Real Estate Information Archive

The Day of Reckoning Beckons 

By the end of Thursday we'll know: Will the Federal Reserve have raised its target range for the federal funds rate, or will it have once again kicked the can down the road? 

As of Wednesday, the folks who put money on the line are betting a 23% chance that a higher fed funds rate will prevail. This is according to CME Group, which monitors trader action in the federal funds rate futures market. Of course, these same traders were betting a 19% chance last week and a 32% chance the week before that. These traders are a fickle lot. As the stock market goes, so seems to go their sentiment on the fed funds rate. 

It's all scuttlebutt, really, and scuttlebutt on the Fed and the fed funds rate is similar to scuttlebutt on the weather: There's a lot you can say, but not much you can do. You have to live with what you get. 

As for us, we still think we'll get another kick of the can. The target rate will remain as is – between 0% and 0.25%. This is where the fed funds rate has been firmly ensconced for the past six years. The rationale for our prognostication remains unchanged: low inflation, stagnating global economic growth, an unstable stock market, a strong U.S. dollar.

But what if we're wrong? What will happen to mortgage lending rates if the Fed moves to raise its target on the fed funds rate? 

The fed funds rate is a short-term rate. Indeed, it's a very short-term rate: It's the overnight lending rate among commercial banks. If the fed funds rate rises, short-term rates will likely be impacted most, at least initially. This means 1-year and 5/1-year ARMs will likely adjust first. 

On the longer end, it's possible little will change immediately. Rates on the 15-year and 30-year loans tend to act more independently of the Fed. It's possible the fed funds rate could rise, and rates on the 15-year and 30-year loans will continue to hold current levels.

Inflation also favors longer-term rates holding steady. The latest data on the consumer price index (CPI) show prices actually fell 0.1% in August. The shift down was lead by a fall in oil and gasoline prices. Given the dearth of inflation, it's possible we could see the yield curve begin to flatten, or even invert. This means short-term rates could rise, while long-term rates do nothing. 

But as we say this, the yield on the 10-year U.S. Treasury note, which influences longer-term rates, is up 15 basis points this month. In the past week, rates on long-term fixed-rate mortgages have drifted higher. As we've mentioned frequently, the long-term impetus is still for rates to rise. 

That said, predicting the flight path of interest rates is akin to predicting the flight path of a butterfly: Short term, they're all over the place; long term, there is a direction. For the butterfly, it's to head south for winter; for interest rates, it's to rise. For this reason, the best lending value just might reside on the long-end of the rate curve.  

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.

We've spent a good deal of time over the past month vetting the Federal Reserve and the odds of an interest-rate increase.  This stuff matters, but really not as much as the overall health of the mortgage and housing markets. Fortunately, the overall health is very good. 

Mortgage-credit availability is no longer an issue. Indeed, credit availability measured by the Mortgage Bankers Association shows that credit is as easily obtainable as it has been in years.  This is no surprise. Even when credit standards were tight, we were sure they would loosen once economic growth and job creation picked up. We've been proven right on this point.  Better yet, credit standards should remain accommodating for some time to come. 

At the same time, home sales continue to march ahead. Prices are still on the rise, but at a more reasonable pace. Starts and demand for new homes continue to trend positively. This is obviously all good news. So don't worry about next Thursday. Whatever happens with interest rates – whether up or hold – mortgage lending and housing will remain in good 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.

The Great Reprieve Appears 

In recent weeks, we've mentioned more than once that the employment report for August could sway the Federal Reserve's decision to raise or hold interest rates. The report is in, and the numbers were less than what was bargained for.  

August saw only 173,000 new jobs created. The key number has always been 200,000+ new jobs. Nevertheless, the latest job gains (plus revised gains for the prior two months) pushed the unemployment rate down to 5.1%, but there is a catch. The employment participation rate remains at a multi-decade low, at 62.6%.

Part of the lower participation rate is attributable to changing demographics – an older population and more younger people staying in school longer. Still, participation remains stubbornly low.  Too many people are not working. The good news is that wages and average weekly hours worked continue to creep higher.

