More Housing Markets Move Into “Buy” Zone

The U.S. housing market is moving deeper into “buy territory,” which indicates that the majority of housing markets remain a sound investment, according to a newly released national index by Florida Atlantic University and Florida International University.

“Housing prices, in general, continue to slow and when considered in light of the recent trends in the Buy vs. Rent Index signal that ownership remains an excellent investment for the majority of Americans,” says Ken Johnson, a real estate economist and an author of the index, the Beracha, Hardin & Johnson Buy vs. Rent Index.

The index shows that owning a home trumps renting a comparable property as well as investing rent savings in a portfolio of stocks and bonds.

Fifteen of the 23 metro markets tracked in the index favored ownership over renting.

“Many of the hardest hit metropolitan areas during the real estate crash are showing signs of resilience as the cost of ownership relative to the cost of renting remains more in balance at this time,” says Eli Beracha, co-author of the index and an assistant professor of real estate at Florida International University.

Rents and home prices are rising across the country, which could impact housing affordability.

“Continuing near-record low mortgage rates, however, are providing a tailwind for ownership,” Johnson says. “There does not appear to be any interest in loosening underwriting standards or offering teaser loans as a panacea to the issue of affordability this time around. That’s another sign that we are learning how to deal with cyclical behavior in our housing markets.”
References: RealtorMag, Florida Atlantic University 

Donald Horne, Team Success Listing
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Home Prices Maintain Strong Growth

Home Prices Maintain Strong Growth

Tight inventories of homes for sale helped push home prices higher in the first quarter. The median price of existing single-family homes rose in 87 percent or 154 of 178 of the major metro areas across the U.S. in the first quarter, according to the latest quarterly report by the National Association of REALTORS®. What’s more, 28 metro areas, or 16 percent, saw double-digit increases from a year ago.

“The solid run of sustained job creation and attractive mortgage rates below 4 percent spurred steady demand for home purchases in many local markets,” says Lawrence Yun, NAR’s chief economist. “Unfortunately, sales were somewhat subdued by supply and demand imbalances and broadly rising prices above wage growth. As a result, the path to home ownership so far this year remains strenuous for a segment of prospective buyers in the most competitive areas.”

The median existing single-family home price was $217,600 in the first quarter nationwide. That is up 6.3 percent from a year ago, according to NAR’s data.

“Current home owners in many metro areas — especially those who purchased a home immediately after the downturn — have enjoyed a sizeable boost in housing equity and household wealth in recent years,” Yun says. “At a time of stagnant wage growth and mounting rent increases, the same cannot be said for renters. Their inability to reach the market because of affordability and supply restrictions is contributing to rising wealth inequality in the U.S.”

Only 24 areas or 13 percent of the metro areas analyzed posted lower median prices compared to a year earlier.

Total existing-home sales – which include single-family and condo sales – climbed 1.7 percent to a seasonally adjusted annual rate of 5.29 million in the first quarter. Existing-home sales are 4.8 percent higher than the 5.05 million pace a year ago.

“In spite of deficient supply levels, stock market volatility and the paltry economic growth seen so far this year, the housing market did show resilience and had its best first quarter of existing-sales since 2007 (5.66 million),” Yun says. “The demand for buying is there, but unless the stock of new and existing-homes for sale increases significantly – especially in several markets in the West – the housing market will struggle to reach its full potential.”

The supply of homes for sale remains tight. By the end of the first quarter, 1.98 million existing homes were available for sale nationwide, fewer than the 2.01 million homes for sale at the end of the first quarter in 2015.
References: RealtorMag, NAR

Donald Horne, Team Success Listing
Associate Broker-Coldwell Banker Shooltz Realty
Oxford Office   248-969-8065
Lapeer Office   810-338-0628
donaldhorne.realtor@gmail.com
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First-Time Buyers Love These Home Features

First-Time Buyers Love These Home Features

Real estate professionals are bullish on the housing market this spring, particularly due to the growing number of first-time home buyers entering the market.

