Category Archives: Housing Market

Mapped: The Salary Needed To Buy A Home In 50 U.S. Metro Areas

Over the last year, home prices have risen in 49 of the biggest 50 metro areas in the United States.

At the same time, mortgage rates have hit seven-year highs, making things more expensive for any prospective home buyer.

With this context in mind, today’s map comes from HowMuch.net, and it shows the salary needed to buy a home in the 50 largest U.S. metro areas.

https://www.zerohedge.com/s3/files/inline-images/salary-needed-house-u-s-metro-areas_edit2.jpg?itok=7NPM9G4n

The Least and Most Expensive Metro Areas

As a reference point, Visual Capitalist’s Jeff Desjardins points out that the median home in the United States costs about $257,600, according to the National Association of Realtors.

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With a 20% down payment and a 4.90% mortgage rate, and taking into account what’s needed to pay principal, interest, taxes, and insurance (PITI) on the home, it would mean a prospective buyer would need to have $61,453.51 in salary to afford such a purchase.

However, based on your frame of reference, this national estimate may seem extremely low or quite high. That’s because the salary required to buy in different major cities in the U.S. can fall anywhere between $37,659 to $254,835.

The 10 Lowest Cost Metro Areas

Here are the lowest cost metro areas in the U.S., based on data and calculations from HSH.com:

https://www.zerohedge.com/s3/files/inline-images/2019-04-29_19-08-55.jpg?itok=qiNBNZFB

After the dust settles, Pittsburgh ranks as the cheapest metro area in the U.S. to buy a home. According to these calculations, buying a median home in Pittsburgh – which includes the surrounding metro area – requires an annual income of less than $40,000 to buy.

Just missing the list was Detroit, where a salary of $48,002.89 is needed.

The 10 Most Expensive Metro Areas

Now, here are the priciest markets in the country, also based on data from HSH.com:

https://www.zerohedge.com/s3/files/inline-images/2019-04-29_19-09-45.jpg?itok=izlHuYly

Topping the list of the most expensive metro areas are San Jose and San Francisco, which are both cities fueled by the economic boom in Silicon Valley. Meanwhile, two other major metro areas in California, Los Angeles and San Diego, are not far behind.

New York City only ranks in sixth here, though it is worth noting that the NYC metro area extends well beyond the five boroughs. It includes Newark, Jersey City, and many nearby counties as well.

As a final point, it’s worth mentioning that all cities here (with the exception of Denver) are in coastal states.

Notes on Calculations

Data on median home prices comes from the National Association of Realtors and is based on 2018 Q4 information, while national mortgage rate data is derived from weekly surveys by Freddie Mac and the Mortgage Bankers Association of America for 30-year fixed rate mortgages.

Calculations include tax and homeowners insurance costs to determine the annual salary it takes to afford the base cost of owning a home (principal, interest, property tax and homeowner’s insurance, or PITI) in the nation’s 50 largest metropolitan areas.

Standard 28% “front-end” debt ratios and a 20% down payments subtracted from the median-home-price data are used to arrive at these figures.

Source: ZeroHedge

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Blow Off Top: Bay Area Median Home Price Drops For First Time In 7 Years

San Francisco Bay Area homes declined last month on a y/y basis for the first time in seven years, according to CoreLogic.

The median price paid for an existing home in the nine counties (Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma) was $830,000, down 0.1% compared with March 2018.

https://www.zerohedge.com/s3/files/inline-images/bay%20area%20median%20sales%20price_0.png?itok=MsHHfIft

The last time prices fell on a y/y basis was March 2012. After that, the Federal Reserve injected several more rounds of quantitative easing that sent home prices soaring for 83 consecutive months. In March 2018, the median home price gained 16.2% over March 2016.

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In 2H18, the appreciation rate dramatically slowed due to quantitative tightening, mortgage rate increase, and the start of a synchronized global slowdown.

“It’s not that surprising that we hit the wall, at least in terms of a pause,” said Andrew LePage, a CoreLogic analyst, wrote in a release.

