Economic and Market Watch Report 1st Quarter, 2006
© 2006 Consolidated Multiple Listing Service, Inc.
and NATIONAL ASSOCIATION OF REALTORS® Reproduction, reprinting, or retransmission in any form is prohibited without written permission.
Consolidated Multiple Listing Service, Inc. Economic and Market Watch Report The Consolidated Multiple Listing Service, Inc. provides MLS service to over 5,000 real estate professionals in southwestern (Greater Fairfield County) Connecticut. We are committed to providing property information-based tools, resources and support services to enhance our member’s success.
Index
Local Report Fairfield County Bethel ............................................................................................................................ Bridgeport .................................................................................................................... Brookfield ..................................................................................................................... Danbury ........................................................................................................................ Darien ........................................................................................................................... Easton ........................................................................................................................... Fairfield ........................................................................................................................ Greenwich ..................................................................................................................... Monroe .......................................................................................................................... New Canaan ................................................................................................................. New Fairfield ................................................................................................................ Newtown ....................................................................................................................... Norwalk ........................................................................................................................ Redding ......................................................................................................................... Ridgefield ...................................................................................................................... Shelton .......................................................................................................................... Sherman ........................................................................................................................ Stamford ....................................................................................................................... Stratford ....................................................................................................................... Trumbull ...................................................................................................................... Weston .......................................................................................................................... Westport ....................................................................................................................... Wilton ...........................................................................................................................
1 1 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 5 5 5 5 5 6
Litchfield County Bridgewater .................................................................................................................. Kent ............................................................................................................................... New Milford ................................................................................................................. Roxbury ........................................................................................................................ Sharon ........................................................................................................................... Warren .......................................................................................................................... Washington ..................................................................................................................
7 7 7 8 8 8 8
New Haven County Ansonia ......................................................................................................................... Beacon Falls ................................................................................................................. Derby ............................................................................................................................ Milford .......................................................................................................................... Oxford ........................................................................................................................... Seymour ........................................................................................................................ Southbury .....................................................................................................................
9 9 9 10 10 10 10
OTHER ................................................................................................................................
11
Trends ...............................................................................................................................................
13
Chief Economist's Commentary* ...................................................................................................
14
Local Forecast ..................................................................................................................................
16
Economic Monitor* .........................................................................................................................
18
*Reprinted from Real Estate Outlook: Market Trends and Insights. ©2006 NATIONAL ASSOCIATION OF REALTORS ®. Used with permission. Reproduction, reprinting, or retransmission of this article in any form (electronic media included) is prohibited without permission. For subscription information please call 1-800-874-6500.
Local Report
Fairfield County, CT Buyer's Market
1
2
3
4
5
Seller's Market
Labor Market : Employment declined by 6,999 jobs in January, February and March. The job losses brought about an increase in the average monthly unemployment rate from 4.1% in the fourth quarter to 4.5% for the three months of the first quarter. Despite the job losses, the job situation still remains strong in Fairfield County. Combined with favorable low mortgage rates, home sales should continue at a strong pace.
Housing Market :
Q4' 05 Average Price
Q1' 06
$677,500
$726,900
# Homes on the Market *
10,864
13,880
# Homes Sold **
1,799
1,416
# New Homes Built
358
