Cost of the shutdown

Last week it was reported that builder confidence slipped in October.

The National Association of Home Builders estimates that September housing starts will be approximately 875,000 to 900,000 units. This range includes 620,000 to 630,000 new single-family homes and 255,000 to 270,000 new apartments.

The REAL Trends Housing Market Report for this month shows that the pace of housing sales increased significantly in September — increasing approximately 21% from September 2012. Housing starts have been increasing since October 2011. The annual rate of new and existing home sales for September 2013 was just over 6 million — an increase from September 2012 but a decrease from the rate in August 2013.

Across the country, the average price of homes sold in September of this year increased 5.5% as compared to September of last year. Regionally, the average price of homes increased 10.2% in the West, 7.3% in the South and 7% in the Midwest. In the Northeast region, however, the average price decreased 0.3%. Housing unit sales last month increased 24.4% in the Midwest, 23.3% in the South, 21.5% in the Northeast, and 14.2% in the West.

Typically, when a housing recovery begins, interest rates increase as buyers increasingly commit to purchase homes. Buyers strive to lock in an interest rate before rates continue to rise. However, limited inventory in some markets is also keeping sales just below historical levels of balanced housing markets.

Variations in real estate markets require Realtors to educate their clients so that they can make informed decisions.

At the end of last week in Washington, D.C., the House and Senate voted to end the government shutdown. This all started when congressional Republicans tried to use must-pass funding legislation to address issues they see with President Obama’s health care legislation.

The deal reached allowed federal workers to return to work and prevented the threat of the United States defaulting on its debts — for at least the near future. Under this deal, Congress approved government funding until January 15, 2014, and the package gives the government the authority to borrow what is needed through February 7, 2014.

An increase in mortgage interest rates coupled with the government shutdown and uncertainty regarding the nation’s debt limit caused some developers and buyers to take a wait-and-see approach in purchasing property. Now that the government is back to work and the end of the year is approaching, buyers are coming off the sidelines and looking in earnest.

Buyers also realize there are tax benefits of closing a home by the end of the year, representing another incentive that will expire.

The government shutdown cost the U.S. economy $24 billion, according Standard & Poor’s. S&P dropped its forecast of gross domestic product (GDP) growth in the fourth quarter. What is still to be measured is the shutdown’s effect on consumer confidence, especially, given the short-term package that was approved. Understandably, the strength of consumer confidence also impacts the real estate market.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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