How Cool Is The Market?

It's been quite interesting to read all these
headline news on the direction of housing market.

BUILDERS CONFIDENCE IN CONDO MARKET DIPS AGAIN [NAHB]:

The component of the MCMI that tracks current condo supply conditions fell to an index value of 32.0, compared to a value of 61.3 during the second quarter of last year. It was the third time since NAHB began tracking this data that the for-sale index has fallen below 50. A rating of 50 generally indicates that the number of positive responses is about the same as the number of negative responses.

NEW INDEX SHOWS STRENGTHENING DEMAND FOR MULTI-FAMILY RENTAL APARTMENTS [NAHB]

Builder confidence in current rental apartment market conditions climbed to a new high in the second quarter of 2006, and their expectations for the next six months are even higher amid rising occupancy rates, rising rents, and increased traffic at all classes of rental apartments, according to results from the National Association of Home Builders/Fannie Mae Multifamily Rental Market Index* (MRMI), released today.

SECOND QUARTER STATE EXISTING-HOME SALES SOFTEN [NAR]

Existing-home sales, including single-family and condo, were down in the second quarter in contrast with a record set in the same period in 2005. Despite the overall decline, 20 states showed increases in sales activity from a year ago, according to the National Association of Realtors^®.

The quarterly report on total state existing-home sales shows that the seasonally adjusted annual rate* was 6.69 million units in the second quarter, down 7.0 percent from the record 7.19 million-unit level in the second quarter of 2005.

WEEKLY APPLICATION SURVEY [MBA]

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.38 percent from 6.54 percent, with points remaining at 0.98 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. 

The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.04 percent from 6.15 percent, with points increasing to 1.12 from 1.09 (including the origination fee) for 80 percent LTV loans. 

The average contract interest rate for one-year ARMs decreased to 5.91 percent from 5.97 percent, with points increasing to 0.82 from 0.80 (including the origination fee) for 80 percent LTV loans.

SALES OF NEW HOME SALES DOWN 21.6% in PAST YEAR. Inventories of unsold homes rise to 11-year high [Market Watch]

Sales of new homes dropped 4.3% in July to a seasonally adjusted annual rate of 1.07 million, the Commerce Department said Thursday. New-home sales are down 21.6% in the past year, the biggest drop since late 1994.

Inventories of unsold homes rose to an 11-year high, while median prices flattened out. The report confirms a dramatic decline in real estate in July. Existing home sales fell 4.3% in July, the realtors reported Wednesday. Total home sales fell to 7.4 million annualized in July, the lowest since January 2004. Total sales are off 12.9% in the past year.

HOUSING STOCKS TAKE HEAT AFTER CHILLY DATA [Market Watch]

Shares of U.S. residential builders fell Wednesday after an economic report showed sales of existing homes falling to their lowest level in two years, heightening concerns that the U.S. housing market is slowing dramatically.

IS ECONOMY HEADED TO A SOFT LANDING [USA Today]

In the past several weeks, a slew of data on housing, manufacturing and employment has bolstered Federal Reserve Chairman Ben Bernanke's forecast for moderating growth and diminishing inflation that should eventually eliminate the need for interest rate increases.
-------
The other big variable is housing. After adding to growth in the past several years, the sector has become a drag, with the drop in home construction shaving as much as 1 percentage point off gross domestic product, says economist Peter Morici of the University of Maryland. The impact could be far greater if the market falls faster.

The slowing housing market will affect construction, employment and consumer spending, as people are less able to draw on the rising equity in their homes.

Conclusion: These are signs for buyers market. Locally, the condo market in close-in burbs like Arlington, Alexandria, and Fairfax still holding. We have to see how the August number is going to come out. August, is traditionally the slowest month for housing. People who are shopping for homes and have children -- are done with the moving. Only other kinds of shoppers, i.e. relo, renters still on the market. With sellers, builders anxious to get their supplies sold, interest rates still low, high inventories, sellers help with closing cost, strong rental market....buyers -- you might as well take advantage of this opportunity, via Real Estate Journal.

If you're in it for the long haul -- that is, buying a home with the intention  to live in it for years -- a home is still a decent investment.

This market is not for flippers! But for those who want to stay for the long haul. Don't be concerned with price fluctuations. It is only on paper. Much like if you have stocks or mutual funds portfolio, your market value goes up and down daily. Unless you sell it, no gain or loss realizes.

Now, the good news. For the Washington DC region that includes the DC-VA-MD-WV, according to HousingEconomics.com (part of NAHB), at 3% -- this region has one of the lowest unemployment rate in the nation. Compares that to 4.6% average nationwide! Employment is one of the most important indicators for the housing industry. That means, locally...we're still fine .

* Buying vs. Renting [Ginnie Mae]

Images: Bankrate.com, CNN/Money.