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Columbia SC Housing is Faced With Cautious Optimism
Columbia SC housing is facing cautious optimism with mixed signals coming in from several economic reports and surveys.
According to the July 2014 U.S. Economic Housing Outlook released recently by Freddie Mac, residential fixed investment fell 4 percent in the first quarter. Housing starts for June fell by 9.3 percent from the May pace. After adding to economic growth in 2012 through mid-2013, housing activity has slowed and is no longer driving the economic recovery. The American public seems less sure that the economy is headed in the right direction.
“Although the economic news for the first half of 2014 has been bittersweet, there is good news to share as we head into the latter half of summer,” according to Frank Nothaft, Freddie Mac vice president and chief economist. “In particular, employment was up by nearly 1.4 million during the first six months and this will bolster household formations, resulting in positive gains most immediately for the rental housing market and then, longer term, for single-family home sales.”
Pending home sales dipped in June following three months of increases. The National Association of Realtors Pending Home Sales index, which is based on contract signings, fell 1.1 points to 102.7 last month. That’s 7.3 points below June 2013’s level, but it’s still above 100, the indicator for average contract activity.
“The multifamily rental market has led the rest of the housing sector into recovery, and about one-third of housing starts in the first quarter were for multifamily rental apartments. There’s no question the single-family recovery is moving slowly, but it continues to doggedly press forward and we are cautiously optimistic.”
Cautious optimism is probably the correct position to take when evaluating the current state of the economic climate. But for the American people, the mixture is much more caution than optimism.
A survey recently conducted by Rasmussen Reports found that only 19 percent of consumers rate the U.S. economy positively, including four percent (4%) who rate it as excellent. Forty percent (40%) rate it as poor. Additionally, consumer sentiment is also down to its lowest point in months.
The June 2014 REALTORS® Confidence Index (RCI) Report indicates that REALTORS® had a slight dip in confidence about current and future market conditions in June across all markets, not just the Columbia SC housing market. Low supply of homes relative to demand, the challenging credit environment, and the continued slow pace of income and job growth were cited as the major factors constraining sales. Given the demand-supply imbalance, home prices generally continued to increase, and properties were on the market for fewer days for the sixth straight month.
A strong third quarter could do much to improve the psyche of the consumer as well as Columbia SC housing. Stay tuned… we’ll keep you updated.
Home Improvement Spending Expected to Slow
The home improvement component of the housing market, measured by the dollars consumers spend to update their homes, is expected to peak during the second half of 2014, and then begin to ease heading into next year.
Revised estimates from the U.S. Census Bureau show the home improvement market grew 5.6 percent in 2013. For 2014, the Leading Indicator of Remodeling Activity (LIRA) projects annual gains in home improvement spending of 9.9 percent, with annual growth slowing to 7.0 percent in the first quarter of 2015.
“With the economy improving slower than expected and home sales struggling to keep up with last year’s pace, the recent strong gains in remodeling spending will likely moderate later this year,” says Chris Herbert, Research Director at the Joint Center. “Although this presents a challenge for the remodeling industry, the LIRA continues to project significant growth going into 2015.”
The rest of the housing market is giving mixed signals, including low inventories, prices out of reach for some and tight credit for others.
Existing home sales climbed 2.6 percent to a seasonally-adjusted annual rate of 5.04 million in June, the highest pace since October 2013. But the Commerce Department reported recently that new home sales for June plummeted by 8 percent.
Columbia SC Mortgage Rates Hover Near Low for the Year
Average Columbia SC mortgage rates declined slightly this past week, and are hovering near their lows for the year.
Mortgage company Freddie Mac said the nationwide average for a 30-year loan slipped to 4.12 percent from 4.13 percent last week. The average for the 15-year mortgage, a popular choice for people who are refinancing, declined to 3.23 percent from 3.26 percent last week.
Columbia SC mortgage rates are below the levels of a year ago. They have fallen in recent weeks after climbing last summer when the Federal Reserve began talking about reducing the monthly bond purchases it was making to keep long-term borrowing rates low.
The Fed issued a statement this week after a two-day policy meeting suggesting that it wants to see further improvement in the economy before it starts raising its key short-term interest rate. The central bank offered no clearer hint of when it will raise that rate, which is at a record low near zero.
Home prices rose in May from a year earlier at the weakest pace in 15 months, data released this past week showed, as sales remain modest.
