How Housing Is Leading Us Out of the Great Recession

Here's a different perspective than we usually hear about our economic recovery...what are your thoughts??

We are often asked if the housing market can truly rebound if the all-round economy remains sluggish. We answer by explaining the housing market is not dependent on the economy but rather the economy is reliant on the housing market. Mark Zandi, Chief Economist at Moodys.com, addressed this issue in a recent report.

 “Historically, housing has always led the U.S. out of recessions. It is the most interest rate-sensitive part of the economy, and as rates fall during recessions, housing rises first.”

How does real estate impact the economy?

Real estate impacts the economy in several ways. As Zandi explains:

“Housing’s resurrection is crucial to the creation of more jobs. Every new single-family home creates and sustains almost five jobs for about a year. These include not only construction jobs, but manufacturing positions for producing lumber, paint, nails, plumbing fixtures, carpets, wall board and so on. Truckers are hired to move this material around, and retailers add workers as new homeowners shop at home-improvement and hardware stores. Realtors, mortgage bankers, landscapers and cable installers all increase staff.”

Is the current market momentum sustainable?

If the economy is dependent on a recovering housing market, we need to know whether the current good news being reported in the real estate industry will continue as we move forward. Again, Mr. Zandi:

“The pace of construction has risen to 900,000 homes per year and is set to double to 1.8 million in the next few years. Even this will be only enough to meet demand; in an average year, 1.25 million households are formed, 350,000 houses are irreparably damaged or demolished, and an additional 200,000 are built for use as vacation or second homes. Given pent-up household formation—hundreds of thousands have put off their plans because of the tough job market—there could be a couple of years in which closer to 2 million homes will need to be built to meet demand.”

Housing will remain strong for the next several years. That will enable the economy to continue to heal until it fully recovers.

Why You Need to Change Your Attitude About Housework

No matter how much housework you do — do more! Not only will you clean your home, but you’ll burn more calories, ward off some cancers, even move closer to spiritual  enlightenment.

 Lisa Kaplan Gordon in lotus position with cleaning supplies

Researchers say cleaning more often can lead to spiritual enlightenment. Image: Lisa Kaplan Gordon for HouseLogic

No matter how much housework you do — do more! Not only will you clean your home, but you’ll burn more calories, ward off some cancers, even move closer to spiritual enlightenment.

At least, that’s what some researchers and authors promise  — clean more, live longer and better.

  • A study of 200,000 women in nine European  countries found that housecleaning between 15 and 17 hours a week — a little  more than 2 hours per day — cut breast cancer risk by 30% among pre-menopausal  women and 20% among post-menopausal women.
  • An Indiana University professor showed that 4 hours of work in and around the house helped hypertensive and pre-hypertensive patients lower their blood pressure, in some cases to normal levels.

These studies have changed my relationship with sweeping and scrubbing.


My attitude has always been: I work so others might clean. I’ve employed wonderful cleaners ever since my first job as a copy girl, when  I’d eat ramen nightly rather than mop a floor in my 500-sq.-ft. Manhattan rental.

Years later, I bit the bullet and vacuumed my four-bedroom house  between cleaning lady visits. Actually, my three cleaning  robots — Roomba, Neato, and Mint — did the vacuuming and sweeping: When I  wanted a deep  clean, I ran all three at once.

But that was then. Now, I realize that doing housework myself can help me achieve other goals I hold dear, like staying fit and living long.

Instead of looking at household chores as  time-eaters, I now look at them as calorie burners. Here’s what an hour of  housework burns:

  • Vacuuming and mopping: 194 calories
  • Dusting: 174 calories
  • Washing windows: 180 calories
  • Ironing: 113 calories

I wore a calorie-counting armband for a week, and on the days I vacuumed the  den or scrubbed the bathroom for half an hour, I burned about 100 calories more  than the days I did not clean. Theoretically, if I vigorously cleaned for 30  minutes each day, I would lose about 10 pounds a year (if I didn’t reward myself  daily with a latte or bag of chips).


In fact, a British study found that women’s waistlines  have expanded 6 inches over the past 60 years because they don’t clean their  homes as long and hard as 1950s housewives, who burned up to 1,000 calories a  day by doing housework without today’s modern machines (like my  Roomba).

Perhaps, the best benefit of housework is that mindful cleaning  can bring me closer to enlightenment, says “The Power of Now” author (and  Oprah’s guru) Eckhart Tolle. Simply, the more one observes the moment, the less  stress she will feel about the past and future. 

