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Housing Market Stronger, Wealthy Americans Confident About Increased Housing Values and What To Expect In 2006

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You may have thought the housing market was slowing, although if you did, your feelings on the housing market differ from wealthy Americans. RISMedia reports that a survey released by PNC Financial Services Group showed that wealthy Americans expect their homes to appreciate in value over the coming years. Fewer than one in 10 expect any decline in value. Floridians are the most bullish on the housing market, while New York and California respondents showed to be more bearish. Perhaps the housing slowdown is a myth? Could be, as seasonal slowdowns aren’t unusual. Here’s more of what the PNC survey found:

Sixty-five percent of those surveyed said they expect to see double-digit increases in the value of their primary homes over the next five years, with nearly one-third (31 percent) anticipating an increase of 20 percent or more.

“Our findings indicate that many among the wealthy will not believe there is a real estate slowdown until they see it reflected in their property values, especially in regions of the country where prices have skyrocketed during the past five years,” said Nicholas Buss, Ph.D., senior vice president and PNC’s real estate economist.

He added: “As an investment, real estate has been an increasingly dominant asset class over the past five years. The party may be over for those who have been ‘flipping’ houses and using real estate to get rich quick. But, in general, established wealthy Americans have not been speculative buyers and they remain solidly confident in the long-term value of their real estate holdings.”

In other real estate news, housing starts increased to 5.23 percent in November, 17.5 percent higher than thy were in November of last year. Single-family housing starts were up by 4.88 percent, 7.5 percent higher than this time last year. Building permits increased by 2.5 percent. Here’s more from our friends at RIS Media:

“The housing market still is fundamentally healthy,” said Dave Wilson, president of the National Association of Home Builders (NAHB) and a custom home builder from Ketchum, Idaho.

“Many builders sense some tapering off of buyer demand because of resistance to high prices and rising interest rates, as reflected in our recent housing market index survey of builders, and many companies have begun offering certain incentives in order to maintain their sales and production.”

“Measures of housing affordability have deteriorated in recent months, but economic fundamentals are still quite solid,” said NAHB Chief Economist David Seiders. “2005 will be a record year for single-family housing and the second best year for total housing starts, exceeded only in 1972 when multifamily production surged.”

Here’s the overall national housing outlook from NAR’s chief economist David Lereah, courtesy of Inc.:

David Lereah, chief economist at the National Association of Realtors, expects home sales next year to be the second-best in history. He called the recent slowdown a “tapping of the brakes” on a red-hot market. “Home sales are coming down from the mountain peak, but they will level-out at a high plateau,” Lereah said in a statement Monday, describing the downturn as a healthy transition to a “more normal and balanced market.”

At the same time, mortgage rates are creeping up. The NAR expects 30-year fixed-rate mortgages to climb upwards, reaching 6.6% by the second half of 2006, as new-home sales drop by 4.8% to 1.23 million.

Here in the Tampa-Clearwater-St. Petersburg region of Florida, expect a robust housing market in 2006. While there may be more inventory for buyers to choose from, that does not suggest less demand; it suggests that a large number of sellers decided to try cashing out. Housing appreciation will be more normal in 2006 than it has been during the last two years. Sellers who ask too much for their homes, condos or other properties will be hard-pressed to get it in a normalized market, and those listings will sit. Smart pricing and aggressive marketing, though, will move any property that’s for sale into a buyer’s hands.

In other areas of the country, such as New York and California, I foresee a slower market in 2006. In Texas I see a hotter market, as Californians cash-out and relocate there. Many New York residents will seek sun, lower taxes and a lack of mass-transit strikes here in beautiful, sunny Florida, where housing is cheaper, taxes are lower and where unions aren’t a problem (it’s a “right to work” state). Rising rates will likely encourage more purchases, as buyers seek to lock-in a lower rate before higher ones take effect. However, any sharp interest rate increases will definitely affect the overall housing market, as will sharp rises in oil/gasoline prices. Lower oil/gasoline prices will benefit the overall market, as will a strong economy. Buyers will likely have more negotiating leverage due to higher market inventory in some markets. For more real estate news and information, visit my blog.

