Talking about Existing Home Sales, Housing starts, foreclosure numbers and much more…
Existing Home Sales October 2014
NAR just released the Existing Home Sales for October 2014 and there is some good news! NAR said that existing home sales rose for the second straight month and are now above year-over-year levels for the first time in a year.
Check Out the Highlights:
- October 2014 US existing home sales increased 1.5% from September 2014.
- This is the highest level since September 2013
- October 2014 US existing home sales increased 2.5% from October 2013
- October 2014 existing home sales in the South increased 2.8%
- October 2014 existing home sales in the South are 5.3% higher than above October 2013
- October 2014 US median existing home price rose 5.5% above October 2013
- The median price in the South increased 5.1% from October 2013
- This is the 32nd consecutive month of YoY price increases
- October 2014 US housing inventory increased 5.2% YoY
- All cash sales were 27% of transactions in October 2014
The 2 most important things in NAR’s report are the increasing inventory and that the percentage of sales that are distressed ( foreclosures and short sales ) are down 14% from October 2013. Increasing inventory is a sign that fewer home owners are underwater. Decreasing distressed sales is a good sign that the housing market is getting back to normal.
It is also worth mentioning that existing home sales have been increasing from the previous month continually since March ( other than the exception of an unexpected drop in August ). It is when we see long term trends and YoY changes that I start feeling really positive about the housing market and the economy.
One thing that does NOT make me feel quite so positive is that first time home buyers made up 29% of sales in October. First time home buyers have represented less than 30% of all buyers in 18 of the last 19 months according to NAR.
The numbers above are from NAR and are for either the entire US or the South. I have not posted the October 2014 Market Report for Upstate South Carolina yet but the highlights are:
- October 2014 Median Home Price in Upstate SC is UP 1.8% from October 2013
- October 2014 Upstate South Carolina home sales are up 16.2% from October 2013
- Inventory in Upstate SC for October 2014 is up 6.0% compared to October 2013
Please understand that these numbers are for all areas of the WUAR MLS and that is a HUGE area. For more info about real estate market conditions in the Anderson SC area, check out the Monthly Reports or Weekly Snapshots.
October 2014 Housing Starts
In case you missed my last post, home builder confidence increased according to the NAHB/Wells Fargo Housing Market Index. So the recent Permits, Starts and Completions report from the Census Bureau and HUD is more interesting than normal.
They said that housing starts unexpectedly dropped from the previous month but the number of building permits increased. I am not too concerned about the change from the previous month considering the YoY change:
- Housing starts are 7.8% higher than October 2013
- Building permits are up 1.2% from the October 2013 level
I wonder if the increase in home builder confidence should have given us a hint that we would see improvements in housing starts and building permits?
An interesting tidbit in the report is that the median size of a single-family home built in the third quarter of 2014 was down 2.3% from the second quarter of 2014. This could be a sign that home builders are shifting to slightly smaller, more affordable houses.
As the economy struggled, builders focused on building bigger, more expensive homes for buyers with the income and credit to buy homes. Since first time home buyers are so important to a healthy real estate market, it could be a good sign that builders seem to refocusing on more affordable homes.
Housing permits in October are at the highest point since 2008. Check out the chart showing housing starts:
I found a bunch of interesting stuff from the Urban Institute that give us a little insight into the big picture for real estate and mortgage lending:
Adjustable rate mortgages accounted for as much as 29% of all new originations during the peak of the recent housing bubble in 2005 (top chart). They fell to a historic low of 1% in 2009, and slowly grew to 6.3% of total originations in August 2014, 35% higher than one year earlier. Fifteen-year FRMs, predominantly a refinance product, comprise 15% of new mortgage originations.
Access to mortgage credit is still tight, especially for borrowers with low FICO scores. The mean and median FICO scores on new originations have both drifted up over the last decade by about 41 and 43 points, respectively. The 10th percentile of FICO scores, which represents the lower bound of creditworthiness needed to qualify for a mortgage, stood at 662 as of August 2014. Prior to the housing crisis, this threshold held steady in the low 600s.
Home prices are still very affordable by historical standard! Even if mortgage rates continue to rise up to 6%, affordability would STILL be at the long term historical average.
