Associated Press

In this Wednesday, Oct. 7, 2015, photo, a home is for sale in Coral Gables, Fla. Fewer Americans bought homes in October, a sign that rising home values may be pushing more would-be buyers to the real estate market’s sidelines, based on information released Monday, Nov. 23, 2015, by the National Association of Realtors. (AP Photo/Lynne Sladky)

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In this Wednesday, Oct. 7, 2015, photo, a home is for sale in Coral Gables, Fla. Fewer Americans bought homes in October, a sign that rising home values may be pushing more would-be buyers to the real estate market’s sidelines, based on information released Monday, Nov. 23, 2015, by the National Association of Realtors. (AP Photo/Lynne Sladky)

WASHINGTON (AP) — Fewer Americans bought homes in October, a sign that rising home values may be pushing more would-be buyers to the real estate market’s sidelines.

The National Association of Realtors said Monday that sales of existing homes fell 3.4 percent last month to a seasonally adjusted annual rate of 5.36 million.

The decline comes after strong growth in home-buying for much of 2015, bolstered by steady job gains and low mortgage rates. Home purchases have advanced 3.9 percent from a year ago, even as buyers have fewer choices because the number of listings on the market has dropped 4.5 percent.

But last month suggested the start of a reflexive backlash after the strong gains in home-buying. The additional sales have spawned sharp price increases that have outpaced wage growth and left some would-be buyers out of the market.

The October sales decrease indicates “the market is treading water,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Yet other economists anticipate sales growth to return because of the underlying health of the broader economy.

“Despite the setback, home sales should resume higher in the face of rising rents, good job growth, improved consumer confidence and still-low mortgage rates,” said Sal Guatieri, a senior economist at BMO Capital Markets.

The median home sales price was $219,600 in October, a 5.8 percent annual increase. Sales fell sharply in the West and South where prices have risen at the fastest rates this year. Purchases declined 8.7 percent in the West and 3.2 percent in the South, while dipping 0.8 percent in the Midwest and staying unchanged in the Northeast on a seasonally adjusted basis.

The 5 percent unemployment rate has helped coax traditional buyers into the market, supplanting the investors who bought foreclosed properties for all-cash in the aftermath of the Great Recession. Current homeowners seeking an upgrade or chance to downsize appear to have accounted for much of this year’s sales gains, as first-time buyers accounted for 31 percent of sales in October. First-time buyers have historically made up 40 percent of all sales.

Tight inventories are curbing enthusiasm among some homebuyers. Just 4.8 months’ supply of homes is available, well below the 6 months associated with a balanced market.

The limited supplies and greater demand fueled higher home values. Home prices have appreciated at more than double the gains in average hourly earnings, requiring buyers to set aside more savings for a down payment or bid more fiercely for the most desirable properties.

Low mortgage rates have offset some of the pain from those price gains. But rates have started to rise ahead of a December Federal Reserve meeting, where Fed officials are expected to raise short-term rates for the first time in nearly a decade.

The average, 30-year fixed mortgage rate has risen to just a hair under 4 percent from 3.79 percent a month ago, according to mortgage buyer Freddie Mac.

October Real Estate Sales in California

For release:
November 24, 2015

California pending home sales bounce back in October
Southern California and Bay Area regions rise, Central Valley posts lower

LOS ANGELES (Nov. 24) – Pending home sales bounced back from the previous month at the statewide level in October, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. Pending sales were also significantly higher on an annual basis, portending higher closed escrows in the next couple of months.

In a separate report, California REALTORS® responding to C.A.R.’s October Market Pulse Survey saw a nominal increase in sales with multiple offers compared with September and an increase in the number of offers received. The number of floor calls and open house traffic declined, however, primarily reflecting seasonal factors as the market enters the end of the home-buying season. The Market Pulse Survey is a monthly online survey of more than 300 California REALTORS®, which measures data about their last closed transaction and sentiment about business activity in their market area for the previous month and the last year.

Pending home sales data:

• Statewide pending home sales increased in October, with the Pending Home Sales Index (PHSI)* rising 2.5 percent from a revised 110.7 in September to 113.4 in October, based on signed contracts. The month-to-month gain was better than the average increase of 0.9 percent from September to October observed in the last seven years.

• On an annual basis, statewide pending home sales were up 13.9 percent from the revised 99.5 index recorded in October 2014. Pending sales have been increasing on a year-over-year basis since November 2014 and have seen double-digit increases for nine straight months.

