Tag Archives: markets price

A Decade Low in Housing Affordability Won’t Kill the Real Estate Boom

Source: Dr. Steve Sjuggerud, Stansberry Research

I’ve spent years urging anyone who would listen to buy a house…

Folks didn’t want to hear that story back in 2011, when I first began pounding the table. Investors were scared. Nobody wanted to buy.

That’s why housing was such a great deal, though. It was dirt-cheap and hitting all-time levels of affordability.

Plenty has changed since then…

U.S. home prices have steadily climbed, and housing affordability has fallen as a result.

Today, housing affordability is at a decade low. But as I’ll show, that doesn’t mean the boom is dead.

Let me explain…

The idea of housing affordability is simple. When someone buys a home, he doesn’t worry so much about the purchase price… He worries about the monthly payment. If he can afford the payment, he can afford the house.

The monthly payment includes a few numbers… namely the home’s price and the interest rate. Compare that with the person’s income, and you know how affordable (or not) a home would be.

Importantly, these numbers are similar for a lot of folks. So the National Association of Realtors uses median home prices, median income, and mortgage rates to build an overall measure of housing affordability in America.

This indicator tells us if housing is cheap, expensive, or somewhere in between.

Again, things have changed since I first began urging readers to buy real estate. Housing affordability is now at a 10-year low. Take a look…

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A high affordability number indicates housing is cheap… signaling a great time to buy. A low number indicates an expensive market, where folks will have to stretch to buy.

You can see that housing is getting less affordable. It recently fell to affordability levels not seen since 2008. But that doesn’t tell the full story.

Despite a decade low for affordability, we’re now right at the long-term average. Check it out…

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It’s true that the easy money in real estate might be behind us. But affordability hasn’t completely dried up.

We are clearly in the late innings of this boom. The great deals are getting harder to find, but certain markets still have plenty of value remaining.

I’ve personally put a large chunk of my net worth into Florida real estate. I’ve sold some of those properties for big profits… but I’ve been able to find new deals too.

So while affordability is down, I remain bullish on U.S. housing. We’re still near the long-term average for affordability in U.S. housing. And folks can still make money in U.S. real estate.

If you’re looking to put money to work, buying a house is still a solid deal today.

Is the Housing Market Normalizing? One Sign the Tide’s Turning

Source: Suzanne De Vita RISMedia

 

With demand strong and supply weak, the housing market is overwhelmingly partial to sellers. The average homeowner is profiting $40,000 at resale (with decade-high returns in 2017), and higher in the hottest markets, where they’re attracting multiple offers in record time.

Now, there’s an early indicator that the market may shift. At the start of summer, 14.2 percent of listings nationwide had their prices reduced, according to a new report by Zillow. At the beginning of the year, 13 percent had cuts, and at the close of 2016, 11.7 percent were lowered. The increase between January and June is the largest on record in the report, and doubled the jump in the same six months in 2017.

The bigger bounds are generally on higher-priced properties, and on the West Coast, the report shows. Of costlier listings, 16.2 percent have been slashed since the start of the year—up 0.9 percent. By comparison, 11.2 of lower-priced properties have been reduced—down 0.1 percent. The disparity illustrates the immense interest in more practically priced properties, which are in scarcer supply.

The amount of discounted homes increased the most in San Diego, up 7.7 percent in the last six months, to 20 percent. The amount climbed in Denver, Las Vegas, Orlando, Portland, Ore., Sacramento and Seattle, as well. On the flip side, the share shrank in Philadelphia, from 17.2 percent to 16.2 percent, as well as in Indianapolis, Pittsburgh and San Antonio.

Is the change a change in dynamic? According to Aaron Terrazas, senior economist at Zillow, the concessions could be a premature sign of a swing, but not yet.

“The housing market has tilted sharply in favor of sellers over the past two years, but there are very early preliminary signs that the winds may be starting to shift ever so slightly,” says Terrazas. “A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price points and primarily in markets that have seen outsized price gains in recent years.

“It’s far too soon to call this a buyer’s market,” Terrazas says. “Home values are still expected to appreciate at double their historic rate over the next 12 months, but the frenetic pace of the housing market over the past few years is starting to return toward a more normal trend.”

For more information, please visit www.zillow.com.

Brokers Seeing “Simple Economic Recipe For a Softening Housing Market”

Source: NWMLS

KIRKLAND, Washington (July 5, 2018) – Home buyers around many parts of Washington state had
more choices and less competition during June, prompting some industry leaders to comment on “a
feeling of change in the market.”

“Inventory is up and demand has dropped,” reported Robert Wasser, an officer with the board of directors
at Northwest Multiple Listing Service. That combination is “a pretty simple economic recipe for a
softening market,” he added in commenting on the latest MLS statistics.

