According to a report released by the Federal Reserve This Week in Real Estate the market value of all owner-occupied residential real estate rose to $25.6 trillion in the third quarter. Below are a few highlights from the second week of December that influence our business:

Fannie Mae: Home Sales to Stabilize in 2019
Although economic growth is expected to slow in the new year, new data suggests the housing market will stabilize come 2019, according to Fannie Mae. “We expect full-year 2018 economic growth to come in at 3.1% – an expansion high – before slowing markedly to 2.3% in 2019 and 1.6% in 2020,” Fannie Mae Chief Economist Doug Duncan said. The report indicates that consumer spending will continue being the largest positive contributor for growth. Nevertheless, the GSE believes higher tariffs, trade uncertainty and rising interest rates and input costs will further constrain business fixed investment growth. With the exception of accelerating inflation, both mortgage rates and home sales could stabilize in 2019, according to the ESR Group. In fact, Fannie predicts purchase mortgage originations will climb, but origination volumes will slow as refinances decline.

U.S. Household Balance Sheet Continues to Recover in Q3 2018
The third quarter Federal Reserve Flow of Funds report showed continued improvement in the financial position of U.S. households with real estate, as the market value of all owner-occupied residential real estate (household owned) rose to $25.6 trillion. According to NAHB tabulations of the quarterly series, the asset or market value of owner-occupied real estate held by U.S. households increased $298 billion dollars while the liabilities (home mortgages) increased by about $90 billion from the second quarter reading. The housing market’s value of owners’ equity in real estate as a percentage of household real estate reached 59.9% in the third quarter of 2018, a level had not been seen since 2002. On the other hand, the greatest quarter-to-quarter percent increase in households’ equity position, that is, the difference between assets and liabilities, occurred not in 2018 but in 2017. The 2018 third quarter’s increase in equity position was 1.4%, which was substantially lower than the quarter-to-quarter increases of over 2.0% in the previous year’s quarters.

HUD Announces New FHA Loan Limits for 2019
The Federal Housing Administration (FHA) announced its loan limits for 2019 on Friday. The nationwide rise in median home prices indicates most buyers across the country – including those in more than 3,000 counties – will see increases. The FHA floor will increase from $294,515 to $314,827. This base limit applies to areas where 115% of the area median home price is less than $314,827. The FHA high-cost ceiling will increase from $679,650 to $726,525.  High-cost areas are those where 115% of the median home price is greater than the floor ($314,827). In these areas, the limit equals 115% of the median home price up to the FHA ceiling ($726,525). FHA also increased the loan limits for its Home Equity Conversion Mortgage (HECM), or reverse mortgage program, from $679,650 to $726,525.

Residential Construction Loans Grow as Equity Climbs and Housing Appreciation Slows


Residential Construction Loans Grow As Equity Climbs and Housing Appreciation Slows

While home equity is still climbing, led by the Western region, appreciation is slowing down according to the CoreLogic Home Equity Report released This Week in Real Estate. Below are a few highlights from the first week of December that influence our business:

Active Home Buyers are Spending Significant Amounts of Time Looking for the Right Home

In the third quarter of 2018, 13% of adults in NAHB’s Housing Trends Report poll report planning to purchase a home in the next 12 months.  Of that group, 46 percent are not merely planning it, they are already actively engaged in the search for the right home to buy.  And they are spending significant amounts of time looking. In fact, 54% of those actively engaged in the process have been trying to find the right home for three months or longer. Why is it taking this long? The number one reason active home buyers gave in the third quarter of 2018 is they can’t find a home at a price they can afford (49%), followed by not being able to find a home with the desired set of features (40%). Not far behind, 38% can’t find a home in the right neighborhood. And finally, a critical question: what are these veteran house hunters, who have already actively looked for at least three months, going to do if their dream house remains elusive in the months ahead: 61% will continue looking for the ‘right’ home in the same preferred location, 37% will expand the search area, 23% is willing to accept a smaller/older home, and 16% might buy a more expensive home. One option that is not in the cards for most of them: giving up. Only 18% will stop trying to find a home.

