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Foreign Buyers: Typically Upscale than Domestic Buyers

Fri, 07/15/2016 - 11:15

Foreign buyers purchased residential properties for a variety of reasons and across geographic areas, with the prices of properties purchased typically above those of domestic buyers, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate.

On average, foreign buyers paid $477,462 which is higher than the average price of all existing homes sold in the U.S. at $266,683.[1]  In terms of the typical residential property purchased by foreign buyers, the median price of these properties was $277,380 compared to $223,058 for all existing homes sold in the U.S. in the same time period.[2]

Among the major foreign buyers, Chinese buyers purchased residential properties that were more expensive than properties purchased by other buyers. This can be attributed to the tendency of Chinese buyers to purchase residential properties in central cities and suburban areas with relatively higher property prices such as California, Washington, and New York. In contrast, Canadians mostly purchased residential properties in Florida and Arizona where properties may be cheaper.

Approximately 36 percent of residential clients viewed U.S. property prices to be less expensive than prices in their home country, while 24 percent viewed U.S. prices as more expensive than prices in their home country, and 10 percent viewed U.S. prices to be about the same as in the home country. Roughly three in 10 respondents were not sure how their residential clients viewed U.S. home prices comparatively.

[1] The mean or the average price is used to calculate the dollar volume of purchases and can be used as a measure of central tendency. It is found by summing the responses and dividing by the number of responses.

[2] The median is the middle value of the distribution. Half of all purchases fall below this value and half are above this value. Because home values tend to skew to the higher end, the median is often a better reflection of typical market activity.


May 2016 Housing Affordability Index

Thu, 07/14/2016 - 11:26

At the national level, housing affordability is down from a year ago as higher home prices cause a slip in affordability. Median family incomes are not rising at the pace of home prices however, historically lower rates provide opportunities for potential home owners.

  • Housing affordability declined from a year ago in May pushing the index from 161.2 to 158.8. The median sales price for a single family home sold in May in the US was $241,000 up 4.6 percent from a year ago.
  • Nationally, mortgage rates were down 7 basis points from one year ago (one percentage point equals 100 basis points) while incomes modestly rose approximately 2.1 percent.
  • Regionally, all regions saw declines in affordability from a year ago except the Northeast. The Northeast had an increase of 3.5 percent because it saw a slight decline in home prices. The South had the largest decline in affordability of 3.0 percent. The West had a decline in the affordability index of 2.6 percent followed by the Midwest with 2.4 percent.
  • The West had the biggest increase in price at 6.8 percent. The South had an increase of 5.9 percent while the Midwest had a 4.7 percent gain in price. The Northeast had a decline of 0.5 percent.
  • By region, affordability is down in all regions from last month. The Midwest (4.3 percent) had the biggest decline. The South and West had a decline of 3.8 percent and 2.5 percent. The Northeast had the smallest decline in affordability of 0.5 percent.
  • Despite month to month changes, the most affordable region is the Midwest where the index is 197.6. The least affordable region remains the West where the index is 116.7.  For comparison, the index is 162.7 in the South, 164.2 in the Northeast.
  • Currently mortgage applications are up and rates have remained low. Inventory has not picked up and is having an impact on escalated home prices across many metro markets. Home owners are benefiting from equity gains, but renters hoping to get into the housing market are challenged by rising house prices and rising rents. Job gains have been stronger lately, but incomes are not keeping pace with rising home prices. Lending standards are easing helping some first time buyers to enter the housing market.
  • 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.


Half of Foreign Buyers Paid in Cash in April 2015—March 2016

Tue, 07/12/2016 - 15:21

Fifty percent of reported foreign buyers of U.S. residential property transactions were all-cash sales, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate.


Non-resident foreign buyers tend to purchase in cash while resident foreign buyers obtain mortgage financing from U.S. sources because they are likely to have a U.S. based credit history and able to provide the mortgage documentation required by U.S. creditors.[1] Seventy-three percent of non-resident foreign buyers made an all-cash purchase compared to 33 percent of resident foreign buyers.

Foreign buyers from Canada, China, and the United Kingdom were more likely to pay cash. Meanwhile, foreign buyers from India and Mexico, most of whom are resident foreigners buying primary residences, were more likely to obtain mortgage financing from U.S. sources.

Transferring funds from the home country to the United States can be difficult and/or lengthy. Among cases in which a respondent had a foreign client who did not purchase property, 21 percent were associated with cases where the client “cannot move money” and “could not obtain financing”.

