Tag Archives: home sales


Existing-Home Sales Up in February; Inventory Rises from Prior Month

Existing-home sales rose 0.8 percent in February to a seasonally adjusted annual rate of 4.98 million, the National Association of Realtors reported (NAR) Thursday. Economists had expected the sales pace to climb to 5.01 million from January’s originally reported 4.92 million. January sales were revised up to 4.94 million.

The median price of an existing single-family home rose to $173,600 in February as the median price in January was revised down to $170,600.

The inventory of homes for sale rose for the first time since last July, up 9.6 percent to 1,940,000. At the reported sales pace, that represents a 4.7-month supply of homes for sale, up from the 4.3-month supply reported for January.

The month-over-month increase in sales was the eighth in the last 12 months. February sales were 10.2 percent ahead of the pace one year ago.

The report on existing-home sales tracked NAR’s Pending Home Sales Index (PHSI) which fell in December to its lowest level since June. The PHSI, however, bounced back in January to its highest level since April 2010.

Weak prices continue to contribute to the reluctance of homeowners to list their homes. The median price of an existing single-family home averaged $176,500 over the last six months, down from $180,000 in the previous six months (which included the summer months, typically a stronger sales period). Listed inventory, according to theNAR, is 19.2 percent below a year ago, when there was a 6.4-month supply.

Sales continue to be plagued by weak inventory. The inventory of homes for sale has averaged 2,189,000 for the last 12 months, down from 2,832,000 for the previous 12 months.

Though the February median price was up 11.6 percent from a year ago, the median price of an existing single-family home has fallen for five of the last eight months. The median price is down 24.6 percent from the July 2006 peak of $230,300 and is off 8.1 percent from the 2012 peak of $188,800 in June.

Distressed homes—foreclosures and short sales—accounted for 25 percent of February sales, up from 23 percent in January but down from 34 percent in February 2012. Fifteen percent of February sales were foreclosures, and 10 percent were short sales compared with January, when 14 percent of sales were foreclosures and nine percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in February, while short sales were discounted 15 percent. In January, foreclosures sold for an average discount of 20 percent, while short sales were discounted 12 percent.

Unlike the government report on new home sales which tracks contracts, the NAR report is based on closings, which means this report (though labeled “February”) actually reflects economic conditions in December, when contracts were signed amidst uncertainty that “fiscal cliff” negotiations would affect the mortgage interest tax deductions and other homeownership incentives.

The median time on market for all homes was 74 days in February, 24 percent below 97 days in February 2012, the NAR said. Short sales were on the market for a median of 101 days, while foreclosures typically sold in 52 days and non-distressed homes took 77 days. One out of three homes sold in February was on the market for less than a month.

First-time buyers, according to the NAR, accounted for 30 percent of purchases in February, unchanged from January; they were 32 percent in February 2012.

Regionally, existing-home sales in the Northeast fell 3.1 percent to an annual rate of 630,000 in February, 8.6 percent above February 2012. The median price in the Northeast was $238,800, 7.6 percent above a year ago and up 5.6 percent from January.

Existing-home sales in the Midwest slipped 1.7 percent in February to a pace of 1.14 million, 12.9 percent above a year ago. The median price in the Midwest was $129,900, up 7.7 percent from February 2012 but down 1.1 percent from January.

In the South, existing-home sales increased 2.6 percent to 2.01 million in February, 14.9 percent above February 2012. The median price in the South was $150,500, up 9.3 percent from a year ago and up 2.0 percent from January.

Existing-home sales in the West rose 2.6 percent to 1.2 million in February, 1.7 percent above a year ago. The median price in the West rose to $237,700, 22.7 percent above February 2012, but off 0.4 percent from January.

By: Mark Lieberman, Five Star Institute Economist, on DSNews


Analysis: Investors Driving Recovery as Activity Surges

A recent analysis from John Burns Real Estate Consulting suggests that investors may be the biggest driving force in the housing recovery.

In a report from the company, senior research analyst Erik Franks noted that investors are buying homes at an increased pace and at prices that allow for a reasonable rental return.

“Investors are buying homes at a more rapid pace than ever before, and this time their investments actually make sense,” Franks wrote.

Across the 167 metro areas analyzed by the company, investor activity as a share of all transactions rose to 29.6 percent in the first quarter of 2012, up from a low of 23.6 percent in the last quarter of 2009. Furthermore, the company’s “on the ground” research leads analysts to believe this year’s second-quarter activity exceeded the first quarter’s, with investor activity spiking 2 percent.

