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Black Knight – “First Look” at March 2016

Published on: Apr 22, 2016 @ 8:12 am

Black Knight – “First Look” at March 2016

The Data and Analytics division of Black Knight
Financial Services (NYSE: BKFS) reports the following
“first look” at March 2016 month-end mortgage
performance statistics derived from its loan-level
database representing the majority of the national
mortgage market.

–  National delinquency rate fell 8% in March; at
4.08%, it is at its lowest point since March 2007
–  At just under 2%, the rate of 30-day delinquencies
is at lowest level in over 15 years
–  Spurred by declining interest rates, prepayment
speeds (historically a good indicator of refinance
activity) were up 46% from one month ago
–  Foreclosure starts were down 14% from February;
still driven primarily by repeat foreclosure activity

US jobless claims fall to 4-decade low

A proxy for layoffs across the US pointed to one of the
healthiest labor markets in decades, as the number of
US workers who applied for new unemployment benefits
declined to the lowest level since the early 1970s.
Initial jobless claims fell by 6,000 to a seasonally
adjusted 247,000 in the week ended April 16, the Labor
Department said Thursday. That was the lowest level for
jobless claims since the week of Nov. 24, 1973.  That
also marked the 59th straight week that initial jobless
claims remained below 300,000, the longest such streak
in more than four decades.  Recent claims data are
“astonishingly low,” said Timothy Hopper, chief
economist at TIAA Global Asset Management. “The fact
that the numbers continue to ratchet down suggests that
labor demand is strong and a sign the labor market
should continue to improve.”  Yet while the numbers
point to a stable labor market, they don’t foretell an
economic acceleration. In fact, last time jobless
claims were this low, an oil-shock recession had just
begun.  The direction of the layoff proxy is a key
difference between the latest readings and those in
1973. Jobless claims entered 2016 near these historic
lows but have fallen slightly. In contrast, by November
1973, when the National Bureau of Economic Research
pegs the start of a recession that stretched into the
early part of 1975, jobless claims had been modestly
climbing for nine months.

Federal Reserve officials will likely consider the
relative health of the labor market at next week’s
policy meeting. But recently, central bankers have
indicated they are concerned about weakness in the
global economy and are watching inflation readings and
wage gains closely. A large majority of economists
surveyed by The Wall Street Journal expect the Fed to
hold its benchmark interest rate steady at the meeting.
A low level of layoffs typically coincides with solid
hiring. Employers added 215,000 jobs in March, a
healthy increase. The unemployment rate ticked up to
5%, but the increase in part reflected more workers
entering the labor force.  Jobless claims have trended
near the four-decade low much of this spring. But that
comes with a caveat. The Easter holiday, which moves on
the calendar each year, can distort seasonal
adjustments to the data during March and April. The
four-week moving average, which smooths out volatility,
fell by 4,500 last week to 260,500. That level has
stayed fairly consistent since early March.  Still,
there was one other historical point of strength in the
latest reading. A measure of the number of people on
unemployment rolls, which are reported with a one-week
lag, fell by 39,000 in the week ended April 9 to the
lowest level recorded since 2000.

 

NAHB – remodeling market index dips in first quarter of
2016

The National Association of Home Builders’ (NAHB)
Remodeling Market Index (RMI) posted a reading of 54 in
the first quarter of 2016, dipping four points below
the previous quarter but remaining in positive
territory above 50.  An RMI above 50 indicates that
more remodelers report market activity is higher
(compared to the prior quarter) than report it is
lower. The overall RMI averages ratings of current
remodeling activity with indicators of future
remodeling activity.  “Remodelers were solidly booked
for jobs in the first quarter of 2016 but calls and
appointments for work slowed down in comparison to the
end of 2015,” said 2016 NAHB Remodelers Chair Tim
Shigley, CAPS, CGP, GMB, GMR, a remodeler from Wichita,
Kan. “Volatility in the financial markets during the
first quarter may have impacted consumers’ readiness to
commit to projects.”  The RMI’s current market
conditions index stands at 55, decreasing by a single
point from the previous quarter. Among its components,
major additions and alterations continued gains from
the previous quarter, rising to 55 from 54. The smaller
remodeling projects component decreased two points to
54, and the home maintenance and repair component of
the RMI decreased two points to 56.  At 53, the RMI’s
future market conditions index decreased six points
from the previous quarter. Among its four components,
calls for bids decreased to 51 from 58, the amount of
work committed fell to 52 from 57 and appointments for
proposals dropped to 52 from 60. Meanwhile, the backlog
of remodeling jobs decreased only three points to 58
from the previous quarter’s reading and high-water mark
of 61.

