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Updated: 1 hour 6 min ago

Lenders Pensive, But Warming to Government Overtures

Fri, 03/20/2015 - 10:05

It has become rarer for banks and lenders to hold the loans they originate.  One factor linked to tight credit is the process where loan investors force lenders to buy back mortgages they sold to the investor.  In this case, the investors are the FHA and GSEs.  These buyback requests occur when the FHA, Fannie Mae or Freddie Mac receive loans that do not meet their standards.  While academic studies have shown that the incidence of these repurchase requests have dropped to historic lows in recent years, the fear of reputational risk and potential costs remain elevated.

Lenders Feel the Pinch

85% of participants in the 4th quarter Survey of Mortgage Originators indicated having been the subject of a repurchase request between 2009 and 2013.  Of those, more than 60% resulted in a buy-back, while the remaining 41% were resolved without one.  Furthermore, 90% of respondents indicated that repurchase requests from aggregators or investors impacted their willingness to lend, 40% significantly so.  Repurchase requests were the leading factor cited by survey participants as driving reluctance to lend to borrowers with greater risk (e.g. FICO<640, higher DTIs, and low down payments).

Government Response

The agencies made overtures to ease lender concerns about buy-back risk in recent months through their representation and warrant policies.  An estimated 40% of respondents indicated a modest improvement in willingness to lend to riskier borrowers as a result, while an equal share indicated that the changes would have no effect.  A fifth of respondents indicated that they would wait and see.

Of the suggestions that would improve credit availability, 25% of respondents cited more clearly defined rules that determine repurchase risk.  An additional 12.5% cited allowing indemnification for minor infractions rather than repurchase of these loans, while 12.5% indicated that no changes would ameliorate their concerns.

Government attempts to ease lenders’ concern appears to have worked to a degree, but more change to programs or perception may be necessary.  Though the government has made a concerted effort to shift repurchase requests closer to origination, historically they have come when loans default.  Furthermore, private aggregators and the FHA have sued originators whom they purchased loans from.  Thus, the market may have to wait for another housing cycle and rise in defaults for lenders to observe the government’s actions before they wade back into the deep end of the market en mass.

Rising Foreign Investment and Non-immigrant Admission Trends: An Opportunity for Engaging in Transactions with International Clients

Thu, 03/19/2015 - 12:01

The United States continues to be a prime destination for foreign direct investment[1]  (FDI) with its open investment regime and favorable economic and political environment. [2]  With its top-notch and many universities, the U.S. also has been attracting an increasing number of international students.

Expanding trade and investment flows and increasing international student population present opportunities for engaging in real estate transactions with international clients.  According to NAR surveys of its REALTORS®, about half of international clients are citizens of another country who are in the U.S. on temporary visas or are recent immigrants who have been in the U.S. for less than six months.

Over the period 2010-2013 (latest data available by country), the United Kingdom, Japan, and the Netherlands were the largest sources of foreign direct investment. Canada remained as a major investor (Chart 1). Among Asian countries, next to Japan were Korea, Australia, and China as the biggest sources of foreign capital.  Although China has the least inflow in terms of volume of dollars, its growth has been the most spectacular, with inflows increasing from $114 million during 2002-2005 to $ 8 billion during 2010-2013, a 70-fold increase. Among Latin American countries, Mexico, Brazil, and Venezuela made the largest foreign direct investments.  Not surprisingly, these countries have also been the major sources of international clients purchasing U.S. residential property.

California, Texas, New York, Florida, and Illinois were the major destination of investors, intra-company transferees, and those granted business waivers in 2013 (Chart 2). These states, except for Illinois, have also been the preferred locations of international home buyers.REALTORS® have also reported that some international clients purchase homes for their children studying at U.S. universities and later use these homes for vacation or investment/rental purposes. China, Canada, Mexico, South Korea, Saudi Arabia, and India are the top countries of origin of international students (Chart 3). California, New York, Texas, Michigan, and Massachusetts were the top 5 states of choice of international students in 2013 (Chart 4). It’s worth noting that Michigan draws far more foreign students than Florida even though the state is notably smaller in population.What This Means to REALTORS®: Increasing foreign investments in the U.S. and the accompanying flow of people is enhancing the opportunities for engaging in transactions with international clients.  NAR provides training/certification to increase one’s expertise in dealing with international clients. Visit the website for more information at http://www.realtor.org/global.

