Tuesday, October 28, 2003
Housing drives economy's rise
advertisement
Sales at or near record pace in Sept.
Jeannine Aversa
Associated Press
Oct. 28, 2003 12:00 AM
WASHINGTON - New-home sales edged down in September but nevertheless registered their third-highest level on record. Sales of previously owned homes scored their best month ever, fresh evidence that the housing market continues to help spur an economic recovery.
The Commerce Department reported Monday that new-home sales came in at a seasonally adjusted annual rate of 1.145 million in September, a 0.2 percent dip from August.
Even with the drop, the level of sales was stronger than the 1.125 million pace that analysts were forecasting. New-home sales posted their best month ever in June, when they racked up a 1.200 million-unit pace. They turned in their second-best month on record in August, when sales came in at a 1.147 million rate.
Sales of new homes in the Phoenix area rolled on at a torrid pace. Housing analyst R.L. Brown said single-family permits hit 4,450 in September compared with 3,002 in September 2002, a 48 percent jump.
Permits were up more than 22 percent through September, on track to set an annual record, Brown said. Closings were up 20 percent from last September and 12 percent year to date.
In a second report, the National Association of Realtors said that existing-home sales nationwide rose by 3.6 percent in September to a seasonally adjusted annual rate of 6.69 million units, the third month in a row that a record-high sales pace was reached.
Brown said Valley resales were strong. He tracked 7,688 in September, up more than 34 percent from 5,725 in September 2002. Resales were up 15.3 percent for the year.
"These housing results bode extremely well for the economy's year-end finish and the early months of 2004," said economist Ken Mayland, president of ClearView Economics. "This recovery now rests on strong foundations."
On Wall Street, stocks moved higher. The Dow Jones industrials gained 42 points and the Nasdaq was up 12.
Low mortgage rates have helped keep the housing market healthy throughout the economy's struggle to get back to full strength following the 2001 recession.
The average rate on a 30-year, fixed-rate mortgage in September was 6.15 percent, down from 6.26 percent in August.
Home sales in 2003 are on track to set annual records, economists said.
By region, sales of new homes in September soared by 26 percent in the Northeast to an annual rate of 97,000, and in the West, they jumped by 12.4 percent to a pace of 335,000.
But in the Midwest, sales fell 18 percent to a pace of 209,000 and in the South they dipped by 2.5 percent to a rate of 504,000.
For previously owned homes, sales rose 7 percent in the Northeast to a rate of 760,000 units. In the West, sales rose 5.1 percent to a pace of 1.85 million units
Sales in the Midwest went up 4.4 percent to a pace of 1.43 million units, and in the South they rose by 0.8 percent to a pace of 2.64 million units.
"These are terrific numbers. We have excellent mortgage rates and house prices are moving up smartly, keeping the incentive alive to own a home," said David Seiders, chief economist at the National Association of Home Builders.
The Federal Reserve is expected to hold a main short-term interest rate at 1 percent, a 45-year low, when it meets today, economists say.
advertisement
Sales at or near record pace in Sept.
Jeannine Aversa
Associated Press
Oct. 28, 2003 12:00 AM
WASHINGTON - New-home sales edged down in September but nevertheless registered their third-highest level on record. Sales of previously owned homes scored their best month ever, fresh evidence that the housing market continues to help spur an economic recovery.
The Commerce Department reported Monday that new-home sales came in at a seasonally adjusted annual rate of 1.145 million in September, a 0.2 percent dip from August.
Even with the drop, the level of sales was stronger than the 1.125 million pace that analysts were forecasting. New-home sales posted their best month ever in June, when they racked up a 1.200 million-unit pace. They turned in their second-best month on record in August, when sales came in at a 1.147 million rate.
Sales of new homes in the Phoenix area rolled on at a torrid pace. Housing analyst R.L. Brown said single-family permits hit 4,450 in September compared with 3,002 in September 2002, a 48 percent jump.
Permits were up more than 22 percent through September, on track to set an annual record, Brown said. Closings were up 20 percent from last September and 12 percent year to date.
In a second report, the National Association of Realtors said that existing-home sales nationwide rose by 3.6 percent in September to a seasonally adjusted annual rate of 6.69 million units, the third month in a row that a record-high sales pace was reached.
Brown said Valley resales were strong. He tracked 7,688 in September, up more than 34 percent from 5,725 in September 2002. Resales were up 15.3 percent for the year.
"These housing results bode extremely well for the economy's year-end finish and the early months of 2004," said economist Ken Mayland, president of ClearView Economics. "This recovery now rests on strong foundations."
On Wall Street, stocks moved higher. The Dow Jones industrials gained 42 points and the Nasdaq was up 12.
