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KW Research 1 This Month in Real Estate February 2009 Commentary…………………………….2 The Numbers that Drive Real Estate…3 Snapshot of the Economy………………9 Recent.

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Presentation on theme: "KW Research 1 This Month in Real Estate February 2009 Commentary…………………………….2 The Numbers that Drive Real Estate…3 Snapshot of the Economy………………9 Recent."— Presentation transcript:

1 KW Research 1 This Month in Real Estate February 2009 Commentary…………………………….2 The Numbers that Drive Real Estate…3 Snapshot of the Economy………………9 Recent Government Action…………….13 Research for Buyers and Sellers……….16

2 KW Research 2 Commentary Home sales finally experienced an increase in the final month of 2008, thanks to many markets in Arizona, California, Nevada and Florida. A significant wave of new homebuyers, echo boomers (the children of baby boomers), are beginning to make up the next major demographic of American households. The U.S. economy slowed during the last two quarters of 2008, yet the overall economy still grew by 1.3 percent for the year. In the last month, a proactive new administration took office with a powerful and capable economic brain trust on a mission to steer us into calmer economic seas. Across the nation, a sense of hope builds with the expectation that the new administration will push through Congress a massive stimulus plan centered on job creation, tax credits, and improvements in infrastructure. And most importantly, the government is working aggressively with housing and banking institutions to tackle the growing issue of foreclosures, thus assisting struggling home owners. Declining inflation and falling energy prices continue to provide some relief to consumers, increasing disposable income. On the housing front, mortgage rates now stand at 5.05 percent, nearly the lowest point in 50 years. These unprecedented low rates are continuing to offer refinancing relief for many homeowners and an opportunity for home ownership for those who might have been locked out previously. Housing affordability now stands at a level not seen since the 1970s.

3 KW Research 3 The Numbers that Drive Real Estate

4 KW Research 4 Home Sales In Millions According to the National Association of Realtors, existing home sales rose 6.5% to a seasonally adjusted rate of 4.74 million units in December, up from 4.45 million units in November. While year over year sales decreased by 3.5%, the month to month increase is attributed to increasing sales in the West. Areas experiencing the strongest increase in sales are those that saw the sharpest declines in home prices. Note: Pace of sales as of December every year (in Millions) Source: National Association of Realtors

5 KW Research 5 Median Home Price In Thousands The national median home price declined to $175,400 in December, down 15% from one year ago. In many areas around the country, homes are continuing to sell for less than replacement construction costs. Median home price as of December every year Source: National Association of Realtors

6 KW Research 6 Inventory - Months Supply Number of months it would take to sell all the homes on the market at the current rate of sales Inventory fell 12% to 3.68 million in December from 4.16 million homes in November. According to the National Association of Realtors, housing inventory usually falls by about 8 to 10 percent in December as homeowners tend to pull homes off the market towards the end of the year to reassess. However, the larger drop off in inventory in December is primarily attributed to rising sales and fewer listings on the market. As a result, this has reduced the months supply to 9.3 months, the lowest level in 2008. Inventory as of December every year Source: NAR

7 KW Research 7 Mortgage Rates 30-Year Fixed Mortgage rates averaged around 5.05% for the month of January. Weekly rates rose slightly from 4.96% in the second week of January to 5.10% for the final week that month. Historically low rates continue to offer unique opportunities for first-time homebuyers and homeowners seeking to trade up. Mortgage rates as of January every year Source: Freddie Mac

8 KW Research 8 Affordability - % of Income The percentage of a median familys income required to make mortgage payments on a median priced home Homes continue to be more affordable as NARs affordability index rose for a fifth consecutive month due to low interest rates, a slight increase in the median family income and a decrease in qualifying income. As a result, the median mortgage payment (principal and interest) now consumes about 16% of family income in comparison to 20% a year ago. Affordability as of December every year. Calculations assume a 20% down payment. Source: NAR

9 KW Research 9 Snapshot of the Economy

10 KW Research 10 Gross Domestic Product The economy contracted by 3.8% in the fourth quarter of 2008. The decline was slightly less than the 5% many analysts were projecting. Despite the contraction in the last two quarters, the overall economy grew by 1.3% for 2008. Source: Bureau of Economic Analysis

11 KW Research 11 Unemployment The unemployment rate rose to 7.2%. It is increasingly becoming crucial for Congress and President Barack Obama to swiftly pass an economic and housing stimulus plan. Strong homebuyer incentives and low mortgage rates should help increase demand for homes and in turn stabilize home prices. Job creation will be vital to help keep homeowners out of foreclosures. Unemployment as of December every year Source: Bureau of Labor Statistics

12 KW Research 12 Inflation Inflation is at the lowest point since the 1950s. Declining gas prices is leading the way of generally weak prices across most sectors. Inflation as of December every year Source: Bureau of Labor Statistics – Consumer Price Index

13 KW Research 13 Recent Government Action

14 KW Research 14 Jan 9, 2009 Fannie Mae launches pilot program to encourage short sales over foreclosures History -Short sales are transactions in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan. -Since the short sale process can be quite lengthy, the National Association of Realtors has been working with Fannie Mae and Freddie Mac to help shorten the time frame. The Plan: -Fannie Mae has launched a pilot program in Phoenix and Orlando where it will pre- approve the price range and the loss it will willing accept before an offer is presented. -If successful, this program may be instituted nationally with the hope of more home owners and lenders opting for short sales over foreclosures. -The end goal of the program is to decrease overall foreclosure rates. Source:

15 KW Research 15 Jan 13, 2009 Fannie Mae announces national REO rental policy History -"Renters in foreclosed properties have often been a casualty of the foreclosure crisis the country is facing. This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates. Michael Williams – Chief Operating Officer of Fannie Mae The Plan: -A new policy will be in place to allow renters of foreclosed Fannie Mae properties to continue to rent on a month-to-month basis. -This policy only applies to renters, not to mortgagors or their family and only applies to single family properties where a homeowners association (HOA) does not prohibit rentals. -HUD approval will still be required for FHA loans. -Qualified renters will have the option to sign a month-to-month lease or receive financial assistance if they choose to move out. -Fannie Mae plans to manage properties through local property management companies and real estate brokers. -A security deposit will not be required. Credit checks will not be conducted. -If the property sells, the lease will transfer to the new owner. Source:

16 KW Research 16 Research for Buyers and Sellers

17 KW Research 17 Top 5 Sources of Down Payments Source20072008 Savings52%56% Proceeds from primary residence43%34% Gift from relative/friend10%13% Sales of stocks/bonds8% 401K/pension fund (including loan)4%5% Source: 2008 NAR Profile of Homebuyers and Sellers

18 KW Research 18 Increased Demand Anticipated for Housing in College Towns The growth in the number of 20 to 24 year old demographic has historically remained relatively stable over the past few years, but according to Census projections this age group is anticipated to rise in the near future. Since increasing numbers of this age group are attending college every year, increased demand is anticipated in college towns. Source: National Association of Realtors using Census Bureau projections

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