Spring Home Sales

According to David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years. With all 20 cities within the Case- Shiller benchmark, seeing prices rise over the last year, questions about whether this is a normal housing market or if prices could be heading for a fall are natural."

Although 2016 sales in the Sarasota/Manatee markets where mostly flat last year, and with sales year-over-year in January down between 8.0% and 9.0%, the spring housing markets are showing signs of blooming sales early this year, not because of higher-than-average temperatures, but because of high demand and rising home prices. Affordability and tight credit are the biggest factors home buyers are facing today. The foreclosure crisis is over, but it left behind an entirely new landscape for potential buyers. Entry-level homes are in limited supply due to individual investors and hedge funds bought tens of thousands of them during the crisis and turned them into rentals. The number of single-family rentals jumped to more than 15 million, up from about 11 million in 2009, according to the U.S. Census. Still a superior market for investors, not so good for renters!

Although sales are down in January, I believe these are "lagging indicators" and we will see a turn around on home sales later this year as long as the economy continues to grow, stock market continues to rally, (The DOW is currently over 21000!) mortgage rates stay stable, (rates just received another increase yesterday). We have a President who is determined to revamp the Frank-Dodd Act, which will allow banks to loosen some of the restrictions on their lending practices. Please note: I am not in favor of banks offering 100% LTV (loan-to- value) mortgages or to allow them to invest heavily into derivatives. These types of investments are too risky and they do not know how to manage this risk! This was a huge part of the cause of our last recession.


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