We can all use a  lot less stress. So instead of rushing through housework, or talking to my  mother on the phone while I’m washing dishes, I’ll dive into the moment of  cleaning. When scrubbing pots, I feel the water cascading over my hands, notice  the tiny soap bubbles, feel the crusted food melt away — that kind of  thing.

It’s a discipline that gets easier with time. But the more I stay in the now of cleaning, the calmer I feel. Really.

What’s your  relationship with cleaning? Do you love it or loathe it? Besides a clean house,  what benefits do you get from housework?

Is this another real estate bubble or just a lot of hot air?

Here in the northeast, we're not very "bubbly"...which in this case is a good thing! What are your thoughts about the local market?
 
 
The number one question real estate agents are being asked these days is: “Is this another bubble?”

For now, the answer is no. Overall, the housing market this spring is hot, way hotter than any normal spring. For the most part, this is just the natural result of supply that is at record lows thanks to the price declines of the last few years.

The Great BubbleSpring 2013
High price to income (PI) ratios Low to average PI ratios
Lots of new listings Record low new listings
Record high sales volume Average sales volume
Extremely easy credit Relatively tight credit

 

A Mini Bubble Brewing in a Few Cities

The market today is so hot that many Redfin Agents are concerned that we’re entering into bubble territory. At a recent lunch with a half-dozen Redfin Agents, Redfin CEO Glenn Kelman asked whether they felt that the market was getting bubbly. They all nodded vigorously.

In some markets, there may be a “Mini Bubble” going on right now. This map shows the four markets most likely to be in a Mini Bubble, and the four least likely:

New-Bubble-Map3_Redfin

MarketPrice to Income vs. Jan-00Sale to List Mar-13Flips* Mar-13Multiple Offers Mar-132-Week Pending Mar-13
Washington DC 26% 98% 11% 71% 43%
Los Angeles 26% 100% 10% 91% 52%
San Diego 13% 99% 11% 91% 50%
San Francisco 12% 104% 10% 93% 60%
New York 9% 94% 6% 68% 9%
Portland 8% 99% 8% 60% 41%
Boston 6% 97% 11% 74% 3%
Seattle 4% 100% 12% 74% 48%
Denver 0% 100% 12% 46% 52%
Phoenix -4% 99% 10% 36% 37%
Charlotte -8% 97% 3% 50% -
Dallas -10% 98% 7% 46% 28%
Las Vegas -14% 101% 10% - 14%
Chicago -17% 97% 7% 51% 12%
Atlanta -20% 99% 18% 50% 24%
National 5% 99% 10% 76% 35%

* “Flips” refers to the percentage of home sales where the same home also sold at least once more in the preceding 18 months.

 

What makes a Bubble?

Multiple offers are becoming the norm in many markets. More than a third of new listings are pending within a week, over half in much of California. Inventory hits a new record low every month. There’s no doubt that this market feels similar in many ways to the bubble of 2005 and 2006, but a real estate bubble is more than stiff competition among buyers and rapidly rising prices.

Consider some of the features of the real estate bubble that dramatically burst in 2008, taking the entire economy with it. The Great Housing Bubble had the following characteristics…

Rapidly Rising Home Prices

All 20 markets tracked by the Case-Shiller home price index experienced year-over-year price gains from 2003 all the way through early 2006. Now, home prices are definitely rising rapidly in many markets. Of the 19 markets we track as part of the Redfin Real-Time Home Price Tracker, 12 saw double-digit price gains between March 2012 and March 2013. Sale-to-list ratios are 98% or higher in over two thirds of Redfin’s markets and up from a year ago in every market but Phoenix:

New-Bubble_Sale-to-List_2013-03_Redfin

But a spike in home prices alone does not a bubble make. Over the long term home prices have historically risen slightly faster than the rate of inflation. The recent spike in prices is just a return to the long-term trend in many markets that overcorrected, which leads us to…

Home Prices Detached From Incomes

One of the easiest ways to tell if you’re in a housing bubble is to compare home prices to incomes. If home prices are rising considerably faster than incomes, chances are good that there’s a bubble. Over the long term, price to income ratios should remain relatively stable in any given market, barring dramatic improvements or collapses in the local economy.

To investigate where this metric sits today, we compared the Case-Shiller home price index to per capita incomes from the U.S. Bureau of Economic Analysis. Between January 2000 and the height of the housing bubble between 2005 and 2006, the price to income ratio rose over 50 percent in half of the twenty metro areas tracked by Case-Shiller. Across the nation as a whole, home prices rose 102% between January 2000 and December 2005, while incomes rose just 24%.

