2 Pieces of Good News in March – Sales & Interest Rates
The real estate market both nationwide and in St. Tammany Parish enjoyed a gorgeous spring forecast in March when the National Association of Home Builders (NAHB) announced that despite the frigid winter temperatures, new home sales were up during the month of
January over December’s decline at the end of 2013. Specifically, the increase was 9.6% over December’s sales and up 2.2% over sales in January, 2013. The statistics showed 184,000 standing new homes for sale which pushed the monthly inventory of new homes available to 4.7 month’s supply. However, only 45,000 of those new homes were completely done and ready to purchase. The 184,000 inventory supply of homes shows that building has really picked up the pace, and there are currently over 100,000 new homes under construction.
In addition to the increased new home sales pace in January, 2014, the amount of money being spent by private residential construction firms was up over 14% compared to January, 2013. This spending reflects an increase of activity in the housing market despite the abnormally cold temperatures from this past winter. The “usual suspects” are still hampering both home buyers and new home builders alike with tight credit conditions making it difficult for both to get construction loans or new home mortgages. Also, the cost of materials, due to the increase cost of fuel, as well as a lack of material supply has put a dent in a rapid increase of new home construction and new home sales. However, despite these conditions, builders are reporting a profit margin of 4.9% on new homes sold compared to .5% in 2010 and -3% in 2008.
While builders and home buyers are still fighting a housing market which has been slowly and steadily rising to its feet after the Recession, the Fed has made small and cautious moves to stabilize the financial market by beginning to wind down its bond buying program. The measure of the success of the program, in the past, has been strictly based on the unemployment rate in the United States. The unemployment rate has been declining, but the numbers have not been a true reflection of new jobs created for those who have been unemployed on a long-term basis. Because of this skew of numbers which may not be an accurate reflection of the job market, the Fed made the decision in its first quarterly meeting in 2014.
The unemployment rate is expected to drop to approximately 6.1% this year, and the Fed is dropping its bond purchases another $10 billion to $55 billion. However, they will keep interest rates at 0%, not increasing them until the following factors are considered: measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. Janet Yellen, the new chair of the Federal Reserve said rates would likely remain low for a “considerable period” after the Fed’s bond-buying program ends. Overall, keeping the interest rate at 0% until the economy substantially improves will be a real boon for the real estate market both nationally and in the St. Tammany Parish Real Estate Market. Rates are low and look to remain that way for awhile, so if you are on the fence about buying a new home in St. Tammany Parish, explore your options by visiting Bedico Creek Preserve in Madisonville, LA. Contact Us at 985-845-4200 or E-mail [email protected] to make an appointment to tour our new home community.
