3 Big Reasons Why Home Sales Are Falling

DAILY REAL ESTATE NEWS | FRIDAY, DECEMBER 20, 2013 Existing-home sales dropped in November, falling 4.3 percent from October sales, and marking the first time in more than two years that home sales are below year ago levels, the National Association of REALTORS® reports. What’s behind the drop in sales? NAR’s chief economist Lawrence Yun pinpoints three main factors: Higher mortgage rates, constrained inventories, and continuing tight credit. 1. Higher mortgage rates: The 30-year fixed-rate mortgage is up nearly a full percentage point in the past year, causing home buyers to face an increase in borrowing costs. The 30-year fixed-rate mortgage increased to 4.26 percent in November compared to a 3.35 percent average in November 2012, Freddie Mac reports. The Federal Reserve announced this week that it would begin winding down its bond-buying stimulus program next month, which is expected to result in higher mortgage rates. The average 30-year fixed-rate mortgage could likely rise to 5 percent or 5.5 percent next year, Yun notes. 2. Tight credit: New rules defining Qualified Mortgage will take effect soon, and could leave more borrowers on the sidelines. “New underwriting rules to protect borrowers, effective in January, will prohibit many loan features, set tighter limits on the amount of debt a borrower can have and still get a mortgage, and require that lenders accurately measure a borrower’s ability to repay,” says Steve Brown, NAR’s president. “This means that qualified borrowers are getting a loan that they are very likely to be able to repay, but some borrowers may wind up paying much more for their mortgage, or not get a loan at all due to the tougher standards. The new rules may tighten credit too much, but we’re hopeful regulators will make adjustments if this proves to be true.” 3. Constrained inventories: Housing inventory in November fell 0.9 percent to 2.09 million existing homes available for sale. The total housing inventory represents a 5.1-month supply at the current sales pace, NAR notes. One factor is a shrinking number of distressed homes – foreclosures and short sales. Distressed homes accounted for 14 percent of November sales compared to 22 percent in November 2012, NAR notes. “There is a pent-up demand for both rental and owner-occupied housing as household formation will inevitably burst out, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction,” Yun notes. “As such, rents are rising at the fastest pace in five years, while annual home prices are rising at the highest rate in eight years.” The national median home price for existing-homes was up 9.4 percent year-over-year in November, averaging $196,300 nationwide.

Real Estate Matters | Don’t rush home upgrades just to get a tax credit

Robert F. Bukaty/ASSOCIATED PRESS) I have a furnace and a roof that will need replacing in the next year or two. Do you recommend I rush to do this before the end of the year for the tax credit? One roofer told me the amount of tax credit was not worth it. One HVAC installer told me it only applies to a total system replacement (heat and air). I’d appreciate whatever guidance you can provide. Every year, for at least the past seven years, Ilyce has had three tax experts come on her show before the end of the year to discuss what’s new with regard to taxes and what consumers should look out for. The experts are Bill Nemeth, Chet Burgess and Merry Brodie. They are all enrolled agents (EAs), which are tax preparers who are licensed to represent taxpayers before the IRS. To answer your question, we went directly to the source, Bill Nemeth. He wrote that the “maximum tax credit is $300 on the purchase of a qualifying HVAC system (assuming you did not get credit for other energy-saving expenditures since 2006). For reference, the credit was formerly $1,500 for energy-saving devices.” Further, the roof replacement you are considering “only qualifies for the energy credit if it is made up of white shingles (usually a bad thing since the white shingles will quickly turn green from the normal weathering of the roof) or if it is metal,” he wrote. Bill said that he and Merry replaced their roof several years ago and found the contractor by consulting Angie’s List. “We were delighted with the price and the quality of work of the contractor, which took just one day to start and finish. Our neighbor replaced his roof in the same month with some ‘guys.’ They were at it for several weeks and the workmanship was not on a par with our roof.” The problem with rushing to take advantage of a tax credit (which is a dollar for dollar reduction in your taxes, compared with a tax deduction, where you get a percentage savings), is that the maximum amount of the tax credit is limited. You won’t be able to take advantage of the entire amount if you rush to get it done before the end of the year, and you might actually lose money by replacing mechanical systems that still have some life left in them. Rather than rush into an HVAC install/upgrade, Nemeth recommends that you take some time to study the available alternatives to reduce your costs. Some utility companies will rebate you 10 percent of the purchase price of energy-efficient HVAC, for example. “The hard lesson we learned first-hand is to check out the various companies offering you the HVAC system. We thought that all companies are pretty much the same — not so. The young kids that installed our new HVAC heat pumps had never installed one before — it took four visits by a senior technician after they left to get it working. When they installed the units, they set it up to use the strangest size filter,” Nemeth recounted. His advice, which is has nothing to do with taxes but everything to do with being a satisfied consumer, is a good one: Consult with a number of companies and be sure to check references before you decide which company to use for the purchase and installation of your HVAC system. “We went with a brand name (system) but the install was terrible, and we continue to live with this terrible install, probably until we sell the house,” he added. And we’ll say this: It’s never a good idea to rush on a big purchase just to get a tax credit. Because the price of living with a bad system or a terrible install over the years is just too high, even if you get a small tax credit as an offset.

