Barron’s: Home prices to increase over next 3 years

From Barrons:

Betting on the House

It’s no secret that U.S. home prices have enjoyed a healthy rebound in 2013 after the nightmarish 33% drop over the previous five years that triggered an orgy of mortgage defaults and wealth destruction. These days, monthly home-price reports regularly show double-digit percentage jumps over the year-earlier period, whether it’s the 13.3% annual increase for September of the S&P/Case-Shiller 20-City Composite Home Price Index or the 12.2% annual rise for October logged by CoreLogic’s home-price index.

Yet, at least some observers question how much longer the home-price recovery can continue. A jump in mortgage rates along with the torrid increases in home prices have hurt transaction volume some. The market has been overly dependent on all-cash buyers such as vulture funds, which earlier this year accounted for about a third of all sales. What will happen when they have eaten their fill? Increasingly, the home-price growth will depend on conventional buyers, who must borrow from a mortgage-lending industry that is still imposing stringent lending standards on new mortgages.

Still, after talking to various industry experts and analyzing disparate data, Barron’s thinks that home-price appreciation should continue for the next three years, albeit at a slower pace than the double-digit increases seen this year.

We claim some bragging rights on the subject: In two cover stories last year — “Home Prices Ready to Rebound” in the March 19 issue and “Happy at Last” in the Sept. 10 issue — we not only called the imminent recovery but hit the timing of it right on the screws.

TO BE SURE, forecasting markets is an unforgiving and somewhat foolhardy task. And experts’ three-year projections for home prices vary all over the lot. Ingo Winzer of Local Market Monitor, which tracks more than 300 U.S. metro markets, is looking for price growth of about 7% over each of the next three years, while CoreLogic, the real-estate statistical firm, expects price increases of 4.7% in 2014, 4% in 2015, and 1.9% in 2016.

For the sake of conservatism, we’re hewing to the middle range, looking for home-price jumps of 5% in each of the first two years and, perhaps, just 3% in 2016, as new construction picks up to bolster supply and more empty-nest baby boomers put their houses on the market to unlock trapped home equity. These projections somewhat mirror those of Moody’s Analytics. “The U.S. is clearly in a home-price up-cycle that has a lot of room to run,” says Mark Zandi, chief economist for Moody’s Analytics.

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31 Responses to Barron’s: Home prices to increase over next 3 years

  1. Comrade Nom Deplume, a.k.a Captain Justice says:


  2. joyce says:

    Good afternoon. I just wanted to say I also find it hilarious knowing that you use voice recognition software to post. Nothing wrong it using the software of course, just thinking back to some of your longer posts … picturing you get all into it and stuff.

  3. Comrade Nom Deplume, a.k.a Captain Justice says:


    I find typing on an iPad to be something of a bore. I type fast and find that the touchscreen cannot keep up. Or it is more imprecise than I thought. Whatever the reason, I find it difficult. If I couldn’t use this software I probably would not post nearly as much as I’d be ending more effort to post. The iPad version seems to do a pretty good job.

    Nothing personal but I really don’t feel like expending a great deal of effort here. Fabian likes to play his gotcha game with that but I frankly don’t much care.

  4. Libturd at home says:

    Moving onto the 3rd hockey game today.

    It’s friggin’ cold.

    One more tomorrow morning at 7am in Old Bridge (outdoors) and we’re done.

    What the hell was I thinking?

  5. Ben says:

    This story really doesn’t jive with Grims numbers a few days ago. Maybe the people moving into NJ don’t own anything?

    According to United, 4,045 of its New Jersey customers moved out of state last year, while 2,326 moved in, resulting in a 63.5 to 36.5 ratio.

  6. 30 year realtor says:

    Today has been the busiest real estate weekend I can remember for quite sometime. All 9 of my active listings will be shown this weekend, 3 of them will be shown multiple times. Two other listings accepted offers yesterday. Offers made on 4 of my listings since 12/20.

    This is not to say I believe the market is healthy. Still believe we are in for a long, slow slide sideways on values. Market is still on life support from the Fed creating artificially low interest rates and employment remains weak. I am not here to be a cheerleader, but there is no denying the activity in today’s North Jersey real estate market.

