Home sales, prices will rise sharply next year

The Palm Beach Post - Residences - - Front Page -

A grow­ing num­ber of hous­ing mar­kets are now poised for out­stand­ing growth in 2016, it is pre­dicted by lead­ing econ­o­mists. A good in­di­ca­tion of our grow­ing mar­ket was when the Fed­eral Re­serve fi­nally raised its prime in­ter­est rate on Dec. 16, af­ter years of hold­ing the rate at zero per­cent.

One report, by the Na­tional As­so­ci­a­tion of Real­tors, points out spe­cific rea­sons for their op­ti­mistic pro­jec­tions:

“Sev­eral mar­kets across the coun­try are poised for sub­stan­tial growth in home prices and sales in 2016 – likely top­ping 2006 even, ac­cord­ing to re­al­tor.com’s re­cently re­leased hous­ing fore­cast. “Grow­ing house­hold for­ma­tion, a strength­en­ing job mar­ket, and low un­em­ploy­ment rates are good signs that can get more mil­len­ni­als, young genXers, and re­tirees mov­ing.”

The report fo­cuses on 10 mar­kets that are most likely to ex­pe­ri­ence sub­stan­tial growth next year.

“There are 10 mar­kets that will likely get a lot of at­ten­tion in the new year, at least if re­al­tor.com’s pre­dic­tions hold true. Their re­searchers re­cently iden­ti­fied the mar­kets they be­lieve will have growth equal to or bet­ter than the U.S. av­er­age.

“These mar­kets will likely have high de­mand from home buy­ers (al­ready hav­ing 60 per­cent more list­ing page views on re­al­tor.com than the U.S. over­all) and quick sales (in­ven­tory that sells 16 days faster than the U.S. av­er­age).

“Some mar­kets have been hot and are re­main­ing hot (San Diego, Sacra­mento, Bos­ton, At­lanta),” says Jonathan Smoke, re­al­tor.com’s chief econ­o­mist.

“Some are just now see­ing signs of re­cov­ery based on sub­stan­tially bet­ter eco­nomic con­di­tions fore­casted for next year. Some are spillover mar­kets from very hot mar­kets and most have one or more key de­mo­graphic driv­ing de­mand,” the report noted.

Ques­tion: Do many home­own­ers still have a neg­a­tive eq­uity?

An­swer: Yes, but the rate of neg­a­tive eq­uity is drop­ping. Here’s the lat­est report from Zil­low:

“The U.S. neg­a­tive eq­uity rate con­tin­ued to drop in the third quar­ter of 2015, ac­cord­ing to the Zil­low Neg­a­tive Eq­uity Report. Na­tion­ally, 13.4 per­cent of home­own­ers owe more on their mort­gage than their home is worth, down from 14.4 per­cent last quar­ter, and 16.9 per­cent a year ago.

“Neg­a­tive eq­uity is one of the most per­sis­tent re­minders of the hous­ing mar­ket crash. Home­own­ers who owe more on their mort­gage than their homes are worth can­not sell, which holds back mar­kets from re­cov­er­ing.” Q: Are mort­gages be­com­ing more read­ily avail­able? A: At this point they are be­com­ing less avail­able. Here’s a late report from the Mort­gage Bankers As­so­ci­a­tion:

“Mort­gage credit avail­abil­ity de­creased in Novem­ber ac­cord­ing to the Mort­gage Credit Avail­abil­ity In­dex (MCAI), a report which an­a­lyzes data from Ellie Mae’s Al­lRegs Mar­ket Clar­ity busi­ness in­for­ma­tion tool.”

The report noted that the MCAI de­creased 0.8 per­cent to 127.4 in Novem­ber. It also pointed out that a de­cline in the MCAI in­di­cates that lend­ing stan­dards are tight­en­ing, while in­creases in the in­dex are in­dica­tive of loos­en­ing credit. The in­dex was bench­marked to 100 in March 2012.

“Of the four com­po­nent in­dices, the Con­ven­tional MCAI saw the great­est tight­en­ing (down 2.0 per­cent) over the month fol­lowed by the Con­form­ing MCAI (down 1.0 per­cent), and the Jumbo MCAI (down 0.8 per­cent).”

Q: Are there mar­kets to­day that are in real dan­ger of be­com­ing a real es­tate bub­ble?

A: San Fran­cisco’s hous­ing mar­ket has grown so un­af­ford­able that some ex­perts say the mar­ket is al­ready in a bub­ble, and it’s not the only mar­ket econ­o­mists are con­cerned about. Here’s a por­tion of a re­cent report:

“A third of the ex­perts sur­veyed in the lat­est Zil­low Home Price Ex­pec­ta­tions Sur­vey said the San Fran­cisco hous­ing mar­ket is in a bub­ble, and another 20 per­cent be­lieve the mar­ket is at-risk for bub­ble con­di­tions within the next year.

“The sur­vey, spon­sored quar­terly by Zil­low and con­ducted by Pulse­nomics LLC, asked more than 100 pan­elists about their ex­pec­ta­tions for the hous­ing mar­ket. Of those, 66 an­swered a ques­tion about bub­ble con­di­tions in 20 lo­cal hous­ing mar­kets.

“The sur­vey re­sponses re­vealed that some hous­ing ex­perts are con­cerned about over-val­u­a­tion in some of the na­tion’s hottest hous­ing mar­kets — and that there is sig­nif­i­cant dis­agree­ment among ex­perts about whether the rapid home-value growth in those mar­kets puts con­sumers at risk.”

Jim Woodard

Open House

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