Category Archives: Market Reports

Epic Housing Shortage Being Reported

The Joint Center of Housing Studies (JCHS) at Harvard University recently released their 2017 State of the Nation’s Housing Study, and a recent blog from JCHS revealed some of the more surprising aspects of the study.

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The first two revelations centered around the shortage of housing inventory currently available in both existing homes and new construction.

Regarding Existing Home Inventory:

“For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply – almost half of the 6.0 months level that is considered a balanced market.”

Regarding New Home Inventory:

“Markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.”

Bottom Line

The biggest challenge in today’s market is getting current homeowners and builders to realize the opportunity they have to maximize profit by selling and/or building NOW!!

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Homeowners: Your Home Must Be Sold TWICE

Homeowners: Your Home Must Be Sold TWICE | Keeping Current Matters

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5%+ over the next twelve months. One major challenge in such a market is the bank appraisal.

If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth, as compared to an appraiser’s evaluation of that same home.

Bill Banfield, VP of Capital Markets at Quicken Loans urges anyone looking to buy or sell in today’s market to remember the impact of this challenge:

“While a 1 or 2 percent difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage.

A homeowner [or a buyer] could be forced to bring more cash to closing in order to make a mortgage work if the appraisal is lower than expected. On the other hand, if an appraisal comes in higher, they could be surprised with more equity than they had planned. Either way, if owners are aware of their local markets it will lead to smoother mortgage transactions.”

The chart below illustrates the changes in home price estimates over the last 12 months.

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, meet with an experienced professional who can guide you through this and any other obstacle that may arise.

Watch out! 26-year-olds are taking over the US economy, expert says

Millennials, or “echo boomers,” have the world in their hands. At least the future of our world’s finances, one expert says.

As it stands, there are 4.8 million Americans who are 26 years old, according to research from Smead Capital Management Chief Executive William Smead. That tops the nearly 3.9 million individuals in the U.S. who are 43, and is more than the 4.5 million Americans who are 56 years old, he said.

“It’s time to focus on the ‘millennial trade,'” Smead said during an interview on CNBC’s “Closing Bell.” Investments in home stocks such as NVR and Lennar are ones that Smead would suggest, as well as entertainment companies Disney and Comcast.

Think of the two recently married parents with a kid at home when you’re making investments today, Smead explained of his stock picks.

“There is a wave of individuals, who over the next few years will find jobs, buy homes, get married and have kids,” Deutsche Bank’s, chief international economist, Torsten Slok, told “Closing Bell.” It’s not as much about the “urban dweller” living in a high-rise apartment right out of college.

One should also turn their attention away from the other end of the spectrum — the baby boomers — and “keep the ‘wave’ [in the middle] in mind,” Slok emphasized.

As echo boomers are getting more jobs, Slok said, more people will be paying taxes and pouring money into the government.

“And don’t listen to investors who say we will have ‘demographic headwinds’ forever, because echo boomers’ kids will come around,” Slok added, explaining how the cycle will continue and calming any fears about “baby boomers dying before a younger generation can replace them.”

Economywide consumption is shifting — slowly but surely — from baby boomers to echo boomers, Slok reiterated, so be warned.

Home Prices to Moderate in Year Ahead

Home prices grew at an annual rate of 7.2 percent in December 2016, rising month-over-month from November by 0.8 percent, according to CoreLogic’s recently released Home Price Index (HPI) Forecast. The Forecast projects a moderating price growth rate in the year ahead, at 4.7 percent from December 2016 to December 2017.

CoreLogic: Home Prices to Moderate in Year Ahead

“As of the end of 2016, the CoreLogic national index was 3.9 percent below the peak reached in April 2006,” says Dr. Frank Nothaft, chief economist for CoreLogic. “We expect our national index to rise 4.7 percent during 2017, which would put homes prices at a new nominal peak before the end of this year.”

“Last year ended with a bang with home prices up over 7 percent nationally, led largely by major metro areas,” says Anand Nallathambi, president and CEO of CoreLogic. “We expect prices to continue to rise just under 5 percent in 2017, buoyed by lack of supply and continued high demand.”

Existing-Home Sales Begin 2017 with a Bang

Existing-home sales began 2017 with a bang, growing 3.3 percent and hitting a 10-year high in January, according to the National Association of REALTORS® (NAR). With the exception of the Midwest, every region saw gains, with total sales reaching 5.69 million—the fastest pace since February 2007.

Existing-Home Sales Begin 2017 with a Bang

“Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” says Lawrence Yun, NAR chief economist. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”

The median existing-home price also rose again in January, up 7.1 percent to $228,900 from $213,700 one year prior, according to the report. The median existing condominium and single-family home prices grew, as well: 6.2 percent to $217,400 and 7.3 percent to $230,400, respectively.