Glen Bell, a real estate broker with BetterHomes and Gardens Reliance Partners in the East Bay region, said home sales and prices tend to accelerate between February and March as buyers prepare to move before the summer months. He said there was a slight pick up in activity, “but not as strong as last year.”

“It reflects a trend that began in mid-2018 when home sales slowed and inventory grew, forcing sellers to be more competitive,” LePage said.”The year-over-year increase in the region’s median sale price was 16.2% in March last year. But after that, the gains in the median gradually decreased each month and fell to the 2 to 3% range early this year and then disappeared this March.”

Sales of homes in the nine counties were 15% lower in March when compared with last year. It was the lowest March in terms of sales in 11 years. Sales have been slowing on a y/y basis for the last 10 months – an ominous sign that not just the top is in, but a quick reversal in price is immient.

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Santa Clara County noticed the most significant y/y median home price declines, falling 10% to $1.08 million in March. It was one of the hottest markets on the West Coast, if not the entire country last year – has fallen into a dangerous slump where prices are crashing.

“We’ve definitely seen some softness and some slowing,” said Michael Repka, chief executive and general counsel of DeLeon Realty in Palo Alto.

The total number of homes sold in the nine counties hit 6,124, up 39% from Feburary, but down 14.8% y/y, CoreLogic reported.

The slowdown in home sales and a decline in price last month “mainly reflect buyers purchasing decisions in Feburary,” LePage said in the press release. In early 1Q19, the market was recovering from a slowdown in the economy and a volatile stock market from Christmas.

Since Feburary, stock market volatility has dropped, mortgage rates are much lower, and since mid-March, IPOs have been debuting, which could bring more buyers to the market in the coming months.

Jason Nelson, an agent with Alain Pinel/Compass in Mill Valley, said that in Southern Marin, “there might be a slowdown in the market especially on the higher end.”

https://www.zerohedge.com/s3/files/inline-images/bay%20area%20prices%20.png?itok=tt_kohT9

S&P Dow Jones Indices published S&P CoreLogic Case-Shiller Indices Tuesday, indicating that the decline in home prices wasn’t just centered in the San Francisco Bay Area, but rather seen across the entire US.

Source: ZeroHedge

New Home Sales Soar To 16-Month Highs As Price Plunges

New home sales were expected to retrace some of February’s gains but in a reversal of yesterday’s dismal drop in existing home sales, new home sales in March soared 4.5% higher MoM (and February was revised stronger from +4.9% MoM to +5.9% MoM).

This is the 3rd straight month of rising new home sales.

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The 692k SAAR is the highest since Nov 2017 – near the post-crisis highs.

The reason – among others – is simple – median new home prices plunged to their lowest since Feb 2017 (a 9.7% from a year earlier to a two-year low of $302,700)….

https://www.zerohedge.com/s3/files/inline-images/2019-04-23.png?itok=Ouo7e1vD

A mixed picture across regions with Northeast March new home sales plunging to 28K, down 22.2% from February, but Midwest surged from 74K to 87K, up 17.6%.

The supply of homes at the current sales rate decreased to six months from 6.3 months in February. The number of new homes for sale in the period was little changed at 344,000.

New-home purchases account for about 10 percent of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close.

Let’s just hope the recent resurgence in mortgage rates doesn’t last…

https://www.zerohedge.com/s3/files/inline-images/bfmDB7B.jpg?itok=zHL-lBVs

Source: ZeroHedge

Existing Home Sales Fall 5.44% Year Over Year In March

Existing Housing Sales Inventory Lowest Since 1999

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At the same time, the INVENTORY of existing home sales rose in March, but still remains near its lowest level since 1999.

Existing home sales Median Price YoY has slowed to 3.8% with The Fed’s quantitative tightening (QT). As opposed to 13.4% YoY during The Fed’s QE3.

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Time to bring out your Fed!

