Economist's Outlook

‘Open House:’ A Tradition Still Alive and Growing

Do you scan the paper to find open houses while you are drinking your Sunday coffee? Despite all the changes technology has made in the housing market, the Sunday open house has undoubtedly been a tradition in real estate industry. In fact, it is a tradition that is still alive and growing, as Google search data shows. Nationwide, public interest in open houses seems to have increased over time.

NAR tracked the search activity for open houses from January 2004 through June 2017 using the public Google Trends website. Google Trends is a tool that allows you to see what people are searching and how specific terms have trended over time. Derived from Google’s search data, Trends measures the relative volume of searches made on Google. It creates indexes that show trending instead of actual volume of the specific search terms.

Our study focuses on the proportion of searches for open houses performed from 2004 through last month. The study begins in 2004, when the housing market was in the bubble period. The data, based on eight different search terms associated with open houses, shows that people are becoming more and more interested in searching for open houses over the time.

Main Findings


On Sunday, April 17th 2016, searches in the Real Estate category related to open houses reached their highest level of interest. Based on Google Trends, the interest for open houses was 100 on a 0-100 scale[1]. This can be a good proxy for public interest in open houses, since it shows when most queries into the search box for open houses occurred in the last 13 years.

We calculated the 6-month average for every year and found that Google searches for open houses in 2017 reached the highest mark in 13 years. Data shows that open house searches in 2004 were half as popular as in 2017. Also, it is interesting to note that public interest for open houses was relatively “inelastic” to the recent housing downturn. The 6-month average interest for open houses slightly decreased from 58 in 2009 to 55 in 2010 while it picked up at 61 in 2011.

We reviewed search activity for each month, and we see that home search activity gets typically busy in March, April, May and August while it reaches its lowest level in December and January every year. This is the same trend that we see in Existing Home Sales activity; sales activity increases in the “warm” months of the year while it diminishes in the winter as well.

Looking at the weekly search activity that occurred throughout each year, we found that in the last 13 years the most popular month of the year, day of the week and time of the day for a search related to open houses were accordingly:

Search activity by state and metropolitan area level

Google search data provides results for search activities at the state and metropolitan area level. During a specified time frame, we are able to see in which location searches for open houses were most popular. A result of 100 shows the location with the most popularity as a fraction of total searches in that area. Thus, it is important to bear in mind that a higher value means a higher proportion of all queries and not a higher absolute query count. So, a small state where 80 percent of the queries are for “open houses” will get twice the score of a big state where only 40 percent of the queries are for “open houses”. Thus, results favor small areas[2].

For the period 2011 until last month, open house search was most popular in Connecticut (100) followed by North Dakota (88) and Montana (83). This means that these three states had the three highest proportions of queries related to open houses. For North Dakota and Montana, we see that more people are moving to these two areas. While employment increased, North Dakota and Montana experienced influx of migrants who are interested in looking for open houses.

The visualization below shows the open house search activity for each state from January 2011 through June 2017. Select your state in the Google search box and see how your state ranked based on the search activity for open houses:

At the metropolitan area level, Google Trends provides results for 40 areas. Followed by Hartford & New Haven, CT and Santa Barbara – Santa Maria – San Luis Obispo, CA, Ft. Myers – Naples, FL had the highest traffic for open house search relatively to other searches on Google.  From 2011 through last month, home search activity in Ft. Myers – Naples was typically busy in the first three months of the year—when the weather is warm but not yet too hot—while activity diminished in the following months, a contrast with nationwide home search activity which tends to reach its highest value in the “warm” months and be slower in the first months of the year. This example shows that public interest may trend differently by area throughout the year.

The visualization below allows you to see how home search activity is trending in your area, so you know what to expect about people’s interest when you host an open house.


[1] Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. Likewise a score of 0 means the term was less than 1% as popular as the peak.


[2] Also, based on the Law of Large Numbers, proportions tend to get closer to the true percentage as the size of population increases because standard deviation gets smaller. This means that proportions for big states are closer to reality.


Instant Reaction: May Owners’ Gains Forecast

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index level in May reached a new high and is up 5.6 percent from a year earlier.  But what does this mean for homeowners?

Home prices affect the wealth of homeowners. As the price of housing increases, the wealth of homeowners increases as well. Based on the above increase of home prices, it is estimated that value of owners’ household real estate was increased by 1.2 trillion in the last year and 103 billion came from home price increases in May. That means that 75 million homeowners each gained $16,530 on average in May 2017 from a year earlier.

The Future of Appraisal: It’s Not Simple

Reports of delayed appraisals and rising appraisal costs flourished in 2016. In this article, we try to shed light on potential paths the industry might take moving forward given trends in demographics, training, and automation. This analysis suggests that while industry constraints may improve in the short-run, the long-term constraints are significant. Furthermore, neither expanded training of new entrants nor automation alone will solve anticipated growth in demand on the appraisal industry.

Earlier this year, NAR Research surveyed REALTOR®-members who were also in the Appraiser Trends Study. The key findings were that while some appraisers would exit the industry in the near-term, a demographic waive of baby-boomer appraisers planned to retire in the not-so-distant future. Simultaneously, training the next generation was a problem. Finally, while some point to automation as a salve other suggest that it can only partially satisfy needs and creates headwind to attract the next generation of appraisers.

The intent of this analysis is to shed light on potential changes to the appraisal industry in the coming decades. Any forecast is susceptible to changes in assumptions and a long-term forecast like this one even more so. This analysis is not all-inclusive, but is intended to gauge the magnitude of major trends in the industry and possible solutions. The remainder of report is as follows; both supply of and demand for appraisers is estimated and then compared to a period of stress, shortages and rising costs, to provide insights about potential stress in the future.

Supply of Appraisers

First, the total number of unique active appraisers in the United States must be determined. The Appraisal Subcommittee (ASC) maintains a database of all licensed or certified appraisers in the United States with roughly 96,000[1] records. However, this database is an amalgamation of state databases and does not have unique identifiers for appraisers nor does it account for appraisers with multiple designations (e.g. certified, certified residential, licensed residential). Respondents to NAR’s Appraiser Trends Survey indicated in which state(s) they operated as well as their designation(s). These responses were used to estimate the magnitude of duplication in the ASC’s database and to deflate that figure in order to provide an estimate of the total unique residential appraisers at 82,000.

