Housing Confidence Grows in South (and West)

States in the South and West are expected to see the highest price gains in the next 12 months of about 4 to 8 percent, according to the REALTORS® Confidence Index Survey, a survey of about 3,000 REALTORS®. Tight inventory conditions persist in these areas, driving up home prices.

Nationally, REALTORS® expect prices to move up by about 4 percent in the next 12 months, according to the latest survey, based on data gathered in November.

The highest price growth in the next year is projected for California, Nevada, Utah, Arizona, Texas, Louisiana, Florida, Georgia, and South Carolina. Other states outside of the region that also are expected to see some of the larger price jumps include North Dakota, Minnesota, Michigan, and Massachusetts.

Source: “Expected Price Growth Strongest in West and South Markets,” National Association of REALTORS®’ Economists Outlook (Dec. 9, 2013)

Housing Will Strengthen in 2014 - NAHB

Despite many headwinds, the housing recovery is expected to pick up in the next year.

“The cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015,” says David Crowe, chief economist for the National Association of Home Builders. "From the standpoint of GDP growth, housing has been a plus, growing at two, three, and four times the rate of the rest of the economy in recent quarters."

Crowe made the statements during the Fall 2013 Construction Forecast webinar, hosted by NAHB last week. He noted that a double-digit increase in home prices over the past year has helped spur a housing rebound. But Crowe warned that the steep price increases won't last forever.

"We expect to see price increases moderate in the next few years as we see additional inventory on the market and investors back away as the bargains disappear," Crowe said.

The growth in household formations is a bright spot aiding the recovery, economists noted during the webinar. During the recession, household formation growth was delayed as young professionals moved back home with their parents or doubled up with roommates.

During the height of the housing boom, the U.S. was producing 1.4 million additional households each year. However, during the recession, that figure dropped to 500,000 per year. Today, the figure has risen to 700,000.

Still, plenty of challenges remain to the housing recovery, economists note.

"Credit conditions are much tighter now, builders are increasingly facing labor shortages, lot supplies are tight, building material prices are rising, and inaccurate appraisals are hurting home sales." Crowe said. "You can't charge more than you can get an appraisal for. Even though we are seeing price increases in labor, land, and materials, 36 percent of builders recently said they had lost at least one sale over appraisals coming in below the cost of production."

NAHB made some of the following projections in housing starts:
Housing starts in 2013 are projected to reach 924,000—up 18 percent from last year.
Single-family housing starts are expected to rise 17 percent this year and an additional 31 percent next year. NAHB projects that single-family production will surpass the 1 million mark in 2015.
Multifamily starts are expected to rise 20 percent in 2013 and another 10 percent in 2014. Crowe characterized that as a “normal level” of multifamily production.

Source: National Association of Home Builders

South Florida Growing at 3.5% Largely Due to Real Estate

Real estate, once again, can be found at the head of South Florida’s economic pack.

New output numbers released Tuesday show real estate as the No. 1 contributor to economic growth last year, accounting for 31 cents of every new dollar added to the tri-county area’s $274 billion economy. Overall, the economy grew by 3.5 percent, the sharpest increase since 2006 and well ahead of the national metropolitan average of 2.5 percent.

“Overall, I think it’s a pretty good number,” said Robert Cruz, official economist for Miami-Dade County. He noted that of Florida’s largest economies, South Florida had the sharpest growth in 2012.

Real estate’s return as a major economic engine comes amid rising property values and a return of cranes in downtown Miami as developers again see profits in one of the most ravaged housing markets in the country.

“Real estate is really the foundation for this area. It’s crucial for the recovery,” said Tony Villamil, a private economist and dean of the business school at St. Thomas University.

In 2012, the real estate sector – which is driven by rents, property values and commercial transactions – contributed about $52 billion to the combined economies of Broward, Miami-Dade and Palm Beach. That was 8.4 percent better than in 2011, and the best showing since 2006.

