December Existing-Home Sales Up 1%

Existing-home sales finished 2013 with a slight increase, closing the book on the strongest year for sales since 2006, theNational Association of Realtors (NAR) reported Thursday.

Total existing-home sales–including all completed transactions of single-family homes, townhomes, condominiums, and co-ops–increased 1.0 percent month-over-month to a seasonally adjusted annualized rate of 4.87 million last month. November’s sales rate was revised down to 4.82 million.

December’s sales were down year-over-year, coming up 0.6 percent short of December 2012’s pace of 4.90 million.

Removing all other types of sales, sales of existing single-family homes rose 1.9 percent from November to an adjusted annual rate of 4.30 million. Compared to the prior year, single-family sales were down 0.7 percent.

For all of last year, NAR estimates there were 5.09 million existing-home sales, a 9.1 percent improvement from 2012.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market,” said NAR chief economist Lawrence Yun. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

While sales were up from November, it wasn’t new homeowners driving the increase: First-time buyers accounted for 27 percent of purchases in December, down from 28 percent in November and 30 percent in December 2012. All-cash sales–often reflective of investor activity–made up 32 percent of December transactions, unchanged from November and up from the previous year.

Even with prices and mortgage rates slated to rise, NAR president Steve Brown says sales should hold strong in 2014 as job numbers improve. That doesn’t mean the year won’t be without challenges, though.

“The only factors holding us back from a stronger recovery are the ongoing issues of restrictive mortgage credit and constrained inventory,” Brown said. “With strict new mortgage rules in place, we will be monitoring the lending environment to ensure that financially qualified buyers can access the credit they need to purchase a home.”

The national median existing-home price for all housing types in December was $198,000, up 9.9 percent year-over-year. A comparatively smaller share of distressed sales (14 percent compared with December 2012’s 24 percent) accounted for some of the price growth, NAR reported.

 

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Micro Apartments Yield A Big Boom in the Small Space Sector

Ever since the economy took a hit in 2008, downsizing has been a top priority for many homeowners and renters. The McMansion is out; low-maintenance living is in.

You can see it in traditional listings as well as on the real estate auction block—for the past several years, capacious luxury mansions have been sold via auction due to previously languishing on standard real estate listings; this continues to be a popular method of sale for owners looking to liquidate these mammoth estates (just ask Michael Jordan). With finances still in flux for most Americans, cutting back on monthly costs of maintaining a home or apartment is essential. Enter the micro apartment—the latest trend in economical living space.

Being scooped up by young urban singles, service workers, recent grads, and retirees on a fixed income, the micro apartment is the epitome of the downsize. Typically weighing in between 200 and 350 square feet (at most), these units often include private bathrooms and modern building amenities, yet require sharing a kitchen and patio with other micro dwellers. Many consider this a small sacrifice due to the clever space-saving floor plan that offers such furnishings as a dining room table which transforms into a bed, as well as a host of built-in shelves for storage. Bundle that with Internet access and an optimal location near city hot spots and transportation, and micros can be the ideal home for some. Micro apartments have become favored dwellings in leading metropolitan areas such as New York, Boston, San Francisco, and Seattle.

USA Today recently covered this real estate sector uptick, reporting, “Though tiny has long been typical in Manhattan, mini-apartments are popping up in more U.S. cities where land is finite, downtowns have regained cachet, and rents have risen. In a digital age when library-sized book collections can be kept on a hand-held device, more Americans see downsizing as not only feasible but also economical and eco-friendly. . . . Developers say they can’t build micro-housing fast enough.”

Seattle, in particular, is leading the way with micros, where this style of living is exceptionally popular for young singles who want to reside within city limits. Jim Potter, founder of Footprint Investments and chairperson of Kauri Investments, a real estate investment and development company, has already completed six buildings with 40 to 60 micro apartments each in Seattle and is in the process of developing similar buildings this year in Portland, Oregon, and Jersey City.

