Pending Home Sales Drop in June

Following three consecutive months of gains, pending home sales drop 1.1 percent in June, the National Association of REALTORS® reports.

NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, was at 102.7 in June, down 7.3 percent from year-ago levels. Any reading above 100 on the index is considered an average level of contract activity.

Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” he says. “However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a high number of potential buyers from fully taking advantage of lower interest rates.”Pending Home Sales

Yun expects a slight uptick in sales during the second half of the year.

“The good news is that price appreciation has decreased to its slowest pace since March 2012 behind much-needed increases in inventory,” Yun notes. “With rents rising 4 percent annually, potential buyers are less likely to experience sticker shock and make smart decisions on whether or not it makes sense to buy or continue renting.”

Across the country, pending home sales were mixed in June. They dropped by 2.9 percent (3.2 percent below year-ago levels) in the Northeast and by 2.4 percent (4.3 percent below year ago levels) in the South. On the other hand, pending home sales were up by 1.1 percent in the Midwest (but 5.5 percent below year-ago levels) and by 0.2 percent in the West (but 16.7 percent below year-ago levels), NAR reports.

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Source: NAR

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New Sellers Tool: Mortgage Rate Buy-Down

New Sellers Tool: Mortgage Rate Buy-Down. Some real estate professionals have begun touting “seller-assisted, below-market-rate financing” on for-sale signs outside of listed homes. They’re also offering interest rate buy-downs, a marketing technique most commonly used in new-home sales by home builders.  mortgage rate

As home sales slow in some markets, more sellers may consider hooking potential buyers by offering to lower their mortgage rate. Mortgage assistance may help offset rising prices and the much predicted looming rise in mortgage rates.

Some sellers are offering to lower buyers’ long-term monthly mortgage expense—for the life of the loan—by paying money upfront to the buyers’ lender to reduce the interest rate. For example, the seller may pay two to three points on the loan; a point is 1 percent of the mortgage amount. This would reduce the buyers’ interest rate by about one of half of a percentage point. When sellers pay points, they’re paying interest on the loan in advance.

From 2006 to 2009, mortgage rate buy-downs on resales were common, says David H. Stevens, chief executive of the Mortgage Bankers Association.

Oray Nicolai, a senior mortgage banker with Access National Mortgage, assists real estate professionals in structuring and presenting rate buy-downs to sellers and purchasers. Nicolai says that, in some cases, rate buy-downs can help make up for a low offer.

For example, Nicolai says in one incident buyers made an offer $50,000 less than the seller was willing to accept so the sellers bought down the rate by half a percentage point from 4.25 percent to 3.75 percent for a fixed, 30-year mortgage. The sellers were then able to get the price they needed to sell, while the buyers ended up with the same monthly principal and interest payment that they needed. The sellers’ buy-down cost them $13,600, allowing them to net about $36,000 more than they would have if they had accepted the buyers’ initial lower offer, Nicolai notes.

While rate buy-downs aren’t always the best move for sellers, housing experts say it’s one option that real estate professionals, sellers, and buyers may want to explore in the interest of saving a deal.

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Source: Los Angeles Times 07/27/2014

 

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Buyers Have Issues with Cell Towers & Antennas

An overwhelming 94 percent of home buyers and renters surveyed by the National Institute for Science, Law & Public Policy (NISLAPP) say they are less interested and would pay less for a property located near cell towers or antennas.

What’s more, of the 1,000 survey respondents, 79 percent said that under no circumstances would they ever purchase or rent a property within a few blocks of a cell tower or antennas, and almost 90 percent said they were concerned about the increasing number of cell towers and antennas in their residential neighborhood.   cell towers

The survey, “Neighborhood Cell Towers & Antennas—Do They Impact a Property’s Desirability?” also found that properties where a cell tower or group of antennas are placed on top of or attached to a building (condominium high-rise, for instance) is problematic for buyers.

“A study of real estate sales prices would be beneficial at this time in the Unites States to determine what discounts home buyers are currently placing on properties near cell towers and antennas,” says Jim Turner, chair of NISLAPP.