The Appraisal Foundation (AF) maintains records of the number persons who pass the National Uniform Licensing and Certification Examinations (NCLUE) exam each year. This exam is required before an appraiser can practice. In 2008, 2,087 persons passed the exam but that figure fell to an average of roughly 1,000 from 2010 to 2014, before bottoming at 662 in 2016.

Finally, participants in NAR’s Appraiser Trends Survey provided the number of years they intended to work before anticipated retirement or exit from the industry. These figures were used to estimate planned retirement for the entire population of 82,000 appraisers in the industry. Combining the expected annual new trainees and retirements to the stock of 82,000 creates a projection of the total stock of appraisers over a 50-year period (below).

As depicted below, the total number of appraisers varies widely depending on one’s assumption about the number of new entrants each year. If training continues as it did in 2016, the total number of appraisers falls to roughly a quarter of today’s level within 30 years (green line).  However, at a higher level of 2,087 new entrants annually as in 2008, the industry actually eclipses today’s level within 40 years (grey). Given the difficult and time consuming training process as well as steady decline in number of new entrants since 2008, the middle-path (blue) was selected for this analysis (an alternative is used later). Thus, some modest improvement in training is incorporated into the baseline.

Demand for Appraisals

Demand for appraisals comes from the number of unique home sales and refinances. Nearly all home purchases, new or existing, require an appraisal. To forecast the volume of new and existing home sales, the number of households was forecast based on a 20-year projection from the Harvard Joint Center for Housing Studies[2] and augmented with the average growth rate from the Harvard study. Demand for both owner and renter occupied housing is correlated with household formation. The historic ratio of number of new and existing home sales to households in conjunction with the new forecast of households drove the forecast of new and existing home sales. Note that demand for both new and existing sales rise over time with population growth. The grey and green areas represent refinances and HELOC/improvement loans, which are assumed to decline and plateau going forward at a fixed share of purchase demand in a rising rate environment.[3] This assumption is an over simplification but represents a conservative estimate in that an increase in refinances from this assumption would create more demand for appraisers.

However, as evidenced by both Fannie Mae’s and Freddie Mac’s recent forays into automated appraisals, automation will have a significant impact on the industry. Public statements by Fannie Mae indicate that as much as 10 percent of refinance mortgage will be automated, but discussions with industry analysts and experts suggest that it could be higher, include purchase mortgages, and might someday include government-backed mortgages (FHA, VA, etc.). As depicted above, the green and yellow dashed lines represent total demand under different levels of automation, which subtracts from total demand. The different levels of automation are:

  • Baseline – 10% of all GSE refinance mortgages
  • Low GSE and FHA Automation – 20% of all GSE and FHA purchase and refinance mortgages
  • High GSE Automation – 50% of all GSE purchase and refinance mortgages
  • High GSE and FHA Automation – 50% of all GSE and FHA purchase and refinance mortgages

Furthermore, the GSE’s share of the market is assumed to moderate toward its historic norm of roughly 40 percent, while the FHA’s share moderates as well to 18 percent by unit volume. These latter assumptions could change with GSE reform, but lower shares would suggest lower take-up of automation and therefore more demand for appraisers’ services.

Supply vs. Demand: Defining Stress

In 2016, there were widespread anecdotes of appraiser shortages, delays, and “rush order” fees. As a result, the ratio of appraisals needed (e.g. new and existing sales with refinances) relative to the number of appraisers in 2016 was selected as the benchmark for stress as depicted by the pink dashed line in the chart below. An increase in the ratio suggests growing strain and a measure above the 180 average appraisals per appraiser indicates higher stress than in 2016. Four scenarios are depicted below each with a varying degree of automation as discussed earlier. In all periods there is a short-run improvement as automation takes hold followed by increasing stress as boomers exit the industry and population-driven housing demand continues to grow.

What if training improves? In the chart below, the same four scenarios of automation are depicted, but with a higher rate of new entrants to the appraisal field, 2,087 persons per year as in 2008. With this change each scenario improves and the time to return to or approach stress levels is postponed five to ten years. However, the stress levels are breached in each scenario except for “high GSE and FHA automation” for at least a year and under moderate levels of automation stress is maintained. Even under high levels of automation, the appraisals/appraiser ratio is elevated in the mid-term.

Appraisals: The Future is Mixed

While some have bet the future of the appraisal industry on automation others are less sanguine. This analysis suggests that even with high levels of automation of appraisals, there remains a need to increase training of new entrants to the appraisal industry. Furthermore, this analysis does not account for distortions within the industry such as factors that exacerbate the demand for FHA, VA, and rural appraisals. In a future of growing demand for and declining supply of appraisers, strain on these submarkets would likely outpace the general strain on the industry.

[1] As of January, 2017


[3] Share of refinance applications of total applications in 1990 based on HMDA, roughly 25%

May 2017 Housing Affordability Index

At the national level, housing affordability is down from last month and down from a year ago. Mortgage rates increased to 4.01 percent this May, up compared to 3.83 percent a year ago.

  • Housing affordability declined from a year ago in May moving the index down 5.4 percent from 161.8 to 153.0. The median sales price for a single family home sold in May in the US was $254,600 up 6.0 percent from a year ago.
  • Nationally, mortgage rates were up 18 basis point from one year ago (one percentage point equals 100 basis points) while incomes rose 2.4 percent.
  • Regionally, the Midwest and the West shared the biggest increase in price at 7.4 percent. The South had an increase of 5.0 percent. The Northeast had the smallest incline in price of 4.9 percent.
  • Regionally, all four regions saw a decline in affordability from a year ago. The West had the biggest decline of 7.3 percent. The Midwest followed with a decline of 6.8 percent. The South had a decline of 5.0 while the Northeast had the smallest decline of 4.6 percent.
  • By region, affordability is down from last month except in the South where there was no change. The Midwest had the biggest decline of 3.5 percent followed by the Northeast who had a decline of 2.9 percent. The West had the smallest decline in affordability of 2.3 percent.
  • Despite month-to-month changes, the most affordable region is the Midwest where the index is 187.8.  The least affordable region remains the West where the index is 109.2.  For comparison, the index is 154.8 in the South, and 158.2 in the Northeast.
  • Mortgage applications are currently down this week. Housing activity and consumer confidence is up but providing for demand remains a challenge. More new construction will help improve home ownership rates and tame price growth.
  • 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.