The latest employment report could lead to a fiery debate when Fed officials convene on Sept. 16 and 17. The stock market should add fuel to the fire. The Dow 30 and the S&P 500 were down over 10% in the last week of August. A drop of 10% or more is considered a stock-market correction.

The Fed is supposed to act independently of stock prices, but stock prices do influence the Fed. Stock prices certainly influence traders in federal fund rate futures contracts. These traders bet on the odds of a Fed interest-rate increase. They're not giving very good odds these days. CME Group, which offers a “Fed Watch” service, says traders are pricing futures contracts with a 19% chance of a rate increase. This is down from 32% in the prior week. The decrease in traders odds correlates with the decrease in stock prices. 

Of course, stocks could rally and odds could change. Both frequently do. Still, we remain sided with the traders betting the low odds. We don't think the Fed will raise the federal funds rate come next Thursday: The U.S. job numbers were weak for August, the U.S. stock market is in a funk, inflation remains muted, and global economic growth (most notably China) is waning.  Also, the U.S. dollar remains historically strong against most world currencies. An interest-rate hike would further strengthen the dollar.  (This is a mixed blessing: Imports are cheaper, but exports cost more.)

Mortgage rates seem to side with us. Rates have drifted lower since Friday's employment report. A quote below 3.9% on the 30-year fixed-rate loan is the norm in many markets.  The 15-year fixed-rate loan is regularly quoted below 3.1%. 

This doesn't mean we are home free. Market participants move interest rates independently of the Fed. Mortgage rates can rise even if the Fed does nothing onSept. 17. 

Yes, we see mortgage rates holding current lows, but that can change in a hurry. Though we don't think it will, “a hurry” could come as soon as next week. 

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.

Speculation runs rampant: Will the Federal Reserve raise the federal funds rate or not next month? We remain in the “not” category, and to see how our opinion jibes with other opinions, we'll occasionally turn to CME Group's website (cmegroup.com). CME follows the federal funds futures market, where speculators bet on future interest rates, and CME's data show speculators are betting only a 24% chance for a rate increase next month.

That said, professional speculators can be a schizophrenic lot.  It's not unusual for CME to report wild weekly swings in the percentage speculators are giving the Fed.  Who knows? Next week these same speculators might price in a 50% chance.

The Fed may or may not raise the fed funds rate, which may or may not impact long-term lending rates.  The fed funds rate is a very short-term rate. It's the rate commercial banks lend to each other overnight. Given that most banks have an ample supply of excessive reserves held at the Fed, there isn't much demand for these loans.  The current fed funds rate is only 14 basis points.  In other words, a Fed rate hike wouldn't necessarily work its way to the long-end of the lending curve. 

Our instincts –  and this is all anyone can really go on – suggests that today's low rates will hold for a while longer.  Come early September, though, we wouldn't be surprised to see rates creep higher due to rising speculator anticipation. Therefore, now is as good a time as any to act.  We still think that the long-term impetus is for rates to rise.  

 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.

Housing: The New Store of Value

It's been a rough August for stocks. Investors have had to endure a 10% drop in the major stock-market barometers: the Dow 30, the S&P 500, and the NASDAQ Composite Index. We wouldn't be surprised to see further declines in weeks to come, given the precarious state of the Chinese stock market and China's economy.

But as they say, when your house burns down mine looks a lot better. Housing as an asset class looks good compared to stocks. At the least, housing has momentum on its side.

Housing demand continues to trend higher. Existing-home sales posted a solid 2% gain in July, with sales hitting 5.59 million units on an annualized rate. Sales were strong despite a dearth of inventory, which stands at 4.8-month’s supply at current sales.  Year over year, supply is down nearly a full month. When supply is down and demand is up, prices are usually up as well. The median price for an existing home rose 5.6% to $234,000 in July. 

New-home sales were also up last month, which is no surprised, considering the strong uptrend in housing starts in recent months.  Sales of new homes posted at 507,000 units, a 5.4% increase over June.  Here, too, inventory remains tight, with supply dropping to 5.2 months at the current sales rate.  Again, we see the same dynamic: tight supply plus rising demand equals rising prices.  The median price of a new home rose 3% to $285,900. 

