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Updated: 35 min 57 sec ago

Do Elections Affect the Housing Market in Washington, DC?

Wed, 10/05/2016 - 10:26

In view of the upcoming presidential elections, Washington, DC is getting ready to welcome the administration of the next president. But what does this mean for local housing market? Do elections affect housing market in the area? Let’s take a closer look at the single family existing home sales in the following areas in the past six presidential elections (1988-2015):

  • Washington County, DC (which refers strictly to the District of Columbia alone),
  • Counties inside the beltway (Montgomery County, Prince George’s county, Alexandria, Arlington County, Fairfax County, Falls Church), and
  • Washington, DC metro area (as defined by the Office of Management and Budget).

The current study focuses on the total existing home sales between November and March, since activity for home sales is normally expected to be slower in these months than the other months of the year.  For the three years surrounding the last six presidential elections (the year before, the election year, and the year after), here is the average home sales growth for each one of the areas[1]:

Based on the chart above, we notice that activity for home sales is busier in the election year and even better in the following year for Washington County, DC. In the Washington, DC metro area:

  • The year before an election home sales rose by 10 percent on average.
  • The year of the elections home sales rose by 12 percent on average.
  • The year after the elections home sales rose by 10 percent on average.

We also notice that the metro area experiences higher growth in home sales than the county itself. This shows that people go beyond the District’s borders to buy single-family homes.

Likewise, median home prices had more gains in the election year than the previous and following year in both areas. According to the visualization below, in Washington, DC metro area, median home prices grew by 3 percent in the previous year of the elections, 7 percent in the election years and they went back to 5 percent growth one year after the elections. In a similar way, the District experienced 7 percent price growth in the previous year of the elections, 8 percent in the election years and 6 percent one year after the elections.

All in all, it seems that the following months will be very busy for Realtors in Washington, DC metro area. In buyer’s perspective, housing hunting process is expected to be more competitive while sellers can benefit from the anticipated busier activity.

 

Detailed analysis for each one of the election periods

Elections 1992: In the first year of Clinton’s presidency, home sales increased by 2 percent in Washington, DC metro area from the previous year. However, sales increased by 12 percent one year after the elections. Taking a closer look at the housing market in 1993, it seems that more factors boosted home sales that year. For instance, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 required Fannie Mae and Freddie Mac to devote a percentage of their lending to support affordable housing increasing their pooling.

Home prices grew less than the year before the elections. The median home price in 1992 was $141,424 in Washington, DC metro area while it was slightly higher at $148,819 in Washington County, DC for the period between November/1992 and March/1993.

Elections 1996: In the second term of Clinton’s presidency, home sales in Washington, DC metro area decreased by 8 percent compared to a year prior. In contrast, home sales increased by 48 percent in the year after the elections. In July 1997, the Taxpayer Relief Act changed the treatment of capital gains from residential real estate to exempt from taxation gains of up to $250,000 for singles and $500,000 for married couples.

With regards to home prices, the median home price in 1996 was $145,327 in the metro area while it was $138,720 at county level. Home prices increased in both areas in 1996 (3.4 percent price growth in metro area, and 6.1 percent price growth in the county).

Elections 2000: Under the first year of Bush’s presidency, home sales increased less than the year before the elections in Washington, DC metro area. In 1999, single-family home sales increased 65% while they rose 37% in 2000. Also, in the beginning of March 2000, the Dot-com bubble collapse began. This may be one of the reasons that home sales slowed down in 2000.

However, home prices increased in 2000. Median home price was $176,124 in the metro area while it was $166,136 in the county for the period between Nov/2000 and March/2001.

Elections 2004: In 2004, while the homeownership rate peaked with an all-time high at 69 percent, single-family home sales reached a peak in Washington, DC metro area (32,050 home sales in the period between November and March). As a result, median home price for the months November through March rose to $348,915 in 2004 from $272,314 a year earlier (28 percent increase).

Elections 2008: Nationwide, after the largest drop in home sales in 25 years, home sales continued to fall. However, in the Washington, DC metro area, single-family home sales started picking up in 2008. Home sales increased by 25 percent from a year earlier for the period November/2008- March/2009.