Cash Comprises 30 Percent of Sales in REALTOR® Commercial Markets

Commercial real estate finds itself at the intersection of major global changes. Activity has remained moderate in the world’s economies, with further monetary easing continuing on several continents, according to the Expectations & Market Realities in Real Estate 2017: Intersection of Global Change report, released by Deloitte, the National Association of REALTORS®, and Situs RERC.

Commercial real estate (CRE) investment trends mirror the global economic slowdown and broader uncertainty.  Sales of global large capitalization (cap) transactions—over $2.5M—have been on a decline over the past two years, with 2016 volume totaling $826 billion (down 15%) and the 2017 first quarter’s volume at $271 billion (down 2%), based on data from Real Capital Analytics (RCA).  Investors took a pause from the strong pace of investments recorded in 2015, ascertaining the impact of economic and geopolitical changes upon markets. Commercial investments in the U.S. echo the global trends, with sales volume in large cap markets closing the year at $489 billion, an 11 percent decline on a yearly basis.

In comparison to the high-end deals, 83 percent of REALTORS® who specialize in commercial investments reported transactions below the $2.0 million threshold in 2016.  Although many REALTORS® participate in transactions above $2.0 million per deal, they serve a segment of the CRE market for which data are generally not as widely reported—small cap investments.

Based on National Association of REALTORS® (NAR) data, CRE in small cap markets continued on a divergent path, with sales volume accelerating during 2016. REALTORS® reported continued improvement in fundamentals and investment sales.  Following on the first and second quarters’ above-8.0 percent advances in sales volume, and the third quarter’s 11.0 percent gain, the last quarter of the year witnessed sales volume rising 12.9 percent compared with the same period in 2015.

As domestic and international investors across the value spectrum broadened their search for yield into secondary and tertiary markets, the shortage of available inventory remained the number one concern for commercial REALTORS®. Prices for small cap commercial properties increased at an average of 5.9 percent during the year. The data underscore an important point about the recovery and growth in small cap markets.  The rebound in smaller markets lagged by three years that of large cap markets, providing investors in these markets opportunities for continued growth.

However, even with continued improvement in leasing fundamentals and cash flows, overarching regulatory concerns led to a tightening of lending conditions in REALTORS®’ markets. In 2016, 37 percent of REALTORS® reported tightening lending conditions, compared with 33 percent in 2015, 22 percent in 2014 and 28 percent in 2013.

In addition, 51 percent of REALTORS® reported that insufficient bank capital remains an obstacle to commercial sales in small cap markets. Regulatory uncertainty for financial institutions was the main reason for the banks’ restrictive approach to commercial lending, followed by proposed legislative and regulatory initiatives.

Against this backdrop, the proportion of cash deals increased from 26 percent in 2015 to 30 percent in 2016, as it remained a significant component of small cap markets’ financing.

For the full report, access NAR’s Commercial Real Estate Lending Trends 2017.

Home Sales for May 2017: Raw Count

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.

  • Existing home sales increased 1.1 percent in May from one month prior while new home sales rose 2.9 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, 555,000 existing homes were sold in May while new home sales totaled 58,000.  These raw counts represent a 24 percent increase for existing home sales from one month prior while new home sales rose 2 percent.  What was the trend in recent years?  Sales from April to May increased by 11 percent on average in the prior three years for existing homes and rose by 2 percent for new homes.  So this year, existing homes outperformed compared to their recent norm. As for new home sales, they neither underperformed nor outperformed since sales increased at the same rate as their recent norm.
  • 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 busier activity in June while sales are expected to fall in July. For example, in the past 3 years, June sales rose by 7 to 16 percent from May but July sales dropped by 2 to 12 percent from June. For the new home sales market, the raw sales activity is expected to diminish in June while sales typically drop in July as well.  For example, in the past 3 years, sales in June decreased by 6 to 12 percent from May while July sales dropped by 1 percent on average from June.


Consumer Perception: Homes Are Affordable Only to Those With Above Average Incomes

In the second quarter release of the Housing Opportunities and Market Experience (HOME) report, NAR asked consumers their thoughts and perceptions on housing affordability in their communities. The responses were nearly split down the line, where 49 percent of buyers felt that homes are affordable for buyers with above average incomes, 41 percent felt that homes are affordable for almost all buyers, and nine percent felt that homes are only affordable for buyers with high incomes.

Fifty-three percent of those that make under $50,000 a year felt that homes are affordable to almost all buyers, compared to only 30 percent of those that make over $100,000 a year. Only 29 percent of those in the West region felt that homes are affordable to almost all buyers. Forty-six percent of buyers 34 years and under and 65 years and over felt that homes are affordable to almost all buyers. Those with no college education were less likely to feel that homes are affordable than consumers with some education. Those in rural areas are more likely than those in suburban areas to feel that homes are affordable.

What is more interesting is that some buyers have considered moving to more affordable communities due to current home prices. Nearly a third of consumers (29 percent) 34 years and under said they have considered moving to a more affordable community, compared to only 17 percent of those 45 to 54 years of age. Over a quarter of consumers (27 percent) of those that make under $50,000 a year also said they have considered moving to a more affordable community. Consumers in the Northeast, Midwest, and in urban centers are more likely to say they have considered moving.

