This Month in Real Estate Newsletter for U.S. Market – October 2010
Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across North America. 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.
Market Update:
The housing market continues its slow recovery without the aid of the now expired tax credit. Sales are slower but growing, and prices remain on par with last year’s levels. Interest rates also hit a new historic low, a major factor in helping keep mortgage payments low, which is expected to spur sales.
The economy shone a bit brighter in September. It grew faster during the second quarter than expected, and companies continued to hire. Experts believe there is now less risk of a double-dip recession. Now, the Federal Reserve Board’s challenge is not if the economy will grow but how fast.
Experts anticipate both the economy and the housing market will continue their path on the way to a complete recovery. This march back up provides excellent opportunities: an ample selection of homes, affordable prices, and historically low interest rates.
Home sales began to rebound in August. This increase follows a large drop caused by the expiration of the Federal tax credit in July. Sales are expected to slowly rebound as the market finds its footing without leaning on the government for support. First-time buyers fell from 38% to 31% in August from July. Over the same time period, investors rose from 19% to 21%,
Overall home prices fell slightly in August compared to July, but major markets appear to be bucking trend as the Case-Shiller Index shows an increase of 3.2%.
Distressed properties accounted for a slightly larger proportion of sales in August compared to July. The discount in distressed properties helps explain the slight decline in August prices.
Total inventory came back below 4 million to 3.98 million in August, representing 11.6 months of inventory. While still at a relatively high level, months of inventory dropped by nearly a month in August from the 12.5 month’s supply in July.
Housing remains highly affordable, and prospective home buyers stand to benefit from the lowest mortgage rates in decades, as well as advantageous home prices. The ratio now stands at 14.9%, growing closer to the record of 13.6%.
Source: National Association of Realtors
Interest Rates:
Mortgage rates once again set new record lows in early September and remained below 4.4% throughout the month. As economic activity gains momentum, rates will rise to keep inflation at an acceptable level.
**Mortgage Rates as of Sept. 30, 2010
This Month in Real Estate VIDEO for U.S. Report – Oct. 2010
This Month in Real Estate Newsletter for Canada – October 2010
Commentary:
Canada’s housing market remains well-balanced with cooling home sales and new listings adjusting to historical trends. “The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability,” said Gregory Klump, CREA chief economist.
The outlook for the Canadian economy, while having changed slightly due to recent uneven developments in the global economic landscape and south of the border, remains solid and is expected to continue lending support to the housing sector.
While monetary policy measures undertaken since April have modestly tightened financial conditions in Canada, they remain “exceptionally stimulative.” According to Georges Pahud, CREA president, “The Bank of Canada recognizes that inflation remains well contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many home buyers.”
According to the central bank’s statement, “Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.” However, some economists believe that this may not be the last hike this year. In the mean time, Canada’s recovery will proceed slowly.
Housing Market:
Home Sales
Resale housing activity improved in August, totaling 32,807 units and is up 4.1% from the previous month. This is the first monthly increase since March of 2010. Activity was up most in Ontario and British Columbia, with monthly gains in these two provinces accounting for most of the improvement in national sales activity in August.
Average Home Price
The national home price averaged $324,928 in August, which is on par with the same month last year. Average prices rose or were stable in more than two-thirds of all markets on a year-over-year basis. Average price trends are expected to remain stable as supply and demand continues to move the market further into balanced territory.
Inventory
Sales-to-Listings Ratio
The market continues to hold its ground in a balanced territory as seen by the sales-to-new listings ratios, which have remained well within 40%-60% for five consecutive months. This bodes well for home price stability as the new supply of homes continues to adjust to lower demand, resulting from accelerated home purchases earlier this year.
Mortgage Rates
Average for: 25-Year Amortization, 5-Year Term
The Bank of Canada raised its target overnight rate by one quarter of one percentage point to 1% on September 8, marking its third consecutive quarter point hike. Mortgage rates stayed put at 5.39% for the month of September. This was down 0.1% from a year earlier and was also 0.1% below where it stood at the beginning of the year. Despite further expected increases, interest rates remained well below the historical average.
Sources: Conference Board, The Canadian Real Estate Association (CREA), Royal Bank of Canada, Canadian Mortgage and Housing Corporation, Bank of Canada
This Month in Real Estate VIDEO Report for Canada – October 2010