Investor activity has returned to Stockton, Miami, Las Vegas, Riverside-San Bernardino, Sacramento, and Phoenix, all areas investors were previously reluctant to enter after their old investments crashed. According to the report, some markets are now “completely dominated” by investors, such as Las Vegas (where investor activity makes up 50 percent of total activity) and Phoenix (46 percent).

Investors also seem to be attracted to small markets-particularly those in inland California, the report notes. Second home buyers are also making their way into smaller markets, leading to large activity increases in Naples, The Villages, Tucson, and Panama City.

While Franks conceded that these signs of increased investor interest may point to a false recovery, he said John Burns Real Estate Consulting is not concerned and welcomes the return of private capital.

“Most of these investors are paying all cash and buying homes below replacement cost,” Franks wrote. “They are helping the market recover by removing supply at the low end of the market and driving real buyers to higher price points, including new homes.”

Franks also wrote that the company doesn’t foresee a scenario in which investors dump their stock on the market unless it’s clear prices are dropping again. For now, Franks said he and his colleagues feel comfortable for the near future.

“We are hyper-focused on the potential positive result, which is that rising prices get fence-sitting consumers off the fence. We are seeing this occur in some pockets around the country.”

 

By Tory Barringer, DSNews

 

BofA Makes Changes to Trim Short Sale Timeline

By: Carrie Bay, DSnews.com

Bank of America is making changes to its short sale procedures and introducing an improved task flow within the short sale technology module from Equator, BofA’s short sale management platform of choice. The goal: to reduce the timeframe for a short sale decision to less than three weeks.

Starting Saturday, April 14, real estate professionals working with BofA will be required to submit five documents for short sales initiated with an offer:

The acknowledgement and disclosure form, short sale addendum, and the form for third-party authorization are available through the company’s online Agent Resource Center.

The third-party authorization form is a new standardized document developed specifically for BofA. Previously, the lender accepted third-party authorization forms in differing formats and from a variety of sources when transacting a short sale.

Bank of America says it recognized a need for greater compliance and consistency with this important document and has now created its own form to standardize the third-party authorization process. The two-page document

requires signed acknowledgments from all borrowers and designated representatives in a short sale. Beginning April 14, BofA will accept only the official Bank of America Third-Party Authorization Form for short sales.

The bank’s new short sale process will enable real estate agents, brokers, attorneys, and other short sale specialists involved in pre-foreclosure transactions to complete tasks such as document collection, valuations, and underwriting simultaneously.

With these steps running concurrently, the timeline from initiation to closing is reduced. In fact, Bank of America says it will now be able to provide a decision on a short sale offer in 20 days. Typically, BofA’s short sale process has taken anywhere from 45 days upwards.

In continuing to streamline the decision process, should the buyer walk away from the sale, Bank of America is giving agents five days to submit a backup offer. Previously, the backup offer window was 14 days. Interested buyers are limited to two counteroffers and will receive a response from the lender within three days.

BofA notes that all email messaging between designated selling agents and their Bank of America short sale specialist will continue to occur within the Equator system. Agents will receive a standard notice via email to log into the system and retrieve their messages.

In order to implement the myriad of changes, BofA’s Equator platform will be down for 10-12 hours the night of Friday, April 13 into the early morning of Saturday, April 14.

Real estate agents and other short sale professionals are invited to review a Bank of America webinar outlining the coming changes. BofA is also offering task-by-task training on the new Equator process via a webinar to be aired on Thursday, April 19 from 4-5 p.m. (EST). Additional information can be found through the company’s online Agent Resource Center.

Bank of America’s short sale and REO executive Bob Hora says the company expects short sales to continue to increase and is taking steps to ensure it is providing decisions quickly and real estate agents are alerted of status as soon as possible.


Housing Crisis to End in 2012 as Banks Loosen Credit Standards

By: Krista Franks Brock, DSNews.com

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters. However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.


Spring Outlook: Reports From the Field Suggest Better Days Ahead

By: Carrie Bay, DSNews.com

Despite the fact that key market indicators released in recent weeks have shown declines in home sales, anecdotal reports from real estate agents in the field suggest “better days are ahead for the industry,” according to commentary released Monday by the economic team at Wells Fargo Securities, LLC.

Even builders – who’ve endured possibly the steepest drop-off in business over this downturn – are optimistic heading into the spring, the economists note.

As a result, Wells’ economic team has nudged its forecast for home sales slightly higher, as the spring selling season appears to have gotten off to a strong start. They are now expecting sales of existing homes to top out at 4.50 million in 2012 and rise to 4.65 million in 2013. These annual projections compare to 4.26 million existing homes sold in 2011.

“While employment conditions have clearly improved and consumer confidence and spending have risen, we remain concerned about the lack of real after-tax income growth.

That said, the anecdotal evidence is hard to dismiss,” the economists write. 