Nevertheless, home prices continued to fall in the metro area. Actually, median price dropped to 295,877 for the period Nov/2008-March/2009. That was a 21 percent decrease from a year earlier.

Elections 2012: During the second inauguration of Obama, home sales in the Washington, DC metro area rose by 11 percent from a year earlier. Home sales for the period Nov/2012 – March/2013 were almost 20,000 while the median home price increased to $320,468 (11 percent increase).

[1] Excluding the category of “Counties inside the beltway” because there are not available data for this area before 2004.

64 Percent of Contracts Were Settled on Time

Tue, 10/04/2016 - 09:23

In reporting on their last contract that went into settlement or was terminated over the period June–August 2016, respondents indicated that 64 percent of contracts were settled on time, 30 percent had delayed settlement, and six percent were terminated, according to the August 2016 REALTORS® Confidence Index Survey Report.

Among contracts that had a delayed settlement (30 percent), issues related to obtaining financing, appraisal, and home inspection were the primary causes of the delay. The fraction of delays due to appraisals has increased in recent months, in part due to a shortage of appraisers and other issues reported by REALTORS® (e.g., being asked to make “inspections”).[1]

 

Among contracts that were terminated (six percent), issues related to home inspections, obtaining financing, and appraisals were the major causes of termination.

[1] Danielle Hale, “Concern about Fast-Rising Prices, or Overworked Appraisers?” http://economistsoutlook.blogs.realtor.org/2016/08/24/concern-about-fast-rising-prices-or-overworked-appraisers/

 

TRID: A Year Later

Mon, 10/03/2016 - 11:15

A year after implementation of the Know Before You Owe rule, many REALTORS® expressed both support, but also frustration. The TILA-RESPA Integrated Documentation (TRID) or Know Before You Owe rule went into effect on October 3rd 2015. In early September, NAR Research surveyed nearly 2,500 REALTORS® to get their perspective on the impact of Know Before You Owe one year after implementation. This survey reviews REALTORS® experiences in the 3-month period prior to the 1st anniversary with the 3-month period after implementation (Q4 2015 versus Q3 2016).

In general, the results were positive as delays eased and REATLORS® found new ways to ameliorate the impact of the regulation. However, members remained frustrated with limited access to the closing disclosures (which replaced the HUD-1) and its impact on the relationship between REATLORS® and their clients. Respondents indicate that since implementation:

  • Delayed transactions fell from 10.4 percent to 8.5 percent, but cancellations edged up slightly from 0.6 percent to 0.7 percent.
  • 45.6 percent of respondents had problems getting closing disclosures down from 54.5 percent.
  • However, REALTORS® were more likely to request closing disclosures from title agents than lenders in the 3rd quarter, especially REALTORS® with greater transactions volume.
  • On average delayed and canceled transactions cost consumers $410 and $226, respectively. Rental and deposit expenses as well as lost vacation time accounted for most expenses.
  • The share of respondents who identified errors on CDs rose from 43.3 percent to 50.6 percent. Missing concessions and incorrect names or addresses were the most frequently cited errors, but incorrect fees, commissions, and taxes were also reported
  • Large retail banks were far more problematic than small lenders, mortgage banks, and non-banks
  • REALTORS® noted no change in lenders’ willingness to share the closing disclosure following the CFPB’s clarification on CD sharing in late July of 2016. Legal requirements and consumer privacy were most frequently cited when sharing was refused.

In addition to taking the survey, many respondents shared their perspectives on TRID including these thoughts:

“We are creatures of habit and hate changes. Once I had about 3 closings under TRID, it all was like my first closing 13 years ago. I don’t see a problem now…”

“In my opinion the TRID guidelines have reduced the communication between lenders and REALTORS® and it feels like a push to keep us out of the process…”

“I worked 23 years building strong relationships and this new TRID experience has removed me from a lot of the process making me feel my relationships are suffering as a result. The real estate industry, on whole, is suffering from external influences and the client is ultimately the one who loses that great service.”

“My clients often got screwed by their lenders before TRID. They paid outrageous loan fees. This has dropped significantly.”

