A note from Brendan Reilly
Greetings! My newsletter covers local and national real estate trends to keep you abreast of current conditions. If you or anyone you know is looking to buy or sell a property in Suburban Philadelphia, I would love to help!
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Mortgage rates hover near 2014 lows
A funny thing's happened to mortgage rates this year. The consensus among economists and industry analysts was that it would rise to 5.5% by the end of the year. So what's happened? The average price of a 30-year, fixed-rate home loan dipped as low as 4.23% in August. Why did everyone think mortgage rates were going to go up this year? The Federal Reserve is ending its campaign to drive down long-term interest rates, including mortgage rates. The nation's bank-for-banks began buying $85 billion worth of debt a month in September 2012. By flooding the mortgage market with money, it pushed mortgage rates to record lows in an attempt to boost real estate sales and property values. In a process the Fed refers to as tapering, it reduced those purchases to $75 billion in January, $65 billion in February and March, $55 billion in April, $45 billion in May, $35 billion in June and July, and $25 billion in August and September. So why are mortgage rates defying all expectations? One reason is the weak demand for new loans. Millions of homeowners leapt at cheaper mortgages when interest rates were falling. Many refinanced twice. The Mortgage Bankers Association expected refinancings to fall by more than half this year, but they're actually off by more than 60%. The association expected some of those losses to be offset by a 10% rise in home sales and corresponding increase in demand for mortgages to finance those purchases. But home sales are flat, and it now expects the number of mortgage originations for purchase to fall by about 10% this year.
Developers win big in Pa. Supreme Court ruling
Equus Capital Partners scored a huge win for itself and developers across the state when the Pennsylvania Supreme Court ruled in its favor regarding a proposed mixed-use development in Newtown Square, Pa. The 4-to-3 ruling issued yesterday concludes a years-long battle over Ellis Preserve Town Center and a so-called planned residential development ordinance Newtown Square officials signed off on in 2009. A planned residential development, or PRD, is a state law that allows mixed-use development in municipalities. The case has far reaching implications for developers and townships. The ordinance had the potential to totally alter the way developers and municipalities have approached land development and planning for more than four decades. Among other things, the court determined the ordinance passed by Newtown Square for Ellis Preserve was appropriately drafted and complies with the Pennsylvania Municipalities Planning Code. The company now anticipates starting the first phase of its town center that will include 120,000 square feet of retail along with a120-room hotel.
Student loan debt curbs housing market by $83 billion, study says
There's been lots of debate lately in housing circles about the impact of student debt on home ownership. Now there's a new study out that attempts to put a number on that impact: 414,000. That's how many home sales will not happen this year because of high levels of student loan debt, according to a report from John Burns Consulting, an Irvine, Calif.-based firm that advises home builders. That's equal to about 8 percent of all home sales, and enough to dent the housing industry by $83 billion a year. The report is the latest in a growing pile of research that links rising student debt levels – overall student loan debt has nearly tripled since 2005 to $1.1 trillion – with sluggish home sales, especially among young adults.
Existing home sales drop as investors take a pass
Existing home sales fell in August for the first time in four months as investors stepped away from the housing market. That’s according to the National Association of Realtors, which reports that sales of existing single-family homes, townhomes, condominiums and co-ops fell 1.7 percent last month to a seasonally adjusted annual rate of 5.05 million. That’s still the second-highest sales pace this year, but it’s 5.3 percent below August 2013’s pace. The median home price for existing homes was $219,800 in August, 4.8 percent above the same month a year ago.
Home builders' confidence at highest level in nearly nine years
Home builders’ confidence in the market for new single-family houses rose for the fourth consecutive month in September, hitting its highest level since November 2005. That’s according to the National Association of Home Builders/Wells Fargo Market Index, which gained 4 points last month to reach 59. The index is based on a survey of home builders, who are asked about current sales, their sales expectations for the next six months, and traffic of prospective buyers. All three of these components got higher scores in September, and builder confidence rose in every region of the U.S. Tight credit for consumers, slow first time buyer activity, and rising costs for home builders also are limiting the recovery of the housing market.
First six months were sluggish, but there’s hope for the remainder of the year
Call it a hangover that time hasn’t healed. The region’s housing market is still suffering from the bad winter weather of almost two seasons ago. Sales of existing houses fell for nearly the entire region for the first six months of the year because of protracted inclement weather that translated into a slow start for the spring selling season. Just two counties saw sales increase — Camden and Gloucester — and they rose by less than a percent. Though Philadelphia County saw the most houses sold for the first six months of the year, it was off by 8.2 percent compared with the same time last year. Montgomery County logged 4,099 sales, down by 5.8 percent. Chester County recorded 2,713 transactions, which is a 10 percent drop. There are some signs that could portend to a strong finish for the second half of the year. The number of houses under contract rose by 2.2 percent in June, according to the report. And, home prices are on the rise as inventory of new and existing homes on the market remains constrained.
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