The 8 Biggest Concerns for REALTORS®

The 8 Biggest Concerns for REALTORS®. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

REALTORS® are “strongly confident” about the housing market’s outlook over the next six months, although confidence has eased since the beginning of this spring, according to the latest REALTORS® Confidence Index, a monthly survey of nearly 3,000 REALTORS® about local market conditions.

In general, REALTORS® continued to report “strong” local market conditions last month for single-family and townhome properties. The strong confidence is being buoyed by strong job creation, the reduction in the Federal Housing Administration’s annual mortgage insurance premium rates, and the acceptance of Fannie Mae and Freddie Mac’s 3 percent down payment loans.

Still, REALTORS® are reporting several issues with the market. The survey revealed the following top concerns:

• The upcoming TILA-RESPA Integrated Disclosure regulations, which take effect Oct. 3, and concerns that they could delay closings.
• Tight inventory with a limited number of homes for-sale.
• Affordability issues: Fewer affordable homes so sellers are also hesitant to move.
• Financing issues, such as difficulty in qualifying for a mortgage due to higher FICO credit and down payment standards, protracted mortgage approval process, and condo-financing issues.
• Appraisal issues: conservative estimates, “out-of-town appraisers,” and slow turn-around.
• Rising interest rates.
• Declining demand from international buyers due to a strong U.S. dollar.
• Uncertainty about flood insurance rates and reform.

Source: “June 2015 REALTORS® Confidence Index,”National Association of REALTORS® (June 2015)

3 Reasons Why It’s a Great Time for Sellers

3 Reasons Why It’s a Great Time for Sellers. Image courtesy of ponsulak / FreeDigitalPhotos.net

Rising home prices, demand from home buyers, and less competition is making 2015 a stellar year to sell for many U.S. home owners across the country, says Daren Blomquist, RealtyTrac’s vice president.

Blomquist points to these three factors behind why this year is shaping up more favorably for sellers:

1. Stronger demand coming from buyers: Sellers in many markets are seeing stronger demand from a larger pool of buyers, including first-time buyers, boomerang buyers (previous owners who lost their home to foreclosure), as well as traditional owner-occupant buyers. Particularly of note lately, the number of buyers using Federal Housing Administration – typically low down payment loans often used by first-time home buyers – is on the rise, accounting for 23 percent of all single-family home and condo sales with financing in the second half of 2015. That marks the highest share since the first quarter of 2013, according to RealtyTrac’s Midyear 2015 U.S. Home Sales report.

2. Home prices are skyrocketing: Single-family home and condo sellers in the first half of this year sold for an average of 13 percent above their original purchase price. “So far in 2015, [sellers] are realizing the biggest gains in home price appreciation since 2007,” Blomquist says. “In June, sellers sold for above estimated market value on average for the first time in nearly two years.” Median sales prices of existing-homes pushed above the previous 2006 peak to a record high in June, the National Association of REALTORS® reported this week. The median existing-home price for all housing types was $236,400 in June – surpassing the peak median sales price set in July 2006 at $230,400.

3. Sellers have less competition: Inventories of for-sale homes remains tight, which has forced buyers to have to compete for the limited supply. Distressed sales –properties in the foreclosure process or bank-owned – accounted for 8 percent of all single-family and condo sales in June, the lowest monthly share since January 2011. In 2011, the share of distressed sales had reached a monthly peak of nearly 46 percent of all single-family and condo sales.

Source: “2015 Great Year to Sell,” RealtyTrac (July 22, 2015)

Home Prices Reach an All-Time High

Home Prices Reach an All-Time High. Image courtesy of renjith krishnan / FreeDigitalPhotos.net

The rise in buyer demand combined with a limited number of homes for sale pushed the national median sales price above its 2006 peak and to a record high, according to the National Association of REALTORS®.

The median existing-home price for all housing types reached $236,400 in June – 6.5 percent above year ago levels and surpassing the peak median sales price set in July 2006 at $230,400.

Along with a boost in home prices last month, existing-home sales also reached the highest pace in more than eight years. Lawrence Yun, NAR’s chief economist, calls this year’s spring buying season the strongest since the downturn.

“Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” Yun says. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”

Yun says that June’s sales also likely got a boost by the spring’s initial phase of rising mortgage rates. That “usually prods some prospective buyers to buy now rather than wait until later when borrowing costs could be higher,” Yun says.

Total sales of completed single-family, townhome, condo, and co-op transactions ticked up 3.2 percent last month to a seasonally adjusted annual rate of 5.49 million and are nearly 10 percent above year ago levels. Sales also are the highest pace since February 2007. All major regions of the U.S. saw sales move higher in June.

The number of homes for-sale across the country remains low, as housing inventories only saw a 0.9 percent increase in June to 2.30 million existing homes for-sale. Inventories are 0.4 percent higher than a year ago. Unsold inventory is at a 5-month supply at the current sales pace.

“Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers,” says Yun. “Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes.”

But with inventories still low, properties are selling faster. Forty-seven percent of homes sold in less than a month in June, according to NAR. Properties typically stayed on the market for 34 days in June, the shortest number of days since NAR began tracking in May 2011. Short sales had the longest days on the market with a median of 129 days, while foreclosures sold in 39 days. Non-distressed homes were on the market for 33 days.

