No Open Houses Sunday March 29
Just a reminder that there are no Open Houses today. Instead, this shows all houses and condos currently available for sale. Different arrangements are being made for viewing – some are video only – so please contact me to see what is possible. (more…)
New Listings week ending March 27
With no Open Houses please call to schedule a private showing for these New Listings: (more…)
Properties Currently Available for Sale
As there are no Open Houses currently, I am replacing the normal Open House post with one showing details of all houses and condos currently available for sale. Different arrangements are being made for viewing – some are video only – so please contact me to see what is possible. (more…)
New Listings mid-week March 25
Houses are still selling as buyers and sellers make creative arrangements for viewing: (more…)
Houses and Condos currently For Sale
As there are few if any Open Houses now, I am replacing the normal Open House post with one showing details of all houses and condos currently available for sale. Different arrangements are being made for viewing – some are video only – so please contact me to see what is possible. (more…)
New Listings week ending March 20
There is still a lot of activity in the local market. With few if any Open Houses please call to schedule a private showing for these New Listings: (more…)
Open Houses weekend March 21/22
While Sagan Harborside Sotheby’s International Realty, along with most of the other brokers locally, has suspended Open Houses for the time being, there are still a few scheduled. Hence, I report them here, even though I strongly recommend that prospective buyers schedule a private showing.
Marblehead Open House
Salem Open Houses
Beverly Open House
Lynn Open Houses
Why are Mortgage Rates Jumping?
Recession and Recovery
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Why are Mortgage Rates Jumping?
Regular readers of this column are aware of the link between the 10-year Treasury (10T) and the 30-year Fixed rate Mortgage(FRM). Over the last several years the spread – the difference between FRM and the yield on 10T has averaged around 1.75% (see table below). So with the 10T yielding 1.15% the FRM should be say 2.9%. Right?
Wrong. Today’s Freddie Mac weekly survey, taken on Monday-Wednesday this week, showed an average rate of 3.65%, up from 3.36% last week and the all-time low of 3.29% recorded two weeks ago.
Why is that? The simple answer is Supply and Demand, a basic economic equation I have been applying to the housing market in recent years. While simple, this is a fundamental of understanding markets – whether for housing, mortgage rates – or toilet paper.
In recent years there have been more buyers – Demand – than sellers – Supply- in the housing market, and this has led to bidding wars and rising prices. In my Recession and Recovery piece I wrote that the imbalance between Sellers and Buyers was quite likely to change in the coming weeks, as some buyers hold off and more sellers come forward.
My hope is that this will lead to a more balanced market when conditions stabilise.
Coming back to mortgage rates, in my Mortgage rates Stabilise post last Saturday I wrote: “Lenders are overwhelmed by refinancing requests and are keeping rates up to slow demand.”
In other words, Demand is exceeding Supply and prices are rising.
I under-estimated the degree to which the quoted mortgage rate would rise in the short-term. This was Freddie Mac’s comment today: “Mortgage rates rose again this week as lenders increased prices to help manage skyrocketing refinance demand. This is expected to be a short-term phenomenon as lenders work through their backlog.”
And here is a very short video from Bankrate explaining what has been going on this week: Why aren’t mortgage rates lower?”.
The table below shows the spread over the last 15 years. Noe that in a previous time of stress – 2008/09 (although for a very different reason) the spread widened before reverting to the mean when conditions stabilised.
I expect the same phenomenon to occur again in due course.
I’ll end with the same Wall Street Journal quote I used to end one of my earlier posts:
“For all the foreboding about the novel coronavirus—foreboding that is justified—it is heartening to see the American people responding in ways reminiscent of the frontier spirit. Most people are doing what they have to do to survive a clear and immediate threat to their lives and communities.”
And I ended: “And that spirit will also determine that the recovery will come.”
As it shall.
Andrew Oliver
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
New Listings mid-week March 18
Here are the most recent New Listings. There currently are a few Open Houses scheduled this weekend but I recommend that you make a private appointment to view any property in which you have an interest.
Marblehead New Listings
Swampscott New Listings
Salem New Listings
Beverly New Listings
Lynn New Listings
Recession and Recovery
Mortgage rates Stabilise
Coronavirus and the Housing Market: Part 2
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
This is NOT Like the Last Time
Below is an article from Keeping Current Matters, highlighting the substantial differences between 2008 and today.
And here is a link to my recent post: Recession and Recovery
5 Simple Graphs Proving This Is NOT Like the Last Time
With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:
“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”
There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.
1. Mortgage standards are nothing like they were back then.
During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.
2. Prices are not soaring out of control.
Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.
3. We don’t have a surplus of homes on the market. We have a shortage.
The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.
4. Houses became too expensive to buy.
The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:
5. People are equity rich, not tapped out.
In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.
Bottom Line
If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.
Mortgage rates after the collapse of bond yields
Andrew Oliver
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Scheduled Open Houses Sunday March 15
Despite cancellations by many brokerage firms these Open Houses are still listed as taking place today. A better option for buyers would be to arrange a private showing.
Marblehead Open Houses
Swampscott Open Houses
Salem Open Houses
Beverly Open Houses
Lynn Open Houses
Recession and Recovery
Mortgage rates after the collapse of bond yields
Coronavirus and the Housing Market: Part 2
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Recession and Recovery
Statistics tell us about the past, while markets look to the future. I have no doubt that the world will see negative growth in the second quarter and possibly the third quarter – which would make it officially a recession – but I also expect a strong recovery fueled by the amount of monetary and fiscal stimulus that has already been provided by some countries and will be by others.
