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Pending Home Sales Rise 4.5%
Pending home sales in January were up 4.5 percent month-over-month, and that was above expectations for a rise of 1.9 percent.
Pending home sales were up 10.4 percent on a year-over-year basis, beating expectations for a rise of 8.2 percent.
January’s number was also revised up to reflect a 1.9 percent decline, from the initial reading of a 4.3 percent decline.
Regionally, in the Northeast the pending home sales index (PHSI) were up 8.2 percent on the month, in the Midwest sales were up 4.5 percent on the month, in the South sales were up 5.9 percent, and in the West it was up a marginal 0.1 percent, and down 1.5 percent from a year ago.
In a press release, Lawrence Yun, NAR’s chief economist said, “Favorable affordability conditions and job growth have unleashed a pent-up demand. Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country. It’s also why we’re experiencing the strongest price growth in more than seven years.”
These recent pending home sales figures show that existing home supply is tight, especially in the West which is why home price increases in the region are increasing the most. Yun said he now expects 5 million home sales in 2013, down from 5.1 million.
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Home Buyers Wants Have Changed
What home buyers want when looking for their perfect abode have changed, according to a new study by the National Association of Home Builders.
The study found that home buyers are overwhelmingly much more cautious and sensitive to prices than before, but what’s really interesting is what tops buyer’s lists of must-haves in their new home.
It’s probably not a surprise to learn that energy efficient homes are priority number one for the vast majority of home buyers. The NAHB found that Energy-star appliances are essential number one in the eyes of many buyers, followed by energy efficient laundry rooms.
High-end amenities were cited by 62% of home buyers as being more important to them than available living space – in other words, most people are more than willing to sacrifice that extra bedroom or go with a smaller living room in order to get their hands on the latest hi-tech gizmos like wireless home security and Wi-Fi controls for their utilities.
Home buyers also want style over substance, preferring French doors over regular doors, and they want luxuries like a double sink in the kitchen, and a hot tub and shower in the bathroom.
Luxuries like a golf course community and an elevator have gone out the window in the eyes of many home buyers. Consumers don’t see the need for laminate countertops, nor do they have a use for wine cooler refrigerators anymore. Mind you, they’d like some outdoor space – but an outdoor kitchen is probably a little too excessive for most.
What most people are looking for is access to the right kinds of amenities and they prefer to live outside of cities and live in the suburbs. Watch a video on the NHB report.
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Bernanke: Housing Market Has Hit Bottom
Federal Reserve chief Ben Bernanke gave a cautiously optimistic view of the U.S. housing market recently, saying evidence suggested the market had hit the bottom over the last year and was recovering.
Mr. Bernanke was testifying before the House Financial Services Committee when he said the Fed’s bond buying program appeared to be having a positive early impact on the housing market, helping homeowners refinance existing loans or buy new homes.
Bernanke said house prices had dropped 30% nationwide from their peak since the beginning of the financial crisis, but said prices of homes had crept up over the last year.
The number of foreclosures, while still too high, are declining as are the number of homeowners who are underwater, a term meaning they owe more on their mortgages than their homes are now worth.
Bernanke said the continuing improvement in the housing market would have a positive impact on the employment picture, both by directly creating more jobs in home construction and factories that make home goods, and also indirectly by improving peoples’ sense of wealth.
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2012 Home Sales – Best in 5 Years
The National Association of Realtors reports that December sales of previously owned homes came in just slightly below November’s sales pace, but up 12.8% from a year ago. That brought full-year sales to 4.65 million, up 9% from 2011 and the best year for home sales since 2007, when there were 5 million homes sold just before the start of the recession.
Sales are being helped by a combination of strong market fundamentals, near record low mortgage rates, lower unemployment and a rebound in home prices, all of which are bringing buyers into the market who had been waiting for it to bottom out. According to NAR, the mortgage rates and years of depressed home prices have also combined to create the most affordable housing market on record.
And the NAR predicts strong sales should continue into 2013 and beyond. It has a forecast for 5.1 million existing home sales this year, and 5.4 million next year.
