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Now Is the Best Time to Sell … or Is it?

 

 

Rising home prices and a squeeze on inventory has more millennial homebuyers and potential sellers looking at upgrading their home admitting to being obsessed with timing the market to increase their gains, according to a recent study by ValueInsured.

The study found that among all homeowners surveyed who were interested in selling their home 69 percent said that they were concerned with trying to time the market, an increase of 13 percentage points from 56 percent during the same period last year.

Among those wishing to buy a home this season, the study found that 60 percent said they were concerned with trying to time the market, again reflecting a 13 percentage points increase over last year.

The pressure to time the market was most acute among millennials with 65 percent potential millennial homebuyers admitting that they were more market-timing conscious, up from 45 percent last year. Among millennial homeowners too, ValueInsured’s study found 73 percent millennial homeowners who wished to upgrade but were waiting for better prices admitting that timing the market was key to a better deal.

The study revealed that an eroding preference for owning over renting was one of the many factors that coincided with rising concerns over timing the market due to home prices and rising rates. “Americans, homeowners and non-owners, far prefer owning to renting if given a choice. However, that preference is sliding steadily, even among homeowners,” the ValueInsured study said.

While 68 percent non-homeowners believed that owning a home was better than renting, the data revealed that this was still a 4-point drop from 72 percent expressing the same sentiment last year. The percentage dropped among homeowners too, with 87 percent homeowners believing that it was better to own than rent, compared with 90 percent during the same period last year.

The study found that non-homeowning millennials were more confident that the housing market was moving in a direction that was more favorable to renters than owners, with nearly three in four (72 percent) millennial homeowners surveyed now believing that the housing market favored renting over buying.

 

Federal Open Market Committee Examines Economic Outlook

The Federal Reserve announced that interest rates remained unchanged after the end of the two-day policy meeting of the Federal Open Market Committee (FOMC). The Fed had last increased rates in March. The committee voted unanimously to keep the rates unchanged and said that it would monitor labor market conditions and the movement of inflation before announcing further rate hikes.

“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent,” the Fed said in a statement after the meeting. “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”

The Central Bank had stated that it was targeting an inflation rate of 2 percent at the beginning of the year, and after the meeting, it said: “On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent.”

The stability in rates this month will bring some respite to homebuyers who have been challenged by rising mortgage rates after the hike in overall interest rates by the Fed in March. Mortgage rates climbed to their highest level in over four years last week with the 30-year fixed-rate mortgage increasing for the third consecutive week to 4.58 percent. This according to the Freddie Mac Primary Mortgage Market survey that showed average mortgage rates had continued their upward march, continuing a trend seen since the beginning of 2018.

So should the market expect another hike in June? The committee said that the committee would assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. “This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments,” the Committee said in its statement.

Worries Climb Over Rising Home Prices

U.S. home sales have slowed to a crawl this quarter, mostly due to an entrenched combination of low inventory and consistently rising prices. The latter was true again in March, according to the latest Home Price Index report from CoreLogic. The HPI for March found that over the last year, home prices nationally rose 7 percent.

From February, prices were up 1.4 percent, but in year-over-year comparisons, CoreLogic found that all 50 states saw prices escalate since March of 2017.

“Home prices grew briskly in the first quarter of 2018,” said Frank Nothaft, Chief Economist at CoreLogic. “High demand and limited supply have pushed home prices above where they were in early 2006. New construction still lags historically normal levels, keeping upward pressure on prices.”

The largest annual gains happened in Washington and Nevada, where, CoreLogic found, home prices grew by 12.6 percent since last March. What’s more, CoreLogic expects prices to keep climbing and expects U.S. home prices to be 5.2 percent higher by next March. Prices are expected to rise 0.1 percent in April.

Of the 100 largest metropolitan areas, based on housing stock, 37 have an overvalued as of March, the report stated.

“Additionally, as of March 2018, 28 percent of the top 100 metropolitan areas were undervalued and 35 percent were at value” it stated.

When looking at the top 50 markets, CoreLogic found that half were overvalued. Seven were undervalued and 18 were at value.”

CoreLogic president and CEO  Frank Martell called this dynamic a clearly “unsustainable condition that can only be remedied by aggressive and coordinated public/private sector actions.”

According to Martell, rising home prices would remain a sober reality facing a lot of would-be buyers until it was “straightened out.”

