This Month in Real Estate Newsletter for U.S. Market – November 2010
Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across the United State. The aim of the consumer-oriented segments is to help Keller Williams Realty realtors combat the “doom and gloom” messages of the national print and television media with real information on the state of the real estate market.
The housing market continues its gradual recovery without the aid of the tax credit. Sales are slower but growing. Although it will likely be uneven at times, slow growth is believed to be the trend moving forward. Interest rates hit a new historic low again, a major factor in helping keep mortgage payments incredibly affordable.
Extended periods of record low interest rates and further plans from the Federal Reserve Board to expedite recovery have some concerned about future inflation. One such investment guru, John Paulson, touted the benefits of owning real estate as a hedge against inflation on Forbes.com. “Your debt and interest payments get locked in at record lows, while the price of your home will rise … If you don’t own a home buy one … if you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.”
This march back up continues to provide excellent opportunities: an ample selection of homes, affordable prices, and historically low interest rates. Experts anticipate both the economy and the housing market will continue their paths on the way to a complete recovery.
Home sales continued to rebound in September, increasing 10% compared to the previous month. This builds on August’s gain of 7.6% that followed a large drop caused by the expiration of the federal tax credit in July. Sales are expected to gradually grow as the market moves toward recovery without government stimulus. The recent foreclosure moratorium has opened up opportunities for short sales. Although it could make the near-term “choppy at times,” industry experts expect the overall trend to continue growing slowly.
After four months of prices remaining on par with year-ago levels, September showed a slight decline. Last September distressed properties were 29% of all home sales; this September that number rose to 35%. The larger proportion of distressed sales, which are typically discounted, helps to explain the decline. While these discounted sales provide opportunities for buyers, sellers look forward to the general trending upward of home price.
There are fewer homes on the market again in September, representing 10.7 months of inventory. While still at a relatively high level, months of inventory shrank by nearly a month in September from August’s 11.6 and nearly two months since the 12.5-month supply in July. This continues to represent an excellent opportunity for buyers and investors who have not yet taken advantage of the abundant opportunities of the market including record low rates, an ample but shrinking selection of homes, and highly affordable prices.
Housing remains at near-record affordability levels, and prospective home buyers stand to benefit from the lowest mortgage rates in decades, as well as advantageous home prices. Housing is approximately 60% more affordable now than during the height of the market.
Source: National Association of Realtors
Mortgage rates once again set new record lows in early October to 4.19% and remained below 4.3% throughout the month. These historically low rates contributed to real savings for buyers. Furthermore, the longer the buyer owns the home, the greater the savings they will realize. As economic activity gains momentum, rates will rise to keep inflation at an acceptable level.
Rates as of November 4 .
This Month in Real Estate Newsletter for Canada – November 2010
Home sales continued to improve in September, while housing inventory continued to readjust to a more normalized level. The hangover from accelerated home purchases earlier this year is expected to keep housing activity at a sustainable level. This rebalancing of demand and supply is further stabilizing home prices.
While recent uncertain developments in the global economic landscape and south of the border somewhat temper the outlook of a strong upward momentum for Canada’s economy, the country’s economic fundamentals remain solid and it is expected to continue lending support to the housing sector.
“Mortgage lending rates eased in the third quarter, which helped support sales activity over the past couple of months,” said Gregory Klump, Canadian Real Estate Association’s chief economist. “Interest rates are going nowhere fast, so home ownership will remain within reach for many home buyers.”
In the meantime, further rate hikes this year are subject to careful consideration by the central bank. The probability of such an act is likely to be contingent upon developments in the economy, as well as the job market.
Resale housing activity further stabilized. In September home sales recorded a 3% increase month-over-month. This marks the second consecutive monthly increase in home sales activity. Two-thirds of local markets posted monthly upward trends, led by Winnipeg, Calgary, and Montreal.
Average Home Price:
The national home price’s upward trend continued to moderate. At $331,089, average price remained on par with where it stood a year ago for the second consecutive month. Average prices rose or were stable in more than three-fourths of all markets on a year-over-year basis. Average price trends are expected to further stabilize as supply and demand continues to rebalance.
The market maintained its balanced position. In September the number of new listings slightly edged up. However, the improvement in home sales has shrunk the months’ supply to 6.6 months from 6.9 months in August. This balancing act between supply and demand continues to lend support to home price stability.
Average for: 25-Year Amortization, 5-Year Term
Most of Canada’s major banks have moved to cut their fixed mortgage rates in October in reaction to declining borrowing costs at the banks themselves. Mortgage rates dropped 0.1% to 5.29% this month from September. This was down more than half a percentage point from a year earlier and was also 0.2% below where it stood at the beginning of the year. Although interest rates remained well below the historical average, further increases are expected, creating urgency for buyers.
Sources: Conference Board, The Canadian Real Estate Association (CREA), Royal Bank of Canada, Canadian Mortgage and Housing Corporation, Bank of Canada
CREA Ratifies Deal with Competition Bureau
Delegates from Canada’s 101 local real estate boards came to the coast of Newfoundland and Labrador to cast their votes for the settlement with the Competition Bureau at CREA’s annual Special General Meeting (SGM).
The result: an overwhelming 97% voted “yes,” formally endorsing the consent agreement CREA’s board of directors had initially approved in September.
The ratification inaugurated a 10-year, legally binding agreement through which CREA has agreed that its rules, as well as those of its members, should not deny or discriminate against Realtors wishing to offer mere posting services.
If anything, this agreement reaffirms the need for buyers and sellers to consult their Realtor: an individual who can help navigate them through these uncertain economic times as they make the biggest financial decision of their lives.
Sources: REMonline, TheGlobeandMail.com