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Updated: 33 min 7 sec ago

Online Communities Taking Over the Neighborhood

Wed, 07/15/2015 - 10:44

This blog post was written by Amanda Riggs, Research Survey Analyst.

Getting involved in your community once only meant volunteering for a civil group, joining a sports club, or running for local governance. People stayed connected through face to face interactions. In a service industry like real estate that thrives on friendly interactions and personal connections, building online communities through websites, social media, and digital communication is now one of the most efficient ways that REALTORS® can build and expand their network to generate new business.

The majority of business for real estate professionals comes from referrals and repeat business, which makes sense since the industry is built upon personal relationships. At first, the idea of expanding online communities to grow the real estate industry seems like a no-brainer. All businesses these days rely on digital connectivity or they get left behind. The National Association of REALTORS® (NAR)’s Research department flipped through its survey data to take a deep look at how its members value online communities for their business. Here is what the surveys said:

The NAR 2015 Member Profile, an in-house survey that gathers demographic data on its 1 million real estate members, reports that:

  • 65 percent of REALTORS® use social media for their business.
  • 64 percent said that open houses brought no business.
  • 40 percent of business for younger agents are from referrals and repeat business and 64 percent for more experienced agents.

Naturally, word of mouth remains the largest source of income for NAR members and only grows by the number of years REALTORS® stay in the game. What is interesting to note is that open houses are almost a dead avenue for REALTORS® – they brought two-thirds of NAR members no business. Websites do not appear to bring in new clients on their own. However, two-third of members said they actively use social media as a means to market their brand and showcase their listings.

The NAR 2014 Profile of Home Buyers and Sellers, NAR’s profile of the buying and selling process, states that:

  • The first step in the home-buying process for 43 percent of home buyers was looking online for properties and 12 percent looked online for information about how to buy a home.
  • Ninety-two percent of buyers use the internet in some way in their home search process and 50 percent of buyers use a mobile website or application in their home search.
  • Real estate agents were viewed as a useful information source by 98 percent of buyers who used an agent while searching for a home.
  • Eighty-eight percent of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001.

As a frame of reference, in 1964, 61 percent of buyers contacted agents, 40 percent read newspaper ads, and seven percent drove around when looking for a home. In 2014, 43 percent looked for properties online. While the initial process may start online, when buyers seek to make a home purchase, they turn to the advice from a real estate agent that they connected with from a trusted friend or family member.

While we do not know exactly how much revenue is generated directly from social media, we do know that social media platforms like Facebook, Twitter, Instagram, Pinterest, and Tumblr do support the building of online communities for REALTORS® to stay connected to current and past clients. They also lend a hand to referrals. Purchasing a home is a lifetime milestone for most and people want to work with someone they trust, usually asking for a referral from a coworker, friend, or family member. People also now have the digital technology to search for a home and then later connect with the agent associated with that property. On social media platforms, agents can showcase homes for potential buyers and thus expand their client base through a digital community.

More importantly, real estate has become a digital landscape where all licensed agents and industry professionals must keep up. Not only can building an online community be beneficial to business, the price may be too high to ignore it. In the NAR 2014 Profile of Real Estate Firms, 41 percent of real estate firms say they expect future competition to come from virtual firms in the next year. Keeping up with technology was also listed as the second biggest challenge in the next two years that NAR member firms reported for their future business outlook. The report also cited that 15 percent of sales and new business inquires come from websites and social media. We expect real estate agents to continue to grow their networks of referrals and repeat customers through the aid of social media.

Which social media platforms are the best for business in real estate? Facebook and Twitter are the most widely used platforms across the world in a general sense. Nevertheless, Instagram and Pinterest are growing and could provide a better site to showcase new property photos without having to pay for advertising. LinkedIn is another professional networking tool that allows agents and brokers to expand their digital community boosting industry achievements. It is not a question of if social media contributes to sales, but how can REALTORS® maximize the digital space to create their online communities so that their business of tomorrow can thrive.

By way of example, we look at NAR’s Research and Statistics social media platforms. NAR Research’s Facebook page has upwards of 37 thousand likes with a weekly average reach of 15,000 people. As REALTORS® are always on the go and mobile with their devices, it is no surprise that they are constantly engaged on Twitter. NAR Research’s Twitter page has nearly 80 thousand followers engaged on a range of topics related to the housing market. Two of the hottest growing platforms include Instagram and Pinterest that can support REALTORS® illustrate their listings and expand their digital networks. Not sure on how to do it? NAR has put together a host of resources that can help direct you on how to use social media as a real estate professional in the Field Guide to Social Networking for REALTORS®.

