Posts
As a Realtor I find many of my clients waiting for prices to go down which they have. Many people say to me "You probably don't want prices to go down?" My response suprises them. I think the market could not and should not substain these prices. I too was was a first time buyer.
I just read an acrticle that stated the rates have gone down the last 4 weeks in a row. I now read an acrticle that states it is a 5th week which I will post in my my next blog. I believe this comes from Federal Reserve not raising the rates.
I was at the Dr. office the other day and they all know I am a Realtor and one gal said "Wow the rates are so high we can't buy" I thought were did she get that idea?
When you read a newspaper article read beyond the the title. I often find when I see articles, I find out after I read after the first paragrah there is more to the story. In my opinion this is a great time for buyers to get into the market especially with the rates and so much inventory. It is also good for sellers as long as they are in tune with the market this also makes sense for them.
I am 100% right? I cant say yes or no I can only say it is my opinion. If you would like more information or would like to post your ideas please feel free to do so.
Best Wishes,
Bridget
Saturday, August 26, 2006
Thursday, August 10, 2006
Homes Sales To Hold Fairly Steady For Balance of Year
(August 8, 2006) – The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors®.David Lereah, NAR’s chief economist, said the indicators already are leveling-off. “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts,” he said. “New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.”“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Lereah said. “This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9 percent in the fourth quarter.NAR President Thomas M. Stevens from Vienna, Va., said current market conditions are favorable for buyers. “The rise in housing supply is the biggest change in the market over the last year,” said Stevens, senior vice president of NRT Inc. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns – but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value.”The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise only 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory.The unemployment rate should average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3.0 percent this year.
Tuesday, August 08, 2006
The Federal Reserve Does Not Raise The Rate
By Martin Crutsinger
ASSOCIATED PRESS
11:28 a.m. August 8, 2006
WASHINGTON – The Federal Reserve on Tuesday left a key interest rate unchanged, marking at least a temporary pause in what had been the longest unbroken stretch of Fed rate increases in recent history.
The Fed's rate-setting committee voted 9 to 1 to leave the federal funds rate, the interest banks charge on overnight loans, at 5.25 percent. It was the first time the Fed had met and not raised rates in more than two years.
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However, the relief for millions of business and consumer borrowers could be only temporary. The central bank said that “some inflation risks remain,” holding out the possibility that it could resume raising rates at future meetings.
The Fed decision means that banks' prime lending rate, the benchmark for various consumer and business loans, will remain at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent, its lowest point since 1958.
In 17 consecutive meetings stretching from June 2004 through June 2006, the Fed boosted the funds rate from a 46-year low of 1 percent to the current 5.25 percent, all in an effort to slow the economy enough to keep inflation under control.
The Fed's decision to finally pause had been widely anticipated given the signs of a spreading economic slowdown, in part reflecting the impact of the Fed's long string of rate hikes.
Overall economic growth slowed in the spring to a rate of just 2.5 percent, less than half the pace of the first three months of the year, and on Friday the government reported that the unemployment rate in July rose from 4.6 percent to 4.8 percent.
In explaining its decision, the Fed noted the slowing economy, saying, “Economic growth has moderated from its quite strong pace earlier this year.”
The Fed said this moderation in part reflected a gradual cooling of the housing market, the economic drag caused by rising energy prices and the lagged effects of previous Fed rate hikes.
But the central bank also signaled concerns about continued inflation risks, although it also said “inflation pressures seem likely to moderate over time.”
The central bank said that “the extent and timing of any additional” rate hikes that may be needed will depend on incoming data on both inflation and economic growth.
For the first time since Ben Bernanke took over as chairman in February, the Fed decision was not unanimous. Fed board member Jeffrey Lacker dissented, saying he would have preferred another quarter-point rate hike.
Many analysts believe the pause in rates will be short-lived as Fed policy-makers confront continued inflation pressures in the form of a relentless surge in energy prices and new data that wage pressures are intensifying.
The Labor Department reported Tuesday, just before the Fed policy-makers began meeting, that productivity slowed sharply in the spring while labor costs rose, a combination that could spell inflation troubles down the road.
Many economists believe the Fed will follow the August pause with one and possibly two more quarter-point rate hikes in the fall. The Fed's next meeting is Sept. 20.
Expectations of a pause in the rate hikes had been raised by Bernanke when he delivered the Fed's latest economic forecast to Congress last month, saying the central bank believed that a slowing economy would lower inflation pressures over the next two years.