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33450 San Gabriel Avenue, Acton, CA 93510 - MLS/Listing # SR13150425

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30040 San Francisquito Canyon Road, Saugus, CA 91390 - MLS/Listing # SR13220588

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29347 Las Brisas Road, Valencia, CA 91354 - MLS/Listing # SR13210701

Rental Demand Slowing, Except in These Areas

DAILY REAL ESTATE NEWS | MONDAY, DECEMBER 09, 2013 Harvard’s Joint Center for Housing Studies released its biennial housing report today, offering predictions for the U.S. rental market in the next two years. While the study finds that growth in demand for multifamily housing will slow its pace within the next few years, demographic forces alone will mean an increase of between 4 million and 4.7 million renters over the next decade. The report gives voice to some anxiety about possible overbuilding, noting that long development periods in multifamily housing make it harder to determine the actual volume of new multifamily housing coming onto the market. The study also finds that “vacancy rates do appear to be bottoming out and rent increases are slowing in many markets, suggesting that supply and demand are moving into balance.” Still, there are two areas where rental availability is far lower than demand: Low-income rentals and affordable senior housing. The report notes that the “growing number of seniors on fixed incomes is likely to outstrip the limited supply of affordable rentals. With the number of families with children also on the rise, demand for larger rental units will increase as well, particularly in communities with access to good schools and employment centers.” Yet while demand is growing, so too are rents, putting further pressure on these groups. For the first time, more than half of all U.S. renters spend more than 30 percent of their income on rent. Between the year 2000 and 2012, real median rents (adjusted for inflation) increased by 6 percent across the country. During the same period, the real median income of renters dropped by 13 percent. The report also says that the private market is struggling to keep up with the growth in demand in this demographic. The study’s authors note that the deficiency in low-income rental options is growing faster than it has in previous years. “The shortfall in the number of units affordable to extremely low-income renters in the U.S. more than doubled from 1.9 million in 2001 to 4.9 million in 2011. The situation just keeps getting worse,” says Chris Herbert, Research Director at the Harvard Joint Center for Housing Studies. “For many low-income families, the rental housing affordability crisis is like a game of musical chairs in which there is never a chair left for them.”

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Rising rates, health care among top 10 issues affecting real estate

WRITTEN BY STAFF REPORTSTuesday, November 19, 2013 11:19 am

 

Rising interest and capitalization rates top the list of issues that have future implications for real estate. That’s according to an industry expert at the “Top 10 Issues Affecting Real Estate” session at the 2013 Realtors Conference and Expo in San Francisco.

Scott Muldavin, industry veteran and president of The Muldavin Company Inc., a consulting firm in San Rafael, Calif., shared his insights into top issues that could potentially impact homeowners, real estate markets and the industry in the coming years.

He said the top issue affecting real estate is that historically low interest rates have driven the economy and real estate markets in recent years, but as rates start to rise, it could raise capitalization rates, the ratio between the income produced by an asset and its cost, which could create anxiety about investing in real estate.

“Interest rates are going to rise significantly, so my advice is to be careful about your investments today and lock in those low rates if you can,” said Muldavin.

He said that health care is also an important issue that has implications for real estate. As the population ages, there will be greater demand for senior housing, requiring a change in the configuration and size of available housing, and for greater medical care, resulting in an expansion in medical facilities.

Muldavin said there’s been a capital market resurgence, which is good news for residential and commercial real estate. In commercial markets, transaction volume is up, credit is available, underwriting has loosened and a full range of debt options is back.

For residential markets, underwriting remains tougher, but rates are near historic lows and affordability remains high.

Future housing demand from “echo boomers,” the 80 million Americans born between 1982 and 1995, will also impact real estate markets, he said.

“We are the only developed country that has had an echo boom and that’s a positive thing if the country can react and respond to it,” said Muldavin.

Echo boomers often prefer a more flexible and active urban lifestyle, they rely heavily on mass transit, and are often willing to trade home size for location. However, Muldavin said that the suburbs are fighting back with better mass transit, new bike paths, and repurposed properties to attract more future buyers.

Climate change and more extreme weather patterns will also continue to have a strong impact on coastal homes and many other properties across the country. Muldavin cited the impact of recent storms like Hurricanes Katrina and Sandy, and how property owners in these markets are now dealing with changes in code and zoning standards and paying significantly higher insurance premiums.

Like weather and geologic events, major global events can also impact real estate markets, such as acts of terrorism, war, global debt crisis and financial and economic downturns, he said.

“The risk of future events is high, and while it’s always hard to anticipate these risks, they need to be considered because their impact is often great,” said Muldavin.

Increased natural gas and oil production in the United States, which has an impact on the economy and environment, is another issue with implications for real estate. He said there’s been an increase in fracking and oil and natural gas production in recent years, and while this is creating greater employment opportunities and reducing U.S. dependence on foreign oil, it’s also contributing to climate change, environmental degradation and contamination.

Muldavin cited globalization, foreign investment and the economies of other countries as variables that will continue to have a greater impact on the U.S. economy and real estate market.

Another issue is how technology will continue to impact office spaces. Muldavin said many corporations are employing work-from-home policies and other mobility solutions that are allowing individuals to work when and where they want, significantly reducing office space requirements.

“Many people are replacing physical items with electronics and free or virtual products, such as e-books and smartphones enabled with cameras, GPS and flashlights. This means businesses will continue to require less retail space, so I believe the trend in the future will be for fewer and smaller stores,” he said.

Muldavin said the impact of the Internet on bricks-and-mortar retail stores is also a growing issue. He said retail demand is down across the country due to an increase in Internet sales, which are expected to rise from the current 6.5 percent to nearly 15 percent by 2020.

