Weekly Mortgage and Real Estate Report – Week of May 20, 2019

ECONOMIC COMMENTARY

The Ugly Word Arises

So, we had declared that everything was in place for a fantastic economic ride. Low interest rates, a moderately expanding economy and rising stock prices. Then the ugly word was uttered — tariffs. It took one word to put a bump in the road of our goldilocks economy. As soon as the word was spoken (or Tweeted) — the markets immediately showed their dismay.

Now, this word had been bandied about before as part of the many trade discussions which have taken place in the past few years. Sometimes the word just turns out just to be part of negotiating tactics. Or, the tariffs implemented are not as extensive as threatened. In these cases, the markets have quieted down, and the economy has moved along its merry way. It has been about two weeks since the word was presented recently, and in this case the drama has continued.

However, the initial reaction we have witnessed reminds us that it only takes one little — or big — thing or event to upset the apple cart. Natural disasters, political events, international tensions, and more, have the ability to put a charge into the economy and the markets. Thus, the word tariff can be very ugly, or it can just be a gentle reminder. Only time will tell. 

REAL ESTATE NEWS

 First American Financial Corp., Santa Ana, Calif., said rising home affordability is benefiting home buyers at a key point of the spring home buying season. “The interest rate-driven affordability surge arrived just in time for the spring home-buying season,” said Odeta Kushi, First American Senior Economist. “Home buyers have reacted positively to lower rates. When rates dipped just before springtime, applications for residential loans surged nearly 19 percent for the week. While many of those applications were for refinances, there was also renewed interest in home buying. Rising affordability has already benefited home buyers and, if the lower rate environment persists, we’re in for a great spring home-buying season.” Kushi added: “Combined with higher incomes, the good news for home buyers and the housing market is house-buying power is at its second highest point in over two decades. Source: First American

Baby Boomer homebuyers must have a laundry, but they would rather do without an elevator or a wine cellar in their home according to a recent study by the National Association of Home Builders (NAHB). The study, which is part of its What Homebuyers Really Want Report, revealed that while their top home feature likes and dislikes are in sync with other generations, baby boomers are more likely to have strong opinions about what they want, and don’t want, in their homes. While a laundry room topped the list of must-have features with 94 percent of baby boomers listing it as an essential feature, 91 percent of this generation would also like energy efficient windows. At 89 percent, a patio also rated high among home features desired or essential for baby boomers, followed by a ceiling fan, garage storage, and exterior lighting, with 88 percent of boomers listing these features as essential or desirable in a home. A full bath on the main level, walk-in pantry, hardwood flooring, and a fully energy efficient home rounded off the top 10 home features that baby boomers desired. The report noted that the only feature listed by baby boomers that was different from other generations was the desire to have a full bath on the main level. Among community features that were ranked as most desirable by baby boomers, having a home near a retail space ranked first, followed by walking/jogging trails, suburban homes, walkable communities, and homes close to a park area. Source: NAMB

Baby boomers are the fastest growing segment of roommate seekers, growing twice as fast as any other group. SpareRoom reports that, according to date from Harvard University’s Joint Center for Housing Studies, people over the age of 50 living with roommates has grown by 27 percent in the past year, with a total number of 2.6 million older people living with non-relative roommates. “People think of apartment sharing as a young person’s game, but that’s no longer the case,” says Tom MacThomas, SpareRoom’s US General Manager. “The over 50s might not be the biggest group of roommates but they’re definitely the fastest growing.” Rising cost of living across the U.S. as well as inflation means that many older Americans are seeking roommates as a financially-sound alternative to living alone. Additionally, life changes such as divorce means that many are seeking roommates for the first time in their lives. For renters, having a roommate could save those 50 and older over $25,000 a year. MacThomas cites the financial benefit as one of the reasons for the growth among older roommate-seekers. Source: MReport

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Weekly Mortgage and Real Estate Report – Week of April 15, 2019

ECONOMIC COMMENTARY

Yes, They Were Wrong

At the first of the year we published a range of forecasts. This included the predictions for interest rates in 2019. These predictions were summarized by MarketWatch — For 2019, Market Watch reviewed the predictions of rates on home loans by several major economists. The range was an annual average of between 4.8% to 5.3% for 30-year fixed rates. In general, that means the economists believe that rates will rise some more.