The rise in mortgage interest rates is influencing consumer-purchasing choices. Twelve percent of all buyers said they might have to delay purchasing a home due to the rise in mortgage interest rates, while seven percent say it would speed up their process. A quarter said that mortgage interest rates, however, had no impact on their process. This trend was fairly consistent across regions, income levels, and age. The process was delayed in the West (15 percent), in urban areas (16 percent), for those 35 to 44 years of age (14 percent) and for consumers with a somewhat difficult ability to qualify for a mortgage (16 percent).


A Look at Pending Home Sales Numbers for May

  • NAR released a summary of pending home sales data showing that May’s pending home sales pace is down 0.8 percent from last month and down 1.7 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.
  • Three of the four regions showed declines from a year ago. The Northeast was the only region to have an incline of 3.1 percent. The South had a decline of 1.4 percent followed by the Midwest with a decline of 2.8 percent. The West had the biggest decline of 4.5 percent.
  • From last month, the only region that did not have a decline was the Midwest, which remained flat. The West had the biggest decline of 1.3 percent. The South had a decline of 1.2 percent. The Northeast had the smallest decline of 0.8 percent.
  • The pending home sales index level for the month was 108.5 for the US. April’s data was revised down slightly to 109.4.
  • In spite of the decline, this is the pending index’s 37th consecutive month over the 100 index level.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.


Regulatory Framework Cuts Bank Capital for Commercial Deals in REALTOR® Markets

Based on the Expectations & Market Realities in Real Estate 2017: Intersection of Global Change report—released by Situs RERC, Deloitte and the National Association of REALTORS®—commercial real estate (CRE) investors took a step back during 2016. Large cap CRE sales volume declined by double digits on a yearly basis, with $489 billion in closed transactions during the year, based on data from Real Capital Analytics (RCA). Global economic conditions, political uncertainty and a stronger dollar were some of the reasons for investors’ caution.

In contrast to the large cap transactions reported by RCA, commercial REALTORS® managed transactions averaging less than $2.5 million per deal, frequently located in secondary and tertiary markets.  The Commercial Real Estate Lending Trends 2017 shines the spotlight on this significant segment of the economy.

Investment sales in small cap markets posted a solid trend line in 2016, with sales volume accelerating with each successive quarter. However, the first quarter of 2017 recorded the first yearly decline in four years. The data underscore an important point about the recovery and growth in small cap markets.  Based on comparisons of vacancies, rents, as well as sales, prices and cap rates, the rebound in smaller markets was delayed by three years and the rate of price growth has been shallower. However, the downturn in large cap markets may have a quicker echo in small cap counterparts.

In tandem with a slower rebound, capital liquidity in small cap markets also recovered at a slower pace, as debt financing comprised a much-larger portion of capital in small cap markets, whereas large cap deals benefit from significant equity contributions. Based on the 2017 report, the bulk of capital in REALTORS®’ markets flowed through regional and local/community banks, which accounted for 58 percent of transactions.

For regional and community banks, compliance costs stemming from financial regulations have made a stronger impact on available capital for CRE deals. With higher costs of compliance and higher capital reserve requirements for CRE loans, regional and community banks have been more cautious in their lending during 2016 and the first quarter of 2017, resulting in tightening of capital. The report further indicates that 51 percent of REALTORS® reported that insufficient bank capital remains an obstacle to sales in small cap markets.

The main reason for insufficient bank capital for commercial deals stems from financial regulatory uncertainty, which was cited by 28 percent of NAR members who specialize in CRE transactions. With a Republican Congress and White House, promises of tax reform and financial deregulation have yet to materialize. New and proposed legislative and regulatory initiatives were another important reason for insufficient bank capital allocated to CRE loans, comprising 26 percent of members’ responses. The third main reason was a combination of reduced net operating income, reduced property values and equity.

For the full report, access NAR’s Commercial Real Estate Lending Trends 2017 at

Online Home Value Estimates Are NOT Appraisals

Where are these home value estimates coming from?

By Karen Belita, Data Scientist

The prevalence of technology gives anyone more access to a broad spectrum of information on the internet. In real estate, access to property details and values is easier due partly to Automated Valuation Models or AVMs.

Automated Valuation Models spit out a price for a property based on computer algorithms and calculations that take different sets of property data and look for patterns and relationships between property value and the input data. There are websites that will have a home value estimate available by just searching an address, while others may provide an estimate only upon request.

When it comes to online home value estimates, the number one caveat for consumers is that these estimates are not a substitute for formal appraisals, comparative market analyses and the in-depth expertise of real estate professionals. However, it is important to know the different sources of AVMs and home value estimates available online, so that members can help clients and potential clients understand these estimates in their proper context.

The most popular sources of home value estimates online are those that use AVMs. These estimates have varying levels of accuracies and may not take into account the unique qualities of a home, a neighborhood, and local markets. The main sources of AVM estimates are:

• Realtors Property Resource® (RPR®): RPR® has two home value estimates, their AVM estimate and the Realtors Valuation Model® (RVM®) estimate. The difference between the two is that RVM® uses the same data as the AVM plus Multiple Listing Service (MLS) Data. Both AVM and RVM® show the accuracy level of the estimate by giving estimate ranges and confidence scores. This resource is available for REALTORS® only and allows a significant amount of expert customization, making it a useful tool for members, especially when working with well-researched clients.

•®:® uses tax assessment records, recent sale prices of comparable properties, and other factors to estimate home values. This estimate is free and publicly available.

• Redfin: Redfin is a web-based real estate brokerage that gives the Redfin estimate for the property, which is based on market, neighborhood, and home specific data, including MLS data on recently sold homes. Redfin cites that their estimates for properties currently on the market are more accurate than estimates for off-market properties. This estimate is free and publicly available.

• HouseCanary: HouseCanary has two main services: valuations and forecasting. Their estimates use property level data from public records and the MLS. Their accuracy will vary across markets depending on the availability of data. This estimate is available with subscription to their services.

•’s estimate mainly uses public records. They test and benchmark the accuracy of their estimates. This estimate is free and publicly available.

• Zillow: Zillow has the Zestimate, which is their home value estimate for properties and is computed using public and user-submitted data. Their estimates have different accuracy levels depending on the data of the property and location. This estimate is free and publicly available.

