Home-price growth is slowing even as the sales of homes under $200,000 slip and the share of home sales above the $500,000 price point grow, according to the August home report from RealtyTrac.
Residential properties, including single-family homes, condominiums and townhomes, sold at an estimated annual pace of 4,508,559 in August, down one-half% from the previous month and down 16% from a year ago — the fourth consecutive month where annualized sales volume has decreased on a year-over-year basis.
The median price of U.S. residential properties sold in August — including both distressed and non-distressed sales — was $195,000, up 3% from the previous month, and up 15% from a year ago to the highest level since August 2008, a six-year high.
“Higher-end properties are taking up a bigger share of a smaller home sales pie, boosting the median home price nationwide higher even as home price appreciation slows to single digits in many of last year’s red-hot local housing markets,” said Daren Blomquist, vice president at RealtyTrac. “On the other hand, markets where large institutional investors and other buyers have not picked clean lower-priced inventory are continuing to see strong, double-digit increases in median home prices.”
The share of sales in the $200,000-and-below price range was down 9% from a year ago, while the share of sales in the above-$200,000 price range increased 10% from a year ago.
Breaking down the above-$200,000 price range further, the share of sales in the $500,000-to-$1 million price range increased 18% from a year ago while the share of sales in the over-$1 million price range increased 38% from a year ago. Overall the share of sales above $500,000 increased 23% from a year ago.
“Housing sales in Seattle continue to be very healthy across the board, but one area in particular that has shown strong growth this year is the luxury market,” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market. “In August, homes priced above $2 million saw a 38% increase in sales compared to a year ago. I attribute this to Seattle’s economic boom, which is attracting an increasing number of high-paying, executive-level professionals as well as international interest from buyers who are competing for multi-million dollar homes.”
Among 197 metropolitan statistical areas with a population of 200,000 or more and with sufficient sales data, 124 (63%) saw lower annual home price appreciation in August 2014 compared to August 2013.
Home price appreciation slowed in 36 of the nation’s 50 largest markets (72%) and in 18 of the nation’s 20 largest markets (90%).
Major markets with decelerating home price appreciation in August 2014 compared to a year ago included San Francisco (9% annual appreciation in August compared to 37% a year ago); Los Angeles (7% annual appreciation in August compared to 27% a year ago); Phoenix (6% annual appreciation in August compared to 25% a year ago); Atlanta (10% annual appreciation in August compared to 28% a year ago); and Las Vegas (8% annual appreciation in August compared to 26% a year ago).
“We continue to see the traditional housing cycle this year with most of the price appreciation happening in the spring and early summer months,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. “Inventory in the Southern California coastal markets has become far more balanced, giving buyers a good level of choice and a moderate amount of negotiating room.”
Markets with accelerating appreciation and hitting new home price peaks
Major markets where home price appreciation in August was still accelerating compared to a year ago included Cincinnati (22% annual appreciation in August compared to 4% depreciation a year ago); Cleveland (23% annual appreciation in August compared to 1% a year ago); Miami (20% annual appreciation in August compared to 15% a year ago); Pittsburgh (7% annual appreciation in August compared to 3% a year ago); and Seattle (8% annual appreciation in August compared to 7% a year ago).
Out of the 197 major markets, 22 (11%) reached new median home price peaks in August, including Pittsburgh, Cincinnati, Columbus, Charlotte, and Austin, Texas.
“The Ohio markets continue to experience an increase in overall pricing, but a noticeable decline in total units sold,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton, Ohio markets. “The declining year-over-year sales unit numbers can be attributed to the lack of available inventory, particularly within the first-time home buyer price range. As cash sales continue to decline within the Ohio markets, the available inventory is continuing to experience improvement, which shows further stability and growth of the Ohio housing stock.”
Short sales and distressed sales account for 13.5% of all residential sales
The median price of U.S. distressed sales — properties in the foreclosure process or bank-owned — was $129,000 in August, up 2% from the previous month and up 15% from a year ago, but still 37% below the median price of non-distressed sales: $205,000.
Short sales and distressed sales (properties in some stage of foreclosure or bank-owned when sold) accounted for 13.5% of all U.S. residential property sales in August, up from 10.7% in the previous month but still down from 14.3% in August 2013.
