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Economist's Outlook

Raw Count of Home Sales (July 2015)

Tue, 09/01/2015 - 15:43
  • Existing-home sales increased 2 percent in July from one month prior while new home sales increased 5.4 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful compared to the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 552,000 existing-homes were sold in June while new home sales totaled 43,000. These raw counts represent a 3 percent loss for existing-home sales from one month prior while new home sales dropped 4 percent. What was the trend in the recent years? Sales from June to July dropped by 2 percent on average in the prior three years for existing-homes and decreased by 11 percent on average for new homes. So this year, existing-home sales underperformed compared to their recent norm while new home sale outperformed.
  • Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data—from GDP and employment to consumer price inflation and industrial production—are seasonally adjusted to account for regular events we can anticipate have an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
  • What to expect about home sales in the upcoming months in terms of raw counts? Independent of headline seasonally adjusted figures, August is a mixed month for existing-home sales.  Although last year existing-home sales dropped in August, we also commonly see increases in sales activity from July to August. In contrast, existing-home sales typically drop in September. For example, in the past 3 years, September sales typically decline by 9 to 21 percent from August. For the new home sales market, the raw sales activity in August and September tends to be almost the same compared to those occurring in July.

New Faces in Commercial Real Estate

Tue, 09/01/2015 - 15:36

Recently commercial membership has seen demographic changes. New members joining commercial real estate contrast some characteristics of typical commercial membership. While commercial real estate is male dominated, we see this trend shifting when looking at those members with 2 years or less of experience in commercial real estate. Based on data from the 2015 Commercial Member Profile, we can see who is joining commercial real estate and how they differ from the typical commercial member.

Commercial REALTORS® with two years or less of experience:

  • The majority of commercial members with two years or less of experience in commercial real estate are licensed as sales agents at 36 percent and brokers at 24 percent, compared to all commercial members who are typically licensed as brokers (59 percent) and sales agents (24 percent).
  • Commercial members with two years or less of experience have been in any field of real estate for three years, while all commercial members have been in real estate for 25 years.
  • The gender breakdown among commercial members is 75 percent male, but this changes when looking at commercial members with two years or less of experience. Females make up 51 percent of the newest members in commercial real estate. This is the only experience category which shows a larger percentage of women than men.
  • The newest members in commercial real estate are typically married (65 percent) and 54 years old, six years younger than the median age of all commercial members at 60 years old.
  • The median number of transactions by commercial members is 11, compared with two years or less of experience the median was three transactions in 2014. This number doubles to six transactions with three to five years of experience.
  • Among commercial members with two years or less of experience in commercial real estate, 58 percent worked between 40 and 59 hours per week, the same as all commercial members.
  • The newest members in commercial real estate are well educated. 40 percent have completed their bachelor’s degree, 31 percent have completed some college or hold an associate’s degree, and 19 percent have a graduate degree. Thirty-seven percent of all commercial members have completed their bachelor’s degree.
  • The most common compensation structures for members with two years or less of experience was percentage commission split (41 percent), 100% commission (22 percent), and straight salary (15 percent). The percentage receiving a straight salary is higher among newer commercial real estate agents, compared to the typical commercial member who only reports receiving a straight salary four percent of the time.
  • Less experienced commercial real estate agents receive a median of only 40 percent of their annual income from commercial activities. Whereas the typical member receives 76 percent of their salary from commercial activities.

For more information on commercial REALTORS®, members can view the full 2015 Commercial Member Profile, or download the report through the REALTOR® store.

In What States Did Properties Sell Quickly in May-July 2015?

Tue, 09/01/2015 - 15:20

In the monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?”. The map below shows the median days on market of respondents about their sales from May-July 2015, according to the July 2015 REALTORS® Confidence Index Survey Report.[1]

Nationally, properties that closed in July 2015 were typically on the market for at 42 days (34 days in June 2015; 48 days in July 2014).11 Properties typically sold within a month in Washington, Oregon, California, Utah, Colorado, North Dakota, Kansas, Texas, Michigan, Massachusetts, and the District of Columbia.

Days on market typically increase after June due to seasonality effects. Amid tight supply, properties stayed on the market for fewer days compared to a year ago.

All real estate is local. State-level data permits the comparison of local markets against the state and national summary.

[1] The median days on market is the value such that half of properties stayed in the market below the median days and half of properties stayed on the market above the median days.

11 Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market.