[1] Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States. Resident foreigners are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

TRID: Back on Track in June

Tue, 07/12/2016 - 11:18

The average time-to-close snapped back to its downward trend in June after a May reversion. The time from contract to settlement in June relative to the same time in 2015 edged lower relative to last month. On average, sales took 2.8 days longer to close compared to June of 2015. The June reading is the lowest since October of 2015.

Excluding the May reading, the average time-to-close relative to a year earlier, a means of measuring the post-TRID delays in the market adjusted for seasonality, has fallen steadily.  At this pace, time-to-close could be normalized by year’s end. Despite the delays, lenders indicated no cancelled settlements in the 1st quarter, down sharply from the 4th quarter of 2015.

TRID or Know Before You Owe is a new set of rules governing the closing process. These rules are intended to help make consumers more aware of their financial liability, while streamlining the process. Settlement delays may increase in the post-Brexit environment as a surge in refinancing taxes producers’ ability to underwrite and close on time. Still, the surge will be transitory as rates will eventually rise or refinance demand will burnout, but the trend will boost producers profits and help them to offset or to spread some costs. TRID related delays will likely ease through the summer as the first wave of regulatory reviews under the new regime provide insights, large producers gain market share, vendor software improves, and demand from mortgage investors recovers.


Major U.S. Destinations of Foreign Buyers in April 2015—March 2016

Mon, 07/11/2016 - 11:22

Foreign buyers accounted for four percent of U.S. existing home sales in April 2015—March 2016, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate.

While international clients represent a small segment of total U.S. existing-home sales market, they are an important clientele, particularly to states that tend to attract international clients: Florida, California, Texas, Arizona, and New York. Together, these five states accounted for 51 percent of international buyers who purchased residential property. Other major destinations include New Jersey, Illinois, North Carolina, Maryland, Georgia, Connecticut, Colorado, Michigan, Nevada, and Washington.

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 in deciding where to purchase a property.

Most Canadian buyers purchased residential property in Florida, Arizona, California, Nevada, and Texas. Canadian buyers typically purchase properties for use as vacation homes, so they tend to locate in states with warm climates and resort areas.

About a third of Chinese buyers purchased residential property in California, most likely because of its proximity to and cultural affinity with Asia. New York, Texas, Washington, and New Jersey were also preferred destinations. With roughly 39 percent of Chinese buyers buying in states other than these top five states, they are among the more broadly geographically distributed foreign buyer groups.

Compared to other major foreign buyers, Indian buyers are not as concentrated in any particular state, although Texas, California, and New Jersey were top destinations. Most Indian buyers purchased properties to use as a primary residence in these states where they most likely found jobs.

Most buyers from Mexico purchased properties in Texas and California, which are both geographically close and culturally similar to Mexico. North Carolina, Illinois, and Florida were also major destinations.

U.K. buyers mainly purchased residential property for vacation use, typically in warm-weather states of Florida, California, and Texas.

Low Mortgage Rates and the Housing Market: Pros and Cons

Thu, 07/07/2016 - 15:07

While low mortgage rates boost consumer buying power, the reason for the low rates could hold home buyers back.

Economic forecasters and analysts have frequently missed the mark recently when forecasting interest rates. In general, forecasters and experts have expected faster economic growth and policy normalization (i.e. higher interest rates) than has come to pass. Instead, interest rates, including mortgage rates, have remained low and moved lower. Today’s mortgage rate data from Freddie Mac show that the rate on a 30-year fixed-rate mortgage was 3.41—the lowest since May 2, 2013 when rates were 3.35 percent.

While lower mortgage rates are a good thing for U.S. home buyers, 86 percent of whom financed their recent purchase transaction, the reason for lower mortgage rates might offset some of the positive effects.[1] Uncertainty over Brexit is highlighted as a reason, and while it has certainly had an impact, the cause of low rates is concern that global economies are not growing. Note, for example, that much of the decline in mortgage rates occurred during the first quarter of 2016—before the Brexit vote in June, which only added more uncertainty about growth prospects and took rates on another leg down. A look at the pros and cons of this recent drop in mortgage rates shows that they may not be as unambiguously beneficial to the housing market as previous low rates have been.


Lower mortgage rates—which have declined by more than 50 basis points since the start of the year—boost the home purchasing power of would-be buyers.

Here are some calculations:

  • A 50 basis point reduction in mortgage rates reduces monthly payments by nearly $50 per $100,000 in home price ($80,000 financed).
  • The reduction in monthly payments reduces income needed to qualify by roughly $1,000.
  • At the current US median home price, this amounts to a roughly $2,500 reduction in the income required to finance a home purchase with a 20 percent down payment ($200,000 mortgage).

