The Rise In American Homeownership Tenure


The Rise In American Homeownership Tenure

Homeowners are remaining in their homes longer than ever before according to a report from First American This Week in Real Estate and mortgage applications to purchase a home jumped 17% to start the new year. Below are a few highlights from the second week of January that influence our business:

Plunge in Rates Sparks 23.5% Spike in Mortgage After Unusually Weak Holidays
The combination of lower mortgage rates and an unusually slow end to 2018 caused mortgage applications to surge to start this year. Overall volume jumped 23.5 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. A sharp drop in interest rates to the lowest level since April sparked a mini-boom in refinancing. Those applications surged 35 percent week-to-week to their highest level since July. Volume was still lower by nearly 22 percent than a year ago, when the average rate on the 30-year fixed mortgage was 51 basis points lower. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.74 percent, from 4.84 percent, with points increasing to 0.47 from 0.42 (including the origination fee) for loans with a 20 percent down payment. The rate is 22 basis points lower than four weeks ago. Mortgage applications to purchase a home also jumped 17 percent last week but were just 4 percent higher than a year ago.

Home Price Growth Slows in Most States
Home prices have appreciated consistently since the housing market began its recovery, but now they appear to be slowing down after a six-year run. The latest data from Black Knight reveals that home price growth has slowed in 33 states and in 71 of the nation’s 100 largest markets. Annual gains decelerated by 1.3% from February to October, according to Black Knight’s latest Mortgage Monitor report. October saw growth flatten to just 5.4%, down from February’s four-year high of 6.7%. The report notes that home price appreciation from July through October was the most tepid four-month stretch in nearly four years. And, while the slowdown is apparent across much of the nation, the west saw the most deceleration, with California the standout as price growth fell below the national average for the first time since early 2012.

American Homeownership Tenure is Climbing
Americans are remaining in their homes longer than ever before, consequently tightening the lid on housing supply. First American data indicates that homeownership tenure has risen 10% just from 2017 and has significantly climbed since the market crashed in 2008. “Tenure jumped to seven years during the aftermath of the crash between 2008 and 2016, and the most recent data from December 2018 shows that the median length of time someone lives in their home has increased 10% compared with a year ago,” First American Chief Economist Mark Fleming said.

Mortgage Rates Plummet



Mortgage Rates Plummet

The market value of U.S. housing increased $1.9 trillion last year according to a report released by Zillow This Week in Real Estate resulting in a total value of $33.3 trillion. Below are a few highlights from the first week of January that influence our business:

U.S. Housing Market Value Climbs to $33.3 Trillion in 2018

In 2018, the total value of the U.S. housing market increased $1.9 trillion, propelling its value to a whopping $33.3 trillion, according to new data from Zillow. This 6.2% increase is up $10.9 billion from 2012, when the housing market crashed. Zillow Senior Economist Aaron Terrazas said seen from the rearview mirror, 2018 was a year of unusually strong, stable home value growth across the country. “During the second half of the year, appreciation slowed sharply in the priciest corners of the country while it picked up in affordable hotspots,” Terrazas said. “Housing wealth may have touched new highs this year, but home value gains don’t translate into dollars in the bank account unless homeowners opt to sell or borrow against their home and, in contrast to previous housing booms, many Americans have been more reluctant in recent years to spend against their home’s worth,” Terrazas said.

Mortgage Rates Lowest in Nearly a Year

Mortgage rates have been plummeting, depending on your definition of the word. To be sure, the past 2 months have no competition in nearly 3 years. The past few days have been special in their own right. Whereas there was cause for concern about the new year bringing a bounce for stock prices and mortgage rates, stocks haven’t done much of anything in the context of their late-2018 volatility, and mortgage rates have dropped another eighth of a percentage point (or more, depending on the lender). There are now lenders quoting 30 year fixed rates as low as 4.375% on top tier scenarios with the average lender back to 4.5%. That’s quite a jump from the 5.125% average at the recent highs (just 2 months ago).

