According to John Smoke, chief economist for Realtor.com, the official site of the National Association of REALTORS, the stock market correction has been a gift for the housing market due to low interest rates and the window of time before rates move up again. We wonder - how will the housing market be affected when the stock market is no longer in correction mode?
The GDP grew at a rate of 3.7 percent in the second Q2 estimate, way above forecasts, and most housing metrics have been positive as of late. . .how are housing and the economy going to work together for the remainder of 2015 and 2016 to buoy each other up?

Housing and the economy are finally in a supportive, virtuous cycle again. The economic growth we’ve seen over the last two years has provided the context for the healthy growth in home sales and the recovery of prices we have experienced this year. Higher prices are a result of surging demand with tight supply, which is finally resulting in more growth in single-family construction. Historically, new construction and housing services contribute 18 percent of the US economy. That contribution has been lower while new construction was depressed and while the housing sector worked through the distress brought on by the foreclosure crisis. Housing’s contribution is on the rise again, just in time to offset the drag from lower oil production and lower exports caused by the strong dollar.

More job creation, higher consumer confidence, and an increasing pace of household formation all lead to more demand for housing, keeping that virtuous cycle going.

Before Greece and then China rattled global stock markets, mortgage rates were already on the move. The 30-year fixed conforming rate has seen more than 50 basis points of movement in 2015, touching 4.2 percent briefly in June. The upward moves followed clear data that the US economy was strong and growing in the second quarter. But China’s weakness, and the easing of monetary policies in China and by other Asian countries strengthened the dollar and drove demand for US treasuries, driving yields down and mortgage rates with them. The selloff in stocks had the same effect—producing more demand for treasuries and lowering yields and mortgage rates.

At the beginning of this year, forecasters expected mortgage rates to be higher than they are now, so rates now in September remaining at such low levels is truly a gift for every buyer. The number one issue holding back would-be buyers this year has been tight supply. Now that school has started, frustrated buyers who haven’t been able to purchase have the most choices they’ve had all year and they haven’t missed the opportunity to lock in rates near their lows. I expect that will produce a much stronger fall as a result.

"The various mortgage metrics today suggest that today’s investor is looking for every reason not to make a loan."

As economic data continue to confirm that the U.S. economy is seeing solid and consistent growth, rates should resume their ascension. I wouldn’t be surprised in we challenge the June peak before the year is over.

The stock market doesn’t always move in reflection of the underlying strength of the U.S. economy, and the recent selloff is one of those corrections historically that are mostly about bringing down stock valuations. When the market is on consistent positive footing again, mortgage rates will likely move up.

What will be the short and long term effects on the mortgage industry if the Fed chooses not to raise interest rates in September?

Mortgage rates have already been ignoring the Fed. Despite the official target remaining at zero, we’ve already seen mortgage rates move up. I don’t really think the September decision—either way—will have much of an effect. The August employment data will likely cause more movement in mortgage rates than the official September policy announcement.

The Fed tried to increase mortgage rates in 2005 and 2006 to cool off the housing market. Over those two years, the target Federal Funds Rate was increased 300 basis points, from 2.25 to 5.25. Those moves only produced about 100 basis points of movement in mortgage rates, and that’s looking at the highest average monthly rate compared to the lowest average monthly rate. Overall the average 30 year conforming mortgage rates was under 6.2 percent in December 2006 even though the Federal Funds Target range was 5.25-5.25. The 30-year fixed rate in January 2005 averaged 5.7 percent.

Mortgage rates reflect global demand for U.S. bonds, and market volatility and global economic concerns make those bonds all the more attractive to a wider audience than just our Fed.

That said, I do think moderately higher rates are inevitable due to continued economic expansion and a tightening U.S. labor market. In housing, we’ve witnessed firsthand what happens when excess supply turns into limited supply—prices appreciate well above normal historical experience. The Fed seems intent on making sure inflation won’t flare up, and managing short term rates is their primary tool for controlling inflation.

I believe that modestly higher interest rates will help rather than hurt housing and the mortgage industry. Higher rates will provide banks and investors with more profit incentive to grow purchase mortgages, leading to more competition and wider credit access than we have today.

The various mortgage metrics today suggest that today’s investor is looking for every reason not to make a loan. When the potential rewards finally outweigh the potential risks, we’ll have more purchase originations even though the costs to consumers will be marginally higher. Today’s historically low rates don’t matter much to the households who can’t—or perceive they can’t—qualify.

Weigh the pros and cons of buying a house before jumping into the real estate market. Tell me if you've heard the following internal/external dialogue as you determine whether you're ready...

1. Homeownership is a never-ending time and money suck.
2. But renting is like throwing your money down the drain.
3. And, hey, you’re young! Why tie yourself down with a house?
4. But other people your age own homes — shouldn’t you own a home by now?

(And repeat.)

Stop the one-sided, one-way conversation in your head and read these pros and cons of buying a house to decide what’s right for you.