Figures for June show a 5.2 percent improvement in the number of active listings system-wide, coupled
with drops in the volume of pending sales (down 8.4 percent) and closed sales (down .07 percent)
compared with a year ago. Despite the shift of some indicators favoring buyers, prices area-wide
continued to rise, increasing more than 10 percent from twelve months ago.

“There was a feeling of change in the market this June and the numbers supported that feeling,” remarked
John Deely, principal managing broker at Coldwell Banker Bain. He noted many brokers also reported an
increase in properties going past their offer review date, more price reductions, and an increase in reverse
prospecting (a tool that allows the listing broker to view a list of brokers with potential buyers for that
listing). “We’re also experiencing a decrease in multiple offers and the number of buyers participating in
multiple offers,” added Deely.

Northwest MLS brokers added 13,153 new listings to inventory during June, a drop from both a year ago
when they added 13,658, and from May when 14,524 new listings were added. With new listings
outgaining sales, total inventory as measured by active listings and months of supply improved.

At month end, Northwest MLS reported 15,234 active listings and 1.5 months of supply. Inventory of
single family homes and condos reached its highest level since October. The supply of active listings in
King County surged 47 percent from a year ago, boosting the months of supply to just under 1.3 months –
the highest level since September 2016 when there was 1.37 months of supply.

“Although still a quick response market, with more new listings coming on the market during the summer
months, we experienced dispersed buyer energy due to the greater availability and selection,” stated J.
Lennox Scott, chairman and CEO of John L. Scott Real Estate. He estimates sales activity is off 15-to-20
percent for each new listing’s first 30 days on the market. “Now through October will be the best time of
year for homebuyers,” he remarked.

“Sellers are becoming more active in the market as they sense buyers pulling back,” suggested George
Moorhead, designated broker and owner at Bentley Properties. Improving supply, a marked increase in
expired or cancelled listings, and market times almost doubling are factors he mentioned when describing
the market as “more than just lackluster” with summer showing no sign of improvement.

Housing in 2018: Where Are Home Values Headed?

Source: Suzanne DeVita/RISMedia

Analysts are expecting even higher home prices in 2018 than originally projected, according to new research.

Zillow’s 2017 Q4 Home Price Expectations Survey reveals experts are anticipating a 4.1 percent hike in the new year, up from the 3 percent they forecasted a year ago. Over 100 experts, including economists, participated in the survey.

Their reasoning? Home-building has not panned out as planned—yet.

“The American labor market is stronger than it’s been in decades, and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes,” says Aaron Terrazas, senior economist at Zillow. “Home-building has not kept pace with this surge in demand and remains well below historical norms. We don’t expect that these demand-supply imbalances will fundamentally shift in 2018. Demand will continue to grow and, though supply should increase somewhat, we still won’t build enough new homes to meet this demand, contributing to higher prices.”

Less than 20 percent of experts forecast home-building to pick up next year, the survey shows. Approximately 313,000 new homes were on the market in October, representing 4.9 months supply, according to the U.S. Census Bureau. Entry-level homes, especially, are scarce—down 20.4 percent year-over-year over the summer, reports Trulia.

Additionally, experts foresee increasing mortgage rates, with the 30-year, fixed rate ranging anywhere from 4.28 to 4.70 percent. Currently, the 30-year averages 3.90 percent, according to Freddie Mac.

“Higher mortgage rates will eat into buyers’ budgets, putting even more price pressure on the most affordable homes for sale,” Terrazas says. “Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market.”

One factor in the health of the housing market is the homeownership rate; experts predict it, too, will rise, though slightly, to 64 percent. The homeownership rate has improved twice thus far this year, up to 63.9 percent in third quarter, according to the Census.

Beyond 2018, analysts are divided.

“Our most optimistic group of experts projects average annual home value appreciation of almost 5 percent annually through the five-year period ending in 2022, while the most pessimistic group expects an average annual rate of just 1.4 percent,” says Terry Loebs, founder of Pulsenomics, which conducted the survey in conjunction with Zillow. “I don’t foresee a stronger consensus emerging until we have greater clarity concerning tax reform and the pace of entry-level home building.”

Seattle Leads an “Unstoppable” Housing Market

Source: RISMedia

Home prices grew in the latest S&P CoreLogic/Case-Shiller Indices, up 6.1 percent year-over-year in August, compared to 5.9 percent in July. The increase is against-grain in an economy gaining at a lesser pace, says S&P Dow Jones Indices Chairman of the Index Committee and Managing Director David M. Blitzer.

“Home price increases appear to be unstoppable,” Blitzer says. “Most prices across the rest of the economy are barely moving compared to housing. Over the last year the consumer price index rose 2.2 percent, driven largely by energy costs. Aside from oil, the only other major item with price gains close to housing was hospital services, which were up 4.6 percent. Wages climbed 3.6 percent in the year to August.”