Job Growth Surged in December

At the end of 2018, job growth surged. Total employment increased by 312,000 in December and the unemployment rate rose to 3.9%; however, this increase was good news because it was generated by growth in the labor force. Residential construction employment increased by 1,700 in December. The total construction industry (residential and nonresidential) added 280,000 jobs in 2018, more than the gain of 250,000 jobs in 2017. According to the Employment Situation for December released by the Bureau of Labor Statistics (BLS), total non-farm payroll employment rose by 312,000, faster than the upwardly revised increase of 176,000 jobs in November. It was the biggest monthly gain since February 2018. In 2018, job gains have averaged 220,000 per month, about 20% higher than the average monthly growth of 182,000 over all of 2017. Over the past twelve months, total non-farm payroll employment rose by 2.6 million, compared with the increase of 2.2 million in 2017. Residential construction employment now stands at 2.85 million in December, broken down as 816,000 builders and 2.0 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction is 6,567 a month. Over the last 12 months, home builders and remodelers added 99,800 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 871,400 positions.

Renters Paid More in 2018 Than Ever Before


While home prices continue to appreciate, albeit at a slower pace, according to a report released by HotPads This Week in Real Estate U.S. renters paid a record $504.4 billion in rent in 2018. Below are a few highlights from the last week of the year that influence our business:

Pending Home Sales See 0.7% Drop in November
Pending home sales overall slipped in November, but saw minor increases in the Northeast and the West, according to the National Association of Realtors. The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.7 percent to 101.4 in November, down from 102.1 in October. However, year-over-year contract signings dropped 7.7 percent, making this the eleventh straight month of annual decreases. The Pending Home Sales Index in the West increased 2.8 percent in November to 87.2 and fell 12.2 percent below a year ago.

Case-Shiller: Home Price Gains Slowing, Still up 5.5%
Home prices continued to ratchet down their advances in October. The Case-Shiller National Home Price Index which covers all nine U.S. census divisions, reported a 5.5 percent annual gain in October, unchanged from the year-over-year reading in September. That index had not been below 6.0 percent for a year until it dropped to 5.7 percent in August. Before seasonal adjustment the National Index managed a 0.1 percent gain for the month and 05 percent after adjustment. “Home prices in most parts of the U.S. rose in October from September and from a year earlier,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The combination of higher mortgage rates and higher home prices rising faster than incomes and wages means fewer people can afford to buy a house. Fixed rate 30-year mortgages are currently 4.75 percent, up from 4 percent one year earlier. Home prices are up 54 percent or 40 percent excluding inflation, since they bottomed in 2012.

Renters Paid More For Housing in 2018 Than They Ever Have Before
Thanks to higher rents throughout much of the year, U.S. renters paid out more in rent than they ever have before, with a total rent payout equal to the gross domestic product of Belgium. According to a new report from HotPads, U.S. renters paid a record $504.4 billion in rent in 2018, topping 2017’s total by $12.6 billion. There were approximately 43.2 million renter households in the U.S. this year, nearly 100,000 less than there were in 2017. The current median rent is $1,475, up 3% from a year ago. HotPads data showed that rents rose about 3% year-over-year throughout the year, continuing a gradual slowdown in rent appreciation that began in mid-2016. And with rents forecasted to continue growing in 2019, driven by higher mortgage interest rates likely keeping some renters from becoming buyers, that total will likely increase next year.

Rising Inventory & Increase of Existing Home Sales


The first two months of the fourth quarter has seen consecutive months of increased existing home sales as reported by the National Association of Realtors This Week in Real Estate and rising inventory beginning to tame home price appreciation. Below are a few highlights from the third week of December that influence our business:

Existing Home Sales Increase for Second Consecutive Month

Existing-home sales increased in November, according to the National Association of Realtors, marking two consecutive months of increases. Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.9 percent from October to a seasonally adjusted rate of 5.32 million in November. Sales are now down 7.0 percent from a year ago (5.72 million in November 2017). Single-family home sales sit at a seasonally adjusted annual rate of 4.71 million in November. That is up from 4.62 million in October, but 6.7 percent below the 5.05 million sales pace from a year ago. Lawrence Yun, NAR’s chief economist, says two consecutive months of increases is a welcomed sign for the market. “The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago. Rising inventory is clearly taming home price appreciation.” Existing-home sales in the West declined 6.3 percent to an annual rate of 1.04 million in November, 15.4 percent below a year ago.

