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Updated: 1 hour 12 min ago

October 2016 EHS Over Ten Years

Fri, 12/09/2016 - 11:11

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 October months and how that might compare to the “ten year October average” which is an average of the data from the past ten October months.

  • The total number of homes sold in the US for October 2016 is higher the ten year October average. Regionally, all four regions were above the ten year October average, while the Midwest and South led with stronger sales.
  • Comparing October of 2006 to October of 2016 fewer homes were sold in 2016 in the US and all regions, the Northeast enduring the biggest decline of 29.9 percent. The US had a drop of 11.8 percent while the West had the smallest drop in sales at 2.3 percent over the ten year period. The South led all regions in sales in 2006 and 2016.
  • This October the median home price is higher than the ten year October average median price for the US and all four regions. The West led all regions with 22.8 percent followed by the South with 18.7 percent. The Midwest was higher by 16.4 percent and the Northeast was above the average by 4.3 percent.
  • Comparing October of 2016 to October 2006, the median price of a home increased in all regions. The South led all regions with a gain of 10.0 percent followed by the Midwest with 9.3 percent. The US had an incline in price of 6.1 percent while the Northeast had the smallest gain of 0.8 percent and the West experienced a modest gain of 1.2 percent.
  • The median price year over year percentage change shows that home prices began to fall in 2008 nationally, and prices dipped by double digits in 2008 in the West which had the biggest decline of 17.7 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 21.7 percent and the US showed 10.0 gains. The following year, 2013, price growth rates peaked and the West had the largest gain in price of 16.2 percent, while the Northeast had the smallest gain at 5.9 percent from 2012 to 2013. This October the West (7.8%) had the highest year over year price change over the US and the other three regions. Even though prices fell and rose dramatically over the ten-year time period, if we average year over year changes over that time, prices grew less than one percent on average each year for the US and three regions and were down on average only in the Northeast.  The US and the South had an average gain of 0.4 percent per year. The Midwest had an average gain of 0.7 percent per year and the West had the biggest gain of 0.8 percent per year. These average gains were computed by averaging the year over year changes. Because these year over year changes apply to different home values each year we can find an average decline in the Northeast event though prices in October 2016 were higher than October 2006 prices in that region.
  • There are currently fewer homes available for sale in the US this October than the ten year October average.  This current October the US had the fastest pace of homes sold relative to the inventory when months supply was 4.3 months. In 2007 the US had the slowest relative pace when it would have taken 10.6 months to sell the supply of homes on the market at the prevailing sales pace. Relative to all supply, the condo market had the biggest challenge in 2008 when it would have taken 12.7 months to sell all available inventory at the prevailing sales pace.
  • The ten year October average national months supply is 7.1 while single family is 6.9 and condos are 8.5 months supply.
  • Prices fell the October average year over year percentage change averaging out price change over the ten years prices are up less than one percent for the US and three regions and down in the Northeast.

View the full Oct 2016 EHS Over Ten Years slides.

Sales for Investment Purpose: 13 Percent of Residential Sales in October 2016

Fri, 12/09/2016 - 10:40

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members the characteristics of the most recent sale that closed in the reference month, including “Did the buyer purchase the property as an investment property?”

Investment sales made up 13 percent of sales in October 2016 (14 percent in September 2016; 13 percent in October 2015). At their peak in 2009, investment sales were 25 percent of sales. Purchases for investment purposes have generally been on the decline, with fewer distressed sales on the market and with home prices rising to levels that make the purchase less attractive as an investment. Also, low mortgage rates are less of a benefit to investors since many of them use cash to purchase a home.

Distressed sales accounted for five percent of sales in October 2016 (four percent in September 2016; six percent in October 2015). Foreclosed properties were four percent of residential sales, while short sales were only one percent of residential sales.[1] With rising home values, improved economic conditions, and fewer foreclosures, the share of sales of distressed properties has generally continued to decline. Distressed sales accounted for about a third to half of sales until 2012 when they began to fall below this level.

As the shares of investment and distressed sales to total sales have declined, so has the share of cash sales. Purchases that were financed with cash were 22 percent of sales in October 2016 (21 percent in September 2016; 24 percent in October 2015. Buyers of homes for investment purposes, distressed sales, second homes, and foreign clients are more likely to pay cash than first-time home buyers.

 

[1] The survey asks respondents who had a sale in the month to report on the characteristics of the most recent sale closed.

October 2016 Housing Affordability Index

Fri, 12/09/2016 - 10:16

At the national level, housing affordability is up from a year ago for the fourth consecutive month. Mortgage rates dipped and stood at 3.76 this October but they are already higher for current home shoppers.

