Tag Archives: housing market

Average U.S. Home Is Selling After Just 3 Weeks On Market; Fastest Pace In At Least 30 Years

Earlier today Bloomberg shared their thoughts that recent data released by the National Association of Realtors (NAR), namely the fact that homes are sitting on the market for a record low average of just 3 weeks before being scooped up, pointed to a devastating shortage of housing inventory for sale.  Here was Bloomberg’s take:

Here’s more evidence that the defining characteristic of the U.S. housing market is a shortage of inventory for sale: Homes are sitting on the market for the shortest time in 30 years, according to an annual report on homebuyers and sellers published today by the National Association of Realtors.

The typical home spent just three weeks on the market, according to the report, which focused on about 8,000 homebuyers who purchased their home in the year ending in June. That was down from four weeks in the year ending June 2016 and 11 weeks in 2012, when the U.S. housing market was still reeling from the foreclosure crisis. It was the shortest time since the NAR report began including data on how long homes spend on the market, in 1987.

Buyers are snapping up homes quickly at a time when for-sale listings are in short supply, forcing them to compete. The number of available properties declined in September, according to NAR’s monthly report on existing home sales, marking the 28th consecutive month of year-on-year decline in inventory.

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Moreover, the “inventory shortage’ thesis was further reinforced by data showing that a growing percentage of buyers are once again having to pay asking price or more to win their fair share of the American dream. 

In addition to moving fast, buyers also had to pony up to close the deal. Forty-two percent of buyers paid at least the listing price, the highest share since the NAR survey started keeping track in 2007.

“With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home,” said Lawrence Yun, NAR chief economist, in a statement. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”

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That said, while Bloomberg has taken the ‘glass half full’ approach in it’s analysis, one could also easily make the argument that the housing market isn’t suffering from a lack of supply at all but rather an artificially high level of demand courtesy of a combination of perpetually low interest rates and taxpayer subsidized mortgages that require minimal down payments of just 3%.

For evidence of the slightly more pessimistic assessment of the housing market, one has to simply review the fine print included in the NAR report which reveals that the average first-time homebuyer is financing roughly 95% of their purchase price and the tightest housing markets are those that fall below FHA limits.  So, what does that tell you about how “tight” housing markets would be if they weren’t subsidized by the U.S. taxpayer?

Of course, to suggest that millennials should hold off on purchasing a home until they can actually afford a debt-to-equity ratio somewhere south of 19x is probably considered a hate crime in many social circles so we can understand why it might be avoided.

Source: ZeroHedge

 

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Know the Competition: Who’s Buying Homes, Who’s Selling—and Who’s Not?

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With soaring rental prices, extremely low mortgage rates, and a stronger economy, it seems that just about everyone wants to buy a home these days. But high home prices are keeping many aspiring homeowners, as well as would-be sellers (who need a new home to move into) out of the market.

So who is buying and selling these days?

It turns out the typical buyer and seller both are getting older—and buyers need to make more money to be able to afford a home of their own, according to the 2017 Profile of Home Buyers and Sellers by the National Association of Realtors®. The report is based on a 131-question survey filled out by nearly 8,000 recent home buyers.

It turns out the typical buyer and seller both are getting older—and buyers need to make more money to be able to afford a home of their own, according to the 2017 Profile of Home Buyers and Sellers by the National Association of Realtors®. The report is based on a 131-question survey filled out by nearly 8,000 recent home buyers.

“Prices are going up,” says Chief Economist Danielle Hale of realtor.com®. “So in order to get into the housing market, buyers need to have more income to afford the same type of properties.”

Who is the typical home buyer these days?

Home buyers come in all shapes and sizes, but the typical one is about 45 years old. That’s up considerably since 1981, the inaugural year of the report, when the median age was just 31.

Buyers these days are also making good money, at about $88,800 a year, according to the report. It was $88,500 in the previous year.

Most buyers preferred the suburbs and more rural areas, at 85%, compared with urban areas, which is where just 13% of folks bought homes. And the vast majority, 83%, also preferred a stand-alone, single-family house, the kind that typically has a lawn out back.