Markets with the highest share of combined short sales and distressed sales in August were Modesto, Calif., (36.1%), Lakeland, Fla. (35.9%), Stockton, Calif., (33.4%), Las Vegas (33.2%), and Orlando (29.3%).
Short sales accounted for 4.6% of all sales, while bank-owned (REO) sales accounted for 7.8% of all sales and sales at the foreclosure auction accounted for 1.0% of all sales — and the share of sales was down compared to a year ago for all three of these categories of sales.
Thursday, September 25, 2014
Monday, September 22, 2014
WSJ: Student debt could cut home sales 8% in 2014-Effect of debt is major drain, new study says
One thing that hasn’t been underreported in housing in 2014 is the crushing amount of student debt out there, but Nick Timiraos looks into just how much it impacts housing and mortgage finance in the Wall Street Journal.
Higher levels of student debt will reduce U.S. home sales by around 8% this year, according to a report released Friday by John Burns Real Estate Consulting, an advisory firm.
The paper examines the impact of student debt on purchase activity for households under age 40. Those households account for around two-thirds of student debt holders. It concludes that sales of new and existing home will total 5.26 million this year, with some 414,000 “lost” households as a result of rising student debt burdens.
Higher debt burdens will defer home purchases for many borrowers while requiring others to buy a less expensive home in order to qualify for a loan or save for a down payment.
The paper estimates that every $250 per month in student loan debt reduces borrowers’ purchasing power by $44,000, and since 2005, some 3.8 million additional households have at least $250 per month in student debt.
Put differently, around 35% of households under age 40 have monthly student debt payments exceeding $250, up from 22% of households in 2005.
Existing home sales drop 1.8% on cash buyer retreat-Annual home sales down 5.3%
With cash-paying investors on full retreat, existing home sales dropped 1.8% in August, according to the National Association of Realtors.
Sales increases in the Northeast and Midwest were outweighed by declines in the South and West, which are the two biggest housing markets.
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell to a seasonally adjusted annual rate of 5.05 million in August from the already downwardly revised 5.14 million in July.
Sales are at the second-highest pace of 2014, but remain 5.3% below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.
Lawrence Yun, NAR chief economist, says sales activity remains stronger than earlier in the year, but fell last month as investors stepped away.
"There was a marked decline in all-cash sales from investors,” he said. "On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”
Yun adds, "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”
The median existing-home price for all housing types in August was $219,800, which is 4.8%above August 2013. This marks the 30th consecutive month of year-over-year price gains.
Total housing inventory at the end of August declined 1.7% to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. However, unsold inventory is 4.5 percent higher than a year ago, when there were 2.21 million existing homes available for sale.
All-cash sales were 23% of transactions in August, dropping for the second consecutive month (29% in July) and representing the lowest overall share since December 2009 (22%). Individual investors, who account for many cash sales, purchased 12 percent of homes in August, down from 16 percent last month and 17 percent in August 2013. Sixty-four percent of investors paid cash in August.
NAR President Steve Brown, co-owner of Irongate Realtors in Dayton, Ohio, says a gradual decline in investor activity, many who pay in cash, is good for the market and creates more opportunity for buyers who rely on financing to purchase a home.
"Realtors applaud the recent policy change to eliminate post-payment interest charges on FHA-insured single-family mortgages,” he said. "The prepayment penalty placed an unfair and unreasonable burden on consumers who already face high housing and closing costs.”
The percent share of first-time buyers remained unchanged in August from July at 29%. First-time buyers have represented less than 30% of all buyers in 16 of the past 17 months.
Distressed homes – foreclosures and short sales – represented 8% of August sales, remaining in the single-digits for the second straight month and down from 12% a year ago. Six percent of August sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 14 percent below market value in August (20% in July), while short sales were discounted 10% (14% in July).
Properties typically stayed on the market in August longer (53 days) than last month (48 days) and a year ago (43 days). Short sales were on the market for a median of 135 days in August, while foreclosures sold in 53 days and non-distressed homes typically took 52 days. Forty percent of homes sold in August were on the market for less than a month.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell for the fourth consecutive month to 4.12 percent in August from 4.13% in July, and remains at the lowest rate since June 2013 (4.07%).
