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Updated: 26 min 32 sec ago

In What States Did Properties Sell Quickly in December 2015–February 2016?

Fri, 04/01/2016 - 10:29

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “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?”

Nationally, properties sold in February 2016 were typically on the market 59 days (64 days in January 2016; 62 days in February 2015), according to the February 2016 REALTORS® Confidence Index Survey Report.11 Fewer days on the market are an indication that inventory remains tight. Short sales were on the market for the longest time at 126 days, while foreclosed properties typically stayed on the market for only 57 days. Non-distressed properties were typically on the market for 57 days.

Nationally, approximately 35 percent of properties were on the market for less than a month when sold. About 15 percent were on the market for longer than six months.

By state, properties typically sold within a month in the District of Columbia, Colorado, and Alaska. Properties typically sold between 31 and 45 days in Washington, California, Utah, Arizona, Minnesota, Nebraska, Kansas, and Oklahoma. In some oil-producing states which are undergoing slower job growth following the collapse of oil prices, such as Montana, Wyoming, New Mexico, and Louisiana, properties stayed on the market between 61 and 90 days. Texas appears more resilient to the oil price collapse, as properties typically sold between 46 and 60 days. Local conditions vary, and the data is provided for REALTORS® who may want to compare local markets against the state and national summary.

 

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. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

February 2016 EHS Over Ten Years

Thu, 03/31/2016 - 10:24

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 data looks like in comparison to the last ten February months and how that might compare to the “ten year February average” which is an average of the data from the past ten February months.

  • The total number of homes sold in the US for February 2016 is higher the ten year February average. Regionally, the Northeast and the West were slightly below the ten year February average, while the Midwest and South showed stronger sales. Since 2014 February EHS has been on the rise for the US and all four regions.
  • Comparing February of 2006 to February of 2016 fewer homes were sold in 2016 in the US and all regions, the Northeast enduring the biggest decline of 44.2 percent. The US had a drop of 25.8 percent while the South had the smallest drop in sales at 17.6 percent over the ten year period.
  • This February the median home price is higher than the ten year February average median price for the US and all four regions.
  • Comparing February of 2016 to February 2006, the median price of a home increased only in the Midwest and South. The US had a slight decline in price of 2.3 percent while the Northeast had the biggest dip of 14.3 percent and the West experienced a 5.8 percent decline in price.
  • Looking at year over year changes, after February 2011 price growth began to stabilize and maintain momentum thru the current year for the US and four regions. Since 2012 February price growth has been steady, while the Northeast experienced a few slight declines in 2014 and 2016.
  • The median price year over year percentage change shows that home prices began to fall in 2007 nationally, and prices dipped by double digits in 2009 for all regions except the Midwest which was close at 9.2 percent. The trend for median home prices turned around completely in 2013, when all regions including the US showed price gains. Because of this, all regions and the US saw their lowest February median price in either 2011 or 2012. The West had the largest gain in price of 22.3 percent, while the Northeast had the smallest gain at 5.5 percent from 2012 to 2013. This February the West (7.0%) 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 February than the ten year February average.  This current February the US had the fastest pace of homes sold relative to the inventory when months supply was 4.4 months. In 2008 the US had the slowest relative pace when it would have taken 9.8 months to sell the supply of homes on the market at the prevailing sales pace. Relative to all supply, the condo market had the biggest challenge in 2009 when it would have taken 14 months to sell all available inventory at the prevailing sales pace. Since 2012 supply levels for both single family and condos have gradually come down to a healthy balance of inventories.
  • The ten year February average national months supply is 6.7 while single family is 6.5 and condos are 8.2 months supply.
  • To summarize current February trends show prices and sales on the upswing while inventory conditions continue to deteriorate. The housing market is starting to stabilize and return to the period prior to the housing bubble.

View the Feb 2016 EHS Over Ten Years slides.

Former Renters: 38 Percent of Homebuyers in February 2016

Wed, 03/30/2016 - 09:11

Home buyers who were renting immediately prior to their recent home purchase accounted for 38 percent of sales in February 2016 (40 percent in January 2016; 38 percent in February 2015), according to the February 2016 REALTORS® Confidence Index Survey Report.

Renters are facing challenges transitioning into homeownership. According to NAR’s March 2016 Housing Opportunities and Market Experience (HOME) Survey of U.S. households, 63 percent of respondents who currently do not own a home believe it would be difficult to qualify for a mortgage given their current financial situation.[1] Steep house price increases amid modest income gains have increasingly made homes less affordable, especially for first-time homebuyers (Chart 2). Access to credit remains tight compared to conditions prior to 2008, although conditions are slowly easing, using FICO scores as one indicator (see Chart 3).