“We don’t do any advertising, and we’re 100 percent occupied all the time,” Potter said. “It is a national phenomenon and Seattle is ahead of the pack. . . . Nobody else is producing something at this moderately priced range. You get a brand new building with a new bathroom. You get Internet access and it’s fully furnished. In general, our buildings are on major bus lines and/or light rail.”

Seattle may be ahead in the micro-space now, but it may not be for long. Despite a blanket 400 square-foot requirement on all apartments in New York City, the Big Apple is also entering the micro arena.

“Last year [Mayor Michael] Bloomberg, along with the Department of Housing Preservation and Development Commissioner, Mathew M. Wambua, launched the adAPT NYC Competition, a pilot program to develop a rental building composed of micro-units,” AOL Real Estate reports. “The winner of the competition proposed 55 units ranging from 250 to 370 square feet (23 to 34 square meters), made of prefab modules. The building is scheduled for completion in Manhattan by September 2015, and will include a rooftop garden, lounges, a deck, laundry, bike storage, a cafe, and fitness room.”

San Francisco and Boston are getting in on the micro action as well, where these “aPodments,” “micro lofts,” or “metro suites,” as they are often called, are being sought after by service workers who want close proximity to their jobs, as well as techies who consider utilizing a micro as a second home for late nights in the city. The economical rent is the greatest draw.

“In San Francisco, Patrick Kennedy of micro-apartment developer Panoramic Interests, rents 295-square-foot apartments for $1,600, about a third less than the going rate for newly built studios in the area,” CNNMoney reports. “Panaromic’s recently completed 23-unit building includes a Murphy bed that flips up and leaves a dining table behind that can seat five people, a work area, storage, exterior space, and Internet access—all within 295 square feet. The kitchens have refrigerators, dishwashers, and microwaves, but no conventional ovens.”

Many metropolitan areas are thrilled with this new property boom. “City officials often welcome this mini-sizing, which is common in Tokyo and many European capitals, as a smart-growth, lower-priced solution to a housing phenom: people living alone,” USA Today reports. “Nationwide, the share of households occupied by a single person reached 27 percent in 2010, up from 8 percent in 1940 and 18 percent in 1970. The number exceeds 40 percent in Atlanta, Cincinnati, Denver, Pittsburgh, Seattle, St. Louis, and Washington, according to Census data.”

Not everyone appreciates this new micro movement. Many residents who live near these micro-unit buildings complain of overcrowding and less parking availability since these complexes do not offer parking spaces or garages for occupants.

Yet overall, this new option for more affordable city living has a myriad of benefits for various groups, including real estate developers and city planners as well as apartment dwellers. While the appeal of the micro apartment tends to draw young singles who love the nightlife and rarely spend a quiet evening at home, this living space is also attracting a senior demographic looking for a low-maintenance, cost-effective domestic habitat. It seems that across the board, the micro apartment holds a level of enticement for a wide range of renters, which may mean the boom has just begun.

Berkshire Hills Completes Acquisition of BofA Branches in Central New York

Berkshire Hills Bancorp, Inc., announced Tuesday that its banking subsidiary, Berkshire Bank, has completed the previously announced acquisition of 20 retail bank locations from Bank of America, effective January 17, 2014.  As a result of the transaction, Berkshire acquired approximately $450 million in deposits and $4 million in loans as of January 14, 2014, bringing the total number of branches in Berkshire’s footprint to 91 across New England and New York.

The newest branches are located in the eastern and central New York cities of Amsterdam, Cairo, Chatham, Glens Falls, Greenville, Hudson, Ilion, Johnstown, Little Falls, New Hartford, New Lebanon, Queensbury, Utica, West Winfield, and Whitesboro.

Chairman and CEO Michael Daly stated, “We are thrilled to welcome the customers and employees of these branches to ‘America’s Most Exciting Bank.’ Our expanded footprint in New York will benefit both existing and new customers through enhanced convenience and active community support.”