The rebound in the market for previously-owned homes is also showing up in the market for new homes, where sales rebounded to their highest levels since 2009, while housing starts reached the highest level since 2008.
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Locking in Interest Rates – Best Policies to Follow
No one can time the market as to when interest rates should be locked in. The question most often asked about rates, “what’s going to happen in the next few months with interest rates?”
No one knows, and if anyone tells you they know what will happen to rates in the future, consider whether you really want to listen to them or work with them. They think they know things they can’t possibly know.
Consider the following when deciding whether or not to lock in your mortgage rate:
1 – Lock in your rate when you have a good deal and you know roughly when you can close on your property. 30 to 60 days should be the longest lock period you consider.
2 – Lock in with a lender who offers you a float down. If rates get better, you can take advantage of the lower rates.
3 – Consider locking in with a lender who offers a liberal rate-lock extension policy. Understand that rate lock extensions are not free. Some expire beyond the ability to extend. Try to find a lender who will allow you to extend your lock if, for some reason, your deal takes longer to close than you had anticipated.
4 – Don’t think too long. Rates always go up faster than they fall, sorta like gasoline prices. If you find a rate that suits your budget, lock it in!
We know what moves interest rates, and we can even look back and determine what caused rates to increase after the fact. But we can also know who won the Super Bowl on Monday morning, but we don’t know who will win before it’s played.
Lock in your interest rate using the above guidelines as soon as your are able to.
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Keep Your House Free of the Flu Bug
With most of the country experiencing its worst flu year in decades, we need to be more conscience of things it takes to stay clear of the dreaded bug.
Vaccination is the best way to protect yourself from the flu. There are additional steps you can take to keep yourself and your family healthy this flu season.
Hand-washing is key, and vigorous hand rubbing is more important than water temperature or type of soap. Also, place paper towels or napkins at the sink you can use and toss, don’t use hand towels that just absorb and pass along germs.
More Anti-Flu Tips:
• Line trashcans with plastic bags from the grocery so you can throw away used tissues without touching them.
• Clean door handles and faucets with inexpensive rubbing alcohol — 70% or 90% — rather than commercial anti-bacterial wipes.
• Don’t forget to sanitize TV remote controls, especially if a sick person has touched them.
• Crack a window or door to let in fresh air, rather than just breathing the same stale, germy air.
• Wash sheets on sickbeds at least twice a week in the hottest water that they can stand and add a splash of chlorine bleach.
• Avoid close contact with people who are sick. When you are sick, keep your distance from others to protect them from getting sick too.
• Avoid touching your eyes, nose or mouth. Germs are often spread when a person touches something that is contaminated with germs and then touches his or her eyes, nose, or mouth.
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More Robust Housing Recovery Forecast in 2013
It’s time once again to gaze deeply into our crystal ball to predict what the New Year may bring to our cherished housing industry.
Of course, everything hinges on whether we all find ourselves going over a Fiscal Cliff, but we’re not going to touch that red hot iron for now, we’ll save that for later if Congress and the President can’t agree on things.
Meanwhile, we’re devoting this entire newsletter to looking ahead, and hopefully assuming we won’t go over that cliff, so let’s get started…
Year-end reports and forecasts for the New Year are rolling in with ever more positive numbers for the housing recovery to continue.
November’s existing home sales rose 5.9 percent over October and are 14.5 percent higher than sales in November 2011, according to the National Association of Realtors (NAR). NAR says existing home sales are at the highest level they’ve been since November, 2009.
The national median existing-home price for all housing types was $180,600 in November, up 10.1 percent from November 2011 and the ninth consecutive monthly year-over-year price gain, which last occurred from September 2005 to May 2006 – during boom times.
In the new home sector, builders are puffing up with confidence. The NAHB/Wells Fargo Housing Market Index (HMI), which measures builder confidence in the single-family housing market, has posted gains for eight consecutive months and now stands at a level of 47.