Coupled with incomes that are maintaining a steady pace of increase between 2 and 3 percent over the last two years,[2] the reduction in mortgage rates will help sustain housing market demand in the face of rising home prices.


While lower mortgage rates could boost demand, global economic growth concerns could shake U.S. consumer psyche, especially if U.S. workers expect slowing global growth to impact labor markets. On top of this concern, potential home buyers are experiencing difficulty finding a property amid inventory shortages and saving for a down payment, particularly if they are potential first-time home buyers managing student loan debt and increasing rental prices. In fact, 71 percent of student loan borrowers who are non-homeowners indicate that student debt is impacting their ability to purchase a home.[3] This could mean that the benefits of lower mortgage rates go largely to current homeowners who can refinance, reinforcing the already sizable gap in wealth outcomes for those who own their homes compared to those who do not.[4]

Thus far, the U.S. economy has proven resilient to the weaker global economic environment. A stronger U.S. consumer, who benefits from lower financing costs, may help ensure that trend continues.

[1]National Association of Realtors® 2015 Profile of Home Buyers and Sellers

[2] Year over year growth in average weekly earnings for all employees on private payrolls has ranged from 1.8 to 2.8 percent in the 2 years ending May 2016. Year over year growth in total compensation per employee has ranged from 1.6 to 3.1 percent in the same period while change in wages and salaries has ranged from 1.8 to 3.6 percent. Data from the BLS and BEA.

[3] National Association of Realtors® Student Loan Debt and Housing Report 2016 http://www.realtor.org/reports/student-loan-debt-and-housing-report

[4] See for example Lawrence Yun in Forbes who cites data from the Federal Reserve Survey of Consumer Finances.


Foreigners Purchased $102.6 B of U.S. Residential Property in April 2015—March 2016

Thu, 07/07/2016 - 11:21

Foreign buyers purchased $102.6 billion of residential property in April 2015—March 2016, a one percent decrease from the $103.9 billion of property purchased in April 2014—March 2015, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate. Both the increase in home prices and the depreciating value of foreign currencies against the U.S. dollar made buying property pricier and led to a pull-back from non-resident foreign buyers.[1]

Foreign buyers purchased 214,885 residential properties, a three percent increase from the previous period. Non-resident foreigners accounted for 41 percent of foreign buyers while resident foreigners—who are recent immigrants and temporary workers or students—made up 59 percent. In past years, the number of foreign buyers was split almost evenly between resident and non-resident foreign buyers. The slowdown in economic growth in many countries and the strengthening of the U.S. dollar against many foreign currencies explains in part the drop in the number of non-resident foreign buyers. While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by resident foreign buyers rose, resulting in the overall sales dollar volume still being the second highest since 2009.

For the second year in a row, Chinese foreign buyers were the top buyers, purchasing $27.3 billion worth of residential property which is 26.7 percent of the dollar volume of residential property sold. Canadian buyers purchased $8.9 billion of residential property; Indian buyers, $6.1 billion; United Kingdom buyers, $5.5 billion; and Mexican buyers, $4.8 billion.

Foreigners, especially those from China, continue to see the U.S. as a solid investment opportunity and an attractive place to visit and live. This year’s findings highlight the tremendous appeal U.S. real estate still has on many foreign nationals despite the price of property becoming less affordable.

[1] Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States. Resident foreigners are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.


China Leads Foreign Buyers of U.S. Residential Property in April 2015—March 2016

Wed, 07/06/2016 - 15:32

Foreign buyers purchased $102.6 billion of residential property in April 2015—March 2016, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate. Foreign buyers from five countries continued to account for most of the reported purchases: China, Canada, Mexico, India, and the United Kingdom. Together, they constituted 45 percent of foreign residential property buyers.[1] For the second year in a row, China was the top origin of foreign buyers, displacing Canada.

Foreign buyers are of two types: those who primarily reside in another country (non-resident) and those who reside in the U.S. as recent immigrants or those residing in the U.S. on temporary visas for work, education, or other purpose (resident). Non-resident foreign buyers typically purchase properties for investment and/or vacation and pay in cash while resident foreign buyers typically purchase the property for use as a primary residence and obtain U.S. mortgage financing.

Most Canadians and U.K. foreign buyers are non-resident buyers, while most Chinese, Indian, and Mexican foreign buyers are resident buyers. About 80 percent of Canadian foreign buyers and 61 percent of U.K. foreign buyers were non-resident buyers. In the 12 months ended March 2015, only 39 percent of Chinese buyers were non-resident, a decrease from the 47 percent share in the previous 12-month period. Slower economic growth in China, the depreciation of the yuan, and tighter regulation on individual capital outflows may account for this.

