May 8, 2012 Real Estate Report

Real Estate Trends Newsletter -- A weekly news update for mortgage professionals

 

Jeff Baxter
Prosperity Mortgage
33298 South Coastal Highway
Bethany Beach,DE 19930
jeff.baxter@prosperitymortgage.com
302-537-5076
302-602-1067
http://www.prosperitymortgage.com/jeff-baxter

MLO: NMSLR ID 191033
Branch/Company ID: NMSLR ID 70353

I’ve been a banker, marketer, and business owner for over 30 years. As a mortgage banker with Prosperity Mortgage since 2003, I work in all the beach markets in southern Delaware and have been a consistent, “go to” lending partner for hundreds of real estate professionals.

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May 8, 2012

ECONOMIC COMMENTARY
 Dissecting the Employment Report

Every month we wait for the jobs numbers. And every month the markets react to the numbers, but not always as you would expect. For example, this month we had a string of less than stellar economic releases, including the employment report for March. Especially concerning was the fact that first time claims for unemployment were trending upwards after hitting a four year low this winter. These weaker economic reports toned down expectations for the employment report for April. The analysts predicted an increase of 160,000, a slight improvement from the March jobs released, but weaker than the reports we witnessed for the previous three months. Lower expectations actually put us in a better position to not be disappointed. As in sales, it is always better to under-promise and over-deliver.

The report released was actually mixed, with a lower than expected increase in jobs (115,000) but with a slight unexpected decrease in the unemployment rate and an upward revision of jobs added the previous two months. Regardless of the additional factors, the markets were definitely disappointed in the numbers as stocks, oil prices and interest rates moved sharply lower on Friday. This brings us back to the pause question we have been analyzing for the past several weeks. Did the warm weather stimulate the economy this past winter, borrowing some steam (excuse the pun) from springtime? Or is this pause a reaction to weakness overseas as several countries in Europe have entered a recession? One area of weakness highlighted in the report was something widely expected. All jobs creation is coming from the private sector. The government side is still contracting and this factor was expected as stimulus dollars spent earlier in the recovery period has disappeared. We expect government contraction to continue for some time, however in the long run this is necessary for a healthier long-term recovery.

REAL ESTATE NEWS
 Pending home sales increased in March and are well above a year ago, another signal the housing market is recovering, according to the National Association of Realtors®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 4.1 percent to 101.4 in March from an upwardly revised 97.4 in February and is 12.8 percent above March 2011 when it was 89.9. The data reflects contracts but not closings. The index is now at the highest level since April 2010 when it reached 111.3. Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said. “The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun said. Source: NAR

"Mom and pop investors” are trying to capitalize on a depressed real estate market in the hopes of one day being able to cash in. An article in USA Today highlights this new breed of small-scale investors who like to buy and hold properties, opposed to the high-dollar large investment firms that once dominated the real estate market who preferred to buy and flip their property investments. For “mom and pop investors,” the strategy is to buy homes at rock-bottom prices, rent the properties out to cover all of the costs of home ownership for several years, and then one day sell the homes when prices recover. “An unprecedented number of investors are looking into this,” John Burns, CEO OF John Burns Real Estate Consulting, told USA Today. Investors purchased more than 26 percent of single-family and condos in 167 U.S. markets in the first nine months of last year, according to data supplied by Burns to USA Today. For investors in the rental market, an 8 percent annual return is fairly normal, according to Burns. “That means that someone who buys a $100,000 property — and pays cash for it — makes $8,000 a year after expenses, including maintenance and taxes,” the USA Today article notes. Source: USA Today

Foreign investors are finding plenty of deals in the U.S. when it comes to real estate, and, as such, more international investors are flocking to key states to buy their piece of the American Dream. Mexico is the top country of origin for foreign buyers purchasing U.S. homes, according to a recent study by Credit Sesame, which used National Association of REALTORS® data for its findings. “In this period of tremendous uncertainly globally, real estate here is a safe haven,” Susan Wachter, professor of real estate and finance at University of Pennsylvania, told MSNBC.com. The top destinations of foreign investors for U.S. real estate purchases are: 

  • Florida: Thirty-one percent of all home purchases in that state are made by foreign buyers, with most coming from Cuba, Haiti, and Colombia;
  • California: 12 percent of all home purchases (most coming from Mexico, the Philippines, China, India, and Vietnam);
  • Texas: 9 percent of all home purchases (most coming from Mexico, India, Vietnam, China, and the Philippines). Source: MSNBC.com

 

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All first mortgage products are provided by Prosperity Mortgage Company. Prosperity Mortgage Company may not be available in your area. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. Prosperity Mortgage Company is licensed in New Jersey as a Department of Banking Mortgage Banker and in Pennsylvania by the Department of Banking.

  

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