The National Association of Realtors is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries. Learn more at realtor.org.

Slight Cooling in Housing a Good Thing:

U.S. housing prices rose 8.5% through August even as higher mortgage rates hurt demand, according to a Federal Housing Finance Agency report.

Though home prices continue to rise, real estate research from Zillow (Z) finds evidence the housing market is cooling. The pace of home value appreciation slowed in the third quarter to 1.2%, about half the pace of the second quarter of this year. And as Stan Humphries, chief economist at Zillow, tells The Daily Ticker in the above video -- that’s “a pretty good thing.”

Why?

“We have been wanting to see a little bit of moderation in the pace of home value gains because they’ve been rising at a very fast pace off the bottom. And in order to get back to a normal pace we need to start to see things moderate,” he tells us. “The normal pace in the housing market looks more like 3.5% [growth in values] a year, so in the past several months we’ve been rising at almost twice that pace.”
In other words, you want the housing recovery to be sustainable so in some cases (like now) a slowdown is good.

Seven Year Low in Foreclosures:

The number of U.S. homes set on the path to foreclosure slid to a seven-year low in the third quarter, reflecting a gradually improving housing market and fewer homeowners falling behind on mortgage payments.

Lenders initiated foreclosure action on 174,366 homes in the July-September period, the lowest level since the second quarter of 2006, foreclosure listing firm RealtyTrac said Thursday.

Foreclosure starts declined 13 percent from the previous quarter and were down 39 percent from the third quarter last year, the firm said. Foreclosures peaked in 2010 at 1.05 million units and have been declining ever since.

The national slowdown in foreclosure starts comes as the U.S. housing market continues to recover from a deep slump, a rebound driven by rising home prices, steady job growth and fewer troubled loans dating back to the housing bubble days. Fewer homes entering the foreclosure pipeline should translate into fewer properties that eventually end up lost to foreclosure.

Existing-Home Sales Reach Highest Pace Since February '07

DAILY REAL ESTATE NEWS | FRIDAY, SEPTEMBER 20, 2013

Existing-home sales increased in August, reaching their highest level in 6 1/2 years. What's more, the median price shows nine consecutive months of double-digit year-over-year increases, according to the National Association of REALTORS®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums, and co-ops, rose 1.7 percent to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July. They're also 13.2 percent higher than the 4.84 million-unit level in August 2012.

Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months.

Lawrence Yun, NAR chief economist, said the market may be experiencing a temporary peak.

“Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions,” he said. “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 August increased 0.4 percent 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 in July. Unsold inventory is 6.3 percent below a year ago, when there was a 6-month supply. “Limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August, although 63 percent sold below list price,” said Yun.

Data from realtor.com®, NAR’s listing site, shows large declines in inventory from a year ago in the following areas:

• Naples, Fla.: down 23.5 percent
• Detroit metro: down 23.3 percent
• Greater Boston: down 20.7 percent

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.46 percent in August from 4.37 percent in July, and is the highest since July 2011 when it was 4.55 percent; the rate was 3.60 percent in August 2012.

The national median existing-home price for all housing types was $212,100 in August, up 14.7 percent from August 2012. This is the strongest year-over-year price gain since October 2005 when the median rose 16.6 percent, and marks 18 consecutive months of year-over-year price increases.

Distressed homes – foreclosures and short sales – accounted for 12 percent of August sales, down from 15 percent in July, and are the lowest share since monthly tracking began in October 2008; they were 23 percent in August 2012. Ongoing declines in the share of distressed sales are responsible for some of the growth in median price.

Eight percent of August sales were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in August, while short sales were discounted 12 percent.

NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said 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,” he said. “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.”

The median time on market for all homes was 43 days in August, little changed from 42 days in July, but is much faster than the 70 days on market in August 2012. Short sales were on the market for a median of 98 days, while foreclosures typically sold in 52, days and non-distressed homes took 41 days. Forty-three percent of homes sold in August were on the market for less than a month.

First-time buyers accounted for 28 percent of purchases in August, down from 29 percent in July and 31 percent in August 2012.

All-cash sales comprised 32 percent of transactions in August, up from 31 percent in July and 27 percent in August 2012. Individual investors, who account for many cash sales, purchased 17 percent of homes in August, compared with 16 percent in July and 18 percent in August 2012. Last month, three out of four investors paid cash.

Single-family home sales rose 1.7 percent to a seasonally adjusted annual rate of 4.84 million in August from 4.76 million in July, and are 12.8 percent above the 4.29 million-unit pace in August 2012. The median existing single-family home price was $212,200 in August, which is 14.4 percent higher than a year ago.

Existing condominium and co-op sales rose 1.6 percent to an annual rate of 640,000 units in August from 630,000 in July, and are 16.4 percent above the 550,000-unit level a year ago. The median existing condo price was $211,700 in August, up 17.7 percent from August 2012.

Existing-home sales by region:

Northeast: Existing-home sales were unchanged at an annual rate of 710,000 in August but are 12.7 percent above August 2012. The median price in the Northeast was $268,800, up 7.6 percent from a year ago.

Midwest: Existing-home sales increased 3.1 percent in August to a pace of 1.32 million, and are 18.9 percent higher than a year ago. The median price in the Midwest was $166,100, which is 10.0 percent above August 2012.

South: Existing-home sales rose 3.8 percent to an annual level of 2.19 million in August and are 13.5 percent above August 2012. The median price in the South was $181,000, up 14.6 percent from a year ago.

