From Jason Payne, Market News Analyst …
Mid-February is an exciting time of year for real estate investors.
And this festive atmosphere has nothing to do with Valentine’s Day – although Donald Trump has been known to occasionally wear romantic property-themed underwear throughout the week of February 14th, as a “special treat” for his highest performing assets.
:-)
No, today’s timely Market News Update explains the real reason why this year’s most exciting REI season is poised to be especially tantalizing …
… and I’m so glad Mogul is letting me share this update as our team’s special Valentine’s gift to you!
(If you were hoping for a box of chocolate candies, you’ll have to take it up with Mogul in the section for “Tips & Feedback”, located below this update. By the way, you’re on the wrong website!)
Why Are Investors Getting Hot & Bothered?
Notwithstanding the underwear-related eccentricities of a certain toupéed tycoon, most “normal” real estate investors are beginning to feel all hot-and-bothered for an altogether different reason this week:
It’s almost time for our industry’s busiest season of the year for buying and selling houses!
Yes, the spring and summer months are traditionally the busiest times of year for residential real estate. The weather is typically more cooperative during these relatively mild months, and many families prefer to change their home address while the kids are on their summer break.
Also, during the last few quarters, investors have (finally) begun to enjoy a long-awaited stabilization across much of the market for residential U.S. housing …
… which has only heightened the tantalizing nature of our industry’s upcoming transactional bonanza.
For example, according to last week’s Home Price Index from CoreLogic, national housing prices increased 11.0% during December 2013 (compared to year-ago levels).
Commenting on this robust price growth, CoreLogic’s president and CEO, Anand Nallathambi, released the following statement to investors: "After six years of fits and starts, we can now see a clearer path to a durable recovery in single-family residential housing across most of the United States."
Additionally, on a forward-looking basis, the company’s research indicates a possible rise and subsequent stabilization of U.S. home prices.
"Last year, home prices rose 11.0%, the highest rate of annual increase since 2005, and 10 states and the District of Columbia reached new all-time price peaks," said Dr. Mark Fleming, chief economist for CoreLogic. "We expect the rising prices to attract more sellers, unlocking this pent-up supply, which will have a moderating effect on prices in 2014."
And therein lies the best news of all …
Pent-Up Supply Can Likely be Unlocked without Price Declines
As the U.S. housing market continues to enjoy improving economic fundamentals, this year’s busy season appears poised to offer the best of both worlds for buyers and sellers alike.
You see, for approximately two years, a shortage of sellers has propped-up prices across the U.S. as investors jostled for a dwindling supply of houses. Now, as the market’s busiest season approaches, escalating values are spurring more listings as homeowners regain equity lost in the worst crash since the 1930s.
For would-be buyers, more choice means relief from the bidding wars of last year, when the supply was at a 12-year low leading into the key spring season. And sellers should now be able to enjoy gains on many of the bargain basement deals they purchased in the wake of The Great Recession – albeit at a decelerating pace.
Nationwide housing prices are expected to climb approximately 4.0% in 2014 (compared to last year’s 11.0% gain), according to Paul Diggle, property economist for Capital Economics Ltd. in London. This deceleration of expected price growth is primarily attributed to the tighter inventories mentioned above, as well as increasing mortgage rates, which should push some buyers out of the market, while forcing others to look for cheaper deals.
Diggle’s firm projects 30-year fixed mortgage rates of 5.0% by the end of the year. That compares with the average this week of 4.2%, according to data from Freddie Mac.
Similarly, we here at Mogul continue to expect that borrowing costs will climb higher as the Federal Reserve tapers various economic stimulus measures. But it is encouraging to note that buyers currently appear to be unfazed, perhaps desiring to lock-in relatively low interest rates while the gettin’ is still good.
“We’re right on the cusp of a strong spring selling season,” Donald Tomnitz, chief executive officer of Fort Worth, Texas-based D.R. Horton, said last week on the company’s earnings conference call. “The spring selling season has started a little early, for our company, and that’s a very positive thing.”
Jason Payne’s next Market News Update is scheduled for Wednesday, Feb. 26th.
Jason Payne
is a management consultant and founder of the Groundwar Group -- a private consulting firm providing premier corporate advisory and leadership training solutions for business leaders and investors worldwide. Mr. Payne is also the Senior Market News Analyst and a featured "Mindset" advisor for more than 15,000 entrepreneurs and investors at RealEstateMogul.com -- roles he has held since 2013 and 2014, respectively. In these capacities, Jason draws from more than a decade of successful business and investment research on Wall Street to provide insightful commentaries on a wide variety of investing- and leadership-related topics.
Mr. Payne began his career as a research analyst in the award-winning Equity Research department of Morgan Keegan & Company, where at 26 years of age, he became one of the youngest published analysts on Wall Street -- with a specialized focus on real estate investment trusts (REITs). Jason also holds a degree in Finance from New York University's prestigious Leonard N. Stern School of Business, and he is currently completing his professional residency within the Global Leadership Training program of Uruguay's multinational Geronimo Center for Innovation & Leadership.