Home Price Appreciation is Slowing Down: Equity is Still Climbing, Just Not as Fast as Before

The average homeowner gained $12,400 in equity in one year’s time, according to CoreLogic’s Home Equity Report for the third quarter of 2018. And while that’s not exactly nothing, it’s the smallest annual increase in two years. Last quarter’s report revealed an increase of $16,000 in home equity. CoreLogic analyzed data on more than 50 million U.S. properties with a mortgage. Its report revealed that homeowners with mortgages (which account for 63% of all properties) saw their home equity increase 9.4% from last year. While the rate of growth may be slowing, almost every state experienced some growth, with the Western region posting the most notable uptick. California homeowners gained an average of $36,500 in home equity, while Nevada, Washington and Oregon homeowners saw their equity increase by approximately $32,600, $27,000 and $9,000, respectively. The number of homes with negative equity also fell in the third quarter. The data shows that, year over year, negative-equity homes – or homes that have liens that exceed their value – fell 16% to 2.6 million homes. “On average, homeowners saw their home equity increase again this quarter, but not nearly as much as in previous quarters,” said CoreLogic Chief Economist Frank Nothaft. “During the third quarter, homeowners gained an average of $12,400 compared to the second quarter when the average home equity wealth increase was more than $16,000.”

Continued Residential Construction Loan Growth 

The volume of residential construction loans increased by 2.8% during the third quarter of 2018, marking 22 consecutive quarters of growth. Furthermore, recent stabilization of year-over-year growth rates is an indicator of continued, modest growth for single-family construction. Tight availability of acquisition, development and construction (AD&C) loans has been a limiting or cost factor for home building growth, but easing credit conditions and a growing loan base have helped expand residential construction activity. According to data from the FDIC and NAHB analysis, the outstanding stock of 1-4 unit residential construction loans made by FDIC-insured institutions rose by $2.2 billion during the third quarter of 2018, raising the total stock of outstanding loans to $79 billion. On a year-over-year basis, the stock of residential construction loans is up 8%, which has been a useful indicator of the additional volume builders intend to add to construction activity. Since the first quarter of 2013, the stock of outstanding home building construction loans has grown by 95%, an increase of $38 billion.


November’s Influence on the Housing Market


In response to the ongoing run-up in home prices over the last year the Federal Housing Finance Agency announced This Week in Real Estate that the conforming loan limits will increase by 6.9 percent to $484,350 effective January 1, 2019. Below are a few highlights from the last week of November that influence our business:

Pending Home Sales Slip 2.6% in October
Pending home sales declined slightly in October in all regions but the Northeast, according to the National Association of Realtors®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 2.6 percent to 102.1 in October, down from 104.8 in September. However, year-over-year contract signings dropped 6.7 percent, making this the tenth straight month of annual decreases. While the short-term outlook is uncertain, Yun stressed that he is very optimistic about the long-term outlook. The current home sales level matches sales in 2000. “However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago,” said Yun. “So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.” All four major regions saw a decline when compared to a year ago, with the West seeing the most pronounced drop. Yun said that decline is not at all surprising. “The West region experienced the fastest run-up in home prices in a short time and therefore, has essentially priced out many consumers,” Yun said. Yun pointed to year-over-year increases in active listings from data at realtor.com to illustrate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., Columbus, Ohio, San Francisco-Oakland-Hayward, Calif. and San Diego-Carlsbad, Calif. saw the largest increase in active listings in October compared to a year ago. Yun expects existing-home sales this year to decrease 3.1 percent to 5.34 million, and the national median existing-home price to increase 4.7 percent. Looking ahead to next year, existing sales are forecast to decline 0.4 percent and home prices to drop roughly 2.5 percent.

Entry Level Home Inventory Yields Declining New Home Size
Continuing a multiyear trend, new single-family home size decreased during the third quarter of 2018. New home size has been falling over the last three years due to an incremental move to additional entry-level home construction. According to third quarter 2018 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area decreased to 2,320 square feet. Average (mean) square footage for new single-family homes declined to 2,495 square feet. Since cycle lows (and on a one-year moving average basis), the average size of new single-family homes is 8% higher at 2,565 square feet, while the median size is 13% higher at 2,369 square feet.

