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Real Estate Report – Is It The Weather?

February 11, 2014

posted by Stephen Katz @ 2:30 PM
Friday, February 20, 1914

Real Estate Trends Newsletter -- A weekly news update for mortgage professionals
Stephen Katz
800 Johnson Ferry Road, NE
Atlanta, GA 30342

NMLS ID: 69623

February 11, 2014

 Is It The Weather?

For the past three quarters, the economy has grown at an annual rate of just under 3.5% based upon the preliminary numbers released in late January for the 4th quarter. This growth rate is even more impressive when you consider the fact that we endured a government shutdown for part of the last quarter of 2013. It is estimated that this shutdown knocked approximately 1% off the growth rate for the 4th quarter. A 3.5% growth rate, while not smoking hot, is strong enough to bring down unemployment while not igniting fears of inflation. A pretty good balance.

And this balanced growth is a good indication as to why the stock markets rallied strongly in 2013 while long-term interest rates rose. Now we ask whether this growth rate is sustainable for 2014. We had several weak reports released in January, including the December jobs report and a slowing housing sector. Some have hypothesized that the severe winter weather in December and even worse weather in January is the culprit. If this is the case, the numbers should bounce back–including the stock market and rates, both of which fell in January.

Keep in mind that storms actually can boost some sectors of the economy such as the use of energy. Our heating bills are telling us that. Last week’s release of January’s jobs report was another mixed bag with the unemployment rate unexpectedly moving down slightly to 6.6% but the total jobs created below forecast at 113,000. It is interesting to see both the number for January and also the revision of the previous months’ numbers as there was very little adjustment to the disappointing December release but upwards adjustments in previous months. Weather related slowdown? With regard to jobs creation we certainly hope this is the case. We think everyone is hoping for a warmer February, though it has not started out that way. 

 More than three-quarters of Americans who fall within Generations X and Y believe they have become increasingly knowledgeable about home ownership due to the greater media coverage on the real estate market the past six years, according to a Better Homes and Gardens Real Estate survey of about 1,000 18-35 year olds. These two generations say that before buying they’d do their homework first, researching interest rates, home prices in a desired neighborhood, and the ability to secure a loan. Despite the past housing crisis, these generations say they are not deterred from home buying, and 75% say that home ownership is a key indicator of success. Generations X and Y, which boast 103 million of the population, are viewed as major drivers of the economy for the next 30 years. Among some of the survey’s findings about Generation X and Y’s perceptions on home ownership is: 

  • 71% of Gen X and Gen Y surveyed say that home ownership is not something they deserve but rater something you must earn, and they say they’re willing to sacrifice in order to be able to buy a home one day. Sixty-two percent say they would save by eating out less, 40 percent are willing to take a second job, and 23 percent would move back home with their parents. 
  • 75% say owning a nice home is an indicator of success over taking fancy vacations, owning an expensive car, or owning designer clothing. Source: Better Homes and Gardens Real Estate

Professionally photographed homes tend to sell for more money and sell faster than homes listed with point-and-shoot cameras, according to a new study by the real estate brokerage Redfin. The study found that homes priced between $200,000 and $1 million sold for an average of $3,400 to $11,200 more than their list prices when professionally photographed than homes with amateur photos. For homes priced between $400,000 and $499,999, the study found that homes professionally photographed sold for $11,200 more. In an analysis of 22 markets, the Redfin study evaluated the sales success of homes shot professionally with a digital single-lens reflex camera versus homes shot with amateur, point-and-shoot cameras. The study evaluated homes priced between $200,000 and $1 million. The study also found that homes that were professionally photographed also tended to sell faster. For instance, homes in the $400,000 range that were professionally photographed sold 21 days faster than those photographed with point-and-shoot cameras. Source: Redfin

Could this be the year to check out hybrid mortgages, which haven’t been popular lately? Maybe. You can count on interest rates going higher because the Federal Reserve intends to continue reducing its monthly purchases of mortgage bonds and Treasury securities, which will have the side effect of raising rates and the national economy finally appears to be picking up steam, based on the latest quarterly data. Higher growth rates in turn will increase demand for available credit and probably nudge rates higher. So what does this mean for you if you’re thinking about buying a house or refinancing and you want to nail down the most favorable interest rate and terms? Should you shop primarily for a traditional home loan that guarantees you a specific rate for 15 to 30 years? Or should you check out what’s also on the shelf in the way of hybrids — loans that provide a guaranteed fixed rate for a pre-defined period of time, say five, seven or 10 years — then convert to a rate that can change annually? The case for sticking with a traditional fixed-rate loan is straightforward. Though 30-year rates are more than a percentage point higher this month than they were a year earlier, they are still not far off multi-decade lows. On the other hand, loans that provide a guaranteed fixed rate for a pre-defined period of time, then convert to a variable rate, are usually less expensive than traditional 30-year fixed loans. Source: Ken Harney, The Nation’s Housing  Want to check out current rates on hybrid adjustables?  Just contact me and I will give you up-to-date quotes. 

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Stephen Katz

(770) 309-0939 (direct) or (866) 742-8400 -- For the past 18 years, Stephen Katz has built a successful business almost entirely on referrals. As your mortgage consultant throughout the home loan process, Stephen will explain the pros and cons of all available mortgage programs and help you choose the financing option that is best suited to your needs. Throughout the loan process, he will keep you informed and will respond quickly to your requests with answers and solutions. Consistently a top producer, Stephen is a Mortgage Bankers Association "Diamond" Award winner, a Georgia Mortgage "Top Gun" and has closed almost half a billion dollars in loans. Put his knowledge and experience to work for you!

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