Housing Market Archives - Page 17 of 25 - Real Estate News and Commentary

November 15, 2013July 4, 2019

Is there a best way to predict the housing market

Various studies demonstrate that you can assess and somewhat predict activity in a housing market; which, albeit in hindsight, can assist home sellers and buyers in determining whether it is a good time to sell or buy a home. For example, I recently wrote about gauging real estate through divorce and premarital agreements; which discussed the implications of these life events to the housing market. The increase in prenups could indicate an increased perception in the value of home ownership and possibly the overall housing market.

Another recent study indicated that it may be possible to determine home pricing through internet search data. Beracha and Wintoki (Forecasting Residential Real Estate Price Changes from Online Search Activity; The Journal of Real Estate Research 35.3 (2013): 283-312.) set out to find out if keyword search engine data from Google could determine price shifts in various cities. They concluded that this may be the first study that directly links “aggregated” search engine data to “abnormal crosssectional home price changes.”

Essentially, the research established that you can figure out metro housing market activity through Google Trends and Google Insights, which provide keyword volume measurement in internet searches. The study examined the keywords “real estate [city]” from 2004 through 2011, and concluded that “…cities associated with abnormally high real estate search intensity consistently outperform cities with abnormally low real estate search volume by as much as 8.5% over a two-year period.”

And although the study’s authors discussed prior research linking internet keyword searches and consumer behavior, they caution that there are a number of keywords related to real estate that may be more relevant than the keywords used in their study. Regardless, the authors assume that their results may be useful in home sales and purchases. More importantly, it may seem as if their results may strengthen the link between specific search engine keywords (e.g, “real estate Rockville” or “real estate Bethesda”) and the ability to predict a housing bubble, or possibly home price peaks.

Generalized, “global” data, such as those described in Beracha and Wintoki’s study, and their meaning may be interesting; however, limiting yourself to such indiscriminate analysis for your home sale or purchase could be disadvantageous. Global data does not distinguish the many factors that impact regional markets; nor can it sort out differences within a local market (neighborhood data within a region can vary significantly).

Using “global” tools may be useful; however, if you are planning a home sale or purchase – seek out the assistance of a local Realtor®. Your real estate agent has access to local specific data that is reported through the MLS. Using MLS data, your agent can prepare a market analysis that compares your home to recent neighborhood sales; the breakdown can put your home in perspective and can give you a price range to assist you in listing or purchasing the home. Additionally, your agent can provide a hyper-local trend analysis so as to help you understand what to expect from the local housing market.

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by Dan Krell © 2013

Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

October 16, 2013July 5, 2019

Debt ceiling, default, and fear; how housing market will react

There are no courthouse default notices, and it is unlikely for real estate investors to go knocking on the white house doors to try to purchase it as a short sale. Although a government default is not quite the same as a default on your mortgage, a government default will nonetheless have consequences in the housing market.

A U.S. default would be uncharted economic waters; there is no way to know exactly what will happen – but it will most certainly not be good. When speculating about the consequences of a government default, some talk about 1930’s Germany and 1990’s Russia; these defaults occurred for different reasons and had different outcomes.

Experts discuss a possible consequence of a government default to be an almost immediate economic recession, which could rapidly evolve into a depression. The resulting shock from a possible economic contraction would filter through the economy and would no doubt result in mass layoffs. And just like the most recent recession, mass unemployment had deleterious effects in the housing market and real estate industry resulting in waves of foreclosures and property devaluation.

Other possible outcomes of a default could be runaway inflation, sky high interest rates, and/or general economic calamity. In these scenarios, forget about a housing recovery; home buyers could find it exponentially difficult to obtain a mortgage to buy a home. Homeowners who have fixed rate mortgages should be safe from payment increases; however those with adjustable rate mortgages could possibly see interest rate increases hitting adjustment caps.

In an October 9th article, Morgan Housel wrote (“What Happens If the U.S. Defaults on Its Debt?”; fool.com); “…Those holding bad mortgage debt fared the worst in 2008, but financial pain spread throughout the entire financial system, and to areas that had nothing to do with real estate. The reason was fear. If the global financial system is built on credit, it is supported by trust. When you remove trust, people hide now and ask questions later. The system freezes. I don’t want to lend to you because you might hold something bad, or be lending to someone who is holding something bad, or be lending to someone who is lending to someone who is holding something bad. So people just wait. Credit stops flowing, and as we learned in 2008, that simply devastates the economy… But a credit crisis doesn’t need to last long to bring the house down. Lehman Brothers was well capitalized two days before it was bankrupt…”

Fear is a very powerful emotion that can be used to influence popular beliefs and behavior. As congressional budget talks have been at a standstill, talk of a government default seems to be on everyone’s mind as we approach the debt ceiling. And although we fear a government default, the distinction must be made between default and debt ceiling.