• At the regional level, pending sales were higher on a year-over-year basis in all areas, with Southern California and Central Valley both increasing at a double-digit rate compared to last October.

• San Francisco Bay Area pending sales rose 16.3 percent to reach an index of 145.6 in October, up from September’s 125.2 and up 16.1 percent from October 2014’s 125.4 index.

• Pending home sales in Southern California increased to 94.3 in October, up 9.8 percent from 85.9 in September and up 9 percent from an index of 86.5 a year ago.

• Central Valley pending sales dropped in October to reach an index of 89.5, down 13.9 percent from September’s 103.9 index but up 18.6 percent from October 2014’s 75.5 index.

Equity and distressed housing market data:

• The share of equity sales – or non-distressed property sales – dipped in October but remained at the highest levels since the fall of 2007. Equity sales now make up 93.7 percent of all sales, up from 91.5 percent a year ago.

• The combined share of all distressed property sales (REOs and short sales) edged up in October to 6.3 percent of total sales, but was down from 8.5 percent a year ago.

• Fifteen of the 44 counties that C.A.R. reports showed month-to-month decreases in their share of distressed sales, with Mariposa having the smallest share of distressed sales at 0 percent, followed by San Francisco (0.4 percent), San Mateo (0.8 percent), and Santa Cruz (1.3 percent). Madera had the highest share of distressed sales at 19 percent, followed by Siskiyou (16.4 percent), Yuba (12.1 percent), and Tulare (11.9 percent).

October REALTOR® Market Pulse Survey**:

• More than one in four homes (27 percent) closed above asking price in October, and nearly half (47 percent) closed below asking price. One-fourth (25 percent) closed at asking price.

• For the one in four homes that sold above asking price, the premium paid over asking price fell to an average of 8.9 percent, down from 11 percent in September and up from 8.4 percent in October 2014.

• The 46 percent of homes that sold below asking price sold for an average of 12 percent below asking price in October, up from 10 percent in September and up from 6.3 percent in October 2014.

• About two-thirds (64 percent) of properties received multiple offers in October, indicating the market remains competitive. Fifty-one percent of properties received multiple offers in October 2014.

• The average number of offers per property increased to 3.2 in October, up from 2.4 in September and up from 2.3 in October 2014.

• With home prices leveling off in recent months, more sellers are adjusting their listing price to become more in line with buyers’ expectations. One-third (32 percent) of properties had price reductions in October, the highest level reached in the last 12 months.

• REALTOR® respondents reported that floor calls, listing appointments, and open house traffic all declined in October, mostly due to seasonal factors.

• When asked what REALTORS®’ biggest concerns are, more than one in five (22 percent) said low housing affordability, 21 percent indicated a lack of housing inventory, 16 percent cited overinflated home prices, and 12 percent said a slowdown in economic growth.

• On a positive note, four of five REALTORS® believe market conditions will either improve or remain the same.

 

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Why the Housing Rebound Hasn’t Lifted the U.S. Economy Much

 

 

Many homeowners don’t realize they have home equity to tap, while banks have pulled back on loan amounts and other types of loans have become cheaper

A development of townhomes in San Jose, Calif. Even though the housing sector has picked up, the economic impact has been muted.
A development of townhomes in San Jose, Calif. Even though the housing sector has picked up, the economic impact has been muted. Photo: David Paul Morris/Bloomberg News

American homeowners are finally digging out of the hole created by the housing crisis. But their housing wealth is playing a much smaller role in the overall economy than it did before the downturn.

Home equity has roughly doubled to $12.1 trillion since house prices hit bottom in 2011, according to the Federal Reserve. As a result, a key gauge of housing wealth—homeowners’ equity as a share of real-estate values—is nearing the point seen a decade ago, before the downturn.

Such a level once would have offered a double-barreled boost to the economy by providing owners with more money to tap and making them feel more flush and likely to spend. But today, that newfound wealth has had little effect on behavior. While the traditional ways Americans tap their home equity—home-equity loans, lines of credit and cash-out refinances—are higher than last year, they are still depressed.

In the first half of the year, owners borrowed $43.5 billion against their homes with home-equity loans and lines of credit, according to trade publication Inside Mortgage Finance. That was 45% higher than in the first half of 2014, but scarcely a quarter of the amount seen when equity was last as high in 2007.