  • Housing affordability increased from a year ago in October moving the index up 0.5 percent from 169.4 to 170.2. The median sales price for a single family home sold in October in the US was $233,700 up 5.9 percent from a year ago.
  • Nationally, mortgage rates were down 29 basis points from one year ago (one percentage point equals 100 basis points) while incomes rose 2.7 percent.
  • Regionally, the West had the biggest increase in price at 7.6 percent. The South had an increase of 6.9 percent while the Midwest had a 5.7 percent gain in price. The Northeast had the smallest increase of 2.8 percent.
  • Regionally, two of the four regions saw increases in affordability from a year ago. The Northeast had the biggest increase of 3.5 percent. The Midwest had a modest increase of 0.8 percent. The South had a decline in affordability of 1.8 percent while the West had a decline of 0.5 percent.
  • By region, affordability is up in all regions from last month. The Midwest had the biggest increase of 3.8 percent. The Northeast followed with a gain of 3.2 percent and the South had a gain of 2.6 percent. The West had the smallest increase in affordability of 0.3 percent.
  • Despite month to month changes, the most affordable region is the Midwest where the index is 216.9. The least affordable region remains the West where the index is 120.4.  For comparison, the index is 173.5 in the South, 178.5 in the Northeast.
  • Mortgage applications are currently down this week and while rates remain low from a broad historical perspective, they have increased notably from the lows seen as recently as just before the election period. These housing affordability numbers reflect those lower mortgage rates, but we can expect to see these higher mortgage rates dampen housing affordability in the months ahead. Job creation is steady and will help stabilize consumer confidence going forward. More inventory and new home creation will help tame home prices which are still growing faster than incomes.
  • 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.

2016 Home Buying Trend: Purchasing Larger Homes Continues

Wed, 12/07/2016 - 15:39

Home buyer demographics change slightly from year to year due to macroeconomic forces from the health of the economy to inflation to the global trade on oil prices. The National Association of REALTORS® recently released its 2016 Profile of Home Buyers and Sellers report and the trend of purchasing up in home size has continued again this year.

First, in all regions of the country, the desire to own a home of one’s own continues to dominate as the top reason for purchasing a home, almost three times as much as any other reason to purchase. Nationally, the desire to purchase one’s own home was 31 percent of all buyers, followed by the desire for a larger home (10 percent), a job-related relocation or move (eight percent), and a change in family situation (eight percent). For first-time buyers, the desire to purchase one’s own home was 67 percent.

In five out of nine regions in the United States, buyers continued to trade up and buy bigger homes than last year. According to the 2016 report, 46 percent of all buyers traded up in the size of their home, up from 42 percent in 2015. In the 2015 report, buyers reported that they were looking for homes similar in size at 29 percent compared to 26 percent in 2016.

 

The top regions that continued to trade up in size were New England, East North Central, South Atlantic, Mountain, and Pacific. Interestingly, share of buyers that traded up in size in West North Central last year, in contrast, went back down to six percent in 2016 (similar to 2014) from 13 percent in 2015. The regions with the share of buyers that traded up in 2015 but fell slightly in 2016 include the Middle Atlantic, East South Central, and West South Central.

While these regions where the share may have dropped a few percentage points, the desire for a larger home was still the second most frequently cited reason in almost every region. The only exceptions were in the West North Central that cited the desire to be closer to family, and the West South Central that cited a job relocation as the second most common reason to purchase a home.

One reason for this shift in purchasing power is that people have more equity from selling their previous homes in order to buy a bigger one. Since the housing downturn in 2010, many homes were worth less than their mortgages. Over the last several years, home prices have been rising. In 2014, 17 percent reported waiting or stalling to sell their home, which dropped to 13 percent in 2015 and again to 12 percent in 2016. Sellers also reported that they sold their homes for a median of $43,100 more than they purchased it, up from $40,000 in 2015 and $30,100 in 2014. The most common reason for selling a home in 2016 was that the home was too small at 18 percent, up from 16 percent in 2015.

 

The typical seller in 2016 was 54 years old (same as the last two years) and the median household income in 2015 was $100,700, down from $104,000 in 2014. Sellers aged 35 to 44 years were the largest age group to sell homes last year at 22 percent. We can speculate that the sellers probably had a child in the last few years and wanted a bigger home to expand their family. We also see the trend where repeat buyers have been able to sell their homes at a higher price in order to trade up and purchase larger homes. Sellers aged 55 to 64 also made up 22 percent of all sellers, possibly looking to downsize to a smaller home as they near retirement.

First-time Homebuyers: 33 Percent of Residential Sales in October 2016

Wed, 12/07/2016 - 11:19

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members the characteristics of the most recent sale that closed in the reference month, including “Was the buyer a first-time buyer?”

