Affordability Remains High, Despite Price Gains

 

Daily Real Estate News | Monday, May 13, 2013

Low mortgage rates and stabilizing incomes are keeping home affordability high and giving home buyers “ample buying power,” according to the National Association of REALTORS®.
The Wall Street Journal highlights the following example on just how affordable housing has become: “Assuming a 5 percent down payment, a 3.5 percent mortgage rate, and 25 percent of a gross income devoted to mortgage payments, a buyer would only need an income of $36,500 to buy a house at the median price. With a 10 percent down payment, the required salary falls to $34,600, and with a 20 percent down payment, it falls to $30,700.”
In the first quarter, the median family income nationwide was $62,200.
Housing affordability remains high despite recent reports that show home prices in 150 U.S. cities saw their biggest year-over-year gains in more than seven years, according to NAR’s most recent report, reflecting data from the first quarter of 2013. The median price of a single-family, existing home was $176,600 in the first quarter of this year, an increase of 11.3 percent from year ago levels, NAR notes.
Areas with strong job growth are posting some of the largest home price gains, including:

• Akron, Ohio: +32.7%
• San Francisco By area: +32.6%
• Reno-Sparks, Nev.: +32.1%
• Silicon Valley area surrounding San Jose, Calif.: +31.7%
• Atlanta: +31.1%
• Phoenix: +30.1%

Source: “Home Prices Jump but Affordability Remains in Buyers’ Favor,” The Wall Street Journal (May 9, 2013)

Foreclosure Activity Drops to 6-Year Low

 

Daily Real Estate News | Friday, May 10, 2013

Foreclosure filings dropped 5 percent in April from March, with foreclosure filings down 23 percent in April from year ago levels, RealtyTrac reports. Nationwide foreclosure activity has reached a 74-month low or the lowest point since February 2007.
"The April numbers indicate that the pig is moving through the python when it comes to deferred foreclosures in judicial foreclosure states," said Daren Blomquist, vice president at RealtyTrac. "Foreclosure starts have been increasing for several months in many of the judicial states, and now that increased volume is showing up in the second stage of the process: the public foreclosure auction."
Judicial foreclosure auctions rose 22 percent from March to April and were up 31 percent from year-ago levels, RealtyTrac reports. On the other hand, scheduled, non-judicial foreclosure auctions dropped 7 percent in March and are down 43 percent from last year.
Foreclosure starts are rising in several non-judicial states, Blomquist notes. While foreclosure starts have fallen nationwide, 22 states are still seeing a rise in foreclosures over the previous month, RealtyTrac reports. Some of those states include: New Jersey (138 percent increase), Connecticut (46 percent increase), Texas (37 percent increase), Georgia (35 percent increase), Oregon (16 percent increase), and California (13 percent increase).

Source: RealtyTrac and “RealtyTrac: April foreclosure filings drop 23%,” HousingWire (May 9, 2013)

Are Underpriced Homes Fueling Bidding Wars?

 

Daily Real Estate News | Wednesday, May 08, 2013

The number of homes for sale is at the lowest point in more than 10 years, but with buyer demand still high, many markets are seeing bidding wars. A TIME magazine article recently asked: “Are buyers being manipulated into overbidding for the relatively few attractive homes on the market?”
Some real estate professionals say that homes are being underpriced in order to ignite a bidding war.
“Most people are not pricing at market value,” a real estate professional told the San Francisco Chronicle. “Even in this market, you don’t want to overprice.”
For example, the San Francisco-based agent said a two-bedroom townhouse in the area was priced at $659,000 recently, even after a similar townhome had sold a year ago for $675,000.
“We priced it intentionally to get multiple offers and sell quickly,” the agent says. The townhouse attracted nine offers and sold for 15 percent above the asking price — $755,000.
Bidding wars have become commonplace in markets like Denver, where half of the new homes on the market are selling in less than 30 days. In Northern and Southern California nine in 10 homes are attracting bidding wars, as well as two-thirds of the homes for sale in Boston, New York City, Seattle, and Washington, D.C., the TIME magazine article notes.
“The only question is not whether a new listing will get multiple bids but how many it will get,” says a Sacramento, Calif.-based real estate professional.

Source: “Forget Lowballing: Bidding Wars Return in Hot Housing Markets,” TIME (April 30, 2013)

Will 'Missing Households' Reappear After Investors Leave?

