DAILY REAL ESTATE NEWS | RELEASED FRIDAY, MAY 15, 2015
Inventory Shortages Keeping Home Sales Low- Home sales will pick up to a solid 5.3 million this year and are expected to hit 5.5 million next year, but until inventory constraints improve, the country’s large pent-up demand for home sales can’t be met, NAR Chief Economist Lawrence Yun said at the 2015 REALTORS® Legislative Meetings & Trade Expo in Washington, D.C.
Overall, the economy is on a steady growth track, with solid job formation, continuing low interest rates, and the large millennial generation entering its peak household-formation years. But with buyers having to compete for a limited selection of properties in many markets across the country, home prices are rising fast, making it hard for many first-time buyers to get into the market.
Yun’s concerned that, as a result of these conditions, many households risk missing out on the wealth-building effect of home ownership at a time of low interest rates and strong price appreciation. “Young people are in a position to leave their parents’ home because job growth is picking up, but the lack of inventory and rising prices is making that hard,” he said.
For lawmakers, there are important policy implications, because home ownership is the path most people take to building wealth. As more households find their options limited to renting, inequality—already rising across the country—will worsen. “Without home ownership, many people will not be able to enter the middle class,” he said.
Despite the need for more inventory, builders are concentrating on the multifamily rental market right now, because that’s where the demand is, said Robert Dietz, vice president for tax and market analysis for the National Association of Home Builders. Dietz, speaking at the same forum on residential issues and trends, said the renter population has been the big growth story in real estate since the economic recovery began several years ago.
There’s plenty of interest among builders to fill the need for more single-family homes, too, but small builders, who historically have been responsible for building two-thirds of new homes each year, can’t get the acquisition and development financing they need to get back into the market. Lenders want them to have buyers already lined up before they give them financing, Dietz said, making it hard for builders to get inventory in the market for buyers to look at. Also keeping housing starts down are a lack of skilled labor and a shortage of developed lots, he said. Prices of building materials are on the rise, too.
Yun is forecasting 1.1 million housing starts this year, rising to 1.4 million next year. Prices are on track to rise 6 percent this year and then ease to a sustainable 4 percent next year, as more homes come on the market. He predicts long-term mortgage rates will stay at a low 4 percent this year, rising to 5.2 percent next year. Yun said interest rates will continue to rise, but he doesn’t expect big jumps in the years ahead because inflation remains in check and energy prices aren’t expected to go up to any significant degree in the years ahead.
April 29, 2015 – Pending home sales in March continued their recent momentum, rising for the third straight month and remaining at their highest level since June 2013, according to the National Association of Realtors® (NAR).
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, climbed 1.1 percent to 108.6 in March from an upward revision of 107.4 in February. It's now 11.1 percent above March 2014 (97.7).
The index has increased year-over-year for seven consecutive months and is at its highest level since June 2013 (109.4).
"Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year," says Lawrence Yun, NAR chief economist. "While (it's) certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year's activity is being driven by more long-term homeowners."
Yun expects a gradual improvement in home sales in the coming months, but he says insufficient supply and accelerating prices could be a speed bump.
"Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer," Yun says. "This in turn has pushed home prices to unhealthy levels – nearly four or more times above the pace of wage growth in some parts of the country.
"Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability," Yun adds.
The PHSI in the Northeast fell (1.5 percent) for the fourth straight month to 80.2 in March, but it's 0.6 percent above a year ago. In the Midwest, the index declined 2.5 percent to 107.5 in March, but it's 11.3 percent above March 2014.
Pending home sales in the South increased 4.0 percent to an index of 126.5 in March and they're 12.4 percent above last March. The index in the West rose 1.7 percent in March to 103.7, and it's now 15.6 percent above a year ago.
It is a market dominated by the sellers who can and are selling. So, why aren't more potential sellers selling? This article answers that question.
