Published on: Mar 25, 2016 @ 10:37 am
CoreLogic – cash sales share in 2015 lowest in seven
years
Cash sales accounted for 33.4% of total home sales in
December 2015 and 33.9% of total home sales for the
full year 2015. The full year 2015 cash sales share was
the lowest since 2008. The December cash sales share
was down 3.3 percentage points year over year from
36.7% in December 2014. On a month-over-month basis,
the cash sales share fell by 2.8 percentage points in
December 2015 compared with November 2015. The month
over month decrease in cash sales share was larger than
normal for the month of December, indicating that the
elevated share reported for November, and attributed to
the new federal mortgage rules (TRID), was temporary.
The cash sales share peaked in January 2011 when cash
transactions accounted for 46.6% of total home sales
nationally. Prior to the housing crisis, the cash sales
share of total home sales averaged approximately 25%.
If the cash sales share continues to fall at the same
rate it did in December 2015, the share should hit 25%
by mid-2017.
Real estate-owned (REO) sales had the largest cash
sales share in December 2015 at 59.2%. Resales had the
next highest cash sales share at 33.4%, followed by
short sales at 30.9% and newly constructed homes at
15.4%. While the percentage of REO sales that were
all-cash transactions remained high, REO transactions
accounted for only 6.9% of all sales in December 2015.
In January 2011 when the cash sales share was at its
peak, REO sales represented 23.9% of total home sales.
Resales typically make up the majority of home sales
(about 79% in December 2015), and therefore have the
biggest impact on the total cash sales share. Delaware
had the largest cash sales share of any state at 57%,
followed by Alabama (50.1%), New York (46.5%), Florida
(46.3%) and Mississippi (45%). Of the nation’s largest
100 Core Based Statistical Areas (CBSAs) measured by
population, Detroit, Mich. had the highest cash sales
share at 62.7%, followed by West Palm Beach-Boca
Raton-Delray Beach, Fla. (53.4%), Miami-Miami
Beach-Kendall, Fla. (53.2%), Fort Lauderdale-Pompano
Beach-Deerfield Beach, Fla. (51.2%) and North
Port-Sarasota-Bradenton, Fla. (51%). Syracuse, N.Y. had
the lowest cash sales share at 12.5%.
Fourth-quarter GDP revised up; corporate profits fall
US economic growth slowed in the fourth quarter, but
not as sharply as previously estimated, with fairly
strong consumer spending offsetting the drag from
efforts by businesses to reduce an inventory overhang.
Gross domestic product increased at a 1.4% annual rate
instead of the previously reported 1.0% pace, the
Commerce Department said on Friday in its third GDP
estimate. GDP growth was initially estimated to have
risen at only a 0.7% rate. The economy grew at a rate
of 2.0% in the third quarter and expanded 2.4% for all
of 2015. Economists polled by Reuters had expected
that fourth-quarter GDP growth would be unrevised at a
1.0% rate. The upward revisions reflected a stronger
pace of consumer spending than previously estimated.
Consumer spending, which accounts for more than two
thirds of US economic activity, rose at a 2.4% pace
rather than the 2.0% rate reported last month. That
reflected more consumption of services than previously
estimated. The fairly solid pace of consumer spending
underscores the economy’s underlying strength and
should further allay fears of a recession, which
triggered a massive stock market sell-off early this
year. Spending is being supported by a tightening
labor market, which is steadily lifting wages, and
rising house prices. Gasoline prices around $2 per
gallon are also helping to underpin household
discretionary spending. Inventory investment was
revised lower. Still, inventories remain high relative
to domestic demand. Businesses accumulated $78.3
billion worth of inventory rather than the $81.7
billion reported last month. As a result, inventories
subtracted 0.22 percentage point from GDP growth
instead of the previously reported 0.14 percentage
point.
Zillow – February market report: peeking at home value
peaks
Median home values in more than a quarter of the
nation’s metro housing markets are currently, or were
recently, as high as they’ve ever been.
In February, home values rose 4.3% year-over-year to a
Zillow Home Value Index of $184,600. Median home
values in more than a quarter of the nation’s metro
housing markets are currently, or were recently (within
the last year), at peak and as high as they’ve ever
been, according to the February Zillow Real Estate
Market Report. But what do home value peaks really
mean? As with most things in real estate, the answer
depends on where you are. The national Zillow Home
Value Index was $184,600 in February, 5.9% below the
record median home value set in mid-2007. But over the
past year, many housing markets in the South,
especially Texas and Tennessee, have joined many
Western housing markets in blowing past their previous
median home value highs. Dallas home values set a new
record at $180,700 in February, up 13.7% from last
February. Nashville home values rose 9.5% to a median
of $189,100.