“Most of the problems come from agents and banks that are unwilling to share the information because it is ‘illegal’. I spend a lot of time arguing that it is not, buyer agrees to share it in contract, vs bank and other agent saying it cannot be shared.”

The market appears to have made steady progress adapting to the new TRID rules and some see value in it. However, frustration driven by change and lack of access to the closing disclosure remains.

To Buy a New or Previously Owned Home

Thu, 09/29/2016 - 15:32

Since 1981, the Profile of Home Buyers and Sellers has collected data on whether home buyers purchased a new home or a previously constructed existing home. For many people around the country, new home construction simply does not exist in their area and moving to a location with new homes becomes a geographic hike that isn’t feasible. In addition, new homes often cost more than one that someone has lived in before. In the 2015 Profile of Home Buyers and Sellers, the typical buyer purchased a new home for $277,000 compared to an existing home for $209,000. So what is the breakdown of new and existing homes purchases?

Most recently, from 2011 to 2015 new home purchases have been the lowest consistent levels seen since NAR started collecting the data 35 years ago at 16 percent. In 2015, there were 5.25 million existing homes sold compared to only 501,000 newly constructed single-family homes (condos not included).

In the last few years, there has been a lack of inventory of homes on the market and builders have been reluctant to start new development since the recent market downturn despite historic low mortgage interest rates. In 1981 and 1985, new home purchases were similarly low at only 18 percent of all homes purchased and were at their lowest in 2010 at 15 percent.

 

 

In 1989, new home purchases were at a peak at 29 percent of all homes purchased that year, preceded by a robust year in 1987 at 27 percent. In 2003, we saw another spike in new home purchases to 28 percent of all homes bought that year. From 2004 to 2008, new homes fared well between 21 and 23 percent.

Conversely, existing homes sales accounted for 84 percent of all homes sold from 2011 through 2015. Previously owned homes sold at a peak in 2010 at 85 percent and at a low in 1987 and 2003 at 71 and 72 percent respectively.

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.

August Pending Home Sales

Thu, 09/29/2016 - 11:41
  • NAR released a summary of pending home sales data showing that August’s pending home sales are down 2.4 percent from last month and also slipped 0.2 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 decreases from a year ago except the Northeast, which had an increase of 5.9 percent. The Midwest saw the biggest decline from a year ago at 1.7 percent while the West had the smallest decline of 0.6 percent. The South had a decline of 1.5 percent.
  • From last month, the Northeast had the largest increase at 1.3 percent. The Midwest had the smallest decline of 0.9 percent. The South followed with a decline of 3.2 percent and the West had the largest decline of 5.3 percent.
  • The pending home sales index level was 108.5 for the US.
  • 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.

REALTORS® Expect Slower Price Growth in Next 12 Months

Wed, 09/28/2016 - 09:37

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “In the neighborhood or area where you make most of your sales, what are your expectations for residential property prices over the next year?”

The map below shows the median expected price change in the next 12 months among REALTORS® who responded to the June–August 2016 RCI surveys, according to the August 2016 REALTORS® Confidence Index Survey Report. Price expectations vary by area, and the median expected price change is a measure that represents the middle value of the distribution of responses.

The areas of strongest expected price growth are in the District of Columbia and Washington, where the median expected price growth was more than five to six percent. REALTOR® respondents from Oregon, Colorado, Tennessee, South Carolina, and Florida also expected strong price growth of greater than four to five percent.

 

With prices having increased steeply since 2011, REALTORS® expect prices to grow at a slower pace in the next 12 months, with half of the respondents expecting home prices to increase by 3.1 percent or less.

 

 

In many states, REALTORS® expect prices to increase but at a slower pace in the next 12 months than was expected in previous months.[1]

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

Seasonal Housing Slowdown

Tue, 09/27/2016 - 15:18

Many local markets have been red-hot. A home seller might be tempted to wonder what is wrong with their home or REALTOR® if a buyer is not found in a month. Throughout this past summer, nearly half of homes listed found a willing buyer within a month: the median days on market nationally was 34 days from April to August. The pace was faster in the Pacific Northwest and a bit slower in the New England states, but this broadly brisk rate of sales will not last because autumn is here and winter is ahead.

View Lawrence Yun’s full Forbes article here.

