Economist's Outlook

Typical Sales Price of Homes by Gender, Race, and Ethnicity

In the NAR 2017 Choosing a Career in Real Estate: A Perspective on Gender, Race, and Ethnicity, respondents were asked what the typical sales price of the homes were in their main business area. While the million-dollar homes are reserved for only a small percent of the population (three percent of agents sold homes over $1 million in 2016), most homes sold on the market annually are between $150,000 and $749,999. In fact, according to the 2017 Profile of Home Buyers and Sellers report, the median price of homes purchased was $235,000.

For all respondents, 27 percent of residential agents sold homes between $350,000 and $749,999. Fifty-seven percent of agents sold homes between $150,000 and $349,999. The highest share of homes are sold between the $200,000 to $299,999 price range, and start to taper off as the price of homes increases.

When we segment the typical sales price of homes in the business area by gender, male and female respondents are also fairly evenly distributed between the price ranges. By one percent, female members work in areas where the typical sales price is $100,000 to $199,999 and males in the $200,000 to $299,999 price range by two percent. By one percent, female members work in areas where the typical sales price range is $300,000 to $499,999 price range and by two percent more in the $500,000 to $749,999 price range.

When we segment the typical sales price of homes by race and ethnicity, we see a slightly different picture. While only 25 percent of all residential-only specialists work in areas where the typical sales price is less than $200,000, 40 percent of Black and African American members work in neighborhoods with this price range. While 20 percent of all residential-only specialists work in areas with typical homes over $500,000, 51 percent of Asian and Pacific Islander members work in neighborhoods with this price range. For White, Caucasian, Hispanic, and Latino members, they work in areas in the various price ranges closer to the median of all members.

All agents predominantly work in communities that are racially and ethnically diverse. Thirty-nine percent of all respondents said their communities of business operation is somewhat mixed between several race and ethnic backgrounds and 34 percent operate in highly mixed communities with multiple race and ethnic diversity. Fifty-three percent of Asian and Pacific Islander members work highly mixed communities, more than other groups, and 18 percent of White and Caucasian members work in communities that are predominantly one race or ethnic background, more than other groups.

In Which States Did Properties Sell Most Quickly in October 2017?

Amid strong demand and tight supply, REALTORS® reported that properties that sold in October 2017 were typically on the market for 34 days in October 2017, down from 41 days compared to October 2016, according to the October 2017 REALTORS® Confidence Index Survey.[1]

During the August–October 2017, properties sold in less than 31 days in 18 states and in the District of Columbia, with properties selling most quickly in these areas: Washington (22 days); Nevada (23 days); Colorado (25 days); Massachusetts, the District of Columbia, California, Minnesota, and Utah (25 days), Kansas, Nebraska, Tennessee, and Oregon (26 days); Texas, Georgia (28 days), Indiana, Kentucky, Iowa (29 days), and South Dakota, Wyoming (30 days).

According to Realtor.com data, properties sold most quickly in the metro areas of San-Francisco-Oakland-Hayward (31 days), San Jose-Sunnyvale-Sta. Clara (31 days), and Seattle-Tacoma-Bellevue (37 days). Properties sold quickly within 45 days in other metro areas in California, Washington, Utah, Tennessee, Colorado, Arizona, Idaho, Minnesota, Wisconsin, and Massachusetts.

Amid tight supply, the median days on market have been broadly on a downtrend since 2011 when the properties typically were on the market for three months from May 2011, when this question was first asked in the RCI Survey, through March 2012.

[1] In generating the median days on market at the state level, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

October 2017 Existing Home Sales

  • NAR released a summary of existing-home sales data showing that housing market activity this September inclined 2.0 percent from last month but fell modestly 0.9 percent from last year. October’s existing home sales reached 5.48 million seasonally adjusted annual rate.
  • The national median existing-home price for all housing types was $247,000 in October, up 5.5 percent from a year ago. This marks the 68th consecutive month of year over year gains.
  • Regionally, all four regions showed growth in prices from a year ago, with the West leading all regions with an incline of 7.8 percent. The Midwest had a gain of 7.1 percent followed by the Northeast with a gain of 6.6 percent. The South had the smallest gain of 4.6 percent from October 2016.

  • From September, all four regions experienced gains in sales with the Northeast leading with a gain of 4.2 percent. The West inclined 2.4 percent followed by the South with an increase of 1.9 percent. The Midwest had a modest gain of 0.8 percent.
  • Two of the four regions showed a decline in sales from a year ago while the Northeast was flat. The West had the only incline of 0.8 percent. The Midwest had a decline of 1.5 percent. The South had the biggest drop in sales of 1.8 percent. The South led all regions in percentage of national sales, accounting for 39.4 percent of total, while the Northeast had the smallest share at 13.5 percent.

