|A Rare American Species|
For the last few months I have been trying to figure out a pithy article on the current state of housing in the United States. But all I can see, based on news programs, news articles, and self-serving government reports is confusion and conflicting statistics.
Here is what we think we know: current 30 year fixed mortgage rates are in the very low 4's (4.13% to 4.20%). 15 year fixed loans are 3.17% and adjustables are in the 2.75% to 3.00%. And the trend over the last few weeks seems to be down or at least steady. Even equity-based loans are in the low 4s. From where I sit loan rates do not seem to be the reason for the lag in sales.
The weather? Potentially this is a big reason, anyone east of Reno, Nevada has seen a winter that blows through once every twenty or thirty years. People in the lower, middle, and upper Midwest stayed in and those in the east never left their fireplaces except to go to work. The last thought for everyone was house hunting. Most were trying to keep warm.
Employment? No one knows how many are really unemployed or underemployed. The government drops from the rolls and stats those unemployed after a period of time; the reason for this is lost to the world of stats and figures. But those are real people and are still living and breathing – but unfortunately they are also not in a position to participate in new homes. So until employment comes back to the historic norm, this will continue to be a drag on construction and sales.
Technology? Here's a thought: Businesses once moved employees to match job needs. This was a serious driver of home sales in suburban areas during the 1950s, 60s, and 70s. This promoted the old saw about home sales peeking in summer to prepare for families moving in before the next school season. This drove a lot of home sales. Now with technology these employees can often stay in place, communicate, and manage projects and employees long distance. The Internet and other protocols allow face-to-face meetings with Cisco and Skype systems. How much this affects new home sales is yet to be determined.
Home Prices: Home prices continue to rise in most parts of the country. But remember that ALL home pricing structures are local. Detroit? Buy a huge home needing some fixing up for less than $30,000. Same home in Pleasanton, California - $1 million plus. Think local! But it is the trends to look at for overall economic activity, for the past year average existing home prices are up almost 10%. Foreclosures and short sales are down 10% in the same period. An interesting figure is that 34% of homes were on the market for less than a month, this does show some velocity to the market. (Article )
Average new home median price is $261,800, down a tic over the last month. The current running annual new home sales estimate is 455,000, half what experts believe is the real demand in a healthier economy. What 500,000 additional new homes would do to average pricing, economic activity, and growth is something serious to ponder. In the years before the Great Recession we were building 1.2 million homes annually, but then again that did contribute to the problem.
Debt: Student debt for those under 33 is a serious drag on sales of first homes. Paying for college education loans severely limits the ability to accumulate down payments and afford monthly mortgages. This is a worsening problem and will continue to affect the first home, under 30, market for years.
My history teacher in high school told me that there are liars, damn liars, and government statisticians. Most of the housing numbers are generated through the Census Bureau and then churned through the media, so my readers consider the source then consider the reality. SOURCE
Stay Tuned . . . . . .