Basically, at this point we can say that these forecasts were wrong. Rates have actually come down so far this year, with 30-year fixed rates averaging more than one-half of one percent below this range. We all know that predictions are often wrong, which is why we don’t place bets on the markets. We are not here to place blame. We are here to point out an important opportunity. If you are looking to make a large purchase such as a home or refinancing, this is certainly a great time to take advantage of these low rates.

We must also point out that there is plenty of time left in the year. That means that the original predictions may still turn out to be true. We know that rates, like any markets, can turn at any time. For that reason, we can’t say how long this opportunity will last. It may last a few more weeks or for a much longer period of time. Our advice would be to act on what is beneficial to you today, rather than waiting for the other shoe to drop later on. 

REAL ESTATE NEWS

 Home inspections are often a major bone of contention between buyers and sellers. Buyers tend to demand that sellers fix every little thing that their examiners find wrong with the house, and sellers sometimes hold firm that they won’t mend items that they believe amount to nothing less than nitpicking. Worse, though, buyers tend to ascribe the cost to repair everything the inspector discovers at two or even three times what it really might set them back. So, they prune their offers by that amount. That leaves sellers stuck having to decide whether to accept a lowball offer or bite the bullet. Let more hard bargaining ensue. But now there are several ways both sides can obtain accurate repair estimates quickly. If you are familiar with inspection reports, you know they can be lengthy and detailed — and therefore difficult to decipher. They also offer little, if any, insight into what it might cost to repair what the inspector says needs to be fixed. These companies provide options, which do not guarantee pricing because “there are too many variables and potential underlying issues” of which it may not be aware — RepairPricer, Punchlist and HouseMaster. Estimates are not contracts and are subject to change based upon actual conditions. Source: Lew Sichelman, uexpress

People are staying in their homes longer and making repairs or renovations according to a new survey. The sixth annual LightStream Home Improvement Survey conducted by The Harris Poll found that 73% of owners are planning home improvements in 2019, a rise of 26% from last year. They are also planning to spend more – $9,000 on average – a record high for the survey, while the share planning to spend $25,000 or more rose by 83% year-over-year. “The majority of homeowners are planning on staying in their homes for at least 10 years—or never move,” said Todd Nelson, senior vice president of strategic partnerships at LightStream. “Regardless of their age, we found that most consumers are focusing their home improvement projects to reflect their personal lifestyle, comfort and interests.” But the reason for renovations is less about adding value than it is about creating a perfect space. Personalization is the top motivator for 27% of respondents while just 14% are driven by increasing value. Improving their home ahead of sale was the priority for just 7% while 4% were preparing for a major life event such as having a baby. Source: MPA

While modular construction makes up only a small minority of today’s construction, it is gaining notice as a potential solution to today’s housing shortage and high housing and construction costs. Modular housing makes up just 2 percent of single-family home construction and 3 percent of multifamily construction today, according to an article in the National Review. Rising construction costs and a diminished construction labor force have contributed to the low housing supply. According to the article, “Last year alone, the United States fell 400,000 homes short of the total needed to keep up with population growth.” Modular housing could help reduce construction time by half and construction costs by 10 to 20 percent. Instead of the nearly 22 separate types of professionals that contribute to traditional home construction, a smaller force of workers can build housing in a climate-controlled facility. “As housing prices grow farther out of reach for millions of Americans, the smaller budgets and faster building times of modular housing could be an affordability game-changer,” Hendrix stated in his article. However, modular construction companies face several challenges in creating and distributing their buildings. Unionized labor forces have not embraced modular housing construction. Acquiring the large upfront funds from lenders can be a challenge as well. Another major challenge comes in the form of regulations. Across the country, there are about 93,000 different building codes, which vary by city and county, according to the National Review. Source: DS News

Weekly Mortgage and Real Estate Report – Week of April 8, 2019

ECONOMIC COMMENTARY

The Inverted Yield Curve

A few weeks ago, we had a one-day precipitous drop in the stock market which was blamed on the appearance of an inverted yield curve, which for some analysts signals that a recession can be on the horizon. This begs two questions. First, what is an inverted yield curve? Simply, an inversion occurs when long-term rates become lower than short-term rates. Typically, long-term interest rates are higher than short-term rates. When you go to the bank and you tie up your money in a CD for a longer period of time, you expect the bank to pay you a higher rate for the longer term.