Meanwhile, cash-out refinances, which let homeowners take out a new mortgage and tap some of the home’s value at the same time, were up 48% in the three months ended in August from the year-earlier period, according to Black Knight Financial Services. BKFS 2.29 % But they remain below the level seen in the summer of 2013. The average cash-out refinance in the three months ended in August left the borrower with mortgage debt of about 68% of the home’s value—not a risky level by any stretch.

Home equity’s effect on consumer spending is at its lowest ebb since the early 1990s, according to Moody’s MCO -0.59 % Analytics. The research firm estimates that every $1 rise in home equity in the fourth quarter of 2014 would translate to about two cents of extra consumer spending over the next 1 to 1½ years. That was a third of the impact home equity had before the bust, Moody’s said.

Home equity’s effect on consumer spending is at its lowest ebb since the early 1990s, according to Moody’s MCO -0.59 % Analytics. The research firm estimates that every $1 rise in home equity in the fourth quarter of 2014 would translate to about two cents of extra consumer spending over the next 1 to 1½ years. That was a third of the impact home equity had before the bust, Moody’s said.

The impact is more muted now despite the fact that home equity per homeowner has roughly doubled. At the end of the second quarter, the figure was about $156,700, up from $81,100 in the second quarter of 2011, according to Moody’s Analytics chief economist Mark Zandi. Though the homeownership rate has fallen, the total number of households has increased, meaning the number of households that own hasn’t changed much since the housing bubble burst in 2006, Mr. Zandi said.

Why aren’t homeowners feeling flush again? For one thing, since rising home prices over the past few years largely have made up for ground lost during the recession, many owners might not even realize they have equity to tap.

The percentage of homeowners who were underwater, or owing more on their mortgage than the home’s value, dropped to 8.7% by mid-2015 from 21% at the end of 2011, according to CoreLogic. CLGX 1.01 % Yet the percentage of homeowners who thought they were underwater fell by merely one percentage point to 27%, according to housing-finance company Fannie Mae.

The bust looms large and home equity is seen as more fleeting than it used to be, said Fannie Mae chief economist Doug Duncan.

“Consumers are definitely more conservative financially than they were 10 years ago. They’ve seen that house prices can be volatile,” Mr. Duncan said.

Mortgage lenders also aren’t giving owners access to as much equity as they used to. While it was common during the boom to see loans that took out 100% or even more of a home’s value, now few will let an owner take out more than 80%.

Finally, other kinds of loans are cheaper, removing one incentive to tap home equity.

Six years ago, for example, the average five-year new-car loan had an interest rate of 6.83%, versus 5.56% for a $30,000 home-equity credit line. But in the week ended Nov. 11, the average interest rate for a five-year new-car loan was 4.3%, according to Bankrate.com, versus 4.74% for the HELOC.

Home equity as a share of real-estate values at the end of the second quarter was 56%, according to the Federal Reserve, not quite back to the level of 60% seen in the boom. That means Americans’ mortgage debt is still elevated relative to home values, which could be another factor affecting the decision of whether or not to cash out equity.

Could home equity start to flex its muscle sometime soon?

Some economists think it might. One reason: In many metro areas, home prices have overtaken or are about to overtake their boom-era peak.

About 38% of metro areas had prices above their pre-2009 peak at the end of the third quarter, up from a 30% level last year, according to Moody’s Analytics and CoreLogic. A further 13% of metros are within 5% of their prebust peak.

That’s important, because it means new home equity is being created rather than merely making up for lost ground. It also means fewer homeowners are underwater, freeing them up for a home sale and potential move-up purchase while also making home improvements and renovations seem less like throwing good money after bad.

“We’re at an inflection point,” Mr. Zandi said. “Since the crash, it’s all been about repairing homeowners’ equity but now that house prices are returning to prerecession levels, we will see homeowners’ equity driving consumer spending, home improvements and economic activity.”

 

US Housing Market Recovery Inches Forward

MCLEAN, VA–(Marketwired – Nov 25, 2015) – Freddie Mac (OTCQB: FMCC) today released its updated Multi-Indicator Market Index® (MiMi®) showing the U.S. housing market continuing to slowly stabilize with three additional metro areas entering their outer range of stable housing activity: Charleston, South Carolina; Sarasota, Florida; and Washington, DC.

