Saturday, January 28, 2006

Market Projections-- RE/MAX chairman, Dave Liniger and other National News Figures

A recent article/email was sent to me from InWest Title Marketing and Escrow Officer, Michael Dinsmore in St. George, Utah, conveying and article written by Blanche Evans. Among the things discussed is the outlook nationally. A couple things worth highlighting is that the markets inventory levels are still in the range of being a Sellers market, although on the borderline of being neither a Sellers nor a Buyers market.
For all those newbies out there, a Sellers market means that conditions are favorable for Sellers and not Buyers. Those conditions would include a low inventory of homes like theirs (the Seller), making theirs more valuable, therefore in being able to get a higher price. Also, the supply of homes are affected by interest rates. If they stay low or lower, then the enticements lead Buyers to buy and with a higher amount of Buyers, the Sellers are sure to pull a better price with more demand on his/her home. Remember that people still have to move on occasion and will tolerate a little higher interest rate than our current lower 6%ish rate. They do it out of necessity and circumstance. Visit our page St George Homes For Sale for more Seller tips and information.

Hopefully you will see from the following article written by Blanche Evans that our recent blog predictions and information look "right on". See News Release below (NAR is abbreviation for The National Association of Realtors):

As Predicted, NAR Sets Fifth-year Sales Record -- What's Next?
by Blanche Evans

Despite a nearly six percent decline in home sales in December 2005, existing housing sales easily set a fifth annual record, but what does 2006 hold in store?

Total existing-home sales, which include single-family, townhomes, condominiums and co-ops, were up over 4 percent for 2005. Over 7 million homes were sold, up from 6.8 million in 2004.
David Lereah, NAR's chief economist, says he expected the monthly sales decline. "This is part of the market adjustment we've been discussing, with a soft landing in sight for the housing sector," he said. "The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead. Overall fundamentals remain solid, driven by population and employment growth as well as favorable affordability conditions in most of the country, so we expect the housing market to remain historically high but lower than last year's record."

The national median existing-home price for all housing types was $211,000 in December, up 10.5 percent from December 2004 when the median was $191,000. The median is a typical market price where half of the homes sold for more and half sold for less.

But this may be the last year that housing sees double-digit gains for a while.

NAR President Thomas M. Stevens from Vienna, Va., said it may take a while for home price growth to cool. "We're coming off of five years of tight supply, and many sellers are accustomed to expecting very strong price gains and exceptional returns on their investment," said Stevens, senior vice president of NRT Inc. "With the supply of homes improving and buyers having more choices, the rate of price growth should come down to more normal levels this year."

Currently, says the NAR, there's a 5.1 supply of homes nationwide at the current sales pace, which is getting close to the 6-month benchmark of a "normal market," which neither overfavors the buyer or seller. Below six months of inventory, homes are said to be in a seller's market, where conditions favor the seller due to demand. Above six months, conditions favor the buyer, due to increased inventory.

Is it time to panic? Will sellers be unable to sell their homes?

"The sky is not falling in the housing markets, only cooling," reasons Lereah. "After five years of record-breaking performances, the housing sector is taking a breather -- home sales are falling and price appreciation is slowing. The great fundamentals that were in place that initially generated the boom -- historically low mortgage rates, favorable demographic trends (substantial home buying from boomers, immigrants and boomer children), and reduced home buying costs from technology innovation (Internet home search and mortgage application and closing processes) are still in place today."

Interest rates, according to Freddie Mac, are dropping. The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.27 percent in December, down from 6.33 percent in November; and is 6.10 percent currently.

"If lower interest rates are sustained, the housing market could see some unexpected lift," Lereah says.

Yet, according to the California Association of Realtors, home prices are rising, but sales decreased nearly 18 percent in December. Why are sales trending toward softening?

"As the boom winds down, investors are exiting the markets, cleansing the speculative element in housing," explains Lereah. "There may be a handful of interest-sensitive local hot housing markets that experience a short-term contraction, but for the nation, as a whole, the boom is winding down to an expansion."

RE/MAX chairman, Dave Liniger predicts 2006 will be the second best year the real estate industry has ever experienced.

"I don't think the last two months are anything worse than a normal cycle of the real estate business. November and December declines were a normal reaction to fluctuating interest rates. This year we would anticipate that resales will probably drop 4 to 5 percent from the record pace that they were last year. I think we are going to see an outstanding year for the real estate business."

Like Lereah, Liniger expects housing prices to retreat more in some parts of the country than others, but for most regions, housing is unlikely to show a dramatic collapse, although he suggests, "You do certainly have to be a little concerned with properties that have shown double digit appreciation on both coasts."

He says the market will be much more "normal." "You're going to see price appreciation, depending upon the region you're in, somewhere between three and six percent."