[1] Foreign direct investments are investments in which the investor seeks some long-term management control of the company by acquisition of some control of the company. The Organization for Economic Co-operation and Development, of which the U.S. is a member, considers 10 percent ownership of the voting stock of a company as a benchmark. Foreign direct investment differs from portfolio investments which are made for the purpose of portfolio diversification or securing a financial return.

[2] “Foreign Direct Investment in the United States”, Department of Commerce and the Council of Economic Advisers, October 2013. See  http://www.whitehouse.gov/sites/default/files/2013fdi_report_-_final_for_web.pdf

Apartment Spotlight: Six Markets Tie for Year over Year Vacancy Declines

Wed, 03/18/2015 - 11:11

Commercial fundamentals improved in the fourth quarter 2014, with rising net absorption driving rents higher across the major property types. As employment gains are expected to continue into 2015, demand for commercial space is expected to advance.

Multifamily demand is expected to remain strong, as the pace of household formation closes on historical averages. However, 2015 will mark the first year since the recession that supply will likely outpace demand.

Fundamental improvements were experienced across the country at different rates. In 2014, Lexington, KY provided the largest year-over-year availability decline, with a 100 basis point drop. The second largest declines came from six markets, with varying vacancy rates, which all experienced 90 basis point drops: Albuquerque, NM; Columbia, SC; Dayton, OH; Fort Worth, TX; Las Vegas, NV; and Tulsa, OK.

Of the group, Ft. Worth and Las Vegas are the largest by population, with over 2.0 million people in each metro area. The other markets hover slightly below 1.0 million people. Employment trends were positive for five metros, with Albuquerque being the only one to experience a slight decline in total employment. A contributing factor to the decline may have been an exodus of residents from the metro area. Albuquerque lost 2,940 households between 2013 and 2014.  Dayton was the other metro area with a decline in the number of households over the period—890 households.

Las Vegas had the strongest employment growth of the group, at 3.2 percent followed by Ft. Worth, with 2.8 percent growth year-over-year.  In contrast to its household change, Dayton’s employment advanced 1.3 percent on a yearly basis. Tulsa experienced a 1.2 percent gain in employment, while Columbia posted 0.4 percent increase in total employment.

Vacancies ranged across the group from about 3.0 percent in Albuquerque to 6.0 percent in Columbia during 2014. Demand was positive across all metros, with net absorption registering growth in three metros—Dayton (85% YoY change), Ft. Worth (17% YoY change) and Tulsa (27% YoY change). Asking rents advanced in all markets, with Ft. Worth posting the highest annual growth rate, at 3.3 percent, followed by Tulsa, with 3.2 percent.  Rents rose 2.3 percent in Las Vegas, 2.1 percent in Columbia and Dayton, and 1.7 percent in Albuquerque.

For a look at NAR’s commercial forecast for 2015, visit the Commercial Real Estate Outlook.

Latest Housing Starts (February 2015)

Wed, 03/18/2015 - 08:18
  • Housing starts tumbled in February.  The snowy weather was the reason since the declines were much deeper in the Northeast and the Midwest regions compared to the South and the West regions where the cold weather was less of a factor.  Even as the outdoor activity of actual construction fell, the indoor activity of obtaining housing permits actually increased in February.  More new homes will surely reach the market as the weather improves.
  • Specifically, housing starts in February hit 897,000 (annualized pace) from 1.081 million in January.  Housing permits rose 3 percent to 1.092 million in February.  The permit increase was predominately in the multifamily units (apartments and condominiums).
  • The overall inventory of homes for sale is running low.  The supply of existing home inventory at 4.7 months in January.  For new homes, it was 5.4 months.  A normal condition would be around 6 to 7 months.  Therefore, there is a slight inventory shortage and more new homes need to be built.
  • Many locally based homebuilders have been restrained by excessive difficulty in obtaining construction loans.  Many local lenders have indicated the new financial regulations as being burdensome as to the reason why construction loans are not an easy matter.  The national homebuilders do not need construction loans since they obtain capital from Wall Street.  In addition there has been a shortage of qualified construction workers.  Larger firms are more easily able to outbid and provide a steadier flow of work hours then smaller firms.  Therefore, the combined influences of construction loan difficulty and worker shortage have led to an increased market concentration in the homebuilding industry with less competition.
  • Despite frictions related to homebuilding, new home construction will no doubt increase in 2015.  Single-family new home construction is expected to rise by around 25 percent while multifamily new home construction is expected to rise by around 10 percent.  The overall housing starts are expected to reach around 1.2 million units in 2015.  Unfortunately, that is grossly inadequate given the already low inventory levels and falling apartment vacancy rates. A cool 1.5 million new units are needed.  Home prices and rents will likely therefore outpace people’s income growth.