Low mortgage rates have helped keep the housing market healthy throughout the economy's struggle to get back to full strength following the 2001 recession.
The average rate on a 30-year, fixed-rate mortgage in September was 6.15 percent, down from 6.26 percent in August.
Home sales in 2003 are on track to set annual records, economists said.
By region, sales of new homes in September soared by 26 percent in the Northeast to an annual rate of 97,000, and in the West, they jumped by 12.4 percent to a pace of 335,000.
But in the Midwest, sales fell 18 percent to a pace of 209,000 and in the South they dipped by 2.5 percent to a rate of 504,000.
For previously owned homes, sales rose 7 percent in the Northeast to a rate of 760,000 units. In the West, sales rose 5.1 percent to a pace of 1.85 million units
Sales in the Midwest went up 4.4 percent to a pace of 1.43 million units, and in the South they rose by 0.8 percent to a pace of 2.64 million units.
"These are terrific numbers. We have excellent mortgage rates and house prices are moving up smartly, keeping the incentive alive to own a home," said David Seiders, chief economist at the National Association of Home Builders.
The Federal Reserve is expected to hold a main short-term interest rate at 1 percent, a 45-year low, when it meets today, economists say.
Eclectic mix of new buyers fueling Valley's record housing market
Catherine Burrough and Glen Creno
The Arizona Republic
Oct. 26, 2003 12:00 AM
It's not the usual cast of buyers propelling Greater Phoenix's housing market to another record-breaking year.
A burgeoning collection of 20-somethings, single parents, fringe pioneers, out-of-state transplants, optimistic investors, deep-pocketed golfers and luxury life-stylers are pushing sales and prices to all-time highs.
A rare combination of factors - the lowest interest rates in 40 years, looser lending guidelines and home prices that remain relatively low - is attracting all these buyers despite early predictions of a slowdown.
"Every year, every one of us is dumbfounded," Arizona housing analyst R.L. Brown said. "The market goes bonkers again."
A record 94,243 new and used homes from Pinal County to Lake Pleasant sold through September, according to Brown's Phoenix Housing Market Letter. That's a 14 percent leap from 2002's record pace for the same period.
Still, several economists are wary that the market is flying too high and fear that any significant uptick in mortgage or unemployment rates could bring it to a sudden halt.
Other analysts fret that higher prices will nudge buyers out of the market, dilute its affordability and ultimately knock the steam out of the Valley's main economic engine.
Housing prices aren't climbing at the same rate but are up from 2002. The typical used home in Maricopa County sold for $157,500 in September, according to the Arizona Real Estate Center. A year ago, the price was $146,000.
Although Valley home prices continue to rise steadily, buyers from states such as Colorado, Illinois, New York and California feel like they are getting bargains in Arizona.
"I can't believe what I am getting for my money," said Nancy Marcella, who is moving from Aspen, Colo., to Cave Creek.
Marcella, an anesthesiologist nurse, is buying a luxury home for less than half of what her Colorado house is selling for so she can work less. Getting a job was less of a concern than finding a new lifestyle. She also wanted to spend less time on her home's upkeep and spend less money on its mortgage so she could travel more.
Jobs vs. people
Marcella and other transplants are driving the housing market, not the state's anemic job growth, economists say.
People flocking to Arizona looking for more house for their money are self-employed, travel for jobs, are retired or are making it on one income, and count on the Valley's economy to bounce back.
Bob McCord, chief executive of Coldwell Banker Success Realty, said that the 70,000 to 80,000 people moving to the Valley every year are creating a strong demand for housing even as job growth sputters.
"I still can't figure out where all the money is coming from," said Eileen Harris of ZIP Realty. "But the buyers are coming, and they are locking in on the low interest rates."
Phoenix's unemployment rate did drop to 5 percent in September, from 5.5 percent a year ago. There's still a disconnect between the robust housing market and the tepid gains in jobs and incomes.
Professional hockey player Dallas Eakins, 36, isn't thinking about employment. He can't wait to retire so he can spend his winters in the Valley.
The former Phoenix Coyote found a home in north Scottsdale's Grayhawk community in the mid-1990s. He sold it and bought another one, which he's keeping for now. Meanwhile, he and his wife are building a million-dollar custom home in the golf development.
"I just fell in love with that place," Eakins said.
Location
Some people moving to the area are getting a double bang for their buck and choosing houses farther out, where prices are cheapest. They are getting some of the few jobs created in this economy.
In August, Patti and Bob Bleeker moved to Phoenix for a job and a bigger home with a smaller monthly payment.
Bob, a health care manager, was transferred to CIGNA's Valley operations from California. After checking houses in pricier north Scottsdale, the couple purchased a home in far north Anthem.
