After plunging throughout 2012 and for much of 2013, and rising only modestly through the beginning of this year, the inventory of all for-sale homes nationwide spiked in May, jumping 11.8% year-over-year according to Zillow (Z).
But most of those gains in inventory were made among homes priced in the middle and top one-third of home values, according to Zillow Real Estate Market Reports.
The number of homes available for sale in the most affordable price bracket, those homes most sought by first-time homebuyers, fell year-over-year in 28 of the nation’s largest metro areas analyzed by Zillow.
“It’s good to see overall inventory rising. It’s likely that many would-be sellers have decided to capitalize on recent home value gains, particularly as the pace slows, and list their home for sale now in order to move into a new home while mortgage interest rates remain low,” said Zillow chief economist Stan Humphries. “But persistent inventory constraints at the low end of the market continue to make it a tough environment for first-time and lower-income homebuyers. Low inventory and high demand can lead to rapid price spikes, which make homes even more difficult to afford for many buyers. Hopefully the inventory gains we’re seeing in the middle and upper tiers of the market will begin trickling down to the most affordable homes soon.”
The total number of homes listed for sale on Zillow in May was up 4.3% over April, and has risen month-over-month in each of the past three months on a seasonally adjusted basis.
Overall inventory of for-sale homes was up year-over-year in 506 (78%) of the more than 600 metro areas analyzed by Zillow. Large metros where inventory has increased the most include Las Vegas (up 51.5% year-over-year), Washington, DC (up 45.7% year-over-year) and Riverside, Calif. (up 42.7% year-over-year).
In addition to low numbers of affordable homes for sale, first-time and lower-income homebuyers armed with traditional financing are also competing with all-cash buyers at the lower end of the market. Zillow reported last week that in 27 of the top 30 metros analyzed by Zillow, more than one third of all sales of the lowest-priced homes were made with cash. In three of the top 30 metros – Tampa, Detroit and Miami – more than 80% of all sales in the lowest price bracket were cash deals.
National home values in May were up 0.1% from April to a Zillow Home Value Index of $172,300, and have now risen for 28 consecutive months.
Year-over-year, U.S. home values rose 5.4% in May, the slowest annual pace of appreciation in more than a year. For the 12-month period from May 2014 to May 2015, national home values are expected to rise another 2.9% to approximately $177,321, according to the Zillow Home Value Forecast.
Monday, June 23, 2014
Thursday, June 19, 2014
Cash Is Still King
Despite cash sales dropping in 102 of 126 metro areas in the first quarter of 2014 compared to a year ago, cash still rules the market, according to a recent Zillow report.
“Even as the share of all-cash sales falls in many areas, it’s pretty clear that cash is still king, especially at the lower end of the market,” said Zillow Chief Economist Stan Humphries.
“It can be difficult for more traditional buyers to compete with cash offers, especially in a tight inventory environment and among cash-strapped first-time buyers most likely to seek lower-priced properties,” Humphries said.
“Housing is much more than an investment for most buyers, and it’s heartening to see more buyers armed with traditional financing begin to enter the market. This is a critical step on the way back to a more normal, balanced housing market,” he added.
However, homes priced in the lowest third of all homes available are the most attractive to cash buyers.
In 27 of the top 30 metros, more than one third of all sales of the lowest-priced homes were made by cash.
Furthermore, in three of the top 10 metros – Tampa, Detroit and Miami – more than 80% of all sales in the lowest price bracket were cash deals.
As reported by HousingWire back in May, “Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market,” said Daren Blomquist, vice president at RealtyTrac.
Individual, non-business buyers were more likely to buy bottom-tier homes with cash in the first quarter – in 20 out of the top 30 metros, the portion of sales that were all cash in the bottom tier was more than double that in top-tier homes. Meanwhile, business buyers, on average, were more likely to pay all cash in home purchases than individual buyers. In 11 of the top 30 metros, more than 90 percent of homes purchased by business buyers in the bottom price tier were all cash.
“Even as the share of all-cash sales falls in many areas, it’s pretty clear that cash is still king, especially at the lower end of the market,” said Zillow Chief Economist Stan Humphries.
“It can be difficult for more traditional buyers to compete with cash offers, especially in a tight inventory environment and among cash-strapped first-time buyers most likely to seek lower-priced properties,” Humphries said.
“Housing is much more than an investment for most buyers, and it’s heartening to see more buyers armed with traditional financing begin to enter the market. This is a critical step on the way back to a more normal, balanced housing market,” he added.
However, homes priced in the lowest third of all homes available are the most attractive to cash buyers.
In 27 of the top 30 metros, more than one third of all sales of the lowest-priced homes were made by cash.