The post-recession increase in single-family home size is consistent with the historical pattern coming out of recessions. Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions. This pattern was exacerbated during the current business cycle due to market weakness among first-time homebuyers and supply-side constraints in the building market. But current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market cools.

Loan Limits Increase to $484,350 
Given the rapid run-up in home prices over the last year, it’s no surprise that loan limits will also be going up in 2019. The Federal Housing Finance Agency (FHFA) announced that the maximum conforming loan limits for mortgages eligible for acquisition or guarantee by the two government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae will be $484,350. The conforming loan limit as established by the Housing and Economic Recovery Act (HERA) is reviewed each year and adjusted as necessary to reflect the change in the average U.S. home price. The new limit represents a 6.9 percent increase over the $453,100 limit for 2018, the percentage by which FHFA’s Housing Price Index (HPI) for the third quarter of 2018 increased on an annual basis. The new limits are effective as of January 1, 2019. The Federal Housing Administration (FHA) and the VA are expected to adopt the same loan limits for 2019.


The Increase of Existing Home Sales


The National Association of Realtors reported This Week in Real Estate that the run of 6 consecutive months of decline in existing-home sales ended in October. In addition, housing starts in October increased 1.5 percent over September. Below are a few highlights from the third week of November that influence our business:

Single-Family Starts Stable in October as Caution Grows
Total housing starts posted a 1.5 percent increase in October (1.23 million units) compared to a revised September estimate of 1.21 million units. However, total starts are 2.9 percent lower than October 2017. Despite the recent market softness, 2018 is still shaping up to be the best year since the recession. Total housing starts are 5.6 percent higher for 2018 on a year-to-date basis, according to the joint data release from the Census Bureau and HUD. The pace of single-family starts posted a slight monthly decline in October, decreasing 1.8 percent to a seasonally adjusted annual rate of 865,000. September and August single-family starts were revised up totaling to an additional 21,000 units. The weaker conditions for single-family construction are likely to continue, as noted by the November decline of the NAHB/Wells Fargo Housing Market Index, by eight points, now registering a score of 60. On a year-to-date basis, single-family starts are 5.5 percent higher as of October relative to the first ten months of 2017. Single-family permits, a useful indicator of future construction activity, were slightly lower at 0.6 percent in October and have registered a 0.6 percent loss thus far in 2018 compared to last year. Regional data show – on a year-to-date basis positive conditions across the West (+15.2 percent), South (+3.9 percent), and the Northeast (+3.2 percent). However, single-family construction is down 2.5 percent for the year in the Midwest.

Existing-Home Sales Increase for the First Time in Six Months
Existing-home sales increased in October after six straight months of decreases, according to the National Association of Realtors®. Three of four major U.S. regions saw gains in sales activity last month. Total existing-home sales increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million in October. Sales are now down 5.1 percent from a year ago (5.5 million in October 2017). Lawrence Yun, NAR’s chief economist, says increasing housing inventory has brought more buyers to the market. “After six consecutive months of decline, buyers are finally stepping back into the housing market,” he said. “Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.” The median existing-home price2 for all housing types in October was $255,400, up 3.8 percent from October 2017 ($246,000). October’s price increase marks the 80th straight month of year-over-year gains. Unsold inventory is at a 4.3-month supply at the current sales pace, down from 4.4 last month and up from 3.9 months a year ago.

The 10 Best Days of the Year to Buy a Home
On Tuesday ATTOM Data Solutions released an analysis of the best days of the year to buy a home, which shows that only 10 days of the year offer discounts below estimated market value — seven in December, and one each in October, November and February. According to the analysis, buyers willing to close on a home purchase the day after Christmas realize the biggest discounts below full market of any day in the year. This analysis of more than 18 million single family home and condo sales over the past five years is evidence of the hot sellers’ market of the past five years. “People closing on a home purchase December 26 were submitting offers around Thanksgiving and starting their home search around Halloween — likely not a common path to home purchase for most buyers and exactly why it’s the best time to buy,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Buyers and investors willing to start their home search right about when stores are setting up Christmas decorations will face less competition and likely be dealing with more motivated sellers, giving them the upper hand in price negotiations.”


