Imperial Golf Estates Open House TODAY
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Why Mortgage Rates Will Fall
I have read and heard several comments suggesting that the increase in the 30-year Fixed Rate Mortgage (FRM) this year has been a direct result of the increase in the Federal Reserve’s Fed Funds rate (FF).
This is not correct.
As I will demonstrate, the FRM is determined by market forces, and in particular by the extra yield – the “spread” – which investors require when buying pools of mortgages (Mortgage Backed Securities or MBS), as compared with the risk-free yield available with the 10-year Treasury Note (10T) which has the nearest duration to the expected life of a pool of mortgages.
In contrast, the FF is the rate that banks use when setting their Prime Rates. When the FF increases, banks increase their Prime Rates and therefore the interest rate on those loans whose rates are based upon Prime Rates – e.g. credit cards and auto loans.
And we will see that the FRM increased this year long before the Fed started to increase the FF rate.
Mortgage-Backed Securities (MBS)
A conventional mortgage or conventional loan is any type of home buyer’s loan that is not offered or secured by a government entity. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies.
Most conventional mortgages are packaged into mortgage-backed securities and sold to investors. This allows the bank or originator to use its capital to finance more mortgages.
The relationship between 10T and FRM
This chart shows how the two have moved in lockstep over the last 30-plus years:
Source: National Association of Realtors
While the “spread” has mostly been in the 1.5-2% range, it has fluctuated, especially during times of financial stress or uncertainty: (more…)
Housing Market Favorable for Preseason Buyers
Speculation that home sales in October would drop dramatically in Collier County following Hurricane Ian was proven inaccurate as closed and pending sales for the month increased 23.7 and 8.7 percent, respectively, compared to closed and pending sales reported in September, according to the October 2022 Market Report by the Naples Area Board of REALTORS® (NABOR®), which tracks home listings and sales within Collier County (excluding Marco Island). And even though 525 listings were either terminated, expired or withdrawn from the Southwest Florida MLS during October, overall inventory for the month increased 72.7 percent to 2,325 properties from 1,346 properties in October 2021.
According to NABOR®’s statistics (more…)
Home Prices After Ian? Probably Going Up
A price spike is expected for Florida real estate spared the wrath of Hurricane Ian. Multiple studies show property values in storm-ravaged regions have historically risen past the national average following a disaster.
Veros Real Estate Solutions estimated that property prices topped the national average by 7% in five metropolitan areas over the 12 months following a hit by a major storm.
An April 2022 analysis of Florida’s housing market by University of California, San Diego economist Joshua Graff Zivin and colleagues also concluded that home prices rise temporarily after hurricanes. And the authors also said they did not observe “any major changes to the racial, ethnic or gender profiles of buyers, suggesting that socio-demographic characteristics of neighborhoods are quite stable in the face of these housing market shocks.”
Many storm victims show an unwillingness to move, which is often the biggest factor in rising prices. However, Ian might change that equation because of predicted hikes to homeowners insurance policies.
A June 2022 report from the Insurance Information Institute found the average cost of insuring a home in Florida has risen to $4,231 annually, although Veros Chief Economist Eric Fox still does not anticipate the situation changing significantly.
“People want to move from states that aren’t run as well as ours, and they have the money to do it,” says Florida real estate agent Rick Pitts. “Hurricanes are no joke – but in California you don’t get an earthquake warning.”
Source: Forbes (10/07/22) Kochkodin, Brandon
© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688
And read these recent articles:
Economic commentary
No, the Federal Reserve does not control mortgage rates
Federal Reserve tries to rewrite history
Has Inflation Peaked?
Have Mortgage Rates peaked?
Are we already in a Recession?
Federal Reserve in Fantasyland: Implications for Housing Market
How far Behind the Curve is the Federal Reserve?
Will the Federal Reserve show chutzpah today?
Why are Mortgage Rates so high?
Other
How to protect your house from title fraud
Florida Lawmakers Pass Insurance, Condo Reforms
Florida Regulator: Insurers Can Offer Roof Deductibles
Expansion Plans for Fort Myers Airport
Guide to Buying and Selling in Southwest Florida
Market Summaries
Florida Market Update in 4 minutes
Naples mid-year Market Report
Sales Resemble Pre-Pandemic — But Not Pricing & Inventory
- Andrew Oliver, M.B.E., M.B.A.
Real Estate Advisor
Andrew.Oliver@Compass.com
www.TheFeinsGroup.com
www.OliverReportsFL.com
m: 617.834.8205
———-
800 Laurel Oak Drive, Suite 400, Naples, FL 34108
———-
Licensed in Massachusetts
www.OliverReportsMA.com
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact me on 617.834.8205 or Andrew.Oliver@Compas
How have home prices behaved after previous major Hurricanes?