At 5.25 percent, the funds rate, which is the overnight rate that banks charge to loan other banks, is at its highest point in more than five years.
The funds rate is the Fed's main tool for influencing economic activity. Higher interest rates slow borrowing for homes, cars and other items and in this way depress economic growth.
ASSOCIATED PRESS
11:28 a.m. August 8, 2006
WASHINGTON – The Federal Reserve on Tuesday left a key interest rate unchanged, marking at least a temporary pause in what had been the longest unbroken stretch of Fed rate increases in recent history.
The Fed's rate-setting committee voted 9 to 1 to leave the federal funds rate, the interest banks charge on overnight loans, at 5.25 percent. It was the first time the Fed had met and not raised rates in more than two years.
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However, the relief for millions of business and consumer borrowers could be only temporary. The central bank said that “some inflation risks remain,” holding out the possibility that it could resume raising rates at future meetings.
The Fed decision means that banks' prime lending rate, the benchmark for various consumer and business loans, will remain at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent, its lowest point since 1958.
In 17 consecutive meetings stretching from June 2004 through June 2006, the Fed boosted the funds rate from a 46-year low of 1 percent to the current 5.25 percent, all in an effort to slow the economy enough to keep inflation under control.
The Fed's decision to finally pause had been widely anticipated given the signs of a spreading economic slowdown, in part reflecting the impact of the Fed's long string of rate hikes.
Overall economic growth slowed in the spring to a rate of just 2.5 percent, less than half the pace of the first three months of the year, and on Friday the government reported that the unemployment rate in July rose from 4.6 percent to 4.8 percent.
In explaining its decision, the Fed noted the slowing economy, saying, “Economic growth has moderated from its quite strong pace earlier this year.”
The Fed said this moderation in part reflected a gradual cooling of the housing market, the economic drag caused by rising energy prices and the lagged effects of previous Fed rate hikes.
But the central bank also signaled concerns about continued inflation risks, although it also said “inflation pressures seem likely to moderate over time.”
The central bank said that “the extent and timing of any additional” rate hikes that may be needed will depend on incoming data on both inflation and economic growth.
For the first time since Ben Bernanke took over as chairman in February, the Fed decision was not unanimous. Fed board member Jeffrey Lacker dissented, saying he would have preferred another quarter-point rate hike.
Many analysts believe the pause in rates will be short-lived as Fed policy-makers confront continued inflation pressures in the form of a relentless surge in energy prices and new data that wage pressures are intensifying.
The Labor Department reported Tuesday, just before the Fed policy-makers began meeting, that productivity slowed sharply in the spring while labor costs rose, a combination that could spell inflation troubles down the road.
Many economists believe the Fed will follow the August pause with one and possibly two more quarter-point rate hikes in the fall. The Fed's next meeting is Sept. 20.
Expectations of a pause in the rate hikes had been raised by Bernanke when he delivered the Fed's latest economic forecast to Congress last month, saying the central bank believed that a slowing economy would lower inflation pressures over the next two years.
At 5.25 percent, the funds rate, which is the overnight rate that banks charge to loan other banks, is at its highest point in more than five years.
The funds rate is the Fed's main tool for influencing economic activity. Higher interest rates slow borrowing for homes, cars and other items and in this way depress economic growth.
Tuesday, July 25, 2006
The Market Beginning To Level Out
Pending Home Sales Index Leveling Out
WASHINGTON (July 6, 2006) – The index of pending home sales, a leading gauge for the housing sector, rose slightly in May, an indication that the market is stabilizing, according to the National Association of Realtors®. The Pending Home Sales Index,* based on contracts signed in May, was up 1.3 percent to a level of 113.4 from an index of 111.9 in April, but was 10.1 percent lower than May 2005.The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalized within a month or two of signing.An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales.David Lereah, NAR’s chief economist, said the index appears to be moderating. “The slight change in pending home sales indicates the market is beginning to level out,” Lereah said. “This is consistent with our forecast, which is showing a soft landing for the housing sector. We are entering the second phase of the transition period from the housing boom, in which sellers are becoming more realistic about their expectations – sales are stabilizing and annual home price appreciation is returning to historic norms.”Regionally, the PHSI in the South was down) 1.7 percent in May and was 7.3 percent lower than May 2005. In the Northeast, the index was down 0.6 percent in May and was 7.8 percent below a year ago. The index in the Midwest was up 0.6 percent to 100.9 in May but was 13.6 percent lower than May 2005. The index in the West rose 9.9 percent to 110.1 in May but was 12.9 percent below a year earlier. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
# # #* The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.Existing-home sales for June will be released July 25; the next Pending Home Sales Index will be on August 1.