The share of first-time home buyers accounted for 33 percent of residential sales in October 2016 (34 percent in September 2016; 31 percent in October 2015), the fifth consecutive month the share has held at above 30 percent.[1] Sustained low mortgage rates and job growth are likely underpinning the sustained, albeit modest, increase in homebuying by first-time buyers. The 30-year fixed mortgage rate has stayed below four percent since August 2015, while the unemployment rate has hovered at or below five percent since October 2015.[2]

Buyers 34 years old and under, who are likely to be first-time buyers, accounted for 31 percent of residential buyers in October 2016, (31 percent in September 2016; 28 percent in October 2015). The share of buyers 34 and under has been on an uptrend from the 26 percent share in July 2013 when this information was first collected in the survey.[3]

Homebuyers who were renting prior to their recent home purchase accounted for 42 percent of sales (41 percent in September 2016; 36 percent in October 2015). The fraction of buyers who were renting prior to their recent home purchase has increased from the 36 percent share in September 2014 when this information was first collected.[4]

[1] First-time buyers accounted for 35 percent of all home buyers based on data from NAR’s 2016 Profile of Home Buyers and Sellers (HBS), up from 32 percent in 2016. The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.

[2] Average contract rates on 30-year conventional mortgages reported by Freddie Mac, downloaded from Haver Analytics. The unemployment rate is among the population 16+ years old from the Burea of Labor Statistics, downloaded from Haver Analytics.

[3] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 28 percent were 18-34 years old. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and also captures purchases for investment purposes and vacation/second homes.

[4] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 41 percent rented an apartment or house. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and also captures purchases for investment purposes and vacation/second homes.

The Sources of Downpayments Among Different Buyer Types

Tue, 12/06/2016 - 15:43

Since 1997, the Profile of Home Buyers and Sellers has collected data on the sources of buyers’ downpayment for when they purchase a home. This year, 88 percent of all buyers financed their home and 98 percent of buyers ages 18 through 44 financed the home. All buyers financed a median of 90 percent of the mortgage and had a median downpayment of 10 percent. For first-time buyers, the median percent financed was 94 percent and they put down six percent. For repeat buyers, they financed 86 percent and put down a median of 14 percent.

In 2016, 61 percent of all buyers used savings for the downpayment, compared to 76 percent for first-time buyers and 53 percent of repeat buyers. Thirty-five percent of all buyers used the proceeds from the sale of a primary residence for the downpayment, compared to only two percent of first-time buyers (who may have inherited the home) and 52 percent of repeat buyers. Thirteen percent of all buyers used a gift from a relative or friend, 24 percent for first-time buyers, and eight percent for repeat buyers.

Comparatively in 1997, 70 percent of the downpayment for first-time buyers came from savings, none from the sale of another residence, and 25 percent as a gift from a friend or relative. Savings remained the number one source of the downpayment for first-time buyers over the course of two decades. In 2003, savings dropped to only 60 percent as a source of the downpayment and 61 percent in 2009, the two lowest points on the timeline. Savings was at a peak as a source of the downpayment in 2014 and 2015 when it hit 81 percent for first-time buyers. As for a gift from a friend of relative as the source of the downpayment, this share remained relatively flat over 20 years, dropping to to 22 percent in the mid-2000’s and up to 27 percent in the 2010’s. Proceeds from the sale of a primary residence remained small for first-time buyers, but grew slightly over the years to four percent from 2003 to 2007 and back down to two percent in 2016.

 

For repeat buyers in 1997, 51 percent used savings for the downpayment and 52 percent used proceeds from the sale of a primary residence. In 2016, 53 percent used savings and 53 percent used the proceeds from the sale of a primary residence. Savings dipped to the mid-40 percentiles in the 2000’s for repeat buyers, getting as low as 40 percent in 2005 and 2006. In the 2010’s, it jumped up to the high-50th percentile hitting 59 percent in 2011 and 2012. Proceeds from the sale of a primary residence saw an inverse relationship over two decades, where is jumped up to the mid-60 percentiles in the 2000’s, reaching a high of 66 percent in 2005 as a source of the downpayment. In the 2010’s, it decreased to the low-40 percentiles for repeat buyers hitting 40 percent in 2012.

To follow this series as we discuss the findings of 35 years of profile data, check out the hashtag #NARHBSat35 on your social channels. NAR Research will be releasing trend line data since 1981 to celebrate 35 years of home buyer and seller demographic research.

Properties Were Typically on the Market for 41 Days in October 2016

Tue, 12/06/2016 - 11:12

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?”

Properties stayed on the market for fewer days in October 2016 compared to one year ago amid strong demand and tight supply. Nationally, properties sold in October 2016 were typically on the market for 41 days (39 days in September 2016; 57 days in October 2015).[1]

In many states, half of the properties that sold in August–October 2016 were on the market for less than 31 days. Local conditions vary, and the data is provided for REALTORS® who want to compare local markets against other states and the national summary.

