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February 2017 Pending Home Sales

Thu, 03/30/2017 - 11:20
  • NAR released a summary of pending home sales data showing that February’s pending home sales improved 5.5 percent from last month and are up 2.6 percent from a year ago. February’s inclines show consumer confidence is strong going into the busier months of home purchases.
  • 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.
  • Two of the four regions showed inclines from a year ago. The Northeast lead with an increase of 6.6 percent followed by the South 4.2 percent. The West had a decline of 0.2 percent. The Midwest had the biggest decline of 0.6 percent.
  • From last month, all regions showed gains in pending sales. The Midwest has the biggest increase of 11.4 percent followed by the South with 4.3 percent. The Northeast had an incline of 3.4 percent and the West had the smallest incline of 3.1 percent.
  • The pending home sales index level for the month was 112.3 for the US. January’s data was unrevised and remained 106.4.
  • 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.

Properties Typically Sold Faster at 45 Days in February 2017 Amid Tight Supply

Tue, 03/28/2017 - 14:49

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 that sold in December 2016–February 2017 were typically on the market for less than 31 days in Washington, Oregon, Colorado, Utah, Nebraska, Kentucky, Tennessee, and the District of Columbia, according to the February 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Local conditions vary, and the data is provided for REALTORS® who want to compare local markets against other states and the national summary.[2]

Looking at the values over the last few years, in most states the median length of time that properties stay on the market has trended downwards, though the graphs also show that days on market in some states fluctuate seasonally.[3]

Properties stayed on the market for fewer days in February 2017 compared to one year ago, amid strong demand and tight supply. Nationally, properties sold in February 2017 were typically on the market for 45 days (50 days in January 2017; 59 days in February 2016).[4] The length of time properties are on the market has fallen as demand has outpaced the inventory of homes for sale. In 2011, properties were typically on the market for 97 days.

Nationally, 42 percent of properties that sold in February 2017 were on the market for less than a month (38 percent in January 2017; 35 percent in February 2016).[5] Only nine percent of properties were on the market for six months or longer (11 percent in January 2017; 15 percent in February 2016).

[1]The author thanks Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

[2] There is only one observation for Alaska so the median days on market cannot be calculated.

[3]To increase the number of observations for each state, NAR uses data from the last three surveys. The selected states shown in these charts are those with approximately 150 observations.

[4]The survey asks,“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, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

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

Instant Reaction: January Owners’ Gains Forecast

Tue, 03/28/2017 - 08:58

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 January reached a new high and is up 5.9 percent from a year earlier.  But what does this mean for homeowners?

Home prices affect the wealth of homeowners. As the price of housing increases, the wealth of homeowners increases as well. Based on the above increase of home prices, it is estimated that value of owners’ household real estate was increased by 1.3 trillion in the last year and 107 billion came from home price increases in January. That means that 75 million homeowners each gained $17,100 on average in January 2017 from a year earlier.

Appraisal: A Candle Burnt at Both Ends

Mon, 03/27/2017 - 15:12

Refinancing soared in 2015 and 2016 as rates fell, while burgeoning home sales pushed over the five million sales mark and the TRID regulation was implemented. In this environment, anecdotes of delayed closing, difficulties getting appraisals and even “rush” fees for quick turn-around appraisals began to percolate. Is this a short-term problem or something more? NAR Research sought insight on this issue with a recent survey. In short, the appraisal industry is a candle burnt at both ends; regulation, an altered appraisal market structure, and compensation issues burden those currently in the industry, while poor incentives make it harder to grow the next generation of appraisers. The coming wave of boomer retirements and growing needs of a changing country suggest that appraisal is an area that needs more focus.

Demand Rises While Supply Falls

Mortgage rates fell and refinancing expanded with each batch of weak economic news during the great recession and subsequent expansion. More recently refinancing ebbed as the number of borrowers who could benefit declined with the post-election jump in mortgage rates. Nearly all home sales and most refinances require an appraisal to determine the accurate value of the home on which money is to be lent. Streamline and HARP refinances do not require a new appraisal and an FHA loan that is refinanced within the program may not either.[1] In the larger context, though, these appraisal-free programs were relatively small and dwindling.

Unusually high refinance volume added to the burden placed on appraisers in recent years at the same time that the number of certified appraisers who specialize in real estate shrank[2]. Purchase demand has increased steadily for existing homes and is likely to continue modest gains in the face of rising mortgage rates as refinancing tapers off. Volume per appraiser peaked in 2012 and has eased, but remains elevated. Demand for newly constructed homes is likely to rise as well. On net, the appraisal volume should ease modestly, but remain elevated. However, the same may not be true of the number of real estate appraisers.

Boomers’ Retirement Looms

Demographics suggest an imminent decline in the number of appraisers due to retirement. The average age of an appraiser in NAR’s survey was 54.5 years and 85.4 percent expect to retire in 13.7 years…roughly the age this group will become eligible for social security benefits. This trend raises the question of new entrants.

Only 16.1 percent of respondents were actively training new appraisers and 38.4 percent of that group indicated that they do so for no compensation despite it adding an average of 10.2 hours to their weekly workload as well as added legal liability. Finally, 40 percent of survey respondents indicated that their clients (lenders, appraisal management companies, etc.) would not accept work performed by a trainee.