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Source: Confounded Interest

The Manhattan Housing Market Is On Its Worst Cold Streak In 30 Years

A confluence of factors ranging from stubborn sellers refusing to budge on their asks, the Trump tax plan’s SALT cap, and a glut of luxury apartments prompted sales of Manhattan real estate to drop again in the fourth quarter, according to reports published by a trio of residential brokers. By one broker’s count, Q1 marked the sixth straight quarterly drop in sales volume, the worst streak in at least 30 years.

Per the FT, sales tumbled by 11%, according to broker Stribling & Associates, by 5%, according to Corcoran, and by 2.7% for co-ops and condominium apartments, according to Douglas Elliman and real estate appraisal firm Miller Samuel.

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While the average sales price for new developments climbed a staggering 89.4% to $7.6 million, that figure was exaggerated by a single purchase: Ken Griffin’s purchase of a $240 million penthouse at 220 Central Park South, which, according to some, was the most expensive home ever sold in America. But depending on the report, the median sales price ranged from 2% lower to 3.2% higher. And although the entry level market in Manhattan – that is, apartments priced at $1 million and below – had held up for most of the past year, it has recently started to suffer.

“It’s like a layer cake,” Jonathan Miller, CEO of Miller Samuel, told CNBC. “When you have softening at the top, it starts to melt into the next layer and the next layer after that, because those buyers further down have to compete on price.”

According to one broker, sellers with unrealistic expectations are the biggest barrier to sales, because they’re refusing to adjust for the fact that listings have been piling up and sitting on the market for longer periods, giving buyers more room to negotiate, and more options. Inventory has climbed 9% over the past nine months, and there’s a glut in new developments that’s only going to get worse.

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And of course, New York City isn’t helping the market by passing an a one-time “mansion tax” on all apartments selling for $1 million or more – which is a large chunk of apartments sold in the borough. But it could have been worse: As one broker put it, the pied-e-terre tax that was briefly considered would have been a “market stopper.”

“The pied-à-terre tax would have been a market stopper, [the mansion tax] is a market dampener,” said Ms Liebman. “I don’t think New York City is acting very friendly right now to the wealthy buyers,” she said, adding that many are opting to buy in Florida and other states with lower taxes than New York.

But although higher taxes are expected to drive more would-be buyers toward rentals, the number of new leases in Manhattan was also down 3% in Q1. Meanwhile, leases climbed a staggering 38% year-over-year in Brooklyn.

As brokers in New York City and other high end markets like Greenwich, Conn. struggle with slowing sales, we imagine brokers in mid-tier markets are watching with a wary eye to see if the weakness spreads.

Source: ZeroHedge

‘Too Big To Sell’ – Boomers Trapped In McMansions As Retirement Looms

More wealthy baby boomers are finding themselves trapped in homes that are too big to sell. They want to downsize but can’t get what they paid.

This was guaranteed to happen, and did. Baby boomers and retirees built large, elaborate dream homes only to find that few people want to buy them.

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Please consider a Growing Problem in Real Estate: Too Many Too Big Houses.

Large, high-end homes across the Sunbelt are sitting on the market, enduring deep price cuts to sell.

That is a far different picture than 15 years ago, when retirees were rushing to build elaborate, five or six-bedroom houses in warm climates, fueled in part by the easy credit of the real estate boom. Many baby boomers poured millions into these spacious homes, planning to live out their golden years in houses with all the bells and whistles.

Now, many boomers are discovering that these large, high-maintenance houses no longer fit their needs as they grow older, but younger people aren’t buying them.

Tastes—and access to credit—have shifted dramatically since the early 2000s. These days, buyers of all ages eschew the large, ornate houses built in those years in favor of smaller, more-modern looking alternatives, and prefer walkable areas to living miles from retail.

The problem is especially acute in areas with large clusters of retirees. In North Carolina’s Buncombe County, which draws retirees with its mild climate and Blue Ridge Mountain scenery, there are 34 homes priced over $2 million on the market, but only 16 sold in that price range in the past year, said Marilyn Wright, an agent at Premier Sotheby’s International Realty in Asheville.