  • October’s inventory figures are down 3.2 percent from last month to 1.80 million homes for sale. Supply continues to be an issue as inventories are down 10.4 percent from a year ago, marking 29 months of year over year declines. It will take 3.9 months to move the current level of inventory at the current sales pace. Transactions are moving faster and it takes approximately 34 days for a home to go from listing to a contract in the current housing market, down from 41 days a year ago.

  • In October, single-family sales increased 2.1 percent and condominiums sales inclined 1.7 percent compared to last month. Single-family home sales rose 1.0 percent and condominium sales were unchanged compared to a year ago. Both single-family and condominiums had an increase in price with single-family up 5.4 percent at $248,300 and condominiums up 6.9 percent at $236,800 from October 2016.

Instant Reaction: September Owners’ Gains Forecast

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index level in September reached a new high and is up 6.2 percent from a year earlier.  But what does this mean for homeowners?

Home prices affect the wealth of homeowners. As the price of housing increases, the wealth of homeowners increases as well. Based on the above increase of home prices, it is estimated that value of owners’ household real estate was increased by 1.4 trillion in the last year and 116 billion came from home price increases in September. That means that 75 million homeowners each gained $18,500 on average in September 2017 from a year earlier.

Homebuying in San Francisco, San Jose, and Seattle Sill Strong Despite Steep Prices

Tight supply has led to higher price growth, especially in the metro areas of San Jose- Sunnyvale-Sta. Clara, Francisco-Oakland-Hayward, and Seattle-Tacoma-Bellevue. Given the steep increase in home prices, an interesting question is whether demand is starting to wane given the strong price escalation in these areas. To answer this question, we look at how fast properties are selling and the price appreciation in these areas, using market data from Realtor.com.

In San Jose-Sunnyvale-Sta. Clara, the median listing price was $1.1 million in October 2017, yet even at this price, properties continued to sell quickly, with the properties typically listed on Realtor.com for 31 days.  In October of last year, the median days on market was 37 days, and the median price was at $900,050. Back in May 2012, the median listing price was $499,925, while the median days on market was 47 days. The continued downtrend in the number of days properties are on the market even as prices have escalated sharply indicates that demand remains strong in the San Jose-Sunnyvale-Sta. Clara market (or that demand remains strong, causing properties to sell quickly and prices to escalate).

In San-Francisco-Oakland-Hayward, the median price was $899,050, with the median number of days listed at 31 days. In October 2016, the median days properties were listed on Realtor.com was 35 days, with the median price at $830,050. Back in May 2012, the median price was $509,975, while the median days on market was 40 days. The median days on market properties are listed on Realtor.com has also quickened (although at a lesser pace than in San Jose ) even as  home price also continue to appreciate sharply.  That properties continue to sell more quickly even as prices have increased steeply also indicates that there is still strong demand in the San-Francisco-Oakland-Hayward (or that strong demand amid tight supply is fueling price growth and moving properties off the market quickly).

Demand for properties have also caused prices to increase strongly and properties to sell quickly in the Seattle-Tacoma-Bellevue metro area. Properties were listed on Realtor.com at a median of 37 days, down from 42 days in October 2016, while the median price rose to $495,000, from last year’s $430,050. Back in May 2012, the median price on market was $307,549, while the median days on market was 59 days. Again, the fast pace of demand properties are selling on the market even as prices continue to rise indicates that that demand remains strong in the Seattle-Tacoma-Bellevue market.

Inadequate construction relative to demand has elevated prices and caused a fast turnover of homes for sale. A comparison of the number of building permits to the number of job earning households (two job earners per household) shows the number of permits have lagged behind the number of job creation in many metro areas. In San Francisco-Oakland-Hayward, the number of building permits is short of nearly 80 thousand units compared to the net new jobs created when converted to households (two net new jobs will form one household). In San Jose-Sunnyvale-Sta. Clara, construction is short of nearly 30 thousand units. In Seattle, construction is short of about six thousand units. In California, the housing shortage is most dire in Riverside-San Bernardino-Ontario (129 thousand units) and Sacramento-Roseville-Arden Arcade (43 thousand units).

To conclude, the fast pace of sales even with rising prices indicates that demand remains strong in the metro areas of San Jose- Sunnyvale-Sta. Clara, Francisco-Oakland-Hayward, and Seattle-Tacoma-Bellevue. Strong job growth has fueled demand, and housing construction has not kept pace with the strong demand.

