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Economist's Outlook

Demographic Trend Lines in Housing: Exciting? Yes! Here’s Why

Fri, 08/26/2016 - 09:22

This year the Profile of Home Buyers and Sellers will hit its 35 year birthday.  A lot can happen in 35 years!  The benefit to collecting home buyer and seller data for 35 years is that demographic changes become explicitly apparent in time series exhibits. The other benefit is when data remains relatively flat, you can quickly see that as well.  The median age of home buyers has both: flat data and data changes.  Let’s take a look at what that means.

Taking the change first, the median age of repeat buyers (those who owned a home in the past and are buying another home) has increased, nearly every year, for the last 35 years. In 1981, the first year the data was collected, the median age of a repeat buyer was just 36 years old. In 2015, the median age of a repeat buyer was 53 years old.

Why is that? A couple of factors could be behind the increase in age. Longer life spans have allowed more retirees to enjoy retirement, but also to move longer distances, and purchase a new home in a new area—closer to friends and family or closer to lifestyle considerations such as recreation and health facilities. Additionally, using our Profile data, we can also see that the tenure in the home is longer than in the past, so trading up to the next home is happening at a later age.

As for first-time home buyers, there has been a lot of discussion recently among analysts and the media about the typical millennial (born 1980-1995) delaying marriage, delaying child rearing, and delaying the move out of a parent’s home and into one of their own. While delays in these milestone events is happening among millennials, for those who can manage to overcome numerous hurdles (student loan debt, stagnant wage growth, affordability constraints, and tight credit to name a few) and buy a home, it’s happening at the same age as past generations. Increasingly today, when first-time buyers do buy a home they don’t feel like they have to wait until marriage. Forty-four percent of first-time buyers in 2015 were not married, compared to 32 percent in 1981. With the exception of one year’s worth of data (1993) the median age of home buyers has remained steady between 28 and 32 years of age. A boring trend line of data in that it remains relatively flat, but a meaningful one.

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

Vacancies Decline in REALTORS®’ CRE Markets

Fri, 08/26/2016 - 08:24

Commercial fundamentals in REALTORS®’ markets continued gaining strength during the second quarter of 2016. Based on NAR’s Commercial Real Estate Market Trends report, leasing activity advanced.

With demand for commercial space rising, developers have taken note and ramped up construction. New commercial construction mirrored the broader economic slowdown, posting a 5.3 percent gain from the prior quarter. However, demand continues to outpace the supply pipeline, leading to rising occupancy.

Vacancy rates continued declining, ranging from a low of 5.0 percent for apartments to a high of 13.2 percent for hotel properties. Office vacancies declined 365 basis points year-over-year, to 12.3 percent.  Industrial availability witnessed a yearly decrease of 95 basis points—to 9.8 percent. Retail vacancies slid 70 basis points on a yearly basis, to 11.8 percent. With declining vacancies, lease concessions declined 5.5 percent.



To access the latest Commercial Real Estate Market Trends report, visit:

35th Anniversary for the Profile of Home Buyers and Sellers

Thu, 08/25/2016 - 11:15

On October 31st, NAR will release the 2016 Profile of Home Buyers and Sellers. NAR has been producing this survey research report since 1981. To mark the 35th year of publication, we will be highlighting some of the key trends gleaned from the Profile series with new infographics and trendlines.

The report has grown and evolved with changing home buying trends and the need for more information. The 1981 survey was just 59 questions long. The 2016 survey contained 132 questions. Although the report has evolved, data has been collected for more than three decades describing the demographic characteristics of home buyers and sellers, buyers and sellers experience in the home transaction process as well as market characteristics including the use of real estate agents. One measure of how the market has changed is the manner in which the data is collected. In 1981 only a paper copy of the survey was offered. Today recent home buyers can take the survey via paper or online, and in English or Spanish. Because of its long history and timely information available each year, the report is valued by REALTORS®, market analysts and policymakers.

Data is collected from a nationally representative sample of recent home buyers who purchased a primary residence in the 12-month period between July and June. Data is also representative of the geographic distribution of home sales. Consumer names are obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county records.

Today the data set provides such a wealth of data that it is used to create a number of “spin-off” reports including: Home Buyer and Seller Generational Trends Report, Recent Home Buyer Profiles, Profile of Home Buyers and Sellers in Sub-regions, Real Estate in a Digital Age, Veterans and Active Military Home Buyers and Sellers Profile, and Moving with Kids.