Today, in 11 of the 20 markets, price to income ratios are at or below where they were in 2000. Just four markets are in possible “bubble” territory, 10% or more above their January 2000 level: Washington DC (+26%), Los Angeles (+26%), San Diego (+13%), and San Francisco (+12%).

 

Change in home price to per-capita income ratio since Jan. 2000

 

Case-Shiller Metro AreaPeakLatest
Atlanta 12% (20%)
Boston 51% 6%
Charlotte 23% (8%)
Chicago 34% (17%)
Cleveland 8% (26%)
Dallas 10% (10%)
Denver 16% 0%
Detroit 11% (35%)
Las Vegas 83% (14%)
Los Angeles 103% 26%
Miami 106% 10%
Minneapolis 42% (7%)
New York 69% 9%
Phoenix 72% (4%)
Portland 49% 8%
San Diego 93% 13%
San Francisco 79% 12%
Seattle 45% 4%
Tampa 86% (3%)
Washington DC 92% 26%
Composite-20 63% 5%

 

Lots of Listings and Sales

When home prices were shooting to new highs in 2005, sales and listings were off the charts. Inventory was low, but not for lack of new listings. Plenty of new homes were coming on the market daily—new and existing home sales hit levels in 2005 that were more than double their early 1990s levels—but record sales were keeping standing inventory low.

Contrast that with today’s market, where new listings are scarce and standing inventory is at record lows. Sales are up quite a bit from their post-bubble lows, but current levels are roughly on par with pre-bubble averages. To put it another way, during the frenzy in 2005, inventory felt tight because many buyers were acting crazy, but today inventory is actually tight. Tight inventory naturally leads to price increases.

Proliferation of Sketchy Financing

At the height of the market frenzy in 2006, abundant financing was available to anyone who could fog a mirror. No job, no income, no assets? No problem! Over a quarter of homes were purchased with zero-down loans. Many of those homes ended up as the foreclosures and short sales that caused much of the post-bubble pain the housing market has experienced the last few years. Meanwhile, all-cash deals were relatively rare, making up about 17% of sales.

New-Bubble_Sale-Financing_Redfin

Today the tables are completely turned. Just six percent of sales are backed by zero-down loans, while nearly half of sales (46%) are all-cash. Much of the frenzy we’re experiencing today is driven by investors. That doesn’t necessarily mean that prices are reasonable, but it does mean that we won’t be seeing the same kind of crash we had in 2008.

So What Will the Next Bust Look Like?

In our most recent buyer survey 58% of buyers—62% in Washington DC and Los Angeles—indicated “low interest rates” as one of the primary reasons they’re buying now. The Mortgage Bankers Association forecasts that the interest rate on a 30-year fixed-rate mortgage—currently at 3.57%—will rise nearly a full point to 4.5% by this time next year. That’s still low by historic standards but could easily be enough to significantly dampen buyer enthusiasm.

At the same time, the recent upticks in prices will bring more sellers into the market over the next year, and homebuilders are still ramping back up, with new home sales likely to increase quite a bit from their current level.

In other words, over the next year inventory will increase and demand will decrease. In markets where home prices are at or below a level supported by local incomes, this will just slow down appreciation, but in Washington DC and Los Angeles this could trigger a minor correction, knocking around five percent off home prices in those markets.

In Washington DC, where the home price to income ratio is 26% above the January 2000 level, Redfin Agent Philip Gvinter recently wrote an offer with no appraisal contingency, no inspection contingency, accepting the home in as-is condition, a 14 day financing contingency, and a $40,000 escalation clause, but still came in second out of thirteen offers. “We are definitely in the beginning phases of a bubble,” remarked Gvinter.

San Diego is also a risk, but to a much lesser degree, since prices there haven’t shot up as much yet. In San Francisco, well over a third of the sales are all-cash, but the home price to income ratio is 12% above the January 2000 level, and rising. Redfin Agent Charmaine Frank describes the market there as “a complete frenzy,” and observes that “some properties are receiving upward of 40 to 60 offers and selling in 24 hours or less.” This in a market where the median home price in March was over $800,000. However, since income data does not include capital gains such as stock sales, which are a big driving force in the Bay Area right now, it’s unlikely that there will be a correction there unless tech stocks crash first.

What’s a Buyer or Seller to Do?

If you’re buying a home in Washington DC or Los Angeles right now, be cautious. If you find a home that you can’t live without and you can get it for a price that you are 100% comfortable with, go for it, but it’s not worth over-extending or compromising in this market when lower prices, higher selection, and less competition may be just around the corner.

