Real estate tips from Brooks Beaupain
Brooks Beaupain, ASP, GRI | Windermere Real Estate/East, Inc.
[email protected] |  206-778-4663
In This Issue
A Look at the 2011 Housing Market
Links that Make Life Easier
The Lighter Side
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Brooks Beaupain
You might have heard some discouraging things recently about home prices and employment rates.  But are things really all that bad?


There's more to the numbers than meets the eye at first glance.  Without trying to turn this into an economist's report (which it is not :), here's some insight that helps us see behind the numbers.


By the way, if you have friends or colleagues who would be interested in this information, please forward my newsletter on to them!

A Look at the 2011 Housing Market


After four rough-and-tumble years, real estate is beginning to show signs of recovery.  Many variables are in play, however, and economic experts are brimming with conflicting predictions about the future. Here's a look.



Home Prices Were Down in December.  However... 


Yes, month-to-month home prices dropped in 19 out of the 20 metropolitan areas measured by the S&P/Case-Shiller report in December. But whenever you see a report on home prices there are two questions to ask yourself:


"What kind of market am I looking at?"


Home value imageForty-seven percent of the homes that closed in December were distressed properties, which include short sales (in which the home is sold for less than the mortgage balance) and bank-owned properties, also known as REOs.


Short sales in particular often sell for less than similar homes that are not short sales, and they also take an enormously long time to close: six months is not unusual.  Which leads us to the second question:


"How old is the market represented by the numbers?"


Home sales data are based on closed sales, which means they always lag today's market by at least 60 days (the shortest typical time to list, get an offer, and close on a non-short sale home).  Short sales compound this factor exponentially.  Many of the short sales that closed in December probably went pending in the summer, which means the January report portrayed a market that was anywhere from seven months to two months old.


The bottom line:


Home prices always lag home sales, and closed home sale data reflect buyer activity that happened months ago.  Rather than relying on information that could be outdated, please call me to find out what's happening now, in our market.



Early Signs Indicate Demand is Rising 


It's early in the year to make a strong call on home buyer activity, but Zillow reported a 75 percent year-to-year increase in visitors to their website in January.  They attribute about half of that to improvements on the site, but this still leaves plenty of room for increased home buyer demand.


In addition, home purchase mortgage applications are on the rise, and the remodeling industry (closely tied to the housing industry) is predicting a stronger year than 2010.


The bottom line:


We typically see a surge of home buyer activity in the spring.  This year, as you'll see below, increased consumer confidence could be providing an added boost.



The Job Market:  Just How Bad Is It? 


Job ads.


When the January jobless numbers came out on February 4, New York Times economic reporter David Leonhardt called it "the strangest report I have ever seen" in his 11 years of covering the data.  That's because while unemployment unexpectedly dropped from 9.4 percent to 9.0 percent, non-farm payrolls rose by only 36,000, far below what had been predicted.


Mixed indicators, and rumors of a turning point.


Experts are still scrambling to explain the apparent contradiction.  Did bad weather during the month of January keep workers at home and skew the non-farm payroll report downwards?  Or, does the fact that the unemployment rate is determined by a much smaller survey than the payroll report make it a less reliable indicator?


No one seems to be saying for sure, but a number of experts have pointed out that newly created businesses are often not included in the payroll survey because the Labor Department does not know they exist yet.  On a large enough scale this becomes meaningful, and David Leonhardt states that at turning points in the economy, new businesses are usually responsible for a significant number of jobs.


The bottom line:


The one concept that everyone appears to agree upon is that the road to a healthy job market is going to be a long haul, and until that happens real estate will feel the effects.  There are signs we could be at a turning point, however, so let's hope we're on our way. 



Consumer Confidence versus the Employment Rate


When it comes to predicting the economic future, is it possible that consumers could be more accurate than number-crunchers? 


The New York Times recently posted an interesting article by Frank Norris, entitled "From 1983, Hope for Jobs in 2011."  (No, the author was not extolling the virtues of poufy hair and carrying a comb in one's back pocket. :)  He was explaining that the unemployment outlook in 2011 might be better than anticipated because our current economy shares some important similarities with the economy in 1983, when unemployment was expected to remain above 10 percent throughout the entire year, and instead it ended up at 8.3 percent.


In his article he also mentions this:


Consumer confidence is at an all-time high (really!)