The real estate numbers were one data point in the annual metropolitan report card issued by the federal Bureau of Economic Analysis. The annual numbers mirror the quarterly Gross Domestic Product reports that track the health of the national economy.

In general, the report showed metropolitan areas faring well in 2012, with most sectors gaining. Financial services, a category that includes real estate, helped drive growth across the country, as did manufacturing and the category that includes retail.

Government dollars were basically flat in 2012. Though down by $19 million, that still represented less than a 1 percent decline. The data does not cover the start of the automatic federal spending cuts called “the sequester,” which began in March. But the numbers do reflect cutbacks in spending at the end of Washington’s $800 billion stimulus program and as Miami-Dade governments grapple with ongoing budget squeezes. The decline shows a bottoming out of spending cuts, with 2010 and 2011 seeing government output down by between $100 million and $200 million.

In South Florida, the education sector was the No. 1 drag on output, with a 7 percent decline. The figures are preliminary, so the sharp decline may moderate as BEA revises its numbers.

Copyright © 2013 The Miami Herald. Distributed by MCT Information Services.

Single Family Home Construction Up by 7% in August

U.S. builders started work in August on the most single-family homes in six months and requested permits to construct even more in future months. The figures suggest housing remains a driver of economic growth despite higher mortgage rates.

Construction of single-family homes started rose 7 percent last month to a seasonally adjusted annual rate of 628,000, the Commerce Department said Wednesday. That’s the fastest rate since February. And builders sought 627,000 permits to construct future single-family homes, 3 percent more than July and the best pace since May 2008.

Overall, builders broke ground last month on houses and apartments at an annual rate of 891,000. That’s up from a rate of 883,000 the previous month. The gain in single-family homes was offset by a decline in volatile demand for apartments.

Total permits fell to a rate of 918,000 from 954,000 in July, also because of a decline in apartments.

Still, several economists noted that single-family homes represent the bulk of the market. They made up 70 percent of homes started in August. Ted Wieseman, an economist at Morgan Stanley, said their value is two to three times that of an apartment building. That suggests residential construction should boost economic growth again in the July-September quarter.

“The fact that the trend in single-family starts and permits continues to improve … supports our view that construction activity will continue to increase through year end,” said Joseph LaVorgna, an economist at Deutsche Bank.

Housing starts are 19 percent higher than a year ago. The housing market has been recovering steadily over the past year, helped by lower mortgage rates and steady job growth. The gains have contributed to economic growth at a time when consumers and businesses have spent more cautiously.

But mortgage rates have risen more than a full percentage point since early May. Some economists say higher rates may be starting to slow the recovery’s momentum. In July, new-home sales plummeted to the lowest level in nine months.

Mortgage rates could rise even further if the Federal Reserve decides later Wednesday to slow its $85 billion-a-month bond purchase program. Most economists expect the Fed will announce that it will reduce its purchases by $10 billion. The bond purchases have kept long-term interest rates low.

The average fixed rate on a 30-year mortgage was 4.57 percent last week. That’s near the highest level in two years. Still, rates remain low by historical standards. And most economists expect the housing recovery to withstand the increase in borrowing costs.

Homebuilder confidence remained at its highest level in nearly eight years in September, according to a survey by the National Association of Home Builders. But builders are starting to worry that sales may slow in the coming months if rates keep rising, the survey found.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.

Copyright © 2013 The Associated Press.

Move-up Buyers Return to the Market as Equity Levels Improve

As home equity levels improve, the move-up buyer is back on the market. More move-up buyers are selling their current properties to replace them with pricier homes, according to the latest report from FNC, a real estate data firm. 
The move-up buyers are coming with larger down payments on new homes as recent improvements in home equity levels have allowed them to move.

"An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending," says Yanling Mayer, FNC’s director of research. "These buyers are typically more responsive to market conditions and financial incentives.”

