By Terry Brown
2012 ends with some of my favorite advice to those who will graduate in May - enjoy!
Rule 1: Life is not fair - get used to it!
Rule 2: The world won't care about your self-esteem. The world will
expect you to accomplish something BEFORE you feel good about yourself.
Rule 3: You will NOT make $60,000 a year right out of high school. You
won't be a vice-president with a car phone until you earn both.
Rule 4: If you think your teacher is tough, wait till you get a boss.
Rule 5: Flipping burgers is not beneath your dignity. Your Grandparents
had a different word for burger flipping: they called it opportunity.
Rule 6: If you mess up, it's not your parents' fault, so don't whine about your mistakes; learn from them.
Rule 7: Before you were born, your parents weren't as boring as they
are now. They got that way from paying your bills, cleaning your clothes
and listening to you talk about how cool you thought you were. So
before you save the rain forest from the parasites of your parent's
generation, try delousing the closet in your own room.
Rule 8:
Your school may have done away with winners and losers, but life HAS
NOT. In some schools, they have abolished failing grades and they'll
give you as MANY TIMES as you want to get the right answer. This doesn't
bear the slightest resemblance to ANYTHING in real life.
Rule
9: Life is not divided into semesters. You don't get summers off and
very few employers are interested in helping you FIND YOURSELF. Do that
on your own time.
Rule 10: Television is NOT real life. In real life people actually have to leave the coffee shop and go to jobs.
Rule 11: Be nice to nerds. Chances are you'll end up working for one.
tdb
Friday, December 28, 2012
Thursday, November 15, 2012
My prediction for 2013
by Terry Brown
I don't make predictions very often, mainly because I don't like to be wrong. However, some indicators are popping up that I cannot ignore.
Reports are that there are 10 million young adults from ages 18 to 25 who are living at home. Why? They don't have jobs or are can't get enough hours where they work due to the job market.
The National Restaurant Association claims that they are the largest industry in the United States. That makes sense, since it covers the Hot Dog wagon to 5 Star restaurants. Tens of millions of people work in this industry. I own a national brand fast food restaurant and have owned various brands over the years. I'm still very plugged in to the different franchises that I have belonged to over the years, and they are all planning on doing the same thing in 2013.
Obamacare is the law of the land. No matter if you love it or hate it, it's still the law - so I for one am now figuring out how to deal with it without it sinking me, and everyone else in this industry is doing the same thing. According to the law, if you have 50 or more full time employees, you must provide insurance for them all or pay a $2000 fine for each of them. If you can do math, that's a $100k tax. If you have one of those national brand restaurants, normal annual sales are usually in the $1M area, but they have lots of royalty fees and marketing fees and require you do all kinds of stuff which is expensive - so if you can post a 10% bottom line, you are the norm. Some fine-tune it and pull off 15% bottom lines, but they are rare. That's why there are so many multi-unit owners out there - $100k a year for a serious investment isn't a very good payback - so have 3 or 4 of them and you can increase your percentage upwards to 12-15% bottom line by sharing expenses. However, now an owner has to pay $100k for a new tax for just 50 employees, some of these multi-unit owners have a total 200 employees - and many are full-time. Quick math says 200 employees x $2k = $400k. Now the owner doesn't have much of a bottom line any longer...
So, what can one do? Ah! Make everyone PART-TIME! This is great for the owner, as they dodge a really deadly bullet, but bad for the employees - as a Part-time definition in Obamacare is 29.5hrs or less per week. So, all those restaurant workers who voted for Obamacare will now get 25% of their hours cut - I'm sure they were told this somewhere - don't you think?
However, this is where the silver lining begins. Remember, an employer is going to have to take a 40hr per week employee to less than 30hrs per week - or 25% less hours. I can attest that restaurant owners don't run padded staffs - they usually have exactly how many people it takes to make their operation run, not a person more. So, if they are going to cut 25% of ALL hours, they are going to need to HIRE 25% more employees. Think of it - EVERY restaurant in the US is about to hire 25% more staff! This is going to put a strain on job pool. Many people who are unemployed are so because they can't find a job - they are now going to be able to get two jobs if they can handle the scheduling...
This is going to help get this 10 million young adults off parent's couches and into their own apartments.
Oh yeah, has anyone noticed that no one has been building apartments since 2008? Seven million high school graduates a year since 2008 and less than 1 million new housing units each year since then - in other words, we have a massive housing shortage that is about to fall into our laps.
2013 could be a frenzy of Real Estate transactions. The Feds are going to recognize it and start pumping some of these foreclosures that are sitting on the sidelines, further exhausting empty houses in neighborhoods. This is great, great news - IF you are a home owner. If you are renting - sorry, you are about to pay a premium as housing starts to dry up - so try to lock your lease rate for multiple years if you can convince your landlord to ink the deal - OR - BUY. Even if you have questionable credit, there are still alot of home owners that will do an owner financed deal if you have enough down payment.
That's my outlook of 2013. An unexpected war, default of the US, etc could easily void this projection but otherwise - this is what I'm gearing up for.
Terry Brown, Owner - RE/MAX Mountain River
Owner - Key Largo Arby's (14 years)
Past Owner - Florida Keys Wendy's (18 years)
Past Owner - Florida Keys Dairy Queen (5 years)
I don't make predictions very often, mainly because I don't like to be wrong. However, some indicators are popping up that I cannot ignore.
Reports are that there are 10 million young adults from ages 18 to 25 who are living at home. Why? They don't have jobs or are can't get enough hours where they work due to the job market.
The National Restaurant Association claims that they are the largest industry in the United States. That makes sense, since it covers the Hot Dog wagon to 5 Star restaurants. Tens of millions of people work in this industry. I own a national brand fast food restaurant and have owned various brands over the years. I'm still very plugged in to the different franchises that I have belonged to over the years, and they are all planning on doing the same thing in 2013.