Single-Family Starts Weak, Especially in the West

The pace of single-family starts declined for the third consecutive month as housing affordability concerns continue to weigh on the home construction market. Total starts posted a 3.2% increase due to gains for multifamily development. Total single-family and apartment construction starts are up 5.1% on a year-to-date basis, according to the joint data release from the Census Bureau and HUD. The November rate of single-family starts decreased 4.6% to a seasonally adjusted annual rate of 824,000. The steady decline for the pace of single-family construction mirrors recent weakness for the NAHB/Wells Fargo Housing Market Index (HMI), now registering a score of 56. Builders are concerned about housing affordability conditions due to the rise in mortgage rates and increasing construction and regulatory costs. However, rate declines over recent weeks should provide some support for the market in the coming months. On a year-to-date basis, single-family starts are 3.9% higher relative to the first eleven months of 2017. Single-family permits, a useful indicator of future construction activity, were flat in November and have registered a 5.2% gain thus far in 2018 compared to last year. Single-family construction is down 4% for the year in the Midwest. Single-family starts are up in the larger building regions of the South (3%) and the West (12%). Single-family construction is 4% higher in the Northeast (despite new home sales declines) due to relative strength in the not-for-sale, custom market in that region.

Builder Confidence Drops Four Points Amid Concerns Over Housing Affordability 

Builder confidence in the market for newly-built single-family homes fell four points to 56 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) as concerns over housing affordability persist. The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” Although this is the lowest HMI reading since May 2015, builder sentiment remains in positive territory. Builders report that consumer demand exists, but customers are hesitating to make a purchase because of rising home costs. However, recent declines in mortgage interest rates should help move the market forward in early 2019. Looking at the three-month moving averages for regional HMI scores, the Midwest dropped two points to 55; the West and South both fell three points to 68 and 65, respectively; and the Northeast registered an eight-point drop to 50.



According to a report released by the Federal Reserve This Week in Real Estate the market value of all owner-occupied residential real estate rose to $25.6 trillion in the third quarter. Below are a few highlights from the second week of December that influence our business:

Fannie Mae: Home Sales to Stabilize in 2019
Although economic growth is expected to slow in the new year, new data suggests the housing market will stabilize come 2019, according to Fannie Mae. “We expect full-year 2018 economic growth to come in at 3.1% – an expansion high – before slowing markedly to 2.3% in 2019 and 1.6% in 2020,” Fannie Mae Chief Economist Doug Duncan said. The report indicates that consumer spending will continue being the largest positive contributor for growth. Nevertheless, the GSE believes higher tariffs, trade uncertainty and rising interest rates and input costs will further constrain business fixed investment growth. With the exception of accelerating inflation, both mortgage rates and home sales could stabilize in 2019, according to the ESR Group. In fact, Fannie predicts purchase mortgage originations will climb, but origination volumes will slow as refinances decline.

U.S. Household Balance Sheet Continues to Recover in Q3 2018
The third quarter Federal Reserve Flow of Funds report showed continued improvement in the financial position of U.S. households with real estate, as the market value of all owner-occupied residential real estate (household owned) rose to $25.6 trillion. According to NAHB tabulations of the quarterly series, the asset or market value of owner-occupied real estate held by U.S. households increased $298 billion dollars while the liabilities (home mortgages) increased by about $90 billion from the second quarter reading. The housing market’s value of owners’ equity in real estate as a percentage of household real estate reached 59.9% in the third quarter of 2018, a level had not been seen since 2002. On the other hand, the greatest quarter-to-quarter percent increase in households’ equity position, that is, the difference between assets and liabilities, occurred not in 2018 but in 2017. The 2018 third quarter’s increase in equity position was 1.4%, which was substantially lower than the quarter-to-quarter increases of over 2.0% in the previous year’s quarters.