November Brings Balance to the Housing Market


Economists reported This Week in Real Estate that “sellers will keep their foothold for another couple of years at least, though with weakened negotiating power thanks to basic economic fundamentals like a growing job market rather than one that has been artificially bolstered.” Below are a few highlights from the second week of November that influence our business:

Single-Family Permits: Declines in the Midwest and Northeast

Over the first nine months of 2018, the total number of single-family permits issued year-to-date (YTD) nationwide reached 664,665. On a year-over-year basis, this is a 5.7% increase over the September 2017 level of 628,858. The preliminary results from the New Residential Construction Survey are similar, year-to-date single-family permits over the first nine months of 2018 was, 663,800 which is 5.5% ahead of its level over the same period of 2017, 628,900. Year-to-date, single-family permits grew in the Southern and the Western regions of the country, while the Midwest and Northeast declined by 0.9% and 6.4% respectively, compared to September 2017 YTD. The Western region had the highest growth in single-family (11.5%) while the South recorded the highest multifamily permits growth (14.9%) during the last 12 months.

Real Estate Markets Cooling Across the Country, and it’s Not Just the Winter Effect

In December 2008, almost a decade ago exactly, Case-Shiller posted a record 18% price drop in home values across the country as the subprime mortgage crisis reached fever pitch. After a slow and painful recession period, economic prosperity pushed the market out of recovery mode and into a full-fledged real estate boom characterized by double-digit price growth, rock-bottom inventory and surging buyer demand over the past few years. It’s been the lowest of lows, followed by a glorified golden age for the country’s trillion-dollar residential real estate business. But a new normal, one that’s neither ice cold nor fiery red, does appear to be taking shape. “There is a definite shift,” said Lawrence Yun, chief economist of the National Association of Realtors and fellow Forbes contributor. “I would characterize the current state as normalizing and not truly a buyer’s market. It was clearly a seller’s market in spring, but now things appear to be more balanced.” Rest easy, no one’s warning of a housing bust 2.0 danger zone. The current price run-up wasn’t artificially bolstered by mortgage fraud, but rather economic fundamentals including a growing jobs market, and that thing we all learned in Economics 101: supply and demand. In fact, economists forecast that sellers will keep their foothold for another couple of years at least, though with weakened negotiating power.

Most Buyers Don’t Expect House Hunting to Get Easier Soon

Only about 2 out of every 10 prospective home buyers (people looking to buy a home in the next year) expect the search for a home to get easier in the months ahead. The majority, about 7 out of 10, instead think house hunting will get harder or stay about the same. This opinion is shared among buyers of all ages, as only 15%-21% of each generation expects the search for a home to get easier soon. These findings come from NAHB’s Housing Trends Report (HTR) for the third quarter of 2018. Another way to find out buyers’ perception about the inventory of available housing in their markets is to ask if they see the number of for-sale homes (with their desired features and price point) rising or falling compared to three months earlier. In the third quarter of 2018, 29% said they could see more such homes vs. 61% who said they saw fewer/about the same number as before. Put shortly, most prospective buyers have seen no improvement in the availability of housing. A majority of buyers in each generation shares that opinion.

