for the largest of the year. Again, no question about what is behind this appreciation.

Inventories are now news beyond the real estate industry. This week the Washington Post headlined the difficulties millennials are having with competition and shortages now that they have finally decided to enter the housing market. Among the stories about failed offers and multiple bids, the Post does offer some encouraging words from the director of Harvard’s Joint Center for Housing. Christopher E. Herbert reminds us that Baby Boomers entered the market in the early 1980s, faced with a double-digit recession and double-digit interest rates. “But then homeownership rates and housing prices boomed in the 1990s. That group started out on a slower trajectory, then caught up. When you’re young you have some time to make up for a slower start.”

Please call or email if you have any questions.

Posted on March 3, 2017 at 5:42 pm
Greg Timms | Category: Economical Updates | Tagged , , , , , ,

Fifty-Nine Months in a Row

Rising interest rates apparently aren’t scaring off buyers, so far at least. A spurt in existing home sales in January pushed the seasonally adjusted annual rate up 3.3% over December to 5.69 million units, a gain of 3.8% year-over-year.
The rate of increase was the strongest for any month since the previous January and sent sales jumping over those from last November to become the best month for existing sales since the peak of 5.79 million units in February 2007.
Condo/coop sales were particularly strong, soaring 8.3% to a seasonally adjusted rate of 650,000 units, an increase of 4.8% over the last 12 months. Single-family sales rose 2.6% to 5.04 million units.
According to the National Association of Realtors, home prices appreciated for the 59th straight month on an annual basis. The median price for all types of homes increased 7.1% year-over-year to $228,900 and was the largest increase in a year.
The Federal Housing Finance Agency’s (FHFA’s) Home Price Index was a little less ebullient than NAR and lags it by a month, but still had annual prices up in December by 6.2%, the strongest year-over-year gain since August. FHFA economist Andrew Leventis said that, while prices probably weren’t yet feeling a full impact from rising interest rates, “There is no evidence of a normalization in the unusually low inventories of homes available for sale, which has been the primary force behind the extraordinary price gains.”
Among other reasons home prices have risen so quickly over the last few years was the increasing size of new homes. Per James McManus, writing in Builder, tight credit, labor and material shortages, and a large share of move-up buyers, pushed builders disproportionately toward bigger, pricier homes, and away from those that would pull droves of renters into homeownership.
The National Association of Home Builders (NAHB) says the average floor area of new homes rose about 11% between 2008 and 2016 to an average of around 2,600 square feet. Recently those home sizes started trending down, and NAHB suggests they are heading for further declines.

McManus says buyers may soon have some fresh options in communities “designed specifically for rental refugees, downsizing discretionary buyers, and those on a modest budget looking to retire to a modest modicum of entitled living.” He quotes one homebuilder who has coined the phrase “entry-level plus” for new developments coming on line in some areas and says they will bring lower price tags along with a smaller footprint.

Posted on February 24, 2017 at 8:07 pm
Greg Timms | Category: Economical Updates | Tagged , , , , , ,

Crushed it!

In the words of several media reports, the January Employment Situation Report “crushed it.” There were 227,000 new jobs created during the month, up from a revised 157,000 in December and the best report since last September. The number was way above expectations; analysts had been looking for a number in the range of 155,000 to 195,000.

But into every bright economic report, a little rain must fall; in this case the data on wages. The estimated increase of 0.4% reported for December was revised down to 0.2% and January’s gain was a meager 0.1%. But another set of employment stats offers hope. The Job Openings and Labor Turnover report or JOLTs (rumored to be one of Janet Yellen’s favorite indicators) shows a tightening labor market, with 5.50 million job openings at the end of December and 5.252M hires. Econoday calls the 249,000 job gap an indication that “employers are having a hard time finding people with the right job skills.” That’s usually a precursor to higher salaries.

Back on the “home” front. One of the possible reasons behind the tight inventories of homes for sale is the number of homes that were converted from owner-occupied to rentals during the Great Recession; some analysts put the figure at 3 million. A new study this week from the Research Institute for Housing American (RIHA) points out both that this is nothing new and that it may be exacerbating new home shortages as well.

The report, written by Stuart S. Rosenthal, calls the shift from owned homes to rentals both cyclical and a two-way street. There are both short term and long term transitions from owned to rented and back again. Short-term shifts are often prompted by changes in home prices–falling prices tend to push owned homes into rentals only to see them shift back when prices rise. Over time a net of about 2% of the housing stock becomes rentals. Longer term shifts tend to be related to age. Older homes are more likely to become rentals and to stay that way than are younger properties.

Rosenthal says rising home prices may be shifting rentals back to owner homes and this has the potential to undercut the demand for new construction. In addition, the current low homeownership rate suggests that a large buffer stock of potential owner-occupied homes may now sit in the rental segment of the market.

After some pretty wild swings in November, December, and January, interest rates have gone a little squishy. Per Freddie Mac, average rates moved within a two basis point range for the third straight week.