The report shows that though existing-home inventory expanded 2.4 percent to 1.69 million, supply is still 7.1 percent lower than one year prior. Months supply of inventory is currently 3.6. Existing homes averaged 50 days on the market, down from 64 days one year prior—38 percent of homes sold, however, were on the market for less than a month. Realtor.com® data show the markets with the shortest days on market were San Jose-Sunnyvale-Santa Clara, Calif. (43 days), San Francisco-Oakland-Hayward, Calif. (47 days), San Diego-Carlsbad, Calif. (55 days), Seattle-Tacoma-Bellevue, Wash. (57 days) and Nashville-Davidson-Murfreesboro-Franklin, Tenn., Vallejo-Fairfield, Calif., and Greeley, Colo. (58 days).

Existing-home sales in the West, according to the report, soared 6.6 percent in January, while sales in the Northeast jumped 5.3 percent and sales in the South rose 3.6 percent. Sales in the Midwest fell 1.5 percent. The median price in the West was $332,300 (a 6.8 percent annual increase); the median price in the Northeast was $253,800 (2.5 percent); the median price in the South was $201,400 (9.2 percent); and the median price in the Midwest was $174,900 (6.5 percent).

First-time homebuyers comprised 33 percent of existing-home sales in January—an uptick from 32 percent in December and one year prior. All-cash sales comprised 23 percent, while distressed sales comprised 7 percent—both dips from one year prior.

“Competition is likely to heat up even more heading into the spring for house hunters looking for homes in the lower- and mid-market price range,” Yun says. “NAR and realtor.com’s new ongoing research—the REALTORS® Affordability Distribution Curve and Score—revealed that the combination of higher rates and prices led to households in over half of all states last month being able to afford less of all active inventory on the market based on their income.”

For more information, please visit www.nar.realtor.

Listing in the Winter Attracts More Serious Buyers

A recent study of more than 7 million home sales over the past four years revealed that the season in which a home is listed may be able to shed some light on the likelihood that the home will sell for more than asking price, as well as how quickly the sale will close.

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It’s no surprise that listing a home for sale during the spring saw the largest return, as the spring is traditionally the busiest season for real estate. What is surprising, though, is that listing during the winter came in second!

“Among spring listings, 18.7 percent of homes fetched above asking, with winter listings not far behind at 17.5 percent. While 48.0 percent of homes listed in spring sold within 30 days, 46.2 percent of homes in winter did the same.”

The study goes on to say that:

“Buyers [in the winter] often need to move, so they’re much less likely to make a lowball offer and they’ll often want to close quickly — two things that can make the sale much smoother.” 

Bottom Line

If you are debating listing your home for sale in 2017, keep in mind that the spring is when most other homeowners will decide to list their homes as well. Listing your home this winter will ensure that you have the best exposure to the serious buyers who are out looking now!

The study used the astronomical seasons to determine which season the listing date fell into (Winter: Dec. 21 – Mar. 20; Spring: Mar. 21 – June 20; Summer: June 21 – Sept 21; Autumn: Sept 21 – Dec. 20).

2016 U.S. Existing-Home Sales Best Since 2006

Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

In December, existing sales decreased 2.8% to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month’s slide, sales are only 0.7% higher than a year ago.

December existing-home sales in the Northeast slid 6.2% to an annual rate of 760,000, but were still 2.7% above a year ago. The median price in the Northeast was $245,900, which was 3.8% below December 2015.

Earlier this month, the Hudson Gateway Multiple Listing Service Inc. reported that sales activity in the Hudson Valley was the highest since the recovery from the recession began in 2011, the HGMLS stated in its report.

Lawrence Yun, NAR chief economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”

The median existing-home price for all housing types in December was $232,200, up 4.0% from December 2015 ($223,200). December’s price increase marks the 58th consecutive month of year-over-year gains.

Total housing inventory at the end of December dropped 10.8% to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3% lower than a year ago (1.76 million), has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015).

“Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction,” said Yun. “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production.”

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage surged in December to 4.20% from 3.77% in November. December’s average commitment rate was the highest rate since April 2014 (4.32%).

First-time buyers were 32% of sales in December, which is unchanged both from November and a year ago. First-time buyers also represented 32% of sales in all of 2016. NAR’s 2016 Profile of Home Buyers and Sellers—released in late 2016 —revealed that the annual share of first-time buyers was 35%.

“Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it’s not getting any easier to be a first-time buyer,” said Yun. “It’ll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market.”

On the topic of first-time- and moderate-income buyers, NAR President William E. Brown, a Realtor from Alamo, CA, says Realtors look forward to working with the Federal Housing Administration to express why it is necessary to follow through with the previously announced decision to reduce the cost of mortgage insurance. By cutting annual premiums from 0.85% to 0.60%, an FHA-insured mortgage becomes a more viable and affordable option for these buyers.

“Without the premium reduction, we estimate that roughly 750,000 to 850,000 homebuyers will face higher costs and between 30,000 and 40,000 would-be buyers will be prevented from entering the market,” he said.

Properties typically stayed on the market for 52 days in December, up from 43 days in November but down from a year ago (58 days). Short sales were on the market the longest at a median of 97 days in December, while foreclosures sold in 53 days and non-distressed homes took 50 days. Thirty-seven percent of homes sold in December were on the market for less than a month.

