Archive for May, 2014

Home prices jump in March: S&P/Case-Shiller

U.S. single-family home prices rose in March, a closely watched survey said Tuesday, as the housing market extended its fragile recovery.

April Existing-Home Sales Show Modest Improvement Behind Gaining Inventory

WASHINGTON (May 22, 2014) – Existing-home sales increased for the first time this year in April, while inventory meaningfully increased and home price growth moderated, according to the National Association of Realtors®. Monthly sales gains in the West and South offset a modest decline in the Midwest while the Northeast was unchanged.

Total existing-home sales¹, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.3 percent to a seasonally adjusted annual rate of 4.65 million in April from 4.59 million in March, but are 6.8 percent below the 4.99 million-unit level in April 2013.

Lawrence Yun, NAR chief economist, expected the improvement. “Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point,” he said. “Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year.”

Total housing inventory² at the end of April jumped 16.8 percent to 2.29 million existing homes available for sale, which represents a 5.9-month supply at the current sales pace, up from 5.1 months in March. Unsold inventory is 6.5 percent higher than a year ago, when there was a 5.2-month supply.

“We’ll continue to see a balancing act between housing inventory and price growth, which remains stronger than normal simply because there have not been enough sellers in many areas. More inventory and increased new-home construction will help to foster healthy market conditions,” Yun added.

The median existing-home price³for all housing types in April was $201,700, which is 5.2 percent above April 2013; in the first quarter the median price was 8.6 percent above a year earlier. “Current price data suggests a trend of slower growth, which bodes well for preserving favorable affordability conditions in much of the country,” Yun said.

Earlier this month, NAR reported the market share of all-cash purchases has risen despite a downtrend in distressed home sales and investor activity. Distressed homes⁴ – foreclosures and short sales – accounted for 15 percent of April sales, down from 18 percent in April 2013.

Ten percent of April sales were foreclosures, and 5 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in April, while short sales were discounted 10 percent.

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said there was some heating of the market last month. “The typical time on market shrunk in April, with four out of 10 homes selling in less than a month,” he said.  “Homes that show well and are properly priced tend to sell the fastest. More housing inventory gives buyers better choices, and takes the pressure off of the buying process, which is a welcome sign, especially for first-time buyers.”

Properties sold faster for the fourth straight month in April, reflecting the prolonged lag in inventory relative to demand. The median time on market for all homes was 48 days in April, down from 55 days in March; it was 43 days on market in April 2013.

Short sales were on the market for a median of 96 days in April, while foreclosures typically sold in 56 days and non-distressed homes took 45 days. Forty-one percent of homes sold in April were on the market for less than a month.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.34 percent in April, unchanged from March but up from 3.45 percent in April 2013.

First-time buyers continue to represent fewer than one-third of all buyers at 29 percent in April, down from 30 percent in March; they were 29 percent in April 2013.

All-cash sales comprised 32 percent of transactions in April, compared with 33 percent in March and 32 percent in April 2013. Individual investors, who account for many cash sales, purchased 18 percent of homes in April, up from 17 percent in March; they were 19 percent in April 2013. Seven out of 10 investors paid cash in April.

Single-family home sales inched up 0.5 percent to a seasonally adjusted annual rate of 4.06 million in April from 4.04 million in March, but are 7.7 percent below the 4.40 million pace a year ago. The median existing single-family home price was $201,100 in April, up 4.7 percent from April 2013.

Existing condominium and co-op sales rose 7.3 percent to an annual rate of 590,000 units in April from 550,000 units in March, but are unchanged from April 2013. The median existing condo price was $205,500 in April, which is 8.3 percent higher than a year ago.

Regionally, existing-home sales in the Northeast were unchanged at an annual rate of 600,000 in April, but are 6.3 percent below April 2013. The median price in the Northeast was $244,000, down 0.4 percent from a year ago.

Existing-home sales in the Midwest slipped 1.0 percent in April to a pace of 1.03 million, and are 9.6 percent below a year ago. The median price in the Midwest was $157,200, which is 5.8 percent above April 2013.

In the South, existing-home sales increased 1.0 percent to an annual level of 1.94 million in April, but are 3.5 percent below April 2013. The median price in the South was $173,200, up 3.2 percent from a year ago.

Existing-home sales in the West rose 4.9 percent to a pace of 1.08 million in April, but are 10.0 percent below a year ago. The median price in the West was $291,200, which is 9.7 percent above April 2013.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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NOTE:  For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

¹Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample – about 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

²Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

³The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.

⁴Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.

Realtor.com®, NAR’s listing site, posts metro area median listing price and inventory data at: www.realtor.com/data-portal/Real-Estate-Statistics.aspx.