Home Prices and Equity Rise as Affordability Lowers


ATTOM Data Solutions reported This Week in Real Estate that the number of equity rich U.S. properties increased to a new high in the third quarter of 2018. Below are a few highlights from the first week of November that influence our business:

Equity Rich U.S. Properties Increase to New High of 14.5 Million in Q3 2018
On Thursday ATTOM Data Solutions released its Q3 2018 U.S. Home Equity & Underwater Report, which shows that in the third quarter of 2018, nearly 14.5 million U.S. properties were equity rich – where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value – up by more than 433,000 from a year ago to a new high as far back as data is available, Q4 2013. The 14.5 million equity rich properties in Q3 2018 represented 25.7 percent of all properties with a mortgage, up from 24.9 percent in the previous quarter but down from 26.4 percent in Q3 2017. “West coast markets along with New York have the highest share of equity rich homeowners while markets in the Mississippi Valley and Rust Belt continue to have stubbornly high rates of seriously underwater homeowners when it comes to home equity,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. States with the highest share of equity rich properties were California (42.5 percent); Hawaii (39.4 percent); Washington (35.3 percent); New York (34.9 percent); and Oregon (33.6 percent).

Housing Affordability Edges Lower in the Third Quarter
A modest increase in interest rates and home prices kept housing affordability at a 10-year low in the third quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). In all, 56.4 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $71,900. This is down from the 57.1 percent of homes sold in the second quarter that were affordable to median-income earners and the lowest reading since mid-2008. The national median home price edged up from $265,000 in the second quarter of 2018 to $268,000 in the third quarter. This is the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates rose by a nominal 5 basis points in the third quarter to 4.72 percent from 4.67 percent in the second quarter.

CoreLogic Reports September Home Prices Increased by 5.6% Year Over Year
CoreLogic released on Tuesday the CoreLogic Home Price Index (HPI) and HPI Forecast for September 2018, which shows home prices rose both year over year and month over month. Home prices increased nationally by 5.6 percent year over year from September 2017. On a month-over-month basis, prices increased by 0.4 percent in September 2018. Looking ahead, the CoreLogic HPI Forecast indicates home prices will increase by 4.7 percent on a year-over-year basis from September 2018 to September 2019. On a month-over-month basis, home prices are expected to decrease by 0.6 percent from September to October 2018. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.


2019 Housing Forecasting and Millennial Homeownership

2019 Forecasting and Millennial Homeownership

National Association of Realtors chief economist Lawrence Yun presented his 2019 forecast This Week in Real Estate at NAR’s annual conference in Boston. Mr. Yun estimates there will be 5.345 million home sales in 2018, down 3% from last year, and will increase to 5.4 million sales in 2019, a 1% increase. Additionally, Mr. Yun expects median home prices to increase 3.1% in 2019 and 2.6% growth in 2020. Below are a few highlights from the final week of October that influence our business:

2019 Forecast: Existing Home Sales to Stabilize and Price Growth to Continue
Consumers should expect home sales to flatten and home prices to continue to increase, though at a slower pace, according to a residential housing and economic forecast session at NAR’s 2018 Realtors Conference & Expo. “2017 was the best year for home sales in ten years, and 2018 is only down 1.5 percent year to date. Statistically, it is a mild twinge in the data and a very mild adjustment compared to the long-term growth we’ve been experiencing over the past few years. The current market conditions are fundamentally different than what we were experiencing before the recession 10 years ago,” said NAR chief economist Lawrence Yun. “Most states are reporting stable or strong market conditions, housing starts are under-producing instead of over-producing and we are seeing historically low foreclosure levels, indicating that people are living within their means and not purchasing homes they cannot afford. This is a stronger, more stable market compared to the loosely regulated market leading up to the bust.” With a few months of data remaining in 2018, Yun estimates that existing-home sales will finish at a pace of 5.345 million—a decrease from 2017 (5.51 million). In 2019, sales are forecasted to increase to 5.4 million, a 1 percent increase. The national median existing-home price is expected to rise to around $266,800 in 2019 (up 3.1 percent from 2018 this year and $274,000 in 2020. “Home price appreciation will slow down – the days of easy price gains are coming to an end – but prices will continue to rise.”

Construction Spending Holds Ground
The U.S. Census Bureau of the Department of Commerce announced that construction spending during September 2018 was estimated at a seasonally adjusted annual rate of $1.330 trillion, about the same as the revised August estimate of $1.329 trillion. Notably, September’s spending is 7.2% above the September 2017 estimate of $1.24 trillion. Of that, residential construction spending was at a seasonally adjusted annual rate of $556.4 billion in September, 0.6% above the revised August estimate of $553 billion. NAHB Chairman Randy Noel said despite rising affordability concerns, builders continue to report firm demand for housing, especially as Millennials and other newcomers enter the market. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced,” Noel stated.