In a general sense, the idea of home values being at
their “peak” is easy to take out of context. In a
normal market – in which nominal home values grow
fairly consistently year after year at a roughly 2% to
3% annual pace – home values are always reaching new
peaks. In this example, home values in Anywhere, USA,
can be reliably counted upon to be modestly higher this
year than they were last year, and to be a bit higher
next year than they are this year. Aside from periodic
slowdowns or small dips in home values caused by local
economic factors, nominal home values should always
just keep chugging slowly upward in normal times. But
the past decade-plus has been anything but normal for
US housing, which has distorted this definition of
“peak” home values. By now we’re all familiar with
housing’s rough arc in the 21st century: a rapid
acceleration in home value growth between roughly 2000
and 2007, followed by an almost equally rapid decline
from May 2007 through early 2012 and then a steadier
climb back again in more recent years. The very broad
nature of last decade’s housing boom and bust means
that the majority of local markets have followed a
similar path as the US as a whole, though the severity
of their local booms and busts and exact peak and
trough dates will vary somewhat.
But not all local markets experienced the housing boom,
bust and recovery the same way. Some markets just kept
chugging away slowly, never really falling much in the
first place. It has taken others years to slowly claw
their way back to pre-recession levels after a
difficult bust. And still others had only a mild bust
period, recovered quickly and have been setting new
peaks for years. Pittsburgh is a good example of a
market that has just kept chugging along, with no clear
boom and bust period, only steady growth over the past
two decades. Rather than experience a sharp dip during
the bust, home values in the Pittsburgh area more or
less flattened out without falling too much between
2008 and 2013, before resuming their somewhat more
rapid rise during the recovery. Far from being a cause
for concern, the fact that home values in Pittsburgh
are currently hovering very near their “peak” is really
just a sign of remarkable stability in the market.
Boston is an example of a market that had a clear
run-up in home values, a distinct decline during the
bust, and a long recovery over the past few years.
During the boom years, home values in Boston peaked
early relative to the nation, at $384,900 in September
2005. What followed was a long six-year period of
falling home values, reaching bottom in November 2011
at $311,800, a drop of almost 19%. It took until
January 2016 for home values in Greater Boston to
surpass their prior peak. Home values in Greater Boston
are, after years of bust and recovery, finally starting
to break new ground again, and look to be on a
sustainable growth path going forward.
Finally, a market like Denver is indicative of a market
that quickly shook off the bust and has taken off like
a rocket in recent years. Prior to the recession, home
values in the Denver area peaked at $237,600 in May
2006. During the bust, home values fell to a low of
$207,300 by August 2011. By July of 2013, Denver-area
home values had already surpassed their earlier peak,
and haven’t slowed down since. Currently, home values
in Denver stand at $326,300 – 37.3% higher than May
2006 values, and up a whopping 57.4% from their August
2011bottom. This rapid growth in home values is
largely driven by Denver’s own massive population
growth over the past decade-plus, combined with a
limited supply of new homes for sale. This kind of
rapid and unflagging growth could be worrisome, and may
indicate a local bubble starting to form in Denver and
similar markets like the Bay Area. But even so, rapid
growth on its own isn’t enough to indicate a bubble as
long as this growth is driven by solid underlying
economic fundamentals like strong job and wage growth,
true housing demand and limited supply and not rampant
speculation – which is the case in Denver. So while
taking a peek at peak home values naturally piques our
interest and is useful in determining how far some
markets have come and how far others still have to go,
interpreting what it really means is all a matter of
perspective.
In February, the median US home value rose 0.2% from
January and 4.3% from February 2015, according to the
Zillow Home Value Index. US home values have grown on a
year-over-year basis for 44 straight months. Home
values in 26 of the nation’s 35 largest metro markets
grew faster year-over-year than the nation’s 4.3%
annual pace in February. Home values grew by more than
10% per year in six of those large metro markets:
Denver (up 14.5% year-over-year), Dallas (13.7%),
Portland (13.4%), San Jose (11.4%), San Francisco
(10.9%) and Miami (10.5%). None of the nation’s largest
metros experienced annual home value declines in
February. The US median rent in January was $1,383 per
month, up 0.1% from January and 2.6% from February
2015, according to the Zillow Rent Index. US rents have
grown year-over-year for 42 consecutive months. Median
rents in all but one of the nation’s 35 largest metro
markets grew year-over-year to some extent, with only
Cleveland experiencing an annual decline (-1.2% from
February 2015). Rents grew fastest year-over-year in
the San Francisco (up 10.5% from January 2015),
Portland (up 8.7%) and San Jose (up 8%) metros.