Rising mortgage rates are driving the higher demand because move-up buyers are wanting to take advantage before mortgage rates rise any more, brokers say.

Plus, more move-up buyers are in a better position to move. Forty percent of all home owners now have at least 20 percent or more of equity in their homes now, according to RealtyTrac data.

Also, 8.3 million additional home owners are expected to have at least 20 percent equity within the next 15 months if home prices continue to appreciate at the same pace, says Daren Blomquist, vice president of RealtyTrac. Blomquist adds that if 5 percent of these home owners decide to sell their homes, that would amount to an additional 415,000 homes for sale in the coming months.

Source: “Move-up buying activity rises with home equity gains,” HousingWire (Sept. 12, 2013)

Florida No. 4 in List of States With Biggest Foreclosure Drops

The number of home owners entering the foreclosure process dropped below pre-recession levels in August, according to RealtyTrac. In some states, the declines were even more pronounced. Financial site 24/7 Wall St. reviewed the states with at least 500 foreclosure starts as of August 2013 to identify which had the largest declines in the last year:

1. Illinois: Change in foreclosure starts: -66.2%
2. Arizona: -64.9%
3. Washington: -64.9%
4. Florida: -64.6%
5. California: -57.5%
6. North Carolina: -56.0%
7. Michigan: -55.0%
8. Tennessee: -51.0%

Source: “States with the Biggest Drops in Foreclosures,” USA Today (Sept. 14, 2013)

Obama Housing Scorecard: Number of Underwater Homeowners Down 42%

Home prices are rising, more underwater home owners are regaining equity, and home sales are on the rise, according to the Obama Housing Scorecard, released each month by the U.S. Department of Housing and Urban Development. 

The August report showed that home prices continue to make strong gains while the number of underwater home owners has dropped by 42 percent since the beginning of 2012. The number of home owners who owe more on their mortgage than it is currently worth has dropped from 12.1 million to 7.1 million as of the second quarter of 2013. Home sales—for existing homes and new homes—continue to rebound as well.

However, the report also strikes a cautious note, underscoring the fact that housing market hasn't returned to normal quite yet.

“As we regain stability in our housing markets, it is important to remember that we still have a long way to go in making sure that our housing finance system is strong for future generations,” says Kurt Usowski, HUD deputy assistant secretary for economic affairs.

The report notes that more than 1.7 million home owner assistance actions have taken place through the administration’s Making Home Affordable Program, including loan modifications and other foreclosure-mitigation efforts. But the administration continues to press mortgage servicers to improve their processes in helping struggling home owners, such as through better identification of home owners who could be helped through the program as well as improving upon the timeliness, accuracy, and detail of servicers communications with home owners.

“While there is significant progress, there is still more improvement needed in [mortgage] servicer behavior,” says Tim Massad, Treasury assistant secretary for financial stability. “And while the housing market has recovered substantially, there are still home owners struggling to avoid foreclosure and it is vital that we continue to try to help them.”

Source: U.S. Department of Housing and Urban Development and “Obama Housing Scorecard: Housing faces long journey ahead,” HousingWire (Sept. 13, 2013)

Florida Foreclosures Down 65%

Florida foreclosures dropped dramatically in RealtyTrac’s latest report for August. Overall foreclosure activity dropped 43 percent, and foreclosure starts – homes that received a first notice – dropped 54 percent year-to-year.

Nationally, RealtyTrac reports that national foreclosure filings – default notices, scheduled auctions and bank repossessions – decreased 2 percent from the previous month and 34 percent year-to-year, the 35th consecutive month where foreclosure activity has decreased on an annual basis. One in every 1,019 U.S. housing units had some kind of foreclosure filing activity during the month.

Some experts say the Florida drop relates, at least in part, to a bill passed during the 2013 session of the Florida Legislature to ease the court burden of foreclosures in the state. St. Petersburg foreclosure attorney Matthew Weidner tells the Tampa Tribune that mortgage servicers and banks now have more trouble proving that they own a mortgage, which the legislation requires.