Accelerating Housing Costs Has Renters Feeling the Squeeze

Tue, 03/17/2015 - 12:41

The gap between rental costs and household income is widening to unsustainable levels in many parts of the country, and the situation could worsen unless new home construction meaningfully rises according to new research by the National Association of Realtors®. In the past five years, a typical rent rose 15% while the income of renters grew by only 11%.

NAR’s research analyzed changes on income growth, housing costs and changes in the share of renter and owner-occupied households over the past five years in 70 metropolitan statistical areas across the U.S.

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The top markets where renters have seen the highest increase in rents since 2009 are:

  • New York, NY-NJ-PA (50.7%),
  • Seattle, WA(32.4%),
  • San Jose, CA (25.6%),
  • Denver, CO (24.1%),
  • St. Louis, MO-IL  (22.3%).

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A way to relieve housing costs is to increase the supply of new home construction – particularly to entry-level buyers. Builders have been hesitant since the recession to add supply because of rising construction costs, limited access to credit from local lenders and concerns about the re-emergence of younger buyers. Yun estimates housing starts need to rise to 1.5 million, which is the historical average.


Return Buyers on the Rise

Tue, 03/17/2015 - 10:24

Millions of former homeowners experienced a foreclosure or shortsale over the last 9 years.  Eventually these borrowers will return to the housing market.  Participants in the 4th quarter Survey of Mortgage originators survey were asked if there was a change in volume of formerly distressed sellers seeking mortgage credit.  Relative to 2013, half of respondents indicated an increase in potential return buyers seeking credit.

 This result suggests a continuation of the growing trend of return buyers.  Over the 12-month period from July of 2013 to June of 2014, 8% of home buyers were previously distressed sellers.  This share was an increase from 6% in the prior period.

Irish Home Price Trend and the U.S. Forecast

Tue, 03/17/2015 - 09:11
  • Irish home prices rose at 16 percent in 2014.  That gain was the best in the world.  Ireland had experienced a big bubble and burst, but the climb since then has been consistently one of the best.   It is also why the broader Irish economy is projected to grow much faster than the rest of Europe.
  • According to a major real estate firm based in Britain, the home prices moved this way in 2014:               See the full list of countries here.
  • Irish took a drastic step during the recent past financial crisis that nearly all other major countries did not do.  Government spending was slashed, government employee salaries were cut, and it raised taxes to help balance the budget.  The short-term pain was going to be acute.  But it realized there will be long-term gains.  The long-term gains are already here in terms of rising home prices, rising employment, and rising economy.
  • The fast-rising home prices in Ireland (though still well below the prior bubble-peak) are due to many years of under-construction of new homes.  Now that the economy is rising and employment gains solid, more construction needs to take place from low inventory conditions.  This story sound familiar.  America has been under producing new homes in recent years.  Inventory levels are low.  Prices are rising in the mid-single digits.  But is it on the verge of accelerating into double-digit rate of appreciation as occurred last year in Ireland?
  • A crucial turning point in the rich history of Ireland was when St. Patrick escaped slavery many centuries ago and arrived on the island to spread the word of the Bible.  Another significant moment was when the island became free and sovereign after the First World War.  The process was not easy, as the largely Catholic country wanted the whole island free while the Protestants in the northern portion continued to wish to be part of Britain.  In the end, however, Ireland did free itself.  In the very first presidential election, the Irish people elected a Protestant.  That an overwhelmingly Catholic country could freely elect a Protestant was evidently a major signal that people could overcome their fears.  Economies prosper when people do not fear.  That is why people in Ireland now have a higher per capita income than those in Britain.  America at first could not accept a Catholic Presidential candidate so voted solidly for Herbert Hoover.  Later, America did elect JFK – signaling no fear of religion and economic prosperity.