Chris Polychron, NAR’s president, says that real estate professionals are reporting drastic imbalances of supply compared to buyer demand in several metro areas, most notably in the West.

“The demand for buying has really heated up this summer, leading to multiple bidders and homes selling at or above the asking price,” Polychron says. “Furthermore, tight inventory conditions are being exacerbated by the fact that some home owners are hesitant to sell because they’re not optimistic they’ll have adequate time to find an affordable property to move into.”

Source: National Association of REALTORS®

Isn’t the Condo Market Rebounding?

Isn’t the Condo Market Rebounding? Image courtesy of mapichai / FreeDigitalPhotos.net

While construction of single-family homes and multifamily rentals is on the rebound, condo construction has sunk to new lows. A condo rebound has been delayed by stringent rules on condo mortgages that took effect post-housing crisis, as well as stronger demand among young people for rentals, The Wall Street Journal reports.

Condo construction in the first quarter comprised only 5.5 percent of all construction of multifamily housing — the lowest ratio since the Commerce Department began tracking such data in 1974. Historically, condo construction falls at a 24 percent average.

Condos traditionally offer higher returns for investors than apartments. “Many developers would rather be building condominiums,” says Peter Bazeli, senior vice president at New York-based real estate consulting firm Weitzman Group. “With condos, you’re paying down debt with every closing and then putting money in your pocket right away.”

But many factors are hampering the condo market’s recovery. For one, economists note that young adults have been flocking to rentals instead, and condos typically cater to entry-level buyers. Also, developers say construction loans are limiting the supply of condos they build. Developers say they can get a construction loan for about 75 percent of the cost of building an apartment complex, but only about 50 percent for a condo complex because lenders are deeming it a higher risk.

The Federal Housing Administration tightened its lending standards from 2008 to 2012, which has made condo funding even tougher, too. In order for the FHA to insure mortgages in a condo complex, at least half of the units must be owner-occupied and no more than half can be FHA-insured. For condo projects under development, at least 30 percent of units must be under contract for sale before the FHA will start backing mortgages there.

Economists say that has kept the condo market sluggish and still far from recovery. The median condo resale price in May was $216,400, about $15,400 less than its pre-crisis peak in June 2005. On the other hand, the median resale price for single-family homes in May was $230,300 — only $600 less than its pre-crisis peak in July 2006.

But some developers see glimmers of a condo rebound forming.

“Rising apartment rents provide renters more reason to buy instead of renting,” the Journal reports. “Job growth is improving for young would-be buyers. And real estate lobbyists say they are making inroads in Washington to build support for easing the FHA restrictions on condo mortgages.”

Source: “Condos Left Behind in Housing Rebound,” The Wall Street Journal (July 21, 2015)

Land Costs Have Skyrocketed Over 40 Years

Land Costs Have Skyrocketed Over 40 Years. Image courtesy of imagerymajestic / FreeDigitalPhotos.net

Average land prices have risen over the past 40 years, with the biggest price growth mostly occurring in western and eastern states.

In 1975, all 48 contiguous states and Washington, D.C. had average land values below $15,000. After that year, land costs started a steady climb. In 2015, the cost of land to build an average home has grown to $97,138.

Land value is determined by subtracting the structure cost from the total home value. The data from the Lincoln Institute of Land Policy – a map showing the changes in average land values from 1975 to 2015 in each state.

California and Connecticut were the first states with average land values exceeding $140,000 in 1988 and 1989, respectively. By 1999, the majority of states had average land values over $15,000 – the central states and Alaska being the exception in remaining below $15,000.

It was the period from 2000 to 2007 that land values quickly appreciated, however. By 2007, many states had average land prices that were greater than $140,000, such as Nevada, Florida, New Jersey, California, Arizona, among others.

But from 2008 to 2011, the financial crisis sparked a plunge in land values across the country. The sharpest price reductions in land costs were in Nevada, Arizona, and Florida.

Land values are still recovering, although mostly not at the same levels as in 2007. What’s more, land values in a few states, such as Oklahoma, Mississippi, West Virginia, and New Hampshire remain below $15,000.

View an animated map showing the rising costs of land over four decades.

Source: “This Animated Map Shows the Rising Cost of Land in the U.S. in the Past 40 Years,” Howmuch.net (July 14, 2015)

Report Calls for a Bigger Fight Against ‘Blight’

Report Calls for a Bigger Fight Against ‘Blight’. Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net

Communities are confronting different types of blighted properties, from littered and vacant lots to foreclosed and abandoned homes, according to a recent Keep America Beautiful report. Blight that causes physical changes to properties can cause “harmful impacts on the lifecycle of neighborhoods and their residents,” says KAB President and CEO Jennifer Jehn.

Blighted properties are characterized from foreclosure and bank repossession to tax delinquency and environmental contamination, the report notes.

Vacant homes can cost municipalities anywhere from $5,000 to $35,000 in police enforcement, fire services, nuisance abatement, and environmental clean-up costs, according to the report.

Blighted residential properties can impact the values of nearby homes. Property values within 500 feet can see a decrease to value by as much as $7,000.

The report calls for community leaders and lawmakers to address blight with numerous initiatives, such as urban greening (like community gardens), land banking, and property manager programs, that strive to restore blighted communities to the mainstream real estate market.

Source: “Blight Knows No Bounds in New Economy,” RISMedia (July 15, 2015)