blog.hsh.com

The reckoning is finally on the horizon
-Richard Green

Commercial real estate (CRE) experts know that their market will be in shambles for months (if not years) to come. However, a recent survey reveals that many industry professionals believe that the market will hit bottom in 2010:

Real estate industry leaders who are meeting at the Urban Land Institute’s annual gathering in San Francisco are more optimistic than they were at this time last year because they can see the reckoning finally on the horizon, said Richard Green, director of the USC Lusk Center for Real Estate.

“Supply and demand” is perhaps the most generic, even cliche, law of economics. Yet, the seemingly-oversimplified phrase is the functional foundation of the housing market. The healthy dichotomy of seller and buyer is what greases the housing market. Unfortunately there are several monkey wrenches jamming the system.

When the housing market self destructed in 2006, supply surged and demand was vanquished. There are at least 10 separate factors to monitor which will dictate when the housing market can reinvent itself.

Here are the results from last week’s Market Trends survey:

(Click to Enlarge)

Every two months, the mortgage-market analysts at HSH recap the events of the past two months, and make a prediction on the future direction of mortgage rates.

“Since our last forecast, significant portions of the residential mortgage market have been reshaped due to government intervention and — in some ways — due to a lack of government action. We’ve come through an election cycle, seen hundreds of billions of dollars spent trying to comfort financial markets, and heard the promise of hundreds of billions more dollars in various forms of ’stimulus’ that may be on the way. For mortgages and real estate, at least one important support is in place; others may arrive under a new administration.”

From Forbes.com:

While no one is ready to call the bottom of the worst housing collapse in decades, there were glimmers this week that the severity could be waning.

Reports Tuesday showed the glut of newly built homes on the market fell to a five month low last month, while the decline in home prices is starting to ease, and in some cities values are even starting to rise. What’s more, existing home sales rose slightly from June to July, according to data Monday.

Read the rest of this entry »

This week’s issue of HSH’s Market Trends Newsletter, “Mortgage Rates Ease Slightly,” examines how recent economic conditions like the health of Fannie Mae and Freddie Mac, and current spreads between 30-year Fixed Rate Mortgages and the 10-year Treasury have affected the movement of mortgage rates:

For their part, rates were steady to slightly lower for the week. HSH’s Fixed Rate Mortgage Indicator (FRMI), the average interest rate for all 30-year FRMs — including conforming, jumbo and expanded conforming offerings — slid below the 7% threshold for the first time in four weeks, closing our national survey at 6.99%, a three basis point (.03%) decline. For 5/1 Hybrid ARMs, the overall shed a lone basis point to finish the week at 6.63%.

Read the rest of this entry »

Last week Federal Reserve Chairman Ben Bernanke delivered a key speech on “Reducing Systemic Risk” at the annual Fed conference in Jackson Hole, Wyoming which in part reiterated the hopeful economic outlook consumers have been promised for much of the year.

Despite the Fed’s concerns over inflation, it will continue to leave interest rates unchanged, since expectations are that inflation will ease over the “medium term” (end of this year and into 2009); if not Bernanke said the Fed will be forced to react. Since mid-July, the drop in oil prices, a settling in food costs, and a stronger dollar have controlled inflation to a certain degree, and have spared policy makers from having to raise rates.

By this point in time it has grown redundant to explain the current state of the housing market and the plight of homeowners desperate to get a decent bid on their home; but I’ll do it anyway.

The Mortgage Bankers Association reported today that mortgage applications for the week ending August 15 had dropped to their lowest level since 2000. A Reuters/Zogby poll released today found that while falling gas prices have eased certain consumers’ minds — under 13% polled believed gas prices would increase a lot between now and the end of the year, two-thirds believed housing prices in their area would stay the same or fall in the next year.