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WES KUNKLE, GRI. Real Estate and Mortgage Broker.

U.S. July Housing Starts Rise 8.3% to 1.978 Million Annual Rate

Aug. 17 (Bloomberg) -- U.S. housing starts rose more than forecast in July as builders responded to the best two months of home sales on record. Building permits, a sign of future activity, also increased.

Builders broke ground on homes at a 1.978 million-unit annual pace last month, up 8.3 percent from a revised 1.826 million rate in June, the Commerce Department said in Washington.

Sales of new homes reached a record in May and were the second-strongest ever in June, the latest government data showed. So far this year, housing starts have averaged 1.939 million, on pace to surpass last year's 1.85 million, the most in 25 years. Job growth this year and 30-year mortgage rates that are less than a percentage point above their all-time low are bolstering construction and the economy.

``There are plenty of regions where a fairly deep backlog of construction projects exists, suggesting that housing starts should remain fairly stable over the near term,'' said Joseph Abate, senior U.S. economist at Lehman Brothers in New York, before the report.

Housing starts were forecast to rise to a 1.898 million rate in July, according to the median of 61 forecasts in a Bloomberg News survey, from 1.802 million initially reported for June. Starts averaged 1.85 million at an annual rate last year.

Building permits rose 5.7 percent to a 2.055 million pace last month. Starts of single-family homes increased 8.5 percent in July to a 1.651 million-unit rate after a 1.522 million pace a month earlier. Starts of townhouses, apartments and other multifamily dwellings rose 7.6 percent to a 327,000 annual rate.


By region, starts rose 15.8 percent in the West to 549,000 at an annual pace; 15.7 percent in the Northeast to 192,000, the highest since February 1990; 4.3 percent in the Midwest to 336,000; and 4.3 percent in the South to 901,000.

The number of homes authorized but not yet started decreased 0.6 percent in July to 201,700 from 203,000.

The number of houses already under construction in July rose 0.9 percent to a 1.234 million rate. July housing completions fell 1.3 percent to 1.839 million units at an annual pace. Single- family completions rose 0.7 percent to 1.542 million.

Weather played less of a role in homebuilding last month than in June, economists said. July U.S. rainfall was close to the month's average over the last century following June's record precipitation in the southern part of the country.

The National Association of Home Builders said yesterday that its measure of U.S. homebuilder optimism rose this month to its highest point in almost a year. The builders group is forecasting housing starts of 1.9 million in 2004, the most since 1978, and record single-family starts of 1.56 million.

Mortgage Rates

Thirty-year mortgage rates that increased to 6.28 percent in May and June, about a percentage point above last year's record low, prompted people to buy in anticipation borrowing costs would keep rising. Since then, they've fallen. Last week, the rate dropped to 5.85 percent, according to Freddie Mac, the No. 2 buyer of mortgages.

``The negative impact of higher interest rates can take six months to develop,'' NAHB Economist Michael Carliner said. ``The immediate impact can actually be to stimulate demand as buyers on the fence jump into the market.''

Hovnanian Enterprises Inc., the nation's No. 8 homebuilder by market share, reported a 50 percent increase in July orders from a year ago. Chief Executive Ara Hovnanian said Friday that the Red Bank, New Jersey-based company plans to add 300 workers to its 3,000 member staff by the end of this year in response to increased demand.

``We had a fabulous July in terms of housing contracts,'' Hovnanian said. ``July orders were up 50 percent compared with last year.''

Home Sales

New home sales reached an all-time high in May and were the second-best ever in June. Sales have averaged 1.242 million this year compared with 1.089 million in 2003.

Homebuilding contributed 0.81 percentage point to the 3 percent annual rate of economic growth in the second quarter, according to the government. In the first quarter, when the economy expanded at a 3.9 annual rate, it contributed 0.24 percentage point.

Residential construction accounts for about 5 percent of the value of all goods and services produced in the U.S. Housing- related spending on such items as furniture and appliances also contributes to growth. Furniture sales rose 1.1 percent in July, according to the Commerce Department's retail report.

``I don't think that anybody can come up with a scenario in which housing creation is sustained at these levels for the rest of the year,'' said Patrick Franke, an economist with Commerzbank AG in Frankfurt.

August housing starts in the South may be weaker in the aftermath of Hurricane Charley, which has caused an estimated $11 billion of damage in Florida. Ellen Beeson, an economist at Bank of Tokyo-Mitsubishi Ltd., in New York, said the hurricane hindered construction work and related recovery efforts will probably divert some resources normally employed in homebuilding.

``We could see a large drop in housing starts because of the hurricane,'' Beeson said.

