Big Predictions for Housing for Next 2 Years

Home sales are projected to post some big gains in the next two years, according to Fannie Mae’s latest monthly economic outlook.

Fannie Mae economists predict that existing-home sales will rise by 10.5 percent this year, and by 6.2 percent in 2014. The economists made even bolder projections for new single-family home sales -- growing 15.1 percent this year and 44.1 percent in 2014.

"We expect home prices to firm further amid a durable housing recovery, continuing to boost household net worth, gradually diminishing the population of underwater borrowers, and reducing incentive for strategic defaults," according to Fannie Mae’s report.

Fannie Mae projects that mortgage rates will stay low by historical averages this year, but the 30-year fixed-rate mortgage will rise from an average of 3.5 percent during the first quarter to an average of 4 percent during the final three months of 2013. During the fourth quarter of 2014, mortgage rates are projected to tick up to a 4.5 percent average.

Mortgage applications for purchases are projected to increase by 16.8 percent this year and by 17.1 percent in 2014. However, a decline in applications for refinancings will likely cause mortgage originations to be down 14.5 percent this year and by 31.4 percent in 2014, Fannie economists predict.

Sellers Who Delay May Miss Out

Some would-be move-up home sellers are eyeing home prices carefully. They’re waiting to see how much home prices appreciate more before they consider selling their home. But they may be missing their perfect opportunity, some housing experts say.

The best time to move may depend on when the home owner purchased their current residence, says Daren Blomquist, vice president of RealtyTrac. Blomquist says that home owners who purchased their home during the sluggish market the last two to three years may find moving up in 2013 may be their prime opportunity.

"Because they bought near the bottom, these home owners should have built up some good equity that can go toward the purchase of a new home, and waiting longer to build more equity likely won’t provide much advantage given that other homes that they might want to move up to will also be appreciating at roughly the same pace," Blomquist told HousingWire.

Home owners who wait much longer to sell their home may miss out.

"If you're selling one house just to move up to another, it does you no good to wait for prices to rise — the price of the move-up home will increase faster than the price of the place you're leaving behind," says Redfin CEO Glenn Kelman.

Plus, mortgage rates are expected to come off the 3.5 percent range and reach 4.4 percent in the next year, according to the Mortgage Bankers Association. That will increase the costs of financing your next home.
Source: “The Time to Sell Is a Waiting Game for Some,” HousingWire (March 21, 2013)

How House Hunters View Your Listing Researcher Michael Seiler tracked the eye movements of 45 people viewing 10 online real estate listings with six photos in August 2011, determining that 95 percent of participants viewed the first photo—an exterior property shot—for just 20 seconds. The study is relevant because knowing how house-hunters view a listing online can help agents fine-tune their marketing approach.

Founder and director of Old Dominion University's Institute for Behavioral and Experimental Real Estate, Seiler says participants moved their eyes in a "Z" pattern from the upper left corner and after reaching the bottom right corner, they scanned up the right column of the screen.

After viewing the home's exterior photo, 76 percent looked at the property description; but 41.5 percent did not bother to ever read the agent's remarks. Researchers also cautioned practitioners against using all capital letters, overhyped adjectives, and brand names in property descriptions.

Seiler determined that overall, participants devoted 60 percent of their time to photos, 20 percent to property descriptions, and 20 percent to the agent's comments; and he found that their interest diminished after clicking through numerous properties.

"You have to grab people's attention within two seconds," Seiler remarked. "Do it the way a billboard does." Some agents ensure the photos, property descriptions, and remarks can be seen without scrolling; while others limit their remarks to only a few paragraphs and focus more on the lifestyle and neighborhood than appliances and other features.
Source: "20 Seconds for Love at First Sight," Wall Street Journal (March 22, 2013)

Freddie Has High Expectations for Spring Market

Daily Real Estate News | Thursday, March 21, 2013
Get ready for the healthiest spring home-buying season since 2007, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for March.

The mortgage giant is forecasting low mortgage rates and increasing housing prices to continue, as well as gradually improving consumer confidence that will likely boost home sales this spring.

Sales are expected to rise 8 to 10 percent in 2013 compared to 2012 numbers, Freddie economists report. Freddie Mac also expects housing starts to rise to 950,000 units this year compared to 780,000 in 2012.

"History shows us not all economic recoveries are created equal, and consumer confidence mirrors this fact,” says Frank Nothaft, Freddie Mac’s chief economist. “With the spring home-buying season upon us, the recent highs in the stock market are a welcome signal of better times ahead. But it will be the gradually declining unemployment rate and steadily improving housing market that will deliver broad-based economic benefits for Americans and, in turn, support the overall recovery."

Source: Freddie Mac

1.7 Million Home Owners Regain Equity in 2012

Rising home prices have helped more home owners make their way above water again, with 1.7 million residential properties regaining equity in 2012, according to the latest figures from CoreLogic. The number of mortgaged home owners with equity now stands at 38.1 million.

More home owners are expected to soon join them: About 1.8 million homes will regain equity if home prices rise by another 5 percent—which most economists have forecast for this year.