In its 2016 Mid-Atlantic Housing Market Survey, MRIS – one of the nation’s largest multiple listing services – found that 57 percent of nearly 750 real estate professionals recently surveyed expect this updated kitchen and bathspring to be busier than last year. The majority of the respondents cited low mortgage rates as the main reason they believe buyers will act faster this year than last year.

Eighty-eight percent of respondents predict there will be more first-time buyers this year too. With that growth, how do you appeal to first-time buyers with your listings? Respondents rated the following home features as the most important to first-time home buyers:

  1. Updated kitchen and bath: 81%
  2. An open floor plan: 59%
  3. Low-maintenance features: 43%
  4. Walkable communities: 36%
  5. Energy efficiency: 20%
  6. Strength of cell phone service or WiFi: 19%
    References: MRIS Blog, RealtorMag 
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2016 Predicted To Be Housing’s Golden Year

2016 Predicted To Be Housing’s Golden Year

Officials from mortgage giant Freddie Mac have made a bold prediction: This year housing starts and home prices will reach their highest levels since 2006.

The main reasons behind its bullish forecast is low mortgage rates, an improving job market, and a gradual increase in housing supply.

housing market“Housing markets are poised for their best year in a decade,” says Sean Becketti, Freddie Mac’s chief economist. “In our latest forecast, total home sales, housing starts, and home prices will reach their highest levels since 2006.”

The 30-year fixed-rate mortgage remains well-below 4 percent this year. This week it averaged 3.71 percent.

“Expect the 30-year mortgage rate to remain very attractive throughout the spring home-buying season, staying below 4 percent until the second half of the year,” according to Freddie Mac’s monthly Outlook for March.

For home sellers, they’ll be able to enjoy more home price increases. “In 2015, house prices increased about 6 percent on a year-over-year basis,” Freddie notes in its outlook. “Expect house prices to continue to rise, but at a moderating pace, with annual price appreciation slowing to 4.8 percent in 2016.”

Also, gains in employment across the country will help to fuel hotter housing markets, according to Freddie Mac. The unemployment rate dropped below 5 percent recently.

That said, challenges remain for the housing market, particularly with wage growth. Wages remain “anemic, barely keeping pace with inflation,” Freddie Mac officials caution.

“If wages and incomes do not start rising, then rising interest rates, home prices, and rents will squeeze households and ultimately slow housing markets,” Freddie Mac notes.

Despite some headwinds, officials remain mostly upbeat. The “nation’s housing markets should sustain their momentum from 2015 into 2016 and 2017,” the outlook notes.
References: Freddie Mac, RealtorMag 

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Homes Getting Less Affordable For Many

Home prices are rising faster than wages in 61% of markets

Housing is becoming increasingly unaffordable in many cities, a new report from RealtyTrac reveals. Their First Quarter 2016 Home Affordability Index shows that home price growth is exceeding wage growth in 61 percent of the nation’s housing markets.

In the first quarter of this year, average wage earners would need to spend about 30.2 percent of their monthly pay in order to afford mortgage payments on a median-priced home. Last year earners on homes getting less affordableaverage would need to spend 26.4 percent of their monthly wages.

“While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” says Daren Blomquist, senior vice president at RealtyTrac. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.”

These metro areas are the least affordable compared to their historic norms:

  • Denver
  • New York City
  • Omaha, Neb.
  • Austin, Texas
  • Dallas
  • San Francisco
  • St. Louis, Mo.

On the flip side, these metro housing markets are the most affordable compared to their historic norms:

  • Boston
  • Baltimore
  • Birmingham, Ala.
  • Providence, R.I.
  • Chicago
    References: RealtyTrac, RealtorMag, Daily Real Estate News
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More Homes Are Coming Soon

More New Homes Are Coming Soon

Builders are beginning work on more single-family homes across the country, which could offer some much-needed inventory relief for many housing markets. Housing starts nationwide are up nearly 31 percent year-over-year.

In February, housing starts jumped 5.2 percent alone on a month-over-month basis to a seasonally adjusted annual rate of 1.178 million units, the Commerce Department reported Wednesday. Broken out, single-family production rose 7.2 percent month-over-month to 822,000. That is the highest level since November 2007. Meanwhile, multifamily starts mostly held flat last month.

real estate“It means that home builders are responding to the demand out there,” says Jonathan Smoke, realtor.com®’s chief economist, about the new report. “We don’t have enough supply of homes to keep up with the increase” among a growing number of buyers entering the market.

