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This Month in Real Estate Newsletter For U.S. & Canada Markets – July 2010
This Month in Real_Estate Newsletter for U.S. Real Estate Market – June 2010
Commentary:
The U.S. housing market continues to benefit from the tax credit: home prices and sales remain above year-ago levels. As the summer progresses, however, the positive impact of government stimulus will wind down. Experts point to improved stability as a sign the real_estate market can likely hold its ground without further support from the government. However, economists indicate that the key for the housing market through the end of 2010 will be job growth and a manageable level of distressed properties.
The economy continues its journey to recovery with two steps forward and one step back, but the ground lost during the recession was great and the progress so far should be celebrated. The road to this particular recovery has been expected to be more prolonged than many previous recovery periods. Consumer confidence lowered from its high in May primarily due to a disappointing employment report, while the swelling federal deficit has also raised concern. Unmanageable debt levels have lead some European countries into their current situation, and Americans do not want to follow suit.
A job bill that would have further extended unemployment benefits has not gotten off the ground due to concerns over the deficit. Sited as a top priority for the government, a financial overhaul bill continues to proceed though Congress. The bill’s goal is to protect the financial system and the average consumer from unnecessary risk and unsound lending practices in an effort to build a stronger system for the long-term stability of the U.S. economy.
The Housing Market:
Existing Home Sales
Existing home sales slowed slightly in May to 5.66 million, down 2.2% from April but up 19.2% from last May. This is the eleventh consecutive month of year-over-year increase. Lawrence Yun, NAR chief economist, attributes this to the “ongoing effects of the home buyer tax credit,” and he anticipates the same next month. In May, 46% of sales were from first-time buyers, down slightly from the previous month’s 49% but still considered high.
Median Home Price:
The median price for an existing home was $179,600 in May, up 2.8% from a year ago and 4.2% from April. Distressed homes, accounting for 31% of last month’s sales, continued skewing prices downward slightly as they are usually discounted from comparable homes. Overall, prices this past year continued to show increased stability over the previous year. Vicki Cox Golder, president of NAR states, “With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus.”
Inventory:
Total housing inventory declined slightly to 4.89 million in May, representing between eight and eight-and-a-half month supply of sales (if homes continue to sell at the current pace consistently and no new ones come on the market). There are about the same number of homes for sale as last year, with 1% more currently available. Although there continues to be a nice selection of available homes for buyers, the 3.4% fewer number from last month helps to further stabilize prices.
Mortgage Rates:
Mortgage rates fell to a new record low in June amid a drop in consumer confidence concerning the recovery. The tone of the Federal Reserve’s latest meeting was notably tempered on the outlook for recovery, indicating that the economy is stronger than last year but there is still much ground to cover. Interest rates significantly below 5% may pique the interest of more investors.
Affordability:
Affordability remains advantageous, supported by the lowest mortgage rates in decades as well as lowered home prices. The home price-to-income ratio continues to remain well below the historical average of 25%, but stabilized home prices are drawing affordability back up toward more normal levels. The ratio now stands at 15.4%.
Sources: National Association of Realtors, Freddie Mac
Government Action:
Tax Credit’s Closing Deadline Extended
Home buyers who signed a contract before the end of April will now have three additional months to close and still be eligible for the homebuyer tax credit. A bill to extend the deadline to September 30 obtained congressional approval on June 30, the evening it was set to expire.
Many of these buyers are purchasing short sales which have notably slower contract-to-close time frames. A KW Research study found short sales often take twice as long to close as typical home sales.
While this does not extend the credit to any additional buyers, it is great news for those 180,000 who have not yet closed on their home sale through no fault of their own.
Source: WSJ.com
Watch Video Report For U.S. Market – July 2010
This Month in Real_Estate Newsletter for Canada – July 2010
Commentary:
Canada’s housing market continues to march into more balanced territory as the full effect of rising mortgage rates and mortgage regulation changes sets in.
Together, higher rates and tighter qualification rules will help to normalize demand, which has been at record levels in recent months. Prices, which now stand at an all-time high, are also expected to soften as new listings come onto the market at a decelerated pace in response to the new sales and pricing environment. This harmonic trending of supply and demand suggests that the market is moving toward a long-term sustainability, and a U.S.-style home price correction is very unlikely.
Meanwhile, the outlook for the Canadian economy, employment, and mortgage market remain upbeat, lending strong support for market stability. The reported 6.1% GDP growth in the first quarter and a record 109,000 jobs created in April reflect Canada’s fundamental strengths. While this may have prompted the Bank of Canada’s first rate increase in nearly three years, the central bank indicated that “the required rebalancing of global growth has not yet materialized,” and any further hikes would have to be weighed against both domestic and global economic developments.
Housing Market:
Home Sales
Existing home sales activity totaled 37,576 units in May, down 9.5% from near-record level activity the previous month. The decline resulted largely from fewer real_estate sales in Toronto, Vancouver and Ottawa. Reflected in this departure from the seasonal norm is the combination 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 rose 8.5% to $346,881 in May from a year ago—the highest on record. This represents a flat gain of 0.5% over last month. With demand ebbing, economists and industry experts expect prices to increase at a slower rate as the market swings back into balance.
Inventory
Sales-to-Listings Ratio
In May, there were 4% fewer new listings entering the realestate market. This marks the first monthly decline in new listings in eight months. As the number of newly listed homes is expected to continue normalizing in response to a more competitive sales and pricing condition, this will ultimately result in a more balanced and sustainable housing environment .
Mortgage Rates
Average for: 25-Year Amortization, 5-Year Term
The Bank of Canada raised its benchmark interest rate by 0.25%, the first hike in nearly three years. While encouraging signs of local strength continue to overwhelm concerns about the international backdrops and make further hikes possible, the bank left the door open to hold at 0.5%, or even retract if the global situation deteriorates. Mortgage rates edged down to 5.89% at the end of June.
Sources: Conference Board, The Canadian Real Estate Association, Royal Bank of Canada, Canadian Mortgage and Housing Corporation, Bank of Canada
Notable News:
Canadian Homeownership Rising Studies point to recent demographic trends …
People ages 20 to 24 are living with their parents longer, allowing them to save for their first home.
•The share of people in their early 20s living in owner-occupied homes rose from 31% to 56% for women and from 52% to 66% for men.
•This trend of adult children living with their parents is highest in high income families.
The rate of homeownership for those ages 20 to 34, in the highest income group, has grown from 12.5% to 60.4% in the last 35 years.
•Couples with children in the same age and income group have increased ownership levels from 65.4% to 93.6%.
Most boomers will stay homeowners for at least 10 more years after reaching age 65. The number of senior homeowners is likely to climb to 80%.
•75% of Canadians are homeowners at age 65.
•73% of those born in the early 1910s and 78% of those born during World War II were homeowners.
•Longer life expectancy, which has increased by 12 years between 1951 and 2006, and improved financial stability made available through full government pensions for those 65 and over and private pension funds will better enable seniors to maintain their homes or purchase new ones.
•This upward trend in homeownership among seniors also reflects the rise in family incomes, particularly at the bottom end of the income distribution.
Sources: TD Financial Group and Realty Times
Watch Video Report for Canada – July 2010
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