At 4.12 percent, the rate on 30-year Columbia SC mortgage rates is down from 4.53 percent at the start of the year. Rates have fallen even though the Fed has been trimming its monthly bond purchases. The Fed said this week that it will slow the pace of its purchases by another $10 billion to $25 billion a month. The purchases are set to end in October.
To calculate average Columbia SC mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
- The average fee for a 30-year mortgage was 0.6 point, unchanged from last week. The fee for a 15-year mortgage rose to 0.7 point from 0.6 point last week.
- The average rate on a five-year adjustable-rate mortgage increased to 3.01 percent from 2.99 percent. The fee remained at 0.5 point.
- For a one-year ARM, the average rate edged down to 2.38 point from 2.39 percent. The fee held at 0.4 point.
Housing starts and building permits in the U.S. unexpectedly fell in June, suggesting the housing market recovery was struggling to get back on track after stalling in late 2013.
The Commerce Department reports groundbreaking declined 9.3 percent to a seasonally adjusted annual 893,000 million unit-pace, the lowest since September.
For more Columbia SC real estate news, click the Columbia SC Real Estate News link to your right under Columbia SC Real Estate Categories for more.
Several new initiatives were announced recently at the Making Home Affordable summit that will hopefully spur the Columbia SC housing market.
U.S. Treasury Secretary Jacob Lew identified three specific issues that are holding back Columbia SC housing and announced plans to address each of those issues.
Three New Plans to Help Columbia SC Housing:
- The extension of the Making Home Affordable program until "at least December 31, 2016"
- A plan to expand access to credit by working to revive the private-label mortgage-backed securities market
- A new partnership between the Treasury and the Department of Housing and Urban Development to build new, affordable rental housing
Lew said, "These new actions will help provide more affordable options for renters, assist homeowners facing foreclosure or juggling bills to pay their mortgages and expand access to credit for prospective borrowers.”
The Making Home Affordable program has provided relief to homeowners across the country, including more than a million homeowners who have been able to permanently modify their mortgages through HAMP and save roughly $540 a month in mortgage payments. The Making Home Affordable program is not just helping families keep their homes, it is giving families peace of mind.
In spite of the success of the program, there are still a lot of would-be homebuyers with good credit who cannot get into the Columbia SC housing market due to the lack of private capital in the mortgage market.
Lew said, "Fostering the development of a safe and sustainable private market for mortgage lending that can serve alongside government-supported options is seen as critical to the long term success of the Columbia SC housing market, and that is why I have directed my team to bring investors and securitizers together in the months ahead so we can uncover new paths to increase private investment.”
Lew also called on Congress to extend the Mortgage Forgiveness Debt Relief Act, “so struggling families that have lost their home to foreclosure or that have sold their home in a short sale in order to move into more affordable housing are not punished with a large tax bill.”
He also urged Congress to pass housing finance reform. "The work in the Senate Banking Committee was an important milestone on the road to reform, but lawmakers need to keep moving forward," he said.
To stay abreast of news as it affects the Columbia SC housing market, find more Columbia SC real estate news under the news category to your right below Columbia SC Real Estate Categories.
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Are We Facing Another Columbia SC Housing Bubble?
By most accounts, Columbia SC housing is on the rebound – sales are up, prices are up, building permits and starts are up, and confidence is also up. (See our next article about "Housing Coming Out of its Recent Slump")
But should we all be getting ready for the next round of the sky falling when it comes to Columbia SC housing?
Trulia doesn't think so. In fact, their Chief Economist, Dr. Jed Kolko says that Columbia SC housing is, on average, actually undervalued by around 3 percent. This means that in conjunction with a variety of other factors, the Columbia SC housing sector isn't so hot that it's facing a bubble. If homes were selling for well over their worth, we'd have a worry, but Dr. Kolko says we're leveling out and are not on the verge of another Columbia SC housing bubble.
More good news from Trulia is the fact that builders are not overbuilding, meaning there won't be another glut of Columbia SC housing that just sits there, dragging down the market. In addition, lenders are not over-lending, meaning the era of no-doc loans is officially over. To the contrary, the difficulty for some people to get approved who should actually qualify is another reason to feel safe that we're not on the verge of another bubble, despite rising home prices.
If you're on the fence about buying a home now and concerned about pricing, sooner is probably better for your wallet than later. Prices are rising, albeit slowly. That's a good thing, for buyers AND sellers. It means no bubble is in our future for Columbia SC housing.
Is Housing Coming Out of its Recent Slump?
Home resales rose more than expected in May and the inventory of properties for sale was the highest in more than 1-1/2 years, according to the National Association of Realtors.