That’s near the midpoint of 50, where an equal numbers of builders view the market as good or bad. The HMI has not been above 50 since April of 2006.
Growing households are also boosting confidence. In the early 2000s, America was generating 1.4 million new households every year. The bust cut that by about two-thirds to 500,000. Right now, new households are formed at nearly 900,000 per year, according to NAHB.
Freddie Mac, however, recently released a forecast that projected household net growth at 1.20 to 1.25 million in 2013.
A segment of renters bracing to take the homeownership plunge are adding to the rosy 2013 forecast. More than one in three of today’s renters, 31 percent, plan to buy a home in the next two years, a 9-point increase from 22 percent in January 2011, according to Trulia’s American Dream survey.
Near record low interest rates shouldn’t hurt the recovery…
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Mortgage Rates Start 2013 Near Record Lows
Fixed-rate mortgages ended 2012 by hovering near record-breaking lows and keeping home buyer affordability high, Freddie Mac reports in its weekly mortgage market survey.
“The 30-year fixed-rate mortgage averaged 3.66 percent for 2012, the lowest annual average in at least 65 years,” says Frank Nothaft, Freddie Mac’s chief economist. “Rates on 30-year fixed mortgages were nearly 0.6 percentage points below that of the beginning of the year, which translates into an interest payment savings of nearly $98,600 over the life of a $200,000 loan. Moreover, opting for a 15-year fixed mortgage at today’s rates, a home owner could save an additional $138,400 in interest payments.”
Nationwide, the average 30-year fixed rate mortgage rate is starting 2013 at 3.35 percent. Last year at this time, 30-year rates were 3.95 percent. 15-year fixed rates are starting the new year at or around 2.65 percent, compared to a year ago at 3.24 percent. 1-year and 5-year adjustable-rate mortgages are also starting the new year below last year’s levels.
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Home Prices Projected to Continue Increasing in 2013
More 
evidence that the housing market is trying to dig out of the doldrums and set it sites on recovery came out with a panel of 105 professional forecasters projecting home prices will continue to increase in 2013 rising 3.1 percent for the year, according to the December 2012 Zillow Home Price Expectations Survey.
The most optimistic group of forecasters predicted an average increase of 6.3 percent in home prices for 2012. The most pessimistic predicted an average increase of 3 percent for 2012.
The most optimistic group for 2013 home prices predicted an average increase of 4.9 percent and the most pessimistic an average increase of 0.8 percent. There is much concern about a negative impact on the housing market recovery as a result of changes to the mortgage interest deduction (MID), if made.
Most of the forecasters feel that changes to the MID would have almost no impact on overall home prices in the U.S. and would instead just impact high-priced homes.
If the (MID) eligible mortgage is reduced to $500,000 and 2nd home deductions are eliminated, 55 percent of the respondents felt this would have “little to no near-term impact on overall home prices.”
If the MID is eliminated entirely over a period of several years, then the biggest negative impact on the market is expected by the panel, but even then just on high-end home prices with 70 percent of respondents saying they would not expect those home prices to fall moderately or significantly however that there would be “no overall impact” on U.S. home prices as a whole if that were to happen.
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Year End Tax Tips to Trim Your 2013 Taxes
Unless Congress intervenes, the Bush-era tax cuts expire when 2013 arrives. Also at risk if lawmakers don’t act before Dec. 31st are many popular tax breaks that expired at the end of 2011 that have long been considered sure-shots for revival. Those breaks include the authority to make direct contributions from traditional IRAs to charity.
Many believe Congress will extend current tax rates, at least temporarily, and probably for all taxpayers.
There are some year-end things you can do to trim your 2012 tax liability. Let’s review them briefly:
Prepare For a New Surtax – One of the biggest changes on the books for 2013 is a 3.8% surtax on investment income for married couples with modified AGI of more than $250,000 (singles, $200,000). As part of the new health care law, the tax applies to the smaller of net investment income or the amount by which taxable income exceeds the thresholds. Investment income includes dividends, interest, capital gains, annuities, royalties and rents. Investment income does not include distributions from IRAs or other retirement accounts.