Obamacare is the law of the land. No matter if you love it or hate it, it's still the law - so I for one am now figuring out how to deal with it without it sinking me, and everyone else in this industry is doing the same thing. According to the law, if you have 50 or more full time employees, you must provide insurance for them all or pay a $2000 fine for each of them. If you can do math, that's a $100k tax. If you have one of those national brand restaurants, normal annual sales are usually in the $1M area, but they have lots of royalty fees and marketing fees and require you do all kinds of stuff which is expensive - so if you can post a 10% bottom line, you are the norm. Some fine-tune it and pull off 15% bottom lines, but they are rare. That's why there are so many multi-unit owners out there - $100k a year for a serious investment isn't a very good payback - so have 3 or 4 of them and you can increase your percentage upwards to 12-15% bottom line by sharing expenses. However, now an owner has to pay $100k for a new tax for just 50 employees, some of these multi-unit owners have a total 200 employees - and many are full-time. Quick math says 200 employees x $2k = $400k. Now the owner doesn't have much of a bottom line any longer...
So, what can one do? Ah! Make everyone PART-TIME! This is great for the owner, as they dodge a really deadly bullet, but bad for the employees - as a Part-time definition in Obamacare is 29.5hrs or less per week. So, all those restaurant workers who voted for Obamacare will now get 25% of their hours cut - I'm sure they were told this somewhere - don't you think?
However, this is where the silver lining begins. Remember, an employer is going to have to take a 40hr per week employee to less than 30hrs per week - or 25% less hours. I can attest that restaurant owners don't run padded staffs - they usually have exactly how many people it takes to make their operation run, not a person more. So, if they are going to cut 25% of ALL hours, they are going to need to HIRE 25% more employees. Think of it - EVERY restaurant in the US is about to hire 25% more staff! This is going to put a strain on job pool. Many people who are unemployed are so because they can't find a job - they are now going to be able to get two jobs if they can handle the scheduling...
This is going to help get this 10 million young adults off parent's couches and into their own apartments.
Oh yeah, has anyone noticed that no one has been building apartments since 2008? Seven million high school graduates a year since 2008 and less than 1 million new housing units each year since then - in other words, we have a massive housing shortage that is about to fall into our laps.
2013 could be a frenzy of Real Estate transactions. The Feds are going to recognize it and start pumping some of these foreclosures that are sitting on the sidelines, further exhausting empty houses in neighborhoods. This is great, great news - IF you are a home owner. If you are renting - sorry, you are about to pay a premium as housing starts to dry up - so try to lock your lease rate for multiple years if you can convince your landlord to ink the deal - OR - BUY. Even if you have questionable credit, there are still alot of home owners that will do an owner financed deal if you have enough down payment.
That's my outlook of 2013. An unexpected war, default of the US, etc could easily void this projection but otherwise - this is what I'm gearing up for.
Terry Brown, Owner - RE/MAX Mountain River
Owner - Key Largo Arby's (14 years)
Past Owner - Florida Keys Wendy's (18 years)
Past Owner - Florida Keys Dairy Queen (5 years)
Tuesday, October 23, 2012
A new housing boom
@CNNMoney
NEW YORK (CNNMoney) -- The long-battered housing market is finally starting to get back on its feet. But some experts believe it could soon become another housing boom.
Signs of recovery have been evident in the recent pick ups in home prices, home sales and construction. Foreclosures are also down and the Federal Reserve has acted to push mortgage rates near record lows.
But while many economists believe this emerging housing recovery
will produce only slow and modest improvement in home prices,
construction and jobs, others believe the rebound will be much stronger.
Barclays Capital put out a report recently forecasting that home prices, which fell by more than a third after the housing bubble burst in 2007, could be back to peak levels as soon as 2015.
"In our view, the housing market had undergone a dramatic over-correction during the prior five years, resulting in pent-up demand for housing purchases that would spark a rapid rise in housing starts," said Stephen Kim, an analyst with Barclays, in a note to clients.
In addition to what Kim sees as a big rebound in building, he's bullish on home prices, expecting rises of 5% to 7.5% a year.
Related: Where housing is most (and least) affordable
Construction is expected to be even stronger, with numerous experts forecasting home construction to grow by at least 20% a year for each of the next two years. Some believe building could be back near the pre-bubble average of about 1.5 million new homes a year by 2016, about double the 750,000 homes expected this year.
"We think the recovery is for real this time around," said Rick Palacios, senior analyst with John Burns Real Estate Consulting. "If you look across the U.S. economy right now, there are only a handful of industries looking at 20-30% growth over the next 4-5 years, and housing is one of those."
Home builder stocks are up 162% in the last 12 months, led by a 250% jump at PulteGroup (PHM). Other leading builders including DR Horton (DHI), Toll Brothers (TOL), KB Home (KBH) and Lennar (LEN) have all seen their stocks more than double over that time. New orders at publicly-traded builders are up 30% since January, according to Kim.
Related: Is buying rental property now a sure bet?
Palacios said stocks in other sectors, from manufacturers of drywall to flooring to kitchen and bath fixtures, have all more than doubled as well this year.
The housing rebound can have a ripple effect that could help get the entire economy growing at a much stronger pace, which will add to more demand for housing.
"That turn in the [housing] market is occurring now and it should become a boom by 2015. It will be powerful enough ... to lift the entire U.S. economy," said Roger Altman, chairman of Evercore Partners and former deputy Treasury secretary, in a column for the Financial Times.
Altman said he expects housing will add 4 million jobs to the economy over the next five years, as pent-up demand for home purchases drives building and and home prices higher.
NEW YORK (CNNMoney) -- The long-battered housing market is finally starting to get back on its feet. But some experts believe it could soon become another housing boom.
Signs of recovery have been evident in the recent pick ups in home prices, home sales and construction. Foreclosures are also down and the Federal Reserve has acted to push mortgage rates near record lows.
Barclays Capital put out a report recently forecasting that home prices, which fell by more than a third after the housing bubble burst in 2007, could be back to peak levels as soon as 2015.
