Economist's Outlook

Contracts That Closed in January 2016 Typically Took 42 Days to Close

In a monthly survey, the National Association of REALTORS® asks REALTOR® respondents how many days it took to close their most recent contract that closed in January 2016. The median days to close a contract was 42 days, up from 36 days in July 2015 when NAR first started tracking this information, according to the January 2016 REALTORS® Confidence Index Survey Report. The average number of days to close a contract also rose to 46 days from 41 days in July 2015.[1]

The survey also asks the respondents if they observed a longer closed period compared to a year ago. Nearly half of respondents reported a longer closing period compared to a year ago.

Reports about TRID are mixed: there are reports that “TRID is causing delays” and “making transactions difficult,” but there are also reports that TRID has been “fairly easy to deal with” and that the TRID rules “aren’t a major problem”.[2] Respondents have reported writing 45-day closing periods in their contracts to take into account the TRID timelines.

Delays due to financing are the biggest cause of recent delays. Among contracts that had a delayed settlement in the period November 2015‒January 2016 (32 percent of contracts), 40 percent had financing issues.

 [1] The median is the number (of days) such that half of the respondents reported a lower number and half of the respondents reported a higher number. It is less susceptible to extreme values than the average (mean). A higher average (mean) compared to the median indicates the presence of data at the upper range that skews the distribution of observations to the right and that pulls up the average(mean) compared to the median which is the middle value.  

[2] The TILA‒RESPA Integrated Disclosure (TRID) regulations which came into effect on October 3, 2015 were intended to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. Toward this end, the new guidelines prescribe timelines when consumers should receive the Loan Estimate and the Closing Disclosure. The creditor should deliver the Loan Estimate or place it in the mail no later than the third business day after receiving the loan application. The creditor is required to ensure that the consumer receives the Closing Disclosure no later than three business days before the consummation of the loan. If the creditor provides a new Closing Disclosure, the consumer must be provided with another three-business day waiting period. Guidelines at


In What States Did Properties Sell Quickly in November 2015–January 2016?

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?”

Nationally, properties sold in January 2016 were typically on the market 64 days compared to 69 days one year ago, indicating an improved market for sellers (58 days in December 2015; 69 days in January 2015), according to the January 2016 REALTORS® Confidence Index Survey Report.

Fewer days on the market are an indication that inventory remains tight.11 Short sales were on the market for the longest time at 77 days, while foreclosed properties typically stayed on the market for only 57 days. Non-distressed properties were typically on the market for 61 days.

Properties typically sold within a month in the District of Columbia and within 45 days in Washington, California, Utah, Arizona, Kansas, and Nebraska. In some oil-producing states which are undergoing slower job growth following the collapse of oil prices, such as North Dakota, Montana, New Mexico and Louisiana, properties stayed on the market between 61 and 90 days. Texas appears more resilient to the oil price collapse, as properties typically sold within 46 to 60 days. Local conditions vary, and the data is provided for REALTORS® who may want to compare local markets against the state and national summary.


11 Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

Retail Availability Declines as Employment Advances

U.S. macroeconomic momentum declined during the fourth quarter of 2015, buffeted by global economic slowdown and financial volatility. Based on the second estimate from the Bureau of Economic Analysis, real gross domestic product (GDP) rose at an annual rate of 1.0 percent, a slight improvement from the first estimate.

Consumer spending advanced at an annual rate of 2.0 percent in the fourth quarter, benefiting from the winter holiday season. However, with soft retail sales, brisk electronic commerce proved the silver lining. Spending on durable goods increased by 3.4 percent, as consumers purchased furniture, household appliances and recreational goods and vehicles. Nondurable good purchases advanced modestly, driven by sales of clothing and shoes.

Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. Average weekly earnings of private employees rose by 2.4 percent in the fourth quarter of this year, compared to one year earlier. The unemployment rate declined from 5.6 percent in the first quarter 2015 to 5.0 percent by the close of the year. At the end of December there were 7.9 million unemployed Americans.  The average duration of unemployment declined from 31 weeks in the first quarter to 28 weeks by the end of 2015.

Consumer confidence, as measured by The Conference Board, declined to 96.0 in the fourth quarter of 2015, the lowest reading of the year. Separately, the Consumer sentiment index compiled by the University of Michigan moved up slightly in the last quarter of the year to 91.3, compared with the 90.7 value from the third quarter. The second quarter value was 94.2 while the third quarter posted 90.7.

Demand for retail properties has picked up in tandem with rising employment and confidence. Retail tenants are expanding, leading developers to increase construction. Vacancy rates for retail buildings declined 10 basis points in the fourth quarter, to 11.2 percent, based on CBRE data. With declining availability, rents are expected to rise.

Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. Even with a soft holiday shopping season, retail vacancies declined 40 basis points, to 12.9 percent in the last quarter.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit


Home Purchases by Foreign Buyers are Likely Easing

Over the 12-month period April 2014‒March 2015, the National Association of REALTORS® estimated that the dollar volume of home purchases of foreign buyers rose to $102 billion, led by purchases from Chinese buyers. While NAR is yet to conduct its annual survey in April 2016, current economic indicators could prove challenging to foreign buyers and may indicate an easing of foreign demand. [1]

  • Rising U.S. home prices. U.S. home prices have continued to increase strongly, making homes less affordable for domestic and foreign buyers alike. As of January 2016, the median price of an existing home stood at $213,800, or eight percent higher compared to the levels one year ago.
  • Stronger dollar. On top of the strong increase in home prices, the dollar has also strengthened against most currencies, which means that foreign buyers have to shell out more of the local currency for every dollar of purchase. For example, the dollar has appreciated against the Brazilian real by a whopping 54 percent, against the Mexican peso by 23 percent, and the Canadian dollar by 15 percent.

Given the increase in U.S. home prices and the appreciation of the dollar, the price of a typical U.S. home measured in Brazilian real was 67 percent higher in January 2016 compared to a year ago. Measured in Mexican pesos, U.S. home prices were 33 percent higher. Measured in Canadian dollars, U.S. home prices were 27 higher (see Chart 1).

According to data compiled by the International Monetary Fund’s Global Housing Watch project, the U.S. has experienced one of the more robust rates of housing price growth.[2] After adjusting for inflation, U.S. home prices increased in real terms by 6.2 percent in the second quarter of 2015. In comparison, house prices decreased in real terms in countries such as China (-4.8%), Brazil (-5%), and Russia (-11%). In Mexico, house prices increased in real terms at a more moderate pace (3.3%), as well as in Canada (4.2%).

  • Slower economic growth. The countries that have been traditionally the top sources of foreign buyers – China, Canada, Latin America, and Europe – are expected to grow at a slower or moderate pace in 2016. The global slowdown in 2016 is essentially arising from two fronts: the slowdown in the Chinese economy and the oversupply in oil production that has led to falling oil prices and slower economic growth in oil-producing countries such as Canada.

  • Tighter capital flow monitoring in China. Given the speculative attacks on the yuan, China’s State Administration of Foreign Exchange has enhanced its systems and regulations for reporting and monitoring capital flows.[3]  This is expected to have some impact since foreign buyers typically pay cash. In January 2016, China’s State Administration of Foreign Exchange launched an individual foreign exchange monitoring system. Under this system, individuals are not allowed to evade their purchase quota of $50,000 per year per person. Those individuals who borrow another individual’s quota will be put on watch list for the current year and two consecutive years. Banks are required to report any quota evasion within 20 days and to assign technicians to the individual foreign exchange business monitoring system.

In summary, foreign buyers are facing some headwinds. On a positive note, the slowdown in demand from foreign buyers may help ease the tightness of supply in the market.

[1] Thanks to Danielle Hale Hedge, Managing Director, Housing Research, for reviewing and editing this blog.

[2] See

[3] See

Increased International Trade and E-Commerce Lead to Industrial Demand Ramp Up

Economic activity momentum decelerated in the last quarter of 2015. Real gross domestic product (GDP) advanced at an annual rate of 1.0 percent, according to the Bureau of Economic Analysis’s second estimate. International trade felt the impact of the stronger dollar in the fourth quarter. Exports declined by 2.7 percent, while imports also declined 0.6 percent, pegging real net exports at a negative $556.8 billion during the quarter.

Retail e-commerce sales totaled $89.1 billion in the fourth quarter of the year, a 14.7 percent gain compared with the same quarter of the prior year, according to the Census Bureau. E-commerce sales represented 7.5 percent of total retail sales. As more consumers shift to on-line purchases, distribution centers play a greater role in fulfilling orders.

Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. With demand for industrial properties rising, transportation and warehousing employment gained 22,200 new positions, while wholesale trade employment rose by 24,100 jobs.

The industrial sector recorded stronger fundamentals in the fourth quarter, with rising demand and declining vacancies. Industrial net absorption totaled 66.3 million square feet in the fourth quarter, bringing the total for 2015 to 231.2 million square feet, according to JLL. Warehouse and distribution centers accounted for the lion’s share of demand, followed by manufacturing. Supply picked up as well, with new completions ringing the year end at 115.0 million square feet. Demand continued outpacing supply, driving industrial vacancies down to 6.4 percent, a 14-year low, according to JLL. With a tight market, industrial rents rose 5.6 percent, to an average of $4.93 per square foot in the fourth quarter.

Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. Industrial availability reached 11.4 percent, a 17-basis point decrease on a yearly basis.