Most real estate agents are reporting “significant gains in buyer interest and sales,” and these gains are organic rather than incentive induced, according to the Wells Fargo economic team. 

Unfortunately, they note that conservative appraisals and tight mortgage underwriting continue to undermine a large number of deals, however, they “suspect that the undertow from these two hindrances will subside over the course of this year, as the fog surrounding shadow inventories lightens up a bit and more lenders come back to the market.”

Unseasonably warm weather led to upticks in existing-home sales in December and January. Those gains were paid back with a 0.9 percent decline in February, but the economic group at Wells says the underlying trend remains positive and they expect to see further improvements as the spring homebuying season kicks off.

Distressed transactions still make up a considerable portion of overall sales activity and will continue to pressure prices through at least the first half of 2012, they note in the report. Real home prices are now back down to 1999 levels, as are price-to-rent ratios, according to the economists.

“We expect home prices to definitively bottom by the middle of this year, as the backlog of foreclosures finally begins [to] clear,” writes Wells Fargo’s economic team. “For properties not in foreclosure, prices have probably already bottomed, but should remain relatively low” given the competition from foreclosures.

 

 

Home Prices Have Been Rising for Three Months: Report

By: Carrie Bay, DSnews.com

Standard & Poor’s reported Tuesday that it’s closely watched Case-Shiller index declined in January for the fifth straight month, with both the 10-city and 20-city composite readings slipping 0.8 percent from December.

But according to John Burns Real Estate Consulting (JBREC), that’s stale news and doesn’t reflect what’s actually happening in the market right now. In fact, the independent research company says home prices are rising.

JBREC conducted its own analysis of home prices in 97 markets and found that over the January-to-March period prices are up in 90 of them. The average price increase over the last three months is 1.1 percent, or a 4.5 percent annual rate, according to data issued by JBREC just before S&P’s Case-Shiller release.

The company also found that home prices have been trending up nationally since January, and even more markets have turned positive recently, with 93 of the 97 markets it analyzed showing appreciation over the last month.

So why are other industry indices still painting a picture of the doom and gloom of freefalling home prices? Wayne Yamano, VP and director of research for JBREC, says it’s because most price indices are on a three-month lag.

Yamano explains that after hundreds of hours of research vetting 23 data sources and running calculation after calculation, JBREC developed the Burns Home Value Index (BHVI), which calculates home values based on prices that are set at the time purchase contracts are negotiated and signed.

Nearly all other indices are based on when the purchase transaction closes, he says, which is typically two months after the purchase contracts were negotiated. Then, it takes one to two months for the closing price data to be compiled and reported, according to Yamano.

He contends that the BHVI is a better assessment of current changes in home prices and precedes median price data from the National Association of Realtors by three months and the S&P/Case-Shiller index by four to six months.

“It is current because it uses what is happening in MLS databases all over the country, as well as some leading indicators we have determined are reliable,” Yamano explained. “We call it a Home Value index because it is partially based on an ‘electronic appraisal’ of every home in the market, rather than just the small sample of homes that are actually transacting.”

JBREC has calculated BHVI index values for the United States and 97 major metro areas, with history going back to January 2000.

“The slow housing market recovery is underway, and it can accelerate or turn down quickly,” said Yamano. “The future is uncertain, and it is even more uncertain when you are using data that is three months old.”


Radar Logic: 2011 Home Bargains May Continue This Year

By: Krista Franks Brock, DSnews.com

Last year was a good year for home bargain-hunters, according to the latest data from Radar Logic. The firm’s January report revealed a 5.42 percent decline in prices from January 2011 to January 2012 and a simultaneous 7.7 percent increase in transactions.

Radar Logic surveys 25 metropolitan statistical areas on a monthly basis.

However, despite the year-over-year increase, home sales decreased 23.5 percent in the month ending January 19. The decline was greater among traditional sales, which fell 25.9 percent, than distressed sales, which declined 15 percent.

The discrepancy between traditional and distressed sales enhanced the overall price decline, according to the Radar Logic report, which stated, “the relative increase in distressed sales weighed on the RPX Composite, exacerbating its decline.”

The 5.42 percent price decline over the year brought Radar Logic’s composite to its lowest rate since July 2002.

However, the rate of decline did slow toward the end of 2011, but Radar Logic nonetheless suggests the market has not yet reached bottom.

“Frankly, I don’t think we’ve reached the bottom in housing prices,” said Quinn Eddins, director of research at Radar Logic.

Supply continues to outpace demand “particularly if you consider homes in the foreclosure process and those under water,” according to Eddins.

“At very least the excess supply will delay the recovery in housing prices, and could well push prices lower,” Eddins said.