Perhaps the best coordinated response so far has come from the UK where monetary, fiscal and regulatory measures were announced together on Wednesday. The US has been slow to acknowledge the seriousness of COVID-19 and the fiscal measures announced so far are, rightly, largely aimed at helping those most affected by the economic impact of the shutdown of so much of the country. I have to assume that a larger fiscal stimulus will be announced at some point.
As to the future I quote from a recent Wall Street Journal editorial:
“For all the foreboding about the novel coronavirus—foreboding that is justified—it is heartening to see the American people responding in ways reminiscent of the frontier spirit. Most people are doing what they have to do to survive a clear and immediate threat to their lives and communities.”
“The new watchword is “social distancing.” The speed with which the American people and their institutions are executing that sound strategy is breathtaking.”
“Health emergencies in the U.S. mainly and appropriately remain the responsibility of state and local officials.”
“The House package includes free testing for everyone who needs it, and two weeks of paid sick leave to allow people with the virus to stay home from work and avoid infecting co-workers. It also includes enhanced jobless benefits, increased food aid for children, senior citizens and food banks, and higher funding for Medicaid benefits.”
“The pandemic is still in its early stages in the U.S., and the fight will be a long haul. Social distancing by individuals and businesses may have to persist for weeks or even months. The good news on Friday is that the federal government and private economy seem at last to be manning the health barricades.”
China’s example
Perhaps lost in the drama of this week is the news that China seems to be on the path to returning to normal. On Friday Apple reopened all its 42 stores which had been closed since early February.
“It feels to me that China is getting the coronavirus under control,” CEO Tim Cook said in an interview two weeks ago. “I mean you look at the numbers, they’re coming down day by day by day. And so I’m very optimistic there.” Cook went on to point out that Apple’s suppliers were reopening factories.
Starbucks closed about half of its 4,300 stores on January 29. Those closures, combined with already planned closures for Chinese New Year holiday, resulted in some 80% of its stores shuttered in early February. As of early March more than 90% of its stores were open, albeit most were operating on a reduced schedule. By month’s end, assuming no unforeseen reoccurrences of the disease, the company expects 95% of stores in China to be open.
On March 9, Jing Daily reported that China may soon have the disease under control thanks to its proactive public health measures. And some analysts predict government-imposed quarantine measures may begin to lift as early as the end of March.
With the first quarter of 2020 in the tank, JP Morgan research analysts are hopeful for an economic recovery in the second quarter. According to China Daily, Jing Ulrich, the bank’s vice chairman of global banking and Asia-Pacific, predicts that the Chinese economy will grow 15% quarter-on-quarter from April to June, after contracting by 3.9% during the first three months of 2020, compared to the previous year.
Comment
The slow response to the seriousness of COVID-19 may delay the recovery in the US but that recovery should still take place later this year. The timing depends upon the success of the measures to contain the spread of the virus and the scale of the fiscal stimulus which is still to be announced.
As for the housing market, I have for some years used the simple concept of Supply and Demand to describe conditions. For some years Demand has far out-stripped Supply. It seems quite possible that for the next few months Demand may be reduced as buyers adopt a wait and see attitude, while Supply may increase as those sellers who had been thinking of selling decide to do so.
If this works out, we may later in the year see a more balanced housing market between buyers and sellers.
I will end this piece by repeating an earlier quote from the WSJ:L
“For all the foreboding about the novel coronavirus—foreboding that is justified—it is heartening to see the American people responding in ways reminiscent of the frontier spirit. Most people are doing what they have to do to survive a clear and immediate threat to their lives and communities.”
And that spirit will also determine that the recovery will come.
Mortgage rates after the collapse of bond yields
Coronavirus and the Housing Market: Part 2
Andrew Oliver
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Mortgage rates stabilise
As suggested in last week’s Mortgage rates after the collapse of bond yields the 30-year Fixed rate Mortgage (FRM) did not follow the further collapse in the yield on th 10-year Treasury – which itself reversed later in the week.
The Freddie Mac weekly survey actually saw an increase in the FRM from 3.29% to 3.37%.
There would appear to be two main reasons for the stabilising of rates: lenders are overwhelmed by refinancing requests and are keeping rates up to slow demand; and the buyers of mortgage-backed securities – the ultimate determinant of rates – are balking at lower rates.
The FRM remains very close to all-time lows and we may have seen the actual bottom, but it is unlikely that rates will rise significantly any time soon.
Recession and Recovery
Mortgage rates after the collapse of bond yields
Andrew Oliver
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Currently Scheduled Open Houses weekend of March 14/15
It is not clear if the advertised Open Houses should or will actually take place – some brokerage firms have already cancelled all their Open Houses and others may follow – but as of Saturday morning these Open Houses are still listed. A better option for buyers would be to arrange a private showing.
Marblehead Open Houses
Swampscott Open Houses
Salem Open Houses
Beverly Open Houses
Lynn Open Houses
Recession and Recovery
Mortgage rates after the collapse of bond yields
Coronavirus and the Housing Market: Part 2
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
New Listings week ending March 13
Here are the latest New Listings. Buyers are advised to arrange a private showing rather than attend any Open Houses currently listed which may well not take place.
Marblehead New Listings
Swampscott New Listings
Salem New Listings
Beverly New Listings
Lynn New Listings
Recession and Recovery
Mortgage rates after the collapse of bond yields
Coronavirus and the Housing Market: Part 2
Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Recent Comments