SunEdison files for bankruptcy protection

SunEdison, once the fastest-growing US renewable energy
company, filed for Chapter 11 bankruptcy protection on
Thursday as years of debt-fueled acquisitions proved
unsustainable.  In its bankruptcy filing, the company
said it had assets of $20.7 billion and liabilities of
$16.1 billion as of Sept. 30.  The company said its two
publicly traded subsidiaries, TerraForm Power and
TerraForm Global, were not part of the bankruptcy.  The
company said it secured up to $300 million in new
financing from its first-lien and second-lien lenders,
which is subject to court approval. The money will be
used to support SunEdison’s operations during its
bankruptcy, such as paying wages and vendors, and
proceeding with ongoing projects.  “Our decision to
initiate a court-supervised restructuring was a
difficult but important step to address our immediate
liquidity issues,” said Ahmad Chatila, SunEdison chief
executive officer.  He said the company planned to use
Chapter 11 to reduce debt, shed non-core operations and
take steps to get the most value out of its technology
and intellectual property.

Zillow – Q1 2016 market report: tight inventory, rapid
price growth represent real headwinds for the market’s
core

–  There are 5.9% fewer homes for sale in the US than
there were a year ago.
–  There are 10.4% fewer entry-level homes for sale in
the US than there were a year ago.
–  Low supply is driving up home prices among
entry-level homes, which are often sought after by
first-time buyers.

Faced with rapidly appreciating home values and a
dwindling inventory of homes for sale in the critical
entry-level and mid-market home segments, first-time
and move-up home buyers – typically the housing
market’s bread-and-butter – are likely in store for a
tough spring home shopping season.  Nationwide, median
home values rose 4.8% year-over-year in March and 1.1%
over the course of the first quarter, to a Zillow Home
Value Index of $186,200, according to the first quarter
Zillow Real Estate Market Report. And while overall US
home values continue to grow at a modest (though slowly
accelerating) clip, home values are rising the fastest
among entry-level and mid-market homes in a large
majority of the nation’s biggest housing markets.  A
number of factors are driving this growth, and many are
positive, including strengthening household formation,
continued growth in jobs and wages, and general
confidence and optimism in the overall value of
homeownership, especially among younger generations.
But the likeliest contributor to this rapid growth in
the bottom and middle is worrisome: There is a real
lack of homes to buy in these segments.

Overall, there were 5.9% fewer homes available for sale
nationwide at the end of the first quarter than there
were a year ago. But the number of homes for sale in
the bottom and middle thirds of the US market each fell
by 10.4%, compared to a relatively scant decline of
just 1.9% in the top third of the market.  This is
leading to a situation in which the majority of homes
for sale in many markets are more expensive homes not
typically sought by budget-conscious entry-level and
younger buyers. In all 35 of the nation’s largest
markets and the US as a whole, more homes are available
for sale in the top-third of the market than in either
of the other segments. In nine of those large metros,
top-tier homes make up more than half of all homes
available for sale.  And strong demand for
more-affordable homes, driven in part by those healthy
fundamentals noted earlier, can’t help but push prices
up more quickly for those budget-friendly homes that
are available. Home values in the bottom tier are
growing faster than the other two tiers in 18 of the
nation’s 35 largest metro housing markets, and
middle-tier growth is outpacing bottom and top-tier
growth in another eleven. That leaves just six of the
country’s 35 largest markets in which home value growth
in the top tier is outpacing the bottom and middle.
And in some cases, the growth rates between top and
bottom tiers aren’t particularly close. In the
fast-growing Denver metro, for example, bottom-tier
home values grew at a 20.3% annual pace in March,
fastest among markets in which bottom-tier values are
growing the most, and almost double local top-tier
annual growth of “just” 10.6%. Similar trends can be
found in Phoenix, where bottom-tier home values are
growing at almost triple the annual pace of top-tier
values (11.2% at the bottom vs. 4.2% at the top) and
Riverside (10% vs. 2.7%).

This rapid home value appreciation and limited
inventory in the bottom two-thirds of the market
undoubtedly puts a majority of would-be home buyers in
a tough spot. But the flip side is that those
better-heeled buyers in search of a top-tier home are
swimming in much smoother waters.  Annual home value
growth among top-tier homes in 20 of the nation’s top
35 markets is slower than the overall national pace of
4.8%. Additionally, the most expensive homes on the
market are also more likely to have a price cut. The
share of top-tier listings nationwide with a price cut
has increased 1.6 percentage points over the past year,
compared to just 0.4 percentage points in the middle
tier and 0.5 percentage points at the bottom.  In other
words, buyers looking for the most expensive homes will
find somewhat softening prices, a relatively larger
selection of homes to choose from and more limited
competition this spring. At the same time, entry-level
and mid-market buyers are likely to face much stiffer
competition, rapidly rising prices and very limited
inventory.  Yet another reminder that it pays to be
wealthy.