Pro: You can customize
Don't like the cabinets in your kitchen? Dying to turn that counter-top into a solid piece of granite? As a renter, you have limited ability to customize your surroundings. As a homeowner, you can make your home your canvas. Paint the walls, knock down a wall, create your dream kitchen — no one can tell you what you can or cannot do to your home. No one but your homeowners’ association, that is.  :-) (oh, that cheeky homeowner's association)


Pro: Freedom to live how you want
Want to foster dogs, have seven cats, and have tunnels to navigate through your rooms? Go for it. Want to host a cookout on your deck? Start up the grill.
As a renter, you’re subject to your landlord’s rules about pets, outdoor spaces, and other lifestyle choices. As an owner, you can do almost anything, as long as it’s legal and you don’t disturb the neighbors. :-) 

Pro: Financial perks 
Being a homeowner can help you build up equity. You can also write off mortgage interest at tax time, get tax credits for certain improvements (such as energy-efficient windows), and turn your unused rooms into rental units for extra income.

Pro: Fixed monthly payments 
As long as you are on a fixed-rate mortgage, your mortgage payments will remain steady (although in certain cases, they could go up.  But long term, as inflation kicks in, you’ll repay your mortgage in cheaper dollars over time.

If you’re a tenant, unless you live in a rent-controlled area, your landlord can increase your rent anytime your lease is up for renewal. And if your lease is month-to-month, your landlord could legally raise the rent every 30 days.


Con: Less flexibility

If your circumstances or preferences change, you no longer have the flexibility to move quickly. As a renter, if you lose your job, realize you hate your neighborhood, or decide to move in with your significant other, you can move as soon as your lease expires (or plunk down whatever cash is necessary for an early lease termination).

If you own a home, by contrast, you’ll have to endure extensive additional expenses, hassle, and stress to sell (or rent out) your home before you can move to your next spot.

Con: Limited access to amenities

When you move to a house, you may not be able to access to-quality amenities you were accustomed to as a renter. You may have to say goodbye to that gym, swimming pool or valet trash service. 


Con: More responsibility
As soon as a home is in your name, the maintenance and repair hassles are now your responsibility. That leaky faucet will no longer be magically fixed while you're at work, and you'll have to start mowing the lawn in the summer and shovel snow in the winter.


Con: More financial pressure 
Owning a home is a long-term financial responsibility. If you’re a renter and you’re hit with a financial hardship, you can move into a less-expensive rental. As a homeowner, you’re stuck with your mortgage (or you can try a refinance). If the idea of paying a mortgage for 15 to 30 years makes you hyperventilate, you’re probably not ready for home-ownership.


Con: Costly surprises

As a homeowner, you face a lot of potentially expensive surprises, such as a roof that suddenly starts leaking or a sump pump that fails and lets your basement flood. As a renter, your biggest potential surprise expense is a rent hike when your lease is up for renewal — and if you don’t like the proposed rent increase, you can negotiate or move.

- See more at: http://www.trulia.com/blog/rent-buy/?ecampaign=cnews&eurl=www.trulia.com%2Fblog%2Frent-buy%2F#sthash.x3KSM2Iz.dpuf

Having worked in banking before I started my real estate, property management and property flipping endeavors - I've been wondering lately : will recent stock market scares create a new surge in real estate investment?

In August 2015, the stock market proved just how volatile and uncertain it can be. In spite of warning signs, many kept using stocks as the ‘easy’ option to invest. Even though many company’s stocks trade for ridiculous sums, people kept buying in. In a single day, the stock market saw $1.4 trillion in wealth eliminated. That was a Friday. When markets opened the following Monday, the market lost another trillion dollars. A single investor lost close to $4 billion in those couple of days. What’s ironic is that stocks really haven’t been delivering any amazing returns in recent years. Most may average a 5% to 10% return over the long haul. People can sometimes find close to those returns on certificates of deposit, with less volatility. Then there is real estate, which can offer better growth and yields, with even less downside. Hopefully millions will heed the warning and adjust their investments accordingly. 


Everything may fluctuate over time: the value of properties, the value of companies, and even the value of the dollars in your wallet are all subject to change. The difference is that some things are more volatile than others. Some fluctuations are more predictable than others. It’s pretty easy to forecast real estate changes, and they are slow to move. Stocks, on the other hand, can plunge unexpectedly in a matter of hours. They lack the safety of physical properties. It is interesting to note that even in the lows, real estate can keep on throwing off almost the same amount of cash flow.

It’s Time to Freak Out and Sell Stocks

As the smart money exited the stock market and numbers plunged into the red, the headlines said not to panic or sell. That clearly means it was time to panic and get out for many. Depending on when you are reading this the market may have clawed back a few points, or dipped further. It’s smart to remember that little uptick before the real dive, and that these declines can go a lot deeper and longer than anyone likes to believe. There is no question in any analysts’ minds that the stock market is headed for a massive ‘correction’.

- See more at: http://www.cthomesllc.com/2015/08/stock-market-scare-to-kick-start-real-estate-buying-spree/#sthash.senimPlF.dpuf