Is there an end in sight? According to Blitzer, home prices have come back since the downturn—and then some—but how long they sustain their trajectory remains to be seen.

“The ongoing rise in home prices poses questions of why prices are climbing and whether they will continue to outpace most of the economy,” says Blitzer. “Currently, low mortgage rates, combined with an improving economy, are supporting home prices. Low interest rates raise the value of both real and financial long-lived assets.

“The price gains are not simply a rebound from the financial crisis,” Blitzer says. “Nationally and in nine of the 20 cities in the report, home prices have reached new all-time highs; however, home prices will not rise forever. Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking. The Federal Reserve is pushing short-term interest rates upward and mortgage rates are likely to follow over time, removing a key factor supporting rising home prices.”

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index’s 10-City Composite rose 5.3 percent year-over-year, up from 5.2 percent in July, while its 20-City Composite rose 5.9 percent year-over-year, up from 5.8 percent in July. Month-over-month, the 10-City Composite and the 20-City Composite both rose, 0.5 percent and 0.4 percent, respectively.

Of the 20 cities analyzed for the Index, Las Vegas, Nev., San Diego, Calif., and Seattle, Wash., came out on top, with prices up 8.6 percent year-over-year in Las Vegas, 7.8 percent in San Diego and 13.2 percent in Seattle.

Ahead of the Curve: Home Price Growth Outpaces Inflation

Source: RISMedia

Home prices continue to chart growth, rising on an annual basis to outpace inflation, according to CoreLogic’s recently released Home Price Index (HPI) for January 2017. Prices increased 0.7 percent month-over-month and 6.9 percent year-over-year.

A combination of factors is driving momentum ahead of the curve, says Dr. Frank Nothaft, chief economist of CoreLogic.

“With lean for-sale inventories and low rental vacancy rates, many markets have seen housing prices outpace inflation,” Nothaft says. “Over the 12 months through January of this year, the CoreLogic Home Price Index recorded a 6.9 percent rise in home prices nationally and the CoreLogic Single-Family Rental Index was up 2.7 percent—both rising faster than inflation.”

Accounting for limited available inventory, CoreLogic’s HPI Forecast expects home prices to rise 0.1 percent month-over-month from January to February, and 4.8 percent year-over-year from January 2017 to January 2018.

“Home prices continue to climb across the nation, and the spring home-buying season is shaping up to be one of the strongest in recent memory,” says Frank Martell, president and CEO of CoreLogic. “A potent mix of progressive economic recovery, demographics, tight housing stocks and continued low mortgage rates are expected to support this robust market outlook for the foreseeable future. We expect the CoreLogic [HPI] to rise 4.8 percent nationally over the next 12 months, buoyed by lack of supply and continued high demand.”

The spring home-buying season came early this year, according to realtor.com®, which expects record-high home prices and record-low days on market for February.

Source: CoreLogic

For the latest real estate news and trends, bookmark RISMedia.com.

What Will a Trump Administration Mean to the Housing Finance Industry?

Source: RISMedia

After Donald Trump’s stunning victory on Election Day, many of us are wondering what his election might mean to the residential mortgage industry, especially considering the Trump team provided few details on housing during the campaign. The following are some perspectives:

Reduced Regulations
This is the one area where the Trump campaign did provide some indication of what the president-elect would do. Trump’s transition team has recently indicated that it would like to see a full repeal of the Dodd-Frank law, which would include the abolishment of the CFPB.  Many people think this is unlikely, but most in the mortgage industry would welcome a broad rollback of regulations. Reduced regulation would provide a number of things, some good and some not so good, depending on where you work and where you stand on issues such as subprime lending.

First, reducing or eliminating the detrimental usage of enforcement tools such as the False Claims Act could lure large lenders back to the FHA program. It would also cause many lenders to reduce underwriting overlays and open the credit box, which is needed. Secondly, reducing regulation could reverse the trend of swelling loan manufacturing costs by lowering mortgage origination expenditures associated with compliance. In theory, this would improve pricing for consumers. Finally, reducing regulations could spur a resurgence of subprime and Alt-A lending. This could be good or bad, depending on who you ask.

Subprime lending has all but vanished from the mortgage market, leaving consumers with less-than-stellar credit with few options. The reemergence of subprime lending would definitely increase overall mortgage volumes, but it could also lead to increased foreclosures and larger and more frequent real estate bubbles. Large lenders, who will be unlikely to move towards subprime, will probably counter by creating products that leverage their ability to hold certain proprietary loans on their balance sheets. This would obviously favor larger depository institutions that have the capacity to hold loans on their books. In terms of marketshare, reduced regulations will also favor big banks.

Higher Interest Rates
Higher interest rates were already in motion before Trump was elected, but the upward trend accelerated in the days following, although it’s not yet clear why. Economists generally believe that most of Trump’s stated ideas on immigration, trade, infrastructure, and tax rates will lead to bigger deficits and higher inflation. While a deficit-hating Congress could keep some of this in check, inflation and deficits equate to sharply higher interest rates.