REALTORS® Confidence Index Survey: October 2017 Highlights

The REALTORS® Confidence Index (RCI) survey gathers monthly information from REALTORS® about local real estate market conditions, characteristics of buyers and sellers, and issues affecting homeownership and real estate transactions.[1] This report presents key results about market transactions from October 2017. View and download the full report here. [2]

Market Conditions and Expectations

  • The REALTORS® Buyer Traffic Index registered at 60 (56 in October 2016).[3]
  • The REALTORS® Seller Traffic Index registered at 45 (41 in October 2016).
  • The REALTORS® Confidence Index—Six-Month Outlook Current Conditions registered at 67 for detached single-family, 56 for townhome, and 53 for condominium properties. An index above 50 indicates market conditions are expected to improve.
  • Properties were typically on the market for 34 days (41 days in October 2016).
  • Eighty-nine percent of respondents reported that home prices remained constant or rose in October 2017 compared to levels one year ago (85 percent in October 2016).

Characteristics of Buyers and Sellers

  • First-time buyers accounted for 32 percent of sales (33 percent in October 2016).
  • Vacation and investment buyers comprised 13 percent of sales (13 percent in October 2016).
  • Sales of distressed properties (foreclosed or sold as a short sale) accounted for four percent of sales (five percent in October 2016).
  • Cash sales made up 20 percent of sales (22 percent in October 2016).
  • Twenty-two percent of sellers offered incentives such as paying for closing costs (10 percent), providing a warranty (10 percent), and undertaking remodeling (four percent).[4]

Issues Affecting Buyers and Sellers

  • From August–October 2017, 73 percent of contracts settled on time (62 percent in October 2016).
  • Among sales that closed in October 2017, 74 percent had contract contingencies. The most common contingencies pertained to home inspection (54 percent), obtaining financing (45 percent), and getting an acceptable appraisal (43 percent).
  • REALTORS® continue to report “low inventory” as the major issue affecting transactions in October 2017.

About the RCI Survey

  • The RCI Survey gathers information from REALTORS® about local market conditions  based on their client interactions and the characteristics of their most recent sales for the month.
  • The October 2017 survey was sent to 50,000 REALTORS® who were selected from NAR’s nearly 1.2 million members through simple random sampling and to 5,520 respondents in the previous three surveys who provided their email addresses.
  • There were 3,617 respondents to the online survey which ran from November 1‒9, 2017.
  • The survey’s overall margin of error at the 95 percent confidence level is two percent. The margins of error for subgroups and sample proportions of below or above 50 percent are larger.
  • NAR weighs the responses by a factor that aligns the sample distribution of responses to the distribution of NAR membership.

The REALTORS® Confidence Index is provided by NAR solely for use as a reference. Resale of any part of this data is prohibited without NAR’s prior written consent. For questions on this report or to purchase the RCI series, please email: Data@realtors.org.

[1] Respondents report on the most recent characteristics of their most recent sale for the month.

[2] Thanks to George Ratiu, Managing Director, Housing and Commercial Research and Gay Cororaton, Research Economist for their data analysis and comments to the RCI Report.

[3] An index greater than 50 means more respondents reported conditions as “strong” compared to one year ago than “weak.” An index of 50 indicates a balance of respondents

who viewed conditions as “strong” or “weak.”

[4] The difference in the sum of percentages to the total percentage of sellers who offered incentives is due to rounding.

Thanksgiving 2017: How family and friends can influence the home purchase

This Thanksgiving we look at how recent buyers are choosing their homes, and how their friends and family can influence their decision. While we don’t all get to see our families every day, for many home buyers having the option to do so can influence the home they purchase. Based on data from the recently released 2017 Profile of Home Buyers and Sellers, we can see how multi-generation homes are becoming more common and the importance of living close to friends and family.

  • This year 13 percent of all buyers purchased a multi-generational home, and buyers were typically 53 years old. Eighty-three percent of the multi-generational homes purchased were single-family homes.
  • Multi-generational homes were typically 2,100 square feet and were purchased for $250,000. Buyers of multi-generational homes typically expected to live in their home for 15 years. Forty-nine percent of buyers owned their previous home.
  • Among all multi-generational buyers, the desire to own a home of their own was the primary reason for purchasing (26 percent). The majority of multi-generational buyers were married couples (66 percent), and single females (16 percent).
  • The main reasons for purchasing a multi-generational home were to care for aging family members (33 percent), and children or relatives over 18 moving back into the house (31 percent).
  • Eight percent of all buyers purchased their home to be closer to friends and family. Single females (13 percent) and married couples (11 percent) purchased their homes to be close to friends and family.
  • The convenience to friends and family for single females (44 percent), single males (36 percent), and unmarried couples (36 percent) was an influencing factor of their neighborhood choice.

View this year’s Thanksgiving infographic. For more information on home buyers see the 2017 Profile of Home Buyers and Sellers and the Recent Buyer Profiles. 

Growth of Property Values

Home price appreciation and depreciation is an important topic in today’s economy. Using data from the American Community Survey (ACS), we can analyze the gains and losses of property values over time. Looking at the 2005 – 2016 period, the figures point to trends, which vary by region and state. To summarize, price growth appears to be the strongest in the South and is weaker in the Northeast. Overall, all regions are displaying growth in property values with only a few states showing no growth or loses. Below is a breakdown of NAR’s four regions by state.