The NISLAPP survey echoes the findings of a study by Sandy Bond of the New Zealand Property Institute and past president of the Pacific Rim Real Estate Society (PRRES). “The Impact of Cell Phone Towers on House Prices in Residential Neighborhoods,” which was published in The Appraisal Journal in 2006, found that buyers would pay as much as 20 percent less for a property near a cell tower or antenna.

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Source: National Institute for Science,Law & Public Policy June 2014.

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Millennial Home Buyers, Where Are They Headed?

While first-time millennial home buyers’ presence in the housing market has been subdued in recent years, some metro areas are poised to soon see an increase in home buying from the millennial generation, according to new research from the National Association of REALTORS®.              millennial home buyers

“Limited job prospects, student debt, and flat wage growth have combined with tight credit conditions and low inventory to price millennials out of some of the top cities such as New York and San Francisco,” says Lawrence Yun, NAR’s chief economist. “However, NAR research finds that there are other metro areas millennial home buyers are moving to where job growth is strong and home ownership is more attainable. These markets are well-positioned to soon experience a rise in first-time buyers as the economy improves.”

To identify those soon-to-be booming millennial markets, NAR factored in current housing conditions and housing affordability, job creation, and population trends in 100 metro area across the country that have a large millennial presence to determine the best markets for aspiring millennial home buyers. Seven of the 10 metro areas were in the Midwest and West. The top markets identified (listed in alphabetical order) are:

  • Austin, Texas
  • Dallas
  • Denver
  • Des Moines, Iowa
  • Grand Rapids, Mich.
  • Minneapolis
  • New Orleans
  • Ogden, Utah
  • Salt Lake City
  • Seattle

NAR also identified the following markets with high potential for attracting millennial home buyers:

  • Madison, Wis.
  • Nashville, Tenn.
  • Omaha, Neb.
  • Raleigh, N.C.
  • Washington, D.C.

“Millennials will eventually settle down, trade their roommates for spouses and want to raise a family,” says Steve Brown, NAR’s president. “As long as median income continues to support purchasing power in most areas, the demand and opportunity will be there for millennials to purchase their first home with guidance and insights from a REALTOR®.”

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Source: NAR

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Housing Market Still Faces 3 Challenges

Existing-home sales gained momentum in June, reaching an annual pace of 5 million sales for the first time since October 2013, according to the National Association of REALTORS®’ latest housing report. Rising inventories also are pushing the overall supply of homes for sale toward a more balanced housing market, with unsold inventories 6.5 percent higher than a year ago, NAR notes.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” says Lawrence Yun, NAR’s chief economist. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.”                 housing market

Still, the market is facing several headwinds that continue to subdue a more robust recovery. NAR noted three in its most recent housing report:

1. Sluggish new-home construction: While overall housing inventories showed improvement in June, inventory problems continue to weigh on the market and could become more problematic if new-home construction doesn’t increase in more markets, NAR notes. “New-home construction needs to rise by at least 50 percent for a complete return to a balanced housing market because supply shortages — particularly in the West — are still putting upward pressure on prices,” Yun notes.

2. Stagnant wage growth: Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” Yun notes. “However, the lack of wage increases is leaving a large pool of potential home buyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”

3. Dwindling first-time home buyers: The percentage of first-time buyers continues to be low by historical standards. First-time home buyers made up 28 percent of the housing market in June, down from a typical 40 percent of the market historically.

NAR President Steve Brown says that some prospective buyers who have above average credit scores but low down payments are being deterred from home ownership by the high cost of FHA mortgage insurance.

“Access to affordable credit continues to hamper young, prospective first-time buyers,” says Brown. “NAR recommends that the FHA reduce high annual mortgage insurance premiums for all qualified homebuyers and eliminate the insurance requirement for the life of the loan. The FHA Hawk program is a good start, but it should offer further reductions for participating home buyers.”

Housing Snapshot for June

Here are some more housing indicators from NAR’s most recent report.

Home prices: Median existing-home prices for all housing types in June was $223,300, 4.3 percent higher than year-ago levels. This was the 28th consecutive month for year-over-year price gains.

Distressed homes: Foreclosures and short sales accounted for 11 percent of June sales, a 15 percent drop from year-ago levels. On average, foreclosures sold for a discount of 20 percent below market value, while short sales were discounted 11 percent in June.