Sixty Percent of REALTORS® Participated in Like-Kind Exchanges

Tue, 07/14/2015 - 15:21

This blog post was written by George Ratiu, Director of Quantitative & Commercial Research and Erin Fitzpatrick, Research Intern

Real estate constitutes the foundation of economic activity, with real estate transactions providing the connecting pathways between individuals, businesses, and governments. In 2014 the value of real estate in the United States totaled $42.4 trillion[1]. Sales of commercial real estate assets—priced at or above $2.5 million—totaled $438 billion[2] in 2014, while sales of smaller commercial assets—priced below $2.5 million—comprised an additional $60 billion[3]. In addition, sales of residential real estate totaled $1.1 trillion[4] in 2014, with existing properties accounting for 89 percent of total.

For a significant proportion of real estate market participants, like-kind exchanges (LKE) provide an important vehicle to sell and acquire property. The Internal Revenue Code (IRC) Section 1031 codifies that the tax owed on any gain after a sale may be deferred as long as the proceeds are reinvested in a similar property through a like-kind exchange.  The Internal Revenue Service (IRS) makes note of the fact that while the gain “is tax-deferred […] it is not tax-free.”[5]

Like-kind exchanges (LKE) feature prominently in NAR members’ real estate transactions. Based on the Like-Kind Exchanges: Real Estate Market Perspectives 2015 report, slightly over 60 percent of respondents indicated that they participated in at least one like-kind exchange within the 2011-2014 period. Of the total, 40 percent participated in 1—3 transactions, while 14 percent were active in 4—6 exchanges.

REALTORS® were active participants in like-kind exchanges during 2011-2014. The majority of respondents—68 percent—indicated that they acted as a real estate broker/agent in the exchange. An additional 24 percent identified their role as a real estate owner/investor. NAR members acted as professional advisors or qualified intermediaries in six percent and two percent of transactions respectively.REALTORS® were asked about the composition of business entities which held the properties transferred through a like-kind exchange. The survey results show that 48 percent of total FMV of the exchanged properties was held in an individual or sole proprietorship and 33 percent was held in a S-Corporation, Partnership, LLC, LLP, or MLP. An additional 10 percent of properties were held in C-Corporations (which excluded REITs).To access the Like-Kind Exchanges: Real Estate Market Perspectives 2015 report, visit http://www.realtor.org/reports/like-kind-exchange-survey.


[1] Federal Reserve Board, Flow of Funds B.101, B103, B104 tables

[2] Real Capital Analytics, US Capital Trends®

[3] Smith and Ratiu (2015), “Small Commercial Real Estate Market,” National Association of REALTORS®

[4] U.S. Census Bureau, New Residential Sales; National Association of REALTORS® Existing Home Sales

[5] Internal Revenue Service, Like-Kind Exchanges Under IRC Code Section 1031, FS-2008-18, February 2008

Existing-Home Sales Data by State

Tue, 07/14/2015 - 14:25

This blog post was written by Summer Research Interns Erin Fitzpatrick and La Shawn Skeete. Erin is currently studying at George Washington University pursuing a B.S. in Economics and a B.A. in Political Science. La Shawn is currently studying at The University of Maryland, College Park pursuing a degree in Economics.

NAR’s existing-home sales series is provided for the four major regions and for the nation.

Most state and local associations of Realtors® provide data for their service areas.  This information is typically raw counts of sales from local multiple listing services (MLSs) though availability and format of the data varies.  The following list of state data providers, which includes association and non-association providers, is given as a courtesy reference.  Contact the state or local Realtor® association in your area for more information (find contact information here).

Alabama http://acre.cba.ua.edu/page.php?id=38 Alaska http://laborstats.alaska.gov/housing/housing.htm Arizona State list of locals: https://www.aaronline.com/about-us/#locassn
Phoenix Area only: http://www.armls.com/statistics/market-reports Arkansas http://www.arkansasrealtors.com/news-events/housing-market-reports California Snapshot: http://www.car.org/marketdata/marketglance/
By region: http://www.car.org/marketdata/data/countysalesactivity/ Colorado http://www.coloradorealtors.com/colorado-regional-statistics/ Connecticut State association: http://www.ctrealtor.com/mt_media_news/pressReleases.shtml