Veros Real Estate Solutions has published a report looking at real estate markets after 5 major storms. All the cities that experienced these massive hurricanes experienced higher levels of home value appreciation in the year after the storm than the year before.
There may have been other factors impacting house prices in the year prior to and the year following the hurricanes that were unrelated to the hurricane itself. For example, house prices might have been going up rapidly in a given market simply due to an overall seller’s market in that city at the time of the storm. This was certainly the case with Ft. Myers in 2004 during Hurricane Charley.
To mitigate the effect of other factors outside of the hurricane and to normalize the appreciation statistics, the appreciation of each city pre- and post-hurricane was taken as a percentage of the US national average appreciation during the same timeframes.
Overall, the same trend is observed. For example, in the year prior to Katrina, New Orleans had appreciation of 97% of the US average appreciation. In the year after Katrina, the average appreciation skyrocketed to 109% of the US average – an increase of 12%! For these five storms, the post hurricane annual appreciation (as a percentage of average US house price appreciation) ranged from a low of 2.4% to a high of 11.9% more than the annual appreciation in those markets prior to the storm. The average increase was 6.6% Thus, both methods of analyzing the data show the same results.
At first blush, this may seem like a surprising result, but it all comes down to supply and demand. People whose homes have been severely damaged have to find a new place to live in the short term while their home is being repaired. This causes demand to increase for an existing pool of housing inventory. Likewise, some of the inventory of homes to purchase will have been damaged by the storm thereby reducing the supply. Increased demand and reduced supply for an asset means (all other things being equal) that there will be upward price pressure. Thus, post-hurricane housing markets follow classic economic theory.
And read these recent articles:
Economic commentary
No, the Federal Reserve does not control mortgage rates
Federal Reserve tries to rewrite history
Has Inflation Peaked?
Have Mortgage Rates peaked?
Are we already in a Recession?
Federal Reserve in Fantasyland: Implications for Housing Market
How far Behind the Curve is the Federal Reserve?
Will the Federal Reserve show chutzpah today?
Why are Mortgage Rates so high?
Other
How to protect your house from title fraud
Florida Lawmakers Pass Insurance, Condo Reforms
Florida Regulator: Insurers Can Offer Roof Deductibles
Expansion Plans for Fort Myers Airport
Guide to Buying and Selling in Southwest Florida
Market Summaries
Florida Market Update in 4 minutes
Naples mid-year Market Report
Sales Resemble Pre-Pandemic — But Not Pricing & Inventory
- Andrew Oliver, M.B.E., M.B.A.
Real Estate Advisor
Andrew.Oliver@Compass.com
www.TheFeinsGroup.com
www.OliverReportsFL.com
m: 617.834.8205
———-
800 Laurel Oak Drive, Suite 400, Naples, FL 34108
———-
Licensed in Massachusetts
www.OliverReportsMA.com
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact me on 617.834.8205 or Andrew.Oliver@Compas
Buyers Undeterred in Ian’s Hardest-Hit Areas
In the month before Hurricane Ian hurtled into southwest Florida, shredding Lee County and destroying or damaging more than 32,000 homes, the area reigned as having the most overvalued real estate in the nation.
The county of pristine barrier islands and waterfront homes had bullied title-holder Boise, Idaho, into second place in an August ranking of price-bloated housing markets, according to a study released Tuesday by Florida Atlantic University and Florida International University.
Two weeks after Ian’s Category 4 wrath, economists and Realtors said the Sept. 28 storm may be a pause in Florida’s humming housing market but is unlikely to have long-term impacts because “people want to live near saltwater in a warm and business-friendly climate,” said Ken H. Johnson, an FAU housing economist.
In the near term, however, Ian could bolster unaffordability in Southwest Florida and Palm Beach County by reducing the number of homes for sale and rent as locals look for temporary residences while their Lee County homes are rebuilt.
“I haven’t lost a single potential buyer because of the storm,” said Bob Ashworth, a real estate agent with RE/Max Realty Team in Cape Coral. “We still have strong demand. People still want to buy.” (more…)
Mortgage Rates peaked? I spoke too soon
In June I published Have Mortgage Rates peaked? when the 30-year national average Fixed-Rate Mortgage (FRM) reached 5.81% and commented: “..a realistic expectation would be that the spread (the difference between the FRM and the yield on the 10-year Treasury) will drop from its current 2.5% to at least 1.8% at some point. If the yield on 10T stays in the low 3% range that would suggest that the FRM will drop below 5% again.”
Well it did…for a while, dropping to 4.99% on August 4th.
But then this happened:
Why have mortgage rates jumped again? (more…)
Pelican Bay Villa $205,000 Price Drop!
