Underlying market values

The index of pending home sales increased 0.3% in September after a 2.6 % decrease in August according to the National Association of Realtors in Washington. This increase, however, is less than what was forecasted by a Bloomberg survey of economists.

This is attributed to tight access to credit, certain areas still having high levels of unemployment, and potential buyers waiting to see the results of the coming elections. Then there are buyers who are benefiting from available opportunities and low interest rates. They are purchasing homes that have been on the market that are significantly discounted and those that are priced well in desirable locations making excellent rentals.

Regionally, there was a 4.3% increase in the West, a 1.4% increase in the Northeast and a 1% increase in the South and a 5.8% decrease in the Midwest.

The sales of new homes, as indicated by sales contracts, increased in September. This is the first increase since 2010 according to the Commerce Department. What these numbers show is that buyers still preferring new homes and there is a shortage of this inventory in most markets.

 

The Federal Reserve policy makers are buying mortgage-backed securities in an effort to bolster employment. Employment remains key to the continued stabilization of the real estate market. The stock market is another factor, especially, for the Greenwich real estate market. As of this writing, stocks advanced because of better-than forecasted corporate earnings.

The Chief Economist of the National Association of Realtors (NAR), Lawrence Yun, believes home-contract activity which is represented by the pending home sales index, will be at levels above prior years. However there continues to be inconsistencies in this indicator’s movement. He acknowledges that the real estate will require “positive underlying market fundamentals” that are expected in 2013. To that end, orders for durable goods increased almost 10% in September mainly due to aircraft orders according to figures from the Commerce Department. Also, less Americans filed applications for unemployment consistent with projections. The Labor Department said that unemployment filings declined by 23,000 from 369,000 for the period.

The low cost of money is a major reason why the real estate market is improving. The average rate on a 30-year fixed mortgage decreased to under 3.40 % last week. In September the Federal Reserve announced another round of asset purchases and a pledge to purchase $40 billion a month in mortgage-backed securities. Fed chairman Ben Bernanke realizes the housing market is needed to drive the economy which spurred that action.

Now the question remains: Which candidate will be successful in orchestrating the necessary policies to create the required “positive underlying market fundamentals” for our country?

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be e-mailed to [email protected] or she may be reached directly at 203-249-2244.

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