One of the reasons that the housing market has been on a record setting pace is historically low interest rates. Liniger believes that rates may climb somewhat in the upcoming year, but not enough to derail the real estate market. "I think you're looking at very reasonable rates in the neighborhood of six-point-five percent before the year is over."

For clues to the future, Liniger advises keeping watch on the Baby Boomers. "They'll continue to keep the market hot," he predicts. "They see real estate being a very, solid investment, unlike recent experiences in the stock market. So, I think you're going to see second home sales continue to be very, very strong."

Published: January 26, 2006

Thursday, January 19, 2006

Economic Summit 2006

I'd like to talk between the lines with two sources I have come accross in telling what the demand and in predicting what the market will do here in the local area of St George, Utah for the year of 2006.
First Source
The first source is an article from January 2006 copy of REALTOR Magazine, entitled "2006 economic outlook- A Stellar market by any measure". This source comments, "Despite lagging consumer confidence, the economic fundamentals are good. Continuing strong population growth, fueled in part by immigration and new household formation by boomer children, is keeping housing demand at peak levels." An easing housing shortage with increase of inventory on the market, although still lower than usual, will soften price appreciation. That is on the grand scale. Now for the St George Utah area.
Second Source
Recently an ecomomic summit 2006 was held for this areas real estate, Saint George as its chief anchor city. The report puts appreciation values for 2005 as among the highest in the nation for real estate.
In looking forward to 2006, a look at what the projection of what interest rates plan to do is in order. The summit comments that, "The 30year fixed rate mortgage should trend up modestly and reach 6.6 percent during the second half of 2006." To continue with predictions and comments from the summit, "The residential construction market is showing initial signs of slowing nationwide. However, in Utah homebuilding remains strong with residential construction concentrated in Salt Lake, Utah, Washington, and Davis counties. All indicators point to a vibrant residential construction market, with singlefamily housing accounting for much of the growth.
Average U.S. home prices increased 12.02 percent year over year from the third quarter of 2004 through the third quarter of 2005 . Utah continues to show noticeable house price appreciation with annual price growth of 11.4 percent. Utah’s ranking jumped to #22 , compared with #31 in the previous report and last place in the fourth quarter of 2003. St.George came in at #4 in terms of highest rates of house price appreciation when compared to other “Metropolitan Statistical Areas” with a one year appreciation rate o f 31.57% .
While there may be a housing bubble on both coasts, it is not likely the case anywhere in the intermountain West and certainly not here in Utah. Growth in our market can be attributed to nice homes in great neighborhoods. We enjoy spectacular scenery set in a mild climate. We have amenities and cultural offerings often times reserved for large metropolitan areas. We have the peace of mind associated with worldclass healthcare and a sense of security that comes from below average crime statistics. All in all, we are living in a pretty great place. Bot tom line, 2 006 will be another great year for investing, owning and transacting real estate in Southern Utah!"
Summit Report- inclusive of
Among the things included in the summit report are:
The St George MSA (Metropolitan Statistical Area) was the fastest growing area in 2003 according to the Census Bureau. Graphs show single family residences, land, lot and water, and condo townhomes. The graphs show the number of sales for the last five years, which 5 subset areas contained which portion of that, the last three years month-by-month sales prices graphed linearly and average quarterly sales prices for the last three years compared side by side. Other items covered are: residential building permits and for what areas, housing inventory, future big developments, home appreciation forecast, affordability index at its lowest, where is the in-migration coming from, market indicators, global economic conditions, median price appreciation for 2006 real estate, Saint George report on foreclosures and general investment analysis.
To access the power point presentation off our website go to the in-line paragraph link we placed in the third paragraph of this article above. Hope we are keeping you abreast and alive about St George Utah real estate.
Reading Between the Lines
Our reading between the lines takes on the dimension of caution pertaining to what interest rates will do. But while caution seems to be invoked in the Summit report, I believe that it is mostly due, at least in part, for cautioning realtors and sellers to not be so ambitious as to what they can expect to get when our appreciation rates were among the most illustrious in this last year. Still the astute will read between the lines, that St George is St George's best kept secret in order to preserve our economic base- we are small and can only grow so fast people.
Bigger Homes, Bigger Inventory
To what degree have we overbuilt in our larger home department may be a good question to ask? Because my shopppers are noticing quite a bit of those on the market these days. Yet these days really ought to mean Nov. 2005 because as the graphs show, December and January are always slower.
St George Area Parade of Homes
We will see what happens in leau of our annual St. George Area Parade of Homeskick up to take place Feb. 17-26, 2006. Mostly, I am not worried about this year being a good year for real estate values, except for what interest rates will do.