Lease concessions declined 3.1 percent. Tenant improvement (TI) allowances averaged $47 per square foot per year nationally.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit

Raw Count of Home Sales (January 2016)

  • Existing-home sales increased 0.4 percent in January from one month prior while new home sales declined 9.2 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, 302,000 existing-homes were sold in January while new home sales totaled 37,000.  These raw counts represent a 31 percent loss for existing-home sales from one month prior while new home sales dropped 3 percent.  What was the trend in the recent years?  Sales from December to January decreased by 27 percent on average in the prior three years for existing-homes and rose 11 percent for new homes.  So this year, both existing and new home sales underperformed compared to 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 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 activity in March for existing-home sales. For example, in the past 3 years, February sales typically increased by 4 to 5 percent from January and with more gains in March where sales rose by 26 to 37 percent from February. For the new home sales market, the raw sales activity in February tends to be better than that occurring in January, and activity is expected to grow more in March. For example, in the past 3 years, February sales rose by 6 to 15 percent from January while March sales rose by 2 to 14 percent from February.

January Pending Home Sales

  • NAR released a summary of pending home sales data showing that January’s pending home sales are down modestly 2.5 percent from last month but slightly improved 1.4 percent from a year ago. January’s pending sales reveal a slow beginning to the year with the South being the only region to have gains in pending sales of 0.3 percent from last month.
  • Pending sales are homes that have a signed contract to purchase on them but have yet to close. They tend to lead existing-home Sales data by 1 to 2 months.
  • All regions showed increases from a year ago except the South, which had a decline of 1.3 percent. The Northeast saw the biggest gain from a year ago at 10.9 percent while the West had the smallest gain at 0.4 percent.
  • From last month, the Midwest had the largest decline at 4.9 percent while the West followed with a decline of 4.5. The Northeast had the smallest dip in pending sales at 3.2 percent.
  • The pending home sales index level was 106.0 for the US.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing-home sales above the 5 million mark.
  • Despite a steady start to the year for existing-home sales, a slow start for 2016 pending sales implies that there could be some weakness ahead in existing-home sales. An improvement in inventory levels would help combat price acceleration and provide potential home buyers more options, possibly reversing the slow start to the year.

Buyer and Seller Traffic Conditions, by State, from November 2015‒January 2016

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members to rate the past month’s buyer and seller traffic in the neighborhood or area where they make most of their sales. NAR compiles the responses on buyer traffic into a REALTORS® Buyer Traffic Index and the responses on seller traffic into a REALTORS® Seller Traffic Index. The maps below show the condition of buyer and seller traffic using data collected from November 2015‒January 2016, according to the January 2016 REALTORS® Confidence Index Survey Report.

Measured by the REALTORS® Buyer Traffic Index, buyer traffic was “strong” in many states but “weak” in some states in the Northeast, Midwest, and South.[1] The slump in oil prices has led to “weak” buyer traffic conditions in North Dakota, South Dakota, Wyoming, and Oklahoma, while Texas continues to experience “strong” buyer demand.

Measured by the REALTORS® Seller Traffic Index, seller traffic was “weak” across most states, an indication of the continued tightness of supply in many markets.[2] Seller traffic was reported to be “moderate” only in North Dakota where significant residential construction took place as builders anticipated strong housing demand in the wake of the boom in oil production.


[1] The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak,” values greater than 25 to 49 are considered “weak,” a value of 50 is considered “moderate,” values greater than 50 to 75 are considered “strong,” and values greater than 76 are considered “very strong.”

[2] Respondents were asked “How do you rate the past month’s seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak,” values greater than 25 to 49 are considered “weak,” a value of 50 is considered “moderate,” values greater than 50 to 75 are considered “strong,” and values greater than 76 are considered “very strong.”

Rising Employment Boosts Office Space Demand

U.S. macroeconomic momentum slowed during the fourth quarter of 2015, buffeted by global economic slowdown and financial volatility. Based on the second estimate from the Bureau of Economic Analysis, real gross domestic product (GDP) rose at an annual rate of 1.0 percent. The second estimate was an upgrade from the first one, which measured 0.7 percent. However it remains well below the long-term average of 3.0 percent.

The fourth quarter offered a silver lining on the employment front. Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. Average weekly earnings of private employees rose by 2.4 percent in the fourth quarter of this year, compared to one year earlier. Employment in private service-providing industries provided the main thrust for new job growth during the fourth quarter of the year.  Employment in professional and business services gained 199,000 net new jobs, followed by education and health with 177,000 net new jobs. With the holiday travel season in full swing, and warmer-than-usual weather, leisure and hospitality added 130,000 net new positions, while retail trade gained 72,400 jobs. Financial services added 39,000 new positions to payrolls during the period, keeping demand for office space positive.

