Real Estate Information Archive

A Respite or a Reversal?

Home builder optimism stepped back this month. The Wells Fargo/NAHB Sentiment Index posted at 62 for November. For the past couple of months the index had posted at 64. (A reading over 50 means optimism outweighs pessimism.)

The future sales component was the most notable disappointment in the November numbers. Builder optimism eased five points to post at 70. This means builders still expect to sell a lot of homes in the coming months, just not as many as they expected last month.

The one consistently weak component in the index remains weak, though it was slightly less weak compared to October.  The traffic component rose one point to 48 in November. Lack of traffic has been a lingering problem for home builders. The component remains weak due to our biggest lament – lack of first-time buyers. We're hoping that D.R. Horton's success, which we reported on last week, in building and selling starter homes points to an overall increase in first-time buyer participation.

Builders were also a bit down due to less building activity in October. Housing starts dropped 11% to 1.06 million units on an annualized rate for the month. Most of the damage was concentrated in multi-family homes, which tumbled 25% to 338,000 units. The good news is that the drop in single-family homes was much less severe. Single-family starts were off 2.4% to 722,000 units.

Of course, our bread is buttered with sales. Multi-family units include both apartment and condominium construction. New condo and new single-family home sales remain elevated in most major metropolitan markets. Construction activity should remain brisk. Indeed, permits continue to trend higher. Single-family permits were up 2.45% to 711,000 units on an annualized rate in October.  Multi-family permits were up 6.8% to 439,000 units.

Next week, data on existing- and new-home sales will be released for October. Sales for both segments have trended higher (though not linearly) for 2015. We expect sales to continue to push higher through the first half of 2016. In other words, 2016 should look and feel a lot like 2015, at least from the outset.

Information provided by Jessica Regan.

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When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

D.R. Horton, the nation's largest home builder, reported strong financial results for its fiscal-year fourth quarter. Earnings were up 44% year over year. Orders, an important metric for future revenue, were up 19%. D.R. Horton executives see strong sales and solid earnings growth into the relevant future.

But it's not D.R. Horton's consolidated numbers that is the key takeaway. D.R. Horton's success in the starter-home segment is what we find encouraging.

In late 2013, D.R. Horton started its Express brand of entry-level homes. In the quarter ended this past June, D.R. Horton reported that Express homes had grown to account for 19% of its orders.

The segment continues to grow. First-time home buyers accounted for 40% of D.R. Horton's sales in the latest quarter. Year over year, Express sales tripled to 5,648 homes. D.R. Horton sold a lot of Express homes, and sold them at a lower price. The average price for an Express home was a very reasonable $185,000, which was $6,000 less than the previous quarter.   

To be sure, we're looking at markets that tend to be lower priced – those in Florida and the Carolinas. Margins aren't as thick as those on higher-priced homes. But if the turnover is high enough, good money can be made selling to first-time buyers, as D.R. Horton proves.   

We frequently mention that first-time buyers are key to maintaining the housing market. Given Horton's success, we expect more builders to follow its lead and up their investment in the segment. That would be good news for near-term sales prospects and for housings' long-term health.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Speaking before Congress this week, Federal Reserve Chair Janet Yellen said that a rate hike is a "live possibility” next month, if the economy advances as Fed officials expect. Fed officials meet again on Dec. 16.   

A couple questions: What's a “live possibility” as opposed to a dead possibility? What are Fed officials' expectations for the economy? It's all a black box really; something for them to know and for us to find out later. As is so often the case, Fed officials rarely enlighten when they try to explain. 

What do the traders think? They seem to have bought into Yellen's rhetoric, as equivocating as that rhetoric might be. Traders in federal funds rate future contracts are pricing these contracts with a 60% probability the Fed will raise interest rates next month.  A week ago, the probability was at 30%.  

So is it likely the Fed will raise the fed funds rate for the first time in over nine years? More important, is it likely mortgage rates are going to rise, and keep rising? 

We'll stick to our guns: We've been saying since January that a fed funds rate was unlikely in 2015. That said, the next time around is the last chance for us to be proven wrong. Fed officials might do something just for appearances. After all, they've been leading the market on for the entire year. A rate increase has always been just around the corner. Sometimes you do something just to save face. 

Mortgage rates appear to be pricing in the potential for an increase. For most of last week, rates held steady, and even drifted slightly lower. This week has produced a noticeable move higher. The 30-year fixed-rate mortgage is near a 30-day high. Despite the rise, the 30-year loan is still regularly quoted below 4%. That could change over the next month, or even the next week. To err on the side of caution, more lenders could continue to price in a rate increase. 

That said, we don't see rates continually ratcheting higher, even if the Fed does raise the fed funds rate. For one, the increase will be no more than 25 basis points. What's more, 2016 is an election year. Fed officials are reluctant to raise rates when the two major political parties go to battle. The Fed wants to remain as politically neutral as possible. Therefore, whatever occurs on Dec. 16 could very well hold over the ensuing 12 months. 

