Tag Archives: Real estate pricing

4 Keys to Real Estate Recovery

Photo Courtesy of: http://onepicinspires.blogspot.com/
Photo Courtesy of: http://onepicinspires.blogspot.com/

In order to have a fully recovered housing market and economic recovery, economists point to the need for four positive indicators:

1. A healthy job market with low stable unemployment;

2. Mortgage delinquencies that have returned to historical averages;

3. Home prices consistent with an affordable mortgage payment–to–income ratio; and

4. Home sales that are in the range of historical norms.

So, is the housing market inching closer?

Freddie Mac’s U.S. Economic and Housing Market Outlook for January takes a look at how the housing market is performing among these four indicators. Economists note that the unemployment rate — while inching down — still remains high at 6.7 percent. Meanwhile, mortgage delinquencies have fallen to 5.88 percent — nearly half of their peak rate but still higher than the national average of about 2 percent, Freddie notes.

Home prices still have some room to grow without outpacing income growth, economists say.

“From 1999–2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth,” Freddie Mac notes in the report. “Currently, payment-to-income ratios are only 60 percent of the level we had in 1999, suggesting room for continued housing growth.”

Finally, home sales have risen over the past two years but remain below levels from a nearly a decade ago. Home sales, historically, average a rate of about 6 percent of the housing stock every year. They dropped to 4 percent during the housing crisis. Economists are predicting a 5.7 percent pace in 2014.

“As we start 2014, the housing recovery continues its steady pace,” Frank Nothaft, Freddie Mac’s chief economist. “House-price gains will likely moderate from last year’s pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak.”

Source: Freddie Mac and “Are We There Yet? Freddie Mac Says Recovery Has a Ways to Go,” Mortgage News Daily (Jan. 16, 2014)

Read More

A Real Estate Lion’s Miraculous Tale of Recovery
FHA: Unsung Hero of the Recovery

 

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More Than 3 Million Regained Equity in 2013

Stacked housing; Photo courtesy of http://www.funnypica.com/
Stacked housing; Photo courtesy of http://www.funnypica.com/

Home prices rebounded in 2013, helping more than 3 million home owners regain long-lost equity, according to CoreLogic’s latest MarketPulse report.

“We’re encouraged by the improvements of the past year and have every reason to be cautiously optimistic about continued progress in 2014. That said, monitoring the current and potential headwinds the industry faces is critical,” says Anand Nallathambi, president and CEO of CoreLogic.

More than two-thirds of all homes with a mortgage now have at least 20 percent equity, giving home owners more options in the housing market in the new year and increasing their employment mobility.

Still, 6.4 million residential properties have negative equity, and a third of those are concentrated in five states: Nevada, Florida, Arizona, Ohio, and Georgia.

Some of the biggest jumps in home prices over the last six months has occurred in Chicago and Raleigh, N.C., CoreLogic reports.

“That acceleration is consistent with our prior analysis, which showed that Chicago has had the most rapid growth of any market for owner-occupied purchase transactions in the past two years,” the report said.

Source: “CoreLogic: 2013 marks year of rapid transition,” HousingWire (Dec. 30, 2013)
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Housing Affordability Declines as Interest Rates Go UP

Picture courtesy of http://www.treadstonemortgage.com/
Picture courtesy of http://www.treadstonemortgage.com/

The majority of housing markets remain affordable to the average family, but rising mortgage rates and rising housing prices are causing more families to have to stretch financially, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for December.

“Rising mortgage rates and rising housing prices over the past six months are making it more challenging for the typical family to purchase a home without stretching beyond their means, especially in the Northeast and along the Pacific Coast,” says Frank Nothaft, Freddie Mac’s chief economist. “Like most, we expect mortgage rates to rise over the coming year, so it’s critical we start to see more job gains and income growth in the coming year. This will help to keep payment-to-income ratios in balance — an important factor not only for first-time buyers but for sustaining homeownership levels among existing owners.”

According to Freddie Mac’s report, more than 70 percent of the nation’s housing stock remained affordable to the typical family in the third quarter at a 4.4 percent interest rate for a 30-year fixed-rate mortgage. However, that percentage decreases to about 63 percent at a 5 percent mortgage rate;  55 percent at a 6 percent interest rate; and 35 percent at a 7 percent interest rate.

Source: Freddie Mac

 

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Higher Prices for Newly Constructed Homes

Photo credit: www.pleated-jeans.com
Photo credit: www.pleated-jeans.com

Many of the nation’s largest builders are raising their prices, even as existing-home prices are beginning to moderate.

