Tag Archives: Real estate pricing

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

Housing Inventories Are Falling

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Photo Credit: http://www.shakesville.com/2008/06/my-former-landlord.html
Photo Credit: http://www.shakesville.com/2008/06/my-former-landlord.html

Home prices are increasing across the country as the number of homes for-sale continues to fall. But at a time when buyer demand is picking up, why is inventory still so low?

Inventories fell to 1.82 million at the end of last year, a 21.6 percent drop from one year earlier, the National Association of REALTORS® reports.

The Wall Street Journal recently highlighted several reasons behind the dropping inventories, including:

  • Sellers hesitant to sell: About 22 percent of home owners with a mortgage are still underwater, owing more than their home is currently worth. Home owners don’t tend to sell unless a life-changing event occurs when they’re underwater because they don’t want to take a loss on the sale of their house. CoreLogic data shows that inventories are the most constrained in areas with the highest number of underwater borrowers.
  • Not enough equity to trade up: Often times, home owners rely on the equity from their home to make a down payment on their next home. With fewer home owners seeing equity in their houses, they may not have enough money to move into a pricier home, which is constraining the would-be “trade up” buyer from moving.
  • Investors continue to snatch up properties: Investors are snapping up properties, but they’ve changed their strategy from past years, which is also constraining inventories. Now they’re holding onto properties and turning them into rentals instead of rehabbing properties and flipping them for profit. This is keeping fewer homes on the market.
  • Banks are slowing down foreclosures: Banks have new rules to meet with the foreclosure process, and it’s causing them to move at a slower pace in foreclosing on homes. Banks also are showing a preference for short sales and loan modifications, which are curbing the number of foreclosed homes on the market.
  • Builders are doing less building: Housing starts were at record lows from 2009 through 2011 so there’s less inventory being added to the market. A rebound in the new-home market has only recently started to occur.

Source: “Six Reasons Housing Inventory Keeps Declining,” The Wall Street Journal (Jan. 22, 2013)

 

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Real Estate

California Home Prices Rise in September; Sales Fall

Photo credit: www.funfluster.com/
Photo credit: www.funfluster.com/

A continued shortage of available homes for sale lowered California home sales in September, while the median price reached the highest level in more than four years, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported this week.

  • “Sales in the inland and coastal markets continue to move in different directions.  Low inventory – especially in distressed areas – is dampening sales activity,” said C.A.R. President LeFrancis Arnold.  “In many of these areas, there is a one- to two-month supply of REO homes on the market. “The Inland Empire and the Central Valley have experienced double-digit sales declines compared with last year.  Meanwhile, sales were higher in San Diego and most Bay Area counties, where the economies appear to be growing faster than the rest of the state.”
  • Sales in September were down 5.2 percent compared with August and down 1.2 percent from September 2011.
  • The statewide median price of an existing, single-family detached home inched up 0.3 percent from August’s $343,820 median price to $345,000 in September.
  • California’s housing inventory eased slightly in September, with the Unsold Inventory Index for existing, single-family detached homes edging up to 3.7 months, up from a revised 3.2 months in August and 5.3 months in September 2011.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A six- to seven-month supply is considered normal.
  • Homes sold faster in September, with the median number of days it took to sell a single-family home falling to 39.3 days in September 2012 from 41.1 days in August and down from a revised 54.2 days for the same period a year ago.

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Real Estate

New-Home Prices Soar to 5-Year High

Photo credit: www.community.joejet.com/
Photo credit: www.community.joejet.com/

The median price of a new home rose a record-breaking 11.2 percent in August, reaching $256,000. That marks the highest level since March 2007, the U.S. Census Bureau reported Wednesday.

The price of new homes in August soared 17 percent compared to last year at this time.

The number of new-homes that sold in higher price ranges — $400,000 or more — rose significantly in August.

“This reflects the fact that people who are able to buy homes right now are those in higher-income ranges who have cash and equity on hand, while first-time buyers are having a tougher time getting qualified for a mortgage,” says David Crowe, the National Association of Home Builders’ chief economist.

