| As a Realtor that specializes in Power Ranch Arizona; I try to stay on top of national trends as well as local trends. I thought this article was interesting in that it does show some opportunities. Good December but Lousy Year |
| Written by Jonathan Dienhart and Ken Lee | |
| 01.28.2011 | |
Our data feature, courtesy of Housing IntelligencePro, shows that of states with at least 1,000 new home closings in 2010, there were only 5 which beat their 2009 performance in terms of volume. These states varied from stable heartland areas like Wyoming to the unique island market in Hawaii. The top-three performing states all have something in common – unemployment rates are significantly lower than the national average. It’s certainly no surprise that states with healthier labor markets have healthier housing markets, but it underscores the vital need for better job growth elsewhere across the nation. Many of the major housing indicators finished off the year with positive results in December but as we look back at 2010 as a whole, overall conditions in the housing market underperformed expectations. Despite the economy beginning to add jobs again, persistently high levels of unemployment and uncertainty about the strength of the economic recovery has cast a shadow over housing. This morning, figures were released that showed the economy grew at a 3.2% clip during the fourth quarter. GDP growth was slower than the consensus 3.5% growth that most economists were expecting which ignited concerns over slower growth moving forward. The next big economic release to keep an eye out for will be the January employment report next Friday which will give us a glimpse on how the labor market started out the year. New home sales as measured by the Census jumped 17.5% in December, but given the seasonally low volume in December and small sample size of the Census data, this is likely not as a significant number as it may seem on its face. Last week, the National Association of Realtors reported that home sales in December increased 12.3% from the previous month. However, both segments of the housing markets still posted year-over-year declines for the month of December while annual sales figures for 2010 finished lower than 2009. Census-measured new home sales are down 7.6% from last December while existing home sales declined 2.9% during that period according to NAR. The Economy Advance estimates for fourth quarter gross domestic product showed the economy growing faster than it was at the end of the third quarter. However, the economy expanded at a slower pace than the consensus 3.5% growth that economists were expecting. The U.S. economy grew 3.2% during the fourth quarter which is stronger than the 2.6% pace in the final second quarter report. This marks the sixth straight quarter that the U.S. economy has expanded. Increased consumer spending in the fourth quarter was offset by slower growth in business and government spending. The Reuters/University of Michigan consumer sentiment index eased slightly in January due to higher fuel and food prices. The final January figure for the consumer sentiment index declined slightly to a reading of 74.2 from 74.5 in December. Employment costs increased 0.4% from October through December 2010, which matched the increase in employment costs for the previous quarter. The employment cost index increased 2.0% during the past twelve months. Annual employment costs have slightly increased over the past several quarters and recorded their largest annual gain in the fourth quarter since the first quarter of 2009. Consumer confidence increased to a reading of 60.6 in January compared to a revised figure of 53.3 last month. This is the highest the consumer confidence index has been since May 2010. The consumer confidence index is also higher compared to the same year-ago period when the index stood at 56.5. Both the present situation and expectations indexes recorded increases in January. All nine regions across the country also posted monthly gains in consumer confidence. Housing Market The new home market finished the year with an impressive December which showed improvement in all its major indicators. Both home prices and sales posted impressive gains while new home inventory continued to decline. New home sales surged 17.5% from the previous month in December to a seasonally-adjusted annual rate of 329,000 units mainly due to a jump in activity in the West region. This is the highest the annual sales pace of new homes has been since April when the federal homebuyer tax credit expired. Home sales for the previous three months were also revised higher by a combined 4,000 units. While new home sales remain at historically low levels, they are up 20% in the past five months after reaching an all-time record low in August. Stronger sales activity also helped prices firm up in December. Median new home prices rebounded 12.1% from the previous month to $241,500 in December. This is the second straight month that new home prices have increased and the highest they have been since April 2008. New home prices are also up 8.5% from this time last year and 5.2% higher than they were this time two years ago. However, higher prices along with rising rates have pushed new home affordability dramatically lower in the past two months. After reaching all-time record highs just in October, the new home affordability ratio has now declined for two straight months to a reading of 54.1% in December. Higher mortgage rates and price appreciation has pushed the new home affordability ratio to its lowest levels since December 2008. New home inventory levels continued to improve in December which will help position the new homes market for a solid recovery once demand returns. In December, new home inventories declined to 190,000 units on a seasonally-adjusted basis. This is the seventh consecutive month that new home inventory has declined while it has not posted a monthly increase in the past 11 months. Fixed mortgage rates continued to drift higher this past week. National average mortgage rates increased from the previous week to 4.80% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on January 27th. This is the second straight week that rates have increased and the highest they have been since the end of 2010. However, the average rate on a 30-year fixed mortgage has now averaged under 5.0% for 38 straight weeks. In the week ending January 21st, the MBA’s seasonally-adjusted purchase index dropped 8.74% from the previous week and was down 20.08% compared to the same time last year. This is the fourth straight week that the purchase index has declined and the lowest it has been since late October. |