Tue, 09/01/2015 - 11:21

On October 3rd, the new TILA RESPA Integrated Documentation (TRID) will be implemented.  Under TRID, the current closing documentation will be streamlined and reduced. In addition, features are added to the closing documents that are intended to help consumers better understand their financial commitment. To find out how REALTORS® are preparing for these changes, NAR Research surveyed members in early August of 2015.

In preparation for TRID, 82.2% of respondents had taken some form of training (webinar, class, etc.).  Firm or broker sponsored events were the most commonly attended at 35.4%, while events run by state and local associations were second at 26.9%. Training conducted by lending and title companies affiliated with the agent’s firm were the next most popular at 25.1%. Non-affiliated title and lenders were next at 21.2% and 18.1%, respectively.

While the TRID changes don’t directly affect REALTORS®, REALTORS® can help to ameliorate the impact. Most REALTORS® are aware of the changes, taking actions, and working with industry partners to smooth the transition.

View the full  REALTORS® and the New Closing Process report.

Increased International Trade and E-Commerce Lead to Industrial Demand Ramp Up

Mon, 08/31/2015 - 15:10

Economic activity rebounded in the second quarter of this year. Real gross domestic product (GDP) advanced at a recently revised annual rate of 3.7 percent, to $16.3 trillion, according to the Bureau of Economic Analysis’s estimate. The increase in GDP was driven by higher consumer spending, exports, residential fixed investment, and government spending.

International trade provided uplift to GDP during the second quarter, as export growth outpaced import activity. Exports totaled $2.1 trillion in the second quarter, a 5.2 percent increase on an annual basis. In comparison, imports rose at an annual rate of 2.8 percent, totaling $2.7 trillion. While the balance of trade improved slightly, real net exports remained negative. However, trade activity proved beneficial in boosting demand for industrial space.

Retail e-commerce sales totaled $83.9 billion in the second quarter of the year, an 18.1 percent annual growth rate. As more consumers shift to on-line purchases, distribution centers play a greater role in fulfilling orders—including higher volume of perishable goods, such as groceries.

Payroll employment continued rising, underpinning growing demand for commercial spaces. During the second quarter, 678,000 new employees joined payrolls nationwide, bringing the total for the first half of 2015 to 1.3 million. As industrial leasing has been gearing up to meet the higher demands from increased imports and stronger electronic commerce distribution volume, transportation and warehousing employment gained 39,000 new positions, and wholesale trade employment rose by 9,000 jobs during the second quarter.

Industrial space net absorption continued rising, totaling 102.9 million square feet in the first half of this year, based on JLL data. Warehouse and distribution account for the bulk of the demand (87.8M sq. ft.), followed by manufacturing (13.5M sq. ft.). Supply also rose, with new industrial completions adding 83.6 million square feet to total stock. With demand outpacing supply, industrial vacancies declined to 6.9 percent, a 14-year low, according to JLL. With a tight market, industrial rents rose 5.1 percent.

Fundamentals in REALTORS® CRE markets moved in tandem with the broad markets during the second quarter 2015. Leasing volume during the second quarter rose 5.0 percent compared with the first quarter 2015. Leasing rate growth remained steady, rising 3.0 percent in the second quarter, compared with the 3.0 percent advance in the previous quarter. Industrial availability posted the largest year-over-year decline—246 basis points—to 10.8 percent.

Lease concessions in REALTORS® CRE markets declined 8.0 percent. Tenant improvement (TI) allowances averaged $10 per square foot per year nationally. As availabilities tightened with increased demand, industrial properties recorded the second-lowest TI rates at $6 per square foot per year.

To access the Commercial Real Estate Outlook: 2015.Q3 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.


July 2015 Existing-Home Sales Over Ten Years

Mon, 08/31/2015 - 10:58

View the July 2015 EHS Vs Ten Year Average slides.

Every month NAR produces existing-home sales, median sales prices, and inventory figures. The reporting of this data is always based on homes sold the previous month and the data is explained in comparison to the same month a year ago. We also provide a perspective of the market relative to last month, adjusting for seasonal factors, and comment on the potential direction of the housing market.

The data below shows what our current month’s data looks like in comparison to the last ten July months and how that might compare to the “ten year July average” which is an average of the data from the past ten July months.

