Tag Archives: Business and Economy

Buyers Flocking to ‘Harshest’ Market Yet

The climate is gradually moving toward spring-like temperatures…but it is burning up in housing, with prices rising 8 percent year-over-year, according to a new realtor.com® report. The climb in March sent the median list price to $280,000—above the prior record $275,000 from July 2017.

Based on data from realtor.com, there were 1.29 million March listings (a decline of 8 percent year-over-year), and homes lasted 63 days on-market (a 7 percent decline year-over-year and a 24 percent decline month-over-month).

“Our latest inventory data tells us buyers are out in full force this spring,” says Javier Vivas, director of Economic Research for realtor.com. “Never in history have there been more eyes on fewer homes than today. At the end of March, we observed price gains that put us on pace for half of the homes listed this summer to be above $300,000. Buyers are not just paying more for the same home; the mix of homes in the market is rapidly changing.”

 According to Vivas, the most affordable homes are the most scarce—and the most sought-after.

“The injection of new listings above $350,000 remains healthy, but inventory between $200,000 and $350,000 remains anemic and non-existent under $200,000,” Vivas says. “This bodes well for buyers in the upper and luxury tiers but paints a darker picture for the entry-level market. If the pattern holds, one in 12 listings nationally will be listed above $1,000,000 this summer, while only one in three will be listed under the $200,000—the sweet spot targeted by nearly half of all buyers. In February, above-$1,000,000 homes made up only one in every 40 home sales.”

 “March housing trends show the inventory depletion we’ve seen over the last two buying seasons is carrying over to this year,” says Vivas. “It’s going to be a languid search for buyers this season as they face the harshest, most competitive buying conditions yet.”

by: Suzanne De Vita, RISMedia

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What to Consider When Selling Your Home in a Rising Rate Environment

There are many economic variables to consider when selling your home when interest rates are rising. If that’s the only changing economic variable, you’re generally going to see a negative impact on both home sales and home prices. This means as interest rates rise, the buyer pool for your home is going to shrink.

In 2008, the Federal Reserve set rates at 0.25 percent because of the recession and the lack of buyer confidence or demand. Since then, buyer confidence and buyer demand have risen. In December 2015, rates climbed to 0.5 percent and continued to rise to where they are today at 1.5 percent. The Fed has noted rates will rise to 2 percent in 2018 and then 3 percent by 2020.

What Happens to the Ability to Sell Your Home With These Rises in Interest Rates?
If interest rates rise 1 percent and all other economic factors remain the same, purchasing power for homebuyers will decrease by just over 11 percent; therefore, every quarter-percent (0.25 percent) rise of interest rates reduces homebuyer purchasing power by 3 percent.

That means for a home purchase of $300,000, a 1 percent interest rate rise reduces buying power to just under $267,000. So, someone who potentially may have been able to purchase your home may no longer have the buying power to do so. This creates a smaller buyer pool and less demand for your home. It’s also likely to increase supply as fewer people are able to purchase homes.

If mortgage rates rise, it becomes more probable for indecisive buyers to rush into the market, and the short term will likely see a decent boost; however, it could add extra pressure if rates continue to rise without leveling out.

While interest rates play a role in the housing market, there are a variety of personal and economic factors to consider, as well.

What Other Economic Factors Play a Role?
Supply and demand play crucial roles in determining the movement of home prices. If supply goes up, home prices go down. If supply goes down, home prices will probably go up. If demand increases, home prices mostly likely will as well; however, if fewer people are looking to buy homes, then prices will most likely decrease. As a seller, these are important factors to consider when putting your home on the market.

The sale of new homes is another factor to consider alongside rising interest rates because supply and demand will always play a factor in the home-buying process. Supply increases when new homes are created. Assuming that interest rates don’t rise too rapidly, paying attention to new-home inventory levels will give you an indication of what to expect as a seller.

Monthly income, as it relates to monthly mortgage payments, is a more important variable to gauge than interest rates alone. Your debt-to-income ratio plays a larger factor in your ability to qualify for a mortgage than interest rates alone. When monthly income rises, your ability to absorb higher interest rates does, as well. This means that as long as people are making more money, they’ll also be able to pay off any increase in debts.

When the real estate market crashed in 2007-2008, monthly payments of principal and interest were nearing 25 percent of the U.S. median family monthly income. Even with a rise in interest rates, Americans are currently seeing the highest monthly median income in the last 35 years. Because of this, the percentage of monthly income going toward monthly payments is still well below levels that analysts consider dangerous.