165
Avg # of Days on Market
77
90
Q2' 06
(Forecast)
***
* Available as of Mar. 31, 2006. ** May not add to total of zip codes. *** During the first two months of 1st quarter.
Bethel Data by Zip Codes Zip Code
Average Price
06801
$402,800
Price Change (1 Year) -4.30%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 32
(1 Year) 18.52%
Average Days on Market 86
% of Asking Price (Sold/List Price) 93.9%
Bridgeport Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
% Change in # Homes Sold
Average Days on Market
% of Asking Price (Sold/List Price)
Zip Code
Average Price
06604
$275,100
15.73%
(Quarter) 20
(1 Year) -20.00%
82
95.8%
06605
$384,600
27.60%
11
-35.29%
111
95.6%
06606
$257,900
15.34%
87
-3.33%
80
97.3%
1
Local Report
Fairfield County, CT Bridgeport Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
Zip Code
Average Price
06607
$153,300
9.74%
06608
$159,200
44.73%
5
06610
$218,100
-0.14%
27
% Change in # Homes Sold
(Quarter) 5
(1 Year) -28.57%
Average Days on Market
% of Asking Price (Sold/List Price)
84
99.2%
150.00%
91
93.4%
0.00%
110
94.5%
Brookfield Data by Zip Codes Zip Code
Average Price
06804
$492,300
Price Change (1 Year) -3.75%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 29
(1 Year) -19.44%
Average Days on Market 89
% of Asking Price (Sold/List Price) 96.7%
Danbury Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
Zip Code
Average Price
06810
$341,400
5.83%
(Quarter) 43
06811
$424,300
-1.85%
43
% Change in # Homes Sold (1 Year) 2.38% 0.00%
Average Days on Market
% of Asking Price (Sold/List Price)
88
96.2%
94
96.8%
Darien Data by Zip Codes Zip Code 06820
Average Price $1,370,500
Price Change (1 Year) -16.23%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 24
(1 Year) -27.27%
Average Days on Market 83
% of Asking Price (Sold/List Price) 93.6%
Easton Data by Zip Codes Zip Code
Average Price
06612
$785,300
Price Change (1 Year) -14.28%
Total # Homes Sold (Quarter) 10
2
% Change in # Homes Sold (1 Year) -44.44%
Average Days on Market 77
% of Asking Price (Sold/List Price) 96.6%
Local Report
Fairfield County, CT Fairfield Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
Zip Code
Average Price
06824
$893,100
10.77%
(Quarter) 87
06825
$589,000
22.48%
43
% Change in # Homes Sold (1 Year) -3.33% 26.47%
Average Days on Market
% of Asking Price (Sold/List Price)
88
96.5%
94
96.1%
Greenwich Data by Zip Codes Zip Code
Average Price
Price Change (1 Year)
06830
$2,010,000
0.85%
06831
$1,021,300
-21.14%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 3
(1 Year) -25.00%
4
300.00%
Average Days on Market
% of Asking Price (Sold/List Price)
113
95.7%
117
95.7%
Monroe Data by Zip Codes Zip Code
Average Price
06468
$482,200
Price Change (1 Year) -5.49%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 31
(1 Year) -24.39%
Average Days on Market 73
% of Asking Price (Sold/List Price) 97.3%
New Canaan Data by Zip Codes Zip Code 06840
Average Price $2,066,600
Price Change (1 Year) -3.02%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 34
(1 Year) -2.86%
Average Days on Market 115
% of Asking Price (Sold/List Price) 95.0%
New Fairfield Data by Zip Codes Zip Code
Average Price
06812
$428,900
Price Change (1 Year) -7.22%
Total # Homes Sold (Quarter) 27
3
% Change in # Homes Sold (1 Year) -12.90%
Average Days on Market 74
% of Asking Price (Sold/List Price) 96.4%
Local Report
Fairfield County, CT Newtown Data by Zip Codes Zip Code
Average Price
06470
$670,000
Price Change (1 Year) 14.28%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 40
(1 Year) -21.57%
Average Days on Market 102
% of Asking Price (Sold/List Price) 97.3%
Norwalk Data by Zip Codes Zip Code
Average Price
06850
$685,500
Price Change (1 Year)
Total # Homes Sold
17.76%
(Quarter) 36
% Change in # Homes Sold (1 Year) -7.69%
Average Days on Market
% of Asking Price (Sold/List Price)
94
96.8%
06851
$542,600
-2.90%
50
-3.85%
82
97.1%
06853
$1,217,800
-18.56%
18
50.00%
145
96.8%
06854
$502,700
2.68%
23
-30.30%
72
97.9%
06855
$749,300
2.70%
13
-23.53%
77
98.9%
06856
$1,850,000
-
1
-
0
94.9%
Redding Data by Zip Codes Zip Code 06896
Average Price $1,181,800
Price Change (1 Year) 69.14%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 24
(1 Year) -14.29%
Average Days on Market 112
% of Asking Price (Sold/List Price) 93.8%
Ridgefield Data by Zip Codes Zip Code 06877
Average Price $1,044,200
Price Change (1 Year) 18.83%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 54
(1 Year) 1.89%
Average Days on Market 96
% of Asking Price (Sold/List Price) 97.1%
Shelton Data by Zip Codes Zip Code
Average Price
06484
$426,400
Price Change (1 Year) 1.60%
Total # Homes Sold (Quarter) 79
4
% Change in # Homes Sold (1 Year) 8.22%
Average Days on Market 79
% of Asking Price (Sold/List Price) 97.5%
Local Report
Fairfield County, CT Sherman Data by Zip Codes Zip Code
Average Price
06784
$627,400
Price Change (1 Year) 17.42%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 18
(1 Year) 28.57%
Average Days on Market 110
% of Asking Price (Sold/List Price) 95.5%
Stamford Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
% Change in # Homes Sold
Zip Code
Average Price
06902
$795,400
-15.40%
(Quarter) 39
(1 Year) -13.33%
06903
$1,060,900
29.24%
43
06904
$792,500
23.35%
1
06905
$675,900
10.03%
06906
$527,400
2.51%
06907
$608,100
10.79%
Average Days on Market
% of Asking Price (Sold/List Price)
83
96.0%
-18.87%
86
97.2%
-50.00%
49
93.3%
30
-23.08%
67
97.5%
9
0.00%
66
97.6%
17
-10.53%
88
98.2%
Stratford Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
Zip Code
Average Price
06614
$339,100
5.57%
(Quarter) 92
06615
$286,300
7.47%
38
% Change in # Homes Sold (1 Year) 4.55% 22.58%
Average Days on Market
% of Asking Price (Sold/List Price)
87
97.1%
107
96.6%
Trumbull Data by Zip Codes Zip Code
Average Price
06611
$493,100
Price Change (1 Year) 13.04%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 72
(1 Year) -23.40%
Average Days on Market 86
% of Asking Price (Sold/List Price) 97.1%
Weston Data by Zip Codes Zip Code 06883
Average Price $1,279,800
Price Change (1 Year) -0.23%
Total # Homes Sold (Quarter) 19
5
% Change in # Homes Sold (1 Year) -34.48%
Average Days on Market 95
% of Asking Price (Sold/List Price) 97.5%
Local Report
Fairfield County, CT Westport Data by Zip Codes Zip Code 06880
Average Price $1,734,300
Price Change (1 Year) 37.71%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 92
(1 Year) -2.13%
Average Days on Market 106
% of Asking Price (Sold/List Price) 95.7%
Wilton Data by Zip Codes Zip Code 06897
Average Price $1,191,200
Price Change (1 Year) 0.80%
Total # Homes Sold (Quarter) 43
6
% Change in # Homes Sold (1 Year) -10.42%
Average Days on Market 100
% of Asking Price (Sold/List Price) 99.6%
Local Report
Litchfield County, CT Buyer's Market
1
2
3
4
5
Seller's Market
Labor Market : Employment increased by 734 jobs in Litchfield County during January, February and March. However, the number of job seekers also increased. The combined effect of these two trends was an increase in the average monthly unemployment rate from 4.1% for the fourth quarter to 4.9% in the three months of the first quarter. The solid job growth may provide strong home sales, while low mortgage rates should continue to spur sales.
