February 2014 Newsletter

Jeff Fleming headshot 2012It’s February and Spring is just around the corner!  Are you prepared for the retirees who are going to be putting their homes on the market and looking for that perfect retirement destination?  Whether it’s a waterfront home, a mountain cabin, a beach villa, or a golf view condo, AARC members have a portfolio of amenitized options!

AARC is your source for market trends and customer insights.  Tell a friend today!


Jeff Fleming, Chair

A Closer Look at the Latest Existing Home Sales Release

Danielle Hale / Research Economist, National Association of Realtors

Taking a closer look at Existing Home Sales price data reveals an interesting trend going on in the market…

  • As shown in the chart below, while sales in the lower home-price tiers are falling, sales at the upper end are rising, quite swiftly at the highest end.
  • One impact of the fact that home sales are rising at the high end but falling at the low end is that the mix of homes may be changing. In addition to fewer distressed properties, homes selling now may have more bedrooms, square footage, and other valuable amenities than homes that were sold last year.
  • This shift in the mix of homes selling has the effect of pushing up the price of the median home sold, which is simply the price of the home where 50 percent of all homes sold were priced above and 50 percent were priced below that sales price.
  • In spite of this drawback in the median home sales price, it has advantages of being able to be produced quickly and being a remarkably good leading indicator for other price measures that are less susceptible to the mix of homes issue.

home-salesSolid New-Home Sales Lift Hopes for Housing Market

Martin Crutsinger / AP Economics Writer

A surprisingly strong pace of new-home sales last month has boosted hopes that the spring buying season will be solid enough to lift the overall economy.

Sales of new homes rebounded in January to the fastest rate in more than five years. The strength in purchases followed a slowdown that had been linked to higher mortgage rates and severe winter weather.

The report Wednesday from the Commerce Department helped support stock prices, especially shares of homebuilders.  Many economists predict that sales of both new and existing homes will rise in 2014, lifted by an improving economy and steady job growth.

“Despite higher mortgage rates, the fundamentals for new-home sales and residential construction are solid,” said Stuart Hoffman, chief economist at PNC Financial Services Group. “The economy is adding jobs and incomes are growing, making households more confident.”

Sales of new homes rose 9.6 percent in January to a seasonally adjusted annual rate of 468,000. It was the fastest pace since July 2008.

The surge came as a surprise to economists. Most had expected a decline in January, in part because they thought purchases would be held back by winter storms in much of the country. Sales had fallen 3.8 percent in December and 1.8 percent in November, prompting concerns that the housing recovery might be losing momentum.

Housing, while still a long way from the boom of several years ago, has been recovering over the past two years. Residential construction has grown at double-digit rates over the past two years and contributed about one-third of a percentage point to overall economic growth last year.

Hoffman said he expected construction and sales of new and existing homes to post further gains in 2014, though a bit less than in 2013.  “There is significant pent-up demand for new homes after potential buyers have put off purchases for years because of concerns about the economy,” he said.

Hoffman foresees sales of new homes climbing to around 500,000 this year, up from 428,000 in 2013, when sales had risen 16.3 percent to their highest level in five years.  Other economists are even more optimistic. Economists at IHS Global Insight are forecasting that new-home sales will hit 528,000 this year, a 23.4 percent increase over last year.

Wednesday’s brighter-than-expected news on housing helped lift spirits on Wall Street, sending the Standard & Poor’s 500 index back into record territory and sharply boosting stock prices of several home builders.  Shares of both PulteGroup and Lennar rose about 3 percent.

Lowe’s shares surged nearly 5 percent. The home-improvement retailer said its net income rose 6 percent in the most recent quarter, thanks in part to the housing recovery.

Housing indicators are especially hard to read in the winter because of the unpredictable effects of severe weather. But analysts said a variety of signs point to underlying strength that should support sales gains in the March-June spring selling season.  “We expect any drop-off in housing to be a pause and not a retrenchment,” said Michael Gapen, an economist at Barclays Research.

Economists are optimistic about further sales gains because they think the overall economy will strengthen this year as more people find jobs and last year’s drag from higher federal taxes and government spending cuts eases.