[1] http://www.realtor.org/reports/housing-opportunities-and-market-experience-survey

Federal Reserve Board Economists Present “On the Effect of Student Debt on Access to Homeownership” at a REALTOR® University Speaker Series

Tue, 03/29/2016 - 14:01

The rising level of student debt and the relatively high default rates for student loans have raised concerns about the impact on future homeownership among student borrowers. In a presentation at a REALTOR® University Speaker Series held recently, Federal Reserve Board economists Dr. Daniel Ringo and Dr. Alvaro Mezza presented the results of a paper estimating the impact of an increase in student debt on homeownership.[1]

(To listen to the webinar, please click here.  To access the paper by Alvaro A. Mezza, Daniel R. Ringo, Shane M. Sherlund, and Kamila Sommer “On the Effect of Student Loans on Access to Homeownership”, please click here.)

The authors use a uniquely constructed administrative data set for a nationally representative cohort of 34,891 individuals aged 23 to 31 in 2004 and followed over time, from 1997 to 2010. This administrative dataset includes anonymized information pertaining to credit bureau records, student-level information (e.g., loans and grants availed of, years in school, and degree earned), school-level information (e.g. tuition fee, whether public, private, for-profit or non-for-profit), and economic variables of the state that student was enrolled in[2].

Among the paper’s interesting results are:

  • A 10 percent increase in student loan debt decreases the homeownership rate by one to two percentage points 24 months out of school.
  • In terms of numbers, a 10 percent increase in tuition fee (which is associated with student debt) reduces the number of potential homeowners by 280 individuals per 10,000 college goers two years after exiting school, which is equivalent to 170 individuals per 10,000 individuals (both college and non-college goers). [3]
  • A 10 percent increase in student loan debt causes a 0.6 percentage point increase in the probability that the borrower falls into the subprime category (credit score of 620 or less) and a 0.8 percentage point increase in the probability that a borrower falls into deeply subprime (500 or less).[4]
  • A 10 percent increase in debt is associated with a 0.7 percentage points increase in delinquency rates.
  • The authors did not find conclusive evidence that an increase in student loan leads to a lower mortgage balance.
  • Still, all is not gloom and doom– the authors point out that the homeownership rate is increasing almost linearly over time during the five-year window. In other words, an increase of 10 percent in student debt only delays the home purchase rate of a given cohort, by about three months, based on the authors’ estimates.
The authors are careful to point the following caveats:

  • The paper captures the impact of an increase in student debt, not the impact of student’s access to education loans on homeownership. The impact of the access to student loans on homeownership can be positive for as long as the income returns over time exceed the level of debt.
  • Tighter credit underwriting standards after 2005 suggest that the drag of student debt on homeownership may be greater, with lenders more sensitive to debt-to-income and loan-to-value ratios. However, the authors note that the introduction of income-based student loan repayment plans may moderate the link between student loan debt and homeownership.

About the Authors

Alvaro A. Mezza is a senior economist of the Consumer Finance Section. Daniel R. Ringo is an economist of the Real Estate Finance Section. Shane M. Sherlund is assistant director of Program Direction Section. Kamila Sommer is a senior economist of the Real Estate Finance Section. Information on the research areas, expertise, and education of the authors can be accessed from the Federal Reserve Board.

About REALTOR® University

REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.

[1] The REALTOR® University Speaker Series was held on March 25, 2016. The authors make the disclaimer that the views expressed in the paper and in the presentation do not reflect the views of the Federal Reserve Board.

[2] Anonymized administrative data are from TransUnion LLC, National Student Clearinghouse, National Student Loan Data System, Integrated Postsecondary Educations Data System, and the College Board.

[3] The authors use the in-state tuition rate at public 4-year colleges in the student’s home state as an instrumental variable for student debt, and the authors conduct a number of validation exercises to ensure that the tuition rate is a valid instrumental variable. In econometric theory, omitted variables, whose effect is picked up by the error term, lead to biased estimates of the effect of the observed explanatory variables on the dependent variable being explained. The authors use Two-Stage Least Squares and maximum likelihood methods to estimate the coefficients of the likelihood of owning a home.

[4] The credit scores are based on TransUnion LLC credit score system.

Highlights of February 2016 REALTORS® Confidence Index Survey

Mon, 03/28/2016 - 10:47

Market conditions vary across local markets, but the REALTORS® confidence and traffic indices indicate that overall market activity improved in February 2016 compared to one year ago and to the previous month, according to the February 2016 REALTORS® Confidence Index Survey Report. Sustained job creation and the low cost of obtaining a mortgage continue to support housing demand. However, lack of supply across many states is weighing on sales and driving up prices, making homes less affordable especially for first-time buyers.

First-time home buyers accounted for 30 percent of sales. Purchases for investment purposes made up 18 percent of sales, while distressed properties were ten percent of sales. Respondents from New York, a state which follows a judicial foreclosure process that typically takes longer than a non-judicial process, reported an increase in distressed properties in the market. Cash sales accounted for 25 percent of sales. Nationally, properties typically were on the market 59 days and took 40 days to close the contract. There are reports that TRID has led to longer rate lock and escrow periods, but there are also reports that TRID has been “fairly easy to deal with” and that the new rules “are not a major problem” largely because the industry prepared for the changes in the time between announcement and implementation.[1]

Very low supply, steep price increases, and lender processing delays were reported as the key issues affecting sales, especially to first-time homebuyers. Appraisal backlogs and “below-market” and “inconsistent” appraisals were also reported to be causing transaction delays and cancellations.The collapse in oil prices is also a concern in oil-producing states such as Texas, Wyoming, Montana, and Oklahoma. Still, with the spring and summer months coming, respondents were generally confident about the outlook for the next six months across all property types. Respondents typically expected prices to increase 3.6 percent in the next 12 months.