State government: http://www.chfa.org//Press%20Room/CHFA%20Research%20Data/default.aspx Delaware No statistics at this time District of Columbia http://gcaar.com/toolkit_ektid1592.aspx Florida http://media.floridarealtors.org/market-data/ Georgia State association, Requires Login: http://www.garealtor.com/Resources/GeorgiaHousingIndicators/tabid/281/ctl/Login/Default.aspx?returnurl=%2fResources%2fGeorgiaHousingIndicators%2ftabid%2f281%2fDefault.aspx
Local MLS: http://www.gamls.com/statistics/index.cfm?Typ=County&Fn=SF Hawaii http://www.hawaiirealtors.com/MarketInfo/year-end-reports Idaho No statistics at this time. Illinois http://www.illinoisrealtor.org/marketstats Indiana http://www.indianarealtors.com/Research/Indiana-Real-Estate-Markets-Report.aspx Iowa http://www.iowarealtors.com/news/housing-trends Kansas http://kansasrealtor.com/news-media/market-stats/ Kentucky Requires Login: https://kar.com/members/ky-housing-statistics Louisiana http://www.larealtors.org/news/news/market-trends-data/40-market-trends-data/891-real-estate-trends Maine http://www.mainerealtors.com/page/974-849/statistics Maryland http://www.mdrealtor.org/ResearchStats/HousingStatistics.aspx Massachusetts https://www.marealtor.com/members/housing-data Michigan http://www.mirealtors.com/Housing-Statistics Minnesota http://www.mnrealtor.com/member-resources/housing-report Mississippi Points to local statistics, no statewide info: http://msrealtors.org/HousingStats.php Missouri http://www.missourirealtor.org/resources/stats/marketreports Montana http://montanarealtors.org/press-room Nebraska No statewide statistics; http://www.nebraskarealtors.com/i4a/pages/index.cfm?pageID=4104 Nevada http://business.nv.gov/News_Media/Publications/Housing_Market_Report/ New Hampshire http://www.nhar.org/short-term-data/ New Jersey http://njar-public.stats.10kresearch.com/reports New Mexico http://www.nmrealtor.com/housing-trends/ New York http://www.nysar.com/industry-resources/market-data North Carolina http://www.ncrealtors.org/market-statistics-about-ncar-menu.html North Dakota State association: http://ndrealtors.com/resources/
State government: https://www.nd.gov/tax/property/pubs/salesratio/sales-ratio-2014.pdf?20150615090909 Ohio http://ohiorealtors.org/ohio-home-sales-statistics/ Oklahoma http://okrealtors.com/housingdata/ Oregon http://www.pdx.edu/realestate/research_quarterly.html Pennsylvania http://www.parealtor.org/news/ Rhode Island http://www.rirealtors.org/RealtorResources/SalesStats/Default.asp South Carolina Requires Login: https://www.screaltors.org/press/ South Dakota http://www.sdrealtor.org/aboutus/housingstatistics/ Tennessee Requires Login: http://www.tarnet.com/news/ Texas https://www.texasrealestate.com/for-texas-realtors/research-about-texas-real-estate Utah http://utahrealtors.com/news-center/housing-statistics/state-summary/ Vermont http://www.vermontrealtors.com/realtor-benefits/reports/ Virginia https://www.varealtor.com/homesales Washington 1993 to 2013: http://wcrer.be.washington.edu/WSHM/WSHM.html

2008 to present: http://realestate.washington.edu/research/wcrer/reports/ West Virginia Available by phone only: http://www.wvrealtors.com/contact.shtml Wisconsin https://www.wra.org/Resources/Property/Wisconsin_Housing_Statistics/ Wyoming No statistics at this time

Despite Rising Prices, 63 Percent of Properties Sold at a Discount in May 2015

Mon, 07/13/2015 - 15:45

Although prices are on the uptrend, about 63 percent of properties sold at a discount compared to the listing price, according to the May 2015 REALTORS® Confidence Index Survey. The price discount is typically in the range of 1 to 11 percent.

Properties that stay on the market for a longer time are more likely to be sold at a discount than properties that stay on the market for a shorter time. Based on properties sold from 2012 thru May 2015 reported by REALTORS® in a monthly survey, 84 percent of properties that sold after 12 months were sold at a discount. On the other hand, only slightly less than half of properties that were sold within a month were sold at a discount.   Meanwhile, 24 percent of properties that sold within a month sold at a premium compared to only six percent for properties that were sold after 12 months.

