Real Estate Market Trends

Transcription

1 THOMAS E. WHITE WHITE REALTY Real Estate Market Trends OCTOBER 2013 Dynamic Shift In Housing Market In This Issue Dynamic Shift In Housing Market New Housing Starts Up Slightly, New Permits Taper Off Existing Home Sales Rise, Limited Inventory Pushes Prices Higher As the year s peak home buying season comes to a close, key market indicators point to a shift in the dynamics of the housing market, suggesting that future home value appreciations may be driven by market demand, rather than inventory shortages. An analysis of the summer home buying season ending in August shows year-overyear changes now in the single-digits for three key indicators inventory count, median age and median list price, signaling a leveling of the market not seen for some time. The national market was virtually flat month-over-month compared to July for both inventory and median list price, and registered a slight increase in median age of inventory. Where we have seen significant volatility in many markets, including double-digit declines in inventory as well as increases in median price for both yearly and monthly views, we are now looking at a housing market that much more closely resembles normal. Widespread Inventory Recovery - The inventory recovery is broad and growing. The net number of listings increased even though the summer season is ending. Close to one-third of the markets are within 5% of last year s inventory levels, and more than two-thirds of markets registered a net increase in inventory over last month. Prices Stabilize - Despite the increase in inventories, the national median list price did not change compared to last month. Absent a significant weakening in economic conditions or significantly higher mortgage interest rates, prices should continue to slowly rise alongside typical cost of living increases. Price Appreciation Widespread - In August, 84% of MSAs registered a year-over-year increase in their median list price, with 53% of markets registering an increase of 5% or more. Only 18 markets reported a list price decline, of which only 11 markets had a list price decline of 1% or more; only 3 markets had a list price decline of 5% or more. 2.5 Million Borrowers No Longer Underwater Distressed Sales Continue To Fall Foreclosure Crisis Is Drawing To A Close 30-Year Fixed-Rate Mortgage At 9-Week Low Contact Information <Agent Name> <Company Name> <Street Address> <City, State, Zip Code> @website.com> PHONE: (242) CELL: (242) Volume II, Issue X OCTOBER 2013

2 KEY TRENDS New Housing Starts Up Slightly, New Permits Taper Off Distressed Sales Continue To Fall In line with the broad decline in foreclosure inventory, distressed sales continue to make up for a smaller share of the residential sales. Last month, distressed homes accounted for 12% of sales, down from 15% the month previous. This is the lowest share since tracking began in 2008; they were 23% in August Construction on new homes rose 0.91% in last month to a seasonally adjusted rate of 891,000. Builders however are being cautious. The overall result disappointed economists who had expected a starts rate of 921,000, compared to an estimate of 896,000. Longer-term trends pointed to a continuing rebound. Starts were up 18.96% from the same period in the prior year. Still, there s concern that rising mortgage rates are slowing down the market s recovery. Mortgage rates started increasing in early May on speculation about potential tapering of the Fed Reserve s aggressive bond buying stimulus program. Although rates remain relatively low by historical standards, they have increased more than 1% since early May. Surprising markets, the Fed announced this week that it won t start tapering yet. Home-builder stocks jumped after the announcement. The Fed made its no-taper decision because it was 'spooked' by the rise in interest rates over the past few months and the impact on the housing market. Page 2 Indeed, there are signs that the recent rise in rates hit the housing market more than had been expected. Recent reports show that rising rates led to an overall drop in mortgage applications. Economists predict the demand for homes can survive at the current level of mortgage rates. There was good news behind the disappointing headline on construction starts. Building permits for single-family homes rose 3% to the highest level since May Building permits fell 3.77% in to an annual rate of 918,000, while permits for multi-unit buildings fell at least five-units dropped 15.70%. Builders spend more to construct single-family homes than apartments, so an increase in SFR construction starts is particularly welcome. Starts for SFRs rose 7%, while starts in multi-unit buildings fell 9.4%. Single-family homes are also a larger share of the newconstruction market than apartments. The upside in the single-family category pointed to stronger construction spending despite the lower than expected overall starts result. Ongoing declines in the share of distressed sales are responsible for some of the growth in median price. For the past 12 months, properties in aboveaverage condition have been discounted by an average of 10%-11%, while properties in below average condition were discounted at an average of 15%- 20% percent. Last month 8% of sales were foreclosures, and 4% were short sales. Foreclosures sold for an average discount of 16% below market value in August, while short sales were discounted 12%. The median time on market for all homes was 43-days last month, up from 42-days in July, but is much faster than the 70- days on market in August Short sales were on the market for 98-days, while foreclosures typically sold in 52-days and nondistressed homes took 41-days. Almost 43% percent of homes sold last month were on the market for less than a month. First-time buyers accounted for 28% of purchases, down from 29. All-cash sales comprised 32% of transactions, up from 31. Individual investors, who account for many cash sales, purchased 17% of homes, compared with 16% the month before. Last month, three out of four investors paid cash.

