REAL ESTATE TIPS...Home Inspections Pave the Way to Smoother Real Estate Transactions

By Keith Loria

When it comes to selling your home, the last thing you want to do is hold up a sale because of a simple problem that could have been identified by investing in a home inspection. While it may not be the No. 1 item on your to-do list as you prepare to list your home, a home inspection is an integral piece of the puzzle. Bringing to light any problems or issues that need to be addressed, a home inspection can save you a lot of time, money and headaches.

Here are some of the most common problems a home inspector can unearth.

Bedroom Windows.

All rooms listed as bedrooms must have an operating window with 30 square feet of clearance for fire escape. Bedrooms must also have heat. If a home is listed with three bedrooms, and one does not meet both these requirements, it cannot legally be called a bedroom.

Furnaces and Compressors.

Rust in the heat exchange is a common problem that shows up during home inspections. Another common problem involves missing insulation where required by code at the time the house was built, or an improvement or replacement was installed.

Electrical Issues.

Common electrical code violations include electrical junctions not enclosed in a junction box, a lack of GFCI outlets in bathrooms and kitchens, or reverse-polarity on outlets. These are inexpensive things to repair, but by not doing so, it can hold up a sale.

Lifesaving Equipment.

Smoke detectors and carbon monoxide detectors are required by law in most states, and not having them will be considered a code violation.

Plumbing.

A number of plumbing issues are very common, with violations ranging from dripping faucets to loose toilets and improper drainage.

Structural Problems.

While these can be more expensive to fix, if they aren’t taken care of properly, they can prolong a sale. Violations in this area include rotten wood trim around windows and doors, rotten or delaminating siding and missing flashing on roofs or above windows and doors.

Extra Rooms.

If you had your basement fixed up at some point while living in the home, or even added a sunroom, be sure you have the proper permits in place. This will need to be taken care of before any sale can go through.

Don’t put your home sale in jeopardy because of code violations that can be easily fixed. Hire an inspector, make the necessary changes and enjoy the comfort it brings when the closing comes to fruition.

REAL ESTATE TRENDS...Cities to Watch: 2016's Fastest-Growing Places

After being overthrown last year by Houston, Austin regains the number one spot as the fastest-growing city in the U.S., according to a new analysis by Forbes. Adding to its allure, Austin boasts booming technology, pharmaceutical and biotech industries as well as low-cost of living.

Read more: The 20 Hottest Housing Markets This Month

Forbes.com compiled its annual list of America’s Fastest-Growing Cities by ranking the 100 largest metro areas and their surrounding suburbs. For its rankings, they factor in population growth for 2015 and 2016, year-over-year job growth for 2015, the metro’s economic growth rate, unemployment, and median annual pay for college-educated workers in the area.

The following cities topped Forbes’ list as the fastest-growing populations and economies (included below with each city’s population growth for 2015 and projected growth rate for 2016): 

1. Austin, Texas

• 2015 population growth rate: 3.15%
• 2016 projected growth rate: 1.56%

2. San Francisco, Calif.

• 2015 population growth rate: 1.24%
• 2016 projected growth rate: 0.77%

3. Dallas, Texas

• 2015 population growth rate: 2.16%
• 2016 projected growth rate: 1.58%

4. Seattle, Wash.

• 2015 population growth rate: 1.68%
• 2016 projected growth rate: 1.34%

5. Salt Lake City, Utah

• 2015 population growth rate: 1.05%
• 2016 projected growth rate: 1.40%

6. Ogden, Utah

• 2015 population growth rate: 1.64%
• 2016 projected growth rate: 1.37%

7. Orlando, Fla.

• 2015 population growth rate: 2.31%
• 2016 projected growth rate: 2.03%

8. San Jose, Calif.

• 2015 population growth rate: 1.27%
• 2016 projected growth rate: 0.93%

9. Raleigh, N.C.

• 2015 population growth rate: 2.28%
• 2016 projected growth rate: 1.44%

10. Cape Coral, Fla.

• 2015 population growth rate: 2.84%
• 2016 projected growth rate: 2.15%

REAL ESTATE TOPICS...US existing-home sales edge higher in January

Washington (AFP) - US existing-home sales edged higher in January, while tight inventory drove prices higher at the fastest pace since last April, the National Association of Realtors said Tuesday.