Staging a home can also increase the price buyers are willing to offer. According to NAR’s 2015 Profile of Home Staging, 32 percent of buyers’ agents believe staged homes increases the dollar value buyers are willing to offer by one to five percent. 


How Do Foreign Buyers Decide on a U.S. Location for a Home Purchase?

Mon, 07/13/2015 - 11:13

Foreign buyers purchase U.S. residential existing-home properties for a variety of reasons—for example, vacation, investment, asset diversification, and residential use.  How do they decide where to buy?

Based on information from NAR’s 2015 Profile of Home Buying Activity of International Clients, proximity to the home country, the presence of relatives, friends and associates, job and educational opportunities, and climate and location appear to be important considerations to prospective buyers. Europeans and Canadians are attracted to Florida and Arizona for their warmer climates. California and Texas are favored by purchasers from Asia/Oceania. Buyers from Latin America, including Mexico, favor states in close proximity such as Texas and Florida.

The top five countries with international buyers purchasing in the United States are Canada, China, India, Mexico, and the United Kingdom:

  • Chinese buyers tend to focus more heavily on the west coast but can also be found throughout the United States.
  • Canadians tend to buy in Arizona, Nevada and Florida—apparently seeking winter vacation opportunities.  Cities recently reported by realtor.com include Fort Lauderdale, Orlando, Las Vegas, Los Angeles, Miami, and Naples. Chinese buyers are strongly focused on the west coast, which provides geographical proximity, educational opportunities, and business and trade opportunities, for example, Los Angeles, San Francisco, Seattle, as well as New York and Houston.  Many of the purchases are for business, educational, and investment purposes, although there is also interest in vacation homes.
  • Buyers from India purchase throughout the country, much less concentrated in purchases than other nationalities.  Cities mentioned include New York, Los Angeles, San Jose, Dallas, and Chicago.  Given the lack of areas generally mentioned as resort/vacation locales, many purchases by Indian buyers are business oriented.
  • Mexican purchasers are particularly interested in Texas.  Cities include San Antonio, Houston, and El Paso, as well as San Diego and Miami.  Both investment and lifestyle are of interest, as well as a desire in some cases for vacation homes.
  • U.K. citizens focus on both vacation and work oriented areas:  Los Angeles, New York, Orlando, Kissimmee, Houston, and San Francisco have been featured prominently in recent searches.

Unemployment Insurance Claims: Trend Down in First Half of 2015

Fri, 07/10/2015 - 14:49

This blog post was written by Erin Fitzpatrick. Erin is a Summer Research Intern and is currently studying at George Washington University pursuing a B.S. in Economics and a B.A. in Political Science.

  • Initial claims for unemployment insurance filed during the week ending July 4 increased from the previous week’s level to 297,000. This increase of 15,000 claims can be attributed as weekly volatility in the data. The 4-week moving average also increased to 279,500 claims. Initial claims for unemployment insurance are filed by workers starting a period of unemployment. Fewer initial claims mean fewer layoffs and greater job stability. Most analysts consider a level of 300,000 as an indicator of normal economic activity.

  • Despite initial claims for unemployment insurance increasing over the past couple of weeks, the average number of claims has decreased significantly over time. In 2015, the average number of initial claims filed from January-June was 285,174, a significant decline from the peak level of 616,771 in 2009.
  • NAR expects nonfarm payroll employment to increase by about 2.5 million net new jobs in 2015 and 5.3 million in existing home sales.

Mortgage Application Data (July 8th, 2015)

Fri, 07/10/2015 - 14:19

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 applications increased 4.6 % from the week ending June 26th and 8.4% when compared with this week last year.
  • Seasonally adjusted applications for purchase increased over the week by 6.6% and application volumes are a promising 16.9% higher than this time last year.
  • 30-year FRM rates decreased 3 basis points over the week to 4.23% and remain 9 basis points less than they were in 2014. Fixed rate mortgage applications volumes are also 9.4% higher since this time last year and government FRM applications are up dramatically from last year by 29.0%.


  • Despite rising mortgage rates, applications remain robust.
  • These increases in applications  reflect stronger interest in home-ownership through “strong job gains among young adults, less expensive mortgage insurance and lenders offering low down payment programs”, according to NAR Chief Economist Lawrence Yun.
  • There remains about 3 months of housing supply while the normal figure is 5-7 months for a balanced housing market.  An increase in supply would help to ameliorate price pressure and boost applications.