To jump start the anniversary we begin with a trendline collected since 1981 showing the method sellers uses to sell their home. Today there is an overwhelming use of real estate agents in the home selling transaction. In 2015, a high of 89 percent of sellers opted to sell their home with the help of a real estate agent. Just eight percent of sellers sold via FSBO—the lowest share recorded since 1981.

Follow along with new content for the anniversary with the hashtag #NARHBSat35.

Rural Housing Service: The Silent Surge

Thu, 08/25/2016 - 06:47

The 2014 HMDA data provide interesting market insights. The FHA continues to shrink giving way to an expanding conventional market. The most dramatic change from a decade ago is the role of the Veterans Administration, Rural Housing Service (RHS), and the Farm Service Agency (FSA). These latter two programs are not well known, but have expanded lending in rural areas.

The RHS and FSA are part of the United States Department of Agriculture (USDA) and are intended to support financing for home purchases and farm purchases, respectively, in areas designated as rural. RHS supports home financing in two ways; either through direct loans or by guaranteeing loans. When the RHS gaurantees a loan it is acting as an insurer, guaranteeing the steady payments from the mortgagee to whomever buys the mortgage. In 2014, the RHS and FSA financed nearly 134,000 mortgages, nearly six times the level at the peak of the housing bubble. This shift to stable financing is important as rural markets had a higher share of both subprime loans[1] and loans with risky prepayment pentalties[2] during the build up to the last financial crisis.

The majority of RHS work is done with gaurantees like the FHA. As of July, the program had guaranteed well over a million loans and had 962,953 outstanding. Of these 75.3 percent were to first time buyers and 90.1 percent were to borrowers of moderate or lower income. The vast majority of guarantees are for single-family homes with loans averaging $127,407 and buyers contributing 2.1 percent in equity on average. Racially, the majority of RHS guarantees have gone to White borrowers at 85.1 percent and only 5.0 percent going to African Americans. This pattern is in stark contrast to the 265,543 RHS direct loans where African Americans make up 18.1 percent of originations and Hispanics 14.4, while Whites receive 64.4 percent of financing. 87.0 percent of this program’s direct lending goes to low or very low income borrowers.

While the FHA is more widely know for its role in supporting urban homeownership and equality in finance, the RHS has provided the same access in rural markets. Like its larger urban relative, the RHS charges a fee for its guarantee. However, the RHS fees upfront and annual fees, 2 percent and 0. 5 percent respectively, are far lower than the FHA’s 1.75 percent upfront fee and 0.85 percent annual fee. What’s more the RHS’ fees are scheduled to decline to 1 percent and 0.35 percent, respectively, on October 1st.

While the RHS will only guarantee 90 percent of the balance, the borrower can use grants, gifts and down payment assitance from non-interested parties to fill the gap. The catch is that there are income limits, the house must be in an area designated as rural, and the maximum front-end and back-end debt-to-income ratios are 29 percent and 41 percent as compared to the FHA’s 31 percent and 43 percent.

The RHS program expanded dramatically in the wake of the financial crisis. It is now a dominant player supporting first-time, low income, and minority borrowers with safer financing in rural areas.

[1] Dickstein, George, Singleton and Thomas. “Subprime and Predatory Lending in Rural America”, Carey Institute (UNH). 2006. pp. 3

[2] Center for Responsible Lending. “Rural Borrowers More Likely to be Penalized for Refinancing Subprime Home Loans”. 2004

Concern about Fast-Rising Prices, or Overworked Appraisers?

Wed, 08/24/2016 - 12:27

While the market seems to have made steady progress adjusting to the TILA/RESPA Integrated Disclosure (TRID) rules and TRID-induced delays,[1] a new contract-delaying culprit may be re-surfacing.

In addition to flashing yellow lights on affordability as home prices continue to rise faster than incomes, the housing market may be facing another hurdle stemming from appraisals. Data from the July REALTORS® Confidence Index, shown in Figure 1, indicates that 32 percent of contracts that were settled or terminated in the last three months had a delay, the highest share facing delays since the October – December 2015 period which was coincident with the implementation of TRID. July data also show that the share of contracts ending in termination has eased slightly lower, so the share of contracts settling on time has ticked down only modestly.

Figure 1

Issues obtaining financing were still the number one source of delays, according to REALTORS® reporting on the outcome of these concluded contracts, but appraisal issues were reported for more than one in four delayed contracts (see Figure 2).

