Market Updates

Existing Sales and Inventory Increase

Existing home sales increased 1.3 percent in April, but fell 6.8 percent from the same period a year ago. The National Association of REALTORS® (NAR) reported April 2014 total existing home sales at a seasonally adjusted rate of 4.65 million units combined for single-family homes, townhomes, condominiums and co-ops, up from 4.59 million units in March.

The West and South increased by 4.9 percent and 1.0 percent respectively in April, the Northeast remained unchanged, and the Midwest decreased 1.0 percent from the previous month. Year-over-year, all regions decreased, ranging from a 3.5 percent drop in the South to a 10.0 percent decrease in the West. Seasonally adjusted condominium and co-op sales increased 7.3 percent in April, and were unchanged from the same period a year ago.

First-time buyers comprised 29 percent of April 2014 sales, down from 30 percent in March and were unchanged from last April. The January first-time buyer share of 26 percent was the lowest since NAR began reporting that share monthly in October 2008. The historical average first-time buyer share is about 40 percent. Tight lending conditions continue to buffet first-time buyers despite reports of easing standards.

Total housing inventory leaped 16.8 percent in April to 2.29 million existing homes. At the current sales rate, the April 2014 inventory represents a 5.9-month supply, up from a 5.1-month supply in March and up from a 5.2-month supply a year ago. Continuing a positive note, NAR also reported that the April median time on market for all homes was 48 days, down from 55 days in March but up from 43 days during the same month a year ago. NAR reported that 41 percent of homes sold in April were on the market less than a month, compared to 37 percent of all homes sold in March.

The share of distressed sales ticked up to 15 percent in April from 14 percent in March, but was down from 18 percent in April 2013. Distressed sales are defined as foreclosures and short sales sold at deep discounts. All cash sales comprised 32 percent of April transactions, down from 33 percent in March, and unchanged from the same period a year ago. Individual investors purchased an 18 percent share in April, up from 17 percent in March but down from 19 percent during the same period a year ago. Some 70 percent of April investors paid cash, virtually unchanged from 71 percent last month.

The April median sales price for existing homes of all types increased to $201,700 from the downwardly revised March median sales price of $196,700 and was up 5.2 percent from a year ago. The median condominium/co-op price increased again to $205,500 in April, up from a downwardly revised $198,300 in March and was up 8.3 percent from April 2013.

The Pending Home Sales Index increased 3.4 percent in March, the first increase since June 2013. Therefore, it was expected that April existing home sales would respond with a modest increase. Despite the slight increase in the April investor share, higher existing home prices make these homes less appealing for investors, and a future withdrawal of that demand will take some steam out of existing sales. The increased inventory of existing homes coupled with increased new home construction will expand choices for first-time buyers, the missing link in this housing recovery.

While existing home sales struggled through a sub-par first quarter, new home sales continue to post year-over-year gains (also tempered by recent weather impacts) as investor activity cools.

View this original post on NAHB’s blog, Eye on Housing.

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.

Delinquency and Foreclosure Rates Decline to Lowest Level in Six Years

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.39 percent of all loans outstanding at the end of the fourth quarter of 2013, the lowest level since the first quarter of 2008. The delinquency rate decreased two basis points from the previous quarter, and 70 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 2.86 percent, down 22 basis points from the third quarter and 88 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since 2008.

The non-seasonally adjusted percentage of loans on which foreclosure actions were started during the fourth quarter decreased to 0.54 percent from 0.61 percent, a decrease of seven basis points, and the lowest level since 2006.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 5.41 percent, a decrease of 24 basis points from last quarter, and a decrease of 137 basis points from the fourth quarter of last year.

“We continue to see substantial improvement in both delinquency and foreclosure rates, with most measures now back to pre-crisis levels,” says Michael Fratantoni, MBA’s Chief Economist and Senior Vice President of Research and Industry Technology.

“The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of over 10 percent in 2010 and is edging closer to the historical average of around 5 percent. The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in six years. The percentage of new foreclosures started, at 0.54 percent, is the lowest in eight years and is back within its typical historical range.

“There was broad improvement in foreclosure rates in the fourth quarter, with 49 states and the District of Columbia recording a decrease. Florida still leads the nation in the percentage of loans in foreclosure, but that percentage has fallen to 8.56 percent from a peak of 14.5 percent. New Jersey and New York had the next two highest rates but both states did see a drop from the previous quarter. States with judicial foreclosure systems still account for most of the loans in foreclosure. Of the 17 states that had a higher foreclosure inventory rate than the national average, 15 were judicial states. While the percentage of loans in foreclosure dropped in both judicial and nonjudicial states, the average rate for judicial states was 4.92 percent compared to the average rate of 1.52 percent for nonjudicial states. That being says, for judicial states this was still a significant improvement from the rate of 6.88 percent recorded in 2012.

