There has been quite a bit of data in the past two weeks regarding the Real Estate Market. The New Homes Sales numbers for October reported yesterday from the Census Bureau were exceptional, but some believe that these numbers are skewed and will be revised downward. The reasons are as follows: Purchase Contracts to purchase new homes jumped 25.4% in October after falling more than 6 1/2 percent in September from August. Along with the October numbers released yesterday, the originally reported seasonally adjusted rate of 421,000 units for September was adjusted down to 379,000, and the August numbers were adjusted down to only 354,000 units. Considering the August numbers were adjusted down approximately 15% from the original report, the newly reported 444,000 units for the month of October may be adjusted downward.
We also had the "Pending Home Sales" report for the month of October for existing homes released on November 25th. The month of October saw a 0.6% decline from September, the fifth month in a row of declines, and this is also down 1.6% from the same time last year according to the National Association of Realtors. Much of this however is due to the lack of inventory of homes for sale is certain areas.
It is no secret that the now infamous U.S. Government shut down is partially to blame because of all of the delays that it caused. According to Jed Smith the Managing Director of Quantitative Research for the National Association of Realtors, "29% of respondents to the October 2013 REALTOR® Confidence Index Survey reported that the government shutdown had a temporary effect on ongoing transactions. Other data indicated that the shutdown also apparently impacted buyer confidence to some degree for future transactions. Overall the impact was noticeable but somewhat lower than feared."
Rising interest rates are also a factor. As interest rates rise as they have, potential Buyers purchasing power is diminished due to higher mortgage payments. With the affordability of housing becoming more of an issue due to the rise in Real Estate prices since the collapse in 2008, and the limited inventory of housing for sale in certain areas, we may have a somewhat "different" and still very good Real Estate Market next year.
Much will also depend on how the New Federal Reserve Chairperson Janet Yellen views the U.S. economy in the months to come from all of the economic data received. If the Federal Reserve begins to taper, and it is only a matter of time, this can may cause interest rates to climb as the view will be for an ongoing improving U.S. economy. And the stock market with its now normal volatile patterns of selling off, or overzealous buying, depending on the News Headlines at the moment, will also be a factor to watch closely.
Real Estate prices are at the Highest levels that we have seen in many years; this is a very different and much Healthier Real Estate Market than the one that we experienced in 2007. Anyone that has purchased a home since 2007, or refinanced their existing home, knows that the Banks will only lend money to you if you give them everything that they now require in terms of documentation, and I mean everything! If you do not have an impeccable file, obtaining a Conventional Home Loan may be difficult. While this is may appear to be not fair at times, this is actually a very good thing. Lenders do not want to repeat the mistakes made between 2004 and 2007. Thankfully!
In my humble opinion, 2014 will be a very good year for the Real Estate Market, barring any unforeseen disasters. So if you are planning to sell your current property in Silicon Valley, this is a very good time. Or if you are planning to purchase your first property, this is also a very good time.
Next up will be the monthly jobs report to be released tomorrow morning, Friday December 6th. If the numbers are better than expected, interest rates may go up again. However, more jobs are good for the economy and the people that are getting the jobs. I Strongly Believe that Home Ownership is part of the American Dream! Stay Tuned!
Joe Carrero
Silicon Valley & Bay Area
Real Estate Specialist Since 1995
If you enjoy reading my Silicon Valley Real Estate Blog,
please recommend me on Google and recommend me to your friends on your
Social Networking Profiles. Thank You! JC