In March, the median US home value rose 0.4% from
February, according to the Zillow Home Value Index. US
home values have grown on a year-over-year basis for 45
straight months.  But while home values have been
growing consistently for going on four years, lately,
the pace of growth has picked up after a yearlong
cooling-off period from spring 2014 through spring
2015. The post-bottom pace of annual home value growth
peaked at 7.9% in April 2014, then slowed in each of
the subsequent 12 months, reaching a low of 2.7% in
April 2015. Annual home value growth has since been
higher than the month before in 10 of the past 11
months, before falling somewhat in March to a 4.8%
pace, from 4.9% in February.  While annual growth in
this range is largely sustainable and not much to worry
about on its own, this uptick in growth bears watching
as the spring home shopping season heats up –
especially in light of the rapid growth and limited
inventory issues noted earlier. If home values begin
growing too much, too fast, many more buyers risk
getting priced out of the market, which has a number of
trickle-down effects. One of these impacts could be
felt in the rental market, as would-be buyers are stuck
renting for longer, keeping apartments occupied that
may otherwise go to newly formed renter households and
contributing to upward pressure on rents themselves.
Another impact could be continued deterioration in home
affordability overall if growth in home values outpaces
income growth.  Home values in 25 of the nation’s 35
largest metro markets grew faster year-over-year than
the nation’s 4.8% annual pace in March. Home values
grew by more than 10% per year in seven of those large
metro markets: Denver (up 15.7% year-over-year),
Portland (14.8%), Dallas (13%), San Jose (12.6%),
Seattle (11.7%), San Francisco (11.5%) and Miami
(10.5%). None of the nation’s largest metros
experienced annual home value declines in March.

The US median rent in March was $1,389 per month, up
0.5% from February and 2.6% from March 2015, according
to the Zillow Rent Index. US rents have grown
year-over-year for 43 consecutive months. March was the
fifth straight month in which median US home values
grew faster year-over-year than median rents.  Similar
to home value growth, annual growth in rents in this
range is normal and nothing to worry much about.
However, between August 2015 and February, monthly
rents in each of those seven months hovered between
$1,380 and $1,382, before rising to the current $1,389
this month. This $7 per month bump isn’t huge by any
means, but does represent a bit of a departure from
recent trends, and could be an early signal that rental
growth is picking up again, potentially as a result of
tightness in the rental market caused by renters unable
to find a home to buy in their budget. This also bears
watching.  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 March 2015). Rents grew fastest
year-over-year in the San Francisco (up 9.9% from March
2015), Portland (up 8.6%) and San Jose (up 8%) metros.

Looking ahead, Zillow expects national home values to
continue growing, rising another 2.7% through March
2017 to a Zillow Home Value Index of $191,257. US rents
are also expected to keep growing over the next year,
at a 2.7% pace through March 2017 to a Zillow Rent
Index of $1,426.  Existing home sales activity in March
was fairly strong, a somewhat promising sign for the
upcoming spring season after a disappointing February.
But existing home sales have been very volatile lately,
and have failed to string together more than a couple
months in a row of increases before stumbling again. It
will take several solid months this spring to break the
two-steps-forward, one-step-back routine the market has
been stuck in for a while – and it’s hard to
meaningfully increase sales activity when the number of
homes for sale keeps dropping.  Which means the market
could be setting up to be pretty tough for potential
buyers this spring, especially for first-time buyers
and those looking to move up from their first home and
into a slightly more expensive place. Competition will
be fierce, and buyers’ patience will be tested. In
order to stand out in a competitive market, buyers
should get pre-approved for a loan, find an agent who
has experience with bidding wars and be prepared to
come in at the asking price, so the seller knows
they’re serious.

Categories
Real Estate News

CoreLogic – cash sales share in 2015 lowest in seven years

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.

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Real Estate News

CoreLogic – distressed sales accounted for 12% of homes sold nationally in November 2015

Published on: Jan 27, 2016 @ 8:18 am

CoreLogic – distressed sales accounted for 12% of homes
sold nationally in November 2015

–  Of total sales in November 2015, distressed sales
made up 11.9% and real estate-owned (REO) sales made up
8.7%

–  Maryland remains the state with the largest share of
distressed sales among all states at 20.3%

–  Denver-Aurora-Lakewood, Colo. had the lowest
distressed sales share among the largest Core Based
Statistical Areas (CBSAs) at 3.1%

Distressed sales, which include REOs and short sales,
accounted for 11.9% of total home sales nationally in
November 2015, down 1.9 percentage points from November
2014 and up 1.4 percentage points from October 2015.
This month-over-month increase was expected due to
seasonality, and the magnitude of the change was in
line with previous Novembers.  Within the distressed
category, REO sales accounted for 8.7% and short sales
accounted for 3.2% of total home sales in November
2015. The REO sales share was 1.5 percentage points
below the November 2014 share and is the lowest for the
month of November since 2007. The short sales share
fell below 4% in mid-2014 and has remained in the 3-4%
range since then. At its peak in January 2009,
distressed sales totaled 32.4% of all sales, with REO
sales representing 27.9% of that share. While
distressed sales play an important role in clearing the
housing market of foreclosed properties, they sell at a
discount to non-distressed sales, and when the share of
distressed sales is high, it can pull down the prices
of non-distressed sales. There will always be some
level of distress in the housing market, and by
comparison, the pre-crisis share of distressed sales
was traditionally about 2%. If the current
year-over-year decrease in the distressed sales share
continues, it will reach that “normal” 2-percent mark
in mid-2019.