Industry Changes

Retirement is not the only factor affecting the appraisal industry. Dynamics within the industry, in particular the emergence of appraisal management companies (AMCs), created disincentives for appraisers to take particular assignments. Survey respondents indicated that bank-owned AMCs paid roughly half the fees that lenders or independent AMCs paid. In addition, respondents’ comments suggests that AMCs may require extra work or charge fees to the appraiser, which reduce the appraiser’s compensation.[3] Costs in general rose from 2015 to 2016, while fees were flat according to survey respondents. This dynamic may create a preference among appraisers to opt-out of assignments from lender-owned AMCs. Not surprisingly, only 55 percent of respondents took assignments from bank-owned AMCs compared to 73.5 percent for independent AMCs and 80 percent for banks.

Not All Appraisals Are the Same

The general decline in certified residential appraisers only tells part of the story. Participation in FHA, VA, and RHS was decidedly lower as reported by participants in NAR’s Appraisal Trends Survey. Nearly half of respondents chose not to perform VA loans, while more than a quarter were likely to opt out of assignments for FHA and USDA financed properties. The reason for this preference is not clear. Some argue that the standards for these appraisals are higher, while some requirements of these programs may place or are perceived[4] to place requirements on appraisers that overlap with inspectors, thus requiring separate certifications or regulations at the local level. A third rational is that many appraisers may not qualify for the rosters of eligible appraisers maintained by the VA, RHS, and FHA.

Regardless of the reason, this trend is concerning as the millennial population is large and likely to swell the housing market over the next decade as first-time buyers re-emerge. Likewise, anecdotes suggests that there is a shortage of appraisals for rural areas. Demand for appraisals in rural areas will rise if the benefits of economic growth spread to these areas as advocated by the new administration. Finally, the veteran population has grown after nearly two decades of conflict and is likely to rise with President’s proposal to expand defense spending in the years ahead. These trends will raise demand specialized appraisers, suggesting the need for training of more qualified appraisers and/or reconsideration of current impediments.

Some analysts may point to the growing use of automated appraisals as an outlet. Indeed, this trend was a point of concern for respondents to NAR’s survey. However, neither the FHA nor the VA or RHS programs currently use automated appraisals and the nature of the appraisal requirements for these programs may preclude it. In addition, as policy discussions of reforming the secondary market for mortgages focus greater attention on private market participation and higher costs, this change would only raise the onus and likely market share for mission driven programs like the FHA, VA, and RHS.

Appraisals play an important function in the flow of capital from investors to homebuyers. As the number of appraisers has waned in recent years and evidence of appraisers opting out of particular assignments increases, reports of problems have grown. Addressing these issues will gain importance as the demographics of both appraisers and homebuyers shift in the decades ahead.

[1] When the closing costs are not rolled into the balance. For simplicity, all FHA-to-FHA refinances are assumed not to require an appraisal. This would underestimate the demand for appraisals.

[2] Data on appraisers is from the Appraisal Subcommittee of the Federal Financial Institutions Examination Council as compiled and posted by the Appraisal Institute. Due to the nature of the ASC’s database, the AI’s tabulations cannot be independently validated.

[3] For instance, “With the added requirements for a report mostly from AMCs (listings, addendums, original pictures, etc) the amount of reports you can complete in a week has declined, which means the salary has actually decreased while the requirements have increased.” And “Also some AMC’s charge an upload charge that is immediately charged to my credit…” or “paying ‘technology fees’ to upload the completed report,”

[4] One survey respondent noted that the, “FHA has also caused tremendous problems with their inspection requirements of appraisers. They require appraisers to complete home inspections. Some states have home inspector acts in place. My state is one and requires us to be licensed as home inspectors if we operate, analyze and comment on 2 or more components.”

Highlights of the February 2017 REALTORS® Confidence Index Survey Report

Mon, 03/27/2017 - 11:20

While local conditions vary, the REALTORS® Buyer Traffic Index and the REALTORS® Confidence IndexCurrent Conditions for single-family homes, townhomes, and condominiums remained above 50 in February 2017, indicating that more respondents reported “strong” than “weak” conditions. Both indices were higher than their levels one year ago and in the previous month.[1] The REALTORS® Seller Traffic Index decreased slightly from its levels one year ago and was unchanged from its level in the previous month. It has remained below 50 since January 2008, indicating that seller activity is still “weak,” according to the February 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[2]

In February 2017, first-time homebuyers accounted for 32 percent of sales.[3] Amid solid job creation, the share of first-time homebuyers has been on a modest rise, up from 29 percent in 2014. With fewer new foreclosures, distressed properties accounted for seven percent of sales, purchases for investment purposes made up 17 percent of sales, and cash sales accounted for 27 percent of sales. Amid tight supply, half of properties that sold in February 2017 were on the market for 45 days or less compared to 59 days in February 2016.

Lack of supply and appraisal-related problems were the main issues reported by REALTORS®. Respondents also expressed concern about the impact of rising mortgage rates and economic policy changes under the Trump Administration on the recovery of the housing market. Overall, respondents remained confident about the outlook over the next six months for the single-family homes, townhomes, and condominium markets, with the six-month outlook confidence indices for each of these markets registering above 50.

[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]The author thanks Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

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

REALTORS® Reported Strong Homebuying Activity and Low Supply in February 2017

Fri, 03/24/2017 - 14:52

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members How do you rate the past month’s buyer/seller traffic in the neighborhood(s) or area(s) where you make most of your sales?