3 MARKET REPORTS Existing Home Sales Rise, Limited Inventory Pushes Prices Foreclosure Crisis Is Drawing To A Close Existing home sales increased in last month and reached the highest level in 6.5 years, while the median price shows 9 consecutive months of doubledigit year-over-year increases. Total existing home sales rose 1.7% to a seasonally adjusted annual rate of 5.48 million from 5.39 million the month previous and are 13.22% higher than the 4.84 million-unit level a year ago. Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above yearago levels for the past 26 months. The market may be experiencing a temporary peak however. Rising mortgage rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions. Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn t as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase. Total housing inventory at the end of last month increased 0.4% to 2.25 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, down from a 5.0 month supply a month before. Unsold inventory is 6.3% below a year ago, when there was a 6.0 month supply. Limited inventory in some areas means multiple bidding remains a factor; 17 % of all homes sold above the asking price last month, although 63% sold below list price. The national median existing home price for all housing types was $212,100 up 14.70% from the same period last year. This is the strongest year-over-year price gain since October 2005 when the median rose 16.6%, and marks 18 consecutive months of yearover-year price increases. Rising home values will encourage more people to sell. As the equity position of most homeowners continues to improve, some who have been on the sidelines will list their home for sale. Most of those owners also will be buying another home, but higher levels of new home construction going into 2014, combined with some reduction in demand from less favorable affordability conditions, will help to moderate price growth to more sustainable levels. Single-family home sales rose 1.7% to a seasonally adjusted annual rate of 4.84 million from 4.76 million in the month before and are 12.85% above the 4.29 million-unit pace in August The median existing single-family home price was $212,200 which is 14.4% higher than a year ago. Regionally, existing home sales in the Northeast were unchanged at an annual rate of 710,000 in but are 12.7% above August The median price in the Northeast was $268,800, up 7.6% from a year ago. Existing home sales in the Midwest increased 3.1% to a pace of 1.32 million, and are 18.9% higher than a year ago. The median price in the Midwest was $166,100, which is 10% above August In the South, existing home sales rose 3.8 % to an annual level of 2.19 million and are 13.5% above August The median price in the South was $181,000, up 14.6% from a year ago. Existing home sales in the West declined 2.3% to a pace of 1.26 million in August but are 7.7% higher than a year ago. With the tightest regional inventory conditions, the median price in the West rose to $287,500, which is 18.8% above August The number of new foreclosure filings in August hit its lowest level in nearly eight years, according to an online marketer of foreclosed properties. Soaring home prices and a big decline in underwater borrowers - those who owe more on their mortgage loans than their homes are worth - have helped drive the trend. August's initial foreclosure filings fell 44% to 55,575, just below the 56,063 that were recorded in October The foreclosure crunch began in summer 2006, at about the same time that housing prices hit their peak. This is a strong indicator that the crisis is over. The foreclosure floodwaters have receded in most parts of the country, although lenders and communities continue to clean up the damage left behind. The mopping-up process does continue, however. In August, for example, the number of homes repossessed by lenders rose 6%, compared with July, to 39,277. But that still represents a drop of 25% year-over-year, and is more than 60% below the recorded peak of repossessions reported in September of Page 3

4 MARKET REPORTS 2.5 Million Mortgage Borrowers No Longer Underwater INSIDER QUOTES On the Improving Market Index "The housing market experienced robust price appreciation during the first half of 2013 and our forecast calls for double-digit growth through the second half of the year. Thanks to a sharp increase in home prices last quarter, 2.5 million more mortgage borrowers no longer owe more on their homes than they are worth. By the end of June, 7.1 million, or 14.5%, of mortgage borrowers remained underwater on their loans compared with 9.6 million, or 19.7%, at the end of the first quarter. In late 2009, during the worst of the housing market's meltdown, 26% of all borrowers were underwater. The improvement is mainly due to soaring home prices, which jumped 7% during the second quarter, according to all major national home price indices. The trend will likely slow as the pace of home price increases starts to steady. With fewer borrowers underwater, more homeowners will likely put homes up for sale because they know they can get cash out of the deal. In addition, many sellers will no longer have to take the hit to their credit score that accompanies a short sale, deals in which homes are sold for less than what a seller owes their bank. At 36.4%, Nevada had the highest percentage of mortgage borrowers who were still underwater. About 31.5% of Florida's borrowers were still underwater during the quarter; followed by Arizona with 24.7%, Michigan with 22.5%, and Georgia with 20.7%. In the major metropolitan marketplace, the Miami area had the highest percentage of homeowners who are still underwater at 36.5%. Miami was followed Tampa, FL with 33.8%, Phoenix, AZ with 25.6%, Riverside County, CA with 24.8% and Warren, MI with 24.3%. Despite their rebound of late, home prices remain reasonable in a historical context, with most states near peak affordability levels." Rick Judson NAHB Chairman

5 MARKET MORTGAGE REPORTS RATES NEWS 30-Year Fixed-Rate Mortgage At 9-Week Low Average fixed mortgage rates fell following the Federal Reserve announcement that it will maintain its bond buying stimulus helping to keep home buyer affordability elevated. The average rate on the 30-year fixed mortgage is at its lowest level since the last week of July. Mortgage rates fell following the Federal Reserve announcement that it will maintain its bond buying stimulus. These low rates should somewhat offset the house price gains seen the last number of months and keep housing affordability elevated. For instance, the S&P/Case- Shiller 20-city composite house price index rose 12.4% year over year, which represented the largest annual increase since February In addition, more than half of the cities had annual growth exceeding 10% and four cities saw increases exceeding 20%. The party may not last long however. The Fed meets again at the end of October, and the committee could vote to reduce the pace of bond purchases. The Fed has been spending $85 billion per month in these purchases to stimulate the economy and keep rates low. Once the Fed pulls back on the program, mortgage rates may shoot up. Page 35

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