Office net absorption totaled 14.4 million square feet in the second quarter of 2015, up from the weaker first quarter’s 6.3 million square feet, based on data from JLL. Compared with 20.7 million square feet absorbed in the first half of the year, new completions totaled 15.5 million square feet over the period. Overall office vacancies declined from 15.6 percent in the first quarter to 15.3 percent in the second quarter. Based on JLL’s research, office vacancies are expected to drop below 15.0 percent by the end of this year. Rents for office properties rose 2.5 percent over the first six months of 2015, leading to projections that—at the current demand pace—they will close the year higher by 5.0 – 6.0 percent from 2014.

Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. Office vacancies declined 62 basis points to 14.3 percent compared with a year ago.

Lease concessions declined 3.1 percent. Tenant improvement (TI) allowances averaged $47 per square foot per year nationally.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit




Highlights of January 2016 REALTORS® Confidence Index Survey

Market conditions vary across local markets, but the REALTORS® confidence and traffic indices indicate that overall market activity was unchanged in January 2016 compared to January 2015. Compared to December 2015, market activity slightly improved, according to the January 2016 REALTORS® Confidence Index Survey Report. There were some reports that the blizzard that hit the Mid-Atlantic and Northeast in January adversely affected listings and closings, but it was not nearly as disruptive as the blizzard in January 2015 which was later in the month and had a bigger effect on the data figures in the Northeast. Continued job creation and low interest rates are sustaining housing demand, but a lack of inventory and resulting price increases are weighing on sales and affordability.

First-time home buyers accounted for 32 percent of sales, up from 28 percent in January 2015. Purchases for investment purposes made up 17 percent of sales, while distressed properties were nine percent of sales. Respondents from New York and Florida, which follow a judicial foreclosure process that typically takes longer than a non-judicial process, reported an increase in distressed properties that are coming into the market. Cash sales accounted for 26 percent of sales. Properties were typically on the market 64 days nationally compared to 69 days a year ago, an indication that supply remains tight relative to demand. It typically took 42 days to close a sale, up from 36 days in July 2015 when NAR first started tracking this information.

Tight inventories, steep price increases, and lender processing delays were reported as the key issues affecting sales, especially to first-time homebuyers. Delayed and “below-market” appraisals were also reported to be causing transaction delays and cancellations.The collapse in oil prices is also a concern among REALTORS® in some oil-producing states such as Texas, Wyoming and Oklahoma. With spring and summer months coming, respondents were generally confident about the outlook for the next six months across all property types. Respondents typically expected prices to increase 3.4 percent.

AARP’s Livability Index: Great Neighborhoods for All Ages A REALTOR® University Speaker Series Presentation by Dr. Rodney Harrell

How livable is your neighborhood? In a presentation in the REALTOR® University Speaker Series held recently, Dr. Rodney Harrell presented the AARP Livability Index, an index that seeks to measure the quality of living in neighborhoods across multiple dimensions. Dr. Harrell is Director, Livable Communities, AARP Policy Institute.

According to Dr. Harrell, a livable neighborhood is one that is safe, provides affordable and appropriate housing and transportation options, has community features, and allows people to age in place.[1] Along this concept, the Livability Index assesses seven broad categories of community livability: housing, neighborhood, transportation, environment, health, engagement, and opportunity (see Chart). The index uses 60 indicators that score how livable a neighborhood is and how it might become more livable in the future.[2] For example, under the Housing category, the index looks at metrics such as the median housing cost, the percent of income spent on housing, the availability of subsidized housing, the percent of homes that have basic passage[3], and the availability of multi-family housing.

Dr. Harrell remarked that the Livability Index can be used not only by interested homebuyers and REALTORS® in assessing neighborhood livability, but by policy makers and county executives who are interested in framing policies that enhance the livability in their neighborhoods.

Dr. Harrell also discussed AARP’s  Future of Housing Initiative. This initiative seeks to highlight the need for housing options and designs that anticipate and meet the needs of the aging population. By 2030, about 70 million of the population will be 65 and above.

Want to know how livable is your neighborhood? Please click this link.

To listen to the Dr. Harrell’s presentation, please click this link.

About the SpeakerDr. Harrell joined the Public Policy Institute in March 2008 as a senior strategic policy advisor. Prior to joining AARP, he worked as a research and evaluation consultant, as a researcher and instructor for the University of Maryland, and as a Governor’s Fellow in the Maryland Department of Housing and Community Development / Maryland Heritage Areas Authority.Dr. Harrell graduated summa cum laude from the honors program at Howard University, earned dual master’s degrees in public affairs and urban and regional planning from the Woodrow Wilson School at Princeton University, and received a PhD in urban planning and design from the University of Maryland, College Park, where he was a Wylie Fellow. He is a member of the Phi Beta Kappa and Phi Kappa Phi honor societies.About REALTOR® University

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] Dr. Rodney Harrell, “What is a Livable Community and How do we Measure One? “ at

[2] A neighborhood is defined as a census tract.