REALTORS® reported strong home buying demand amid tight supply in February 2017, according to the February 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that buyer traffic conditions can be characterized as “moderate” to “very strong” in many states except in North Dakota and Delaware where buyer traffic conditions were “weak.”[2] Buyer traffic conditions were “very strong” in the states of Washington and Rhode Island.

The REALTORS® Seller Traffic Index indicates seller traffic conditions were “weak” in most states, although 13 states had “moderate” seller traffic conditions. Respondents reported that demand is strong, but there is a severe lack of supply, especially of affordable homes. This is consistent with available data on the affordability of active housing inventory.[3]

Employment conditions affect the supply and demand for housing. The chart that follows shows the change in non-farm employment from January 2016 to January 2017 by state. Nationally, employment rose 1.6 percent in January 2017. Employment growth was strongest in Idaho, Nevada, Utah, and Florida. In these states, buyer traffic was “moderate” to “strong”. Non-farm employment contracted in the oil-producing states of Alaska, North Dakota, Wyoming, Kansas, Oklahoma, Louisiana, and Mississippi, as well as in West Virginia.[4] In some of these states, the job cutbacks have led to “moderate” seller traffic conditions, based on the REALTORS® Seller Traffic Index. Texas, which has a more diversified economy, has been more resilient than other oil-producing states, with employment growing slightly above the national average.[5]

Nationally, the REALTORS® Buyer Traffic Index registered at 70 in February 2017 (63 in January 2017; 65 in February 2016), indicating that more respondents viewed buyer traffic conditions as “strong” rather than “weak.”[6] Homebuying demand is likely being bolstered by sustained job growth, with 2.4 million jobs added in the last 12 months and 16 million jobs generated since February 2010.[7] Future interest rate increases may also be prompting first-time homebuyers to take advantage of the current mortgage rates. In the week of March 9, the 30-year fixed mortgage rate averaged 4.21 percent.[8] Mortgage rates are likely to continue to rise modestly to an average of 4.4 percent in 2017 and 5.0 percent in 2018.[9]

The REALTORS® Seller Traffic Index registered at 41 in February 2017 (41 in January 2017; 43 in February 2016), indicating that more respondents viewed seller traffic conditions as “weak” rather than “strong.” Supply conditions have remained largely tight in many areas, with the index registering below 50 since January 2008.

[1]The author thanks Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

[2] To increase the number of observations for each state, NAR computes the index based on data for the last three months. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. The survey asks, “How do you rate the past month’s buyer/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).” NAR compiles the responses into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very Weak,” values greater than 25 to 45 are labeled “Weak,” values greater than 45 to 55 are labeled “Moderate,” values greater than 55 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.” The range of +/-5 around 50 approximates the historical margins of error at the 95 percent confidence level for small states.

[3] See for example: https://www.nar.realtor/news-releases/2017/02/nar-realtorcom-identify-growing-rift-between-housing-availability-and-affordability and https://www.nar.realtor/topics/realtors-affordability-distribution-curve-and-score

[4] Source: U.S. Department of Energy. See https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm.

[5] 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/

[6]The REALTORS® 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.

[7] The last 12 months refers to February 2016 to February 2017. Nearly 8.7 million jobs were lost from February 2008–February 2010, so the gain above previous peak employment is 7.3 million jobs.

[8] Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac.

[9] NAR forecast. See https:// https://www.nar.realtor/sites/default/files/reports/2017/embargoes/forecast-02-2017-us-economic-outlook-02-27-2017.pdf.

February 2017 Existing-Home Sales

Fri, 03/24/2017 - 10:42
  • NAR released a summary of existing-home sales data showing that housing market activity this February is down 3.7 percent from last month but improved 5.4 percent from last year. February’s existing-home sales reached the 5.48 million seasonally adjusted annual rate.
  •  The national median existing-home price for all housing types was $228,400 in February, up 7.7 percent from a year ago. This marks 60 consecutive months of year over year’s gains as prices continue to rise.
  • Regionally, all four regions showed growth in prices from a year ago, with the South and West leading all regions with an incline of 9.6 percent. The Midwest had a gain of 6.1 percent. The Northeast had the smallest gain of 4.1 percent from February 2016.
  • From January, three of the four regions experienced declines in sales while the South inclined 1.3 percent. The Northeast had the biggest decline of 13.8 percent while the Midwest had a 7.0 percent decline in sales. The West had the smallest decline of 3.1 percent.
  • All four regions showed an increase in sales from a year ago with the West leading with an incline of 9.6 percent. The South had a gain of 5.9 percent followed by the Midwest with a gain of 2.6 percent. The Northeast had the smallest gain of 1.5 percent. The South headed all regions in percentage of national sales at 42.7 percent while the Northeast has the smallest share at 12.6 percent.
  • February’s inventory figures are up 4.2 percent from last month to 1.75 million homes for sale. Inventories are down 6.4 percent from a year ago which is 21 months of year over year declines. It will take 3.8 months to move the current level of inventory at the current sales pace. It takes approximately 45 days for a home to go from listing to a contract in the current housing market, down from 59 days a year ago. This is the lowest months’ supply in February since 1999.
  • In February, single-family sales declined 3.0 percent and condominiums declined 9.2 percent compared to last month. Single-family home sales inclined 5.8 percent and condominium sales were up 1.7 percent compared to a year ago. Both single-family and condominiums had an increase in price with single-family up 7.6 percent at $229,900 and condominiums up 8.2 percent at $216,100 from February 2016.