Asia/Oceania accounted for 34 percent of foreign buyers of residential properties, followed by Latin America and the Caribbean at 21 percent, Europe at 18 percent, North America (mainly, Canada) at 12 percent, and Africa at three percent. Twelve percent of foreign buyers came from a country that the survey respondent could not identify.

[1] Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States. Resident foreigners are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

May 2016 Housing Price Index

Tue, 07/05/2016 - 14:46
  • Recent housing price data at the national level suggests that while home price growth may be slowing, prices continue to increase at a strong pace—faster than what would be considered typical. Strong buyer demand and low inventories coupled with still relatively low levels of new construction are continuing to push prices up and keep housing market tipped in favor of sellers in most local markets. However, prices in some areas are creating affordability concerns that may dampen demand and slow the pace of increase in the months to come.
  • The pace of home price growth still has a substantial way to go before it moves back to a rate that is sustainable. New construction is needed to help meet the continued strong demand from buyers in an economy where jobs are still being created and there is a low supply of homes for sale. Without an increase in new construction, affordability could cause a new housing crisis where would-be owners are held back by ever-rising rents, debt obligations such as student loans, and a lack of affordable housing supply.
  • Various data sources are flashing the same rising price signals:
    • Today, CoreLogic released their housing price index data for May 2016 which confirms that home prices continue to increase faster than incomes.[1] The national index grew by 5.9 percent year over year as measured by CoreLogic. This is a slight acceleration from the pace of increase measured in the last few months because the data has frequently been revised lower.[2]
    • Last week, Case Shiller data showed that house prices rose roughly 5 percent in all three indices since April 2015. The national index gained 5.0 percent, while the 10-city composite rose 4.7 percent and the 20-city composite rose 5.4 percent year over year. Each area’s measured gain was 0.1 precent lower in April than March.
    • Nearly two weeks ago, the Federal Housing Finance Agency (FHFA)and the National Association of Realtors® (NAR) reported price data for April and May.
    • NAR data showed that prices grew at a 5.6 percent pace from April 2015 to April 2016. NAR also reported on new May 2016 data which showed a slight deceleration to 4.7 percent growth from one year ago.
    • FHFA data showed that prices were up 5.9 percent in April from one year ago, slightly slower than the pace seen in March, but within the 5 to 6 percent pace seen in the last 15 months .
  • Potential buyers and sellers should be sure to put the national numbers in the context of what is going on in their local markets. The fastest overall growth rates in the NAR data are in the West where prices rose 6.8 percent from one year ago. By contrast, NAR’s median price showed a slight decline in the Northeast.
  • Case Shiller data show similar results. The strongest price growth was seen out West in Portland (12.3%), Seattle (10.7%), and Denver (9.5%) in the year ending April 2016. By contrast, Washington DC (1.9%), New York (2.6%), and Cleveland (2.9%) were the slowest growing markets. Data shows that sellers in these somewhat weaker areas may not have as much power to demand higher prices for their homes given the local market. How does your market compare to the national price trends?
  • NAR reports the median price of all homes that have sold while Case Shiller, CoreLogic, and the Federal Housing Finance Agency report the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported April prices include information from repeat transactions closed in February, March, and April. For this reason, changes in the NAR median price tend to lead other indexes and may suggest that some relief in price growth could be on the horizon.

[1] Personal income increased at a 4.0 percent pace year over year in May, and while disposable personal income increased at a 4.1 percent pace, per person disposable income was up only 3.3 percent. These figures are in current dollars, not adjusted for inflation.

[2] May’s pace is a deceleration from the first-reported pace of increase in the previous few months. Per the methodology, CoreLogic price indices are “fully revised with each release.”

Raw Count of Home Sales (May 2016)

Tue, 07/05/2016 - 11:29
  • Existing-home sales increased 1.8 percent in May from one month prior while new home sales dropped 6.0 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, 526,000 existing-homes were sold in May while new home sales totaled 51,000.  These raw counts represent a 12 percent gain for existing-home sales from one month prior while new home sales decreased 11 percent.  What was the trend in recent years?  Sales from April to May increased by 12 percent on average in the prior three years for existing-homes and were unchanged for new homes.  So this year, existing-homes performed their recent norm while new home sales underperformed.
  • 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 that 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 June but less activity in July for existing-home sales. For example, in the past 3 years, June sales typically increased by 7 to 16 percent from May while in July sales typically decreased by 2 to 4 percent from June. For the new home sales market, the raw sales activity tends to decrease in both June and July. For example, in the past 3 years, June sales typically dropped by 6 to 12 percent and July sales decreased further by 2 to 23 percent from June.