[3] Basic passage refers to a one zero-step entrance with wide passage (32 inches of clear passage space). A house is visitable if it meets one other criteria: having one bathroom on the main floor you can get into in a wheelchair.


REALTORS® Reported Slight Uptick in Buyer Traffic amid Tight Supply in January 2016

While local conditions vary, overall buyer traffic slightly improved in January 2016 compared to a year ago and a month ago, according to the January 2016 REALTORS® Confidence Index Survey Report.[1]

The REALTORS® Buyer Traffic Index registered at 59 in January 2016 (51 in December 2015; 56 in January 2015). Meanwhile, supply conditions remained by and large tight in many areas. The REALTORS® Seller Traffic Index registered at 40 (38 in December 2015; 41 in January 2015). An index below 50 indicates that more respondents viewed traffic conditions as “weak” rather than “strong.”

The gap in demand and supply has led to strong price growth against modest gains in income, making a home purchase increasingly less affordable. The national median existing single-family home price in the fourth quarter of 2015 was $222,700, up 6.9 percent from the fourth quarter of 2014 ($208,400). For all of 2015, an average of 89 percent of measured metro areas saw increasing home prices, up from the averages in 2014 (83 percent) and 2013 (88 percent).

The number of permits authorized for new privately owned housing units has been improving and averaged 1.17 million units in 2015. However, 690,084 units, or 59 percent of new construction have been multi-family structures. About 95 percent of the multi-family units were for rental occupancy in 2013-2014[1]. Historically, multi-family structures accounted for only 20 percent of new construction, so the availability of single-units for purchase among recently constructed properties is lower than is historically normal. REALTORS® reported low inventory of properties in the lower price range and for those that are move-in ready.

[1] Source: Census Bureau. Characteristics of Units in New Multifamily Buildings Completed, Units Per Building, 2014.

[1] Respondents were asked “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?”

Regional Home Prices

  • Yesterday, we looked at the FHFA and Case-Shiller release focusing on national data trends. Today, we’ll dig a bit deeper to look at more local data at the regional, state, and city or MSA level.
  • Monthly FHFA releases data at the Census division level and quarterly it releases state and metro area data. Case-Shiller offers data on 20-cities monthly. Both of these sources confirm the trend seen in NAR measures.
  • At the regional level: the most robust home price gains from a year ago at the end of 2015 were in the West. NAR reported price change of 8.6 percent in December. According to FHFA year over year prices in December 2015 rose 7.7 percent in the Pacific division which includes Hawaii, Alaska, Washington, Oregon, and California and 7.0 percent in the Mountain division which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico. The East South Central Division which includes Alabama, Kentucky, Mississippi, and Tennessee also increased by 7.0 percent.
  • At the other end of the spectrum, NAR data showed the smallest price gains from a year ago in the Northeast (6.1 percent for the year ending in December), and FHFA showed a similar pattern. Prices rose 4.1 percent in New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut) and 2.6 percent in the Middle Atlantic states (New York, New Jersey, Pennsylvania) from December one year ago.
  • State by state data, pictured below, shows more detail. While Florida had strong growth, the South as a whole had more moderate growth than the West where Nevada, Colorado, Idaho, Washington, and Oregon all saw double-digit rates of price increase in the 4th quarter of 2015.
  • Among cities, Case-Shiller reported the biggest year over year gains in Portland (11.4%), San Francisco (10.3%), and Denver (10.2%). Each had more than 10 percent year over year gains. The smallest gains in Case Shiller’s cities were Cleveland at 2.8 percent, Chicago at 2.4 percent, and Washington DC at 1.7 percent. While NAR saw strong performance from the same three metro areas in the 4th quarter, NAR also saw strength in metro price data among metro areas in Florida that are not covered by the Case Shiller Index. In its quarterly release, FHFA produced a similar list of the top-20 metro areas. Again, the specific areas covered are different, but many of the top metro areas on FHFA’s list are in Florida and the West region including North Port-Sarasota-Bradenton (FL), Reno (NV), and Punta Gorda (FL) as the top 3.

Commercial Price Growth Expected to Slow in 2016

Commercial sales transactions span the price spectrum, but tend to be measured and reported based on size. Commercial real estate (CRE) deals at the higher end—$2.5 million and above—comprise a large share of investment sales, and generally receive most of the press coverage. Smaller commercial transactions tend to be obscured given their size. However, these smaller properties provide the types of commercial space that the average American encounters on a daily basis—e.g. strip shopping centers, warehouses, small offices, supermarkets, etc.  These are the types of buildings that are important in local communities, and REALTORS® are active in serving these markets.

The National Association of REALTORS® Commercial Real Estate Outlook: 2016.Q1 report focuses on market performance in both large (LCRE) and small commercial (SCRE) sectors.  The report provides an overview of economic indicators, investment sales and leasing fundamentals.