Broad Impact of the FHA Fee Freeze

Wed, 03/22/2017 - 14:50

In late January, the new Trump administration froze a number of policy changes made in the waning days of the Obama Presidency. One such change, a 25 basis point increase in the mortgage insurance premium (MIP) charged by the Federal Housing Administration (FHA), was previously analyzed by NAR Research. Here we report local impacts of the change, which are large in both high cost areas and in areas where FHA usage is highest.

NAR Research previously estimated that 30,000 to 40,000 home purchases would be lost in 2017 and another 750,000 to 850,000 homebuyers would face higher costs. These effects were re-estimated at the local level using 2015 HMDA figures for purchase mortgages. The results vary widely across the country.

Markets with high shares of purchase mortgages financed with FHA support will experience the broadest impact of the higher MIP fees. The top 10 markets in terms of FHA share were in smaller communities in Texas and California along with wide swaths of the Southeast and “rust belt” (see map below). Since more than 40 percent of home purchases in the top 10 markets were financed with FHA backing, these markets would have received the broadest boost to affordability from the lower monthly payments. The most robust impacts are likely to be felt in Laredo (TX), Vineland-Bridgeton (NJ), and McAlien-Edinburg-Mission (TX). Nationally, 25.3 percent of purchase mortgages were backed by the FHA in 2015.

However, because the MIP is charged on the outstanding mortgage balance, buyers utilizing the FHA in markets with the highest home prices would forgo the greatest reduction in annual cost. Markets in California and Hawaii dominate this list. In 2015, the average homebuyer in San Francisco who financed their purchase with an FHA loan would have saved nearly $1,450 annually.

A 25 basis point fee reduction at the FHA would have a broad benefit. In particular, those markets with the highest cost and greatest dependence on FHA financing would feel the pinch. Curious how your market stacks up? The chart below depicts the FHA share of purchase mortgages and annual savings from a 25 basis point MIP reduction in more than 300 metropolitan areas across the country.

 

Demand for Apartments Remains Solid in 2017

Fri, 03/17/2017 - 11:16

Economic activity continued on an upward trend in the last quarter of 2016, but at a slower pace, as the first estimate of real gross domestic product (GDP) from the Bureau of Economic Analysis documented. Preliminary figures indicated that GDP rose at an annual rate of 1.9 percent, on par with the average 1.9 percent typical of fourth-quarter GDP growth over the 2000-15 period.

The pace of employment growth remained positive, but softened slightly in the fourth quarter. Payroll employment advanced by 495,000 net new jobs during the fourth quarter, closing 2016 with a net total of 2.2 million new employees, according to the Bureau of Labor Statistics. Private service-providing industries continued as the growth engine during the quarter, with 455,000 net new jobs.

The unemployment rate declined from 4.9 percent in the third quarter to 4.7 percent in the last one, based on data from the Bureau of Labor Statistics. The average duration of unemployment also declined from 27 weeks in the third quarter to 26 weeks by the end of the year.

The labor force participation (LFP) rate declined slightly, moving from 62.8 percent in the third quarter to 62.7 percent in the last quarter. In comparison, before the Great Recession the LFP rate was 65.9 percent.

Disposable personal income—adjusted for inflation—rose 1.5 percent in the fourth quarter, according to the Bureau of Economic Analysis. The personal saving rate was 5.6 percent in the fourth quarter, slightly lower from the previous quarter.

Following gains in employment, consumer confidence picked up. The Conference Board’s Consumer Confidence index advanced 12.3 percent year-over-year, to 107.8, the highest value since the first quarter of 2007. The value for December 2016 was 113.3, indicating growing optimism about the outlook. Separately, the Consumer sentiment index compiled by the University of Michigan also advanced in the fourth quarter of the year to 93.1, compared with the 91.3 value from the fourth quarter of 2015.

With improving employment prospects and a return to labor markets, household formation has rebounded in 2016, returning toward its long-term trend. Historically, household formation averaged 1.3 million every year over the 1958-2007 period. Between 2008 and 2013, the average number of new households dropped to 579,000 per year, underscoring the severity of the Great Recession and ensuing slow recovery. During 2015, household formation advanced at a pace of 704,000 new households.

With steady economic growth and rising household formation, demand for multifamily properties remained solid in the last quarter of 2016. Net absorption of multifamily units advanced 4.9 percent on a yearly basis, to a total of 201,000 units for 2016, according to CBRE. Development of multifamily properties outpaced demand, as 243,000 units were delivered during the year. The national vacancy rate averaged 4.9 percent during the fourth quarter, 30 basis points higher from the same period in 2015. With increasing supply and rising vacancies, rent growth moderated, posting a yearly advance of 0.2 percent.

 

Commercial fundamentals in smaller markets strengthened during the fourth quarter of 2016. Leasing volume advanced 2.5 percent from the prior quarter, as leasing rates rose by 3.1 percent. Vacancy rates continued declining, ranging from a low of 7.2 percent for apartments to a high of 14.6 percent for office properties. Industrial availability witnessed a yearly decrease of 80 basis points—to 10.6 percent. Lease terms remained steady, with 36-month and 60-month leases capturing 59.0 percent of the market. One-year and two-year leases made up 26.0 percent of total.