Helping Family with A Downpayment For Their Dream Home

Tue, 09/27/2016 - 11:46

Consumers across income and education brackets would greatly benefit from increased awareness and financial understanding on downpayment requirements needed to obtain a mortgage. In NAR’s September Housing Opportunities and Market experience (HOME) report, a quarterly index measuring consumer sentiment on the housing market, respondents were asked topical questions regarding downpayments. The report found that 14 percent of respondents believe they need less than 10 percent for a mortgage downpayment. Thirty-four percent believe that need more than 20 percent for a downpayment.

 

For those that currently own a home, 35 percent—the largest share—believe they need 15 to 20 percent for a downpayment, and 13 percent believe they need five percent or less—the smallest share. For respondents 34 years and younger, 37 percent believe they need more than 20 percent, as did 43 percent of those 65 years or older. Four in 10 people with an income of less than $50,000 believe they need more than 20 percent as do nearly half of respondents with no college education.

The September survey also asked if respondents whether they helped out a family member with a downpayment and if they received downpayment assistance from family. For all respondents, only 16 percent had helped out a child or family member with a downpayment. Respondents from rural areas (19 percent) were more likely to help a child or family member with a downpayment than in urban areas (14 percent). Respondents with an income of over $100,000 (19 percent) were also more likely to help a family member than those that make less than $50,000 (14 percent). Respondents that own a home (20 percent) are twice as likely to help out a family member with a downpayment as those that rent (nine percent) or live with someone else (10 percent). Respondents that offered downpayment assistance increased with age.

For all respondents, 19 percent have received a downpayment from a parent or family member. Twenty-two percent of those that make $50,000 to $100,000 received assistance with a downpayment from a parent or family member—the largest share by income group. Thirty-four percent of respondents 34 years or younger have also received downpayment assistance from family—the largest share among age group. Urban areas and the Northeast region received the greatest share of downpayment assistance as did those with some college education.

For more information on mortgage eligibility and downpayment requirements to purchase a home, please see the Buying a Home portal by the U.S. Department of Housing and Urban Development (HUD) and the Local Homebuying Programs by state.

 

Properties Were Typically on the Market for 36 Days in August 2016

Tue, 09/27/2016 - 11:17

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 August 2016 compared to one year ago amid strong demand and tight supply, according to the August 2016 REALTORS® Confidence Index Survey Report. Nationally, properties sold in August 2016 were typically on the market for 36 days (36 days in July 2016; 47 days in August 2015).11 Local conditions vary, and the data is provided for REALTORS® who want to compare local markets against other states and the national summary.

In many states, half of the properties that sold in June–August 2016 were on the market for less than 31 days.

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.

11 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.

Highlights of the August 2016 REALTORS® Confidence Index Survey

Fri, 09/23/2016 - 15:18

While local conditions vary, the REALTORS® buyer traffic and current conditions confidence indices remained above 50 in August 2016, indicating that more local markets were “strong” rather than “weak,” according to the August 2016 REALTORS® Confidence Index Survey Report.[1] The buyer traffic index, an indicator of homebuying interest, stood at about the same level as last year but was lower than the previous month’s level, perhaps reflecting some seasonal slowdown as well as an easing of demand due to the steep price growth that has made purchasing a home increasingly less affordable.[2] The seller traffic index has remained below 50 since September 2008, indicating that seller activity remains generally “weak.” Relatively strong demand amid tight supply has pushed prices up to increasingly less affordable levels.

First-time homebuyers accounted for 31 percent of sales, essentially unchanged from its levels one year ago and the previous month. Purchases for investment purposes made up 13 percent of sales, and cash sales accounted for 22 percent of sales, both substantially unchanged from the levels one year ago and the previous month. Distressed properties were five percent of sales, down from seven percent last year. Nationally, amid tight supply, half of properties that sold in August 2016 were on the market for 36 days or less compared to 47 days one year ago.

Very low supply, declining affordability, appraisal issues, and lender processing delays were reported as the key issues affecting sales. Still, most respondents were confident about the outlook for the next six months across all property types, with the six-month confidence indices for single-family homes and townhomes registering over 50. With home prices increasingly becoming less affordable, respondents typically expected prices to increase at a slower pace of 3.1 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] 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.