The area around Scottsdale, Ariz., also popular with wealthy retirees, had 349 homes on the market at or above $3 million as of February 1—an all-time high, according to a Walt Danley Realty report. Homes built before 2012 are selling at steep discounts—sometimes almost 50%, and many owners end up selling for less than they paid to build their homes, said Walt Danley’s Dub Dellis.

Kiawah Island, a South Carolina beach community, currently has around 225 houses for sale, which amounts to a three- or four-year supply. Of those, the larger and more expensive homes are the hardest to sell, especially if they haven’t been renovated recently, according to local real-estate agent Pam Harrington.

The problem is expected to worsen in the 2020s, as more baby boomers across the country advance into their 70s and 80s, the age group where people typically exit homeownership due to poor health or death, said Dowell Myers, co-author of a 2018 Fannie Mae report, “The Coming Exodus of Older Homeowners.” Boomers currently own 32 million homes and account for two out of five homeowners in the country.

Not Just the South

It’s not just big houses across the Sunbelt. It’s big houses everywhere. If anything, I suspect it’s worse in the north. There is an exodus of people in high tax states like Illinois who want the hell out.

Already big homes were hard to sell. Now these progressive states are raising taxes.

Triple Whammy

  1. Millennials trapped in debt and cannot afford them
  2. Millennials wouldn’t buy them anyway because tastes have changed.
  3. Taxes are driving people away from states like Illinois

Good luck with that.

For the plight of Illinoisans, please consider Illinois’ Demographic Collapse: Get Out As Soon As You Can.

Authored by Mike Shedlock via MishTalk,
Source: ZeroHedge

The U.S. Economy Is In Big Trouble

Summary

  • Economic data is showing further negative divergence from the rally in the stock market.

  • The Census Bureau finally released January new home sales, which showed a 6.9% drop from December.

  • E-commerce sales for Q4 reported last week showed a 2% annualized growth rate, down from 2.6% in Q3.

  • The economy is over-leveraged with debt at every level to an extreme, and the Fed knows it.

  • I would say the odds that the Fed starts printing money again before the end of 2019 are better than 50/50 now.

“You’ve really seen the limits of monetary and fiscal policy in its ability to extend out a long boom period.” – Josh Friedman, Co-Chairman of Canyon Partners (a “deep value,” credit-driven hedge fund)

(Dave Kranzler) The Fed’s abrupt policy reversal says it all. No more rate hikes (yes, one is “scheduled” for 2020, but that’s fake news), and the balance sheet run-off is being “tapered,” but will stop in September. Do not be surprised if it ends sooner. Listening to Powell explain the decision or reading the statement released is a waste of time. The truth is reflected in the deed. The motive is an attempt to prevent the onset economic and financial chaos. It’s really as simple as that. See Occam’s Razor if you need an explanation.

As the market began to sell off in March, the Fed’s FOMC foot soldiers began to discuss further easing of monetary policy and hinted at the possibility, if necessary, of introducing “radical” monetary policies. This references Bernanke’s speech ahead of the roll-out of QE1. Before QE1 was implemented, Bernanke said that it was meant to be a temporary solution to an extreme crisis. Eight-and-a-half years and $4.5 trillion later, the Fed is going to end its balance sheet reduction program after little more than a 10% reversal of QE and it’s hinting at restarting QE. Make no mistake, the 60 Minutes propaganda hit-job was a thinly veiled effort to prop up the stock market and instill confidence in the Fed’s policies.

Economic data is showing further negative divergence from the rally in the stock market. The Census Bureau finally released January new home sales, which showed a 6.9% drop from December. Remember, the data behind the report is seasonally adjusted and converted to an annualized rate. This theoretically removes the seasonal effects of lower home sales in December and January. The Census Bureau (questionably) revised December’s sales up to 652k SAAR from 621k SAAR. But January’s SAAR was still 2.3% below the original number reported. New home sales are tanking despite the fact that median sales price was 3.7% below January 2018 and inventory soared 18%.