  • In the Northeast where price growth is typically slow, Pennsylvania leads all states with a 40 percent price growth from 2005 to 2016, while average annual growth was 3 percent. Rhode Island had a negative 11 percent price change over this time and experienced negative 1 percent annual price change.
  • In the Midwest where affordability is most favorable, North Dakota led all states with 106 percent price growth from 2005 to 2016 while having 6 percent average annual growth. Illinois had no price growth over this time and experienced no annual growth, on average.
  • In the South which typically leads all regions in sales, Louisiana led all states with 57 percent price growth from 2005 to 2016 while having 4 percent average annual price growth. Florida experienced 3 percent price growth over this time and no growth annually, on average.
  • In the West, the least affordable region, Montana led all states with 74 percent price growth from 2005 to 2016 while having a 5 percent average annual growth in price. Nevada shows a negative 16 percent price change over this time and shows a negative 1 percent average annual price change.

Small Cap Commercial Markets’ Momentum Slows in Third Quarter of 2017

Commercial sales transactions span the price spectrum, but tend to be measured and reported based on size. Commercial real estate (CRE) deals at the higher end—$2.5 million and above—comprise a large share of investment sales. Smaller commercial transactions tend to be obscured given their size. However, these smaller properties provide the types of commercial space where average Americans engage on a daily basis.

The National Association of REALTORS® Commercial Real Estate Outlook report focuses on market performance in both large (LCRE) and small commercial (SCRE) sectors.  The report provides an overview of economic indicators, investment sales and leasing fundamentals.


The U.S. economy maintained a solid pace in the third quarter of this year, with positive consumer spending, improved business investments and gains in export activity. Employment continued rising during the third quarter, with a gain of 364,000 net new jobs. Over the January through October period, there were 1.7 million net new payroll positions, with 1.6million in the private sector. Average weekly earnings of employees rose by 2.8 percent in the third quarter of this year, compared to one year earlier. The unemployment rate declined to 4.3 percent in the third quarter of 2016, down from 4.9 percent a year ago.

Investment Sales

Investment volume in LCRE markets continued into the third quarter of this year. The volume of commercial sales in LCRE markets totaled $114.2 billion, a nine percent year-over-year decline, according to Real Capital Analytics (RCA). The decline curve masked mixed performance across and within the property types. While office sales were down 18 percent on a yearly basis—mostly due to a drop in CBD office transactions—suburban office sales rose. Meanwhile, the industrial sector posted strong sales volume, exceeding the prior peak set in the third quarter of 2007. However, the gains were outpaced by the 32 percent drop in retail sales during the third quarter.

Glancing at the broad landscape, markets seem much more nuanced this year. Portfolio sales increased three percent in the third quarter of this year, while single asset sales declined 13 percent. The trend of diverging markets continued, with sales in the six major metros tracked by RCA posting a 12 percent decline year-over-year. In comparison, sales in LCRE secondary markets declined only six percent, while volume in tertiary markets dropped 14 percent.

Commercial real estate in SCRE markets continued to experience advances in investment sales, however the momentum moderated during the third quarter of 2017. Following on the first quarter’s 4.4 percent decline and the second quarter’s 4.4 percent increase in sales volume, REALTORS® reported sales volume rose 3.6 percent in the third quarter.

 

Investment Prices

Highlighting the nuanced environment, prices in LCRE markets advanced 7.5 percent in the third quarter, according to RCA. The increase was driven by strong appreciation in prices of apartment and industrial properties, which advanced 10.0 percent and 8.2 percent, respectively.  Prices for retail properties were virtually flat, with a slight 0.8 percent year-over-year increase. Office property prices rose 5.1 percent during the quarter, as both CBD and suburban properties experienced appreciation.

Capitalization rates in LCRE markets continued on a slight downward trend, moving from 6.9 percent in the second quarter to 6.8 percent in the third, based on RCA data. On a yearly basis, cap rates were flat, as the 20 basis-point compression experienced by apartment properties was balanced by an equal cap rate increase for office and hotel properties.

In small cap markets, investors remained active, seeking higher yields. The shortage of available inventory—a defining market feature during this cycle—remained the number one concern for REALTORS® engaged in commercial investments.

Prices for SCRE properties advanced, posting a 3.9 percent yearly advance in the third quarter of this year. The price trend mirrored broader markets, displaying a moderation in momentum. The pricing gap between sellers and buyers remained the second highest ranked concern. Capitalization rates in SCRE markets declined from the first two quarters of this year, to an average 7.2 percent across all property types. However, on a yearly basis, cap rates were flat.

Outlook

Commercial leasing fundamentals are expected to continue on a positive trend, benefiting from the tail winds of an expanding economy. Tax reform discussions have been favorable toward commercial investments, although questions remain about various aspects of the Senate and House proposals.


