This Month in Real Estate Newsletter For U.S. & Canada Markets – August 2010
This Month in Real_Estate Newsletter for U.S. Real Estate Market – August 2010
Market Update:
Housing activity continues to remain above year-ago levels despite some setbacks resulting from the now-expired tax credit. Improved stability in home prices with similar levels of distressed properties seen last year offers a hopeful sign the market is holding its ground. However, the economy still has a considerable way to go to achieve its full recovery.
Consumers are saving more and being picky about how they spend their money. While a higher savings rate means less spending in the near term, this is a positive sign that households are taking control of their finances to build some cushion that can be used to pay down debt and/or support future spending.
Existing home sales marked the twelfth consecutive month of year-over-year increase in June. On a monthly basis, sales activity eased 5.1% from May. The moderation in home sales reflects “understandable swings as buyers responded to the tax credits,” according to Lawrence Yun, NAR chief economist. He anticipates such impact to show up in the next two months.
June’s median home price increased for the fourth consecutive month. Distressed homes, accounting for 32% of sales last month, continued holding home prices at highly affordable levels for the time being. While distressed sales hovered around the same level as a year ago, the gain in home prices is pointing to a sustained stability in the making.
Interest Rates:
Mortgage rates set a new record low in July as consumer confidence softened and unemployment remained elevated. This presents a great opportunity for buyers and investors. Coupled with lowered home prices and a robust rental market, investors are finding their way to cash-flow opportunities. As recovery gains deeper roots, rates will need to rise to keep inflation in check.
Watch Video Report For U.S. Market - August 2010
Commentary:
The housing market continues to swing back into balance. Coming off a hot market, home sales are falling in line with the historic average and home prices are falling in line with historic price-appreciation levels. Although not as exciting as the record-breaking activity seen earlier this year, this period of slower growth is necessary for long-term stability.
Likewise, the outlook for the Canadian economy, employment, and mortgage market remains upbeat, but tempered. The second month of record-breaking number of jobs created is a good indicator of strength. Canada will continue to be somewhat susceptible to global economic movements, and the Bank of Canada intends to monitor both the domestic and global economy as it makes further decisions about interest rate increases.
Overall, the outlook remains cautiously optimistic, but it is widely recognized that the Canadian economy remains strong, resilient, and stable compared to other major economies.
Housing Market:
Home Sales
Existing home sales activity totaled 33,959 units in June, down 8.2% from the previous month as sales trend back toward the 20 year average. This departure from the seasonal norm is considered by some to be the effects of changes to mortgage regulations and rising interest rates that caused buyers to act in April that would have otherwise done so at a later date.
Average Home Price
The national average home price slid a slight 1.2% to $342,661 in June from a month ago, but remains 4.9% above year-ago levels. Now that home prices have fallen back in line with the 30-year historic appreciation rate of 5.5%, economists and industry experts expect prices to increase at a slower rate as the market balances.
Inventory
Sales-to-Listings Ratio
The number of months of inventory measures the amount of time it would take to sell all the homes on the market at the current pace of sales if no new homes become available. There were 6.9 months of inventory in June, which is close to the level seen in March of 2009. Fewer new listings are expected to enter the market over the coming months, which should continue to stabilize the balance between supply and demand.
Mortgage Rates
Average for: 25-Year Amortization, 5-Year Term
Mortgage rates fell slightly to 5.79% for the month of July from 5.89% in June. Interest rates are expected to increase as recovery continues to gain a firmer footing. Now could be a great time to lock in a historically favorable 5 year fixed mortgage rate.
Sources: Conference Board, The Canadian Real Estate Association (CREA), Royal Bank of Canada, Canadian Mortgage and Housing Corporation, Bank of Canada
Notable News:
Bank of Canada Raises Interest Rate
Since 2007, the Bank of Canada has either cut rates or kept rates steady. In order to stay close to the 2% target inflation rate, the Bank raised rates 0.25% for the second time in July, following closely behind the first rate increase the previous month. The rate now stands at 0.75%.
While the Canadian economy, and job growth particularly, has been strong lately, the Bank cautioned that it expects economic growth to continue at a slower pace for the remainder of the year. Thus far, the recovery has been driven largely by consumers. Earlier in the year, many chose to take advantage of low interest rates and purchased sooner than they otherwise would have. Going forward, consumers are expected to play a smaller role, while business investment and trade take the lead. This is a good signal for the long-term stability and growth of the economy.
Watch Video Report for Canada – August 2010
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