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Friday, March 30, 2012

March 2012 Real Estate Report

The Dow Jones Industrial Average crossed over 13,000 in Mid-March while the S&P crossed the 1,400 level. These are more than just psychological barriers -- they represent highs not seen since the start of the fiscal crisis almost five years ago. There are two ways you could look at these numbers. In one respect, we have seen a remarkable 100% increase in the Dow since the low below 6,600 three years ago. That is quite a run. On the other hand, one could say that the Dow is still below its high of over 14,000 almost five years ago. The stance we take on these numbers is not important. What is important is how the stock market affects consumer confidence. All along we have been talking about the slow recovery being a result of a lack of consumer confidence. If consumers gain confidence in the markets, they will be more confident about the economy in general.

Besides, if we wanted to put these numbers in perspective, we could point out that the Dow was near 1,700 in 1987. We will let you do the math. While we watch the stock market's effect upon confidence and the recovery, one place to seek a clue would be in the housing sector. This past week we had important numbers released within this sector. These numbers were mixed, but did not dispel the notion that housing is on the rebound. Good news on housing is vitally important because we know we have a larger amount of distressed properties moving through the system this year. If the market absorbs these quickly in the form of short sales, modifications and REO sales, then we will have a real estate recovery much sooner than analysts are predicting. No long-term economic recovery can take place with stocks stagnant and the real estate market languishing. We are hoping the Dow at this level represents another building block to a solid recovery.

[WEEKLY INTEREST RATE OVERVIEW]
[http://www.newsletterproonline.com/newsletters/wp-content/themes/default/images/hsection2.jpg]The Markets. Rates rose for the second straight week. Freddie Mac announced that for the week ending March 22, 30-year fixed rates rose from 3.92% to 4.08%. The average for 15 year loans rose from to 3.30%. Adjustable rates also rose, with the average for one-year adjustables rising to 2.84% and five-year adjustables increasing to 2.96%. A year ago 30-year fixed rates were at 4.81%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, "Rates on home loans are catching up with increases in U.S. Treasury bond yields placing the average 30-year rate above 4 percent for the first time since the end of October 2011. Bond yields rose over the past two weeks in part due to an improving assessment of the state of the economy by the Federal Reserve, better than expected results of commercial bank stress tests and the likelihood of a second bailout for Greece. Meanwhile, consumers continued to reduce their debt burdens in the fourth quarter of 2011. For instance, homeowners reduced their financial obligations ratio (debt payments as a share of disposable income) to the lowest point since the second quarter of 1994." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

[REAL ESTATE NEWS]
[http://www.newsletterproonline.com/newsletters/wp-content/themes/default/images/hsection3.jpg] Some builders are putting up brand-new houses as rentals. At a time when buyers are scarce but tenants are plentiful, builders say it's an idea whose time has come again. “It's a very dynamic business opportunity,” says architect-developer Robert Koch, who is building an 80-unit rental subdivision in the Knoxville, Tenn., area. Houses as rentals are nothing new. Depending on whom you ask, anywhere from one-third to one-half of the country's rental units are houses. Purpose-built single-family, detached rentals are not new, either. Backed by tax credits and other subsidies, dozens of subdivisions are built every year to house low-income families, the elderly and even college kids. But now, bowing to the realities of today's for-sale housing market, a growing cadre of market-rate builders are warming to the concept of houses as an alternative rental product. Several factors are driving developers to consider building houses for rent instead of sale. For one, the market is currently flush with renters. Source: Source Media

Americans’ concerns over housing and the economy are subsiding, according to Fannie Mae’s National Housing Survey from February. An improving job market is a big part of what’s behind Americans feeling more confident about the housing market and the direction of the economy, according to the survey. “The pickup in the pace of hiring over the past few months has helped soothe consumer concerns, lifting their moods regarding their personal finances, the direction of the economy, and their views on the housing market,” says Doug Duncan, chief economist of Fannie Mae. “As a result, we’ve seen more potential for economic upside, creating a more balanced near-term outlook.” The survey found that 28 percent of Americans expect home prices to increase over the next 12 months while 53 percent say prices will likely stay the same. Fifteen percent say they expect home prices to decline. Meanwhile, the majority of those surveyed see rental prices continuing to increase over the next year. Sixty-five percent of those surveyed say that if they were going to move they’d buy their next home; 29 percent say they would rent. With low rates and falling home prices, 70 percent of those surveyed say now is a good time to purchase a home. Source: Fannie Mae

Fifty-one percent of Americans in a recent poll say that if their financial situation were to improve, they’d buy a home. Coming in second on the list of wishes, they’d make repairs or improvements to the home they already have, according to the poll of more than 1,400 Americans conducted by the National Foundation for Credit Counseling Web site, www.DebtAdvice.org<http://www.debtadvice.org/>;. Meanwhile, 17 percent of Americans polled said they’d upgrade their car and 9 percent said they’d take a vacation. "Home ownership has traditionally been a part of sound financial planning," says Gail Cunningham, spokesperson for the NFCC, a nonprofit credit counseling organization. "With a combined total of 74 percent of respondents selecting a home-oriented option, the poll results strongly suggests that people continue to place value in owning a home, and are anxious to buy a house or improve their existing one." Source: Realtor Magazine Daily News

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