There are now 4 villas for sale in Pelican Bay:
3 Las Brisas: $2.6 million, 3 bed +den, 2,800 SF, Pool, Pets with approval
7229 Pelican Bay Blvd: $1.95 million, 2 bed + den, 2,319 SF, Community Pool, 2 Pets
6644 Trident Way: $1.1 million, 2 bed, 1,354 SF, Community Pool, 2 Pets
and following a $205,000 price reduction to $2,290,000: 5893 Via Lugano
Call me on 617.834.8205 with questions or to schedule a showing. (more…)
Is the U.S. Housing Market at a Crossroads?
Homes reached record prices in early 2022 – so is the current market a housing recession or just a market correction?
Here are some extracts from an article Market at the Crossroads on the Florida Realtors website, with my comments and links to recent articles at the end.
Is there a housing slowdown?
There is widespread consensus that the housing market has experienced a drastic drop-off in activity since its pandemic-prompted heights.
The housing market is “not like the volatile stock market, always going up and down; the housing market moves at a different, slower pace. “The market simply could not, and was never expected to, grow at that pace indefinitely,” Neda Navab, president of brokerage operations at real estate company Compass said. “Whether this trend will continue long enough for the market to enter a true ‘recession,’ or if this is simply the start of an expected ‘correction’ to historic norms, still remains to be seen.”
The case for a housing correction (more…)
Pelican Bay Villa Open House TODAY 2-4
Join me today 2-4 to see one of only 2 villas currently for sale in Pelican Bay with a private pool.
Lush landscaped views await you from this 3 bed/2.5 bath villa in Lugano at Pelican Bay. Located in the heart of Pelican Bay, this Northwest-facing property boasts 2,100 square feet of living area, plus a walled garden and lanai with private pool and spa. There is only one Pelican Bay! The premier luxury community in northern Naples, Pelican Bay offers residents exclusive access to unrivaled amenities that include three Gulf-front restaurants, two tennis facilities, a 27-hole golf course, two boardwalks, a Fitness and Wellness Center, and three miles of private beaches. With venues easily accessible by the community’s comprehensive tram system, residents can just take a backseat and enjoy the ride. Pelican Bay is adjacent to Waterside Shops and within walking distance of Artis–Naples, Southwest Florida’s top tier performing arts center, which is currently planning a $150 million renovation. You’ll never be far from fine dining, luxury shopping, and world class entertainment.
Click Customer_Financial_Report for details and Features for highlights. And Pelican Bay for full information about Pelican Bay.
And read these recent articles: (more…)
Pelican Bay Villa Open House TODAY 12-4
Join me today 12-4 to see the only villa currently for sale in Pelican Bay with a private pool.
Lush landscaped views await you from this 3 bed/2.5 bath villa in Lugano at Pelican Bay. Located in the heart of Pelican Bay, this Northwest-facing property boasts 2,100 square feet of living area, plus a walled garden and lanai with private pool and spa. There is only one Pelican Bay! The premier luxury community in northern Naples, Pelican Bay offers residents exclusive access to unrivaled amenities that include three Gulf-front restaurants, two tennis facilities, a 27-hole golf course, two boardwalks, a Fitness and Wellness Center, and three miles of private beaches. With venues easily accessible by the community’s comprehensive tram system, residents can just take a backseat and enjoy the ride. Pelican Bay is adjacent to Waterside Shops and within walking distance of Artis–Naples, Southwest Florida’s top tier performing arts center, which is currently planning a $150 million renovation. You’ll never be far from fine dining, luxury shopping, and world class entertainment.
Click Customer_Financial_Report for details and Features for highlights. And Pelican Bay for full information about Pelican Bay.
And read these recent articles: (more…)
Florida July Market Update in 4 minutes
This short video is an excellent summary of what is happening to the market overall in Florida.
And this is my recent overview of the market in Naples: Market returning to normal – well, mostly
And read these recent articles: (more…)
Market returning to normal – well, mostly
After the extremely strong market post COVID it is instructive to take a slightly longer-term look.
These 3 charts are very much big picture for the entire Naples region and include all types of property. They do show, however, that sales and new listings have reverted to the norm, while prices overall are some 65% higher. (more…)
Recession: what Recession?
The August jobs report published yesterday showed that the labour market remained red-hot in July despite expectations job growth would cool as tighter monetary conditions and company layoffs stoked fears of a recession.
Here were the key numbers from the report, compared to economist estimates compiled by Bloomberg:
Non-farm payrolls: +528,000 vs. +250,000 (more…)
No, the Federal Reserve does not control mortgage rates
There is widespread misunderstanding about what drives mortgage rates. Indeed, I read an article recenlty on the National Association of Realtors website which stated that mortgage rates had risen sharply following the increase in the Federal Reserve’s interest rate.
Not so. (more…)