All but nine states recorded lower distressed sales
shares in November 2015 compared with a year earlier.
Maryland had the largest share of distressed sales of
any state at 20.2%[1] in November 2015, followed by
Connecticut (19.1%), Florida (19%), Michigan (18.9%)
and Illinois (17.8%). North Dakota had the smallest
distressed sales share at 2.7%. Nevada had a 5.4
percentage point drop in its distressed sales share
from a year earlier, the largest decline of any state.
California had the largest improvement of any state
from its peak distressed sales share, falling 59.2
percentage points from its January 2009 peak of 67.4%.
While some states stand out as having high distressed
sales shares, only North Dakota and the District of
Columbia are close to their pre-crisis levels (within
one percentage point).  Of the 25 largest CBSAs based
on mortgage loan count, Orlando-Kissimmee-Sanford, Fla.
had the largest share of distressed sales at 21.2%,
followed by Tampa-St. Petersburg-Clearwater, Fla.
(20.7%), Baltimore-Columbia-Towson, Md. (20.4%),
Chicago-Naperville-Arlington Heights, Ill. (20.4%) and
Miami-Miami Beach-Kendall, Fla. (20.3%).
Denver-Aurora-Lakewood, Colo. had the smallest
distressed sales share among the largest CBSAs at 3.1%.
Las Vegas-Henderson-Paradise, Nev. had the largest
year-over-year drop in its distressed sales share,
falling by 5.5 percentage points from 20.3% in November
2014 to 14.8% in November 2015. Riverside-San
Bernardino-Ontario, Calif. had the largest overall
improvement in its distressed sales share from its peak
value, dropping from 76.3% in February 2009 to 10.9% in
November 2015.

Oil prices attempt to trim losses

Oil futures pared losses on Wednesday, echoing a modest
stock market recovery, but analysts said a surprise
ballooning in US inventories and little chance of the
world’s major producers agreeing to cut output would
likely temper any rallies.  Fresh evidence of slowing
growth in top commodities consumer China, along with
caution before the outcome of the US Federal Reserve’s
first policy meeting of the year, earlier knocked
around $1 off the price of oil.  Senior OPEC and
Russian officials on Tuesday stepped up vague talk of
possible joint action to eliminate one of the largest
oil surpluses in modern times, although few market
watchers believed this would result in any cuts to
output.  Brent crude was last down 26 cents at $31.54 a
barrel by 1347 GMT (8:47 a.m. ET), having hit a session
low of $30.83, in lockstep with European equities
edging off the day’s lows. US futures fell 65 cents to
$30.80 a barrel.  Oil has risen from last week’s 2003
lows after speculators unwound some of the record-high
bearish positions they had racked up over the last six
months.  “There is dove-tailing of moves in oil with
moves in equities that is happening and of course the
equity markets, we’ve seen, are so prone to risk
aversion,” BNP Paribas global head of commodity
strategy Harry Tchilinguirian said.  “Right now oil is
buffeted between short-covering, cross-asset
correlations and its own weak fundamentals.”  Oil
prices have fallen nearly 16% in January, bringing
total losses since the start of the decline in mid-2014
to 77%. US crude stocks rose by 11.4 million barrels
last week to 496.6 million, the American Petroleum
Institute said, topping analyst expectations for an
increase of 3.3 million barrels.

Mortgage applications down

Mortgage applications increased 8.8% from one week
earlier, according to data from the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Applications Survey
for the week ending January 22, 2016.  This week’s
results include an adjustment to account for the Martin
Luther King holiday.  The Market Composite Index, a
measure of mortgage loan application volume, increased
8.8% on a seasonally adjusted basis from one week
earlier.  On an unadjusted basis, the Index increased
0.3% compared with the previous week.  The Refinance
Index increased 11% from the previous week.  The
seasonally adjusted Purchase Index increased 5% from
one week earlier. The unadjusted Purchase Index
increased 0.4% compared with the previous week and was
22% higher than the same week one year ago.  The
refinance share of mortgage activity decreased to 59.0%
of total applications from 59.1% the previous week. The
adjustable-rate mortgage (ARM) share of activity
increased to 6.9% of total applications.  The FHA share
of total applications decreased to 12.7% from 13.7% the
week prior. The VA share of total applications
increased to 11.1% from 10.8% the week prior. The USDA
share of total applications remained unchanged from
0.7% the week prior.

Franchisees fight back against $15 wages
The International Franchise Association, the industry’s
largest trade group, wants the Supreme Court to take up
its challenge to portions of Seattle’s $15 minimum wage
law.  Seattle’s City Council in June 2014 voted to
raise the minimum wage in increments, hitting $15 an
hour by 2017 for businesses with at least 500 staffers.
The $15 level is more than double the federal hourly
minimum of $7.25.

The International Franchise Association and five
Seattle franchisees quickly sued Seattle, which like
New York City has moved to treat smaller franchised
businesses like larger companies.  They argued that the
mandated $15 pay unfairly lumps franchised businesses
with large employers. The association and franchisees
want to be recognized as smaller businesses to get more
time to raise pay incrementally to $15 by 2021.  “Our
appeal has never sought to prevent the City of
Seattle’s wage law from going into effect,” franchise
association President Robert Cresanti said in a
statement this week. “Our appeal to the Supreme Court
will be focused solely on the discriminatory treatment
of franchisees under Seattle’s wage law and the
motivation to discriminate against interstate
commerce.”  The association said a response is due from
the city of Seattle within 30 days, and the Supreme
Court is expected to announce this spring whether it
will hear the case.