Housing Market :
Q4' 05 Average Price
Q1' 06
$652,000
$526,700
1,137
1,289
# Homes Sold **
127
102
# New Homes Built
129
47
Avg # of Days on Market
107
135
# Homes on the Market *
Q2' 06
(Forecast)
***
* Available as of Mar. 31, 2006. ** May not add to total of zip codes. *** During the first two months of 1st quarter.
Bridgewater Data by Zip Codes Zip Code
Average Price
06752
$582,700
Price Change (1 Year) 33.04%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 5
(1 Year) 150.00%
Average Days on Market 150
% of Asking Price (Sold/List Price) 93.1%
Kent Data by Zip Codes Zip Code
Average Price
06757
$405,000
Price Change (1 Year) -22.22%
Total # Homes Sold (Quarter) 4
7
% Change in # Homes Sold (1 Year) -50.00%
Average Days on Market 112
% of Asking Price (Sold/List Price) 98.2%
Local Report
Litchfield County, CT New Milford Data by Zip Codes Zip Code
Average Price
06776
$425,900
Price Change (1 Year) 7.58%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 63
(1 Year) -11.27%
Average Days on Market 116
% of Asking Price (Sold/List Price) 96.5%
Roxbury Data by Zip Codes Zip Code
Average Price
06783
$712,100
Price Change (1 Year) -10.80%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 8
(1 Year) 33.33%
Average Days on Market 231
% of Asking Price (Sold/List Price) 91.6%
Sharon Data by Zip Codes Zip Code
Average Price
06069
$409,000
Price Change (1 Year) -12.36%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 4
(1 Year) 33.33%
Average Days on Market 110
% of Asking Price (Sold/List Price) 94.6%
Warren Data by Zip Codes Zip Code
Average Price
06754
$352,500
Price Change (1 Year) -38.54%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 3
(1 Year) -40.00%
Average Days on Market 124
% of Asking Price (Sold/List Price) 92.9%
Washington Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
% Change in # Homes Sold
Average Days on Market
% of Asking Price (Sold/List Price)
Zip Code
Average Price
06777
$614,800
-33.81%
214
92.6%
06793
$1,205,700
-10.00%
7
-12.50%
138
83.2%
06794
$922,500
33.19%
2
-60.00%
189
90.2%
(Quarter) 6
8
(1 Year) 50.00%
Local Report
New Haven County, CT Buyer's Market
1
2
3
4
5
Seller's Market
Labor Market : Employment declined by 4,903 jobs in January, February and March. The job losses brought about an increase in the average monthly unemployment rate from 5% in the fourth quarter to 5.5% for the three months of the first quarter. Despite the job losses, the job situation still remains strong in New Haven County. Combined with favorable low mortgage rates, home sales should continue at a strong pace.
Housing Market :
Q4' 05 Average Price
Q1' 06
$380,800
$410,200
1,388
1,731
# Homes Sold **
286
208
# New Homes Built
256
121
Avg # of Days on Market
72
83
# Homes on the Market *
Q2' 06
(Forecast)
***
* Available as of Mar. 31, 2006. ** May not add to total of zip codes. *** During the first two months of 1st quarter.