  • The total number of homes sold in the US for July 2015 is higher the ten year July average. Regionally, the Northeast was slightly below the ten year July average all other regions showed stronger sales. The Midwest and South was above the average by more than 15%, the West was also up 9% while Northeast was essentially level with the July average.
  • Comparing July of 2005 to July of 2015 fewer homes were sold in 2015 in the US and all regions, the Northeast undergoing the biggest decline of 41.7%. The South, still leading all regions in home sales had the smallest drop in sales at 15.8% over the ten year period.
  • This July the median home price is higher than the ten year July average median price for the US and all four regions.
  • Comparing July of 2015 to 2005 the median price of a home was higher only in the US, Midwest and South. The Northeast had a slight decline in price while the West experienced a 6% decline in price. While the US had an increase in price of 3% the price of homes in the South jumped 9%.
  • The median price year-over-year percentage change shows that home prices began to fall in 2006 in some regions and 2007 nationally, but did not fall considerably in most areas until around 2009. The trend for median home prices turned around completely in 2012, all regions including the US showed price gains. Because of this, all regions and the US saw their lowest July median price in 2011. The West had the largest gain in price of 26%, while the Northeast had the smallest gain at 4% from 2011 to 2012. This July the West (8.4%) had the highest year over year price percentage change over the US and the other three regions.
  • There are currently fewer homes available for sale in the US this July than the ten year July average. In 2005 the US had the fastest pace of homes sold relative to the inventory taking 4.6 months. In 2010 the US had the slowest pace taking 11.9 months to sell the supply of homes on the market. Relative to all supply, the condo market had the biggest challenge in 2010 when it would have taken a little more than 16 months to sell all available inventory at the prevailing sales pace, but now, the condo market is actually tighter than it was in 2005, nearly on par with tight single-family inventories.
  • The ten year July average national months supply is 7.7 and this July we are at 4.8 months supply. The ten year average month supply for July for condos is 10.0 months and the single family supply is 7.4 months.

Mortgage Application Data (August 26th, 2015)

Fri, 08/28/2015 - 11:23

This blog post was written by La Shawn Skeete. La Shawn is a Summer Research Intern, and is currently studying at The University of Maryland, College Park pursuing a degree in Economics.

  • Seasonally adjusted mortgage application volumes increased only 0.2% from the week ending August 14th and are 17.2% higher than this time last year.


  • Seasonally adjusted applications for purchases increased over the week by 1.7% and purchase application volumes are 18.0% higher than last year.
  • 30-year FRM rates decreased again this week, this time by 3 basis points to 4.08% and are less than they were in 2014 by 20 basis points.


  • The record stock index declines in China spurred money movement to the US Treasury market, which is viewed as a safe capital investment.  Mortgage rates fell as a result.
  • Despite a modest decline in pending home sales for June, figures are still 8.2% above those of last year.
  • The lack of housing supply has contributed to an increase in home prices, but in most markets homes are still affordable when compared to rents. Low rates are helping to sustain affordability.

Mortgage application data serve as an indicator to homes sales and other home related expenditures such as appliances and furniture.

Latest Consumer Confidence (August 2015)

Fri, 08/28/2015 - 11:12
  • Consumers are confident, even as the stock market gyrates and shakes. Rising employment and a solid boost to housing equity for a majority of households are evidently more than sufficient to overcome the fall in the stock market.
  • Specifically, the consumer confidence index rose above the 100 mark in August for only the third time in the past 88 months. Both components of the confidence rose: about the present conditions (from 104 to 115) and about the future (from 82 to 92). That portends well for consumer decision regarding expensive and long-lasting purchases, such as buying a home.
  • The gain in the housing wealth over the past 12 months has been roughly $1 trillion and still rising. The median national home price rose 5.6 percent in July. Meanwhile, the stock market wealth plunged, resulting in a several trillion dollar loss. But this big wipe out is not having a direct impact on confidence. Even though about a half of Americans have some exposures to the stock market through mutual funds and retirement accounts, it is really the top 10 percent who have a meaningful amount of $100,000 or more invested in the stock market. Therefore, 90 percent of the population is not that caring about what’s happening to the stock market. All the while home values are rising for the vast majority of households.
  • Keep a tab on the consumer confidence index in the current raucous presidential election campaigns. When the index surpassed 100 then the incumbent party retained the White House. When the index fell below 100 then the opposition party won the Presidency. The only exception was President Obama’s re-election in 2012 when the consumer confidence index in the month before the election was only 73.

Housing’s Large Economic Impact

Fri, 08/28/2015 - 11:00

Find out how much the real estate industry is affecting the gross state product for your area.

The impact can be direct or indirect, but housing is a significant driver of economic activity. In 2013, the value of construction as well as real estate and rental and leasing accounted for 16.8% of gross domestic product, but the impact is much larger in some states. As depicted below, in 2013 real estate tended to have a larger impact on the economies of states located on the coasts, while those in the Midwest, Southeast and Texas tended to have lower shares.