Furthermore, in three of the top 10 metros – Tampa, Detroit and Miami – more than 80% of all sales in the lowest price bracket were cash deals.
As reported by HousingWire back in May, “Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market,” said Daren Blomquist, vice president at RealtyTrac.
Individual, non-business buyers were more likely to buy bottom-tier homes with cash in the first quarter – in 20 out of the top 30 metros, the portion of sales that were all cash in the bottom tier was more than double that in top-tier homes. Meanwhile, business buyers, on average, were more likely to pay all cash in home purchases than individual buyers. In 11 of the top 30 metros, more than 90 percent of homes purchased by business buyers in the bottom price tier were all cash.
Tuesday, June 17, 2014
May single-family housing starts retreat 5.9%- Building Permits Follow Suit
Single-family housing starts retreated 5.9% in May after a 13.2% spike last week, posting a rate of 625,000, according to the U.S. Census Bureau.
This is below April’s revised rate of 664,000.
Meanwhile, privately-owned housing starts in May also declined and fell 6.5% below April’s revised figure of 1,071,000.
However, this is still 9.4% above last year’s trends when May 2013 posted a rate of 915,000.
Single-family housing authorizations in May came in at a rate of 619,000, 3.7% above the revised April figure of 597,000, while privately-owned housing units authorized by building permits in May posted a rate of 991,000, which was 6.4% below the revised April rate of 1,059,000, but only 1.9% below May 2013.
Single-family housing completions gained 2.1% in May over April and hit a rate of 618,000.
In addition, privately-owned housing completions in May were at a seasonally adjusted annual rate of 897,000, which is 6.8% above April’s revised estimate of 840,000 and is 24.8% above the May 2013 rate of 719,000.
This is below April’s revised rate of 664,000.
Meanwhile, privately-owned housing starts in May also declined and fell 6.5% below April’s revised figure of 1,071,000.
However, this is still 9.4% above last year’s trends when May 2013 posted a rate of 915,000.
Single-family housing authorizations in May came in at a rate of 619,000, 3.7% above the revised April figure of 597,000, while privately-owned housing units authorized by building permits in May posted a rate of 991,000, which was 6.4% below the revised April rate of 1,059,000, but only 1.9% below May 2013.
Single-family housing completions gained 2.1% in May over April and hit a rate of 618,000.
In addition, privately-owned housing completions in May were at a seasonally adjusted annual rate of 897,000, which is 6.8% above April’s revised estimate of 840,000 and is 24.8% above the May 2013 rate of 719,000.
Monday, June 9, 2014
Largest mortgage financier: The great home recovery reversal
Housing has peaked and 2014 will show a slowdown from the amount of housing activity in 2013, Fannie Mae’s May 2014 National Housing Survey shows.
Respondents to the annual survey say that economic concerns and stagnant household income are dragging down housing. The results show that in the space of just one month, attitudes toward housing can shift dramatically.
The share of 1,000 respondents who still believe the economy is headed in the wrong direction remained at 57% last month, and those who said their household income is significantly higher than it was at the same time last year decreased four percentage points to 21%.
Housing activity in 2014 has been well below typical seasonal trends.
“Consumers’ lukewarm income expectations and reticence about the economy seem to be holding back housing demand,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “This year’s spring and summer home buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months.”
He added that while recent housing activity suggests that the worst of the housing slump may be behind America, this caution among consumers means sales this year will likely be too weak to pull sales for all of 2014 ahead of last year.
The survey findings track with real world indicators that support the conclusions by Fannie Mae: The housing market has serious cracks in the foundation – existing home sales have stalled out, pending home sales have plunged, price increases have slowed, and construction is slowing.
It's a 180 degree turn from the last National Housing Survey, which was considerably more positive.
For the April survey, Duncan said, “consumer attitudes about the current home selling environment have improved and now are at the most favorable level we’ve seen in the survey’s four-year history."
Here are some of the key survey findings from the May report.
Homeownership and Renting
The Economy and Household Finances
Respondents to the annual survey say that economic concerns and stagnant household income are dragging down housing. The results show that in the space of just one month, attitudes toward housing can shift dramatically.
The share of 1,000 respondents who still believe the economy is headed in the wrong direction remained at 57% last month, and those who said their household income is significantly higher than it was at the same time last year decreased four percentage points to 21%.
Housing activity in 2014 has been well below typical seasonal trends.
“Consumers’ lukewarm income expectations and reticence about the economy seem to be holding back housing demand,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “This year’s spring and summer home buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months.”