Single-family home sales slipped 1.8% to a seasonally adjusted annual rate of 4.46 million in August from 4.54 million in July, and are now 4.9% below the 4.69 million pace a year ago. The median existing single-family home price was $220,600 in August, up 5.2% from August 2013.
Existing condominium and co-op sales declined 1.7% to a seasonally adjusted annual rate of 590,000 units in August from 600,000 in July, and are now 7.8% below the 640,000 unit pace a year ago. The median existing condo price was $213,900 in August, which is 2.1% higher than a year ago.
Regionally, August existing home sales in the Northeast jumped 4.7% to an annual rate of 670,000, but remain 4.3% below a year ago. The median price in the Northeast was $265,800, which is 0.8% lower than a year ago.
In the Midwest, existing home sales increased 2.5% to an annual level of 1.24 million in August, but remain 3.9% below August 2013. The median price in the Midwest was $173,800, up 5.9% from a year ago.
Existing home sales in the South declined 4.2% to an annual rate of 2.03 million in August, and are now down 4.2% from August 2013. The median price in the South was $186,700, up 4.7% from a year ago.
Existing home sales in the West fell 5.1% to an annual rate of 1.11 million in August, and are 9.8% below a year ago. The median price in the West was $301,900, which is 5.4% above August 2013.
Sales increases in the Northeast and Midwest were outweighed by declines in the South and West, which are the two biggest housing markets.
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell to a seasonally adjusted annual rate of 5.05 million in August from the already downwardly revised 5.14 million in July.
Sales are at the second-highest pace of 2014, but remain 5.3% below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.
Lawrence Yun, NAR chief economist, says sales activity remains stronger than earlier in the year, but fell last month as investors stepped away.
"There was a marked decline in all-cash sales from investors,” he said. "On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”
Yun adds, "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”
The median existing-home price for all housing types in August was $219,800, which is 4.8%above August 2013. This marks the 30th consecutive month of year-over-year price gains.
Total housing inventory at the end of August declined 1.7% to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. However, unsold inventory is 4.5 percent higher than a year ago, when there were 2.21 million existing homes available for sale.
All-cash sales were 23% of transactions in August, dropping for the second consecutive month (29% in July) and representing the lowest overall share since December 2009 (22%). Individual investors, who account for many cash sales, purchased 12 percent of homes in August, down from 16 percent last month and 17 percent in August 2013. Sixty-four percent of investors paid cash in August.
NAR President Steve Brown, co-owner of Irongate Realtors in Dayton, Ohio, says a gradual decline in investor activity, many who pay in cash, is good for the market and creates more opportunity for buyers who rely on financing to purchase a home.
"Realtors applaud the recent policy change to eliminate post-payment interest charges on FHA-insured single-family mortgages,” he said. "The prepayment penalty placed an unfair and unreasonable burden on consumers who already face high housing and closing costs.”
The percent share of first-time buyers remained unchanged in August from July at 29%. First-time buyers have represented less than 30% of all buyers in 16 of the past 17 months.
Distressed homes – foreclosures and short sales – represented 8% of August sales, remaining in the single-digits for the second straight month and down from 12% a year ago. Six percent of August sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 14 percent below market value in August (20% in July), while short sales were discounted 10% (14% in July).
Properties typically stayed on the market in August longer (53 days) than last month (48 days) and a year ago (43 days). Short sales were on the market for a median of 135 days in August, while foreclosures sold in 53 days and non-distressed homes typically took 52 days. Forty percent of homes sold in August were on the market for less than a month.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell for the fourth consecutive month to 4.12 percent in August from 4.13% in July, and remains at the lowest rate since June 2013 (4.07%).
Single-family home sales slipped 1.8% to a seasonally adjusted annual rate of 4.46 million in August from 4.54 million in July, and are now 4.9% below the 4.69 million pace a year ago. The median existing single-family home price was $220,600 in August, up 5.2% from August 2013.
Existing condominium and co-op sales declined 1.7% to a seasonally adjusted annual rate of 590,000 units in August from 600,000 in July, and are now 7.8% below the 640,000 unit pace a year ago. The median existing condo price was $213,900 in August, which is 2.1% higher than a year ago.