• uses property records, home sales data, and local market data for their estimates. Their accuracy depends on the accuracy and completeness of public data. This estimate is free and publicly available.

There are also websites that provide home value estimates by request only or estimates using user inputs:,,,,, and Some banking and financial institutions, such as Chase Bank, Bank of America, and the Federal Housing Finance Agency, also provide estimates to accompany their other financial services. Again, it is important to know that these estimates have varying levels of accuracy. These sites may or may not use Automated Valuation Models, but can be another source of property and home value data that anyone can access.

As technologies advance and more data becomes available, the number of sites that provide home value estimates may grow. With the knowledge of where to find home value estimates online, it is important to note that these home value estimates are not interchangeable with formal appraisals, comparative market analyses, and they cannot be used as a basis for a loan. Most of these sites, if not all, reiterate the importance of consulting the expertise of real estate professionals to receive an in-depth and in-person analysis of the property and the local market.

Instant Reaction: April Owners’ Gains Forecast

The S&P CoreLogic Case-Shiller National Index shows that U.S. prices of single-family homes continue to rise. The national index level in April reached a new high and is up 5.5 percent from a year earlier.  But what does this mean for homeowners?

Home prices affect the wealth of homeowners. As the price of housing increases, the wealth of homeowners increases as well. Based on the above increase of home prices, it is estimated that value of owners’ household real estate was increased by 1.2 trillion in the last year and 102 billion came from home price increases in April. That means that 75 million homeowners each gained $16,300 on average in April 2017 from a year earlier.

Growth of Property Values

Developing wealth is a hot topic in today’s economy. Some individuals have come to realize one efficient means of developing wealth is through home ownership and real estate. One way to determine this would be looking at the property values over time and monitoring the trend. Let us look at property values from the American Community Survey (ACS) starting in 2005 and compare them to estimated values of 2016. We can apply the Federal Housing Finance Agency (FHFA) House Price Index (HPI) growth rate and look at some of the states that have strong price growth versus those who are either struggling to gain or losing value.

  • In the Northeast, Pennsylvania leads all states with a 38 percent price growth from 2005 to 2016, while average annual growth was 3 percent. Rhode Island had a negative 9 percent price change over this time and experienced negative 1 percent annual price change.
  • In the Midwest, North Dakota led all states with 103 percent price growth from 2005 to 2016 while having 6 percent average annual growth. Illinois had no price growth over this time and experienced no annual growth, on average.
  • In the South, Louisiana led all states with 56 percent price growth from 2005 to 2016 while having 4 percent average annual price growth. Florida experienced 2 percent price growth over this time and no growth annually, on average.
  • In the West, Montana led all states with 79 percent price growth from 2005 to 2016 while having a 5 percent average annual growth in price. Nevada shows a negative 16 percent price change over this time and shows a negative 1 percent average annual price change. [1]

[1] Price growth was estimated by applying the 2005-2016 growth rate based on the FHFA House Price Index.

Building Permits: A Closer Look

Building permits increased in most markets, but we see fewer permits and more expensive construction in high-priced markets.

In the era of limited housing inventory, adding new construction is one of the means to deal with housing affordability issues. At the local level, metropolitan areas are doing the most to address the housing shortage by building new housing. We looked at the volume of construction permits for single-family units in 382 metro areas[1] in 2016 and compared them to a year earlier.

Indeed, 70 percent of metro areas issued more permits for single-family units in 2016 than in 2015. Meanwhile, 74 percent of those with an increase had a higher increase of permits than the national level (8 percent). Here are some of the metro areas, which had the highest gains in building permits for single-family units[2]:


Fewer permits and higher construction cost per unit for high-priced markets

However, that is not the case for many of the high-priced markets such as Miami, New York, San Diego and Honolulu. Actually, the number of permits issued for single-family units dropped in these areas in 2016. For instance in the New York metro area, building permits for single-family units decreased 7 percent from a year earlier while single-family construction decreased 14 percent in the Honolulu metro area.

In the meantime, the construction cost per unit[3] increased in these areas. Although construction cost per unit is already high, it increased even further in 2016. In New York metro area construction cost per unit rose 5 percent from $289,250 to $302,700 while it increased 4 percent in Honolulu from $390,220 to $405,350.

Here are the metro areas, which had fewer building permits for single-family units while construction cost per unit increased:


It seems that there are two ways to interpret this oxymoron:

1.       High construction cost pushed down the construction activity for single-family units in these areas.

Fewer single-family units are built because construction cost is more expensive. One of the most important elements of construction cost is labor cost. Based on Occupational Employment Statistics[4], we see that the annual wage per employee increased between 2014 and 2015. While labor is already expensive in these areas, the increase in wages makes housing construction more expensive. For example, Honolulu is included in the list of the top paying metro areas for this occupation. The annual wage per employee rose from $64,800 in 2014 to $66,859 in 2015 (3.2 percent increase).

In addition, a survey of single-family builders conducted by NAHB in June 2016[5] shows that shortages of labor and subcontractors have become more widespread than they were a year ago. According to the survey, the share of builders reporting either some or a serious shortage has skyrocketed from a low of 21 percent in 2012, to 46 percent in 2014, 52 percent in 2015, and now 56 percent in 2016. The net result of the labor shortage, based on the survey, is that 75% of builders say they have had to pay higher wages and bids, 64% have delayed projects, and 68% have raised home prices.

2.       Construction of high-end units pushed up construction cost per unit although there are fewer permits.

It is unfortunate that the Building Permits Survey does not collect any information about the square footage of the new units permitted. However, we know that construction cost is affected by the size of the single-family unit and the construction materials. The fact that construction cost increased in high-priced areas while there were fewer permits in 2016 could mean that more high-end units tended to be built in these areas.

Nevertheless, according to first quarter 2017 data from the Census Quarterly Starts and Completions by Purpose and Design[6], median single-family square floor area decreased to 2,423 in 2016 from 2,466 in 2015 for started units. Similarly, for completed units, median single-family square feet floor area also decreased to 2,422 in 2016 from 2,467 in 2015. This recent small decline in size indicates that builders may be adding more entry-level homes in the inventory.