The suburbs reigned supreme because that’s where many of the available homes with the desired features are, says Hale.

“Properties tend to be a bit more affordable than in urban areas,” Hale says. “You’ll get much more space in the suburbs for your money than you will in an urban area, and the schools do tend to be better as well.”

Calling all the single ladies

In another indication of just how much things can change in 36 years, about 18% of home sales were made by single women. That’s up from 17% last year and just 11% in 1981. And while it’s still well below the 65% of sales that married couples scooped up, it’s ahead of the 7% of sales that unmarried men made. An additional 8% of closings were made by unmarried couples.

There are more single women today than there have been historically, says Jessica Lautz, NAR’s managing director of survey research and communications. She points to how folks are marrying later in life, or not at all. Or, some may have been married before and become widowed or divorced.

Being able to have a 30-year fixed mortgage provides financial security, compared with facing rising rental prices, Lautz says.

In addition, single women buy homes that cost just a little bit more than single men: a median $185,000 versus $175,000 for the men. And that’s despite often making less than their male counterparts.

Fewer first-time buyers are getting in on the action

High student debt, coupled with rising home prices, kept many first-time buyers out of the market. These real estate virgins made up only about 34% of home sales, according to the report. That’s slightly down from 35% last year and the long-term average of 39%.

Those who were able to buy a home were a median age of 32.

“Right around turning 30 is still a significant milestone in many people’s lives,” says Hale. “That’s why we tend to see a lot of first-time buyers.”

These buyers typically had a household income of about $75,000, up from $72,000 last year. They were likely to buy a 1,650-square-foot abode for about $190,000 in a suburban area.

“The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages,” NAR’s Chief Economist Lawrence Yun said in a statement. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”

Big student loan bills due every month also make it harder for many of these younger folks to save up for a down payment. And it could affect their debt-to-income ratios, which lenders look at before issuing mortgages.

About 41% of first-time buyers have debt, according to NAR’s report, up from 40% last year. And they now owe about $29,000—compared with $26,000 in 2016. Ouch.

“An overwhelming majority of millennials with student debt believe it’s delaying their ability to buy a home, and typically for seven years,” Yun said in a statement. “Even in markets with a plethora of job opportunities and higher pay, steep rents and home prices make it extremely difficult to put savings aside for a down payment.”

What kinds of homes are buyers snagging?

Buyers overwhelmingly opted for existing homes (ones that had previously been lived in), at about 85%, compared with just 15% who closed on brand-new abodes, according to the report. That’s likely because there are fewer newly built homes on the market as well as the newer homes tending to cost significantly more.

They shelled out a median $235,000 on their homes, which were a median 1,870 square feet. The typical home was built in 1991 and had three bedrooms and two bathrooms.

And they’re not moving far away. Usually buyers moved only about 15 miles from their previous home.

Who’s selling their homes?

They typical home seller in 2017 was much older than the typical buyer, at about 55 years old. Their household incomes were also higher, at about $103,300 a year.

“The age of sellers and repeat buyers continues to increase,” says NAR’s Lautz. That’s because many baby boomers are purchasing retirement homes later in life.

The top reasons for selling were a residence that was too small, the desire to be close to family and friends, and the need to relocate for work.

Sellers usually stayed about 10 years in their homes before putting them on the market. Their properties stayed on the market for a median of three weeks, compared with four weeks last year.

And, in a boon for sellers, they sold their homes for a median $47,500 more than what they originally paid for them, and got about 99% of their final listing price.

By Clare Trapasso | Realtor .com

Pending Home Sales Plunge; NAR Admits “The Housing Market Has Essentially Stalled”

After dismal drops in existing and new home sales, this morning’s pending home sales data for August was a disaster, tumbling 2.6% MoM (3.1% YoY) to its lowest SAAR since January 2016.

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This is the second YoY decline in sales in a row, with SAAR tumbling to its lowest since Jan 2016…

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Lawrence Yun, NAR chief economist, says this summer’s terribly low supply levels have officially drained all of the housing market’s momentum over the past year.