At the local level, every home sale has an economic impact. The impact can be separated into three parts:

  • Expenditures related to the transaction such as commissions
  • Expenditures on improvements and services on the new home
  • A multiplier that accounts for how the expenditures listed above, which is income to the recipients, are spent in turn generating additional economic activity

Because commissions, remodeling and services are often related to the value of the home, states with higher median home prices tend to have larger economic impacts her home sale. For instance, the average economic impact of a sale in California during 2013 was $111,000 compared to $42,000 in South Dakota.

Likewise, changes in the median home price tend to drive annual fluctuations in the economic impact that home sales have at the state level. In 2013, the strongest gains in economic activity per home sale were felt in Hawaii, Washington, DC, California, and Massachusetts. Conversely, some of the slowest growth was in Arkansas, Alaska, Kentucky, Pennsylvania, and Vermont. However, home sales and median prices experienced a sharp recovery in 2014 that has extended into 2015 with more than 90% of metro areas across the country experiencing price growth in the 2nd quarter of 2015 relative to the same period in 2014.  This robust trend will likely grow these figures in next year’s report. Updated reports for the economic impact of a home sale for each state are now available.

July Existing-Home Sales

Thu, 08/27/2015 - 11:21
  • NAR released a summary of existing-home sales data showing that July’s existing-home sales increased year-over-year for the 10th consecutive month, as sales reach the 5.59 million seasonal annual adjusted rate. July’s sales are the highest sales pace since February 2007 jumping up 10.3% from a year ago, while sales moved up 2.0% from last month.
  • The national median existing-home price for all housing types was $234,000 in July, up 5.6% percent from a year ago, close to the record high of last month.
  • Regionally, all four regions showed growth in prices from a year ago. The West had the largest gain at 8.4% while the Northeast had the smallest gain at 1.3% from last July.
  • From June, only the South and the West showed an increase in sales. The West increased 3.2% while the South increased 4.1%.  The Northeast was the weakest region with a decline of 2.8% while the sales in the Midwest were flat. However, all regions showed an increase in sales from a year ago. The Northeast had the smallest increase of 9.4% while the West had the biggest gain of 11.3%. The South leads all regions in percentage of sales at 44% while the Northeast has the smallest share at 13%.
  • July’s inventory figures declined 0.4% from last month and are down 4.7 % from a year ago. It will take 4.8 months to move the current level of inventory at the current sales pace. It takes approximately 42 days for a home to go from listing to a contract in the current housing market.
  • Single family sales are outperforming condo sales, increasing 2.7% while condo sales fell 3.1% from last month. Single family home sales increased 11.0% and condo sales are only up 5.0% from a year ago. Both single family and condos had an increase in price with single family up 5.8% and condo up 3.2% from a year ago, July 2014.

Office Vacancies Decline As Employment Gains Drive Demand

Thu, 08/27/2015 - 11:11

Macroeconomic conditions continued improving at a moderate pace in the second quarter of this year. Real gross domestic product (GDP) advanced at an annual rate of 2.3 percent, to $16.3 trillion, according to the Bureau of Economic Analysis. The gain remained below the long-run historical average of 3.0 percent. The increase in GDP was driven by higher consumer spending, exports, residential fixed investment, and government spending.

The improved economic environment proved favorable for commercial fundamentals, as demand for commercial lease space continued advancing in the second quarter of 2015, rebounding from the soft performance of the wintry first quarter. While construction has been ramping up across all property types, the gap between demand and supply continued to add downward pressure on availability.

Office net absorption totaled 14.4 million square feet in the second quarter of 2015, up from the weaker first quarter’s 6.3 million square feet, based on data from JLL. Compared with 20.7 million square feet absorbed in the first half of the year, new completions totaled 15.5 million square feet over the period. Overall office vacancies declined from 15.6 percent in the first quarter to 15.3 percent in the second quarter. Based on JLL’s research, office vacancies are expected to drop below 15.0 percent by the end of this year. Rents for office properties rose 2.5 percent over the first six months of 2015, leading to projections that—at the current demand pace—they will close the year higher by 5.0 – 6.0 percent from 2014.


Fundamentals in REALTORS® CRE markets moved in tandem with the broad markets during the second quarter 2015. Leasing volume during the second quarter rose 5.0 percent compared with the first quarter 2015. Leasing rate growth remained steady, rising 3.0 percent in the second quarter, compared with the 3.0 percent advance in the previous quarter. Office vacancies declined 65 basis points to 15.9 percent compared with a year ago.


