Real Estate 'Topics, Tips, Trends and News' : September 2015

Tuesday, September 29, 2015

REAL ESTATE TOPICS...Rising home prices aren't all good news

Home prices are on the rise. But there's good news and bad news.

Nationwide, the median home price increased 8.2% to $229,400 in the second quarter compared to 2014, according to the National Association of Realtors.

First, the good news: Higher prices increase home equity and help bring some owners above water and increase their wealth.

"People with a lot of equity are more likely to start small businesses and are more likely to move up the economic ladder," said Bill Wheaton, an economics professor at MIT. "Having collateral propels you in life."

Now, the bad news: Incomes haven't kept up. While the unemployment rate has dropped from 10% in October 2009 to the current 5.1%, pay growth has been slow. Hourly earnings rose just 2.2% in August from the year before.

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Sluggish wage growth makes it harder for buyers to enter the market -- particularly first timers and borderline borrowers.

"When home prices are far outstripping incomes, it will take out the marginal buyer who can qualify for a certain loan and down payment. If home prices continue to increase, those properties are no longer affordable," said Keith Gumbinger, vice president of HSH.com.

Home prices have recovered unevenly across the housing spectrum. "Homes in the bottom third of the market are appreciating faster on an annual basis than those on the top," said Zillow's Chief Economist Svenja Gudell.

"At the same time, incomes at the bottom are flat, and sometimes even declining where incomes at the top are mildly rising."

According to Zillow, low-income households dedicate 26 cents of every dollar earned on a mortgage for a bottom-tier home. At the other end of the spectrum, high-income households spend 12 cents on the dollar on a mortgage for a high-end home.

While low mortgage rates have helped maintain some affordability, paying more toward housing means cutting back elsewhere.

Home values still have a lot more room to run in many markets to get back to pre-recession levels, according to Gumbinger.

But in a hot market like San Francisco, where prices are rising among the fastest in the nation, residents are feeling the pressure.

"Existing folks can get crowded out due to rising costs, limited availability of homes or rentals that are accessible to them," he said. Home prices are up 9.5% annually in the City by the Bay.

Historically, San Francisco residents spent 37% of their incomes on mortgage payments, according to Gudell. Now, it's closer to 41%. And if mortgage rates rise to 5% -- which is still pretty low -- she expects residents to have to dedicate 50% of their incomes toward their payments.

"That is too much. You can't sustain that. If you think of the average worker, what are they to do?"

Monday, September 28, 2015

REAL ESTATE NEWS...US pending home sales fall in August

Washington (AFP) - US pending home sales slipped in August, an industry group said Monday in a report showing a slight cooling in the housing market, a key driver of economic growth

Contract signings for previously owned homes fell 1.4 percent in August, but were up 6.1 percent from a year ago, the National Association of Realtors said.

"Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget," said Lawrence Yun, NAR chief economist.

It was only the second time this year that NAR's pending home sales index had fallen month-on-month, after a drop in June.

The August decline in pending sales surprised analysts, who had forecast they would rise by 0.5 percent for a second straight month, after sales of existing homes hit their highest pace since 2007 in August.

Pending home sales are a leading indicator, pointing to completed sales in the coming month or two.

A tight housing supply has been pushing up home prices, leaving many would-be buyers on the sidelines. Although job growth has continued at a steady clip, strengthening the finances of many consumers, the rise in prices notably has discouraged first-time buyers, a key driver of growth in the housing market.

NAR said it expected pending sales maintain their current pace but warned of looming threats, including the potential shutdown of the federal government in coming days amid a budget battle in Congress.

"The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being," Yun said.

Republican and Democratic lawmakers are fighting over funding government operations in the new 2016 fiscal year, beginning October 1.

With no legislative authorization to fund government yet in place, Congress faces the prospects of another crippling and politically disastrous shutdown like the one that shuttered federal buildings for 16 days in 2013.

REAL ESTATE NEWS...FAST FACTS, California Median Home Prices

Calif. median home price: July 2015:

California: $488,260

Calif. highest median home price by region/county July 2015: San Francisco, $1,312,500

Calif. lowest median home price by region/county July 2015: Siskiyou, $176,000

Calif. Pending Home Sales Index:
July 2015: Increased 1.6 percent from a revised 120.4 in June to 122.3

Calif. Traditional Housing Affordability Index: Second Quarter 2015: 30 percent (Source: C.A.R.)

Mortgage rates: Week ending 9/17/2015 (Source: Freddie Mac)
• 30-yr. fixed: 3.91% fees/points: 0.6%
• 15-yr. fixed: 3.11% fees/points: 0.6%
• 1-yr. adjustable: 2.56% Fees/points: 0.2%

REAL ESTATE NEWS...More than a Quarter of U.S. Homes Lost Value in the Last Year

As the housing market levels off, some markets are struggling to leave the recession behind

- In Baltimore, 48.1 percent of homes decreased in value over the past year.