Regionally, August existing home sales in the Northeast jumped 4.7% to an annual rate of 670,000, but remain 4.3% below a year ago. The median price in the Northeast was $265,800, which is 0.8% lower than a year ago.
In the Midwest, existing home sales increased 2.5% to an annual level of 1.24 million in August, but remain 3.9% below August 2013. The median price in the Midwest was $173,800, up 5.9% from a year ago.
Existing home sales in the South declined 4.2% to an annual rate of 2.03 million in August, and are now down 4.2% from August 2013. The median price in the South was $186,700, up 4.7% from a year ago.
Existing home sales in the West fell 5.1% to an annual rate of 1.11 million in August, and are 9.8% below a year ago. The median price in the West was $301,900, which is 5.4% above August 2013.
Thursday, September 18, 2014
Housing start woes go deeper than single-month drop
With news Thursday that privately owned housing starts plunged 14.4% in August, many were left scratching their heads at how starts could have printed so poorly.
The August print for housing starts was a seasonally adjusted annual rate of 956,000, well below analyst expectations, but 8% above the August 2013 rate of 885,000.
“The decline in housing starts in August was worse than we or the consensus had anticipated and stands in stark contrast to surging homebuilder confidence,” said Paul Diggle, property economist for Capital Economics. “This weakness should prove temporary, however, with the strengthening economic recovery and shortage of homebuilding relative to household formation set to boost starts over the coming months.”
Troubling in the data is that starts and building permits fell in every region in August. The last time that happened was in October 2009, when the housing crash was still in progress.
Housing starts are little changed from the level at the start of 2013, reflecting a similar stagnation in new home sales. In addition, land and labor shortages have been significant constraints on homebuilders, although these may now be easing.
Click to enlarge
Chart: Zerohedge
In a bit of conspicuous incongruity, on Wednesday the National Association of Home Builders/Wells Fargo Housing Market Index hit 59 — the highest level since November 2005. This is the fourth consecutive month it has increased, reaching a nine-year high.
Jonathan Smoke, chief economist for Realtor.com, however said that nothing in the report was really unexpected.
“The totals (permits and starts) were down in August over July, driven by declines in multifamily. None of the single family numbers were statistically significant— meaning the best we can say about August based on this initial survey sample is that it was likely flat—not hugely up or down,” Smoke said.
“Multifamily new construction is where we have seen most of the growth, not just this year, but every year since 2011. Multifamily demand continues to benefit from the decline in home ownership and the now record levels of households in the US that rent,” Smoke said. “We are not seeing rents or vacancies show any wide-spread weakness, so the August reading is simply a reflection of the lumpiness of the data. We had huge positive numbers in July, which were also revised up.”
Smoke said that on the single family side, the market has seen weakness all year and an inability to see more than low single digit growth over last year. This level of single family production is half of what a normal market should produce, he said.
“What isn’t normal today is the depressed first-time and entry level market, which is a reflection of the ‘overlay tight’ qualification restrictions. Meanwhile builders have been investing in lots and product designs reflective of a more qualified buyer— that’s why we’ve seen new home prices and new home sizes grow so much. But that also means they aren’t building large volumes of affordable homes that the first-time market would need if they could qualify,” Smoke said.
“The numbers are also reflective of regional differences. The south, where affordability is strong, had a slight increase in single family starts in August over July and is also up 12% year-over-year,” he said. “The south represents 55% of current single family starts.
“With new single family construction remaining weak, we will continue to see limited overall supply of homes for sale, and finding affordable homes for sale will continue to be challenging,” Smoke said.
“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.
During the Bipartisan Policy Center’s 2014 Housing Summit, Beth Ann Bovino, chief economist of Standard & Poor’s, said certain negative economic conditions are now turning around, as proof that housing can be sustained.
Diggle noted the disconnect.
“Minor consolations in the data were a 2.2% upward revision to starts in July and the fact that the latest drop ‘only’ reversed three-quarters of the previous gain. But this is clearly a disappointing release,” he said. “But it’s not unusual for the NAHB measure and starts to diverge for extended periods – it’s happened twice before in the early- and late-1990s and on both occasions the divergence ended with a drop in homebuilder confidence rather than a rise in homebuilding.”
Diggle said he thinks the current divergence will end with a significant increase in housing starts.