Ansonia Data by Zip Codes Zip Code
Average Price
06401
$277,200
Price Change (1 Year) 19.69%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 22
(1 Year) 15.79%
Average Days on Market 92
% of Asking Price (Sold/List Price) 98.3%
Beacon Falls Data by Zip Codes Zip Code
Average Price
06403
$218,400
Price Change (1 Year) -24.30%
Total # Homes Sold (Quarter) 7
9
% Change in # Homes Sold (1 Year) 16.67%
Average Days on Market 82
% of Asking Price (Sold/List Price) 94.9%
Local Report
New Haven County, CT Derby Data by Zip Codes Zip Code
Average Price
06418
$259,100
Price Change (1 Year) 1.41%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 14
(1 Year) 55.56%
Average Days on Market 105
% of Asking Price (Sold/List Price) 97.0%
Milford Data by Zip Codes Zip Code
Average Price
06460
$417,700
Price Change (1 Year) 13.66%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 80
(1 Year) -15.79%
Average Days on Market 64
% of Asking Price (Sold/List Price) 96.3%
Oxford Data by Zip Codes Zip Code
Average Price
06478
$492,900
Price Change (1 Year) 9.66%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 39
(1 Year) 21.88%
Average Days on Market 98
% of Asking Price (Sold/List Price) 97.5%
Seymour Data by Zip Codes Zip Code
Average Price
06483
$307,100
Price Change (1 Year) -8.55%
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 20
(1 Year) -39.39%
Average Days on Market 75
% of Asking Price (Sold/List Price) 97.1%
Southbury Data by Zip Codes Zip Code
Average Price
06488
$588,000
Price Change (1 Year) 19.12%
Total # Homes Sold (Quarter) 26
10
% Change in # Homes Sold (1 Year) 30.00%
Average Days on Market 107
% of Asking Price (Sold/List Price) 95.5%
Local Report
Others OTHER Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 1
(1 Year)
Zip Code
Average Price
06013
$300,000
-
06039
$1,100,000
285.29%
1
06068
$250,000
-
1
06405
$450,000
-50.10%
1
06419
$480,000
-
1
06437
$1,187,500
-
06471
$46,000
-
06477
$497,100
06482
$549,200
06492
$379,000
06511 06512 06513 06514
Average Days on Market
% of Asking Price (Sold/List Price)
-
40
94.2%
-50.00%
159
115.8%
-
0
90.9%
-50.00%
150
97.0%
-
110
96.2%
2
-
96
93.7%
1
-
21
95.8%
13.54%
4
-69.23%
45
96.7%
18.57%
30
-28.57%
114
97.0%
-28.49%
1
0.00%
114
97.2%
$219,000
-
1
-
140
97.4%
$212,000
-0.47%
2
0.00%
67
99.6%
$160,400
-3.37%
3
50.00%
41
97.4%
$282,700
48.79%
6
500.00%
85
97.7%
06515
$155,000
-50.92%
2
-33.33%
27
98.4%
06516
$241,000
24.74%
11
10.00%
91
96.3%
06518
$267,000
-9.34%
1
0.00%
71
95.4%
06519
$139,000
-
1
-
20
92.7%
06524
$441,000
0.96%
3
50.00%
125
97.1%
06525
$1,221,300
182.64%
3
-66.67%
117
96.7%
06704
$163,500
20.04%
2
-50.00%
124
100.6%
06705
$153,300
-6.47%
8
300.00%
70
99.7%
06706
$173,600
-
3
-
36
98.1%
06708
$178,100
9.26%
5
400.00%
70
96.2%
06710
$235,000
-
1
-
63
100.0%
06712
$254,600
-
3
-
119
97.0%
06716
$382,000
-
1
-
49
98.0%
06751
$335,000
-19.95%
1
-75.00%
56
96.5%
06755
$356,600
-7.97%
5
150.00%
73
97.0%
06756
$338,300
9.94%
3
-25.00%
161
93.1%
06759
$666,700
0.26%
3
50.00%
102
106.2%
06762
$330,800
-74.80%
3
50.00%
43
96.2%
06763
$249,500
30.63%
1
0.00%
0
100.0%
06770
$258,400
8.34%
36
63.64%
78
97.5%
11
Local Report
Others OTHER Data by Zip Codes Price Change (1 Year)
Total # Homes Sold
% Change in # Homes Sold
(Quarter) 1
(1 Year)
Zip Code
Average Price
06779
$236,000
-
06785
$645,000
7.50%
2
06791
$299,900
-
1
06795
$280,000
-46.97%
1
06796
$270,000
-
1
06798
$452,800
-20.69%
7
06804
$355,000
-
1
-
06807
$2,283,800
88.28%
4
06831
$1,472,500
47.25%
2
06870
$1,940,000
-37.42%
06878
$1,232,000
-67.34%
06880
$3,100,000
06890 OTHER
Average Days on Market
% of Asking Price (Sold/List Price)
-
59
100.5%
100.00%
92
96.0%
-
39
100.0%
0.00%
168
93.3%
-
92
90.0%
-41.67%
107
96.7%
94
98.1%
100.00%
36
95.3%
100.00%
151
98.5%
1
0.00%
131
89.2%
5
150.00%
80
97.4%
-
1
-
254
91.2%
$963,600
-8.37%
8
-38.46%
79
97.2%
$429,000
-
1
-
4
97.5%
12
Trends The Rising Tide of Mortgage Rates By Ken Fears, Economist After a brief respite in the middle of January, mortgage rates continued their climb past the 6.0% mark this spring. The average mortgage rate for the 30-year fixed rate contract reached 6.24% in the first quarter of 2006. Unfortunately, mortgage rates will only rise from here. But the news isn’t all bad. While prices are at record highs and mortgage rates are on the rise, employment and incomes are also on the rise. Housing affordability depends on a number of factors: mortgage rates, home prices, and incomes. As mortgage rates rise, affordability falls. The same is true of home prices. In both cases, as these factors rise, the size of the required monthly payment also rises. However, as incomes rise, the amount that an individual can spend per month rises, and the monthly payment is really the crucial factor. Over the last few years, people have been amazed that home prices continued to rise. However, what this trend has shown is that the monthly payment is what really matters to the homebuyers. For instance, if a home is priced at $200,000, then the monthly payment for this home if mortgage rates are 10% (assuming 20% down) is $1,468. However, if mortgage rates fall to 5%, the monthly payment becomes $955. Affordability rises in this case, so people can buy a larger home, or save the difference. Over time demand will rise and the price of the home will be bid up until the monthly payment on it is nearly the same as before the rate change. The new price is roughly $308,000, or a 50% increase in the home price for a 50% decline in rates. The one factor that is closest to set-in-stone in the purchase equation is the percentage of buyer’s income that she will devote to housing, which is roughly 28%. But rising incomes will increase the monthly payment that buyers can afford. For example, a person with an annual income of $50,000 can afford a monthly payment of $1,167. If their income were to grow 4.0%, then the monthly payment that the homebuyer could afford rises to $1,202, an increase of $35. While this may not sound like much, it is important to note that real disposable income rose 12.9% from 2000 to 2005. In this example, that would increase the feasible monthly payment to $1,317, or an increase of $150.
