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Real Estate News

Existing-Home Sales Stumble in July

Slowed by frustratingly low inventory levels in many parts of the country, existing-home sales lost momentum in July and decreased year-over-year for the first time since November 2015, according to the National Association of REALTORS®. Only the West region saw a monthly increase in closings in July.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.2 percent to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June. For only the second time in the last 21 months, sales are now below (1.6 percent) a year ago (5.48 million).

Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months. “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he says. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”

Adds Yun, “Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single-family home.”

The median existing-home price for all housing types in July was $244,100, up 5.3 percent from July 2015 ($231,800). July’s price increase marks the 53rd consecutive month of year-over-year gains.

Total housing inventory at the end of July inched 0.9 percent higher to 2.13 million existing homes available for sale, but is still 5.8 percent lower than a year ago (2.26 million) and has now declined year-over-year for 14 straight months. Unsold inventory is at a 4.7-month supply at the current sales pace, which is up from 4.5 months in June.

“Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand,” adds Yun. “As a result, sales in all regions are now flat or below a year ago and price growth isn’t slowing to a healthier and sustainable pace.”

The share of first-time buyers was 32 percent in July, which is below last month (33 percent) but up from 28 percent a year ago. First-time buyers represented 30 percent of sales in all of 2015.

All-cash sales were 21 percent of transactions in July, down from 22 percent in June, 23 percent a year ago and the lowest share since November 2009 (19 percent). Individual investors, who account for many cash sales, purchased 11 percent of homes in July, unchanged from June and down from 13 percent a year ago. Seventy percent of investors paid in cash in July.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage dropped from 3.57 percent in June to 3.44 percent in July. Mortgage rates have now fallen five straight months and in July were the lowest since January 2013 (3.41 percent). The average commitment rate for all of 2015 was 3.85 percent.

NAR President Tom Salomone says in addition to affordability concerns, an issue seen earlier in the housing recovery may be reemerging. Realtors® are indicating that appraisal complications are appearing more frequently as the reason why a contract signing experienced a delayed settlement.

“Appraisal-related contract issues have notably risen over the past year and were the root cause of over a quarter of contract delays in the past three months,” he says. “This is likely a combination of sharply growing home prices in some areas, the uptick in home sales this year and the strong refinance market overworking the already reduced number of practicing appraisers. Realtors® are carefully monitoring this trend, and some have already indicated they’re extending closing dates on contracts to allow extra time to accommodate the possibility of appraisal-related delays.”

Coming in at the lowest share since NAR began tracking in October 2008, distressed sales – foreclosures and short sales – were 5 percent of sales in July, down from 6 percent in June and 7 percent a year ago. Four percent of July sales were foreclosures and 1 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in July (11 percent in June), while short sales were discounted 16 percent (18 percent in June).

Properties typically stayed on the market for 36 days in July, up from 34 days in June but down from 42 days a year ago. Short sales were on the market the longest at a median of 95 days in July, while foreclosures sold in 54 days and non-distressed homes took 34 days. Forty-seven percent of homes sold in July were on the market for less than a month.

Inventory data from Realtor.com® reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in July were Denver-Aurora-Lakewood, Colo., San Francisco-Oakland-Hayward, Calif., San Jose-Sunnyvale-Santa Clara, Calif., and Seattle-Tacoma-Bellevue, Wash., all at a median of 32 days; and Vallejo-Fairfield, Calif., at a median of 36 days.

“July’s existing home sales report is yet another telling sign that inventory is holding back overall progress in the housing market,” says Quicken Loans Vice President Bill Banfield. “New home sales data pointed to the root problem being addressed, as production ramped up and median sale price dropped, a strong indicator that builders are placing an increased focus on affordable homes.”

“The primary culprit behind the decline in July is the lack of homes on the market,” says realtor.com chief economist Jonathan Smoke. “We simply can’t see growth in sales without having enough homes to sell. This has been the case for 47 straight months, a situation that has bolstered home prices but made it tough for people to find a home for sale that meets their needs.”

Single-family and Condo/Co-op Sales

Single-family home sales decreased 2.0 percent to a seasonally adjusted annual rate of 4.82 million in July from 4.92 million in June, and are now 0.8 percent under the 4.86 million pace a year ago. The median existing single-family home price was $246,000 in July, up 5.4 percent from July 2015.