For example, homebuilder KB Home has had average prices for its new homes soar 23 percent annually. Lennar has raised the average price on its new homes by 16 percent annually in the third quarter, now averaging $291,000. The average price of all existing homes was $258,000, according to the National Association of REALTORS®.

“The big picture is that new-build house prices fell less than existing house prices during the crash and have risen more during the recovery,” says Paul Diggle at Capital Economics.

While prices are up for new homes, both Lennar and KB Home announced this week a weaker pace for new orders. Lennar officials blamed the slowdown on rising mortgage rates and the double-digit percentage increases in home prices this year.

“We see strong, viable, fundamental demand out there, but it has cooled a little bit,” Rick Beckwitt, Lennar’s president, said during a recent earnings call. “As a result, from a pricing standpoint, we have selected some of our inventory and increased incentives associated with that inventory.”

Analyst Ivy Zelman doesn’t believe new home prices are inflated or priced at an abnormal premium over existing homes.

“In Arizona, California, Florida, and Nevada, we conclude that prices are still 15 percent lower than the 2006 peak, which excludes an adjustment for an increasing size of new homes and would be further compounded by seven years of inflation,” Zelman says.

Source: “Forget easing prices, new homes are up, up, up,” CNBC (Sept. 24, 2013) and “New-Home Orders Slower for Lennar, KB Home,” The Wall Street Journal (Sept. 24, 2013):  DAILY REAL ESTATE NEWS

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Nevada County Real Estate Trends

 

Nevada County Stats : Reprinted with permission from Trendgraphix  Inc.
Nevada County Stats : Reprinted with permission from Trendgraphix Inc.

September 19, 2013

Viewing the chart above, you can see that sales of homes from June 2012 to the end of August 2013 have increased. Inventory, however, has dropped from 626 homes to 495 homes

Without making your eyes bleary, here are the stats. For sale in the months of August 2013 495 homes, August 2012, 587 homes a decrease of -15.7% down. Homes sold in the month of August 2013, 124,  in the month of August 2013, 107 for in increase in sales of 15.9%.

The median price in June 2012 was $260,000. In August the median price raised to $305,000 a significant increase percentage wise of 17.3%

Judging from the chart above, February was the lowest inventory with 305 and we seem to be steadily increasing our inventory  This may be due to more home owners  realizing  that they may be above water with their mortgages and the market has come back for selling their homes.

 

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My House is Worth Money, Time for a Divorce

Photo credit: http://www.lolriot.com/
Photo credit: http://www.lolriot.com/

“So many couples have been living together and biding their time,” says Leigh Sigman, an Orlando lawyer. “I know many people who have coasted for years and touched base with me periodically — until they got equity in their homes.”

During the housing market crash, home prices fell dramatically in some areas, causing the home in a marriage to become one asset that no one wanted in a divorce because of the large amount of mortgage debt it carried, says Sigman.

But some metros are seeing that as home values rise, divorce rates are too.

“I have seen many of the deals we’re doing have involved a divorce — selling a house because of it or buying because of it,” says Robert Tenaglia, a real estate professional in Orlando. “When people don’t have equity and don’t have money, it dissuades them from going through the final step.”

Many couples may need the equity from the house sale to cover the costs of starting a new life and for a down payment on a new home or an apartment deposit, Tenaglia says.

Source: “Divorce and Home Values: Till Equity Do Us Part,” RISMedia (Sept. 6, 2013)

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Home Owners Equity Rising Above Water

Jenga Style Homes Photo courtesy of Pleated-jeans.com
Jenga Style Homes Photo courtesy of Pleated-jeans.com

In the next 15 months, 8.3 million home owners — about 18 percent of home owners who have a mortgage — are expected to gain enough equity to be in a better position to sell their homes, according to RealtyTrac’s September report on home equity.

“Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months,” says Daren Blomquist, vice president at RealtyTrac. “Home owners who already have ample equity are quickly building on that equity, while the 8.3 million homeowners on the fence with little or no equity are on track to regain enough equity to sell before 2015 if home prices continue to increase at the rate of 1.33 percent per month that they have since bottoming out in March 2012.

The 8.3 million of home owners have a range of 10 percent negative equity to 10 percent positive equity, according to RealtyTrac. Home owners with low equity may face challenges in selling a home due to the cost of the sale and having a down payment on a new home. As equity rises, more home owners are in the position to sell their home without having to resort such actions as a short sale.

