Talking about home prices, foreclosures, the election and the possibility of GSE reform and much more…
Home Prices Still Increasing
First let me say most of this is about house prices for the entire US or for large multi state areas. So this is a 30,000 view and not the down and dirty local real estate market information that buyers and sellers MUST have to make informed decisions! Still, this is a good information to have in the back of your mind…
The good news is that the majority of US real estate markets are still seeing home price increases in the 3rd quarter of 2014. However, the overall rate of appreciation is slowing.
According to the National Association of Realtors (NAR), the median price for an existing single-family home rose annually last quarter in 73 percent of the 172 major metros surveyed. This is slightly more markets than the previous quarter when 71 percent of metros posted year-over-year gains.
I am sure it may sound strange, but I am glad to see the pace of home price increases are slowing down to a level that is more in line with the historical average. NAR said that 16 markets last quarter had double-digit increases in home prices. This is down from 19 in the 2nd quarter. It just isn’t normal for home prices to increase at double digit pace.
Lawrence Yun, chief economist for the NAR said:
Home-price gains returned to more normalized levels of low- to mid-single digit rate of appreciation in many metro markets as inventory levels steadily increased.
Yun uses the word normalized and I must agree. Bubbles are NOT normal. If home prices are increasing too quickly, it starts to make me think we could be in a bubble. And we all know what happens when a bubble pops…
NAR said that the US median existing single-family home price in Q3 was up 4.9% from last year. If we look at the September 2014 Upstate South Carolina real estate market report, we see that home prices are up 2.3% compared to September 2013.
If we look at NAR’s median home prices for the 4 regions of the US:
- Midwest UP 5.0%
- West UP 4.9%
- South UP 4.5%
- Northeast UP 2.2%
While it is great that home prices are still increasing, there was some bad news in NAR’s report. The pace that home are selling has dropped. NAR said that total existing-home sales for the third quarter of 2014 are down 3.8% compared to the third quarter of 2013.
In Upstate South Carolina, sales for September 2014 are UP 17.5% compared to September 2013. Which sounds great. But if we look at the September 2014 Market Report for Anderson, we see that sales are down 2.1% compared to September 2013. And that still doesn’t really tell you everything you need to know about the real estate market in Anderson.
Remember, it doesn’t matter if you are in Anderson SC or Timbuktu:
Always contact a local REALTOR to discuss your home’s value and your local market conditions
One good bit of news is that the number of distressed homes ( foreclosure and short sales ) sold decreased. According to NAR, the percentage of distressed homes sold in the third quarter of 2014 was down compared to the third quarter of 2013. Distressed home accounted for 9% of third quarter sales compared to 14% a year ago.
According to data from the September 2014 REALTORS Confidence Index Survey, the share of distressed sales to existing home sales continued to decline. In September 2014, distressed sales accounted for 10% of US home sales. NAR said that in September 2014, 7% of reported sales were foreclosures and about 3% were short sales.
Some of the decline in distressed sales is because there are fewer distressed homes for sale and some of the decline is because institutional investors are not buying homes at the same pace. RealtyTrac recently reported that sales to institutional investors in the third quarter plunged to 4.3% of all sales. According to RealtyTrac, this is the lowest level since Q4 2010.
RealtyTrac also said that that 33.9% of single-family home and condo sales last quarter were cash deals. This is down from 36.9% in the second quarter and flat from last year.
Daren Blomquist, VP at RealtyTrac said:
As institutional investors and other cash buyers slow down their purchasing in many markets across the country, more traditional buyers—including first-time homebuyers and move-up buyers—will need to increasingly fill in the missing puzzle pieces to maintain the momentum of the housing recovery.
RealtyTrac said that that cash sales last quarter were concentrated at the lowest and highest extremes of the housing market. RealtyTrac said that 64% of home purchases made under $100,000 and 41% of purchases made above $2 million were cash deals.
I have also noticed this in our area. I am not sure the number of all cash deals in our area are this high. There is no doubt that we are seeing more cash buyers in both homes under $100,000 and over $1,000,000 in Upstate South Carolina. While the number of cash buyers for homes over $1,000,000 doesn’t affect most first time home buyers, it certainly does make a difference for people looking at homes under $100,000 in Anderson County.
The share of first-time home buyers fell to its lowest point in nearly three decades according to the National Association of Realtors. The long-term average is four out of ten purchases are from first-time home buyers. But the share of first-time buyers has dropped to 33%, which is the lowest level since 1987.
Considering how important first time home buyers are for a healthy housing market, this is disturbing.
59 0f 350 Housing Markets Fully Recovered?
According to the National Association of Home Builders/First American Leading Markets Index (LMI), 59 of the approximately 350 metro areas in the U.S. returned to or exceeded their last normal levels of economic and housing activity in the third quarter of 2014. They also said that 66% of markets have shown an improvement year over year.