To contact the reporter on this story:
Victor Epstein in Washington at  vepstein@bloomberg.net
To contact the editor responsible for this story:
Kevin Miller in Washington at  kmiller@bloomberg.net
Last Updated: August 17, 2004 08:30 EDT

2nd Homes, Vacation Properties in Hot Demand

(July 26, 2004) --   A quarter or more of the nation's wealthy plan to purchase a second home during the next few years, according to research by Centex Destination Properties. Less affluent households also are interested in acquiring vacation properties.

Meanwhile, 40 percent of respondents to a related poll conducted by American Lives Inc. would not be opposed to traveling more than four hours to their vacation homes. The Second Home Property National Study also reveals that buyers increasingly are opting for low-maintenance units near retailers, eateries, and recreational amenities over those in recreation-oriented destinations such as ski resorts and golf-course communities.

Source: Copley News Service (07/26/04); Woodard, James M.


Rates on 30-year mortgages fall below 6%

WASHINGTON (AP) � In good news for home buyers, rates on 30-year mortgages fell below the 6% level this week for the first time in three months, although economists said they don't expect rates to stay at this level for long.

Freddie Mac said Thursday in its weekly nationwide survey that rates on 30-year, fixed-rate mortgages averaged 5.98% percent this week, down from 6% last week. The rate was the lowest since the last time the 30-year mortgage was below 6% on April 22, when rates averaged 5.94%.

Since peaking at a high for this year of 6.34% the week of May 13, 30-year mortgage rates have been headed lower, reflecting in part a slowdown in economic activity in June.

The economy hit what Federal Reserve Chairman Alan Greenspan on Tuesday termed a "soft patch" in June. Greenspan, however, in delivering the Fed's midyear economic forecast to Congress, sought to allay fears that the slowdown could threaten the sustainability of the current recovery.

He predicted that growth would soon rebound even as the Fed proceeds with what Greenspan indicated should be a gradual pace of interest rate increases.

Frank Nothaft, chief economist at Freddie Mac, said that the Fed's outlook for the second half of this year was "more upbeat than expected" and he said this stronger growth would translate into further increases in mortgage rates and other interest rates set by financial markets along with the rise in short-term rates controlled by the Fed.

"However, the rise in mortgage rates will be measured, not extreme, and that will help keep the housing industry stable and affordable in the coming months," he said.

The Freddie Mac survey found that rates on 15-year, fixed-rate mortgages, a popular option for refinancing, averaged 5.39% this week, the lowest level since late April and down from 5.40%.

Rates on one-year adjustable rate mortgages rose to 4.12%, up from 4.02%.

The 30-year mortgage fell to the lowest level in more than four decades in mid-June 2003 when it averaged 5.21% for two weeks.

A year ago, rates on 30-year mortgages averaged 5.67% with 15-year mortgages at 5.0% percent and one-year ARMs at 3.58%.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.6 point this week.

Higher Interest Rates Won't Hurt Housing, Says NAR Forecast

WASHINGTON (July 6, 2004) – Interest rates are rising due to healthy economic growth and they won't dampen the general strength of the nation's housing market, according to the National Association of Realtors�.

David Lereah, NAR's chief economist, said the cause of higher interest rates makes all the difference. "The reason interest rates are higher is that we are in a growing economy rather than dealing with inflationary pressures," he said. "This is good news because corporate profits are up 40 percent from two years ago, so companies are spending and jobs are being created at a strong pace. In the housing markets, this is largely neutralizing the effects of modestly higher interest rates."

"In fact, mortgage interest rates will remain very favorable in historic terms for the foreseeable future. One concern is for lower-income home buyers who are affected the most by a rise in financing costs—our hope is that the improving job market will provide the means to also afford decent housing at the lower rungs of the housing ladder," Lereah said.

Short-term interest rates are rising slowly, and long-term rates rose previously in anticipation of the Federal Reserve Board move last week. The 30-year fixed-rate mortgage retreated last week to 6.21 percent after reaching the 6.3-percent range in May, but should creep up to 6.7 percent by the fourth quarter. Unemployment is trending down and is expected to be 5.2 percent by the beginning of next year.

Lereah forecasts existing-home sales to hit a record 6.31 million this year, up 3.4 percent from 2003. New-home sales are expected to rise 6.4 percent to 1.16 million in 2004, also a record. Housing starts should grow by 2.6 percent to 1.90 million, the highest level since the impact of the baby boom generation in 1978.

The median existing-home price should rise 6.7 percent this year to $181,500; the median new-home price is seen at $209,600, up 7.9 percent from 2003.

NAR projects the U.S. gross domestic product to grow 4.5 percent this year, while the Consumer Price Index should rise 2.7 percent in 2004.

Inflation-adjusted disposable personal income is expected to grow by 3.8 percent this year, and the consumer confidence index will trend up to101 in the fourth quarter.

The National Association of Realtors� , "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

June 18, 2004-USA Today web site.
30-year, 15-year mortgage rates rise again
WASHINGTON � Rates on 30-year mortgages rose to 6.32% on average this week, but the continued increase isn't expected to clip the wings of the housing market, economists say.