NEW YORK – March 31, 2015 – Existing-home sales are up nearly 5 percent from last year, but sales would be much higher if it wasn't for the negative equity overhang, economists say.
The National Association of Realtors® recently reported that existing-home sales increased 4.7 percent in February compared to a year ago.
But with an improving labor market, home sales should be even higher, Mark Fleming, chief economist at First American Financial Corp., told The New York Times, regardless of the fact that home prices are higher too.
"Rising prices only crimp affordability for the first-time buyer who doesn't yet own the asset," Fleming says. "But the vast majority of home sales are to existing homeowners. And for existing homeowners, what changes affordability is their own income and the price of money."
Currently, though, too many homeowners still lack sufficient equity in their homes to sell, Fleming notes. Owners with home equity below 20 percent are less likely to sell because if they can't cover the costs of the transaction.
A significant number of current homeowners can't afford to move up if they're relying on profit from an existing home for the downpayment. About 35 percent of owners nationwide are either in a negative equity position or have equity below 20 percent, according to some industry estimates.
However, the equity picture has shown improvement recently. CoreLogic reported earlier this month that 89 percent – or about 44.5 million – of all U.S. properties with a mortgage had at least some equity by the end of the fourth quarter of 2014.
What's more, if home prices rise by an additional 5 percent, about 1 million more homeowners in negative equity stand to inch back into the black. However, much of the equity is concentrated at the high-end of the housing market (94 percent of homes valued at more than $200,000 have equity compared to 84 percent of homes valued less than $200,000).
Also, many homeowners remain "under-equitied" with less than 20 percent equity in their homes. Nearly 50 million properties – one in five (20 percent) – are considered "under-equitied" in the U.S., and about 1.4 million of those properties have less than 5 percent equity, considered "near-negative equity."
According to CoreLogic's report, the states with the largest number of negative equity homeowners, as of the fourth quarter of 2014, are: Nevada (24 percent); Florida (23.3 percent); Arizona (18.7 percent); Illinois (16.2 percent), and Rhode Island (15.8 percent).
Source: "Negative Equity a Drag on Home Sales," The New York Times (March 27, 2015) and "89% of U.S. Homes Ended 2014 With Equity," REALTOR® Magazine Daily News (March 18, 2015)
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If you did not know, May 1st is May Day. This day originated on May 1 during the 19th century. It is an ancient Northern Hemisphere spring festival and usually a public holiday; it is also a traditional spring holiday in many cultures. Dances, singing, and cake are usually part of the celebrations that the day includes.Information found here: http://en.wikipedia.org/wiki/May_Day
Below, you will find 3 great ways to celebrate May Day with your neighbors. Maybe you can put these ideas into action this weekend!
Create a Basket: Use a small wicker basket and add a bow. Add golf, tennis, or baseballs for the sports enthusiast. Seashells for the beach bum in your life. Fresh scents and flowers always brighten someones day (male or female, believe it or not)! Pick wildflowers or purchase a bouquet from a local florist. Remember to shop small! Also, a plate or tray of home made desserts or other tasty treats are usually always welcomed!
Host a Picnic
Sunshine and blue skies are the perfect time to plan a neighborhood get together. Invite a neighbor or two to celebrate in your yard or at a local park. Pack some sandwiches, wine, fruit, seltzer water, and whatever else you'd enjoy on a beautiful May Day!
While neighbors always enjoy a May Day surprise, there are others in your community who would love a visitor in any season--
Nursing Homes: ask if you can deliver May Day baskets to residents. Ask their advice before using fresh flowers or food products. Ask if there are any residents in particular who would be cheered by a special visit.
Emergency Rooms: Deliver a care package of hand sanitizer, tissues, lozenges, a notepad and pen to people waiting in the Emergency Room.
Police/Fire Department: Drop off a basket to your nearest police or fire station with a note of thanks and a prayer for safety. With permission and planning, take May Day Baskets to the local jail or recovery center.
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