If you’re buying in the middling markets, there’s no need to be concerned about near-term price declines, but it also won’t hurt to wait it out for a year or so for the frenzy to die down. Prices aren’t likely to be much higher. If you’re a price-sensitive buyer in Atlanta, Chicago, Las Vegas, or Dallas, buying soon would be a good idea, since prices are likely to go up before they stabilize at historically supported levels.

If you’re thinking of selling your home to sell in Washington DC or Los Angeles, you would do well to get it on the market now. Take full advantage of the current frenzy, rent a while, then look to buy in a year or so when inventory will probably be higher. If you play your cards right you’ll get a nice down payment out of your current home, so higher rates won’t affect you as much when you buy later.

Don’t Call it a Comeback (of the Bubble)

The dearth of listings and price gains we’re seeing in today’s market are not sustainable, but the evidence points to more of a “bottom bounce” than a bubble. Things will settle down, the imbalance between buyers and sellers will inevitably tilt back to equilibrium, but barring a massive external economic disruption or major world war, prices are unlikely to drop considerably from where they are today.

2012 Marks a Year of Growth at RE/MAX of New England

Overall Increases Show Improvement in Market Conditions...let's keep the momentum going into 2013 and beyond!!

Natick, MA – April 9, 2013 – RE/MAX of New England is pleased to announce several key success factors which marked 2012 as a year of recovery in the housing market – an overall increase in volume of home sales, total transactions, Agent productivity, and the launch of proprietary technologies.

In New England, RE/MAX Agents were involved in 33,369 transaction sides, an increase of 18.1% over 2011. The 2012 New England sales volume for RE/MAX Agents was $8,132,829,983 up 21.1% from last year. Agent productivity within the RE/MAX of New England network rose 6% to an average of 13 transaction sides per Agent*.

AcrossNew England, RE/MAX outperformed the competition in Agent productivity**. In Massachusetts, RE/MAX completed 11 transactions per Agent, three more than their nearest competitor; in Connecticut, RE/MAX completed 15 transactions per Agent, three more than the closest competition; in New Hampshire, RE/MAX completed 17 transactions per Agent, almost double their nearest competitor at nine;  in Rhode Island, RE/MAX achieved 14 transactions per Agent twice that of  their nearest competitor; and in Maine, RE/MAX completed 15 transactions per Agent, just one more than their competition.

These significant improvements and milestones came under the new leadership of Executive Vice President and Regional Director of RE/MAX of New England, Dan Breault, who started his new role in May of 2012. Dan is a demonstrated leader growing RE/MAX’s market share in Indiana by more than twenty-five percent and Agent productivity by thirty-eight percent in a down economy. He brings decades of leadership, sales and major brand experience to the New England market.

“These signs of improvement are incredibly exciting for everyone at RE/MAX of New England,” said Breault. “The past few years have been a challenging time for all of our Agents, but the numbers confirm that we have successfully led the way through these tough times and are maintaining our position as the most productive sales force in the industry.”

Also an important milestone in 2012 was the official introduction of Integra Enterprises Corporation. Integra is the largest sub-franchiser of RE/MAX, LLC, representing approximately 30 percent of RE/MAX franchises worldwide. More than 27,000 RE/MAX Agents fall under the umbrella of Integra, including all 2,725 RE/MAX Agents inNew England. Despite operating in more than 30 countries internationally, this family-run, privately-held company based inToronto,Ontario,Canadahas maintained a low profile in the international business community, instead choosing to focus on enhancing the RE/MAX brand name.

Entering its 33rd year in business in 2012, Integra moved forward with an aggressive growth strategy to shake up market share inNew England. Their goal was to double existing market share, further growing the RE/MAX name. Integra took the first step toward this goal by completing the largest conversion inNew England to date. ERA Andrew Realty, with 70 experienced Agents in two offices inMedford,MA andStoneham,MA, joined Integra under the name RE/MAX Andrew Realty Services.

In addition, RE/MAX of New England also experienced an increase in franchise growth through several significant mergers and acquisitions. Most notably, RE/MAX Heritage and RE/MAX Leading Edge, both inMassachusetts, united to create one of the largest real estate company’s in that state. Keeping the name RE/MAX Leading Edge, the offices’ combined market share now makes them the number five real estate company in Massachusetts and the number two franchise within RE/MAX of New England in volume, transactions, and Agent count.