Looking at changes in this value over the last few years, in most states the median length of time that properties stay on the market continues to fall amid tight inventory conditions.[2]

 

 

Nationally, short sales were on the market for the longest time at 99 days, while foreclosed properties typically stayed on the market for 50 days. Non-distressed properties were typically on the market for only 39 days.

 Nationally, 43 percent of properties were on the market for less than a month.[3] Only nine percent of properties were on the market for six months or longer.

[1] Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market. In generating the median days on market at the state level, we use 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.

[2] The data shown here are states with observations of at least 150 over the rolling three-month period.

[3] Days on market usually refers to the time period from listing date to contract date.

How Commuting Costs Factor Into Home Buying

Mon, 12/05/2016 - 15:31

Either way you look at it, buyers know that commuting costs are high. Some buyers need to be closer to their job while others need to be closer to school districts. The National Association of REALTORS® released its 2016 Profile of Home Buyers and Sellers report to understand the trends of buyers and sellers. One trend we found fascinating that continued in 2016 was the importance of commuting costs. Twenty-nine percent of buyers found commuting costs as being very important to them, and another 39 percent said it was somewhat important to them.

We segmented this group further to learn the main factors that influence a buyer’s neighborhood choice. We found that 65 percent of this group choose a neighborhood as it was convenient to their job. Twenty-three percent of this group compromised on the price of the home. What is also interesting to note is that this group was also made up of 46 percent first-time home buyers, compared to the 35 percent of all buyers that purchased their first home this year.

 

Of this group, the median age was 38 years old; they bought homes with three bedrooms, two bathrooms, and were typically 1,800 square feet. The median income was $83,900 and the median home price purchased was $215,000.

So how does this compare to other buyers? We segmented married couples that had children under 18 living at home because it was similar in size as a subgroup, which comprised 31 percent of all buyers. Forty-two percent of this group cited that the distance to schools was the most important factor in selecting a neighborhood. Thirty-two percent (up from 27 percent) were first-time buyers, closer to the overall median, and these homes were typically larger with four bedrooms and two bathrooms at 2,200 square feet. The median age for this group was 37 years old; they bought homes with median income of $100,000 and the median home price purchased was $277,000 (up from $260,000 last year).

For unmarried couples, which comprise only eight percent of all buyers, 57 percent said that convenience to a job was the most influential factor when selecting a neighborhood.

The data also indicates that once families had kids, living closer to schools took priority over living closer to work. When segmented for children living at home, respondents reported that they actively compromised on the distance from their jobs more than any other group (16 percent with kids at home, compared to 14 percent of all buyers and 12 percent with no kids at home).

Home Buyers: Search Online For A Home, Close With An Agent

Fri, 12/02/2016 - 15:10

We are in a digital age and home buyers use the internet at various stages in their home search process. NAR data from the 2016 Profile of Home Buyers and Sellers shows that the first step in the buying process is to look online for properties—44 percent of buyers started here (up from 42 in 2015) and 13 percent of buyers looked online for information about the home buying process in the effort to educate themselves. Seventeen percent (up 14 percent last year) contacted a real estate agent right out of the gate.

In 2016, 51 percent of all buyers found the home they ultimately purchased on the internet and 34 percent found their home through a real estate agent. In comparison, in 2001, only eight percent of buyers found the home they purchased on the internet and 48 percent found their home through an agent. The use of the internet to find the home has increased over the years.

Buyers also indicated that finding the right property was the most difficult step in the home search process (52 percent), and more so for first-time buyers (56 percent). For all buyers, the paperwork (24 percent), understanding the process (17 percent), and saving for the downpayment (13 percent) were listed as difficult steps as well.

For buyers that looked online for properties, they also visited 10 homes over the course of 10 weeks before they purchased. For buyers that went straight to a real estate agent and did not look online, they visited four homes over only four weeks before they made their purchase, indicating that they likely know the neighborhood already where they want to buy.

As a result of using the internet to search for homes, buyers took the following actions: they walked through the home they viewed online (67 percent), saw exterior of homes and neighborhoods without walking through a home (44 percent), and found the agent used to search for or to buy a home (33 percent).

When it was time to finally close on a home, the majority of buyers work with a real estate agent. In fact, nine in 10 buyers signed with the help of an agent, which is the same as last year.

October Pending Home Sales

Fri, 12/02/2016 - 11:20
  • NAR released a summary of pending home sales data showing that October’s pending home sales are up 0.1 percent from last month and also up 1.8 percent from a year ago.
  • Pending sales are 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 regions showed increases from a year ago, the Northeast led all regions with an increase of 3.9 percent. The West followed with an increase of 2.5 from a year ago. The Midwest had an increase of 1.2 and the South had the smallest incline of 0.8 percent.
  • From last month, the Midwest had the largest increase at 1.6 percent. The West followed with a modest increase of 0.7 percent and the Northeast had an incline of 0.4 percent. The South had the only decline of 1.3 percent.
  • The pending home sales index level was 110.0 for the US. This is the pending index’s 30th consecutive month over the 100 index level. September data was revised down to 109.9.
  • 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.

