REAL ESTATE NEWS...U.S. House Prices Rise 1.3 Percent in First Quarter

FHFA House Price Index Shows Increases for Fifteenth Consecutive Quarter

FOR IMMEDIATE RELEASE

5/26/2015

Washington, D.C. – U.S. house prices rose 1.3 percent in the first quarter of 2015 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).  This is the fifteenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index.  FHFA's seasonally adjusted monthly index for March was up 0.3 percent from February.  The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. 

"The first quarter saw strong and widespread home price growth throughout most of the country," said FHFA Principal Economist Andrew Leventis.  "Home prices are now, on average, roughly 20 percent above where they were three years ago.  This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of overall inflation observed during that same time period."

The seasonally adjusted, purchase-only HPI rose 5.0 percent from the first quarter of 2014 to the first quarter of 2015 while prices of other goods and services fell 1.5 percent.  The inflation-adjusted price of homes thus rose approximately 6.5 percent over the latest year.

Other Significant Findings

• Between the first quarter of 2014 and the first quarter of 2015, home prices rose in 48 states.  The top five states in annual appreciation: 1) Colorado – 11.2 percent 2) Nevada – 10.1 percent 3) Florida – 8.7 percent 4) Washington – 7.6 percent 5) California – 7.5 percent.
• Among the 100 most populated metropolitan areas in the U.S., four-quarter price increases were greatest in Oakland-Hayward-Berkeley, CA  (MSAD), where prices increased by 13.4 percent.  Prices were weakest in the Greensboro-High Point, NC, where they fell 2.3 percent.
• Of the nine census divisions, the Mountain division experienced the strongest increase in the first quarter, posting a 2.6 percent quarterly increase and a 6.8 percent increase since last year.  House price appreciation was weakest in the West North Central division, where prices rose 0.7 percent. 

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The attached packet provides tables and graphs showing home price statistics for metropolitan areas, states, census divisions, and the U.S. as a whole.

Other Price Indexes

Most statistics in the attached release reference price changes computed with FHFA's basic "purchase-only" HPI.  In some cases, however, the reported statistics reference alternative price measures.  FHFA publishes--and makes available for download--three additional varieties of home price index beyond the basic "purchase-only" series.  Although they all use the same basic methodology, the three alternatives rely on slightly different datasets in index estimation. 

The alternative measures include:

• "Distress-Free" house price indexes.  Sales of bank-owned properties and short sales are removed from purchase-only dataset prior to estimation of the indexes.
• "Expanded-Data" house price indexes.  Sales price information sourced from county recorder offices and from FHA-endorsed mortgages are added to the purchase-only data sample.     
• "All-Transactions" house price indexes.  Appraisal values from refinance mortgages are added to the purchase-only data sample.

For some geographic areas, multiple index types are available.  For instance, for individual states, three types of indexes are available.  The various series tend to correlate closely over the long-term, but short-term differences can be significant. 

REAL ESTATE TOPICS...It’s Time to Replace Your Roof When…

Most homeowners don’t think about their roofs until leaky ceilings 
and puddles form inside their home. In which case, you end up spending way more than you planned. Why think about your roof if there isn’t a problem?

According to Metal Roofing Alliance Executive Director Bill Hippard, “Roofers are most in demand following severe weather such as heavy rain or high winds. If you put off doing repairs or replacing your roof until you have a problem, you may find that the contractor has a waiting list, and your problem will get worse before it can be addressed.”

To avoid costly delays and repairs, we have put together a list of signs that you should look for throughout your home. So let’s get to it!

It’s time to replace your roof when…

1. Your roof has missing shingles.

High winds can remove shingles from your roof, creating an invitation for leaks. You can use binoculars to inspect your roof without a ladder.

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2. Shingles are cracked or peeling.

Even if the shingles aren’t missing, there can be damage. If they’re curling or torn, they’re on their way to failing.

3. There are stains or water marks on your ceiling.

You may have a leaking roof even if you don’t see a puddle. It’s important to find the source of the leak and make repairs before the problem grows.

4. Shingles are discolored.

This can be a sign of mold or algae growth on your roof, particularly in warm, wet climates. The elements are hard on a roof, causing it to deteriorate and fail.