This is good news for first-time homebuyers and, therefore, the homeownership rate. By increasing construction labor, even more entry-level homes are expected to enter the market. With more entry-level homes and less expensive labor cost, more potential homebuyers will be able to afford a home purchase and, thus, the homeownership rate might go back to norm.

View the data here >


[1] U.S. Census Bureau, Building Permits Survey.

[2]The selected metro areas had more than 200 building permits issued in 2015.

[3] Construction cost per unit (for single-family units) = valuation for single-family units/permits for single-family units; add brief description of what is included vs. not included in total valuation like we discussed before (i.e. land, materials, labor, etc) and a link to any documentation from the US Census if it is available

[4] The Occupational Employment Statistics (OES) program produces employment and wage estimates annually for over 800 occupations.




May 2017 Existing-Home Sales

  • NAR released a summary of existing-home sales data showing that housing market activity this May rose modestly 1.1 percent from last month and improved 2.7 percent from last year. May’s existing home sales reached the 5.62 million seasonally adjusted annual rate.
  •  The national median existing-home price for all housing types was $252,800 in May, up 5.8 percent from a year ago. This marks 63rd consecutive month of year over year’s gains as prices rise for potential homebuyers.
  • Regionally, all four regions showed growth in prices from a year ago, with the Midwest leading all regions with an incline of 7.3 percent. The West had a gain of 6.9 percent followed by the South with a gain of 5.3 percent. The Northeast had the smallest gain of 4.7 percent from May 2016.
  • From April, three of the four regions experienced gains in sales. The Northeast inclined 6.8 percent. The West had an incline of 3.4 percent while the South had a 2.2 percent gain in sales. The Midwest had the only decline of 5.9 percent, a result of job losses and price gains.
  • Three of the four regions showed an increase in sales from a year ago with the South leading with an incline of 4.5 percent. The West had a gain of 3.4 percent. The Northeast had an incline of 2.6 percent. The Midwest had the only decline of 0.8 percent. The South headed all regions in percentage of national sales at 41.6 percent while the Northeast has the smallest share at 13.9 percent.
  • May’s inventory figures are up 2.1 percent from last month to 1.96 million homes for sale. Inventories are down 8.4 percent from a year ago which is 24 months of year over year declines. It will take 4.2 months to move the current level of inventory at the current sales pace. Transactions are moving faster and it takes approximately 27 days for a home to go from listing to a contract in the current housing market, down from 32 days a year ago.
  • In May, single-family sales increased 1.0 percent and condominiums sales were up 1.6 percent compared to last month. Single-family home sales inclined 2.7 percent and condominium sales were up 3.2 percent compared to a year ago. Both single-family and condominiums had an increase in price with single-family up 6.0 percent at $254,600 and condominiums up 4.8 percent at $238,700 from May 2016.


Sources of Income for Real Estate Agents

For entrepreneurs like real estate agents who hustle for their income, every penny counts. Return on investment is important and agents will spend money on technology if it brings in new business. Let’s take a deeper look into the income and how business is generated according to the 2017 Member Profile.


The median gross income for all agents in 2016 was $42,500 and the net income (after taxes and expenses) was $26,820. For members with less than two years of experience, the median gross income was $8,930 and net income was $7,690. For those with 16 or more years of experience, the median gross income was $78,850 and their net income was $46,790.

Income for agents predominantly come from selling homes. Forty-six percent receive 100 percent of their income from their real estate specialty, and another 33 percent receive 50 to 99 percent of their income from real estate. Seventy percent of members surveyed said their primary specialty is residential brokerage and 70 percent are sales agents.

Thirty-five percent of real estate agents receive a fixed commission split (under 100%), 26 percent receive a graduated commission split (increases with production), and 14 percent receive a capped commission split (rises to 100% after a predetermined threshold). Many agents, however, supplement their income from other areas of the real estate business with a secondary specialty, such as relocation services (16 percent), residential property management (14 percent), and commercial brokerage (12 percent).

This paints a picture of the typical real estate agent. Half of all members get their income entirely from their primary real estate specialty, where two-thirds specialize in residential real estate and two-thirds are sales agents.

Source of Income

The typical REALTOR® received 13 percent of their business from repeat customers and clients. For agents that have 16 years of experience or more, that figure increased to a median of 36 percent from repeat business clients, compared to agents that have two years of experience or less that said they received no repeat business.

The typical REALTOR® received 18 percent of their business from referrals of past customers and clients. For agents that have 16 years of experience or more, that figure increased to a median of 25 percent from referrals, compared to agents that have two years of experience or less that said they received no business from referrals.

The typical REALTOR® brought in one percent of their business from their website. Agents that spent more than $1,000 on their website brought in six percent of their business from their website. Sixty-three percent of agents said they brought in no business from open houses and 24 percent said they received 10 percent or less of their business from an open house.

Maturing Commercial Loans 2017: the Wall of Debt that Didn’t Crash

U.S. capital markets had a banner year in 2016, even accounting for volatility. The investment environment for commercial markets remained well-diversified, totaling $6.6 trillion in 2016. Debt investments accounted for 57 percent of total, with equity comprising the rest.

On the equity side of commercial real estate financing, where equity investors held $2.9 trillion in assets, private equity accounted for 55 percent of capital, followed by listed and non-listed REITs, which made up 31 percent of financing in 2016, according to Situs RERC.  Pension funds, both domestic and cross-border were the third largest capital provider group, representing 5 percent of the equity market.  The remainder was distributed between groups comprised of life insurance companies, commercial banks, corporations, foreign investors and others.

On the debt side, chartered depository institutions (banks) accounted for the bulk of capital providers, with a little over half of total market holdings, based on data from the Federal Reserve. The second largest share of debt holders was comprised of government sponsored enterprises (Fannie, Freddie), which accounted for 18 percent of debt investments, dominating the multifamily investment sector. Life insurance companies held 11 percent of commercial real estate debt, followed by securitized debt holders—commercial mortgage backed securities (CMBS), collateralized debt obligations (CDOs), and other asset backed securities (ABS)—making up 10 percent of total. U.S. offices of foreign banks accounted for two percent of total debt holders.