Forecast for Housing and the Economy Suggests Gradual Improvement through 2015

WASHINGTON (May 15, 2014) – Housing activity was sub-par in the first quarter of this year, dampened in part by severe weather patterns, but an uptrend is expected with healthy underlying demand over the balance of the year and through 2015, according to presentations at a residential real estate forum here during the Realtor® Party Convention & Trade Expo.

Lawrence Yun, NAR chief economist, said the U.S. population has been growing steadily, but job creation has not. “When you look at the jobs-to-population ratio, the current period is weaker than it was from the late 1990s through 2007,” he said. “This explains why Main Street America does not fully feel the recovery.”

Yun said that growth in the Gross Domestic Product slowed in the first quarter, and possibly contracted. “There are no fresh signs of recession, and the second quarter could grow about 3 percent,” he added.

Yun said the home sales-to-population ratio also has been below normal since 2008. Despite a large pent-up demand from years of below-normal home sales, inventory constraints and tight credit conditions continue to impede the market, in combination with strongly rising home prices and higher mortgage interest rates.

Although existing-home sales rose more than 9 percent to nearly 5.1 million in 2013, sales activity retrenched during the past six months. Even with gradual improvement moving forward, they are projected to decline about 3 percent for the year to just over 4.9 million, but should trend up to more than 5.2 million in 2015.

Because of tight inventories and rising sales last year, the median existing-home price rose 11.5 percent to just over $197,000. Home price growth is likely to moderate from more new home construction, with the median price increasing about 6 percent in 2014 to $209,000 and reaching nearly $219,000 next year as market conditions begin to balance.

An upside of rising prices is a recovery in home equity. “Based on our forecast for this year, the median home equity gain over three years is expected to be $40,000,” Yun noted. “A gap between new and existing-home prices from rising construction costs shows that prices are well supported by fundamentals in most of the country.”

He expects the Federal Reserve to end tapering of monetary policy by the end of the year and to hike the Fed funds rates in the first quarter of 2015.

Although the pattern is uneven month-to-month, mortgage interest rates are forecast to gradually rise, with the 30-year fixed rate averaging 4.7 percent this year and 5.5 percent in 2015. “Inevitably, rising mortgage interest rates will hurt housing affordability,” Yun said.

Housing starts have stayed below 1 million a year for the past six years, but need to reach the long-term average of 1.5 million to balance the market. “Because of the prolonged slowdown in construction, we now need 1.7 million housing starts per year to catch up,” Yun said. While improving, housing construction is seen at nearly 1.1 million this year and approximately 1.4 million in 2015.

The sluggish recovery in housing starts is impacted by construction costs rising faster than inflation, labor shortages in the building trades, and the difficulty for small local home builders to obtain construction loans. “Onerous financial regulations are preventing small banks from originating construction loans,” Yun said.

Job growth, which is the key to overall economic health, has essentially recovered all of the eight million jobs lost since the great recession. Employment is expected to improve, with job growth rising 1.6 percent in 2014 and 1.9 percent next year, after growing 1.7 percent in 2013; consumer confidence should gradually rise.

The Gross Domestic Product should grow 2.2 percent this year and about 2.9 percent in 2015; GDP grew 1.9 percent in 2013. Inflation, as measured by the Consumer Price Index, was a tame 1.4 percent in 2013 but is projected to rise to 2.5 percent this year and 3.5 percent in 2015.

Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University, agreed we’re unlikely to see a back-up in GDP. “Growth in the stock market and the recovery in housing along with pent-up demand are major factors driving the economy,” he said.

“There are three federal surveys that measure household growth and that are inconsistent, but we had real growth in 2012 that fell back last year,” Belsky said.  “Even the survey with the strongest household growth shows we’re a million below where we should be, but we’re probably two million below. We could see a notable uptick in household formation later this year.”

Belsky noted there are nearly three million more young adults who lived with their parents in 2012 than in 2007, and the median incomes for all young adults have declined since the great recession.

According to the Federal Reserve Bank of New York, student loan default rates have soared from just over 6 percent in 2003 to nearly 12 percent last year. Student debt is hurting credit scores and hindering the ability of some young adults to qualify for a mortgage; it could be a problem for as many as one in 10 renters who are in their 20s.

The Joint Center for Housing Studies projects household growth to rival or top the annual average pace from 1995 to 2000, and projects 76 percent of the growth over the next decade will be from minority households. The greatest increase is expected to be among households age 65 and older.

According to Fannie Mae, roughly nine out of 10 people under the age of 45 expect to buy a home in the future, but Belsky said mortgage underwriting standards are dramatically tighter, which disproportionately impacts minorities and those with lower incomes.