Sales of previously owned homes rose 0.4 percent to an annual rate of 5.47 million units in January, the NAR said. The December pace was slightly revised downward to 5.45 million units

January sales were 11.0 percent higher than a year ago, the largest year-over-year gain since July 2013.

Sales gains were broad, with only the West showing a decline, and pointed to a strong start to 2016 for the housing market, a bright spot in the modestly growing US economy.

Sales of single-family homes, the largest part of the market, rose 1.0 percent from December. Sales of condominiums and co-ops fell 4.7 percent.

Over the past 12 months, single-family home sales were up 11.2 percent and condo/co-op sales increased 8.9 percent.

Lawrence Yun, NAR's chief economist, said the housing market has been showing encouraging resilience in recent months, but home prices were still rising too fast because of a lack of supply.

"Despite the global economic slowdown, the housing sector continues to recover and will likely help the US economy avoid a recession," Yun said.

The median existing-home price overall in January was $213,800, up 8.2 percent from January 2015, the largest year-over-year gain since April 2015.

The supply of existing homes on the market rose 3.4 percent in January but was 2.2 percent lower than a year ago.

"Home prices ascending near or above double-digit appreciation aren't healthy -- especially considering the fact that household income and wages are barely rising," Yun said.

Ian Shepherdson of Pantheon Macroeconomics said that rising mortgage applications in recent months "points to a strong spring selling season" with tight inventory likely to drive further rapid price gains.

The National Association of Realtors reported Tuesday that home prices in 20 major cities rose 0.8 percent in December from November, and were up 5.7 percent from a year ago.

The highest annual gains among the 20 cities continued to be in Portland, San Francisco and Denver, all reporting double-digit increases in December, led by Portland at 11.4 percent.

REAL ESTATE NEWS...Pending Sales of U.S. Existing Homes Increase by Most in a Year

BY Victoria Stilwell

Contracts to purchase previously owned homes rebounded more than forecast in February as sales picked up in most of the U.S., a good sign as the spring-selling season approaches.

The pending home sales index climbed 3.5 percent, the biggest gain in a year, after a 3 percent decrease a month earlier that was larger than initially reported, the Washington-based National Association of Realtors said Monday. The median projection in a Bloomberg survey of economists called for a 1.2 percent increase.

Americans, emboldened by better employment prospects and fewer firings, are finding it easier to buy a home, aided further by borrowing costs that remain near historical lows. Improving demand may encourage current owners to put their properties on the market, which would help expand inventories and provide an additional lift to the industry.

“The key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what’s being scooped up by a growing pool of buyers,” NAR chief economist Lawrence Yun said in a statement. “Without adequate supply, sales will likely plateau.”

Survey Results

Estimates in the Bloomberg survey of 29 economists ranged from a decline of 2.6 percent to an advance of 2.5 percent. The Realtors’ group revised the January data from an initially reported 2.5 percent slump.

Three of four regions showed an increase in contract signings from a month earlier, led by an 11.4 percent jump in the Midwest. Contract signings also climbed 2.1 percent in the South and 0.7 percent in the West. They dropped 0.2 percent in the Northeast.

Purchases rose 5.1 percent in February from the previous year on an unadjusted basis, after a 1.5 percent decrease in the 12 months that ended in January, the Realtors’ group reported.

The pending home sales index was 109.1 on a seasonally-adjusted basis, the strongest since July. A reading of 100 corresponds with the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.

Leading Indicator

Economists consider pending sales a leading indicator because they track when purchase contracts are signed. Existing-home sales are tabulated when a contract closes, usually a month or two later.

Figures released by NAR last week sales of those homes dropped more than forecast in February, falling 7.1 percent to a three-month low 5.08 million annual rate. Yun said then that the slump may be a sign prospective buyers are beginning to show resistance to higher prices, and that fewer renters were interested in buying, citing affordability issues.

Also bridling housing’s progress is the tight inventory of available homes, which is reducing both selection and pushing prices out of reach for some would-be buyers. Builders have also cited difficulties in finding viable lots and construction workers as the recovery progresses.