To lower the potential tax bite, you could give away income-producing assets, such as stocks or investment property, to adult children whose income is far below the threshold. They would not be affected by that extra tax. This is a particularly good year to make large gifts because of a change in the federal gift tax law.
You could also consider accelerating plans to convert part of your traditional IRA to a Roth. Although IRA distributions are not investment income under the surtax law, they could boost your taxable income above the threshold to make otherwise protected investment income vulnerable. Plus, because tax-free Roth distributions are not included in AGI, they would not count toward the surtax threshold in future years.
Unless Congress intervenes, this will be the last year that taxpayers who are in the 10% and 15% tax brackets — joint filers with taxable incomes up to $70,700 and individuals with incomes up to $35,350 — can enjoy a 0% tax rate on long-term capital gains. However, the 0% rate only applies until your income breaks through the 15% ceiling. If you’re a married couple with income of $60,000 and sell a stock for a profit of $20,700, you’ll pay 15% capital-gains tax on $10,000.
Congress has yet to extend a tax break that enables IRA owners who are 70 and a half or older to send a tax-free distribution of up to $100,000 directly to charity. Don’t wait past mid December to direct your IRA custodian to withdraw your minimum distribution.
Give, and You’ll Receive a Break – No matter what happens with the federal estate tax next year, you can still give an unlimited number of individuals up to $13,000 each this year without worrying about federal gift tax. Your spouse can give another $13,000 each to the same people. Higher-income parents could consider giving appreciated stock to adult children in the 0% capital-gains bracket. An adult child in a lower bracket would pay a lot less in capital gains on a sale than if you sold the stock.
If you are considering giving away a vacation home, business interests or appreciating stock, this may be the time to do it either directly or through a trust. See an estate-planning lawyer for advice. The lifetime gift-tax exemption may never be this high again.
Boost Medical Expenses – Under the health care law, there’s a higher hurdle between you and medical expense deductions starting in 2013. Currently, write-offs are permitted only to the extent your qualifying bills exceed 7.5% of your adjusted gross income. Next year, the threshold rises to 10%. However, for the 2013 to 2016 tax years, the 7.5% threshold applies if either spouse turns 65 before the end of the year.
Consider accelerating the timing of planned elective surgery, dental work or other medical procedures. If you have the option to get some procedures done now, you may want to take care of those things before the year ends. Other expenses that could push you above the threshold: the cost of transportation to a medical facility and certain medically related home improvements.
As always, tax laws seem to be ever-changing, so it is advisable to consult a tax attorney or CPA before making any major changes in your tax filing status, or taking action that could affect your withholding.
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Housing in Midst of Recovery
Forecasting increases in home prices and completed transactions for the year, the National Association of Realtors is starting to report slow, but positive improvement for housing.
According to NAR, pending home sales jumped 14.5%, compared to September 2011. In comparison, August pending home sales grew 10.7%, suggesting overall improvement in 2012.
NAR chief economist, Lawrence Yun, stated it is the pending home sales that continue to hold a higher ground. “This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”
While housing has a long road ahead before anyone can call it a full recovery, small, yet positive economic indicators in housing are slowly emerging, with the PHSI being one of them, given that it has risen for 17 consecutive months on a year-over-year basis. This September revealed a significant increase in contract activity versus the previous year in every region except the West, which struggles with a limited inventory.
It is predicted that over the next year, the conditions of housing will remain affordable, with the 30-year-fixed-rate mortgage remaining remarkably low until it’s gradual 4% rise toward the second half of 2013.
Additionally, NAR says that completed existing-home sales in 2012 will total close to 4.6 million (an increase of 9.0 percent), and are projected to rise about 9.0 percent next year to nearly 5.1 million. With notably lower housing inventory, the national median existing-home price is expected to increase 6.0 percent this year and 5.0 percent in 2013.