To access the Commercial Real Estate Outlook: 2017.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

 

 

Raw Count of Home Sales (January 2017)

Wed, 03/15/2017 - 11:20
  • Existing-home sales rose 3.3 percent in January from one month prior while new home sales increased 3.7 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, 320,000 existing-homes were sold in January while new home sales totaled 41,000.  These raw counts represent a 27 percent decrease for existing-home sales from one month prior while new home sales rose 8 percent.  What was the trend in recent years?  Sales from December to January decreased by 30 percent on average in the prior three years for existing-homes and increased by 7 percent for new homes.  So this year, both existing and new home sales outperformed to their recent normal.
  • 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 February and even better in March. For example, in the past 3 years, February sales rose by 3 percent on average from January while March sales rose by 26 to 37 percent from February. New home sales market tends to get busier in both February and March as well. For example, in the past 3 years, raw home sales in February increased by 6 to 15 percent from January while March sales rose by 2 to 11 percent from February.

Retail Rent Growth Enters 2017 on Upward Swing

Tue, 03/14/2017 - 15:56

Economic activity continued on an upward trend in the last quarter of 2016, but at a slower pace, as the first estimate of real gross domestic product (GDP) from the Bureau of Economic Analysis documented. Preliminary figures indicated that GDP rose at an annual rate of 1.9 percent, on par with the average 1.9 percent typical of fourth-quarter GDP growth over the 2000-15 period. The slower quarterly economic performance closed the book on 2016 with an annual GDP growth rate of 1.6 percent.

Consumer spending—the main driver of GDP—continued on an upward swing for the 28th consecutive quarter. Personal consumption rose at an annual rate of 2.5 percent in the fourth quarter. Benefitting from the traditional holiday season, the fourth quarter experienced solid gains in durable goods spending, especially cars and light trucks (up 11.8 percent), as well as recreational goods and vehicles (up 16.2 percent). Consumers also spent more on furniture and durable household appliances (up 4.0 percent). Nondurable goods spending increased at a comparable 2.3 percent during the quarter, with more consumer dollars flowing toward grocery store purchases. Spending on services rose 1.3 percent on an annual basis, with transportation, recreation and financial services leading the spending gains.

Disposable personal income—adjusted for inflation—rose 1.5 percent in the fourth quarter, according to the Bureau of Economic Analysis. The personal saving rate was 5.6 percent in the fourth quarter, slightly lower from the previous quarter.

The pace of employment growth remained positive, but softened slightly in the fourth quarter. Payroll employment advanced by 495,000 net new jobs during the fourth quarter, closing 2016 with a net total of 2.2 million new employees, according to the Bureau of Labor Statistics. Private service-providing industries continued as the growth engine during the quarter, with 455,000 net new jobs. With the retail shopping season in full swing, retail trade employment gained 23,500 net new positions, as the wholesale trade sector added 13,800 net new employees to the quarterly payrolls.

 

Following gains in employment, consumer confidence picked up. The Conference Board’s Consumer Confidence index advanced 12.3 percent year-over-year, to 107.8, the highest value since the first quarter of 2007. The value for December 2016 was 113.3, indicating growing optimism about the outlook. Separately, the Consumer sentiment index compiled by the University of Michigan also advanced in the fourth quarter of the year to 93.1, compared with the 91.3 value from the fourth quarter of 2015.

Going into the last quarter of 2016, demand for retail properties remained steady, as employment growth and rising wages boosted consumer spending. Retail net absorption totaled 12.5 million square feet during the quarter, bringing to yearly total to 74.8 million square feet, according to CBRE. Retail construction activity continued at subdued levels, with 12.8 million square feet of new completions. Availability moved sideways during the last quarter of 2016, staying at 7.1 percent. Retail rents—up for 12 consecutive quarters—advanced 4.0 percent year-over-year, to $16.59 per square foot.

Commercial fundamentals in smaller markets strengthened during the fourth quarter of 2016. Leasing volume advanced 2.5 percent from the prior quarter, as leasing rates rose by 3.1 percent. NAR members’ average gross lease volume for the quarter was $953,700. New construction echoed the broader economic landscape, posting a 6.6 percent gain from the third quarter of 2016.

To access the Commercial Real Estate Outlook: 2017.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

 

E-Commerce Sales Advance 14.3 Percent, Strengthening Industrial Demand

Mon, 03/13/2017 - 11:25

Economic growth remained positive in the fourth quarter of 2016, but momentum slipped from the upbeat pace of the third quarter. Real gross domestic product (GDP) advanced at an annual rate of 1.9 percent, according to the Bureau of Economic Analysis’s first estimate.

The fourth quarter increase in economic activity stemmed from moderately positive contributions across most of the main GDP components. Net exports offered the only exception—experiencing the impact of a strengthening dollar. The 4.3 percent decline in exports coupled with the 8.3 percent jump in imports led to a negative contribution to quarterly GDP.

Consumer spending—the main driver of GDP—continued on an upward swing for the 28th consecutive quarter. Personal consumption rose at an annual rate of 2.5 percent in the fourth quarter. Benefitting from the traditional holiday season, the fourth quarter experienced solid gains in durable goods spending, especially cars and light trucks (up 11.8 percent), as well as recreational goods and vehicles (up 16.2 percent). Consumers also spent more on furniture and durable household appliances (up 4.0 percent).

Consumers continued their shift toward on-line purchases in 2016, driving demand for distribution centers. Retail e-commerce sales totaled $102.7 billion in the fourth quarter of the year, a 14.3 percent gain compared with the same quarter of the prior year, according to the Census Bureau. E-commerce sales represented 8.1 percent of total retail sales.