All four regions of the U.S. posted gains in housing starts last month, except the Northeast. The West posted the largest month-over-month gain as new-home starts climbed 26.6 percent, followed by a 19.9 percent increase in the Midwest, and a 7.1 percent rise in the South. The Northeast, on the other hand, posted a 51.3 percent month-over-month decrease in February.

Overall, “February’s single-family gains indicate that this sector is strengthening in line with our forecast,” says David Crowe, chief economist of the National Association of Home Builders. “As the U.S. economy firms, job creation continues and mortgage interest rates remain low, we should see further growth in housing production moving forward.”

However, the number of new permits – an indicator of future building – did post a drop in February compared to January. That could signal at least a temporary slowdown.

Permits fell 3.1 percent in February month-over-month, but most of that was attributed to an 8.4 percent drop in multifamily permits. Single-family permits inched up 0.4 percent to 731,000 in February.

A turnaround is likely coming to the Northeast, with permits rising 40.4 percent in February. On the other hand, the Midwest posted an 11.4 percent decrease in permits, the West saw a 7.2 percent decrease, and the South had a 4.4 percent drop in permits.
References: NAHB, Realtor.com, RealtorMag, Daily Real Estate News

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Housing Inventory Is Tight In This Price Bracket

Housing Inventory Is Tight In This Price Bracket

Just as more first-time home buyers are stepping into home ownership, lower-priced homes are increasingly difficult to find in many housing markets. The number of homes for-sale below $100,000 plunged 8.6 percent in January compared to a year earlier.

On the other hand, luxury home buyers are finding more to choose from: homes above $1 million increased 15 percent year-over-year, according to housing data from the National Association of real estateREALTORS®.

“The lower the price, the smaller the growth in the number of homes on the market,” The Wall Street Journal reports. “Lower-priced homes [are] selling quickly even as inventory of expensive ones piles up.”

High-end buyers, on the other hand, are more sensitive to stock-market changes and some may be delaying purchases recently – which may explain why inventory is rising in the higher brackets, analysts note.

“In certain price points, it’s really tough for buyers right now. There’s limited inventory and lots of demand,” Alec Traub, a Los Angeles real estate professional, told The Wall Street Journal.

For example, in the Phoenix area, real estate pro Cami Elliott says that a buyer she recently assisted had more than 45 potential homes to view in the $750,000 range. But buyers looking for a home close to $4000,000, only had about three or four options, Elliott told The Wall Street Journal.

Overall, the housing market nationwide has about a four-month supply of existing homes for sale, according to NAR. Most economists consider six months to be a more balanced, healthy housing market.
References: Wall Street Journal, RealtorMag, Daily Real Estate News

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Expect A Strong Spring Housing Market

Expect A Strong Spring Housing Market

Recent housing and economic reports predict we’ll see solid spring home sales, according to Jonathan Smoke, realtor.com®’s chief economist. Here are some signs:

On jobs: “Job creation — arguably the most important factor in housing demand — is moving apace,” Smoke notes. In January, 151,000 jobs were created and unemployment is near 10-year lows. Smoke predicts that the latest employment growth should translate into a 3 percent boost to home sales this spring housing marketyear.

On home sales: Existing-home sales from January 2015 to January 2016 have grown 11 percent. Sales are taking longer close, due to new mortgage rules that took effect last fall, but the pace of sales is growing. New-home sales have also grown solidly year-over-year, and the median price of new homes is declining as more builders offer more affordable homes than catering to just the luxury.

On home prices: Prices are moving up and most of that has been attributed to the limited number of homes for-sale. At the current pace, there is a four-month supply of homes on the market — much lower than the norms of six to seven months. “This is driving prices higher and encouraging consumers who hope to buy this year to get started as soon as possible,” Smoke notes.