Second, why is an inversion seen as a harbinger of bad times? Inverted yield curves typically occur some time before recessions because the markets see slower growth ahead, which causes long-term rates to fall. Short-term rates will fall only when the Federal Reserve Board trims their benchmark rates. Thus, today the markets are predicting a slowdown in growth, but the Fed has not lowered short-term rates as they have only just declared that they are just about done raising short-term rates. We have actually seen a flat yield curve for the past several months, and the Feds more recent statements about ending their increases has helped bring long-term rates down even further.

Here is the point. While an inverted yield curve can be a predictor of recessions and slower growth, predictions are never guaranteed. To see real evidence, we should look at the economic indicators. A very important indicator was released Friday. The jobs report showed 196,000 jobs added in March. Following a weak February report, this has relieved many analysts who thought February was a harbinger that the slowdown was already here. For the first quarter we added an average of 180,000 jobs per month, subject to two future revisions. Again, no guarantee that even a mild recession is on the horizon, but an indication that employment growth has slowed from the brisk pace of last year. 

REAL ESTATE NEWS

 Buying a home is likely to get more affordable this spring as declining prices and interest rates give 6.0 percent more purchasing power while keeping monthly payments the same or a decrease of $62 per month in principal and interest on the average home, according to Black Knight’s latest Mortgage Monitor Report. The report indicated that annual home price growth has slowed for 10 consecutive months falling from 6.8 percent year-over-year in February 2018 to 4.6 percent at the end of the year. As a result, the average value of a home has also decreased by $850 in December. The declining values also indicate that it would now take 22.2 percent of median income to purchase a home with a 20 percent down payment and a 30-year fixed-rate loan. The report indicated that declining rates are also boosting refinancing of loans — with 3.27 million homeowners likely to qualify for a refinance and reduce their current interest rate at least by 0.75 percent by doing so. The report noted that the recent rate declines could also result in increased cash out lending, which had softened last year as “equity utilization became more expensive in 2018.” “While this is all welcome news for consumers heading into the spring home buying season, it remains to be seen whether recent rate declines and easing affordability will be enough to halt the deceleration in home price growth,” said Ben Graboske, President of Black Knight’s Data and Analytics Division. Source: MReport

Recent data from RentCafé shows that the number of seniors renting has taken off, seeing stunning growth in a 10-year period. RentCafé’s data shows that renters aged 60 and over grew by 43% over 10 years, from 6.55 million in 2007 to 9.37 million in 2017, outpacing their younger counterparts in renter growth. RentCafé pointed out that the median age for renters is still younger than their owner counterparts, but that’s to be expected. Their blog explained, as expected, renter householders tend to be younger, with a median age of 42 in 2017, compared to owner householders that had a median age of 56 in the same year. But the median age of renters has been slowly closing the gap over the last decade. RentCafé’s analysis notes that older renter households increased at a faster rate than older owner households. Older owner households grew just 31% compared with older renters increasing by 43%. Source: HousingWire

Laundry rooms and energy-saving features such as Energy Star appliances, windows and whole house certification are among the most wanted home features, according to survey results from NAHB released during a press conference at the NAHB International Builders’ Show in Las Vegas. NAHB surveyed nearly 4,000 home buyers — those who have either recently purchased a home or plan to purchase a home within the next three years — ranking 175 features based on how essential they are to a home-purchasing decision. The top 10 features also included home-storage needs, such as garage storage and walk-in pantries, as well as hardwood flooring, a patio and exterior lighting. Housing trends across the board include a continued decline in the average home size and decreased demand for upscale features such as three-plus-car garages. In 2018, according to information from the U.S. Census Bureau, the average new home declined to 2,576 square feet — down from its peak at 2,689 square feet in 2015 — driven in part by increased production in townhouses, which comprised 14% of new home starts. Source: NAMB

Weekly Mortgage and Real Estate Report – Week of April 1, 2019

ECONOMIC COMMENTARY

Here Comes Proof

At the end of this week, the job numbers for March will be released. With these numbers we will see proof of one of two directions. The first could be that the dismal jobs numbers in February were just an anomaly. January’s job growth was reported as very strong and when you take January’s numbers together with February, one can see that the average growth per month was not far below average. Therefore, we don’t need a huge bounce back month in March to even things out — just an average month.