WASHINGTON (July 6, 2006) – The index of pending home sales, a leading gauge for the housing sector, rose slightly in May, an indication that the market is stabilizing, according to the National Association of Realtors®. The Pending Home Sales Index,* based on contracts signed in May, was up 1.3 percent to a level of 113.4 from an index of 111.9 in April, but was 10.1 percent lower than May 2005.The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalized within a month or two of signing.An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales.David Lereah, NAR’s chief economist, said the index appears to be moderating. “The slight change in pending home sales indicates the market is beginning to level out,” Lereah said. “This is consistent with our forecast, which is showing a soft landing for the housing sector. We are entering the second phase of the transition period from the housing boom, in which sellers are becoming more realistic about their expectations – sales are stabilizing and annual home price appreciation is returning to historic norms.”Regionally, the PHSI in the South was down) 1.7 percent in May and was 7.3 percent lower than May 2005. In the Northeast, the index was down 0.6 percent in May and was 7.8 percent below a year ago. The index in the Midwest was up 0.6 percent to 100.9 in May but was 13.6 percent lower than May 2005. The index in the West rose 9.9 percent to 110.1 in May but was 12.9 percent below a year earlier. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
# # #* The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.Existing-home sales for June will be released July 25; the next Pending Home Sales Index will be on August 1.
Monday, July 17, 2006
Don't Forget To Visit My Favorites
From time to time I come across websites I think my clients would find beneficial and when I do I post them to the "Favorites Links" banner. I encourage you to visit my website www.SellingNorthCounty.com to see the sites I post. Today I came across a site I think buyers would find helpful when searching for a home or neighborhood to research crime statistics. You will find it here at my website under favorite links it is the first link. On this site you can enter a address and pick specific dates and enter which crimes you are wanting information on and it will display how many times the violation occurred during that time. It will also offers other links on its site to local law enforcement. So the next time you are searching for crime stats I think you will find this site helpful.
Thursday, June 29, 2006
Home prices still rising from last year
For release:Tuesday, June 27, 2006
C.A.R. reports median price of a home in California at $564,430 in May, up 8 percent from year ago; sales decrease 21.1 percent
LOS ANGELES (June 27) – The median price of an existing home in California increased 8 percent in May and sales decreased 21.1 percent compared with the same period a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“The median price of a home continued to increase in May, but at a more sustainable 8 percent rate,” said C.A.R. President Vince Malta. “This is the first time since November 2001 that the median price did not increase by double digits, reflecting the return to the more balanced market that we have anticipated.
“Interest rates, while still historically low, continue to impact sales as did the inventory of homes for sale, which reached nearly a six-month supply in May,” he said. “It’s important that consumers work with their REALTOR® to ensure that their home is competitively priced in today’s changing market.”
Closed escrow sales of existing, single-family detached homes in California totaled 488,260 in May at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 21.1 percent from the 618,920 sales pace recorded in May 2005.
The statewide sales figure represents what the total number of homes sold during 2006 would be if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during May 2006 was $564,430, an 8 percent increase over the revised $522,530 median for May 2005, C.A.R. reported. The May 2006 median price increased 0.5 percent compared with April’s revised $561,750 median price.
“Year-to-date sales are down 19.5 percent, in line with our recently revised 2006 California Housing Market Forecast, which projected a 16.8 percent decrease in sales for this year to 520,000 units compared with 2005,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “We expect the rate of home price appreciation to increase 8 percent to $565,900 for the year as a whole, compared with the impressive double-digit gains we’ve witnessed over the past four years.”
Highlights of C.A.R.’s resale housing figures for May 2006:
. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2006 was 5.9 months, compared with 2.7 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
. Thirty-year fixed mortgage interest rates averaged 6.6 percent during May 2006, compared with 5.72 percent in May 2005, according to Freddie Mac. Adjustable mortgage interest rates averaged 5.63 percent in May 2006 compared with 4.23 percent in May 2005.
. The median number of days it took to sell a single-family home was 44 days in May 2006, compared with 27 days (revised) for the same period a year ago.