The first quarter employment landscape offered a few high points. Payrolls rose at a solid pace, adding 4495,000 net new jobs. In a nod to the rising profile of electronic commerce and demand for industrial properties, transportation and warehousing gained 39,100 net new employees, the strongest quarterly gain of the year for the sector.

Benefiting from the growing economy and continued gains in e-commerce, the industrial sector posted solid performance figures in the fourth quarter of 2016. Industrial net absorption totaled 47.0 million square feet, marking the 27th positive demand quarter, according to CBRE. Industrial developers tightened the gap between supply and demand to its closest level of the cycle, as new completions totaled 44.7 million square feet. As demand continued outpacing new construction, industrial vacancy dropped to 4.9 percent. Industrial rents advanced 6.3 percent on a yearly basis—the highest level since 2007—to an average of $6.58 per square foot.

 

Commercial fundamentals in smaller markets strengthened during the fourth quarter of 2016. Leasing volume advanced 2.5 percent from the prior quarter, as leasing rates rose by 3.1 percent.

Tenant demand remained strongest in the 5,000 square feet and below segment, accounting for 87.0 percent of leased properties. Demand for space in the Under 2,500 square feet segment increased in the last quarter, capturing 46.0 percent of responses. Demand also rose for properties in the 50,000 – 100,000 square feet segment and for those in the Over 100,000 square feet.

 

To access the Commercial Real Estate Outlook: 2017.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

29 Percent of Sales Contracts in November 2016—January 2017 Had a Delayed Settlement

Thu, 03/09/2017 - 11:16

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks membersIn the past three months, think of your most recent sales contract that was either settled/closed or terminated. Please explain how the deal concluded (settled, delayed, terminated, sale is pending, no contract signed).”

Among respondents who had a contract that went into settlement (on time or delayed) or was terminated over the period November 2016, December 2016, and January 2017, 29 percent had a delayed settlement, according to the January 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Sixty-seven percent reported that the contract was settled on time, and five percent reported that the contract was terminated.

Among contracts that had a delayed settlement (29 percent), 38 percent faced issues related to obtaining financing and 22 percent faced appraisal issues. Regarding appraisal issues, respondents reported facing appraisal delays due to a shortage of appraisers, valuations that are not in line with market conditions, and “out-of-town” appraisers who are not familiar with local conditions. In NAR’s Survey of Mortgage Originators, 55 percent who took part in the survey reported some level of issues getting appraisals.[2]  Other specific issues that led to delays involved titling, sale contingencies, problems related to distressed sales, home/hazard/flood insurance issues, and the buyer losing a job.

Based on information collected from the most recent sale of REALTOR® respondents ,the median days to close a contract was 40 days in January 2017 (40 days in December 2016; 42 days in January 2016). In July 2015 when NAR collected this information prior to the implementation of TRID/”Know Before You Owe”, the median days to close was 36 days.

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

[1] The author acknowledges Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

[2] Ken Fears, 2016 Survey of Mortgage Originators, Fourth Quarter, Economists Outlook Blog. See http://economistsoutlook.blogs.realtor.org/2017/02/07/survey-of-mortgage-originators/

County Median Home Prices

Thu, 03/09/2017 - 10:35

A week after the release of the Housing Price Index for the last quarter of 2016,  the median home price per county[1] has been updated. Applying the price change in the related metropolitan areas, it seems that, compared to a year earlier, home prices continue to rise in 97 percent of the counties. Counties in the following metro areas experienced price gains higher than 11%:

  • Palm Bay-Melbourne-Titusville, FL
  • Lewiston-Auburn, ME
  • Seattle-Bellevue-Everett, WA
  • Portland-Vancouver-Hillsboro, OR-WA
  • Crestview-Fort Walton Beach-Destin, FL
  • Tampa-St. Petersburg-Clearwater, FL
  • Jacksonville, FL
  • Salem, OR

At the same time, mortgage rates continue to rise. Based on Freddie Mac data, the average rate for a 30-year fixed mortgage was 4.17 percent in February. Since the 2016 elections, the typical mortgage rate has risen from 3.5 percent to 4.2 percent. Mortgage rates are still historically low, but crossing over from the 3 percent range to 4 percent range raises worries to potential home buyers.

The monthly payment was calculated by county based on the mortgage rate in October (3.5 percent), the rate as of early January (4.2 percent) and a higher rate likely to be seen within the next two years (5.0 percent).

Nationwide, it is estimated that the rise of mortgage rates from 3.5 to 4.2 percent increased the monthly payment by $75 to the amount of $921 while a rise from 4.2 to 5.0 percent will increase the monthly payments by $90[2] ($1,011 per month).

But the effect depends on the location. At the high end, San Francisco homebuyers have seen a nearly $377 increase in monthly payments so far, and if rates were even higher now, financing the same-priced home would cost an extra $451 per month.  At the low end, in Cochran County, TX, home buyers are paying an extra $13 per month on account of the mortgage rate rise since November, and they could see an extra $16 per month as rates rise to 5 percent. At this end of the spectrum, the change in monthly payments seems much more manageable.

However, these examples only use the current price of homes to see the difference.  In the years ahead, NAR expects that the 30 year fixed-rate will increase to 4.4 percent in 2017 and 5.0 percent in 2018 while home prices are expected to rise 4.2 and 3.1 percent, accordingly. Rising prices in addition to rising mortgage rates will push the monthly cost of housing up even higher for new homebuyers. Existing homeowners who took out fixed rate mortgages will have the same monthly principal and interest payment.

