Published on: Nov 26, 2014 @ 8:31 am
Mortgage applications decreased 4.3% from one week
earlier,
according to data from the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Applications
Survey for the week ending November 21, 2014. The
previous week’s results had included an adjustment
for the Veterans Day holiday. The Market Composite
Index, a measure of mortgage loan application volume,
decreased 4.3% on a seasonally adjusted basis from one
week earlier. On an unadjusted basis, the Index
increased 5% compared with the previous week. The
Refinance Index decreased 4% from the previous week.
The seasonally adjusted Purchase Index decreased 5%
from one week earlier. The unadjusted Purchase Index
increased 1% compared with the previous week and was
10% lower than the same week one year ago. The
refinance share of mortgage activity increased to 63%
of total applications from 61% the previous week. The
adjustable-rate mortgage (ARM) share of activity
increased to 7.0% of total applications. The FHA share
of total applications decreased to 9.4% this week from
9.9% last week. The VA share of total applications
decreased to 10.3% this week from 11.5% last week. The
USDA share of total applications remained unchanged at
0.8% this week. The average contract interest rate for
30-year fixed-rate mortgages with conforming loan
balances ($417,000 or less) decreased to 4.15% from
4.18%, with points increasing to 0.25 from 0.24
(including the origination fee) for 80% loan-to-value
ratio (LTV) loans. The effective rate decreased from
last week.
Consumer sentiment down November
US consumer sentiment rose in November to its highest
level in more than seven years on improvements in the
current economic condition, including lower gas prices
and improving job prospects, a survey released on
Wednesday showed. The Thomson Reuters/University of
Michigan’s final November reading on the overall index
on consumer sentiment came in at 88.8, its highest
reading since July 2007 on a final basis. The reading
was up from the 86.9 the month before but slightly
below the preliminary reading of 89.4. Despite the
uptick, it was below the median forecast of 90.0 among
economists polled by Reuters. “Consumers more
frequently reported hearing about positive rather than
negative economic developments in the November survey,
with reports of improving employment the dominant news
item,” survey director Richard Curtin said in a
statement. “While there was no change in evaluations
of the current performance of the economy or the
year-ahead outlook – both remained at positive levels –
the longer term economic outlook improved
substantially.” The survey’s barometer of current
economic conditions rose to 102.7 from 98.3, just below
a forecast of 103.0. The survey’s gauge of consumer
expectations edged up to 79.9 from the 79.6 in October
and was short of the expected 80.8. The survey’s
one-year inflation expectation slipped to 2.8%, the
lowest year-ahead inflation rate expected since October
2010, from the 2.9% in the prior month. The survey’s
five-to-10-year inflation outlook was at 2.6% from 2.8%
in October.
NAR – pending home sales drop in October
Pending home sales declined in October but remained at
a healthy level of activity and are above
year-over-year levels for the second straight month,
according to the National Association of Realtors
(NAR). The Pending Home Sales Index, a forward-looking
indicator based on contract signings, decreased 1.1% to
104.1 in October from an upwardly-revised 105.3 in
September, but is 2.2% higher than October 2013
(101.9). The index is above 100—considered an average
level of contract activity—for the sixth consecutive
month. The median existing-home price for all housing
types in October was $208,300, which is 5.5% above
October 2013. Monthly median price growth has averaged
5.8% in 2014 (through October) after averaging 11.5%
last year. The PHSI in the Northeast inched 0.5% to
87.9 in October, and is now 3.4% above a year ago. In
the Midwest the index slightly declined 0.6% to 100.6
in October, and is now 3.0% below October 2013.
Pending home sales in the South decreased 1.0% to an
index of 118.3 in October, but is still 3.9% above last
October. The index in the West fell 3.2% in October to
98.1, but remains 4.1% above a year ago.
Durable goods orders up in October
US durable-goods orders rose last month on a surge in
military spending, but underlying data pointed to broad
weakness in business investment. Orders for durable
goods–products like earth movers and refrigerators
designed to last at least three years–rose a
seasonally adjusted 0.4% in October from a month
earlier, the Commerce Department said Wednesday. That
partly reversed a 0.9% drop in September. Economists
surveyed by The Wall Street Journal had expected
overall orders to fall 0.5%. The rise largely
reflected a 45.3% surge in demand for defense aircraft
and parts. But that masked weak demand for other goods.