Millennial Homeownership Rate Rises to 37%
According to the Census Bureau’s Housing Vacancy Survey (HVS), the U.S. homeownership rate was 64.4% in the third quarter of 2018, which is not statistically different from its last quarter reading. The national homeownership rate demonstrated stability during a quarter in which housing markets softened due to declining affordability conditions. This follows the rate dropping to a cycle low of 62.9% in the second quarter 2016. Compared to the peak of 69.2% in 2004, however, the homeownership rate is still lower by almost five percentage points. The count of total households, however, increased to 121 million in the third quarter of 2018 from 119 million a year ago. Newly-gained households are predominantly owner households, while renter households only increased by 60,000. The homeownership rates among all age groups under 64 increased over the last year. Millennial households, mostly first-time homebuyers, registered the largest gains among all households, a 1.2 percentage point increase from a year ago. Millennials are gradually returning to the for-sale housing market, where gains in home price are slowing down. The homeownership rates of households ages 45-54 and 55-64 experienced a 0.8 percentage point increase.



Housing Market Gains in the 3rd Quarter


Housing Market Gains in the 3rd Quarter

Despite the slowdown in the rate of home price appreciation as reported by ATTOM Data Solutions This Week in Real Estate, homeowners who sold in Q3 2018 realized the highest average price gain since Q2 2007. Below are a few highlights from the fourth week of October that influence our business:

Pending Home Sales Stabilize

Pending home sales increased in September but have decreased on an annual basis for nine consecutive months. The Pending Home Sale Index increased 0.5% in September but remains down 1.0% year-over-year. The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR). The PHSI increased to 104.6 in September, from 104.1 in August. The PHSI increased 4.5% in the West and 1.2% in the Midwest but decreased 0.4% in the Northeast and 1.4% in the South. Year-over-year, the PHSI increased 3.3% in the South, but declined 1.1% in the Midwest, 2.7% in the Northeast and 7.4% in the West. 

U.S. Median Home Price Increases 4.8% in Q3 2018, Slowest Rate of Annual Appreciation Since Q2 2016

ATTOM Data Solutions released its Q3 2018 U.S. Home Sales Report on Thursday which shows that U.S. single family homes and condos sold for a median price of $256,000 in the third quarter, up 1.0 percent from the previous quarter and up 4.8 percent from a year ago – the slowest pace of annual home price appreciation since Q2 2016. “The continued slowdown in the rate of home price appreciation nationwide and in many local markets is a rational response to worsening home affordability – which has deteriorated at an accelerated pace this year due to rising mortgage rates,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Markets not experiencing this price appreciation cool down may have more of an affordability cushion to work with, but some are in danger of overheating if home price gains continue to run hot.”

“I think the key factor underpinning the decelerating price appreciation is the impact of rising rates on the monthly payment,” said Tendayi Kapfidze, chief economist at mortgage marketplace Lending Tree. “Absent financing structures that allow a borrower to increase leverage while mitigating an increase in the monthly debt service, buying power is decreasing across the board. “This especially affects the marginal buyer who doesn’t have a lot of wiggle room,” Kapfidze added. “And if you remember your econ 101, the marginal buyer transacts at the market clearing price. So, while there is still strong demand, some potential buyers are falling out of the market and others are moving down in price with the aggregate effect being a moderation in price appreciation.”

