Midyear Report: The Housing Market Is on Track for Its Best Year Since 2006 (and It Ain’t a Bubble)

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Realtor.com| Jonathan Smoke| June 10, 2015| Link

As we approach the midpoint of 2015, the residential real estate market is on track for its best year since 2006, the peak of the housing bubble. (This time, though, it’s no bubble.)

Job growth is powering the surge in demand for homes. More than 3 million jobs have been created in the past 12 months. And more than 1 million jobs have been created for 25- to 34-year-olds, the age range in which most Americans buy their first home.

We’re seeing record traffic at realtor.com®Real estate websites across the board are experiencing 15% year-over-year growth in unique users, but our site has seen more than twice that (perhaps thanks to Elizabeth Banks?). The vast majority of our visitors report that they intend to purchase a home.

With rising demand, homes are selling more quickly, too. In May the median age of inventory (homes on the market) nationwide was 66 days—that’s 8 days faster than for last year. The hottest markets are seeing inventory move 18 to 45 days faster.

A rapidly declining age of inventory signals that demand is growing more rapidly than supply. Indeed, we’ve had 32 months in a row of existing-home inventory at less than a six months’ supply. That’s why we’re also seeing above-normal price appreciation.

Year-over-year median home price appreciation reached 9% in April, which has helped existing homeowners see strong gains in equity.

That level of price appreciation would be problematic if it continued, but we don’t think it will. Median list prices, which often predict the direction of actual price changes, moderated in each of the past two months as the number of listings grew.

Meanwhile, rents are increasing at a similar or even stronger pace than home prices. Record numbers of renting households have driven down apartment vacancies, and low vacancies led to higher rents. As a result, it is cheaper to buy rather than rent in 80% of the counties in the U.S.

And now the clock is ticking as mortgage rates are on the rise. With strong employment data in April and May, the average 30-year fixed conforming mortgage rate broke through the 4% level, and in the past week moved above 4.10%.

Is that slowing down demand? No, just the opposite. Consumers can clearly see that affordability is going down for real, so those who are ready and able to buy are searching for homes, looking at listings, visiting open houses, applying for mortgages, and signing contracts.

In April, new-home sales were up 26% over last year. Pending home sales, which are new contracts on existing homes, were up 14%.

At this level of growth, total home sales in 2015 could come close to 6 million, which is a level comparable to 2007 (if not quite at the level of peak 2006). But 2007 was a year of decline for the housing market, whereas in 2015, we’re expecting more good things to come.

Housing Inventory Slowly Disappearing

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KeepingCurrentMatters.com| March 26, 2015| Link

The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) released their latest Existing Home Sales Report this week.

Inventory Levels & Demand

Amidst reporting on the fact that sales of existing homes rose 1.2% from January, and outpaced year-over-year figures for the fifth consecutive month, was the news that total unsold housing inventory is at 4.6-month supply.

This is down 0.5% from last February and remains below the 6 months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still under 4%, new programs available for down payments as low as 3%, and you have an attractive market for buyers.

Buyer demand for housing remains twice as high as this time last year.

Prices Rising

February marked the 36th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $202,600 (up 7.5% from 2014).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

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NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

“Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices. Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before (interest) rates rise.”

Bottom Line

If you are debating putting your home on the market this year, now may be the time. The amount of buyers ready and willing to make a purchase is at the highest level in years. Contact a local professional in your area to get the process started.

2015: Year of the First-Time Home Buyer

RealtorMag| December 5, 2014| Link

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First-time home buyers are expected to re-emerge in the new year after mostly staying out of the market in the aftermath of the housing crisis. That’s one of realtor.com®’s five top housing predictions for 2015.

“The residual financial effects of recession-driven job losses and subsequent unemployment have impeded Millennials’ entry into the home-owning market,” says Jonathan Smoke, chief economist for realtor.com®. “In 2015, increases in employment opportunities will empower younger buyers to return to the market and fuel the continued housing recovery. If access to credit improves, we could see substantially larger numbers of young buyers in the market. However, given a high dependency on financial qualifications, this activity will be skewed to geographic areas with higher affordability, such as the Midwest and South.”