Home Search Process for Veterans and Active-Service Members

Fri, 07/01/2016 - 13:26

We know that veterans and active-service members are a unique buying demographic that made up 21 percent of all home buyers in 2015. We also learned this year that veterans move a median of 75 miles from the home they previously sold to their new home purchased, whereas that active-duty military most often purchase a home due to a job relocation. With this in mind, working with a real estate agent that knows the local area is that much more vital for this group of home buyers.

According to the 2016 Veterans and Active-Military Home Buyers and Sellers Profile, consistent with all buyers, veterans and active-service military first looked online for properties. Both veterans (17 percent) and active-service military (20 percent) contacted a real estate before doing anything else, more so than all buyers (14 percent). Veterans and active-service military also got their information from real estate agents more than any other source, compared to all buyers that frequently looked online in addition to working with an agent. Veterans were also slightly more likely to find the home they purchased directly from an agent at 38 percent, compared to 33 percent of all buyers. For veterans and active-service military alike, finding the right property was the most difficult step in the process.

Eighty-five percent of veterans and 86 percent of active service members purchased their home through a real estate agent. More so than all buyers, veterans wanted help from an agent to determine what comparable homes were selling for in the area and active-service members wanted help to learn more about the neighborhoods. Eighty-nine percent of veterans and 90 percent of active-service members were satisfied with the home buying process. Eighty-seven percent of veterans and 85 percent of active-service members would use their agent again or recommend their agent to others.


Housing Choices of the 55+ Population: A REALTOR® University Speaker Series Presentation

Fri, 07/01/2016 - 13:00

America’s population is increasingly aging: roughly one in three will be 55 years and older by 2060, up from about one in five in 2010.[1] What are the housing choices of the 55+ adult population?

In a presentation at the REALTOR® University Speaker Series held recently, Dr. Sean Becketti discussed the results of a recent study by Freddie Mac on the housing choices of the 55+ population, presenting information that either validated or disputed some commonly held notions or “myths” about the 55+ population.[2] Dr.Sean Becketti is Chief Economist and Vice-President of Freddie Mac.

To listen to the webinar[3], please click here.


Among the highlights of the study are:

1)  Majority of the adult 55+ want to age in place. Approximately 63% of 55+ homeowners would prefer to stay in their current residence because they are satisfied with their community (56%) and their current homes (65%). However, nearly one in four (23%) of 55+ homeowners would need major renovations that will enable them to remain mobile and safe in their homes.

2)  Only a minority want to downsize or retire to a warmer state. Only 20 percent cited downsizing as a “very important” reason for moving, and only 19 percent cited moving to a warm climate as a “very important” reason. The “very important” reasons when deciding to move and where to live are: affordability of living in a community (46%), amenities for retirement (44%), less maintenance (41%), and proximity to family members (31%).

3)  Many of the 55+ are not financially prepared for retirement. Approximately 36 percent of those retired, and 57 percent of those still working, are still paying a mortgage.  Of those, a majority still have 10 years on their loan. Only 20 percent of those in the workforce feel “very confident” they’ll be financially ready for retirement, and only 34 of those who are already retired say they “strongly agree” that they feel financially secure. Not surprisingly, confidence among both groups increases with income. And when the “somewhat confident” and “somewhat agree” groups are included, the picture looks rosier—well over half of each group expresses confidence regardless of income.

4)  Approximately 20 percent of 55+ headed households have provided their children with money for a down payment.

Homeowners who have provided—or expect to provide—down payment assistance to their children was surprisingly small. In addition, relatively few reported receiving such assistance at all from their own parents. In fact, 15 percent of respondents indicated that they are unwilling to provide financial assistance although they are financially able to do so.


About the Speaker

Dr. Sean Becketti is Chief Economist and of Freddie Mac. Prior to this, he was senior vice president and head of modeling and analytics of Flagstar Bank. His experience also includes senior executive roles with Washington Mutual and Wells Fargo in which he led research functions focused on mortgage markets and capital markets. Dr. Becketti also previously worked at Freddie Mac from 1996 – 2001 in several senior financial and analytical roles. Earlier in his career, he served as senior economist with the Federal Reserve Bank of Kansas City and as an assistant professor of economics at UCLA. Dr. Becketti holds master’s and Ph.D. degrees from Stanford University and a bachelor’s degree from University of California – Santa Cruz.

About REALTOR® University Speaker Series

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] Census Bureau projections.

[2] To find out more about this study and to collaborate with Freddie Mac on this research, please contact Anthony Hutchinson, Director, Government and Industry Relations, at anthony_hutchinson@freddiemac.com.