Figure 2

Looking over time, in Figure 3, we can see that contract delays stemming from issues obtaining financing have been relatively consistent in recent months, and are much improved from the second half of 2015.

Figure 3

However, delays resulting from issues related to appraisals have been on the rise in 2016, as shown in Figure 4.

Figure 4


We do not have sufficient data from this survey to know whether these appraisal-related delays are a result of appraiser concern for housing market prices rising more quickly than normal or whether volume from a robust home sales market in the first half of 2016 and surprisingly strong post-Brexit refinance market has overworked the already reduced number of appraisers in the market. Comments from REALTORS® seem to indicate that both factors play a role. Several REALTORS® indicated that low appraisals were an issue while many others indicated that timeliness and delays due to a shortage of appraisers were a problem. Data from a separate survey of lenders shows that some lenders are noting too few appraisers[2] in the wake of the Brexit vote and an increase in non-TRID related delays.[3] Some REALTORS® have already indicated that they have extended closing dates on contracts to allow extra time to accommodate appraisal-related delays and still have an on-time settlement.

REALTORS® are well-advised to monitor this trend and use this information to manage buyer and seller expectations accordingly.

[1] TRID or Know Before You Owe is a new set of rules governing the closing process. These rules are intended to help make consumers more aware of risks and their liability, while streamlining the home financing process. However, they also introduced a new set of timelines that, in some situations, can add time to the process. Because time is money to lenders, early evidence also suggests that they may be passing some of the cost of delays onto consumers. TRID guidelines at NAR Research on TRID at



Commercial Leasing Accelerates in REALTORS®’ Markets in Q2

Wed, 08/24/2016 - 12:17

Commercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings.  Based on Energy Information Administration data approximately 72 percent of commercial buildings are less than 10,000 square feet in size.  An additional 8 percent of commercial buildings are less than 17,000 square feet in size.  In short, the commercial real estate market is bifurcated, with the majority of buildings (81 percent) relatively small (SCRE), but with the bulk of commercial space (71 percent) in the larger buildings (LCRE).

While large buildings in top-tier markets generally receive most of the press coverage, smaller commercial properties tend to be obscured given their relatively smaller 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.

NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions, and summarizes sales and rental activity based on a quarterly survey of commercial REALTOR® practitioners. Based on the latest report, fundamentals improved during the second quarter 2016. Leasing volume during the second quarter rose 8.7 percent compared with the first quarter 2016. Leasing rates advanced at a steady pace, rising 3.7 percent in the second quarter, compared with the 2.5 percent advance in the previous quarter.


NAR members’ average gross lease volume for the quarter was $229,658, 51.4 percent lower than the previous quarter. New construction mirrored the broader economic slowdown, posting a 5.3 percent gain from the prior quarter.

Tenant demand remained strongest in the 5,000 square feet and below segment, accounting for 82.0 percent of leased properties. Demand for space in the 10,000 – 49,999 square feet segment rose from 5.0 percent in the first quarter of 2016, to 8.0 percent in the second quarter of this year. Lease terms remained steady, with 36-month and 60-month leases capturing 60.0 percent of the market. Two-year leases made up 15.0 percent of total.


To access the latest Commercial Real Estate Market Trends report, visit:

Strategies for Aging in Place: Preparing for Tomorrow’s Housing Needs Today A REALTOR® University Speaker Series Presentation

Mon, 08/22/2016 - 15:39

America’s population is aging: in 2015, the 65 and over population accounted for about one in seven of the population; by 2030, this ratio will rise to one in five, and by 2060, the ratio will be nearly at one in four.[1] With aging as an inevitable process, what are the strategies and home features to plan for that makes the home safe and functional while remaining visually pleasant through the process?

At a REALTOR® University Speaker Series held recently[2], Marianne Cusato shared her insights on strategies that REALTORS® can use to help buyers or sellers choose or remodel homes that will enable their clients to age in place independently, safely, and comfortably. Ms. Cusato is Associate Professor at University of Notre Dame’s School of Architecture, Housing Expert for HomeAdvisor, a designer, author and lecturer in the fields of real estate trends and housing.

To listen to the webinar, click here.