First Quarter
Average Home Price
2001 2004 2005 2006
$427,976 $540,224 $625,460 $656,423
Average Rate on 30Year FRM 8.26% 5.61% 5.75% 6.24%
Monthly Payment $2,459 $2,733 $3,206 $3,521
In the area covered by Consolidated MLS, we’ve seen an increase in the average price of roughly 53.4% since 2001. The average monthly payment has risen by roughly $1062. But what does this mean for the future? How will buyers continue to afford homes as prices rise? Luckily, the growing economy continues to create more jobs and grow incomes. NAR® Research expects job growth to continue at a healthy clip, rising 1.6% in 2006 and 1.4% in 2007. More importantly, incomes, which grew 1.5% last year, are expected to increase 3.7% in 2006 and 4.0% in 2007. Rising employment will help to increase the pool of persons looking for housing, while rising incomes will help to offset the eroding power of rising mortgage rates. The booming economy continues to create healthy drivers for a more stable, long-term real estate market. Rising incomes will help to soften the landing for the real estate market as a whole as it transitions to an environment of higher mortgage rates.
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Chief Economist’s Commentary
A Tale of Two (types of) Cities by David Lereah, Chief Economist Well, the boom is over and most of our nation’s hot housing markets are cooling. Home sales are off 5 to 20 percent in some markets that were once setting annual sales records. But there have been no signs of bubbles bursting as of yet. Real estate activity began slowing about six months ago, and – perhaps with some fingers and toes crossed – our nation’s housing industry is managing a soft landing. And quite nicely, thank you. It is true, some of those “hot hot hot” markets are experiencing more of a cooling down than are others, but there is also a silver lining to that: some of America’s non-boom markets are showing signs of life. During the real estate boom’s five-year run (2001 to 2005), about 65 of the 135 metropolitan areas on which the National Association of REALTORS® tracks price data experienced robust price appreciation. The households living in – and investors investing in – those 65 boom markets during those five years enjoyed substantial equity gains on their properties and no doubt engendered the envy of non-boom homeowners and investors. Indeed, to the dismay of the remaining 70 metro areas, the boom seemed to discriminate as it passed over them. But today, the housing coin has flipped – sales are softening in (former) boom cities and gaining momentum in non-boom cities. It appears the haves and the have-nots have reversed places. What is driving that reversal of fortune? The answer is: affordability. Quite simply, affordable metros are in favor and unaffordable metros are experiencing a correction. Let’s look at both situations. Affordable Metros The recent real estate boom seemed to have bypassed Denver, Salt Lake City, Houston, and Albuquerque, New Mexico; now those markets are raising some eyebrows. In recent months, they have shown a pick up in sales activity. What all four of these metros have in common is a healthy local economy (evident in their job creation figures) and affordable housing prices. It is becoming increasingly clear that in the aftermath of the boom, households are now seeking affordable property to purchase (and live in). For example, there are cases where households living in pricey northern California neighborhoods (such as San Francisco) are moving from an area where the median home price is a lofty $730,000 to areas with substantially lower median home prices. Denver and Salt Lake City – as well as some still-hot markets like Las Vegas and Phoenix – could be the fortunate recipients of that trend. Another way of viewing a healthy housing market is to look at the direction of months’ supply of homes available for sale (the housing inventory). The top ten metros ranked by the largest year- over-year decrease in months’ supply in February, reveals that nine out of those ten areas are affordable markets. Led by Austin, Texas, which experienced the largest decrease (falling from a 5.0-months’ supply in February 2005 to 4.3-months’ supply in February 2006), the remaining nine metros were Houston, San Antonio, Raleigh-Cary, Albuquerque, Mobile, Fort Myers-Cape Coral, Kansas City, Beaumont-Port Arthur, Texas and Baton Rouge. Only Fort Myers-Cape Coral, Florida experienced the real estate boom and has a median home price higher than the national median home price. Again, all of these metros share the two characteristics that are attracting future home buyers – a healthy local economy and a relatively low median home price. I expect these metros as well as other affordable and healthy metros to exhibit slow- to moderate growth during the remaining months of this year.