With the Federal Reserve’s commitment to unwinding its easing measures, in addition to a likely rate increase in December of this year, interest rates are expected to move upward in 2018. For commercial investments, there are downward pressures expected on cap rates going forward, although the impact is likely to be unevenly distributed across geography, sectors and property class. In SCRE markets, increased scrutiny from banking regulators has tightened lending conditions, a trend which will close out 2017.

 


 

September 2017 Housing Affordability Index

At the national level, housing affordability is up from last month but down from a year ago. Mortgage rates increased to 4.15 percent this September, up compared to 3.78 percent a year ago.

  • Housing affordability declined from a year ago in September moving the index down 5.4 percent from 169.8 to 160.7. The median sales price for a single family home sold in September in the US was $246,800 up 4.2 percent from a year ago.
  • Nationally, mortgage rates were up 37 basis points from one year ago (one percentage point equals 100 basis points) while median family incomes rose 3.1 percent.
  • Regionally, the Midwest recorded the biggest increase in price at 5.3 percent. The West had an increase of 5.2 percent while the South had a gain of 4.7 percent. The Northeast had the smallest incline in price of 4.4 percent.
  • Regionally, all four regions saw a decline in affordability from a year ago. The Midwest had the biggest decline of 7.1 percent. The West followed with a decline of 6.0 percent. The South had a decline of 5.9 while the Northeast had the smallest decline of 5.3 percent.
  • On a monthly basis, affordability is up from last month in all four regions. The Northeast had the biggest incline of 5.0 percent followed by the West, which had an incline of 4.7 percent. The Midwest and the South both shared a rise in affordability of 3.6 percent.
  • Despite month-to-month changes, the most affordable region was the Midwest, with an index value of 197.7. The least affordable region remained the West where the index was 115.0. For comparison, the index was 163.7 in the South, and 168.8 in the Northeast.

  • Mortgage applications are currently unchanged. Home price growth is slowing while median family incomes are rising making home purchases more affordable for potential buyers. Job creation is improving in some markets and mortgage rates are still historically low.
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

Who Owns a Half Million-Dollar Home?

After the release of the tax reform legislation from the House, last week’s question was “who will be affected by the new bill?”

One of the key elements of the tax reform is the proposed capping of the mortgage interest deduction at $500K. Under the current tax framework, taxpayers who own a home are able to reduce their taxable income by the amount of interest paid on the loan, which is secured by their principal residence. Interest is deductible on only the first $1 million of debt used for acquiring, constructing, or substantially improving the residence ($500,000 for single individuals if filing separately), or the first $100,000 of home equity debt regardless of the purpose or use of the loan.  The new tax reform legislation allows homeowners to take the deduction on their first $500,000 of mortgage debt, half of the current threshold. The new threshold will affect only mortgages on purchases made after the law is in force (but will not include refinancing). Thus, a new homebuyer will be able to deduct from his taxable income up to $15,475[1] under the new proposed tax framework, while he could deduct up to $30,950 under the current tax framework. Although $500K seems to be a decent amount of money, is it enough to buy a home in all areas in the United States?

Since all real estate is local, we calculated the share of homes[2] with a value higher than $500K by Congressional District. Based on the data, on average, 15% of homes with a first mortgage are worth over half a million dollars across the congressional districts. The share varies from 0.1% (13th District, Ohio) to 94% (14th District, California). Actually, one out of every two homes is worth over half a million in several districts in the following states: California, Connecticut, District of Columbia, Hawaii, Massachusetts, New York, Virginia and Washington.

Furthermore, we should bear in mind that the limit of $500K is not indexed to inflation, causing its value to diminish even further over time. Thus, we took our analysis one step further and calculated the share of homes with a value higher than $500K (subject to an inflation rate of 2%) in 2026 and 2036.

The map below allows you to see the share of homes with a first mortgage and value higher than $500K in 2016, 2026 and 2036.


It is true that the statistics above include people with a mortgage who already own a house. As we already mentioned, the MID cap will be applied to new mortgages only. Thus, someone would argue that these people will not be affected. It is true that there will not be a direct effect on these owners, but we expect that they will be less willing to sell their home. Consequently, homeowners are expected to be less mobile. Finally, the diminished role of mortgage interest deduction will impact home values negatively. By how much is debatable, but all homeowners can expect to lose some portion of their housing equity if the proposed tax bill become the law.

[1] In the first year of a 30-year mortgage (assuming a 20% down payment and 3.9% mortgage rate)

[2] Only homes with a first mortgage are included

Veteran’s Day 2017: Active-Duty Military and Veteran Home Buyers

This Veteran’s Day we honor those who have served our country, and those who are actively serving in the military, or have a spouse who is currently or has served in the past. Looking at data from the recently released 2017 Profile of Home Buyers and Sellers, we can see home buying trends among active duty military and veteran home buyers.