Excluding transportation, orders fell 0.9%, the
biggest drop since December 2013. Excluding
defense-related products, orders fell 0.6%. Orders for
nondefense capital goods excluding aircraft-a measure
of business spending on equipment and software–fell
1.3% in October after dropping at the same rate in
September. Orders for machinery, computer products,
fabricated metal products and primary metals all fell
last month.
The broader trend suggests demand for long-lasting
goods continues to rise as more Americans gain jobs and
firms gain confidence to invest. So far this year,
orders for durable goods have risen 7.5% compared with
2013. Orders for nondefense capital goods excluding
aircraft have climbed 5.4%. But the latest monthly
figures also suggest the economy may be cooling from
its fast growth pace in the spring and summer. The US
economy grew at an annualized pace of 3.9% in July
through September, concluding a six-month stretch that
marked the strongest growth in more than a decade, the
government reported this week. Many economists expect
economic growth to slow to between 2% and 3% in the
fourth quarter, and Wednesday’s report could reaffirm
those expectations. Troubles in Japan and Europe are
threatening to dent US exports and hurt sales at
American factories. But US companies and consumers are
also being helped by lower fuel costs after a fall in
global oil prices. And they appear to be gaining enough
confidence to invest as Americans sustain higher
spending. A Federal Reserve report earlier this month
suggested economic growth could slow this quarter. US
industrial production-the output of factories,
utilities and mines-fell 0.1% in October from the prior
month.
US new home sales rise in October
Sales of new US single-family homes rose for a third
straight month in October, but a downward revision to
the prior month’s sales pace indicated the housing
market recovery would remain gradual. The Commerce
Department said on Wednesday that sales gained 0.7% to
a seasonally adjusted annual rate of 458,000 units.
September’s sales pace was revised down to 455,000
units from 467,000 units. Economists polled by Reuters
had forecast new home sales rising to a 472,000-unit
pace last month. New home sales, which account for
about 8% of the housing market, tend to be volatile
month to month. Compared to October last year, sales
were up 1.8%. Housing remains constrained by slow wage
growth, which is resulting in a slow pace of household
formation. Last month, new home sales rose 7.1% in the
Northeast and surged 15.8% in the Midwest. In the
populous South, sales fell 1.9% and were down 2.7% in
the West. With sales rising modestly, the stock of new
houses available on the market rose 1.0% last month to
the highest level since June 2010. At October’s sales
pace it would take 5.6 months to clear the supply of
houses on the market, up from 5.5 months in September.
Six months’ supply is normally considered a healthy
balance between supply and demand. The median new home
price jumped 15.4% from a year ago to a record
$305,000.
Midwest manufacturing growth slows
The Institute for Supply Management-Chicago’s gauge
of manufacturing activity in the US Midwest fell to
60.8 in November from 66.2 the month prior. Economists
expected a shallower drop to 63. Readings above 50
point to expansion, while those below indicate
contraction.
NAR – commercial real estate demand holding steady
Despite a slowing global economy, forward economic
momentum in the US should keep commercial real estate
activity on firmer footing, according to the National
Association of Realtors (NAR) quarterly commercial real
estate forecast. Lawrence Yun, NAR chief economist,
says commercial activity should progress at a gradual
pace heading into 2015. “Solid economic growth in the
third quarter proved that the second quarter wasn’t
an anomaly, as business spending increased, commercial
construction rose and the labor market continued to
make positive strides,” he said. “Job growth is the
catalyst to improved demand for commercial real estate
leasing and new construction projects.” However, Yun
does caution that softening in the global economy will
likely widen the trade deficit in the US and could
trigger some weakening in the overall economy. “GDP
growth in the fourth quarter will be sluggish at around
2% behind stalling exports. Although GDP will likely
climb to near 3% in 2015, the current pace of job
growth could slow and ultimately impact commercial real
estate activity if sluggishness in the global economy
persists,” he said.
National office vacancy rates are forecast to decrease
0.5% over the coming year due to job growth exceeding
inventory coming onto the market. Improved
manufacturing activity should lead to a declining
vacancy rate for industrial space (0.4%), while retail
space is forecast to decline 0.2% behind a boost in
consumer spending from personal income gains and lower
gas prices. “Low housing inventory and the sizeable
demand for rentals will continue to spur multifamily
construction as well as keep rents rising above
inflation through next year,” says Yun. NAR’s
latest Commercial Real Estate Outlook offers overall
projections for four major commercial sectors and
analyzes quarterly data in the office, industrial,
retail and multifamily markets. Historic data for metro
areas is provided by REIS Inc., a source of commercial
real estate performance information.