Dennis McGill, director of research for Zelman & Associates in New York, also focused on trends in housing demand. “Our analysis of Census Data shows an average of only 720,000 housing starts annually from 2010 through 2013, but our projections over the next five years exceed an average of 1.9 million,” he said.

“We won’t ramp up to that level right away, but if you average housing starts for the entire period from 2010 to 2019, it would be about 1.44 million,” McGill said. “There is a strong tailwind to housing starts. We’re starting to see capital come back to single family construction, which is very favorable.”

McGill notes trends in residential electric consumption mirror the growth in households, and also young adult employment, which is driving the growth.

The percentage of 24 to 34 year old married couples has risen since the last recession, but they are delaying a transition to homeownership. Zelman believes that the majority of this recent change has been due to recessionary impacts that should start to unwind.

McGill said their analysis shows the existing-home inventory relative to the number of households in the first quarter of this year is 30 percent lower than the average of the past two decades. In addition, total sales closings in 2013 were 20 percent lower than the 25-year average. “If we don’t bring capacity back to the market, home prices will continue to rise strongly,” he said.

A Zelman consumer survey shows most young adults believe a lack of savings for a downpayment is their biggest hurdle to obtaining a mortgage, but most of them think they need a much larger downpayment than is actually required.

For example, 25 percent believe they need a downpayment of 16 to 20 percent, and another 15 percent believe they need a downpayment of more than 20 percent. However, the actual requirement for an FHA loan is 3.5 percent.

Even with the well-known debt issues, nearly one-quarter of people under the age of 35 are debt free, which is better than the historic average. In addition, the Zelman survey shows that contrary to fears, there is no correlation between student loan debt and household formation. “A lot of this is a recessionary impact that we think is overlooked,” McGill said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Realtor.com® Gives Buyers, Sellers and Agents What They Want

WASHINGTON (May 15, 2014) – New enhancements to residential listing site realtor.com® are giving consumers the features they want and ensuring that they can continue to rely on the site for the freshest and most comprehensive property listings. That was the message delivered today by Steve Berkowitz, CEO of Move Inc., operator of NAR’s official property listing website realtor.com®, during the Realtor® Party Convention & Trade Expo.

During the meeting, Berkowitz laid out future plans for realtor.com®, including connecting the website and brand with renters and a younger and more mobile audience, giving users a more personalized experience, and helping consumers find the right Realtor® who can help them achieve their home buying and selling goals.

He said realtor.com® is the most popular site for engaged consumers and that one-in-three visitors to the site is a serious buyer that is actively searching for a property. Renters are also tomorrow’s buyers and a high-potential market segment; 74 percent of renters who are actively searching the site are in the market and looking to buy a home.

When consumers visit the site, Berkowitz said they are searching for fresh, up-to-date market data; comprehensive and accurate listings; an easy-to-use platform; high-quality photos and videos of properties; and precise search and filtering capabilities.

“Realtor.com® is also giving consumers the information they want, where they want it: in the palm of their hand,” he said. “A growing number of consumers are searching for real estate listings using mobile devices. In fact, in March 2014 nearly 60 percent of viewed listings were accessed through a mobile device.”

The rising popularity of searching for listings across mobile platforms means realtor.com® has seen nearly a 60 percent increase in downloads of its mobile application since 2012. He said consumers using these devices spend more time reviewing listings and photos than desktop computer users, which likely means they are more ready to buy or sell and wanting accurate, real-time listings.

“Accurate data is critically important to consumers and Realtors®,” said National Association of Realtors® President Steve Brown, broker/owner of Irongate, Inc. Realtors® in Dayton, Ohio. “Realtor.com® represents what’s real in real estate and provides the most reliable data in neighborhoods across the country, helping consumers to make the smartest decisions about buying, selling and investing in a home.”

Realtor.com® recently launched a national advertising campaign, Accuracy Matters, to educate consumers about the site’s unique ability to deliver reliable and accurate property listings. NAR’s latest advertising campaign, to launch in July, will support realtor.com® messaging and further promote the Realtor® brand.

Berkowitz said that despite an abundance of online sources for property listings, buyers and sellers value the help of a real estate professional when searching for a home that fits their family’s needs, and that four out of five consumers engage a Realtor® early in the homebuying process. While consumers depend on an agent’s help throughout the buying process, they particularly rely on a Realtor’s® guidance when it comes to negotiating the deal, he said.

“Improved agent profiles and branding for Realtors® is also making it easier for consumers to find the right agent to help them make their homeownership dreams a reality in the offline word,” said Berkowitz.

Other recent site enhancements include larger photos, increased mapping and search capabilities, and greater insights into neighborhoods and home sale histories through a new partnership with remodeling website Porch.

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