Raw Count of Home Sales (October 2016)

Wed, 11/30/2016 - 11:21
  • Existing home sales rose 2.0 percent in October from one month prior while new home sales decreased 1.9 percent.  These headline figures are seasonally adjusted figures and are reported in the news.  However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures.  The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 446,000 existing homes were sold in October while new home sales totaled 45,000.  These raw counts represent an 8 percent decrease for existing home sales from one month prior while new home sales were unchanged.  What was the trend in recent years?  Sales from September to October decreased by 2 percent on average in the prior three years for existing homes and increased by 10 percent for new homes.  So this year, existing homes outperformed to their recent normal while new home sales underperformed.
  • Why are seasonally adjusted figures reported in the news?  To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate that have an effect on data around the same time each year.  For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity.  Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends.  That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month.  When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
  • What to expect about home sales in the upcoming months in terms of raw counts?  Independent of headline seasonally adjusted figures, expect slower activity in November while activity will get busier in December. For example, in the past 3 years, November sales dropped by 15 percent to 21 percent from October while December sales increased by 7 to 24 percent from November. New home sales market tends to follow the same trend in the following two months. For example, in the past 3 years, raw home sales in November decreased by 8 to 18 percent from October while December sales typically rose by 6 to 13 percent from November.

 

Student Loan Debt Hampering Home Buying: A Regional Perspective

Tue, 11/29/2016 - 15:31

The 2016 Profile of Home Buyers and Sellers survey is the second year we have collected data on the difficulty of saving for a down payment to buy a home and whether student loans were an impediment.

In years past, the down payment had been cited as one of the most problematic steps in the home buying process. In the 2016 report, the number grew slightly to 13 percent of buyers that had difficulty saving for the down payment and, of those, the number that reported student loan debt made saving the most strenuous step in the buying process jumped to 49 percent. For first-time buyers in the 2016 report, who are predominantly Millennials under the age of 34 years, 26 percent said saving for the down payment was the most arduous step in the process and, of those, 55 percent stated that student loan debt delayed them from buying a home.

 

For all buyers this year, a little more than a quarter (27 percent) reported having student loans with a median of $25,000 in debt. For first-time buyers, 40 percent cited still having student loans with a median amount of $26,000 in debt.

What’s more interesting is the amount of student loan debt that respondents cited around the country by subregion. The median student debt was the lowest at $20,000 in the Pacific states of Washington, Oregon, California, Alaska, and Hawaii, as well as the West South Central states of Texas, Oklahoma, Arkansas, and Louisiana. The median student loan debt was the highest at $40,000 in the East South Central states of Kentucky, Tennessee, Mississippi, and Alabama.

A majority of the regions reported student loan debt delaying buyers from purchasing a home. On the low end, debt delayed the South Atlantic and East South Central subregions for a median of two years. On the high end, debt delayed New England and Pacific states for a median of five years and the Mountain and West South Central subregions for a median of four years.

REALTORS® Are Generally Optimistic Over the Next Six Months

Tue, 11/29/2016 - 11:12

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales: For single-family homes? For townhomes? For condominiums? NAR compiles the responses for each property market into a REALTORS® Confidence Index.

The REALTORS® Confidence Index—Six-Month Outlook for single-family homes and townhomes registered above 50, indicating that more REALTORS® expected market conditions to be “strong” than “weak” over the next six months.[1] The index for condominiums was at 50, above the 44 level registered at this time in 2015. The approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016,” is expected to boost purchase activity in the condominium market.[2] Among other measures, the law eases access to FHA condominium financing by reducing the FHA condo owner occupancy ratio from 50 percent to 35 percent, directing the FHA to streamline the condominium re-certification process, and providing more flexibility for mixed-use buildings.

In the single-family homes market, the outlook in the next six months is “moderate” in many states to “very strong” in the states of Washington and Rhode Island.[3] In the townhomes and condominiums markets, the outlook is more mixed, ranging from “very weak” in West Virginia to “very strong “in the District of Columbia.

[1] Respondents were asked “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?” The responses for each type of property are compiled into an index. An index of 50 indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality.

[2]The bill, which was championed by NAR, passed the House of Representatives 427-0 and the Senate under unanimous consent on July 14, 2016 and was signed by President Obama on July 29, 2016. See http://www.realtor.org/articles/president-obama-signs-hr-3700

[3] The market outlook for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. A diffusion index greater than 50 means that more respondents rated conditions as “Strong” than “Weak.” For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 48 are labeled “Weak,” values greater than 48 to 52 are labeled “Moderate,” values greater than 52 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very strong.”