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

May 2015 Housing Affordability Index

Fri, 07/10/2015 - 12:42

At the national level, housing affordability is down from a year ago and for the month of May as fewer previously owned homes are available and prices continue to grow at an unhealthy pace relative to incomes, and lower mortgage rates did not completely offset this effect.

•Housing affordability is down from a year ago in May as the median price for a single family home in the US is up from a year ago. Regionally, the West had the biggest increase in price at 10.3% while the Northeast experienced slower price growth at 6.3%.

•The median single-family home price is $230,300 up 8.6% from May 2014. May’s mortgage rate is 3.90, down 44 basis points (one percentage point equals 100 basis points) from last year. Nationally, affordability is down from 161.2 in May 2014 to 159.7 in May 2015 because the affordability benefits of lower mortgage rates did not completely offset the challenge of rising home prices.

•Affordability is down from one month ago in all regions, and the Midwest had the largest drop of 5.8% while the West fell only 2.6%. From one year ago, affordability is down in Midwest and West while the Northeast had an increase of 1.9%. The South remained flat as lower mortgage rates offset higher home prices. The West saw the biggest decline in affordability at 1.6% and the Midwest had a decline of 1.2%.

•Higher prices are great for current home owners and a mixed sign for potential buyers. While higher prices make homes less affordable, higher prices have a tendency to push out all cash purchases and investors leaving would-be buyers with more options.

•Also, the current trend of price growth is likely encouraging more new home construction which will relieve some of the inventory pressure.  First time home buyers may want to secure a lower mortgage rate before their monthly payments rise with rate increases which are expected as the Federal Reserve begins to raise interest rates which could happen later this year. It will be interesting to see how international events play a role in rate changes going forward. Recent data suggests that demand is still strong and applications are currently on the upswing.

•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 Confidence (June 2015)

Fri, 07/10/2015 - 10:34
  • A good-paying job today but an anxiety about a job cut tomorrow does not inspire confidence.  Good thing that the job market has consistently been improving.  No surprise then that more Americans are expressing a greater confidence about the U.S. economy.  Confidence is particularly important for a major purchase like buying a home or a car since it is a longer term commitment and longer term financial obligation.
  • In June the consumer confidence index rose to 101.4 from 94 readings in the two prior months.  The above 100 reading signifies a majority of Americans expressing positive views.  This is only the 3rd month where the reading topped above 100 since early 2007.  More jobs are helping of course.  In addition a very high stock market valuation is no doubt contributing to the gains as well.  But the rising home values may be having an even a bigger impact.  About a half of American households have some amount invested in the stock market.  However, only about a 10 percent of families are said to have a “meaningful” investment in the stock market of $100,000 or more.  Therefore the rise in the stock market only helps the top few.
  • By contrast, 74 million households are homeowners while 42 million are renters.  And home values have risen by 27 percent over the past 3 years, equating to about $48,000 in housing equity for a typical homeowner over this period.  A solid gain for a solid majority of Americans.
  • Confidence has already helped auto sales back to normal.  Home sales are rising but still underperforming.  That means there is plenty of a stored-up demand that is looking to come out and, hence, a greater potential for home sales growth in the near future.
  • As an aside, Germany at the moment seems to hold the fate of Greece.  That was not always the case.  Athens and the rest of Greece had been the supreme model of democracy and good economy from the early classical times.  Greeks labeled the Germanic tribes as the “barbarians”.  After several centuries came Frederick the Great in what is now Berlin.  He welcomed the hard working Protestant immigrants who had been expelled from Catholic Austria.  He liked their industry and thrift but insisted one major change of the new immigrants: get rid of the Calvinistic predestination gloom.  It was from this time in the mid-18thcentury that Germany started to show it could do well economically.  Suppress gloom and bring on confidence.

Top Foreign Buyers of Existing-Homes by Country

Thu, 07/09/2015 - 15:15

Existing-home sales (EHS) to foreign buyers were approximately 8 percent of the total U.S. existing-home sales market of $ 1.3 trillion for the 12 months ending March 2015, according to NAR’s recently released 2015 Profile of Home Buying Activity of International Clients 

Buyers came from across the globe, but five countries accounted for 54 percent of dollar sales:  Canada, China, Mexico, India, and the United Kingdom.  China led the way in the volume of international purchases in the U.S.  Chinese buyers purchased $ 28.6 billion worth of property, followed by Canadian buyers at $11.2 billion, Indian buyers at $7.9 billion, Mexican buyers at $4.9 billion, and buyers from the United Kingdom (U.K.) at $3.8 billion.