The impetus is for mortgage rates to move higher over the next 30 days, but we don't think they will move egregiously higher. However high rates rise, Dec. 16will likely be the high-water mark. After Dec. 16, we could see rates drift lower again.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Most Everything Down

A slow week on the news front, and what little news there was wasn't especially good. 

Initial indications show that economic growth in the third quarter was nothing to write home about. Gross domestic product (GDP) growth posted at 1.5% on an annualized rate. This is considerably slower than the 3.9% growth posted in the second quarter. Admittedly, economists weren't expecting much – most expected growth to post lower than 2% – but what we got was even lower than most estimates. 

Residential investment was the noticeable bright spot in the GDP numbers. Investment continues to trend positively, having increased 6.1% for the third quarter. That said, we still need more of it. Residential investment currently runs at 3.5% of GDP. Historically, it runs between 4% and 5%. 

GDP growth could be crimped further by fewer home sales. The Pending Home Sales Index dropped 2.3% in September. The drop was due primarily to one of our frequent laments: Insufficient starter housing and starter housing that's expensively priced. The dearth of lower-end sales is pulling down the overall index. More important, it continues to pull down first-time buyers. 

Finishing the trifecta, mortgage applications posted lower last week. The Mortgage Bankers Association reported that both the purchase and refinance indexes fell 1%. Given the recent uptick in mortgage rates, we don't expect to see a pickup in activity when the MBA reports for this week. Still, application activity all around remains significantly elevated compared to this time last year. 

But will mortgage application activity remain elevated? The Federal Reserve is once again front-and-center and could alter the current market dynamic. We explain below.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Are you familiar with the name Hyman Minsky? We didn't think so, but the name is worth knowing. Minsky was an economist who wrote a short, but influential, monograph titled “The Financial Instability Hypothesis” 20 years ago. In short, Minsky hypothesized that the longer the good times roll, and the stronger the roll is, the likelihood for a catastrophic turnaround increases. Think what occurred to housing around 2008. 

Housing has been on a strong run for the past five years. To be sure, much of the run has been a matter of reclaiming ground lost after the housing bubble burst, but it has still been a strong run.  So, does this mean we're anticipating another housing-market correction? No, we think the market remains healthy. We don't see the speculative fervor that lead to the bubble that formed a decade ago. That said, we think it's a good idea to keep in mind where we are and where we've come from over the past five years. 

Few people were imploring people to look at housing to the degree we were post-2008. We still think housing is worth a look today. We just think it's worth being a little more discriminating while looking.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The Best-Performing Sector in the Economy Today

Home builders are downright spunky these days. Optimism runs rampant. The latest Wells Fargo/NAHB Sentiment Index posted at 64 for October. This is the highest posting since 2005. (A posting above 50 tilts sentiment toward optimism.) Things are good today, and they're good for the immediate future. The current sales component of the index, the most heavily weighted component, rose three points to 70. This means the immediate outlook for new-home sales is strong.

As for the longer-term outlook, it looks like blue skies ahead. The permits component was up seven points to 75. This means home builders are expecting strong starts and sales for the next six months.

As for starts today, they continue to ratchet higher. Starts jumped 6.5% to 1.206 million units on an annualized basis in September. This is nearly double the number of starts we saw four years ago. Multi-family units lead the charge. They spiked 18.3% to 466,000 units for the month. The good news is that we're still seeing gains in the larger and more important single-family component. Here, starts rose 0.3% to 740,000 units.

Now, combine rising construction activity and rising sales volumes with rising stock prices, and it's easy to understand why so many home builders are so optimistic. The S&P Home builders ETF (NYSE: XHB) is up 134% compared to 73% for the S&P 500 Index over the past five years. From the depths of the recession, March 2009, the XHB is up 270% compared to 170% for the S&P 500.

On the financing end, mortgage rates continue to provide a strong tailwind for anyone looking to buy or to refinance a home. Freddie Mac's latest survey shows borrowers across the country are getting sub-3.9% on a 30-year fixed-rate loan. Borrowers who prefer a shorter-term loan are seeing the 15-year fixed-rate loan hover around 3%.

We think rates will hold these levels through November, and possibly through the rest of the year. We're sticking with our January 2015 prediction – no Federal Reserve interest rate hike for 2015. Fed officials meet next week and futures traders are betting only a 5% chance for a rate increase. Looking to December, when the last Fed meeting of the year will occur, traders are betting a 30% chance.

Getting a low-interest rate loan is nice, but it's even nicer when the process gets easier. Fannie Mae recently said that it will allow lenders to use employment and income information from a database maintained by credit bureau Equifax. For loans Fannie Mae buys, this means it won't require the traditional documentation of physical copies of pay stubs and tax data. 

Anyone considering a loan should consider acting sooner than later. Application volume has been volatile lately due to the new lending disclosure rules under TILA-RESPA. Last week, purchase activity spiked 16%, while refinance activity was up 9%. Given the expected rise in new and existing home sales, we expect lending activity to rise too.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

On first blush, ultra-low lending rates would appear to be nothing but good. After all, lowering the cost of financing lowers the financing cost of purchasing a home (or any asset). 

