The Real Estate Report 10/16/2013

 

 

The Employment Report that Wasn't...

This week in the month we usually present an analysis of the monthly employment data. Only last week the report was not released because of the government shutdown. And if it was released, we really couldn't trust the numbers because the report itself would not reflect the damage that was done during the government shutdown. The employment data covers September and the shutdown began October 1. As a matter of fact, it will be some time before we see how the period of the shutdown really influences the economy. Even the thought of the end of the shutdown brought cheer to the stock market last week. And while we could very well see interest rates and oil prices head back up after a real deal is solidified -- these moves could be short lived because of the unknowns regarding the long-term effects of the shutdown upon the economy.

With the approximate date of the debt ceiling limit approaching, we write this column confident of at least a last minute short-term deal coming to fruition this week. Beyond that, the shutdown of government will serve as a good test of the strength of the recovery. This year the stock market has soared and rates have risen in response to the fact that we were no longer threatened with a double dip recession. The shutdown is a reminder that intervening variables -- both positive and negative -- have a way of telling us that all bets are off the table. You just can't predict the future when it comes down to variables that you can't foresee. And so it will go with the reaction of the economy to the shutdown. Perhaps we will be resilient and bounce right back. Or perhaps this shutdown will wind up slowing the economy down for awhile. Only time will tell us and hopefully there will not be additional intervening variables in the meantime.

 

According to the Wall Street Journal, rising home-buying costs are pushing people into apartments, causing landlords to pass along hefty rent increases this summer. The average monthly rent in the third quarter was $1,073, up 1% from the prior quarter, the largest quarterly gain in a year, according to a report to be released Tuesday by Reis Inc., a real-estate research firm. Compared with the third quarter a year ago, average monthly rent was up 3%. None of the 79 markets tracked by Reis saw rents fall. Source: The WSJ

The Appraisal Institute advised homeowners to use discretion when deciding which home improvement projects to take on, saying that not all renovations positively impact property values. “Projects that take a home significantly beyond community norms are often not worth the cost when the owner sells the home,” said Appraisal Institute president Richard L. Borges II, MAI, SRA. “If they don’t match what’s standard in a community, they’ll be considered excessive.” According to Remodeling magazine’s most recent Cost vs. Value report, some of the projects with the highest expected return on investment are siding replacement, entry door replacement, attic bedroom addition, minor kitchen remodel and garage door replacement. Other renovations with high expected pay-offs include basement remodel, deck addition and window replacement. Borges advised homeowners that it may be best to hold off on big renovations if a homeowner isn’t sure how long they will be in their home. The longer a homeowner stays in a property, the greater the opportunity for a return on investment, he said. “Consumers should be aware that cost does not necessarily equal value,” Borges added. For an unbiased analysis of what their home would be worth both before and after an improvement project, a homeowner can work with a professional real estate appraiser – such as a designated member of the Appraisal Institute – to conduct a feasibility study. During a feasibility study, the appraiser will analyze the homeowner’s property, weigh the cost of rehabilitation and provide an estimate of the property's value before and after the improvement. Some green and energy-efficient renovations, such as adding Energy Star appliances and extra insulation, are likely to pay the homeowner back in lowered utility bills relatively quickly. Lower utility costs also are a draw for potential homebuyers. When appraising a home, the appraiser evaluates local supply and demand for green and energy-efficient properties and features. Source: NMP Daily

Fifty-five percent of Americans say they expect home values to rise over the next 12 months, further showing that consumers are becoming less fearful about jumping back into the real estate game, according to Bankrate’s latest monthly Financial Security Index. Nine percent of Americans say they think prices will fall, and 27 percent believe values will stay flat. "It appears that Americans' love affair with real estate is back," says Greg McBride, senior financial analyst for Bankrate.com. "Even though the housing bust shows that housing prices don't just go straight up, people just don't have the same risk aversion to real estate and home ownership that they do to stock ownership." Bankrate’s July index showed that Americans prefer real estate over stocks as a way to invest money they don’t need for 10 years. The decrease in foreclosures and still-low rates have been two factors helping home values to recover, says William Delwiche, an investment strategist for Robert W. Baird & Co. "We got past that wave of the foreclosure crisis and banks trying to dump all their homes on the market," Delwiche says. "Lower rates have had an undeniably positive effect on not just household balance sheets, but also the housing market generally. It makes it much easier to buy a house if you're so inclined." Source: Bankrate.com

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