This obviously would not be good for mortgage originations and could lead to further consolidations in the industry. Higher interest rates also favor big money-center banks, which have diversified income streams and mortgage servicing units that will see their MSR values increase. Lenders with deep pockets are in the best position to weather any downturn.

GSE Reform
This, in my view, is the biggest wild card. Some believe that Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, finally has an ally in the White House who will support his desire to dismantle Fannie Mae and Freddie Mac and eliminate any further government guarantees of conventional mortgage loans. This would be catastrophic for mortgage lending in America, causing thousands of independent lenders to go out of business and making mortgage loans available only to a relatively miniscule segment of our population. But others believe the GSEs provide billions of dollars to the Treasury each year and that Congress would never support a policy that would harm homeowners and turn off the spigot of free cash to the government.

It is difficult to anticipate how this one will play out. If Fannie Mae and/or Freddie Mac need to take a draw from the Treasury, which is likely to happen at some point, some members of Congress might see that as an indicator that it is time for the government to get out of the mortgage business. Let’s hope that cooler heads will prevail. Reforming the GSEs and creating a permanent source of liquidity for the mortgage lending industry would be good for everyone, especially independent lenders. Trump is a real estate man; he may see homeownership as a way to build communities and support our economy. He’s not someone who believes that most of us should be renters.

There is no doubt that there are a lot of questions that will remain unanswered in the coming weeks and months. What will be Trump’s position on affordable lending or FHA reform? Will he take a page from the Bush Administration and see homeownership as a vehicle to engage with minority and other underserved communities? His appointments to key housing positions at HUD and inside the White House will begin to give us some indication of what is likely to occur.

Gary Acosta is the CEO of the National Association of Hispanic Real Estate Professionals (NAHREP) and co-founder of The Mortgage Collaborative.

For more information, please visit www.nahrep.org.

For the latest real estate news, trends and marketing, be sure to bookmark rismedia.com.

Economic News: Home Price Gains, Job Growth Steady

 

“Heigh-ho, heigh-ho, it’s off to work we go.” The Seven Dwarfs. A strengthening jobs market and low home rates are digging up demand for limited housing inventory. Meanwhile, home price gains hold steady.

The S&P/Case-Shiller 20-city Home Price Index rose 5.7 percent year-over-year from January 2015 to January 2016. This was in line with estimates and matched December’s 5.7 percent gain. Prices were up 0.8 percent month-over-month. The low inventory of homes available for sale has been the key reason for price growth; more Americans working also has fueled demand.

On the labor front, the Bureau of Labor Statistics reported that 215,000 jobs were created in March, above the 200,000 expected, though down from the 245,000 created in February. While the Unemployment Rate edged higher to 5 percent from 4.9 percent, the report was positive, signaling that despite global economic woes, job growth here in the U.S. remains solid.

At this time, home loan rates continue to hold steady as well, hovering just above historic lows.

 

In a light report week, investors will scour the words of the Fed’s meeting minutes looking for clues regarding the next hike to the benchmark Fed Funds Rate.

  • On Tuesday, the ISM Services Index will be released.
  • Wednesday brings the March Federal Open Market Committee meeting minutes.
  • Weekly Initial Jobless Claims will be delivered on Thursday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result.

If you or someone you know has any questions about the housing market, current rates or home loan products, I would be happy to help. Please don’t hesitate to email or call me.

Michelle Wickett
Senior Loan Originator
Axia Home Loans | NMLS 27830
Phone: (360) 791-0513
Fax: 360-459-1212
License:: NMLS 62804
michelle.wickett@axiahomeloans.com
www.mortgagesbymichellewickett.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“Heigh-ho, heigh-ho, it’s off to work we go.” The Seven Dwarfs. A strengthening jobs market and low home rates are digging up demand for limited housing inventory. Meanwhile, home price gains hold steady.

The S&P/Case-Shiller 20-city Home Price Index rose 5.7 percent year-over-year from January 2015 to January 2016. This was in line with estimates and matched December’s 5.7 percent gain. Prices were up 0.8 percent month-over-month. The low inventory of homes available for sale has been the key reason for price growth; more Americans working also has fueled demand.

On the labor front, the Bureau of Labor Statistics reported that 215,000 jobs were created in March, above the 200,000 expected, though down from the 245,000 created in February. While the Unemployment Rate edged higher to 5 percent from 4.9 percent, the report was positive, signaling that despite global economic woes, job growth here in the U.S. remains solid.

At this time, home loan rates continue to hold steady as well, hovering just above historic lows.

If you or someone you know has any questions about the housing market, current rates or home loan products, I would be happy to help. Please don’t hesitate to email or call me.