[3] Thanks to Meredith Dunn, Communications Manager, for recording and editing the webinar video.

Veteran Home Buyers: Moving Long Distances into Senior-Related Communities

Fri, 07/01/2016 - 11:25

Active military and veterans made up 21 percent of all home buyers in 2015. According to NAR’s 2016 Veterans & Active Military Home Buyers and Sellers Profile, the typical veteran home buyer is 61-years old, married without children under the age of 18 living at home. Veterans move long distances for retirement and to be closer to friends and family. They often purchase senior-related housing.

The median age for veteran home buyers is 61 years old, compared to 34 years for active-duty members and 44 years for all buyers. As veterans become older in age, their reasons for purchasing a home shifts towards the desire to move closer to friends and family (14 percent) and retirement (11 percent), compared to active-duty service members that purchased a home due to a job relocation (33 percent). Veterans and active-service members also only searched for eight weeks for the home they purchased, compared to 10 weeks for all buyers.

That being said, 43 percent of veterans bought senior-related housing, compared to only 14 percent of buyers over 49 years of age. Twenty-one percent of active military bought multi-generational homes compared to 13 percent of all buyers. Veterans also moved the farthest distances to be closer to friends and families at a median of 75 miles, compared to 14 miles for all buyers.

Veterans are more likely to be married (78 percent) or single males (13 percent), compared to 67 percent of all buyers that are married and nine percent of single males. Seventy-four percent of veterans reported having no children under the age of 18 living at home, compared to 63 percent of all buyers. Nearly half of active-duty service members reported having at least two children under 18 living at home.

Veteran Home Buyers: Moving Long Distances into Senior-Related Communities

Cash Accounts for 26 Percent of Commercial Transactions in REALTOR® Markets

Thu, 06/30/2016 - 15:08

Commercial real estate investment trends were positive in 2015, with sales of large cap CRE transactions—over $2.5M—totaling $543 billion, based on Real Capital Analytics (RCA) data.  However, in the first quarter 2016 sales volume dropped 20 percent on a yearly basis, to $111 billion. Part of the decline was due to large portfolio transactions in the first quarter of 2015, which were absent this year.

In contrast to the large cap transactions reported by RCA, commercial REALTORS® managed transactions averaging less than $2.5 million per deal, frequently located in secondary and tertiary markets.  The Commercial Real Estate Lending Trends 2016 shines the spotlight on this significant segment of the economy.

Based on National Association of REALTORS® (NAR) data for the small cap CRE markets, sales rose 8.5 percent year-over-year during the first quarter of this year. The average sale transaction price totaled $1.1 million during the quarter. With inventory shortage continuing as a main concern, prices in small cap CRE markets rose a more moderate 5.1 percent year-over-year during the period. Average capitalization rates declined to an average 7.2 percent across all property types, a 60 basis point compression on a yearly basis.

However, in a reversal of the trend, lending conditions tightened in REALTORS®’ markets, with 33 percent of NAR members reporting tightening lending conditions, a noticeable increase from the prior year’s 23 percent.  At the same time, the percentage of members who reported that lending eased dropped from 42 percent in 2015 to 31 percent in 2016.

In addition, for 26 percent of members, the average transaction’s loan-to-value (LTV) was 70 percent or lower, with 48 percent of total deals posting LTVs of 75 percent and above.  Just as importantly, cash deals comprised 26 percent of all transactions. While the figure represents a decline from prior years, it remained a significant component of small cap markets’ financing.

For more information and the full report, access NAR’s Commercial Lending Trends 2016 at http://www.realtor.org/reports/commercial-lending-trends-survey.


Sales to First-Time Buyers: 30 Percent of Sales in May 2016

Thu, 06/30/2016 - 11:20

The share of first-time home buyers accounted for 30 percent of residential sales in May 2016 (32 percent in April 2016; 32 percent in May 2015), according to the May 2016 REALTORS® Confidence Index Survey Report.[1] REALTORS® have reported that the lack of supply especially of affordable homes, the difficulty in qualifying for a mortgage, and the inability to make a downpayment have made purchasing a home difficult for potential first-time buyers despite the low-interest rate environment.

According to NAR’s 2016 Q1 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.[2] The widening gap between gains in income and home prices has made it more difficult to qualify for a mortgage, save for a downpayment, and meet the monthly mortgage payment. As of April 2016, the median family income is up by 10 percent compared to the level in January 2012, while the median price of an existing home is up by 45 percent over this same period[3].Although education increases the likelihood of being a homeowner in the long-run, the level of student debt has also delayed a home purchase, according to a joint survey on student loan debt by NAR and SALT®, a consumer literacy program provided by nonprofit American Student Assistance®. Seventy-one percent of non-homeowners polled in the survey believe their student loan debt is delaying them from buying a home.[4] Those polled in the survey only include borrowers who are currently in repayment.