"In our view, the housing market had undergone a dramatic over-correction during the prior five years, resulting in pent-up demand for housing purchases that would spark a rapid rise in housing starts," said Stephen Kim, an analyst with Barclays, in a note to clients.
In addition to what Kim sees as a big rebound in building, he's bullish on home prices, expecting rises of 5% to 7.5% a year.
Related: Where housing is most (and least) affordable
Construction is expected to be even stronger, with numerous experts forecasting home construction to grow by at least 20% a year for each of the next two years. Some believe building could be back near the pre-bubble average of about 1.5 million new homes a year by 2016, about double the 750,000 homes expected this year.
"We think the recovery is for real this time around," said Rick Palacios, senior analyst with John Burns Real Estate Consulting. "If you look across the U.S. economy right now, there are only a handful of industries looking at 20-30% growth over the next 4-5 years, and housing is one of those."
Home builder stocks are up 162% in the last 12 months, led by a 250% jump at PulteGroup (PHM). Other leading builders including DR Horton (DHI), Toll Brothers (TOL), KB Home (KBH) and Lennar (LEN) have all seen their stocks more than double over that time. New orders at publicly-traded builders are up 30% since January, according to Kim.
Related: Is buying rental property now a sure bet?
Palacios said stocks in other sectors, from manufacturers of drywall to flooring to kitchen and bath fixtures, have all more than doubled as well this year.
The housing rebound can have a ripple effect that could help get the entire economy growing at a much stronger pace, which will add to more demand for housing.
"That turn in the [housing] market is occurring now and it should become a boom by 2015. It will be powerful enough ... to lift the entire U.S. economy," said Roger Altman, chairman of Evercore Partners and former deputy Treasury secretary, in a column for the Financial Times.
Altman said he expects housing will add 4 million jobs to the economy over the next five years, as pent-up demand for home purchases drives building and and home prices higher.
Saturday, October 20, 2012
Denver housing inventory falls by one-third in past year
Contrary to other similarly affected metro areas, the inventory reductions in Denver are fairly even across the board. Inventory for all homes in the metro area dropped 31.7 percent. Inventory fell 32.3 percent in the bottom-price tier, 32.5 percent in the middle tier and 30.8 percent in the upper tier.
Nationally, inventory rates fell 19.4 percent across the three price tiers, declining the most (22 percent) in the upper tier.
With inventories down and demand up, home prices are on the rise — a positive sign for the housing market. But that can make it tough on homebuyers, especially first-time buyers.
The Zillow study said inventory of lower-priced homes, which are commonly sought by first-time homebuyers, dropped by 42.7 percent in California, including 59.7 percent in Fresno, 55.4 percent in Sacramento and 53.2 percent in San Francisco.
"First-time homebuyers are being squeezed out of the market by falling inventory and the rapid influx of investors looking to buy basic homes to rent out to the growing population of people who have recently been foreclosed upon," said Stan Humphries, Zillow's chief economist. "Investors are paying in cash and can close sooner, which is more favorable to banks and homeowners looking to sell."
Out of the 101 metro areas covered in the report, inventory across all tiers dropped the least in the Hartford, Conn. (4.6 percent), Albuquerque (4.9 percent) and New Haven, Conn. (5.5 percent) metro areas, and rose in only one market — Little Rock, Ark. (0.4 percent).
In the 30 largest metro areas, inventory across all tiers fell the most in Sacramento (42.4 percent) and fell the least in Cincinnati (9.5 percent).
The Zillow analysis tracked changes in the number of homes listed for sale on Zillow across the country as of Sept. 30.
John Mossman: 303-954-1479, jmossman@denverpost.com
Thursday, October 18, 2012
Denver property values recover from 2008
Denver Home Value Information
Value trends in Denver, CO
- Denver = red
- National = green
- Avg. Single-Family Home Value 2012
- Average Condo Value 2012
Tuesday, October 16, 2012
JP Morgan boss says US housing mkt has turned corner
JP Morgan boss says US housing market has turned the corner
Continue reading the main story Jamie Dimon, chief executive of JP Morgan Chase, has said the US housing market "has turned the corner".He said that his bank, which is the biggest in the US by assets, would be reducing the amount it sets aside to cover losses from mortgages.
Net profit came in at $5.7bn (£3.5bn), up 33% from $4.3bn in the same period last year.
Meanwhile, Wells Fargo, the biggest US mortgage lender, reported a record quarterly profit.
JP Morgan set aside $1.8bn to cover potential loan losses, down from $2.4bn a year ago, it said in its results for the three months to the end of September. "Importantly, we believe the housing market has turned the corner," Mr Dimon said in a statement. The collapse of the US housing market sparked the banking crisis in 2008 that led to the global economic downturn. While the bank thinks the bottom of the housing market has been reached, Mr Dimon warned: "We also expect to see high default-related expense for a while longer."
Mortgage production-related revenue - excluding repurchase losses - was up 36% to a record $1.8bn.
One of the downsides to the results was a steep rise in demand from state-backed US mortgage guarantee giants Fannie Mae and Freddie Mac to repurchase mortgages that JP Morgan had sold them, according to Glenn Schorr, an analyst at Nomura Securities. "All in, we think it's a good quarter for JP Morgan, and other banks should see some of the same benefits," he said. 'Stupid error'
JP Morgan said it had made "a modest loss" in the quarter from what is left of the portfolio that has lost it an estimated $5.8bn this year. It said it expected to lose another $300m by the end of the year.
The shares fell sharply when the bank announced the trading losses in May, but have now almost completely recovered. Earlier in the week, Mr Dimon told an audience in Washington that he should have stopped the trades by the so-called London Whale. "We made a stupid error," he said. "I should have caught it... I didn't."
The bank has so far declined to comment on a report in Thursday's New York Times, which said that federal authorities were using taped telephone conversations, notes from staff meetings, instant messages and emails to build criminal cases against four people who worked for the London team.