- Hot markets in the West had fewer homes losing value in August than they did a year ago.

- The U.S. Zillow Home Value Index grew 3.3 percent to $180,800.

Sep 22, 2015

SEATTLE, Sept. 22, 2015 /PRNewswire/ -- More than a quarter of homes across the country lost value over the past year, despite the ongoing housing market recovery, according to the Zillow® August Real Estate Market Report[i]. Some markets have already surpassed home values reached at the height of the housing bubble, while other markets are struggling to leave the recession behind.

Nationally, homes appreciated 3.3 percent from a year ago, rising to a Zillow Home Value Index[ii] of $180,800. The national growth rate has leveled off over the past five months, suggesting the housing recovery is ending and the market is returning to normal. However, 27.9 percent of homes lost value over the past year. Before the housing market crashed, an average of 21.2 percent of homes were losing value. In December 2008, 81.6 percent of homes lost value, the highest amount during the recession.

Markets on the East Coast and in the Midwest had the highest share of homes that lost value. A staggering 48.1 percent of homes in Baltimore decreased in value over the past year. Philadelphia (43.4 percent) andWashington, DC (41.2 percent) also had large shares of homes losing value.

Conversely, few homes lost value in hot markets like Denver, Dallas, San Jose, and San Francisco, which all saw double-digit home value growth over the past year. Less than five percent of homes in Denver (1.5 percent) andDallas (4 percent) were worth less in August 2015 than they were a year ago.

"We're not going in reverse, but we are hitting the brakes a bit in some markets," said Zillow Chief Economist Dr.Svenja Gudell. "It's easy to say the recession is over when a third of the biggest markets are more expensive now than ever before, but we're still seeing a number of homes losing value. The reality is there are still areas lagging behind in the recovery."

Renters looking to become homeowners may find more opportunities in slower markets like Philadelphia. According to the January 2015 Zillow Housing Confidence Index[iii], when home values there were growing at 2.8 percent annually, eight percent of renters in the area said they planned to buy within a year. This jumped to 18 percent in the most recent survey, when home value growth was nearly flat at 0.3 percent.

Rents are still growing faster than home values. The Zillow Rent Index[iv] rose 3.8 percent on an annual basis to$1,381, giving potential buyers another reason to consider entering the market.

Metro Name	August 2015 Zillow Home Value Index (ZHVI)	Year-over-Year Percent Change in ZHVI	Percent of Homes Decreasing in Value
United States	$ 180,800	3.3%	27.9%
New York-Northern New Jersey	$ 384,100	1.3%	38.6%
Los Angeles, CA	$ 544,300	4.1%	13.6%
Chicago, IL	$ 191,200	2.5%	35.8%
Dallas-Fort Worth, TX	$ 168,000	13.8%	4.0%
Philadelphia, PA	$ 202,200	0.3%	43.4%
Houston, TX	$ 162,000	8.1%	N/A
Washington, DC	$ 358,000	-0.3%	41.2%
Miami-Fort Lauderdale, FL	$ 222,800	9.8%	16.3%
Atlanta, GA	$ 158,600	5.7%	22.4%
Boston, MA	$ 376,000	4.2%	13.5%
San Francisco, CA	$ 764,600	11.8%	5.2%
Detroit, MI	$ 118,700	5.9%	26.7%
Riverside, CA	$ 290,200	5.0%	25.7%
Phoenix, AZ	$ 206,400	6.3%	16.1%
Seattle, WA	$ 355,400	7.2%	7.0%
Minneapolis-St Paul, MN	$ 212,500	2.4%	25.0%
San Diego, CA	$ 483,800	5.6%	12.7%
St. Louis, MO	$ 136,300	5.9%	27.3%
Tampa, FL	$ 153,600	6.4%	18.6%
Baltimore, MD	$ 240,400	-0.9%	48.1%
Denver, CO	$ 308,600	16.3%	1.5%
Pittsburgh, PA	$ 125,200	1.9%	37.1%
Portland, OR	$ 295,600	9.1%	7.2%
Sacramento, CA	$ 341,000	5.9%	18.4%
San Antonio, TX	$ 150,500	4.4%	N/A
Orlando, FL	$ 174,100	4.8%	18.1%
Cincinnati, OH	$ 137,100	1.3%	32.6%
Cleveland, OH	$ 122,900	2.2%	31.5%
Kansas City, MO	$ 143,500	4.7%	N/A
Las Vegas, NV	$ 190,700	7.0%	16.2%
San Jose, CA	$ 904,000	12.5%	6.5%
Columbus, OH	$ 150,500	5.2%	23.6%
Charlotte, NC	$ 162,400	4.6%	20.0%
Indianapolis, IN	$ 132,800	3.6%	N/A
Austin, TX	$ 235,000	8.6%	N/A

Zillow

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