“After all, labor market conditions are strengthening - demonstrated by the 36,000 drop in initial jobless claims, the largest in two years, to 280,000 last week – and earnings growth looks likely to rise,” he said. “And at 1.4 (million) last year, household formation is outstripping homebuilding. The upshot is that we expect housing starts, which may average 1 (million) this year, to rise to 1.3 (million) in 2015.”
The August print for housing starts was a seasonally adjusted annual rate of 956,000, well below analyst expectations, but 8% above the August 2013 rate of 885,000.
“The decline in housing starts in August was worse than we or the consensus had anticipated and stands in stark contrast to surging homebuilder confidence,” said Paul Diggle, property economist for Capital Economics. “This weakness should prove temporary, however, with the strengthening economic recovery and shortage of homebuilding relative to household formation set to boost starts over the coming months.”
Troubling in the data is that starts and building permits fell in every region in August. The last time that happened was in October 2009, when the housing crash was still in progress.
Housing starts are little changed from the level at the start of 2013, reflecting a similar stagnation in new home sales. In addition, land and labor shortages have been significant constraints on homebuilders, although these may now be easing.
Click to enlarge
Chart: Zerohedge
In a bit of conspicuous incongruity, on Wednesday the National Association of Home Builders/Wells Fargo Housing Market Index hit 59 — the highest level since November 2005. This is the fourth consecutive month it has increased, reaching a nine-year high.
Jonathan Smoke, chief economist for Realtor.com, however said that nothing in the report was really unexpected.
“The totals (permits and starts) were down in August over July, driven by declines in multifamily. None of the single family numbers were statistically significant— meaning the best we can say about August based on this initial survey sample is that it was likely flat—not hugely up or down,” Smoke said.
“Multifamily new construction is where we have seen most of the growth, not just this year, but every year since 2011. Multifamily demand continues to benefit from the decline in home ownership and the now record levels of households in the US that rent,” Smoke said. “We are not seeing rents or vacancies show any wide-spread weakness, so the August reading is simply a reflection of the lumpiness of the data. We had huge positive numbers in July, which were also revised up.”
Smoke said that on the single family side, the market has seen weakness all year and an inability to see more than low single digit growth over last year. This level of single family production is half of what a normal market should produce, he said.
“What isn’t normal today is the depressed first-time and entry level market, which is a reflection of the ‘overlay tight’ qualification restrictions. Meanwhile builders have been investing in lots and product designs reflective of a more qualified buyer— that’s why we’ve seen new home prices and new home sizes grow so much. But that also means they aren’t building large volumes of affordable homes that the first-time market would need if they could qualify,” Smoke said.
“The numbers are also reflective of regional differences. The south, where affordability is strong, had a slight increase in single family starts in August over July and is also up 12% year-over-year,” he said. “The south represents 55% of current single family starts.
“With new single family construction remaining weak, we will continue to see limited overall supply of homes for sale, and finding affordable homes for sale will continue to be challenging,” Smoke said.
“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.
During the Bipartisan Policy Center’s 2014 Housing Summit, Beth Ann Bovino, chief economist of Standard & Poor’s, said certain negative economic conditions are now turning around, as proof that housing can be sustained.
Diggle noted the disconnect.
“Minor consolations in the data were a 2.2% upward revision to starts in July and the fact that the latest drop ‘only’ reversed three-quarters of the previous gain. But this is clearly a disappointing release,” he said. “But it’s not unusual for the NAHB measure and starts to diverge for extended periods – it’s happened twice before in the early- and late-1990s and on both occasions the divergence ended with a drop in homebuilder confidence rather than a rise in homebuilding.”
Diggle said he thinks the current divergence will end with a significant increase in housing starts.
“After all, labor market conditions are strengthening - demonstrated by the 36,000 drop in initial jobless claims, the largest in two years, to 280,000 last week – and earnings growth looks likely to rise,” he said. “And at 1.4 (million) last year, household formation is outstripping homebuilding. The upshot is that we expect housing starts, which may average 1 (million) this year, to rise to 1.3 (million) in 2015.”
Housing starts nosedive 14.4% in August-Below analyst expectations despite coming off a heated July
Privately-owned housing starts plunged 14.4% in August, according to the U.S. Census Bureau.