St. Patrick’s Day: Green and Energy Efficient Home Features

Mon, 03/16/2015 - 13:12

How do green features influence buyers’ purchasing choices? Using the 2014 Profile of Home Buyers and Sellers and the 2015 Home Buyer and Seller Generational Trends report, it is apparent that green and energy efficient features are important to a significant portion of recent home buyers.

All Buyers:

  • The importance of the home’s environmentally friendly features which were described as very important or somewhat important included:
    • Heating and cooling costs: 86 percent
    • Energy Efficient Appliances: 68 percent
    • Energy Efficient Lighting: 66 percent
    • Landscaping for Energy Conservation: 46 percent
    • Environmentally Friendly Community Features: 47 percent
    • Solar Panels Installed on Home: 11 percent

  • When purchasing a newly-built home, one of the top reasons was for green/energy efficiency features. Nine percent of buyers cited this as the reason for their newly-built home purchase.

Generational Trends:

  • Ten percent of the 34 and younger age group described the reason for their new home purchase as for green/efficiency reasons. Nine percent of 35 to 49 year olds and 60 to 68 years olds also said that green/ energy efficiency was the reason for their newly-built home purchase.
  • Among buyers who considered environmentally friendly features as “Very Important” here are the top age groups in each category:
    • Heating and cooling costs: 40 percent of 60 to 68 year olds.
    • Commuting costs: 39 percent of buyers aged 34 or younger.
    • Energy efficient appliances: 37 percent of 60 to 68 year olds.
    • Energy efficient lighting: 25 percent of both 50 to 59 year olds and 60 to 68 year olds.
    • Landscaping for energy conservation: 13 percent of 60 to 68 year olds.
    • Environmentally friendly community features: 11 percent of both 35 to 49 and 60 to 68 year olds.
    • Solar Panels installed on home: 2 percent of 35 to 49, 50 to 59, and 60 to 68 year olds.

For more information on Home Buyers and Sellers check out the Going Green Infographic, the 2015 Home Buyer and Seller Generational Trends report, and the 2014 Profile of Home Buyers and Sellers.


Credit Conditions Still Difficult But Slowly Easing

Fri, 03/13/2015 - 15:27

Qualifying for a mortgage is still generally difficult, although becoming easier, according to the January 2015 REALTORS® Confidence Index Survey.  Some respondents in states such as TX, CA, and NY reported that more people are qualifying for credit.  About 4 percent of REALTOR® respondents reported a purchase by a buyer with credit score of less than 620, up from about 1-2 percent in 2012-2014. In a normal market, the share of credit scores below 620 would be closer to 5 percent. Almost half of  REALTORS® providing transaction credit score information reported FICO credit scores of  740 and above; in 2013, the share was hovering at about 60 percent.

Potential buyers facing credit limitations might want to consider a mortgage origination by community banks and credit unions.

Apartment Spotlight: Lexington, KY Records Largest YoY Vacancy Decline

Fri, 03/13/2015 - 11:47

Commercial fundamentals improved in the fourth quarter 2014, with rising net absorption driving rents higher across the major property types. As employment gains are expected to continue into 2015, demand for commercial space is expected to advance.

Multifamily demand is expected to remain strong, as the pace of household formation closes on historical averages. However, 2015 will mark the first year since the recession that supply will likely outpace demand.

Across metropolitan areas, Lexington, KY experienced the largest year-over-year availability decline during 2014. Apartment vacancy declined 100 basis points, closing the year at 5.0 percent.  The decline was driven by a significant shift in demand, coupled with zero new completions.  Net absorption moved from negative 129 units in 2013 to 214 units in 2014.


Employment growth in the Lexington-Fayette MSA was positive for the year, with 2,400 net new jobs. In addition, the metropolitan area recorded 590 new households. The average household income rose 5.0 percent on a yearly basis.

Apartment asking rents in Lexington rose 1.0 percent year-over-year in 2014, to $692. Effective rents advanced 0.8 percent.

For a look at NAR’s commercial forecast for 2015, visit http://www.realtor.org/reports/commercial-real-estate-outlook.