LGI Homes (NASDAQ:LGIH) reported that in January it deliveries declined year-over-year (and sequentially), and Toll Brothers (NYSE:TOL) reported a shocking 24% in new orders. None of the homebuilders are willing to give forward guidance. LGI’s average sale price is well below $200k, so “affordability” and “supply” are not the problem (it’s the economy, stupid).

The upward revision to December’s new home sales report is questionable because it does not fit the mortgage purchase application data as reported in December. New homes sales are recorded when a contract is signed. 90% of all new construction homes are purchased with a mortgage. If purchase applications are dropping, it is 99% certain that new home sales are dropping. With the November number revised down 599k, and mortgage purchase applications falling almost every week in December, it’s 99% likely that new home sales at best were flat from November to December. In other words, the original Census Bureau guesstimate was probably closer to the truth.

The chart to the right shows the year-over-year change in the number of new homes (yr/yr change in the number

https://static.seekingalpha.com/uploads/2019/3/22/saupload_Untitled-10.png

of units as estimated by the Census Bureau) sold for each month. I added the downward sloping trend channel to help illustrate the general decline in new home sales. As you can see, the trend began declining in early 2015.

Recall that it was in January 2015 that Fannie Mae and Freddie Mac began reducing the qualification requirements for government-backed “conforming” mortgages, starting with reducing the down payment requirement from 5% to 3%. For the next three years, the government continued to lower this bar to expand the pool of potential homebuyers and reduce the monthly payment burden. This was on top of the Fed artificially taking interest rates down to all-time lows. In other words, the powers that be connected to the housing market and the policymakers at the Fed and the government knew that the housing market was growing weak and have gone to great lengths in an attempt to defer a housing market disaster. Short of making 0% down payments a standard feature of government-guaranteed mortgage programs, I’m not sure what else can be done help put homebuyers into homes they can’t afford.

I do expect, at the very least, that we might see a “statistical” bounce in the numbers to show up over the couple of existing and new home sale reports (starting with February’s numbers). Both the NAR and the government will likely “stretch” seasonal adjustments imposed on the data to squeeze out reports which show gains, plus it looks like purchase mortgage applications may have bounced a bit in February and March, though the data was “choppy” (i.e., positive one week and negative the next).

E-commerce sales for Q4 reported last week showed a 2% annualized growth rate, down from 2.6% in Q3. Q3 was revised lower from the 3.1% originally reported. This partially explains why South Korea’s exports were down 19.1% last month, German industrial production was down 3.3%, China auto sales tanked 15% and Japan’s tool orders plummeted 29.3%. The global economy is at its weakest since the financial crisis.

It would be a mistake to believe that the U.S. is not contributing to this. The Empire State manufacturing survey index fell to 3.7 in March from 8.8 in February. Wall Street’s finest were looking for an index reading of 10. New orders are their weakest since May 2017. Like the Philly Fed survey index, this index has been in general downtrend since mid-2017. The downward slope of the trendline steepened starting around June 2018. Industrial production for February was said to have nudged up 0.1% from January. But this was attributable to a weather-related boost for utilities. The manufacturing index fell 0.4%. Wall Street was thinking both indices would rise 0.4%. Oops.

The economy is over-leveraged with debt at every level to an extreme and the Fed knows it. Economic activity is beginning to head off of a cliff. The Fed knows that too. The Fed has access to much more in-depth, thorough and accurate data than is made available to the public. While it’s not obvious from its public posture, the Fed knows the system is in trouble. The Fed’s abrupt policy reversal is an act of admission. I would say the odds that the Fed starts printing money again before the end of 2019 are better than 50/50 now. The “smartest” money is moving quickly into cash. Corporate insiders are unloading shares at a record pace. It’s better to look stupid now than to be one a bagholder later.

Source: by Dave Kranzler | Seeking Alpha