Single-Family Homes Are a Buyer’s Best Friend

Fri, 09/23/2016 - 14:44

Overwhelmingly, home buyers have purchased detached single-family homes more than any other type of home in the last 35 years. Since 1981, the Profile of Home Buyers and Sellers has collected data on the types of homes purchased throughout the three-and-a-half decades. Consistently, 74 to 88 percent of home buyers purchased single-family homes each year. Home buyers purchased townhomes and condos each at roughly 10 percent of the time and other types of homes less frequently.

In 1981, 76 percent of home buyers bought detached single-family homes, eight percent bought townhomes, and 16 percent bought condos. By comparison in 2015, 83 percent bought detached single-family homes, seven percent bought townhomes, and three percent bought condos.

Single-family homes were the top home choice in 1985 at 88 percent, and again at 87 percent in 2002 and 2004. From 1985 to 2002, four in five buyers steadily purchased single-family homes. From 2005 to 2012, three in four buyers bought single-family homes. Townhome purchases hovered around nine percent for the majority of the 1990s and early 2000s and then dropped one to two points since 2008. Condo purchases were most popular from 1997 to 2007 at 11 percent for several years, but also dropped a few percentage points starting in 2008. By 2015, only three percent of homes purchased were condos. Other home types started gaining popularity in 2003 at two percent and have grown in market share to seven percent by 2015.

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.

REALTORS® Reported “Weak” Supply Amid “Strong” Demand in August 2016

Fri, 09/23/2016 - 14:38

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.

The REALTORS® Buyer Traffic Index[1] registered at 61(64 in July 2016; 60 in August 2015), indicating that more respondents viewed buyer traffic conditions as “strong” rather than “weak,” according to the August 2016 REALTORS® Confidence Index Survey Report. The index is essentially unchanged 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.

Meanwhile, supply conditions remained, by and large, tight in many areas. The REALTORS® Seller Traffic Index registered at 44 (45 in July 2016; 45 in August 2015), indicating that more respondents viewed seller traffic conditions as “weak” rather than “strong.”

The maps below show the condition of buyer and seller traffic using data collected from June‒August 2016. Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that markets were “moderate” to “very strong” in all states except in Wyoming, North Dakota, and Connecticut where buyer traffic was “weak.”[2]

Seller traffic was “weak” in many states, measured by the REALTORS® Seller Traffic Index.[3] However, seller traffic was “moderate” to “strong” in several states, including those that had benefited from the oil boom but are now facing slower job growth because of lingering lower oil and natural resources prices—Alaska, Montana, North Dakota, New Mexico, Texas, and Louisiana.

Employment conditions affect the demand and supply for housing. The chart that follows shows the change in non-farm employment in July 2016 from July 2015 by state. Non-farm employment contracted in the oil-producing states of North Dakota, Wyoming, Oklahoma, and Louisiana and increased only modestly in several other natural resources states in the Midwest and South.[4] The slower job growth and job cutbacks in these states are likely leading to more seller traffic and a shift to a buyer’s market.[5] Meanwhile, several other oil-states such as Utah, Colorado, Texas, and New Mexico have job growth near to or above the national average. Employment growth was strongest in Washington, Oregon, Idaho, Utah, Colorado, and Florida. Buyer traffic was “strong” to “very strong” in these states.

[1]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.

[2] 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 76 are labeled “Very strong.”

[3] 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 76 are labeled “Very strong.”

[4] 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/

[5] https://communityimpact.com/houston/the-woodlands/economic-development/2015/12/09/falling-oil-prices-starting-to-affect-woodlands-economy/http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/