5. Your roof is old.

If you have a typical asphalt shingle roof, and it’s more than 10-15 years-old, chances are, you’re going to need to replace it in the near future.

REAL ESTATE NEWS...Boost for Hispanic homeownership, realtors

Boost for Hispanic homeownership, realtors
California’s Hispanic community should benefit from a new partnership announced Tuesday by two industry bodies. The Mortgage Bankers Association and the National Association of Hispanic Real Estate Professionals have joined forces to boost the level of homeownership among Latinos across the US and also to bring more Hispanics into the real estate and mortgage professions. The MBA’s education program will be actively promoted by both organizations in colleges and universities with high Hispanic enrolment.

Gary Acosta, NAHREP co-founder and CEO enthused: "There are incredible career opportunities in real estate finance and the Mortgage Bankers Association is doing some of the most innovative work in attracting new entrants into the industry.”
David H. Stevens, President and CEO of MBA said that homeownership is a key part of the American Dream: "And yet real challenges remain for many Americans, especially first-time homebuyers, the self-employed, and new Americans, to access credit. To serve our diverse customers, the real estate finance industry needs a diverse workforce.”
 
The Osbournes swap renting for homeownership
Ozzy and Sharon Osbourne are ending a few years of renting and buying a new home in Beverly Hills. TMZ.com reports that the celebrity couple are paying $10 million for the English-style home with 5 bedrooms and 5.5 bathrooms. There is also a two-story guesthouse and plenty of outdoor features including pool, spa and rose garden.
 

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Bay Area housing affordability crisis needs collaboration says study
The San Francisco Bay Area faces a housing affordability crisis created by a number of factors, including the large number of people moving to the area for jobs, recent policy and spending shifts in California and major growth in Asian capital into the real estate market. Those are some of the findings of a new study by RICS, an international organization focusing on the built environment, which believes that a collaborative approach is required to tackle the issues. Director of strategy Daniel Cook said: “We need much more collaboration between public and private sectors on financing and provision of both housing and infrastructure. The major issues San Francisco is facing are replicated in many major cities of the world. They are directly related to growing populations, ongoing high rates of urbanization and growing resource scarcity.”

Linda Mandolini, president of Eden Housing, Inc., based in Hayward, says one approach would be to create an affordable housing real estate investment trust (REIT) to help with financing. She believes that an essential next step would be for RICS and the industry to work with housing and infrastructure providers, local governments, and California state government to address the range of issues associated with these major challenges

REAL ESTATE TOPICS...California continues to dominate nation's hottest housing markets

California’s housing market continued to dominate the nation in May, according to a new report from realtor.com.

The site recently ranked the nation’s 20 hottest real estate markets, and California markets took up half the list, boosted by a tight supply of homes and a growth in demand powered by a booming economy.

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“On the demand side, we are seeing traffic and searches on realtor.com continue to set new highs,” said realtor.com chief economist Jonathan Smoke.

San Francisco and San Jose were at the top of the list, coming in at numbers two, and three, respectively – the same slots they occupied in April. Sacramento, meanwhile, leaped from No. 21 in April to No. 12 last month.

“Sacramento typically follows strong growth in Silicon Valley and the San Francisco Bay Area, as it is a relatively more affordable alternative,” Smoke said. “But this market has strong employment growth above the national average and is seeing strong household growth as a result.”

The 20 hottest real estate markets in May

1. Denver-Aurora-Lakewood, CO
2. San Francisco-Oakland-Hayward, CA
3. San Jose-Sunnyvale, CA.
4. Dallas-Fort Woorth-Arlington, TX
5. Vallejo-Fairfield, CA
6. Boston-Cambridge-Newton, MA-NH
7. Santa Cruz-Watsonville, CA
8. Santa Rosa, CA
9. Ann Arbor, MI
10. Detroit-Dearborn, MI
11. San Diego-Carlsbad, CA
12. Sacramento-Roseville-Arden-Arcade, CA
13. Boulder, CO
14. Fargo, ND-MN
15. Los Angeles-Long Beach-Anaheim, CA
16. Austin-Round Rock, TX
17. Oxnard-Thousand Oaks-Ventura, CA
18. Manchester-Nashua, NH
19. Columbus, OH
20. Stockton-Lodi, CA

