MarketWatch, authored by David Howell, is published on a bi-monthly basis by McEnearney Associates, Inc. It provides useful and insightful summaries of current housing
market trends. MarketWatch statistics include housing sales from all companies serving our Virginia - Washington DC - Maryland Metropolitan area.
TURN INTO THE SKID AND TAKE YOUR FOOT OFF THE
That’s wise advice when driving in bad weather. When you hit a rough spot in the road and start to skid, every instinct screams out to hit the brakes and turn the steering wheel hard in the opposite direction. But Driver’s Ed 101 teaches us that gentle corrective action will let you straighten out and start heading the right way – and then equally gentle pressure on the accelerator lets you get moving again. We hope that simple lesson isn’t lost on our nation’s housing policy makers.
One of the major reasons the market is in such a significant skid is that it was driving way too fast and was ignoring some very basic rules of the road. There were times that the traffic not only looked the other way, but urged even more speed. No one in their right mind would suggest that keeping the pedal to the metal – in the form of issuing mortgages to anything that moves – is the remedy. But we’re concerned that there may be too much braking and overcorrecting. It’s almost certain that the conforming loan limits are going to drop, making loans more expensive for homes priced more than $750,000 – and that’s a very important segment of our market here. And there are other new traffic laws being contemplated – increasing down payment requirements, a significant reduction in Fannie and Freddie’s role, and reducing or eliminating the home mortgage interest deduction. The motivation for the latter seems to have more to do with raising new revenue than addressing the problems in the housing market. The adoption of any one of these policy initiatives could slow the market, and if all were enacted it would amount to jerking the steering wheel and stomping on the brakes of the market.
As concerned as we may be about policy decisions that are ultimately beyond our control, we are also reminded of our company’s history. When John McEnearney opened his doors for business in July 1980, mortgage interest rates were 17% and most loans required 10% or even 20% down. And people still bought and sold houses. It wasn’t easy and it took a lot of creativity, but people still needed a place to live and were still attracted to the dream of owning their own home. In the intervening 31 years, we have witnessed just about every kind of market condition imaginable, and current conditions could certainly be better. Yet this week, and next week, and the week after, more than 250 sellers and buyers will reach agreement on contract terms to buy and sell a home in Montgomery County, and more than 1,000 in the metro area. That’s surprising to some in the face of all the negative news, but it is reassuring to us.
This is a resilient market, and folks will find ways to adapt to whatever conditions exists, just like we always have.
Interest rates have nothing to do with a sluggish market, as rates are lower than any time since the Eisenhower administration.
30-year fixed interest rates at the end of August averaged 4.22%, compared to 4.36% at the end of August 2010.
That 4.22% figure represents a new historical low, besting the October 2010 number of 4.23%.
NEW CONTRACT ACTIVITY
There were almost 900 homes that went under contract in August, traditionally one of the slowest months of the year.
That includes 40 homes priced more than $1 million.
Almost 40% of the homes going under contract in August were on the market for 30 days or less, suggesting that buyers will act quickly when they see well-priced homes.
The overall supply of homes on the market at the end of August was 3.6 months, down slightly from 3.7 months at the end of August 2010.
In the lower price ranges, there’s surprisingly little inventory of properly priced homes – the ones that are priced right are not staying on the market long.