Real estate, housing and economic news for 2-24-2016…
Existing Home Sales Increased
NAR just reported that Existing-home sales increased in January to the highest annual rate in six months. Low inventory levels helped to cause home prices to grow also! Total existing-home sales are now 11.0% higher than a year ago. This is the largest year-over-year gain since July 2013.
Lawrence Yun, NAR chief economist said:
Existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015. The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints.
Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.
The median existing-home price increased 8.2 % from January 2015. This is the 47th consecutive month of year-over-year gains in house prices.
The share of first-time buyers remained at 32% in January for the second consecutive month. This is up from 28% a year ago.
All-cash sales were 26% of transactions in January which is down slightly from 27% a year ago.
Distressed sales (foreclosures and short sales) made up 9% of existing home sales in January. This is down from 11% a year ago.
Case-Shiller on Home Prices
Another BIG real estate report came out yesterday from Case-Shiller. They said that home prices continued to rise across the country over the last 12 months.
The S&P/Case-Shiller U.S. National Home Price Index increased 5.4% YoY in December 2015.
The 10-City and 20-City Composites reported year-over-year increases of 5.1% and 5.7%.
While this important, it is similar to the report from NAR (NOT the local data that buyers and sellers need ).
Lackluster Return in South Carolina?
Interesting little article from Mark Fleming at First American looked at home prices in South Carolina. Specifically, they looked at the homes that have sold 2 or more times. Then they calculated the annualized return between the first and second sale, measured in the year of the second sale. This is the home-seller’s annualized return on their investment in housing.
Prior to the housing crisis, people selling houses in South Carolina saw annualized returns exceeding 10% at the peak. But after the housing crisis, it has NOT been quite as impressive. If inflation were higher, then the gains would be MUCH lower.
Check out the chart from First American:
Were home prices in South Carolina increasing at a pace that was unsustainable prior to the housing crash? The chart from First American only goes back to 2001.
I can only go back to 2002 in the MLS to show you home prices in Anderson, Oconee and Pickens Counties:
This is NOT comparing prices of the same home like First American did…
Still this illustrates how home prices increased quickly before the housing crash, fell and have been steadily increasing. Both the average and median home price in our area is ABOVE the level before the crash.
Sadly, this is not true for every home and this is showing the average and median home prices for 3 counties. It will NOT tell you exactly how much a specific home has increased over the past 13 years…
Building Wealth Via Real Estate
OK so that previous tidbit might seem a little depressing. However, recently the Harvard Joint Center for Housing Studies released a report that shows home ownership IS associated with significant gains in household wealth.
And this is true even if we look at the BIG long range picture of 1999 to 2013. They said the the key to retaining these gains in wealth was whether or not the person actually continued to own their home! Check out the charts:
The key thing to remember is that it isn’t buying a home that created wealth. It is continuing to own a home that BUILT wealth.
Buying a Fixer Upper Means You Need Extra Money
I cannot tell you how many times someone will contact me about a home that needs work. While talking to them, it turns out they have NOT thought about how they will pay for or get the necessary repairs completed.
Sometimes, these types of homes are bought and then resold to people that simply do NOT have the means to repair the homes. Purchasing a home via “creative financing” such as a land contract or rent to own is NOT always the best option…
Please read Fixer-Uppers Trap Low-Income Buyers
Buying a Home = Hurry Up and Wait
Interesting info regarding how the amount of time to close on a home has increased:
When it comes to closing on your home loan, you better be prepared to hurry up and wait — perhaps as much as two months — before you get your keys.
The average time in January to close on a loan was on average 50 days, up from 49 days in December and 10 days longer than it was in January 2015, when the average loan closing time was 40 days, according to the latest estimate from Pleasanton, Calif.-based Ellie Mae, which provides loan software to the mortgage industry.
This is something that buyers and seller BOTH need to be aware of.
Please read more at Home closing delays from TRID getting longer
Black Knight on January 2016 Mortgage Data
Black Knight just released their First Look Mortgage Report for January. They said:
- Mortgage delinquency rate up 6.6% in January
- Mortgage delinquency rate above 5% nationally for the first time in 11 months
- Prepayment rate (indicator of refinance activity) dropped to its lowest level since February 2014
- Foreclosure sales up nearly 16% following the holiday moratoriums
- Active foreclosure inventory down 26% from last year
Share of First Time Home Buyers Increased
–First-time buyers accounted for 56.1 percent of primary owner-occupied home purchase mortgages with a government guarantee, up a shade from 56.0 percent the prior January.
–The Combined FBMSI (which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages) stood at an estimated 50.7 percent, up slightly from 50.6 percent the prior January.
AEI defines first time home buyers differently than NAR. Still, this is good news…
Relationship Between Mortgage Debt and Home Prices Changed
Check out this chart showing mortgage debt and home prices:
While I am no fan of debt, this report does raise some interesting points.
Read all about it at Whither Mortgages
Whether it is a Home or a Business, Location in Important
A Girl Scout is selling boxes of cookies outside of a Portland pot shop Saturday, hoping to raise money for a summer trip to horse camp. She was selling under the supervision of her aunt, who said they came up with the idea…
Read more at Girl scout sells cookies outside pot shop
Obscure But Important Economic Indicator
The Chemical Activity Barometer slipped 0.1% in February following flat performance in January and two months of revised gains in November and December 2015.
The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the U.S. economy’s business cycle given its early position in the supply chain. The CAB can be used to determine turning points and likely trends in the wider economy.
Read more at Chemical Activity Barometer Slips in February
While important, I have yet to see conclusive evidence that economic confidence levels directly affect the housing market.
From Gallup: Americans continue to be slightly more negative than positive about the U.S. economy. Gallup’s Economic Confidence Index stands at -11, similar to most weekly scores since September.
From The Conference Board: The Conference Board Consumer Confidence Index declined in February. The Present Situation Index declined and the Expectations Index also decreased.
Housing Matters No Matter What Flavor Kool Aid You Prefer
I have grown even more fond of NetFlix as the number of political ads has become unbearable. Yet one issue that is absent from all the BS being spewed by the candidates has been housing:
The presidential candidates are failing to address the greatest challenge facing the American economy and American households. America faces a growing crisis in housing supply unseen since the aftermath of the Second World War.
The current shortage of new residential housing in the United States forcing many middle-class Americans and young people to put off or give up the dream of homeownership has a knock-on effect across the economy, resulting in greater economic inequality and slower growth.
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