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Home Prices at June 2004 Levels
The Federal Housing Finance Agency (FHFA) has released its House Price Index (HPI) for August which shows a 0.7 percent increase in prices compared to July. For the 12 months ending in August, U.S. prices rose 4.7 percent. July figures were revised downward in the report from a 0.2 percent increase to 0.1.
Home prices nationally are now at approximately the same level as in June 2004 and are 15.9 percent below the peak in prices reached in April 2007. FHFA’s bases its index on the purchase price of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac.
For the nine census divisions, seasonally adjusted monthly price changes from July to August ranged from -0.5 percent in the East South Central division to +3.0 percent in the Pacific division, while the 12-month changes ranged from 0.4 percent in the Middle Atlantic division to +11.4 percent in the Mountain division.
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Hurricane Impact Could Exceed $20 Billion
Hurricane Sandy swept through 12 U.S. states, causing floods and fires, and an estimated $10 billion to $20 billion in potential losses according to estimates from research firm Capital Economics.
Mortgage Bankers Association CEO David Stevens said he expects loan application numbers and rates to be affected for the period that includes Hurricane Sandy. But overall, he views the storm as a “temporary blip” that will have no long term affects or significant impact on the mortgage finance system. Some industries, including home construction and repair, will no doubt see a boost in the aftermath.
Last year’s Hurricane Irene, which was less severe, ended up costing the Northeast region $10 billion while 2005’s Hurricane Katrina led to $100 billion in cleanup expenses around the Gulf Coast, according to data from Paul Ashworth, chief U.S. economist for Capital Economics.
Despite the negative impact of the hurricane, Capital Economics contends Sandy’s overall effect on economic output “is likely to be small,” although the economy will take a hit early on.
The financial impact will be short-term and over before the end of this quarter, Capital Economics said. When factoring in the expected boost to GDP on cleanup activity, the overall impact is modest. Much of the clean up spending will be born by insurers and large global reinsurance firms, many of which are based in Europe.
The states impacted by Sandy represent 23% of the nation’s gross domestic product, with the New York metropolitan area alone accounting for 10% of GDP.
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Pending Home Sales Up in September
Forecasting increases in home prices and completed transactions for the year, the National Association of Realtors is starting to report slow, but positive improvement for housing.
According to NAR, pending home sales jumped 14.5%, compared to September 2011. In comparison, August pending home sales grew 10.7%, suggesting overall improvement in 2012.
NAR chief economist, Lawrence Yun, stated it is the pending home sales that continue to hold a higher ground. “This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”
While housing has a long road ahead before anyone can call it a full recovery, small, yet positive economic indicators in housing are slowly emerging, with the PHSI being one of them, given that it has risen for 17 consecutive months on a year-over-year basis. This September revealed a significant increase in contract activity versus the previous year in every region except the West, which struggles with a limited inventory.
It is predicted that over the next year, the conditions of housing will remain affordable, with the 30-year-fixed-rate mortgage remaining remarkably low until it’s gradual 4% rise toward the second half of 2013.
Additionally, NAR says that completed existing-home sales in 2012 will total close to 4.6 million (an increase of 9.0 percent), and are projected to rise about 9.0 percent next year to nearly 5.1 million. With notably lower housing inventory, the national median existing-home price is expected to increase 6.0 percent this year and 5.0 percent in 2013.
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August Home Prices at 2-Year High
U.S. home prices continued to increase in August with the Case-Shiller 20-city Home Price Index increasing 0.9 percent to its highest level since September 2010. The index rose in 19 of the 20 cities included in the index.
Economists had expected the 20-city index to be 2.0 percent ahead of August 2011, when in fact it was 1.3 percent ahead of that measured time period.
The median price of an existing single family home dropped 1.5 percent in August, according to the National Association of Realtors but was up 8.0 percent from August 2011. In July, the median price of an existing single family home was up 9.7 percent from one year earlier.
Home values play a significant role in the nation’s economy following the “wealth effect” which holds that households spend more as perceived wealth increases. Increases in household net worth due to real estate – rather than stock – values have, according to studies, a greater impact on consumption which is more than 70 percent of GDP.