On the other hand, a weak report for March could be seen as the start of a trend of slower jobs growth and thus slower overall economic growth. This means that this week’s jobs report is more significant than the others we have witnessed over the past several years. In the aftermath of the recession, the United States has witnessed a record of over 100 months of positive jobs growth, and the past few years have been very strong. So, it would not be surprising to see somewhat of a slowdown in the months ahead.

Keep in mind that it is not just the jobs growth for March that is important. In the past several months, we have seen some pretty significant revisions to previously released numbers. Thus, an upward revision in February’s numbers is also a possibility. The analysts will also be looking at the labor participation rate to see how many of the long-term unemployed or retired are re-entering the workforce, because the low unemployment rate tells us that we need more workers to become available in order for the labor force to keep growing. Overall, this will be a very interesting jobs report, and the results may give us a clue as to the direction of the economy and especially interest rates.  

REAL ESTATE NEWS

 The majority of Americans—79 percent recently surveyed—still believe that owning a home is a vital component of achieving the American dream, according to a Bankrate.com survey of more than 2,000 consumers. Americans placed achieving homeownership ahead of retirement (68 percent), having a successful career (63 percent), and owning an automobile (58 percent), according to the survey. While the majority of respondents rated ownership high, they do see several challenges to overcome to achieve it. About half of the survey’s respondents say they don’t own a home because they can’t afford it on their income. Four in 10 Americans say they don’t own because they can’t afford a down payment and closing costs, while one-third cite high home prices as the major obstacle. But a rigid savings plan could put more consumers into homeownership. “Put yourself on financial lockdown for at least six months before purchasing a home,” says Dana Scanlon, a real estate pro with Keller Williams Capital Properties in Bethesda, Md. “Don’t buy new furniture, keep your old car running, and check your spending habits.” Luis Rosa, a financial planner in Henderson, Nev., suggests a two-year plan to save up for closing costs and a down payment and to boost credit scores. Source: Realtor®.com

The number one way younger millennials and Generation Zers learn about brands is from friends and family, outpacing Google, social media, Amazon, retail stores, and television in descending order, according to a recent study of 18- to 29-year-olds by Swift Prepaid Solutions, a payments technology provider. As digital natives, members of this group of emerging buyers are highly tech-savvy, and, like their older counterparts, prefer to browse online before making a purchase. However, because brand loyalty among these buyers is largely driven by opinions of people they know and trust, it’s crucial for real estate pros to build strong, lasting relationships with their clients in order to attract more business. Here are three ways to provide high quality customer service to strengthen your brand reputation and build loyalty among your clientele: (1) Reply to all emails and phone calls immediately; (2) Exercise unparalleled transparency; and (3) Focus solely on your clients. Customer service consultant, speaker, and trainer Micah Solomon suggests getting to know clients on a personal level, like a bartender, doorman, or hairstylist would. Work on remembering details like the names of their children or pets. True personal service will differentiate your brand. Source: REALTOR® Magazine

Some homeowners bypass the permit process when they remodel their home. They may find the process too expensive or cumbersome. Permitting fees can sometimes cost hundreds of dollars or more. Some homeowners may believe that if they go ahead with a kitchen or bath remodel without a permit, they’ll likely never get caught. But failing to get a permit could be troublesome when they go to sell the home. Most states require homeowners to fill out a disclosure statement when they go to sell. In that form, sellers are usually asked if they completed work to the home without a required permit. Lying about it can also backfire—the sellers could be sued later by the new homeowner for making false statements. “You can personally become liable for work carried out without permits,” writes Bill Gassett, a real estate professional with RE/MAX in New England, for The Washington Post. “Maybe the finished basement built by the previous homeowner with the fancy kitchen that sold the home has to be ripped out, or you’ll have to pay a penalty.” Also, if there’s any incident that was caused by the lack of permits, the homeowner may face a denial of their insurance claim. Source: RIS Media 

Weekly Mortgage and Real Estate Report – Week of March 11, 2019

ECONOMIC COMMENTARY

Fed Looking at the Data

This does not always happen, but Friday’s job report came just in time for the Federal Reserve Board to analyze the data and act on it during their next meeting which starts one-week from today. Before the data was released, most analysts were predicting no action to be taken at this meeting. As a matter of fact, most predictions are ranging from no rate increases this year to perhaps one rate increase towards the end of the year.