Realtor.com®’s top five housing predictions for 2015 are:

  1. Millennials to drive household formation. Households headed by Millennials are expected to see significant growth in 2015, particularly as the economy continues to make gains. Millennials are expected to drive two-thirds of household formations over the next five years, according to realtor.com®’s report. The forecasted addition of 2.5 million jobs next year, as well as an increase in household formation, are the two factors that realtor.com® points to in driving more first-time home buyers to the housing market.
  2. Existing-home sales on the rise. Existing-home sales are projected to rise 8 percent year-over-year in 2015, as more buyers enter the market. Distressed properties will make up a smaller share of that growth, unlike in 2012, when a similar increase in existing-home sales was mostly driven by distressed properties.
  3. Home prices will rise. Home prices are expected to continue to edge up in 2015, with realtor.com® forecasters predicting a 4.5 percent gain. “While first-time home buyers have many economic factors working in their favor, increasing home prices will make it more difficult to get into high-priced markets such as San Francisco and San Jose, Calif.,” realtor.com® notes in its report. “As a result, first-time home buyer activity is expected to concentrate in markets with strong employment and affordability, such as Des Moines, Iowa; Atlanta; and Houston.”
  4. Mortgage rates to inch up to 5 percent. In the middle of 2015, mortgage rates are expected to increase as the Federal Reserve increases its target rate by at least 50 basis points before the end of the year. That will likely bring the 30-year fixed-rate mortgage to an average of 5 percent by the end of 2015. (It’s currently averaging 3.89 percent, according to Freddie Mac.) The 1-year adjustable-rate mortgage, on the other hand, is expected to rise more minimally. “Lower ARM interest rates will influence an uptick in buyer interest for adjustable and hybrid mortgages,” realtor.com® notes. “While still at historic lows, rate increases will affect housing affordability for first-timers trying to break into the housing market and will be another factor pushing them to less-expensive locales.”
  5. Housing affordability will decline. Affordability for homes, based on home-price appreciation and rising mortgage interest rates, will likely fall by 5 to 10 percent in 2015. However, the decline in affordability likely will be offset by an increase in salaries next year for many households. “When considering historical norms, housing affordability will continue to remain strong next year,” realtor.com® notes.

Mortgage Lenders Set to Relax Standards

Wall Street Journal|November 28, 2014|Joe Light| Link

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Some of the largest U.S. mortgage lenders are preparing to further ease standards for borrowers after the release of new guidelines this month from mortgage giants Fannie Mae and Freddie Mac .

The new guidelines, to take full effect Dec. 1, resulted from an agreement in October meant to clarify when lenders would be penalized for making mistakes on mortgages they sell to Fannie and Freddie. Lenders have blamed the lack of clarity for tight credit conditions that have made it difficult for many consumers to qualify for a mortgage.

Relaxing the lending standards potentially could make it possible for hundreds of thousands of additional consumers to get mortgages.

Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute, said the moves are “going to be big,” but she added that “it’s going to take time” to see the full impact of the changes.

The Urban Institute, a Washington think tank, earlier this year estimated that as many as 1.2 million additional home loans would be made annually if mortgage availability were at “normal” levels.

Some lenders, including Wells Fargo & Co. and SunTrust Banks Inc., said borrowers should begin to see initial changes in a few weeks, including faster turnaround times for mortgage applications to be processed.

Currently, it can take two months or longer between the time a consumer makes an application and the loan is made.

Lenders also are expected to widen the scope of the types of borrowers they will accept by reducing credit-score requirements and giving greater leeway to consumers whose credit history suffered because of one-time events, such as a job loss or big medical bill.

Economists have long maintained that tight credit could be holding back the housing recovery and damping economic growth. On Tuesday, the S&P/Case-Shiller Index showed that U.S. home prices grew 4.8% in the 12 months ending in September, their slowest pace in two years.

After the financial crisis, Fannie and Freddie made banks repurchase tens of billions of dollars in loans that the companies said didn’t meet their standards. In turn, many lenders stopped making loans to all but the most pristine of borrowers.

In many cases, they required borrowers to have substantially higher credit scores and put in place other measures—so-called credit overlays—that were more stringent than what Fannie and Freddie required.

With the new agreement, “I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays,” said David Stevens, president of the Mortgage Bankers Association.

Wells Fargo, the nation’s largest mortgage lender, lifted its credit-score overlay earlier this year, which the bank said was in anticipation of the agreement with Fannie and Freddie. Now it says borrowers can expect a smoother process of getting a loan with less “excessive” paperwork.

“It’s providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” said Mike Heid, president of Wells Fargo Home Mortgage.

For example, under the previous system, Mr. Heid said a borrower who had a late payment on an auto loan might have been asked to write a memo describing what happened, even if such a mistake wasn’t critical to the decision to make a loan or not. That was because Wells couldn’t be certain what would trigger a repurchase demand from Fannie or Freddie, he said.

Now, they are less likely to be required to ask for such documentation, he said, which should speed the process of securing a loan.

Jerome Lienhard, CEO of SunTrust Mortgage, said the new guidelines likely would allow the company to lift its overlays by “a pretty meaningful amount.” He said the bank is still analyzing which overlays to remove, but he is confident many will be eliminated. “This is real. This is substantive,” he said.

Before the new rules were put in place, Mason-McDuffie Mortgage Corp. in San Ramon, Calif., typically wouldn’t make a loan to a borrower with a credit score below 660, said Bill Godfrey, the company’s executive vice president of capital markets. Now, he said he believes the company will lend down to 620, the limit for loans backed by Fannie and Freddie.

