Most Americans Believe Their Home is a Good Investment

Americans expressed cautious optimism about the housing market and the value of home ownership in Fannie Mae’s first quarter 2011 National Housing Survey.
The survey uncovered newfound optimism about home prices, the economy, and personal finances balanced by concerns about rising household expenses, which may require Americans to remain cautions about the recovery.
Despite consumer caution, 57% of Americans still believe that buying a home has a lot of potential as an investment—ranking higher than other investments, such as buying stocks or putting money into an IRA or 401(k) plan.
“Despite moderate signs of improvement in the housing market and the overall economy, consumer attitudes continue to be shaped by ongoing concerns about the recovery and their own financial situations,” said Fannie Mae Chief Economist Doug Duncan. “Uncertainty regarding the improving labor market, expectations of little home price and interest rate movement, and rising household expenses has left consumers feeling less financially secure and translates into weak mortgage demand. While we have seen indications of improving economic activity in recent months, especially the strengthening of private sector employment, consumers’ attitudes improved only marginally, and in some areas not at all, from a year ago, reflecting the continued unevenness and uncertainty of this recovery.”
Other survey highlights:

• Forty-four percent of home owners believe the value of their home today is worth 20% or more than what they originally paid for it, declining from 46% in June 2010 and 51% in January 2010.

• One in three Americans (30%) expect home prices to strengthen over the next year, up four percentage points from the fourth quarter of 2010, but virtually unchanged from a year ago.

• Only 13% of pre-Baby Boomers (age 65+) think it will be easier for the next generation to purchase a home than it was for them, compared with 28% of Generation Y Americans.

• Nearly one in four (23%) mortgage borrowers say they are underwater, compared with 30% in January 2010.

• Only 31% of underwater borrowers think they have sufficient savings (compared to 42% in June 2010, and 43% of all mortgage borrowers).

• Forty-six percent of underwater borrowers say they are stressed about their ability to make payments on their debt (versus 35% in June 2010, and 33% of all mortgage borrowers).

Source: Fannie Mae

Read more: http://www.houselogic.com/news/articles/most-americans-believe-their-home-good-investment/#ixzz1M9Q8ML00

New-Home Building On the Rise

The news coming out of the home construction industry is cautiously positive. We do not think that we have overcome all the problems and obstacles, but all indications are that new home construction rates are on the rise. The report below shows positive signs and we can only hope this trend will continue. - RT

New home construction is picking up just in time for the spring buying season, according to the latest new-home report released on Tuesday from the Commerce Department. Builders broke ground on more new homes in March than in the last six months.

Another bright spot: Building permits, an indicator of future construction, increased 11.2 percent for the month.

After a dismal winter performance, new-home building bounced back 7.2 percent in March from February to a seasonally adjusted 549,000 units. Yet, the sector is still far below the 1.2 million units a year that economists consider a healthy building pace.

The new-home sector has faced hard times in recent years, competing against a flood of foreclosures and short sales on the market that have pushed housing prices down. In February, construction fell to its lowest level in nearly two years, and requests for building permits to start new projects had dropped to a five-decade low in February.

Builder sentiment also remains low, according to Monday’s release of the National Association of Home Builders’ monthly index of industry sentiment for April.

Builders' views on the market had risen slightly in March to 17 in the index but in April fell back to 16, a level that it had remained at for four straight months prior to March. Any reading below 50 indicates negative sentiment about the market, a level the index hasn’t been above since April 2006.

Source: “U.S. Housing Starts, Permits Rebounded in March,” Associated Press (April 19, 2011) and “Builder Outlook for Home Buying Falls Slightly as Foreclosures, Short Sales Weigh Heavy,” Associated Press (April 18, 2011

Pending Home Sales Continue Uptrend

Pending home sales improved further in December, marking the fifth gain in the past six months, according to the National Association of Realtors®
The Pending Home Sales Index,* a forward-looking indicator, increased 2.0 percent to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November. The index is 4.2 percent below the 97.8 mark in December 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, credits good affordability conditions and economic improvement. “Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit,” he said.

“In the past two years, home buyers have been very successful, with super-low loan default rates, partly because of stable home prices during that time. That trend is likely to continue in 2011 as long as there is sufficient demand to absorb inventory,” Yun said. “The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, is highly unlikely this year.”
The PHSI in the Northeast increased 1.8 percent to 73.9 in December but is 5.3 percent below December 2009. In the Midwest the index rose 8.0 percent in December to 84.6 but is 5.1 percent below a year ago. Pending home sales in the South jumped 11.5 percent to an index of 101.9 and are 1.7 percent above December 2009. In the West the index fell 13.2 percent to 105.8 and is 10.7 percent below a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.
NOTE: Existing-home sales for January will be reported February 23 along with revisions for the past three years, and the next Pending Home Sales Index will be released February 28. Fourth quarter metro area home prices and state home sales will be published February 10; release times are 10:00 a.m. EST.
Source: http://www.realtor.org/press_room/news_releases/2011/01/phs_continue