“The dream of homeownership continues to fade away for the average prospective buyer,” he said. “Lower-priced are appreciating much faster than higher-priced properties, making the crisis progressively worse.”

Limited Options Holding Homebuyers Back

Inventory is still holding sales back, according to the latest pending home sales data from the National Association of Realtors (NAR). The Pending Home Sales Index by NAR indicates that despite a 0.4 percent increase in pending home sales in March, numbers still aren’t as high as they were last year. With the increased activity in March, pending home sales are still down three percent year over year.

“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” said NAR Chief Economist Lawrence Yun. “Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand. What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy.”

Danielle Hale, Chief Economist at Realtor.com agreed: “The slight increase in March is still not enough to push the pending index above year-ago levels. It marks the third consecutive year-over-year decline suggesting that unless more come to the market , we’re unlikely to see a major breakout above the 5.5 million sales pace that has dominated since mid-2015.”

Yun also noted that winter storms during the “unseasonably cold” winter in the north contributed in part to the decline in contract signings. Additionally, Yun stated that increasing prices coupled with decreasing incomes would push some people out of the market, as mortgage rates hit a four-year high.

“Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive,” said Yun. “That is why it is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth. Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers—especially first-time buyers—will be left on the sidelines.”

“While many buyers will be able to successfully adjust to higher mortgage rates, first-timers with a lot of debt and little cash are more likely to get tripped up,” Hale said.

Overall, existing home sales are still expected to increase year over year. Yun predicts existing home sales to be around 5.61 million in 2018, over 5.51 million in 2017.

The 5 Toughest Housing Markets for Millennials

More than any other age group, millennials are feeling the one-two punch of tight inventory and consistently climbing housing prices. Realtor.com, in fact, calls the current state of the market  “the toughest home buying season in history” in a new look on which metros are the hardest for millennials to buy into.

“Millennials want to buy, but record-low inventory is making it extremely difficult,” said Danielle Hale, Chief Economist for Realtor.com. “Our analysis shows millennials are facing challenges in both established markets such as San Jose and Seattle, as well as more recently popular areas like Omaha and Salt Lake City.”

Minneapolis is in the top five too. According to the report, in these five cities are increasingly out of reach for millennial buyers, despite that this group of buyers is flocking to them for their strong economies and high-paying jobs.

“As a result, millennials make up a higher share of the population, at 14.6 percent, compared to 13.4 percent for the U.S.,” the report stated. “Household income among 25- to 34 year-olds in these five locations is also significantly higher, at roughly $79,000, compared to the U.S. median of $59,800.

And millennials are definitely interested in buying. Realtor.com said that in the first quarter, millennials accounted for 25 percent of views, higher than any other age group.

But the economic hopes for San Jose, Seattle, Salt Lake City, Omaha, and Minneapolis are meeting with the economic realities of living there. While the median U.S. home price is $280,000, the median price in San Jose is $1.24 million. The report stated that the Bay Area is “replete with young students and scholars” chasing tech salaries—the average millennial salary in San Jose is $102,000 a year—at companies like Google and Apple. The competition for houses, therefore, is intense, and non-tech workers are increasingly getting shoved to the outskirts of the city.

The same story is occurring in the other four cities, just with different numbers. Millennials average $78,300 a year in Seattle, where the median home price is $533,000; they average about $68,000 a year in Salt Lake City, where the median home is almost $400,000; $73,600 a year in Minneapolis, where the median house can cost $283,000; and $63,500 a year in Omaha, where the median home price is the same as in Minneapolis.

All that combines with especially low inventory. Nationally, inventory is 35 percent lower than the spring of 2012, the report found. Compared to this time last year, active listings in these five metros remain 8 percent lower, the age of inventory is 7 percent lower, and list prices are 8 percent higher.

“Supply is nearly three times lower than the rest of the country, at 5.7 listings versus 16.1 listings per 1,000 households,”: the report stated. “Additionally, listings in these areas are scarcer and selling faster for more money. In these five metros, active listings are 9 percent lower, the age of inventory is 13 percent lower, and list prices are 14 percent higher from a year ago.”

Home Price Index February 2018

February 2018 National Home Prices

Home prices nationwide, including distressed sales, increased year over year by 6.7 percent in February 2018 compared with February 2017 and increased month over month by 1 percent in February 2018 compared with January 2018 (revisions to public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results).