Put in a very simple way: raising the debt ceiling is akin to asking for an increase in your credit card limit. However, you don’t default just because your credit limit is not raised; you default when you fail to make payments on your debt. Even if there is no debt ceiling increase, many experts agree that a chance of a U.S. default is slim; it has been estimated that treasury revenue is much more than the amount needed for debt servicing. Regardless, the fear of a government default is enough to chill the housing market.

By Dan Krell
Copyright © 2013

October 11, 2013July 2, 2019

Talking housing market conditions beyond media narrative

At a recent round table meeting chaired by local real estate agents and lenders, someone asked the Realtors® to describe current market conditions. Although descriptions were given with pride and confidence, they were not different from the depictions that have been reported throughout the year; the responses seemed shallow and pedestrian.

Attendees were hoping for responses that demonstrated a grasp of the local housing market, but instead they got a media narrative that doesn’t tell the whole story. One agent eagerly provided her response saying, “there is a lack of inventory, making it difficult for buyers to find a home.” While another agent described how home sellers need to be realistic about home prices because buyers are wary of paying higher prices and continued appraisal issues.

To say that housing inventory is low is not telling the whole story. Local housing market activity during 2013, not unlike conditions reported around the country, felt like the peak market conditions of eight years ago – but for different reasons. Montgomery County’s active single family home listings through September 2013 increased about 7.7% compared to the same period in 2012, as reported by the Greater Capital Area Association of Realtors® (gcaar.com). Although county single family home active listings are less than half that were recorded in 2007; consider that SFH actives are also at about the same level reported during 2005, which is considered to be the peak market.

Although the number of homes listed may be close to the same levels of the peak market, SFH closings are reported to be about 34% lower than the number reported during the same period in 2005; and SFH contract activity is about 30% lower than 2005 as well. Even though the market has seemed as if it has been the most active in recent years, SFH contract activity is slightly lower than the same period in 2009.

And although home sale prices have rebounded somewhat, average sale prices continue to be way below what they were during the market peak. It is easy for home sellers to grasp on the reports of double-digit year-over-year increases; however, sellers who expect the same return are disappointed. The year over year jump in home prices are explained by some experts as a statistical phenomenon produced by the sharp decrease in distressed home sales (e.g., foreclosures and short sales). This can be accounted for by the nominal month-over-month increases in average home sale prices through 2013.

Home sale absorption rate through 2013 has been similar to that of 2012, considered to be the housing market bottom. Absorption rate measures the pace of home sales by comparing monthly sales to the same month’s listings. This similar pace may indicate that the increased activity during 2013 may not be due to “pent up demand,” which has been a popular narrative by economists; but rather it may signify the underlying strengths in the marketplace.

That being said, the housing market is co-dependent on overall economic conditions. As mortgage interest rates have slowly risen, we have seen a resiliency in the market as home sales have remained stable. And as some economists are talking about the possibility of the double digit interest rates in the future, it appears as if a slow and deliberate increase has not yet deterred home buyers.

By Dan Krell
Copyright © 2013

September 26, 2013July 1, 2019

Are rising interest rates helpful?

After much speculation, mortgage interest rates appear to be on the move. Even with rising interest rates, rates are still relatively low. Some economists expect that when the Fed’s Quantitative Easing program begins tapering, mortgage interest rates may jump due to financial market volatility.

Many fear that rising interest rates could derail the recovering housing market. In an August 19th news release (realtor.org), Chief NAR economist Lawrence Yun stated that although the pace of home sales are at its highest since February 2007, the market could be experiencing a “temporary peak” due to home buyers’ seeking to close deals before interest rates rise significantly. Looking ahead, Dr. Yun expects that rising interest rates and limited inventory could create an imbalanced market due to inconsistent home sales.

Home sale prices also have been rising, prompting bidding wars, as the median home sale price was reported by NAR to have maintained nine consecutive months of double digit year over year increases. However, Dr. Yun stated, “Limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August, although 63 percent sold below list price.”

