This Week in Real Estate: Sept. 26, 2016


The Federal Reserve Bank chose not to increase the federal funds rate This Week in Real Estate leaving just two more opportunities to do so in 2016. Below are a few highlights from the third week of September that influence our business:

* Fastest Appreciating Housing Markets. U.S. home values increased 5% nationally to $188,100, but in some metros home-price appreciations was much higher, according to the August Zillow Real Estate Market Reports. On the other hand, household income posted its first significant increase, 5.2%, in eight years, new data from the U.S. Census Bureau showed. “Inventory, while still down nationwide and in most areas, is actually starting to rise in a handful of markets, including the Bay Area, Texas and parts of the Southwest,” Zillow Chief Economist Svenja Gudell said. “But make no mistake, it’s still tough out there for buyers, especially in Western markets like Seattle, Denver and Portland that have strong job growth,” she added. Zillow’s top five metros with the fastest appreciating home values: 5) Tampa, Florida, home prices increased 9.8%, 4) Denver, Colorado, home prices increased 10.7%, 3) Seattle, Washington, home prices increased 11.3%, 2) Dallas-Fort Worth, Texas, home prices increased 12% and 1) Portland, Oregon, home prices increased 14.8%.
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* Freddie Mac: Mortgage Interest Rates Will Hit 40-Year Low in 2016. If current trends hold steady, this year could prove to be a banner year for housing, Freddie Mac said in a new report. In Freddie Mac’s new monthly outlook report, the government-sponsored enterprise states that it is currently projecting a “surge” in mortgage originations during the third quarter, further reinforcing its view that 2016 will be the “best year” for home sales since 2006. Additionally, Freddie Mac’s current forecast is for the interest rate on the 30-year fixed-rate mortgage to finish the year with an average of 3.6%, making 2016’s mortgage rates the lowest in more than 40 years. “We continue to believe that originations will reach $2 trillion this year, the highest since 2012,” said Freddie Mace Chief Economist Sean Becketti. “The housing market remains a bright spot for the U.S. economy, with solid job gains and low mortgage interest rates sustaining the economy’s momentum in September,” Becketti said.
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* The New Normal: Time to Close Settles at 46 Days. After rising, falling, and rising again in the wake of the implementation of the CFPB’s TRID rule, the time to close a mortgage loan appears to finally be settling into a new normal – about a month and a half. Ellie Mae’s report, which is pulled from a “robust” sampling of approximately 75% of all mortgage applications that were initiated on Ellie Mae’s Encompass system. Ellie Mae’s report also showed that the percentage of mortgages that were refinances climbed to the highest level since March. Ellie Mae’s report also provided more proof that of the continued historic lows in mortgage interest rates – as the average interest rate on a 30-year, fixed-rate mortgage that closed in July was 3.77% – the lowest that figure has been since May 2013.
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* Housing Starts Are Poised to Surge. Despite the tailwinds of strong job growth and the vanguard of the millennial generation entering their prime home buying years, developers have been strangely reluctant to break ground on new single-family homes in 2016. This segment has seen so-called housing starts dip to a seasonally adjusted and annualized rate of 722,000 as of July, down from 765,000 at the end of 2015. Neil Dutta, head of U.S. Economist at Renaissance Macro Research, highlighted that the strength in new home sales relative to home starts suggests that construction activity is due to rise significantly in the year ahead. “The last time the ratio of starts to new home sales was this low, starts ending up surging for the next year,” he wrote. When the ratio of starts to new sales tumbled to a similar level around the beginning of 2015, new activity rose at a robust clip for the next 12 months, culminating with starts in February hitting a seasonally adjusted and annualized rate of 845,000. In a note to clients, Dutta added that the rise in homebuilder confidence also belies the subdued level of starts. “Something seriously has to give here,” he concluded.
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Have a productive week!


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