This Week in Real Estate: February 5, 2017

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CoreLogic released data This Week in Real Estate that suggests the real estate market has completely recovered from the “boom-bust” cycle that started a dozen years ago. In other news this week, the Federal Reserve decided not to increase the federal funds rate. Below are a few highlights from the last week of January and the first few days of February that influence our business:
 
* Case-Shiller: Housing Market Now Officially, Completely Recovered. According to the latest data released Tuesday by S&P Dow Jones Indices and CoreLogic, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, increased 5.6% annually. “With the S&P CoreLogic Case-Shiller National Home Price Index rising at about 5.5% annual rate over the last two-and-a-half years and having reached a new all-time high recently, one can argue that housing has recovered from the boom-bust cycle that began a dozen years ago,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee. “The recovery has been supported by a few economic factors: low interest rates, falling unemployment, and consistent gains in per-capita disposable personal income.” Seattle, Portland, and Denver reported the highest annual gains among the top 20 cities for each of the past 10 months.
 
* U.S. Distressed Sale Share Drops to Nine-Year Low in 2016, U.S. Home Sellers in 2016 Realized Biggest Average Profits Since 2007, 44% of Markets Reached New All-Time Home Price Peaks in 2016. ATTOM Data Solutions released its Year-End 2016 U.S. Home Sales Report on Thursday, which shows 16.2 percent of single family home and condo sales in 2016 were distressed sales – bank-owned sales, short sales or foreclosure auctions – down from 18.8 percent of all sales in 2015 to the the lowest level since 2007. “The housing market hit several important milestones in 2016, with distressed sales at a nine-year low and home prices at a 10-year high, just barely below the pre-recession peak in 2006,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “This was all good news for home sellers, who realized their biggest average profits since purchase nationwide in 2016. Even distressed property sellers are benefitting from this hot seller’s market, with a record-high share of homes at foreclosure auction being purchased by third-party buyers rather than reverting back to the foreclosing bank.” Homeowners who sold in 2016 realized an average home price gain since purchase of $38,206, which translated into an average 21 percent gain since purchase, up from an average 13 percent gain in 2015 to the highest since 2007, a nine-year high. Among 201 Metropolitan statistical areas with a population of at least 200,000 and sufficient home price data, 89 metro areas (44 percent) reached new all-time home price peaks in 2016. Nationwide home sales to all-cash buyers represented 28.3 of all home sales in 2016, the lowest level since 2007 – a nine-year low.
 
* Federal Open Market Committee January/February Meeting – No News is Good News. The Federal Open Market Committee (FOMC), the monetary policy arm of the Federal Reserve System, concluded its two-day meeting and released a statement announcing no change in the target range for the federal funds rate. The current 50-75 basis point range was expected to be maintained following this first meeting since the December meeting, at which the target range for the funds rate was raised for only the second time since the financial crisis. The pace of rate increases is expected to accelerate. Among FOMC participants, the median projection of the “appropriate” level for the funds rate indicates three rate increases by the end of 2017. The CME Group’s FedWatch Tool indicates the FOMC meeting in June is currently the most popular bet for the next increase. With payroll gains steady, the unemployment rate below 5% and inflation grudgingly moving toward the Fed’s 2% target, economic conditions are right for a faster pace for monetary policy normalization, but the mantras of “only gradual increases” and “below levels expected to prevail in the longer run” still apply. 

Have a productive week,
Jason

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