REAL ESTATE TOPICS...6 myths about credit scores

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REAL ESTATE TOPICS...California has half of the hottest markets

California has half of the hottest markets
California dominates a league table of America’s 20 hottest housing markets. The analysis from realtor.com shows that in May Denver continued to top the list but San Francisco-Oakland-Hayward and San Jose-Sunnyvale-Santa Clara aren’t far behind in 2^nd and 3^rd positions. Vallejo-Fairfield, Santa Cruz-Watsonville, Santa Rosa, San Diego-Carlsbad, Sacramento-Roseville-Arden Arcade, Los Angeles-Long Beach-Anaheim, Oxnard-Thousand Oaks-Ventura and Stockton-Lodi are all in the top 20. The Stockton-Lodi market has seen the biggest surge, rising from number 38 in April to 20 in May.
 
House prices will drop says Bank of America analyst
The US faces three years of “modest” declines in house prices according to a new report from one of America’s biggest mortgage lenders. Bank of America analyst Chris Flanagan wrote Monday that the prices will start to dip in 2017 and will continue on that trajectory until the end of the decade. He acknowledges that his outlook flies in the face of popular opinion but he cites continued low wage growth against increasing house prices for his reasoning. Bloomberg reports that Flanagan expects prices to rise by 3.7 per cent this year, then 0.8 per cent in 2016 before reversing with a 1.7 per cent decline in 2017, 2.1 per cent in 2018 and 0.8 per cent in 2019.
 

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Summit calls for action on housing affordability
California’s economy is at risk of lawmakers don’t take action to tackle high housing costs. A letter from the California Economic Summit to the Governor and state legislature is pushing for greater subsidies to allow an increase in affordable and market-rate housing in areas close to jobs and transit. Cathy Creswell of the Summit’s housing action team said: "The recovery is expanding and jobs are coming back, but more Californians than ever are living in poverty, homelessness is climbing, and too many working people can't afford a place to live." A key element to housing affordability is increased construction the Summit says and is urging the lawmakers to ensure that new homes are built in the right places to create good synergy with employment opportunities.
 
Mischa Barton lists 90210 home
Star of The OC and Recovery Road Mischa Barton is selling her Beverly Hills compound according to Zillow. The actress has listed her villa-style home for $8.995 million. The home has 8 bedrooms including guest quarters, 11 bathrooms, a pool, and spa and sits on one acre. 

REAL ESTATE TOPICS...House flipping: 5 tips for big returns

Diana Olick Wednesday, 27 May 2015 | 10:50 AM ET

Home prices are rising at a fast clip, and for-sale listings are still very low. That makes flipping a house more competitive than ever today, but it also mean potentially record returns for investors.

If you're ready to put in the work, there is certainly good money to be made. Just be smart, as emotion-free as possible and get ready for a real estate ride like no other. And no, it's not as easy as it looks on TV.

1. Do the math

Figure out what you can spend on both the house and the renovation, down to the last dollar, and include how much risk you are prepared to take. Price out the cost of carrying a short-term loan (if you need one), taxes, utilities and maintenance on the home for up to a year. Price out your material costs and labor. Look at comparable sales in the market to see what the likely sale price will be and don't expect a penny over. Once you have a financial plan in front of you, with a reasonable margin for risk, begin shopping for homes that meet that budget. Don't let a huge fixer-upper with potentially larger returns muddle your math.

Patrick T. Fallon | Bloomberg | Getty Images

A woman walks past RE/MAX Holdings signage while arriving for an open house in Redondo Beach, Calif.

2. Know your market

Is this an already established area with rising prices? Is it a transitional neighborhood with good potential that may not be quite "there" yet? Is this an area with good schools that will attract families? Is this a community popular with retirees? Knowing your market will help you to choose the most desirable home and it should help you know what your profit margin will be. Every neighborhood has a not-to-exceed price. Know what that is. Doing your homework on recent sales and average days on market can give you an idea of how long to hold the property before flipping. Perhaps you want to rent it for a year or two until the neighborhood really takes off, or do a quick renovation because the neighborhood is very competitive.