That could mean lenders are doing more prep work before filing foreclosure paperwork, which would impact the foreclosure numbers. However, RealtyTrac Vice President Daren Blomquist says it’s too early to know the impact of Florida’s new foreclosure law.

Read more at Florida Realtors 2013

Florida Homes Show Robust Price Rise

Home prices nationwide, including distressed sales, increased 12.4 percent on a year-over-year basis in July 2013 compared to July 2012 – the 17th consecutive monthly year-over-year increase in home prices nationally.

Excluding distressed sales from the equation, of the five states with the highest home price appreciation Florida ranks fifth with a 13.5 percent increase.

Read more at Florida Realtors

Homeowners Ecouraged From Rising Prices

A big jump in home values has pulled 3.2 million homeowners above water on their mortgages in the past year, but that pace will slow if home price gains taper.

At the end of June, 12.2 million homeowners with mortgages – 23.8 percent – remained underwater, owing more on their mortgages than their homes were worth, according to an analysis by Zillow. That’s down from 15.3 million a year ago.

The drop in underwater borrowers correlated with a robust jump in home prices, which were up 12.1 percent for the 12 months ended in June, Case-Shiller’s 20-city index shows.

Fewer underwater homeowners is a “big plus” for the economy, says Mark Zandi, chief economist at Moody’s Analytics. “The home is still the most important asset most Americans have.”

Rising home values make people feel wealthier so they’re more likely to spend. On the flip side, if homeowners are underwater, they’re more cautious with spending, Zandi says.

Underwater borrowers are also more likely to default on home loans, which can weigh on surrounding home values. They also face more obstacles to refinance into lower-cost mortgages, which can also hurt their spending, says Svenja Gudell, Zillow senior economist.

While millions of homeowners remain underwater, another 18 percent of mortgaged homeowners have 20 percent or less equity in their homes, Zillow’s data show.

That much equity is generally needed to sell one home and have enough funds to buy another one. The swollen ranks of underwater and low-equity homeowners have affected the existing home market, Zandi says. Many people feel they can’t sell, or they don’t want to sell, at today’s prices, he says.

Even with the rapid home price gains in the past year, 57 percent of underwater homeowners carry mortgage debt that’s 20 percent or more what their homes are worth, Zillow says.

It will take years for them to regain equity, even as home values continue to recover. Some homeowners may never get back to a positive-equity situation, Gudell says.

Of the top 30 markets covered by Zillow, Las Vegas has the most deeply underwater homeowners. Almost 13 percent of mortgaged homeowners there owe twice or more what their home is worth, Zillow says. Miami is second with 8.7 percent of mortgaged homeowners in that situation, followed by Detroit at 8.2 percent.

Overall, Las Vegas also has the highest percentage of mortgaged homeowners who are underwater, at 48.4 percent. Atlanta is next at 44 percent and Orlando at 39.8 percent.

If home price gains slow, as many economists expect, the reduction in the number of underwater borrowers will slow, too. Over the next year, Zillow forecasts another 1.9 million homeowners will rise above water.

Separately, mortgage finance giant Freddie Mac reported that the average 30-year mortgage rate fell to 4.51 percent for the week ended Aug. 29, down from 4.58 percent a week ago. The average 15-year fixed mortgage fell to 3.54 percent from 3.60 percent a week ago.

Copyright © USA TODAY 2013

Foreclosure Inventories Falling

CoreLogic reports that foreclosure inventories nationwide fell 32 percent in July compared to a year ago. Is this another sign that the foreclosure crisis may finally be over? 

In July, 949,000 homes were in some stage of foreclosure, down from 1.4 million a year ago. That represents a decrease in foreclosure inventory from 3.4 percent of all homes with a mortgage in July 2012 to 2.4 percent in July 2013.