In March 2015, a federal judge threw out the franchise
groups’ lawsuit, and the decision was upheld in
September by the 9th US Circuit Court of Appeals.  For
now, Seattle wages are tiered. The wages range from
$10.50 to $13 an hour, depending on the size of the
employer and whether the company pays toward medical
benefits.  A representative from Seattle Mayor Ed
Murray’s office could not be immediately reached for
comment.  The impact of higher mandated pay on
franchisees is contentious.  A recent survey from the
conservative Employment Policies Institute, a
conservative nonprofit research organization, found
franchisees are more harmed than nonfranchised
businesses when implementing wage hikes.  The survey of
more than 600 businesses found franchisees are more
likely to take “offsetting steps including reducing
staff, reducing hours and using automation to manage
the increased labor costs caused by minimum wage
increases” than are nonfranchised businesses.  This
trend was more pronounced in the fast food and hotel
sectors — more than 80% of franchised fast food owners
said they would be more likely to reduce hiring, versus
58% of non-fast-food restaurant owners. And nearly 90%
of franchised hotels said they would raise room rates,
compared with 70% of nonfranchised hotels.
Policymakers will compound the damage of a $15 minimum
wage by arbitrarily targeting businesses with a
recognizable brand for uniquely-harsh wage mandates,”
Michael Saltsman, the Washington, D.C.-based
institute’s research director, said in a statement.

Zillow – rapid reaction: December new home sales

–  Sales of newly built homes rose more than 10% in
December from November, to 544,000 units sold (SAAR),
the best month for new home sales since February 2015
and second best since 2008.

–  Similar to existing home sales, some sales that may
have otherwise closed in November may have been pushed
into December because of new settlement and disclosure
rules.

–  The seasonally adjusted median price of a new home
fell 4.3% from December 2014, to $285,200, the biggest
annual decline since early 2012.

New home sales had a strong December, recording their
best month since February 2015 and second-best since
2008, according to the US Census Bureau. Additionally,
for the first time since July 2015, both new and
existing home sales for the month moved in the same
direction, reversing a months-long trend in which one
would rise, and the other would fall. But even with the
strong finish, sales of newly built homes are still
running slightly below their February level and were
roughly flat over the course of 2015. Additionally,
like existing home sales, new home sales in December
were likely boosted by recently adopted changes in
settlement and disclosure rules that pushed closings
that may have occurred in November into December. The
price of new homes, which have been fetching a large
premium over existing homes as builders focus on a
higher-end clientele, fell 4.3% year-over-year in
December (seasonally adjusted) to $285,200, the biggest
annual decline since early 2012. This is some — modest
— good news for buyers struggling to find a home to buy
and get a hold in the market.

WSJ – what’s ahead for jumbo-loan borrowers in 2016

The jumbo-mortgage market reached new highs in 2015 and
recent turmoil in global stocks is unlikely to slow it
down much in 2016, industry experts say.  Lenders
provided an estimated $320 billion in jumbo mortgage
financing in 2015, which translates to 19% of all
mortgage lending, says Guy Cecala, CEO and publisher of
Inside Mortgage Finance. That’s up slightly from 18% of
the market in 2014 and the highest market share since
2002, he says.  While a down stock market might mean
less available cash for some home buyers to purchase an
expensive home, historically people also have shifted
assets to real estate as a safer investment, Mr. Cecala
says. “Whether that plays out depends on how long the
stock market stays down,” he adds. The market dip is
likely to keep interest rates below 4% for a while
longer, which also could make borrowing large sums more
attractive, says Keith Gumbinger, vice president of
mortgage-rate website HSH.com. The Federal Reserve also
is less likely to raise short-term rates this spring,
he adds.  Mr. Gumbinger expects the Fed to raise
short-term rates no more than two to three times in
2016, with the average 30-year, fixed-rate jumbo not
topping 4 5/8%. Five-year, adjustable-rate mortgages
could go up to 4%, he adds.

Fear of rising rates and home prices could spur a
homebuying frenzy in the spring, says Ray Rodriguez,
regional mortgage sales manager for Cherry Hill,
N.J.-based TD Bank. Existing borrowers with
adjustable-rate mortgages nearing the end of their
fixed-rate may also rush to refinance, he adds.  Still,
overall refinance rates are expected to be lower than
in 2015 since so many borrowers have already
refinanced, says David Adamo, CEO of Stamford,
Conn.-based Luxury Mortgage. An unexpected rate dip in
winter-spring 2015 triggered a refinance frenzy.
Loosened credit-qualifications rules will continue in
2016, but nothing like what occurred in the 2000s that
led to the mortgage crisis, Mr. Adamo says. Last year,
minimum FICO scores for jumbos dropped to 660 for some
lenders, for example, and down payments could be as low
as 15% or even 10%. Still, borrowers with a credit
score of 740 or above who put 20% down can expect to
get the best interest rates.  Jumbo borrowers have
loans that exceed conforming limits of government-back
loans, $417,000 in most places and $625,500 in some
high-cost areas. The Federal Housing Finance Agency
didn’t raise baseline limits last year because home
prices haven’t returned to prerecession levels
nationwide. But 39 counties in the US—covering Denver,
Nashville and Napa, Calif., among others—were bumped
into the high-cost category, so borrowers there now
qualify for more financing.