Lease concessions in REALTORS® CRE markets declined 8.0 percent. Tenant improvement (TI) allowances averaged $10 per square foot per year nationally. In keeping with higher vacancies, office properties recorded the highest TI rates at $17 per square foot per year.

To access the Commercial Real Estate Outlook: 2015.Q3 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

REALTORS® Six-Month Home Price Outlook Strong

Wed, 08/26/2015 - 13:53

The maps show the six-month price outlook by state[1], as reported in July by REALTORS®: July 2015 REALTORS® Confidence Index Survey ReportThe outlook was most upbeat in states with growing technology sectors such as California, Washington, Oregon, and Massachusetts; states with shale/oil-related industries such as Texas, North Dakota, Montana, and Wyoming; and in states that are attracting new residents such as Colorado and Florida. Among all property types, the condominium market was the weakest, with REALTORS® reporting financing issues for both FHA-insured and the GSE-backed loans.[2]

[1] States were categorized based on the REALTORS® Confidence Index for that state: less than 25 (“Very weak”); 26-29 (“Weak”); 50 (“Moderate”); 51-75 (“Strong”); 76 and over (“Very strong”).

[2] FHA and the GSEs have financing eligibility criteria relating to ownership occupancy requirements, delinquent dues, project approval process, and use for commercial space. See the Statement of NAR Submitted for the Record to the Senate Committee Housing and Banking Affairs on December 9, 2014 at http://www.ksefocus.com/billdatabase/clientfiles/172/1/2180.pdf

Latest New Home Sales (July 2015)

Wed, 08/26/2015 - 11:15
  • New home sales increased by 26 percent from one year ago. It’s a further proof of the housing market strengthening. Amid stock market gyrations residential real estate appears a very safe place to invest particularly given the current housing shortage in America.
  • Specifically, new home sales, which are not closings but rather contract signings on a newly constructed home, reached 507,000 annualized sales pace in July. Sales are up solidly from one year ago, yet only at about half the pace compared to the pre-recession levels when one million sales were the norm.
  • The supply of new homes is on the tight side with only 5.2 months supply. More new homes can be constructed without worrying about excess supply.
  • The median price of a newly constructed home was $285,900. It is no longer $300,000 and implying builders are putting some focus on constructing affordable homes. The price premium above the median existing home price is now 21 percent, which is still wider than normal.
  • Many local communities are willing to authorize housing permits for multifamily apartments but less willing for condominiums or single-family homes. That’s a pity. There is strong demand and insufficient supply as evidenced by continuing gains in home prices in excess of income growth. This lack of new housing permits is partly contributing to homeownership rate falling to a 30-year low.

Case Shiller and FHFA Housing Price Index

Tue, 08/25/2015 - 15:21
  • Today, Case Shiller and the Federal Housing Finance Agency (FHFA) released their housing price index data for June 2015.
  • Case Shiller data showed that house prices rose roughly 5 percent in all three indices since June 2014.  The 10-city composite gained 4.6 percent, the 20-city composite rose 5.0 percent, and the national index showed a gain of 4.5 percent year over year.
  • The 10-city and 20-city indices have been in a narrow range since February 2015.  In that time the 20-city index has shown annual gains each month of either 4.9 or 5.0 percent while the 10-city index has shown gains of either 4.6 or 4.7 percent.
  • FHFA data showed that prices were up 5.6 percent in June. Prices have ranged between 5.4 and 5.7 percent year over year growth according to FHFA since February.
  • Last week the National Association of Realtors® (NAR) reported rising prices in June and July. Price growth in the year ended July 2015 was 5.6 percent after a 6.4 percent rise in June 2015.
  • Recent housing price data at the national level suggests that home prices continue to increase at a strong pace though the pace of increase may be stabilizing or even slightly weakening. Strong buyer demand and low inventories coupled with relatively low levels of new construction are continuing to push prices up and the keep housing market tipped in favor of sellers in most local markets.
  • Of course, potential buyers and sellers should be sure to put the national numbers in the context of what is going on in their local markets. The fastest overall growth rates were seen in Denver (10.2%), San Francisco (9.5%), and Dallas (8.2%) in the year ending June 2015—a repeat of the last few month’s top markets. By contrast, Washington DC (1.6%) and Chicago (1.4%) were the slowest growing markets while Cleveland and New York (tied at 2.8%) rounded out the bottom four markets. Data shows that sellers in these somewhat weaker areas may not have as much power to demand higher prices for their homes given the local market. How does your market compare to the national price trends?
  • NAR reports the median price of all homes that have sold while Case Shiller reports the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported June prices include information from repeat transactions closed in April, May, and June. For this reason, changes in the NAR median price tend to lead Case Shiller and may suggest that price growth could be slowing in the next few months but is likely to remain strong. The current strong pace needs to slow somewhat to keep housing prices in line with job and wage fundamentals.