HUD Announces New FHA Loan Limits for 2019
The Federal Housing Administration (FHA) announced its loan limits for 2019 on Friday. The nationwide rise in median home prices indicates most buyers across the country – including those in more than 3,000 counties – will see increases. The FHA floor will increase from $294,515 to $314,827. This base limit applies to areas where 115% of the area median home price is less than $314,827. The FHA high-cost ceiling will increase from $679,650 to $726,525.  High-cost areas are those where 115% of the median home price is greater than the floor ($314,827). In these areas, the limit equals 115% of the median home price up to the FHA ceiling ($726,525). FHA also increased the loan limits for its Home Equity Conversion Mortgage (HECM), or reverse mortgage program, from $679,650 to $726,525.

Residential Construction Loans Grow as Equity Climbs and Housing Appreciation Slows


Residential Construction Loans Grow As Equity Climbs and Housing Appreciation Slows

While home equity is still climbing, led by the Western region, appreciation is slowing down according to the CoreLogic Home Equity Report released This Week in Real Estate. Below are a few highlights from the first week of December that influence our business:

Active Home Buyers are Spending Significant Amounts of Time Looking for the Right Home

In the third quarter of 2018, 13% of adults in NAHB’s Housing Trends Report poll report planning to purchase a home in the next 12 months.  Of that group, 46 percent are not merely planning it, they are already actively engaged in the search for the right home to buy.  And they are spending significant amounts of time looking. In fact, 54% of those actively engaged in the process have been trying to find the right home for three months or longer. Why is it taking this long? The number one reason active home buyers gave in the third quarter of 2018 is they can’t find a home at a price they can afford (49%), followed by not being able to find a home with the desired set of features (40%). Not far behind, 38% can’t find a home in the right neighborhood. And finally, a critical question: what are these veteran house hunters, who have already actively looked for at least three months, going to do if their dream house remains elusive in the months ahead: 61% will continue looking for the ‘right’ home in the same preferred location, 37% will expand the search area, 23% is willing to accept a smaller/older home, and 16% might buy a more expensive home. One option that is not in the cards for most of them: giving up. Only 18% will stop trying to find a home.

Home Price Appreciation is Slowing Down: Equity is Still Climbing, Just Not as Fast as Before

The average homeowner gained $12,400 in equity in one year’s time, according to CoreLogic’s Home Equity Report for the third quarter of 2018. And while that’s not exactly nothing, it’s the smallest annual increase in two years. Last quarter’s report revealed an increase of $16,000 in home equity. CoreLogic analyzed data on more than 50 million U.S. properties with a mortgage. Its report revealed that homeowners with mortgages (which account for 63% of all properties) saw their home equity increase 9.4% from last year. While the rate of growth may be slowing, almost every state experienced some growth, with the Western region posting the most notable uptick. California homeowners gained an average of $36,500 in home equity, while Nevada, Washington and Oregon homeowners saw their equity increase by approximately $32,600, $27,000 and $9,000, respectively. The number of homes with negative equity also fell in the third quarter. The data shows that, year over year, negative-equity homes – or homes that have liens that exceed their value – fell 16% to 2.6 million homes. “On average, homeowners saw their home equity increase again this quarter, but not nearly as much as in previous quarters,” said CoreLogic Chief Economist Frank Nothaft. “During the third quarter, homeowners gained an average of $12,400 compared to the second quarter when the average home equity wealth increase was more than $16,000.”

Continued Residential Construction Loan Growth 

The volume of residential construction loans increased by 2.8% during the third quarter of 2018, marking 22 consecutive quarters of growth. Furthermore, recent stabilization of year-over-year growth rates is an indicator of continued, modest growth for single-family construction. Tight availability of acquisition, development and construction (AD&C) loans has been a limiting or cost factor for home building growth, but easing credit conditions and a growing loan base have helped expand residential construction activity. According to data from the FDIC and NAHB analysis, the outstanding stock of 1-4 unit residential construction loans made by FDIC-insured institutions rose by $2.2 billion during the third quarter of 2018, raising the total stock of outstanding loans to $79 billion. On a year-over-year basis, the stock of residential construction loans is up 8%, which has been a useful indicator of the additional volume builders intend to add to construction activity. Since the first quarter of 2013, the stock of outstanding home building construction loans has grown by 95%, an increase of $38 billion.