Also last year, the Consumer Finance Protection Bureau
introduced new documents that aim to make it easier to
compare different mortgage offerings. Many lenders were
concerned that a new rule requiring a three-day waiting
period for borrowers to receive and review the
documents would delay closings or kill deals, but
lenders, real-estate agents and borrowers largely
adapted to the change, says John Schleck, Bank of
America’s online and centralized sales executive. “We
spent a lot of time getting ready and it paid off,” he
adds.  Finally, more borrowers will be able to conduct
business virtually this year, a trend expected to rise
rapidly in future years, says Victor Ciardelli, CEO of
Chicago, Ill.-based Guaranteed Rate. That trend isn’t
limited to online lenders either. For example, Wells
Fargo Home Mortgage rolled out a new feature for its
YourLoanTracker service in which borrowers can receive
and upload documentation via a mobile or other digital
device, as well as track loan progress, says Brad
Blackwell, executive vice president and portfolio
business manager for the company.  Unless the bottom
falls out of the economy, jumbo lenders predict
continued demand, Mr. Cecala says. Regional banks and
nonbank lenders were able to expand their jumbo
mortgage volume largely because of continued enthusiasm
on the part of big banks to buy and hold them in
portfolio.  Wells Fargo remains the nation’s largest
jumbo lender, both for originations and purchasing
loans from other lenders to hold in portfolio. “We have
a strong appetite for jumbo lending,” Mr. Blackwell
says.

Categories
Real Estate News

Zillow – new homes have ‘plenty of runway’ in 2015

Published on: Mar 5, 2015 @ 09:51 am

A proliferation of data and new data analysis methods
are changing the way builders buy, sell and develop
vacant land, according to experts, and builders are

cautiously optimistic that easier credit and more
flexibility will help the new homes market rebound in
2015. Several groups of real estate experts,
executives of large residential builders and land
advisors spoke this week at a building and building
products symposium held at Barclay’s New York City
headquarters. The state of the land market – a key
factor in determining what kinds of housing gets built,
where and at what price – was a common theme throughout
the various discussions. “The real opportunity of land
goes beyond the land itself,” said Steve Benson, CEO of
Phoenix-based land-banking and advisory firm Community
Development Capital Group. “Builders are looking at
land as much more than a piece of dirt now.”
Landowners and buyers alike are using multiple data
sources to examine what is being built in other areas,
which designs work best for certain parcels and which
builders are best suited to maximize certain features
of a given piece of land, Benson said. Rather than
plowing ahead and building a certain set of homes on a
given piece of land, developers today may be more apt
to sell their land to a different type of developer
rather than undergo a project themselves, or choose to
build a different type of home than they normally
would, based on data. “Real estate has always been
about location, location, location,” Benson said. “But
with land especially, it’s future location, future
location, future location. Today, data helps inform
that equation for builders much more than in the past.”

High land costs, and perhaps unrealistic value
assessments by landowners, are a big reason why
developers are having difficulty developing more
entry-level, lower-cost communities and homes, said
Greg Vogel, CEO and founder of Land Advisors
Organization, a Scottsdale, Ariz.-based land brokerage.
Developable tracts of land appreciated very quickly in
value during 2012 and 2013 in anticipation of a
building boom in 2014 that largely has yet to
materialize, Vogel said, calling 2014 “a dud” compared
to expectations for new development. But strong recent
years have convinced today’s landowners – tomorrow’s
land sellers – that their land may be worth more than
it is. “[Land] sellers are very sticky on the up,”
Vogel said, in reference to land price appreciation.
“We’ll offer a price, and they’ll tell us, ‘See you
next year.’” As a result, builders are increasingly
forced to put higher-priced homes on the developable
lots they do control, in order to recoup their higher
land-acquisition costs. This will create challenges for
larger builders looking to cater to lower-end and
first-time buyers, who are expected to enter the market
in higher numbers in coming years as younger buyers, in
particular, get married and start families. Most
observers agreed that it’s just a question of time
until we see millennial demand pick up. “If the
entry-level buyer does come back, I’m not sure there
will be a lot of opportunities to develop those kinds
of communities right away,” Vogel said.