“We will be able to be looser and open up the net wider,” said Mr. Godfrey.

Not all lenders are poised to relax their underwriting rules. On an earnings call a few days after the agreement was announced, U.S. Bank Chief Executive Richard Davis called it “a good sound bite” and indicated that his bank wasn’t prepared to make changes.

“Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times…we are simply going to stay on the sidelines in the concerns of both compliance risks and other uncertainties,” said Mr. Davis.

“You won’t see us start to expand our criteria much past what we’ve done,” said Bank of America Chief Executive Brian Moynihan at an investor conference this month.

Isaac Boltansky, an analyst at Compass Point Research & Trading, said some lenders are still too “shellshocked due to litigation and the shifting regulatory environment” to ease credit conditions soon.

Still, overall, Fannie Mae CEO Timothy J. Mayopoulos this month said lenders were “reacting positively to those developments. I do think that lenders are nonetheless concerned about other factors in the environment that we do not control.”

Opulence Abounds: Homes in the 10 Most Affluent Cities

August 29, 2014 |Realtor.com| Eric Gunther| Link

The Business Journals recently crunched the numbers on 942 U.S. metro areas to arrive at their ranking of the most affluent cities in the country.

They derived their findings from a “12-part formula … with highest scores to areas that have strong concentrations of upscale incomes, expensive houses, high-end jobs and residents with advanced degrees”.

We’re not going to parse out all 12 secret herbs and spices in their formula, but we were curious to see what an affluent buyer could expect to find in these most affluent cities.

Opulence abounded in most all of the markets, but if you have expensive tastes and a tighter budget, we recommend you head for unexpected affluence in Los Alamos, Lexington Park, or Trenton—where most of the homes for sale are priced under $1 million.

If any of these affluent and elegant homes speak to your caviar dreams, just click on the photo to learn more. And if you’d like to see what the market looks like in the top 10 cities, just click on any city name below.

1. Washington, DC — 3425 Prospect St NW, $11 million.

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Luxurious Malibu Triple-Wide Listed for $3.75 Million

July 14, 2014| Zillow Blog| Emily Heffter| Link

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In Malibu, there are beach estates for the rich and famous, with disappearing walls of glass and secluded terraces overlooking the ocean. And then there are these deals: mobile homes for celebrities seeking a Bohemian paradise with a small price tag.

The 500-or-so mobile homes on chassis in two Malibu trailer parks usually fly off the market for as little as $300,000. The best homes — triple-wides with high-end amenities and gorgeous ocean views — sell for $4 million or more.

That seems like a lot until you consider that just a couple of blocks away there are homes for sale for $25 million, $38 million and $40 million.

The most expensive mobile home in Malibu is a 2,200-square-foot, 4-bedroom at 28128 Pacific Coast Hwy SPC 209, with access to one of the city’s swankiest surfing beaches. The mint green home is listed for $3.75 million — not including the cost of renting the space in Paradise Cove Mobile Home Park.

“Everything sells really, really well down here,” said David Carter, an agent with Pritchett-Rapf Realtors who specializes in mobile home sales. He recently sold a unit for $2.1 million.

Besides Paradise Cove, there is a park farther north, at Point Dume, on Zuma Beach. If Paradise Cove is a relaxed surfing community, Point Dume is a country club. Residents zoom to the beach on golf carts, the preferred transportation mode, and share coin-operated laundry if their unit doesn’t have a washer and dryer.

Both communities grew in the 1960s and 1970s, as celebrities flocked to vacation rentals overlooking some of California’s most beautiful beaches.

According to online reports, Matthew McConaughey, Pamela Anderson, Minnie Driver, former Los Angeles Times publisher Otis Chandler and Stephen Hillenburg, the creator of Spongebob Squarepants, have all resided at Paradise Cove Park.

“People are trying to find that low-key feeling,” said Eytan Levin, an agent with 4 Malibu Real Estate Partners. “It’s a more affordable way to own something with access to these beaches where celebrities can feel like they can let down their guard.”

What $250,000 Buys You Around the Country

July 29, 2014| Emily Heffter| Zillow Bog| Link

When it comes to spending a quarter-million dollars on a home, what you can buy comes down to location, location, location. The same money that could land you in a bidding war for a manufactured home in one of the hottest markets in the country will get you an idyllic retreat within walking distance to the beach on the other side of the country.

Here’s a look at 10 homes for sale for about $250,000:

Saint Charles, MO

3275 Simeon Bunker St, Saint Charles, MO
For sale: $250,000

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 This newer home near Saint Louis has hardwoods, a gas fireplace, four bedrooms and 3.5 bathrooms. The finished basement has a full bathroom and potential for another bedroom.

See more homes for sale in Saint Charles.