 

Daily Real Estate News | Tuesday, May 07, 2013

Investors and all-cash home buyers accounted for about 19 percent and 30 percent, respectively, of all sales in March, according to the National Association of REALTORS®. That represents a significant share of the market, and some analysts are concerned that as home prices rise, investor and all-cash demand will start to shrink.
Who will step up in their place?
Robert Dietz, an economist with the National Association of Home Builders, notes in a recent article for U.S. News & World Report that “missing households” in today’s market who have delayed home ownership will eventually play catch up.
Notably, recent college grads who delayed home ownership by moving in with their parents or renting are expected to increase their homebuying activity. Also, surveys show a growth in the number of Americans living together as roommates who are not relatives. Americans have doubled or even tripled up in rental residences to help cut costs. But as more people get married and start families and jobs stabilize, household formation will likely grow, Dietz notes.
The nation’s population has grown, but the number of independent households of renters and owners has not kept pace. The Census Bureau’s American Community Survey shows that the population from 2006 to 2011 grew by more than 4 percent, but there was only about a 3 percent growth in the number of households.
Dietz expects that homebuying demand will come strongly from rental households that were created over the last seven years. In that time, the number of rental households in single-family homes grew by 2.5 million, or 22 percent. Traditional renting households in multifamily units increased by nearly 7 percent, Dietz notes.
Dietz says the “real demand for housing is on the sidelines, particularly among younger Americans. ... For these younger prospective homebuyers, policy debates concerning the future of the housing finance system and home ownership programs like the mortgage interest deduction will have real impacts on their housing and wealth status in the years to come.”

Source: “What Happens to the Housing Market When the Investors Leave?” U.S. News & World Report (May 3, 2013)

4 Threats That Remain in Housing Recovery

 

Daily Real Estate News | Monday, May 06, 2013

The housing recovery appears to be on track and growing stronger. Home sales and prices are up after reaching bottom in 2010, foreclosures and mortgage delinquencies are dropping, yet housing affordability still remains high.
So why are some analysts and economists concerned?
At a recent Milken Institute Global Conference in Beverly Hills, Calif., panelists said that threats to the housing recovery still remain. The biggest threats they pointed to included:

1. Land scarcity: Real estate developers are struggling to find desirable land to start new projects, which is limiting the supply of new homes. A few years ago, banks took ownership of land after developers had foreclosed on some projects. The land is worth less than its original price so banks are reluctant to write off additional losses by selling it too cheaply. Plus, lenders remain cautious about issuing loans for new land purchases.
2. House flippers should be cautious: Housing affordability is high mostly due to super low mortgage rates, and investors are taking advantage with intentions of flipping homes for profit. "No doubt you can buy a house today and get a really good price and a low-interest loan,” says Jeff Greene, president of Florida Sunshine Investments. “But if you want to sell that house to somebody two or three years later and rates go up to 5 or 6 percent, how much is he going to pay for that house?"
3. Foreign buyers potentially inflating prices: In some markets, strong demand by foreign buyers has helped home prices recover, which has made homes more expensive for Americans in some areas. Some analysts fear that it could even lead to another housing bubble if interest rates started rising quickly as well. Markets like Miami, Los Angeles, and New York are seeing strong demand among foreign buyers. Some say this is a good thing, because it reflects a strong faith in the U.S. market.
4. A ‘patchy’ recovery: Some markets are seeing rapid increases with bidding wars, rising prices, and low inventories, while other markets are still at a standstill. For example, Miami’s housing market is “on fire” while 80 miles north in Palm Beach County there’s a “huge glut of housing,” says Greene.

Source: “5 Reasons the Housing Recovery Remains Wobbly,” U.S. News & World Report (May 3, 2013)

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'Pocket Listings' Spark Controversy

Daily Real Estate News | Thursday, May 02, 2013

With the housing rebound in full swing, “pocket listings” are growing in many parts of the country as some sellers look to preserve their privacy, and brokers use them to trigger an aura of exclusivity to a listing. But some in the industry worry that exclusivity may be crossing an ethical line.
Pocket listings refer to situations in which real estate agents purposely keep sales information about a home off the multiple listing services, and brokers only show that house to people they expect to actually purchase it.
The National Association of REALTORS® does not have an official policy on pocket listings, spokesman Walt Molony told CNNMoney. But some real estate boards say they don’t like the practice.
In New York, the practice of “pocket listings” violates the Universal Co-Brokerage Agreement, which requires agents to share listings, maintains Neil Garfinkel, counsel for the Real Estate Board of New York.
Some housing experts also say that pocket listings create a gray area when an agent is able to collect double commission from the deal by acting as the agent for both the buyer and seller. "If an agent is putting their own economic interest ahead of the seller’s, it’s a violation of state law," Garfinkel says.
However, "most of the time, pocket listings are done ethically and fairly," Betty Graham, president of Coldwell Banker Previews International/NRT, told CNNMoney.
If the home doesn’t sell quickly as a "pocket listing," many agents say they’ll then advise their clients to readjust their price and list the home publicly on the MLS. But some agents say a few sellers may prefer the privacy of pocket listings because they’re not highly motivated to move — unless someone offers them a “make-me-move” deal with a great price, CNNMoney reports.
Source: “Secret 'pocket listings' return in hot housing markets,” CNNMoney (May 2, 2013)