Price Vs. Pace Vs. Margin

Beyond the kinds of large, multi-acre tracts on the
edge of cities and towns favored by big, publicly
traded homebuilding companies, smaller in-fill lots
located in downtowns and established communities also
represent opportunities for builders, particularly
smaller, private developers. Private developers can
build higher-density projects with a smaller overall
number of units on infill sites, Vogel said, though
these homes cannot compete on price with those built by
larger firms. But what they lack in price strength,
these developments can make up for in design
flexibility. “Private firms excel at being able to
simply hire an architect and ask, ‘What can you do with
this site?’” Vogel said. “And with those kinds of
projects, they don’t have to worry about competing with
the bigger builder down the street or on the other side
of town.” In recent years, data indicate that builders
seem content to trade high sales volumes in exchange
for lower volumes, but higher sales prices. Vogel said
the way to get higher sales volume is simply to have
more speculatively built homes completed and available
for sale in the first place. “If you have a house
ready to go, you’ll get a higher pace of sales,” Vogel
said. But the key question builders ask is not monthly
sales pace versus final sales prices, Benson said, but
instead is sales price versus profit margin at a given
pace. If a builder is selling three homes per month,
then that builder knows that overhead costs will total
a certain amount at that pace. If they wanted to adjust
the pace of sales to six homes per month, they need to
adjust their overhead costs and maximize their
efficiencies accordingly, which many may be unwilling
to do if they’re comfortable at a given margin.

“Plenty of Runway”

In order to begin building more homes, the one thing
builders would like to see more than anything else –
more than lower land costs and higher wages among
buyers – is simply more economic confidence among
potential buyers, said John Burns, CEO of John Burns
Real Estate Consulting. According to a recent Burns
survey, roughly one-third of builders said more
confidence topped their 2015 wish list. That bodes
well for 2015 and beyond, as recent Zillow research
indicates housing confidence, in particular, is on its
way up, especially among younger renters who may be
looking to buy in the next few years. But not all
demand for new homes is expected to come from younger,
entry-level and first-time homebuyers in coming months
and years. Douglas Yearley, CEO of Pennsylvania-based
residential construction firm Toll Brothers, said there
are plenty of existing homeowners looking to move up
into a larger or nicer home. The typical home built by
Toll Brothers sells for roughly $700,000, Yearley said,
certainly on the higher end of the price spectrum but
not outrageously so. “There’s plenty of runway left in
what we do,” Yearley said. Builders were also hopeful
that slowly easing access to mortgage credit would
convince more would-be buyers to enter the market.
Steve Hilton, CEO of Scottsdale-based homebuilder
Meritage Homes Corp., said there is currently more
demand for new homes than his company is able to
qualify, an indication that if credit conditions were
looser more homes could be sold. Hilton also indicated
there could be a kind of chicken or egg problem
preventing the credit market from easing further, as
borrowers with lower credit sometimes don’t apply in
the first place. “There’s a kind of perception gap
we’re seeing,” Hilton said. “We see a lot of people
with a 680 credit score, which is historically pretty
good, thinking that they can’t get a loan. So they
don’t apply in the first place. There’s a lot of good
loans out there that aren’t getting made.”

US consumer spending falls, inflation pressures muted

US consumer spending fell for a second straight month
in January, likely as lower gasoline prices continued
to weigh on receipts at service stations. The Commerce
Department said on Monday consumer spending slipped
0.2% after falling 0.3% in December. Economists polled
by Reuters had forecast consumer spending, which
accounts for more than two-thirds of US economic
activity, dipping 0.1% in January. When adjusted for
inflation, consumer spending increased 0.3% after
December’s 0.1% dip. Income increased 0.3% after a
similar rise in December. Income at the disposal of
households after accounting for inflation advanced
0.9%, the largest increase since December 2012. The
saving rate increased to 5.5%, the highest since
December 2012. Lower gasoline prices continued to put
downward pressure on inflation, with key consumer price
gauges slipping further below the Federal Reserve’s 2%
target. A price index for consumer spending braked to
show a 0.2% rise in the 12 months through January, the
weakest reading since October 2009. The personal
consumption expenditures (PCE) price index had
increased 0.8% in December. Excluding food and energy,
the so-called core PCE price index increased 1.3% in
the 12 months through January.

Urban Institute: the renter next door

An unexpected side effect of the mortgage crisis has
been the replacement in many neighborhoods of
single-family homeowners with renters. An article from
the Urban Institute, took a closer look at the 14.2
million single-family rental units in the US and found
that renters are living in smaller, older and slightly
less suburban homes than homeowners, and are poorer,
more racially and ethnically diverse and younger than
homeowners. From 2007 on in the aftermath of the
mortgage crisis, investors (mostly small) bought many
of the 7.5 million owner-occupied homes that were in
foreclosure or had experienced a short sale, and
converted them to rental properties. The result was a
huge increase in the number of occupied single-family
rental properties in the aftermath of the crisis, from
10.5 million units in 2005 to 14.2 million in 2013, a
35% increase, according to the American Housing Survey.
Rental units comprised 61% of the 6.1 million unit net
increase in single-family housing stock from 2005 to
2013, with the remainder split between vacant
single-family units (21%) and owner-occupied
single-family units (17%).