August 2016 Existing-Home Sales

Fri, 09/23/2016 - 10:31
  • NAR released a summary of existing-home sales data showing that housing market activity slowed for the second month in a row. August’s existing-home sales slid to the 5.33 million seasonally adjusted annual rate and existing-home sales are modestly up 0.8 percent from a year ago.
  •  The national median existing-home price for all housing types was $240,200 in August, up 5.1 percent from a year ago.
  • Regionally, all four regions showed growth in prices from a year ago, with the West leading at 9.2 percent. The South had an increase of 6.7 percent, and the Midwest followed with a 5.5 percent increase. The Northeast had the smallest gain of 0.8 percent from August 2015.
  • From July, three regions experienced declines in sales with the Northeast being the only region to have an increase of 6.1 percent. The Northeast is benefiting from sufficient inventory and that is helping tame price growth. The South had the biggest regional dip in sales with decline of 2.7 percent. The West had a decline of 1.6 percent while the sales in the Midwest declined 0.8 percent.
  • All regions showed a modest gain in sales from a year ago except the Northeast where sales remained flat. The South led all regions and had the biggest gain of 0.9 percent. The Midwest and the West both had gains of 0.8 percent. The South also leads all regions in percentage of national sales at 40.5 percent while the Northeast has the smallest share at 13.1 percent.
  • August’s inventory figures are down 3.3 percent from last month to 2.04 million homes for sale and the level remains below historical averages. Inventories are considerably down 10.1 percent from a year ago. It will take 4.6 months to move the current level of inventory at the current sales pace. It takes approximately 36 days for a home to go from listing to a contract in the current housing market, down from 47 days a year ago.
  • Single family sales decreased 2.3 percent while condos increased significantly 10.5 percent compared to last month. Single family home sales inclined 0.6 percent and condo sales are also up 1.6 percent from a year ago. Both single family and condos had an increase in price with single family up 5.3 percent and condos up 3.7 percent from August 2015.

 

 

Growth Forecast for REALTOR® Firms

Thu, 09/22/2016 - 09:25

Let’s take a snap shot into the minds of REALTOR® firms and their projection for business in the near-term from the 2016 Profile of Real Estate Firms. First, we know that roughly half (47 percent) of all firms are actively recruiting agents in 2016, up from 44 percent in 2015. Hiring is always an indicator of industry health. At the peak, 88 percent of large firms with four or more offices are actively recruiting. Firms cited that their main reason for recruitment (at 86 percent) is that they are experiencing growth in their primary business area. Another reason for recruitment, at roughly two-thirds (64 percent), could be that firms have the expectation of profitability to increase in the next year—from mid-2016 to mid-2017—which is consistent across residential and commercial firms and grows to 72 percent for larger firms with multiple offices.

 

Firms’ view of their competition is always fascinating. By and large, firms expect the level of competition to stay the same from all angles, meaning traditional brick and mortar firms, virtual firms, and non-traditional market participants. Forty-six percent of firms cited that competition was expected to increase from virtual firms and 43 percent expected an increase from non-traditional market participants, which is not a surprise and is consistent with 2015.

The biggest challenges firms face are profitability, keeping up with technology, and maintaining sufficient inventory. New challenges that emerged were TRID or TILA-RESPA Integrated Disclosure (17 percent) and wire fraud (12 percent). However, competition from traditional brick and mortar firms, virtual firms, and non-traditional market participants all moved down a few percentage points in 2016 compared to last year. The recruitment of younger agents, agent retention, and local or regional economic conditions all moved up by a few points as expected challenges in the next two years.

For the first time on the 2016 survey, we asked if firms had an exit plan in place, as in if they have a backup strategy in case they want to change industries due to economic shifts, or simply if they plan to retire and want to pass the torch. Thirty-eight percent of firms said they did in fact have an exit strategy while 43 percent said they did not plan on retiring or leaving the business.

Trading Up and Trading Down: The Times Are A Changin’

Wed, 09/21/2016 - 10:51

Repeat home buyers have the option of trading up for a bigger home, purchasing a home similar in size, and trading down to a smaller home. This change in home size often corresponds to life changes. For instance, empty nesters will often trade down to a smaller home when children leave and they want less space to maintain. Young families that expect more children will often trade up in size to accommodate more people under one roof.

The Profile of Home Buyers and Sellers has collected data since 2003 on the changing size of homes purchased by home buyers. Size often corresponds to home price. Similar in fashion, the Profile of Home Buyers and Sellers has also tracked the changing price of homes purchased by home buyers since 2008.