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3. Know your buyer and renovate with that buyer in mind

If this is a neighborhood with good schools, then your buyer is a young family. Older homes may not have the open kitchen/family room that these buyers demand. Spend your money making the family space open and inviting. Make sure there are enough bathrooms for kids and invest in a Jack and Jill vanity in the hallway bath. Finish the basement if possible. Don't focus too much on the master suite, but make sure mom and dad do have their own bathroom. If this is a retirement area, look for a home with just one main level or a ranch style. If there are stairways, open them up and widen tight spaces. Make sure the home is easily accessible from the street—no big stairways up to the front door. And turn the yard into a patio for a maintenance-free outdoors.

4. Educate your buyer

You put in the work—make a list. Disclose every system that was replaced, from HVAC to electrical and any structural problems that were repaired. Take a snapshot of a new roof. Note which windows are new. List new appliances and fixtures and present a binder with all instruction booklets and warranties. Display instructions next to any new "smart home" features, like security, sound system and lighting controls. Let buyers know every detail of how this charming historic home is updated to today's standards.

5. Don't overprice

It's tempting to look at your renovation, love what you've done, factor in all the sweat equity and overvalue the home. Remember, your buyer likely didn't see it when you started. They didn't know the kitchen was disgusting and the basement stunk. They have no idea how much stress you went through. They see the finished product only, and they have been shopping the market, touring the comparable homes. Every neighborhood has a general price point, and you need to stay within it. Underpricing slightly could result in multiple offers and a final sale price above asking. Better than having all your hard work sit on the market for months.

REAL ESTATE TIPS...Buying a home? Don't make these costly mistakes

By Landon Dowdy

The housing market is gaining steam, fueled by an improving job market and near record-low mortgage rates.

Pending home sales rose in April to the highest level in nine years and the median price jumped as well. And millennials represent the largest share of homebuyers, according to an analysis by the National Association of Realtors. Nearly one-third of all homebuyers, and 68 percent of first-time buyers, were 34 or younger last year. And those numbers are expected to grow.

Buying your first home or know someone who is? Here are three common, and potentially costly, mistakes to avoid.

Mistake #1: Overestimating what you can afford.

Real estate brokers say first-time buyers often focus on the down payment and monthly mortgage amount when calculating how much they can afford and forget to factor in closing and other costs.

"They get to the closing and they're shocked by the amount of money they have to pay," said Vicki Fillet, certified financial planner and president at Blueprint Financial Planning in Hoboken, New Jersey.

It's important to remember too that monthly payments include not just the mortgage, but interest, taxes and insurance—something that buyers can often forget when figuring out their budgets.

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It's a good idea to get pre-approved for a mortgage loan so you know how much a bank is willing to lend you before you make an offer on a home. But keep in mind that the amount you're pre-approved to borrow from a mortgage lender may be more than you can actually afford once you factor in taxes, insurance and other costs like condo or homeowners' association fees and maintenance.

As a general guideline, your total monthly payment (including mortgage principal, interest, real estate taxes and homeowners insurance) shouldn't exceed 28 percent of your gross, or pretax, income.

While some sellers are still asking for 20 percent down payments, it's possible to pay much less. Mortgage giants Fannie Mae and Freddie Mac announced guidelines late last year for loans with down payments as low as 3 percent under a new program largely aimed at first-time homebuyers. Just remember that the lower your down payment, the bigger your mortgage loan (and the more you'll pay in interest).

Mistake #2: Letting your emotions get the best of you.

Don't get so attached that you buy with your heart and not your head. "It's difficult not to get emotionally attached. Homeownership is an investment in your future," said Chris Polychron, president of the National Association of Realtors.

But be careful. Get too emotionally attached and it can set you up to spend more than you can afford.

Cathy Moyano of Coccia Realty in Kearny, New Jersey, recommends prioritizing what you want in your home. Make a list of the most important qualities, whether you want a certain school district, updated bathrooms, a backyard, etc. Then figure out what you aren't willing to give up. You won't find the perfect home that meets your entire list so narrowing it down to what matters most can help you through your search process.