Office Markets
Office vacancy rates are forecast to slightly decline
from 15.7% in the fourth quarter to 15.6% through the
fourth quarter of 2015. The markets with the lowest
office vacancy rates in the fourth quarter are
Washington, D.C., at 9.3%; New York City, 9.6%; Little
Rock, Ark., 11.6%; San Francisco, 12.2%; and Seattle,
at 12.8%. Office rents are projected to increase 2.4%
in 2014 and 3.3% next year. Net absorption of office
space in the US, which includes the leasing of new
space coming on the market as well as space in existing
properties, is likely to total 35.6 million square feet
this year and 48.8 million in 2015.
Industrial Markets
Industrial vacancy rates are expected to fall from 8.8%
in the fourth quarter to 8.4% in the fourth quarter of
2015. The areas with the lowest industrial vacancy
rates currently are Orange County, Calif., with a
vacancy rate of 3.6%; Los Angeles, 3.7%; Seattle, 5.8%;
Miami, 6.0; and Palm Beach, Fla., at 6.5%. Annual
industrial rents should rise 2.4% this year and 2.9% in
2015. Net absorption of industrial space nationally is
expected to total 110.7 million square feet in 2014 and
102.5 million square feet next year.
Retail Markets
Vacancy rates in the retail market are expected to
decline from 9.7% currently to 9.5% in the fourth
quarter of 2015. Currently, the markets with the
lowest retail vacancy rates include San Francisco, at
3.5%; Fairfield County, Conn., 3.9%; San Jose, Calif.,
4.6%; Orange County, Calif., 5.2%; and Long Island,
N.Y., at 5.3%. Average retail rents are forecast to
rise 2.0% in 2014 and 2.5% next year. Net absorption of
retail space is likely to total 11.4 million square
feet this year and jump to 18.9 million in 2015.
Multifamily Markets
The apartment rental market – multifamily housing –
should see vacancy rates slightly increase from 4.0%
currently to 4.3% in the fourth quarter of 2015.
Vacancy rates below 5% are generally considered a
landlord’s market, with demand justifying higher
rent. Areas with the lowest multifamily vacancy rates
currently are Orange County, Calif., and Sacramento,
Calif., at 2.2%; Providence, R.I., and New Haven,
Conn., at 2.3%; and Hartford, Conn., at 2.5%. Average
apartment rents are projected to rise 4.0 this year and
3.9% in 2015. Multifamily net absorption is expected to
total 216,300 units in 2014 and 171,200 next year.
RealtyTrac – US median home price in October increases
RealtyTrac today released its October 2014 Residential
& Foreclosure Sales Report, which shows the median
sales price of US single family homes and condos in
October was $193,000, up 2% from the previous month and
up 16% from a year ago to the highest level since
September 2008 — a 73-month high. “This US
recovery is largely being driven by investors, and as
the lower-priced, often distressed inventory most
appealing to investors dries up in a given market,
investor activity will slow down in that market and
move to other markets with more ideal inventory
available,” said Daren Blomquist, vice president at
RealtyTrac. “This has created a ripple-effect
recovery moving out from traditional investor hot spots
such as Phoenix, Atlanta and many California markets
and into markets such as Charlotte, Columbus, Ohio,
Dallas and Oklahoma City. “More than 32% of all
single family homes and condos purchased so far in 2014
are non-owner occupied compared to 68% that are
owner-occupied,” Blomquist added. “That is the
highest share of investor purchases since we began
tracking in 2001.”