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Chief Economist’s Commentary
Boom Metros Phoenix, Naples, Florida, and Washington, DC all experienced the boom during the past five years, but are now showing strong signs of cooling. What they all have in common are a history of robust price appreciation and a healthy local economy. Ranking the top ten metros by the largest increase in months’ supply (which is a sign of a “cooling” market) in February reveals that all ten metros were boom metros. From first to tenth are Phoenix, Palm Bay-Melbourne, Florida, Pensacola, Florida, Chicago-Naperville, Hagerstown-Martinsburg, Tucson, Orlando, Boston, Washington DC, and Worcester, Massachusetts. Phoenix experienced the greatest increase, where its months’ supply rose from 1.2 months in February 2005 to 5.6 months in February 2006. Sales in all of these metros have also fallen within the past 6 months. A Happy Ending The good news is that affordable metros are beginning to expand while boom metros are cooling into a soft landing. There have been no bubbles bursting, as predicted by so many academics and Wall Street analysts during the past several years. The last time a bubble burst was in Boston in 1990/91.What happened in Boston? It experienced a negative local economic event – a sharp recession. During that time, Boston lost 15 percent of its labor force and the months’ supply of homes climbed up to a remarkable 16 months! Something had to give so prices tumbled downward for the next four years. The difference between Boston’s experience and today’s cooling metros is the health of the local economy. Boston’s economy experienced a contraction, while our boom markets all possess healthy, expanding economies. With job creation and income growth, households will continue to have the wherewithal to purchase property even in cooling local markets. That is a perfect recipe for a soft landing.
Want more insights from NAR Chief Economist David Lereah? Visit REALTOR.org to see some of his latest comments from press interviews and speeches at www.REALTOR.org/Research.nsf/ Pages/housingoverview
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Forecast
The Forecast By Lawrence Yun, Senior Research Forecaster Immigration is a not an easy subject to tackle. Should the U.S. have fully open borders and allow anyone from any country to come to the U.S. and contribute to and take advantage of American culture and citizenship? Or, should our nation build a fence around itself to protect it against illegal immigration and possible entry from potential terrorists? There are passionate feelings displayed by those who support a more open borders approach to immigration (such as allowing illegal immigrants to remain in the country), and those who would restrict immigration or otherwise suppress activities by those who come here from another county. There are many well-reasoned arguments on both sides. The topic has led to intra-party disunity within both the Republican and Democratic parties. But, there is one area where there is a little disagreement. Immigration has helped the housing market. Why? The answer is simple: people need a home in which to live. So it should not be surprising that dynamic housing markets are frequently those in regions that have significant immigrant populations. The fast growing regions of Las Vegas, Phoenix, Washington D.C. and much of Florida have seen strong housing demand – and a significant run-up in home prices – due in no small part because these markets have strong immigrant populations. So, what happens to housing markets when there is no immigration? Here’s an example. Home prices in Japan have been stagnant for the past 20 years. One reason is that the country’s population has been virtually unchanged during that same time period. The same stagnation is also present in eastern Germany (where many have left for the better western half). Similar situations can be found in areas of the U.S. like Elmira, New York and Danville, Illinois. What happens to those empty homes when people leave and there are no new households to occupy them? An interesting study by the Philadelphia Federal Reserve Bank showed that home prices in immigration-heavy neighborhoods rise much more slowly than other neighborhoods in the local region. That is, the “there goes the neighborhood” reaction may be at work as established residents flee an area as newcomers move in. However, home prices in any overall metro region with a high number of immigrants in general rose at a significantly faster clip then those metro regions with little immigration. More people translates into more housing demand. The concerns of whether or not the current swelling number of immigrants will eventually assimilate into the U.S. society are an open and legitimate question that needs to be addressed fully. But housing demand will remain healthy — and