Changing Times

We are three years into one of the biggest economic downturns and I keep getting the question, “When is housing coming back?”.  The best answer to this question is “It depends”.  It depends on the jobs market, which depends on businesses doing well, which depends on the price of oil, demand for new products, consumer spending, political landscape and economies of other countries among other things.  There is no way to predict when the ‘upturn’ in housing will occur and I believe housing will be a lagging indicator this time around.  The best way to keep track of housing trends is to keep an eye on statistics published by the National Association of Realtors and your local Realtors. For example, I publish reports for Cowlitz County.  There is a summary report as well as a report by zip code for major areas in the county. Please look in the Market Info section for the latest data. In addition, please continue to read articles published by major economists to get a sense of the macro-economic situation. 

A good one published recently is by Lawrence Yun, Chief Economist and Senior Vice President of Research at the National Association of Realtors. 

An excerpt – “As far as the economy and housing, the climate has also been somewhat other than temperate. Mortgage rates have already jumped from their exceptionally low rates of last year, and are likely to rise even further. Of course, we expected mortgage rates to increase – that is not unusual as an economy comes out of recession and is in recovery.  But another reason underlying additional upticks in interest rates is the situation in Egypt and other countries in the Near and Middle east regions.  As I am writing this column, Egyptians are “on the march” – whether for or against their current political leadership.  For better or worse, the tipping point for that most ancient of civilized nations is past and the country will undergo significant changes.

Why should those of us in the U.S. care? After all, Egypt is not a major oil-producing country. But Egypt’s neighboring countries are. The reigning regimes in those nations – including Saudi Arabia — have had a similarly tight but potentially shaky hold on power and that could impact the price and supply of oil. Oil prices not surprisingly surged above the $100 mark recently. Because of that, there will be additional worldwide inflationary pressure and a consequent need to charge higher interest rates to compensate for loss in purchasing power of money. For the U.S, that means each $10 increase in oil prices will result in Americans needing to fork over an additional $220 million each day for oil consumption. Those funds mostly will go to foreign oil-producing countries. Not into the U.S. economy. “

Read the full article – http://economistsoutlook.blogs.realtor.org/2011/02/22/february-2011-real-estate-insights-changing-times/

Pending Home Sales Continue Uptrend

Washington, January 27, 2011

Pending home sales improved further in December, marking the fifth gain in the past six months, according to the National Association of Realtors®

The Pending Home Sales Index,* a forward-looking indicator, increased 2.0 percent to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November. The index is 4.2 percent below the 97.8 mark in December 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, credits good affordability conditions and economic improvement. “Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit,” he said.

“In the past two years, home buyers have been very successful, with super-low loan default rates, partly because of stable home prices during that time. That trend is likely to continue in 2011 as long as there is sufficient demand to absorb inventory,” Yun said. “The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, is highly unlikely this year.”

The PHSI in the Northeast increased 1.8 percent to 73.9 in December but is 5.3 percent below December 2009. In the Midwest the index rose 8.0 percent in December to 84.6 but is 5.1 percent below a year ago. Pending home sales in the South jumped 11.5 percent to an index of 101.9 and are 1.7 percent above December 2009. In the West the index fell 13.2 percent to 105.8 and is 10.7 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

NOTE: Existing-home sales for January will be reported February 23 along with revisions for the past three years, and the next Pending Home Sales Index will be released February 28. Fourth quarter metro area home prices and state home sales will be published February 10; release times are 10:00 a.m. EST.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data, tables and surveys also may be found by clicking on Research.