As prices rose, inventories of new homes in August remained at record lows. It would take 4.5 months to clear the houses on the market at August’s sales pace, the Census Bureau reported.

Single-family home sales mostly held steady in August, remaining at two-year highs. Sales slipped 0.3 percent to a seasonally adjusted annual rate of 373,000.

On a regional basis, new-home sales in August soared 20 percent in the Northeast, 1.8 percent in the Midwest, and 0.9 percent in the West. New-home sales declined 4.9 percent in the South in August.

“New-home sales in August effectively tied the pace they set in the previous month, when they were the strongest we’ve seen in more than two years — so this is really a continuation of the good news we’ve been getting on the housing front,” says Barry Rutenberg, NAHB chairman. “Looking at the big picture, sales have been trending gradually upward since the middle of last year as favorable interest rates and prices have driven more consumers to get back in the market for a newly built home.”

Source: “New Home Sales Ease, But Prices Hit 5-Year High,” Reuters (Sept. 26, 2012) and the National Association of Home Builders

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Real Estate

Home Prices Continue to Rise Over Last Year’s Levels

 
More housing reports released on Tuesday showed home prices on the rise. The Federal Housing Finance Agency reported that U.S. home prices increased 3.7 percent from a year ago in the 12-month period ending in July.

FHFA’s home price index is now at about the same level it was in June 2004. However, it’s 16.4 percent below the peak reached in April 2007. To calculate its housing index, the FHFA uses purchase price data on mortgages owned or guaranteed by Freddie Mac and Fannie Mae.

Also on Tuesday, S&P/Case-Shiller released a report also showing home prices on the rise for the fourth consecutive month and at their highest level in nearly two years. S&P/Case-Shiller report measures home prices in 10-city and 20-city composite indices. In its 20-city index, S&P/Case-Shiller reported home prices up 1.2 percent compared to a year earlier.

“The news on home prices in this report confirm recent good news about housing,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, told The Wall Street Journal. “Single family housing starts are well ahead of last year’s pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing.”

Last week, NAR reported that the median price on existing-homes rose 9.5 percent over year ago levels. The median home price in August is $187,400.

The increase to the sales price in August was the strongest since January 2006 when median home prices had risen 10.2 percent higher than what they were a year ago.

The National Association of REALTORS® will release its pending home sales report on Thursday.

Source: “FHFA Home Price Index Now Equals 2004 Levels,” HousingWire (Sept. 25, 2012) and “Case-Shiller Shows Home Prices Rise Sharply Again,” The Wall Street Journal (Sept. 25, 2012)

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Real Estate

July Pending Home Sales Rebound

China in N.Y. 4th of July Parade, 1911 (LOC)
China in N.Y. 4th of July Parade, 1911 (LOC) (Photo credit: The Library of Congress)

 

 

 

 

 

 

 

 

 

 

Pending home sales rose in July to the highest level in over two years and remain well above year-ago levels, according to the National Association of REALTORS® (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said the index is at the highest level since April 2010, which was shortly before the closing deadline for the home buyer tax credit. “While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity,” Yun said.

Limited inventory is constraining market activity. “All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage,” Yun added.

The PHSI in the Northeast increased 0.5 percent to 77.0 in July and is 13.4 percent higher than a year ago. In the Midwest the index grew 3.4 percent to 97.4 in July and is 20.2 percent above July 2011. Pending home sales in the South rose 5.2 percent to an index of 111.7 in July and are 15.6 percent above a year ago. In the West the index slipped 1.7 percent in July to 109.9 but is 1.3 percent higher than July 2011.

Existing-home sales are projected to rise 8 to 9 percent in 2012, followed by another 7 to 8 percent gain in 2013. Home prices are expected to increase 10 percent cumulatively over the next two years.

“Falling visible and shadow inventories point toward continuing price gains. Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand,” Yun said.