Rival's results Wells Fargo said that its net profit was $4.9bn, up 27% from 2011. Revenue was up 8% to $21.2bn in the quarter from the same period last year. "By focusing on earning all of our customers' business and providing outstanding service, we continued to generate growth across our diversified set of businesses," said chairman and chief executive John Stumpf. "In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses."
The US government this week filed a lawsuit against Wells Fargo for mortgage fraud, alleging that the bank lied about the quality of mortgages it handled leading to huge losses for the government when the loans went bad. It is seeking damages for hundreds of millions of dollars in insurance claims already paid to Wells Fargo by the Federal Housing Administration.
Sunday, September 30, 2012
Home Prices Rebound
Home prices rebound
@CNNMoney September 25, 2012: 10:11 AM ET
Home prices are back to 2003 levels in the latest sign of an improved housing market.
NEW YORK (CNNMoney) -- In another sign of a turnaround in the long-battered real estate market, average home prices rebounded in July to the same level as they were nine years ago.
According to the closely watched S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, the typical home price in July rose 1.6% compared to the previous month.
It marked the third straight month that prices in all 20 major markets followed by the index improved, and it would have been the fourth straight month of improvement across the full spectrum if not for a slight decline in Detroit in April.
The index was up 1.2% compared to a year earlier, an improvement from the year-over-year change reported for June. While home prices have been showing a sequential change in recent months, it wasn't until June that prices were higher than a year earlier.
The July reading matched levels last seen in summer 2003, when the market was marching toward its peak in 2006. The collapse of the market after that led to the financial crisis of 2008.
"The news on home prices in this report confirm recent good news about housing," said David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. "Single-family housing starts are well ahead of last year's pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing."
Record low mortgage rates and a tighter supply of homes available for sale have helped to lift home prices. Lower unemployment also has helped with home prices, although job growth in recent months has been slower than hoped.
Earlier this month, the Federal Reserve announced it would buy $40 billion in mortgage bonds a month for the foreseeable future. This third round of asset purchases by the central bank, popularly known as QE3, is its effort to jump start the economy through even lower home loan rates.
Related: Best home deals in Best Places
Mike Larson, real estate analyst with Weiss Research, said part of the improvement in the housing market is due to investors using the low mortgage rates to buy up homes that are in foreclosure and renting them in a strong rental market.
But he said that he doesn't think there's much chance of housing prices forming any kind of new bubble in the foreseeable future.
"Clearly the worst is behind us for this market., but this is not a market that is going to take off again," he said. "While you have a firming up, you still have tight lending standards and people who have been burned are reluctant or unable to get back in the market." He predicts it will take several more years before housing prices can gain more than 1% to 2% a year.
Related: Buy or rent? 10 major cities
But that is good news for a housing market that was plagued by plunging home values and high foreclosure rates for much of the last six years. And the good news has the potential to build on itself, said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.
"Housing remains a rare bright spot in an economy that is otherwise muddling through," he wrote in a note to clients Tuesday. "The price trend for housing is significant, because it provides economic stimulus via stronger household balance sheets."
Friday, September 28, 2012
Home prices may not return to peak until 2023
@CNNMoney September 26, 2012: 6:15 AM ET
The severe decline in home prices may mean some homeowners who bought at the peak may never get their money back.
NEW YORK (CNNMoney) -- Home prices are showing signs of life, but have a long way to go to make up for losses from the housing bust.
U.S. home prices dropped by a third from the start of 2007 to the start of 2012, according to Fiserv, an analytics firm.
Fiserv forecasts prices will bounce back an average of 3.7% a year for the next five years -- a rate that would still leave prices 20% below the peak. At that forecasted growth rate, the national average high of $238,000 would not be hit again until 2023.
It could take even longer in some areas. "In some hard-hit markets, prices could take decades to recover," said Fiserv economist David Stiff.
Among those facing a long haul: Arizona, California, Florida and Nevada, the states most caught up in the speculative feeding frenzy of the mid-2000s.
Related: Buy or rent? 10 major cities
In California, for example, home prices should grow a little faster than the national average. Fiserv projects 4.4% gains during the next five years. But the hole is also deeper, with prices having fallen nearly 46% from early 2007 to early 2012. Break even won't come until after 2026.
Homeowners in Nevada may have to wait the longest to make up lost ground. Home prices in the state plunged nearly 60%, and Fiserv projects annual gains of just 2.3%. It would take some 40 years at that pace to get back to 2007 levels.
Real estate, of course, is local, and there are many housing markets that never bubbled during the boom. In those places, buyers who bought in 2007 are much more likely to be in the money today. In South Dakota, Texas and West Virginia, prices are already slightly higher than they were five years ago.
In North Dakota, a housing shortage driven by the oil boom has sent prices soaring 17.7% over the past five years.
Iowa, Oklahoma and Nebraska, are nearly back to peak, as are Kentucky, Vermont and Alaska. These were all housing markets that recorded only mild price increases during the boom.
Sunday, September 16, 2012
Asking Prices Rise 2.3% Year Over Year
The Trulia
Price Monitor and the Trulia Rent
Monitor are the earliest leading indicators of how asking prices and rents
are trending nationally and locally. They adjust for the changing mix of listed
homes and therefore show what’s really happening to asking prices and rents.
Because asking prices lead sales prices by approximately two or more months, the
Monitors reveal trends before other price indexes do. With that, here’s the
scoop on where prices and rents are headed.
National Home Prices Up 2.3% Year over Year, and Rising in 68 of 100 Largest Metros
In August, asking prices rose 2.3% year over year, the largest annual jump reported yet by the Trulia Price Monitor and the largest year-over-year increases since before the recession. Excluding foreclosures, asking prices rose nationally 3.8% year over year. The month-over-month increase of 0.8% was the seventh consecutive monthly increase. Two-thirds of large metros – 68 out of 100 – had year-over-year price increases, and even more – 87 out of 100 — had quarter-over-quarter increases.