Reasons that Foreigners Purchase U.S. Existing Homes

Wed, 07/08/2015 - 16:04

Foreigners purchase properties in the U.S. for residential, investment, and vacation purposes, according to NAR’s 2015 Profile of Home Buying Activity of International Clients.  About 46 percent of reported international transactions were intended for primary residences.  About 20 percent purchase for renting out the property, and about 15 percent purchase for vacation purposes. About 11 percent purchase for both vacation and residential rental purpose. Buyers from Canada and the United Kingdom tend to purchase properties for vacation and residential rental, while buyers from China, India, and Mexico are more likely to buy properties to use as a primary residence.

About 61 percent of purchases by foreign buyers were for single-family detached homes. About 19 percent purchased condominiums and 11 percent purchased townhouses.

REALTORS® Are Generally Confident About the Outlook in the Next Six Months

Tue, 07/07/2015 - 15:21

In May 2015, REALTORS® were by and large “strongly confident” about the outlook for all property types in the next six months compared to a year ago, although confidence tapered compared to the expectation in April 2015, according to the May 2015 REALTORS® Confidence Index Survey. [1] The May 2015 report is based on the responses of  3,805 REALTORS®.

For the fifth month in a row, the indices rose above 50 for all property types. In the single family market, the REALTORS® Confidence Index-Six-Month Outlook registered at 74 (76 in April 2015; 66 in May 2014). The index for townhomes registered at 55 (58 in April 2015; 48 in May 2014). The index for condominiums also dipped to 50 (52 in March 2015; 43 in April 2014). An index greater than 50 indicates that the number of respondents with a “strong” outlook outnumbered those with a “weak” outlook.

Sustained job creation at a pace of 220 thousand jobs per month in 2015, lower FHA monthly mortgage insurance premium rates (resulting in a 0.5 percentage point reduction since January 2015), and the availability of three percent downpayment for loans backed by Fannie Mae and Freddie Mac since early this year are likely underpinning the improved market confidence.

[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?”

Latest Employment Situation by State (May 2015)

Tue, 07/07/2015 - 14:59
  • The best state for job creation was Utah as of May, marking several consecutive months of being on top.  Utah’s job creation rate was 3.8 percent over the past 12 months.  The West region is doing particularly well with Washington, Nevada, Idaho, Oregon, and California in the top-ten.  The South was also moving along nicely with Florida, Georgia, North Carolina, and Texas in the top group.
  • Only two states had fewer jobs now versus 12 months ago: West Virginia and Alaska.
  • The job market is positive broadly speaking but weakening: 32 states experienced a slower pace of job creation compared to the prior month while 18 states moved at a stronger pace.
  • Not surprisingly, the real estate market is most vibrant in the states with fast job creations.  More people working means more income and more potential homeowners.  More jobs also entail more office leasing and increased rental housing demand.
  • Some worthy point of note in the latest report are the following:
    • Because of lower oil prices North Dakota is rapidly coming down the list.  But Texas refuses to buckle because of a much more diverse economy.  Dallas is in fact strengthening, even though Houston is showing marked lower job gains.
    • The technology sector jobs are boosting San Jose (5.7 percent growth) and Seattle (3.7 percent growth).  The home prices and rents as a result are rising fast in these two cities.
    • Do not confuse a low unemployment rate with job creations.  The local unemployment rate can be very low yet job gains may be slow.  An example would be Lincoln, Nebraska which as 2.2 percent unemployment rate.  But the job creation of 1.2 percent is below the national average.  The reason is that few people are moving into Lincoln.  Conversely, Las Vegas has a faster job addition rate than the national average, growing 2.6 percent; but its unemployment rate is 6.9 percent, which is above the national rate. For impact on real estate, it is job additions that matter not the unemployment rate.
    • Michigan is making a strong come back.  Grand Rapids has consistently been strong, growing at 4.1 percent in the latest.  Detroit is also growing at a surprisingly fast pace of 2.7 percent growth.  The bankruptcy of Detroit and restructuring of debts and government spending cuts have evidently helped raise business confidence in the city.
  • From 2010 to 2015 (May), Utah has grown by 16 percent, Texas by 14 percent, California by 13 percent, and Florida by 12 percent.  By contrast New York has grown by only 8 percent, Illinois by 6 percent, Pennsylvania by 4 percent, Mississippi by 3 percent, and West Virginia by 1 percent.  The country overall grew by 9 percent.  If such growth trends replicate over the next five years then there will be a reallocation of electoral-college votes for the Presidential election.  Utah and Texas will gain while Illinois and Pennsylvania will lose.  Legalistic reading says wait till 2020 official Census count before reshuffling.  However, one could say that there is a good reason to reallocate the votes today in 2015 if following the spirit of proportional representation by population.  Utah is short of one or two new Congressional members in the meantime.

