From a recent news feed comes the story that the latest national economic growth numbers should finally put to rest fears of a recession that could choke the real estate recovery now getting underway.
Second quarter Gross Domestic Product (or GDP) came in at an upwardly-revised 3.3 percent -- far above the 1.9 percent the federal government had previously estimated. To see the whole report from BEA click here
Key reasons for the robust economic performance: Exports, which have been riding the weak dollar to record levels, and lower imports because the prices of foreign-made goods have been priced higher.
Why should anyone interested in real estate care about GDP? Well, number one, when the economic growth rate accelerates, consumer confidence in the economy rises. That, in turn, pulls potential buyers off the sidelines and opens the door to higher housing sales. I’ve certainly seen more shoppers out recently, as have most of my compatriots at the office. And sure enough, the consumer confidence numbers for August, released last week by the Conference Board, are up by 5 points.
We're already seeing some impressive jumps in home sales in places that haven't seen positive news in two to three years -- central Florida and even some of the hardest-hit parts of California. According to a new report from the real estate tracking firm, DataQuick, sales in southern California jumped 16.7 percent in July over June, and were 14 percent above the pace of July the year before. Our sales have ticked up in spots around Michigan, too; but it has been spotty.
Another encouraging sign: Recently mortgage rates dropped to 6.39 percent for 30-year fixed rate loans, according to the Mortgage Bankers Association of America. Fifteen year rates are still just under 6 percent. Applications for loans to buy homes jumped by 6 percent for conventional loans and are up an impressive 19.9 percent for FHA mortgages. We are seeing a huge increase in FHA mortgages locally.
Foreclosures are still running high locally and that is also attracting more buyers to jump into the market. Foreclosed properties, as a percentage of sales, are still running between 40-50% locally. But, I have also noticed that more and more homes above the $300 price level have sold recently, which is a good thing; since the $300 level represented a barrier for a long time and homes priced above that level were just dead for months.
So, has it turned around? Are we out of the woods on housing? It’s too early to tell. We are just ending up the best selling season of the year (summer is the best every year), so we’ll have to see if things drop off significantly or whether we can sustain this new level of activity and sales. Let’s all hope!