September Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: September Existing Home Sales
KEY DATA: Sales: -3.0%; 1-Family: -3.6%; Condos: +1.8%

IN A NUTSHELL: “The housing market just cannot get any traction despite record low mortgage rates.”

WHAT IT MEANS: I was nice to see that housing starts improved but for the market to really be solid, the existing home segment must improve. This is where most of the action takes place and right now it is largely treading water. Existing home sales eased back in September, according to the National Association of Realtors. A rise in condo and co-op purchases couldn’t offset a decline in single-family sales. The only region where demand improved was the Northeast. Contract failures, which are usually due to an inability to secure a mortgage, remained high. As long as distressed homes affect appraisals and credit standards remain tight, sales are not going to gain much traction. Housing prices were down over the years despite a decline in the share of homes sold that were distressed.

MARKETS AND FED POLICY IMPLICATIONS: There are so many hurdles facing the housing market that it is hard to see when conditions will return to “normal”. In addition to appraisal and credit issues, lots of households don’t even have the equity to make a move. With job growth weak, mobility is limited and that too slows the market. Still, the mortgage rate is so low and affordability so high that you would think conditions should be improving a little. It just doesn’t look that way as the September sales pace is pretty much what we have seen all year. Sometimes it has been higher, other times lower but it seems that roughly a 5.0 million unit annualized sales pace is where demand seems to wander around. In September, the pace was 4.91 million. So once again it needs to be pointed out that the economy will have to make do without housing pushing things upward. That means the slow, steady, grinding recovery is likely to stay that way for quite a while.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

July New Home Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: July New Home Sales
KEY DATA: Sales: 298,000 units annualized (down 0.7%); Median Prices (Year-over-Year): +4.7%

IN A NUTSHELL: “With all the uncertainty about the debt ceiling and the economy, it is not surprising that buyers shied away from signing on the bottom line to buy new homes.”

WHAT IT MEANS: New home sales edged down once again as buyers just don’t want to commit to anything right now. The level of sales is pitiful, being only slightly above the all-time low set last summer. Thus, while the year-over-year increase of nearly 7% might look good, it is simply coming off the lowest of lows. Regionally, the sales numbers are totally bizarre and reflect the limited size of the market. In the Northeast, purchases doubled. Of course there were almost no homes sold in June so the increase only brought demand back to more “normal” levels. There was a small increase in the Midwest but moderate declines in the South and West. Builders recognize their plight and they are basically doing no speculative building. The number of homes for sale fell. You probably have to go back to Colonial times to see the number of houses on the market this low (okay, that’s a small exaggeration but you get the picture). As for prices, they were up fairly solidly over July 2010 levels. A somewhat larger percentage of the homes selling for over $500,000 pulled up prices.

MARKETS AND FED POLICY IMPLICATIONS: This report reminds us that the recovery cannot count on the housing sector adding much to growth. That is hardly a surprise. The pressures facing home builders do not end with the economy as they also have to face the reality of price cutting in the distressed home segment of the market. Worse, the level is so low that even strong increases in sales and housing starts will not add that much to growth. But as long as residential activity does add a little to growth, which it is likely to do, we are okay. With the Fed going on its “camping trip” to Jackson Hole this week, everyone is waiting to see what, if anything, Mr. Bernanke has up his sleeve this year. I suspect he will simply lay out the tool box and make it clear that the FOMC is “locked and loaded” and ready to pull the trigger on any and all the policy tools it has available. Whether those policies constitute treason, I leave up to the reader, but with the Fed the only game in town, the pressure is on to make sure the slow recovery does not fail. Mr. Bernanke is an expert on the Great Depression and he knows policy missteps cut short the attempts at recovery. While moving to restrictive fiscal policy may be the same mistake made in the 1930s, the Fed will reiterate that it will pump as much into the economy as it can. Whether lower rates can do anything is another story.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

Calculating Your Monthly Mortgage Payments

Calculating Your Monthly Mortgage Payments

One of the most important factors to consider when buying a new home is affordability. As a general rule, mortgage payments should not exceed 25-30 percent of your monthly take-home pay. The best way to know what you can afford is to determine the possible payment range by comparing the price of the home with other essential ingredients.

Figure Out How Much You Want To Borrow

Your first step to calculating your monthly mortgage payment is knowing how much you want to borrow. This can be determined by subtracting your down payment amount from the purchase price of the home, which will give you the amount that you will need to request from a lender.

Know Your Rates

The next step is to determine the current interest rates for the purchase of a home. Rates vary and may change often, so check with your lender for current rates. It’s worth noting that the interest rates you receive will, in part, be based on your credit history. This means that knowing your FICO score and credit rating will give you a good idea as to how your interest rates will be calculated.

Choose Your Loan Term

Your monthly mortgage payments will be determined by a number of factors, including the term of your loan. If you were to borrow $250,000, your monthly payments would be less with a 30-year mortgage than with a 15-year mortgage. The reason is because it would take larger monthly payments to get the loan paid off quicker, which is why you will need to select a loan term before calculating your payments.

Additional Costs To Consider

Your total mortgage payment will include taxes, homeowner’s insurance and possibly even private mortgage insurance (PMI) if you provide less than 20 percent down and your loan requires it.

Just The Facts & Figures

Now that you know how much you need to borrow, have chosen your loan term and are familiar with the current interest rates, it’s time to calculate your payment. Most lenders offer a mortgage calculator on their Web site or you can get an estimate by speaking with your lender.

If you still need help in calculating your potential monthly mortgage payments, don’t hesitate to ask your REALTOR®, mortgage broker or lender.

RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisiors, and are not providing any financial advise, you should consult with a licensed financial advisior prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

November Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist

 

INDICATOR: November Existing Home Sales

KEY DATA: Sales: +5.6%; 1-Family: +6.7%; Condos: -1.9%  

IN A NUTSHELL:   “The housing markets upward climb from the depths of depression is continuing.”  

WHAT IT MEANS:   The housing market is coming back!  Okay, that is saying way too much about a sector that is still hurting.  Nevertheless, the direction is up and that is good.  Existing home sales rose in November, according to the National Association of Realtors.  Yes, I know, the sales pace remains pathetic but everything is relative.  Since hitting rock bottom in July, a consequence of the government’s home buyers’ credits disappearing, demand has steadily improved.  Most of the gain came in the single-family portion of the market.  Condo and coop purchases have improved modestly.  Looking across the nation, while every region posted an increase, the Midwest and West shined the most.  As for prices, they firmed but mostly in the Northeast.  With inventory declining, we could see prices rise slowly going forward. 

MARKETS AND FED POLICY IMPLICATIONS: Yes, Virginia, there is a housing market.  No, it is not a robust, economy leader but it is turning around.  Housing starts seem to be edging upward and now we see that existing home sales are on a clear improving trend.  Mortgage rates are still quite low even with the recent pop and that rise will likely hurt refinancings more than new purchases.  That, indeed, is what the Mortgage Bankers Association weekly applications data seem to be indicating.  The rates remain great on an historical basis and should hot stop too many sales.  The problem is more with equity and credit availability.  With prices so low and appraisals using many fire sale comparables, it is hard to get much money from a home.   Lacking equity, it’s tough to move and without people trading up or down, demand is limited.  That not only hurts the housing market but also affects labor mobility.  While another housing bubble would not be a good idea, some decent increases in home prices would be a great help.  Despite the depressed levels, investors should look at this report as a sign that housing could add somewhat to growth going forward.  As for the Fed, the members have hung their bond purchases on the economy with care, hoping a robust recovery will soon appear.  They will likely get that upturn, but not because of QE2.