Serious delinquencies and foreclosures continue to decline with the housing recovery, but are still too high compared to the early 2000s. Loans 90 days delinquent or in foreclosure totaled 4.7% in the third quarter of 2014, down from 5.7% for the same quarter a year earlier. So while we are headed in the right direction, we still have a way to go.
Hope Now on Foreclosures and Loan Modifications
Earlier this week, Hope Now reported that approximately 468,000 homeowners received non-foreclosure solutions from mortgage servicers in July, August and September.
Hope Now said that foreclosure sales totaled approximately 108,000 for the quarter. This is the lowest quarterly total for foreclosure sales recorded since 2007 and 6% lower than the previous quarter. Even more impressive is that foreclosure sales in the 3rd quarter of 2014 are down 36% compared to the 3rd quarter of 2013.
Some of the key stats:
- Foreclosure starts for Q3 2014 were down 27% compared to Q3 2013
- Q3 2014 loan modifications declined 6% from the previous quarter
- Q3 2014 short sales decreased 9% from the previous quarter
Eric Selk, Executive Director of Hope Now said:
While the third quarter did show declines across the board in mortgage solutions, it is important to note that foreclosure sales and serious delinquencies have declined accordingly. The delinquency trends, quarter over quarter, show steady improvement in the national market and point towards housing stabilization.
Fewer foreclosures will help to further stabilize and strengthen the US real estate market.
FNC on Home Prices
The latest data from FNC shows that US home prices decreased 0.3% between August and September. This is the first time in 30 months that FNC has not reported an increase in house prices. The FNC index is based on sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas.
FNC also said:
- About 11.5% of total existing home sales were foreclosures
- Home sold for 96.5% of Asking Price
- The average Days on Market was 99 days
- Throughout the 3rd quarter, home prices were up 1.8% from the 2nd quarter
As with the report from NAR, this is talking about US home prices so it more of a 30,000 foot view than the down and dirty local market info that buyers and sellers REALLY need.
Black Knight on Foreclosure and Mortgages
Looking at Black Knight’s First Look Report for October, we see:
- Mortgage Delinquency Rate Falls to Seven-Year Low
- Foreclosure Inventory Down Over 33% From Last Year
- Foreclosure Inventory at Lowest Level Since February 2008
- Foreclosure Starts Decrease More Than 10% in October
- Foreclosure Starts Down 31% YoY
Yet another positive report. I have not felt this positive about the coming year in a long long time.
Architecture Billings Index Healthy
According the American Institute of Architects (AIA), due to continued strength in the multi-family residential market and the emerging growth for institutional projects, demand for design services continues to be healthy as exhibited in the latest Architecture Billings Index (ABI). As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending.
This is yet another positive economic indicator despite not being specifically about single family residential development. As the economy goes, so goes housing…
Markit Flash PMI Decreases
After a bunch of positive news, I almost hate to share that the latest report from Markit showed the weakest overall improvement in business conditions since January:
- Manufacturing PMI hits 10-month low
- Weaker rates of output and new business growth were the main negative influences
- Resilient job market trends continued across the U.S. manufacturing sector
- New export sales decline at sharpest pace since June 2013
Chris Williamson, Chief Economist at Markit said:
The manufacturing sector is undergoing a marked slowdown in the fall after enjoying a buoyant summer. Output growth has now fallen for three straight months, taking the pace of expansion down to its lowest since the start of the year. Unlike January, however, this time the weaker rate of growth can’t be blamed on the weather.
Not good at all. Especially since strong manufacturing translates into good income for many middle class Americans.
Big City Homes Unaffordable
According to Interest.com’s 2014 Home Affordability Study, middle income families are unable to afford the median priced home in over half of the country’s 25 largest cities.
Mike Sante, Interest.com’s managing editor said:
The bottom line is that buying a decent home remains a difficult or unobtainable dream for Americans in too many of the nation’s largest cities. In those cities with the least affordable housing, the failure of paychecks to keep up with rapidly rising housing costs is reaching crisis proportions.
It is a shame that many people relocate to large cities because of more job opportunities only to find out the cost of living makes any gains in income disappear. Doubling your income does not mean as much if you pay 3X as much for housing every month.
And Sante hits the nail on the head about stagnant incomes. Not that the millionaire club in DC cares about the average American anymore…