Prices Gains Accelerating Most in Arizona and Nevada
Let’s look at the top 10 markets with the largest year-over-year price increases. Asking prices in Phoenix rose 24.2% year-over-year in August. Two other Southwest metros – Tucson and Las Vegas – are on the top-ten list, along with four Florida metros (Cape Coral – Fort Myers, West Palm Beach, Miami and Orlando), Warren-Troy-Farmington Hills MI, Denver and San Jose. The Southwest metros of Tucson and Las Vegas have seen the biggest turnaround: three months ago, in May 2012, prices were falling year over year in those markets. In contrast, Miami’s year-over-year price increase slowed, from 14.5% in May to 9.6% in August. Miami prices rose only 1.1% quarter-over-quarter – which is below the national quarter over quarter increase of 1.8%! – so Miami’s gains aren’t so hot anymore.
Rent Increases Slow Down to 4.7% Year Over Year, Thanks To New Construction
In August, rents rose nationally 4.7% year over year. That’s the smallest year-over-year increase since March. Three months ago, in May, rents were up 5.8% year over year. What’s slowing down those rent increases? One big factor is new construction: according to the Census, there was a big jump in the number of newly completed buildings with five or more units – which means more rental units are on the market to meet demand. Completed new units in multifamily buildings in July – the latest data available – were 47% higher than a year earlier.
Among the largest 25 rental markets, rents rose the most in Houston and Seattle, where they climbed more than 10% year over year in August. But renters are getting a touch of relief in Denver, San Francisco, Miami, Oakland and Boston, where rents are no longer rising quite as fast as they were three months ago. That may not be much comfort, though, since these hot rental markets are still seeing annual rent increases of 8% or more.
Bringing It All Together: Prices, Rents and Wages
With price increases accelerating and rent increases decelerating, the national year-over-year price increase, excluding foreclosures, of 3.8% is gaining ground on the national year-over-year rent increase of 4.7%. If prices start rising faster than rents, then buying a home won’t be getting any cheaper relative to renting.
And there’s another milestone: with prices excluding foreclosures up 3.8% year over year, prices are also rising faster than wages, which rose 2.6% year over year in 2011 according to the Bureau of Labor Statistics. When price increases outpace wage increases, affordability starts to decline. (Check out our post comparing affordability across metros, showing how long it takes to save for a downpayment.)
In short: price increases are important for the housing recovery and are great news for homeowners, particularly those who are underwater. They’re good news for the economy, too, since price increases encourage builders to start new construction, which in turn creates jobs. But this is a bit of a catch-22. Rising prices will also make housing less affordable for those who don’t own, especially if prices start rising faster than wages.
Will these trends continue? Look for the next Trulia Price Monitor and Trulia Rent Monitor on Thursday, October 4, 2012 at 10AM ET.
How did we put this report together? To recap the methodology, the Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes, including foreclosures provided by RealtyTrac. The Trulia Price Monitor also accounts for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices. The Monitors can detect price movements at least three months before the major sales-price indexes do. Our FAQs provide all the technical details.
National Home Prices Up 2.3% Year over Year, and Rising in 68 of 100 Largest Metros
In August, asking prices rose 2.3% year over year, the largest annual jump reported yet by the Trulia Price Monitor and the largest year-over-year increases since before the recession. Excluding foreclosures, asking prices rose nationally 3.8% year over year. The month-over-month increase of 0.8% was the seventh consecutive monthly increase. Two-thirds of large metros – 68 out of 100 – had year-over-year price increases, and even more – 87 out of 100 — had quarter-over-quarter increases.
Prices Gains Accelerating Most in Arizona and Nevada
Let’s look at the top 10 markets with the largest year-over-year price increases. Asking prices in Phoenix rose 24.2% year-over-year in August. Two other Southwest metros – Tucson and Las Vegas – are on the top-ten list, along with four Florida metros (Cape Coral – Fort Myers, West Palm Beach, Miami and Orlando), Warren-Troy-Farmington Hills MI, Denver and San Jose. The Southwest metros of Tucson and Las Vegas have seen the biggest turnaround: three months ago, in May 2012, prices were falling year over year in those markets. In contrast, Miami’s year-over-year price increase slowed, from 14.5% in May to 9.6% in August. Miami prices rose only 1.1% quarter-over-quarter – which is below the national quarter over quarter increase of 1.8%! – so Miami’s gains aren’t so hot anymore.
Rent Increases Slow Down to 4.7% Year Over Year, Thanks To New Construction
In August, rents rose nationally 4.7% year over year. That’s the smallest year-over-year increase since March. Three months ago, in May, rents were up 5.8% year over year. What’s slowing down those rent increases? One big factor is new construction: according to the Census, there was a big jump in the number of newly completed buildings with five or more units – which means more rental units are on the market to meet demand. Completed new units in multifamily buildings in July – the latest data available – were 47% higher than a year earlier.
Among the largest 25 rental markets, rents rose the most in Houston and Seattle, where they climbed more than 10% year over year in August. But renters are getting a touch of relief in Denver, San Francisco, Miami, Oakland and Boston, where rents are no longer rising quite as fast as they were three months ago. That may not be much comfort, though, since these hot rental markets are still seeing annual rent increases of 8% or more.
Bringing It All Together: Prices, Rents and Wages
With price increases accelerating and rent increases decelerating, the national year-over-year price increase, excluding foreclosures, of 3.8% is gaining ground on the national year-over-year rent increase of 4.7%. If prices start rising faster than rents, then buying a home won’t be getting any cheaper relative to renting.
And there’s another milestone: with prices excluding foreclosures up 3.8% year over year, prices are also rising faster than wages, which rose 2.6% year over year in 2011 according to the Bureau of Labor Statistics. When price increases outpace wage increases, affordability starts to decline. (Check out our post comparing affordability across metros, showing how long it takes to save for a downpayment.)
In short: price increases are important for the housing recovery and are great news for homeowners, particularly those who are underwater. They’re good news for the economy, too, since price increases encourage builders to start new construction, which in turn creates jobs. But this is a bit of a catch-22. Rising prices will also make housing less affordable for those who don’t own, especially if prices start rising faster than wages.