Source: NAR

 

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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

Home Sales Increasing And Prices Are Bouncing Back

Seal of the United States Federal Housing Fina...
Seal of the United States Federal Housing Finance Agency. (Photo credit: Wikipedia)

 

 

 

 

 

 

 

 

I’ve noticed an increase in sales in Nevada County.  A recent article which I’m republishing here indicates that  home prices are increasing nationwide.

“The Federal Housing Finance Agency reported that nationwide home prices posted their first gain in the first quarter since 2007. While the gain was modest at 0.6 percent, housing experts note it’s still another sign that the housing market is gaining momentum.

FHFA’s housing price index is calculated using home sales price information based off Freddie Mac and Fannie Mae-backed mortgages.

FHFA’s seasonally adjusted monthly index rose 1.8 percent in March over February, which is the largest monthly increase in at least 20 years. Year-over-year, home prices increased 2.7 percent, FHFA reports.

“Increased affordability and a somewhat smaller inventory of homes for sale are positively impacting house prices,” says Andrew Leventis, FHFA’s principal economist.

Price increases were the highest in Hawaii with a 10.3 percent increase, and in Washington, D.C., which saw a 9.8 percent gain, according to FHFA.

Still, Number of Underwater Home Owners Remain High

Despite recent improvements in home prices, the percentage of underwater borrowers has shown little improvement in the last year. More than 30 percent of home owners in the first quarter remained underwater on their mortgage, owing more on their home than it’s currently worth, according to a new Zillow housing report.

A year ago, 32.4 percent of all borrowers had negative equity on their loan compared to 31.4 percent during the most recent quarter, Zillow reports.

Yet, Zillow notes that nine out of 10 underwater borrowers are current on their mortgage payments.

“[It’s] important to note that negative equity remains only a paper loss for the vast majority of underwater home owners,” says Stan Humphries, Zillow’s chief economist. “As home values slowly increase and these home owners continue to pay down their principal, they will surface again.”

The highest share of underwater home owners continues to be in Las Vegas, where 71 percent of home owners are underwater, followed by Phoenix (at 55.5 percent) and Atlanta (at 55.2 percent), according to the Zillow housing report.

Source: “U.S. Housing Prices Rise,” UPI (May 23, 2012); “Home Prices Rose Most in Two Decades in March, FHFA Says,” Bloomberg News (May 23, 2012) and “More than 30% of Mortgage Borrowers Still Underwater,” CNNMoney (May 24, 2012)

 

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Real Estate

As Home Rents Head Higher, Owning Regains its Appeal

Scotts Flat Lake April 13, 2012 early morning from my deck Photo by John J. O'Dell
Scotts Flat Lake April 13, 2012 early morning from my deck Photo by John J. O'Dell

Rising rents, coupled with slumping home prices and interest rates near record-lows, are boosting demand for homes at entry-level prices.

Making sense of the story

  • Increased buying activity from investors and second-home purchases may be factors behind the recent pickup in home sales, but real estate agents say they are fielding more calls from anxious tenants complaining about rising rents.
  • Average apartment rents rose by 2.7 percent last year, while the national vacancy rate dropped below 5 percent for the first time since 2001, according to a quarterly survey released Wednesday by REIS Inc., a real estate research firm.
  • The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9 percent and 4.9 percent, respectively.  Such increases are one reason why industry analysts believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year.
  • Historically, the cost to rent an apartment has been about 10 percent lower than the after-tax cost of owning a home.  That rental discount began to fall in 2010 and disappeared entirely last year, according to analysts at Deutsche Bank who track housing costs. By the end of 2011, the bank’s research found that the cost to rent an apartment was about 15 percent higher than the cost to own a home.
  • It isn’t always easy for home buyers to make it to the closing table though. Lending and appraisal standards remain tight, keeping many would-be buyers out of the market.  And aspiring buyers are competing with savvy investors who have turned buying and reselling foreclosed homes into a business.

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