“August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” he said.

“Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”

With little relief expected from the housing shortages that continue to plague several areas, Yun believes the housing market has essentially stalled.

Further complicating any sales improvement in the months ahead is the fact that Hurricane Harvey’s damage to the Houston region contributed to the South’s decline in contract signings in August, and will likely continue to do so in the months ahead. Furthermore, the temporary pause in activity in Florida this month in the wake of Hurricane Irma will slow overall sales even more in the South.

Yun now forecasts existing-home sales to close out the year at around 5.44 million, which comes in slightly below (0.2 percent) the pace set in 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

“The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year,” said Yun.

“The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9 percent.”

Of course, none of those fun-durr-mentals matter…

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Source: ZeroHedge

Fannie Mae Says Economy Will Slow in 2nd Half Of 2017

WASHINGTON, DC – Expectations for 2017 economic growth remain at 2.0 percent amid a projected second half slowdown, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s July 2017 Economic and Housing Outlook. With the expansion having entered its ninth year, incoming data point to a second quarter economic growth rebound to 2.7 percent annualized, up from 1.4 percent in the first quarter. However, the full percentage point rise in the saving rate since December signals increased caution among consumers, despite elevated consumer confidence. Decelerating corporate profit growth, commonly seen in the late stages of an expansion, presents a challenge to business investment that is compounded by tax policy uncertainty. In addition, residential investment will likely contribute less to second half growth due to lackluster homebuilding activity and tight for-sale inventory that is restraining home sales. Consequently, se cond half growth is expected to slow slightly to 1.9 percent. Moderate growth is expected to continue in 2018, with potential changes to fiscal and monetary policy posing both upside and downside risks to the forecast.

“While second quarter growth is poised to rebound, we expect growth to moderate through the remainder of 2017. Consumer spending, traditionally the largest contributor to economic growth, is sluggish and is lagging positive consumer sentiment and solid hiring,” said Fannie Mae Chief Economist Doug Duncan. “While labor market slack continues to diminish, wage growth is not accelerating and inflation has moved further below the Fed’s target. These conditions support our call that the Fed will continue gradual monetary policy normalization, announce its balance sheet tapering policy in September, and wait until December for additional data, especially on inflation, before raising the fed funds rate for the third time this year.”

“Construction activity has lost some steam following the first quarter’s weather-driven boost,” Duncan continued. “Meanwhile, very lean inventory continues to act as a boon for home prices and a bane for affordability, particularly among potential first-time homeowners. According to our second quarter Mortgage Lender Sentiment Survey, lenders expect to ease credit standards further. However, we continue to project that the pace of growth in total home sales will slow to 3.3 percent this year, as we believe rapid home price gains amid scarce supply will remain a hurdle for potential homebuyers despite improvements in credit access.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full July 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

By Matthew Classick | FNMA

Existing Home Sales Down 1.8% In June And Why It Matters

Existing Home Sales in June Dive 1.8 Percent: Same Old Problem? Second and Third Quarter Impact?

The wind down to the end of the second quarter is not going very well. Existing home sales in June fell 1.8% to a seasonally adjusted annualized rate of 5.52 million. The Econoday consensus estimate was 5.58 million.

The slip in pending home sales was no false signal as existing home sales fell 1.8 percent in June to a lower-than-expected annualized rate of 5.520 million. Year-on-year, sales are still in the plus column but not by much, at 0.7 percent which is the lowest reading since February.

Compared to sales, prices are rich with the median of $263,800 up 6.5 percent from a year ago. Another negative for sales is supply which fell 0.5 percent in the month to 1.96 million for an on-year decline of 7.1 percent. Relative to sales, supply is at 4.3 months vs 4.2 months in May.

High prices appear to be keeping first-time buyers out of the market with the group representing 32 percent of sales vs 33 percent in May and 35 percent for all of last year.

Rising prices and thin supply, not to mention low wages, are offsetting favorable mortgage rates and holding down sales. Housing data have been up and down and unable to find convincing traction so far this year. Watch for new home sales on Wednesday where general strength is the expectation.

