Tuesday, March 31, 2015

What’s Holding Potential Sellers Back?

Existing-home sales are up nearly 5 percent from last year, but sales would be much higher if it wasn't for the negative equity overhang, economists say.
Should You Sell?
The National Association of REALTORS® recently reported that existing-home sales increased 4.7 percent in February compared to a year ago.
But with an improving labor market, home sales should be even higher, Mark Fleming, chief economist at First American Financial Corp., told The New York Times. Home prices are higher too, which often correlates with rising home sales, according to Fleming's research.
"Rising prices only crimp affordability for the first-time buyer who doesn’t yet own the asset," Fleming told The New York Times. "But the vast majority of home sales are to existing home owners. And for existing home owners, what changes affordability is their own income and the price of money."
However, too many home owners still lack sufficient equity in their homes to sell, Fleming notes. Home owners who have equity below 20 percent are less likely to sell because they may not be able to cover the costs of the transaction.
About 35 percent of home owners nationwide are either in a negative equity position or have equity below 20 percent, according to some industry estimates.
The equity picture has shown much improvement recently. CoreLogic reported earlier this month that89 percent – or about 44.5 million -- of all U.S. properties with a mortgage had equity by the end of the fourth quarter of 2014. 
What’s more, if home prices rise by an additional 5 percent, about 1 million more home owners in negative equity stand to inch back into the black. However, much of the equity is concentrated at the high-end of the housing market (94% of homes valued at more than $200,000 have equity compared to 84% of homes valued less than $200,000).
Also, many home owners remain "under-equitied" – having less than 20 percent of equity in their homes. Nearly 50 million properties – or 20 percent – are considered “under-equitied” in the U.S., and about 1.4 million of those properties have less than 5 percent equity, which his considered “near-negative equity.”
According to CoreLogic’s report, the states with the largest number of negative equity, as of the fourth quarter of 2014, are: Nevada (24%); Florida (23.3%); Arizona (18.7%); Illinois (16.2%), and Rhode Island (15.8%).
Source: "Negative Equity a Drag on Home Sales," The New York Times (March 27, 2015) and "89% of U.S. Homes Ended 2014 With Equity," REALTOR® Magazine Daily News (March 18, 2015)

Friday, March 27, 2015

Why Renters May Be in Trouble

The gap between rental costs and household income is widening to unsustainable levels across the country. As more renters face steeper costs, it may put them even further away from home ownership, according to a new study released by the National Association of REALTORS®. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas across the U.S.
Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to their research.
"The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay," says Lawrence Yun, NAR's chief economist.
New York, Seattle, and San Jose, Calif., are among the cities where combined rent growth far exceeds wages, according to the survey.
"Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes," says Yun. "With rents taking up a larger chunk of household incomes, it's difficult for first-time buyers – especially in high-cost areas – to save for an adequate down payment."
Meanwhile, those who were able to buy a home in recent years have been insulated from the rising housing costs since they were able to lock-in a low 30-year fixed-rate mortgage with a set monthly payment, according to NAR's study. As such, home owners were able to grow their net worth as home values increased and their mortgage balances went down.
"The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year," according to NAR’s study.
The markets that have seen rents rise by the highest amounts since 2009 are:
  • New York: 50.7%
  • Seattle: 32.38%
  • San Jose, Calif.: 25.6%
  • Denver: 24.14%
  • St. Louis: 22.26%
"Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities," says Yun.
The key to relieve housing costs: Builders need to ramp up the supply of new-home construction, according to Yun. He estimates that housing starts need to rise to 1.5 million. Over the past seven years, housing starts have fallen far short from that historical average – averaging about 766,000 per year.
"With a stronger economy and labor market, it's critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices," Yun says.

Tuesday, March 24, 2015

Home Prices Surge to Fastest Pace in Year

Home Prices Surge to Fastest Pace in Year

Existing-home sales showed some improvement in February, but remain constrained by low inventories of homes for-sale that are pushing price growth to the fastest pace in a year, according to the National Association of REALTORS®.
Inventory Crunch
Tight Supplies Put Home Prices on the Move
A Big Threat to the Spring Housing Market
Why Inventory Problems Aren't Going Away
The median existing-home price for all housing types was $202,600 in February – 7.5 percent higher than a year ago.
"Insufficient supply appears to be hampering prospective buyersin several areas of the country and is hiking prices to near unsustainable levels," says Lawrence Yun, NAR’s chief economist. "Stronger price growth is a boon for home owners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before [mortgage] rates rise."
Mortgage rates, for now, continue to hover near historical lows. The 30-year fixed-rate mortgage averaged 3.71 percent in February, according to mortgage giant Freddie Mac.
"With all indications pointing to a rate increase from the Federal Reserve this year – perhaps as early as this summer – affordability concerns could heighten as home prices and rents both continue to exceed wages," says Yun. Indeed, an NAR study earlier this month found a widening gap between rent and income growth across the country, which is making it more difficult for renters to become home owners.
4 Stats to Gauge the Market
Here are some more findings from NAR's latest housing report:
1. Existing-home sales: Existing-home sales rose 1.2 percent month-over-month, reaching a seasonally adjusted annual rate of 4.88 million in February. Sales are 4.7 percent higher than a year ago.
2. Housing inventory: Housing inventories rose 1.6 percent to 1.89 million existing-homes for-sale in February, but remain 0.5 percent below a year ago. Unsold inventory is at a 4.6-month supply at the current sales pace. Most economists consider a 6-month supply healthy for the market.
3. Distressed sales: Foreclosures and short sales comprised 11 percent of sales in February, down from 16 percent a year ago. In February, 8 percent of sales were foreclosures, and 3 percent were short sales. On average, foreclosures sold for a discount of 17 percent below market value (in January, it was 15 percent) and short sales were discounted by 15 percent on average (from 12 percent in January).
4. Days on the market: Properties were on the market for 62 days, on average, in February, down from 69 days in January. Short sales were on the market for the longest – 120 days. Foreclosures tended to sell in 58 days and non-distressed homes took 61 days. Thirty-four percent of homes sold in February were on the market for less than a month, according to NAR’s report.
By Region
The following is an overview of how sales fared in February across the country:
  • Northeast: existing-home sales plunged 6.5 percent to an annual rate of 580,000, but are 3.6 percent above year ago levels. Median price: $241,800, up 3.3 percent year-over-year.
  • Midwest: existing-home sales were mostly unchanged from January at an annual level of 1.08 million, but are 4.9 percent higher than February 2014 levels. Median price: $152,900, up 8.8 percent from a year ago.
  • South: existing-home sales rose 1.9 percent to an annual rate of 2.11 million last month, and are 6 percent higher than year ago levels. Median price: $177,900, up 8.5 percent from a year ago.
  • West: existing-home sales increased 5.7 percent to an annual rate of 1.11 million in February, and are 2.8 percent above a year ago. Median price: $290,100 -- 4.2 percent above February 2014.

How to Lower Utility Costs for Any Home DAILY REAL ESTATE NEWS | FRIDAY, MARCH 16, 2018 Your clients may be able to decrease utility...