Posted on February 10, 2017 at 10:06 pm
Greg Timms | Category: Economical Updates | Tagged , , , ,

Tough Sledding

Despite taking a dip in December, existing home sales still closed out 2016 as their best year since 2006. The National Association of Realtors (NAR) said that over the 12 months an estimated 5.45 million single-family houses, townhomes, condos, and cooperative apartments changed hands. This was 200,000 more units than sold in all of 2015 and the highest number of such transactions since 6.48 million homes sold in the last gasp of the housing boom.
Still, the housing market hit some tough sledding in December as both new and existing home sales suffered. Interest rates peaked at two-year highs and inventories reached a new low in NAR’s records that date back to 1998. Sales for the month were at a seasonally adjusted annual rate of 5.49 million units, down by 2.8% from November, and exceeding by a bare 0.7% the November 2015 rate.
The number of existing homes for sale ended the month at 1.65 million, an estimated 3.6-month supply at the current rate of sale and a decline of nearly 11% from listings in November. NAR has said in the past that a six-month inventory is a good balance between supply and demand.
New home sales followed a similar pattern–a good year overall, a pretty bad December. The Census Bureau said there were 563,000 newly constructed single-family homes sold in 2016 compared to 501,000 in 2015. But, for the month sales were down 10.4% from November. The seasonally adjusted annual rate was 536,000, well below even the lowest forecast and off by 0.4% from the previous December. At least the inventory was relatively healthy–at 5.8 months it was the biggest of the year.
The Federal Housing Finance Agency (FHFA) which reports on home prices based on mortgages sold to or guaranteed by Freddie or Fannie posted another aggressive report on home price gains. The agency says prices rose 6.1% from November 2015 to November 2016 and 0.5% on a monthly basis. This is the fourth month in a row that the year-over-year gain for that index has exceeded 6.0%.
But maybe, as economists have been predicting for months, the price juggernaut is slowing down. NAR reports prices one month in advance of the other major data sources and said this week there was only a 4.0% annual increase in December compared to 6.8% for the 12-month period ended in November. That is more than a slowdown; in statistical terms, it is more like slamming on the brakes.

Another notable item for the week. The Mortgage Bankers Association said the number of applications for purchase mortgages last week was the highest since June which bodes well for the coming year.


Posted on January 27, 2017 at 11:49 pm
Greg Timms | Category: Economical Updates, Real Estate News | Tagged , , , , , ,

JUST SOLD! 18724 Caminito Pasadero, San Diego 92128

160057063

Greg Timms Blog | 8724 Caminito Pasadero

Just Sold this gorgeous 3 bedroom model with loft office/study. Ideal location with privacy & garden views.

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Open kitchen with granite counter center island off family room with fireplace & lots of kitchen cabinets. Spacious living room with dining adjacent to it.

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Spacious master suite with walk-in closet, dual vanity & views.

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Sought after gated community with multi-million dollar clubhouse with 2 pools, BBQ area, lighted tennis courts, exercise room, banquet room and more! No Mello Roos. Poway School District.

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

Greg Timms Blog | 8724 Caminito Pasadero

I can get the same results for you! If you are having thoughts of buying or selling (sell early in 2017) then call me now!

Posted on January 23, 2017 at 6:07 pm
Greg Timms | Category: Real Estate Activity, Real Estate News | Tagged , , , , , ,

Playing Catch-Up

The Old Year and our two-week break has left us with a lot of make-up work. While sales and pricing data dominated the usual end-of-month flood and was largely positive, the Census Bureau’s construction numbers took some of the edge off.
The two backward looking reports on home sales–new, and existing–continued to show a strong fall selling season while pending sales, a leading indicator, were a little unsettling.
New home sales, which seem to alternate good months with not-so-good ones, rose 5.2% in November, pulling out of a 1.9% slump the month before. The seasonally adjusted rate of 592,000 units was second only to June for the year-to-date and was 16.5% higher than the pace a year earlier.
Existing home sales were higher for the third straight month. Sales topped October’s by only a fraction, 0.7%, but it was good enough to make November the strongest month since February 2007.
Pending sales were the lowest since January and the 2.5% loss is discouraging vis-à-vis the sales outlook for the next few months. Lawrence Yun, chief economist for the National Association of Realtors (NAR) said the “brisk” uptick in mortgage rates during the month along with inventories that continue to be far from adequate, “dispirited some would-be buyers.”
Construction data indicates that little inventory relief for “dispirited” new home buyers is in the immediate offing. While housing completions were up strongly (15.4% from October), permitting and housing starts lost a lot of ground. Permits fell 4.7% for the month and 6.6% year-over-year. Housing starts dropped even more dramatically; they were 18.7% lower than in October and 6.9% below the November 2015 level.
All the numbers from the five home price reports issued in the last two weeks were exuberant to say the least. Three of the reports were for October and Case-Shiller, the Federal Housing Finance Agency, and Black Knight Financial Services, while not agreeing among themselves on exactly how much prices were up, posted October estimates that were very true to those in recent months; two showed even faster increases. All three put the year-over-year appreciation at 5.6 to 6.0%
If October was exuberant, two November reports were ebullient. CoreLogic upped the annual change from 6.7% in October to 7.1% in November while NAR’s year-over-year number jumped 8 basis points to 6.8%. Nary a sign of the slowdown that analysts have been predicting for months.
There was no holiday respite for Interest rates. The 30-year fixed-rate mortgage hit 4.32% during Christmas week, a 32-month high, but reversed course this week, falling 12 basis points (bps). Despite the 90 bp increase since October 1, Freddie Mac says the average rate for the entire year was 3.65%; the lowest since it started keeping records in 1971.

Don’t forget that new loan limits kicked in on January 1. The increases were not huge–conventional limits went from $417,000 to $424,100 with limits in “high cost areas” rising proportionally–but maybe up just enough to make your purchase or refi more doable.


Greg Timms Blog | FreddieMac 010617

Posted on January 6, 2017 at 5:26 pm
Greg Timms | Category: Economical Updates | Tagged , , , , , , ,