Tag Archives: housing prices

Economic concepts

Arizona Poised to See Above-Average Growth

Thanks to strong improvement in housing prices and improved population in-flow, Arizona should expect above-average growth through the year, according to the bi-annual U.S. State Monitor Report from BMO Economics. Expected real GDP growth in the state is 3.2 percent, up from a 1.8 percent rate currently expected for 2013.

Nonfarm payrolls in Arizona were up 2 percent in 2013 – above the national average. The unemployment rate edged up through much of 2013, but moved lower late in the year to finish at 7.6 percent, the lowest since late 2008 and a significant improvement from the recession high of 10.8 percent.

“Although unemployment in Arizona is still higher than it should be, there has been solid progress made in generating good paying jobs that will bolster our overall economy,” said Steve Johnson, Regional President, Arizona, BMO Harris Bank. “In particular we’ve seen a boost in professional services and the tourism industry, which is great news for business owners in those sectors.”

Population growth has picked up to a 1.3 percent year-over-year pace driven by the improving economy. While that is still below the 3.3 percent rate experienced during the housing boom, positive momentum is expected to continue through the coming years.

Reduced home inventories are allowing for improved construction activity, which was at a near stand-still during the recession.

“Arizona’s housing market is experiencing a strong recovery, despite a recent soft patch. According to the S&P Case-Shiller Index, Phoenix prices have surged more than 40 percent from their lows,” said Robert Kavcic, Senior Economist, BMO Capital Markets.

“While the increase in mortgage rates through the summer softened sales and home building activity, that should prove to be temporary. The foreclosure rate fell to 1.3 percent in the third quarter of last year, from its high of 6.3 percent. Additionally, surging home prices have reduced the number of home mortgages under water to less than 25 percent,” Mr. Kavcic added.

To view a full copy of the report, visit www.bmocm.com/economics.

housing.prices

Bankers: Don’t try to time the market

Timing is everything.

But when it comes to buying a house, Valley banking leaders says it’s best not to rely too much on timing.

“Potential buyers who are still on the sidelines waiting for housing prices to decline further may see themselves priced out of the market if interest rates rise,” says Carl Streicher, regional sales executive at Bank of America. “Timing the market is risky in that we never really know when the bottom has hit until it has passed us by. Also, buyers should be sure they are ready financially and personally to own a home before they purchase, so timing the market shouldn’t be the sole driver of a home purchase.”

According to Streicher, home affordability is at an all-time high, interest rates are at historic lows and home values are increasing. According to a Case-Shiller report released in December, Phoenix home prices have increased nearly 22 percent, leading the nation and indicating that the real estate market is on the rebound.

“Interest rates are starting to rise and home prices are rising due to greater demand, a relatively low supply of homes for sale and foreclosure sales falling,” says Kevin Sellers, executive vice president with First Fidelity Bank in Arizona. “So, if you’re able to take advantage of the lower current market with still affordable homes and historically low mortgage rates, chances are you’ll be making a good investment.”

Valley bankers are warning potential buyers that if they are waiting for home prices to “hit bottom,” they may miss the chance to be a homeowner altogether; prices may rise before we realize they were at their lowest point; or a rise in interest rate could potentially price buyers (particularly first-time buyers) out of the market.

“Trying to time the market when it comes to the purchase of a home is very difficult in any environment considering the complex market dynamics,” says Robert Winter, Arizona manager of mortgage lending for Mutual of Omaha Bank. “For example, if you try to time the market when it comes to home pricing, you risk missing a low interest rate environment. If you try to time the market when it comes to interest rates, you risk purchasing something you don’t necessarily like and possibly paying more than necessary. This doesn’t even take into consideration the fact that not all transactions close successfully, potentially leading to a loss of the time invested.”

While the real estate market and lending are starting to find their new normal, it depends on where you’re positioned as to whether we are currently experiencing a buyer’s market or seller’s market, Winter says.

“The market advantage differs depending on the price point,” Winter says. “In general, the market favors sellers. However, the advantage shifts to buyers when it comes to higher priced homes.”

If you are in a position to take advantage of the favorable climate in the real estate market, Streicher says to ask yourself a few questions before getting started in the home buying process:
• Are you ready to settle in one location for a while?
• What is the total cost of home ownership?
• Is your job stable?