Completed foreclosures — which is a measure of all homes actually lost to foreclosure — were also down. In July, there were 49,000 completed foreclosures, down from 65,000 a year ago. That's a drop of 25 percent year-over-year. Prior to the housing crisis, completed foreclosures were averaging 21,000 a month. That means the number of foreclosures up for sale nationwide is gradually shrinking. 

Although Florida remains the state with the highest foreclosure inventory, the reducing numbers are encouraging.
The following five states had the highest foreclosure inventory (as a percentage of all homes with a mortgage), according to CoreLogic: 

• Florida
• New Jersey
• New York
• Connecticut
• Maine

Meanwhile, the following five states had the lowest foreclosure inventory:

• Wyoming
• Alaska
• North Dakota
• Nebraska
• Colorado

Source: CoreLogic

Florida's Housing Market Gains Momentum in July

Florida’s housing market gained momentum in July, with more closed sales, more pending sales, higher median prices and a shrinking inventory of homes for sale, according to the latest housing data released by Florida Realtors®.

“We’re seeing double-digit gains in statewide closed sales, new listings, pending sales and higher median prices,” said 2013 Florida Realtors President Dean Asher, broker-owner with Don Asher & Associates Inc. in Orlando. “And these increases are happening in both the single-family and the townhome-condo markets. July marks the 19th consecutive month that we’ve seen the statewide single-family home median sales price increase year-over-year. Florida’s housing market is growing and that’s good news for our economy.”

Statewide closed sales of existing single-family homes totaled 21,238 in July, up 20.9 percent compared to the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department in partnership with local Realtor boards/associations. Closed sales typically occur 30 to 90 days after sales contracts are written.

Read more at Florida Realtors

Declining Shadow Inventories Help Housing Recovery

Shadow inventories posted the largest quarter-over-quarter decline since the housing crisis began, and dropped 23 percent year-over-year, according to Compass Point Research & Trading.

Shadow inventories — homes at risk of default that have yet to hit the market — once posed a big threat to the housing recovery. At its peak in March 2010, shadow inventory was at about 5.5 million loans, according to data compiled by the Mortgage Bankers Association and Bloomberg. For the second quarter of 2013, shadow inventory has fallen to 2.99 million.

In comparison, shadow inventory loans totaled about 800,000 in March 2000—considered a more normal average.

There has been a large decline in 90-day-plus past due loans, which has helped lead to the drop in shadow inventories. Also helping to lower shadow inventories is the rise in home prices, lower unemployment rates, the higher number of loan modifications, and tightening of underwriting standards that has led to an improvement in mortgage credit quality, economists note.

“The shadow inventory is quickly being worked off and is no longer a significant weight on the housing market in most parts of the country. The key exceptions would be pockets in Florida, parts of the Midwest, and the middle Atlantic,” says Mark Zandi, Moody’s Analytics chief economist.

The decline is expected to continue as more home owners stay current on their loans.

Source: “Shadow Inventory Decline Begins to Accelerate,” HousingWire (Aug. 23, 2013)

House Prices Up 7.7% for Year Through June

U.S. house prices rose 7.7 percent in the year through June, extending a recovery that’s spurring more homeowners to list their properties for sale.

Prices climbed 0.7 percent on a seasonally adjusted basis from May, the Federal Housing Finance Agency (FHFA) said today in a report from Washington. The average economist estimate was for a 0.6 percent gain, according to data compiled by Bloomberg.

Price increases are drawing more sellers to a market where a tight supply of homes has pushed up values, said Paul Diggle, property economist at Capital Economics Ltd. in London. The inventory of unsold homes was a seasonally adjusted 5 months in June, up from 4.7 months in January, according to data from the National Association of Realtors.

“The current big gains in prices are temporary and they reflect the bounce from the bottom,” Diggle said in a telephone interview before the FHFA report. “They shouldn’t be expected to continue at that pace that much longer.”