Still, many economists remain positive on housing, with construction still trailing what’s needed to keep up with population growth. At the same time, household formation is showing signs of improvement as the labor market gives Americans the confidence and the means for younger people to strike out on their own.

REAL ESTATE TOPICS...U.S. pending home sales hit seven-month high in February

Daniel Acker | Bloomberg | Getty Images

A 'Sale Pending' sign stands outside a home for sale in Peoria, Illinois.

Contracts to buy previously owned U.S. homes rose sharply in February, reversing the previous month's deep decline, as the volatility of the data continues to make it difficult to parse the strength of the housing market.

The National Association of Realtors said its pending home sales index rose 3.5 percent to 109.1 last month, the highest level in seven months. January's reading was revised to show a 3.0 percent decline, which was deeper than initially reported. 

Economists polled by Reuters had forecast contracts rising 1.2 percent last month. Contracts were up 0.7 percent from a year ago.

Regionally, signed contracts climbed 11.4 percent in the Midwest, with more modest gains in the South and West., the Associated Press reported. In the Northeast, the number of contracts dipped 0.2 percent, according to the AP.

Pending sales contracts are a barometer of future purchases. A sale is typically completed a month or two after a contract is signed.

REAL ESTATE TOPICS...One homebuilder executive perfectly summarized America's new housing crisis

By Bob Bryan(Reuters/Rick Wilking) Not enough home construction is happening. America is entering a new housing crisis.

As opposed to the last housing crisis, in which supply was too abundant, this one will be defined by rising prices because of there not being enough homes.

The CFO of KB Homes, the eighth-largest homebuilder in the US, perfectly sums up nearly all of the problems facing the housing market today.

On the company's quarterly earnings call, CFO Jeff Kaminski had this to say:

Over the last three years, it’s kind of interesting, our first-time buyer mix has ranged right around 50% for the last three years, and if you put that in the context of how much our average selling price has lifted, I think it’s over $100,000 in that period. It shows you how we’ve been able to flex and find a first-time buyer in these higher income more desirable sub-markets where they have an easier time getting the mortgage and underwriting is getting easier, but it’s not easy yet.

There's a lot to unpack, but let's dive in.

The first thing Kaminski hits on is that first-time home-buyer business is way down. For KB Homes, the percentage of buyers who are making their first purchase has dropped from around 60% to 70% in 2008 and 2009 to just 50% now.

Now there are many explanations for this, from the mind-set shift of millennials to lower wage growth, but Kaminski notes one important piece: credit.

Many would-be homeowners have shied away from taking on the debt associated with buying a home, whether for psychological or financial reasons. In Kaminski's assessment, this is a big part of the reason the homeownership rate is at historic lows.

Secondly, Kaminski notes that the price point for a first-time homebuyer has increased by over $100,000. This reflects the fact that new housing starts are well below the pre-crisis and historic recovery averages. The lack of new homes has driven prices up.

Kaminski also hits on the post-crisis trend of Americans moving from the suburbs to cities in his "higher income more desirable sub-markets" comment.

For the past few years people have trended away from the suburbs and toward the cities in search of jobs. This has made it difficult for suppliers to keep up with demand, said Kaminski.

"And our choice right now is to continue to target those areas that are more land constrained, so it’s harder to bring things to market," he said in the call.

For instance KB Homes CEO Jeff Mezger said in the same call that the company has been curtailing their building in rural areas in California, and spending more on pricier developments in urban areas.

(BAML) Kaminski does note a possible solution. As the labor market recovers, more people may have an incentive to move away from urban centers to areas where supply is more easily available.

"And depending on the market, as they each recovered at their own pace, you’ll see us go a little further out from the job core, because demand is stronger out in the ring around the jobs," said Kaminski. "A good example would be the Texas cities where the economy has recovered pretty nicely, and you have a fairly typical housing recovery where our first-time buyer percentage is higher."

So as the labor market continues to improve, people will have more desire to move away from city centers to areas where supply is more easily built, making the supply issue easier to solve.

REAL ESTATE TOPICS...Can tiny homes solve homelessness?