Outlook
Looking ahead, Zillow expects national home values to
continue growing, rising another 2.3% through February
2017. Rents are also expected to keep growing over the
next year, at a 1.7% pace through February 2017. The
new home value records being set in a number of markets
mean we’re no longer making up ground lost during the
housing recession –we’re laying a new path forward,
based on demand for housing and economic growth
throughout the economy. In some markets, these new
highs are a return to normalcy, and in others are a
reminder that not all markets react the same to broader
economic trends. Finally, the fact that many other
markets are still off pre-recession peaks by double
digits – places like Las Vegas (down 33.8% from Q2 2006
peaks) and Orlando (off by 29.5% from prior peaks) –
may not even mean those markets are far from full
recovery. Instead, their long path back just highlights
how extraordinarily inflated home values were in those
areas during the housing bubble.
US weekly jobless claims up
The number of Americans filing for unemployment
benefits rose last week while revisions for prior weeks
showed the labor market was much stronger than
previously thought. Initial claims for state
unemployment benefits increased 6,000 to a seasonally
adjusted 265,000 for the week ended March 19, the Labor
Department said on Thursday. The prior week’s claims
were revised to show 6,000 fewer applications received
than previously reported. Economists polled by Reuters
had forecast claims rising to 268,000 in the latest
week. The government also revised data going back to
2011, which showed claims trending lower than
previously reported. Claims for the week ended March 5
were the lowest since November 1973.
WSJ – more Americans are again moving to suburbs than
cities
Economists to real-estate agents have debated whether
the housing boom and bust of the last decade has
dramatically remade the way Americans live or merely
created a temporary disruption. US Census data
released Thursday provides strong support for the
latter thesis—that shifts in where Americans move were
merely temporary, according to analysis by Jed Kolko, a
senior fellow at the Terner Center for Housing
Innovation at the University of California, Berkeley.
For one thing, the rate at which Americans are moving
to the suburbs is once again outpacing the rate at
which they are moving to cities. That picks up on a
decades long trend that only very temporarily reversed
during the recession. Urban counties grew by 0.8% in
2015 to roughly 77 million people, compared with
suburban counties, which grew by nearly 1% to 159
million people. Mr. Kolko defines counties as urban
based on how dense they were as of the 2010 census.
Overall, the US population grew by 0.8% from 2014 to
2015, or a difference of about 2.5 million people.
Suburbs have been outpacing cities in population growth
for decades. In 2001, suburbs grew about 1.2% while
cities grew by about 0.7%. The trend was exacerbated
by the housing boom, when easy mortgages helped buyers
afford homes being built at a rapid pace in far-out
suburbs. In 2006, suburbs grew by 1.5% while cities
instead actually lost nearly 0.4% of their population.
Cities grew faster than suburbs for one year during the
last decade, in 2011. While much has been written about
the revival of cities, the overall population trends
underscore that people flocking to cities remain a
select class, mostly of the young, educated and
affluent who can afford rising prices. In the meantime,
America overall continues to suburbanize. “Rich, young
people are outbidding others for urban housing and so
the faster growth in the suburbs certainly reflects
tight housing supply in dense neighborhoods,” Mr. Kolko
said. Another decades long trend that has re-emerged is
the growth of the South and the West at the expense of
the Northeast and the Midwest. The South and West both
had population growth of 1.2% in 2015, far ahead of
0.2% growth in the Northeast and Midwest. During the
aftermath of the housing bust, the South and West saw
sharp declines in the rate of population growth, while
the Northeast and Midwest held relatively steady,
although they continued to grow more slowly. Some
familiar metro areas also emerged as big population
losers and winners. Austin was the biggest population
gainer for four years running from 2011 to 2014. But
this year it was surpassed by Cape Coral-Fort Myers,
Fla.—also the leader in population growth during the
bubble from 2004 to 2006. Youngstown, Ohio, has been
the biggest population loser since 2010 and continued
to hold that title. It also lost the most population
for most of the boom from 2003 to 2005, but it was
surpassed for a few years by New Orleans and Detroit.