West: Existing-home sales declined 2.3 percent to a pace of 1.26 million in August but are 7.7 percent 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 percent above August 2012.

National Foreclosure Nightmare Coming to an End?

The number of new foreclosure filings in August hit its lowest level in nearly eight years, according to RealtyTrac, 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 2005. 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," said Daren Blomquist, vice president at RealtyTrac. "The foreclosure floodwaters have receded in most parts of the country, although lenders and communities continue to clean up the damage left behind," he added.

The mopping-up process continues, 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 peak of repossessions in September, 2010. 

Banks May Ease Lending Standards Soon

DAILY REAL ESTATE NEWS | THURSDAY, AUGUST 15, 2013

With fewer home owners refinancing their mortgages because of rising interest rates, banks may soon relax their lending standards to ramp up business, according to the Mortgage Bankers Association. 

Credit availability has risen 3 percent since May — when mortgage rates began to rise — according to an MBA survey. Refinances have fallen 59 percent from a year ago, but applications for home purchases have risen 5 percent. 

In recent years, tight underwriting standards have been blamed on shutting out many people from the housing market. Many potential borrowers have been unable to meet requirements for higher credit scores and larger down payments in order to qualify for a loan. 

"As volumes slow, it makes sense that originators might ease some of their overlays as they now have the additional bandwidth to focus on slightly lower-quality loans or those loans that require more intense underwriting prior to approval, such as loans for self-employed individuals or investors that own multiple homes," Craig Strent, CEO of Maryland-based Apex Home Loans, told CNBC. "Competition for loans, particularly for home purchases, will continue to rise as refinances wane and originators look for continued loan volume to support the infrastructure they put in place during the recent refinance wave."

Inventory Crunch Over? More Homes Are For Sale

DAILY REAL ESTATE NEWS | WEDNESDAY, AUGUST 14, 2013

Inventory levels are on the rise nationwide, which could soon mean the severe inventory shortages plaguing many markets the last few months may soon be nearing an end, according to the latest report from realtor.com®. As home prices rise, more sellers may be testing the market, helping to increase the options for home buyers. 

Realtor.com® reported that 1.96 million homes were listed for sale in June -- the highest number since last September. 

The markets that posted the largest rises in the number of homes for sale compared to one year earlier were: 

• Atlanta: inventories rose 17.9% year-over-year
• Sacramento, Calif.: +16.7%
• Los Angeles: +6.8%
• Orlando: +2.8%

All four markets have also posted strong gains in home prices the past year, realtor.com® reports.

“At the current pace of sales, the supply of homes for sale is still very low, suggesting price gains are likely to continue,” The Wall Street Journal reports. “But the months supply is up slightly in a growing number of markets. This could actually boost sales — a major complaint of home shoppers and their real estate agents is that there’s a shortage of attractive homes being offered for sale.” 

Meanwhile, inventories of homes for-sale has fallen year-over-year levels in 26 of the markets realtor.com® monitors. Inventory levels fell the most in Detroit (by –30.2%); Boston (–28.9%), Denver (–25.1%), and San Francisco (–19.4%).

Wells Fargo, Citigroup Halt Foreclosure Sales

Daily Real Estate News | Monday, May 20, 2013

Wells Fargo and Citigroup have temporarily halted foreclosure sales in several states, taking precautions after a federal regulator released new guidance on minimum standards for foreclosure sales.

The Office of the Comptroller of the Currency (OCC) recently released the new standards. The OCC’s directive mostly consists of 13 questions banks need to ask themselves before selling a home in foreclosure, such as whether the borrower is protected from foreclosure by bankruptcy or if the borrower is in an active loan modification plan.

JPMorgan had also mostly stopped its foreclosure sales after the OCC’s standards were released, but has since resumed sales.

Wells Fargo, the nation’s largest mortgage originator, has seen a dramatic drop in foreclosure sales while significantly decreasing the number of sales it’s processing. For example, foreclosure sales by Wells Fargo in California, Nevada, Arizona, Oregon, and Washington plummeted from 349 a day in April to less than 10 a day, according to Foreclosure Radar, a real estate monitoring firm based in California.

"Wells Fargo has temporarily postponed certain foreclosure sales while we study the revised guidance from the OCC," a Wells Fargo spokeswoman confirmed for American Banker. Citibank officials also confirmed the reason behind their halt in sales was to carefully review the new guidance.

"The OCC did not direct a slowdown or pausing," says OCC spokesman Bryan Hubbard. "However, if servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step."

Rising Housing Market Likely to Lift Job Mobility

DAILY REAL ESTATE NEWS | TUESDAY, MAY 14, 2013

Home owners are starting to feel freer to move where the jobs are, Reuters reports, as worries about homes that won't sell or will sell at a loss begin to fade.  

Since early 2012, home prices in the major metro areas have been rising. Homes are also selling faster: It took 62 days, on average, to sell a home, compared with 91 days one year prior, according to March data from the National Association of REALTORS®.

The increase in mobility from the recovering housing market is expected to have a hand in lowering the jobless rate.

"Until the real estate market picked up, people wouldn't even consider a move without the certainty that they could sell their homes," Jerry Funaro, vice president of global marketing for TRC Global Solutions, a Milwaukee-based relocation service, told Reuters. "Companies are now more inclined to make offers since we're seeing real estate markets across the country coming back.” 

The number of people who moved last year increased to 35.6 million, with the mover rate climbing to 12 percent, according to the U.S. Census Bureau. That marked an increase over the 11.6 percent low set in 2011. 