  • Recent home buyers who were active-duty service members made up three percent of all recent buyers and veterans made up 18 percent of all recent home buyers. Fifty-seven percent of active-duty service member buyers, and 20 percent of veteran buyers are first-time home buyers.
  • Active-duty service member buyers were typically 34 years old, and veteran buyers were 59 years old.
  • Seventy-five percent of active-duty service member buyers were married couples, five percent single males, 10 percent unmarried couples, and 10 percent single females. Seventy-six percent of veteran buyers were married couples, 10 percent single males, and single females and unmarried couples were both six percent.
  • The most commonly purchased home type was a detached single-family home at 84 percent for active-duty service member buyers and 85 percent for veteran buyers. Ten percent of active-duty service member buyers and four percent of veteran buyers purchased a townhouse/row house.
  • Prior to purchasing, 67 percent of active-duty service member buyers rented an apartment or house. Thirty-four percent of veteran buyers owned their previous home prior to buying.
  • The main reason for their recent purchase was the desire to own a home of their own, for both active-duty service member buyers (40 percent) and veteran buyers (21 percent).
  • Eighty-eight percent of active-duty service member buyers and 85 percent of veteran buyers found photos to be very useful when searching for homes online.
  • When searching for their home 90 percent of active-duty service members and 84 percent of veteran home buyers bought their home through a real estate agent or broker.

For more information on active military and veteran home buyers view the Veteran’s Day infographic, the Recent Home Buyer and Seller Profiles, and highlights from the 2017 Profile of Home Buyers and Sellers.

 

September 2017 EHS Over Ten Years

Every month NAR produces existing home sales, median sales prices and inventory figures. The reporting of this data is always based on homes sold the previous month and the data is explained in comparison to the same month a year ago. We also provide a perspective of the market relative to last month, adjusting for seasonal factors, and comment on the potential direction of the housing market.

The data below shows what our current month data looks like in comparison to the last ten September months and how that might compare to the “ten year September average” which is an average of the data from the past ten September months.

  • The total number of homes sold in the US for September 2017 is higher the ten year September average. Regionally, all four regions were above the ten year September average, while the Midwest and South led with stronger sales.

  • Comparing September of 2007 to September of 2017 more homes were sold in 2017 in the US and all regions, the West leading with the biggest gain of 34.8 percent. The US had an increase of 17.7 percent while the Midwest had an uptick in sales at 18.2 percent. The South had gains of 11.5 percent. The Northeast region had the slowest pace in sales over the ten year period.

  • This September the median home price is higher than the ten year September average median price for the US and all four regions.

  • Comparing September of 2017 to September 2007, the median price of a home increased in all regions. The South led all regions with a gain of 23.6 percent followed by the Midwest with 18.5 percent. The US had an incline in price of 16.4 percent while the West experienced a gain of 15.6 percent. The Northeast had the smallest gain of 4.8 percent.

  • The median price year over year percentage change shows that home prices began to fall in 2007 nationally, even though the Midwest prices were flat that year. Prices dipped almost by double digits in three of the four regions in 2008 in which the West had the biggest decline of 17.8 percent. The trend for median home prices turned around completely in 2012, when all regions showed price gains. The West had the biggest price increase of 17.7 percent and the US showed 7.9 percent gains. The following year, 2013, price growth peaked and the West had the largest gain in price of 15.5 percent followed by the South with an increase of 14.3 percent. The Northeast had the smallest growth in prices at 1.3 percent from 2012 to 2013. This September the Midwest (5.4%) had the highest year over year price change over the US and the other three regions.

  • There are currently fewer homes available for sale in the US this September than the ten year September average.  Inventory figures over the ten year time period has declined substantially having only increased in both single family and condos in 2014.

  • This current September the US had the fastest pace of homes sold relative to the inventory when months supply was 4.2 months. In 2010, the US had the slowest relative pace when it would have taken 10.7 months to sell the supply of homes on the market at the prevailing sales pace. This was also the case for the condo market which had the biggest challenge in when it would have taken 14.8 months and single-family 10.1 months to sell all available inventory at the prevailing sales pace.

  • The ten year September average national months supply is 7.0 while single family is 6.8 and condos are 8.5 months supply.

3rd Quarter Metro Home Prices

The National Association of Realtors quarterly home prices increased again this quarter. Prices continue to drift up this quarter and outpacing qualifying incomes. With less inventory, faster price growth may become a challenge for potential homebuyers. Here is a look at the metro areas for the top five most and least affordable of the third quarter 2017 as well as a look at the median existing single-family home price year over year percentage change for the top five highest and lowest growth metro areas of the third quarter 2017.