In its weekly nationwide survey of rates, Freddie Mac said Thursday that rates on 30-year, fixed-rate mortgages climbed to 6.32% the week ended June 17, up from 6.30% last week.

Thirty-year mortgage rates hit a low this year of 5.38% the week ended March 18. Since then, they have moved slowly upward.

Rates for 15-year, fixed-rate mortgages also rose this week to 5.70%, from 5.67% last week. But rates for one-year adjustable rate mortgages dipped to 4.13%, down slightly from 4.14% last week.

The recent rise in mortgage rates comes in anticipation that the Federal Reserve will raise its target for a key short-term interest rate on June 30, for the first time in four years.

"The recent increase in mortgage rates has given the housing market a slight breather from the frantic pace in lending that has been prevalent over the last few years," said Frank Nothaft, Freddie Mac's chief economist.

Rates on 30-year mortgages could rise to 6.9% by the end of this year, according to some economists. That would still be low by historical standards. But they believe an improved labor market will help offset the impact of rising rates and support demand for homes.

Economists are forecasting sales of previously owned homes to set a record this year and believe sales of new homes will finish close to a record high.

This time a year ago, rates on 30-year mortgages averaged 5.21%, rates for 15-year mortgages averaged 4.60% and rates on one-year ARMs averaged 3.54%.

The nationwide averages for mortgage rates do not include add-on fees known as points. Thirty-year and 15-year loans each carried an average fee of 0.5 point this week, while one-year ARMs carried an average fee of 0.7 point. A point is one percent of the loan value.

In a separate report, refinancings accounted for 34% of mortgage loan applications filed last week, up from 33% the previous week, the Mortgage Bankers Association said.

June 16, 2004
Rates Rise
The average 30-year fixed mortgage rate rose to 6.30% for the week ending June 11 from 6.28% the previous week, according to Freddie Mac's Primary Mortgage Market Survey. The average 15-year fixed mortgage rate rose from 5.63% to 5.67%, while the average rate for one-year Treasury-indexed ARMs jumped from 3.98% to 4.14%. Fees and points averaged 0.7 of a point for all three mortgage categories. "The one-year ARM responds more directly to movements by the Federal Reserve Board, and market chatter has it that the Fed will not only raise rates at the end of this month, but may do so consecutively throughout the rest of the year," said Frank Nothaft, Freddie Mac's chief economist. "News like that is good news for keeping long-term fixed-rate mortgage rates low, since those are more sensitive to inflationary expectations." A year ago, the average 30-year and 15-year fixed rates were 5.21% and 4.60%, respectively, and the average one-year ARM rate was 3.54%, Freddie Mac said. Freddie Mac can be found online at http://www.freddiemac.com.


June 9, 2004
NAR expects record for existing-home sales in 2004


WASHINGTON -- June 9, 2004 -- Unexpectedly strong job growth will buffet the impact of higher interest rates and help to push existing-home sales to a record in 2004, according to the National Association of Realtors (NAR).

David Lereah, NAR's chief economist, says job growth could reach 3 million this year. "The economy is moving quickly now and the [Federal Reserve] is likely to raise short-term interest rates on June 30," he says. "The market appears to have anticipated the move and has priced it into 30-year mortgage rates, but the cost of financing remains historically low and strong demand will push home sales to a record this year."

The 30-year fixed-rate mortgage is expected to reach 6.9 percent by the fourth quarter. "At the same time, unemployment should drop to 5.3 percent, so we continue to have a very favorable backdrop for housing," Lereah says.

NAR projects existing-home sales to hit a record 6.17 million in 2004, which would be 1.2 percent higher than last year's 6.10 million record. New-home sales should be essentially stable, slipping 0.4 percent to 1.08 million this year, just shy of the record 1.09 million in 2003, while housing starts are seen to be fairly even, down 0.3 percent to 1.84 million.

The median existing-home price is forecast to rise 5.4 percent in 2004 to $179,200, while the median new-home price should grow by 7.9 percent to $210,400.

Lereah says the U.S. gross domestic product is forecast to grow 4.7 percent this year, with inflation remaining under control. The Consumer Price Index is projected to rise 2.4 percent in 2004.

"Energy prices could retreat, but more importantly, productivity gains mean labor costs should stay down," Lereah says. "This means there is no cost-push inflation in the pipeline where rising costs would push up prices, and long-term interest rates will not be moving up significantly this year or next."

Inflation-adjusted disposable personal income should grow by 3.9 percent in 2004, while the consumer confidence index is expected to rise to 96 in the fourth quarter.

More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the June issue of NAR's Real Estate Outlook: Market Trends and Insights. To purchase the publication, call 1-800-874-6500. More information: http://www.realtor.org/research.nsf/pages/Outlook?OpenDocument.

Source: NAR



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