"It's not a huge gain, but when you consider that for two years, we've had the lowest migration rates since World War II, any move up is good news," William Frey, a demographer at the Brookings Institution in Washington, told Reuters.

Meanwhile, in April, the jobless rate dropped to its lowest point in more than four years, reaching 7.5 percent, due to an increase in hiring among employers.

4 Threats That Remain in Housing Recovery

DAILY REAL ESTATE NEWS | MONDAY, MAY 06, 2013

The housing recovery appears to be on track and growing stronger. Home sales and prices are up after reaching bottom in 2010, foreclosures and mortgage delinquencies are dropping, yet housing affordability still remains high. 

So why are some analysts and economists concerned? 

At a recent Milken Institute Global Conference in Beverly Hills, Calif., panelists said that threats to the housing recovery still remain. The biggest threats they pointed to included:

1. Land scarcity: Real estate developers are struggling to find desirable land to start new projects, which is limiting the supply of new homes. A few years ago, banks took ownership of land after developers had foreclosed on some projects. The land is worth less than its original price so banks are reluctant to write off additional losses by selling it too cheaply. Plus, lenders remain cautious about issuing loans for new land purchases. 
2. House flippers should be cautious: Housing affordability is high mostly due to super low mortgage rates, and investors are taking advantage with intentions of flipping homes for profit. "No doubt you can buy a house today and get a really good price and a low-interest loan,” says Jeff Greene, president of Florida Sunshine Investments. “But if you want to sell that house to somebody two or three years later and rates go up to 5 or 6 percent, how much is he going to pay for that house?"
3. Foreign buyers potentially inflating prices: In some markets, strong demand by foreign buyers has helped home prices recover, which has made homes more expensive for Americans in some areas. Some analysts fear that it could even lead to another housing bubble if interest rates started rising quickly as well. Markets like Miami, Los Angeles, and New York are seeing strong demand among foreign buyers. Some say this is a good thing, because it reflects a strong faith in the U.S. market. 
4. A ‘patchy’ recovery: Some markets are seeing rapid increases with bidding wars, rising prices, and low inventories, while other markets are still at a standstill. For example, Miami’s housing market is “on fire” while 80 miles north in Palm Beach County there’s a “huge glut of housing,” says Greene.

Pending Home Sales jump 7% from a year ago:

Contracts to buy existing homes rose in March, and would have increased even more it it wasn't for a historically low supply of for-sale listings nationwide.

The Pending Home Sales Index from the National Association of Realtors increased 1.5 percent month to month which was better than the 1.0 percent increase that economists expected. It is 7 percent higher than March of 2012.

"Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply," said the Realtors' chief economist Lawrence Yun in a release. "Little movement is expected in the near-term sales closings, but they should edge up modestly as the year progresses.

The lack of inventory is due to several factors but one of the newer trends is that many sellers are waiting to put their homes on the market because they are waiting to see how much further home prices will increase.

Regionally, the Realtors' pending home sales index was unchanged in the Northeast from February, up 0.3 percent in the Midwest, up 2.7 percent in the South and up 1.5 percent in the West.

Data Shows Mortgage Credit Easing, Others Not so Sure

Daily Real Estate News | Tuesday, April 23, 2013

Lenders are showing signs of easing up on underwriting for mortgages, according to the latest report from Ellie Mae Inc., a mortgage origination software company. But some critics say they aren’t seeing it in their markets yet, as their customers continue to struggle to qualify for a mortgage, posing one of the biggest obstacles to the housing recovery.

Ellie Mae’s latest findings may provide some encouraging signs for those buyers who have been shut out: Credit scores and down payments for approved mortgages are moving lower.

FICO scores for approved mortgages averaged 743, dropping to the lowest point since Ellie Mae began its tracking in August 2011. For the first quarter, the average credit score overall among approved borrowers was 746, which compares to 748 for all of 2012, according to Ellie’s report, which reflects March data of approved mortgages.

Borrowers approved for a loan made, on average, a 19 percent down payment, the lowest since May 2012, according to Ellie Mae. The front-end debt-to-income ratios were 23 percent.

Borrowers who were denied a mortgage tended to have, on average, a FICO score of 702, a down payment of 15 percent, and front-end debt-to-income ratio of 27 percent, according to Ellie Mae’s findings.

Some critics are quick to point out that Ellie Mae’s findings are only a sample of about 20 percent of all loan originations.

“I warn my clients to be prepared to give their arm, leg, and first-born,” Lakshmi G. Yokoyama, a mortgage consultant at Sierra Pacific Mortgage Corp., told Inman News.

Source: “Ellie Mae: Mortgage credit continues to ease,” Inman News (April 18, 2013

Homes Appreciating Faster than Wages:

As we have been reporting for over a year, home prices are rising.  That is the good news.  The bad news is that wages are not.

While historically low mortgage rates are translating into big savings for homeowners, those same low monthly payments are masking a troubling trend. While home values have been on the rise for the past year — in some areas appreciating by 15 percent or more annually — median wages haven’t kept pace. As a result, home price-to-income ratios in many areas are climbing.

By looking at two metrics — an affordability index and a price-to-income ratio — Zillow researchers have determined that low mortgage rates that make homes appear incredibly affordable are overshadowing a bigger overall trend in which the overall prices of homes are actually significantly more expensive than historic norms relative to annual incomes.

Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes in the fourth quarter of 2012 relative to their region’s median income than they were from 1985 through 1999. Metros with the largest difference between their pre-bubble and fourth quarter 2012 price-to-income ratios included San Jose (52.1 percent more), Los Angeles (48.8 percent more), Portland, (45.4 percent more), San Diego (44.6 percent more) and Denver (40.8 percent more).

Bidding Wars are Back:

The bidding wars are back. Seemingly overnight, many of the nation's major housing markets have gone from stagnant to sizzling, with for-sale listings drawing offers from a large number of house hunters.

In March, 75% of agents with broker Redfin said their clients' offers were countered by rival bids, up from 56% who said so in late 2011.

The competition has been most intense in California, where 9 out of 10 homes sold in San Francisco, Sacramento and cities in Southern California drew competing bids during the month. And at least two-third of listings in Boston, Washington D.C., Seattle and New York generated bidding wars.

"The only question is not whether a new listing will get multiple bids but how many it will get," said Kris Vogt, who manages 14 Coldwell Banker offices in the Sacramento area. One home in an Elk Grove, Calif., subdivision recently received 62 separate bids. The final sale price was for more than $150,000, well above its $129,000 asking price.

Homebuyers eager to purchase before home prices and mortgage rates rise are finding few homes for sale as sellers hold out for better deals, said Glenn Kelman, Redfin's CEO. Even though home prices are on the rise, the balance between buyers and sellers has been thrown off balance, said Kelman.

"With buyers out in force and sellers cautious, the market is in an awkward 'tweener' phase," he said.

Investors Gradually Retreating from Market

Investors Gradually Retreating from Market

Home Prices Pick Up at Fastest Pace in 7 Years

DAILY REAL ESTATE NEWS | THURSDAY, APRIL 04, 2013

Home prices nationwide, which includes distressed sales, soared 10.2 percent year-over-year, according to CoreLogic’s February report. It’s the largest year-over-year increase in home prices since March 2006. It also marks the twelfth consecutive monthly increase in national home prices, according to CoreLogic’s report. 

When excluding distressed sales, home prices rose 10.1 percent year-over-year in February, according to CoreLogic. 

“Nationally, home prices improved at the best rate since mid-2006, marking a full year of annual increases and underscoring the ongoing strengthening of market fundamentals,” says Anand Nallathambi, president and CEO of CoreLogic.

CoreLogic predicts that home prices -- excluding distressed sales -- will likely rise 11.4 percent year-over-year from March 2012. 

“The rebound in prices is heavily driven by western states,” says Mark Fleming, CoreLogic’s chief economist. “Eight of the top ten highest appreciating large markets are in California, with Phoenix and Las Vegas rounding out the list.”

The five states with the highest price appreciation as of February 2013, according to CoreLogic, were: 

• Nevada (+19.3%)
• Arizona (+18.6%)
• California (+15.3%)
• Hawaii (+14.6%)
• Idaho (+13.5%)

Source: CoreLogic

Pending Home Sales Rise 8.4%:

The National Association of Realtors reported that their index of Pending Home Sales rose 8.4% from February 2012 and was constrained only by the lack of inventory available for sale. 

Thinking about buying a home in 2013?  This is not the same market where you can take your time and view many different homes.  Home prices are moving up and the number of available homes for sale that are in good condition are moving fast. 

Lawrence Yun, NAR chief economist, said limited inventory is holding back the market in many areas. "Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels," he said. "Most local home builders are small businesses and simply don't have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market."U.S. home resales (the largest segment of the housing market) hit a three-year high in February and prices jumped, adding to signs of an acceleration in the housing market recovery.

More good news: Yun projects existing-home sales to rise about 7 percent in 2013 to approximately 5 million sales, which is near the current level of activity and the national median existing-home price is forecast to rise nearly 7 percent this year, while mortgage interest rates should remain historically low, but trend up slowly.

So, the industry experts are saying: 1) Good quality Inventory is moving fast and at 2) higher prices and 3) with mortgage rates rising throughout the year.  What does this tell you? 

Will Lending Standards Loosen Up This Spring?

DAILY REAL ESTATE NEWS | THURSDAY, MARCH 28, 2013

Lenders tightened up their underwriting standards the last few years, making it difficult for even creditworthy buyers to get approved for a home loan. Federal Reserve Chairman Ben Bernanke said at a press conference last week that the tightening of the mortgage market “has gone too far.” 

But recent data released by Ellie Mae shows there may be some improvement in the loosening of credit. 

“The credit box may be expanding,” says Jonathan Corr, Ellie Mae president and CEO.

In its latest data release, Ellie Mae found that the average FICO scores for approved loans has started to drop — a 767 FICO average for all of 2012 compared to 761 FICO average for all approved conventional loans during February. 

More applications for mortgages also were approved — 56.8 percent in February versus 55 percent in January, a slight improvement.

The refinance share of loan originations fell to 68 percent in February, from 73 percent in January, which is “a good sign since it indicates lenders are getting more serious about going after the purchase market,” Inman News reports. 

Still, many in the industry say that banks are being too strict with home loans. Lawrence Yun, chief economist for the National Association of REALTORS®, estimates that if credit conditions returned to “normal,” about 500,000 to 700,000 more home sales would occur this year.

Existing Home Sales Hit 3 Year High, Home Prices Rise:

U.S. home resales (the largest segment of the housing market) hit a three-year high in February and prices jumped, adding to signs of an acceleration in the housing market recovery.

