Economy

A recent poll by Fannie Mae reported that 64 percent of Americans now feel confident about putting savings towards real estate investments, assured that housing prices will be the same or higher over the next year.

It’s no surprise that Americans are somewhat concerned regarding other aspects of real estate, i.e. securing loans. Most of the 3,451 people surveyed said it’s more difficult for this generation to purchase houses than it was for their parents.

The Wall Street Journal summarized the report with the following information:

• Nearly two-thirds of those surveyed think it’s a good time to buy a house—nearly the same as in 2003, before the housing boom accelerated—and around one-third say it’s a very good time to make a purchase.
• Around 27% of respondents believe home prices will continue to fall this year, while 36% believe prices will stay flat and 37% believe prices will go up over the year.
• Among the obstacles to obtaining a mortgage: poor credit (22%) and income (19%) topped the list, followed by savings for a down payment (15%) and job security (15%).
• Around 65% of respondents prefer owning to renting, but non-financial reasons top the list of reasons driving the preference for owning, including safety (43%) and quality of schools (33%).

Also, Fannie Mae makes an interesting side note: the 64 percent who believe that now is the time to buy is just shy of the 66 percent who held the same beliefs in 2003 as the U.S. housing market raced higher.

To read the full Wall Street Journal article, visit wsj.com.

The Dallas Business Journal hosted a well-attended Industry Outlook 2010 breakfast and panel discussion at the Westin Galleria Tuesday morning. Moderated by KERA’s Dennis McCuistion, the speaker panel included an impressive group of CEOs from various industries. The overall consensus was that we are fortunate to be in Texas and specifically Dallas. Here is the insight they offered:

Banking:

Elaine Agather said that her bank was lending, but the money was a bit more expensive and many of their clients are more conservative than ever, choosing to remain in cash and waiting for investment opportunities. Her major concerns for 2010 were credit card debt, national debt, and the commercial real estate sector.

Energy:

Jason Few expects that gas prices will remain low, and therefore has no reason to believe that electricity prices will escalate dramatically.  He supports deregulation of his industry, and is confident that Reliant is in a solid position due to technological advances and potential growth in Texas’ nuclear plants.

Pro Sports:

Bill Lively addressed the positive effects that the Super Bowl will have on North Texas’ economy.  Over 280 sponsoring companies have already joined the local effort to make this Super Bowl 2012 the first of many to come.  With Cowboys Stadium’s “50 yard line” location between Dallas and Ft. Worth, Lively foresees that many businesses will benefit from Super Bowl XIV.

Health Care:

Doug Hawthorne astounded the audience with the fact that Texas has the largest uninsured population in the country. Though this issue creates an assortment of problems for Texas hospitals, he reported that Texas Health Resources remains strong.

Retail:

John Menzer spoke positively about Michaels and Aaron Brothers, and is hopeful to keep making modest improvements in 2010. Unemployment certainly has a negative effect on retail, so much of his business’s performance depends on the economy’s continual recovery.

Manufacturing:

A producer of pumps and valves for the energy sector, Mark Blinn does 70% of his business outside of the U.S. in markets such as China and India.  He predicts a positive future for Flowserve, since many foreign countries are beginning to modernize their plants.

While none of the panel speakers were exuberant about the economy in 2010, each had a positive attitude and spoke with a bright glimmer of hope.

The Commerce Department reported Wednesday that new home sales rose 6.2% from September to October, reaching a seasonally adjusted rate of 430,000 sales per year. The numbers took several Wall Street analysts by surprise – a panel of expert forecasts had expected an annual rate of 404,000 new-home sales.

A decrease new-home inventory – down to a 6.7 month supply of 239,000 homes – was also positive news, indicating that housing supply and demand levels are continuing to stabilize.

Though the recent reduction of home construction has helped to bring the housing market closer to equilibrium, it has also negatively affected the economy at large. Residential construction contributes significantly to America’s gross domestic product, thus the industry’s return to health is imperative for the nation’s economic recovery.

