*from www.bloomberg.com, Mar. 15, 2013 (To view original article click here.)
Take Away #1: Bernanke’s efforts to revive housing are making real estate bulls even more bullish as the two biggest U.S. banks predict an accelerating rebound.
Key Facts and Figures:
- JPMorgan Chase & Co. more than doubled its forecast for U.S. home price gains in 2013 to 7% this week.
- The bank also predicted a more than 14% increase through 2015.
- Bank of America said last week property values will jump 8% this year, up from a prior estimate of 4.7% in a report titled, “Someone say house party?”
Take Away #2: A rush to acquire properties as the Fed pushes down borrowing costs is strengthening the economy and sustaining a rally in homebuilder shares.
Key Facts and Figures:
- Homebuyers and investors are rushing to acquire a dwindling supply of properties.
- The Federal Reserve continues to push down borrowing costs by buying mortgage bonds.
- “We still think we are in the early innings of a prolonged recovery in housing and the economy,” said Samantha McLemore.
- Home prices rose 6.8% in December from the year earlier, the biggest gain since 2006.
- The measure is still 29% below the peak that year after soaring homeowner defaults helped trigger the global financial crisis.
Take Away #3: Growth last year was triggered by a lack of housing stock coupled with rising demand from institutional investors.
Key Facts and Figures:
- Blackstone Group LP has purchased 20,000 single-family homes to rent.
- The number of homes for sale fell 5% to 1.74 million in January form the year-earlier period.
- JPMorgan estimates home prices will increase 3.9% next year and 3.2% in 2015.
- New home sales in January saw the highest increase in 20 years.
Take Away #4: In addition to tight inventory, low interest rates are fueling accelerated home price gains.
Key Facts and Figures:
- The average rate for a 30-year loan ended the week yesterday at 3.63%, a six-month high.
- Stronger than expected employment growth drove up yields for the government securities that guide home loans.
- While that’s up from the record low of 3.31% in November, it’s down from 6.8% in July of 2006.
Take Away #5: “We believe a positive feedback loop has begun”, say analysts from Bank of America Corp.
Key Facts and Figures:
- The feedback loop is when the rise in home prices fuels expectations of further appreciation and easing credit conditions, which in turn stimulates homebuying.
- Gains will moderate to 6.5% in 2014 – revised from a previous estimate of a 7.7% increase – and 3.7% in 2015, the analysts wrote.
Take Away #6: The shrinking supply of foreclosed homes has helped to propel prices.
Key Facts and Figures:
- In 2012, 1.3 million liquidations occurred, about 30% less than the bank expected.
- Foreclosures plunged 29% last month form a year earlier to the lowest level since 2007 amid increased efforts by state lawmakers and courts to delay property seizures.
- JPMorgan estimates that by the end of the year, 10% of borrowers will owe more than their home is worth, compared with 25% two years ago.
Take Away #7: Homebuilders are also benefitting from shrinking supply of existing property on the market.
Key Facts and Figures:
- Homebuilders have rallied 64% in the past 12 months through yesterday.
- An 11-compnay gauge rose 0.6% today at 9:49 a.m. in New York and has advanced 14% this year.
- KB Home (KBH) has surged 31% since December.
- D.R. Horton Inc. has gained 25%.
Take Away #8: If home price performance this year and the ensuing years is anything close to these predictions, there could be a further rally in non-agency residential mortgage-backed securities.
Key Facts and Figures:
- So-called non-agency debt, which includes bonds backed by subprime mortgages, returned an average of about 21% last year.
- Bryan Whalen of TCW Group Inc. said, “In a more subdued recovery we thought near-term total rates could be in the mid-teens.”
- “If we see higher numbers we could see total rates of return north of 21%”, Whalen said.
- Homebuilders, which have rallied 64% in the past 12 months through yesterday, are also benefitting from shrinking supply.
Take Away #9: The central bank is waiting for the labor market to “substantially” improve before ending its monthly bond buying.
Key Facts and Figures:
- The Federal Open market Committee has said the central bank is waiting for the labor market to “substantially” improve before ending its buying of $85 billion in bonds each month.
- The number of people filing claims for jobless benefits over the past four weeks has dropped to the lowest level since March 2008.
- The February jobs report showed that hiring in construction jumped by the most in almost six years.
*To view original article from www.bloomberg.com click here.