Will these trends continue? Look for the next Trulia Price Monitor and Trulia Rent Monitor on Thursday, October 4, 2012 at 10AM ET.
How did we put this report together? To recap the methodology, the Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes, including foreclosures provided by RealtyTrac. The Trulia Price Monitor also accounts for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices. The Monitors can detect price movements at least three months before the major sales-price indexes do. Our FAQs provide all the technical details.
Tuesday, August 28, 2012
Home Prices on the Rise While Mortgage Rates Remain Low
by Ed Ferrara
These are the lowest mortgage rates available with 0.7 to 1% origination fee for borrowers who have maintained a record of good credit. Home purchase loans and traditional mortgage refinances require borrowers to have steady employment and income, as well as, enough verifiable assets to cover the down payment and necessary reserves.
Today, many refinances are going through HARP 2.0, the Home Affordable Refinance Program, which increased to a 33% share of all Fannie Mae and Freddie Mac refinances in June. Since HARP was revised with no loan to value caps, the number of refinances through the program soared in June with the average number of refinance mortgages over 125% LTV accounting for 40% of volume, according to the Federal Housing Finance Agency. Some borrowers continue to have problems obtaining HARP as a number of lenders have overlays that are too difficult to overcome. There are still many other lenders who are eager to assist borrowers obtain a HARP 2.0 refinance and can be found by submitting a quick online form which is the easiest, quickest and most secure way to obtain the best HARP mortgage available.
According to FHA (Federal Housing Administration), refinances surged 198.3% during the month of June, 2012 with the streamline refinance accounting for 53.8%. The FHA streamline refinance with no cash out was expanded in June for mortgages that were endorsed prior to June 1, 2009 and offers these borrowers a reduced upfront mortgage insurance premium of .01% and annual mortgage insurance premium of .55%.
This is a cost saving measure together with low FHA mortgage rates that continue to remain stable. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%. Prior to this offer of reduced insurance premiums that runs through the end of 2013, higher fees kept many borrowers away from refinancing. FHA loans normally have higher closing costs (APR) due to various FHA fees and the upfront mortgage insurance premium.
On a regular FHA purchase mortgage, these costs can be added to the mortgage amount in most cases or paid with seller concessions. Regardless of fees, FHA has several mortgage programs designed to help consumers become homeowners with a low down payment which continues to be popular with home buyers.
Remaining stable, jumbo 30 year fixed mortgage rates are at 4.125%, jumbo 15 year fixed mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rates are at 2.250%. Having excellent credit is required in order for borrowers to obtain these lowest jumbo mortgage rates with 0.7 to 1% origination fee. Jumbo mortgage rates can be very competitive since these are mostly private loans held by the lender.
Even guidelines and approval conditions can differ from lender to lender. As more lenders re-enter the jumbo mortgage market, borrowers will have more options available to compare and should be shopping around for the lowest jumbo mortgage rates, as well as, flexible requirements. With rising home prices, jumbo mortgages will again become a popular and necessary non-conforming mortgage product.
MBS prices (mortgage backed securities) generally move mortgage rates in the opposite direction. There were no major changes in MBS prices that affected mortgage rates over the past week since a limited amount of U.S. economic data was released. Second quarter productivity increased at an annual rate of 1.6%. The trade deficit in the U.S. shrank during the month of June due to a decrease in imports and increase in exports. Import prices for July dropped 0.6% which was more than expected. China's exports rose only 1% and imports increased 4.7% from last July, both missing forecasts. The biggest news for the week was jobless claims which fell by 6,000 to 361,000 for the week ending August 4th according to the Labor department.
FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.
Tuesday, August 21, 2012
NAR: Home Price Increase Has Downsides
Limited inventory may be boosting home prices, but buyer choices are stifled in an increasing number of markets, the National Association of Realtors (NAR) reported.
The association’s latest quarterly report showed that the median existing single-family home price increased during Q2 in 110 out of 147 metropolitan statistical areas (MSAs) compared to the same period in 2011. Of the remaining 37 MSAs, 34 posted price declines, and three remained unchanged.
The national median existing single-family home price was $181,500 in Q2, up 7.3 percent from the same time in 2011. This is the strongest year-over-year increase since the first quarter of 2006.
The second quarter’s results illustrated a marked improvement over the first quarter, which showed year-over-year price gains in only 74 MSAs.
Lawrence Yun, chief economist for NAR, said the organization expects prices to continue to rise in the future.
“It’s most encouraging to see a growing number of metro areas with rising median prices, which is improving the equity position of existing homeowners,” Yun said. “Inventory has been trending down, and home builders are still under-producing in relation to growing demand.”
The association’s latest quarterly report showed that the median existing single-family home price increased during Q2 in 110 out of 147 metropolitan statistical areas (MSAs) compared to the same period in 2011. Of the remaining 37 MSAs, 34 posted price declines, and three remained unchanged.
The national median existing single-family home price was $181,500 in Q2, up 7.3 percent from the same time in 2011. This is the strongest year-over-year increase since the first quarter of 2006.
The second quarter’s results illustrated a marked improvement over the first quarter, which showed year-over-year price gains in only 74 MSAs.
Lawrence Yun, chief economist for NAR, said the organization expects prices to continue to rise in the future.
“It’s most encouraging to see a growing number of metro areas with rising median prices, which is improving the equity position of existing homeowners,” Yun said. “Inventory has been trending down, and home builders are still under-producing in relation to growing demand.”
Yun pointed out that price increases can also be attributed partially to
a decreasing share of sales in low price ranges, where inventory
tightened.
Distressed homes accounted for 26 percent of Q2 sales, down from 33 percent in Q2 2011. Drastic discounts from distressed sales usually work to bring the median home price down.
Since the summer of 2007, inventories have been trending downward steadily. The end of the second quarter saw 2.39 existing homes available for sale, a 24.4 percent drop from the same time in 2011.