Looking at the distribution of capital by source, the most striking change over the past several years has been the diminishing profile of the CMBS market. U.S. CMBS issuance rose dramatically from $37 billion in 1997 to a peak of $229 billion in 2007. Originations dropped dramatically during the 2008-10 period, due to the Great Financial Crisis. They have rebounded somewhat, but nowhere near the prior levels, especially in light of the markets’ investment volume. In 2015, CMBS issuers offered $101 billion in commercial bonds. However, 2016 issuance was a more modest $76 billion, as bond issuers felt the impact of financial markets’ volatility. As of the first quarter of 2017, U.S. CMBS issuance was down 21.1 percent, with a total of $15 billion.

For the past seven years, investors have been concerned about the “wall of maturing debt”—many of the loans issued during the 2005-07 period, which were 10-year loans, and were scheduled for refinancing in 2015 – 2018. The majority of the loans were for office and retail assets, which have recorded slower comparative recoveries in fundamentals post-recession. Consequently, concerns abounded about the likelihood of these loans to turn delinquent in large numbers.

Due to a confluence of factors, including continuing low interest rates, improving fundamentals, as well as rising cash flows and property values, refinancing has not proven a major issue. According to Trepp, there is close to $109 billion worth of CMBS loans maturing in 2017.

For perspective, 2016 recorded $111.4 billion in resolved CRE mortgage debt. Of that total, 8.1 percent were a total loss. During the first six months of 2017, there is $65.6 billion worth of CMBS debt due for refinancing, of which only 6.4 percent is delinquent. Most of the maturing debt is linked to office and retail properties, which account for 31.9 percent and 24.8 percent of volume, respectively.

Impact on REALTORS® Commercial Markets

Based on the Commercial Real Estate Lending Trends 2017 report, CMBS loans made up only one percent of capital in REALTORS® markets, a consistent share over the past few years. In turn, as market conditions have improved over the past few years, asset valuations have risen in tandem with net operating income (NOI). The report data indicated that 67 percent REALTORS® active in commercial markets reported rising NOIs for properties they sold or leased over the prior 12 months.

As lending conditions eased, the share of transactions failing due to refinancing has been on a downward trend. Refinancing difficulties caused deal failures in 50 percent of transactions during 2012. The share dropped to 42 percent in 2013 and 21 percent in 2014. Based on REALTORS® latest data, refinancing failures dropped to below 14 percent, the lowest level since the report’s inception.

For more information and the full report, access NAR’s Commercial Real Estate Lending Trends 2017.

Cheaper Homes Just Got More Expensive

One of the US’s largest banks made a subtle, but important change last month that could have big implications for entry-level homebuyers. That bank raised the cost of mortgages on lower priced homes significantly. If this change is adopted system wide, it could create headwinds for first-time buyers. However, it would behoove REALTORS® to work with their preferred lenders or to seek out new lenders willing to support entry-level buyers. Additional supply and slower investor demand could help ease pressures as well, while supporting homeownership.

A Fee Increase

In early May, Wells Fargo changed its adds-on fees, known in housing finance as an “overlays”, for loans guaranteed by the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Rural Housing Service (RHS). These fees are in addition to those charged by the FHA, VA, and RHS. The changes include new fees for those borrowing less than $140,000 and a split between borrowers with credit scores below 700 and those over 740.

As depicted below the fees (converted to rates) for homebuyers who borrows less than $140,000 and who have less than a 700 credit score (orange) rose dramatically in May, while they fell modestly for those with scores greater than 740. Fees for borrowers of loans greater than $140,000 and credit scores greater than 740 were unchanged, while those with scores under 700 saw a modest decline in fees (grey). Wells Fargo does not originate government loans through its wholesale channel with credit scores below 640.

Wells Fargo was one of the few large national banks to enter and to support the entry-level portion of the market following the recession, while other large banks sat on the sideline. It has since pulled back and the void left by it and other large national banks was been filled by credit unions and non-bank lenders. While a few lenders and funders have similar overlays, Wells has the largest reach and its actions could set a precedent for other lenders.

What do the rate changes mean? Most borrowers would see no change, while a few would actually see a modest improvement. However, homebuyers with loans less than $140,000 and with credit scores below 700 would feel the pinch. A borrower with a 680 to 700 credit score and a $120,000 mortgage would see their monthly payment rise by $17 or nearly 3 percent, while the payment would jump by $39 each month for a borrower with a 640 to 660 credit or more than 6 percent.

Sizing the Effect

The share of purchase mortgages for owner-occupants in 2015 that were below $140,000 was just 10.3 percent. However, the FHA, VA, and RHS guaranteed more than half of these loans and they are more likely to support the moderate and lower credit borrowers.

The market for homes under $100,000 is one of the tightest in the housing market. While Wells Fargo is only one lender and has a smaller share of the government business, its actions send signals to the industry. Broader adoption of these pricing changes would raise costs to a large swath of homebuyers.

The areas most impacted by the change are smaller markets in the Southeast and Southwest. Of the top 10 markets by share of purchase mortgages under $140,000, three were in the Southwest and five were in the Southeast. In all of these markets, the government share of mortgages was over 70 percent.

Wells Fargo has a large presence in the market leading both the retail (5.4[1] percent market share in the 1st quarter) and wholesale/correspondent (13.8 percent) lending channels.  Its wholesale presence means that Wells Fargo buys loans from other banks, brokers, and non-banks and packages them for resale into the secondary market. As a consequence, some local lenders with whom REALTORS® work may increase their fees, while others may not. As a result, REALTORS® could begin to probe lenders about their funding and find those that still charge reasonable fees.

Entry-level buyers face rising mortgage rates and slim supplies and now some will see their borrowing costs rise further. While these borrowers do not appear to pose a rising risk to lenders, regulatory risks and strong investor demand may have driven the change. Regardless, buying a home just got tougher for some homebuyers, but REALTORS can still do something about it to aid their clients.