Using data from her study for HomeAdvisor’s on Aging-in-Place Survey, Ms. Cusato noted that baby boomers entering or approaching retirement are preparing their homes or planning ahead when making a move to accommodate their later years. In fact, 56 percent of homeowners who hired a professional to do age-related remodeling work were under 65 years old.

The most common projects are as simple as lowering electrical switches, adding grab bars, and installing lever-handled doorknobs, to installing ramps to the entrance, widening doorways, and putting a bathroom and master bedrooms on the main floor.

With insights from HomeAdvisor’s Aging-in-Place Survey as backdrop, Ms. Cusato shared useful and beautiful home design tips for how REALTOR® can work with clients to meet their needs for both today and tomorrow.

  1. Look for designs for all ages (doors with lever handles, use of pull-out drawers, comfort height toilets)
  2. Discuss the timeline: plan for long-term needs while working on immediate retrofitting needs
  3. Understand the cost and set aside a budget. Home Advisor’s website provides a tool to estimate remodeling costs and to match clients with professionals
  4. Strategies for steps: plan for future placements of ramps and lifts and bathroom additions on the main floor
  5. Strategies for avoiding falls: use natural light, remove rugs and floor coverings that can cause tripping, install grab bars and plan ahead with blocking
  6. Kitchen strategies and food preparation: consider pull-out cabinets and retrofit for sit-down counters
  7. Strategies for ease of living: use sensor faucets, lever handles on doors, and remote control blinds
  8. Bridge the digital divide: consider home automation, energy monitoring and security systems
  9. Consider multi-generational housing: consider home designs like mother-in-law cottages, separate entries, and adaptable suites. Ms. Cusato’s website has home designs that are adaptable to a variety of lifestyles and for aging-in-place.[3]
  10. Plan for transportation needs and for working at home.


About the Speaker

Marianne Cusato is a designer, author and lecturer in the fields of real estate trends and housing. Ms. Cusato is the co-author of two books: The Just Right Home: Buying, Renting, Moving…or Just Dreaming–Find Your Perfect Match! and Get Your House Right, Architectural Elements to Use and Avoid. Ms. Cusato is renowned for her work on innovative housing solutions for disaster recovery: her 308 s.f. Katrina Cottage design won the Smithsonian Institute’s Cooper-Hewitt Design Museum’s 2006 “People’s Design Award.” She is a graduate of the University of Notre Dame School of Architecture.


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] Source: U.. Census Bureau Table NP2014-T-3

[2] Held on August 10, 2016 at the NAR Washington D.C. Office

[3] See Marianne Cusato’s designs at!design/c83s

TRID: The Cost of a Better Experience

Thu, 08/18/2016 - 15:57

The implementation of the new Know Before You Owe or TRID rules were market my initial delays that have given way to relative calm. However, half of lenders surveyed in the 2nd quarter Survey of Mortgage Originators indicated that they increased fees to consumers to cover TRID related costs. Weighted by production volume those costs amounted to $258 on average.

What drove the costs? 71.4 percent of respondents cited investor demand or TRID policy and 57.1 percent cited a lack of regulatory clarity as cost drivers. Some reports suggest that lenders have had difficulty selling the loans they originate to investors, which has caused them to hold onto loans longer, resulting in higher costs. Despite frequent anecdotes, increased manual underwriting was only cited by 14.3 percent of respondents.

Looking to remediation, 42.9 percent indicated that neither clarity, investor changes, nor software changes would reduce costs over time. 28.6 of respondents felt that these changes would reduce costs, while an equal share was unsure.

While the TRID rules may result in higher fees from some lenders, the rules were intended to protect consumers and to streamline the old disclosure process. This benefit is not easy to quantify and costs are not insignificant, but they are not likely to impact sales as fees are often added to the mortgage balance, spreading the charge over the life of the loan.

Sales to First-Time Buyers: 33 Percent of Sales in June 2016

Mon, 08/15/2016 - 15:50

First-time homebuyers appear to be getting back into the market more strongly with interest rates moving down to new lows. First-time buyers accounted for 33 percent of residential sales in June 2016, up from the 30 percent share in May 2016 and one year ago (Chart 1), according to the June 2016 REALTORS® Confidence Index Survey Report ().1

The average contract rate on 30-year conventional mortgages has stayed below four percent since 2015 (except in July 2015), down to an average of 3.57 percent in June 2016 (Chart 2). The last time 30-year rates fell below four percent was in 2012 through the middle of 2013. Mortgage rates are an important consideration in deciding when to purchase a home, especially among first-time homebuyers. In 2015, 95 percent of first-time homebuyers obtained  mortgage financing and typically financed  94 percent of the purchase price.[2]