Latest Producer Price Index

Fri, 03/13/2015 - 11:30
  • The prices of things that companies pay to make products are falling.  This is an early indicator that consumer prices are likely to be well-contained and thereby delay interest rate hike by the Federal Reserve.  But the prices on construction-related goods are rising.
  • In February, producer price index on finished goods was lower by 3.4 percent from one year ago.  The prices on the intermediate and crude products – those things that are not yet in a finished form – plunged by an even larger amount, 6 percent and 25 percent respectively.  Such a trend bodes very well that inflation is far away.  The best guess on the eventual filtering impact to consumer prices is such that the cost-of-living-adjustment (COLA) on social security benefits checks in 2016 will be zero.  Difficult to swallow, but there will likely be no increase on the amount of the social security benefit checks next year.
  • Even though prices of many things for producers are falling, that is not the case for the construction industry.  The prices of raw timber and sand (used for construction) have consistently been moving higher, both about 2 to 3 percent higher.  The price of cement is way up by 9 percent.  The newly constructed home price will therefore rise – from both the broad inventory shortage and due to increases in the cost of construction.
  • Already the gap between the newly constructed home price and existing home price is very wide.  Since the price of new homes is unlikely to decline, the price of existing homes will likely need to rise faster in the upcoming years to get us back to the historical normal spread.
  • As an aside, the prices of things we eat at the early stage of production (not the consumer prices at grocery stores) are moving in the following way: wheat (down 12 percent), corn (down 12 percent), slaughter hogs (down 43 percent), slaughter broilers (down 2 percent), raw milk (down 34 percent).  One major food item that is rising is the price of slaughter cattle (up 15 percent).  For the benefit of the wallet, therefore, it’s time to give up rib-eye steak.  One can read The Jungle by Upton Sinclair to get disgusted about meat processing and packaging.  Or one can switch to pork chops and bacon.   

Latest Retail Sales

Thu, 03/12/2015 - 10:50
  • Consumers spent far less at gas stations due to lower gasoline prices. The saved money, however, did not lead to higher sales at clothing and department stores.  Sales at furniture and home furnishing stores also declined.  One area where retail sales did rise was at sporting and hobby stores.
  • In detail, retail sales fell 0.6 percent in February from the prior month.  From one year ago, retail sales were markedly slower with only 1.7 percent gain, the slowest gain over a 12 month period since 2009.
  • A big reason for the lower overall retail sales was less money spent at gas stations, which fell 23 percent from one year ago.  The lower gasoline prices are projected save around $1,000 to $1,500 per family this year compared to last year.  This savings, however, is not leading to higher spending elsewhere – at least not yet.
  • Related to housing, retail sales at furniture & home furnishing stores were modestly down over the month, but were comfortably higher (up 6 percent) from one year ago.
  • Spending at building material & garden equipment stores also fell during the month though were higher by 4 percent from one year ago.  The direction of home sales will largely determine the direction of retail sales in this sector.
  • Given the job gains of recent months and the savings from gas stations, it is inevitable that retails sales will pick up steam.  Online sales will grow faster just because people are ever becoming more comfortable clicking the mouse from home and from office.  NAR projects the retail vacancy rate to steadily fall and reach 9 percent by next year.  The vacancy rate on industrial spaces (needed for storing online merchandises) will fall to around 8 percent.
  • The introduction of the Apple Watch could be the catalyst for higher retail and online spending in the future.  The Apple Watch will also standardize the time.  Watchmakers in the past worked years on end, mostly in Switzerland, to mesh gears in such a way to produce the most accurate (and also most expensive) watches.   Very interesting though that people who wore these expensive and accurate watches tended to be the least punctual.  And then there are people who do not need a watch at all.  When Falstaff upon waking up asked what time is it, Prince Hal had to give him an honest answer: “You are so fat-witted, with drinking of old sack, and unbuttoning after supper, and sleeping upon benches after noon … What a devil have you to do with the time of the day?” 

Demand for Townhouses Improved in Many Markets in January 2015

Wed, 03/11/2015 - 09:52

REALTOR® confidence about the outlook for townhomes in the next six months improved in many states, according to the January 2015 REALTORS® Confidence Index Survey.   The REALTORS® Confidence Index-Six-Month Outlook crossed the threshold of 50 in many states.