U.S. macroeconomic momentum dropped during the fourth quarter of 2015, buffeted by global economic slowdown and financial volatility. Business investments took a step back, and the strong dollar impacted net exports. Payroll employment offered a bright spot, closing the year with a total of 2.7 million net new jobs, boosted by private service industries. Rising employment drove demand for commercial space across the property spectrum. Vacancies continued declining in the fourth quarter of 2015, as rising rents improved cash flows.

Investment Sales

The pace of commercial transactions rebounded in the fourth quarter of 2015, after the third quarter slowdown. The volume of commercial sales in LCRE markets totaled $157 billion, a 20 percent year-over-year increase, according to Real Capital Analytics (RCA). The fourth quarter data saw gains in both individual and portfolio transactions, with a marked jump in entity level exchanges, which rose 224 percent.

Across the entirety of 2015, apartment transactions comprised the largest share of volume, with $150.0 billion in sales, followed by office properties, which accounted for $145.8 billion. Retail and industrial sales totaled $87.6 billion and $76.5 billion, respectively. Industrial sales posted the largest year-over-year change in transaction volume—54 percent.

In comparison, sales in SCRE markets rose 7.4 percent year-over-year during the fourth quarter, based on REALTORS® market data. The average transaction price declined from $1.9 million in the third quarter of 2015 to $1.6 million in the last quarter.

Investment Prices

Buoyed by rising sales and investor optimism, prices in LCRE markets rose by 12.3 percent during the last quarter of 2015, based on RCA’s Commercial Property Price Index. The advance was driven by strong appreciation in prices of CBD office and hotel properties, which advanced 18.9 percent and 16.1 percent, respectively.  Separately, additional price indices reflected the gains in commercial valuations. The Green Street Advisors Commercial Property Price Index rose 9.7 percent on a yearly basis during the fourth quarter, reaching a value of 122.0, the highest since the index’s inception in 1998. The National Council of Real Estate investment Fiduciaries (NCREIF) Price Index moderated from its third quarter record of 251.61, but increased 5.1 percent year-over-year in the last quarter of 2015.

Capitalization rates in LCRE markets averaged 6.7 percent in the fourth quarter, based on RCA reports, 20 basis points lower than the prior period. Cap rate compression continued, as transactions of office properties in CBD markets tied for the lowest cap rates with apartments, at 5.8 percent.

With inventory shortage continuing as a main concern, prices in SCRE markets rose a more moderate 4.1 percent year-over-year during the period. Average capitalization rates declined to an average 7.8 percent across all property types, a 13 basis point compression on a yearly basis. Apartments posted the lowest cap rate, at 7.2 percent, followed by industrial properties with average cap rates at 7.4 percent.  Office and retail spaces posted cap rates of 8.2 percent and 7.8 percent, respectively. Hotel transactions reported the highest comparative cap rates—8.6 percent.  It is worth noting that these cap rates are higher than those in LCRE markets, reflecting activity in markets where REALTORS® are more engaged.


Looking ahead at 2016, the GDP annual rate of growth is projected to moderate, with a 1.4 percent advance. Following what is shaping up to be a weak first quarter, economic growth is expected to pick up in the second half of 2016 to the tune of 1.6 percent in the third quarter and 2.0 percent in the fourth one. Payroll employment is projected to post 1.3 percent annual growth rate for the year. The unemployment rate is projected to fall to 4.8 percent by the end of 2016.

Commercial fundamentals are expected to improve, with vacancies continuing on a downward trend. With strong fourth quarter volume, CRE investments closed 2015 on an upbeat note, moving toward the 2007 peak. In addition, January 2016 sales maintained momentum, totaling $44.5 billion and registering the second most active January on record, according to RCA.

Given the global uncertainty and financial market gyrations, CRE is likely to remain an attractive alternative for investors this year. At the current sales pace, sales of LCRE properties are projected to total over $560 billion in 2016.

However, after a steep upward trajectory over the past few years during which they surpassed the prior 2007 records, CRE prices are expected to throttle back. With cap rates at very low levels and interest rates expected to rise, the price slowdown is projected to impact Class A assets in top-tier markets, where inventory shortages and crowding of capital have led to the recent run-up. Properties in smaller markets, where the recovery only began in 2013 are likely to see continued price appreciation.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit



FHFA Housing Price Index

  • Today, the Federal Housing Finance Agency (FHFA) released their housing price index data for December 2015. FHFA data showed that prices were up 5.7 percent in December from one year ago, slightly slower than the 5.9 to 6.1 percent year over year growth seen in September thru November, but faster than growth rates seen in the early 2015.
  • Earlier this week, Case Shiller and the National Association of Realtors® (NAR) reported price data.
  • NAR data showed that prices grew at a 7.2 percent pace from December 2014 to December 2015. NAR also reported on new January 2016 data which showed a bump up to 8.2 percent growth from one year ago.
  • Case Shiller data showed that house prices rose more than 5 percent in all three indices since December 2014. The national index gained 5.4 percent, while the 10-city composite rose 5.1 percent and the 20-city composite rose 5.7 percent year over year. While the gain in the national index was higher in December vs. November, the gain in the 10-city index was lower and the rate of change in the 20-city index was the same as the previous month.
  • Recent housing price data at the national level suggests that home prices continue to increase at a strong pace—faster than what would be considered typical. Strong buyer demand and low inventories coupled with still relatively low levels of new construction are continuing to push prices up and keep housing market tipped in favor of sellers in most local markets.
  • Of course, potential buyers and sellers should be sure to put the national numbers in the context of what is going on in their local markets. The fastest overall growth rates were seen in Portland (11.1%), San Francisco (11.0%), and Denver (10.9%) in the year ending November 2015. By contrast, Chicago (2.0%), Washington DC (2.1%), and Cleveland (2.2%) were the slowest growing markets. Data shows that sellers in these somewhat weaker areas may not have as much power to demand higher prices for their homes given the local market. How does your market compare to the national price trends?
  • NAR reports the median price of all homes that have sold while Case Shiller and the Federal Housing Finance Agency report the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported December prices include information from repeat transactions closed in October, November, and December. For this reason, changes in the NAR median price tend to lead Case Shiller and may suggest that additional strong price growth could be on the horizon. The current strong pace is a reflection of continued demand from buyers in an economy where jobs are still being created and there is a low supply of homes for sale. While affordability is a concern in an environment where home price growth is outpacing income growth and mortgage rates are expected to rise, demand has generally been strong enough to shake off this concern.

TRID: Hope on the Horizon

TRID has resulted in delays and cancellations of loans, but the majority of loans are being closed on time according to lenders who took part in NAR’s 9th Survey of Mortgage Originators. While originators were advising clients for longer rate locks, the majority felt that these loans could be done on time. This trend suggests that timelines could normalize in in the future and a majority of respondents expected this normalization in the next six to nine months.

The Know Before You Owe or TILA-RESPA Integrated Disclosure (TRID) rules were intended to protect consumers and to streamline the old disclosure process. The new rules were implemented on October 3rd and since then 8.3 percent of transactions were delayed according to lenders due to TRID, while another 1.5 percent were canceled. To deal with the delays 55 percent of lenders were advising their clients to take 45-day lock periods and 5 percent were recommending a 60-day lock, while 35 percent were not endorsing a change.

Of those lenders who advised for longer rate locks in the 4th quarter, 15.4 percent indicated that they could have closed most of their loans without the buffer and an additional 38.5 percent felt that some of their settlements could have been completed on time. However, 46.2 percent indicated that the buffer was necessary on all transactions.

The results above suggest that longer rate locks are not necessary in all cases and that lenders may begin to rein them in as their comfort with the TRID environment grows. This process could reduce some delays and ameliorate costs. To this end, 60 percent of lenders expect operations to normalize in the next six months, while 10 percent were not affected by the new rules, and 25 percent expect delays to remain a permanent fixture in the TRID paradigm.

TRID has increased time-to-close for a limited portion of the market and lenders have responded with buffers to allay issues. In time, the market will normalize and these buffers will come down, but longer time lines may become a normal part of the TRID environment for a small portion of the market.

January 2016 Existing-Home Sales

  • NAR released a summary of existing-home sales data showing that the housing market sales continue to build on the momentum from last month, as January’s existing-home sales reach the 5.47 million seasonally adjusted annual rate. January’s existing-home sales pace is the second highest since 2007 and sales are up 11 percent from a year ago.
  • The national median existing-home price for all housing types was $213,800 in January, up 8.2 percent from a year ago.
  • Regionally, all four regions showed growth in prices from a year ago. The Midwest had the largest gain at 8.7 percent while the Northeast had the smallest gain at 0.9 percent from last January.
  • From December, only the Northeast and the Midwest regions saw gains in sales. The Midwest had the biggest increase of 4.0 percent followed by the Northeast with a gain of 2.7 percent. The South remained flat and the West declined 4.1 percent.  All regions showed gains in sales from a year ago. The Northeast had the biggest increase of 20.6 percent while the South had the smallest yet still solid gain of 5.7 percent. The South leads all regions in percentage of national sales at 41.0 percent while the Northeast has the smallest share at 13.9 percent.
  • January’s inventory figures increased 3.4 percent from last month to 1.82 million homes for sale but this smaller than normal increase in inventories from December to January means the level remains unhealthy. Inventories are down 2.2 percent from a year ago. It will take 4.0 months to move the current level of inventory at the current sales pace. It takes approximately 64 days for a home to go from listing to a contract in the current housing market compared to 69 days a year ago.
  • Single family sales increased 1 percent while condos fell 4.7 percent compared to last month. Single family home sales increased 11.2 percent and condo sales are up 8.9 percent from a year ago. Both single family and condos had an increase in price with single family up 8.3 percent and condos up 7.4 percent from January 2015.