The national MiMi value stands at 81.3, indicating a housing market that is on its outer range of stable housing activity, while showing an improvement of +0.67% from August to September and a three-month improvement of +1.85%. On a year-over-year basis, the national MiMi value has improved +5.79%. Since its all-time low in October 2010, the national MiMi has rebounded 37%, but remains significantly off from its high of 121.7.

News Facts:

  • Thirty of the 50 states plus the District of Columbia have MiMi values in a stable range, with the District of Columbia (100), North Dakota (95.3), Montana (94.9), Hawaii (93.5) and Alaska (91.5) ranking in the top five. Compared to the same time last year, 19 states and the District of Columbia had MiMi values in a stable range.
  • Fifty of the 100 metro areas have MiMi values in a stable range, with Fresno. CA (100.2), Austin, TX (97.4), Honolulu, HI (95.6), Salt Lake City, UT(94.5) and Los Angeles, CA (94.3) ranking in the top five. Compared to the same time last year, 30 of the top 100 metros had MiMi values in a stable range.
  • The most improving states month-over-month were Florida (+1.58%), Colorado (+1.49%), South Carolina (+1.45%), Utah (+1.22%), and Mississippi (+1.21%). On a year-over-year basis, the most improving states were Florida (+13.34%), Oregon (+11.52%), Colorado (+11.31%), Washington (+10.49 %) and Nevada (+10.14%).
  • The most improving metro areas month-over-month were Denver, CO (+1.85%). Colorado Springs, CO (+1.76%), Kansas City, MO (+1.75%), Stockton, CA (+1.53) and Sarasota, FL (+1.51%). On a year-over-year basis, the most improving metro areas were Orlando, FL (+17.46%), Cape Coral, FL (+16.78%), Tampa, FL (+15.93%), Sarasota, FL (+14.63%) and Denver, CO (+14.60).
  • In September, 46 of the 50 states and 92 of the top 100 metros were showing an improving three- month trend. The same time last year, 37 of the 50 states, and 82 of the top 100 metro areas were showing an improving three-month trend.

Quote attributable to Freddie Mac Deputy Chief Economist Len Kiefer:

“When we observe MiMi’s annual improvement, it’s clear housing markets continue to recover with some markets firing on all cylinders, others inching along, and the vast majority still working to get back to their long-term benchmark normal range. Regardless, nearly twice as many states and metro areas have entered their stable range of housing activity compared to a year ago. Western markets show little signs of slowing down with their local employment pictures continuing to improve and with applications to purchase a home still showing double-digit growth on an annual basis. In many Southern metro areas home sales are improving, which is good news, but their levels still remain depressed.”

The 2015 MiMi release calendar is available online.

MiMi monitors and measures the stability of the nation’s housing market, as well as the housing markets of all 50 states, the District of Columbia, and the top 100 metro markets. MiMi combines proprietary Freddie Mac data with current local market data to assess where each single-family housing market is relative to its own long-term stable range by looking at home purchase applications, payment-to-income ratios (changes in home purchasing power based on house prices, mortgage rates and household income), proportion of on-time mortgage payments in each market, and the local employment picture. The four indicators are combined to create a composite MiMi value for each market. Monthly, MiMi uses this data to show, at a glance, where each market stands relative to its own stable range of housing activity. MiMi also indicates how each market is trending, whether it is moving closer to, or further away from, its stable range. A market can fall outside its stable range by being too weak to generate enough demand for a well-balanced housing market or by overheating to an unsustainable level of activity.

More Young Adults Live With Their Parents Now Than During the Recession

By Laura Kusisto

 Kolko says that the rise in children living with their parents is largely related to the fact that people are marrying and having children later, not to the weak economy and housing market.
GETTY IMAGES

Family togetherness isn’t just for Thanksgiving dinner. More young adults are now living with their parents than during the recession, according to U.S. Census data.

The share of 18-to-34-year-olds living with their parents was 31.5% as of March 2015, up from 31.4% last year, according to a report from the Commerce Department on Monday. In 2005, just 27% of young adults lived with their parents, a number that has climbed pretty steadily since then.

That the percentage at home has barely moved from last year is particularly notable because many economists expected young people to start moving out as the economy has improved and unemployment among young people has dropped significantly. The housing market is relying on those new households to drive future demand.

But the trend of young people continuing to live at home is unlikely to significantly reverse course any time soon, even as the economy improves, says Jed Kolko, an independent economist and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley.

