Weekly Mortgage and Real Estate Report – Week of October 1, 2018

ECONOMIC COMMENTARY
  From the Fed to Jobs

 

The end of the quarter is especially busy when the Federal Reserve Board schedules its meeting at the same time. We are just days past the Fed announcement to raise short-term rates by 1/4 of one percent and a confirmation of strong economic growth for the second quarter. In addition, at the end this week we get a reading of the employment numbers for September. All that news should keep the market analysts very busy. Not that the Fed announcement was a surprise to anyone.

What the analysts were looking for is a hint as to whether we might get another increase by the Fed this year. The Fed’s announcement accompanying their rate increase was anything but clear with regard to the pace of future rate increases. They continue to use the word “gradual,” but as members of the Fed have said several times, things could accelerate if there are signs of rising inflation or imbalances in the financial markets. Of course, things could slow down if other factors come into play.

The next three jobs reports, starting with the end of this week, will go a long way to provide evidence to the Fed. They will be looking at more than the unemployment rate and jobs created. They also will be looking at the labor participation rate and any signs of wage inflation. But the employment numbers are only part of the picture. The strength of the markets will also be a factor. If we have a strong stock market in the fourth quarter, this could help tip the scales toward another increase.

REAL ESTATE NEWS
 By 2020 the US housing market will favor buyers but until then sellers will remain dominant according to an analysis by Zillow. Its quarterly Home Price Expectations Survey was conducted by Pulsenomics and asked more than 100 real estate economists and experts for their predictions. The last few years have been marked by low inventory and escalating prices, putting sellers in the driving seat, but the largest consensus share (43%) of respondents believe buyers will take control in 2020. “For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market,” said Zillow Senior Economist Aaron Terrazas. “Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger.” The experts also gave their views on home prices with an expectation of 5.9% rise for 2018. Source: ZillowThe rate of home flipping in the U.S. plunged almost to a four-year low in the second quarter as the number of distressed or low-priced homes dropped, according to a new report by real estate data firm ATTOM Data Solutions. A flip is defined as a home that has been sold more than once in a 12-month period. A total of 48,768 single-family homes and condos were flipped in the second quarter, comprising about 5.2 percent of all sales. That is down from 5.4 percent a year ago. “Fewer distressed sales are limiting the ability of home flippers to find deep discounts even while rising interest rates are shrinking the pool of potential buyers for flipped homes,” says Daren Blomquist, ATTOM’s senior vice president. “These two forces are squeezing average home flipping returns, pushing investors to leverage financing or migrate to markets with more distressed discounts available to achieve more favorable returns.” Homes flipped in the second quarter sold for an average of $65,520 more than what the investor had purchased the home for, according to ATTOM Data Solutions. That’s down from an all-time high average gross flipping profit of $69,500 in the first quarter. Out of the homes flipped during the second quarter, 32.3 percent were purchased through a distress sale, a home either in foreclosure or a bank-owned home. The first quarter of 2010 saw a peak in distressed sales purchased by home flippers at 68.2 percent. Sources: ATTOM Data Solutions

Home buyers looking to escape city living can find similar neighborhood attributes in the suburbs and exurbs. Homes in both areas tend to offer more square footage, less noise, less pollution, and more privacy. But there are a few distinct differences between the suburbs and exurbs as well. The location is the key difference. Suburbs lie just outside of the city; exurbs are farther out and tend to be in more rural areas, according to Realtor.com®. “Suburbs provide a functional lifestyle close to shopping, schools, and transportation,” says New York-based real estate broker John McSherry. “Exurbs provide a remote location free from noise and congestion.” The suburban housing market has seen significant growth in recent years, according to research from the Urban Land Institute. The overflow of residents from the city to the suburbs continues to accelerate, and many suburbs are expanding outward. As the growth in major metro areas extends, suburbs and exurbs will naturally be absorbed, becoming their own incorporated entity or merging with a nearby municipality, predicts Dave Hyman, a RE/MAX real estate pro in Encinitas, Calif. “Even as cities expand, new suburbs and exurbs, beyond the current ones, will naturally come into being,” he says. Source: Realtor.com®

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