U.S. housing markets are gaining as demand for homes exceeds available supplies in many areas. The National Association of Home Builders/ Wells Fargo Housing Market Index (HMI) for June increased by eight points over May’s reading to achieve a positive reading of 52. This last happened in August-September of 2002, when HMI monthly readings also jumped by eight points.

Any reading over 50 indicates that more builders consider housing market conditions positive than negative. June’s reading was the first time the HMI reading surpassed a reading of 50 since April 2006.

Limited Inventory Drives Sales Of New Homes

Rick Judson, NAHB Chairman, cited short supplies of existing homes as a factor driving sales of new homes. As demand for homes grows and inventories of available existing homes fall, buyers are increasingly buying new homes.

Sales of existing homes continue to be impacted by factors such as homes worth less than the mortgages held against them and sellers taking a “wait and see” attitude toward listing their homes for sale.

All three of the components of June’s national HMI gained:

• The reading for current sales conditions rose from 48 to 56.
• Expectations for future sales gained nine points to 61.
• June’s reading for buyer foot traffic in new homes gained seven points for a reading of 40.

Regional Home Builder Confidence Grows In 3 Of 4 Regions

The 3-month rolling average readings for regional home builder confidence showed increases in three of four regions:

• Northeast: Builder confidence increased by one point to 37.
• Midwest: Builder confidence rose by one point to 47.
• South: Builder confidence rose by four points to 46.
• West: Builder confidence dropped by one point to 48.

High demand and a shortage lots available for building new homes contributed to the West’s slight decrease in builder confidence. Overall, increasing home builder confidence is a sign of economic recovery, but as the economy gains momentum and home prices continue rising, mortgage rates can be expected to rise as well.

Housing Starts Up 28% Annually In May

The U.S. Department of Commerce reported Wednesday that national housing starts rose by 6.80 percent from April’s revised reading. May’s reading of 914,000 housing starts was reported on a seasonally adjusted annual basis. May’s reading was 28.80 percent higher than for May 2012.

Single-family housing starts (one to four units) fell short of investor expectations of 953,000 but exceeded April’s revised reading of 856,000.

Multi-family housing starts surpassed single-family housing starts, but any additions to low inventories of single-family homes could ease the difference between high demand and low inventories of available homes. Meeting demand for homes would temper rising home prices, which could help potential buyers qualify for mortgage loans.

Foreclosure actions increased by 2.0 percent in May from April’s 75 month low point for foreclosure activity according to RealtyTrac’s U.S. Foreclosure Market Report released June 11. However, the good news is that May 2013 foreclosure filings were still 28 percent below May 2012 filings.

RealtyTrac reports that approximately one in 885 homes were in some stage of foreclosure in May. This does not mean that 1 in 885 homes was lost to foreclosure, but it does indicate that documents related to some phase of foreclosure (Notice of Default, Notice of Trustee Sale, and Bank Reposession) were filed.

Actual lender repossessions (REO) increased by 11 percent in May, but were down by 29 percent as compared to May 2012. 33 states reported increases in REOs with North Carolina, Oregon and Wisconsin having the highest numbers of REO properties added.

Judicial Foreclosure States Lagging In Clearing Foreclosure Inventory

Foreclosure starts were up by 4 percent in May, but were 33 percent lower than for May of 2012. States using judicial foreclosure proceedings were 5 of the top 6 states for foreclosure filings. The state of Nevada, which uses non-judicial foreclosure proceedings, was second after Florida and ahead of Ohio, South Carolina and Illinois.

In general, judicial foreclosure proceedings take longer to complete than non-judicial foreclosures. This results in homes being unavailable for sale for longer periods of time. Lenders are required to complete the foreclosure process and in some cases, they must await expiration of a redemption period before a foreclosed home can be repaired and sold.

In states using non-judicial foreclosure proceedings, the time between the initial foreclosure filing and the foreclosure sale can be as little as three to four months. Quickly turning over foreclosed homes is helpful for improving regional housing markets and making more homes available for purchase. Economists have recently cited low inventories of homes as holding back housing markets in some areas.

California is NOT a judicial foreclosure state, and bank owned properties are a very small percentage of our present inventory.

