A report came out very recently that predicts that Idaho, among a few other states will be the first to see economic recovery. The report was created by Moody’s Economy.com and it predicts that 5 States including Idaho will see job growth starting in the 4th quarter of this year.

If the report is accurate, job growth will be a step in the right direction toward a housing recovery.  Don’t get overexcited though, I believe the news, if correct, will have more of an impact on stabilizing cash strapped and credit crunched households allowing them to keep their homes rather than seeing a dramatic increase in home values.  There are more factors that effect the Boise Real Estate Market than people getting some jobs.

What I really liked about the article was the ‘Adversity Index’, an interactive map that shows past trends in key economic factors including: Employment, Housing Starts, Industrial Production, and House Prices.  From what I can tell, the research is pretty accurate, but, they have lumped a fairly broad amount of data into the numbers which can skew things a bit.

What’s Next For Boise Real Estate?

In the coming months, I think we can expect more of the same…sorry, I just don’t think that a turn around is on the horizon.  Keep in mind however, we need to erase the last few years from our minds because the numbers that the Boise Area Real Estate Market turned out were extremely abnormal.

As always, people will keep moving about for various reasons and there will be a demand for real estate in both the new construction, resale and rental markets.

Inventory Levels-

Keep your eye on the inventory levels because this is most likely to have the most dramatic effect on the local markets, especially at the neighborhood level.

Interest Rates-

What can I say?  They’re going to go up.  Inflation is going to be a force in our economy and interest rates will be effected if something else doesn’t curb the value loss of the dollar as compared to goods.

Seasonal Changes-

As usual, we are smack in the middle of the most active months for Real Estate in the Boise Area.  Expect sales to slow as summer ends and we head into fall, it’s pretty much guaranteed.  With the exception of the $8000 First Time Home Buyer Tax Credit, which will have first time home buyers out gobbling up the homes under $250k – at least until December, that’s when it expires.

What Are Your Thoughts?

Will the Boise Area see an economic recovery before other states?  Please leave your comments and ideas below!

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent.  The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the economy may still be contracting, but that it’s not happening with the same speed as in prior months.  Household spending is stabilizing and financial markets are “easing”.

Nevertheless, threats to the recovery are everywhere with the following items on the Fed’s short list:

• The growing ranks of unemployed workers
• The reduction of housing wealth nationally
• Reduced inventories and investment from business

Furthermore, the FOMC fingered today’s inflation levels as too low to support economic growth.  This justifies the Fed’s plan to hold the Fed Funds Rate near zero percent “for an extended period”.

For home buyers and refinancing homeowners, today’s press release was not favorable.

After the Fed’s announcement, stock markets rallied on the idea that the worst of the economy really is over and that led to a broad bond market sell-off.  Mortgage rates spiked in response, adding as much as 0.125 percent, in some cases.

The FOMC’s next scheduled meeting is June 23-24, 2009.

Source
Parsing the Fed Statement
The Wall Street Journal Online
April 29, 2009

http://online.wsj.com/public/resources/documents/info-fedparse0904.html

If you follow me on Twitter or Facebook then you got the update that I was showing homes in the $180K and less range today.  In between showings, I got an update from @Viv_Chan letting me know that interest rates dropped 0.50%!  Now that may not seem substantial, but for my buyer who has set his monthly payment congruent with a $180K home (approx. $995 per month), he can now keep the same monthly payment and shop for a home priced in the $190K range! 

Any buyer experiencing the volatility of the market will tell you that an extra 10K will buy you a lot more of a home than one might expect.  If more home is not in your future then you will get a lower payment instead.  But why did the rates go down as indicated in the chart below?

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today, within the target range of 0.000-0.250 percent.  This doesn’t mean the Fed stood still though.

On plan to resurrect the economy using “all available tools”, today, the Fed announced a new, $1.5 trillion round of fiscal support for the treasury and mortgage markets.

The stimulus will likely be Thursday morning’s headline story.

In its press release, the FOMC touched upon a few of the main economic issues, using these points as a legitimizing backdrop for its newest debt load:

• Job losses and wealth loss are dragging down consumer spending
• Some U.S. trading partners are falling into recession
• Businesses are cutting back on investment and inventory

Of interest is that the FOMC said today’s inflation levels may be too low to support economic growth at all.  This condition is more commonly called deflation.  The Fed’s latest actions, therefore, may be a deliberate attempt to induce inflation through unprecedented borrowing.

For home buyers and potential refinancers, this is terrific news — at least in the short-term.  By introducing new demand for mortgage bonds, the Fed will help pressure mortgage rates lower.  Already this afternoon, mortgage rates fell and they will continue to fall until the market reaches a new equilibrium.

After the Fed’s last intervention, markets reached their balance point in about a day-and-a-half. 

Still sitting on the fence?  Waiting for lower rates rather than preventing higher ones is a flawed strategy and in this case, the dealer just went bust.  Get moving and get your rate locked in by submitting the offer on the home that you’ve been eyeing.  Call me for more information!

Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2009

http://online.wsj.com/public/resources/documents/info-fedparse0903.html

It seems that today, everyone has accumulated enough opinion from the world around them that they have created in their mind their own theory about what the Boise real estate market is doing or will be doing this year.

One such popular housing theory is that — before a bona fide housing recovery can begin – the cost of owning a home versus renting one must return to historical levels.  It seems simple enough to most people that if you could own your own home versus renting one for nearly the same price, you would.

If that belief is a truth, a national return to rising home prices may be in store for 2009.

Falling home prices coupled with falling mortgage rates, too, have dropped the relative, after-tax cost of owning a home to 125% of the cost of renting a home.

This is the exact 18-year historical average and not since 2001 has the gap been this small.

As reported by the Wall Street Journal, though, the study has some flaws.  For example, the data doesn’t account for ongoing home maintenance costs, nor does it consider real estate tax bills and insurance policies.  It also doesn’t take into account our local market and the factors that influence the Boise MSA.

But, combining a relatively low cost of ownership with the government’s $8,000 tax credit for first-time home buyers is likely to convert long-time renters into never-before homeowners.

This, too, is thought to be a key element of the housing recovery.

In many markets (but not all), home prices are expected to edge lower through 2009.  Provided mortgage rates stay low, the cost gap between owning and renting will shrink even more.

As this gap narrows, now may be the time for you to consider a having me perform a Rent VS. Buy calculation for you and your situation.  Contrary to popular belief, there are still good loans available for buyers, you just have to have a good team working for you in order to capitalize on it and secure you a good scenario.  Call me 208-724-7602.

(Image courtesy: Wall Street Journal)

President Obama signed a bill yesterday that will give a $8000 tax credit to first time home buyers.   “The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.”  It’s called “The American Recovery and Reinvestment Act of 2009.”

The National Association of Realtors has  details of the $8000 tax credit and other provisions.

Many buyers and onlookers of the market are beginning to agree that now, more than ever, could be a great time buy a home.   With inventories high and interest rates at 40 year lows there are many reasons to consider buying a home.

As the government dishes out money to first time home buyers, I expect that you’ll see even more competition among buyers in the most affordable price ranges which already make up the bulk of what is selling in the Treasury Valley (70% of homes sold in 2008 were under $250,000) and waiting to buy could be the wrong decision.  Worse yet however could be the return to uneducated, un-counciled, irrational buying — behavior that I believe lends plenty of blame to a good portion of the mess that the market is currently dealing with.

Here are 5 Pitfalls to avoid when buying in 2009.  As always make your purchase thoughtfully, educated and with the council of a great Realtor like myself.  I am willing to help you put together a custom plan for achieving your real estate and financial goals.  Call me anytime at 208-724-7602