“In terms of new foreclosures started, about one fifth of all states saw an increase, but as we have pointed out previously, quarterly movements in this measure have often been the result of changing state laws and the timing associated with these changes and implementation. This has usually resulted in quarterly swings in the foreclosure start rate, sometimes with an offsetting change in the 90 day or more delinquency category, as the foreclosure process is started and stopped.

“The total past due rate for FHA loans increased over the quarter by 41 basis points, but is still down 70 points relative to last year at this time. The increase for the quarter was driven by a 37 basis point increase in loans one payment past due. The foreclosure measures for FHA loans declined both over the quarter and relative to last year.

“Loan cohorts from 2009 and earlier continue to make up more than 90 percent of seriously delinquent loans. Loans originated in 2007 and earlier accounted for 75 percent of the seriously delinquent loans, while loans originated in 2008 and 2009 accounted for another 16 percent. This is important to note because current home prices, while still rising, are about 9 percent below the peak in 2007. Therefore, borrowers with loans originated in 2007 will be more vulnerable to traditional delinquency and foreclosure trigger events such as a divorce, job loss, health issue, or death in the household.

“We have been collecting metro area data for over a year now and these are showing improvements similar to the national numbers. Among the 25 largest metropolitan areas, the Baltimore-Towson metro area had the highest 90+ day delinquency rate at 3.87 percent, but that rate was an improvement from 4.91 percent in the fourth quarter of 2012. The Minneapolis-St Paul metro had the lowest at 1.43 percent. With respect to the proportion of loans in foreclosure, Miami had the highest rate at 10.34 percent, but it also had the largest decrease in its foreclosure rate over the past year. The two metro areas out of the top 25 that showed an increase in loans in foreclosure over the year were Nassau-Suffolk, New York and Edison-New Brunswick, New Jersey.”

Change from last quarter (third quarter of 2013)
On a seasonally adjusted basis, the overall delinquency rate decreased for all loan types, except for subprime fixed loans, subprime ARM loans and FHA loans. The seasonally adjusted delinquency rate decreased 12 basis points to 3.23 percent for prime fixed loans and 53 basis points to 5.44 percent for prime ARM loans. For subprime loans, the delinquency rate increased 32 basis points to 19.52 percent for subprime fixed loans and 87 basis points to 22.33 percent for subprime ARM loans. The delinquency rates for VA loans fell by 12 basis points to 5.29 percent and the FHA delinquency rate rose by 41 basis points to 10.47 percent.

The non-seasonally adjusted percentage of loans in foreclosure, also known as the foreclosure inventory rate, decreased from 3.08 percent last quarter to 2.86 percent. The foreclosure inventory rate for prime fixed loans decreased 16 basis points to 1.56 percent, and the rate for prime ARM loans decreased 69 basis points from last quarter to 3.85 percent. For subprime loans, the rate for subprime fixed loans decreased 71 basis points to 8.28 percent and the rate for subprime ARM loans decreased 97 basis points to 15.48 percent. The foreclosure inventory rate for FHA loans decreased nine basis points to 3.27 percent, while the rate for VA loans decreased three basis points to 1.78 percent.

The non-seasonally adjusted foreclosure starts rate decreased three basis points for prime fixed loans to 0.30 percent, one basis point for prime ARM loans to 0.59 percent, 39 basis points for subprime fixed to 1.47 percent, 100 basis points for subprime ARM loans to 1.91 percent, two basis points for FHA loans to 0.75 percent, and increased three basis points for VA loans to 0.47 percent.

Change from last year (fourth quarter of 2012)
Given the challenges in interpreting the true seasonal effects in these data when comparing quarter to quarter changes, it is important to highlight the year over year changes of the non-seasonally adjusted results.

Compared with the fourth quarter of 2012, the foreclosure inventory rate decreased 54 basis points for prime fixed loans, 283 basis points for prime ARM loans, 100 basis points for subprime fixed, 276 basis points for subprime ARM loans, 58 basis points for FHA loans, and 30 basis points for VA loans.?Over the past year, the non-seasonally adjusted foreclosure starts rate decreased eight basis points for prime fixed loans, 38 basis points for prime ARM loans, 35 basis points for subprime fixed, 95 basis points for subprime ARM loans, 11 basis points for FHA loans, and two basis points for VA loans.