[1] The TILA‒RESPA Integrated Disclosure (TRID) regulations came into effect on October 3, 2015. The new guidelines are intended to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying.

REALTORS® Are Generally Optimistic Over the Next Six Months, Based on December 2015-February 2016 Surveys

Fri, 03/25/2016 - 14:28

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members to assess their outlook over the next six months for the single-family homes, townhomes, and condominium markets. NAR compiles the responses into the REALTORS® Confidence Index—Six-Month Outlook across property types.

Local market conditions vary, but with the spring and summer months coming, REALTORS® remained by and large confident about the outlook over the next six months, according to the February 2016 REALTORS® Confidence Index Survey Report.[1] The following maps show the REALTORS® Confidence Index—Six-Month Outlook across property types by state.[2]

Compared to current conditions in the single-family homes market, all states, except for Delaware, Vermont, and West Virginia, were expected to have broadly “strong” to “very strong” markets in the next six months, partly because of the seasonal uptick in spring and summer. In the townhomes market, the outlook varies from “weak” to “very strong” across the states, with “very strong” market outlooks in Colorado and Nebraska. In the condominium market, the outlook is also mixed across the states, with the District of Columbia having the strongest outlook, the only area where the index registered “very strong.” In spite of some comments expressing concern about the low oil prices, the respondents in oil-producing states such as Texas, Colorado, and Montana broadly had “strong” to “very strong” outlook about conditions in the next six months. In Oklahoma, respondents had a “strong” outlook on the single-family homes market, but had “weak” outlooks on the townhomes and condominium markets.

[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] The market outlook for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. Index values 25 and lower are considered “very weak,” values greater than 25 to 49 are considered “weak,” a value of 50 is considered “moderate,” values greater than 50 to 75 are considered “strong,” and values greater than 76 are considered “very strong.”

February 2016 Existing-Home Sales

Thu, 03/24/2016 - 11:03
  • NAR released a summary of existing-home sales data showing that housing market sales decreased significantly from last month, as February’s existing-home sales slumped to a 5.08 million seasonally adjusted annual rate. February’s existing-home sales pace is the lowest since November of 2015, when sales were hit by implementation of the new TRID mortgage disclosure rules, however sales are up 2.2 percent from a year ago.
  •  The national median existing-home price for all housing types was $210,800 in February, up 4.4 percent from a year ago.
  • Regionally, all regions showed growth in prices from a year ago, except the Northeast which declined 0.8 percent. The West led with the largest gain at 7.0 percent while the South had the smallest gain at 5.0 percent from last February.
  • From January, all regions experienced declines in sales. The Northeast had the biggest decrease of 17.1 percent followed by the Midwest with a decline of 13.8 percent. The South had the smallest decline of 1.8 percent and the West declined 3.4 percent.
  • All regions showed gains in sales from a year ago, except the Midwest where sales were flat. The Northeast had the biggest increase of 5.0 percent while the West had the smallest gain of 0.9 percent. The South leads all regions in percentage of national sales at 43.3 percent while the Northeast has the smallest share at 12.4 percent.
  • February’s inventory figures are up 3.3 percent from last month to 1.88 million homes for sale, but the level remains unhealthy. Inventories are down 1.1 percent from a year ago. It will take 4.4 months to move the current level of inventory at the current sales pace. It takes approximately 59 days for a home to go from listing to a contract in the current housing market compared to 62 days a year ago.
  • Single family sales decreased 7.2 percent while condos also fell 6.6 percent compared to last month. Single family home sales increased 2.0 percent and condo sales are up 3.6 percent from a year ago. Both single family and condos had an increase in price with single family up 4.3 percent and condos up 5.1 percent from February 2015.

Is California an oil-producing state?

Mon, 03/21/2016 - 14:59

This blog post was written by Managing Director of Housing Research, Danielle Hale, and Research Economist, Scholastica (Gay) Cororaton.

California may not be what you think of when you think US oil production, but according to statistics from the Energy Information Administration[1] on monthly crude oil production, California was the number three oil-producing state in terms of barrels of oil produced in 2014 and 2015, as seen in the first table and map below (Table 1/Map 1).

So why hasn’t the collapse of the price of oil wreaked more havoc on the California economy? It’s important to consider the contribution of oil in the context of other economic activity. If we compare the value of oil production[2] against the total value of economic production in a state, otherwise known as GDP by State[3], we can get a sense of oil’s importance to the state economy, and we can understand why Californians are not as concerned as Alaskans about the price of oil, even though California produced 22 to 25 million more barrels of oil than Alaska did in 2014 and 2015.