Despite the favorable interest rate environment, potential buyers are facing a challenge, with home prices rising faster than income growth, mainly because supply has not kept pace with demand (Chart 3). The low interest rate environment is lowering the monthly mortgage payment, but rising prices are also making it more difficult to save for a downpayment. As of May 2016, the median family income is up by 11 percent compared to the level in January 2012, while the median price of an existing-home is up by 56 percent over this same period.[3]

The approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016” by both the House of Representatives and the Senate is expected to help first-time buyers by increasing the access to FHA condominium financing. The new law addresses a number of restrictive conditions that have restricted access to condominium financing related to owner-occupancy requirements, the condominium re-certification process, mixed-use buildings, and private transfer fees.[4] Under the new regulation, condominiums that are 35 percent owner occupied are eligible for FHA-insured financing, a lower barrier than the current requirement of 50 percent.

[1] First-time buyers accounted for about 32 percent of all home buyers based on data from NAR’s 2015 Profile of Home Buyers and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.

[2] National Association of REALTORS® 2015 Profile of Homebuyers and Sellers

[3] NAR data used in calculating the Home Affordability Index.

[4]The bill, which was championed by NAR, passed  the House of Representatives 427-0 and the Senate under unanimous consent on July 14, 2016. The bill is on the way for the President’s signing. See

TRID, Brexit, or Something Else?: Delays Level Off

Fri, 08/12/2016 - 13:08

The average time-to-close, as measured by closed listings reported from MLSs, rose modestly in July relative to a year earlier. July’s 3-day delay was roughly in line with the 3.1 day delay averaged over the prior 3 months. The July reading tied April for the second lowest since October of 2015.

After falling sharply in March, delays have hovered in a relatively tight 3-day range. The July increase may reflect non-TRID related delays, though, as lenders noted an increase of non-TRID delays in the second quarter Survey of Mortgage Originators from 1.5 percent to 3.7 percent as well as rate extensions as a result of Brexit. Brexit related delays are likely to ease as the number of potential refinances burns out and seasonal volumes decline.

TRID or Know Before You Owe is a new set of rules governing the closing process. These rules are intended to help make consumers more aware of their financial liability, while streamlining the process.  The CFPB recently released a set of proposed changes to help clarify lenders’ and mortgage investors’ concerns. These changes may ease TRID related delays in the future as could clarity from the first wave of regulatory reviews under the new regime, greater concentration of production among TRID-proficient producers, vendor software improvements, and as demand from mortgage investors recovers.

Brexit: Lower Rates with Little Delays

Fri, 08/12/2016 - 11:39

Brexit, the vote by British citizens to leave the European Union, could have far reaching implications for international trade, but it could take several years to realize the full impact. In the near term, it means lower mortgage rates, stronger refinances, and improved affordability for home buyers.

For the 2nd quarter Survey of Mortgage Originators, lenders were asked whether Brexit had impacted their business. 14.3 percent noted more rate lock extensions, while twice that figure noted a shortage of appraisers to handle added volume. A majority 64.3 percent noted no issues and no respondents indicated delays.

The need for rate lock extensions is not clear. Higher settlement volumes relative to appraisers could create delays and the need for rate lock extensions. Likewise, a late rate lock extension could trigger re-disclosure of a loan estimate (LE) under TRID and a longer timeline just as decline in the APR of 0.125 percent or more would trigger re-disclosure of the closing disclosure (CD). Regardless, these limiters should ease with time as refinance volumes burnout and as the purchase market moderates through the fall.

Cap Rates Compress in REALTORS® CRE Markets In Q2.2016

Fri, 08/12/2016 - 11:18

Commercial real estate transactions span the price spectrum, but tend to be measured and reported based on size. While the majority of buildings (81 percent) are relatively small (small cap CRE), with the bulk of commercial space (71 percent) concentrated in larger buildings (large cap CRE), larger buildings account for the majority of sales. CRE deals at the higher end—$2.5 million and above—comprise a large share of investment sales, with transaction data readily available from several sources, including Real Capital Analytics (RCA).

Data for smaller transactions—$2.5 million and below—many of which are handled by REALTORS®, are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for small cap CRE properties and transactions.