Diggle’s firm projects that price gains will slow to 4 percent for 2014, down from 8 percent this year.

Higher mortgage rates may be encouraging buyers to complete deals before borrowing costs rise further. Sales of previously owned U.S. homes climbed 6.5 percent last month to the fastest pace since November 2009, the National Association of Realtors reported yesterday. The median price jumped to $213,500, up 13.7 percent from July 2012.

The FHFA’s report showed prices increased 17 percent from a year earlier in the Pacific area, which includes California and Washington. In the Mountain region, including Nevada and Arizona, the gain was 11 percent. The Middle Atlantic area – New York, New Jersey and Pennsylvania – had the smallest increase, at 2.5 percent.

The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae and Freddie Mac. It doesn’t provide a specific price for homes.

Copyright © 2013 Bloomberg

Existing Home Sales Increase in July

Existing-home sales rose strongly in July, with the median price maintaining double-digit year-over-year increases, according to the National Association of Realtors® (NAR).

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 6.5 percent to a seasonally adjusted annual rate of 5.39 million in July from a downwardly revised 5.06 million in June, and are 17.2 percent above the 4.60 million-unit pace in July 2012. Sales have remained above year-ago levels for 25 months.

Read more at Florida Realtors 2013

All-Cash Sales Dominate Market

More than half of all homes sold last year and in 2013, so far, have been purchased mortgage-free, according to economists at Goldman Sachs Group. Prior to the housing crash, about 20 percent of all homes sold were purchased without financing. All-cash sales have more than doubled over the last seven years.

“The surprisingly large cash-share of purchases helps to explain why home sales have jumped over the past two years despite more muted increases in broad measures of new mortgage activity, such as the MBA’s mortgage application index,” The Wall Street Journal reports.

The large share of cash buys are most likely from investors, foreign buyers, and wealthy home owners, the report notes.

The Goldman report estimated that around 44 cents of every one dollar of homes sold presently are being financed with a mortgage. Prior to the housing crisis, that stood at 67 cents of every dollar.

The Goldman Sachs analysts used data from the National Association of REALTORS®, Census Bureau, Mortgage Bankers Association, and Lender Processing Services to arrive at their calculations.

Source: “Half of All Homes Are Being Purchased With Cash,” Wall Street Journal (Aug. 15, 2013)

Builders Broke Ground on More Homes in July

U.S. developers broke ground on new homes at a faster pace in July, partly reversing a sharp drop the previous month. The figures suggest that housing construction is maintaining its recovery.

The Commerce Department said Friday that builders began work last month on houses and apartments at a seasonally adjusted annual rate of 896,000. That was up 6 percent from June, though below a recent peak of just over 1 million in March. Construction began on 26 percent more apartments, a volatile category, but 2.2 percent fewer single-family houses.

Applications for permits for future home construction also rose, though mostly because of apartments. Permits rose 2.7 percent to 943,000, boosted by a 13.5 percent jump in apartment permits. Permits for single-family homes dipped 2 percent.

In June, builders had sought the most building permits for single-family homes in five years. Americans are buying more new homes, and builders are increasingly optimistic that demand will keep rising. Both trends should spur more construction. New-home sales jumped in June to their highest level in five years.

And a measure of homebuilder confidence rose for a fourth consecutive month in August to nearly an eight-year high. The National Association of Home Builders/Wells Fargo builder sentiment index, released Thursday, rose to 59 from 56 in July. That is the highest level since November 2005. A reading above 50 indicates that more builders view sales conditions as good rather than poor.

Home prices and construction began to recover early last year, and the recovery has picked up in recent months. It has offset some of the drag this year from higher taxes and federal spending cuts.

Slow but steady hiring and historically low mortgage rates have encouraged more people to buy homes. Increased demand, along with a tight supply of homes for sale, has pushed home prices higher. It’s also made builders more optimistic about the market for newly built homes, leading to more construction and jobs.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.