The report also notes that one in four home owners in foreclosure also were found to have positive equity. Home owners with equity may have a better chance at selling their homes before letting the foreclosure process run its course, Blomquist says.

But that’s “assuming they realize they have equity and don’t miss the opportunity to leverage that equity,” Blomquist says. “Even home owners deeply underwater have reason for hope, with about 150,000 each month rising past the 25 percent negative equity milestone — although it will certainly take years rather than months before most of those homeowners have enough equity to sell other than via short sale.”

Source: National Association of Realtor©

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More Home Owners Regain Long-Lost Equity

Photo credit: http://xaxor.com/funny-pics/funny-crazy-real-estate-signs.html
Photo credit: http://xaxor.com/funny-pics/funny-crazy-real-estate-signs.html

Rising home prices are helping to propel more home owners back into positive equity. About 850,000 residential properties returned to positive equity during the first quarter of 2013, according to new data released by CoreLogic. That brings the total to 1.7 million borrowers who have regained positive equity in the past year.

In total, 39 million residential properties now have positive equity.

“The negative equity burden continues to recede across the country thanks largely to rising home prices,” says Anand Nallathambi, president and CEO of CoreLogic.

By the end of the first quarter, 19.8 percent of all residential properties with a mortgage — or 19.7 million — still had negative equity. At the end of the fourth quarter of 2012, 10.5 million or 21.7 percent of residential properties were underwater.

The states with the highest percentage of negative equity properties are:

  • Nevada: 45.4% of the properties there are still underwater
  • Florida: 38.1% underwater
  • Michigan: 32% underwater

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Source: “CoreLogic: Nearly 1 million houses float back into positive equity,”

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Housing Bubble Concerns Brew in Key Markets

bubble-house

Skyrocketing home prices in a few markets have some analysts concerned that prices are on the rise too fast and could ultimately hamper the housing recovery.

“In many markets, fundamentals are improving as unemployment rates continue declining, while low prices and low interest rates have affordability high,” according to analysts for Fitch Ratings, a credit rating agency. “However, especially in cities that never fully unwound the mid-2000s bubble, rapidly increasing price levels are a potential cause for concern.”

Many of the areas of concern are in California, where home prices have  posted gains of 13 percent in the past year alone, according to analysts.

Limited housing inventories of for-sale homes mixed with rising buyer demand are mostly behind the rising home prices.

“We believe this level of housing demand is likely to abate once the pent-up demand is satisfied,” Fitch analysts said. “The supply is also artificially low, as recent regulations have limited the pace of foreclosure sales and the large percentage of underwater borrowers continues to hope for future price increases to be able to sell their homes at a profit.”

Source: “A new bubble forecasted in key real estate markets,” HousingWire (May 29, 2013)

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Appraisals Catching Up to Rising Home Values

 

Hard to find comparable sales on this home. Photo credit: http://hekk-m.com/post180818332/
Hard to find comparable sales on this home. Photo credit: http://hekk-m.com/post180818332/

 

In recent months, real estate professionals have had to hold their breath as they waited for an appraisal on a property to come back. Would it be lower than the agreed-upon selling price  — and by how much?

Many real estate professionals have blamed a high number of derailed transactions on low-ball appraisals.

But now the industry is noticing a change in appraised values: Appraisals are getting more in line with the agreed upon selling price, CNNMoney reports.

Appraisers are valuing homes at or above their selling prices as home prices nationwide climb and inventories of homes decrease, says Lawrence Yun, chief economist for the National Association of REALTORS®.

For example, in Wallingford, Wash., real estate pro Michael Ackerman told CNNMoney that he was concerned a transaction would fall apart when a buyer agreed to pay $755,000 for a home since other comparable homes in the area had sold for $690,000.

“Everybody’s jaws dropped” when the appraised value came in at the full, agreed-upon selling price,” says Ackerman.

In some cases, appraisals are even coming in higher — which was practically unheard of just a few months ago. For example, real estate pro Cara Ameer in Jacksonville Beach, Fla., says with home prices in the area rising 15 percent over the past year, she was concerned the appraisal on a two-bedroom townhouse wouldn’t reflect the current rise. A buyer offered to pay $5,000 above the $189,000 asking price. The appraisal came in above the selling price, Ameer says.

Source: “Home appraisals no longer derailing sales,” CNNMoney (May 15, 2013)

 

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