NAR president Moe Veissi said that mortgage rates and historically low prices have increased buying power dramatically. The inventory in the lower price ranges needs to keep up with demand, he said.
“What we need now is additional inventory in the lower price ranges, so we hope banks will be releasing more foreclosure inventory into the market. With gains apparent in all of the price measures, banks also should have more confidence in expanding mortgage credit to home buyers using safe but sensible standards,” Veissi said.
The national median family income in the second quarter was $61,000. To purchase a home at the national median price, a buyer making a 5 percent down payment would only need an income of $39,000.
“Because the income required to buy to a typical home is very manageable by historical standards, any further decline in mortgage interest rates will have little effect. Changes in underwriting guidelines would have a far greater impact,” Yun said.
Existing-home sales varied from region to region, rising 1.3 percent in the Midwest and South but slipping 0.6 percent in the Northeast. In the West, tight inventory brought existing-home sales down 5.3 percent as the median home price jumped up 13.4 percent.
“Inventory is pretty tight in all price ranges in most of the West except for the upper end, which accounts for the sharp price gain,” Yun said.
Distressed homes accounted for 26 percent of Q2 sales, down from 33 percent in Q2 2011. Drastic discounts from distressed sales usually work to bring the median home price down.
Since the summer of 2007, inventories have been trending downward steadily. The end of the second quarter saw 2.39 existing homes available for sale, a 24.4 percent drop from the same time in 2011.
NAR president Moe Veissi said that mortgage rates and historically low prices have increased buying power dramatically. The inventory in the lower price ranges needs to keep up with demand, he said.
“What we need now is additional inventory in the lower price ranges, so we hope banks will be releasing more foreclosure inventory into the market. With gains apparent in all of the price measures, banks also should have more confidence in expanding mortgage credit to home buyers using safe but sensible standards,” Veissi said.
The national median family income in the second quarter was $61,000. To purchase a home at the national median price, a buyer making a 5 percent down payment would only need an income of $39,000.
“Because the income required to buy to a typical home is very manageable by historical standards, any further decline in mortgage interest rates will have little effect. Changes in underwriting guidelines would have a far greater impact,” Yun said.
Existing-home sales varied from region to region, rising 1.3 percent in the Midwest and South but slipping 0.6 percent in the Northeast. In the West, tight inventory brought existing-home sales down 5.3 percent as the median home price jumped up 13.4 percent.
“Inventory is pretty tight in all price ranges in most of the West except for the upper end, which accounts for the sharp price gain,” Yun said.
Sunday, August 19, 2012
It's
pretty easy to see both sides of an investment argument. But it's hard
to argue against buying a house now, assuming you can get a loan.
The
housing cycle is a long one, in part because buying a house moves at a
glacial pace, at least compared with the time it takes to buy a stock or
bond. If you're not pre-approved for a mortgage, you have to submit to a
credit check, which, these days, is only slightly less intrusive than a
CIA
background check. You have to get the home inspected. You have to
figure out the various fees your bank charges, including the one marked
"Just because we can."
STORY: Mortgage rates top 3.5% for a second week
COLUMN: Timber could be growth industry if housing soars
How
long is a housing cycle? Pretty long. A relatively modest housing
bubble, by today's standards, occurred in Boston in the late 1980s.
Average home prices, adjusted for inflation, hit $310,000 in October
1987. Home prices didn't hit that level again until May of 2000. Someone
who bought at the high had a long wait to get even — particularly in
light of the standard broker's commission of 6%.
Home
prices bottomed, however, in March 1993 — roughly six years after the
top. History doesn't repeat itself precisely, but it's interesting to
note that the top of the last housing bubble was six years ago, in 2006.
Why be bullish on housing?
•Prices.
You can always buy low and watch prices go lower. But by many measures,
home prices are still cheap. The median single-family home price — half
higher, half lower — hit its nadir in January, dropping to $154,600,
the lowest since October 2001, according to the National Association of Realtors. That's down from a high of $230,900 in July 2006.
Existing-home prices rose in June to a median $190,100, up 8% from June 2011. Those are still 2003 levels.
•Supply.
The good news is that the enormous supply on the market is shrinking.
It takes a wearisome amount of time for supply to shrink, in part
because there are people who have been wanting to sell their homes for
many years, but haven't been able to get the price they want. As prices
rise, more homes come on the market.
Nevertheless,
Ned Davis Research, a respected institutional research firm, estimates
that excess supply of houses on the market should be eliminated by the
end of 2013. When excess supply dries up, people start building more new
houses, which has the virtuous effect of reducing the unemployment rate
and increasing the economy generally.
•Mortgage rates. The average 30-year fixed-rate mortgage rate is 3.59%, according to mortgage giant Freddie Mac.
That's above the all-time low of 3.49% the week of July 26, but close
enough. It's conceivable that at some point in the next 30 years, your
interest rate would be less than the rate of inflation.
Assuming
you financed 80% of the median single-family home, or $152,080, your
mortgage payment would be about $691, excluding taxes and other
irritations. About $5,589 of your first year's payments would be
tax-deductible mortgage interest.
Thanks
mainly to low home prices and interest rates, the NAR's housing
affordability index rose to its highest level on record. (The higher the
index, the more affordable the average home. The index also takes into
account average family income, which has been falling since 2008.)
What
could go wrong? All sorts of things. You may not be able get a loan.
Bankers are insisting on checking things that seemed far too troublesome
during the housing bubble, like whether you have a decent credit
rating, a down payment, or a job.
The other
problem is that houses are leveraged investments — that is, you borrow
money to buy them. Let's consider the example above, where someone buys a
$190,100 house and finances $152,080. Your investment is $38,020. Let's
say that the worst happens: home prices fall, and you have to sell the
house for $175,000.
Unfortunately,
the bank won't split the loss with you. You'll get back $22,920 from
the sale, and wave goodbye to $15,100 of your down payment. That's a 40%
loss, even though your house has fallen 8% in value.
