This Week in Real Estate 26 October 2011: Time to Buy Investment Property?

Econintersect:  This week the Mortgage Bankers Association reported improved mortgage applications, Altos Research provided home price data on the smaller USA cities, and Econintersect reported on:

• Tuesday Case-Shiller (home prices slightly up in August)
• Yesterday New Home Sales
• Later today Pending Home Sales

Altos Research issued its October 2011 Mid-Cities report covers a different market segment than Case-Shiller (single family homes in Albuquerque, Austin, Baltimore, Boise, Boulder, Charleston, Dover, Durham, Jacksonville, Honolulu, Memphis, Naples, Nashville, Orlando, Pittsburgh, Reno, Sacramento, St. Louis, San Antonio, and Ventura County, CA).  Its conclusion:

This month prices decreased in 13 of the 20 markets, and inventory decreased in all 20 composite markets. The decrease in inventory is expected at this time of year.

The mid-cities composite experienced a decrease in median prices through mid-October. The biggest decreases were in Pittsburgh (-1.59%), Ventura County (-0.64%), and St. Louis (-0.62%). The biggest price gain was in Orlando, with a 0.71% increase.

The inventory in the mid-cities composite was down this month, with all 20 markets showing decreased inventory. Last month, 18 of the 20 markets showed decreased inventory. Over a three-month period, inventory has decreased 4.02%

The Altos national composite also showed decreased inventory over the one-month and three-month time periods. Inventory decreased 1.89% over one-month and 2.25% over three months.

Altos Reseach also opined that it was a good time to buy investment real estate and provided examples:

Las Vegas
Median home price: $137,930
Median rental rate: $983

Chicago
Median home price: $279,385
Median rental rate: $1681

Pittsburgh
Median home price: $157,544
Median rental rate: $915

The Mortgage Bankers Association’s (MBA) reported mortgage applications increased 4.9% from one week earlier for the week ending October 21, 2011.   The refinance share of mortgage activity decreased to 77.3% of total applications from 77.6% the previous week.

During the month of September, the investor share of applications for home purchase was at 6.0 percent, a slight increase from 5.7 percent in August. This change was led by an increase in the Mountain region. In addition, the share of purchase mortgages for second homes decreased to 5.8 percent in September from 6.0 percent in August.

The average interest rate for 30-year fixed-rate mortgage remained unchanged at 4.33%.  Thirty percent of all home purchases are for cash – so mortgages are involved in 70% of the transactions in housing market.  Hat tip to Calculated Risk for graphic below which shows the current mortgage application rate is similar to the late 1990’s..

source: Altos Research, Altos Research Mid-Cities Report, MBA, Calculated Risk