CAAR Blog

The new foreign direct investment (FDI) report from NAR reports that foreign investment in the U.S. real estate sector rose in 2007 to $41.7 (up from $33.6 billion in 2006), continuing the uptrend that began in 2003. This is encouraging in light of downturn in the U.S. market that began in 2006. The 19-page report covers foreign investment in U.S. real estate with a breakdown of the major countries with significant holdings and provides an overview of today’s market and a forecast for the coming year. Bottom line: prospects are good for continued healthy investment in U.S. real estate, given the strength of foreign currencies in relation to the U.S. dollar. Download full report (286K) or access the full list of NAR International research reports.

There has been a lot of talk in the press since the hint of federally subsidized mortgage rates of 4.5% was “leaked” to the press last week.  Frankly, it was not much of a leak.  The idea went public in mid-November when the National Association of Realtors announced plans to promote the idea.  It may have been the worst kept secret in the history of the financial markets. 

But what everyone wants to know is how this is/will affect the marketplace.  Some thought it should be kept secret because it would just cause buyers to hold on instead of making the decision to buy.  After all, Congress and the Federal Government is not an organization built for speed - this decision could take months and stall the markets.

The best news is that just the hint of the Feds taking action has caused interest rates to plummet - hovering around 5.5%.  For anyone who still remembers the double-digit of the past, 5.5% is eye-popping good.  So should you wait for the possibility of even lower rates, or jump in before 5.5% is no longer available? 

Depends. 

Every buyer’s situation is unique.  Are you trying to complete a move before the children start school again in January?  If so, don’t wait for the 4.5% possibility.  Have you found the perfect home that you plan to live in for the next several years?  If so, waiting could mean losing your dream home to another buyer.  Is your current home scheduled to close in the next 30 days?  If so, it does not make sense for you to wait unless you are willing to move into a short-term rental while you wait for the Feds to take action.

On the other hand, some buyers can wait.  If you still need to sell your home before you can purchase a new one, waiting is a viable option.  If you are currently a renter and you can rent by the month for a few months, it may make sense to see what happens.  If you are an investor, you need to weigh the risk of waiting against the possible financial rewards of waiting. 

Buying a home is personal and the math of financing the purchase is just one of several key factors.  The best advice we can give is to consult your REALTOR®, keep an eye on what the Feds are doing, and don’t lose sight of the fact that 5.5% is a great deal on a mortgage.  No one knows if or when the Feds will move on this idea.  It could be today, or it could be never. 

Adendum:  The current rate is the lowest 30-yr fixed since July 2005.  Check out this site to see the history of mortgage rates - Mortgage-x.com

Here is a related story on Inman worth reading.

NAR’s forward-looking pending home sales index eased against a deteriorating economic backdrop but remains in a stable range, the association says. The index, based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September, and is 1.0 percent below October 2007, when it was 89.8. “Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” says Lawrence Yun, NAR chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things: there is pent-up demand, and buyers will enter the market when they have access to safe, affordable mortgages.”

Very interesting perspective from Kenneth Harney’s Washington Post article called Long-Term Numbers Tell a Different Story.  He references a third-quarter survey released Nov. 25 by the Federal Housing Finance Agency, that covers 292 metropolitan markets, of which 273 showed positive net home values over the course of the previous five years, while 19 were negative.

From the FHFA Third-Quarter Survey (pardon the funky formatting)

Percent Change in House Prices with MSA Rankings Period Ended September 30, 2008 (Estimates use all-transactions HPI which includes purchase and refinance mortgages)     
MSA National Ranking**                                                

Top 20 Cities                                      Rank    1-Yr.     Qtr.     5-Yr.     

Austin-Round Rock, TX                                          1     5.62     1.69     35.32     
Augusta-Richmond County, GA-SC                         2     5.48     2.00     38.97     
Rapid City, SD                                                        3     5.43     0.74     29.67     
Houma-Bayou Cane-Thibodaux, LA                        4     5.18     -1.64     43.28     
Houston-Sugar Land-Baytown, TX                          5     5.17     1.49     27.10     
Mobile, AL                                                              6     4.97     2.49     41.92     
Grand Junction, CO                                                7     4.67     1.21     66.11     
Logan, UT-ID                                                          8     4.55     1.11     34.25     
Greenville-Mouldin-Easley, SC                                9     4.55     -0.61     22.63     
Decatur, AL                                                          10     4.21     -0.48     22.97     
Spartanburg, SC                                                    11     4.12     2.20     16.64     
Huntsville, AL                                                       12     4.12     0.51     31.51     
Kennewick-Pasco-Richland, WA                           13     4.11     0.80     20.05     
Kingsport-Bristol-Bristol, TN-VA                    14     3.93     0.69     32.41     
Raleigh-Cary, NC                                                   15     3.84     0.41     27.81     
Florence, SC                                                         16     3.74     -0.30     22.86     
Hickory-Lenoir-Morganton, NC                             17     3.68     1.87     20.38     
Macon, GA                                                            18     3.47     3.64     21.51     
Lubbock, TX                                                         19     3.20     0.62     18.91     
Tuscaloosa, AL                                                     20     3.14     -0.14     28.42     

Virginia Rankings

Roanoke, VA                                                        31     2.65     0.37     40.06     

Lynchburg, VA                                                     50     1.82     -1.30     41.41     

Charlottesville, VA                                        129     -0.80     0.99     54.79     

Virginia Beach-Norfolk-Newport News, VA        163     -1.97     -1.02    72.58     

Washington-Arlington-Alexandria                      250     -12.52   -4.74     43.74

Winchester, VA-WV                                           254     -13.37   -5.54     39.94     

Bottom 10 Cities

Las Vegas-Paradise, NV                                      283     -26.78     -12.63     25.82   

Port St. Lucie, FL                                              284     -27.12     -10.95     14.09     
Cape Coral-Fort Myers, FL                                  285     -28.28     -14.20     14.57     
Bakersfield, CA                                                  286     -28.54     -13.55     31.92     
Riverside-San Bernardino, CA                            287     -31.46     -13.65     20.42     
Vallejo-Fairfield, CA                                           288     -33.27     -16.84     -5.57     
Salinas, CA                                                         289     -34.09     -17.64     -1.76     
Modesto, CA                                                      290     -36.65     -15.04     -6.96     

Stockton, CA                                                     291     -41.44     -19.11     -15.04     
Merced, CA                                                       292     -42.30     -16.51     -15.00

Who are today’s buyers? Sixty-one percent are married couples, 20 percent are single women, 10 percent are single men, and 7 percent are unmarried couples. Learn more about who’s buying homes today and what they’re looking for in a sales professional in an NAR Research analysis based on the latest NAR Profile of Home Buyers and Sellers.