Existing Homes Sales Month-Over-Month and Year-Over-Year

Same Old Problem?

Mortgage News Daily says Existing Home Sales Weakness Blamed on Same Old Problem.

Existing home sales slipped in June, with the blame again placed on low levels of inventory. The decline in sales, announced on Monday by the National Association of Realtors® (NAR), was anticipated, as pending home sales have decreased in each of the previous three months, ticking down 0.8 percent in May.

NAR said sales of existing single-family houses, townhouses, condos and cooperative apartments were down 1.8 percent in June, to a seasonally adjusted annual rate of 5.52 million units, the second slowest performance of the year.

Lawrence Yun, NAR chief economist, says the pullback in existing home sales in June reflected the lull in contract activity in March, April, and May. “Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” he said. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”

The median existing-home price for all housing types in June was $263,800, up 6.5 percent from June 2016 ($247,600). This is a new peak price, surpassing the record set in May. June marked the 64th straight month of year-over-year gains.

The median existing single-family home price was $266,200 in June and the median existing condo price was $245,900. Those prices reflected annual increases of 6.6 percent and 6.5 percent respectively.

The tight supply of homes continues to be reflected in short marketing period. Properties typically stayed on the market for 28 days in June, one day more than in May, but six days fewer than in June 2016. Short sales were on the market the longest at a median of 102 days in June, while foreclosures sold in 57 days and non-distressed homes took 27 days. Fifty-four percent of homes sold in June were on the market for less than a month.

“Prospective buyers who postponed their home search this spring because of limited inventory may have better luck as the summer winds down,” said NAR President William E. Brown. “The pool of buyers this time of year typically begins to shrink as households with children have likely closed on a home before school starts. Inventory remains extremely tight, but patience may pay off in coming months for those looking to buy.”

First-time buyers accounted for 32 percent of existing home sales in June, down from 33 percent the previous month and a year earlier, while individual investors purchased 13 percent, unchanged from a year ago.

Convoluted Logic

Supposedly buyers may have better luck because the pool of buyers is shrinking as summer winds down. Really? By that logic, if there was only one person looking there would be a 100% success rate.

Yun says “The demand for buying a home is as strong as it has been since before the Great Recession.”

Really? By what measure?

Attitudes and Price

This is not a case of inventory or strong unmet demand. Here are the real factors.

  1. The Fed re-blew the housing bubble and wages did not keep up. People cannot afford the going prices. Thus, the number of first-time buyers keeps shrinking.
  2. Millenials do not have the same attitudes towards debt, housing, and family formations as their parents.
  3. Millenials are unwilling to spend money they do not have, for a place that will keep them tied down. They would rather be mobile.

Second and Third Quarter Impact

The decline in existing home purchases portends weakness in consumer spending.

There will be fewer people painting, buying furniture, updating appliances, remodeling kitchens, adding landscaping etc. The pass through effect will be greatest in the third quarter unless there is a rebound.

By Mike “Mish” Shedlock

Premium Homes Dominate Inventory For Sale

Don’t Call It A Comeback: How Rising Home Values May Be Stifling Inventory

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By Ralph McLaughin | Chief Economist For Trulia

U.S. home inventory tumbled to a new low in the first quarter of 2017, falling for eight consecutive quarters. Homebuyers have now been stifled by low inventory for the last two years despite prices rising to pre-recession highs in many markets.

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In this edition of Trulia’s Inventory and Price Watch, we examine how home value recovery may be limiting supply in markets that have recovered most. We find that homebuyers in markets with the biggest gains are facing the tightest supply.

The Trulia Inventory and Price Watch is an analysis of the supply and affordability of starter homes, trade-up homes, and premium homes currently on the market. Segmentation is important because home seekers need information not just about total inventory, but also about inventory in the price range they are interested in buying. For example, changes in total inventory or median affordability don’t provide first-time buyers useful information about what’s happening with the types of homes they’re likely to buy, which are predominantly starter homes.

