The Time Has Come

The Day Has ComeFor the first time, Congress has failed to kick the can down the road before a fiscal deadline hit. We are now fully sequestered. What does that mean? On one hand, we can say that it does not mean much if you look at the stock market. Most of us would have thought that the stock market would take a hit as the deadline expired. Yet, stocks were up solidly this week and for the month of February. Are the markets thinking that Congress will take action after March 1st, but before the cuts really have a chance to hurt the economy? Or are the markets perhaps thinking that the cuts will not affect the economy that much? You could make a case for either argument at this time.

On the other hand — if we look closer stocks were not fazed by the cuts — but oil prices and interest rates did fall this week. Both rates and oil prices trended higher earlier this year as stocks rallied and the fall-back came despite positive economic news released in the past few days. This positive news included continued upbeat news from the real estate sector. Usually when the stock market is strong, oil prices and interest rates are rising. If this trend holds, lower rates and oil prices in the face of positive economic news could actually give the economy a boost to offset the dampening effect government cuts might have on the economy. To make matters more complex, we have the all important employment reports released this week. Our first week under sequestration could be an interesting one, indeed.
The Markets. Rates were down in the past week. Freddie Mac announced that for the week ending February 28, 30-year fixed rates fell from 3.56% to 3.51%. The average for 15-year loans was down slightly at 2.76%. Adjustable rates were also down, with the average for one-year adjustables falling slightly to 2.64% and five-year adjustables decreasing to 2.61%. A year ago 30-year fixed rates were at 3.95%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Rates eased somewhat as the consumer price index in February held steady for the second month in a row. House price indicators, however, showed gains in 2012. The S&P/Case-Shiller® national home price index rose 7.3 percent last year, reflecting the largest four-quarter growth since the third quarter of 2006. This, in part, was a driving force that pushed up the number of existing and new home sales in February to the highest levels since July 2007 and July 2008, respectively.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated March 1, 2013

  Daily   Value Monthly   Value
  Feb   28 January
6-month   Treasury Security 0.13%  0.11%
1-year   Treasury Security 0.17%  0.15%
3-year   Treasury Security 0.36%  0.39%
5-year   Treasury Security 0.77%  0.81%
10-year   Treasury Security 1.89% 1.91%
12-month   LIBOR    0.818%   (Jan)
12-month   MTA    0.178%   (Jan)
11th   District Cost of Funds    0.962%   (Jan)
Prime   Rate    3.25%

During the peak of the housing crisis, foreclosed homes sold at a 25% discount on average, but the market is stabilizing and the price differentiation between a home’s foreclosed valued and original market value is beginning to narrow, FNC reported. The real estate analytics firm released a Foreclosure Market Report recently, saying home prices are rising in many metro areas while foreclosure prices are starting to bottom out, creating some price stability. “The fact that we are seeing a combination of rising home prices and a bottoming out of foreclosure prices is a very good sign the housing recovery is taking hold,” said Dr. Yangling Mayer, FNC Senior Research Economist. “This is the very first time in the long housing recession that the two are happening at the same time.” By the fourth quarter of 2012, the average foreclosure discount, which is a comparison between a foreclosed home’s market value and its final sales price, had dropped to 12.2%, compared to 25% during the peak of the downturn. Single-family REO and foreclosure sales made up 18.1% of the market in the fourth quarter of 2012, down from 26.5% in the first quarter of the same year, FNC said. Source: HousingWire

Near-record low interest rates helped ensure a gain in nationwide housing affordability amid relatively stable house prices in the final quarter of 2012, according to the National Association of Home Builders Housing Opportunity Index (HOI). In all, 74.9 percent of homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $65,000. This was up nearly a percentage point from the 74.1 percent of homes sold that were affordable to median-income earners in last year’s third quarter. “The most recent housing affordability data should be encouraging to many prospective home buyers, because it shows that homeownership remains within reach of median-income consumers even as most local markets appear to be on a recovery path,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. He noted that the most recent reading of the NAHB/First American Improving Markets Index found that 259 out of 361 metros currently qualify as improving, including representatives from all 50 states and the District of Columbia. “The median price of all new and existing homes sold in the fourth quarter of 2012 was $188,000, essentially unchanged from the previous quarter’s $189,000 that marked a nearly three-year high,” noted NAHB Chief Economist David Crowe. “It is noteworthy that affordability remains historically high thanks to favorable rates even as national home price indexes show some rise in values.” Source: NAHB

Nearly 20 percent of recent movers identified “convenience to job” as the most important factor in their choice of neighborhood in 2011, according to the 2011 American Housing Survey (AHS), the definitive source of information on the quality of housing in the United States. For the first time ever, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) have made survey results available on the Census Bureau’s American FactFinder data access tool. A wide range of specific topics is covered in the survey, including plumbing and source of water and sewage disposal; housing problems; householder’s satisfaction with home and neighborhood; value, purchase price and type of home loan; recent home improvement activity and costs; safety features and potential health hazards; features in home providing accessibility to people with disabilities; and socio-economic characteristics of the householder. Statistics are national-level only and are provided for apartments, single-family homes, manufactured housing, new construction and vacant housing units. Recent movers were also asked how they found their current units. The most common methods for home owners were talking with a real estate agent (20 percent), (17 percent) and word of mouth (16 percent). For renters, the most common ways included word of mouth (34 percent), sign on the outside of the building (11 percent) and Craigslist (11 percent). Highlights on the nation’s 115 million occupied homes:

  • The median year these homes were built was 1974, with owner-occupied units being slightly newer      (1976 compared with 1972 for renter-occupied).
  • The median size of single-family detached and mobile home units is 1,800 square feet, with      owner-occupied units being larger (1,800 square feet) than renter-occupied      ones (1,300 square feet). Newly constructed units are also usually larger,      with a median size of 2,200 square feet.
  • Most homes have three or more bedrooms (64 percent). New homes (those built in the last four years)      generally have more bedrooms, with 74 percent of them having three or      more.

About half the homes (52 percent) have two or more bathrooms. Again, new units have more bathrooms, with 83 percent of them having two or more. Source: HUD

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