Economic News Affecting the Housing Market

Economic News Affecting the Housing Market

There was a lot of economic activity that kept investors watching every move.  As the Mortgage and Real Estate News reports:

With a Fed meeting, Treasury auctions, and major economic data on this week’s schedule, investors were watching closely for unfavorable news. In the end, there were no major surprises. Little changed in the Fed statement, auction demand was at average levels, and the economic data was generally close to expectations. The biggest influence on mortgage markets turned out to be turmoil in Greece, which caused investors to seek the relative safety of US bonds, and mortgage rates ended the week a little lower.

Beyond Greece’s economic trouble, investors have been watching to see whether other smaller European countries would slip into economic turmoil.  As a result, investors shifted funds to safer investments, including US Treasuries and mortgage-backed securities (MBS).

In a move that will have direct impact on the housing market, the Mortgage and Real Esta News reports:

Prior to Wednesday’s Fed meeting, it had been reported that support was growing among Fed officials to begin sales of mortgage-backed securities (MBS) from the Fed’s portfolio. The Fed statement made no reference to MBS sales, however. As expected, the Fed made no change in the fed funds rate. The statement described the economy in slightly more positive terms. Also, pending Home Sales, a leading indicator for the housing market, will come out on Tuesday.

While incremental, many of these moves in the economy can prove positive for the real estate market, both in Los Angeles and nationwide.


Pending Home Sales Gain, Possible Spring Surge

According to the National Association of Realtors:

Pending home sales rose in February, potentially signaling a second surge of home sales in response to the home buyer tax credit.  The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 8.2 percent to 97.6 from a downwardly revised 90.2 in January, and remains 17.3 percent above February 2009 when it was 83.2. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

The Pending Home Sales Index is based on a scale of 1 to 100.  One hundred is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.  The index breaks out differently from region to region. In the Northeast the index rose 9.0 percent to 77.7 in February and is 18.9 percent higher than February 2009. In the Midwest the index jumped 21.8 percent to 97.9 and is 18.7 percent above a year ago.  Pending home sales in the South increased 9.2 percent to an index of 107.0, and the index is 17.5 percent higher than February 2009. In the West the index fell 4.8 percent to 98.0 but is 14.6 percent above a year ago.

These numbers and anecdotal evidence from various markets around the country, has led the National Association of Realtors to suggest that there is a distinct possibility of surge in home sales for the spring.  According to the NAR’s chief economist, Lawrence Yun:

“Anecdotally, we’re hearing about a rise of activity in recent weeks with ongoing reports of multiple offers in more markets, so the March data could demonstrate additional improvement from buyers responding to the tax credit.”

All of this together looks like good news for the market as a whole and Los Angeles in particular.


California Home Sellers Turn to Realtors Even More Now

Sellers Respond to ’09 Housing Market by Choosing Realtors

According to the latest survey of home sellers by the California Association of Realtors,

Changes in family and employment status as well as adjustments to monthly mortgage obligations played significant roles in California’s homeowners’ decisions to sell their homes in 2009.

With home sellers facing ever-changing federal housing legislation and a tightening market,

Sellers responded to the challenges of the housing market in 2009 by choosing to work with realtors for guidance and assistance in navigating the complex market…Recognizing the value of working with a real estate professional, 99 percent of sellers chose to work with a realtor, according to the survey. Of those, 72 percent cited the ability of an agent to sell the home at a higher price point as the primary reason. Other reasons included better marketing and exposure (38 percent), while 28 percent reported it was too difficult to sell the home independently.

With the Santa Monica and Los Angeles housing market being one of the most complex in the nation, home sellers will be increasingly leaning on real estate professionals in the coming year.


Home Equity Is Up.

Fed’s Survey Shows Net Equity Grew in Late ’09

According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity grew by nearly $1 trillion from the recession’s nadir in the first quarter of 2009 through the third quarter. From June 30 to Sept. 30, net equity rose by $418 billion.

The latest survey offered some hints of modest improvements for housing. The overall negative-equity rate among American homeowners remained flat in the fourth quarter, at 21.4 percent. But like the Fed’s numbers, that ratio represented a slight decrease from the first two quarters of last year, when 22 percent and 23 percent of owners owed more on their mortgages than the estimated market value of their real estate.

This is good news, not just for home-owners, but for home-buyers.