Tag Archives: home prices

Politics, Real Estate

Home Prices May be Rising Too Fast

upside-down-house

In a historical context, home prices typically increase about 3 to 4 percent a year.

But in the years preceding the housing crash, prices in 2002 started soaring 7 percent a year, then 8 percent in 2004, and 12 percent by 2005, CNBC.com reports.

A “new bubble” may be forming, CNBC columnist Diana Olick writes. CoreLogic’s latest housing data shows home prices rose 8 percent in December year-over-year, the largest gain in more than six years. In some places, home prices are up by double digits from a year ago, like Phoenix where prices are up 26 percent year-over-year.

Inventories of for-sale homes are very tight and many are attributing the tight inventories as helping to drive up home prices. Inventories were at their lowest supply since May 2005, according to the National Association of REALTORS®.

“The greatest concern in the market is the inventory situation,” says Lawrence Yun, chief economist for NAR. “Even if we see an increase in the spring and summer, if home sales hold at the [current] level or even a 5- to 6-month supply, price increases are guaranteed. We don’t want to see rapid appreciation in prices faster than income.”

CNBC reporter Diana Olick notes that “healthy housing market gains are historically driven by increasing employment and income, not by lack of supply; the latter leads to price bubbles.”

But another part driving recent gains are the flood of investors in some markets. Investors are cashing in on once hard-hit markets by the foreclosure crisis, like in California, Las Vegas, and Phoenix. Many of these investors are hedge funds turning single-family homes into rentals, but as prices increase they may be inclined to take their profits sooner rather than later, Olick writes.

“What we had thought were safer, long term buys, may now turn into flips of the last decade,” Olick writes. “The question will be if there are enough non-investor buyers out there to support those sales?”

But the price gains may be sustainable, some say. Consumer confidence is increasing, employment is improving, and price gains may soon allow more home owners who are seeing equity once again trade-up, Olick writes.

Source: “Housing Market Already Shows Signs of New Bubble,” CNBC.com (Feb. 5, 2013) and “New Housing Fears: Home Prices Are Rising Too Fast,” CNBC.com (Jan. 22, 2013)

 

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Real Estate

National Median Home Prices Up 9.5% From Year Ago Levels

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Photo credit: www.caffeinecruisers.com/
Photo credit: www.caffeinecruisers.com/

By Lawrence Yun

The national median home price, at $187,400, is up 9.5 percent from year-ago levels, and the market is on pace to see 4.82 million home sales this year, a 9.3 percent improvement over last year. Almost two-thirds of sales are completed within three months, a big jump from a year earlier. But practitioner confidence, a good indicator of how the market will look down the road, has barely budged for months. All trend lines are from August 2011 to August 2012.

Existing-home sales is a seasonally adjusted annual rate, which is the actual rate of sales for the month, multiplied by 12 and adjusted for seasonal sales differences.  Pending home sales is an index that measures ­housing contract activity. An index of 100 is equal to the level of activity during 2001, the benchmark year. Inventory measures the number of existing homes on the market at the end of the month.  Buyer and seller traffic, current conditions, six-month expectations, and time on market derive from a monthly REALTOR® Confidence Index. Results are based on 3,421 responses to 6,000 surveys sent to large and small real estate offices. The survey asks practitioners to indicate whether conditions are strong (100 points), moderate (50), or weak (0). Some data may be revised from previous issues.

 

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Real Estate

Pending Home Sales Up Strongly From a Year Ago

English: staff photo of Lawrence Yun
Staff photo of Lawrence Yun (Photo credit: Wikipedia)


 

 

 

 

 

 

 

Pending home sales retrenched in April following three consecutive monthly gains, but are notably higher than a year ago, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 5.5 percent to 95.5 from a downwardly revised 101.1 in March but is 14.4 percent above April 2011 when it was 83.5. The data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said a one-month setback in light of many months of gains does not change the fundamentally improving housing market conditions. “Home contract activity has been above year-ago levels now for 12 consecutive months. The housing recovery momentum continues,” he said.

Yun notes home sales are staying well above the levels seen from 2008 through 2011. “Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007,” he said. “All of the major housing market indicators are expected to trend gradually up, but a new federal budget must be passed before the end of the year for the economy to continue to move forward.”

The PHSI in the Northeast rose 0.9 percent to 78.9 in April and is 19.9 percent higher than April 2011. In the Midwest the index slipped 0.3 percent to 93.0 but is 23.0 percent above a year ago. Pending home sales in the South fell 6.8 percent to an index of 105.7 in April but are 13.3 percent higher than April 2011. In the West the index dropped 12.0 percent in April to 94.9 but is 5.1 percent above a year ago.

The housing forecast has been upgraded, with existing-home sales expected to reach 4.66 million this year, compared with 4.26 million in 2011. The outlook for 2013 is now 4.92 million, but could vary significantly depending on two scenarios.