Starts were expected to drop after a strong July but not by this much.
Housing starts for July jumped to an annualized pace of 1.093 million units-up from 0.945 million units the prior month. July was up a sharp 15.7%.
Housing starts printed at a seasonally adjusted annual rate of 956,000, well below analyst expectations, but 8% above the August 2013 rate of 885,000.
Single-family units remained largely flat as they have for the past 20 months, multifamily starts fell from 396,000 to 343,000, or 13.4% for permits, and an incredible 31.5% for starts.
Single-family housing starts in August were at a rate of 643,000; this is 2.4% below the revised July figure of 659,000. The August rate for units in buildings with five units or more was 304,000.
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 998,000. This is 5.6% below the revised July rate of 1,057,000, but is 5.3% above the August 2013 estimate of 948,000.
Single-family authorizations in August were at a rate of 626,000; this is 0.8% below the revised July figure of 631,000. Authorizations of units in buildings with five units or more were at a rate of 343,000 in August.
Privately-owned housing completions in August were at a seasonally adjusted annual rate of 892,000. This is 3.2% above the revised July estimate of 864,000 and is 16.9% above the August 2013 rate of 763,000.
Single-family housing completions in August were at a rate of 591,000; this is 8.2% below the revised July rate of 644,000. The August rate for units in buildings with five units or more was 292,000.
Starts were expected to drop after a strong July but not by this much.
Housing starts for July jumped to an annualized pace of 1.093 million units-up from 0.945 million units the prior month. July was up a sharp 15.7%.
Housing starts printed at a seasonally adjusted annual rate of 956,000, well below analyst expectations, but 8% above the August 2013 rate of 885,000.
Single-family units remained largely flat as they have for the past 20 months, multifamily starts fell from 396,000 to 343,000, or 13.4% for permits, and an incredible 31.5% for starts.
Single-family housing starts in August were at a rate of 643,000; this is 2.4% below the revised July figure of 659,000. The August rate for units in buildings with five units or more was 304,000.
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 998,000. This is 5.6% below the revised July rate of 1,057,000, but is 5.3% above the August 2013 estimate of 948,000.
Single-family authorizations in August were at a rate of 626,000; this is 0.8% below the revised July figure of 631,000. Authorizations of units in buildings with five units or more were at a rate of 343,000 in August.
Privately-owned housing completions in August were at a seasonally adjusted annual rate of 892,000. This is 3.2% above the revised July estimate of 864,000 and is 16.9% above the August 2013 rate of 763,000.
Single-family housing completions in August were at a rate of 591,000; this is 8.2% below the revised July rate of 644,000. The August rate for units in buildings with five units or more was 292,000.
Wednesday, September 17, 2014
3 reasons why California housing is about to go bust- The money is drying up
California is perhaps one of the most important states in mortgage finance. So much of the mortgage finance world is based in California and, like Texas, the industry is a huge source of employment for workers of varying levels of education.
Beacon Economics famously pointed to factors in the Golden State that will lead to a continued, strong housing economy.
Home sales are estimated to continue on their upward trajectory over the next two years; however, the pace of growth will cool to the 4% to 6% range, a rate more in line with income growth. Home sales in California are forecast to rise by double-digit percentages in 2015.
Plus a report yesterday from the California Association of Realtors also had some good news.
The main finding from that report is that the August 2014 price for the average home in California was the highest observed since 2007.
The median price of an existing, single-family detached California home rose 3.3% from July’s median price of $464,750 to $480,280 in August and up 8.9% from the revised $441,010 recorded in August 2013.
But, trouble could be brewing:
“California’s housing market continues to be bifurcated both geographically and demographically, with the San Francisco Bay Area and high-end housing markets outperforming other regions and market segments,” said California Association of Realtors chief economist Leslie Appleton-Young. “A strong job market and barriers to building new housing are creating an imbalance between supply and demand in some housing markets. Buyers who are not impacted by affordability issues are fueling sales in the high-end market, which is putting upward pressure on home prices.”
And according to Property Radar, year-on-year the numbers are much less positive.
August 2014 sales are actually down 13.5% from August 2013. “Median prices fall in half of California’s largest 26 counties,” the report reveals.
According to Property Radar, there are three things that could pop the California real estate market.