“In the fourth quarter we again saw an improvement in the equity position of households,” says Mark Fleming, chief economist for CoreLogic. “Housing market improvements, particularly in the hardest hit states, are the catalyst for households to regain equity and become participants in 2013’s housing market.”

While the numbers are improving, many home owners are still underwater: About 21.5 percent—or 10.4 million—of all residential properties with a mortgage still retained negative equity at the end of the fourth quarter of 2012. That number is down 22 percent, year-over-year.

Nevada has the highest percentage of homes with negative equity (at 52.4%), followed by Florida (40.2%), Arizona (34.9%), Georgia (33.8%), and Michigan (31.9%). These five states alone account for 32.7 percent of the total amount of negative home equity in the U.S., according to CoreLogic.

Some additional findings from CoreLogic’s latest report:

•The majority of homes that have equity tend to be on the higher end of the real estate market. Eighty-six percent of homes valued at more than $200,000 have equity, compared to 72 percent of home less than $200,000.
•About 3.9 million home owners with negative equity have both first and second liens. Their average mortgage balance is $296,000 and their average underwater amount is $80,000.
 

Mortgage Rates Remain Near 65-Year Record Lows

Fixed-rate mortgages mostly held at the same low averages this week, providing more support for the housing recovery, Freddie Mac reports in its weekly mortgage market survey.

“Low mortgage rates are helping to revive the housing market,” says Frank Nothaft, Freddie Mac’s chief economist. Mortgage rates have been staying near their 65-year record lows for the last several weeks.

Freddie Mac reports the following national averages for the week ending March 7:

•30-year fixed-rate mortgages: averaged 3.52 percent, with an average 0.7 point, rising slightly from last week’s 3.51 percent average. A year ago at this time, 30-year rates averaged 3.88 percent.
•15-year fixed-rate mortgages: averaged 2.76 percent, with an average 0.7 point, holding the same as last week’s average. Last year at this time, 15-year rates averaged 3.13 percent.
•5-year adjustable-rate mortgages: averaged 2.63 percent, with an average 0.5 point, rising slightly from last week’s 2.61 percent average. Last year at this time, 5-year ARMs averaged 2.81 percent.
•1-year ARMs: averaged 2.63 percent, with an average 0.3 point, dropping from last week’s 2.64 percent average. A year ago, 1-year ARMs averaged 2.73 percent.

Where Are Home Prices Heading Through 2017?

Home prices are expected to continue their trajectory upward, projected to rise 3.7 percent between the third quarters of 2013 and 2014, according to Fiserv, which used data from the Federal Housing Finance Agency for its projection.

Following the third quarter of 2014, Fiserv predicts home prices to rise an average 3.3 percent annually over the next three years.

“Although some recent real estate activity has been speculative, it seems as if buyers have more realistic expectations about housing market returns after having lived through the largest housing market crash in U.S. history,” says David Stiff, Fiserv’s chief economist. “2012 was the first year since 1997 that the housing market has resembled something recognizable as normal. For the past 15 years, home-price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology.”

In 1997, home prices grew at a 3 percent rate, Stiff says, but from 1998 to 2006, prices started soaring above 5 percent and even saw double-digit increases in some of those years.

By the end of 2013, Fiserv expects that home prices will increase in nearly every U.S. metro area, while some markets may see short-term double-digit price increases.

Source: “Home Prices Expected to Rise at Least 3.3 Percent Annually Through 2017,” RISMedia (March 6, 2013)

Kiplinger: Housing Recovery Firmly Underway

Prices are rising and inventories are falling in markets throughout the United States, which has led financial reporting and forecasting firm Kiplinger to declare the housing recovery “firmly” in motion. Moreover, the company says housing will help carry the overall economy at a time when U.S. exports are decreasing, says Karen Mracek, a Kiplinger editor and real estate analyst.

“The biggest reason we think we’re on firm ground is that we’re seeing every indicator on the way up,” Mracek says. “As with the overall economy, it’s kind of hard to call the bottom or the pivot point. But we’re seeing a range of indicators that suggest pretty solid growth going forward.”

In addition to home values and supply, positive indicators include the number of multiple-bid situations, new-home construction, and credit availability, she says. Solid improvements in these fundamentals will lead to formation of more new households and will also help more borrowers come out from underwater — and trade up to a new home. They’ll also create new jobs in real estate and construction, Mracek explains.

The recent gains made in housing have some concerned that real estate could be entering another bubble market, but Mracek disagrees with that assessment. “There might be [a bubble] in some concentrated markets,” she says. “But I don’t think it will be a bubble that’s as widespread and disastrous as the one that happened in the last decade.”

Improvements have been — and will continue to be — uneven. The turnaround will probably be slower in metro areas in Florida and the Midwest.

Nationally, Mracek says the current housing recovery is real and sustainable, but she also acknowledges that the rise in home values and decline in inventories won’t maintain their current pace.

“We see prices leveling out a bit more [in the future] from the late jumps in 2012,” she says. “There are still foreclosures for the banks to work through. As prices improve, you’re going to see banks get rid of REOs.”

— Brian Summerfield, REALTOR® Magazine