Regional MLS sales and price information is contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORS throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 84.4 percent, or 348 out of 405 cities and communities showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The top 10 lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)
Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. Online at http://www.car.org/index.php?id=MzYzOTk=.
. Statewide, the 10 cities and communities with the highest median home prices in California during May 2006 were: Laguna Beach, $1,692,500; Saratoga, $1,500,000; Burlingame, $1,371,000; Newport Beach, $1,336,000; Manhattan Beach, $1,241,500; Los Gatos, $1,180,000; Santa Monica, $1,162,500; Rancho Palos Verdes, $1,144,000; Lafayette, $1,142,500; Calabasas, $1,130,000; Santa Barbara, $1,130,000.
. Statewide, the 10 cities and communities with the greatest median home price increases in May 2006 compared with the same period a year ago were: Santa Monica, 60.3 percent; Ridgecrest, 56.3 percent; Adelanto, 42.5 percent; Loma Linda, 36.7 percent; Barstow, 36 percent; Laguna Beach, 33.8 percent; Delano, 33.3 percent; Tustin, 32.8 percent; Campbell, 32 percent; California City, 30.6 percent.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
C.A.R. reports median price of a home in California at $564,430 in May, up 8 percent from year ago; sales decrease 21.1 percent
LOS ANGELES (June 27) – The median price of an existing home in California increased 8 percent in May and sales decreased 21.1 percent compared with the same period a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“The median price of a home continued to increase in May, but at a more sustainable 8 percent rate,” said C.A.R. President Vince Malta. “This is the first time since November 2001 that the median price did not increase by double digits, reflecting the return to the more balanced market that we have anticipated.
“Interest rates, while still historically low, continue to impact sales as did the inventory of homes for sale, which reached nearly a six-month supply in May,” he said. “It’s important that consumers work with their REALTOR® to ensure that their home is competitively priced in today’s changing market.”
Closed escrow sales of existing, single-family detached homes in California totaled 488,260 in May at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 21.1 percent from the 618,920 sales pace recorded in May 2005.
The statewide sales figure represents what the total number of homes sold during 2006 would be if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during May 2006 was $564,430, an 8 percent increase over the revised $522,530 median for May 2005, C.A.R. reported. The May 2006 median price increased 0.5 percent compared with April’s revised $561,750 median price.
“Year-to-date sales are down 19.5 percent, in line with our recently revised 2006 California Housing Market Forecast, which projected a 16.8 percent decrease in sales for this year to 520,000 units compared with 2005,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “We expect the rate of home price appreciation to increase 8 percent to $565,900 for the year as a whole, compared with the impressive double-digit gains we’ve witnessed over the past four years.”
Highlights of C.A.R.’s resale housing figures for May 2006:
. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2006 was 5.9 months, compared with 2.7 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
. Thirty-year fixed mortgage interest rates averaged 6.6 percent during May 2006, compared with 5.72 percent in May 2005, according to Freddie Mac. Adjustable mortgage interest rates averaged 5.63 percent in May 2006 compared with 4.23 percent in May 2005.
. The median number of days it took to sell a single-family home was 44 days in May 2006, compared with 27 days (revised) for the same period a year ago.
Regional MLS sales and price information is contained in the tables that accompany this press release. Regional sales data are not adjusted to account for seasonal factors that can influence home sales. The MLS median price and sales data for detached homes are generated from a survey of more than 90 associations of REALTORS throughout the state. MLS median price and sales data for condominiums are based on a survey of more than 60 associations. The median price for both detached homes and condominiums represents closed escrow sales.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 84.4 percent, or 348 out of 405 cities and communities showed an increase in their respective median home prices from a year ago. DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. (The top 10 lists are generated for incorporated cities with a minimum of 30 recorded sales in the month.)
Note: Large changes in local median home prices typically indicate both local home price appreciation, and often, large shifts in the composition of housing market activity. Some of the variations in median home prices may be exaggerated due to compositional changes in housing demand. The DataQuick tables listing median home prices in California cities and counties are accessible through C.A.R. Online at http://www.car.org/index.php?id=MzYzOTk=.