"Our home is bigger, and we can now afford for Patti to stay home with the kids," said Bleeker, whose commute is down to 20 minutes from an hour in California.
Brad Zupp of Coldwell Banker Success Realty said better schools, bigger homes and shorter commutes drive move-up buyers' decisions.
"People continue to pick where they want to buy first and then dog the area until they find the right property," he said.
Devin Rankin sold his central Phoenix home, and girlfriend Shannon Perez sold hers to buy a bigger home together in a better school district for her daughter.
"With our combined incomes and low interest rates, we could get a much nicer home close to a good school," said Rankin, a retired police officer.
He said the couple likely would have bought the bigger home even if interest rates and prices had been a little higher.
Stretched
Some recent buyers may be struggling to afford homes. Families that bought with two incomes may have lost one. Other people may have purchased a house thinking they would get a raise or bonus this year that never materialized.
Rates of residential foreclosures are climbing Valley-wide because some people are stretched too thin. One of the biggest issues looming for the housing market now is whether these homeowners can hold on, according to Harvard University's Joint Center for Housing Studies. It found that the number of people spending more than half their income on their home has shot up.
That will slow the market because those buyers aren't going to move up anytime soon. The big question for the Valley's housing market is now that so many non-traditional buyers have gotten into homes, who will be the next wave of buyers?
"Anyone who can buy has," said Jay Butler, director of the Arizona Real Estate Center.
He now questions whether this spurt of sales is the final wave of buyers "satisfying their dreams."
"A lot of people got into their dream homes and aren't going anywhere for a while," he said.
Any rise in interest rates will knock out many first-time buyers. Prices that jump too high will deter all types of buyers, and home price increases across Greater Phoenix have far outpaced inflation. Then there's the possibility that the steady flow of new buyers from costly housing markets outside the state could ratchet up prices, too.
Hefty increases in housing prices in California, the nation's most populous state, have a ripple effect. Californians flush with cash from the sale of their expensive homes can experience a sort of reverse sticker shock in places like Arizona. They eagerly shell out the asking price without bargaining because it's stunningly less than what they'd pay for a similar house back home.
Despite the pressure on prices, the dip in September's average used-home price from August's $160,500 price is attributed to the growing number of less-expensive houses selling in once-fringe areas like Buckeye and Pinal County. Housing prices in Phoenix, Scottsdale, Mesa, Glendale and Tempe were all up.
Housing won't collapse if sales slow, but prices definitely could flatten out.
Speculating about a housing "bubble" has become a favorite pastime among housing analysts. When housing prices are bid up purely under the expectation that they will continue to appreciate, that creates a price bubble. When prices fall precipitously and houses sell for below what an owner paid, that's a burst bubble.
Some national markets are perilously close to bubble status. But housing market watchers say the Valley is not one of them because the area's home prices haven't shot up 20 percent a year like they have in parts of California and the East.
"As long as people can hold onto their home and jobs, and others continue to move here, the economy and housing market will hold it together," Butler said.
Catherine Burrough and Glen Creno
The Arizona Republic
Oct. 26, 2003 12:00 AM
It's not the usual cast of buyers propelling Greater Phoenix's housing market to another record-breaking year.
A burgeoning collection of 20-somethings, single parents, fringe pioneers, out-of-state transplants, optimistic investors, deep-pocketed golfers and luxury life-stylers are pushing sales and prices to all-time highs.
A rare combination of factors - the lowest interest rates in 40 years, looser lending guidelines and home prices that remain relatively low - is attracting all these buyers despite early predictions of a slowdown.
"Every year, every one of us is dumbfounded," Arizona housing analyst R.L. Brown said. "The market goes bonkers again."
A record 94,243 new and used homes from Pinal County to Lake Pleasant sold through September, according to Brown's Phoenix Housing Market Letter. That's a 14 percent leap from 2002's record pace for the same period.
Still, several economists are wary that the market is flying too high and fear that any significant uptick in mortgage or unemployment rates could bring it to a sudden halt.
Other analysts fret that higher prices will nudge buyers out of the market, dilute its affordability and ultimately knock the steam out of the Valley's main economic engine.
Housing prices aren't climbing at the same rate but are up from 2002. The typical used home in Maricopa County sold for $157,500 in September, according to the Arizona Real Estate Center. A year ago, the price was $146,000.
Although Valley home prices continue to rise steadily, buyers from states such as Colorado, Illinois, New York and California feel like they are getting bargains in Arizona.
"I can't believe what I am getting for my money," said Nancy Marcella, who is moving from Aspen, Colo., to Cave Creek.