Demand for townhomes is strong in states that are experiencing employment growth from the technology and oil/gas industries (e.g., California, Washington, North Dakota, Texas),  the revival of manufacturing (e.g. Michigan), and demand from international clients (e.g., Florida). The growing interest for walkable” and “smart” neighborhoods may also be underpinning demand for townhomes and condominiums.

However, access to condominium financing remains an issue. REALTORS® continued to report that obtaining FHA unit financing for condominiums is difficult because many condominiums do not meet FHA eligibility criteria.[1]  Condominiums are frequently the entry point to homeownership for first-time homebuyers.

 What Does This Mean For REALTORS®?  Helping buyers find starter homes may be an increasing challenge given FHA requirements and increasing demand.  REALTORS® will need to work more patiently with homebuyers and present a wider set of feasible alternatives.

[1] Condominium projects need to pass eligibility criteria to be FHA-approved that will enable borrowers to avail of an FHA mortgage. Among others, criteria relate to the area devoted for non-residential use (no more than 25 percent), ownership (no more than 10 percent ownership by a single entity), delinquency dues ( no more than 15 percent),  use of facility (assisted living facility are generally not eligible), and rental pooling arrangements (not eligible).   See http://portal.hud.gov/hudportal/documents/huddoc?id=11-22mlguide.pdf

Existing Home Sales Trends: A Two Graph Summary

Tue, 03/10/2015 - 11:04

Every month a variety of press commentary discusses NAR’s Existing Home Sales market data.  Can commentary about the housing outlook be summarized in a visually compelling graph?  The answer is “Yes”.

  • Home sales on a 6/12-month rolling basis–i.e., total sales on a previous six and twelve month trending basis—summarizes the existing home sales markets.  Economic trends tend to continue—so a 12 –month roll gives a fairly good idea of where the market will head for the next few months.
  • The six month trend shows that sales fluctuate and are cyclical.  Normal fluctuations occur:  it’s important to look at the underlying trends.  The twelve month trend shows where the market has been—and trends tend to keep moving unless a new development causes them to change.
  • The graph shows that right now housing sales have temporarily plateaued; in conjunction with low inventory and rising price information the problem is on the supply side:  the market is not in trouble—just constrained.  Will the market change?  Yes, when more inventory becomes available.  The ongoing economic expansion may help in getting some more inventories.

  • Adding a second graph can show home prices—again on a rolling six and twelve month basis.  Again, there appears to be underlying market strength.  Rising prices mean fewer people are “under water” on their mortgages—an opportunity to move if desired and the potential creation of additional inventory.

What Does this Mean for REALTORS®?

A quick market summary “cuts to the chase.”  After everything the housing markets have been through and with all of the ongoing commentary in the news, a simple graph summarizes the markets at the national level, and a second graph summarizes prices.

Labor Mobility

Tue, 03/10/2015 - 09:59
  • American dynamism is springing up as more workers are getting hired and more are voluntarily quitting old jobs.  The changing of jobs in some cases requires a change in residence and therefore buying a new home.  The rise in quit rate also hints an impending rise in wages since employers would not want to lose good workers.
  • The number of job openings hit 5.0 million in January, a post-recession high.  Just 12 months ago the job openings were at 3.9 million.
  • The number of newly hired workers also hit 5.0 million in January.  This is an increase from 4.6 million newly hire workers one year ago, though is down from 5.2 million one month prior.
  • The number of people who are no longer working for the same employer hit 4.8 million in January.  This separation rate is up from 4.4 million one year ago.  Within this group, the number of people who voluntarily quit their jobs rose to 2.8 million in January, which is an increase from 2.4 million one year ago.  The rising quit rate is a sure indicator of the need to start raising wages to retain good workers.  The rise in wages in turn will help on housing affordability over time.  In the past few years the gains in both rents and home prices have been outpacing wage growth.
  • One consistent story from the latest string of data is of increase worker mobility.  Moreover, the increase in the job changes is occurring while unemployment benefit payments have been rapidly falling.  Therefore a good number of workers are improving their economic conditions.
  • America is very unique among wealthy countries with such a dynamic labor market.  Companies fire people during bad times and hire people in good times.  That is not the case in most European countries.  Because of stringent labor laws, companies in Europe cannot easily fire people without getting sued.  That is why companies also do not easily hire people either.  There is much less dynamism and mobility in Europe compared to America.