[1] First-time buyers accounted for about 32 percent of all home buyers based on data from NAR’s 2015 Profile of Home Buyers and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.  

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

[3] NAR data used in calculating the Home Affordability Index.

[4] http://www.realtor.org/news-releases/2016/06/71-percent-believe-student-debt-delays-homeownership

In What States Did Properties Sell Quickly in March–May 2016?

Tue, 06/28/2016 - 15:33

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?”

At least half of the properties that sold in March–May 2016 were on the market for 30 days or less in the District of Columbia, Washington, Oregon, California, Idaho, Utah, Colorado, Nebraska, Kansas, Texas, Minnesota, Iowa, and Massachusetts, according to the May 2016 REALTORS® Confidence Index Survey Report. Local conditions vary, and the data is provided for REALTORS® who may want to compare local markets against other states and the national summary.


Nationally, properties sold in May 2016 were typically on the market 32 days (40 days in April 2016; 39 days in May 2015).1 Short sales were on the market for the longest time at 103 days, while foreclosed properties typically stayed on the market for only 51 days. Non-distressed properties were typically on the market for 30 days.

Nationally, 49 percent of properties were on the market for less than a month when sold compared to 45 percent last month and one year ago. About 11 percent of properties sold in May 2016 were on the market for longer than six months.

1 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.

REALTORS® Median Expected Price Change in Next 12 Months, By State, Based on March-May 2016 Surveys

Mon, 06/27/2016 - 15:15

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “In the neighborhood or area where you make most of your sales, what are your expectations for residential property prices over the next year?”

Among REALTORS® who responded to the May 2016 survey, the national median expected price change over the next 12 months was 3.3 percent (3.8 percent in April 2016; 3.6 percent in May 2015), according to the May 2016 REALTORS® Confidence Index Survey Report. On the one hand, REALTORS® expect housing price growth to moderate as rising prices have made homes less affordable for many. On the other hand, tight supply is leading to expectations of further price increases.

The map shows the median expected price change in the next 12 months for each state based on the March–May 2016 RCI surveys. The District of Columbia and the states of Washington, Oregon, and Colorado are the areas that are expected to have the highest price growth, with the median expected price growth at more than five to seven percent in each of these states. REALTOR® respondents from California, Nevada, Idaho, Minnesota, Michigan, Tennessee, South Carolina, and Florida also expected strong price growth, with the median expected price growth at more than four to five percent in each of these states.

The Road to Becoming a REALTOR®

Mon, 06/27/2016 - 11:11

With so many new entrants into the real estate field in 2015, our research analysts pondered where they all came from. We saw in a previous article An Influx of Young Members to the REALTOR® Family that NAR membership was growing. According to the 2016 Member Profile, members with less than one year experience in the industry jumped to 20 percent in 2016 up from 11 percent the year before. In addition, more new entrants were young in age. Five percent of members were under 30 years old, up from two percent in the previous year. To better understand our membership, we dug into the data to see what industries members came from before entering real estate.

For all members, the general trends are that 16 percent came from management/business/finance, 16 percent came from sales/retail, and real estate was their first career for four percent. Once we segmented the data by gender, age, and education. Across all segments, we found that members predominantly came from management/business/finance and sales/retail. But in smaller numbers, members came from other interesting career fields.


When we segmented the data by gender, slightly more males than females came from management/business/finance as well as sales/retail. Thirteen percent of women came from office/administration support compared to only two percent of men. Seven percent of men came from construction and five percent said real estate was their first career. Eight percent of women came from education, seven percent from healthcare, and seven percent were homemakers.


Next we segmented by age. For members under 30 years, nine percent from office administration, nine percent said real estate was their first career, and eight percent came from education. The younger the age, the more likely it is that real estate is a member’s first career. As age increases, the likelihood that a member came from management/business/finance also increases. The opposite is true for the sales and retail field; as age increase, the likelihood that a member came from sales and retail decreases.

Last, we segmented by education. The trends were fairly the same as for all members; however there were a few outliers. For those with only some high school education, 16 percent came from personal care services and 10 percent came from the transportation sector. For those who have some graduate work or more, NAR members came from education. For those with a doctoral degree, 28 percent came from education, 16 percent from the legal field, and 15 percent from healthcare.