Consumer confidence.It may seem astounding, but when January's consumer confidence numbers (as measured by a nightly survey by Discover) showed that only 40 percent of Americans thought the economy was on a downward trend, this was the best consumer confidence rating since the survey began in 2007.


Here's an interesting quote from Frank Norris' article:


"In May 2007, the survey's first month, more than 60 percent thought the economy was getting worse. It turned out they were correct, although in those days most economic indicators were strong."  (Emphasis mine.)


The bottom line: 


Back then, before the 'R' word became part of our daily vocabulary, consumer confidence turned out to be a much better predictor of economic performance than the standard indicators.  That doesn't mean it will be again, but January's increased confidence rate is at least a positive sign.


The article is really a worthwhile read, with information on other factors such as the GDP.  I highly recommend giving it a look. 



The Foreclosure Forecast 


Experts appear to agree that we can expect a large inventory of foreclosure-related properties to come on the market sometime after the first quarter of 2011.  This includes short sales and bank-owned properties, also known as REOs.


The bottom line:


Foreclosure-related sales, especially short sales, have a negative effect on home prices, so expect them to create downward pressure for at least the next year. 



Where Are Interest Rates Headed?


No one knows for sure where mortgage interest rates are headed this year, but the general consensus appears to be "probably up."  The Mortgage Bankers Association expects rates to rise from their current level in the 5.0 percent range to 5.5 percent by the end of 2011.  In addition, stocks have been doing well lately, and when the stock market goes up interest rates usually do as well.


Previous 6 months interest rates.


The bottom line:


Higher interest rates always cut some buyers out of the market.  That being said, the projected rates are still extremely low from a historical perspective, and rising rates could spur potential buyers to action in the short term.  Jumbo loan rates have also become more attractive since the fall, and are currently around 5.5 percent.  This could be helpful to the hard-hit high end housing market.



The Big Picture


Many experts are calling for home prices to stabilize during the first quarter of 2011, and to start rising in 2012.  Others are looking at a potential flood of distressed home inventory and calling for price drops throughout the year.  We also have some interesting wild cards.  Massive snowstorms turned the jobs report into a question mark, and political unrest in Egypt could affect the price of oil, confidence in the dollar, and ultimately our economy.


The bottom line:


Crucial to any housing recovery will be jobs, jobs, jobs, combined with lending guidelines that do not put a stranglehold on home purchases.  Consumer confidence does appear to be on the rise, and in a few months we'll have a much better idea if unemployment is really dropping.


Until then, just be cautious about the information you receive from mainstream sources.  Some of it, such as January's S&P/Case-Shiller report, is good data, but reflects buyer decisions that were made months (sometimes many months) ago.  The one thing we do know for sure is that we are now in a different real estate market.  Time will tell us exactly what that means.



Do you have questions about any of this information?  Please call me, or just click 'Reply' to this email.  I'll be happy to give you my take on our local real estate market, or provide you with any other real estate advice that you may need.



(What the lawyers make us say:  The information in this newsletter is deemed reliable but not guaranteed.   Please always consult a qualified expert before making decisions based on this content.  Nothing in this article is meant to be taken as expert legal, financial, or medical advice.)

Links that Make Life Easier 

Sometimes real estate-related, sometimes not... these are assorted links that come in handy:

Don't be misled by the title. This is a really charming, true story about what happened after a chicken disappeared from the front yard of a brownstone in New York City.  Good for a smile when you have a few moments.
BillShrink lets you save money by comparing things like cell phone plans and credit card offers, and helping you find the cheapest gas stations.
Winter weather gardening tips from MSN Real Estate.

The next time you know someone is using a fallacious argument but you're not sure exactly how, check this list to find out. Then, turn to them quickly and say something like, "You're confusing correlation with causation!", or whatever fits the situation best. You'll feel great. :)  

Ample Harvest helps gardeners donate their excess harvest to the needy in their community instead of allowing it to rot in the garden, by making it easy to find or sign up as a local food pantry.

The Lighter Side

Link to the dog tricks video on 

Fire the maid and the office assistant, this dog has it all covered!  This is a cute video that's good for some laughs - not to mention that it's also a pretty impressive example of what a Jack Russell Terrier will do to stay occupied.


Just click the image to watch the video on the family-friendly site, or click here to go there.



Brooks Beaupain signature 

Brooks Beaupain, REALTOR�, ASP, GRI
Windermere Real Estate/East, Inc.
[email protected] | 206-778-4663

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