. Statewide, the 10 cities and communities with the highest median home prices in California during May 2006 were: Laguna Beach, $1,692,500; Saratoga, $1,500,000; Burlingame, $1,371,000; Newport Beach, $1,336,000; Manhattan Beach, $1,241,500; Los Gatos, $1,180,000; Santa Monica, $1,162,500; Rancho Palos Verdes, $1,144,000; Lafayette, $1,142,500; Calabasas, $1,130,000; Santa Barbara, $1,130,000.
. Statewide, the 10 cities and communities with the greatest median home price increases in May 2006 compared with the same period a year ago were: Santa Monica, 60.3 percent; Ridgecrest, 56.3 percent; Adelanto, 42.5 percent; Loma Linda, 36.7 percent; Barstow, 36 percent; Laguna Beach, 33.8 percent; Delano, 33.3 percent; Tustin, 32.8 percent; Campbell, 32 percent; California City, 30.6 percent.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
Thursday, June 15, 2006
Annual Harvard Study Reports Sharp Drop Unlikely for Real Estate Market
Harvard Releases the 2006 State of the Nation’s Housing Report
RISMEDIA, June 15, 2006—With interest rates rising and speculative demand cooling, the housing boom is coming under pressure, finds this year’s State of the Nation’s Housing report. As long as the economy continues to create jobs and builders trim production to match slowing demand, house prices will keep climbing and the housing sector will likely achieve a soft landing. Although house price growth will likely moderate in many areas, sharp drops in house prices are unlikely anytime soon. Major house price declines seldom occur in the absence of severe overbuilding, major job loss, or a combination of heavy overbuilding and modest job loss. Fortunately, these preconditions are nowhere in evidence across the nation’s metropolitan areas. Even with higher interest rates and home prices crimping affordability, the lure of house price appreciation continues to draw homebuyers to the market. While the national homeownership rate edged down a tenth of a percent in 2005, it increased in the West and Northeast where house price growth was the strongest. In fact, about 1 million homeowners were added nationally last year. Mortgage innovations such as low-downpayment, hybrid-adjustable, and interest-only loans helped blunt the impact of higher home prices and interest rates. “While homeowners with annually adjusting mortgage rates are facing interest increases this year, including those with expiring teaser discounts, only about one in 10 homeowners face higher mortgage payments this year” remarks Nicolas P. Retsinas, director of Harvard’s Joint Center for Housing Studies. Fully eight in 10 owners has no mortgage or a fixed-rate mortgage, and most owners with adjustable loans have an initial fixed-rate period of three or more years. Similarly, most interest-only loans extend for at least five years, leaving ample time to move, refinance, or incomes to grow before principal payments start coming due. But, the report cautions, five years of unprecedented house price appreciation and decades of land use restrictions that make building affordable housing difficult are adding to widespread housing affordability problems. From 2001 to 2004 alone, the number of households spending more than half their incomes on housing increased by 14 percent to 15.8 million. The paradox of today’s housing market is that while more people are building home equity than ever before, slow growth in wages for households in the bottom three-quarters of the income distribution is not keeping pace with escalating housing costs. Amidst a housing boom, it is now impossible to build housing at prices anywhere near what low-income households can afford without subsidies. Further, the report draws attention to the problems of concentrated poverty. Neighborhood decline is fuelling the loss of affordable housing and exposing residents to poor neighborhood conditions. From 1993-2003 the supply of rentals affordable on a $16,000 income fell by 1.2 million, while in 2001 12 percent of such rentals were operated at a loss. This year’s report also highlights the significant contribution that the foreign-born and minorities will make to overall household growth. New household projections incorporating higher but more realistic immigrant assumptions suggest household growth will accelerate to 14.6 million over the next ten years from 12.6 million over the last ten. “Strong household growth, combined with record incomes and wealth, will lift housing investments to new highs next decade,” remarks Eric Belsky, executive director of the Joint Center. “Each generation is achieving higher homeownership rates, incomes, and wealth than the one ahead of it, with the leading edge of the echo baby boom now in their 20s and the baby bust now in their 30s starting off on especially high paths. This is despite the fact that each younger generation has successively higher shares of foreign-born and minority household heads with lower average incomes than same-age native-born whites.” “Even as the housing industry looks past the current softness to robust growth in the decade ahead, the challenges of providing affordable housing for low-income, and increasingly even middle-income households, are clear,” concludes Retsinas. “Slow growth in domestic discretionary spending at the federal level and the reluctance of state and local governments to relieve intense barriers to the production of more affordable housing make the road ahead difficult. Unless governments step up to these challenges, spending on housing will increasingly crowd out spending on pensions and savings among those with low and moderate incomes.” Harvard’s Joint Center for Housing Studies is the nation’s leading center for information and research on housing in the United States. Established in 1959, the Joint Center is a collaborative unit affiliated with the Harvard Design School and the Kennedy School of Government. The Director of the Joint Center for Housing Studies is Nicolas P. Retsinas. The Center’s research and additional information about its programs and activities are available at www.jchs.harvard.edu.