He added that while recent housing activity suggests that the worst of the housing slump may be behind America, this caution among consumers means sales this year will likely be too weak to pull sales for all of 2014 ahead of last year.
The survey findings track with real world indicators that support the conclusions by Fannie Mae: The housing market has serious cracks in the foundation – existing home sales have stalled out, pending home sales have plunged, price increases have slowed, and construction is slowing.
It's a 180 degree turn from the last National Housing Survey, which was considerably more positive.
For the April survey, Duncan said, “consumer attitudes about the current home selling environment have improved and now are at the most favorable level we’ve seen in the survey’s four-year history."
Here are some of the key survey findings from the May report.
Homeownership and Renting
- The average 12-month home price change expectation remained unchanged from last month, at 2.9%
- The share of respondents who say home prices will go up in the next 12 months fell to 48% and the share who say home prices will go down increased to 7%
- The share of respondents who say mortgage rates will go up in the next 12 months continued on a downward trend, dropping to 49%
- Those who say it is a good time to buy a house fell slightly to 68% and those who say it is a good time to sell a house increased to 43% a new all-time survey high.
- The average 12-month rental price change expectation decreased slightly to 3.9%
- 51% of those surveyed said home rental prices will go up in the next 12 months, while 3%of respondents said home prices will go down.
- 49% of respondents thought it would be easy for them to get a home mortgage today, rising 4 percentage points from last month.
- The share who say they would buy if they were going to move increased slightly to 66%.
The Economy and Household Finances
- The share of respondents who say the economy is on the right track increased 3 percentage points from last month to 38%
- The percentage of respondents who expect their personal financial situation to get better over the next 12 months fell slightly to 42%
- The share of respondents who say their household income is significantly higher than it was 12 months ago decreased 4 percentage points to 21%
- The share of respondents who say their household expenses are significantly higher than they were 12 months ago decreased 5 percentage points to 34%
Home purchases weak despite easing credit
Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.
For reasons unfathomable to the American mind, our friends across the pond aren’t keen on that all-American mainstay – the 30-year mortgage.
Never near as popular in the UK as here, there’s been a huge upsurge in homebuyers taking out 30-year loans in London especially. Why? Because especially in London, home prices are rising at about 20% a year.
If things keep on the same track here – could we see 40-year mortgages in America? (That may sound weird, but people are living longer, and borrowers buy the monthly payment, not the mortgage. So it may be stupidish, but not truly stupid – not like chewing gum all the way through a D-Day memorial service.)
First-time homebuyers are drivers and – right now – impediments to housing recovery. They aren’t forming new households like they should and because of student debt, economic uncertainty, and the jobless economic recovery under the watch of the current administration.
Tight lending standards and down payment requirements aren’t helping, either. HousingWire has one great story on where Millennials can cut down on expenses to save their down payment, and here are three more tips to help out.
If you’re not still spinning in hopes a recovery is just around the corner, you know home sales have been weak. But there is good news from the Mortgage Bankers Association: Mortgage access is loosening, and not just for upper-income households.
The MBA’s gauge of mortgage-credit availability rose in May to the highest level in more than three years, thanks to greater access to jumbo loans and easing standards for loans insured by the Federal Housing Administration.
(This is great for the high-end of buyers and the perennially income challenged, but not much word on anything for the middle -- in other words, a Tuesday.)
The you-know-what is still running the printing presses hard every month to buy up Treasurys and bonds, even if they are slowing their pace. You know who else buys U.S. bonds? People with a lot of money who want to have less of it later.
Between inflation, the real and very real possibility of default (it was once so unthinkable the fact that it’s possible deserved a little redundancy), the whims of the Fed board of governors, and the creeping nationalization of the bond market, they are not the safe bet they used to be.
If you think the California real estate market has stabilized and you’re looking to invest, here are some of the best ideas for investing in California real estate out there. (If you think the California real estate market is back to normal because of its instability, you may be right too.)
According to the Federal Deposit Insurance Corp., three banks failed or were closed the week ending June 6: Slavie Federal Savings Bank in Maryland, Columbia Savings Bank in Cincinnati, Ohio, and AztecAmerica Bank En Espanol, in Chicago.
For reasons unfathomable to the American mind, our friends across the pond aren’t keen on that all-American mainstay – the 30-year mortgage.
Never near as popular in the UK as here, there’s been a huge upsurge in homebuyers taking out 30-year loans in London especially. Why? Because especially in London, home prices are rising at about 20% a year.
If things keep on the same track here – could we see 40-year mortgages in America? (That may sound weird, but people are living longer, and borrowers buy the monthly payment, not the mortgage. So it may be stupidish, but not truly stupid – not like chewing gum all the way through a D-Day memorial service.)