The National Association of Realtors said on Thursday existing home sales increased 0.8 percent to an annual rate of 4.98 million units last month, the highest level since November 2009. The January sales pace was revised upward to 4.94 million units from the previously reported 4.92 million units.

The median home sales price in February rose 11.6 percent from a year ago to $173,6000.

In a separate report, the U.S. Department of Commerce reported that New Home Starts rose. Building Permits for new construction approached a five-year high.

Jumbo Loans Availability and Rates Point To Growing Housing Market:

Even as mortgage rates begin to rise, the difference between conforming and jumbo loan rates is shrinking, and that is good news for buyers of higher-priced homes. Conforming loans are largely financed by Fannie Mae and Freddie Mac, and are valued at up to $417,000 — although they can be as high as $625,000 in some of the nation's pricier markets.

Jumbo Loans are anything above that and are funded by banks or private investors. Rates used to be far higher for jumbo loans, but that is changing fast.  As reported by the Mortgage Bankers Association, The spread between a jumbo and a conforming mortgage rate was as wide as 0.875 percent last summer. It has now dropped to between 0 and 0.25 percent as of Monday.

The jumbo market has heated up, as tight lending guidelines have drastically reduced consumer late payments, strategic defaults, and foreclosures, this gives investors confidence to buy jumbos again, which means lower rates for consumer borrowers.

The rebirth of jumbo securitizations is being driven not just by investor confidence, but by growth in jumbo originations, which increased after the conforming loan limit was lowered. Originations of non-agency jumbo mortgages jumped by over 19 percent in 2012 from 2011, according to Inside Mortgage Finance. 

New-home sales continue upward swing

28.9 percent annual jump makes for best January in 5 years

By Inman News
Inman News®

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February 26, 2013

Sales of new single-family homes rose 28.9 percent on an annual basis in January to a seasonally adjusted annual rate of 437,000, the U.S. Census Bureau reported today.

That represents a 15.6 percent increase from December, and was the fastest pace of new-home sales for a January since 2008, blogger Bill McBride pointed out on Calculated Risk.

It was, however, the ninth weakest January in records going back to 1973, McBride noted. Nearly three times as many new homes sold in January 2005.

The median sales price of new homes sold in January was $226,400, up 2.1 percent from a year ago, but down 9.4 percent from December.

The Census Bureau estimated that 150,000 new homes were on the market at the end of December, representing a 4.1-month supply. Less than six months' supply is considered normal, McBride said.




Source: Calculated Risk blog.

Labor Costs to Push Up Housing Prices:

Housing starts are up 24 percent from a year ago, but residential construction employment is up only 3.1 percent, according to the U.S. Commerce and Labor Departments.

During the slow down in new construction, wages were cut or laid off workers naturally sought out other jobs.  Now that housing starts and housing demand have heated back up, the housing industry is struggling to get those workers back to fill demand. And in order to attract skilled workers back, builders are paying more.

Total employment in construction increased by 48,000 in February. Since September, construction employment has risen by 151,000. The biggest growth in February construction jobs came in residential specialty trade contractors, up 17,000. Those trades, such as plumbers, painters, and electricians, have been boosted not just by an increase in home construction but in home remodeling as well.

For example: in Las Vegas where Pardee Homes is building 150 percent more homes this year than they did last year, finding workers is increasingly difficult.  "We lost quite a bit of labor to the oil fields and to places like Wyoming and North Dakota, where you would not expect it to go," noted Klif Andrews, Pardee's Las Vegas president.

Andrews said he is paying workers five to ten percent more now, and that has pushed his home prices higher. "We've raised median home prices up over 15 percent, so we've been able to stay a little bit ahead of it, but cost increases, it's not just labor, it's also materials," he added.

Nationwide, the median price for newly built homes rose 2 percent in January and new home prices now far exceed the median price for existing homes.  

Mortgage Rates Remain Near 65-Year Record Lows

Mortgage Rates Remain Near 65-Year Record Lows

Are Foreclosures a Better Buy Than Short Sales?

Are Foreclosures a Better Buy Than Short Sales?

Existing Home Inventory Drops to 13 Year Low:

What kind of housing market does the following scenario sound like? Home Prices are up 12.3% from 12 months ago, the inventory of available homes for sale are down 25.3% from a year ago and the number of units sold are up.  Sound like a great housing market to be in for a seller, right?  Well that is exactly the market that we are in right now.

The National Association of Realtors said on Thursday that existing home sales rose 0.4 percent last month to a seasonally adjusted annual rate of 4.92 million units. That was the second highest rate of sales since November 2009, when a federal tax credit for home buyers was due to expire.

Inventories were down 25.3 percent from January 2012.  At the current pace of sales, inventories would be exhausted in 4.2 months, the lowest rate since April 2005.

The low inventories are also helping pushing prices higher. Nationwide, the median price for a home resale was $173,600 in January, up 12.3 percent from a year earlier.

With this positive housing market and interest rates that are still well below normal levels, the Spring housing market looks to be a strong one.

Consumer Sentiment Rises and Delinquencies Drop:

Consumer sentiment rebounded solidly early in February after a disappointing showing the previous two months, according to a survey released Friday.

The monthly Thomson Reuters/University of Michigan consumer sentiment index rose to 76.3, up from 73.8 in January. The readings in December and January were weighed down by Americans’ concerns about the potential drag from the so-called "fiscal cliff", which federal lawmakers averted with a last-minute deal.