Instead, Mr. Kolko says that the rise in children living with their parents is largely related to the fact that people are marrying and having children later, not to the weak economy and housing market. Single people without children are more likely to continue living at home much later.

Earlier this month, the Pew Research Center showed that more young women were living with their parents in 2014 than any time since the 1940s. Researchers noted that young women traditionally left home to get married, which they are now doing later and later.

Because young people aren’t likely to leave home in large numbers as their job prospects improve, the surge of pent-up housing demand they were expected to create will be more like a slow, steady trickle, Mr. Kolko said.

That helps explain why the share of first-time homebuyers remains low.

“What I think it means is that the boost to housing from young adults will come more slowly than people expect,” Mr. Kolko said. “The long-term demographic shifts suggest this might be the new normal, with young people living with their parents longer and more permanently delaying household formation and homeownership.”

Downpayment Average Rises as Housing Demand & Buyer Competition Increase…

Average Down Payments Rise as Housing Demand and Buyer Competition Increase

By

November 18, 2015

 CHARLOTTE, N.C., (November 18, 2015) – According to the latest national down payment report released today by LendingTree®, a leading online loan marketplace, average down payment percentages for conventional 30-year fixed rate purchase mortgage offers rose slightly in the third quarter to an average of 17.63 percent, up slightly from 17.34 percent in the prior quarter and 16.29 percent in Q3 2014. The average down payment amount also rose quarter-over-quarter to $48,924, a sizeable increase from the previous quarter’s average of $44,204. The average down payment for all purchase mortgages, including FHA, VA, non-prime, and jumbo mortgages in the second quarter was $49,127 or 15.41 percent.

“During the third quarter, the housing market thrived in certain markets as consumer demand outweighed supply,” said Doug Lebda, founder and CEO of LendingTree. “In competitive housing markets, homebuyers will often bolster their buying credentials by offering a larger down payment. Not only could this improve a buyer’s chances of securing the home, but could also help avoid delays in closing, create built-in equity and generate lower monthly payments.  For potential buyers who are eyeing the market today, rates are beginning to trend upwards as we inch closer to the new year and a potential Fed rate hike.”

The average down payment on an FHA mortgage in the third quarter was 7.99 percent, or $15,391, representing a slight increase from Q2 2015. The average down payment on a jumbo mortgage was 23.98 percent, or $170,185.

The infographic above (click to expand) released by LendingTree ranks each state according to the conventional average down payment percentages offered to LendingTree customers from lowest to highest. The ten states with the lowest average down payment percentage for a 30-year fixed rate conventional loan are:

Rank

State

Quarterly

Rank +/-

Down

Payment % 

                        

Offered –

Loan
Amount

(AVG)

Offered –

Down
Payment

(AVG)

1

MS

1

14.88%

$190,133.13

$24,991.21

2

AL

4

15.02%

$192,115.66

$32,279.25

3

WV

6

15.11%

$183,564.93

$32,562.50

4

IA

-1

15.19%

$182,511.28

$30,975.24

5

KY

3

15.21%

$169,449.46

$31,801.08

6

UT

11

15.28%

$230,113.71

$37,173.84

7

IN

-3

15.33%

$172,793.06

$27,896.22

8

ME

-3

15.43%

$194,340.14

$37,556.97

9

WY

10

15.46%

$215,955.98

$37,644.52

10

NE

19

15.66%

$181,579.49

$30,509.04

The ten states with the highest down payment percentage for a 30-year fixed rate conventional loan are:

Rank

State

Quarterly
Rank +/-

Down
Payment %

Loan
Amount

(AVG)

Offered – Down
Payment (AVG)

42

CT

3

17.97%

$235,755.59

$48,827.18

43

WA

-5

18.02%

$256,922.50

$61,995.68

44

CO

-4

18.71%

$241,437.13

$55,578.62

45

VT

-6

18.77%

$192,189.95

$44,050.25

46

MA

0

18.87%

$256,231.93

$54,516.47

47

DC

4

19.36%

$316,584.02

$101,291.67

48

HI

-1

19.41%

$307,571.43

$62,684.13

49

NJ

1

19.91%

$261,826.43

$65,616.73

50

CA

-1

20.18%

$301,613.85

$80,668.41

51

NY

-3

20.38%

$248,031.57

$86,838.03