Buyers Aged 35-44 & 45-54 Years Capture Greater Share of First-Time Home Buyers

Mon, 11/28/2016 - 15:28

In 2016, first-time home buyers made up 35 percent of all home buyers, an increase over last year’s near all-time low of 32 percent where it had remained for the previous three years, according to The National Association of REALTORS® 2016 Profile of Home Buyers and Sellers report released in October 2016. From 2011 to 2016, the share of first-time buyers was well below the historical norm of 40 percent with buyers facing tight inventory as well as higher home prices and rent costs. In the South, it was as low as 31 percent and the highest in the Northeast region at 44 percent.

What’s more interesting is the fact that the percent of first-time home buyers varies largely across the country. In the Mountain region of Montana, Idaho, Wyoming, Nevada, Utah, Arizona, Colorado, and New Mexico, first-time home buyers were only 28 percent of the total number of buyers in 2016 (up from 21 percent in 2015), the lowest of any other region. They were also a low of 30 percent in the South Atlantic. The share of first-time home buyers was booming, on the other hand, at 45 percent in the Middle Atlantic states of New York, Pennsylvania, and New Jersey, as well as at 42 percent in the New England states of Vermont, New Hampshire, Maine, Massachusetts, Rhode Island, and Connecticut, similar to 2015.

 

Diving into the demographics of first-time home buyers, we see that over time the median age held steady at 31 years for five years in a row from 2011-2015. In 2016, the median age increased slightly to 32 years for first-time buyers. Buyers aged 18-34 years have comprised the largest share of first-time home buyers at roughly 50-60 percent in the last few years. In 2016, buyers aged 25-34 years accounted for 56 percent of first-time home buyers, compared to 50 percent ten years earlier in 2005. By way of comparison, repeat buyers were almost spread evenly around 20 percent in most age groups except Millennials (accounting for only 12 percent in 2016) and those over 75 years old.

The share of first-time home buyers grew for both buyers aged 35-44 years and aged 45-54 years. Buyers aged 35-44 years accounted for more of the first-time buyers’ share this year at 21 percent, up from 19 percent in 2015. Similarly, buyers aged 45-54 years also accounted for more first-time buyers this year at 10 percent, up from eight percent in 2015.

 

Buyer demographics also saw huge differences between household compositions for first-time buyers. Of the unmarried couples that bought a home last year, 60 percent (up from 57 percent in 2015) were first-time home buyers. In comparison, of the married couples that purchased a home, 32 percent were first-time buyers in 2016 (up from 27 percent in the previous year). Of the single males and single females that bought a home, 37 and 36 percent respectively (both down from 39 percent in 2015) were first-time home buyers.

October 2016 Existing-Home Sales

Mon, 11/28/2016 - 11:15
  • NAR released a summary of existing-home sales data showing that housing market activity rose for the second straight month. October’s existing-home sales reached the 5.60 million seasonally adjusted annual rate and existing-home sales are up 5.9 percent from a year ago which is the highest pace since February 2007.
  • The national median existing-home price for all housing types was $232,200 in October, up 6.0 percent from a year ago.
  • Regionally, all four regions showed growth in prices from a year ago, with the West leading at 7.8 percent. The South had an increase of 7.4 percent, and the Midwest followed with a 5.8 percent increase. The Northeast had the smallest gain of 2.9 percent from October 2015.
  • From September, all four regions experienced inclines in sales with the South having the biggest increase of 2.8 percent. The Midwest followed with a gain of 2.3 percent. The Northeast had a gain of 1.4 percent while the West had the smallest gain of 0.8 percent.
  • All four regions showed an increase in sales from a year ago with the West leading all regions with a 10.4 percent gain. The Midwest followed with a 6.3 percent gain. The South had a gain of 4.7 percent and the Northeast had the smallest increase of 1.4 percent. The South led all regions in percentage of national sales at 39.6 percent while the Northeast has the smallest share at 13.4 percent.
  • October’s inventory figures are down 0.5 percent from last month to 2.02 million homes for sale and the level remains below historical averages. Inventories are considerably down, 4.5 percent, from a year ago. It will take 4.3 months to move the current level of inventory at the current sales pace. It takes approximately 41 days for a home to go from listing to a contract in the current housing market, down from 57 days a year ago.
  • Single family sales increased 2.3 percent while condos remained flat compared to last month. Single family home sales inclined 6.6 percent and condo sales were also flat compared to a year ago. Both single family and condos had an increase in price with single family up 5.9 percent at $233,700 and condos up 6.2 percent at $220,300 from October 2015.

New Conforming Limit Improves Financing from Coast-to-Coast

Wed, 11/23/2016 - 12:17

For the first time since 2006, the conforming loan limit will rise in 2017. This change is important in today’s housing market as it allows the financing market to expand to meet the growing needs of strong consumer demand and rising home prices. Furthermore, while the conforming limits will rise, it is unlikely to adversely impact private financing.