[1] Inside Mortgage Finance

Net Operating Income Accelerates in REALTORS®’ Commercial Markets

Commercial market fundamentals marched to a steadier beat during 2016 compared with the investment environment. Demand for properties remained solid throughout the year, leading to declining vacancies and rising rents. There were, however, variations in each property sector.

As professional and business services contributed the highest number of net new jobs in 2016, office-using industries drove demand for office space.  Office net absorption totaled 26.9 million square feet in the first three quarters of the year, complemented by another 13.0 million square feet in the last quarter, based on data from CBRE. Even with 37.1 million square feet of new supply, office vacancy declined to 12.9 percent by year-end, the lowest level in eight years. Rents for office properties rose 6.0 percent during the year, the fastest annual pace since 2007, reaching $31.6 per square foot by the fourth quarter.

Riding the winds of rising imports and growing online commerce, industrial properties maintained a sustained pace in 2016. Net absorption totaled 251.3 million square feet during the year, based on data from CBRE. Construction of industrial space, while accelerating, did not keep up with demand—completions totaled 178.7 million square feet. National vacancies for industrial buildings dropped to 4.7 percent by the fourth quarter, resulting in surging rent growth. Net asking rents increased 6.3 percent over the year, to $6.6 per square foot by year-end, the highest change since 2007.

Retail fundamentals benefitted from growing consumer spending and confidence, posting declining vacancies and rising rents. Net absorption for retail properties totaled 74.8 million square feet in 2016, outpacing by a wide margin the 51.5 million square feet of new completions, according to CBRE. The retail availability rate declined slightly during the first two quarters, but flattened out in the latter half of the year, at 7.1 percent. National retail rents continued advancing in 2016, marking 12 consecutive quarters of growth. The net asking rents reached $16.6 per square foot by the end of the year.

Household formation gains kept demand for multifamily properties on an upward path in 2016. However, accelerating supply of new apartment units began to add downward pressure on rents during the year. Multifamily net absorption reached 201,000 units by the end of the year, a 4.9 percent increase from 2015, according to data from CBRE. Completions picked up the pace, jumping by a sharp 21.4 percent from the prior year, to a total of 242,800 units. With supply outpacing demand, vacancies rose to 4.9 percent by the fourth quarter of 2016, a 30 basis-point upward change. Multifamily rents inched up slightly, rising 0.2 percent for the year.

Underpinning these fundamentals, commercial asset cash flow continued on an upward trend. Based on the REALTORS® Commercial Real Estate Lending Trends 2017 report, net operating income (NOI) increased for 67 percent of respondents. For 40 percent of REALTORS®, NOI increased in the 1 – 4 percent range. For 19 percent of respondents, NOI rose between 5 – 9 percent, while for 8 percent of commercial practitioners, the increase in NOI occurred in the 10 – 25 percent range.

According to the 2016 data, the increase in NOI picked up speed from the trends of the past few years. The percentage of REALTORS® who reported “No Change” in NOI declined from an average of 32 percent in 2015, and 29 percent in 2016, to 25 percent this past year.

For more information and the full report, access NAR’s Commercial Real Estate Lending Trends 2017.

Reach of New Risky Loans Still Modest

Despite reports of a rise in non-QM lending, participants in NAR’s 1st quarter Survey of Mortgage Originators indicated that the non-QM share of the market was anemic. While the non-QM market shrank the share of loans that fall under the “rebuttable presumption” rose modestly. As originators retool in the wake of a declining refinance market, analysts will monitor the market for signs of increased risk taking.

The Dodd-Frank regulations created the Ability to Repay (ATR) rule in which a lender must prove or verify a borrower’s ability to repay their mortgage. Lenders argued that doing so might prove difficult and costly in court, so lenders were granted two levels of legal protection or assumed compliance with the ATR. The first known as the Qualified Mortgage (QM) rule provides the highest level of protection to lenders. Among other things, the QM rule requires originators to verify incomes, limits the fees that a lender can charge, sets a maximum back-end debt-to-income ratio of 43 percent, and prohibits certain loans products like interest-only loans, negative amortization loans, or amortizations longer than 30 years.

A second category of loans, dubbed “rebuttable presumption”, is less safe for lenders. A rebuttable presumption mortgage is the same as the standard QM, but allows for the rate charged by lenders to be as much as 150 basis points above the average prime offer rate (APOR). When a loan has a risk factor like a low down payment or low credit score, the lender will increase the rate to compensate for that risk. By capping how much they can add to the rate, regulators hoped to reduce how much risk lenders would take-on.

In the 1st quarter of 2017, the share of non-QM lending fell to 0.1 percent from 1.0 percent in the 4th quarter. Nearly 56 percent of respondents in the survey offered non-QM loans, but as depicted below by a net decline of 10.6 percent lenders grew less willing to extend these loans in the 1st quarter, wiping out the gains from the 4th quarter. Willingness to extend rebuttable presumption credit also moderated in the 1st quarter, but the share of originations that were rebuttable presumption rose to 8.4 percent.

The bulk of risky loans originated from 2001 to 2006, were sold to investors through private label mortgage backed securities. While non-banks in this survey originate more of the total market for non-QM loans, on an individual lender basis portfolio lenders have a higher weighted average share at 0.7 percent compared to 0.1 percent for non-bank lenders. The CFPB has argued that lenders who hold risky loans in portfolio are directly incented to maintain strong underwriting, to use compensating factors to reduce risk, and to maintain robust capital levels…all factors that declined during the run-up to the last crisis.

While the share of risky loans rose modestly in the 4th quarter of last year, that trend appears to have retrenched in the 1st quarter of 2017. However, as refinance-oriented lenders retool their operations towards the purchase market due to rising rates they may be enticed by profits in riskier loans. Consequently, this trend should be monitored and evaluated alongside potential changes to the QM rule as the market shifts closer to its historic “norm” of modestly higher default rates and looser lending standards.