Marcella, an anesthesiologist nurse, is buying a luxury home for less than half of what her Colorado house is selling for so she can work less. Getting a job was less of a concern than finding a new lifestyle. She also wanted to spend less time on her home's upkeep and spend less money on its mortgage so she could travel more.
Jobs vs. people
Marcella and other transplants are driving the housing market, not the state's anemic job growth, economists say.
People flocking to Arizona looking for more house for their money are self-employed, travel for jobs, are retired or are making it on one income, and count on the Valley's economy to bounce back.
Bob McCord, chief executive of Coldwell Banker Success Realty, said that the 70,000 to 80,000 people moving to the Valley every year are creating a strong demand for housing even as job growth sputters.
"I still can't figure out where all the money is coming from," said Eileen Harris of ZIP Realty. "But the buyers are coming, and they are locking in on the low interest rates."
Phoenix's unemployment rate did drop to 5 percent in September, from 5.5 percent a year ago. There's still a disconnect between the robust housing market and the tepid gains in jobs and incomes.
Professional hockey player Dallas Eakins, 36, isn't thinking about employment. He can't wait to retire so he can spend his winters in the Valley.
The former Phoenix Coyote found a home in north Scottsdale's Grayhawk community in the mid-1990s. He sold it and bought another one, which he's keeping for now. Meanwhile, he and his wife are building a million-dollar custom home in the golf development.
"I just fell in love with that place," Eakins said.
Location
Some people moving to the area are getting a double bang for their buck and choosing houses farther out, where prices are cheapest. They are getting some of the few jobs created in this economy.
In August, Patti and Bob Bleeker moved to Phoenix for a job and a bigger home with a smaller monthly payment.
Bob, a health care manager, was transferred to CIGNA's Valley operations from California. After checking houses in pricier north Scottsdale, the couple purchased a home in far north Anthem.
"Our home is bigger, and we can now afford for Patti to stay home with the kids," said Bleeker, whose commute is down to 20 minutes from an hour in California.
Brad Zupp of Coldwell Banker Success Realty said better schools, bigger homes and shorter commutes drive move-up buyers' decisions.
"People continue to pick where they want to buy first and then dog the area until they find the right property," he said.
Devin Rankin sold his central Phoenix home, and girlfriend Shannon Perez sold hers to buy a bigger home together in a better school district for her daughter.
"With our combined incomes and low interest rates, we could get a much nicer home close to a good school," said Rankin, a retired police officer.
He said the couple likely would have bought the bigger home even if interest rates and prices had been a little higher.
Stretched
Some recent buyers may be struggling to afford homes. Families that bought with two incomes may have lost one. Other people may have purchased a house thinking they would get a raise or bonus this year that never materialized.
Rates of residential foreclosures are climbing Valley-wide because some people are stretched too thin. One of the biggest issues looming for the housing market now is whether these homeowners can hold on, according to Harvard University's Joint Center for Housing Studies. It found that the number of people spending more than half their income on their home has shot up.
That will slow the market because those buyers aren't going to move up anytime soon. The big question for the Valley's housing market is now that so many non-traditional buyers have gotten into homes, who will be the next wave of buyers?
"Anyone who can buy has," said Jay Butler, director of the Arizona Real Estate Center.
He now questions whether this spurt of sales is the final wave of buyers "satisfying their dreams."
"A lot of people got into their dream homes and aren't going anywhere for a while," he said.
Any rise in interest rates will knock out many first-time buyers. Prices that jump too high will deter all types of buyers, and home price increases across Greater Phoenix have far outpaced inflation. Then there's the possibility that the steady flow of new buyers from costly housing markets outside the state could ratchet up prices, too.
Hefty increases in housing prices in California, the nation's most populous state, have a ripple effect. Californians flush with cash from the sale of their expensive homes can experience a sort of reverse sticker shock in places like Arizona. They eagerly shell out the asking price without bargaining because it's stunningly less than what they'd pay for a similar house back home.
Despite the pressure on prices, the dip in September's average used-home price from August's $160,500 price is attributed to the growing number of less-expensive houses selling in once-fringe areas like Buckeye and Pinal County. Housing prices in Phoenix, Scottsdale, Mesa, Glendale and Tempe were all up.
Housing won't collapse if sales slow, but prices definitely could flatten out.
Speculating about a housing "bubble" has become a favorite pastime among housing analysts. When housing prices are bid up purely under the expectation that they will continue to appreciate, that creates a price bubble. When prices fall precipitously and houses sell for below what an owner paid, that's a burst bubble.
Some national markets are perilously close to bubble status. But housing market watchers say the Valley is not one of them because the area's home prices haven't shot up 20 percent a year like they have in parts of California and the East.
"As long as people can hold onto their home and jobs, and others continue to move here, the economy and housing market will hold it together," Butler said.
