Health Care Reform approved by Congress and signed into law by President Obama is a historical moment. Politics aside, what does this mean to the housing market in the Washington and Baltimore metropolitan areas? Job growth. As reported by The Washington Business Journal, expansion of the Department of Health and Human Services and Internal Revenue Services will be necessary to manage the programs. Additionally, creation of the Health Choices Administration provides oversight of the larger health care industry. Secondly, Student Loan Reform (which is how the legislation covers the cost of expanded health coverage) will expand the Department of Education, although it is at the expense of the commercial banking industry, such as Sallie Mae with headquarters in Reston, VA. Finally, with 30 million more people having access to health care, there will be a need for more hospitals, drugs, nurses, doctors and new technology. The local Life Sciences industry will enjoy growth as a result.

The Associated Press is reporting that new home sales for the month of January are at record lows.  This information is consistent with the local resale market data as reported in the Fulton Research Residential Market Trends report.   Can we blame this on: the weather?  Seasonality?  Or just a jittery consumer?  I sense its the latter and that $6,5oo to $8,000 many not be enough for a household to jump into a home purchase.   Jobs, jobs, and more jobs are what’s needed to spur this economy.

However, the Conference Board reports that 0.7 percent of households plan to move and buy a new home in the next six months.  This marks a 700 percent imrovement from February 2009 when only 0.1 percent were in the market for a new home and is slightly higher than the previous 12-month average of 0.4 percent.   This positive indicator suggests the housing industry may see strong activity in the spring months.

Are you treating all Baby Boomers the same way?  Maybe you shouldn’t.  The people born during last half of the Baby Boom have adopted a separate identity - Generation Jones.  This powerful generation includes people born in 1954 to 1965 and they’re running the White House, the Federal Reserve and much of corporate America.  They’re surely not yet Active Adults.  Check out more at their website.

We know the vacation home market has slowed considerably since the boom times, but more importantly, the composition of the buyers has changed signficantly.  Let’s drill down into the numbers using data found in the “2009 National Association of Realtors Investment and Vacation Home Buyer Survey” which reports on 2008 data.  A similar survey was prepared in 2006 (2005 data).  So what has changed?

While sales of primary homes dropped 26 percent since the peak, sales of vacation homes dropped 52 percent.  Vacation homes represent 9 percent of all home sales, down from 12 percent in 2005.

Interestingly, the household composition of the typical vacation home buyer has changed to become more family-oriented.  Buyers are now younger, with the median age dropping from 59 to 46 years old and nearly half of the households have children, compared to 25 percent in the boom times.  These statistics suggest seniors are no longer a dominant market for vacation homes which they would then use as their retirement home. 

Buyers are less affluent, earning 19 percent less than they did in the boom times and 17 percent more are apt to use a mortgage to finance their home. 

This transformation of the typical vacation home buyer is likely a return to the long-term trend.

The Federal Housing Administration, or FHA, is attemtpoing to improve their financial position by raising rates for borrowers.  As CNBC’s Diana Olick reports on her Realty Check blog, the FHA is now raising the rates for upfront mortgage insurance premium paid by borrowers from 1.75 to 2.25 percent. 

The FHA and The Fed are keeping the housing industry afloat by buying mortgages, although both offer shaky footing.  This story will unfold in the coming months as the housing market plans for a life after the stimulus package.   Will the FHA be able to sustain its current volume?  Will The Fed extend their program of purchasing mortgages?  The answers to these questions will shape the housing market recovery in 2010.

In the euphoria of a strong housing market recovery, many people are looking past a ticking time bomb reminicent of Fannie/Freddie in 2005.   Ginnie Mae, the federal agency that packages, guarantees and sells the mortgage securities backed by FHA loans, has seen its volume skyrocket in recent years — from $410 billion in guaranteed loans sold in 2006, to $680 billion in the first 7 months of 2009 and a projected $1 trillion worth of loans in 2010.  What’s the problem?  Well, there are signs of increasing defaults and the potential implosion of this agency will leave taxpayers holding the bill for these loan obligations, ala Fannie/Freddie.  This recent Wall Street Journal article, “The Next Fannie Mae”, clearly identifies the red flags that will lead to this implosion.

What does this mean to us?  If Ginnie Mae goes belly-up, the FHA mortgage engine will slow significantly, causing rates to rise and qualifying criteria to become tighter.  This will affect mostly the first-time buyer market and the outer markets where FHA mortgages are most prevalent.

Fulton Research recently prepared a study of the development potential for Class A Office Space along the Route 28 Corridor in Loudoun County.  The report evaluates many factors that will encourage and challenge growth in the corridor under current zoning and land use policies.  Our recommendation includes a long-term vision for development of the Corridor through 2040 and what needs to be done to achieve that vision.

You can find this report on our Project Profiles page or download directly by clicking here.

[This is an excerpt from July Market Trends report] As I write the July 2009 edition of RESIDENTIAL MARKET TRENDS, the housing market is still turning the corner with one of the strongest sales months in recent memory with over 1,200 more sales in June than May.  The recovery is led by housing activity in the affluent core counties of Washington and Baltimore MSAs.  In fact, in most of the closer-in markets of Washington, the resale market is at a point of being undersupplied, which bodes well for home builders since home buyers will be prompted to also consider new homes.  Even in the less affluent markets, home builders have mentioned that sales are strong.

Read more.  Register here to download your free version of Residential Market Trends

CNBC’s Diana Olick’s blog, Realty Check, is one of my favorite blogs.   In her latest entry, she dives into the subject of bank-0wned inventory that’s not hitting the market.  Why aren’t banks unloading their homes while the market is hot?  Backlog.  Due to the backlog of paperwork, only one-quarter of the bank owned homes are offered for sale.   While sales may be good right now, this slow-drip of below-market real estate will keep prices artificially depressed for years to come. 

-D.