Also, RE/MAX Valley Shore in Old Saybrook, CT merged with Genovali Realty holding number one market share within Old Saybrook. In Maine, RE/MAX By The Bay successfully expanded into Portsmouth, NH adding 20 seasoned Agents to their company and further strengthening their footprint within that territory. In Manchester, VT, Battenkill Real Estate transitioned into RE/MAX Four Seasons after operating as a private real estate office for more than 25 years.  All of these accomplishments furthered strengthened Integra’s vision to expand within the New England market.

RE/MAX of New England also made significant strides in utilizing the newest industry technologies. At the start of the year, remax.com was re-launched allowing users to have a more intuitive, personalized online experience and giving home buyers and sellers direct access to the things that matter most –thousands of listings with the ability to build a customized consumer experience.  Differentiating itself from other real estate franchisors, RE/MAX was the first to incorporate the new Real Estate Network powered by ListHub in a mobile app format, while still offering its consumers the ability to search for homes across the country through traditional MLS data.

RE/MAX of New England Donates More Than $170,000 Through 2012 Community Partnerships

It's always great to be able to give back to worthy causes in the communities we live and work in! We have very philanthropic agents and great partners in our communities.
 
RE/MAX of New England participated in three Susan G. Komen Race for the Cure events in 2012, in Hartford, CT, Boston, MA, and Portland, MA, raising more than $24,000 for the fight against breast cancer. RE/MAX of New England recognized Julie Scott of RE/MAX Leading Edge in Melrose, MA, and a breast cancer survivor herself, with their annual Think Pink Award for her outstanding commitment to the Susan G. Komen organization by raising more than $3,000 last year; funds that will stay in Massachusetts to support preventative screening options and ensure that local women get the care they need in the fight against breast cancer.
 
RE/MAX of New England was also proud to partner with the Boston Celtics for the seventh year for the popular Home Court program, which awards deserving Celtics fans with a brand new home basketball court, jerseys, equipment, and more. In 2012, three families in Lawrence, MA, North Andover, MA, and Monson, MA were awarded their very own home courts. Submissions for this year's program are being accepted at www.celtics.com.
 
For more information, visit www.remax-newengland.com.
 

Dramatic 2012 Sales, Volume Increases at RE/MAX

DENVER, CO – With a housing recovery in full swing, RE/MAX LLC experienced significant improvement in closed transactions and sales volume in 2012. In the U.S., RE/MAX agents were involved with nearly 840,000 transaction sides, an increase of 12% over 2011. The 2012 U.S. sales volume for RE/MAX agents was $165 billion, up 18% from last year. Most importantly, individual productivity within the RE/MAX network rose 15% to an average of 16.3 transaction sides per agent.

"For several years in a row, RE/MAX agents have averaged more sales than other agents. Again in 2012, RE/MAX agents closed more real estate deals than agents with any other brand," said Margaret Kelly, RE/MAX CEO. "It's clear that the advanced tools and technology resources RE/MAX offers makes our agents the best prepared to assist home buyers and sellers in this recovering market."

Since 1997, closed transaction sides in the RE/MAX organization have never fallen below 1 million and have never been exceeded by any competitor. Worldwide in 2012, RE/MAX transaction sides rose 8.4% to 1.3 million and sales volume was up 10.1% to $296 billion.

RE/MAX saw franchise sales growth in 2012, as well. The global franchisor added 739 new franchises and six new countries, including mainland China. RE/MAX ended the year with a country count of 89, an international presence greater than any of its competitors.

In addition to residential performance, nearly 440 commercial offices and divisions increased their transactions by 8.4% and sales volume by 17.4%.

"RE/MAX adapted to the market over the last few years, and trained our agents to succeed. That training paid off, and our agents are now the best positioned for a real estate market that is coming back strong," Kelly added.

Industry recognition also came to RE/MAX in 2012. For the 10th time in 14 years, RE/MAX, LLC was recognized as the #1 real estate franchisor in Entrepreneur magazine's 34th annual "Franchise 500." For the 4th year in a row, RE/MAX earned the top real estate ranking in the Franchise Times Top 200 survey, and was named one of the "Top 50 Franchises for Minorities" by the National Minority Franchising Initiative through the World Franchising Network.

Last year also saw the launch of a redesigned consumer-facing website, remax.com, which is the first real estate franchisor to provide consumers with a personal, consistent web experience across desktops, tablets, and smartphones. Remax.com has been the most visited real estate brand website for the last 3 years according to Experian Hitwise.

As part of the RE/MAX system, brokers and agents have access to comprehensive professional training from the award-winning, on-demand RE/MAX University, as well as technology resources like the RE/MAX Mobile Suite, RE/MAX LeadStreet® and the online customizable marketing toolkit, Design Center.

For more information, please visit www.joinremax.com.