Homeowners who sold in Q3 2018 sold for an average of $61,232 more than their original purchase price, the highest average home seller price gain since Q2 2007. The $61,232 average home seller price gain in Q3 2018 represented an average 32.3 percent return on the original purchase price, up from an average 31.6 percent return in the previous quarter and up from an average 31.4 percent return in Q3 2017. Among 156 metropolitan statistical areas analyzed for average home seller gains, those with the highest average home seller percentage gains were San Jose, California (108.7 percent gain); San Francisco, California (77.3 percent gain); Seattle, Washington (69.8 percent gain); Santa Rose, California (67.9 percent gain); and Salem, Oregon (63.4 percent gain). Along with San Jose, San Francisco and Seattle, other metro areas with a population of at least 1 million and average home seller percentage gains of more than 55 percent were Portland, Oregon (59.6 percent gain); Boston, Massachusetts (58.1 percent gain); Los Angeles, California (58.0 percent gain); Nashville, Tennessee (56.5 percent gain); and Salt Lake City, Utah (56.5 percent gain).

Homeowners Are Staying Put Longer Than Ever Before

Homeowners are staying in place longer than ever before, despite the growing amount of equity in their homes. A new report from First American – a provider of title insurance, settlement services and risk solutions for real estate transactions – reveals that the median tenure for homeownership has jumped to 10 years, up 10% from last year. By comparison, the median tenure in the pre-crash days of 2007 was four years, and in the aftermath of the market’s meltdown – when many homeowners couldn’t move because they were underwater on their properties – the median tenure was seven years. “There is less incentive to sell your home if borrowing the same amount from the bank at today’s rates will be more expensive than your existing monthly mortgage payment,” said Fleming. “As rates rise, many existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate.” But, home prices have recovered over the last decade, Fleming points out, meaning that many homeowners have accumulated enough equity to sell their homes at a profit.



September’s Top Effects on the Housing Market


September’s Top Effects on the Housing Market

While the total number of sales is softer this year compared to last year, builder confidence remains strong according to the most recent National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released This Week in Real Estate. The West enjoys the highest regional HMI score of 74 as well as the largest year-over-year increase in single family construction starts at 14.6%. Below are a few highlights from the third week of October that influence our business:

Builder Confidence Rises One Point in October, Remains at Summer Levels
Builder confidence in the market for newly-built single-family homes rose one point to 68 in October on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builder confidence levels have held in the high 60s since June. Builders continue to view solid housing demand, fueled by a growing economy and a nearly 50-year low for unemployment. Lumber price declines for three straight months from elevated levels earlier this summer have also helped to reduce some cost pressures, but builders will need to manage supply-side costs to keep home prices affordable. Looking at the three-month moving averages for regional HMI scores, the Northeast rose three points to 57 and the South edged up one point to 71. The West held steady at 74 and the Midwest fell two points to 57.

Existing-Home Sales Decline Across the Country in September
Existing-home sales declined in September after a month of stagnation in August, according to the National Association of Realtors®. All four major regions saw no gain in sales activity last month. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4 percent from August to a seasonally adjusted rate of 5.15 million in September. Sales are now down 4.1 percent from a year ago (5.37 million in September 2017). First-time buyers were responsible for 32 percent of sales in September, up from last month (31 percent) and a year ago (29 percent). All-cash sales accounted for 21 percent of transactions in September, up from August and a year ago (both 20 percent). Single-family home sales were at a seasonally adjusted annual rate of 4.58 million in September, down from 4.74 million in August, and are 4.0 percent below the 4.77 million sales pace from a year ago. Existing-home sales in the West fell 3.6 percent to an annual rate of 1.08 million in September, 12.2 percent below a year ago.

Single-Family Starts Flat in September
Total housing starts posted a decline in September due to flat conditions for single-family construction and a pullback for apartment development. Total starts declined 5.3% in September but are 6.4% higher for 2018 on a year-to-date basis, according to the joint data release from the Census Bureau and HUD. The pace of single-family starts was roughly flat in September, decreasing 0.9% to a seasonally adjusted annual rate of 871,000. Slight gains off the summer soft patch for single-family mirror a minor uptick of the NAHB/Wells Fargo Housing Market Index, now registering a score of 68. While builders are benefitting from recent declines in lumber prices (at least relative to spring and summer’s elevated levels), they continue to report concerns about labor access issues. On a year-to-date basis, single-family starts are 6% higher as of September relative to the first nine months of 2017. Single-family permits, a useful indicator of future construction activity, were up slightly (2.9%) in September and have registered a 5.6% gain thus far in 2018 compared to last year. With respect to housing’s economic impact, 54% of homes under construction in September were multifamily (607,000). The current count of apartments under construction is down slightly from a year ago. In September, there were 522,000 single-family units under construction, a gain of more than 9% from this time in 2017. Regional data show – on a year-to-date basis – mixed conditions. Single-family construction is down 1% for the year in the Midwest and flat in the Northeast. Single-family starts are up in the larger building regions of the South (4.9%) and the West (14.6%).