Berkshire has approximately 91 full-service branch offices in Massachusetts, New York, Connecticut, and Vermont, providing personal and business banking, insurance, and wealth management services.

Economists Outline What to Watch for in the Real Estate Market of 2014

Experts at Freddie Mac and Equifax expect falling unemployment and economic growth to keep the housing market steady in 2014. This, despite climbing interest rates and anticipated growth in housing prices nationwide.

Unemployment dipped to 6.7 percent nationally in December, and the Federal Reserve is expecting that figure to drop below 6.5 percent later this year. If the Fed is right, it will be the first time since the Great Recession began in 2008 that unemployment will be so low.

What this spells for the housing market is greater buying power and an upswing in new-home construction, according to Ilyce Glink, managing editor of the Equifax Finance Blog. “The housing market may not return to its pre-recession ‘normal’ in 2014 or even 2015,” Glink said, “but with more Americans employed and able to buy homes, we should see the real estate market, especially new construction housing, continue to pick up steam.”

This rise in the number of employed Americans dovetails with expected growth in the U.S. economy. Frank Nothaft, chief economist at Freddie Mac, says the economy should increase by 2.5 percent to 3 percent in 2014, which should empower more Americans to buy homes.

Experts feel this double-edged uptick will be enough to overcome a 3.7 percent increase in home sale prices nationally (as predicted by the National Association of Realtors) and an increase in mortgage interest rates.

Interest rates hit historic lows in 2013 and then gradually rose a full percentage point by year’s end. Freddie Mac reported that as of mid-January, rates on fixed 30-year mortgages averaged 4.41 percent; rates on fixed 15-year mortgages averaged 3.45 percent.

Economists such as Glink welcome the idea of a steady, slowly recovering housing market. “A cooling off in some of the hot markets isn’t a bad thing,” she said. “There were new bubbles forming and threatening to burst in some markets, and a slow-down could bring appreciation back to a more moderate rate.”

What remains to be seen is just how fast market prices will rise. Equifax warns that if prices climb faster than income, the trend could push some buyers out of the market.

Another factor to consider is the number of new households created by such events as divorce, death, or young people moving out of their parents’ homes after graduating college. According to Amy Crews Cutts, chief economist at Equifax, the Great Recession greatly reduced the number of new households created annually—and she doesn’t expect much change in 2014, particularly among young people.

Slim job prospects and financial insecurity among recent college graduates, combined with high student loan debt, may create a void of buyers that could eventually trigger pent-up demand for homes, said Crews Cutts. While this scenario is not likely to play out this year, it’s worth keeping an eye on.

Mortgage Rates Pull Back Further

December’s discouraging jobs report caused mortgage rates to pull back once again this week.

Freddie Mac’s weekly Primary M

cember’s discouraging jobs report caused mortgage rates to pull back once again this week.

Freddie Mac’s weekly Primary Mortgage Market Survey shows the 30-year fixed-rate mortgage (FRM) falling to an average rate of 4.41 percent (0.7 point) for the week ending January 16, down from 4.51 percent last week. A year ago, the 30-year fixed average sat at 3.38 percent.

The 15-year FRM averaged 3.45 percent (0.7 point) this week, down from 3.56 percent previously.

Adjustable rates were flat to down this week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.10 percent (0.5 point), down from 3.15 percent, while the 1-year ARM averaged 2.56 percent (0.5 point), unchanged from last week, the GSE reports.

“Mortgage rates drifted downward this week amid signs of a weakening economic recovery,” explained Freddie Mac chief economist Frank Nothaft.

In addition to December’s disappointing jobs report—which showed payroll growth of only 74,000 along with a substantial drop in labor participation—Nothaft cited weak retail sales numbers as another factor in this week’s rate movements.

Finance site Bankrate.com also reported declines in fixed and adjustable rates for the week. The site’s weekly national survey shows the 30-year fixed falling from 4.64 percent to 4.57 percent, while the 15-year fixed was down from 3.69 percent to 3.62 percent.