“Buyers should also research their target neighborhood to establish a baseline for local selling prices and the amount of time properties in their target area stay on the market,” he says. “For those considering an upgrade to a larger home, there are still good options available to purchase higher-end properties using jumbo loans. Bank of America continues its jumbo financing, and offers competitive rates, when many other lenders were forced to discontinue these loans due to a lack of a secondary market.”

While bankers say it’s not wise to try to time the market, they agree that working with a mortgage professional and real estate professional to help meet your real estate goals and objectives is a sure-fire formula for success.

Affordability is great,” says Tim Disbrow, senior vice president, Wells Fargo Home Mortgage. “Rates are incredibly low. It is a great time to buy as long as it meets your financial needs.”

housing.prices

Bankers: Don't try to time the market

Timing is everything.

But when it comes to buying a house, Valley banking leaders says it’s best not to rely too much on timing.

“Potential buyers who are still on the sidelines waiting for housing prices to decline further may see themselves priced out of the market if interest rates rise,” says Carl Streicher, regional sales executive at Bank of America. “Timing the market is risky in that we never really know when the bottom has hit until it has passed us by. Also, buyers should be sure they are ready financially and personally to own a home before they purchase, so timing the market shouldn’t be the sole driver of a home purchase.”

According to Streicher, home affordability is at an all-time high, interest rates are at historic lows and home values are increasing. According to a Case-Shiller report released in December, Phoenix home prices have increased nearly 22 percent, leading the nation and indicating that the real estate market is on the rebound.

“Interest rates are starting to rise and home prices are rising due to greater demand, a relatively low supply of homes for sale and foreclosure sales falling,” says Kevin Sellers, executive vice president with First Fidelity Bank in Arizona. “So, if you’re able to take advantage of the lower current market with still affordable homes and historically low mortgage rates, chances are you’ll be making a good investment.”

Valley bankers are warning potential buyers that if they are waiting for home prices to “hit bottom,” they may miss the chance to be a homeowner altogether; prices may rise before we realize they were at their lowest point; or a rise in interest rate could potentially price buyers (particularly first-time buyers) out of the market.

“Trying to time the market when it comes to the purchase of a home is very difficult in any environment considering the complex market dynamics,” says Robert Winter, Arizona manager of mortgage lending for Mutual of Omaha Bank. “For example, if you try to time the market when it comes to home pricing, you risk missing a low interest rate environment. If you try to time the market when it comes to interest rates, you risk purchasing something you don’t necessarily like and possibly paying more than necessary. This doesn’t even take into consideration the fact that not all transactions close successfully, potentially leading to a loss of the time invested.”

While the real estate market and lending are starting to find their new normal, it depends on where you’re positioned as to whether we are currently experiencing a buyer’s market or seller’s market, Winter says.

“The market advantage differs depending on the price point,” Winter says. “In general, the market favors sellers. However, the advantage shifts to buyers when it comes to higher priced homes.”

If you are in a position to take advantage of the favorable climate in the real estate market, Streicher says to ask yourself a few questions before getting started in the home buying process:
• Are you ready to settle in one location for a while?
• What is the total cost of home ownership?
• Is your job stable?

“Buyers should also research their target neighborhood to establish a baseline for local selling prices and the amount of time properties in their target area stay on the market,” he says. “For those considering an upgrade to a larger home, there are still good options available to purchase higher-end properties using jumbo loans. Bank of America continues its jumbo financing, and offers competitive rates, when many other lenders were forced to discontinue these loans due to a lack of a secondary market.”

While bankers say it’s not wise to try to time the market, they agree that working with a mortgage professional and real estate professional to help meet your real estate goals and objectives is a sure-fire formula for success.

Affordability is great,” says Tim Disbrow, senior vice president, Wells Fargo Home Mortgage. “Rates are incredibly low. It is a great time to buy as long as it meets your financial needs.”

Barack Obama

Obama faces tough road with improving economy

Here’s the assignment President Barack Obama has won with his re-election: Improve an economy burdened by high unemployment, stagnant pay, a European financial crisis, slowing global growth and U.S. companies still too anxious to expand much.