For more information, visit www.mba.org.

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.

New Home Purchases Up Sharply in January 2014

MBA estimates that sales of new single-family homes were running at a seasonally adjusted annual rate of 543,000 units in January 2014, based on data from MBA’s Builder Applications Survey.

“While the big jump may appear to conflict with other data, such as MBA’s purchase application index and NAR’s existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes,” says Mike Fratantoni, MBA’s Chief Economist.  “It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December.”

The estimated 543,000 unit sales pace for January was an increase of 35 percent from December’s pace of 402,000 units.  On an unadjusted basis, the MBA estimates that there were 38,000 new home sales in January 2014, a 36 percent increase from the level of 28,000 units in December 2013.  The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

Mortgage applications for new home purchases increased by 27 percent relative to the previous month.  This change does not include any adjustment for typical seasonal patterns.

By product type, conventional loans composed 69.4 percent of loan applications, FHA loans composed 15.9 percent, RHS/USDA loans composed 1.3 percent and VA loans composed 13.4 percent.  The average loan size of new homes decreased from $300,444 in December to $289,358 in January.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.  Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level.  This data also provides information regarding the types of loans used by new home buyers.  Official new home sales estimates are conducted by the Census Bureau on a monthly basis.  In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. 

For more information, visit www.mortgagebankers.org

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.

Home Values Expected to Rise Through 2018

A majority of more than 100 forecasters says they expect large-scale investors to sell off the bulk of homes in their portfolios in the next three to five years, boosting inventory and potentially contributing to a smoother market ahead, according to the latest Zillow® Home Price Expectations Survey. On average, panelists also says they expected nationwide home value appreciation of 4.5 percent this year, with a steady slowdown in appreciation rates each year through 2018.

The survey of 110 economists, real estate experts and investment and market strategists asked panelists to predict the path of the U.S. Zillow Home Value Indexi through 2018 and solicited opinions on investor activity and federal monetary policy. The survey was sponsored by leading real estate information marketplace Zillow, Inc. and is conducted quarterly by Pulsenomics LLC.

Throughout the recovery, large-scale investors have purchased thousands of homes nationwide, particularly lower-priced vacant and foreclosed homes, fixing them up and keeping them in their portfolios as rental properties. This investor activity helped put a floor under sales volumes during the depth of the housing recession, but also created competition for many would-be buyers and contributed to rapid price spikes in some areas.

Panelists were asked to assess the impact to the market if these institutional investors were to significantly curtail their activity this year. Among those panelists expressing an opinion, 79 percent says the impact would be significant or somewhat significant. Panelists were also asked when they thought these investors will have sold the majority of homes in their portfolios. Among those with an opinion, 57 percent says they expected this to occur in the next three to five years.

"Real estate investors, both large and small, played a crucial role in helping to stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn’t necessarily a bad thing, and could have real benefits for buyers," says Zillow Chief Economist Dr. Stan Humphries. "Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year which should be some small solace given the higher prices and mortgage rates that they will encounter. The gradual decline of investor activity should be viewed as another sign of the market slowly returning to normal, and I agree with the panel’s expectations that there will not be a rush for the exit by institutional investors."

Panelists were also asked when the Federal Reserve should end its ongoing stimulus efforts, known as "quantitative easing." Since September 2012, the Fed has been purchasing tens of billions of dollars worth of Treasury bonds and mortgage securities each month, which has helped keep mortgage interest rates low and stimulate demand. The program is now being wound down.

"Mortgage rates have been riding a rally in U.S. Treasury securities caused by volatility in emerging markets in recent weeks, so the impact of Fed tapering on the housing market has been minimal thus far," says Pulsenomics Founder, Terry Loebs. "More than 70 percent of the experts want to see the monetary stimulus reduced to zero before the end of this year, and the current pace of tapering will get us there. Of course, whether Janet Yellen’s Fed will maintain the current pace as new economic challenges arise remains an open question."

Appreciation Expected to Normalize through 2018

On average, panelists says they expect nationwide home value appreciation of 4.5 percent through the end of this year, a pace that exceeds historically normal annual appreciation rates of around 3 percent. This appreciation is expected to slow to roughly 3.8 percent in 2015 and 3.3 percent by 2018, rates much more in line with historic norms.

Based on current expectations for home value appreciation during the next five years, panelists predicted that overall U.S. home values could exceed their April 2007 peak by the first quarter of 2018, and may cross the $200,000 threshold by the third quarter of 2018.