Friday’s job report certainly supports this thinking. For the month, the economy created 20,000 jobs, which was much less than expected, even considering the large gain in January and snowy weather in February. We have been subject to significant revisions of the previous months of job data recently and this time there was not much of an adjustment, as the numbers from the last two months were revised upward by only 12,000 jobs. The headline number is the unemployment rate, and this came in at 3.8%, reversing the increase of the previous month. For Fed watchers, the headline number typically is wage growth. Wages grew 3.4% from the previous year — higher than forecasts.

What does this all mean for next week? Certainly, the jobs report will be seen as weak, but as we pointed out the reports have been volatile lately. One thing we can say is that, no matter what the Fed does, spring will still be coming next week, and it will also be Saint Patrick’s Day. For those of us who don’t like winter weather, we will be celebrating regardless of the Fed. Some nice language concerning how they like low interest rates could also be a cause for celebration as the spring real estate market should be heating up as well.  

REAL ESTATE NEWS

 Home price growth is slowing down and that could spell good news for buyers who were previously priced out of the market. According to CoreLogic’s Home Price Index (HPI) and HPI Forecast for December 2018, though home prices increased by 4.7 percent year-over-year, they’re projected to grow at a slightly lower rate of 4.6 percent year-over-year through December 2019. Comparing the annual average HPI and HPI forecast for 2018 and 2019, price growth is forecasted to slow from 5.8 percent to 3.4 percent, the report indicated. Prices are expected to decrease by 1.0 percent on a month-over-month basis between December 2018 and January 2019. These trends are likely to represent good news for potential homeowners. In 2018, CoreLogic together with RTi Research of Norwalk, Connecticut, conducted a survey measuring consumer-housing sentiment, assessing attitudes toward homeownership and the driving force behind the decision to buy or rent a home. According to this survey, when renters were asked how interested they were in owning a home or residence, 36 percent felt homeownership would allow them to fulfill a dream and provide a place to raise a family. On the other hand, 45 percent of those surveyed claimed they could not afford to buy or take on the responsibility of ownership at this time. However, the latest HPI report indicated that as home-price growth cooled and incomes rose, buyer affordability was likely to improve and help “home sales to pick up.” Source: MReport

Seniors who were born after 1931 are less likely to sell their homes than were previous generations —and it’s a significant cause of the housing shortage, according to the “February Insight” report from Freddie Mac. The result is around 1.6 million houses were not for sale through 2018, representing about one year’s supply of new construction, or more than 50 percent of the shortfall of 2.5 million housing units—that the market faces. The scarcity factor serves to increase housing prices and make renting more attractive to younger generations. However, a shortfall of new construction increases house prices and rental rates. “We believe the additional demand for homeownership from seniors aging in place will increase the relative price of owning versus renting,” said Sam Khater, chief economist at Freddie Mac. “This further highlights the importance of addressing barriers to the production of new housing supply to help accommodate long-term housing demand.” Improved health and higher levels of education are causes of the trend. And it’s likely to increase over time as improvements in health care and technology make aging in place easier. For example, the capability to Skype with a doctor. Source: DS News

Are home prices affected by proximity to hospitals and colleges? That’s what a team of computer scientists from University of California – Riverside wanted to discover as they began an analysis of median home price data from 13,105 ZIP codes over 21 years and rent data from 15,918 ZIP codes over seven years to compare a ZIP code’s appreciation, volatility, and vacancies to the size of a university or hospital within that ZIP code. Their results confirmed that colleges and hospitals are ‘opportunity hubs’ with factors including jobs and high wages, but they also found that homes near these institutions see faster rises and falls of prices, creating a risk for investors. Led by Hristidis and UCR computer science doctoral student Ryan Rivas, the group also determined that homes close to a university did have higher average prices and rents and were highest in ZIP codes with a university of 10,000-20,000 students. Larger hospitals nearby meant higher average prices and rents – especially for one-bedroom homes in smaller ZIP codes – while those with smaller hospitals actually saw prices below the average for ZIP codes with no hospital. Source: Mortgage Professional America 

Weekly Mortgage and Real Estate Report – Week of March 4, 2019

ECONOMIC COMMENTARY

Volatility and Jobs

Within the past year, the markets have all been hit with a heavy dose of volatility. Interest rates moved up significantly in 2018, only to start falling towards the end of the year. Oil prices have been even more volatile with a high of over $75 per barrel in 2018 and a low of just over $45 per barrel. That is quite a swing. Volatility in the stock market towards the end of 2018 was a major topic of discussion. Much of these gyrations were on the downside, but the markets have recovered nicely thus far in 2019.