November’s Influence on the Housing Market


In response to the ongoing run-up in home prices over the last year the Federal Housing Finance Agency announced This Week in Real Estate that the conforming loan limits will increase by 6.9 percent to $484,350 effective January 1, 2019. Below are a few highlights from the last week of November that influence our business:

Pending Home Sales Slip 2.6% in October
Pending home sales declined slightly in October in all regions but the Northeast, according to the National Association of Realtors®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 2.6 percent to 102.1 in October, down from 104.8 in September. However, year-over-year contract signings dropped 6.7 percent, making this the tenth straight month of annual decreases. While the short-term outlook is uncertain, Yun stressed that he is very optimistic about the long-term outlook. The current home sales level matches sales in 2000. “However, mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent. Additionally, there are more jobs today than there were two decades ago,” said Yun. “So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.” All four major regions saw a decline when compared to a year ago, with the West seeing the most pronounced drop. Yun said that decline is not at all surprising. “The West region experienced the fastest run-up in home prices in a short time and therefore, has essentially priced out many consumers,” Yun said. Yun pointed to year-over-year increases in active listings from data at to illustrate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., Columbus, Ohio, San Francisco-Oakland-Hayward, Calif. and San Diego-Carlsbad, Calif. saw the largest increase in active listings in October compared to a year ago. Yun expects existing-home sales this year to decrease 3.1 percent to 5.34 million, and the national median existing-home price to increase 4.7 percent. Looking ahead to next year, existing sales are forecast to decline 0.4 percent and home prices to drop roughly 2.5 percent.

Entry Level Home Inventory Yields Declining New Home Size
Continuing a multiyear trend, new single-family home size decreased during the third quarter of 2018. New home size has been falling over the last three years due to an incremental move to additional entry-level home construction. According to third quarter 2018 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area decreased to 2,320 square feet. Average (mean) square footage for new single-family homes declined to 2,495 square feet. Since cycle lows (and on a one-year moving average basis), the average size of new single-family homes is 8% higher at 2,565 square feet, while the median size is 13% higher at 2,369 square feet.

The post-recession increase in single-family home size is consistent with the historical pattern coming out of recessions. Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions. This pattern was exacerbated during the current business cycle due to market weakness among first-time homebuyers and supply-side constraints in the building market. But current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market cools.

Loan Limits Increase to $484,350 
Given the rapid run-up in home prices over the last year, it’s no surprise that loan limits will also be going up in 2019. The Federal Housing Finance Agency (FHFA) announced that the maximum conforming loan limits for mortgages eligible for acquisition or guarantee by the two government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae will be $484,350. The conforming loan limit as established by the Housing and Economic Recovery Act (HERA) is reviewed each year and adjusted as necessary to reflect the change in the average U.S. home price. The new limit represents a 6.9 percent increase over the $453,100 limit for 2018, the percentage by which FHFA’s Housing Price Index (HPI) for the third quarter of 2018 increased on an annual basis. The new limits are effective as of January 1, 2019. The Federal Housing Administration (FHA) and the VA are expected to adopt the same loan limits for 2019.