Inventory data from Realtor.com reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in December were San Jose-Sunnyvale-Santa Clara, CA, 49 days; San Francisco-Oakland-Hayward, CA., and Nashville-Davidson-Murfreesboro-Franklin, TN, 50 days; and Billings, M., and Hanford-Corcoran, CA, both at 51 days.

All-cash sales were 21% of transactions in December, unchanged from November and down from 24% a year ago. Individual investors, who account for many cash sales, purchased 15% of homes in December, up from 12% in November and unchanged from a year ago. Fifty-nine percent of investors paid in cash in December.

Distressed sales—foreclosures and short sales—rose to 7% in December, up from 6% in November but down from 8% a year ago. Five percent of December sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 20% below market value in December (17% in November), while short sales were discounted 10% (16% in November).

Single-family and Condo/Co-op Sales

Single-family home sales declined 1.8% to a seasonally adjusted annual rate of 4.88 million in December from 4.97 million in November, but were still 1.5% above the 4.81 million pace a year ago. The median existing single-family home price was $233,500 in December, up 3.8% from December 2015.

Existing condominium and co-op sales dropped 10.3% to a seasonally adjusted annual rate of 610,000 units in December, and were 4.7% below a year ago. The median existing condo price was $221,600 in December, which was 5.5% above a year ago.

Westchester Top 2017 Suburban Market, Real Estate Pros Predict

Real estate professionals predict Westchester will be a top place for homebuyers looking outside New York City in 2017, according to a new study.

Westchester will be the top choice for homebuyers looking outside New York City in 2017, surpassing New Jersey and Long Island, according to a new survey .

Real estate data provider PropertyShark said its clients, New York City real estate pros, predict that about 49 percent of homebuyers will look beyond the five boroughs, with most mentioning Westchester County as the place to go to. Respondents cited Yonkers as a real estate market “that could answer the needs of priced-out buyers looking for a quiet location and more living space,” according to the study.

David Gerts, a New York real estate broker, confirmed the trend of homebuyers looking beyond the city. “Rising energy costs and low inventory will force home buyers further into rural areas. Transportation and access to NYC will be a major factor in the decision-making process for first-time homebuyers as they are forced further away.”

PropertyShark did not say how many real estate professionals responded to its polling to make up for the basis of the study.

Will Housing Affordability Be a Challenge in 2017?

Some industry experts are saying that the housing market may be heading for a slowdown in 2017 based on rising home prices and a jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR). Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Will Housing Affordability Be a Challenge in 2017? | Keeping Current Matters

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify. The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market. But, wait a minute… Though the index skyrocketed from 2009 through 2013, we must realize during that time the housing crisis left the market with an overabundance of housing inventory with as many as one out of three listings being a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock. The market is recovering, and values are coming back nicely. That has caused the index to fall. However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008: Will Housing Affordability Be a Challenge in 2017? | Keeping Current Matters

We can see that, even though prices have increased, mortgage rates are still lower than historical averages and have put the index in a better position than every year for the nineteen years before the crash.

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

What Would a Millennial Baby Boom Mean for Housing?

Recently released data from the National Center for Health Statistics revealed that 1.3 million Millennial women gave birth for the first time in 2015. There are now over 16 million women in this generation who have become mothers.

“All told, Millennial women (those born between 1981 to 1997) accounted for about eight in ten (82%) of U.S. births in 2015.”

What Would a Millennial Baby Boom Mean for Housing? | Keeping Current Matters

The data also shows that this generation has waited until later in life to become parents as only 42% of Millennial women were moms in 2014, compared to 49% of Generation X at the same age. A Pew Research Center article discussing the data, points to social influences that may have contributed to the delay:

“The rising age at first birth is hardly limited to the Millennial generation. It has been a trend since at least 1970. Many factors may contribute, including a shift away from marriage, increasing educational attainment and the movement of women into the labor force.”

Do Millennials Want to Be Parents?

“While Millennials may be delaying parenthood, it’s not for a lack of interest in eventually becoming moms and dads. Members of this generation rated being a good parent as a top priority in a 2010 Pew Research Center survey. Some 52% said it was one of the most important goals in their lives, well ahead of having a successful marriage, which 30% said was one of their most important lifetime goals.”

So, What Does This Mean for the Housing Market?

As Jonathan Smoke, Chief Economist for realtor.com explained: “At any given time in our history, demographics would explain 60-80% of what’s happening [in the market], and we are in a period of time where Millennials make up a largest demographic group.” As more and more Millennial families are formed, this generation will shift their focus to providing the best home for their children to grow up in, the best school districts, and often to the stability that owning a home of their own provides. Two-thirds of Millennials have not yet reached the average first-time home buying age of 32, as reported by the National Association of Realtor. The homeownership rate amongst Millennials has nowhere to go but up!

Bottom Line

Millennials as a generation have delayed traditional social norms until later in their lives. Whether getting married, having children or buying a home, the desire to provide for their family is still there, even if it takes a little while longer than it did for previous generations.