First-time homebuyers are drivers and – right now – impediments to housing recovery. They aren’t forming new households like they should and because of student debt, economic uncertainty, and the jobless economic recovery under the watch of the current administration.
Tight lending standards and down payment requirements aren’t helping, either. HousingWire has one great story on where Millennials can cut down on expenses to save their down payment, and here are three more tips to help out.
If you’re not still spinning in hopes a recovery is just around the corner, you know home sales have been weak. But there is good news from the Mortgage Bankers Association: Mortgage access is loosening, and not just for upper-income households.
The MBA’s gauge of mortgage-credit availability rose in May to the highest level in more than three years, thanks to greater access to jumbo loans and easing standards for loans insured by the Federal Housing Administration.
(This is great for the high-end of buyers and the perennially income challenged, but not much word on anything for the middle -- in other words, a Tuesday.)
The you-know-what is still running the printing presses hard every month to buy up Treasurys and bonds, even if they are slowing their pace. You know who else buys U.S. bonds? People with a lot of money who want to have less of it later.
Between inflation, the real and very real possibility of default (it was once so unthinkable the fact that it’s possible deserved a little redundancy), the whims of the Fed board of governors, and the creeping nationalization of the bond market, they are not the safe bet they used to be.
If you think the California real estate market has stabilized and you’re looking to invest, here are some of the best ideas for investing in California real estate out there. (If you think the California real estate market is back to normal because of its instability, you may be right too.)
According to the Federal Deposit Insurance Corp., three banks failed or were closed the week ending June 6: Slavie Federal Savings Bank in Maryland, Columbia Savings Bank in Cincinnati, Ohio, and AztecAmerica Bank En Espanol, in Chicago.
Monday, June 2, 2014
Black Knight: 2 million borrowers can't afford rate resets
There are approximately 2 million modified mortgages facing interest rate resets, and of that amount, 40% are currently underwater, Black Knight’s April Mortgage Monitor Report found.
(source: Black Knight, click image for larger photo)
Further supporting this, adjustable rate mortgages with notes below 6% were prepaying at significantly higher speeds than their fixed-rate mortgage counterparts, suggesting that concerns about rising interest rates persist among borrowers.
“We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture,” said Kostya Gradushy, Black Knight’s manager of loan data and customer analytics.
The national negative equity rate sits at 9.4% of active mortgages. On the other side, the share of underwater modified loans facing interest rate resets is over 40%.
Meanwhile, another 18% of modified borrowers have 9% equity or less in their homes, causing some concern, Gradushy explained.
More than one of every 10 borrowers is in a ‘near negative equity’ position, meaning the borrower has less than 10% equity in his or her home.
“If you do not have about 10% equity in your home, you don’t make any money if you sell the house because closing costs are about 8%,” Jim Gaines, research economist with the Real Estate Center at Texas A&M University, explained.
And this comes amid a wave of lower mortgage rates and the 30-year, fixed-rate mortgage hitting the lowest level in almost nine months.
“Given that the data has shown quite clearly that equity -- or the lack thereof -- is one of the primary drivers of mortgage defaults, these resets may indeed pose an increased risk in the years ahead,” Gradushy added.
Despite improvement in the overall situation for underwater borrowers, there are still areas in the country where borrowers are hovering at the edge.
(source: Black Knight, click image for larger photo)
Further supporting this, adjustable rate mortgages with notes below 6% were prepaying at significantly higher speeds than their fixed-rate mortgage counterparts, suggesting that concerns about rising interest rates persist among borrowers.
“We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture,” said Kostya Gradushy, Black Knight’s manager of loan data and customer analytics.
The national negative equity rate sits at 9.4% of active mortgages. On the other side, the share of underwater modified loans facing interest rate resets is over 40%.
Meanwhile, another 18% of modified borrowers have 9% equity or less in their homes, causing some concern, Gradushy explained.
More than one of every 10 borrowers is in a ‘near negative equity’ position, meaning the borrower has less than 10% equity in his or her home.
“If you do not have about 10% equity in your home, you don’t make any money if you sell the house because closing costs are about 8%,” Jim Gaines, research economist with the Real Estate Center at Texas A&M University, explained.
And this comes amid a wave of lower mortgage rates and the 30-year, fixed-rate mortgage hitting the lowest level in almost nine months.
“Given that the data has shown quite clearly that equity -- or the lack thereof -- is one of the primary drivers of mortgage defaults, these resets may indeed pose an increased risk in the years ahead,” Gradushy added.
Despite improvement in the overall situation for underwater borrowers, there are still areas in the country where borrowers are hovering at the edge.
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