The 5/1 ARM, meanwhile, fell to 3.40 percent, according to Bankrate’s data. The company’s report put it at 3.46 percent last week.

ortgage Market Survey shows the 30-year fixed-rate mortgage (FRM) falling to an average rate of 4.41 percent (0.7 point) for the week ending January 16, down from 4.51 percent last week. A year ago, the 30-year fixed average sat at 3.38 percent.
The 15-year FRM averaged 3.45 percent (0.7 point) this week, down from 3.56 percent previously.
Adjustable rates were flat to down this week. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.10 percent (0.5 point), down from 3.15 percent, while the 1-year ARM averaged 2.56 percent (0.5 point), unchanged from last week, the GSE reports.
“Mortgage rates drifted downward this week amid signs of a weakening economic recovery,” explained Freddie Mac chief economist Frank Nothaft.
In addition to December’s disappointing jobs report—which showed payroll growth of only 74,000 along with a substantial drop in labor participation—Nothaft cited weak retail sales numbers as another factor in this week’s rate movements.
Finance site Bankrate.com also reported declines in fixed and adjustable rates for the week. The site’s weekly national survey shows the 30-year fixed falling from 4.64 percent to 4.57 percent, while the 15-year fixed was down from 3.69 percent to 3.62 percent.
The 5/1 ARM, meanwhile, fell to 3.40 percent, according to Bankrate’s data. The company’s report put it at 3.46 percent last week.

Study Finds Real Estate Pros Are True to Their Occupational Creed

 It stands to reason that if real estate professionals believe homeownership is a good idea, then they would practice what they preach and own their own homes instead of renting. But do they? Trulia’s chief economist, Jed Kolko, has crunched the numbers from Census data between 2007 and 2012, and it turns out, the answer is “yes.”

Kolko discovered that 84.5 percent of real estate agents owned their own homes during the 2007-2012 period. By comparison, the homeownership rate for people in other professions and in the same age and income demographic as the agent population observed was 80 percent. The national average for homeownership across all ages, incomes, and occupations stood at 70.1 percent over the time period studied.

Furthermore, homeownership rates were higher than presumed for other real-estate-related occupations, such as appraisers, construction managers, and architects—all of which claimed a rate at least two percentage points higher than expected based on their demographics, income, and

location, according to Kolko’s assessment. Real estate appraisers and assessors actually beat the agents in terms of homeownership, with a score of 87.9 percent.

Why is homeownership higher among real estate pros? Kolko suggests two possible reasons.

First, real estate professionals probably believe in the value of homeownership more than others do, and they apply that belief to themselves. And second, real estate professionals have the advantage of knowing the ins and outs of their local markets, which makes buying and selling easier (or more profitable) for them than for people in other occupations.

Trulia’s study also revealed a few other surprises regarding homeownership percentages among other occupations. For instance, police officers and firefighters are much more likely to own homes than expected, partly because of help from credit unions and programs like Homes for Heroes.

Homeownership is also higher than expected for hairdressers, hairstylists, cosmetologists, and miscellaneous personal appearance workers. Many of them see customers at home, which might be easier for those who own rather than rent.

On the other hand, the study also uncovered certain occupations where practitioners are less likely to own a home than one would expect considering their demographics, income, and location.

It turns out that chefs, writers, and software developers are below the curve in terms of homeownership. Oddly, economists were found to be almost two percentage points less likely to own a home than expected.

Economist Discusses Positive, Negative Influences on Economic Growth

The overall outlook for the 2014 economy in the United States is optimistic, but guarded, according to Dr. Lynn Reaser, chief economist at the Fermanian Business & Economic Institute in San Diego, California.

“There are beginning to be indications that we are pulling away from the legacy of the global financial crisis of 2008 and 2009, but we put a question mark there,” she told listeners of the Five Star Radio Mortgage Markets Todayprogram and its host, Louis Amaya, co-founder, CIO, andCOO of the iServe Companies.