  7. joyce says:

    Typing on tablets does suck. I think it’s really awful on the Samsung tablets, not to say iPads are much better. It was just this mental image that I got that cracked me up.

    And FYI, it does seem like you care & try more than want to admit.

    Comrade Nom Deplume, a.k.a Captain Justice says:
    January 4, 2014 at 2:24 pm

    I find typing on an iPad to be something of a bore. I type fast and find that the touchscreen cannot keep up. Or it is more imprecise than I thought. Whatever the reason, I find it difficult. If I couldn’t use this software I probably would not post nearly as much as I’d be ending more effort to post. The iPad version seems to do a pretty good job.

    Nothing personal but I really don’t feel like expending a great deal of effort here. Fabian likes to play his gotcha game with that but I frankly don’t much care.

  8. Comrade Nom Deplume, a.k.a Captain Justice says:

    [7] Joyce,

    I hate being wrong or made to look wrong. But I refuse to be baited into providing a well researched treatise for someone who is largely espousing an opinion. Nor do I let myself get sucked in by trolls as I had in the past.

    I do use these threads as opportunities to better familiarize myself on issues but it would be impossible to do that for every argument on this blog. There are plenty of things I want to weigh in on but I let a lot go simply because I’m too mentally fatigued to engage or I have other priorities that are more important. Like folding socks.

    Gary once told me that he didn’t take this place too seriously and tried to post at a fifth grade level. As for not taking it too seriously, I suspect that’s true for everyone here.

  9. Michael says:

    What Really Matters in Life?
    Mexican Fisherman Meets Harvard MBA

    A vacationing American businessman standing on the pier of a quaint coastal fishing village in southern Mexico watched as a small boat with just one young Mexican fisherman pulled into the dock. Inside the small boat were several large yellowfin tuna. Enjoying the warmth of the early afternoon sun, the American complimented the Mexican on the quality of his fish.

    “How long did it take you to catch them?” the American casually asked.

    “Oh, a few hours,” the Mexican fisherman replied.

    “Why don’t you stay out longer and catch more fish?” the American businessman then asked.

    The Mexican warmly replied, “With this I have more than enough to meet my family’s needs.”

    The businessman then became serious, “But what do you do with the rest of your time?”

    Responding with a smile, the Mexican fisherman answered, “I sleep late, play with my children, watch ball games, and take siesta with my wife. Sometimes in the evenings I take a stroll into the village to see my friends, play the guitar, sing a few songs…”

    The American businessman impatiently interrupted, “Look, I have an MBA from Harvard, and I can help you to be more profitable. You can start by fishing several hours longer every day. You can then sell the extra fish you catch. With the extra money, you can buy a bigger boat. With the additional income that larger boat will bring, before long you can buy a second boat, then a third one, and so on, until you have an entire fleet of fishing boats.”

    Proud of his own sharp thinking, he excitedly elaborated a grand scheme which could bring even bigger profits, “Then, instead of selling your catch to a middleman you’ll be able to sell your fish directly to the processor, or even open your own cannery. Eventually, you could control the product, processing and distribution. You could leave this tiny coastal village and move to Mexico City, or possibly even Los Angeles or New York City, where you could even further expand your enterprise.”

    Having never thought of such things, the Mexican fisherman asked, “But how long will all this take?”

    After a rapid mental calculation, the Harvard MBA pronounced, “Probably about 15-20 years, maybe less if you work really hard.”

    “And then what, señor?” asked the fisherman.

    “Why, that’s the best part!” answered the businessman with a laugh. “When the time is right, you would sell your company stock to the public and become very rich. You would make millions.”

    “Millions? Really? What would I do with it all?” asked the young fisherman in disbelief.

    The businessman boasted, “Then you could happily retire with all the money you’ve made. You could move to a quaint coastal fishing village where you could sleep late, play with your grandchildren, watch ball games, and take siesta with your wife. You could stroll to the village in the evenings where you could play the guitar and sing with your friends all you want.”

    The moral of the story is: Know what really matters in life, and you may find that it is already much closer than you think.

  10. grim says:

    Sure everyone has seen that a dozen times, fun fact, the author (Mark Albion) is a Harvard MBA (PhD too).

