Posted by: Clayton-Paul Cormier, Jr. | March 31, 2010

2010 Q1

Signs of Improvement Multiply. Vermont’s Real Estate Market Outlook Warming

vermontbiz.com highlights increasing optimism from Vermont’s leading businesses drawing from a CEO survey on expectations of boosts in sales, capital spending & workforces.

Northeast existing home sales rose 3% and median prices gained 7.5% in February according to the Commerce Department. California home sales were up 8%, and a new study by the FDIC (Federal Deposit Insurance Corp) also show tangible signs of improvement and historically high affordability levels in the US housing market.

Improvement indicators abound including subdued inflation, rising stock prices and a strengthening US Dollar five month rallyAlan Ruskin, head of currency strategy for RBS Capital Markets in Stamford, CT:  “We’ve moved away from the worst fears. In the U.S., the economy picked itself up off the ground. Compared to what it might have looked like from the view of March 2009, March 2010 looks very good.”

Examining The Tree of Life in James Cameron's Avatar, Best Selling Film of All Time

Vermont’s twin and soon to merge multiple listing services show improved first quarter residential sales across the state.

Though there is some overlap and total Vermont mls sales are less than the addition of the two numbers for each year, first quarter sales are up in 2010 50.5% in NNEREN (the Northern New England Real Estate Network), 25.1% in VREIN (the Vermont Real Estate Information Network) and an average of 37.8% over the first quarter of 2009 after having contracted significantly in 2009 compared to 2008.

For 2010/2009/2008 :

NNEREN 265/176/242

VREIN  453/362/534

According to the 42 forecasters surveyed by the Federal Reserve Bank of Philadelphia, the U.S. economy will grow at an annual rate of 2.7 percent over each of the next five quarters with unemployment projected to be an annual average of 9.8 percent in 2010 before falling to 9.2 percent in 2011, 8.3 percent in 2012, and 7.3 percent in 2013.

Others wonder if we’ve hit bottom yet. Joe Morgan, Chief Investment Officer of SVB Asset management writes of “Surviving at the Bottom of the Riverbed” this year, citing ambiguity in the upswing and continued investor challenges.

The narrow passage of the National Health Care Overhaul raised passions on both sides of the political spectrum and will affect real estate markets indirectly given the large segment of the economy affected by the overhaul, and the Obama Administration turned its attention to the next massive and controversial congressional financial fight: overhauling the Fannie Mae (FNM) & Freddie Mac (FRE) public private hybrid structure housing finance system.

Fannie & Freddie ( Government Sponsored Enterprises or GSEs) purchase bank housing loans, package them together with securities and sell them to Wall Street freeing up capital for home loans and extending homeownership opportunities.

GSE Reform is receiving heightened attention 18 months after the GSEs were placed in conservatorship, and is bound to be divisive given the broadly diverging political opinions on how extensive the government subsidy role should be and the risks involved with withdrawing the GSEs from conservatorship for the still fragile housing market.

Treasury Secretary Timothy Geithner this month said “Private gains will no longer be subsidized by public losses, capital and underwriting standards will be appropriate, consumer protection will be strengthened, and excessive risk taking will be restrained.”

Th graph above, from the Wall Street Journal Online, shows the increasingly important role Fannie Mae & Freddie Mac, along with the Federal Housing Authority (FHA)  have come to play in the home loan provision as private investors have been absent during the bust.

First time home buyers and eligible existing home owners are still poised to take advantage of the potential $8,000 and $6,500 tax credits which will continue to boost Vermont residential sales into Q2. These tax credits are available for contracts signed by the end of April and closed on by the end of June. With what many now consider to be an economy already bottomed out and on the rise and 30 year interest rates still hovering around 5%,  these are historic opportunities to buy and take advantage of cheap money,  choose from plentiful inventory and work with some motivated sellers.

Abundant signs of spring and a burgeoning economic recovery point to an ever improving 2010. Vermont property owners and prospective purchasers have a lot to look forward to as Vermont climbs steadily out of the recession, contracts and closings multiply, and property values retake lost ground and appreciate anew.

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