The jobs report for November stated that about 200,000 jobs were created, which helped to bring the unemployment rate down to about 7 percent. The December report saw the rate dive even further to 6.7 percent.

“Nevertheless, this has been a pretty soggy recovery,” Reaser said. “Believe it or not, we have been in a technical recovery for four and a half years. A lot of my friends say, ‘If this is a recovery, tell me what a recession is.’”

Dr. Reaser is also chief economist for the Council of Economic Advisors for the California state controller, and is a participating economist in the S&P/Case-Shiller Real Estate Index. From 1999 to 2009, she served as the chief economist for Bank of America’s investment strategies group.

Last year, the country experienced about 2 percent in growth, Reaser noted. “In 2014, we think things will improve somewhat, with growth going up to 2.5 to 3 percent,” she explained.

“On the job front, we expect to see more hiring this year, although companies are still going to be conservative,” Reaser continued. She says it is expected that three million jobs will be added, which should be enough to drive the employment rate down further, perhaps to 6.5 percent by December of 2014.

“The good news is that we’ve seen the deficit shrink significantly in the past year, and it will continue to shrink a bit more in 2014,” according to Reaser. “Another positive factor is that inflation has not skyrocketed and is still a little less than 2 percent despite the fact that the Federal Reserve has been printing money like mad.”

Reaser predicts that by the early part of 2015, this will come to an end and the Fed could be out of the business of buying Treasuries and mortgage-backed securities each month. However, she warns that a result of the Fed’s tapering could be a rise in interest rates for 30-year fixed-rate mortgages to about 5 percent by the end of 2015.

Despite overall positive signs, Reaser says there could be some unforeseen problems that would slow down the economy, including a fiscal gridlock caused by a government shutdown or another debt ceiling standoff.

Another area of risk concerns reducing the federal deficit. “There is no textbook on unwinding a $4 trillion balance sheet. It’s simply never been done,” she explained. “The problem is that it will take time to reduce this large deficit, which could cause a financial backlash. The Fed thinks change should be gradual. Unfortunately, financial markets don’t understand the term ‘gradual.’ They seem to automatically price in the full impact of the change.”

Other possible negative factors include economic turbulence and bankruptcies in various parts of Europe or a natural disaster such as the one in the Philippines.

To prepare for any eventuality, Reaser offers the following recommendations:

– Considering the rising cost of college educations, students might stay home and attend a community college or trade school, thereby avoiding massive student debt, which now exceeds credit card debt.
– For those nearing retirement age, savings should be increased and carefully guarded. The biggest retirement-related mistake is not saving amounts required for retirement or not saving early enough.
– Young people should be encouraged to study math, science, and technology. This is not just for nerds.
– Since most predictions are that housing prices and interest rates will rise before long, if someone intends to stay in a home for a number of years, 2014 may be the year to buy.
– Be careful where you place your investments. Although interest rates are at rock bottom levels, don’t risk investing in questionable companies.
– Diversification is a key strategy. Buy stock with good solid companies in good locations. This will give a good return over time. Don’t take any chances.
– To remain competitive in business, you must invest in technology.
– Stress test your own enterprise. Watch for game changes. Overnight, you can have a success or be totally wiped out. Beware of disruptive technology.
– Listen to your associates, employees, and customers.

In view of the public’s enormous sense of frustration with government and the economy, Reaser cites a study done by author and journalist Carl Cannon about what would make Americans happy again. These factors include:

– Having the love and support of family and friends.
– Working for an organization that has respect nationally and globally.
– Having pride in the work done, whether it’s hi-tech or bagging groceries.
– Working for companies that instill pride in their employees.

“These intrinsic values help to foster happiness, which can be a key driver for economic growth and prosperity for all of us in the year ahead,” according to Dr. Reaser.