Existing condominium and co-op sales dropped 12.3 percent to a seasonally adjusted annual rate of 570,000 units in July from 650,000 in June, and are now 8.1 percent below July 2015 (620,000 units). The median existing condo price was $228,400 in July, which is 4.1 percent above a year ago.

Regional Breakdown

July existing-home sales in the Northeast descended 13.2 percent to an annual rate of 660,000, and are now 5.7 percent below a year ago. The median price in the Northeast was $284,000, which is 3.3 percent above July 2015.

In the Midwest, existing-home sales fell 5.2 percent to an annual rate of 1.28 million in July (unchanged from a year ago). The median price in the Midwest was $194,000, up 5.0 percent from a year ago.

Existing-home sales in the South in July declined 1.8 percent to an annual rate of 2.22 million, and are now 1.8 percent below July 2015. The median price in the South was $214,500, up 6.6 percent from a year ago.

Existing-home sales in the West rose 2.5 percent to an annual rate of 1.23 million in July, but are still 0.8 percent below a year ago. The median price in the West was $346,100, which is 6.4 percent above July 2015.

“Adding up the limited supply of houses for sale, a potential for higher mortgage rates on the horizon, and dampened consumer confidence, we’re less optimistic about fall sales,” says Smoke. “But things look positive over the medium to longer-term, especially since the housing market is ultimately driven mainly by demographics and employment, both of which are decidedly in favor of strong sales.”

For more information, visit www.realtor.org.

House Prices Inch Higher but Show Signs of Deceleration

U.S. house prices rose 1.2 percent in the second quarter of 2016 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).   House prices rose 5.6 percent from the second quarter of 2015 to the second quarter of 2016.  FHFA’s seasonally adjusted monthly index for June was up 0.2 percent from May.  The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

“Although the appreciation rate for the second quarter was of similar magnitude to what we’ve been seeing for several years now, a close look at the month-over-month price changes during the quarter reveals a potentially significant market shift,” says FHFA Supervisory Economist Andrew Leventis.  “Our monthly price index indicates that in each of the three months of the quarter, the increase was only 0.2 percent.  This is a much more modest pace of appreciation than we’ve seen in some time and most likely reflects accumulated pressures from significantly reduced home affordability.”

While the HPI rose 5.6 percent from the second quarter of 2015 to the second quarter of 2016, prices of other goods and services were nearly unchanged.  The inflation-adjusted price of homes rose approximately 5.7 percent over the last year.

Home prices rose in every state except Vermont between the second quarter of 2015 and the second quarter of 2016.  The top five states in annual appreciation were:  1) Oregon 11.7 percent; 2) Washington 10.3 percent; 3) Colorado 10.2 percent; 4) Florida 10.0 percent; and 5) Nevada 9.6 percent.

Among the 100 most populated metropolitan areas in the U.S., annual price increases were greatest in North Port-Sarasota-Bradenton, Fla., where prices increased by 15.7 percent. Prices were weakest in Bridgeport-Stamford-Norwalk, Conn., where they fell 3.3 percent.

Of the nine census divisions, the Mountain division experienced the strongest increase in the second quarter, posting a 1.9 percent quarterly increase and an 8.1 percent increase since the second quarter of last year.  House price appreciation was weakest in the Middle Atlantic division, where prices rose 0.6 percent from the last quarter.

For more information, visit www.fhfa.gov/hpi.

Mortgage Debt Rises, Federal Reserve Shows

According to the Household Debt and Credit Report released by the Federal Reserve Bank of New York, the outstanding amount of housing-related debt, both home mortgages and home equity lines of credit (HELOCs), totaled $8.8 trillion in the second quarter of 2016, 2.6 percent ($225 billion) greater than the level from one year ago.

However, the outstanding amount of home equity lines of credit declined by 4.2 percent, $21 billion, over the year to $478 billion. This is the 26th consecutive quarter of annual declines. Over this period, HELOCs have shrunk by 32.3 percent. In contrast, home mortgage debt rose over the year by 3.0 percent, $246 billion. The second quarter of 2016 marks the 11th consecutive quarter of annual growth. Over this period home mortgage debt has risen by 5.9 percent, but remains 10.0 percent below its pre-recession peak level.

The FRB NY’s measure of mortgage debt outstanding, which is comparable to home mortgage debt in the Flow of Funds, continues to rise. Additionally, a previous post documented the growth in multifamily residential debt outstanding. In sum, residential mortgage debt outstanding is growing.