In general, the job creation machine has been very steady during these market gyrations. But there are signs of volatility within employment data as well. November’s initial reading showed a disappointing growth of 155,000 jobs, but this number was revised up to a solid 196,000. December showed a spectacular gain of over 300,000 jobs, but this number was revised down by a whopping 90,000 jobs. January’s pintail report showed another spectacular gain of over 300,000 jobs. What does all of this violability mean?

When you look at the final numbers, the jobs report may not be as volatile as it seems. For example, the final number of 196,000 jobs in November is close to the still to be revised 222,000 jobs in December — and both are solid numbers. It also tells us that the revisions have become just as important as the initial numbers. Therefore, we will be watching the revisions of December and January just as closely as the numbers for February when the report is released on Friday. The government shutdown still could have had an effect on the report, especially the revisions. 

REAL ESTATE NEWS

 More young adults are still living with their parents and not branching out on their own, and that could have a long-term, negative impact to their finances, according to a new study from the Urban Institute. Researchers found there is no long-term advantage financially for young adults who live with their parents. The share of young adults aged 25 to 34 who live with their parents rose from nearly 12 percent in 2000 to 22 percent in 2017. The trend coincides with a decline in young adults’ marital rates, which during that time has fallen from 55.3 percent to 40 percent. An increase in rents and student debt also is keeping more young adults living at home, the study notes. But “this early life choice could have long-term consequences,” researchers note in the report about the delay of homeownership. “Young adults who stayed with their parents between ages 25 and 34 were less likely to form independent households and became homeowners 10 years later than those who made an earlier departure.” Young adults who stayed in their parents’ home longer did not end up buying more expensive homes or have lower housing debts later on than those young adults who moved out earlier, the study showed. Urban Institute researchers say this suggests that “living with parents does not better position young adults for homeownership, a critical source of future wealth, and may have negative long-term consequences for independent household formation.” Housing is one of the most important tools for building long-term wealth, and researchers noted that those who buy a home before age 25 receive the biggest housing investment returns over time. Source: The Urban Institute

Homeowners should have felt richer in 2018. Equity rich properties comprised 25.6 percent of U.S. properties financed in 2018, according to a newly released report from ATTOM Data Solutions, a real estate research firm. In the fourth quarter, more than 14.5 million U.S. properties were considered equity rich, where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value. That represents a new high in ATTOM Data’s records dating back to the fourth quarter of 2013. “With homeowners staying put longer, homeownership equity will most likely continue to strengthen,” says Todd Teta, chief product officer with ATTOM Data Solutions. “Those that are seriously underwater may find themselves coming up for air as they continue to pay off excessive legacy mortgages or sell. This report helps to showcase a story of West Coast markets having the highest share of equity rich homeowners versus the South and Midwest markets, who continue to have stubbornly high rates of seriously underwater homeowners.” Source: ATTOM Data Solutions

Chinese home buyers have been the top foreign buyers of residential housing in the U.S. for six consecutive years, and now they’re expanding their footprint beyond luxury markets to lower-priced tiers as well, the National Association of Realtors® reports. Chinese buyers in the U.S. have long had an appetite for million-dollar properties that they’re willing to pay all cash for. But recently, middle-class buyers from China are looking to snatch up lower-priced homes in the U.S. They’re also more often turning to home loans to finance their purchases. “The Chinese people still see the United States as a safe harbor where they can take their assets and park their money not only for their money but also for the future of their children,” Michi Olson, a real estate professional in San Francisco, told CNBC. “The Chinese are basically politically agnostic,” Olson says. “What I mean by that is even though there is a great tension between the U.S. government and Chinese, the Chinese citizen seems to be able to separate the political turmoil with the sound real estate investment.” Source: CNBC 

Weekly Mortgage and Real Estate Report – Week of February 18, 2019

ECONOMIC COMMENTARY

Good News Scenario?

When we entered 2019, we were dealing with a government shutdown, interest rates that were supposed to rise, a nervous stock market and a slowing economy. There was a lot of pessimism running in the veins of economists and market analysts. The question is–was this pessimism justified? Well, let’s start by reviewing the first six weeks of this not-so-new year.