REALTORS® Report Improving Seller Traffic in Some States in May 2015

Mon, 07/06/2015 - 15:48

In a monthly survey about local market conditions, NAR asks REALTORS®: “How do you rate the past month’s traffic in the neighborhood(s) or area(s) where you make most of your sales?”  An index greater than 50 indicates that more REALTOR® respondents viewed traffic as “strong” than those who viewed traffic as “weak.”

The map below shows the index for each state. Seller traffic was reported to be generally “strong” in Montana, Wyoming, Utah, South Dakota, Texas, Oklahoma, Missouri, Virginia, South Carolina, Mississippi, Arkansas, Alabama, Vermont, Maine, and Alaska. Inventory remains generally tight in most states. The construction of new homes has started to pick up, but it is still below the 1.5 million units required arising from household formation and the replenishment of depreciated housing.

The Canadian Existing Home Buyer

Mon, 07/06/2015 - 11:26

Over the 12 months ended March 2015, Canadians purchased U.S. properties at an estimated $11.2 billion in total value, a decrease from last year’s level of $13.8 billion, based on information from NAR’s 2015 Profile of Home Buying Activity of International Clients. Canadian buyers accounted for approximately 11 percent of total international sales in dollar volume.  Close to 80 percent were non-resident clients.  About 41 percent of purchases were in Florida, and 16 percent were in Arizona, which are preferred destinations for their warm climates.  About 47 percent of purchases were for vacation purposes, so Canadians preferred to purchase in suburban and resort areas.  There is almost an even split between single family-detached homes and condominiums and townhouses combined.  On average, Canadian buyers purchased a property valued at $380,292. About 73 percent of buyers purchased on an all-cash basis.

Mortgage Application Data (July 1st, 2015)

Fri, 07/03/2015 - 11:40

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 loan applications decreased 4.7 % from the week ending June 19th. There were, however, 5.5% more applications made when compared with this week last year.
  • Seasonally adjusted applications for purchase decreased slightly over the week by 4.1% but application volumes are still 13.7% higher than this time last year.
  • Applications for refinance also decreased over the week by 5.2%. Government refinance applications remain notably higher than this time last year (32.3%) due to the FHA fee reduction in late January 2015.
  • 30-year FRM rates increased 7 basis points over the week to 4.26%, nearly reaching the 4.28% from this time last year. Fixed rate mortgage applications volume is stronger that the same time last year while adjustable rate mortgage applications are down.

  • Driven by slim inventories, the median home price increased 7.9% over the past 12 months to $228,700.
  • More housing supply could help to sustain sales momentum in the face of increases in rates and home prices.

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

Weekly Unemployment Insurance Claims

Thu, 07/02/2015 - 11:54

This blog post was written by Erin Fitzpatrick. Erin is a Summer Research Intern and is currently studying at George Washington University pursuing a B.S. in Economics and a B.A. in Political Science.

  • Initial claims for unemployment insurance filed during the week ending June 27 increased from the previous week’s level to 281,000. This increase of 10,000 claims can be attributed as weekly volatility in the data. The 4-week moving average also increased to 274,750 claims. Initial claims for unemployment insurance are filed by workers starting a period of unemployment. Fewer initial claims mean fewer layoffs and greater job stability. Most analysts consider a level of 300,000 as an indicator of normal economic activity.

  • While no one likes to experience the need for unemployment insurance checks, the broadly lower figures imply healthier job market conditions. Read here for job gains.
  • NAR expects nonfarm payroll employment to increase by about 2.5 million net new jobs in 2015 and 5.3 million in existing home sales.