certainly healthier for the foreseeable years than it would otherwise be in the absence of immigration. As for 2006, home sales will reach their third best year ever; home prices are projected to rise 6.4%. These are both solid figures in a rising interest-rate environment. The national job market also looks to perform well in 2006. The best guess for now is for 2.3 million net new jobs. Moreover, the stock market has been flirting with a 5-year high, which will translate into higher demand for vacation homes. The construction of these homes, as many in the homebuilding industry will affirm, would not have been possible without immigrants. As for the local area, the job market has been mildly positive in recent quarters (0.3% growth in the latest quarter). At the same time, higher mortgage rates have reduced affordability. Home sales, not surprisingly, has declined 6% in the first quarter compared to the year before. Home prices have continued to increase though because few are forced to sale in a job creating environment. Given the strength in the national economy, the local economy looks to catch part of that upward tide by the year end. Home sales are expected to turn positive once interest rates stabilized while jobs get added. The forecast is for 6% decline in home sales in 2006 followed by a 3% rise in 2007. Home prices will increase 4% and then rise another 3% in 2007. 16
Forecast
Economic and Housing Market Outlook: Second Quarter 2006 2005 Q2
Q3
Q4
Q1
Q2
2006 Q3
Q4
Q1
2007 Q2
Q3
U.S. Economy Annual Growth Rate Real GDP Nonfarm Payroll Empl oyment Consumer Prices Real Disposable Income Consumer Confidence
3.3 1.6 3.7 0.2 102
4.1 1.6 5.5 -1.4 99
1.7 1.2 3.2 6.7 96
5.0 2.1 3.3 4.4 106
3.9 1.5 2.6 4.2 108
3.6 1.8 2.5 4.3 107
3.4 1.7 3.1 4.4 108
3.2 1.6 2.6 4.7 109
3.1 1.2 2.2 3.4 110
3.1 1.5 2.3 3.4 110
Percent Unemployment Rate
5.1
5.0
4.9
4.7
4.8
4.8
4.7
4.7
4.8
Interest Rates, Percent Fed Funds Rate 3-Month T-Bill Rate Prime Rate Corporate Aaa Bond Yield 10-Year Government Bond 30-Year Government Bond
2.9 2.9 5.9 5.1 4.2 4.5
3.5 3.4 6.4 5.1 4.2 4.4
4.0 3.8 7.0 5.4 4.5 4.7
4.4 4.4 7.4 5.5 4.6 4.7
4.9 4.8 7.9 5.9 4.9 5.0
5.0 4.9 8.0 6.1 5.1 5.3
5.0 4.9 8.0 6.2 5.2 5.4
5.0 4.9 8.0 6.3 5.3 5.6
Mortgage Rates, percent 30-Year Fixed Rate 1-Year Adjustable
5.8 4.3
5.7 4.5
5.8 5.1
6.2 5.3
6.6 5.6
6.8 5.7
6.9 5.7
Thousands Existing Single-Family Sales New Single-Family Sales Housing Starts Single-Family Units Multifamily Units Residential Construction*
7,193 1,287 2,044 1,693 351 599
7,180 1,298 2,101 1,747 354 610
6,943 1,286 2,059 1,716 343 614
6,729 1,182 2,139 1,757 382 626
6,669 1,169 2,025 1,677 348 627
6,592 1,122 1,954 1,606 348 614
Percent Change -- Year Ago Existing Single-Family Sales New Single-Family Sales Housing Starts Single-Family Units Multifamily Units Residential Construction
4.7 7.0 6.3 5.9 8.6 6.1
6.5 11.5 6.4 6.9 4.2 7.2
0.9 3.5 4.3 5.9 -2.6 7.6
-3.0 -5.3 2.7 2.8 2.1 7.2
-7.3 -9.1 -0.9 -1.0 -0.8 4.5
National Home Prices Thousands of Dollars Existing Home Prices New Home Prices
209.3 230.2
216.3 236.6
214.7 239.5
209.6 235.2
Percent Change -- Year Ago Existing Home Prices New Home Prices
13.3 6.3
14.2 10.5
13.4 5.2
Local Region Payroll Jobs (in thousands) Home Sales Home Prices (in thousand $)
417.2 3324 641.6
412.4 3742 695.0
418.0 2501 627.1
0.5% 5.4% 12.6%
0.4% -10.3% 7.7%
2004
2005
2006
2007
4.2 1.1 2.7 3.4 80
3.6 1.6 3.4 1.3 100
4.0 1.6 3.0 4.6 105
3.8 1.7 2.0 4.4 109
4.8
5.5
5.1
4.9
4.7
5.0 4.9 8.0 6.4 5.4 5.7
4.8 4.7 7.9 6.4 5.3 5.7
1.3 1.4 4.3 5.6 4.3 5.1
3.2 3.2 6.2 5.3 4.3 4.6
4.5 4.3 7.5 6.0 4.9 5.1
4.5 4.3 7.5 6.2 5.1 5.2
7.0 5.7
7.1 5.7
7.0 5.6
5.8 3.8
5.9 4.5
6.5 5.4
6.8 5.5
6,662 1,091 1,890 1,537 353 600
6,674 1,088 1,855 1,494 360 588
6,716 1,086 1,856 1,490 366 583
6,731 1,176 1,857 1,488 370 584
6,784 1,203 1,956 1,604 345 562
7,072 1,282 2,065 1,714 350 604
-8.2 -13.5 -7.0 -8.1 -1.6 0.7
-4.1 -15.2 -8.2 -10.4 3.0 -2.3
-0.8 -8.0 -13.3 -15.0 -5.7 -6.1
0.7 -7.1 -8.3 -11.2 5.2 -7.0
2.1 4.8 -5.0 -7.4 6.1 -5.0
9.7 10.8 5.2 6.6 -0.9 10.3
4.2 6.6 5.6 6.4 1.4 7.6
-4.0 -5.7 -6.2 -6.7 -3.7 0.4
0.5 -0.9 0.3 -3.5 18.5 -2.0
222.3 238.7
227.1 246.3
224.6 250.3
219.0 246.0
231.8 249.7
236.9 258.1
185.2 221.0
209.1 237.3
219.7 245.2
228.1 256.3
10.1 2.3
6.2 3.7
5.0 4.1
4.6 4.5
4.5 4.6
4.3 4.6
4.3 4.8
8.5 3.9
12.9 7.4
5.1 3.3
3.8 4.5
405.8 1916 658.0
418.5 3115 671.1
414.5 3473 722.1
420.9 2425 649.7
409.0 1920 679.0
422.6 3168 692.6
419.0 3581 748.9
414.9 10929 680.3
419.9 11290 704.1
0.4% -5.9% 4.2%
1.2% 3.3% 3.5%
National Housing Indicators
Percent Change -- Year Ago Jobs Home Sales Home Prices
0.5% 0.5% 5.3%
0.3% -6.1% 5.1%
0.3% -6.3% 4.6%
0.5% -7.2% 3.9%
Quarterly figures are seasonally adjusted annual rates. * Billion dollars Source: Forecast produced using Macroeconomic Advisers quarterly model of the U.S. economy. Assumptions and simulations by Dr. David Lereah and Dr. Lawrence Yun.