In light of the global low-rate environment, investors have been searching for higher returns. U.S. commercial real estate continues to offer stronger yields, especially in rising smaller markets. Based on the latest NAR report on REALTORS® CRE markets, capitalization rates averaged 7.0 percent across all property types, a 50 basis point decline on a yearly basis. Apartments posted the lowest cap rate, at 6.5 percent, with Class A apartment transactions recording average cap rates of 6.2 percent. Office transactions witnessed average cap rates of 6.8 percent, with Class A properties posting yields of 6.5 percent. Hotel transactions registered caps of 7.0 percent, followed by retail properties, with cap rates averaging 7.1 percent. Industrial spaces posted average cap rates of 7.4 percent, with Class A properties commanding yields of 6.9 percent.

Capitalization rates for transactions in large cap CRE markets averaged 6.6 percent in the second quarter, a 30 basis point compression, based on RCA reports. Transactions of office properties in CBD markets tied with apartments for the lowest average cap rates, at 5.6 percent. Retail properties recorded cap rates of 6.4 percent, followed by industrial properties, at 6.8 percent. Hotel transactions averaged cap rates of 8.5 percent in the second quarter.

The interest rate on 10-year Treasury Notes—a standard measure of risk-free investments—averaged 1.6 percent during the second quarter of 2016, 80 basis points lower than the second quarter of 2015. Based on the prevailing rates, the spread between cap rates and 10-year Treasury Notes ranged from 500 basis points in large cap CRE markets to 540 basis points in small cap CRE markets. The spread denotes the continued attractiveness of commercial assets for both domestic and global CRE investors.

To access the latest Commercial Real Estate Market Trends report, visit:

In What States Did Properties Sell Quickly in April–June 2016?

Thu, 08/11/2016 - 14:54

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?”

At least half of the properties that sold in April–June 2016 were on the market for 30 days or less in the District of Columbia and in 16 states, mostly in the West and Midwest regions, according to the June 2016 REALTORS® Confidence Index Survey Report. Local conditions vary, and the data is provided for REALTORS® who may want to compare local markets against other states and the national summary.


Nationally, properties sold in June 2016 were typically on the market 34 days (32 days in May 2016; 34 days in June 2015).11 Short sales were on the market for the longest time at 156 days, while foreclosed properties typically stayed on the market for only 49 days. Non-distressed properties were typically on the market for 30 days.

Nationally, 48 percent of properties were on the market for less than a month. Eleven percent of properties were on the market for longer than six months.

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.

June 2016 Housing Affordability Index

Thu, 08/11/2016 - 11:17

At the national level, housing affordability is down from a year ago as home price growth distresses affordability. Inventory levels are low and are putting pressure on home prices despite another month of declining mortgage rates.

  • Housing affordability declined from a year ago in June pushing the index from 154.8 to 153.3. The median sales price for a single family home sold in June in the US was $249,800 up 5.0 percent from a year ago.
  • Nationally, mortgage rates were down 15 basis points from one year ago (one percentage point equals 100 basis points) while incomes modestly rose approximately 2.1 percent.
  • Regionally, all regions saw declines in affordability from a year ago except the Northeast. The Northeast had an increase of 2.4 percent benefiting from only a slight gain in home prices. The Midwest had the largest decline in affordability of 3.4 percent. The South had a decline in the affordability index of 1.4 percent followed by the West with 1.1 percent.
  • The West had the biggest increase in price at 6.9 percent. The Midwest had an increase of 5.8 percent while the South had a 5.6 percent gain in price. The Northeast had the smallest increase of 1.5 percent.
  • By region, affordability is down in all regions from last month. The Northeast (5.7 percent) had the biggest decline. The Midwest and South had a decline of 5.5 percent and 3.3 percent. The West had the smallest decline in affordability of 1.7 percent.
  • Despite month to month changes, the most affordable region is the Midwest where the index is 186.8. The least affordable region remains the West where the index is 114.8.  For comparison, the index is 157.9 in the South, 154.9 in the Northeast.
  • Mortgage applications picked up this week while rates remain low. Median family incomes are still not keeping pace of increasing home prices. Rents are up more than 3 percent which matches the highs of 2008. Lending standards are easing which can help encourage first time buyers to get involved in the housing market. Purchase mortgage applications remain notably higher than one year ago (see chart).
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

Closing Documents Remain Elusive, but Change Coming

Wed, 08/10/2016 - 15:16

Lenders’ reluctance to share closing disclosures (CDs) with REALTORS® rose in the 2nd quarter of 2016 according to responses to NAR’s Survey of Mortgage Originators. Under the new Know Before You Owe or TRID rules, the HUD-1 closing form was replaced with the CD. In the past, REALTORS® frequently reviewed the HUD-1 for their clients or answered clients’ questions. However, many lenders have refused to share the new closing documents citing legal liability concerns.