Housing is not necessarily a solution to homelessness.

At least, that's the opinion of Alan Graham. But Graham, the CEO of Austin-based Mobile Loaves & Fishes, thinks he knows what the solution is: a sense of community.

"I got the idea that we could lift a chronically homeless individual up off the streets into a gently used recreational vehicle," he says. "I had this wild and crazy idea to develop an RV park on steroids."MLF, a Christian nonprofit, opened a 27-acre development of RVs and tiny homes earlier this year called Community First! Village.

In 2005, he bought one RV for a homeless man for $5,000. Since then, MLF has helped get 115 people off the streets.

Community First! focuses on chronically homeless individuals, which means disabled people who have been homeless continuously for a year or had at least four episodes of homelessness in three years.

By 2017, Community First! will be at full capacity, with more than 200 residents living in a retrofitted RV, microhome or canvas-sided cottage.

But Community First! is taking a fairly unique approach to ending homelessness. Unlike other low-income housing units, the development does not require its residents to be sober. In fact, there are only three rules: Residents must pay rent, obey the law and follow community rules.

It's a village not only in name, but in function. The homes are essentially just bedrooms. The residents share everything else, from state of the art communal kitchens to laundry and bathroom facilities. There's a dog park, volunteer nurses, a market, gardens, chickens and goats, a fish farm and an art gallery. The property even has an outdoor movie theater and a bed and breakfast.

The inhabitants of Community First! will keep these operations -- what Graham calls "microbusinesses" -- up and running. Many of them, like the movie theater and the art gallery, are open to the public. The residents who work there will keep the profits, which can go toward their rent, which ranges from $220 to $380 a month.

Graham hopes the strong sense of community will keep his residents from falling back into homelessness.

"The biggest difference is that this is a relationship model," says Graham. "These little units happen to be your bedroom, but you have all kinds of awesome things that draw you into community."

The $14.5 million development was privately funded. Each of the 25 canvas cottages, 100 RVs and 125 microhomes are sponsored, largely by individual donors.

There's no denying tiny homes are having a moment. For those looking for cheaper rent, microapartments are a way to save; for those who want to live a transitory lifestyle, they're a stylish alternative to RVs.

But the idea of tiny houses as a solution to homelessness isn't new. And as cities attempt to combat homelessness, the idea is growing in popularity.

Some cities have seen enormous success in curbing homelessness with tiny houses. Dignity Village in Portland, Oregon, was founded in 2000, and served as a model for Seattle, which declared a homelessness state of emergency in November 2015. That city's first tiny home community opened in January of this year.

These efforts don't just reduce homelessness -- there's an economic benefit as well. According to Graham, the city of Austin spends about $40,000 per homeless person every year, mainly in the form of medical and criminal justice expenses.

He estimates that Community First! will save taxpayers up to $3 million per year. Similarly, a UNC Charlotte study found that a community for the homeless in Charlotte, North Carolina, saved the city $1.8 million in one year.

But however cost effective, these communities are an experiment -- and not one everyone's on board with. In February, sanitation workers in Los Angeles began seizing tiny homes built by activist Elvis Summers, citing an ordinance that classifies them as bulky objects that can be removed in street cleanups. Unlike the tiny home communities in Austin, Portland and Seattle, which are built on dedicated plots of land, Summers' houses are mobile, and were on city sidewalks.

Community First! faced a fair share of "not in my backyard" sentiment before construction began in 2013. But Graham says the residents have come around, so much so that a second village is already being planned.

"We now have neighbors that I run into periodically throughout the city that are going, 'Thank God that you're out here. It's such a blessing that you're next door to us,'" he says. "We're going to be an asset and far, far, far from a liability."

REAL ESTATE TRENDS...RealtyShares Now Lets Investors Put Money Into Individual Real Estate Markets

About a year ago, RealtyShares launched as a new way for investors to put small amounts of money into real estate projects, kind of like a “LendingClub for Real Estate.” Now the company is launching a way for them to focus on investing in specific markets around the U.S.

RealtyShares works to crowdfund available real estate investments, allowing investors to put in as little as $5,000 into single-family homes, multi-family homes, and even commercial real estate projects. The cost of those projects ranges from $100,000 to the tens of millions.