Looking at the housing stock nationally and in the 100 largest U.S. metros from Q1 2012 to Q1 2017, we found:

  • Nationally, the number of starter and trade-up homes continues drop, falling 8.7% and 7.9% respectively, during the past year, while inventory of premium homes has fallen by just 1.7%;
  • The persistent and disproportional drop in starter and trade-up home inventory is pushing affordability further out of reach of homebuyers. Starter and trade-up homebuyers need to spend 2.9% and 1.6% more of their income than this time last year, whereas premium homebuyers only need to shell out 0.9% more of their income;
  • A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years. On average, the more valuable a market’s housing is compared to pre-recession levels, the larger drop in inventory it is has seen.

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2017 Ushers in a Dramatic Shortage of Homes

Nationally, housing inventory dropped to its lowest level on record in 2017 Q1. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year. In addition:

  • The number of starter homes on the market dropped by 8.7%, while the share of starter homes dropped from 26.1% to 25.9%. Starter homebuyers today will need to shell out 2.9% more of their income towards a home purchase than last year;
  • The number of trade-up homes on the market decreased by 7.9%, while the share of trade-up homes dropped from 23.9% to 23%. Trade-up homebuyers today will need to pay 1.6% more of their income for a home than last year;
  • The number of premium homes on the market decreased by 1.7%, while the share of premium homes increased from 50% to 51%. Premium homebuyers today will need to spend 0.6% more of their income for a home than last year.

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How and Where a Strong Housing Market May Be Hurting Inventory

In the first edition of our report, we provided a few reasons why inventory is low: (1) investors bought up much of the foreclosure home inventory during the financial crisis and turned them into rental units, (2) price spread – that is, when prices of homes in different segments of the housing market diverge from each other – makes it difficult for existing homeowners to tradeup to the next the segment, and (3) slow home value recovery was making it difficult for some homeowners to break even on their homes. While there is evidence that investors indeed converted owner-occupied homes into rentals as well as evidence from our first report that increasing price spread is correlated with decreases in inventory, little work has examined how home value recovery affects inventory. This is perhaps due to the tricky conceptual relationship between home values and inventory: too little recovery might make it difficult for homeowners to sell their home but cheap to buy one, while too much recovery might make it easy for them to sell but difficult to buy.

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In fact, we find a negative correlation between how much a housing market has recovered and how much inventory has changed over the past five years. Using the current value of the housing market relative to the peak value as our measure of recovery, we find markets with greater home value recovery have experienced larger decreases in inventory over the past five years. The linear correlation was moderate (-0.36) and statistically significant. We also found that markets with the strongest recovery, on average, have experienced the largest decreases in inventory.

For example, the five-year average change in inventory of housing markets currently valued below their pre-recession peak (< 95% of peak value) isn’t that different from ones that have recovered to 95% – 105% of their peak. (-27.6% vs. -30.1%). However, the average change in inventory in well-recovered markets (> 105%) is 0more drastic at -45.4%.

The disparity also persists when looking at changes in inventory within each segment, although the difference is largest for starter homes. On average, markets with less than 95% recovery or 95% to 105% recovery had a 34.2% and 31.7% decrease in starter inventory, while markets with more than 105% home value recovery had a whopping 58.2% drop. These findings suggest that a moderate home value recovery doesn’t affect inventory much, but a strong recovery does and impacts inventory of starter homes the most.

Fed Announced They’re Ready To Start Shrinking Their 4.5T Balance Sheet ― Prepare For Higher Mortgage Rates

Federal Reserve Shocker! What It Means For Housing

The Federal Reserve has announced it will be shrinking its balance sheet. During the last housing meltdown in 2008, it bought the underwater assets of big banks.  It has more than two trillion dollars in mortgage-backed securities that are now worth something because of the latest housing boom.  Gregory Mannarino of TradersChoice.net says the Fed is signaling a market top in housing.  It pumped up the mortgage-backed securities it bought by inflating another housing bubble.  Now, the Fed is going to dump the securities on the market.  Mannarino predicts housing prices will fall and interest rates will rise.