Though the latest reports show improvements, new-home sales are still 70% lower than their peak in July 2005. The market has taken another step in the right direction, and it still has several steps to go.  

For a more detailed report, visit cnnmoney.com.

Steve Brown of the Dallas Morning News gave Dallas residents some good news this afternoon:

Housing and finance analyst First American CoreLogic has upped its outlook for the Dallas housing market. The Dallas area will see a 1.85 percent increase in home prices over the next year, First American says in its latest 12-month forecast based on September data. The Dallas price gain is better than the 1.1 percent national increase First American is predicting.

Click to read his full post at dallasnews.com.

Action Economics released a calendar of the top economic reports that will be published next week. If their predictions are accurate, we’ll be giving thanks on Thursday for some positive economic news. More to come…

Today CNNMoney.com released an article on housing affordability entitled “You don’t have to be a millionaire to buy a house.” Is it true?

According to the NAHB and Wells Fargo, 70.1% of all U.S. homes sold during the 3Q were affordable for the typical American family. (Typical, in this study, means a median income of $64,000.) This percentage was a significant rise from the 56.1% which qualified one year ago.

Many buyers have already taken advantage of these low housing prices, which are further discounted by the federal tax credit and low interest rates. Others, however, have procrastinated. To those folks CNN writes, “Now is a good time to buy.”

To read more, visit CNNMoney.com.

“Low risk” — two words most people love to hear these days.

The PMI Group released a report rating the likelihood of home price reductions in over 300 U.S. markets. Dallas was listed as a very low risk city (fifth from the bottom), with a 14.6 percent change of lower home prices two years from now. Miama and Las Vegas tied for “first place” — both have a 99.9 percent chance for declining home prices.

Read Steve Brown’s report for a few more details.

Last Wednesday Alan Bush of the FDIC and Jim Gaines of Texas A&M spoke at Forecast 2010, a professional development conference for Dallas realtors. The two experts shared extensive information about the local, state, and national economies, and UpdateDallas has posted a summary with charts. To view the full presentations, click through to Alan Bush or Jim Gaines.

Bush explained that average U.S. home prices are likely near bottom and are expected to rebound of 7.8% over the next two years.

Observing several positive indicators in the current market, Bush mentioned that housing affordability remains near its highest level in years, and housing inventories are now declining from their peak levels. See charts below.

When asked whether the housing market has bottomed, Gaines echoed Bush’s cautiously optimistic outlook: “Maybe, hopefully, probably. But we still may not really know for sure for another several months.” He sketched out a ‘Best Case Scenario’ that includes favorable corporate earnings for 4Q09, layoffs ending by late 2009, a “jobless recovery” in 2010, and rising consumer confidence and spending. Gaines noted the current personal consumption trends (see below) as a positive indicator of a budding economic rebound.

He shared a visual diagram of housing affordability in Texas versus the rest of the nation…

…and explained that Texas’ foreclosure rate remains remarkably strong compared to the rest of the country.

Finally, Gaines commented that Texas is “poised for a 21^st century boom” due to its population and economic growth, low-cost labor, pro-growth attitude, migration rates, and overall affordability. He gave statistics projecting high local and state population growth, implying that Dallas and Texas both have bright (hopefully booming) economic futures.

Click for more in-depth details from Alan Bush and Jim Gaines.

President Obama’s $75 billion mortgage relief plan is reported to have helped 650,000 troubled borrowers, but housing counselors say that the number of foreclosures still “vastly exceeds” those receiving aid. Though the administration claims the program is on track to assist approximately 4 million homeowners, Elizabeth Warren – Harvard professor and member of the Congressional Oversight Committee – disagrees. Click below to listen to her perspective.

According to today’s report by Texas A&M’s Real Estate Center, October was a strong month for DFW’s housing market.

• Pre-owned home sales scored an 11% gain from one year ago
• The number of pending transactions is almost 30% higher than one year ago
• The median home sale price improved 1% from one year ago
• DFW’s housing inventory dipped 16% to a six-month supply, which is considered a ‘balanced market’