  11. Juice Box says:

    Jim Cramer on Meet the Press this morning says people who are losing their unemployment benefits this month need to move where the jobs are like North Dakota and Montana.

    Reminds me of this

  12. grim says:

    Put the jobless to work building homes for the homeless … problem solved

  13. chicagofinance says:


    Can Selling Real Estate Make You Rich?

    While breaking into real estate may be easy, getting established is tough. Landing those million-dollar listings means succeeding against all odds.

    Jan. 2, 2014 6:27 p.m. ET

    When Roman Serra, a 29-year-old with a master’s degree in art, decided to switch careers, he enrolled in a two-week real-estate course. He took a personality test online and went through a short interview at Chicago real-estate firm Baird & Warner, where he took the class. If he passes his broker’s license examination in January, he is guaranteed a spot as an independent contractor and a desk at one of the company’s 22 offices. He says studying wasn’t difficult compared with his days in college. “I wouldn’t personally consider it intense,” he says.

    Realty Check
    View Slideshow

    Roman Serra, center, in a pre-licensing class for real-estate agents at Baird & Warner’s downtown Chicago office. The 29-year-old artist decided to change careers to boost his income, but the odds are against him being a big earner in property sales. Sally Ryan for The Wall Street Journal

    Amid a recovery in luxury real estate, aspiring agents like Mr. Serra are rushing to take prep courses and licensing exams. Many will find that while breaking into real estate may be easy, getting established is tough. Landing those million-dollar listings means succeeding against all odds.

    Only 2% of Realtors, a trademarked term used by the National Association of Realtors to which the majority of real-estate agents belong, earn more than $250,000 a year. The median annual income nationwide was $43,500 in 2012, up from $34,900 in 2011. The average commission rate for 2013 is projected to be 5.2% of total sale price, according to Real Trends, a Castle Pines, Colo.-based research firm.

    “To really make serious money you have to know the business really well,” says Norman Block, a broker and adjunct professor of real estate at the business school of University of North Carolina at Chapel Hill. “People think, I’m going to drive around in a big fancy car showing houses and it’s going to be a lot of fun.”

    Most successful agents readily admit that isn’t the case—even for top sellers whose headshots are featured on local billboards. Mike McCann, a Philadelphia broker associated with Berkshire Hathaway BRKB +0.06% HomeServices, has a team of 15 agents and assistants that mostly work on the buyer’s end of real estate transactions, where sales can be tough to close. That leaves Mr. McCann time to deal solely with sellers, which is typically more lucrative. “It’s very important to make people feel special and that they’re your only clients,” says Mr. McCann, who adds that has closed more than $1.3 billion in sales over the past 13 years.

    As luxury-home sales continue to rebound, more people are getting serious about real-estate careers. In November, the NAR trade group had about 40,000 more members than in 2012, a total of 1,046,278, the largest increase since 2006.

    Potential home buyers who use real-estate websites assume that they have as much information at their fingertips as agents, says Prof. Block, but that isn’t usually true.

    The most successful buyer’s agents tell their clients about properties for sale before the listings go on sites like Zillow Z -0.21% or Redfin, which pull from the Multiple Listings Service, the industry’s main database that also includes information available only to real-estate professionals. Networking with other agents to help connect buyers and sellers is key.

    “Putting a sign in the yard and lockbox on the door—that doesn’t cut it anymore,” says Prof. Block.

    Marketing budgets can be high, says Mr. McCann. He spends about $335,000 a year on photos, brochures, online promotions and open houses. This outlay is typically paid up front, before any commissions.

    Mr. McCann recently sent out 6,000 hand-signed Thanksgiving cards to former clients. He also mails out July Fourth cards to past clients, buys closing gifts after a sale and sends holiday gifts to builders and clients. He spends $20,000 each year on gifts and mailings, he says.

    Three months ago, Baird & Warner started hosting public sessions about the realities of a real-estate career, says Laura Ellis, the firm’s senior vice president. She says hundreds of aspiring agents have shown up for its free seminars and many attendees are 20-somethings drawn to the vocation’s flexibility and potential for payout. But they often don’t realize it can take a year or more to get established, Ms. Ellis says.