RISMEDIA, June 15, 2006—With interest rates rising and speculative demand cooling, the housing boom is coming under pressure, finds this year’s State of the Nation’s Housing report. As long as the economy continues to create jobs and builders trim production to match slowing demand, house prices will keep climbing and the housing sector will likely achieve a soft landing. Although house price growth will likely moderate in many areas, sharp drops in house prices are unlikely anytime soon. Major house price declines seldom occur in the absence of severe overbuilding, major job loss, or a combination of heavy overbuilding and modest job loss. Fortunately, these preconditions are nowhere in evidence across the nation’s metropolitan areas. Even with higher interest rates and home prices crimping affordability, the lure of house price appreciation continues to draw homebuyers to the market. While the national homeownership rate edged down a tenth of a percent in 2005, it increased in the West and Northeast where house price growth was the strongest. In fact, about 1 million homeowners were added nationally last year. Mortgage innovations such as low-downpayment, hybrid-adjustable, and interest-only loans helped blunt the impact of higher home prices and interest rates. “While homeowners with annually adjusting mortgage rates are facing interest increases this year, including those with expiring teaser discounts, only about one in 10 homeowners face higher mortgage payments this year” remarks Nicolas P. Retsinas, director of Harvard’s Joint Center for Housing Studies. Fully eight in 10 owners has no mortgage or a fixed-rate mortgage, and most owners with adjustable loans have an initial fixed-rate period of three or more years. Similarly, most interest-only loans extend for at least five years, leaving ample time to move, refinance, or incomes to grow before principal payments start coming due. But, the report cautions, five years of unprecedented house price appreciation and decades of land use restrictions that make building affordable housing difficult are adding to widespread housing affordability problems. From 2001 to 2004 alone, the number of households spending more than half their incomes on housing increased by 14 percent to 15.8 million. The paradox of today’s housing market is that while more people are building home equity than ever before, slow growth in wages for households in the bottom three-quarters of the income distribution is not keeping pace with escalating housing costs. Amidst a housing boom, it is now impossible to build housing at prices anywhere near what low-income households can afford without subsidies. Further, the report draws attention to the problems of concentrated poverty. Neighborhood decline is fuelling the loss of affordable housing and exposing residents to poor neighborhood conditions. From 1993-2003 the supply of rentals affordable on a $16,000 income fell by 1.2 million, while in 2001 12 percent of such rentals were operated at a loss. This year’s report also highlights the significant contribution that the foreign-born and minorities will make to overall household growth. New household projections incorporating higher but more realistic immigrant assumptions suggest household growth will accelerate to 14.6 million over the next ten years from 12.6 million over the last ten. “Strong household growth, combined with record incomes and wealth, will lift housing investments to new highs next decade,” remarks Eric Belsky, executive director of the Joint Center. “Each generation is achieving higher homeownership rates, incomes, and wealth than the one ahead of it, with the leading edge of the echo baby boom now in their 20s and the baby bust now in their 30s starting off on especially high paths. This is despite the fact that each younger generation has successively higher shares of foreign-born and minority household heads with lower average incomes than same-age native-born whites.” “Even as the housing industry looks past the current softness to robust growth in the decade ahead, the challenges of providing affordable housing for low-income, and increasingly even middle-income households, are clear,” concludes Retsinas. “Slow growth in domestic discretionary spending at the federal level and the reluctance of state and local governments to relieve intense barriers to the production of more affordable housing make the road ahead difficult. Unless governments step up to these challenges, spending on housing will increasingly crowd out spending on pensions and savings among those with low and moderate incomes.” Harvard’s Joint Center for Housing Studies is the nation’s leading center for information and research on housing in the United States. Established in 1959, the Joint Center is a collaborative unit affiliated with the Harvard Design School and the Kennedy School of Government. The Director of the Joint Center for Housing Studies is Nicolas P. Retsinas. The Center’s research and additional information about its programs and activities are available at www.jchs.harvard.edu.
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