REALTORS® Reported Strong Buyer Traffic Amid Tight Supply in Many States in March‒May 2016

Fri, 06/24/2016 - 14:03

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members to rate the past month’s buyer and seller traffic in the neighborhood or area where they make most of their sales. NAR compiles the responses on buyer traffic into a REALTORS® Buyer Traffic Index and the responses on seller traffic into a REALTORS® Seller Traffic Index.

The maps below show the condition of buyer and seller traffic using data collected from March‒May 2016, according to the May 2016 REALTORS® Confidence Index Survey Report.

Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that markets were “moderate” to “very strong” in all states except in Alaska, Delaware, and Connecticut where buyer traffic was “weak.”[1]

Amid strong demand, seller traffic was “weak” in many states, measured by the REALTORS® Seller Traffic Index.[2] However, seller traffic was “strong” in several states, including those that had benefited from the oil boom but who are now facing slower job growth due to lingering lower oil and natural resources prices—North Dakota, Wyoming, New Mexico, and Texas. The slower job growth and job cutbacks in these states have led to more home selling and a shift to a buyer’s market.[3]

Sparse new home construction has been a major factor driving prices up. Although the number of permits authorized for new privately owned housing units has been improving (1.15 million units on an annualized basis in May 2016), 53 percent of new construction has been multi-family structures, which are mostly for rental occupancy.[4] In 2005, multi-family structures accounted for only 20 percent of new construction, so the availability of single-units for purchase among recently constructed properties is lower than is historically normal.REALTORS® reported low inventory of properties in the lower price range and for those that are move-in ready. The gap in demand and supply has led to strong price growth especially in California, Colorado, Florida, Oregon, South Carolina, Utah, and Washington. Of the 178 metro areas that NAR tracks and has price data on, 28 metro areas experienced price growth in the range of ten to 25 percent in the first quarter of 2016 compared to the levels in the first quarter of 2015.

[1] The index 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 were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are labeled “Weak,” a value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than 76 are labeled “Very strong.”

[2] Respondents were asked “How do you rate the past month’s seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. A value of 50 indicates a balance of respondents who reported “Strong “and “Weak” markets. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are labeled “Weak,” a value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than 76 are labeled “Very strong.”

[3] https://communityimpact.com/houston/the-woodlands/economic-development/2015/12/09/falling-oil-prices-starting-to-affect-woodlands-economy/http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/

[4] Based on the latest data for the first quarter of 2016, 92 percent of the multi-family units completed were for rental occupancy with regions varying from 90 percent in the West to 100 percent in the Midwest. Source: Census Bureau. Quarterly Starts and Completions by Purpose and Design, Units Per Building, 2016 preliminary data. https://www.census.gov/construction/nrc/pdf/quarterly_starts_completions.pdf


May 2016 Existing-Home Sales

Fri, 06/24/2016 - 11:33
  • NAR released a summary of existing-home sales data showing that housing market activity increased for the third consecutive month, as May’s existing-home sales reached the 5.53 million seasonally adjusted annual rate. May’s existing-home sales are up 4.5 percent from a year ago which resulted in the strongest pace since February of 2007.
  •  The national median existing-home price for all housing types was $239,700 in May, up 4.7 percent from a year ago.
  • Regionally, three of the four regions showed growth in prices from a year ago, with the West leading at 7.7 percent. The South had an increase of 5.9 percent, and the Midwest followed with a 4.8 percent increase. The Northeast had the only decline of 0.1 percent from May 2015.
  • From April, three of the four regions experienced increases in sales. The West dominated regional sales with an increase of 5.4 percent. The South had an increase of 4.6 percent while the Northeast had a 4.1 percent increase. The Midwest had a sizable decline of 6.5 percent.
  • All regions showed gains in sales from a year ago except the West where sales declined 1.7 percent. The Northeast had the biggest increase of 11.6 percent followed by the South with a gain of 6.5. The Midwest had the smallest gain of 3.2 percent. The South leads all regions in percentage of national sales at 41.2 percent while the Northeast has the smallest share at 13.9 percent.
  • May’s inventory figures are up 1.4 percent from last month to 2.15 million homes for sale but the level is below historical averages. Inventories are down 5.7 percent from a year ago. It will take 4.7 months to move the current level of inventory at the current sales pace. It takes approximately 32 days for a home to go from listing to a contract in the current housing market, down from 40 days one year ago.
  • Single family sales increased 1.9 percent while condos also increased 1.6 percent compared to last month. Single family home sales increased 4.7 percent and condo sales are also up 3.3 percent from a year ago. Both single family and condos had an increase in price with single family up 4.6 percent and condos up 6.0 percent from May 2015.