For developers looking for funding, RealtyShares provides an easy way to quickly raise money for their projects. It funds about 10 to 20 projects per month and it takes an average of just four days for each RealtyShares investment to be funded. That compares to weeks or months for more traditional funding sources.

In the past year, the company had amassed about $300 million in real estate property value through more than 200 different properties across 59 different cities and 17 states. According to founder and CEO Nav Athwal, average return on investment has ranged from between 8 percent and 29 percent, depending on the type of project funded.

Athwal says most investors that have joined the platform so far have been IT professionals who are looking for new investment opportunities. As a result, the company has rolled out a new product that will allow them to focus on the areas that they know best — that is, the cities they live in.

RealtyShares has identified five specific markets with burgeoning tech and real estate sectors where it sees opportunities for investment. Those markets are Seattle, Dallas, Austin, Miami and Chicago, where the company hopes to more efficiently connect borrowers and investors.

Those market-specific products will enable developers to find funding from local investors who have an interest in development in their cities. And investors get the benefit of profiting from better yields in markets that have not yet been overdeveloped.

RealyShares has raised $1.9 million in funding led by General Catalyst, with other investors that include E*Trade COO Greg Framke and president of Gold Bullion International Savneet Singh.

REAL ESTATE NEWS...US new-home sales gain in February amid higher prices

Sales of new single-family houses ran at an annual pace of 512,000 units, up 2.0 percent from January and 2.1 percent

Washington (AFP) - US new-home sales rose in February but tight supplies and rising prices in the housing market kept a lid on gains, Commerce Department data showed Wednesday.

Sales of new single-family houses ran at an annual pace of 512,000 units, up 2.0 percent from January and 2.1 percent over the 2015 average.

Sales gains were all in the west of the United States, while other regions saw declines.

The median price of a new home was $301,400, over the 2015 average of $296,200 and $282,200 in 2014.

The data, volatile from month to month, showed continuing slow gains in the market with analysts pointing to the restrictions of tight supplies.

On Monday the National Association of Realtors reported a fall in used-home sales for the month but a modest 2.2 percent gain from a year ago, with the group citing limited inventory and higher prices as keeping homebuyers at bay.

Despite the tight inventory in new homes, Ian Shepherdson of Pantheon Macroeconomics said: "The data for the past three months are consistent with the rise in mortgage demand, and we remain hopeful that the spring will bring further gains."

REAL ESTATE TRENDS...US home rental cost growth is slowing

WASHINGTON (AP) — U.S. renters saw their monthly leases rise at a significantly slower pace in February, a sign that new construction may be starting to limit housing costs for apartment dwellers.

By JOSH BOAK

Real estate data firm Zillow said Thursday that median rent rose a seasonally adjusted 2.6 percent from a year ago. The median rent nationwide was $1,383 a month, having barely budged over the past six months after a period of extended acceleration. Two major forces appear to be dampening price growth: an influx of new apartment construction and renters finding their incomes are too low to afford further price hikes.

For the first two months of 2016, finished construction of multi-family apartment units is running nearly 19 percent above last year's pace. This would come on top of a 21.4 percent increase in 2015, according to the Commerce Department.

Price growth has slowed in many metro areas where gains are running above the national average: New York, Los Angeles and Houston. Rental costs have slowed in still hot markets such as San Francisco, San Jose and Denver. Prices have fallen outright in Cleveland, Oklahoma City and Memphis, Tennessee.

Not all markets have seen price growth slow — with many markets seeing rental costs rise at a faster clip.

The median rental price in Seattle has climbed 7.22 percent to $1,946 a month, despite a wave of development in that area. Rental costs are also picking up speed in Boston and Portland, Oregon.

Rental prices had until recently been consistently rising at more than double the pace of wages. But February's slowdown put rents closer to the 2.2 percent increase in average hourly earnings tracked by the Labor Department.

REAL ESTATE NEWS...U.S. new home sales rebound in February

WASHINGTON (Reuters) - U.S. single-family home sales rebounded in February, but the gain was concentrated in one region, which could suggest a loss of momentum in the housing market.