Despite the lift from housing, the economy has been sluggish this year. It expanded at just a 1.7 percent annual rate in the April-June quarter after a 1.1 percent annual rate in the first three months of the year.

Copyright 2013 The Associated Press

Builders' Confidence On The Rise

Builder confidence in newly built, single-family homes is on the rise again.

The National Association of Home Builders/Wells Fargo Housing Market Index posted its fourth consecutive monthly gain in August, bringing it to its highest level in nearly eight years. The index gauges builders’ perceptions of single-family home sales, sales expectations, and buyer traffic for the next six months.

The index now stands at 59 — and any number above 50 indicates that more builders view market conditions as “good” rather than “poor.”

"Builders are seeing more motivated buyers walk through their doors than they have in quite some time," said NAHB Chairman Rick Judson. "What's more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market."

Buyers are showing increasing demand for the limited supply of new and existing homes in markets across the country, says David Crowe, NAHB’s chief economist.

"However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor,” Crowe notes.

Source: National Association of Home Builders

Good News in the Housing Sector Bodes Well for Future Economic Growth

Four years into the recovery, and lackluster economic growth persists. Housing continues to be one bright spot, providing a positive boost to the GDP in the second half of 2013, according to Freddie Mac’s August 2013 U.S. Economic and Housing Market Outlook report.

"The economic recovery has completed its fourth year, but it has not been without growing pains,” says Frank Nothaft, Freddie Mac’s chief economist. “The U.S. has experienced the weakest economic recovery coming out of a recession in the Post-War era. Despite the eye-popping monthly house price appreciation taking place in some parts of the country, the recovery that has lingered for years is just now starting for many Americans. Fortunately, we should see this positive housing trend continue to improve in the second half of the year. A housing recovery is a broad-based recovery, benefiting all Americans, and therefore the overall economy."

Economists point out in the report that the positives in the housing market can help lift the economy in three main ways:

• Increasing construction - Rising demand for housing will help increase new single-family and multifamily construction, and in turn boost home sales. Economists project that starts will hover just below 1 million over the second half of the year, which will mark the best six-month building pace since the first half of 2008.
• Wealth effect - "Through the housing wealth effect, rising home prices should help to spur consumption spending," economists note. Home equity lending is already showing signs of rising. In the second quarter, $9.5 billion in home-equity was cashed-out as part of a refinance. 
• Rising home prices - The uptick in home prices will aid the economic recovery by helping to spur small business formation — “as a business owner’s home often serves as collateral for a start-up,” economists note in the report. 

Source: Freddie Mac

Slowdown in Home Prices is No Reason to Panic

Although home prices have risen nearly 12 percent from a year ago, a slowdown is expected soon. But many analysts say it’s no cause for concern.

“Prices are still going to rise — just not as at brisk a pace as we’ve seen over the past year,” The Wall Street Journal reports. “This should calm down those pundits who have fretted over a new crop of housing bubbles.”

According to a report by Goldman Sachs economists, home prices will likely moderate because they have returned to “fair value” and are no longer being viewed as “undervalued,” as they were for the past two years. Also, a rise in mortgage rates may cause some buyers to re-evaluate their options. 

For the first time this year, buyer traffic dropped below agents’ expectations, and “the next few months will be crucial to determining whether this is just a pause or something more,” the Goldman Sachs report notes.

The report also notes that investors will likely slow their purchases as the number of foreclosures start to dry up. What’s more, the inventory of homes for sale is starting to loosen as more sellers look to put their homes on the market. Those sellers, in turn, will then be looking to purchase another home, so prices will still likely continue to rise until new-home construction catches up.

“With the improving underlying housing demand driven by household formation and economic recovery, we think housing activity will remain on an upward trajectory, despite occasional ups and downs along the way,” says the Goldman report.

Source: “Why Home-Price Growth Will Slow,” The Wall Street Journal (Aug. 12, 2013)