These are the most affordable metro areas for the third quarter 2017:

These are the least affordable metro areas for the third quarter 2017:

These are the top five metro areas that had the highest home price appreciation:

These are the bottom five metro areas that had a decline in home price appreciation:

September 2017 Pending Home Sales

  • NAR released a summary of pending home sales data showing that September’s pending home sales pace was flat with no gain from last month and down 3.5 percent from a year ago.
  • Pending sales represent homes that have a signed contract to purchase on them but have yet to close. They tend to lead Existing Home Sales data by 1 to 2 months.
  • All four regions showed declines from a year ago. The Northeast had the smallest dip of 2.4 percent followed by the Midwest with a decrease of 2.5 percent. The West had a decline of 2.9 percent. The South had the biggest drop of 5.0 percent.
  • From last month, three of the four regions showed inclines in sales. The South had the only decline of 2.3 percent. The Northeast had a gain of 1.2 percent followed by the Midwest with an increase of 1.4 percent. The West had the largest gain of 1.9 percent.
  • The U.S. pending home sales index level for the month was 106.0. August’s data was revised down slightly to 106.0.

  • In spite of the decline, this is the pending index’s 41st consecutive month over the 100 level.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.

Instant Reaction: August Owners’ Gains Forecast

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index level in August reached a new high and is up 6.1 percent from a year earlier.  But what does this mean for homeowners?

Home prices affect the wealth of homeowners. As the price of housing increases, the wealth of homeowners increases as well. Based on the above increase of home prices, it is estimated that value of owners’ household real estate was increased by 1.3 trillion in the last year and 112 billion came from home price increases in August. That means that 75 million homeowners each gained $18,000 on average in August 2017 from a year earlier.

Halloween and Home Buyers

Home buyers choose their home for many different reasons. Using the 2017 Profile of Home Buyers and Sellers and a recently released Realtor.com® survey, we can discover these common reasons as well as some surprising reasons for purchasing a home.

  • Among all home buyers in the 2017 Profile of Home Buyers and Sellers, 85 percent purchased a previously owned home, that was typically a detached single-family home.
  • Recently purchased homes were typically 1,870 square feet, and 52 percent of sellers purchased a larger home than the home that they sold.
  • The desire to own a home of their own (30 percent) and the desire for a larger home (10 percent) were the two top factors recent home buyers cited as their reason for purchasing.
  • Recent buyers purchased previously owned homes because of the better price (32 percent), better overall value (31 percent), and for the charm and character (21 percent).
  • The quality of the neighborhood (58 percent), convenience to job (42 percent), and overall affordability of homes (39 percent) were the three most influencing factors when choosing a neighborhood.
  • Realtor.com®’s survey revealed that 33 percent of respondents are open to living in a haunted house, while 42 percent are not open to the idea.
  • In order to choose a haunted home over a non-haunted home, 35 percent require a better neighborhood, 32 percent need larger square footage, and 29 percent would do so if more bedrooms are involved.
  • According to the survey, 28 percent of respondents believe they have lived in a haunted home

Homebuying Demand Continues to Outpace Supply in Many States in September 2017

In a monthly survey of REALTORS®, respondents are asked “Compared to the same month last year, how would you rate the past month’s traffic in neighborhood(s) or area(s) where you make most of your sales?” Respondents rate buyer traffic as “Stronger” (100), “Stable” (50), or “Weaker” (0) and the responses are compiled into a diffusion index. An index greater than 50 means that more respondents reported “stronger” than “weaker” conditions.

The chart below shows buyer traffic conditions in July–September 2017 compared to conditions one year ago.  Based on the responses reported in the  September 2017 REALTORS® Confidence Index Survey, buyer conditions were “stable” to “very strong” in all states.[1] Buyer traffic was “very strong” in Washington and Tennessee. Texas and Florida, which were battered by hurricanes Harvey and Irma respectively, still showed “strong” buying activity.

Meanwhile, supply conditions varied from weak to strong across states in July–September 2017 compared to conditions one year ago. Seller conditions were weak in many states where buyer traffic conditions are strong to very strong, such as California, Kansas, Minnesota, Illinois, Kansas, New York, Pennsylvania, Maryland, and North Carolina.

Nationally, the REALTORS® Buyer Traffic Index (64) indicates that buyer demand is stronger compared to conditions in the same month last year. Meanwhile, supply remained generally tight, with the REALTORS® Seller Traffic Index remaining below 50 (47).

The inventory of existing and new homes for sale stood at 2.21 million in August 2017, which, at the current level of demand (sales), will be exhausted in 4.3 months. Historical data since January 2000 indicates shows the median price of existing homes tended to appreciate above five percent when months’ supply fell below six months, while home prices fell by at least ten percent when months’ supply rose to ten months or more in 2010.

[1] In generating the indices, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. For graphical purposes, index values from 25.01 to 45 are labeled “Weak,” values of 45.01 to 55 are labeled “Stable,” values of 55.01 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.”