Looking at the second table and map below (Table 2/Map 2), we can see that as a share of economic activity, the number one oil state is North Dakota. Even though oil prices have dropped, oil production was still the equivalent of more than half of total estimated economic activity in the state in 2015[4]. Alaska follows next with an estimated oil share of economic activity at 17.5 percent in 2015. Wyoming, New Mexico, Texas, Oklahoma, and Montana round out the top 7, each expected to have oil production exceed 3 percent of 2015 state economic activity. Kansas, Colorado, Utah, Louisiana, and Mississippi are the next five states, each with oil production estimated to exceed 1 percent of state economic activity in 2015. In contrast, California, the number three producer by barrels, did not see the contribution of oil production exceed 1 percent in either year reviewed.

What industry is considered large? The mining industry across the US contributed 2.6 percent to GDP in 2014[5]. Compare that with the construction industry (3.8 percent) and the housing industry (9.6 percent) in 2014 and that gives some perspective. The collapse in the price of oil has certainly already had effects on the US production industry, and until oil prices recover, areas in which the production of oil plays a prominent role in the economy are likely to experience a headwind to growth. In other parts of the country, however, lower oil prices continue to be a welcome relief for consumers, largely offsetting the negative effects.

[1] https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm

[2] Using total annual barrels produced and an average annual oil price

[3] GDP data by State is from the Bureau of Economic Analysis (BEA) for 2014 and estimated by National Association of REALTORS® (NAR) for 2015 based on BEA and EIA data

[4] Economic activity for 2015 was estimated from 2014 figures using information about oil production changes and the overall change in US economic activity for 2015.

[5] This includes value-added from oil and gas extraction, mining except oil and gas, and support activities for mining per the BEA Valued Added by Industry data; NAR calculations.

March Marks Modest TRID Progress

Fri, 03/18/2016 - 11:17

Lenders appear to have stabilized the TRID impact and edged toward improvement, but substantive delays linger. With a busy spring market looming on the horizon, their efforts may pay dividends when higher volumes come.

The average time-to-close as measured in days fell from 43.3 in January to 39.9 in February. However, this decline reflects seasonal variation. Relative to the same time in February of 2015, the time-to-close was 5.1 days higher reflecting TRID-related delays. The February year-over-year increase under TRID was a decline from the 5.2 additional days in January and the 5.7 day peak registered in December.

There was a shift in the distribution of closing from January to February that was in-line with typical seasonal variation. Comparing February of 2016 to the same period last year, which accounts for seasonal variation, there was a small improvement. The share of settlements that took more than 45 days rose from 36.7 percent in February of 2015 to 45.1 percent in February of 2016, an increase of 8.4 percentage points compared to a year-over year difference of 8.8 percentage points last month. At the other end of the spectrum, the share of settlements that took less than 30 days fell by 8.6 percentage points to 23.7 percent in February compared to a year-over-year decline of 8.3 percentage points in January. Thus, a small share of under 30-day settlements look longer while a slightly larger share of the over 45 day settlements were shorter and the middle portion of the distribution absorbed both, rising 0.1% on a year-over-year basis, an improvement from the 0.6 percent decline last month.

This month’s reading was a mixed bag with modest improvement at the long-end of the settlement distribution and some erosion at the short end. As a result, the average time-to-settle improved modestly. Still this modest gain is progress and the abnormal delays are limited to about 8.5 percent of the market. Lenders will be pressed as volumes rise through the spring and summer months. REALTORS® should seek out lenders who are collaborative and who have successfully navigated TRID without delays to assure smooth settlements in 2016.

January 2016 Housing Affordability Index

Wed, 03/16/2016 - 14:45

At the national level, housing affordability is down from a year ago as rates are slightly higher and brisk home price growth continues to outpace median family incomes.

Housing affordability declined from a year ago in January pushing the index from 182.8 to 171.0. The median sales price for a single family home sold in January in the US was $215,000, up 8.3 percent from a year ago.

  • Nationally, mortgage rates were up 8 basis points from one year ago (one percentage point equals 100 basis points) while incomes rose approximately 2.3 percent. The increase in mortgage rates from one year ago costs the median home buyer $8 per month on principal and interest payments at the current home price while rising home prices require an additional $63 per month for a total increase of $71 in monthly principal and interest.
  • Income growth means the median family earns $126 more per month than January 2015 and while this is more than the increase in housing costs each month, it means that 56 percent of the additional income would need to be devoted to housing, whereas typically a homeowner spends 25 to 30 percent of income on housing.
  • Regionally, three of the four regions saw declines in affordability from a year ago. The Northeast had the only increase of 2.5 percent. The Midwest and South shared the biggest decline in the affordability index of 7.7 percent followed by the West with the smallest at 4.9 percent.
  • The Midwest had the biggest increase in price at 9.0 percent while the Northeast experienced a slight decline in prices at -0.1 percent. The South and the West had sizeable gains in prices of 8.5 percent and 7.6 percent increase in single family home prices, respectively.
  • By region, affordability is up in all regions from last month. The South (5.6 percent) and West (5.4 percent) had the biggest increase while the affordability increased the least in the Midwest (4.5 percent) and Northeast (4.6 percent).
  • Despite month to month changes, the most affordable region is the Midwest where the index is 219.6. The least affordable region remains the West where the index is 124.9.  For comparison, the index is 177.8 in the South, 172.7 in the Northeast.
  • Currently mortgage applications are up and rates this week have slightly increased from the lower path they were on through the end of February. Vacancy rates remain low and rents are still rising so those who do not own may feel a pinch from price increases. Increases in building permits, available workers, and new construction are needed to help offset inventory shortages that have had an impact on home prices. Despite lower figures in pending sales reported last month, continued demand should sustain sales roughly at the current pace and will provide some stability for the economy.
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principle and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