 

Forecast Prices Nationally

The CoreLogic HPI Forecast indicates that home prices will increase by 4.7 percent on a year-over-year basis from February 2018 to February 2019, and on month-over-month basis home prices are expected to be flat from February 2018 to March 2018.

 

The CoreLogic HPI Forecast is a projection of home prices 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.

In an analysis of the country’s 100 largest metropolitan areas based on housing stock, 34 percent of cities have an overvalued housing stock as of February 2018, according to CoreLogic Market Conditions Indicators (MCI) data. The MCI analysis categorizes home prices in individual markets as undervalued, at a value or overvalued by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals such as disposable income. Also, as of February, 30

Home Prices rise again

 

 

U.S. home prices in February were up 0.6 percent from the previous month nationwide, according to the Federal Housing Finance Agency’s latest House Price Index. Prices for sales guaranteed by Fannie Mae and Freddie Mac were up 7.2 percent compared to last February, according to this report.

The month-to-month numbers from FHFA were slightly higher than those reported in the latest S&P CoreLogic Case-Shiller Home Price Index, released on Tuesday, which said that February prices were up 0.4 percent from January; they were up 6.3 percent from a year earlier.

“Home prices continue to rise across the country,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices while commenting on the S&P Case-Shiller HPI. “Year-over-year prices measured by the National index have increased continuously for the past 70 months.”

That’s since May of 2012. In that time, Blitzer said, prices have averaged a growth rate of 6 percent a year.

At nearly 13 percent, Seattle saw the largest growth in the past year in major markets. Home prices were also up by double digits in Las Vegas and San Francisco on the S&P Indices. Washington, D.C., and Chicago saw the lowest growth rate over the past 12 months, each less than 3 percent.

“In San Francisco and Los Angeles, home price gains ranked much higher than what would be expected from their employment increases, indicating that California home prices continued to rise faster than might be expected,” Blitzer said. “In contrast, Miami home prices experienced some of the smaller increases despite better than average employment gains.”

Despite rising prices, Realtor.com data shows in these markets are going fast,” said Danielle Hale, Chief Economist at Realtor.com. “In February, time on market for the typical property in Seattle was 29 days, Las Vegas 42 days, and San Francisco 21 days vs. 83 days nationally.”

Days on market sped up seasonally in March with properties disappearing after only 23 days in Seattle, 39 days in Las Vegas, and 22 days in San Francisco, Hale said.

“Potential sellers, aware of local market conditions, are listing homes priced accordingly. Realtor.com listing prices in March were up 16 percent in Seattle, 11 percent in Las Vegas, and 6 percent in San Francisco, suggesting that high prices will continue to be the norm this spring,” she said.

According to FHFA, home price growth was uneven across different sectors of the country in February. While prices remained flat in the West North Central division, they went up 1.6 percent in the East South Central division.

Year-over-year, home prices grew in every section of the country, ranging from 4.8 percent growth in the Middle Atlantic to 10.3 percent growth in the Pacific.

FHFA also revised it’s previous January totals. Prices that month were up 0.9 percent from December, as opposed to the previously reported 0.8 percent.

Existing Home Sales Grow, But Not Like 2017

 

Existing home sales saw an uptick in March growing 1.1 percent to 5.6 million from 5.54 million in February according to the latest existing-home sales data released by the National Association of Realtors (NAR) on Monday.

However, sales remained 1.2 percent below the same period last year as a shortage of inventory and constraints kept sales activity below the 2017-levels, the report indicated. The monthly existing-home sales data by NAR includes completed transactions for single-family , townhomes, condominiums, and co-ops.

According to the data, the median price of existing homes in March was $250,400 and marked an increase of 5.8 percent from $236,600 recorded in March 2017. The price increase in March 2018 marked the seventy-third consecutive month of year-over-year price gains.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets—especially those out West,” said Lawrence Yun, Chief Economist at NAR.

A shortage of supply of existing homes is another factor that has kept home sales below the year-ago level according to Yun. “Robust gains last month in the Northeast and Midwest – a reversal from the weather-impacted declines seen in February – helped overall sales activity rise to its strongest pace since last November at 5.72 million,” he said. “The unwelcoming news is that while the healthy is generating sustained interest in buying a home this spring, sales are lagging year-ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford.”