If lending returns to normal, the 2013 outlook for existing-home sales would measurably improve to 5.3 million. However, a fiscal cliff scenario of higher taxes and sharp spending cuts beginning in early 2013, which is an unlikely event but still worth noting, would lower the sales projection to 4.5 million.

Because of measurably lower inventory supplies, the forecast for home prices has been upwardly revised with the median existing-home price projected to rise 2 to 3 percent this year and 4 to 5 percent in 2013, with wide local market variations. Miami and Phoenix will easily achieve double-digit price growth by year end.

Yun said the price gains will measurably reduce the number of underwater homeowners. “For example, a 5 percent national price gain means the number of underwater home owners would fall to about 9 million from current estimates of around 11 million. A 10 percent gain, say over the next two years, would reduce the underwater status to about 7 million households out of 75 million owner-occupied homes,” he said.

About 25 million homes are owned free and clear without a mortgage.

Though the proportion of distressed properties is still high, the numbers have been falling over the past two years. “The diminishing share of distressed properties is another reason for higher home prices in upcoming months,” Yun added.

Source: National Association of REALTORS®

 

 

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Real Estate

Cash Buyers Are Driving Home Prices Downward

 

Cash buyers are sending home values down much lower than they otherwise would be, suggests a new survey by Campbell Inside Mortgage Finance, which polled more than 2,500 real estate agents nationwide.

In its December Housing Pulse Tracking Survey, the company found that investors accounted for one out of three real estate transactions last month, and about 74 percent of those purchases by investors were made using all cash.

“Investors have an over-sized command on the market since their ability to pay cash in the majority of transactions puts undue downward pressure on home prices,” an article at Housing Predictor notes about the study.

Cash buyers can be attractive to home sellers, banks, and mortgage companies, since they do not usually come with contingencies, require extra time to secure financing, and tend to move more quickly to closing. As such, cash buyers tend to make purchases at lower prices than those who may need financing or come with contingencies.

Source: “Cash Buyers Pushing Home Prices Lower,” Housing Predictor (Jan. 24, 2012)

 

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Real Estate

Mistakes Housing Investors Make


With traditional investments delivering low returns, some are considering buying rental housing.  However, potential investors should do their homework and avoid the following common mistakes.

Making sense of the story

  • Investing in real estate right now can be profitable, if everything goes as planned.  Rents are increasing in many areas, and more properties may be coming on the market.
  • Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
  • Traditionally, investors rented out properties for 1 percent of the purchase price per month.  However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
  • While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out.  Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers.  The same is true for less-attractive properties or those in less-desirable school districts.
  • Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
  • Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent.  Evicting tenants can take several weeks.
  • It’s also important to remember that owning a rental is not the same as owning a home.  An owner may put up with flaws in a home that a renter wouldn’t tolerate.  Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

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Real Estate

How To Lower Your Property Taxes

Despite home prices in major urban centers decreasing 31 percent between 2005 and 2009, property taxes across the U.S. increased by nearly 20 percent.  There is good news, however; homeowners can fight back.

  • Homeowners should keep in mind that property taxes do not always correspond with home values, because local governments typically don’t measure values every year and some have limits on annual property-tax increases.
  • As a result, current property taxes might reflect the home’s value when the market was healthier.  According to the Congressional Budget Office, property-tax adjustments lag behind changes in home prices by an average of three years.
  • Although homeowners cannot change their property-tax rate, which is set by the local government, homeowners can get their assessment lowered if they appeal to their local assessor.
  • One key to a successful appeal is fact checking the assessor’s work. About half of all successful appeals come from homeowners pointing out an error in the assessor’s description of the home, according to one property tax expert.
  • During the appeal process, which is similar to a less-formal court hearing, homeowners may present their case to several local officials or representatives.  The simplest way to convince officials that a property has been incorrectly valued is to provide evidence of the sales price of homes that are comparable to the property being discussed.  This should include square footage, amenities, and neighborhood characteristics.  Sale documents and photos of the property in question, as well as the comparable properties also should be brought in.
  • Homeowners who have made improvements or substantial changes to the property should be cautious about appealing an assessment though, as it could have negative effects and actually increase the property’s value and, in turn, the property taxes.

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Real Estate

Mortgage Rates Are Great, If You Can Qualify!

Interest rates are near historic lows and home prices are affordable; however, many borrowers are finding they must have nearly pristine credit records and hefty down payments to get the best rates.