 

Latest Consumer Price Inflation (February 2016)

Wed, 03/16/2016 - 10:50
  • The overall consumer inflation was virtually unchanged in February but some components are picking up steam thereby raising the prospect of a higher inflation and higher interest rates next year.
  • Specifically, the overall consumer price index fell by 0.2 percent over the month, thanks to even lower gasoline prices than before. From one year ago, consumer prices were higher by only 1.0 percent.
  • What is strongly rising relates to housing costs. Rents are higher by 3.7 percent from one year ago. Home prices are rising even at a faster rate, but government statisticians do not include home prices into the inflation calculation. Rather they use something called “homeowners’ equivalent rent”, which is what the homeowner would pay to rent out their home. This measure is also rising solidly at 3.2 percent. Given that the housing costs carry the biggest weight in the calculation of the overall inflation, it is just inevitable for the broad inflation rate to go higher, especially once gasoline prices stop falling. Higher inflation will then trigger mortgage rates to move higher.
  • The cost-of-living-adjustment, say on social security checks, was zero in 2015, to reflect no price increase in 2014. But with the inflation expected to rise by 2 percent by the end of this year and possibly by 3 percent in 2017, the cost-of-living-adjustment will similarly be readjusted in the upcoming years.
  • As an aside, one sector has experienced turbo-charged price growth over the past 30 years. Which? Ask the parents with college kids.

How Real Estate Agents Acquire New Business

Tue, 03/15/2016 - 13:43

This seems to be the question everyone wants to know if you are a real estate agent. Me? I found mine by referral so there was already a level of trust established. In fact, most buyers find their agents through a referral  or work with an agent they used in the past 61 percent of the time—41 percent referred from a friend, family, neighbor, or relative, five percent referred by another real estate agent, three percent referred through an employer, and 12 percent use the same agent they worked with in the past, according to The National Association of REALTORS®’s 2015 Profile of Home Buyers and Sellers report, one of NAR’s most widely read and cited surveys regarding the home buying process, types of home purchased and sold, and the role buyers maintain with the real estate agents. Seventy-three percent of sellers also used referrals from someone they knew or an agent previously they previously worked with. Overwhelmingly, 88 percent of buyers and 89 percent of sellers worked with an agent to close the home purchase or sale.

With the increase in the use of digital technology complementing the home search process—44 percent of buyers first looked online and 33 contacted a real estate agent—we can speculate that using the internet and working with an agent go hand in hand in today’s home search process.

So it begs the question—Are the efforts real estate agents put into maintaining digital platforms leading to new customers? For all buyers, 12 percent reported finding their agents online—10 percent from an internet website and two percent search engine or with a mobile application. Referrals and repeat business are no doubt the number one source of new business for real estate agents, but digital marketing is indeed how agents capture an additional fifth of their entire business.

What is interesting to note is that when we segmented the data by age in NAR’s 2016 Home Buyer and Seller Generational Trends Report, we found that buyers ages 61 to 69 found their agents online 17 percent of the time, as this group moves longer distances. As age goes up, the use of a previous agent increases and referrals go down. Older buyers are more likely to be repeat buyers and work with agents they used in the past. Younger buyers 35 years and under, relied heavily on referrals more than any other generation as many were first-time buyers. Nevertheless, 12 percent of Millennials still found their agents through online sources. By demographic composition, single males found their agents 14 percent of the time online, as did 13 percent of both married and unmarried couples.

NAR also surveys its members on the topic in two different reports. Real estate agents, as individual business professionals, were asked in the 2015 Member Profile where their business came from. Again, the median was 20 percent from repeat business and 20 percent from referrals. Sixty-four percent said they received no business from open houses. Agents reported that they received a median of three business inquiries and two percent of all business from their website. Thirty-three percent said they received 1-5 inquiries from their website; however, 32 percent said they received zero inquires. They also said that they spend a median of $130 to maintain a website for the year.