By the end of March, total housing inventory climbed 5.7 percent to 1.67 million existing homes available but was still 7.2 percent lower than the same period a year ago, NAR’s data indicated. Inventory has fallen year-over-year for 34 consecutive months now and unsold inventory is at a 3.6 month supply at the current sales pace.

Shortage of inventory has also led to stiff competition as buyer demand continues to grow, NAR said. According to the report, properties stayed on the market for 30 days in March, down from 37 days in February and 34 days last year. In fact, the report said, 50 percent of homes sold in March were on the market for less than a month.

Yun pointed out that real estate agents were seeing the seasonal ramp-up in buyer demand, but without the commensurate increase in new listings coming onto the market. “As a result, competition is swift and homes are going under contract in roughly a month, which is four days faster than last year and a remarkable 17 days faster than March 2016,” he said.

Is Home Seller Enthusiasm Waning?

The latest report from Redfin shows that home sale prices in March were still on the way up—they were 9 percent higher than a year ago, closing the month at a median $297,000 nationally.

But homes for sale were down across the board as well. Compared to March 2017, the number of on the market in the United States was down 12 percent. More telling, the number of newly listed homes fell 5.6 percent from last year, something Redfin classifies as “a sign of possible waning seller enthusiasm and ongoing tight market conditions.”

Redfin Chief Economist Nela Richardson said one explanation for the dropoff in housing movement this March might have been the fact that Easter came so early.

“Sellers are slow to list this year and we aren’t seeing enough new construction homes to fill the gap,” Richardson said. “If we don’t see the new listings number turn around next month or a pickup in new housing starts, inventory will be a persistent drag on sales for the remainder of the year.”

If seller enthusiasm is waning, buyer demand is still strong. According to Redfin, the typical home went under contract in 43 days in March. That’s eight days faster than a year earlier and faster than any March on record.

Among homes that sold last month, 24 percent sold above their list price, up from 22.3 percent last March. One in five homes that sold in March went under contract within two weeks of their debut, compared to 18.4 percent last year. The Bay Area had much higher numbers than the average, though. In San Jose, 83 percent of houses sold above list price. In San Francisco and Oakland, three-quarters of houses sold higher than listed.

Seattle (for the second month in a row) and Denver were the fastest-moving markets in the country. Houses there were on the market for a median of just seven days in March. The Bay Area also saw houses close in less than two weeks.

As is typically the case, prices grew most in the Bay Area. San Jose saw prices leap by 32 percent from a year ago; San Francisco almost 17 percent.

But less-typical markets showed price growth as well. Allentown, Pennsylvania, saw prices climb 22 percent since last year, just 1 percent more than the prices in Detroit.

At the same time, inventory dropped in 65 of the 73 most populous metros Redfin tracked. In 48 of those metros, inventory fell more than 10 percent compared to last year. Baton Rouge; Washington, D.C.; and Allentown bucked the declining inventory trend, respectively adding 26.6 percent, 11.8 percent, and 11.4 percent to housing supply from last year.

What to Expect in the Homebuying Season

What to Expect in the Homebuying Season

Homebuyers will need to be on their toes this homebuying season if they are to snag their dream abode if the typical time taken to sell a home in 2017 is any indication. According to a report by Zillow, sold faster than ever in 2017, with a typical median-priced house flying off the market in 81 days. And this has been the case for the past three years, the report said citing data that indicated homes sold slightly faster at 80 days in 2016.

In 2017, the fastest-selling market was San Jose, California, with the typical home sold in 41 days. Homes in Miami, on the other hand, took 110 days to sell in both years, the report indicated.

What do these numbers indicate for 2018? “As demand has outpaced supply in the over the past three years, buying a home has become an exercise in speed and agility,” said Aaron Terrazas, Senior Economist at Zillow. “This is shaping up to be another competitive home shopping season for buyers, who may have to linger on the market until they find the right home but then sprint across the finish line once they do. Being prepared—working with a great , getting financing pre-approved—can help a buyer make a stand-out offer.”

According to an earlier Zillow report on Group Consumer Housing trends, a typical buyer spends around four months searching for a home and makes two offers before successfully closing on a home. But the latest data indicates that homes sold in lesser time than that in 2016 and 2017, making it imperative for homebuyers to be ready to move quickly when they find a home they want to purchase, the report said.

The report also indicated that homes sold the fastest in June when the typical U.S. home sold in 73 days flat. In San Jose, the report said, homes sold fastest last year in October within just 39 days of being listed.