The Transitioning Market


The Transitioning Market

As the pace of home price appreciation begins to temper and available inventory rises, the need to educate homeowners of selling in a transitioning market as well as establishing new expectations intensifies. According to a report released by Trulia This Week in Real Estate 17.2% of U.S. listings experienced a price cut in August. That is the highest level of price cuts since 2014. Below are a few highlights from the second week of October that influence our business:

New Home Sales Dip, Still Stronger Than Last Year

The Mortgage Bankers Association (MBA) reports a drop in applications for the purchase of newly constructed homes last month. Those applications fell by 3.9 percent compared to August although they remained 8.2 percent higher than they were the previous September. “Even though new home sales decreased 3.9 percent over the month, the average monthly number of homes sold so far this year (648,000 units) is around 8 percent higher than a year ago, and last month’s 8.2 percent annualized gain in purchase applications points to continued demand for new homes,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Housing demand is still strong even as mortgage rates increase, and as a result, we’re still forecasting for modest growth in purchase origination volume in 2018.” Conventional loans accounted for 71.0 percent of applications and FHA loans for 16.0 percent. VA loans had an 11.9 percent share and 1.1 percent were for RHS/USDA loans.

Home Price Cuts Reach 4-Year High 

There was a significant increase in the share of homes that experienced a price cut in August 2018, according the latest data collected from Trulia. According to the report, in August 17.2% of U.S. listings had a price cut, which is an increase from 16.7% the previous year. This is the highest level of price cuts since 2014. Trulia reports in the majority of the first half of 2018 the share of listings with a price cut held steady from 2017, but began to climb in July and August. The report indicates that this can be attributed to the slowdown of home price growth and inventory levels that are beginning to rise. Trulia Housing Economist Felipe Chacon said buyers should be encouraged by signals in the market, however not every buyer will benefit equally. “Price reductions typically aren’t uniformly spread out across a given city – some neighborhoods might have a lot of listings with a reduced price, others may have none,” Chacon. “Our research shows that price cuts are much more prevalent in higher-cost neighborhoods, so budget-conscious buyers may have some trouble finding a bargain.” Of the top 100 metros, 63 had a year-over-year increase, and some of the most expensive and fastest growing markets experienced the largest jumps. Notably, the West Coast hosted some of the biggest year-over-year price cuts in August.

Q3 Foreclosure Activity Down 8% From Year Ago to Lowest Level Since Q4 2015

ATTOM Data Solutions released its Q3 2018 U.S. Foreclosure Market Report Thursday, which shows a total of 177,146 U.S. properties with foreclosure filings – default notices, scheduled auctions or bank repossessions – in the third quarter, down 6 percent from the previous quarter and down 8 percent from a year ago to the lowest level since Q4 2005 – a nearly 13-year low. U.S. foreclosure activity in Q3 2018 was 36 percent below the pre-recession average of 278,912 properties with foreclosure filings per quarter between Q1 2006 and Q3 2007 – the eighth consecutive quarter where U.S. foreclosure activity has registered below the pre-recession average. “A decade after poorly underwritten mortgages triggered a housing market crash, it’s clear that the foreclosure risk associated with those problem mortgages has faded – average foreclosure timelines have dropped to a two-year low, and the share of foreclosures tied to 2004 to 2008 loans has dropped well below 50 percent,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The biggest foreclosure risk in today’s housing market comes from natural disaster events such as the twin hurricanes of a year ago. Foreclosure starts spiked in the third quarter in many local markets impacted by those hurricanes.



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