A lot has been said – by doom and gloom bloggers, and their followers – over the past few years, about the so called “shadow inventory” of foreclosure houses, just waiting for prices to come up before being unleashed upon the public – thereby pushing prices back downward.  If such a myth was anywhere close to being accurate, this past 12 months of lower housing inventory WOULD have been the ideal time for lenders to have taken advantage of.  Instead, the reduction of the number of the REO’s ( Bank owned properties.) coming onto the local California real estate market has actually worsened the problem – helping to make prices rise, in almost unprecedented fashion.

Last week’s news was relatively quiet with no data significant to the mortgage lending released until Wednesday, when the federal government announced a $138 billion budget deficit for May.

According to the U.S. Treasury this figure is 11 percent higher than for May of 2012, but the federal budget is expected to come in with less than a -$1 trillion deficit for the 2013 fiscal year, which runs from October to September.

The Treasury estimates that the 2013 budget deficit will come in at approximately -$642 billion, well below fiscal 2012′s deficit of -$1.1 trillion. The federal budget has been running deficits over -$1 trillion since 2008.

Employment Market Continues To Strengthen

On Thursday, the Weekly Jobless Claims report brought good news; jobless claims fell from the prior week’s 346,000 jobless claims to 334,000 jobless claims. This was also less than expectations of 350,000 jobless claims. As more workers gain steady employment, this will enable more would-be home buyers to become active buyers.

May Retail sales also showed slight improvement as they moved from 0.60 percent from April’s 0.10 percent.

According to Freddie Mac’s Primary Mortgage Market Survey (PMMS), the average mortgage rate for a 30year fixed rate mortgage rose from last week’s 3.91 percent to 3.98 percent with discount points unchanged at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose from last week’s 3.03 percent to 3.10 percent with discount points holding at 0.70 percent.

What‘s Coming Up This Week

Next week’s economic news schedule has a number of reports due including Wednesday’s FOMC statement and Fed Chair Ben Bernanke’s press conference. This meeting and press conference are significant as any move by the Fed to reduce or cease its current quantitative easing (QE) program could cause mortgage rates to rise further.

Monday’s news includes the Home Builders Index for June. Tuesday brings the Consumer Price Index (CPI) for May and the Core CPI, also for May. The indices measure prices paid by consumers for goods and services; the Core CPI eliminates the volatile food and energy sectors included in the CPI. Rising or falling consumer costs influence how much discretionary income consumers have for saving toward buying a home.

No news is scheduled for Wednesday other than the FOMC statement and press conference.

Thursday brings the Existing Home Sales Report, Weekly Jobs Report, Freddie Mac PMMS and Leading Indicators. These reports are expected to provide news about U.S. housing markets, mortgage rates and economic influences impacting consumers.

There is no economic news scheduled for Friday.

Cuts in federal spending and insurance company losses won’t hold back a surging Orange County economy largely thanks to a robust local housing market, Chapman economists forecast.

Many home buyers have found the perfect house, signed on the dotted line and may think they’ve watched enough home improvement shows to know if the home they’re getting is in good shape. Unfortunately, some buyers make the mistake of skipping a home inspection in order to save a little cash.

Even if a home has already stolen your heart and you’re ready to pay for it as-is, you need to bite the bullet and hire a home inspector to let you know what repairs and financial repercussions await you.

Why You Should Hire A Home Inspector

You might know a thing or two about home remodeling and repairs. However, most people are not experts on the inner workings of a home. That is why it’s important to hire a professional to search for potential furnace issues, electrical wiring mishaps, plumbing weaknesses or roofing deterioration to name a few.

While a home might look like it’s in perfect condition on the surface, there could be major issues hiding beneath its façade. That’s why it really is imperative for your safety that you hire an inspector to scrutinize the bones of your home. Understanding any imperfections may also help you budget for immediate and future repairs.

When to Schedule the Home Inspection

Once you’ve signed a purchase contract, you’ll want to schedule a home inspection before the inspection period has ended. Even though you’ve signed the offer, an inspector could just find something that you just cannot live with or afford to fix.

While you would normally schedule an inspection after you’ve signed a contract, it’s important to have an inspector or two picked out beforehand. Ask your real estate professional or friends and family for referrals and then contact the inspectors for pricing and a list of what they will and will not cover at the inspection.

