Summer 2014 Real Estate Update

October 7th, 2014

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Summer 2014 Market Perspective

Home Prices – Nationally, the median home price increased 5.3% in June to $223,300, up 4.3% from the same month last year. We observed home price growth at a similar rate last year. However, the year-over-year price increase in June was less than half of that seen last year. This slower rate of annual appreciation is more consistent with sustainable growth.   GRAPH - Aug 2014 US Prices

Home sales have begun to pick up after this year’s sluggish start. August sales are down .8% from last year, but are up 2.6% since last month. Given the drop of distressed sales to 11% from 15%, conventional sales of existing homes were up from last year in June. GRAPH - Aug 2014 US Sales ___________________________________________________________________________________________

Sales Rise by Surprise as Homes Hit Market                                              Bloomberg News, excerpted from Investors.com 

Buyers Make a Move  More listings combined with low mortgage rates brightened July’s rally. Purchases of previously owned U.S. homes unexpectedly rose in July to a 10-month high as low borrowing costs and an increase in inventory drew buyers. Existing-home sales climbed 2.4% to a 5.15 million annual pace, the most since September, from a revised 5.03 million pace in June, the National Association of Realtors (NAR) reported today in Washington. The median forecast of 74 economists in a Bloomberg survey called for 5.02 million.

The number of homes for sale were the highest in almost two years. Employment growth, rising property values and a decline in consumer debt are giving would-be buyers the confidence to take the plunge into real estate. Builders are also showing signs of life after a construction lull at the start of the year, a sign that the market’s momentum is sustainable. “The long-term outlook is positive,” Thomas Simons, an economist with Jefferies in New York, said before the report. “The labor market is going to improve a little faster in the next year, and when you have wage growth, housing will get on firmer footing.”

Fewer Americans than forecast applied for unemployment benefits last week, a sign that the job market is making progress, another report today showed. Jobless claims fell by 14,000 to 298,000 in the week ended Aug. 16, according to Labor Department figures. The median forecast of 46 economists surveyed by Bloomberg called for 303,000.

Mixed Market The housing rebound has been giving mixed signals this year after a frigid and snowy winter and gradual improvement in the labor market. Residential construction starts increased in July to an annual pace of 1.09 million units, the highest level in eight months, as permits for future projects advanced 8.1%. Cheaper borrowing costs have helped. The average 30-year, fixed-rate mortgage was 4.12% in the week ended Aug. 14, down from 4.53% at the start of January, according to data from Freddie Mac in McLean, Va. At their July meeting, Federal Reserve officials raised the possibility that they might increase their target interest rate sooner than anticipated in light of labor-market strength, according to meeting minutes released Wednesday. Weak wage growth and low inflation have given the Fed room to hold the target rate near zero, which has kept mortgage rates low. ___________________________________________________________________________________________

New Study Sheds Light on ‘Rent vs. Buy’ Debate                                                       excerpted from NEXTITLE (by GLADIS)

Rent vs. BuyWhile the economy is more or less back on its feet, there are plenty of 20-somethings that are still behind the curve when it comes to homeownership. For some, financial instability, burdensome student debt, and years of underemployment have stood between them and their dream of owning their own home, while others may have been scared off by the foreclosures that became all-too-common during the housing crisis that they watched unfold for much of their adult lives.

Break-Even Rate

However, more statistics are pointing to the fact that those who have the means would be well-served by buying a house. For example, a study from online real estate database Zillow found that buying is a better financial decision than renting after an average of just two years. “Rents keep rising, and mortgage interest rates remain very low, which is helping to skew the rent vs. buy decision toward buying for those who can afford it,” said Stan Humphries, chief economist at Zillow. “Many renters may ask themselves why renew a lease, when you can break even on the same home in less time in many areas. For those renters who can’t qualify for a mortgage or aren’t able to save enough for a down payment on a house, renting can be a more flexible, and often far less frustrating option.”

The numbers by cities

Of course, the two-year break-even rate is an average of the entire country. When looking at each city or region, the numbers can vary widely. Let’s use an example to show just how much one might spend on rent: say a young couple in Portland, OR, spends $1,300/month renting a house and they stay in that same house without the rent increasing for 3 years. They’ve just spent approximately $47,000 in those 3 years, contributing to the equity of their landlord without adding a thing to their own financial assets.

Cause for Optimism

We know that homeownership is objectively a better financial choice, so how do most Americans feel about the housing market at large? According to the latest PulteGroup Home Index Survey, pretty good. The survey found that 74 percent of adults feel that the economy is steady or has improved over the last year and, even better, 57 percent believe now is a good or excellent time to make significant purchases. So if you’re just waiting around, stuck in your own internal rent vs. buy debate, do some research and explore your options before you get out your checkbook to write yet another rent check! ___________________________________________________________________________________________

 What Should You do in this market?

Whether you are a Seller, a Buyer or an Investor, there are lots of good opportunities in today’s market. I’m always available to consult with you to help you assess and achieve your real estate goals.

Barbara Magnuson     253-307-4504

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Contact Barb Magnuson

Magnuson Residential & Commercial Properties
Keller Williams Realty - West Sound
11515 Burnham Drive NW, Gig Harbor, WA 98332
(253) 307-4505
(253)851-4511
(253) 857-8700

barbmagnuson@gmail.com

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