  • Since 2009, credit standards have become much tighter.  For borrowers, this emphasizes the importance of paying close attention to credit scores.
  • New rules unveiled last week, the result of last year’s Dodd-Frank financial-services legislation, require banks and other lenders to disclose to consumers the scores used to determine interest rates charged borrowers, or to deny credit, making it easier for borrowers to see how their credit scores affect the interest rates they pay.
  • The FICO credit scores on loans that banks are giving out and that are backed by government agencies Fannie Mae and Freddie Mac show the new reality.  Currently, the two agencies essentially finance 75 percent of all mortgages by purchasing the loans from banks, thus shaping how much it costs to borrow.
  • FICO scores range from 300 to 850.  Prior to the decline in home prices, a score of 700 to 725 was considered solid and, a borrower could expect to be approved for a “conventional” mortgage at the lowest rates.
  • From 2003 to 2006, 82 percent of Fannie Mae mortgages were for borrowers with a score between 700 and 750, but so far in 2011, only 13 percent of Fannie Mae mortgages carry that score, and just 1.7 percent have a score of 700 to 725.  This year, 75 percent of Fannie Mae mortgages are for FICO scores of 750 to 755, up from less than 5 percent before 2005.
  • These trends demonstrate the importance of understanding credit scores and ensuring credit reports are accurate.  Consumers can check their credit report at AnnualCreditReport.com.

Read the full story

 

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Real Estate

Buyers, Sellers Optimistic About Housing

70 percent of buyers and sellers say they believe the housing market and property values will recover in the next year or two, according to a new survey by Prudential Real Estate and Relocation Services Inc.

What’s more, 86 percent of the more than 1,000 buyers and sellers surveyed believe real estate is still a good investment despite the souring market conditions in many areas the past few years.

Those surveyed said they also are ready to buy: Six in 10 respondents say they are more interested in buying real estate and 59 percent say they are optimistic about buying now with recent momentum from the economic recovery. They also believe they can get a better deal now because of lower prices.

But many survey respondents said that buying a home relies on them being able to sell their existing home. About 67 percent respondent said they are concerned about getting a fair price for their existing home.

“This survey clearly demonstrates that Americans continue to be optimistic about the real estate market and believe that home prices will rise,” says James Mallozzi, chief executive officer of Prudential Real Estate and Relocation Services. “A key take away from the survey is although consumers recognize that it is a good time to buy, they are concerned about their ability to sell their homes. This is one of the reasons the market is still struggling to recover.”

Source: “Americans Confident in Recovery of Real Estate Market,” RISMedia (March 14, 2011)

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Real Estate

California Realtors® Forecast Slight Rise in 2011 Home Sales


Sales of existing, single-family homes are expected to decline slightly in 2010 compared with 2009, but are forecast to rise slightly in 2011, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2011 California Housing Market Forecast.”  Meanwhile, the median price of homes in California is expected to increase both in 2010 and 2011 compared with the year prior.

  • Following near record-high levels of year-over-year sales increases, home sales are expected to decline 10 percent in 2010 compared with 2009, according to the C.A.R. forecast.  C.A.R.’s economists predict home sales will increase 2 percent in 2011 compared with 2010.
  • Home sales are expected to end the year at 492,000 units, compared with 546,500 in 2009.  C.A.R. forecasts sales will come in at 502,000 units in 2011.
  • The median sales price is forecast to increase 11.5 percent to $306,500 for 2010, and an additional 2 percent in 2011 to $312,500, C.A.R. announced.
  • According to C.A.R. Chief Economist Leslie Appleton-Young, the Association expects a net jobs increase of approximately 1.4 million jobs in California for 2011 and an improvement in unemployment figures, which many believe are key to the economic recovery.
  • Ms. Appleton-Young also noted that a lean supply of available homes for sale will drive up prices at the low end ($500,000 and less), but larger inventories and limited, less-attractive financing will cause continued softness at the high end of the market ($1 million and more).

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Real Estate

10 Reasons to Buy a Home Now

Enough with the doom and gloom about home ownership. Brett Arends explains why owning a home is a good thing.

With newspaper headlines declaring that foreclosures are on the rise, short sales are difficult to navigate, and the rate of home ownership is on the decline, some home buyers may no longer see the value of purchasing a home.  However, there are several reasons why home ownership makes economic, financial, and personal sense.

MAKING SENSE OF THE STORY FOR CONSUMERS

  • Home prices have declined approximately 30 percent from their peak, according to Standard & Poor’s Case-Shiller Index, which is good news for home buyers hoping to purchase a house at an affordable price.  As a result, statewide affordability reached 64 percent in the second quarter of this year, meaning 64 percent of California households could afford to purchase an entry-level
    home in the state.
  • Although home buyers should not view a home strictly as an investment, generally speaking, homeownership does offer risk capital.  The median home price in California has risen year-over-year for nine consecutive months, which implies home equity will increase over the next few years.
  • Owning a home also can be beneficial because it acts as “forced savings.”  While the monthly mortgage payment may be slightly higher than renting an apartment, most renters do not put the difference into a savings account.  The portion of a monthly mortgage payment that’s allocated toward the principal of a mortgage shouldn’t be viewed as a cost, but rather as a forced monthly saving, because in the long run it’s building equity in the home.

Read the full story in the Wall Street Journal