Once again, remember that the cheapest price may not be the best deal on home inspections.  Have a good understanding of what, and who, you are investing in.

Even if you do know a lot about the structure, plumbing and wiring of houses, don’t let your ego get the better of you. It’s important to shell out the additional money to hire an inspector and cover your assets. You’d hate to end up with a home that needs major renovations and not have known about it.

For more information on hiring a professional for your South Orange County home inspection, shoot me an email or give me a call.

Filing your taxes can be a complicated and confusing process. If you are a home owner you may have many different home tax deductions and credits to consider.

Since we recently passed the filing date for 2012 taxes, it may be a good time to plan for next year and get your tax tracking systems in place. Check carefully to make sure that you are not making any of these common homeowner tax mistakes – which could cost you money or get you in trouble with the IRS.

Miscalculating Your Home Office Tax Deduction

If you work from home, you will be able to deduct a percentage of your housing costs for your home office. However, most people don’t know how to calculate this and don’t realize that it also has to be recaptured when you eventually sell your home. You will only want to claim it if it is worth it, so make sure you know exactly what you can write off.

Failing To Keep Track Of Home Expenses

Don’t forget to keep a record of home maintenance, repair expenses and any other relevant documents as you go along.   The money you spend on improving your property can help offset future capital gains tax. Keeping good records will save you a lot of headaches when tax time comes around.

Forgetting To Pay Tax On Capital Gains

If you have sell your primary residence this year, you will need to pay capital gains tax on any profit that you have received. Capital gains are the amount that you gained on the property’s value – so if you bought it for $150,000 and sold it for $300,000, your capital gains are $150,000. You may be able to exclude $250,000 of any profits for taxes, or $500,000 if you are a married couple if this exclusion stays the same as in 2012.

Deducting The Wrong Year For Property Taxes

Remember that you must take the tax deduction for your property taxes in the year that you have actually paid them. No matter what the date is on your property taxes bill, you should enter the amount that you paid in the calendar year. If you confuse this part, you might end up claiming the incorrect amount for the year.

These are just a few of the common mistakes that home owners can make when filing their taxes. Avoiding these mistakes will ensure that you pay the right amount and avoid any hassle from the IRS.  Also, please double-check all of these suggestions with a qualified, licensed tax preparer in the South Orange County  area.

The U.S. Department of Labor released its Non-Farm Payrolls and National Unemployment Rate reports Friday showing 175,000 jobs were added in May, which surpassed expectations of 164,000 new jobs and April’s reading of 149,000 jobs added. The jobs added in May were largely from the private sector.

However, the national unemployment rate for May was 7.60 percent, one-tenth of a percent higher than expectations and the April reading of 7.50 percent. The rise was attributed to more people entering the workforce as opposed to people losing jobs.

420,000 workers joined the workforce in May, which pushed the civilian participation rate in the labor market to 63.4 percent; the highest participation rate since October 2012. A rising participation rate suggests that more workers believe they can find jobs and have joined or returned to the labor market.

Economists Pleased With Increasing Jobs In Difficult Environment

Economists were pleased to see jobs increasing against an environment of higher taxes, a soft global economy and budget cutbacks in the U.S. government.

A lingering issue for U.S. labor markets is the number of people looking for full time work, but who are unable to find full-time employment. When these workers are added to the ranks of the unemployed who are actively seeking work, the actual unemployment rate almost doubles to 13.8 percent for May.

The national unemployment rate is based on workers who are actively seeking work. Many U.S. workers stopped looking for work after years of unemployment.

Fed May Review Quantitative Easing Program Soon

These reports don’t provide a clear indication of what the Federal Reserve may do regarding its current monetary policy; the Fed is currently purchasing $85 billion a month in U.S. Treasury bonds and mortgage-backed securities (MBS). This effort is intended to keep long-term interest rates, including mortgage rates, lower.

The Fed has indicated that it will review its quantitative easing (QE) policy relative to improvements in the economy. In recent months, the Federal Open Market Committee of the Federal Reserve (FOMC) has discussed lowering or eliminating its QE efforts, but so far is maintaining its current level of QE and maintaining the federal funds rate at 0.250 percent.

While housing markets are improving, the jobs sector is moving at a slower pace. This suggests that home prices could rise even faster if more consumers had sufficient income for buying a home.