Community News

Though local real estate trends are what I normally focus on, it is still important to view statistics on a larger, national scale to stay “in the know.”  This month’s article is somewhat of a potpourri of topics surrounding the real estate industry.

Realtor.org recently reported that over 70% of our national housing markets which are classified as “metro markets” are showing signs of improvement.  (Note:  A metropolitan statistical area is a geographical region with a core urban population of 50,000 or more people as defined by the U.S. Office of Management and Budget and used for statistical purposes.  There are currently 381 metro markets in the U.S.) This number is three times greater than the number in June 2012.  The criteria include strengthening the categories of housing permits, employment, and housing prices for the previous six months or more. 

As for the ease of purchasing real estate, historically low-interest rates have certainly contributed to keeping the market viable even in the bust cycle.  However, mortgage rates have begun to slowly rise in the past several weeks.   Freddie Mac shows that for the week ending June 6th, the national average for a 30-year fixed-rate mortgage is 3.91%. This is an increase from 3.81% the previous week and 3.67% one year prior. The 15-year fixed-rate mortgages are similar in that as of June 6th, they averaged 3.03% compared to 2.98% the week before and 2.94% in 2012.

As a whole, American households now have a higher net worth than when the recession began in 2007, growing by 4.5% in the opening quarter of 2013. The New York Times reported, “Even as consumer spending remains healthy and the housing market rebounds, the labor market has been much slower to recover and many Americans at middle and lower income levels remain worse off than before the downturn.” Fortunately, in Montana, our jobs have recovered substantially in the last few years.  We are starting to see move-up buyers, as well as an increase in the purchase of secondary residences.

The National Association of Realtors® (NAR) Midyear Legislative Meetings and Trade Expo in May also provides some interesting “elevator talk” statistics.  A direct quote from NAR’s chief economist, Lawrence Yun, sums the forecast up nicely. “Steady job creation and household formation have been helping to unleash pent-up demand in the housing market.  Lagging housing starts and a continuing housing shortage means home prices are primed to rise further, by 13% cumulatively in 2013 and 2014, which will add more than $2 trillion to household wealth over this period.”  Existing home sales rose 9.4% to 4.3 million units in 2012 over the previous year with projections of 5.0 million in 2013, 5.3 million in 2014, and 5.7 million in 2015.  Sales of investment homes increased greatly in 2011 and 2012, and vacation home sales are showing recovery on a slow but steady basis.  Higher sales prices have occurred in part due to very low inventory.  Median prices rose 6.4% in 2012 with anticipated gains of 8% in 2013 and 5% in 2014.

A couple of other takeaways from the “Challenges and Opportunities in Housing and Homeownership” session of the same meetings include mobility and demographics.  The current residential mobility rate (measured by those changing residences in the prior year) is around 12% which represents a fairly steady decline since a high of 20% in the 1990s. This could be due to the lack of inventory in desirable areas or unemployment/ underemployment.  Age distribution and life stages (getting married, starting a family, retiring) also affect this statistic and both baby boomers and millennials are not necessarily following patterns that we have seen before. 

Through all of the boom and bust cycles, seller’s market versus buyer’s market, and the waiting games of timing the market just right for personal needs, real estate has been and continues to be a solid investment and wealth builder for those who view homeownership as a long term venture.