NAR also asked its members where clients came from the perspective of a real estate firm representing a group of agents where they pool their resources in the 2015 Profile of Real Estate Firms. The report states that 55 percent of new customer inquiries come from past clients (30 percent) and referrals (25 percent) for real estate firms. Ten to fifteen percent of new inquires come from the firm’s websites and 5-10 percent from social media. Ten percent of the total sales volume at firms also comes from their own websites and five percent from social media.

Most businesses need digital marketing in order to remain competitive and stay in afloat. Real estate agents and firms are no exception. The industry demands that they put money into creating and maintain their websites and devote resources into creating social media content. Social media, if done properly, can be by and large free marketing and a way to keep in contact with past clients. While having a digital footprint is important, referrals and repeat clients remain the main source of creating and maintaining client relationships in the long run for real estate agents.

Household Formation Slowdown Impacts Apartment Demand in 2015.Q4

Thu, 03/10/2016 - 11:16

Economic performance for the fourth quarter of 2015 was upwardly revised this past week by the Bureau of Economic Analysis. Real gross domestic product (GDP) advanced 1.0 percent on an annual basis, up from the initial estimate of 0.7 percent.

Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. Average weekly earnings of private employees rose by 2.4 percent in the fourth quarter of this year, compared to one year earlier.

The unemployment rate declined from 5.6 percent in the first quarter 2015 to 5.0 percent by the close of the year. At the end of December there were 7.9 million unemployed Americans.  The average duration of unemployment declined from 31 weeks in the first quarter to 28 weeks by the end of 2015.

Consumer confidence, as measured by The Conference Board, declined to 96.0 in the fourth quarter of 2015, the lowest reading of the year. Separately, the Consumer sentiment index compiled by the University of Michigan moved up slightly in the last quarter of the year to 91.3, compared with the 90.7 value from the third quarter. The second quarter value was 94.2 while the third quarter posted 90.7.

Consumers’ wobbling confidence translated into lower household formation figures. Looking at historical trends, household formation averaged 1.3 million every year over the 1958-2007 period. Between 2008 and 2013, the average number of new households dropped to 579,000 per year, underscoring the severity of the Great Recession and ensuing slow recovery. In 2014, net household formation jumped to 2.2 million, as employment growth encouraged more young people to strike it on their own. During 2015, household formation advanced at a rather moderate pace of 191,000 new households.

Demand for multifamily properties continued on an upward path. Renter occupied housing units totaled 42.6 million units in the fourth quarter of 2015, a 300,000 unit advance from the fourth quarter of 2014, based on U.S. Census Bureau data. National vacancy rates averaged 7.0 percent for rental housing during the fourth quarter, unchanged from the same period in 2014. Median rents for rental units averaged $850 in the fourth quarter of this year.

Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. As rising new supply is a concern in major markets, apartments in SCRE markets experienced availability decreases, with the national average declining 63 basis points, to 6.2 percent in the fourth quarter of 2015.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

Contracts That Closed in January 2016 Typically Took 42 Days to Close

Wed, 03/09/2016 - 11:25

In a monthly survey, the National Association of REALTORS® asks REALTOR® respondents how many days it took to close their most recent contract that closed in January 2016. The median days to close a contract was 42 days, up from 36 days in July 2015 when NAR first started tracking this information, according to the January 2016 REALTORS® Confidence Index Survey Report. The average number of days to close a contract also rose to 46 days from 41 days in July 2015.[1]

The survey also asks the respondents if they observed a longer closed period compared to a year ago. Nearly half of respondents reported a longer closing period compared to a year ago.

Reports about TRID are mixed: there are reports that “TRID is causing delays” and “making transactions difficult,” but there are also reports that TRID has been “fairly easy to deal with” and that the TRID rules “aren’t a major problem”.[2] Respondents have reported writing 45-day closing periods in their contracts to take into account the TRID timelines.

Delays due to financing are the biggest cause of recent delays. Among contracts that had a delayed settlement in the period November 2015‒January 2016 (32 percent of contracts), 40 percent had financing issues.

 [1] The median is the number (of days) such that half of the respondents reported a lower number and half of the respondents reported a higher number. It is less susceptible to extreme values than the average (mean). A higher average (mean) compared to the median indicates the presence of data at the upper range that skews the distribution of observations to the right and that pulls up the average(mean) compared to the median which is the middle value.  

[2] The TILA‒RESPA Integrated Disclosure (TRID) regulations which came into effect on October 3, 2015 were intended to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. Toward this end, the new guidelines prescribe timelines when consumers should receive the Loan Estimate and the Closing Disclosure. The creditor should deliver the Loan Estimate or place it in the mail no later than the third business day after receiving the loan application. The creditor is required to ensure that the consumer receives the Closing Disclosure no later than three business days before the consummation of the loan. If the creditor provides a new Closing Disclosure, the consumer must be provided with another three-business day waiting period. Guidelines at http://files.consumerfinance.gov/f/201508_cfpb_tila-respa-integrated-disclosure-rule.pdf.

 

In What States Did Properties Sell Quickly in November 2015–January 2016?

Tue, 03/08/2016 - 11:23

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “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?”