A real estate agent can help facilitate the searching and buying process. Using apps and sites like Zillow, Trulia, StreetEasy and Redfin can also help speed up your search.

Mistake #3: Not planning ahead.

Once you've narrowed the search and you are ready to make on offer, check with your agent about the demand. Is the home getting multiple offers? Has it sat on the market a long time? Will it require a lot of upgrades?

Make sure you get a thorough inspection. Fillet said buyers often don't get an inspector with expertise to check the pipes, the plumbing, or air conditioning. You want someone who knows what they are doing, not just an inspector from the real estate broker, she said.

Remember the resale opportunities. Consider the school district, Fillet said, because even if you don't have children or plan on having any, the next buyer might.

Don't overly improve the property either or "over customize to your personal taste," Moyano said. "Let's say you've painted your dining room purple, before you sell it, paint it back to a neutral color. This sounds like a little thing, but it does leave an impact on when you're showing homes."

REAL ESTATE NEWS...Real Estate on Fire!!!

New home sales surged in April, pending sales of existing properties are up, and so are home prices.

In other words, the real estate market is "really hot" right now, according to the CEO of online real estate search and brokerage firm Redfin. 

"It's a very strong seller's market. We've got homes selling in 45 minutes in places like Omaha and Atlanta," Glenn Kelman said in an interview with "Power Lunch " earlier this week. 

The whole country "has been on fire in the past few months. It's just a really hot market, probably unsustainably hot."

A slew of positive economic data was released this week, suggesting the housing market recovery was gaining traction.

Pending sales of existing homes for April rose 3.4 percent from March, to the highest level in nine years, according to figures released Thursday by the National Association of Realtors. Pending sales are now up 14 percent from a year ago.

New home sales are also on the rise, jumping 6.8 percent in April to a seasonally adjusted annual rate of 517,000 units, the Commerce Department said Tuesday. That spike was higher than analysts had expected.

Meanwhile, the closely-watched S&P/Case-Shiller Index showed housing prices in 20 cities climbed 5 percent year-over-year in March.

Supply is still tight, and buyers are flooding into the market trying to beat mortgage rate increases, Kelman noted. Many market watchers expect the Federal Reserve to begin raising interest rates in September, which will push up mortgage rates.

"Most of the buyers we talk to are really frustrated because they're getting into bidding wars, not just with two or three other buyers but with 5, 10 ,15 buyers," he said.

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"Some of our markets are saying this is crazier than we ever saw in 2007, 2006 so really we're going to see stronger price increases over the next two or three months than we saw previously," Kelman added.

Despite soaring prices, most economists are not yet convinced the housing market is in bubble territory. That's most likely because they're starting from such a low base: in the wake of the 2008 crisis, housing fell into depression territory, as prices swooned by more than 30 percent from peak to trough.

However, he thinks sooner or later prices are going to get ahead of what people are willing to pay and mortgage rates will begin to rise.

"We think that when rates go up, buyers are going to take a step back and we're not going to see the same appreciation," he said. "The people who are borrowing money need to get into the market. But if you're not borrowing money it might be better to sit back and wait until the fall."

REAL ESTATE NEWS...Millennials, Gen-Xers choosing to remain renters but would rather buy

Although James Crosby is getting married later this year to his college sweetheart, the financial analyst said they do not have plans to buy a home in Atlanta in the next few years.

While Crosby, who is 25, said he loathes paying rent and not building up equity in a home, renting has its benefits. Right now, it’s easy for him to budget for rent in an apartment, because the amount he pays each month is static and he will not be faced with any costly surprises such as repairing an air conditioner.

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Like Crosby, fewer Americans are drawn to owning a home and more plan to keep renting as wages remain stagnant and home prices have risen. A recent Gallup poll found that many people are content to be renters with 41% of non-homeowners who said they do not plan to purchase a home in "the foreseeable future." The gap is widening since only one of three people agreed with this sentiment two years ago. The percentage of people who own homes has dropped to 61%, which is the lowest figure in almost 15 years, the poll revealed.

