Current home buying conditions are the best in thirty years. You decided yet?

According to Independence Title, company interest rates have been lowest in the last fifty years. You would think today’s mortgage rates of near 3.875% to 4% would bring happiness (lowest rates since 1950). Instead, some see the low rates as a sign of weakness in housing and the economy weakness, a measure of buyers’ difficulty in getting mortgage loans and/or an indicator of coming deflation. With mortgage rates declining, affordability rises, meaning lower payments to buy that desired house or investment property. Rates are projected to stay low through the end of 2013, early 2014

The historical perspective

Starting around 4%, rates moved up through the 1950's. Then, in 1959-60 home buyers got a taste of 6%. People did not like that rate – it was affordability in reverse. Plus, many mortgages couldn't be refinanced at a lower rate without a penalty payment, so buyers hated getting stuck with the higher rates. The next five years of mid- to high-5% interest rates were palatable, and then they took off in earnest, eventually topping at over 18% in 1981. Ten years ago, consumers thought that rates of 6% were the lowest rates that we would ever see again. Comfortably we can tell you that rates will never be this low again!

Refinancing

Borrowers who might have refinanced once in the past 3 to 5 years months and have 30-year rates in the 5%-5.25% range, should do so again given the drop to current lower rates. Given the narrowing in the jumbo/conforming spread, some jumbo borrowers might also seek to refinance, as might adjustable-rate mortgage borrowers who might prefer to move to fixed-rate mortgages even though their rates are adjusting downward.

If you have not bought or refinanced in the last 2 to 3 years, there is a good chance that you can save 15%, substantial savings today. Affordability is an important factor to watch. Many buyers have already taken advantage of lower rates. It is a well-understood and visible stimulus to act, one of the major reasons the Federal Reserve has kept rates low.

The question is, with homes and rates so affordable, what are the chances to see continued improvement not only in Texas but across the rest of the country this summer and on into 2014?

The amount of market inventory is lacking, do the math. This in turn makes the Texas metros markets prime for:

• Investors: Investors will continue to grow in numbers as they realize housing and real estate are the best risk-adjusted return on their money. Real estate continues to be one of the most undervalued assets available.

• Boomerang buyers: Foreclosed homeowners, who are currently renting homes, will come back in droves. There is not a more affordable time to buy in the last 60 years!

• Entry-level buyers: First-time homeowners, who have been sitting on the sidelines for 6+ years, waiting for a sign of the bottom are looking at price increases in their desired neighborhood and are rushing to become homeowners.

• Move-down buyers: Empty nesters and retirees, who have seen their equity return in their existing home, are buying a home that is more suitable to their current lifestyle, which may or may not include adult children as well as their aging parents. Almost all of the Texas metros have seen a larger portion of this market show up in the last year.

• Moveup buyers: The price appreciation that occurred in the last year has already lifted 1 million underwater homeowners above water nationally, and future price appreciation will lift it even more. The consumer who has been sitting on the sidelines is back buying across all price points due to the affordability factor.

People still want to see the negative portions of the market. Don’t listen to the naysayers. They frequently make one or two negative points, which may be valid, but they don’t understand the big picture.

• Housing is cheap, probably the cheapest many will see in their lifetime (hopefully!!)
• People prefer to own
• Get ready for a surge in home prices!
• Most Texas housing is transforming from cost driven pricing to market driven pricing and will continue in through 2014, just due to the lack of inventory.

Case-Shiller Shows Home Prices Up 4.3% From Year Earlier

Here is an article that was found on Mortgage News.

The S&P/Case-Shiller Home Price Indices (HPI) released this morning outstripped analysts expectations with strong increases in home prices over the 12 months ending in October.  Both the 20-City and the 10-City showed anticipated seasonal weaknesses in October itself, however and along with 12 of the 20 cities, posted a monthly price decrease.

The 10-City Composite Index was up 3.4 percent on an annual basis in October compared to 2.1 percent in September and the 20-City Composite rose 4.3 percent compared to 3.0 percent.  On a month-over-month basis both composites declined 0.1 percent.   S&P/Case-Shiller presents most of its data on a non-seasonally adjusted basis.

In 19 of the 20 cities the annual increase in October was higher than that in September and only two cities, Chicago and New York, had negative annual returns.  The recovery seems well established in some markets; for example Phoenix home prices increased for the 13th consecutive month and San Diego for the ninth.

David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices said, "The October monthly numbers were weaker than September as 12 cities saw prices drop compared to seven the month before.  The five which turned down in October but not in September, were Atlanta, Dallas, Miami, Minneapolis and Seattle. Among all 20 cities, Chicago was the weakest with prices dropping 1.5%, followed by Boston where prices fell 1.4%. Las Vegas saw the strongest one-month gain with prices up 2.8%.

"Annual rates of change in home prices are a better indicator of the performance of the housing market than the month-over-month changes," Blitzer said, "because home prices tend to be lower in fall and winter than in spring and summer.  Both the 10- and 20-City Composites and 19 of 20 cities recorded higher annual returns in October 2012 than in September. The impact of the seasons can also be seen in the seasonally adjusted data where only three cities declined month-to-month. The 10-City Composite annual rate of +3.4% in October was lower than the 20-City Composite annual figure of +4.3% because the two weaker cities - Chicago and New York - have higher weights in the 10-City Composite."

Blitzer said it is clear that the housing recovery is gathering strength.  Continued annual price gains and the strong performances in both the southwest and in California, both of which were strongly affected by the housing bust, "confirm that housing is now contributing to the economy. Last week's final revision to third quarter GDP growth showed that housing represented 10% of the growth while accounting for less than 3% of GDP."

Even cities at the bottom are showing gains.  Detroit had a 24.2 percent annual increase even though prices there are still about 20 percent lower than they were 12 years ago.  Blitzer also cited 22.5 percent and 22.1 percent increases in San Francisco and Phoenix from their recent lows and prices "comfortably higher" than 12 years ago.

As of October average home prices nationwide were back to autumn 2003 levels.  Measured from their June/July 2006 peaks, the decline for both Composites is approximately 30% through October 2012 and approximately 35% from the June/July 2006 peak values to their recent lows in early 2012. The October 2012 levels for both Composites are about 8.4 to 9% above their early 2012 lows.

In October 2012, 12 MSAs and both Composites posted negative month-over-month returns. Detroit, Las Vegas, Los Angeles, Phoenix, Portland, San Diego and San Francisco were the only cities that recorded positive monthly returns. Denver remained flat.

The S&P/Cash Shiller Home Price Index is a composite of single family home price indices for the nine U.S. Census divisions and is calculated quarterly. The 10- and 20-City indices are weighted averages of metropolitan area indices. Each index has a base value of 100 in January 2000.