In 2015, only 42 percent of home buyers traded up in the size of their home. Twelve years prior in 2003, home buyers were more frequently trading up in size at 55 percent. Since 2009, where 54 percent of home buyers traded up, we see a steady decline in the number of home buyers trading up. In 2004, we saw a peak in home buyers trading up to a larger home at 57 percent, and in 2014 we saw a low in home buyers trading up at 40 percent.

Also in 2015, we see a peak in home buyers trading down in size at 31 percent, the largest segment that traded down in the last twelve years. In 2005, roughly a decade prior, home buyers trading down was at its smallest group with just 20 percent of all buyers. Since 2011, the share of home buyers trading down in size has steadily increased.

As for repeat buyers that purchased the same size home, in 2003 the share of this group was only 16 percent—the lowest in the time series. From 2004 to 2012, the share of buyers purchasing the same size of home is greater each year than the share of those who traded down. In 2013 and 2015, repeat buyers that traded down surpassed those buying a home similar in size.

 

In terms of home price, there has been a steady increase in home buyers trading down since 2008 when we started collecting the data. In 2008, just 22 percent traded down in price and 54 percent trade up. By 2015, buyers trading down in price increased to 30 percent and buyers trading up decreased to 47 percent. The share of repeat home buyers that bought roughly the same price in home has been steady at 23 to 25 percent from 2008 to 2015, with the exception of 2010 when only 20 percent bought at the same price.

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.

In Real Estate, Firms Are A Family Affair

Tue, 09/20/2016 - 15:46

In the 2016 Profile of Real Estate Firms, we surveyed our members for the first time on to learn if firms were family-run businesses and what type of family relationships exists within the firm. Members cited that 50 percent of all firms had some type of family relationship and seven percent of those firms were completely family-run where everyone was related.

Family relationships grow stronger as the size of firms increase; 68 percent of firms with four or more offices cited they have some type of family relationship. The most common family structure in the firm was a spouse or partner (62 percent), followed by parent-child (55 percent), siblings (18 percent), and grandparent-grandchild (four percent). The spouse or partner relationship was strongest in smaller, one-office firms and the parent-child and sibling relationships grew with larger firms that had multiple offices.

By and large, firms encourage its members to volunteer in the local community (82 percent), at local associations of REALTORS® (48 percent), at state associations of REALTORS® (28 percent), and at the National Association of REALTORS® (19 percent).

 

Construction Gap Improves, but Remains Wide

Mon, 09/19/2016 - 12:05

Summary:

  • Despite strong gains in 2015, sluggish construction persists
  • Supply constraints are wide spread
  • Prices are likely to continue to rise in markets with inadequate supply in relation to job creation

 

While the homeownership rate tumbled in the wake of the great recession and millions of owners shifted to rentership, the total population and number of families continued to expand along with the need to house them. Construction has been limited and focused on the upper-end of the market. Without an expansion of the total stock of homes, prices and rents will continue to rise at the expense of affordability.

In normal times the supply of homes for sale is driven by two sources: new construction and existing homes brought to the market for sale. In the aftermath of the great recession foreclosures and short sales emerged as an important channel for inventory but have receded. Negative equity and student debt now keep some owners from bringing existing stock to the market, but limited inventory also acts as a disincentive for some would-be sellers. As the market normalizes, the emphasis on traditional channels of inventory, new construction in particular, has grown.

 

The relationship between employment and construction can provide insights to the extent of the shortage.  Historically, there is a strong relationship between new construction and the number of newly employed workers.  From 1990 to 2002 the US averaged 1.2 for total permits (single family and multi-family), or 1 permit for every 1.2 new workers. For single family permits this employment-to-permits (EP) ratio was 1.6.  Both of these ratios have been above their historic averages since 2012 and peaked in 2014.[1]  The total EP ratio fell from a high of 2.3 in 2014 to 2.0 in 2015 as strong single family permits growth outpaced steady improvements in new employment. The single-family EP ratio improved as well, from 3.7 to 3.4, but remains further from its long-term average.

 

This imbalance was widespread with 81.3 percent of the 171 metro areas tracked having a single family EP ratio greater than 1.6.  Furthermore, 36.3 percent of the markets had a ratio of 4.0 or higher.  When multi-family construction was included in the total, the distribution was not as extreme, but 52.9 percent had an EP ratio of 2.0 or higher and 29.1 percent were bunched between a ratio of 2.0 and 3.0 indicating an imbalance.