EHS in 2015 by the Numbers – Part 4 – Contracts

This blog post was written by Managing Director of Housing Research, Danielle Hale, and Data Analyst, Hua Zhong.

You probably know that recent home listings went under contract slightly more often on Mondays followed by Tuesdays, and Fridays. Here is the data to back up your intuition:

  • As we start the New Year, this is a good time to take a look and recap the year behind us to see what insights 2014 holds for 2015. The last sales data for December 2015 is in, and we can get a good sense of the year by looking at the data we currently have for the past 12 months. In our first posts, we looked at popular and least common closing dates, and popular listing dates. Here, we’ll take a look at contracts.
  • Below, we see the most popular under-contract days of 2015[1].  Similar to the pattern in home listings, we see a strong preponderance of spring dates and lack of weekends.
  • The biggest months for new contracts in 2015 were April, May, and June. These months alone accounted for about 3 in 10 new contracts in this analysis.
  • While not devoid of contract activity, the weekends are not common contract signing days.  Among weekdays, Mondays followed by Tuesdays, and Fridays are the most common days for new contracts to be signed, though Wednesdays and Thursdays are only slightly less common. In spite of that fact, not a single Thursday made the list of top 25 days for contracts in 2015.
  • While home closings exhibit a strong tendency to get done at the end of the month, contracts are, like listings, much steadier throughout the course of the month. Listings show a slight tendency to be posted earlier rather than later in a month, and contracts have a very slight tendency to be signed more often in the early to middle portion of a month rather than at the end.

[1] This analysis includes listings that went under contract at any point in the period under observation, January 1, 2015 to December 31, 2015.  If two contracts existed in the observation period on the same listed property because, for example, one contract fell through and another contract was signed in a later month, both contract dates would be counted as “new contracts” in the analysis.  Thus, some contracts counted here may have fallen through.

The Look at the Home Search Process Over 35 Years

We dug into our historical records to look at how long home buyers have searched for the homes they purchased over the years and the number of homes they viewed during that process. Our main finding was that despite major changes in the housing market, ups and downs in the economy, and the advent of the digital age, home buyers searched for roughly the same amount of time and looked at the same number of houses in more than three decades. The differences were only a few weeks, not years, and a couple of homes, not hours spent on the search. Let’s look at the minor fluctuations that have occurred.

The Profile of Home Buyers and Sellers report was first launched in 1981. In the 1980’s—1990’s, it was conducted only every two years. By 2004, the survey was conducted every year accompanied by its annual release, marking the report as one of the most popular and insightful research studies on the home buying and selling market from the perspective of consumers.


Decade Trends

  • For most of the 1990’s, home buyers searched for a median of two months; they looked at 12 homes in the early ‘90’s and 10 homes by the end of the decade.
  • For a majority of the 2000’s, home buyers still searched only two months; by 2009—2010 they were looking for nearly three months. During that decade, home buyers looked at a median of 10 homes for most years, with a slight dip to nine homes during 2004—2006.
  • During the 2010’s, home buyers look for homes for 12 weeks until 2014 and 2015 when it bumped back down to only 10 weeks. At the beginning of the decade, buyers looked at a median of 12 homes. In the last four years, they looked at only 10 homes.
  • 2004—2006 home buyers searched for eight weeks and looked at nine homes, the shortest period of time according to the report.
  • 2009—2011 buyers searched for 12 weeks and looked at 12 homes, the longest search time according to the report.

TRID Delays Stabilize

The new TRID regulations continue to dog the market, but the impact moderated slightly in January. With the spring market beginning to heat up in February, lenders will be pressed to streamline their settlement procedures while REALTORS® will need to search out those lenders best able to close on time.

The average time-to-close as measured in days rose from 40.9 in February to 43.3 in January. Relative to the same time in January of 2015, the time-to-close was 5.3 days higher reflecting TRID-related delays. However, this year-over-year increase was a decline from the 5.7 additional days registered in December and suggests an improvement or at least stabilization.

The distribution of these delays also reinforces the trend seen in December. The share of settlements that took more than 45 days rose from 46.9 percent in December to 50.1 percent in January. This monthly uptick in January at the long-end of the distribution appears to be seasonal, but the increase relative to last year is wholly new and depicts a shift of 8.8% of market share to the 46+ day’s portion of the distribution under TRID, roughly the same as in December.

While delays due to TRID are potent and continue to impact the market, their impact is isolated to roughly 9 percent of settlements. Lenders will be tested in the months ahead as they attempt to streamline their processes and reduce delays in the face of higher volumes in the spring market. REALTORS® should seek out lenders who are collaborative and who have successfully navigated TRID without delays to assure smooth settlements in 2016.