On mortgage rates: Low mortgage rates are improving home buyer affordability, for now. The 30-year fixed-rate mortgage averaged under 3.7 percent in the latest week, which offers buyers nearly 5 percent more buying power than they had at the end of 2015, Smoke notes.

But as Smoke notes: “not everything is rainbows and unicorns. The biggest negative trend impacting potential demand relates to the January and February declines in stock values, which have taken a toll on consumer confidence.” Also, the tight supply of homes for-sale could also limit sales in the spring season. That said, for buyers that are able, the low mortgage rates of the season may prove a strong motivator why buyers shouldn’t wait.
References: Realtor.com, RealtorMag, Daily Real Estate News

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Sales Make Gains But Prices “Rising Too Fast”

Existing-home sales kicked off 2016 on solid footing, according to the National Association of REALTORS®’ latest housing report, released Tuesday. Existing-home sales in January moved to their highest annual rate in six months, while constrained inventory levels also pushed home prices to their fastest increase since last April, according to the report.

All regions in the U.S. saw increases in January sales, except for the West region.

prices rising too fastTotal existing-home sales, which encompass completed transactions for single-family homes, condos, town homes, and co-ops, inched up slightly by 0.4 percent in January to a seasonally adjusted annual rate of 5.47 million. Sales are 11 percent higher than a year ago, which is the largest year-over-year increase since July 2013.

“The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” says Lawrence Yun, NAR’s chief economist. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.”

Home Prices and Inventories

Heading into the spring buying season, home prices and the limited number of homes for sale are the top concerns.

“The spring buying season is right around the corner and current supply levels aren’t even close to what’s needed to accommodate the subsequent growth in housing demand,” says Yun. “Home prices ascending near or above double-digit appreciation aren’t healthy, especially considering the fact that household income and wages are barely rising.”

The median existing-home price for all housing types last month was $213,800, up 8.2 percent from a year ago ($197,600). The price increase in January was the largest since April 2015, when home prices moved 8.5 percent higher compared to a year ago.

Meanwhile, total housing inventory at the end of January rose 3.4 percent to 1.82 million existing homes available for sale. Inventories remain 2.2 percent lower than a year ago. At the current pace, unsold inventory is at a four-month supply, up slightly from 3.9 months in December 2015.

In January, properties typically stayed on the market for 64 days, below the 69 days average from January 2015. Thirty-two percent of homes for sale in January sold last month in less than a month.
References: RealtorMag, Daily Real Estate News, NAR

Donald Horne, Team Success Listing
Associate Broker-Coldwell Banker Shooltz Realty
Oxford Office   248-969-8065
Lapeer Office   810-338-0628
donaldhorne.realtor@gmail.com
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Spring Buying Is On!

The infamous groundhog – Pennsylvania’s Punxsutawney Phil – may not only have the power to predict how many more weeks are left to winter but also the ability to predict the start to housing’s busiest time of year.

Phil didn’t see his shadow on Groundhog Day, which, if superstition holds true, means that winter will be shorter this year, with a warmer February across the country.

If the groundhog is correct, Jonathan Smoke, realtor.com®’s chief economist, says, that could spark an early start to the spring homebuying season.

spring buying is on“Over the 47 years for which we have sales data, when February’s temperature was above average, February home sales showed growth over the prior year 60 percent of the time,” Smoke writes in his most recent column at realtor.com®.

But what matters more than the weather is the health of the economy and the demand for housing, Smoke writes.

“When the market is strong and temperatures are cold, we still typically see growth,” he writes. “But when we have a strong market and warmer temperatures in February, we are far more likely to see growth.”

And “when the housing market is strong like it is now, and Phil doesn’t see his shadow, February sees an average 11 percent year-over-year increase in existing-home sales,” Smoke continues. “Thanks to Punxsutawney Phil, we know that the spring housing market starts early this year — and buyers and sellers had better be ready.”
References: Realtor.com, RealtorMag, Daily Real Estate News

Donald Horne, Team Success Listing
Associate Broker-Coldwell Banker Shooltz Realty
Oxford Office   248-969-8065
Lapeer Office   810-338-0628
donaldhorne.realtor@gmail.com
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