1. There’s no more money in the market
Beacon Economics famously pointed to factors in the Golden State that will lead to a continued, strong housing economy.
Home sales are estimated to continue on their upward trajectory over the next two years; however, the pace of growth will cool to the 4% to 6% range, a rate more in line with income growth. Home sales in California are forecast to rise by double-digit percentages in 2015.
Plus a report yesterday from the California Association of Realtors also had some good news.
The main finding from that report is that the August 2014 price for the average home in California was the highest observed since 2007.
The median price of an existing, single-family detached California home rose 3.3% from July’s median price of $464,750 to $480,280 in August and up 8.9% from the revised $441,010 recorded in August 2013.
But, trouble could be brewing:
“California’s housing market continues to be bifurcated both geographically and demographically, with the San Francisco Bay Area and high-end housing markets outperforming other regions and market segments,” said California Association of Realtors chief economist Leslie Appleton-Young. “A strong job market and barriers to building new housing are creating an imbalance between supply and demand in some housing markets. Buyers who are not impacted by affordability issues are fueling sales in the high-end market, which is putting upward pressure on home prices.”
And according to Property Radar, year-on-year the numbers are much less positive.
August 2014 sales are actually down 13.5% from August 2013. “Median prices fall in half of California’s largest 26 counties,” the report reveals.
According to Property Radar, there are three things that could pop the California real estate market.
1. There’s no more money in the market
Yes, this is literal.There is not more money coming into the California real estate market, there is actually much, much less.2. Less cash means less investors
Cash sales totaled 7,547 in August and were 22% of total sales. Cash sales have been steadily declining, down 46.2%, since reaching a peak of 14,028, or 40% of total sales in August 2011.
“Hey honey, let’s use our extra cash to buy a home, refurbish it and quickly sell at a profit,” say fewer and fewer people in California.3. Not just the mom-and-pops
According to Property Radar, flip sales fell 2.3% for the month and are down 36.5% for the year. Flip sales are defined as properties that have been resold within six months.
Flip sales peaked in October 2012 and have declined 38.2%.
California real estate is also quickly losing the attention of corporate money.Here’s a chart from Property Radar showing the drop in home sales. Mix the below results with the above three facts and it seems clear California real estate is headed for a bust. Click chart to enlarge.
Institutional Investor purchases edged up 0.9% for the month but are down 23% from August 2013. As the supply of distressed properties dwindle and prices rise, institutional investor demand has retreated due to the lower return on investment.
In general, institutional purchases have posted consistent monthly declines since peaking in December 2012 and are down 43.9% since then. Trustee sale purchases by LLCs and LPs are down nearly 83.6% from their October 2012 peak.
NAHB: Homebuilder confidence hits 9-year high-Builders optimistic even with mortgage apps at 14-year low
Builder confidence in the market for newly built, single-family homes rose for a fourth consecutive month in September to a nine-year high.
The National Association of Home Builders/Wells Fargo Housing Market Index, released Wednesday, hit 59 — the highest level since November 2005.
Ironically, despite this week’s gains, mortgage applications are at a 14-year low.
“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.
“While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time homebuyers,” said NAHB Chief Economist David Crowe. “Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.”
Click to enlarge
Chart: ZeroHedge
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”
Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted gains in September. The indices gauging current sales conditions and traffic of prospective buyers each rose five points to 63 and 47, respectively. The index gauging expectations for future sales increased two points to 67.
Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest registered a five-point gain to 59, the South posted a four-point increase to 56, the Northeast recorded a three-point gain to 41 and the West posted a two-point increase to 58.
The National Association of Home Builders/Wells Fargo Housing Market Index, released Wednesday, hit 59 — the highest level since November 2005.
Ironically, despite this week’s gains, mortgage applications are at a 14-year low.
“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.
“While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time homebuyers,” said NAHB Chief Economist David Crowe. “Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.”
Click to enlarge
Chart: ZeroHedge
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”
Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted gains in September. The indices gauging current sales conditions and traffic of prospective buyers each rose five points to 63 and 47, respectively. The index gauging expectations for future sales increased two points to 67.
Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest registered a five-point gain to 59, the South posted a four-point increase to 56, the Northeast recorded a three-point gain to 41 and the West posted a two-point increase to 58.
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