Housing: May Real Estate Activity Justifies Renewed Optimism for Some, Worry for Others


The number of US homebuyers who signed purchase contracts shot up 6.1% in May, blowing away market expectations. A number of factors may be at work given that home sales are still below 2013’s levels. Economic weakness felt earlier this year was blamed on a harsh winter, so the rebound may be partially rooted in improving economic activity as buyers and sellers thaw out. But given the often local nature of real estate, weather can’t explain everything. Higher mortgage rates in the first quarter also held the market back. As rates decreased over the past few months, buyers became more aggressive.

The decrease in overall sales relative to last year is also partially attributable to fewer distressed sales and declining investor participation in the market for single family homes and condominiums. With fewer distressed sales, inventory is responding more naturally to buyer demand. Despite watching homes in many coastal neighborhoods return to pre-recession peaks, some sellers remain on the sidelines fearful of another sharp drop in prices and mindful of stringent lender guidelines. The limited activity taking place between buyers and sellers reflects mostly rising prices, albeit at a seemingly slower pace this year. What happens if sellers gain confidence and lender guidelines ease depends a lot on the direction of interest rates.

Assuming the economy continues to grow without too many upside or downside surprises, the pace of real estate gains depends on where interest rates move from here and how quickly. The Fed should keep benchmark rates near zero long after they turn out the light on the QE bond buying program. Should they raise interest rates too quickly fearing inflation, they could stifle economic activity and scare home buyers away. If the Fed doesn’t act fast enough to extinguish broad signs of inflation, mortgage rates could spike. Janet Yellen’s ability to balance inflation, economic growth and employment as well as Ben Bernanke holds the key to the real estate market’s fate moving forward.


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About William Stern

William, Managing Director in charge of business development and human capital, serves on the firm's executive steering committee. William's expertise in sales and organizational management has helped the firm exceed ambitious growth targets year after year. William is devoted to building infrastructure, eradicating inefficiencies, and developing new products and services that keep Cardiff a dynamic force within its markets. One of William's many initiatives has been to increase Cardiff's footprint across the US, penetrating new markets while building stronger relationships with current partners. Before joining Cardiff, William worked for TD Waterhouse as a Learning and Development Counselor for their burgeoning discount brokerage division. Following TDW, William held a key business development post in the Commercial Equipment Finance Division of a California-based leasing company helping to expand market share and annual sales through direct marketing to middle market companies seeking equipment financing and leasing. To learn more about capital markets, both foreign and domestic, William moved to the San Francisco Bay Area to pursue a career with Fisher Investments (FI) as an Investment Counselor in their Private Client Group. William received two degrees of Bachelor of Arts in Castillian Spanish Literature and Political Science from Revelle College at the University of California, San Diego.