-John Mudd
“Mr. Real Estate”

About Mr. Real Estate

  • Dave Nalle

    How terrible of you to post something like this. Don’t you know we’re supposed to be going into total economic collapse because of the evil of the Bush administration?


  • Christopher Rose

    Wouldn’t this qualify as news?

  • Mark Sahm

    John, how often do you see customers using the First Time Homebuyers option of a Roth IRA? If so, do you recommend using it?

  • Mr. Real Estate

    Dave: We will only go into economic collapse if Democrats successfully talk Americans into believing it’s coming. Our biggest problem is the trade deficit, and we need to directly engauge China on that. Of course, we also have a deficit problem and national debt problem – interest rate hikes will not help us solve these problems (hey central bank dolts – pay off our national debt out of your paychecks or lower the freakin’ rates!!!). The gap between rich and poor are widening, and that’s also a concern, especially because of idiot banks taking advantage of folks using new credit card laws, and idito banks putting 25% interest rates on that debt, which should be illegal in the first place (Congress – pass a bill or resign your seats you cowards!!!). There are some wedge issues that Dems (and Hillary, especially) can use to win in 2008 – if they can organize. Neither party is organized, so neither one is set to lead on economic issues, period. Both parties are beholden to special idiots, I mean interests. Of course, folks like the Clintons and McCain are their own party, so they have a lot of power right now, and they likely will in 2008. Special interests and Congressional idiots beware: You’re opening the door for another Teddy Roosevelt to rain on your parade. I’m a Republican, myself, and I think someone needs to beat the special interests up a bit, as they are getting more from Washington than the average American is.

    Chris: Yes, it would, except that I editorialized and mixed two or three articles together, so I put it in Opinion. I guess, though, if the New York Times qualifies as news, this can also qualify. ;)

    Mark: I have not had any buyers use that option, but I have heard of that option and others where buyers can leverage stock in order to get a mortgage to buy a home.

    Take care and have a Happy Holiday, everyone!

  • Bliffle

    MrRE:” Dave: We will only go into economic collapse if Democrats successfully talk Americans into believing it’s coming.”

    That’s just an expression of your personal political bias, not fact. The democrats (and I’m not one) have been utterly ineffective for 10 years, whereas the Bush contingent, whatever political orientation THEY might be (which I haven’t discerned yet, but they are assuredly not republican) is surely responsible for much economic upheaval thru their wacky policies. Your rant against ‘central bankers’, who are basically economic slaves responding to government and business pressures, is misplaced. It is not ‘central bankers’ who have instituted the mad policies which enable the Credit Card companies to do what they do.

    The problem (for those who view it as a problem) is that the current crop of drunkards in DC has financed their spending spree with cheap paper sold to foreigners, mostly Chinese. There is a lot of pent up inflationary pressure, as a result. Some of that is exhibited in the wave of purchasing in the US by up-scale Chinese citizens flushed with cheap Bush dollars. That’s one thing driving the California market upward. they don’t think to buy property in Pennsylvania or South Dakota, which they know little about and which are not suitably chic and temperate for them.

    There are a lot of people in China and a lot of them are educated and in the ‘middle class’ and most of them are smarter than the residual IS middleclass, which seems busy throwing away it’s heritage for cheap self-indulgent moral binges. While we are casually throwing away our capital base they are investing. While the average US lout is cutting school budgets and railing against university students they are exploiting and and investing. The most important factor in home ownership to these people is school district (as it was years ago to most US people). And they mean it: 2 houses across the street from each othe identical in every other way exhibit a 30% difference in price because one is in a valued school district (even tho I and others know that they are both excellent).