The Commerce Department said on Wednesday home sales rose 2.0 percent to a seasonally adjusted annual rate of 512,000 units. January's sales pace was revised up to 502,000 units from the previously reported 494,000 units.

Sales, however, fell in three regions, taking some shine off the report. Economists polled by Reuters had forecast new home sales, which account for about 9.2 percent of the housing market, rising to a 510,000 unit-rate last month.

The report comes on the heels of data on Monday showing a 7.1 percent dive in sales of previously owned homes in February, which economists blamed on tight inventories and difficulties adjusting the data during the month with a leap day.

Economists also blamed February's weak sales on a drop in contract signings in January because of snow storms. Housing market fundamentals remain strong because of a strengthening labor market, which is boosting household formation, and historically low mortgage rates.

But the dearth of homes for sale, which is limiting options for buyers and pushing up prices, is a major challenge for the sector. In February, the inventory of new homes on the market rose 1.7 percent to 240,000 units, the highest since October 2009.

Still, housing stock remains less than half of what it was at the height of housing bubble. At February's sales pace it would take 5.6 months to clearthe supply of houses on the market, unchanged from January. The median price of a new home rose 2.6 percent from a year ago to $301,400.

New single-family homes sales in the West, which has seen a sharp increase in home prices amid tight inventories, surged 38.5 percent to a 151,000 unit-rate.

Sales, however, fell in the remaining three regions. They plunged 24.2 percent in the Northeast and tumbled 17.9 percent in the Midwest and dropped 4.1 percent in the populous South.

REAL ESTATE TOPICS...Winning: Mortgage Rates Look Good for Spring Buying Season

Mortgage rates moved higher for the second week in a row, while also only posting the second increase this year. This makes mortgage rates very attractive for the upcoming spring home buying season, according to results from the Freddie Mac Primary Mortgage Market Survey® (PMMS®).

“The 10-year Treasury yield ended the survey week exactly where it started, however the solid February employment report boosted the yield noticeably on Friday and Monday,” says Sean Becketti, chief economist, Freddie Mac. “Our mortgage rate survey captured the impact of this temporary increase in yield, and the 30-year mortgage rate rose 4 basis points to 3.68 percent. This marks the second increase this year. Nonetheless, the mortgage rate remains 33 basis points lower than its end-of-2015 level.”

According to the survey, the 30-year fixed-rate mortgage (FRM) averaged 3.68 percent with an average 0.5 point for the week ending March 10, 2016, up from last week when it averaged 3.64 percent. A year ago at this time, the 30-year FRM averaged 3.86 percent.

The 15-year FRM this week averaged 2.96 percent with an average 0.5 point, up from last week when it averaged 2.94 percent. A year ago at this time, the 15-year FRM averaged 3.10 percent.

Results show that the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.92 percent this week with an average 0.4 point, up from last week when it averaged 2.84 percent. A year ago, the 5-year ARM averaged 3.01 percent.

REAL ESTATE NEWS...One big reason existing home sales are plunging

 A dearth of starter and mid-priced homes may be to blame for the housing market's current impasse, according to a Trulia study released Monday. Existing home sales dipped 7.1 percent in February, according to the National Association of Realtors (NAR). 

Supply in the housing market has been tight for the past few years, and data suggests it's starting to impact buying on a larger scale: sales of pre-owned homes in the US slipped 7.1 percent in February to a 5.08 million annualized rate, according to a Monday release from the National Association of Realtors (NAR). 

But it may not be for the reason you think. 

According to a separate study released Monday by Trulia, a real-estate listings website, the real reason for the current housing shortage isn’t a lack of new construction. Rather, it's the gap in prices between mid-level and premium homes that prevents starter homeowners from moving up and first-time buyers from moving in.

“Gridlock in the mid to low end of the housing market is one of the main reasons for the low inventory," Ralph McLaughlin, Trulia’s chief economist and the author of the study, told USA Today.

Trulia’s study examined three factors in the changing housing market for the four-year period from 2012 to 2016:  1) the number and share of inventory comprising starter homes, trade-up homes, and premium homes; 2) the change in the number and share of those homes available; and, 3) the affordability of those homes for different buyers.