But things aren't quite that clear cut. When interest rates are low for borrowers, they are also low for savers and investors. Investment portfolios generate less income. This means savers and investors generally have less income to spend. It also means savers and investors have to take on riskier assets to capture income that was formerly available in safer assets. This increases the likelihood of capital losses, which can impede the ability to service loan obligations. 

Closer to home, low interest rates may not be as good for home buyers as people think, even if interest income isn't a consideration. Low financing costs sound attractive, but interest rates are a discounting tool: When rates are low, asset prices rise at a quicker pace than when rates are higher. It's a wonderful benefit to see surging home prices when you're a home owner, but it's not so wonderful if you're a young buyer seeking that first home. 

All things considered, a higher level of interest rates could actually improve the overall health of the housing market more than it could harm it. 

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

If you were to ask most people, what's an interest rate? They'd answer that it's the price to borrow money. They wouldn't be wrong, but they'd be incomplete. Interest rates are more than the price to borrow money. In fact, there would be interest rates even if there were no money and we all bartered.

More than anything, interest rates allocate. Specifically, they allocate resources between present consumption and future consumption. Everyone prefers a present good to a future good. If someone offered you 10 apples today or 10 apples a year from now, you'd take the 10 apples today.  But if someone offered you 10 apples today or 12 apples a year from now, you'd take the 12 apples if your required rate of return was 20% or less. 

Higher interest rates encourage consumers to forgo current consumption and to lend to producers so that they can produce goods for future consumption. Lower interest rates encourage the opposite; they encourage consumers to consume more today. 

Perpetually low interest rates would seem to be a perpetual positive, but that's not necessarily so. More consumption today can lead to less consumption tomorrow. This is something worth remembering as the Fed continues to hold interest rates at unprecedentedly low levels.

 Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Lending Rates React to a Chronic Case of Inertia

Sept. 17 came and went as expected, with nothing happening. We, along with most traders, were proven right. The Federal Reserve held the federal funds rate near zero, where it has been since Dec. 2008.

Interest rates were not formally raised, but interest rates, in general, and mortgages rates, in particular, formally fell. 

On the former, the bellwether 10-year U.S. Treasury note dropped 15-basis points when the Fed announced no increase in the fed funds rate. On the latter, rates on most mortgage products moved lower.  Depending when you called for a quote, the 30-year fixed-rate mortgage was down 10-basis points or more compared to where it was last Wednesday.  They've inched higher since – rates have been volatile – but you're still likely to get a sub-4% quote on the 30-year loan. 

Fed officials will meet two more times before the year ends: on Oct. 28 and Dec. 16.  As it now stands, traders in fed funds future contracts are betting on a 12% chance the fed funds rate will be increased at the October meeting. They're betting that there's a 32% chance it will be raised in December. 

Few people think a rate increase is in store for 2015, which has been our take since the beginning of the year.  No major central bank is looking to raise interest rates. The U.S. dollar, meanwhile, remains as strong as it has been in years, especially against emerging-market currencies. (Today, a dollar will get you nearly 17 Mexican pesos and over four Brazilian real – a multi-decade high on both.) 

Lower rates have spurred additional lending activity, though activity is being spurred by more than low rates. For the week ending Sept. 18, the Mortgage Bankers Association reports that application activity was up 13.9%.  The seasonally adjusted purchase index was up a strong 9%, and is up 27% year over year.  This is before the full impact of the Fed's rate decision kicked in.

Given the downdraft in lending rates and the updraft in lending activity, we should see an increase in home sales for September. As for August, existing home sales were somewhat sluggish, posting at 5.31 million on an annualized rate. Most economists were expecting around 5.6 million. 

That said, existing home sales have been strong through most of 2015, so a one-off month is no reason for concern. Fundamentally, things still look good. Supply has improved a bit, up to 5.2 months at the current sales pace. Price appreciation is also countenancing toward historical norms.  Year over year, the median price of an existing home is up 4.7% to $228,700.  In many markets, entry-level and lower-priced homes continue to drive aggregate price appreciation. A further deceleration in price appreciation in these niches would be welcomed news for prospective first-time buyers. 

Overall, the outlook is good for both housing and mortgage lending. Expect the outlook to remain good as we head into 2016.  

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Regardless of the direction of interest rates, the housing market remains sound. We’re not alone in our bullish sentiment. Optimism among the nation's home builders continues to rise.

The National Association of Home Builders' sentiment index was up another point this month. The current reading, at 62, is at a 10-year high.  More encouraging yet, the weakest component of the sentiment index, traffic, was up two points to 47. It appears sky-rocketing rental rates are finally motivating more people to do what they want to do anyway – buy a home to occupy.

At this point, housing and mortgage lending have sufficient strength and momentum to survive whatever the Federal Reserve tosses our way. Therefore, interest rates are a non-issue for the immediate future. Unless we see a 150-basis-point spike in the 30-year loan, highly unlikely, we don't see rates derailing housing any time soon.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.