Real Median Income and Number of Households

Mon, 03/09/2015 - 15:20

The visualization below shows the real median household income and the number of households since 2005 for the 50 largest metropolitan areas.

We observe that the areas with the highest median household income are not the areas with the highest number of households. For instance in 2013, San Jose, CA had the highest median household income at around $92,000 while the number of households in that area was 637,628. Washington, DC was next at around $90,000 and San Francisco, CA was third at around $80,000. However, the median household income for New York, NY was equal to $66,000, although households in New York increased by 4.3% the last couple of years to 7,081,691. Similarly, Los Angeles, CA had 4,251,495 households and the median household income was $59,000.

During the period from 2005 – 2013, the real median household income increased in one out of four metro areas. Salt Lake City experienced the highest increase (1% annual growth). With respect to median household incomes for the nation as a whole, it decreased annually by an average of 0.7% – from $55,168 in 2005 to $52,250 in 2013.

Income in Houston, Oklahoma City, Salt Lake City, Seattle and Washington, DC remained above the 2005 level through 2013, unlike many metro areas. Almost all metro areas experienced a decrease of their income in 2009.  Specifically, 30 out of 50 metro areas had a lower income in 2009 compared to 2005. Twenty–nine metros never regained the 2005 level. San Jose, CA was the only exception, where the median income increased by 1% in 2012 and 0.3% in 2013 compared to 2005 level.

Please use the slider to see the median household income and the number of households over the last eight years for the 50 largest metro areas.

International Women’s Day

Fri, 03/06/2015 - 13:57

International Women’s Day is celebrated internationally on March 8th each year. It is a day to acknowledge the economic, political, and social achievements of women. In recognition of this day we can examine the profile of women Realtors® using the 2014 Member Profile.

Women in Real Estate:

  • Women make up 57% of all Realtors®, with 53% licensed as brokers/broker associates, and 62% licensed as sales agents.
  • 62% of women members are between the ages of 50 and 59.
  • Women members were most likely to be married making up 68%, 19% were divorced, 6% are single/never been married, and 6% are widowed.


  • 35% of women members have completed some college.
  • 28% hold a Bachelor’s degree, 12% hold an Associate’s degree, and 10% hold a Master’s degree/MBA/law degree.

Real Estate Career:

  • For 81% of women members, real estate is currently their only occupation.
  • 55% of women members have been active as a real estate professional for 11 or more years, 31% between 3 and 10 years, and 14% have been active for 2 or less years.
  • In a typical work week 57% of women members work over 40 hours.
  • Only 4% of female members have cited real estate as their first career.
  • Some of the previous occupations help by women members include:
    • Management/Business/Financial: 18%
    • Other: 16%
    • Office Admin Support: 15%
    • Sales/Retail: 14%
    • Homemaker: 7%
    • Education: 7%

For more information on International Women’s Day check the out the United Nation’s events page.

Find more information on Realtors® in the International Women’s Day Infographic and the Member Profile.

Latest Employment Report: February 2015

Fri, 03/06/2015 - 11:53
  • The U.S. economy added 3.3 million net new jobs in the past 12 months to February.  One has to go back to the late 1990s when the job growth rate was this strong.  More jobs will enlarge the pool of potential homebuyers and increase the demand for commercial leasing activity.
  • The latest one month gain of 295,000 net new jobs is implying that the momentum continues to build and another 3 million net new jobs over the next 12 months is a possibility.  Rising demand for real estate is near certainty as a result.  This backdrop is the key reason as to why NAR is forecasting 7 to 9 percent rise in home sales in 2015.
  • Jobs related to residential construction and building contractors rose by 16,800 in February and by 167,800 over the past 12 months.  Jobs related to commercial construction and building contractors rose by 15,700 in February and by 117,700 over the past 12 months.  This growth in construction employment reflects the need to build new homes, new apartments, new office buildings, warehouses, and other commercial building spaces.
  • Employment in oil extraction and the related support services fell for the second consecutive month.  No surprise since oil prices have plunged and some oil wells are no longer profitable.  The loss of these hard-hat workers are likely to be a gain for the construction industry, which had been faced with worker shortage.  Homebuilding activity, therefore, could be primed to rise much faster in 2015 than the 8 percent gain experienced in 2014.
  • The unemployment rate has fallen to 5.5 percent, the lowest since early 2008.  However, the employment rate (how many people have jobs) is barely rising and remains at close to recessionary levels.  The discrepancy in trends between unemployment and employment rates is due to a sizable number of people who are out of the labor force and who hence are counted neither as employed nor unemployed.
  • One frustrating aspect of the current job market is that wages are stuck and not really rising.  The average hourly wage in February was $20.80, which is the same as the prior month and up by only 1.6 percent from one year ago.  Home prices have been rising at 5 to 6 percent and apartment rents have been rising at 3 to 4 percent.  Workers in short are getting their life squeezed out of them from rising housing costs.  But homeowners have fixed mortgage payments and therefore are mostly protected.