Nationally, properties sold in January 2016 were typically on the market 64 days compared to 69 days one year ago, indicating an improved market for sellers (58 days in December 2015; 69 days in January 2015), according to the January 2016 REALTORS® Confidence Index Survey Report.

Fewer days on the market are an indication that inventory remains tight.11 Short sales were on the market for the longest time at 77 days, while foreclosed properties typically stayed on the market for only 57 days. Non-distressed properties were typically on the market for 61 days.

Properties typically sold within a month in the District of Columbia and within 45 days in Washington, California, Utah, Arizona, Kansas, and Nebraska. In some oil-producing states which are undergoing slower job growth following the collapse of oil prices, such as North Dakota, Montana, New Mexico and Louisiana, properties stayed on the market between 61 and 90 days. Texas appears more resilient to the oil price collapse, as properties typically sold within 46 to 60 days. Local conditions vary, and the data is provided for REALTORS® who may want to compare local markets against the state and national summary.

 

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. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

Retail Availability Declines as Employment Advances

Mon, 03/07/2016 - 15:01

U.S. macroeconomic momentum declined during the fourth quarter of 2015, buffeted by global economic slowdown and financial volatility. Based on the second estimate from the Bureau of Economic Analysis, real gross domestic product (GDP) rose at an annual rate of 1.0 percent, a slight improvement from the first estimate.

Consumer spending advanced at an annual rate of 2.0 percent in the fourth quarter, benefiting from the winter holiday season. However, with soft retail sales, brisk electronic commerce proved the silver lining. Spending on durable goods increased by 3.4 percent, as consumers purchased furniture, household appliances and recreational goods and vehicles. Nondurable good purchases advanced modestly, driven by sales of clothing and shoes.

Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. Average weekly earnings of private employees rose by 2.4 percent in the fourth quarter of this year, compared to one year earlier. The unemployment rate declined from 5.6 percent in the first quarter 2015 to 5.0 percent by the close of the year. At the end of December there were 7.9 million unemployed Americans.  The average duration of unemployment declined from 31 weeks in the first quarter to 28 weeks by the end of 2015.

Consumer confidence, as measured by The Conference Board, declined to 96.0 in the fourth quarter of 2015, the lowest reading of the year. Separately, the Consumer sentiment index compiled by the University of Michigan moved up slightly in the last quarter of the year to 91.3, compared with the 90.7 value from the third quarter. The second quarter value was 94.2 while the third quarter posted 90.7.

Demand for retail properties has picked up in tandem with rising employment and confidence. Retail tenants are expanding, leading developers to increase construction. Vacancy rates for retail buildings declined 10 basis points in the fourth quarter, to 11.2 percent, based on CBRE data. With declining availability, rents are expected to rise.

Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. Even with a soft holiday shopping season, retail vacancies declined 40 basis points, to 12.9 percent in the last quarter.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

 

Home Purchases by Foreign Buyers are Likely Easing

Mon, 03/07/2016 - 11:24

Over the 12-month period April 2014‒March 2015, the National Association of REALTORS® estimated that the dollar volume of home purchases of foreign buyers rose to $102 billion, led by purchases from Chinese buyers. While NAR is yet to conduct its annual survey in April 2016, current economic indicators could prove challenging to foreign buyers and may indicate an easing of foreign demand. [1]

  • Rising U.S. home prices. U.S. home prices have continued to increase strongly, making homes less affordable for domestic and foreign buyers alike. As of January 2016, the median price of an existing home stood at $213,800, or eight percent higher compared to the levels one year ago.
  • Stronger dollar. On top of the strong increase in home prices, the dollar has also strengthened against most currencies, which means that foreign buyers have to shell out more of the local currency for every dollar of purchase. For example, the dollar has appreciated against the Brazilian real by a whopping 54 percent, against the Mexican peso by 23 percent, and the Canadian dollar by 15 percent.

Given the increase in U.S. home prices and the appreciation of the dollar, the price of a typical U.S. home measured in Brazilian real was 67 percent higher in January 2016 compared to a year ago. Measured in Mexican pesos, U.S. home prices were 33 percent higher. Measured in Canadian dollars, U.S. home prices were 27 higher (see Chart 1).

According to data compiled by the International Monetary Fund’s Global Housing Watch project, the U.S. has experienced one of the more robust rates of housing price growth.[2] After adjusting for inflation, U.S. home prices increased in real terms by 6.2 percent in the second quarter of 2015. In comparison, house prices decreased in real terms in countries such as China (-4.8%), Brazil (-5%), and Russia (-11%). In Mexico, house prices increased in real terms at a more moderate pace (3.3%), as well as in Canada (4.2%).

  • Slower economic growth. The countries that have been traditionally the top sources of foreign buyers – China, Canada, Latin America, and Europe – are expected to grow at a slower or moderate pace in 2016. The global slowdown in 2016 is essentially arising from two fronts: the slowdown in the Chinese economy and the oversupply in oil production that has led to falling oil prices and slower economic growth in oil-producing countries such as Canada.