The October median sales price — which included both
distressed sales of homes in some stage of foreclosure
and non-distressed sales — was up 37% from a trough
of $141,000 in March 2012 but still 19% below the
previous peak of $237,537 in August 2006. Among 97
metropolitan statistical areas with a population of
500,000 or more with sufficient home price data, 20
have reached new post-recession median sales price
peaks in 2013 or 2014, including Denver, Pittsburgh,
Columbus, Ohio, and Charlotte. “Home prices have
risen substantially in the lower price ranges —
generally under $400,000. The median sales price of
distressed homes — those in the foreclosure process
or bank-owned — was $128,701 nationwide in October,
36% below the median sales price of non-distressed
properties, $200,000. But distressed home prices
increased at a faster pace, up 18% from a year ago
while non-distressed home prices were up 11% during the
same time period. “The demand is strong for a
lessening distressed inventory and pushing prices to
their highest level since 2008,” said Mike Pappas,
CEO and president of the Keyes Company, covering the
South Florida market. “Additionally, due to the long
delay in our judicial foreclosure system we are now
seeing a higher quality of distressed inventory being
liquidated, although overall home prices have begun to
gradually level off over the past few months as the
market normalizes.”
Markets with highest home price appreciation
Among metro areas with a population of 500,000 or more
and sufficient home price data, those with the biggest
annual increase in median sales price were Toledo, Ohio
(up 33%), Detroit (up 27%), Cleveland (up 21%),
McAllen-Edinburg-Mission, Texas (up 21%), and Dayton,
Ohio (up 20%). Other major markets with double-digit
appreciation compared to a year ago included Memphis,
Tenn. (up 18%), Austin, Texas (up 17%), Miami (up 16%),
Houston (up 16%), Cincinnati (up 15%), and Chicago (up
15%). “While price appreciation has leveled off
month to month, home prices have increased
significantly from a year ago and we expect this trend
to continue,” said Craig King, COO of Chase
International, covering the Lake Tahoe and Reno, Nev.,
markets. The median sales price in Reno was unchanged
from September to October but up 15% from a year ago
— the 29th consecutive month with a year-over-year
increase in the market. “A number of things have
lined up regionally to provide game changing growth as
we look forward,” continued King. “The world is
aware that Tesla is making a move in to Northern Nevada
with their Gigafactory, but there are other huge
projects on tap as well. Collectively, these projects
could account for population gains of 20 to 25% in the
region over the next four to five years. With limited
inventory the demand for housing will be
unprecedented.”
Markets with accelerating home price appreciation
Home price appreciation accelerated in 45 of the 97
(46%) metro areas nationwide with a population of half
a million or more and with sufficient home price data.
Markets with the fastest-accelerating appreciation
included Cincinnati (15% annual appreciation this year
compared to 4% annual depreciation last year),
Cleveland (21% annual appreciation this year compared
to 2% annual appreciation last year), Nashville (13%
annual appreciation this year compared to 1% annual
appreciation last year), Charlotte (10% annual
appreciation this year compared to 1% annual
depreciation last year), and Columbus, Ohio (14% annual
appreciation this year compared to 3% annual
appreciation last year. Other major markets with
accelerating home price appreciation were Chicago (15%
annual appreciation this year compared to 11% a year
ago), Dallas (11% annual appreciation this year
compared to 7% a year ago), Pittsburgh (8% annual
appreciation compared to 5% a year ago), Seattle (10%
annual appreciation this year compared to 7% a year
ago), Tampa (15% annual appreciation this year compared
to 12% a year ago) and Baltimore (2% annual
appreciation this year compared to 0% a year ago).
“The continued rise in Seattle median home prices is
largely a result of a strong local economy, low housing
supply, and high buyer demand,” said OB Jacobi,
president of Windermere Real Estate, covering the
Seattle market. The percentage of distressed home sales
in Seattle has returned to pre-mortgage crisis levels,
with activity being driven by the hardships that have
always instigated short sales, such as job loss,
divorce, illness, and job relocation. Most of the
distressed properties have shifted into the outlying
areas around Seattle and are selling for well under the
median home price.”
Markets with slowing home price appreciation
Home price appreciation slowed compared to a year ago
in 52 of the 97 (54%) metro areas nationwide with a
population of half a million or more and with
sufficient home price data. Some of the
fastest-appreciating markets in 2013 have seen
substantial slowdowns in price appreciation this year,
including Phoenix (6% annual appreciation in October
2014 compared to 25% a year ago), Los Angeles (9%
annual appreciation this year compared to 24% a year
ago), Oxnard-Thousand Oaks-Ventura in Southern
California (7% annual appreciation this year compared
to 24% a year ago), Jacksonville, Fla. (4% annual
appreciation this year compared to 23% a year ago),
Boston (3% annual appreciation this year compared to
21% a year ago), and San Diego (8% this year compared
to 19% a year ago). Other major markets with
decelerating home price appreciation in October were
New York (1% annual appreciation this year compared to
4% a year ago), Philadelphia (4% annual depreciation
this year compared to 5% annual appreciation a year
ago), Houston (16% annual appreciation this year
compared to 27% a year ago), Miami (16% annual
appreciation this year compared to 20% a year ago),
Atlanta (13% annual appreciation this year compared to
25% a year ago), and San Francisco (12% annual
appreciation this year compared to 34% a year ago).