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0.7% -3.1% 3.6%
0.8% 0.2% 3.2%
1.0% 1.7% 3.2%
1.1% 3.1% 3.7%
412.0 11655 593.8
0.1% 4.8% 15.1%
413.1 11608 653.0
0.3% -0.4% 10.0%
6,787 1,209 1,936 1,600 337 607
6,821 1,198 1,943 1,544 399 595
Economic Monitor
This table reflects data available through April 10, 2006.
Recent Statistics
Monthly Indicator Mortgage Rates The 30-year fixed-rate mortgage edged up inMarch to 6.32% – an increase of seven basis points fromFebruary’s level.Mortgage rates are expected to rise further asconcerns on inflation put upward pressure on interest rates.The one-year adjustable rate increased eight basis points inMarch to 5.42%. Existing Home Sales rose 5.2% in February to a seasonallyadjusted annualized rate of 6.91 million units – ending five con-secutive months of declines.Home prices continued to showstrength,with the median price of an existing home rising 10.6%from February 2005 to $209,000.The inventory of homes forsale rose by 150,000 in the past month to 3.03 million – a 5.3months’ supply at the current sales pace. New Home Sales In February,new home sales posted 1.08 mil-lion seasonally adjusted annualized units.The sales pace representsa 10.5% decrease from January’s revised figure of 1.21 millionunits,and is 13.4% below the level in February of 2005.Inventoryof newly constructed homes increased to 548,000 – a 6.3-months’ supply at the current sales pace. Housing Starts declined in February to 2.12 million seasonal-ly adjusted annualized units after soaring to their highest levelin over 30 years in January.Both single-family and multifamilystarts posted declines.But the current construction pace is stillvery robust.The 1.8 million single-family starts is higher thanthe last year’s record of 1.7 million. Employment The economy added 211,000 jobs in March –stronger than the 190,000 most analysts had anticipated.BothFebruary and January employment numbers were revised down-ward to 225,000 and 154,000,respectively.Unemploymentdecreased to 4.7% – its lowest level in 4 1/2 years. Purchase Applications The Mortgage Bankers Association’spurchase index inched up to 407.6 in March.While the housingmarket begins cooling in most markets with both new andexisting home sales expected to soften due to rising mortgagerates,the index level is still considerably strong and will remainhealthy this year. Housing Affordability NAR’s housing affordability index rose0.8% in February to 117.6.Last month’s index was revised upwardslightly.Going forward,the affordability index should hover at sim-ilar levels for the remainder of the year as moderating homeprices somewhat offset rising mortgage rates.
Inflation The consumer price index (CPI) rose 0.1% inFebruary.Two sectors – fuel and apparel – fell sharply,whichhelped to minimize the increase in the core index which rose0.1%.The CPI should continue to grow at a projected averagemonthly rate of 0.3% for the next three months.
Likely Direction Over the Next Forecast Six Months
Jan Feb Mar
6.15 6.25 6.32
Expanding global economy puts upward pressure on rates
Dec Jan Feb
6,750 6,570 6,910
Higher rates cutting home sales, particularly in highpriced markets
Dec Jan Feb
1,275 1,207 1,080
A huge rise in unsold inventory
Dec Jan Feb
1,989 2,308 2,120
Mostly down, but affordable job creating regions may buck the trend
Jan Feb Mar
154 225 211
Two million net new jobs on tap for 2006
Jan Feb Mar
452.7 406.6 407.6
Will be a difficult year for mortgage brokers
Dec Jan Feb
117.0 116.7 117.6
Home prices rose faster than income over the past five years
Dec Jan Feb
-0.1% 0.7% 0.1%
Inflation at the upward end of the comfort zone
Notes: All rate are seasonally adjusted. New home sales, existing home sales, and housing starts are shown in thousands. Employment growth is shown as month-to-month change in thousands. Inflation is shown as the month-to-month change in the Consumer Price Index. Sources: NAR, Bureau of the Census, Bureau of Labor Statistics, Freddie Mac, and the Mortgage Bankers Association
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