The NAR reports that toal home resales, which are completed transactions of single-family homes, townhomes, condominiums and co-ops, rose 4.9 percent to a seasonally adjusted annual rate of 4.89 million in May. That's from an upwardly-revised 4.66 million in April, but remain 5.0 percent below the 5.15 million-unit level in May 2013.
The 4.9 percent month-over-month gain in May was the highest monthly rise since August 2011 (5.5 percent).
Total housing inventory at the end of May climbed 2.2 percent to 2.28 million existing homes available for sale, which represents a 5.6-month supply at the current sales pace, down slightly from 5.7 months in April.
Unsold inventory is 6.0 percent higher than a year ago, when there were 2.15 million existing homes available for sale.
The median existing-home price for all housing types in May was $213,400, which is 5.1 percent above May 2013.
In June, NAR reported new home construction activity is currently insufficient in most of the U.S., and some states could face persistent housing shortages and affordability issues unless housing starts increase to match up with local job creation.
Columbia SC Mortgage Rates Lower Than a Year Ago
Columbia SC mortgage rates are now lower than a year ago when rates jumped in the initial anticipation of the Federal Reserve's tapering of bond purchases.
What does this mean for the average consumer looking to buy a home? Rates are holding near the 4 percent mark, a still historically low range. The all-time low for the 30-year fixed was set in November 2012 at 3.31 percent, according to Freddie Mac.
This week, the 30-year fixed rate mortgage slipped to 4.14 percent, from 4.17 percent the previous week. But more telling is the comparison to a year ago, when the benchmark home loan stood at 4.46 percent and re-financing slowed considerably from its heady days of 2011-2012.
Here is Freddie Mac's overview of rates for the week:
30-year fixed-rate mortgage (FRM) averaged 4.14 percent, with an average 0.5 point for the week ending June 26, 2014, down from last week when it averaged 4.17 percent. A year ago at this time, the 30-year FRM averaged 4.46 percent.
15-year fixed-rate mortgage (FRM) this week averaged 3.22 percent, with an average 0.5 point, down from last week when it averaged 3.30 percent. A year ago at this time, the 15-year FRM averaged 3.50 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.98 percent this week, with an average 0.3 point, down from last week when it averaged 3.00 percent. A year ago, the 5-year ARM averaged 3.08 percent.
1-year Treasury-indexed ARM averaged 2.40 percent this week, with an average 0.4 point, down from last week when it averaged 2.41 percent. At this time last year, the 1-year ARM averaged 2.66 percent.
When it comes to the most recent numbers for Columbia SC housing, as well as housing nationwide, one thing is clear — the recovery has stalled.
Housing was to play a big part in the 2014 overall economy. Pent up demand, continued low interest rates, and prices that still made Columbia SC housing affordable were all supposed to strengthen the recovery.
So far, this hasn't happened, as proven in the economy's poor performance during the first quarter of the year.
Columbia SC Housing Somewhat Frozen?
It's not just Columbia SC housing numbers, but nationwide as well. And whether housing's slump is just a weather-related blip or a new normal is unclear. But many indicators confirm the slowdown.
Sales of existing homes in March, at an annual rate of 4.59 million units, were down slightly from February and were 7.5 percent lower than in March 2013. Sales of new single-family homes got hit even harder, falling 14.5 percent from February and 13.3 from a year earlier. New building permits — a harbinger of future construction — dropped 2.4 percent from February, though they were up 11.2 percent from March 2013.
Along with weather, the explanation seems plain. Buying a Columbia SC home isn't as good of a deal as it was a year ago. Higher interest rates and higher prices have made homes less affordable. In early 2013, interest rates on 30-year fixed-rate mortgages averaged 3.4 percent, now rates on similar loans are 4.3 percent. At the same time, home prices have bounced off recent lows.
Stricter mortgage lending standards have weakened the housing recovery. But there's also another cause: The Columbia SC housing market is, to some extent, somewhat frozen.
There's less incentive for sellers to sell, especially the ones who refinanced their mortgage at interest rates around 3 to 4 percent, and now, to sell and buy another home would mean a mortgage rate of 4 to 4.5 percent.
This scarcity of sellers turns into frustration for buyers. Prices continue to rise because few homes are for sale. Do we all see the cycle and the trend here?
Now that warmer weather is here, many are expecting a revival in the Columbia SC housing market. The question remains, will a stunted Columbia SC housing market rebound be the revival the overall economy needs to get back on the progressive track?
To stay abreast of news as it affects the Columbia SC housing market, stay plugged in right here at our website.