Interestingly, there appears to be a price dichotomy at work. The S&P/Case-Shiller 20-city index dropped 0.1% in June. Eleven of the 20 cities Case-Shiller follows posted declines. Year over year, the Case-Shiller index is up 5%, but price-appreciation has eased in recent months, with the index now up 5% year over year. This isn't a bad thing. After all, low-to-mid-single-digit appreciation is the historical norm.

Of course, coverage is the reason for the difference in existing-home and new-home prices reported by Realtor.com and the Commerce Department and prices reported by Case-Shiller.  The former two cover most of the country; the latter covers only a few choice metropolitan areas.  As we all know, all real estate markets are local markets. Any aggregate number can be meaningless to any local market. That said, overall, things look healthy, and that means many local markets are healthy as well.  

Given the current state of the stock market, we expect most local markets to remain healthy.  Housing is looking good as both an investment (flipping or rental) and as an appreciating long-term asset (an owner-occupied home).  A sub-4% rate on the 30-year fixed-rate mortgage will further inspire demand. Given housing's comparative advantage to stocks, we see no reason the good times shouldn't last quite a bit longer.    

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.

Times are tough if you're a renter. The Census Bureau reports that vacancy rates are at a 30-year low, at 6.8%.  That can mean only one thing – rising rents.  Rents have already climbed 3.5% in the past 12 months through June. The median asking price for monthly rent is now above $800, a new record. Things are unlikely to improve. Economists at Capital Economics Ltd., in a note to clients, wrote, "Our forecasts that rents will grow at an annual rate of 5% both this year and next would represent the fastest rate of rental growth since the 1980s."

Relentless rent inflation should help reverse the downtrend in the homeownership rate, which is at a 48-year low.  We see more people motivated to lock in a predictable monthly payment.  If you pay $800 in monthly rent, in five years you'll pay $1,021 if rents rise 5% annually. If they rise 3.5% annually, as they have over the past 12 months, you'll still be paying $950 in monthly rent.

Low vacancy rents and relentless rent increases are yet more reasons to remain bullish on the long-term out lookout for home sales. 

 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.

Housing Still On Track for a Strong 2015

Home builders are as optimistic as they've been for nearly a decade. The National Association of Home Builders/Wells Fargo Housing Market Index rose a point this month to register at 61. This is the highest reading since November 2005.  

Sentiment is usually driven by activity. The good news is that activity remains strong. Housing starts rose 0.2% to an annual rate of 1.21 million homes in July. Nearly all the gains were recorded in the important single-family component, which shot up 12.8% to 782,000 homes. 

To be sure, existing-home sales produce the lion's share of transaction activity, but new-home sales and new-home construction contribute much more to overall economic activity. Residential investment has historically averaged roughly 5% of gross domestic product, according to NAHB data. That we continue to see strong home-builder activity bodes well for the overall economy.

The good news is that it continues to climb toward the important 1.5 million annual average. Historically 1.5 million has been the marker that lets you know the economy is hitting its stride. 

With that said, is the sword of Damocles about to break free and end the good times? 

We again refer to the Federal Reserve and interest rates. We've mentioned many times how fickle markets are, and credit markets are as fickle as any. After China devalued its currency last week, many market participants changed their bets: They bet the Fed wouldn't raise the federal funds rate next month. Now, it appears that many bets were placed in haste. The federal funds futures market now shows that traders are pricing futures contracts for a 45% chance the Fed will raise the federal funds rate next month. 

Mortgage rates have been less fickle than most, having trended lower in the past month. The 30-year fixed-rate loan priced below 4% has again become the new norm.  An increase in the federal funds rate could easily change that, though, with above-4% supplanting sub-4%. 

Since the beginning of the year, we've been skeptical of impending Fed action on interest rates. Nevertheless, pressure is mounting on the Fed to do something. But as the Fed itself has said, any decision will be “data” dependent. The employment situation for August could be the datum that tilts the scales. If job growth comes in strong – 250,000 or higher – for August, the Fed could well decide to raise the federal funds rate.  Below that, and it's anyone's guess.

We wouldn't be surprised either way, and either way we still see strong home sales and construction activity through the remainder of the year. As for mortgage rates, we still think current rates are about good as it's going to get.    

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.