Tepid Economy Plays a Role

Both the desire and ability to buy a house is waning among some individuals, because “the economy has kept young people from forming their own households as quickly as they had before the financial crisis,” said David Reiss, a law professor at Brooklyn Law School.

Some Gen X-ers and Millennials are also living at home longer than previous generations and wind up deferring homeownership. The weak and soft job markets have impacted Millennials who are also faced with carrying a heavy debt load from having to finance their undergraduate degrees.

“I would predict that if the economy warms up for a reasonable time, expectations about homeownership are likely to change quickly,” Reiss said.

Until wages increase substantially, many people will not be able to buy their first home. As the prices of houses have increased, income levels have “not kept up with the changes, particularly in the last two years,” said Ron Throupe, an associate professor in the Daniels College of Business at the University of Denver.

“As buyers see a gap in equity needed versus what they’ve saved to buy, their expectation to buy wanes," he said.

Yet there is hope that the current trend will reverse itself, said Throupe.

“There are young adults choosing urban apartment living, but that is likely a delay and not a ‘never’ for homeownership,” he said.

While Crosby said he faces pressure to buy a home in order to fulfill the great American dream, he said owning a home “is not as easy as people think it is” and comes with many other costs such as insurance and property taxes. The couple, with both members eager to advance in their current positions, plans to live in a rented apartment for a few years so that the two can be mobile if their career paths demand it. Once they have reached a certain goal and will be residing in a city for at least seven years, the Atlanta native said then he and his wife-to-be will be ready to commit to paying for a mortgage.

The perils of having a mortgage are more apparent to Americans now, especially for people who “do not feel secure about their employment prospects,” said Don Lawby, the president of Real Property Management, a Salt Lake City-based property management company. As the number of people searching for jobs declines, the trend could shift, he said.

In the aftermath of the recession, many people witnessed the severe impact on home prices, which demonstrated how even though values can rise for many years, the likelihood that they could also decline was not minuscule. Other people decided that owning a home “no longer makes sense to them,” said Lawby.

“The fact that housing prices can drop became real,” he said. “The realization that one could lose money on a house scarred and scared many people.”

Rent-Vs.-Mortgage Gap Widens

In many metropolitan areas, renting is still more affordable than owning a home, especially for people who lack savings for a down payment, said Philip Martin, vice president of market research at Chicago-based Waterton Associates, whose portfolio comprises of 18,000 rental units.

When the cost of buying a home exceeds the cost of renting one, people will gravitate toward waiting on making a purchase, said Lawby. The rental rates for single-family homes have jumped 5.5% over last year, according to Real Property Management’s report.

“Owning a home is again more expensive than renting,” Lawby said. “As rents increase and housing prices stall, the costs differential will eventually merge once again. At that point, home ownership will begin to increase.”

Even when people are ready to purchase a house, many cities and neighborhoods lack enough affordable housing. Many of the houses are either “too costly and more targeted to the ‘move-up’ buyer” and cannot compete with apartments which are less expensive, in better locations and offer many amenities, Martin said. The fact that fewer new homes are being built in moderate price ranges are also a deterrent.

Low Mortgage Rates Are a Benefit

Despite low mortgage rates, many people still are not interested in purchasing a home even though “now is a great time to be in the market” because the prices of homes are predicted to continue their upward climb, said Josh Moffitt, president of Atlanta-based Silverton Mortgage Specialists.

The perception that it is difficult to get approved for a mortgage without a great credit score is not true, he said.

“Potential buyers still feel like they must have perfect credit histories and be able to put 20% down,” Moffitt said. “Now there are more programs that are really geared toward lower credit scores,especially from the FHA, which only require a 3.5% down payment. People who have rebuilt their credit have a lot of options.”

Over the next few years, Crosby also wants to build his credit score so he can obtain a good interest rate for his mortgage. Although he doesn’t have any debt, Crosby also cannot show a lender that he has a history of consistently paying bills on time such as a car payment. By then he also hopes that the housing market has stabilized.

“It’s about trying to find the best value and the cost of a home has shot up over the past few years,” he said. “I don’t want to buy at the highest price.”