This week’s release of July’s S&P/Case-Shiller Home Price Index (spindices.com) also revealed that home sale prices were still holding onto the double digit annual rate of gain over 2012 levels, as the 10 city and 20 city composites posted about a 12% year over year increase for July. However, it is pointed out that home price are still “far below their peak levels.”

The sharp increases in home sale prices sparked fears of another housing bubble. But price gains only increased about 2% from June to July. Monthly price gains have lessened, and the gradual slowdown of home price gains may indicate that home prices may be peaking. Chairman of the Index Committee at S&P Dow Jones Indices, David M. Blitzer, stated, “Following the increase in mortgage rates beginning last May, applications for mortgages have dropped, suggesting that rising interest rates are affecting housing. The Fed’s announcement last week that QE3 bond buying will continue for the time being may have only a limited, though favorable, impact on housing.”

The rapid increase in home prices has affected potential appreciation for many home owners who waited to sell their homes. And the increased inventory provided additional housing stock for eager home buyers. Given the recent increases in home sale prices, the expectation of an uncertain real estate market may not be welcome news by home buyers and sellers.

But home price increases have not only helped the housing market, but the economy as a whole. CoreLogic (corelogic.com) reported that the housing sector contributed about 17% to GDP growth during the first quarter of 2013. However, CoreLogic predicts that increasing mortgage rates will directly affect the housing market, and indirectly affect the overall economy: Single family housing starts (new homes) are thought to be declining because of increasing mortgage rates; and CoreLogic estimates that long term GDP growth to be about 1.75%.

It remains to be seen if modest increases in mortgage interest rates have been beneficial to stave off another housing bubble. However, given that the indicators and experts point to a housing recovery peak; increasing mortgage interest rates could suggest caution for the housing market.

Original located at https://dankrell.com/blog/2013/09/26/rising-interest-rates-a-help-and-hindrance-to-recovering-housing-market-2/

By Dan Krell
Copyright © 2013

August 8, 2013July 2, 2019

Amazon and real estate – will Bezos’ vision change marketing of home listings

The big news this week is of course Jeff Bezos’ purchase of the Washington Post. Why would the man who predicted the demise print media pay $250 million for a regional newspaper and a handful of associated local papers?

If the real estate business is a window into how media plays a role in the daily lives of the average American, then Bezos’ purchase might be a head scratcher. Over the last five years, the National Association of Realtors® annual Profile of Home Buyers and Sellers (realtor.org) has demonstrated how the internet has increasingly played a role in how home buyers actively searched for homes. In 2007, the Profile of Home Buyers and Sellers indicated that about 60% of home buyers completely relied on the internet to search for their home, while about 21% did not use the internet at all in their search. Compare those statistics to the 2012 Profile, which reported that 90% of home buyers used the internet to search for homes; and home buyers who were younger than 44 years of age, the use of the internet is reported to be 96%!

It seems as if home buyers relied on the weekend real estate sections of the paper for a leg up on new home listings and open houses. Real estate agents and brokers happily paid to have their listings included in what seemed to be the weekly catalog of homes for sale. In addition to the home listings, print real estate sections also included other related information (such as decorating, renovation, and buying/selling tips).

However, as the NAR’s Profile of Home Buyers and Sellers indicated, there was a sharp increase in the reliance of the internet to search for homes from 2007 -2012. The time frame is no coincidence; besides the exponential increase in technology and computing power during this period, it also covers the housing bust and subsequent foreclosure crisis. This was a time of tight advertising budgets and the search for efficient advertising modes; the internet offered a bigger bang for the advertising dollar, offering a more robust real estate platform than print could ever offer.

And although there was a colossal increase in the reliance of the internet for real estate listing information in the last five years, there was a consolidation and reorganization of online real estate content during that time frame as well. As the housing market declined in 2007, many sites stopped syndicating their own content and instead partnered with one of the high profile, well organized real estate portals.

It might seem as if the purchase of the Washington Post by an internet visionary who had once foretold the death of printed news might be confusing. But if you understand the Amazon.com business model and how it revolutionized the purchase and delivery of print and recorded media, you would not speculate that the purchase of the venerable news organization was to expand an internet empire to the newsstand – but rather you might believe that the purchase was to acquire a widely recognized brand that generates a considerable amount of content that can be packaged and sold through Bezos’ established model.

Just as the internet revolutionized real estate content and home listings, you might imagine how Bezos’ novel news paradigm could increase the robustness of content and distribution of home and open house listings.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.