Last Friday, the employment numbers for July were released. They weren't spectacular, but they were solid. Payrolls increased by 215,000 for the month, which kept the unemployment rate steady at 5.3%. Wage rates showed some life, up 0.2%. The increase lifts the average hourly wage to just below $25.

Since the job market began to recover in earnest in late 2013, we've been saying that as long as new payrolls come in at 200,000-or-better each month, the housing market would remain in good shape. That's been the case. Since early 2014, new monthly payrolls have regularly posted greater than 200,000.  Not surprisingly, home sales and new-home construction have improved with sustained job growth. Home priceshave also kept pace, which has been something of a surprise. We thought by this time, the rate of price appreciation would have slowed significantly.

As you might expect, we remain bullish on housing. Thanks to continued low mortgage rates and solid monthly job growth, more home buyers will enter the market. As things stand, we see no reason not to expect strong home sales and rising origination activity into at least early 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.

China Does It Again; Mortgage Rates Drift Lower

For a newsletter focused on the U.S mortgage and housing markets, we spend a good deal of time discussing foreign events. China, in particular, has been a hot topic. In July, China's major stock markets tanked, which sent investors scurrying for cover. Many sought refuge in U.S. government securities. The 10-year U.S. Treasury note was one of the haven ports.

Over the past couple days, the yield on the 10-year note has again plunged. China is again the reason. 

The People's Bank of China twice devalued its currency, the yuan, in as many days.  This has sent the dollar rising against the yuan, and many other currencies. China devalued its currency in an attempt to stimulate its sluggish economy. China is a huge export nation. When its currency is devalued, exports are cheaper to the country the exports are headed.  Chinese-manufactured goods become cheaper to U.S. and European consumers. 

For us, lower mortgage rates are a by-product of a depreciated yuan. We've seen rates trend lower on the 15-year and 30-year loans over the past couple days. We are now seeing the 30-year loan quoted in the high threes. Up until a couple weeks, it was regularly quoted in the low fours. 

This is the way the world works today: Financial markets are intertwined. Global events impact local markets, and do so more than many people realize. A couple months ago, Greece held center stage; now it is China, and China is much more important than Greece, economically speaking. China is the world's second-largest economy, trailing only the United States. What happens in China impacts everyone, everywhere. Only the United States is more impacting.   

China's currency devaluation impacts us directly because it crimps the Federal Reserve's plans to hike the federal funds rates (which is what people refer to when they talk about the Fed raising rates).  A rate hike would further strengthen the U.S. dollar, thus hurting many U.S. exporters. Therefore, it’s no surprise that markets have trimmed the odds of a September rate hike to zero.  A week ago, it was 50%; two weeks ago, it was 33%.  Now people are gunning for December for the first rate increase.

In short, mortgage rates have been given a reprieve. Whether refinance or purchase, now is the time to act. Sub-4% on the 30-year loan looks like a gift. We say that because the long-term impetus is still for rates to rise, so no one knows how long today's rates will last.  Always keep in mind that sentiment can change in a heartbeat, and it frequently does. 

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.

Goldman Sachs released an interesting investment note to its clients this week. The note was titled “What's Keeping the Kids at Their Parent's Home?” Goldman concludes the job situation is a key factor, with a few other factors tossed in: high student-debt loads, poor credit scores, and rising rent-to-income ratios. It all sounds negative, but it's not.

There are a high proportion of 18-to-34 year-olds living with their parents. The number hit an all-time high after the recession, and the number just began to drift lower last year. This younger demography represents a huge pool of new household formations. (After all, you have to leave eventually, if just to maintain sanity.)  Fortunately, and contrary to some opinion makers, this young demography still wants to own a home, and it wants to own a single-family home, according to Fannie Mae data.  This is good news for the long-term outlook on housing.  There's a lot of pent-up demand in the single-family-home market that will need to be satisfied.

For the time being, though, prices are keeping many first-time buyers on the sidelines. Demand is particularly strong for starter homes, which have been on a tear. CoreLogic reports low-end homes are now priced 5.5% above pre-bubble levels.  Many first-timers have been priced out of the market. 

For the past year, we've been cheerleading for slower home-price appreciation. Entry-level affordability is the reason why.

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.