Raw Count of Home Sales (May 2015)

Thu, 07/02/2015 - 11:43
  • Existing-home sales increased 5.1 percent in May from one month prior while new home sales increased 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 compared to the seasonally adjusted figures.  The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 497,000 existing-homes were sold in May while new home sales totaled 51,000.  These raw counts represent an 11 percent gain for existing-home sales from one month prior while new home sales remained the same.  What was the trend in the recent years?  Sales from April to May rose by 12 percent on average in the prior three years for existing-homes and by 2 percent on average 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 shows 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 June for existing-home sales.  For example, in the past 3 years, June sales typically rose by 3 to 7 percent from May.  For the new home sales market, the raw sales activity in June tends to typically drop by 3 to 11 percent compared to those occurring in May. However, in 2013 new home sales increased 8 percent in June from May. All in all it’s no time to be thinking of vacation at these months of the year for REALTORS®.

Latest Employment Condition (June 2015)

Thu, 07/02/2015 - 10:53
  • The job market continues to improve.  In June 223,000 net new jobs were added.  The total comes to 2.9 million over the past 12 months.  These gains will provide a solid support for home sales and commercial real estate leasing activity.  The unemployment rate fell to 5.3 percent, the lowest since 2008.
  • Interestingly though the construction industry added zero jobs.  That is inconsistent with rising housing starts and rising construction spending.  Perhaps, it is a one-month fluke arising from data noises and sampling errors.
  • The professional business service sector (accounting, law, management consulting, and similar occupations) has been expanding solidly.  A total of 64,000 net new jobs in the sector over the month and 672,000 over the past year.  At the initial phase of hiring, workers were squeezed into existing office spaces.  Now, companies will need new office spaces and hence office leasing activity should meaningfully pick up in the upcoming months.
  • Not all is right with the labor market.  Due to low oil prices, the jobs in the oil extraction industry fell for the sixth time in the past seven months.  More sadly, more people have left the labor force – no jobs and not even searching for one.  It is the fewer people looking for jobs as the principle reason for the latest fall in the unemployment rate.
  • The average hourly wage rose to $20.99, which is a gain of just 1.9 percent from one year ago.  Both home prices and rents are rising much faster.  Workers are getting the benefit of lower gasoline prices but they are having to fork over more for shelter.  Construction workers are paid better with $25.26 per hour and with faster pay gain of 2.4 percent.
  • A little historical note to mark 1776 and the day of independence and freedom.  While America was focused on “the shot heard around the world“ from Concord/Lexington and freedom from the tyranny of George III, in Scotland a book was quietly published also to commemorate freedom of a different kind.  Adam Smith wrote that economies and the Wealth of Nations can rise faster from freedom from government regulations.  Of course, with the benefits of 200+ years of experience since then, some government regulation can improve the overall economic condition of a country, but Adam Smith’s work laid out the broad economic principles of what can work well.  That is why the English-speaking countries have economically outperformed other language speaking countries from 1776.

May Existing-Home Sales

Wed, 07/01/2015 - 15:32
  • NAR released a summary of existing-home sales data showing that May’s existing-home sales increased year over year for the 8th consecutive month, as sales reach the 5.35 million seasonal annual adjusted rate. May’s sales are the highest pace since November 2009 jumping up 9.2% from a year ago, while sales moved up 5.1% from last month.
  •  The national median existing-home price for all housing types was $228,700 in May, up 7.9% from a year ago, the highest since July 2006.
  •  Regionally, all four regions showed growth in prices from a year ago. The West had the largest gain at 10.2% while the Northeast had the smallest gain at 4.8% from last May. All regions showed an increase in sales from a year ago, and the Northeast had the biggest gain at 11.3% while the South had the smallest gain at 6.9%. The South leads all regions in percentage of sales at 41% while the Northeast has the smallest share at 13%.
  • May’s inventory figures increased 3.2% from last month and are up 1.8 % from a year ago. It will take 5.1 months to move the current level of inventory at the current sales pace. It takes approximately 40 days for a home to go from listing to a contract in the current housing market.
  • Single-family sales are stronger than condo sales, increasing 5.6% while condo sales rose modestly (1.6%) from last month. Single-family home sales increased 9.7% from a year ago, while condo sales rose by 5.1%. Both single-family and condos had an increase in price with single-family up 8.6% and condo up 1.9% from a year ago, May 2014.
  • We saw meaningful gains in first-time home buyers in May as they rose to be 32% of buyers. This may be a result of the FHA premium reductions or Fannie and Freddie low down payment options which are opening up opportunities for first timers to purchase homes. Additionally, with signs of mortgage rates going up there is often a surge of buyers hoping to purchase before the increase in rates. Home prices continue to move up and potential buyers may want to lock in before rates increase making a home purchase less affordable.