  • Tighter capital flow monitoring in China. Given the speculative attacks on the yuan, China’s State Administration of Foreign Exchange has enhanced its systems and regulations for reporting and monitoring capital flows.[3]  This is expected to have some impact since foreign buyers typically pay cash. In January 2016, China’s State Administration of Foreign Exchange launched an individual foreign exchange monitoring system. Under this system, individuals are not allowed to evade their purchase quota of $50,000 per year per person. Those individuals who borrow another individual’s quota will be put on watch list for the current year and two consecutive years. Banks are required to report any quota evasion within 20 days and to assign technicians to the individual foreign exchange business monitoring system.

In summary, foreign buyers are facing some headwinds. On a positive note, the slowdown in demand from foreign buyers may help ease the tightness of supply in the market.

[1] Thanks to Danielle Hale Hedge, Managing Director, Housing Research, for reviewing and editing this blog.

[2] See http://www.imf.org/external/research/housing/

[3] See http://www.safe.gov.cn/wps/portal/english/Regulations

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

Fri, 03/04/2016 - 14:18

Economic activity momentum decelerated in the last quarter of 2015. Real gross domestic product (GDP) advanced at an annual rate of 1.0 percent, according to the Bureau of Economic Analysis’s second estimate. International trade felt the impact of the stronger dollar in the fourth quarter. Exports declined by 2.7 percent, while imports also declined 0.6 percent, pegging real net exports at a negative $556.8 billion during the quarter.

Retail e-commerce sales totaled $89.1 billion in the fourth quarter of the year, a 14.7 percent gain compared with the same quarter of the prior year, according to the Census Bureau. E-commerce sales represented 7.5 percent of total retail sales. As more consumers shift to on-line purchases, distribution centers play a greater role in fulfilling orders.

Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. With demand for industrial properties rising, transportation and warehousing employment gained 22,200 new positions, while wholesale trade employment rose by 24,100 jobs.

The industrial sector recorded stronger fundamentals in the fourth quarter, with rising demand and declining vacancies. Industrial net absorption totaled 66.3 million square feet in the fourth quarter, bringing the total for 2015 to 231.2 million square feet, according to JLL. Warehouse and distribution centers accounted for the lion’s share of demand, followed by manufacturing. Supply picked up as well, with new completions ringing the year end at 115.0 million square feet. Demand continued outpacing supply, driving industrial vacancies down to 6.4 percent, a 14-year low, according to JLL. With a tight market, industrial rents rose 5.6 percent, to an average of $4.93 per square foot in the fourth quarter.

Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. Industrial availability reached 11.4 percent, a 17-basis point decrease on a yearly basis.

Lease concessions declined 3.1 percent. Tenant improvement (TI) allowances averaged $47 per square foot per year nationally.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

Raw Count of Home Sales (January 2016)

Fri, 03/04/2016 - 13:54
  • Existing-home sales increased 0.4 percent in January from one month prior while new home sales declined 9.2 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 than the seasonally adjusted figures.  The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 302,000 existing-homes were sold in January while new home sales totaled 37,000.  These raw counts represent a 31 percent loss for existing-home sales from one month prior while new home sales dropped 3 percent.  What was the trend in the recent years?  Sales from December to January decreased by 27 percent on average in the prior three years for existing-homes and rose 11 percent for new homes.  So this year, both existing and new home sales underperformed compared to their recent norm.
  • 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, expect busier activity in February and even better activity in March for existing-home sales. For example, in the past 3 years, February sales typically increased by 4 to 5 percent from January and with more gains in March where sales rose by 26 to 37 percent from February. For the new home sales market, the raw sales activity in February tends to be better than that occurring in January, and activity is expected to grow more in March. For example, in the past 3 years, February sales rose by 6 to 15 percent from January while March sales rose by 2 to 14 percent from February.

January Pending Home Sales

Fri, 03/04/2016 - 10:30
  • NAR released a summary of pending home sales data showing that January’s pending home sales are down modestly 2.5 percent from last month but slightly improved 1.4 percent from a year ago. January’s pending sales reveal a slow beginning to the year with the South being the only region to have gains in pending sales of 0.3 percent from last month.
  • Pending sales are homes that have a signed contract to purchase on them but have yet to close. They tend to lead existing-home Sales data by 1 to 2 months.
  • All regions showed increases from a year ago except the South, which had a decline of 1.3 percent. The Northeast saw the biggest gain from a year ago at 10.9 percent while the West had the smallest gain at 0.4 percent.
  • From last month, the Midwest had the largest decline at 4.9 percent while the West followed with a decline of 4.5. The Northeast had the smallest dip in pending sales at 3.2 percent.
  • The pending home sales index level was 106.0 for the US.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing-home sales above the 5 million mark.
  • Despite a steady start to the year for existing-home sales, a slow start for 2016 pending sales implies that there could be some weakness ahead in existing-home sales. An improvement in inventory levels would help combat price acceleration and provide potential home buyers more options, possibly reversing the slow start to the year.

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