The report found  that the inventory of starter homes is shrinking at the same time prices are rising. This not only makes it harder and harder for first-time buyers to break into the market, but it also influences price fluctuation and home availability in other segments of the housing market.

Nationwide, the inventory of both starter and trade-up homes has declined by more than 40 percent since 2012. People buying their first home can expect to direct 5.6 percent more of their income towards a home purchase this year than they did in 2012.

NAR's existing home sales report reflects similar trends. The months' supply of available homes increased slightly in February to a still-tight 4.4 months, but fell year-over-year. The median price of a single-family home has increased 4.3 percent since February of last year. 

"The supply of existing homes for sale remains an issue," IHS Global Insight economist Kristin Reynolds wrote in an e-mailed report. "In February, the number of homes available for sale declined from the same period a year earlier, and that has happened uninterrupted for the past nine months. In fact, single-family homes for sale were at their lowest February level since 1995." 

"Despite continued price increases, homeowners are not yet deciding to list their homes for sale in greater numbers, leading to limited options for homebuyers," she continued. 

That’s troubling for the approximately 93 percent of Millennials who want to eventually move into a place of their own someday, but some regional housing markets are better off than others. Trulia found that the biggest drop in starter-home availability occurred across the West and South. Salt Lake City saw the biggest decline, with the number of starter homes available dropping by 87.9 percent in four years.

The smallest decline occurred in Akron, OH, where starter home inventory only declined by 3.2 percent. In terms of affordability, the biggest increase in starter-home cost occurred in Oakland, where first-time buyers now have to direct 69.2 percent of their income towards buying a house. The smallest change occurred in Detroit; there, buying a starter home takes up only 9.6 percent of income.

Trulia attributes the reason for the low inventory in starter and trade-up homes to a combination of factors, including the number of foreclosed homes that were bought by investors during the recession and turned into rentals.

The current high cost for premium houses also plays a role. As prices for premium houses rise, it becomes more challenging for buyers looking to trade up on their current property to find an affordable home, which in turn makes them disinclined to sell. The Trulia study reports that the cost of premium homes has increased by about 20.3 percent since 2012.    

Price cutoffs for Trulia's report were based on value estimates for the entire housing stock, not their listed price. National metrics are based on a weighted sum of listings and the weighted average for affordability in the 100 largest metropolitan areas nationwide.

REAL ESTATE TOPICS...Previously Owned U.S. Home Sales Decline More Than Forecast

By Victoria Stilwell

Sales of previously owned U.S. homes dropped more than forecast in February after reaching the second-highest level since 2007 as low inventory levels continue to limit progress in housing.

Closings on existing homes, which usually take place a month or two after a contract is signed, decreased 7.1 percent to a three-month low 5.08 million annual rate after a 5.47 million pace in January, the National Association of Realtors said Monday. Sales were weaker than the most pessimistic forecast in a Bloomberg survey of economists.

Faster growth in residential real estate is being hampered by a limited selection of available properties that has led to higher offering prices. While mortgage rates are attractive, affordability remains an issue for potential first-time and lower-income buyers whose participation would help broaden the market’s improvement.

“This number seems to suggest the trend may be a little weaker than we thought,” said David Sloan, senior economist at 4cast Inc. in New York. “Supply is fairly limited, so that is a restraint on sales.”

The median forecast of a Bloomberg survey of 70 economists called for 5.31 million, with estimates ranging from 5.15 million to 5.53 million.

Purchases of existing homes decreased in all four regions last month, led by a 17.1 percent slump in the Northeast and a 13.8 percent decline in the Midwest.

While a blizzard on the East Coast may have played a role in the drop in closings, the Realtors group said lack of supply and affordability are the bigger restraints.

“The question is, is this the beginning where homebuyers are beginning to show resistance to higher prices or is this a one-month fluke in the data,” Lawrence Yun, NAR chief economist, said at a news conference as the figures were released. “Now we are seeing fewer renters interested in buying. They’re indicating affordability is an issue.”