On bank balance sheets, residential mortgage debt has different risk weights. The various risk weights were recently enacted by the Basel III regulations and they require banks to maintain a capital buffer to safely overcome downturns. The capital required is directly related to the level of risk a residential mortgage is presumed to present. The Basel III regulations went into effect on January 1, 2015 and banks were required to provide information through the Call Reports, on their residential mortgage exposures, 1-4 family and multifamily, beginning with the first quarter of 2015.

mortage_debt_chart_1

Figure 1 above shows the total and distribution of residential mortgage exposure, both the amount held for sale and the amount of loans and leases, for banks with only domestic offices. According to the chart there was an adjusted total of $879 billion in residential mortgage exposure in the first quarter of 2015. The amount of residential mortgage exposure rose in the second quarter before dipping over the next two quarters. However, in the first quarter of 2016, the amount of residential mortgage exposure reached $906 billion.

In the first quarter of 2015, the majority of the residential mortgage exposure, 79 percent, had a 50 percent risk weight while 18 percent had a risk weight of 100 percent and 4 percent had a risk weight of 20 percent. Over the past year for banks with domestic offices only, the share of residential mortgage exposure requiring a risk weight of 50 percent has widened at the expense of residential mortgages requiring either a 100 percent risk weight or a 20 percent risk weight.

mortgage_debt_chart_2

Figure 2 presents the total amount and the distribution of residential mortgage exposure for banks with both domestic and foreign offices across the entire consolidated bank and not just at domestic offices. According to the graph above there was an adjusted total of $1.56 trillion in residential mortgage exposure in the first quarter of 2015. The amount of residential mortgage exposure climbed steadily over the next 3 quarters before a modest decline in the first quarter of 2016.

In the first quarter of 2015, the majority of the residential mortgage exposure, 65 percent, had a risk weight of 50 percent. However, the proportion of residential mortgages overall with a risk weight of 50 percent at banks with both domestic and international offices was less than the share at banks with only domestic offices. Conversely, a greater percentage of residential mortgage exposure had a risk weight of either 100 percent or 20 percent. Nevertheless, the trend has been the same, the portion of residential mortgages with a 50 percent risk weighting has grown through the first quarter of 2016, while those with a 20 percent or 100 percent risk weighting have shrunk.

This post was originally published on NAHB’s blog, Eye on Housing.

July New Home Sales Soar to Eight-Year High

A recent new home sales report for July showed that sales of newly built homes increased 12.4 percent since June, and rose 31.3 percent year-over-year. This surge marks the highest point in almost eight years.

“New homes are being purchased at a furious pace, and it could give the housing market the added push it’s been waiting for,” says Quicken Loans vice president Bill Banfield. “With more new homes purchased by move-up buyers, it provides an increase in housing choice for first time buyers looking for their starter house.”

Data released found that the new home sales seasonally adjusted annualized rate for July was 654,000, the highest pace of sales since October 2007. Actual new homes sold so far this year are up 13 percent over the first seven months of 2015. This July’s new home supply remains tight at 4.3 months of supply.

The median sales price of new houses sold in July 2016 was $294,600; the average sales price was $355,800. The seasonally adjusted estimate of new houses for sale at the end of July was 233,000. This represents a supply of 4.3 months at the current sales rate.

“It’s great to see evidence of much-needed growth and a shift toward more affordable prices in July’s report,” says realtor.com Chief Economist Jonathan Smoke. “It’s also good news that we are finally seeing builders shifting toward more affordable price points. And given the limited number of homes currently for sale, we can be confident that the decline in new home prices is a result of market shift and not discounting by builders.”

For more information, visit www.census.gov.

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©2015 BHH Affiliates, LLC. An independently owned and operated franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.®  Equal Housing Opportunity.  Licensed in Virginia.

Berkshire Hathaway HomeServices Premier, REALTORS
Roanoke Office

2772 Electric Rd., Suite 1
Roanoke, VA 24018
Phone: 540-343-5000
Fax: 540-343-5135
Email: info@BHHSPremier.com 

 

PPR-Daleville Office

Roanoke/Botetourt Office
1638 Roanoke Rd. Ste. 101
P.O. Box 210
Daleville, VA 24083
Phone: 540-966-3033
Fax: 540-966-3613
Email: info@BHHSPremier.com 

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