Friday, September 21, 2012

Housing Recovery



Interesting real estate article...Karl Case and Robert Shiller comment on the housing recovery

When it comes to predicting housing bubbles, you may get a better guess from a sociologist than an economist, said famed economists Karl Case and Robert Shiller in a rare joint presentation at the New England Mortgage Bankers Conference in Newport, R.I., this morning.
Case and Shiller discussed a new paper they have written that focuses on how beliefs about home prices do more to fuel housing bubbles than actual changes in interest rates.
For 10 years, the pair has surveyed buyers across the country about their expectations for home prices, asking how much they thought their home's value would change over the next year and how much it would change each year for the next decade.
The pair suggest that when people expect prices to rise faster than current interests rates over the coming decade, this helps drive purchases, and the differences between expectations and interest rates track more closely to the changes in sales than changes in interest rates themselves.
"It's the people who have the highest willingness to pay that drive the price," Case said. Looking back at buyer's expectations during the bubble, when people thought their houses would be worth as much as 17 percent more the next year, he said, "the only thing more astounding than people's expectations was what actually happened." 
Overall, both were tempered in their expectations for the housing market. Shiller half-jokingly said there was a 40 percent chance that housing was in recovery, while Case said he was felt housing starts were headed in the right direction and likely to cross 800,000 next month. But he also warned homebuilders to hold off on uncorking the champagne until they crossed 1,000,000.
"Cross your fingers and say a little prayer," he said. 
When it comes to predicting housing bubbles, you may get a better guess from a sociologist than an economist, said famed economists Karl Case and Robert Shiller in a rare joint presentation at the New England Mortgage Bankers Conference in Newport, R.I., this morning.
Case and Shiller discussed a new paper they have written that focuses on how beliefs about home prices do more to fuel housing bubbles than actual changes in interest rates.
For 10 years, the pair has surveyed buyers across the country about their expectations for home prices, asking how much they thought their home's value would change over the next year and how much it would change each year for the next decade.
The pair suggest that when people expect prices to rise faster than current interests rates over the coming decade, this helps drive purchases, and the differences between expectations and interest rates track more closely to the changes in sales than changes in interest rates themselves.
"It's the people who have the highest willingness to pay that drive the price," Case said. Looking back at buyer's expectations during the bubble, when people thought their houses would be worth as much as 17 percent more the next year, he said, "the only thing more astounding than people's expectations was what actually happened." 
Overall, both were tempered in their expectations for the housing market. Shiller half-jokingly said there was a 40 percent chance that housing was in recovery, while Case said he was felt housing starts were headed in the right direction and likely to cross 800,000 next month. But he also warned homebuilders to hold off on uncorking the champagne until they crossed 1,000,000.
"Cross your fingers and say a little prayer," he said.

Tuesday, September 18, 2012

Confidence grows in the housing market

Love to see positive press regarding the real estate market!  Thinking of buying or selling?  With low rates and qualified Buyers it makes sense for both.

"Local Realtors' confidence in the strength of the housing market is steadily improving, according to the latest monthly survey from the Massachusetts Association of Realtors (MAR).  
The group's Realtor Market Index (RMI), which measures whether agents believe the market to be stronger or weaker, has gone up for the 13th straight month compared to the year before.  In August, it measured 56.41.  Scores over 50 indicate a strengthening market. That's a vast improvement over last August's scores, when the RMI measured 21.63.
 "Regaining confidence in the market is a gradual process, but one that fortunately has been improving for 13 straight months," said 2012 MAR President Trisha McCarthy, broker at Keller Williams Realty in Newburyport in a statement. "The best way to ensure this upward trend continues is to increase the number of homes for sale. The only way that can happen is for homeowners who want to sell, but have held off, to make the decision to re-enter the market."
The vast majority of Realtors also expect further increases in home prices, with the association's Realtor Price Index (RPI) near all-time highs. The RPI measured 64.19 in August, which was up 61 percent from the August 2011 RPI of 39.92. This is the seventh straight month of year-over-year increases and the fourth straight month the RPI has been over the 60-point mark. On a month-to-month basis, the RPI was down 1.24 percent from the July 2012 RPI of 65.00.
Agents surveyed also thought that inventory levels would remain tight, with a plurality of respondents ----41 percent---saying that they thought inventory will be at the same level as today, while 37 percent thought inventory would somewhat increase over the next six months."  B&T 9.18.2012