Based on the EP ratio, the gap between the current level of permits and one that would achieve the historic EP ratio or strike a balance between employment and permits can be calculated.[2]  Markets with the biggest absolute shortage of permits tend to be large markets with strong employment and price growth. New York led the list followed by Dallas and San Francisco.  California dominated the top 10 list with three markets including San Jose and San Diego.

The list was also ranked by the 3-year employment to permits ratio (not pictured here).  Trenton (NJ) topped that list with a ratio of 25.1, up from 22.3 in 2014, which resulted from strong employment gains and minimal single family permitting.  Three California markets follow Trenton, but other smaller markets made the list including Springfield (MA) and two Michigan markets in Ann Arbor and Grand Rapids.  Roughly a dozen markets were in balance with ratios near 1.6 including Pensacola, Huntsville, and Columbia (MO).

Supply shortages and price growth have continued through 2016. Reports of bidding wars are common while stories of frustrated would-be home buyers abound. Construction analysts forecast continued improvement and media reports point to gains in the much needed entry-level portion of the market, but builders face headwinds from financing issues, high labor costs, regulations, and limited buildable land.  A decline in negative equity that unlocks existing inventory will help, but the only way to house an expanding workforce and population is through construction.

 

For the full list of Single Family ranking by 3-year employment-to-permits ratio please click here >

 

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[1] To remove annual volatility, a 3-year moving average was calculated.

[2] R = historical average of permits/employment ratio

Inventory balance (excess/shortage) = actual employment / R – actual permits

Market Snapshot: Second Quarter 2016

Wed, 09/14/2016 - 08:18

NAR Research produces a series of Local Market Reports (LMRs) which provide insights into the fundamentals and direction of the nation’s largest metropolitan housing markets. Each report evaluates a number of factors affecting home prices, including:

  • The health of the local job market
  • Foreclosure rates
  • Housing inventory
  • Debt-to-income and mortgage-servicing-costs-to-income ratios

 

The reports for the second quarter of 2016 were released a couple of weeks ago. The visualization below provides a snapshot of these reports. For more detailed data, please visit our Local Market Reports page.

 

 

Home Buyer and Seller Race and Ethnicity Trends

Tue, 09/13/2016 - 15:21

Since 1997, respondents of the Profile of Home Buyers and Sellers have had the option to choose as many or as few options for how they racially and ethnically identify themselves. Using this data, the ethnic and racial diversity of home buyers and sellers can be seen on a trending basis.

The initial tracking of race and ethnicity of home buyers started in 1997, and showed that among recent home buyers 90 percent identified as White/Caucasian, eight percent identified as Hispanic/Latino, five percent identified Black/African-American, four percent identified as Asian/Pacific Islander, and one percent identified as other. Skipping ahead to 2003 all race/ethnicity categories remain consistent going to 2015.  While home buyers remain predominantly White/Caucasian, the other categories each have peak highs. Between 1997 and 2015, each race/ethnicity had peak highs in the following years:

  • White/Caucasian: 1997, 90%
  • Black/African-American: 2005-2007, 7%
  • Hispanic/Latino: 1997, 8%
  • Asian/Pacific Islander: 2006, 6%
  • Other: 2003 and 2014, 3%

Looking at first-time home buyers, the race and ethnicities of non-White/Caucasian buyers is higher than among all buyers. Between 2003 and 2015, the percentage of Black/African-American and Hispanic/Latino first-time home buyers both ranged from six to 11 percent. The percentage of Asian/Pacific Islander first-time home buyers ranged from five to eight percent, and White/Caucasian first-time home buyers ranged from 73 to 80 percent. Between 2003 and 2015, first-time buyers in each race/ethnicity had peak highs in the following years:

  • White/Caucasian: 2013, 80%
  • Black/African-American: 2006, 11%
  • Hispanic/Latino: 2011, 11%
  • Asian/Pacific Islander: 2014, 8%
  • Other: 2003, 4%

 

For more trend lines from the past 35 years of the Profile of Home Buyers and Sellers, follow along using #NARHBSat35.

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