And, oh yes, an economy that risks sinking into another recession if Congress can’t reach a budget deal to avert tax increases and deep spending cuts starting in January.

Yet the outlook isn’t all grim. Signs suggest that the next four years will coincide with a vastly healthier economy than the previous four, which overlapped the Great Recession.

Obama has said he would help create jobs by preserving low income tax rates for all except high-income Americans, spending more on public works and giving targeted tax breaks to businesses.

He used his victory speech in Chicago to stress that the economy is recovering and promised action in the coming months to reduce the government’s budget deficit, overhaul the tax system and reform immigration laws.

“We can build on the progress we’ve made and continue to fight for new jobs and new opportunity and new security for the middle class,” Obama said.

The jobs picture has already been improving gradually. Employers added a solid 171,000 jobs in October. Hiring was also stronger in August and September than first thought.

Cheaper gas and rising home prices have given Americans the confidence to spend slightly more. Retailers, auto dealers and manufacturers have been benefiting.

That said, most economists predict the improvement will remain steady but slow. The unemployment rate is 7.9 percent. Obama was re-elected Tuesday night with the highest unemployment rate for any incumbent president since Franklin Roosevelt.

Few think the rate will return to a normal level of 6 percent within the next two years. The Federal Reserve expects unemployment to be 7.6 percent or higher throughout 2013.

Economists surveyed last month by The Associated Press said they expected the economy to grow a lackluster 2.3 percent next year, too slight to generate strong job growth. From July through September, the economy grew at a meager 2 percent annual rate.

Part of the reason is that much of Europe has sunk into recession. Leaders there are struggling to defuse a debt crisis and save the euro currency. Europe buys 22 percent of America’s exports, and U.S. companies have invested heavily there. Any slowdown in Europe dents U.S. exports and corporate profits.

And China’s powerhouse economy is decelerating, slowing growth across Asia and beyond.

Most urgently, the U.S. economy will fall over a “fiscal cliff” without a budget deal by year’s end. Spending cuts and tax increases of about $1.2 trillion will start to kick in. The combination of those measures would likely trigger a recession and drive unemployment up to 9 percent next year, according to estimates by the Congressional Budget Office.

Many U.S. employers are wary of expanding or hiring until that potential crisis is averted. That’s why analysts have said resolving, or at least delaying, the fiscal cliff should be the most urgent economic priority for the White House.

In the longer run, analysts are more optimistic. Americans are feeling generally better about the economy. Measures of consumer confidence are at or near five-year highs.

And the main reason unemployment rose from 7.8 percent in September to 7.9 percent in October was that more people felt it was a good time to look for work. Most found jobs. Those who didn’t were counted as unemployed. (The government counts people without jobs as unemployed only if they’re looking for one.)

A brighter outlook among consumers is due, in part, to a steady increase in home prices after a painful six-year slump. Higher home prices can help create a “wealth effect,” making homeowners feel richer and spurring more spending.

Banks are also more likely to lend freely when home prices rise because homes are more likely to hold their value.

Americans have also been shrinking debts and saving slightly more. Household debt as a percentage of after-tax income dropped from about 125 percent before the recession to 103 percent in the April-June quarter, according to the Federal Reserve’s latest data. That ratio was roughly 90 percent in the 1990s.

But thanks to record-low interest rates, the cost of repaying those debts has dropped sharply. That, in turn, will free up more money for consumers to spend on cars, appliances and other goods.

Americans paid 10.7 percent of their after-tax income in interest on mortgages, credit cards and other consumer debt in this year’s April-June quarter, according to the Fed. That was down from 14 percent at the end of 2007. And it’s the lowest proportion since 1993.

“That’s 3 percentage points of disposable income that I am no longer using to pay for stuff that I bought earlier but I can instead use to buy stuff now,” noted Alan Levenson, chief economist at T. Rowe Price.

Economists note that economic recoveries after financial crises tend to be painfully slow. In part, that’s because time is needed for consumers to reduce debts and for banks to recover and lend again.

Paul Ashworth, an economist at Capital Economics, noted that banks have boosted lending for the past 18 months — another sign that the passage of time is helping the economy rebound.

Obama “is going to have an easier time of it … because we’re further along the road to recovery after the financial crisis,” Ashworth said.