This pattern worsened in the 2nd quarter as 64.3 percent of lenders indicated that they do not share the CD, up from 54.5 percent. No respondents indicated that they share the documents outright.

Sharing of the CDs may become easier, though. On July 28th, after this survey was closed, the Consumer Financial Protection Bureau clarified that lenders can in fact share the documents. The CFPB noted that certain exceptions within lending laws allow lenders to share the documents when it is a usual, appropriate, or acceptable method, “to provide the customer or the customer’s agent or broker with a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product.”[1] Lenders can comment on the CFPB’s clarification through October 28th.

With this clarification lenders may feel enabled to share the CDs more freely. NAR will continue to monitor.

[1] pp 148

Commercial Sales in REALTORS® Markets Rise 8.4 Percent in Q2.2016

Tue, 08/09/2016 - 15:26

Commercial real estate space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. In terms of inventory, commercial real estate markets are bifurcated, with the majority of buildings (81 percent) being relatively small (small cap CRE), while the bulk of commercial space (71 percent) is concentrated in larger buildings (large cap CRE). The bifurcation continues along transaction volumes as well, with deals at the higher end—$2.5 million and above—comprising a large share of investment sales, while transactions at the lower end make up a smaller piece of the pie.

Data are readily available for transactions in excess of $2.5 million from several sources, including Real Capital Analytics (RCA). However, in general, data for smaller transactions—many of which are handled by REALTORS®—are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for small cap CRE properties and transactions, mostly valued below $2.5 million.

Sales volume in large cap CRE markets posted a 14.0 percent year-over-year drop, totaling $105 billion during the second quarter of 2016, based on RCA data. Following a strong growth trend, sales at the upper end have declined for the past two quarters, as investors took a step back, buffeted by the global economic slowdown, capital markets’ volatility and diverging monetary policies across developed economies.

In REALTORS® markets, commercial sales maintained positive momentum, with rising investment volume.  Sales of commercial properties during the second quarter rose 8.4 percent on a year-over-year basis, in the wake of an 8.5 percent increase during the first quarter.

Prices in large cap CRE markets rose by 2.9 percent during the second quarter of this year, based on partial data from RCA’s Commercial Property Price Index. The advance was driven by continued appreciation in prices of apartment and CBD office properties, both of which have exceeded their prior 2007 peaks.

In comparison to top-tier markets, price growth accelerated in small cap CRE markets during the second quarter of 2016, based on REALTORS®’ information. Commercial properties traded at 5.3 percent higher prices compared with the same period in 2015, following a 5.1 percent increase during the first quarter of this year. The average reported transaction price was $1.4 million during the period.

To access the latest Commercial Real Estate Market Trends report, visit:

Raw Count of Home Sales (June 2016)

Tue, 08/09/2016 - 11:20
  • Existing-home sales increased 1.1 percent in June from one month prior while new home sales rose 3.5 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, 583,000 existing-homes were sold in June while new home sales totaled 54,000.  These raw counts represent an 11 percent gain for existing-home sales from one month prior while new home sales were unchanged.  What was the trend in recent years?  Sales from May to June increased by 7 percent on average in the prior three years for existing-homes and decreased by 4 percent for new homes.  So this year, both existing and new homes sales outperformed.
  • 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 less activity in July and even slower activity in August for existing-home sales. For example, in the past 3 years, July sales typically decreased by 2 to 4 percent from June while in August sales were unchanged or decreased by 3 to 9 percent from July. For the new home sales market, the raw sales activity also tends to decrease in both July and August. For example, in the past 3 years, July sales dropped by 2 to 23 percent and August sales typically decreased by 5 to 6 percent from July.

TRID Costs and Lender Optomism in the 2nd Quarter

Mon, 08/08/2016 - 13:34

Lenders continue to deal with the effects of TRID and wavering investor demand but are more optimistic about investor demand for mortgage in the second half of 2016.  Those are some of the sentiments expressed in the Survey of Mortgage Originators for the 2nd quarter of 2016.  NAR surveyed a panel of lenders from credit unions, retail banks, and mortgage banks on current production trends as well as their outlook on regulations and policy issues such as TRID, Brexit, and front-end risk sharing.