Lenders Optimistic on Changes

Wed, 03/04/2015 - 15:01

In recent months, two changes were made to government financing that were intended to improve credit availability.  Mortgage lenders who took part in the 4th quarter Survey of Mortgage Originators agreed that both programs, the new 3% down payment loan at Fannie Mae and Freddie Mac as well as the reduction of fees at the FHA, will provide a boost to the housing market.

In November, the FHFA which oversees Fannie Mae and Freddie Mac, announced that it would once again allow the two entities to finance loans with as little as 3%.  These loans would be for first-time buyers, require buyer education, require strong underwriting, and would be priced to reflect their risk.  As discussed in an earlier blog, this 3% product would only be accessible by a relative slim portion of the market.  A 71.4% majority of lenders who participated in the 4th quarter survey felt that the 3% product will help to expand access to credit.

In early January, the FHA announced a reduction in the annual mortgage insurance premium charged from 1.35% to 0.85%.  The vast majority of respondents indicated that this would boost production with a production-weighted average increase of 8.5%.  10% of respondents indicated that the change would simply shift demand from the GSEs to the FHA as lender overlays would limit new entrants to the market.  No respondents indicated that the fee reduction would not have an impact.

NAR Research estimated that the pricing change would price in an additional 90,000 to 140,000 potential homeowners who cannot afford to purchase in the current market.  The 8.5% increase that lenders cited correlates to an increase in purchase volume of more than 300,000 purchase mortgages[1].  Overlays are a wild card in the current market that could hamper the impact of the rate reduction, though the administration has made overtures to this end.

FHA and GSEs have made significant changes to improve credit availability in recent months.  Lenders who took part in the 4th quarter survey indicate that these changes should help to improve access and affordability to consumers.  Overlays will remain a headwind, limiting the full benefit of these changes, until the FHA and GSE can ameliorate lender concerns about certain legal risks.

[1] The 8.5% change is assumed equal for purchase and refinance volume.  This might not be the case as the question asks for the impact on “total” volume suggesting that the unit impact on purchase volume could be smaller or larger.

Demand for Homes Continues to Outstrip

Wed, 03/04/2015 - 08:44

REALTORS® continue to report that supply remains low compared to demand, according to the January 2015 REALTORS® Confidence Index SurveyThe Buyer Traffic Index registered at 56, while the Seller Traffic Index was at 41.  An index greater than 50 means the number of respondents who have a “strong” outlook outnumber those with “weak” outlook.

Respondents reported that lower mortgage rates were boosting home buying.[1] Meanwhile, supply has been tight with new construction coming in at less than the normal pace of 1.5 million units. Also, although prices have been rising, many homeowners are still reluctant to list as they wait for prices to pick up further to build up more equity. About 19 percent of mortgaged properties, mostly lower priced homes, have equity below 20 percent.

[1] Based on Corelogic’s Third Quarter 2014 Equity Report, 19 percent of mortgaged residential properties have less than 20 percent equity (under –equitized) and 10.3 percent are in negative equity. Home equity is  concentrated at the upper end of the market; about 94 percent of homes priced at $200,00 and above have positive equity, while only 85 percent of homes priced at below $200,000 have positive equity. http://www.corelogic.com/research/negative-equity/corelogic-q3-2014-equity-report.pdf