Select a County from the dropdown and see how much monthly payments change over the different mortgage rates:

Lastly, please take look at which counties will be affect mostly from the increase of mortgages rates:

 

For more information on data by name or price, and the methodology, please visit the data page. 

 

[1] There is data available for 3,119 counties.

[2] The U.S. median home value matches the county prices calculations. For comparisons purposes, the calculated median home value reflects all homes while NAR’s U.S. median price represents home sales. Thus, the calculated price ($209,227) is expected to be lower than NAR’s home value ($233,900 in Q4 2016). Please see Methodology for more details.

International Women’s Day 2017

Wed, 03/08/2017 - 11:09

International Women’s Day is celebrated internationally on March 8th each year. It is a day to acknowledge the economic, political, and social achievements of women. In recognition of this day we can examine the profile of women REALTORS® using the 2016 Member Profile.

Women in Real Estate:

  • Women make up 62% of all Realtors®, with women making up 56% of licensed brokers/broker associates, and 66% of licensed sales agents.
  • Thirty-three percent of women members are between the ages of 50 and 59.
  • Women members were most likely to be married, at 68%, 18% were divorced, 7% were single/never been married.

Education:

  • Thirty-two percent of women members have completed some college.
  • Fourteen percent of women members hold an Associate’s degree, 29% hold a Bachelor’s degree, and 10% hold a Master’s degree/MBA/law degree.

Real Estate Career:

  • For 76% of women members, real estate is currently their only occupation.
  • Fifty-eight percent of members who have been active as a real estate professional for 16 or more years are female.
  • In a typical work week 54% of women members work 40 hours or more.
  • Only 4% of female members have cited real estate as their first career.
  • Some of the previous occupations help by women members include:
    • Management/Business/Financial: 15%
    • Sales/Retail: 14%
    • Office Admin Support: 13%
    • Education: 8%
    • Healthcare: 7%
    • Homemaker: 7%

For more information on International Women’s Day check the out the United Nation’s events page.

More information on REALTORS® is available in the International Women’s Day Infographic and 2016 Member Profile.

Social Network and Housing Markets: A REALTOR® University Speaker Series Presentation

Mon, 03/06/2017 - 11:47

Becoming a homeowner or investing in a real estate property is one of the most important personal and financial decisions a person will make in his lifetime. In a world when social media and the increasing access to the internet are affecting every aspect of life, how does one’s social network affect the decision to purchase a property? 

At a REALTOR® University Speaker Series held recently[1], Dr. Johannes Stroebel presented research[2] that found that one’s social network of friends has an impact on a person’s decision to purchase property. The process works this way: price changes occurring within the geographical area of an individual’s social network impact his/her perception of the attractiveness of property investments as well as actual decisions to purchase real estate.

To listen to the presentation[3], click Video). To download the study, click here.

The research looked at Facebook users who lived in Los Angeles and analyzed how the home price experience of their social network of friends who lived in other geographic areas affected their home purchase decisions. The research found that housing investment is regularly a topic of discussion with the social network.[4] According to the study, about half of the respondents discussed (sometimes or often) whether buying a house is a good investment.

The study found that an increase in the home price experience[5] of an individual’s social network (“friends”) who reside in other geographic areas:

- increased the chances of the individual becoming a homeowner;

- increased the size of the property the individual purchased; and

- increased the individual’s purchase price;

An implication of the study is that an individual whose social network (friends) live in geographic areas where prices are increasing is more likely to purchase a home than an individual whose social network is experiencing greater price variability (some increasing, some decreasing). The effect is larger for individuals who regularly talk to their friends about investing in property. In this regard, social networks can amplify housing upturns and downturns, if home prices are moving in the same direction in many geographic areas.

 

What This Means to REALTORS®: REALTORS® are increasingly using social media, and this active social media presence can potentially create more business opportunities, as individuals become more aware of housing trends in their areas and discuss  these trends with their social network friends. According to the 2016 Member Profile, 70 percent use social media, 54 percent reported having a website for five years, and 11 percent have a real estate blog.

 

About the Speaker

Dr. Johannes Stroebel is Associate Professor of Finance, New York University Stern School of Business. He is also affiliated with the National Bureau of Economic Research, CESifo (Germany-based), and the Center for Economic Policy Research (U.K.-based). His research on asymmetric information in the housing market, housing bubbles, the regulation of consumer financial products, and the impact of climate change on housing has been published in journals such as the Journal of Finance, the Quarterly Journal of Economics, and Econometrica, among others.

To contact the speaker, please email jcstroebel@googlemail.com.

 

About REALTOR® University Speaker Series

REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.

[1] Held on January 27, 2017 at the NAR Washington D.C. Office

[2] The research is a collaboration of economists Michael C. Bailey (Facebook), Ruiqing Cao (Harvard University), Theresa Kuchler (NYU), and Johannes Stroebel (NYU, NBER, CPER).

[3] Thanks to Meredith Dunn, Communications Manager, for creating the webinar material.

[4] The survey data had 1,242 survey responses, 55% male. The respondents’ age ranges between 19 and 75 years, with an average of 46 years, Respondents are spread over 113 Los Angeles zip codes, but 24% (40%) of them live in the 10 (20) most represented zip codes. On average, the Facebook users in the sample data had 420+ friendship links, and even those in the 25th percentile had 117 links.

[5] The authors measure home price experience of an individual’s social network as the sum of the share of the individual’s network N who live in county c multiplied by the price changes in county c between December 2008 and December 2010.