The Increase of Existing Home Sales


The National Association of Realtors reported This Week in Real Estate that the run of 6 consecutive months of decline in existing-home sales ended in October. In addition, housing starts in October increased 1.5 percent over September. Below are a few highlights from the third week of November that influence our business:

Single-Family Starts Stable in October as Caution Grows
Total housing starts posted a 1.5 percent increase in October (1.23 million units) compared to a revised September estimate of 1.21 million units. However, total starts are 2.9 percent lower than October 2017. Despite the recent market softness, 2018 is still shaping up to be the best year since the recession. Total housing starts are 5.6 percent higher for 2018 on a year-to-date basis, according to the joint data release from the Census Bureau and HUD. The pace of single-family starts posted a slight monthly decline in October, decreasing 1.8 percent to a seasonally adjusted annual rate of 865,000. September and August single-family starts were revised up totaling to an additional 21,000 units. The weaker conditions for single-family construction are likely to continue, as noted by the November decline of the NAHB/Wells Fargo Housing Market Index, by eight points, now registering a score of 60. On a year-to-date basis, single-family starts are 5.5 percent higher as of October relative to the first ten months of 2017. Single-family permits, a useful indicator of future construction activity, were slightly lower at 0.6 percent in October and have registered a 0.6 percent loss thus far in 2018 compared to last year. Regional data show – on a year-to-date basis positive conditions across the West (+15.2 percent), South (+3.9 percent), and the Northeast (+3.2 percent). However, single-family construction is down 2.5 percent for the year in the Midwest.

Existing-Home Sales Increase for the First Time in Six Months
Existing-home sales increased in October after six straight months of decreases, according to the National Association of Realtors®. Three of four major U.S. regions saw gains in sales activity last month. Total existing-home sales increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million in October. Sales are now down 5.1 percent from a year ago (5.5 million in October 2017). Lawrence Yun, NAR’s chief economist, says increasing housing inventory has brought more buyers to the market. “After six consecutive months of decline, buyers are finally stepping back into the housing market,” he said. “Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.” The median existing-home price2 for all housing types in October was $255,400, up 3.8 percent from October 2017 ($246,000). October’s price increase marks the 80th straight month of year-over-year gains. Unsold inventory is at a 4.3-month supply at the current sales pace, down from 4.4 last month and up from 3.9 months a year ago.

The 10 Best Days of the Year to Buy a Home
On Tuesday ATTOM Data Solutions released an analysis of the best days of the year to buy a home, which shows that only 10 days of the year offer discounts below estimated market value — seven in December, and one each in October, November and February. According to the analysis, buyers willing to close on a home purchase the day after Christmas realize the biggest discounts below full market of any day in the year. This analysis of more than 18 million single family home and condo sales over the past five years is evidence of the hot sellers’ market of the past five years. “People closing on a home purchase December 26 were submitting offers around Thanksgiving and starting their home search around Halloween — likely not a common path to home purchase for most buyers and exactly why it’s the best time to buy,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Buyers and investors willing to start their home search right about when stores are setting up Christmas decorations will face less competition and likely be dealing with more motivated sellers, giving them the upper hand in price negotiations.”


November Brings Balance to the Housing Market


Economists reported This Week in Real Estate that “sellers will keep their foothold for another couple of years at least, though with weakened negotiating power thanks to basic economic fundamentals like a growing job market rather than one that has been artificially bolstered.” Below are a few highlights from the second week of November that influence our business:

Single-Family Permits: Declines in the Midwest and Northeast

Over the first nine months of 2018, the total number of single-family permits issued year-to-date (YTD) nationwide reached 664,665. On a year-over-year basis, this is a 5.7% increase over the September 2017 level of 628,858. The preliminary results from the New Residential Construction Survey are similar, year-to-date single-family permits over the first nine months of 2018 was, 663,800 which is 5.5% ahead of its level over the same period of 2017, 628,900. Year-to-date, single-family permits grew in the Southern and the Western regions of the country, while the Midwest and Northeast declined by 0.9% and 6.4% respectively, compared to September 2017 YTD. The Western region had the highest growth in single-family (11.5%) while the South recorded the highest multifamily permits growth (14.9%) during the last 12 months.