    The cure for our irresponsible financial behaviour of the past 5 years must be either recession or inflation. Nobody liked recession 70 years ago when we tried that, but most people like inflation because incomes and house values go up. We are all betting on inflation, we are not a nation of savers but a nation of speculators, and of course we are quite right: the bozos in power cannot be trusted so saving is a fools policy. Economists (themselves mortgaged to the hilt) incessantly complain that the US doesn’t save (like our broke parents told us to) so they can prey on the savings. Actually, most savings are from corporations, not individuals, and is often a mark of failure of initiative and imagination which marks a business as ripe for a takeover to exploit the savings.

  • Atlas Shrug

    Banks are parasites. Congress should cap the level at which a bank can increase any interest rate to. No parasite deserves to eat by levying an outrageous rate without earning it by providing a service that is worth that. Banks provide no long-term service, except in the case of very large purchases (i.e., homes, cars, etc.). Consumers would not pay that unless the law set by Congress made them to do so. Congress will cap the rates eventually, or banks will change their policies.

    When Volker, a central banker, cracked down on inflation everything got worse. The best thing a central bank can do is absolutely nothing.

    Perhaps the price of a home should be able to be completely written off as a tax credit. Perhaps the government should issue block grants to eliminate credit card debt and write laws that force banks to issue cash grants to everyone every year.

    Something has to be done to empower Americans financially, and someone needs to do it. Congress certainly isn’t doing it. Consumers feed everyone by purchasing goods and services and they are getting the short end of the stick.

    Ah, but Atlas Shrugged, and no one was empowered as a result, and the powerful were purchased by China, who is strategically manipulating us based on our desire for convenience, wealth (of goods, mostly) and our inability to solve, or laziness to solve our national financial problems, and our wonderful ability to create more problems. Yes, it is true, there is no leadership in Washington. Just a bunch of parasites feeding off of other parasites.

    And Atlas Shrugged. And everyone was bought and enslaved by China.

    People cannot afford to save when they are spending all their money on goods made in China with money they get from our banks who make it impossible to pay back the money completely due to ungodly high interest rates. Cap ‘em at 7 percent. If interest rates were capped at 7 percent, spending and borrowing would be more normalized.

    We’re a consumerist society, however, corporations do not pay people enough for our society to remain healthy, so people use credit cards or mortgages, which they never pay off because the banks design them so the consumer remains in debt, and creates more debt when they want to buy something because they can’t afford to buy it because of the other debt, which is why they have to create more debt to buy it.

    So what does China do? They buy our debt, because they recognize our entire system is based on debt. And Atlas Shrugged.

    And the world continued to function on the win/lose paradigm and one society ate another until they all ate each other and there were no more societies, and Atlas Shrugged.

  • Dave Nalle

    While we are casually throwing away our capital base they are investing. While the average US lout is cutting school budgets and railing against university students they are exploiting and and investing.

    Now Bliffle, we know you have a crazed fixation on China buying US debt, despite the fact that it’s utterly meaningless who buys our debt paper, but you seem to have missed out on one of the most positive trends in the current economy. People aren’t putting money in banks anymore here in America. They’re investing it like mad. If you check the stats at the BEA, for the last three quarters bank savings are down enormously, while investment is up in a similar proportion. People are putting their money in the stock market, in bonds, in mutual funds and in real estate. This trend is what’s going to keep the economy going more than anything else, and helps insulate it from any inflationary pressure.


  • JR

    Dave Nalle: Now Bliffle, we know you have a crazed fixation on China buying US debt, despite the fact that it’s utterly meaningless who buys our debt paper…

    Actually, I didn’t know about any such fixation.

    While the paper doesn’t look any different no matter who buys it, isn’t there some risk when a large percentage of seemingly independent debt holders might suddenly and arbitrarily act as one, motivated by… oh, I don’t know, nationalism.

  • Dave Nalle

    And how would they ‘act as one’, JR? The debts are only redeemable from the US and on a schedule set by our treasury department. What would they do, burn them? Sell them at a loss to someone else?