HEALTHY RECOVERY UNDERWAY

February existing-home sales and prices affirm a healthy recovery is underway in the housing sector, according to the National Association of Realtors®. Sales have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive mon

February existing-home sales and prices affirm a healthy recovery is underway in the housing sector, according to the National Association of Realtors®. Sales have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive months of year-over-year increases.

Total existing home sales increased 0.8 percent to a seasonally adjusted annual rate of 4.98 million in February from an upwardly revised 4.94 million in January, and are 10.2 percent above level seen in February 2012. February sales were at the highest level since the tax credit period of November 2009.

Lawrence Yun, NAR chief economist, said conditions for continued housing improvement are at play. “Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise. Though home prices are rising much faster than rents, historically low mortgage rates are still making home purchases affordable. The only headwinds are limited housing inventory, which varies greatly around the country, and credit conditions that remain too restrictive.”

Total housing inventory at the end of February rose 9.6 percent to 1.94 million existing homes available for sale, which represents a 4.7-month supply 2 at the current sales pace, up from 4.3 months in January, which was the lowest supply since May 2005. Listed inventory is 19.2 percent below a year ago when there was a 6.4-month supply.

The national median existing-home price for all housing types was $173,600 in February, up 11.6 percent from February 2012. The last time there were 12 consecutive months of year-over-year price increases was from June 2005 to May 2006. The February gain is the strongest since November 2005 when it was 12.9 percent above a year earlier.

Could Rising Mortgage Rates Help Housing?

Mortgage rates are still near record lows but they have been inching up slightly as the U.S. economy shows signs of improving.

Mortgage rates are still near record lows but they have been inching up slightly as the U.S. economy shows signs of improving. The 30-year fixed-rate mortgage reached its highest level in more than six months averaging 3.63 percent.

Mortgage rates are projected to rise higher this year which could make buying a home more expensive. But some housing analysts say that the higher rates could actually help aid the housing recovery.

Home buyers who have been lingering on the market may finally move forward on a purchase. The increasing rates may drive home the point that while borrowing is still cheap, they’d better lock in a rate now before rates move any higher.

Andrea Heuson, finance professor at the University of Miami, says that the increase in mortgage rates also interestingly coincides with increased demand for loans across U.S. businesses—which also could prove positive for home sales. Commercial and industrial loans reached $1.5 trillion, up more than 12.5 percent in January from a year earlier. “The recent increase … bodes well for the future of the U.S. economy,” Heuson told Fortune. When businesses borrow more, that usually boosts the economy,  from job growth to increasing consumer confidence as well as increasing home sales.

Where Are Home Prices Heading?

Home prices are expected to continue their trajectory upward, projected to rise 3.7 percent between the third quarters of 2013 and 2014, according to data from the Federal Housing Finance Agency.

Home prices are expected to continue their trajectory upward, projected to rise 3.7 percent between the third quarters of 2013 and 2014, according to data from the Federal Housing Finance Agency.  In 1997, home prices grew at a 3 percent rate, but from 1998 to 2006, prices started soaring above 5 percent and even saw double-digit increases in some of those years.

“Although some recent real estate activity has been speculative, it seems as if buyers have more realistic expectations about housing market returns after having lived through the largest housing market crash in U.S. history,” says David Stiff, Fiserv’s chief economist. “2012 was the first year since 1997 that the housing market has resembled something recognizable as normal. For the past 15 years, home-price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology.”

Source: RISMedia

Housing Continues to Gain Ground despite Economic Slow Growth

Although the economy seems to be transitioning to a slightly stronger growth path, unresolved fiscal decisions pose significant headwinds in early 2013. “The question mark surrounding potential tax increases and government spending cuts produces signif

Although the economy seems to be transitioning to a slightly stronger growth path, unresolved fiscal decisions pose significant headwinds in early 2013. “The question mark surrounding potential tax increases and government spending cuts produces significant economic uncertainty,” said Fannie Mae Chief Economist Doug Duncan. “Our February forecast accounts for a modified version of sequestration unfolding in 2013, which we expect will result in less fiscal constraint – roughly a 0.2 percentage point drag. Our outlook is bolstered by the employment picture which is trending better than previously reported, as well as the momentum in manufacturing and energy production.” The improving performance of the housing market, boosted by strengthening home prices, inciting more potential buyers to the market, is expected to continue through 2013 and will be considered an important growth driver. Overall, economic growth is expected to come in at 2.0 percent for all of 2013, in line with average growth since the recovery began more than three years ago, Economist Ducan also expects the housing recovery to broaden this year and said, “… the degree to which these drivers will serve to offset the headwinds from ongoing and forthcoming fiscal contraction is still to be determined.” Source: Fannie Mae