Real Estate Markets Cooling Across the Country, and it’s Not Just the Winter Effect

In December 2008, almost a decade ago exactly, Case-Shiller posted a record 18% price drop in home values across the country as the subprime mortgage crisis reached fever pitch. After a slow and painful recession period, economic prosperity pushed the market out of recovery mode and into a full-fledged real estate boom characterized by double-digit price growth, rock-bottom inventory and surging buyer demand over the past few years. It’s been the lowest of lows, followed by a glorified golden age for the country’s trillion-dollar residential real estate business. But a new normal, one that’s neither ice cold nor fiery red, does appear to be taking shape. “There is a definite shift,” said Lawrence Yun, chief economist of the National Association of Realtors and fellow Forbes contributor. “I would characterize the current state as normalizing and not truly a buyer’s market. It was clearly a seller’s market in spring, but now things appear to be more balanced.” Rest easy, no one’s warning of a housing bust 2.0 danger zone. The current price run-up wasn’t artificially bolstered by mortgage fraud, but rather economic fundamentals including a growing jobs market, and that thing we all learned in Economics 101: supply and demand. In fact, economists forecast that sellers will keep their foothold for another couple of years at least, though with weakened negotiating power.

Most Buyers Don’t Expect House Hunting to Get Easier Soon

Only about 2 out of every 10 prospective home buyers (people looking to buy a home in the next year) expect the search for a home to get easier in the months ahead. The majority, about 7 out of 10, instead think house hunting will get harder or stay about the same. This opinion is shared among buyers of all ages, as only 15%-21% of each generation expects the search for a home to get easier soon. These findings come from NAHB’s Housing Trends Report (HTR) for the third quarter of 2018. Another way to find out buyers’ perception about the inventory of available housing in their markets is to ask if they see the number of for-sale homes (with their desired features and price point) rising or falling compared to three months earlier. In the third quarter of 2018, 29% said they could see more such homes vs. 61% who said they saw fewer/about the same number as before. Put shortly, most prospective buyers have seen no improvement in the availability of housing. A majority of buyers in each generation shares that opinion.

Home Prices and Equity Rise as Affordability Lowers


ATTOM Data Solutions reported This Week in Real Estate that the number of equity rich U.S. properties increased to a new high in the third quarter of 2018. Below are a few highlights from the first week of November that influence our business:

Equity Rich U.S. Properties Increase to New High of 14.5 Million in Q3 2018
On Thursday ATTOM Data Solutions released its Q3 2018 U.S. Home Equity & Underwater Report, which shows that in the third quarter of 2018, nearly 14.5 million U.S. properties were equity rich – where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value – up by more than 433,000 from a year ago to a new high as far back as data is available, Q4 2013. The 14.5 million equity rich properties in Q3 2018 represented 25.7 percent of all properties with a mortgage, up from 24.9 percent in the previous quarter but down from 26.4 percent in Q3 2017. “West coast markets along with New York have the highest share of equity rich homeowners while markets in the Mississippi Valley and Rust Belt continue to have stubbornly high rates of seriously underwater homeowners when it comes to home equity,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. States with the highest share of equity rich properties were California (42.5 percent); Hawaii (39.4 percent); Washington (35.3 percent); New York (34.9 percent); and Oregon (33.6 percent).

Housing Affordability Edges Lower in the Third Quarter
A modest increase in interest rates and home prices kept housing affordability at a 10-year low in the third quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). In all, 56.4 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $71,900. This is down from the 57.1 percent of homes sold in the second quarter that were affordable to median-income earners and the lowest reading since mid-2008. The national median home price edged up from $265,000 in the second quarter of 2018 to $268,000 in the third quarter. This is the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates rose by a nominal 5 basis points in the third quarter to 4.72 percent from 4.67 percent in the second quarter.

CoreLogic Reports September Home Prices Increased by 5.6% Year Over Year
CoreLogic released on Tuesday the CoreLogic Home Price Index (HPI) and HPI Forecast for September 2018, which shows home prices rose both year over year and month over month. Home prices increased nationally by 5.6 percent year over year from September 2017. On a month-over-month basis, prices increased by 0.4 percent in September 2018. Looking ahead, the CoreLogic HPI Forecast indicates home prices will increase by 4.7 percent on a year-over-year basis from September 2018 to September 2019. On a month-over-month basis, home prices are expected to decrease by 0.6 percent from September to October 2018. The CoreLogic HPI Forecast is a projection of home prices calculated 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.


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