Fannie Mae and Freddie Mac (the GSEs) as well as the Federal Housing Administration (FHA) are limited in the size of loans that they can help finance. The maximum loan size that the GSEs can finance, also known as the conforming loan limit, is determined by the Federal Housing Financing Agency (FHFA), while the FHA determines its own limit. Loans made above the limit are called jumbo or non-conforming and are either held in bank portfolios are packaged into private mortgage backed securities (PLS) and sold to investors.

New Limits

The current conforming loan limit at the GSEs will rise from $417,000 to $424,100, while the super confomring limit which governs 238 counties, will increase from $625,500 to $636,150. The super confomring limit applied to 234 counties in 2016, but will impact 2038 in 2017 as 4 counties migrated above the $424,100 threshold including Solano county in California along with Lincoln, Logan, and McPherson in Nebraska. However, nine fewer counties are at the super conforming limit. The FHA limit is expected to be raised as well from $271,050 to $275,665. A full list of the new limits is available on the FHFA’s website[1].

  

Geographically, the higher conforming limit will have an impact on every county in the United States. As depicted in the map[2] below, the high cost areas remain most prevelant on the coast, in large metro areas, and in mountain areas like Denver and Boulder. Furthermore, while the national conforming limit rose by $7,100 and the super confomring rose by $10,650, 49 counties have limits between these levels and will experienced larger changes. Denver for instance will see an increase of $34,500 to $493,350, while Boston will see the largest increase of $74,750 to $589,000. 87 counties were unchanged. A list of counties with the largest changes is included at the end of this article.

Credit Expansion

Credit conditions in the jumbo market have been tight for several years requiring high down payments, high credit scores, and low debt-to-income ratios. The FHA and GSEs allow for down payments as low as 3 percent and for higher back-end debt-to-income ratios than the strict 43 percent limit that is maintained in the jumbo sector.

At the same time, it is cheaper to borrow in the jumbo space, so those borrowers who qualify tend to choose jumbo loans. As home prices rise, borrowers without pristine credit could be forced to put down larger down payments, take out piggy-back loans, or they could get pushed out of the market all together. Consequently, the FHFA’s actions will allow the housing finance market to accommodate an expanding housing market and expand access to some borrowers.

The change to the confomring limit could expand access to additional buyers, though. One group[3] estimates that a $10,000 increase in the limit could result in an additional 40,000 sales based on historic market shares.

The FHFA’s change marks the first new conforming limit in a decade. It puts an exclamation mark on housing market’s recovery, but more importantly it paves the way for continued expansion.

 

[1] http://www.fhfa.gov/DataTools/Downloads/Documents/Conforming-Loan-Limits/FullCountyLoanLimitList2017_HERA-BASED_FINAL.PDF

[2] Reproduced from the FHFA – http://www.fhfa.gov/DataTools/Tools/Pages/Conforming-Loan-Limits-Map.aspx

[3] http://www.bkfs.com/Data/DataReports/BKFS_MM_Sep2016_Report.pdf

Highlights of the October 2016 REALTORS® Confidence Index Survey

Mon, 11/21/2016 - 15:45

While local conditions vary, the REALTORS® buyer traffic index and the confidence index for single-family homes remained above 50 in October 2016, indicating that more respondents reported “strong” than “weak” conditions, according to the October 2016 REALTORS® Confidence Index Survey Report.[1] Both indices were higher than their levels one year ago, but both indices were lower than the previous month’s levels, in part due to seasonality effects. The seller traffic index rose slightly from one year ago, but it has remained below 50 since October 2008, indicating that seller activity is still “weak.”

First-time homebuyers accounted for 33 percent of sales, up from 31 percent one year ago.[2] This is the fifth straight month that the share registered above 30 percent. Sustained job creation and continued low mortgage rates continue to create a more favorable environment for homebuyers, but they are facing a lack of supply and mortgage rate increases in early November may test buyers in the months ahead. With fewer new foreclosures, distressed properties accounted for five percent of sales, purchases for investment purposes made up 13 percent of sales, and cash sales accounted for 22 percent of sales. Nationally, amid tight supply, half of properties that sold in October 2016 were on the market for 41 days or less compared to 57 days one year ago. With demand for properties outstripping supply, 40 percent of properties sold at or above the original listing price.

Lack of supply, especially at the lower price range, and appraisal delays due to a shortage of appraisers were the main issues reported by REALTORS®. Respondents in areas affected by Hurricane Matthew also noted a slowdown in their areas. Still, most respondents were confident about the outlook over the next six months for the single-family homes, townhomes, and condominiums markets, with the six-month outlook confidence indices for these markets registering at 50 and above. REALTOR® respondents typically expected prices to increase by about three percent in the next 12 months.