There
are other risks with home ownership, ranging from termites to ghosts in
the hall closet. But if you're planning to live in your home for a long
time, you have the money, and you can get financing, it's a fine time to
buy.
Friday, August 17, 2012
Homebuilder Confidence in U.S. Increase
Confidence among U.S. homebuilders
climbed in August to the highest level in more than five years,
affirming the improvement in residential construction.
The National Association of Home Builders/Wells Fargo builder confidence index rose to 37, higher than projected and the best showing since February 2007, according to figures from the Washington-based group released today. The median forecast in a Bloomberg survey of economists called for no change from July’s 35. Readings below 50 mean more respondents said conditions were poor.
Builders such as PulteGroup Inc. (PHM) are benefiting as less-
expensive properties and record-low mortgage rates entice
buyers. At the same time, faster hiring and fewer foreclosures
are needed to bring about bigger gains for the industry that
precipitated the worst recession in the post-World War II era.
“The outlook appears to be brightening,” Barry Rutenberg, chairman of the NAHB and a builder from Gainesville, Florida, said in a statement. At the same time, “there is still much room for improvement.”
Other reports today showed production at factories, mines and utilities climbed more than forecast in July, and consumer prices were unexpectedly little changed.
Estimates for the builder sentiment index of 46 economists in the Bloomberg survey ranged from 31 to 38. The gauge, which was first published in January 1985, averaged 54 in the five years leading to the recession that started in December 2007. It reached a record low of 8 in January 2009.
The builders group’s index of present single-family home sales climbed to 39 this month from 36 in July and a measure of sales expectations for the next six months rose to 44 from 43. Both gauges reached the highest level since 2007. The index of buyer traffic increased to 31, the highest since May 2006, from the prior month’s 28.
The survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.
The report “provides further evidence of the gradual strengthening that’s occurring in many housing markets,” David Crowe, the association’s chief economist, said in a statement.
PulteGroup, the largest U.S. homebuilder by revenue, posted a better-than-estimated profit and a 32 percent jump in orders in the second quarter, the company said July 26.
With cheaper mortgage rates and homes, “we are very optimistic about housing demand,” Richard Dugas, Pulte’s chairman and chief executive officer, said on a July 26 conference call with analysts. “That being said, we are keeping a watchful eye on the macro trends, which ultimately need to turn more positive for the recovery to expand further.”
Home-improvement retailer Home Depot Inc. (HD) is also benefiting. The Atlanta-based company yesterday reported second- quarter profit that topped analysts’ estimates and raised its forecast for profit this year as customers spent more on remodeling projects.
The National Association of Home Builders/Wells Fargo builder confidence index rose to 37, higher than projected and the best showing since February 2007, according to figures from the Washington-based group released today. The median forecast in a Bloomberg survey of economists called for no change from July’s 35. Readings below 50 mean more respondents said conditions were poor.
Confidence improved among
builders in two of the four U.S. regions, led by the Midwest, where it
rose to 42, the highest level since October 2005, from 33 the prior
month. Photographer: Daniel Acker/Bloomberg
Aug. 14 (Bloomberg) -- Mark
Kiesel, portfolio manager at Pacific Investment Management Co., and
Robert Shiller, an economics professor at Yale University and co-creator
of the S&P/Case-Shiller index of property values in 20 cities, talk
about the U.S. housing market.
They speak with Trish Regan and Adam Johnson on Bloomberg
Television's "Street Smart." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Byron
Wien, vice chairman of Blackstone Group LP’s advisory services unit,
talks about the outlook for the Standard & Poor’s 500 Index and
investment strategy.
Wien, talking with Deirdre Bolton on Bloomberg Television's "In the
Loop," also discusses the U.S. presidential election and European debt
crisis. (Source: Bloomberg)
“The outlook appears to be brightening,” Barry Rutenberg, chairman of the NAHB and a builder from Gainesville, Florida, said in a statement. At the same time, “there is still much room for improvement.”
Other reports today showed production at factories, mines and utilities climbed more than forecast in July, and consumer prices were unexpectedly little changed.
Stocks Climb
Shares rose as the figures showed the world’s largest economy was sustaining the recovery that began in June 2009. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,406.14 at 10:08 a.m. in New York. The S&P Supercomposite Homebuilding Index advanced 0.8 percent.Estimates for the builder sentiment index of 46 economists in the Bloomberg survey ranged from 31 to 38. The gauge, which was first published in January 1985, averaged 54 in the five years leading to the recession that started in December 2007. It reached a record low of 8 in January 2009.
The builders group’s index of present single-family home sales climbed to 39 this month from 36 in July and a measure of sales expectations for the next six months rose to 44 from 43. Both gauges reached the highest level since 2007. The index of buyer traffic increased to 31, the highest since May 2006, from the prior month’s 28.
The survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months.
Regional Breakdown
Confidence improved among builders in two of the four U.S. regions, led by the Midwest, where it rose to 42, the highest level since October 2005, from 33 the prior month. The South reported an increase to 35 from 33. The sentiment index fell to 25 from 34 in the North, and declined to 40 from 43 in the West.The report “provides further evidence of the gradual strengthening that’s occurring in many housing markets,” David Crowe, the association’s chief economist, said in a statement.
PulteGroup, the largest U.S. homebuilder by revenue, posted a better-than-estimated profit and a 32 percent jump in orders in the second quarter, the company said July 26.
With cheaper mortgage rates and homes, “we are very optimistic about housing demand,” Richard Dugas, Pulte’s chairman and chief executive officer, said on a July 26 conference call with analysts. “That being said, we are keeping a watchful eye on the macro trends, which ultimately need to turn more positive for the recovery to expand further.”
Home-improvement retailer Home Depot Inc. (HD) is also benefiting. The Atlanta-based company yesterday reported second- quarter profit that topped analysts’ estimates and raised its forecast for profit this year as customers spent more on remodeling projects.
Tuesday, July 24, 2012
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