    “We do not see the part-time housewives stereotype anymore,” she says, adding that the company has doubled the number of new agents to 300 in 2013 from 2012. About one-third earn between $80,000 and $120,000 a year, she says. The company hires about 30% of the students who take their prelicense courses.

    Most hopeful agents need to save up before they begin. Studying for the broker’s license exam, which covers both national and state laws and regulation, can take weeks, says Bopa Touch, administrator at the Rockwell Institute, a real-estate training school in Bellevue, Wash. In 2013, the company almost doubled the number of students taking its three-week, $489 broker’s license course, compared with 2012, says Ms. Touch. Between registration fees and desk fees—an amount paid to the brokerage firm to cover operating expenses—most new agents spend $2,000 or more to get started, which doesn’t include months of living expenses necessary before commission checks start coming in. “They don’t realize how much money they need to start,” Ms. Touch says.

  14. joyce says:

    You can always hire one half of the poor to kill the other half.

    But seriously, let them build homes. Which in turn will fall down from poor construction and/or neglect and they can rebuild them again… never ending jobs program!!

    grim says:
    January 5, 2014 at 10:25 am
    Sure everyone has seen that a dozen times, fun fact, the author (Mark Albion) is a Harvard MBA (PhD too).

  15. Not Joyce says:

    Joyce, I disagree.

    By coincidence yesterday night I watched on Netflix “Elysium”. One of the story line, is very akin to what happened in Yeltsin’s Russia with the five oligarchs and the rise of Putin. You also can see this with multiple dictators and oligarchs in history.

    The plutocrats/wealthy can try to hire one half of the poor to kill the other half, to do this they need “ruthless savage muscle”. It always happens, eventually “ruthless savage muscle” realizes that they are the real power and decides to put a check on the plutocrats. “Ruthless savage muscle” takes control and their excesses usually turns everyone against it.

    Putin is the biggest example in the last 20 yrs.

  16. Essex says:

    15. Almost as speculative as becoming a financial advisor…….

  17. cobbler says:

    I am not sure any new housing needs to be built to accommodate the homeless, unless Mr. de Blasio and his likes really want to put them next to the Central Park… there are probably more than enough foreclosed/abandoned structures in 1-hr commutable radius from there. Just need to create a strong incentive (carrot and/or stick) for the contractors to hire the unemployed instead of the illegals to rehab these houses.

  18. Essex says:

    Any preferences between Cranford and Westfield? Dumb Question, right?

  19. joyce says:

    I guess it wasn’t obvious that both of my comments were sarcasm.

  20. Essex says:

    ooooo Joyce. You naughty little minx……raaaaaaaawr.

  21. Comrade Nom Deplume, a.k.a Captain Justice says:

    [20] Essex

    “Any preferences between Cranford and Westfield? Dumb Question, right?”


  22. cobbler says:

    Train fare from Cranford to the city is cheaper by 75 cents.

  23. Essex says:

    hahaha — OK

  24. Libturd at home says:

    Cranford offers a lot of whitewater rafting in much of town.

  25. Fabius Maximus says:

    #8 Eddie Ray

    “I hate being wrong or made to look wrong.”
    So the real reason is insecurities, that makes sense.

  26. Three days away, and I get to come back to this whingeing foreigner, gluteus, who advocates for our country to turn into the same kind of Third World sinkhole he left in order to become a parasite on our system.

  27. Fabius Maximus says:

    #5 Ben,

    When you dig into those numbers it shows that while the arrows out of New Jersey look big to NY and PA, when you look at the numbers there is a big offset influx back into the NJ.
    So for NY NJ. There is 42K out and 40K in.
    PA NJ has a bigger differential at 33K out 23K in.

  28. Fabius Maximus says:

    #28 Clot

    I’m here to save y’all!

    So what did you get from your time in Europe apart from your support of a Sh1t football team?

  29. Comrade Nom Deplume, a.k.a Captain Justice says:

    [27] Fabian,

    I wish I could be strong and wrong like you. It’s just not something I like or want.

    And any a-hole can root for a winning team. Takes something extra to stick with your friends and convictions.

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