 

September 2017 Existing Home Sales

  • NAR released a summary of existing-home sales data showing that housing market activity this September rose modestly 0.7 percent from last month but slipped 1.5 percent from last year. September’s existing home sales reached 5.39 million seasonally adjusted annual rate.
  • The national median existing-home price for all housing types was $245,100 in September, up 4.2 percent from a year ago. This marks the 67th consecutive month of year over year gains.
  • Regionally, all four regions showed growth in prices from a year ago, with the Midwest leading all regions with an incline of 5.4 percent. The West had a gain of 5.0 percent followed by the Northeast with a gain of 4.8 percent. The South had the smallest gain of 4.6 percent from September 2016.

  • From August, two of the four regions experienced gains in sales while the Northeast remained flat. The West inclined 3.3 percent. The Midwest rose 1.6 percent. The South had the only drop of 0.9 percent.
  • Three of the four regions showed a decline in sales from a year ago while the West was flat. The Northeast had a drop of 1.4 percent. The Midwest had a decline of 1.5 percent. The South had the biggest drop in sales of 2.3 percent. The South led all regions in percentage of national sales, accounting for 39.5 percent of total, while the Northeast had the smallest share at 13.4 percent.

  • September’s inventory figures are up 1.6 percent from last month to 1.90 million homes for sale. Inventories are down 6.4 percent from a year ago, marking 28 months of year over year declines. It will take 4.2 months to move the current level of inventory at the current sales pace. Transactions are moving faster and it takes approximately 34 days for a home to go from listing to a contract in the current housing market, down from 39 days a year ago.

  • In September, single-family sales increased 1.1 percent and condominiums sales declined 1.6 percent compared to last month. Single-family home sales dipped 1.2 percent and condominium sales were down 3.2 percent compared to a year ago. Both single-family and condominiums had an increase in price with single-family up 4.2 percent at $246,800 and condominiums up 4.1 percent at $231,300 from September 2016.

Eliminating Real Estate Tax Deductions, and The Typical Homeowner

The Effect of Eliminating the State and Local Real Estate Tax Deduction on a Typical Homeowner

Undoubtedly, all eyes in Washington are focused on the “Big 6” and the release of the tax reform framework some weeks ago. Under this framework, standard deduction will be doubled while mortgage interest and charitable contributions will be the only remaining deductions. This means that state and local real interest deduction will be eliminated among other existing deductions. But how a typical homeowner will be affected by this elimination?

Most state and local governments charge an annual tax on the value of real property. Statewide, the real estate tax varies between 0.27% and 2.35%. New Jersey has the highest effective rate at 2.35% and is followed closely by Illinois (2.30%), New Hampshire (2.15%), and Connecticut (1.97%). On the other end of the spectrum, Hawaii has the lowest effective rate at 0.27%, and is followed closely by Alabama (0.43%), Louisiana (0.49%), and Delaware (0.54%).

Since all real estate is local, we looked at the median amount of real estate taxes paid at county level in 2016. As the data shows, among 815 counties[1], Passaic County, NJ had the highest median real estate taxes paid ($9,812), followed by Union County, NJ ($9,594) and Putnam County, NJ ($9,447). In contrast, homeowners in Walker County, AL and St. Landry Parish, LA paid less than $300 for real estate taxes in 2016. See below how your county compares to other 815 counties:


Under the current tax framework, homeowners choose to itemize when the sum of itemized deductions are higher than the standard deduction which is currently at $12,700. If individual deductions like mortgage interest and property tax are less than $12,700, they would take the standard deduction. A deep look into the data above reveals that real estate tax deduction helps homeowners in many counties to itemize while real estate taxes can represent up to 80% of the standard deduction. Especially, homeowners who reside in areas with affordability challenges and high real estate taxes can save money using the mortgage interest and real estate tax deductions.

However, under the proposed framework, the standard deduction is expected to rise to $24,000 and state and local tax deductions to be eliminated. Then, some homeowners will not claim the mortgage interest deduction since mortgage interest deduction will not be enough to make it advantageous for them to continue itemizing. If owners don’t have enough in deductions to exceed the standard deduction amount, it is not worth doing so. As a result, homeowners will stop itemizing and instead take the standard deduction. Because of the large standard deduction, most renters will benefit. The new enlarged benefit for renters also lessen the incentive to become homeowners. It is noteworthy that the new tax reform will hurt new home buyers while mortgage interest is higher during the first years of the mortgage and they would save substantially if they could use the mortgage interest deduction. See below how much mortgage interest[2] a homeowner pays for a typical home at the following counties:

[1] 2016 American Community Survey, 1-year estimates are available for areas with populations of 65,000+

[2] Mortgage interest was calculated based on the following assumptions:

20% down payment, 30 year-fixed rate, median home price