All-Cash Sales: 23 Percent of Residential Sales in January 2017

Thu, 03/02/2017 - 15:58

In January 2017, 23 percent of sales were cash sales (21 percent in December 2016; 26 percent in January 2016), according to the January 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Buyers of homes for investment purposes, distressed sales, second homes, and foreign clients are more likely to pay cash than first-time home buyers. As the shares of investment and distressed sales have declined, so has the share of cash sales.

Distressed sales accounted for seven percent of sales in January 2017 (seven percent in December 2016; nine percent in January 2016). Foreclosed properties were five percent of residential sales, while short sales were only two percent of residential sales.[2] With rising home values, improved economic conditions, and fewer foreclosures, the share of sales of distressed properties has generally continued to decline. Distressed sales accounted for about a third to half of sales until 2012 when they began to fall below this level.

Investment sales made up 15 percent of sales in January 2017 (15 percent in December 2016; 17 percent in January 2016). Purchases for investment purposes have generally been on the decline since 2011–2012 when investment sales accounted for 20 percent of sales. Purchasing for investment has become less attractive with fewer distressed sales on the market and with home prices rising.

[1]The author thanks Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

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

Housing Demand over the Next Decade

Thu, 03/02/2017 - 11:13

Housing data in January gave mixed signals on the direction for the year. Closing activity for existing home sales shot up to a decade-high of 5.69 million units at an annualized pace, but pending contracts fell to their lowest level in 12 months. For the whole of 2017, I expect existing home sales to reach 5.6 million, which would be a gain of 2.2% from the prior year, but below the annualized pace set in January. In short, expect sideway movements for the rest of the year.

 

View, NAR Chief Economist, Lawrence Yun’s full Forbes article here.

Solid Demand Drives Office Vacancies Lower in the Fourth Quarter of 2016

Wed, 03/01/2017 - 15:31

Economic activity continued on an upward trend in the last quarter of 2016, but at a slower pace, as the first estimate of real gross domestic product (GDP) from the Bureau of Economic Analysis documented. Preliminary figures indicated that GDP rose at an annual rate of 1.9 percent, on par with the average 1.9 percent typical of fourth-quarter GDP growth over the 2000-15 period.

The pace of employment growth remained positive, but softened slightly in the fourth quarter. Payroll employment advanced by 495,000 net new jobs during the fourth quarter, closing 2016 with a net total of 2.2 million new employees, according to the Bureau of Labor Statistics. Private service-providing industries continued as the growth engine during the quarter, with 455,000 net new jobs.

 

Within the service industries, education and health services added 163,000 net new payroll positions, the largest industry sector advance. Professional and business services posted the second-highest number of net new employees—122,000—while financial services added 29,000 new positions, indicating continuing demand for office space.

Office net absorption picked up speed in the last quarter of 2016, totaling 13.0 million square feet, almost double the amount from the third quarter, based on data from CBRE. Office construction added 9.7 million square feet to the supply pipeline during the quarter. With the robust demand, office vacancies declined to 12.9 percent, the lowest level in eight years. The decline was driven by solid improvement in suburban office occupancy. Rents for office properties rose 0.9 percent during the fourth quarter, to an average of $31.61 per square foot. Yearly rent growth for office properties advanced by 6.0 percent in 2016.

Commercial fundamentals in smaller markets strengthened during the fourth quarter of 2016. Leasing volume advanced 2.5 percent from the prior quarter, as leasing rates rose by 3.1 percent.

 

NAR members’ average gross lease volume for the quarter was $953,700. New construction echoed the broader economic landscape, posting a 6.6 percent gain from the third quarter of 2016. Tenant demand remained strongest in the 5,000 square feet and below segment, accounting for 87.0 percent of leased properties. Demand for space in the Under 2,500 square feet segment increased in the last quarter, capturing 46.0 percent of responses. Demand also rose for properties in the 50,000 – 100,000 square feet segment and for those in the Over 100,000 square feet.

To access the Commercial Real Estate Outlook: 2017.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

Properties Typically Sold Faster in January 2017 as Demand Outpaces Supply

Wed, 03/01/2017 - 11:14

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 January 2017 compared to one year ago, amid strong demand and tight supply, according to the January 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Properties that sold in November 2016, December 2016, and January 2017 were typically on the market for less than 31 days in Washington, Oregon, Utah, Alaska, Kansas, Texas, Tennessee, and the District of Columbia.

Looking at the values over the last few years, in most states the median length of time that properties stay on the market has trended downwards, though the graphs also show that days on market in some states fluctuate seasonally.[2] Local conditions vary, and the data is provided for REALTORS® who want to compare local markets against other states and the national summary.

Nationally, properties sold in January 2017 were typically on the market for 50 days (52 days in December 2016; 64 days in January 2016).[3] The length of time properties are on the market has fallen as demand has outpaced the inventory of homes for sale. In 2011, properties were typically on the market for 97 days.

Properties that are on the market for a shorter time tend to sell at the original list price or at a premium. Among transactions that closed in January 2017, 50 percent of properties that were on the market for less than one month sold at the original list price or at premium, while only 14 percent of properties that were on the market for 12 months or longer sold at the original list price or at a premium.

[1]The author thanks Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

[2]To increase the number of observations for each state, the analysis is based on a 3-month rolling period. The states shown in these charts are those with approximately 150 observations.

[3] Respondents are 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.

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