Las Vegas, Central California and Central Florida post
highest distressed sale share
Short sales and distressed sales — in foreclosure or
bank-owned — combined accounted for 13.8% of all
residential property sales in October, up slightly from
13.7% the previous month, but down from 14.7% in
October 2013. Markets with the highest percentage of
distressed and short sales combined were Las Vegas
(33.6%), Stockton, Calif., (33.6%), Modesto, Calif.,
(31.7%), Lakeland, Fla., (28.9%), and Orlando (28.4%).
Short sales share close to pre-recession levels
nationwide, up from a year ago in 12 states
Short sales accounted for 5.0% of all residential
property sales in October, unchanged from the previous
month and a year ago and not far above the
pre-recession average of 4.5% a month in 2006. Markets
with the highest percentage of short sales were in
Orlando (14.2%), Lakeland, Fla., (13.0%), Palm
bay-Melbourne-Titusville, Fla., (11.8%), Cape
Coral-Fort Myers, Fla., (11.8%), and Las Vegas (11.5%).
Twelve states saw an increase in short sales share
compared to a year ago, including New Jersey (7.1%
compared to 4.6% a year ago), Illinois (9.9% compared
to 6.6% a year ago), Maryland (9.3% compared to 7.2% a
year ago), Ohio (5.4% compared to 4.7% a year ago),
Nevada (10.8% compared to 9.8% a year ago), California
(4.6% compared to 4.3% a year ago), Michigan (6.5%
compared to 6.2% a year ago) and Arizona (5.8% compared
to 5.6% a year ago).
Bank-owned sales share matches lowest level since
January 2011
Sales of bank-owned properties nationwide accounted for
7.5% of all US residential sales in October, the same
as previous month but down from 9.1% a year ago. The
share of bank-owned sales in September and October was
the lowest share since January 2011. Markets with the
highest percentage of bank-owned sales were in
Stockton, Calif. (23.5%), Modesto, Calif., (19.3%),
Bakersfield, Calif., (18.8%), Las Vegas (18.6%),
Riverside-San Bernardino, Calif., (18.3%), and Phoenix
(16.4%). “Distressed sales remain a small percentage
of the overall marketplace in Southern California as
prices stabilize and market health continues to
improve,” said Chris Pollinger, senior vice president
of sales at First Team Real Estate, covering the
Southern California market.
Foreclosure auction sales share increases most in
Midwest, Rust Belt cities
Sales at the public foreclosure auction accounted for
1.3% of all US residential property sales in October,
up from 1.2% in September and up from 0.7% in October
2013. Markets with the highest percentage of sales at
foreclosure auction were Lakeland, Fla. (5.4%), Orlando
(4.2%), Palm Bay-Melbourne-Titusville (4.1%), Miami
(4.1%), Tampa (4.0%) and Las Vegas (3.5%). Markets
with the biggest annual increases in share of
foreclosure auctions were Des Moines (1.9% compared to
0.1% a year ago), Akron, Ohio (2.1% compared to 0.1% a
year ago), Philadelphia (1.9% compared to 0.1% a year
ago), Chattanooga, Tenn., (1.3% compared to 0.1% a year
ago), and Fresno, Calif., (0.9% compared to 0.1% a year
ago). Major metros with an annual increase in share of
foreclosure auction sales included Dallas (1.8%
compared to 0.4% a year ago), Cincinnati (1.2% compared
to 0.3% a year ago), Columbus (3.0% compared to 0.7% a
year ago), San Antonio (1.5% compared to 0.4% a year
ago), Cleveland (2.2% compared to 0.6% a year ago),
Houston (1.6% compared to 0.6% a year ago),
Jacksonville, Fla., (3.5% compared to 1.4% a year ago),
Oklahoma City (1.3% compared to 0.8% a year ago),
Virginia Beach (1.4% compared to 0.8% a year ago), and
Atlanta (2.3% compared to 3.3% a year ago).