[1] An index greater than 50 indicates the number of respondents who reported “strong” (index=100) outnumbered those who reported “weak” (index=0). An index equal to 50 indicates an equal number of respondents reporting “strong” and “weak” market conditions. The index is not adjusted for seasonality effects.

[2] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 35 percent were first-time home buyers, up from 32 percent in 2015. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and also captures purchases for investment purposes and vacation/second homes.

REALTORS® Reported Strong Buyer Traffic Amid Weak Supply in October 2016

Mon, 11/21/2016 - 15:42

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members “How do you rate the past month’s traffic in the neighborhood(s) or area(s) where you make most of your sales?” NAR compiles the responses on buyer traffic into a REALTORS® Buyer Traffic Index and the responses on seller traffic into a REALTORS® Seller Traffic Index.

Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that buyer traffic conditions can be characterized as “moderate” to “very strong” in all states except in Mississippi and Connecticut, where buyer traffic was “weak.”[1] Buyer traffic conditions were “very strong” only in the state of Washington.

Seller traffic conditions were “weak” to “moderate”, measured by the REALTORS® Seller Traffic Index[2] REALTORS® reported more widespread selling activity in states that had benefited from the oil boom but are now facing job cutbacks or weak job growth because of lingering lower oil and natural resources prices—namely Alaska, North Dakota, Wyoming, New Mexico, Oklahoma, and West Virginia. Seller traffic conditions were also “moderate” in the District of Columbia and in states with robust homebuying demand such as Washington, Texas, Iowa, Arkansas, Tennessee, Alabama, Georgia, and South Carolina, indicating that supply constraints are somewhat easing in these areas.

Employment conditions affect the supply and demand for housing. The chart that follows shows the change in non-farm employment in from September 2015 to September 2016 by state. Non-farm employment contracted in the oil-producing states of Alaska, North Dakota, Wyoming, Kansas, Oklahoma, New Mexico, Louisiana, and West Virginia.[3] In some of these states, the job cutbacks or slower job growth has led to more home selling. Texas has been more resilient than other oil-producing states, with employment growing slightly above the national average. Employment growth was strongest in Oregon, Idaho, and Florida, and buyer traffic was “strong” to “very strong” in these states.

Nationally, the REALTORS® Buyer Traffic Index[4] registered at 56 (59 in September 2016; 52 in October 2015), indicating that more respondents viewed buyer traffic conditions as “strong” rather than “weak,” The index is slightly higher compared to one year ago, but it is lower compared to the previous month, possibly due to seasonal slowdown and the impact of higher prices on demand. The REALTORS® Buyer Traffic Index has held at 50 or higher since January 2015.

Nationally, the REALTORS® Seller Traffic Index registered at 41 (44 in September 2016; 40 in October 2015), indicating that more respondents viewed seller traffic conditions as “weak” rather than “strong.” Supply conditions have remained, by and large, tight in many areas, with the index registering below 50 since September 2008.

[1] The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 48 are labeled “Weak,” values greater than 48 to 52 are labeled “Moderate,” values greater than 52 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very strong.”

[2] Respondents were asked “How do you rate the past month’s seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. A value of 50 indicates a balance of respondents who reported “Strong “and “Weak” markets. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 48 are labeled “Weak,” values greater than 48 to 52 are labeled “Moderate,” values greater than 52 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very strong.”

[3] For a review of states in which oil has an outsized economic impact, see this blog: http://economistsoutlook.blogs.realtor.org/2016/03/21/is-california-an-oil-producing-state/

[4]The Buyer Traffic Index provides information on the level of homebuying demand or interest which may materialize as a contract to purchase or closed sale after two or three months.

Thanksgiving 2016: How family and friends can influence the home purchase

Mon, 11/21/2016 - 14:54

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 impact the home they purchase. Based on data from the recently released 2016 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, 11 percent of all buyers purchased a multi-generational home, and buyers were typically 52 years old. Eight-six percent of the multi-generational homes purchased were single-family homes.
  • Homes were typically 2,100 square feet and were purchased for $251,000. These multi-generational homes typically had four bedrooms and two bathrooms. Thirteen percent of buyers desired a larger 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 (67 percent), and single females (17 percent).
  • The main reasons for purchasing a multi-generational home were for the health and caretaking of aging parents (19 percent), cost savings (18 percent), children or relatives over 18 moving back into the house (14 percent), to spend more time with aging parents (eight percent), and wanting a larger home that multiple incomes could afford (seven percent).
  • Seven percent of all buyers purchased their home to be closer to friends and family. Single females (nine percent) and married couples (eight percent) recently purchased their homes to be close to friends and family.
  • The convenience to friends and family for single females (49 percent) and unmarried couples (36 percent) was an influencing factor of their neighborhood choice.

View this year’s Thanksgiving infographic and remodeling projects infographic. For more information on home buyers see the 2016 Profile of Home Buyers and Sellers and the Recent Buyer Profiles

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