Compared with a year earlier, purchases increased 6.4 percent in February on an unadjusted basis. The number of existing properties on the market fell 1.1 percent to 1.88 million in February from 1.9 million a year earlier.

At the current pace, it would take 4.4 months to sell those houses compared with 4 months at the end of January. It was 4.6 months in February 2015.
The median time a home was on the market decreased last month to 59 days from 64 days in January.

Median Price

In general, tight inventory levels have helped boost the values of homes on the market. The median price of an existing home rose to $210,800 from $201,900 in February 2015.

Higher prices are keeping homes out of reach for some first-time buyers. They accounted for 30 percent of all purchases, the report showed, compared to the 40 percent that is considered more typical.

Cash transactions accounted for about 25 percent of all purchases in February, according to the report. Sales of distressed property, including foreclosures, accounted for 10 percent of the total.

Existing home sales, which are tallied only when purchase contracts close, account for more than 90 percent of the residential market. A timelier barometer is new-home purchases, because they are tabulated earlier in the process, when deals are signed. That report is due from the Commerce Department on March 23.

Home Construction

Some relief from tight inventories may be in store in the months ahead, with a separate Commerce Department report showing last week that new-home construction rose more than forecast in February to a 1.18 million annualized rate. The gain was led by the strongest single-family home building in more than eight years.

Meanwhile low borrowing costs should continue to support the housing industry. Federal Reserve policy makers last week held off on raising interest rates and scaled back forecasts for how high they’ll go this year, citing the potential impact on the U.S. economy from weaker global growth and financial-market turmoil.

The average rate of a 30-year, fixed-rate mortgage was 3.73 percent in the week ended March 17, according to data from Freddie Mac. That’s little changed from 3.78 percent a year earlier and compares with a 3.31 percent rate reached in late 2012 that was the lowest in records back to 1971.

Still, builders remain cautious, with their confidence holding in March at a nine-month low as a measure of the six-month outlook decline to the weakest level in a year, according to a report from the National Association of Home Builders and Wells Fargo.

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REAL ESTATE TOPICS...Unlike in housing bubble, home buyers now put off by rising prices

By Andrea Riquier

Would-be home buyers see high prices as a deterrent, not an incentive to get in the market

There’s a paradox in Monday’s existing-home sales data.

Sales slid 7.1% to the lowest pace since November, the National Association of Realtors said. NAR has warned for many months that low levels of supply, which are pushing prices ever higher, will eventually cripple the market.

February’s decline may be a sign that the Realtors’ fears are coming true, although it may still turn out to be a temporary blip caused by weather, new closing regulations, and the difficulties of adjusting data to account for all those anomalies.

Still, as NAR Chief Economist Lawrence Yun said in a statement, “the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.”

That may sound obvious: if you can’t afford the few limited options available on the market, you’d probably give up too. It also tracks with a survey NAR published last week, which found that the share of current renters who say now is a good time to buy fell in the most recent quarter.

But it’s worth remembering, as Yun pointed out in a press conference Monday morning, that it wasn’t too long ago that higher prices drew more buyers in, rather than shutting them out.

That phenomenon was documented by Robert Shiller, one of the creators of the S&P/Case-Shiller home price index and a Nobel Prize winner for his research on asset price psychology.

In a 2007 paper, Shiller described the bubble mentality as “a feedback mechanism operating through public observations of price increases and public expectations of future price increases. The feedback can also be described as a social epidemic, where certain public conceptions and ideas lead to emotional speculative interest in the markets and, therefore, to prices increase.”

A few paragraphs later, Shiller wrote, “That the recent speculative boom has generated high expectations for future home price increases is indisputable.”

That’s vastly different than the world we live in now. In the February Fannie Mae Home Purchase Sentiment Index, survey respondents said they expect home prices to rise 1.7%. One year ago, respondents forecast prices would rise 2.5%.

In the 12 months to February, the actual price gain was 4.4%, NAR said Monday, but in recent months the yearly increase has been as high as 8.2%.

Homeowners are also less confident about the value of the equity they have in their homes. That means they’re no longer cashing out to finance other spending, as they did in the bubble years.

But it also means they may not understand how much their homes could command on the market, making them less likely to list and worsening the supply problem.