The most optimistic groupii of panelists predicted a 5.6 percent annual increase in home values this year, on average, while the most pessimisticiii predicted an average increase of 3.4 percent. The most optimistic panelists predicted home values would rise roughly 10.6 percent above their 2007 peaks by the end of 2018, on average, while the most pessimistic says they expected home values to remain about 4.5 percent below 2007 peaks.

For more information, visit www.zillow.com.

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2014. All rights reserved.

August Existing-Home Sales Rise, Limited Inventory Continues to Push Prices

Existing-home sales increased in August and reached the highest level in six-and-a-half years, while the median price shows nine consecutive months of double-digit, year-over-year increases, according to the National Association of REALTORS®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7 percent to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July, and are 13.2 percent higher than the 4.84 million-unit level in August 2012.

Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months.

Lawrence Yun, NAR chief economist, says the market may be experiencing a temporary peak. “Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions,” he says. “Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn’t as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase.”

Total housing inventory at the end of August increased 0.4 percent to 2.25 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, down from a 5.0-month supply in July. Unsold inventory is 6.3 percent below a year ago, when there was a 6.0-month supply. “Limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August, although 63 percent sold below list price.”

Data from realtor.com®, NAR’s listing site, shows large declines in inventory from a year ago in Naples, Fla., down 23.5 percent; the Detroit area, down 23.3 percent; and the greater Boston area, down 20.7 percent.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.46 percent in August from 4.37 percent in July, and is the highest since July 2011 when it was 4.55 percent; the rate was 3.60 percent in August 2012.
The national median existing-home price for all housing types was $212,100 in August, up 14.7 percent from August 2012. This is the strongest year-over-year price gain since October 2005 when the median rose 16.6 percent, and marks 18 consecutive months of year-over-year price increases.

Distressed homes – foreclosures and short sales – accounted for 12 percent of August sales, down from 15 percent in July, and is the lowest share since monthly tracking began in October 2008; they were 23 percent in August 2012. Ongoing declines in the share of distressed sales are responsible for some of the growth in median price.

Eight percent of August sales were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in August, while short sales were discounted 12 percent.

NAR President Gary Thomas, says rising home values will encourage more people to sell. “As the equity position of most homeowners continues to improve, some who have been on the sidelines will list their home for sale,” he said. “Most of those owners also will be buying another home, but higher levels of new home construction going into 2014, combined with some reduction in demand from less favorable affordability conditions, will help to moderate price growth to more sustainable levels.”

The median time on market for all homes was 43 days in August, little changed from 42 days in July, but is much faster than the 70 days on market in August 2012. Short sales were on the market for a median of 98 days, while foreclosures typically sold in 52, days and non-distressed homes took 41 days. Forty-three percent of homes sold in August were on the market for less than a month.

First-time buyers accounted for 28 percent of purchases in August, down from 29 percent in July and 31 percent in August 2012.

All-cash sales comprised 32 percent of transactions in August, up from 31 percent in July and 27 percent in August 2012. Individual investors, who account for many cash sales, purchased 17 percent of homes in August, compared with 16 percent in July and 18 percent in August 2012. Last month, three out of four investors paid cash.

Single-family home sales rose 1.7 percent to a seasonally adjusted annual rate of 4.84 million in August from 4.76 million in July, and are 12.8 percent above the 4.29 million-unit pace in August 2012. The median existing single-family home price was $212,200 in August, which is 14.4 percent higher than a year ago.

Existing condominium and co-op sales rose 1.6 percent to an annual rate of 640,000 units in August from 630,000 in July, and are 16.4 percent above the 550,000-unit level a year ago. The median existing condo price was $211,700 in August, up 17.7 percent from August 2012.

Regionally, existing-home sales in the Northeast were unchanged at an annual rate of 710,000 in August but are 12.7 percent above August 2012. The median price in the Northeast was $268,800, up 7.6 percent from a year ago.

Existing-home sales in the Midwest increased 3.1 percent in August to a pace of 1.32 million, and are 18.9 percent higher than a year ago. The median price in the Midwest was $166,100, which is 10.0 percent above August 2012.

In the South, existing-home sales rose 3.8 percent to an annual level of 2.19 million in August and are 13.5 percent above August 2012. The median price in the South was $181,000, up 14.6 percent from a year ago.

For additional commentary and consumer information, visit www.houselogic.com and http://retradio.com.

Mike Spruell
Realtor®/Broker/ePRO
The Lake Norman Homes Team
Southern Homes Elite
www.LakeNormanRealEstate.pro
866-LakeNorman
704-907-7907

Reprinted with permission from RISMedia. ©2013. All rights reserved.