Employment and Low Interest Rates Drive Commercial Real Estate Gains

Tue, 08/25/2015 - 09:28

Commercial sales transactions span the price spectrum, but tend to be measured and reported based on size. CRE deals at the higher end—$2.5 million and above—comprise a large share of investment sales, and generally receive most of the press coverage. Smaller commercial transactions tend to be obscured given their size. However, these smaller properties provide the types of commercial space that the average American encounters on a daily basis—e.g. strip shopping centers, warehouses, small offices, supermarkets, etc.  These are the types of buildings that are important in local communities, and REALTORS® are active in serving these markets.

The National Association of REALTORS® Commercial Real Estate Outlook: 2015.Q3 report focuses on market performance in both large (LCRE) and small commercial (SCRE) sectors.  The report provides an overview of economic indicators, investment sales and leasing fundamentals.

Gross domestic product continued on a moderate growth trend in the second quarter of this year. Higher consumer expenditures, stronger exports and an uptick in government spending provided wind in the economic sails, offsetting declines in business investments.

Payroll employment rose by 678,000 positions in the second quarter, bringing total new jobs to 1.3 million during the first half of 2015. Professional and business services accounted for the bulk of new hires, followed by education and health, as well as leisure and hospitality. The retail trade, construction and manufacturing sectors also provided solid figures over the period. The unemployment rate declined from 5.6 percent in the first quarter to 5.4 percent in the second quarter. Accompanying gains in employment, median earnings of private employees—adjusted for inflation—rose 2.1 percent in the second quarter, a noticeable improvement from the past few years.

With improving economic fundamentals, demand for commercial space continued improving across all property types. Vacancy rates in LCRE and SCRE markets converged, as the rebound has been broadening in secondary and tertiary markets.


Commercial investment sales have been riding a growing wave of capital, coupled with continuing low interest rates. The volume of commercial sales in LCRE markets during the second quarter of this year increased 23 percent on a yearly basis, according to Real Capital Analytics.  In a sign of increasing investor optimism, portfolio transactions have been on the rise, even as individual transactions comprised the largest market share. Prices increased by 3.1 percent in the second quarter, driven by strong appreciation of apartment and CBD office properties.


In comparison, sales in SCRE markets rose nine percent year-over-year during the second quarter, based on REALTORS® market data. With inventory shortage continuing as a main concern, prices accelerated during the period, with properties trading at 6.6 percent higher average prices compared with the second quarter of 2014.

Cap rates in SCRE markets were, on average, higher by 80 basis points compared with cap rates in LCRE markets. With the interest rate on 10-year Treasury Notes averaging 2.1 percent during the second quarter of 2015, the spread between cap rates and 10-year Treasury Notes ranged from 462 basis points in LCRE markets to 542 basis points in SCRE markets. The large spread indicates that CRE investors continue to enjoy healthy returns in rebounding markets.

The outlook for the second half of 2015 remains positive. With economic growth expected to remain moderately positive, demand for commercial properties will continue to provide downward pressure on vacancy rates. As funding sources increase, commercial real estate investments are projected to close over $500 billion by the end of the year.


To access the Commercial Real Estate Outlook: 2015.Q3 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

REALTORS® Outlook Over The Next Six Months: Positive But More Moderate

Mon, 08/24/2015 - 15:17

As of July REALTORS® were by and large “strongly confident” about the outlook over the next six months although confidence eased somewhat compared to June: July 2015 REALTORS® Confidence Index Survey Report.[1] In the single-family markets, the REALTORS® Confidence Index Six-Month Outlook moderated to 68 after six months at over 70 (72 in June 2015; 60 in July 2014). The index for townhomes slid to 51 after six months at over 50 (53 in June 2015; 45 in July 2014). The index for condominiums dipped to 47 (49 in June 2015; 40 in July 2014). An index greater than 50 indicates that the number of respondents with a “strong” outlook outnumbered those with a “weak” outlook.

REALTOR® respondents expressed concern that the steep pace of price appreciation is eroding affordability. Respondents also expressed concern about the possible adverse effect on market transactions and closing when the new disclosure regulations under TILA-RESPA Integrated Disclosure (TRID) take effect on October 3, 2015.[2]

[1] Respondents were asked “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?”