One of the largest surprises is the percentage of all-cash transactions for home purchases. Even with interest rates at historic lows, the percentage of all-cash transactions is higher than normal.  Overall, we seem much more hesitant to take out mortgages than we have been in the past.

High stock market valuations allow people to diversify their percentage of assets, cash out and reinvest in real estate to keep their portfolio balanced.

The number of distressed properties is a result of a strong job environment. This allows folks to pay their mortgages without defaulting, while also helping to keep prices up even with a rise in interest rates.

While interest rates play a large factor in selling your home for top dollar, they’re in no way the only deciding factor. All of the factors mentioned above should be taken into consideration before you rush into selling your home because of high interest rates.

By Ryan Fitzgerald,  Raleigh Realty

As the Triangle drifts, a growth tsunami looms

Wake Up Wake County, the advocacy group that promotes careful development in one of the nation’s fastest growing counties, held a seminar last week at WakeMed. It took place in the hospital’s conference center, but maybe it should have been in the Emergency Room. When it comes to growth, the Triangle is in serious condition.

Advocates and county and municipal officials turned out for the seminar titled: “Our future: Growing smart with housing and transit.” The keynote speaker was Chris Zimmerman, an economist and former Arlington County, Va., elected official who is now with the organization Smart Growth America.

Between the slides and hopeful talk of well-designed growth, it was hard to stifle a sense of gloom. Transit boosters, local officials and planners are trying to get ready for the people to come, but the truth is Wake County and the Triangle aren’t ready and may never be.

Wake County alone is projected to add more than 200,000 people in the next 10 years. The Triangle’s overall growth could double that. One doesn’t need to be a sentimentalist clinging to the disappearing, small-city Triangle to look ahead and think, “uh-oh.”

67 people a day

We are already familiar with the oft-repeated statistic that Wake County is growing by 67 people a day. Now the greater Raleigh area has made the cut for the top 20 places where Amazon wants to build its second headquarters. If we win, it will bring growth of truly Amazonian proportions – 50,000 jobs and probably the same number of cars. The jobs will pay well, but also will drive up rents and home prices.

Most experts think the Triangle won’t win the bid because we are still too small and lack a mass-transit system. But Bloomberg News reported last week that North Carolina is in the running for another giant headquarters: Apple. If Apple builds its fourth headquarters in North Carolina, it may well come to the Triangle.

Growth isn’t a bad thing in itself. I was a newcomer once, arriving here in 1991. Wake County has grown by a half million people since then. I’ve seen the changes, most of them good – better stores, restaurants, entertainment and culture.

But now the national economy is soaring and growth here is accelerating faster than it can be accommodated. Wake County and the Triangle are attracting both aspiring millennials and retiring boomers. In between are young families with children adding to a Wake County school system that is growing by more than 2,000 students annually.

Signs of trouble

In the face of this growth there are signs of trouble. The Triangle has failed to create a regional government that can coordinate growth. The Raleigh City Council is at Ground Zero of the boom, but can’t manage to approve such obvious steps as allowing smaller backyard dwellings to increase housing density. And the state is going ahead with plans to complete the 540 Loop in southern Wake County. That 28-mile, $2.2 billion highway extension will fuel sprawl even as the Republican-led General Assembly is sharply limiting its support for light rail.

Zimmerman said growth can’t be stopped, but it can be managed. He said that requires that local officials think far ahead, innovate and move fast. Once the surge is on top of you – when traffic is gridlocked and affordable housing is available only on the far outskirts of a city – it’s too late.

In North Carolina, local responses to growth are limited by state law that gives the legislature final say over such tools as impact fees and affordable housing requirements. Zimmerman said Virginia’s cities face the same restraints, but Arlington worked around them by offering developers more of what they wanted in return for more of what the city needed. Arlington was also able to control growth by concentrating new offices and mid-rise housing around Metro rail stops. Wake County lacks a light rail system, but could concentrate new development around a coming network of rapid transit bus lines.

Transit is a key to smart development, Zimmerman said, but what people young and old want most are “things closer together.” They want to walk, whether from home to work, or restaurant to theater.

“What it really comes down to,” he said, “is walkability.”

What it needs to begin with, on the part of government and residents alike, is urgency and flexibility.

By: NED BARNETT, News & Observer