Highlights from the 2nd quarter include:

  • Non-QM lending remained in a slump in the 2nd quarter despite a modest improvement in investor demand for these loans.
  • Credit access in general was expected to rise over the coming six months driven by gains in non-QM and rebuttable presumption
  • The share of transactions delayed due to TRID eased further to 1.7 percent with a slight uptick in TRID-related cancellations.
  • Half of lenders passed increased costs to consumer with a weighted average increase of $258. Lenders were more reluctant to originate smaller loans in the TRID environment.
  • The share of lenders unwilling to share closing documents (CD) with REALTORS® rose to 64.3 percent in the 2nd quarter
  • Lenders grew more optimistic about normalized operations in the next six months, but less so for investors’ ability to adjust, which could prolong the impact in jumbo markets on the coasts
  • More than half of respondents indicated they would participate in front-end risk sharing or were considering it, but 42.9 were concerned about having no clear path for small lender participation.
  •  14.3 percent of respondents cited more rate extensions due to Brexit, while 28.6 percent noted a shortage of appraised but a majority 64.3 percent noted not changes.

House Price Growth When Children are Teenagers—A Path to Higher Earnings? A REALTOR® University Speaker Series Presentation

Mon, 08/08/2016 - 11:22

Does house price appreciation prior to children attending college impact their future earnings as adults? This was the subject of a presentation at a recent REALTOR® University Speaker Series by Dr. Daniel Cooper, Senior Economist and Policy Advisor at the Federal Reserve Bank of Boston, who co-authored a study on this question with Maria J. Luengo-Prado.[1]

To listen to the webinar, please click here.[2]

In analyzing the impact of house price growth on children’s future incomes as adults (25 years old or over in 2007), Dr. Cooper and Dr. Luengo-Prado matched child and parent data from families in the Panel Study of Income Dynamics (PSID). The authors identified household heads who were at least 25 years old in 2007, and they matched these household heads with their parents and where they lived when they were 17 years-old (assumed to be the age before they enter college). The sample consists of 892 child respondents who turned 17 between 1979 and 1999 and lived in 126 different metropolitan areas.

The Cooper and Luengo-Prado study found that:

1)      House price appreciation increases the income of homeowners’ children as adults and decreases the income of renters’ children as adults. For every 10 percent increase in home prices that occurred when children were 17 years-old, the income of homeowners’ children as adults was 9 percent higher on average, while the income of renters’ children as adults was 15 percent lower.

2)      The children of homeowners who experience positive house price growth when their children are 17 are more likely to attend a school ranked in the top quartile of colleges and universities than are the children of homeowners that do not experience favorable house price growth. This is one of the channels that links house price growth to income.

3)      While house price growth does not appear to have a consistent influence on the economic mobility of renters’ children, it seems to affect owners’ children. The probability of children ending up in the highest income quartile is lower for all parent income quartiles when house price growth is below the national average than when growth is above the national average. Also, the probability of children ending up in the lowest income quartile is greater when house price growth is below average, particularly for those children with parents whose income is above the lowest income quartile.

Dr. Cooper noted that the results of the study are based on data prior to both the housing boom and the Great Recession and thus may not fully capture the impact of the housing boom and bust on children’s future incomes.

About the Speaker

Dr. Cooper is a senior economist and policy advisor in the macroeconomics/ international economics section of the research department at the Federal Reserve Bank of Boston. His main research interests are related to household consumption and wealth and using microeconomic data to investigate macroeconomic policy questions. Dr. Cooper holds a B.A. in economics from Amherst College and earned M.A. and Ph.D. degrees in economics from the University of Michigan. His CV and full list of publications and studies can be accessed here.

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] Daniel Cooper, María José Luengo-Prado, House price growth when children are teenagers: A path to higher earnings?, Journal of Urban Economics, Volume 86, March 2015, Pages 54-72, ISSN 0094-1190, The views expressed in the study are those of the authors and do not necessarily reflect the views the Federal Reserve Bank of Boston or the Federal Reserve System.

[2] The presentation was held on July 29, 2016 at the NAR Washington Office. Thanks to Meredith Dunn, Communications Manager, for recording and editing the webinar video.