[2] TRID prescribes simplified disclosure forms that the lender needs to deliver to the loan applicant after a loan application is received (Loan Estimate) and before a loan is consummated (Disclosure Form) within prescribed business days and waiting periods. The objective is to help consumers understand the key features, costs, and risks of the mortgage loan for which they are applying. See the Consumer Financial Protection Bureau’s guidelines at http://www.consumerfinance.gov/regulatory-implementation/tila-respa/

Mortgage Application Data (August 20th, 2015)

Fri, 08/21/2015 - 13:51

This blog post was written by La Shawn Skeete. La Shawn is a Summer Research Intern, and is currently studying at The University of Maryland, College Park pursuing a degree in Economics.

  • Seasonally adjusted mortgage application volumes increased 3.6% from the week ending August 7th and are 20.2% higher than this time last year.

  • Seasonally adjusted applications for purchase decreased over the week by 1.1% but purchase application volumes are 19.0% higher than last year.
  • 30-year FRM rates decreased 2 basis points to 4.11% and are less than they were in 2014 by 18 basis points.

  • In the 2nd quarter of this year, 29% of purchase contracts experienced delays due to financing issues, appraisal disagreements, deed problems, homeowner association complications or cold feet among other issues. The implementation of the TRID guidelines on October 3rd is yet another factor that could delay loan closings.
  • The FHA announced its implementation of the “Blueprint for Access” which uses a new “Supplemental Performance Metric” to review a lender’s performance. The resultant insight is expected to “serve eligible underserved borrowers” by expanding credit access from lenders.
  • Vacation home sales have increased 57% since 2013 likely due to increased consumer confidence in the housing market and an expected rise in interest rates from the Federal Reserve.

Mortgage application data serve as an indicator to homes sales and other home related expenditures such as appliances and furniture.

Mortgage Access Continues to Thaw

Fri, 08/21/2015 - 10:51

In the 2nd quarter of 2015, mortgage originators reported measured improvement in access to credit. While more lenders are offering credit outside of the pristine, conventional space, they remain pensive and the trend appears driven by an expansion of interest from mortgage investors.

The share of firms in the most recent Survey of Mortgage Originators that offered non-QM products jumped from 39.3% in the 1st to 53.6% in the 2nd, the highest share to date. All lenders offered prime products and the share offering rebuttable presumption loans surged from 74.5% to 92.3% over this time frame setting a survey high. Rebuttable presumption QM loans are differentiated from other QM loans in that their APR is higher, a sign of some non-pristine characteristics. This pattern suggests that lenders are expanding their offerings to borrowers with lower credit scores and down payments.

While more lenders added non-QM and rebuttable presumption loans to their offerings, lenders’ net willingness to originate non-QM loans eased after showing improvement in the 1st quarter. Willingness to originate prime loans gained steam growing at a strong pace in the 2nd quarter compared to the 1st quarter, but willingness to originate rebuttable presumption QM loans continues to muddle along.

At a more granular level, willingness to originate non-QM mortgages with low balances, those with fees greater than 3%, or low-documentation fell more sharply than non-QMs with higher credit scores, DTIs less than 45%, and interest-only structures. FHA rebuttable presumption loans gained in both the share of originators offering them and willingness to originate given offering.

Few lenders in this survey portfolio loans, so investor takeout is critical. The share of respondents reporting an improvement in investor demand surged for the second consecutive quarter reaching 46.2%. No respondents indicated a weakening of demand or that they were waiting for better investor demand before entering the non-QM space.

A significant share of lenders expressed comfort in rebuttable presumption and non-QM products soon after the introduction of the ATR/QM rule. However, they were slow to take up the new products in part due to limited buyers for these mortgages. Increased investor demand is drawing more lenders into this space, though they remain cautious.

Seasonally Adjusted Inventories

Thu, 08/20/2015 - 15:49

Are inventories even tighter than reported? Is more price pressure on the horizon for existing-homes in the months ahead?

Each month with the National Association of Realtors® Existing-Home Sales data release, we see information on home sales, prices, and inventories. There are two types of inventory measures included in the release:

1)      the raw level of unsold homes on the market, and

2)      the month’s supply—the level of unsold homes on the market relative to the current sales pace. [1]

July’s Existing-Home Sales data release showed that existing-home inventories were at 2.24 million and month’s supply was at 4.8 months. The raw number of unsold homes was down by just 10,000 from June to July, and month’s supply dropped slightly because of declining inventories and the fact that the sales pace quickened from June to July.[2] From July one year ago, the change was even more dramatic. Raw inventory levels declined by 110,000, while the sales pace moved up from 5.07 million to 5.59 million. Month’s supply dropped from 5.6 months to 4.8 months.