Radar Logic predicts prices will remain flat this year and next before increasing “at an accelerating pace” in 2014 and 2015.


Capital Economics Expects Recovery to Continue Even with Higher Rates

By: Esther Cho, DSnews.com

Even with recent reports of rising mortgage rates and falling home prices, Capital Economics stated it still expects the housing recovery to be underway. The research firm cites two reasons in a report on why mortgage rates won’t threaten recovery: rates can only rise so far when tighter monetary policy is still years away, and homes will still be affordable even if mortgage rates were to rise back to normal levels. Last week ending March 15, Freddie Mac reported the 30-year fixed rate at 3.92 percent, an increase from the 3.88 percent reported the prior week, but still below 4 percent for 15 consecutive weeks.

“We doubt that higher mortgage rates will derail a housing recovery that in the last six months has seen total home sales rise by 13 percent and the NAHB homebuilder activity index more than double to 28,” the research firm stated.

In addition to those recent reports, home prices are still dropping, with data from Zillow showing prices declined 4.6 percent from January 2011 to January 2012. “Also, the fall in house prices over the last five years has been so large that even more normal mortgage rates would leave housing looking very affordable. And with housing appearing undervalued relative to disposable incomes per capita, valuations are also very favorable,” Capital Economics stated.

An economic outlook report from Fannie Mae echoed a similar sentiment about the direction of the housing market in a report Monday and stated, “GDP revisions for the fourth quarter of 2011 indicated a stronger underlying pace of demand with higher consumer spending and business investment.” After four months of private sector payroll growth, the GSE named employment growth as an important factor in housing recovery.

Even with declining home prices, Capital Economics explained it can take up to six months for changes in demand and supply to have their full impact on house prices because even with attractive asking prices, it can still take a few months to find a buyer and another month or so before the contract is closed.


Home Affordability Index Reaches Record-High Level

Reprinted from DSnews.com
Written by Esther Cho

Home affordability has reached the highest peak since 1970, which is when the data was first recorded, according to National Association of Realtor’s (NAR) housing affordability index. The index rose to 206.1 in January, and an index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced single-family home, assuming a 20 percent down payment and 25 percent of gross income for mortgage principal and interest payments.

“This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” said Moe Veissi, NAR president.

While projections about future mortgage rates and home prices have been mixed, NAR expects little change and anticipates affordability levels will stay high through 2012.

“Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”

The index is based on the relationship between median home price, median family income, and the average mortgage interest rate.


Pending Home Sales Index Up in January, Reaching 20-Month High

By: Mark Lieberman, Five Star Institute Economist     Reprinted from DSNews.com

The pending home sales index (PHSI) rose in January to 97.0 from a downwardly revised 95.1 in December. At 97.0, the index is at its highest level since April 2011, the National Association of Realtors reported Monday.

The index rose for the third time in the last four months and the January reading was 8 percent above January 2011 levels, but 26.5 percent below the April 2005 peak. The index began in January 2005.

Pending home sales are counted when sales contracts are signed and are viewed as a leading indicator of existing home sales; recent reports suggest that home re-sales should be a bit stronger over the next couple of months, but at a level that is still fairly subdued.

The PHSI has been trending upward, albeit modestly for most of the past two years. Despite the 20-month high, the index is relatively subdued. At the same time, a substantial number of sales contracts are failing to meet underwriting standards and/or other loan criterion as sales contract cancellations remain elevated.

Although a hopeful trend, home sales still appear to be searching for their fundamentally determined level – a level that is likely to be relatively subdued.

The PHSI in the Northeast rose 7.6 percent to 78.2 in January and is 9.8 percent above a year ago. In the Midwest, the index declined 3.8 percent to 88.1 but is 10.8 percent higher than January 2011. Pending home sales in the South increased 7.7 percent to an index of 109.1 in January and are 10.5 percent above a year ago. In the West, the index fell 4.4 percent in January to 101.9, but is 0.7 percent above January 2011.

The PHSI is based on data from Multiple Listing Services (MLSs) and large brokers.

According to the NAR, the index provides advance information on future home-sales activity and offers more solid information on changes in the direction of the market than any of the indicators currently available. Generally, pending home sales become existing-home sales one-to-two months later suggesting it can be used to predict both mortgage demand and sales activity.

While the volume of mortgage purchase applications edged down in January, suggesting sluggish activity, the purchase index collapsed in February.

Realtors are reporting more contract cancellations, which would cause the pending home sales index (based on initial signings) to overstate existing home sales (based on contract closings).

According to the NAR, 33 percent of existing contracts were cancelled in January – unchanged from December but up from only 9 percent in January 2011. The rise in cancellations reflected declining mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price.