The sales gain for new homes in January was led by a 74 percent surge in the Northeast. Sales were up 11 percent in the West and 10 percent in the South. The only region where sales declined was the Midwest, where they fell 17 percent, likely a reflection of winter storms.

The median price of a new home sold in January was up 3.4 percent from a year ago to $260,100.

Home prices are forecast to rise in 2014 but more slowly than last year. The Standard & Poor’s/Case-Shiller 20-city home price index rose by a healthy 13.4 percent in 2013. That was the largest calendar gain in eight years.

One assumption underlying economists’ expectations on housing: Even as the Federal Reserve keeps scaling backs its bond purchases, which were used to keep long-term rates low, mortgage rates will rise only gradually this year.

The average rate on a 30-year mortgage rose to 4.33 percent last week, up from 4.28 percent the previous week. Rates had surged about 1.25 percentage points from May through September, peaking at 4.6 percent, but have since retreated a bit.

AARC - FEB Image 1
5 Signs a Neighborhood is About to Take Off

By Donna Fuscaldo / FoxBusiness

Bargains may be few and far between in the current real estate market, but buyers can get a deal if they are willing to purchase a home in an up-and-coming neighborhood. But discovering a neighborhood with potential can be tricky.

“When you buy in an up-and-coming neighborhood, you are able to get in on the ground floor of appreciation,” says Michael Corbett, real estate and lifestyle expert for real estate website Trulia. “You really want to look for neighborhoods where you can increase the value; the best way to do that is in transitional neighborhoods on the rise.”

But like all investments, buying in a developing neighborhood comes with risks. After all, getting a bargain on a home only becomes an investment if the neighborhood continues to develop and home prices appreciate.

Real estate experts offer the following signs home buyers should be aware of when evaluating emerging neighborhoods:

1. Development Is Already Happening

Construction activity, whether it’s retail, condominiums or residential homes, is a good sign of an area about to boom. “If you start to see large-scale development in certain areas, that’s a harbinger of progress and transition,” says Corbett.

“On a smaller scale, the big tip…is look for Starbucks going in.” She says the coffee giant spends a lot of money on market research to determine new locations.

2. Trendy Establishments are Popping Up

Development doesn’t have to be going at all hours of the night for a neighborhood to qualify as a potential hot spot, but the quality of the new retailers and restaurants are important.

“They don’t need to be the most expensive, but if they are concepts [wine bars, juice bars, organic or farm-to-table restaurants] that mimic those in flourishing neighborhoods, there is a good chance the neighborhood is on the rise,” says Doug Breaker, president and CEO of HomeFinder.com.

3. The Neighborhood is on the Cusp of a Metropolitan Area

Many home buyers get priced out of metropolitan areas and will look for adjoining neighborhoods that are close to cities’ amenities, but are considerably cheaper. Experts say this move is a great way to get in a neighborhood before it becomes overpriced. Corbett points to Miami as an example. That city started to rebound and is now very expensive. But just outside of Miami in Hollywood, Fla, home buyers can get a home for a smaller price tag but still enjoy the perks of living near a major city.

Public transportation is also a big driver of growth in adjacent neighborhoods, adds Breaker. “If there is not an easy way for residents to commute, it will be difficult for the neighborhood to succeed,” he says.

4. City Development Projects and Lower Crime Rates

One of the biggest signs that a neighborhood is on the rise is when crime is on the decline. “If the neighborhood is seeing increased crime it’s not ready to transition yet,” says Corbett.

Many websites track neighborhood crime statistics, so look for improving stats to find hints of emerging areas.

In addition to declining crime rates, experts point to city development projects as a sign a neighborhood is in turnaround mode. City building efforts like gardens, fountains and public building façade projects are all good signs, says Breaker. “If the city is investing in projects that will contribute to the growth of the neighborhood… they are most likely preparing the neighborhood for a turnaround,” he says.

5. For Sale Signs are Going Up

Unkempt houses and boarded up windows are big red flags to buyers, nut if you can spot a couple of houses popping up that looked like they have been renovated (or flipped) it’s a good indicator the neighborhood is set to grow.

“If you see one or two houses that look like they’ve been redone spring up, it’s a sign people are starting to come in and gentrify,” says Corbett. “It’s a great time to jump on the bandwagon.”