Time on market: The median time on market for all homes was 44 days in June, up from 37 days on market in June 2013. Forty-two percent of homes sold in June were on the market for less than a month.

All-cash sales: All-cash sales made up 32 percent of transactions in June, up slightly from 31 percent in June 2013. Individual investors, who account for the majority of cash sales, purchased 16 percent of homes in June, down from 17 percent in June 2013.

Regional Snapshot

Take a closer look at how existing-home sales fared in your area.

  • Northeast: Existing-home sales increased 3.2 percent, but remain 3 percent below year-ago levels. Median price: $269,800, an 0.1 percent decrease from June 2013.
  • Midwest: Existing-home sales surged 6.2 percent, but remain 2.4 percent below June 2013. Median price: $177,900, up 4.6 percent from a year ago.
  • South: Existing-home sales rose slightly by 0.5 percent, up 1 percent from June 2013. Median price: $192,600, up 3.4 percent from a year ago.
  • West: Existing-home sales increased 2.7 percent, but remain 7.3 percent below a year ago. Median price: $301,000, up 7.2 percent from a year ago.

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Source: NAR

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New Home Construction Starts Still Low

New home construction starts have been low over the last couple years, and likely will continue to be low for the next two years, according to analysts at RBC Capital Markets.home construction

While new housing starts will likely hit the 1 million mark this year, that’s still far below the average of 1.46 million starts per year over the last half-century, RBC’s Robert Wetenhall notes in a new research report. Wetenhall predicts starts to reach 1.05 million in 2015 and 1.1 million in 2016.

Slower demographic growth, a soft labor market, tight lending standards, and a sharp increase in the cost of home ownership will make incremental volume growth more difficult to achieve if [economic growth] continues tracking in the range of 2 percent to 2.5 percent,” RBC analysts wrote in the report.

Instead, many builders are focusing on catering more to the luxury market by building pricier homes instead of trying to increase the overall number of units they’re constructing.

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Source: WSJ 07/21/2014

 

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First Time Home Buyers Make These 5 Mistakes

First-time home buyers can be eager to jump into home ownership. But real estate experts say they see them committing the same mistakes, time and time again. Here are some of the most common ones, as identified by experts in a recent CNBC article:   home buyers

1. They’re unprepared to compete against all-cash offers. Buyers need to be ready to make a quick decision if they’re housing market is heating up. Buying a home is “really like finding a job – it’s going to take a lot of time to prepare,” says Cara Pierce, a certified housing counselor with ClearPoint Credit Counseling Solutions. “That way, when the deal comes along, you’re ready to pounce on it.” Housing experts say buyers should have already saved as much as possible for a downpayment, repaired any credit report blemishes, and gotten preapproved for a loan as they start their house hunt to put them in a better position to compete.

2. They place a car ahead of the home. Lenders are going to scrutinize applicants’ debt-to-income ratio when assessing how well they can afford a mortgage payment. Consumers’ debt has gone on average from $40,000 in 2010 to $51,000 today, according to David Norris, president and COO of loanDepot, a non-bank mortgage lender. “It would be much easier to own a home if you can show a history of saving and not have gotten yourself into too much debt,” Norris told CNBC.

3. They place too much emphasis on online loan information. Online sites can be good for finding out general information about loan products and estimated costs, but experts recommend visiting with mortgage lenders face-to-face to help demystify some of the process and to take into account your specific situationGo to different places and talk to loan officers to get a feel for what the differences are between similar types of loans,” says Pierce. “Sometimes a company won’t charge an origination fee, but then the interest rate is higher … and in some cases you can put many of the upfront costs—closing costs, title insurance—into the loan, which makes your balance larger.”

4. They bank too much on online home values. Some real estate websites are giving buyers a false sense of home values, the CNBC article notes. “If a buyer believes that the actual value of the property is $1.1 million [as listed online] when it’s really $1.3 million, it’s a real disservice to the client,” says John Barrentine, co-founder and CEO of RED Real Estate Group. “You really should [spend time] with someone that understands the market, someone who’s there day in and day out.” Home buyers can get the best feel of the market by working with a real estate agent and driving around neighborhoods and get a sense of things about homes that may be less valuable or even more valuable than perceived online.