NAHB said that based on current permit, price and employment data, the nation is running at 90% of normal economic and housing activity.
NAHB Chairman Kevin Kelly said:
The markets are recovering at a slow, gradual pace. Continued job creation, economic growth and increasing consumer confidence should help spur pent-up demand for housing.
NAHB Chief Economist David Crowe said:
An uptick in the number of single-family permits, now at only 44% of normal activity, is the key to a full-fledged housing recovery. In the 17 metros where permits are at or above normal, the overall index shows that these markets have fully recovered.
Certainly good news but this does show us we still have room for improvement. and this may explain why more Americans are doubling up according to Zillow:
Doubling up – whether it’s getting a roommate or moving back in with parents – is an obvious way to cut costs. The research shows that Americans are, increasingly, splitting the rent. In 2012, more than a third of working-age adults were living with another adult with whom they were not in a marriage or partnership. In 2000, less than a quarter of Americans were doubled up.
Zillow Chief Economist Dr. Stan Humphries said:
The rise in doubled-up households is a troubling sign of the times and starkly illustrates one of the prime drivers behind weak home sales these days. But there is a silver lining behind this data. Like a coiled spring, all of these doubled-up households represent tremendous potential energy for the market.
I certainly hope Humphries is correct but I tend to doubt anything from Zillow considering their track record of absurdly incorrect home values and advertising homes that are NOT actually for sale.
How Will the Election Affect Real Estate?
There is no doubt that the results of the midterm elections will have an effect on both the economy and housing. On Wednesday, both the S&P 500 and Dow reached record levels, after Republicans took control of the Senate. Nice to see that Wall Street was pleased by the election results.
But what will it mean for real estate, mortgage rates and GSE reform?
Well we could see higher mortgage guarantee fees from Fannie Mae and Freddie Mac according to an article in MPAmag.
I seriously doubt we will see GSE reform for some time. Maybe I am too pessimistic but thinking that the politicians will come to a consensus on a good plan for reform seems unlikely. Conservatives don’t want another giant government entity. Liberals believe that too little is being done to help struggling homeowners.
However, the Republicans do have a majority in both the House and the Senate. Richard Shelby (R-Alabama) will become the new chair of the Senate Banking, Housing, and Urban Affairs Committee and is a longtime proponent of reforming the GSEs.
Can the President and the Republicans work together to reform the GSEs?
Have they been able to work together on anything?
No and that is only the first of many questions that GSE reform will raise:
Exactly what does GSE reform mean?
Should Fannie Mae and Freddie Mac be consolidated?
Or should the GSEs be eliminated?
What, if anything, is going to replace the GSEs?
Personally, I like the idea of consolidation.
Combining Fannie and Freddie would not require the politicians to come to an agreement. The FFHFA could unify Fannie and Freddie, which would make Fannie and Freddie less expensive to run. Combining the GSEs would reduce the threat that they will need more support from the Treasury and perhaps lower the cost of obtaining a mortgage.
Of course, it would also probably mean eliminating some cushy high paying government jobs and that is NOT going to be very popular…
No matter what happens, if anything, I want what is best for America and the average tax payer. I really could care less about what is best for Wall Street and the banks UNLESS it has negative consequences for the average American.
Something to consider is that low down payments are NOT are bad thing according to the Urban Institute:
If mortgage are made with common sense underwriting, it IS possible to make loans that do not have a high risk of default.
LOL: Zillow Agent Reviews
Zillow has announced the launch of Zillow Tech Connect: Reviews. Brokers, agents and MLSs will be able to display individual agents’ Zillow reviews on their Web site through Zillow Tech Connect.
While reviews are a hot button topic, I am not sure that displaying anything from Zillow on your website is a good thing. Especially since you will be giving Google juice to a company that does not give 2 shits about your success unless you are paying them.
I am sure there will be some way to turn off the backlinks to Zillow. However, Zillow is betting that most agents do not understand this and will screw themselves over in an attempt to easily display reviews on their website.
On the other hand, the same could be said for some of the stuff that NAR, MOVE and REALTOR.COM does…
Calling Bullshit on This Housing Headline
Look at this Headline and snippet from the NYTimes:
More Americans Are Preferring the Lease to the Mortgage
The homeownership rate in the United States plunged during the Great Recession. Many families lost their homes as prices collapsed and unemployment rose.
Now the economy is growing, and there are more jobs than ever. Home prices have risen, although they have not fully recovered.
But the homeownership rate continues to decline.
Here’s the thing. They are assuming that people prefer to rent when it could be that people are being forced to rent for a multitude of reasons.
I am not saying that everyone should buy / own a home.
However, headlines such as this send a subtle subliminal message that more people prefer to rent than own.
There is a difference between what you PREFER to do and doing what you HAVE to do.
BS like this gets my blood pressure up…