The consumer sentiment figure was an indication that the economic recovery is intact, though it’s below the readings in the low 80s late last year.  Everyone knows that in the housing market, it is not so much about interest rates or housing prices but instead its about  how potential home buyers feel about the economy.  Strong sentiment about the economy and their job security has always lead to strong housing demand.

In a separate report, The number of homeowners behind on their mortgages has now fallen for four straight quarters to the lowest rate in four years.   At the end of last year, the delinquency rate took its deepest dive since things began improving in 2010, falling 14 percent from a year ago, according to a new report from Transunion. Thirty-seven states and the District of Columbia saw improvements.

This is another strong sign for housing.  With delinquencies continuing to fall, the number of distressed homes that hit the market is greatly reduced and these homeowners are getting back on track with their credit scores which will lead to more qualified buyers hitting the the market this year.

Press Release - Keller Williams Realty Now #1 Real Estate Company by agent count!

Press Release - Keller Williams Realty Now #1 Real Estate Company by agent count!

In State of the Union Speech, Obama Eyes Housing

In State of the Union Speech, Obama Eyes Housing

Tax Reform, Fixing Mortgage Rules High on 2013 Obama Agenda

Tax Reform, Fixing Mortgage Rules High on 2013 Obama Agenda

Home Price Index Gains 5.5%: 

The S&P/Case-Shiller 20-city composite posted that home prices were 5.5% higher than during the same period in the prior year, for the strongest year-over-year growth since August 2006, with increases in 19 of 20 cities.

Housing is clearly recovering, with positive trends for new- and existing-home sales. However, prices remain 30% below a bubble peak in 2006, according to Case-Shiller data.  That means that there is still an excellent opportunity to select your next home while home prices still have room to move upward.

Housing Starts Best in Over Four Years: 

The rebound in U.S. home building accelerated in December, capping the best year for the industry since 2008 and adding to signs that residential real estate is contributing to economic growth.

According to Commerce Department data, New Home Starts climbed 12.1 percent last month to a 954,000 annual rate, which exceedied all forecasts of economists.  Spurred by record-low mortgage rates, home construction will probably keep making headway in 2013 as it recovers from the worst slump since the Great Depression.

Housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high. They averaged 1.74 million a year from 2000 through 2004. All four regions of the country showed a gain in starts last month, led by a 24.7 percent surge in the Midwest. Construction of single-family houses climbed 8.1 percent in December from the prior month, to the highest level since June 2008. Work on multifamily homes jumped 20.3 percent. 

Free and clear homes point the way to next round of housing demand: 

We are all too familiar with the constant media reports that state that approximately one third of home owners are "upside down" or "underwater" on their mortgage. This is when they owe more on their mortgage than what their home is worth.  As home prices have been steadily increasing, these people are less "underwater" than a year ago but they are still essentially stuck in their current  home.

But a new report by Zillow shows that one third of all homes are owned "Free and Clear" with no mortgage at all. 

Demographics, home prices and geographical location all seem to play into "free-and-clear" home ownership, according to Zillow's survey. Obviously, the longer someone owns a home, the more likely they are to have paid off a mortgage. When looking at free-and-clear ownership rates as a percentage of homeowners in various age groups, however, Zillow found 34.5 percent of 20- to 24-year-old homeowners are free of mortgages. This represents an upwardly mobile block of homeowners that can sell their homes and purchase a new one.

Experts Bullish on Housing: 

Home prices are now rising at their fastest pace since 2005. Housing bulls are running again, pointing to rising construction starts, rising home sales and falling mortgage delinquencies.

"Low prevailing mortgage rates, the limited supply of existing homes for sale (either due to the few foreclosure completions or the number of underwater borrowers who cannot sell), and the anemic levels of new home construction are facilitating affordability and feeding demand," noted analysts at Fitch Ratings. "These factors are offsetting weak fundamentals that would otherwise hinder home price growth, such as high structural unemployment and lackluster wage growth."

With economic growth starting to pick up in 2013, so will mortgage rates.  Mortgage rates directly correlate with economic growth.  As the economy grows, so will rates.  But is that a bad thing for housing?  Actually, its not.

Historically, when mortgage rates start to trend upward, purchasers finally "get off the fence" and pull the trigger on that next home particulary with home prices rising.  Plus, the uptick in mortgage rates that results from a growing economy will still be relatively low compared to other periods when the housing market flourished.  It will certainly dampen the refinance activity but will spur purchase activity.

Pending Home Sales and New Home Sales Improve: 

The number of contracts signed to buy previously owned homes in November rose to the highest level in more than two years on a seasonally adjusted basis, the latest sign of how housing demand has firmed up.
The National Association of Realtors said their index of pending home sales, reflecting sales that have gone into contract but haven't yet closed, rose 9.8% last month from one year ago and by 1.7% from October, marking the 19th consecutive month where contract activity has risen from the previous year.

More recently, traditional buyers—who plan to live in the home they buy—have returned in growing numbers. Household formation is expanding as the economy posts modest job growth. Rising rents and prices are sparking a sense of urgency among buyers, who are increasingly frustrated by the lack of attractive inventory.

In a separate report, New-home sales rose in November, recording their strongest pace in more than 2 years, another sign of improvement in the housing market.

The Census Bureau reported Thursday that sales of new homes rose to an annual rate of 377,000 in the month, up 4.4% from October, and up 15% from year-earlier levels. It was the highest rate of new-home sales since April 2010, when sales were inflated by a temporary $8,000 tax credit for home buyers.