The Transitioning Market
As the pace of home price appreciation begins to temper and available inventory rises, the need to educate homeowners of selling in a transitioning market as well as establishing new expectations intensifies. According to a report released by Trulia This Week in Real Estate 17.2% of U.S. listings experienced a price cut in August. That is the highest level of price cuts since 2014. Below are a few highlights from the second week of October that influence our business:
New Home Sales Dip, Still Stronger Than Last Year
The Mortgage Bankers Association (MBA) reports a drop in applications for the purchase of newly constructed homes last month. Those applications fell by 3.9 percent compared to August although they remained 8.2 percent higher than they were the previous September. “Even though new home sales decreased 3.9 percent over the month, the average monthly number of homes sold so far this year (648,000 units) is around 8 percent higher than a year ago, and last month’s 8.2 percent annualized gain in purchase applications points to continued demand for new homes,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Housing demand is still strong even as mortgage rates increase, and as a result, we’re still forecasting for modest growth in purchase origination volume in 2018.” Conventional loans accounted for 71.0 percent of applications and FHA loans for 16.0 percent. VA loans had an 11.9 percent share and 1.1 percent were for RHS/USDA loans.
Home Price Cuts Reach 4-Year High
There was a significant increase in the share of homes that experienced a price cut in August 2018, according the latest data collected from Trulia. According to the report, in August 17.2% of U.S. listings had a price cut, which is an increase from 16.7% the previous year. This is the highest level of price cuts since 2014. Trulia reports in the majority of the first half of 2018 the share of listings with a price cut held steady from 2017, but began to climb in July and August. The report indicates that this can be attributed to the slowdown of home price growth and inventory levels that are beginning to rise. Trulia Housing Economist Felipe Chacon said buyers should be encouraged by signals in the market, however not every buyer will benefit equally. “Price reductions typically aren’t uniformly spread out across a given city – some neighborhoods might have a lot of listings with a reduced price, others may have none,” Chacon. “Our research shows that price cuts are much more prevalent in higher-cost neighborhoods, so budget-conscious buyers may have some trouble finding a bargain.” Of the top 100 metros, 63 had a year-over-year increase, and some of the most expensive and fastest growing markets experienced the largest jumps. Notably, the West Coast hosted some of the biggest year-over-year price cuts in August.
Q3 Foreclosure Activity Down 8% From Year Ago to Lowest Level Since Q4 2015
ATTOM Data Solutions released its Q3 2018 U.S. Foreclosure Market Report Thursday, which shows a total of 177,146 U.S. properties with foreclosure filings – default notices, scheduled auctions or bank repossessions – in the third quarter, down 6 percent from the previous quarter and down 8 percent from a year ago to the lowest level since Q4 2005 – a nearly 13-year low. U.S. foreclosure activity in Q3 2018 was 36 percent below the pre-recession average of 278,912 properties with foreclosure filings per quarter between Q1 2006 and Q3 2007 – the eighth consecutive quarter where U.S. foreclosure activity has registered below the pre-recession average. “A decade after poorly underwritten mortgages triggered a housing market crash, it’s clear that the foreclosure risk associated with those problem mortgages has faded – average foreclosure timelines have dropped to a two-year low, and the share of foreclosures tied to 2004 to 2008 loans has dropped well below 50 percent,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The biggest foreclosure risk in today’s housing market comes from natural disaster events such as the twin hurricanes of a year ago. Foreclosure starts spiked in the third quarter in many local markets impacted by those hurricanes.