San Jose, CA

607 Mill Pond Dr # 607, San Jose, CA
For sale: $230,000

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In one of the hottest markets in the country, $250,000 doesn’t get you very far. This family-sized double-wide in the heart of Silicon Valley is only $230,000. There is no garage to house your new software company, but it does come with a carport, double-pane windows, access to a social club and 24-hour security.

See more homes for sale in San Jose.

Cleveland, OH

6718 Daisy Ave, Independence, OH
For sale: $249,900

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Cleveland’s real estate market has been one of the slowest in the country to recover from the recession. Because of that, it’s still a buyer’s market, especially in the suburbs. Check out this newly-remodeled, 2,000-square-foot home in the suburb of Independence. It has a custom kitchen, a huge walk-in closet in the master and a big backyard.

See more homes for sale in Cleveland.

See Complete List of Homes

Zillow Making Bid For Trulia

 Online real estate giant Zillow in reported $2 billion bid for Trulia

July 25,2014| Pete Carey| San Jose Mercury News| Link

Two of the most popular real estate sites in the nation — Zillow and Trulia — may combine in a move that would create an online colossus in a tradition-bound industry disrupted by massive technology change in recent years.

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Seattle-based Zillow, the leading online site based on the number of users, is making a bid to buy San Francisco-based Trulia, the second most popular site, for as much as $2 billion, according to a report Thursday by Bloomberg that cited unnamed sources. Neither company would comment on the report.

Both sites have brought tremendous changes to the process of buying a home. Trulia has an easy-to-use app that allows potential buyers to shop on their mobile phones, while Zillow has the best-known way for homeowners and virtual lookie-loos to get an estimate of how much a home is worth. But some in the industry worry the combination would harm consumers, leading to less competition and less innovation.

Combined, the company would have more than 80 million unique visitors, according to the market research firm Comscore, and nearly 90 percent of the market.

Trulia’s shares jumped more than 32 percent or $13.16 a share on the report, and Zillow’s shares were up more than 15 percent or $19.29 a share at the close of the market. Both companies have enjoyed a run-up in stock prices this year.

“An acquisition like this will have a huge impact, specifically on the home-buying space and particularly for real estate agents in the single family resale business,” said Charles Stubbs, chief executive officer of RentPath, whose websites include ApartmentGuide, Rent.com and Lovely.

It would also create a more formidable competitor to San Jose-based Move Inc., which operatesrealtor.com for the National Association of Realtors. Realtor.com was third in unique monthly visitors in March, according to Comscore.

Move declined to comment on the report.

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Silicon Valley Workers Bring Home More Money

Silicon Valley real wages outstrip next best market by $10K — despite sky-high housing costs

July 15, 2014| Lauren Hepler| Silicon Valley Business Journal| Link

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With Silicon Valley’s $2,000-a-month rentsand $4.6 million median priced homes, it might seem like even a big paycheck is quickly eaten up by the high costs of living.

But a new analysis shows that Silicon Valley workers still bring home much more money than their peers in other cities even after shelling out for inflated housing prices.

new analysis of federal data by the Atlantic CityLab and Arizona State University found that workers in the San Jose metro area bring home real average wages — or the money left over after factoring in costs of living — of $75,288 per year. That compares to $64,321 in Stamford, Connecticut, $60,562 in San Francisco and wages in the $55,000-range in affluent sections of Maryland, North Carolina and Texas.

However, the report notes that the higher wages in expensive areas also magnifies problems for workers making less money, contributing to a trend toward “economically and geographically segregated” areas of the country — another dynamic vividly illustrated in Silicon Valley.

While low-wage service sector businesses don’t generally face intense pressure to compete for top talent, major employers in the Silicon Valley tech industry must shell out to attract and retain workers for a variety of reasons.

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Silicon Valley Boasts Three of the Most Expensive Housing Markets

When the median home price is $4.6 million: Silicon Valley claims 3 of nation’s 10 most expensive housing markets

July 7, 2014| Lauren Hepler| Silicon Valley Business Journal| Link

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You thought your $2,000-a-month Silicon Valley rent was bad?

Try buying a home in one of the region’s most expensive neighborhoods, like Atherton, Palo Alto or Portola Valley. All three now rank among the top 10 priciest housing markets in the country.

In Atherton’s 94027 ZIP code, the median home value is a whopping $4.59 million — or a staggering 26 times the value of the average $172,300 U.S. home — which makes the area the single most expensive market in the U.S. Palo Alto’s 94304, the country’s No. 4 most costly area, boasts a $3.3 million median home value. Nearby Portola Valley’s 94028 ZIP code is $2.8 million, good for the No. 8 priciest neighborhood in the nation.

That’s all according to a new analysis by The Atlantic CityLab of data from 20,000-plus U.S. ZIP codes collected by real estate site Zillow. See the charts at the bottom of this story for a full breakdown of the new home value numbers.

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