The stock market? While still very volatile, it has recovered over 5% in the first few weeks of the year. One factor helping the stock market is the fact that interest rates have fallen in response to the Federal Reserve Board taking more of a “wait and see” approach with regard to future rate increases. All those market gurus predicting higher rates in 2019 are starting to back track on their prognostications.

The government shutdown is over and it looks like we will not have a repeat (for now). The first measure of economic growth for the fourth quarter continues to be delayed, but the first jobs report of the year was pretty strong. Low interest rates and a pretty strong economy? Sounds like good news all the way around. That sort of news might make the real estate market a bit stronger than was predicted as well. 

REAL ESTATE NEWS

 Fannie Mae expects home sales to stabilize in 2019 after falling in 2018, according to the Fannie Mae Economic and Strategic Research Group’s 2019 Economic and Housing Outlook. Rates are expected to change little in 2019 from their level late last year of around 4.5 percent, allowing potential homebuyers time to adjust to the rate environment after the volatility experienced in 2018. The Fed’s continued efforts to unwind expansionary monetary policies implemented during the recession have the potential to add to the headwinds facing the economy,” said Fannie Mae Chief Economist Doug Duncan. “However, we believe that contained price pressures should afford the Fed sufficient latitude to slow or pause rate hikes this year. This will allow the economy to continue growing, albeit at a slower pace, and housing to regain its footing.” A slower pace of house price appreciation (4.2 percent in 2019 from 5.5 percent in 2018, according to the Federal Housing Finance Agency purchase-only home price index), and stable rates should make buying a home more affordable and increase buyer confidence. At the same time, Fannie’s forecast for continued job growth implies that the unemployment rate will remain near historic lows–a positive for wage growth and affordability. It expects single-family starts to grow modestly in 2019 as home buying firms. Although labor shortages will likely continue to frustrate builders, lower interest rates should help contain their borrowing costs. However, solid labor market conditions and favorable demographic trends, including household formations by Millennials, are expected to provide support to the multifamily sector in 2019. Total residential investment, which includes new construction and home improvement spending as well as brokerage fees, is projected to rebound this year after contracting last year for the first time in seven years. Source: Fannie Mae

House hunters like to search for homes online during their workday, a new survey shows. The peak times for consumers to search for home listings are between 9 a.m. to 5 p.m. on the weekdays. The most popular time is Friday at 10 a.m., according to a new analysis from real estate brokerage Redfin. Searching for a new home is like a job. Maybe that’s why people most often do it while they work,” Redfin notes in its analysis. Nearly 64 percent more consumers are on Redfin’s website at 10 a.m. on Fridays than any other time, according to the study. Following closely behind, the next most popular window is 11 a.m. on Mondays. On the flip side, researchers found that weekday evenings are unpopular times to search for homes. Weekends also failed to come close to the weekday mid-morning rush of browsers, researchers note. “One possible explanation is the popularity of weekends for hitting the pavement and touring homes in person rather than through a computer or smart phone screen,” Redfin notes. “Another reason could be the rise in real estate technology tools,” such as notifications that are sent when new homes meeting the person’s preferences hit the market or there’s a price change. The temptation to take a peek at the new listings may be too great when a consumer receives a notification while they’re sitting at work in front of their computer or phone at work. Source: Redfin

New homes are increasingly being listed with price cuts according to a recent Zillow analysis that found price cuts for newly constructed housing was more common in the fourth quarter of 2018 than in the first one. More than a quarter of new homes had their list price cut at least once in Q42018, compared with 19.2 percent in the first quarter of the year. And the trend wasn’t restricted to new homes. The analysis found that 16.3 percent of all listings experienced a price cut in November 2018. The analysis put this growing trend down to slowing home value growth, rising rates, and increased inventory especially in major metro areas. It revealed that the nation’s median home was worth almost 1.5 times (49.8 percent) more today than it was at the height of the recession—although “the growth rate of home values has slowed in recent months.” Rates also rose in 2018 after spending five years at historically low levels, the analysis noted. That, along with an increase in for-sale housing supply towards the end of the year, “eventually caused housing demand to fall.” “More newly built homes are seeing their list prices drop, but the size of those price cuts has been remarkably steady, which suggests that the trend we are seeing is being driven more by price discovery than by desperate sellers,” said Aaron Terrazas Senior Economist at Zillow. Source: MReport