5. They forgo the home inspection. About 10 percent of homes recently purchased weren’t inspected by a home inspector, according to Bill Loden, president of the American Society of Home Inspectors. Some buyers were trying to cut down on the costs of hiring an inspector to investigate a home – which usually averages about $450 — but defects uncovered later could potentially result in the loss of thousands of dollars. “It takes a trained eye to be able to see the problems that can exist in a home,” Loden said. “The inspection can also give the first-time buyer a bit of a schooling on the house and how to maintain it.” Buyers should also be prepared to ask questions about conditions that are common to specific areas, such as radon in Midwest; sewers in California; and active clay soils in Dallas that can lead to foundation issues, the CNBC article notes. The home may require additional inspection from a specialist to rule out potential problems.

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Source: CNBC 07/17/2014

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67% Of Home Owners Planning Home Renovations

Sixty-seven percent of consumers say they’re planning home renovations within the next six months, according to realtor.com®’s Home Improvement Survey of more than 1,500 home owners. They’re planning to spend more money on their home renovations than last year, the survey found.                                home renovations

The most common budget range for home improvements was between $2,001 and $5,000. Eighteen percent of respondents who say they plan to renovate before the end of the year are budgeting $10,000 to $20,000 on their renovation.

Respondents indicated that these are the most popular areas of the home to renovate: the kitchen (61%), bathrooms (59%), backyards or patios (33%), and the exterior of the home (32%).

“With 32 percent of consumers planning to spend money on improving the look and feel of their homes, home buyers should think about purchasing homes that require renovations,” says Barbara O’Connor, chief marketing officer for Move Inc., the operator of realtor.com. “By considering these kinds of homes, buyers open themselves up to more affordable options and the ability to renovate their homes to fit their specific needs and tastes.”

Here are some additional survey findings:

Most Popular Reasons for Planned Home Improvements

  • To improve the aesthetics and/or enjoyment of the home (32%)
  • In preparation for putting house on the market (22%)
  • Recently purchased a home needing renovations (19%)
  • To improve the value of the home (11%)

Owners’ Home-Improvement Budgets for the Next Six Months

  • $2,001 – $5,000 (22%)
  • $5,001 – $10,000 (19%)
  • $10,001 – $20,000 (18%)
  • $20,001 – $50,000 (14%)

Owners’ Intentions to Sell

  • Not any time in the foreseeable future (37%)
  • 0 – 6 months (20%)
  • 1 – 3 years (19%)
  • 4 – 6 years (10%)

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Source: Move Inc

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Listings Utilizing Open Houses At 6.3% Nationwide

Open houses can generate a lot of buyer traffic for a listing, but they are held for only a small fraction of listings. According to a HomeFinder study, open houses were held to reach potential buyers for only 6.3 percent of listings nationwide.  open houses

Here are some additional open house insights from the study:

  • Sunday is the most common day to host an open house.
  • A home is on the market for an average of seven days before holding an open house.
  • Seventy-seven percent of all open houses are held for listings that are single-family homes.
  • The median list price of a home hosting an open house is $339,990.
  • The following top five cities have the most open houses in the country: New York; Los Angeles; Washington, D.C.; Chicago; and Baltimore.

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Source: HomeFinder.com 07/09/2014

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Rising Home Prices Hurting Housing Affordability

Rising home prices pushed housing affordability down in May compared with last year, making homes a little less affordable to the average family, according to the National Association of REALTORS®’ latest housing affordability index.

The median price for a single-family home rose to $213,600 in May, up 4.9 percent from a year ago. However, the affordability picture may improve in the coming months as price gain slow. Meanwhile, mortgage rates rose 77 basis points from last year (with one percentage point equal to 100 basis points).                      Housing Affordability

“While jobs and income levels are up slightly from last year, they are not growing fast enough to offset price increases,” writes Michael Hyman, an NAR research assistant, on NAR’s Economists’ Outlook blog. “Having money for a down payment can still be a big hurdle for potential home buyers who already pay comparable rent payments.”

Affordability was down in May in all regions of the country, with the South posting the largest drop in affordability in the month, but the West saw the largest slump in affordability year-over-year after seeing the largest price gain of 8.4 percent.

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Source: NAR 07/15/2014

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