The home sales figure is what we call a seasonally-adjusted annual rate. It’s adjusted so that we can easily compare July home sales with December home sales. The correction for the fact that many more homes are sold in the summer months when school is out and many fewer homes are sold during the cold winter holiday season has already been made.[3] The headline inventory data, however, is not seasonally adjusted. In the chart below, the non-seasonally adjusted levels of both sales and inventories are depicted. The vertical grey lines mark each January, the typical slow month for sales and inventories.

[1] The months supply can be understood as the number of months it would take to exhaust the current inventory at the current sales pace. This measure assumes that all of the listings would eventually sell and no new listings would come on to the market.


We produce a less widely covered estimate of seasonally adjusted inventories. Shown in the graph below, you can see that this estimate does not show consistent dips each January. In the most recent data, seasonally adjusted inventory fell to 2.06 million unsold homes which is the lowest level since March 2014. In March 2014, however, homes were selling at a pace of 4.7 million homes per year. In July 2015, homes sold at a 5.59 million per year pace. This means that July 2015 seasonally adjusted months supply—pictured far below—was only 4.4 months compared to 5.3 months the last time inventory was this low. [1] We typically think of roughly 6 months supply as a balanced market.


So what does it mean? The major take-away from this data is that unless new supply comes online or housing demand drops off, more price pressure is ahead in the existing-home market. Realtors® reported in July that some buyers may already be getting fatigued as once-target homes slip out of reach due to rising home prices, mortgage rates creeping up, and stagnant incomes. This means that the adjustment could come on the demand-side, and instead of rising prices we will see fewer home sales ahead.

Whether buyers downsize their purchase plans or give up on their current home search remains to be seen. As hard as it is to compromise for a home purchase, with the price of rent rising at the fastest pace in seven years, staying in a rental may not be all that great of an option.

[1] Seasonally adjusted inventories relative to seasonally adjusted sales

[2] In June 2015 existing-homes were sold at a 5.48 million annual pace while in July 2015 existing-homes sold at a pace consistent with 5.59 million homes sold per year.

[3] For more on seasonal adjustment, see this topic: http://economistsoutlook.blogs.realtor.org/tag/seasonality/

Lenders Cautious on TRID

Thu, 08/20/2015 - 11:01

On October 3rd, the new TILA RESAP Integrated Documentation (TRID) will be implemented. Under TRID, the current closing documentation is streamlined and features are added to help consumers better understand their financial commitment. Lenders were asked their impression of the new rules in the latest Survey of Mortgage Originators.  While most expect a small impact, there are changes that could affect your business.

When asked about their efforts to come to compliance with TRID, none of the respondents were ready as of late July, but 100% expected to be compliant by October 3rd. In preparation for the implementation of TRID, all of the survey respondents had discussed their preparations with their REALTOR® partners.

Similar to today, under TRID originators will have to contend with several timelines for providing consumers with disclosures. REALTORS can help by working with their clients to provide lenders with the required documentation as soon as possible. The three factors that can trigger an issue for lenders just prior to closing are: an increase in the APR of more than 1/8th, the addition of a prepayment penalty or a change in mortgage product (e.g. 15-year fixed rate mortgage vs. a 30-year FRM). As depicted above, the incidence of these changes within three days of closing was low in 2014. Furthermore, respondents indicated they expect the new rules to result in 9.5% of transactions being delayed and 1.0% being cancelled.

Because failure to comply with the new rules could carry penalties for a lender, understanding when the TRID rules apply is critical. The TRID rules apply once an application is made for a mortgage. Some lenders have voiced concern because the definition of an application was streamlined under TRID and made identical to the definition of a pre-approval letter. The CFPB suggests a means of labeling a pre-approval letter to distinguish it from an application. However, more than a third of respondents in the 2nd quarter of 2015 indicated that the new TRID rules would affect their willingness to offer pre-approval letters.

Lenders voiced concern about the new TRID rules in the 2nd quarter Survey of Mortgage Originators.  However, they remain optimistic that the share of originations that will be delayed or canceled will be low.  Of greater concern may be lenders’ reticence to offer pre-approval letters.  To this end, it may behoove REALTORS to seek out multiple sources for pre-approvals until lenders acclimate to the new rules.