US 4Q economic growth rate revised lower

US economic growth braked more sharply than initially
thought in the fourth quarter amid a slow pace of stock
accumulation by businesses and a wider trade deficit,
but the underlying fundamentals remained solid. Gross
domestic product expanded at a 2.2% annual pace,
revised down from the 2.6% pace estimated last month,
the Commerce Department said on Friday. The economy
grew at a 5% rate in the third quarter. The
fourth-quarter revision was generally in line with
expectations. With both business and consumer spending
expanding in the fourth quarter, growth in final sales
to domestic purchasers was revised to a 3.2% pace from
the previous 2.8% rate. Businesses accumulated $88.4
billion worth of inventory in the fourth quarter, far
less than the $113.1 billion the government had
estimated last month. That resulted in the GDP growth
contribution from inventories being revised down to
one-tenth of a percentage point from 0.8 percentage
point previously. Residential construction spending
was revised down, while government spending was not as
weak in the fourth quarter as previously reported.

Categories
Real Estate News

Industrial production in December

Published on: Jan 23, 2015 @ 9:42 am

US manufacturing output rose modestly in

December, slowing
from the torrid gains registered a month earlier but still
signaling that American industry is weathering the impact of
a strong dollar and weaker overseas markets.  Factory output
rose 0.3% last month, the Federal Reserve said on Friday.
That marks the fourth straight month of growth although the
pace was slower than the revised 1.3% expansion in November.
The output reading is consistent with a survey of factory
manager sentiment released on Jan. 2 that pointed to a
weaker pace of growth in activity last month.  Economists
polled by Reuters had forecast manufacturing output rising
0.2% in December.  Mining output jumped by 2.2%, reflecting
an increase in oil and gas extraction, although a drop in
drilling and well-servicing activity tempered the gains.
The gains in manufacturing and mining were not enough to
compensate for a sharp 7.3% drop in utilities output, and
overall industrial production edged down 0.1%, its first
decline in four months.  The decline in utilities was driven
be steep falls in sales of electricity and natural gas.

Zillow – owners’ equivalent rent and the housing bubble:
feature or bug?

The Bureau of Labor Statistics (BLS) released its December
2014 Consumer Price Index (CPI) data, one of the two main
data series used to measure how prices change in the United
States. CPI data are produced from the results of the BLS
Consumer Expenditure Survey (CES). The CPI data include a
number of sub-indices for particular goods, including
estimates of housing prices.  For homeowners, the CPI series
on Owners’ Equivalent Rent (OER) is designed to gauge how
much homeowners’ shelter costs contribute to changing
prices. This is particularly difficult since, unlike other
goods such as groceries or cars, most homeowners’ monthly
housing costs do not change much on a month to month basis
due to the prevalence of fixed-rate mortgages.  To get a
better sense of how much homeowners’ shelter costs are
changing, the CES asks homeowners the following question:
“If someone were to rent your home today, how much do you
think it would rent for monthly, unfurnished and without
utilities.”  One unique feature of the OER series is that,
unlike most housing price or housing value indexes including
the Zillow Home Value Index (ZHVI), during the 2000s the OER
series did not suggest a rapid run-up in shelter costs in
advance of the Great Recession, or a steep drop in shelter
costs during the housing bust. Instead, the OER series grew
steadily from 2000 through 2009 – roughly in line with the
growth of all prices – before flattening out in 2009 and
2010. Since 2010, the OER series has resumed its pre-crisis
trend.  Part of the difference between OER and most other
housing indices is the formulation of the question. The CES
question mixes purchase prices and rent prices. Since rents
grew slowly during the housing bubble but grew quickly
during the housing bust, owners may have been focusing more
on trends in their local rental market rather than trends in
their local purchase market when responding to the survey.
Regardless, the absence of an obvious housing bubble or bust
in the OER series, and its differences to most other home
price/value indices, raises questions about what exactly is
being measured.

DataQuick – Southern California home sales and median sale
price rise

CoreLogic today released its December Southern California
housing market report. The number of homes sold increased
sharply from the month of November and rose modestly from
the same time a year earlier, marking one of just two months
in 2014 to post a year-over-year gain in sales. The region’s
median sale price also increased from November and rose year
over year for the 33rd consecutive month, although that
annual gain was the lowest since the string of price
increases began in spring 2012.  A total of 19,205 new and
resale houses and condos sold in Los Angeles, Riverside, San
Diego, Ventura, San Bernardino and Orange counties in
December 2014. That was up month over month 22.8% from
15,643 sales in November 2014, and up year over year 4.3%
from 18,415 sales in December 2013, according to CoreLogic
DataQuick data.  Sales usually increase from November to
December. On average, Southern California sales have risen
13.1% between those two months since 1988, when CoreLogic
DataQuick data began. On a year-over-year basis, sales in
2014 fell each month except in September (+1.2%) and
December.  The total number of homes sold in Southern
California in all of 2014 fell 8.7% compared with 2013.
December home sales have ranged from a low of 13,240 in 2007
to a high of 36,865 in 2003. December 2014 sales were 20.2%
below the December average of 24,067 sales since 1988.  “One
month doesn’t make a trend, but December’s uptick in home
sales might indicate renewed interest in housing thanks to
lower mortgage rates and job growth in recent months,” said
Andrew LePage, data analyst for CoreLogic DataQuick. “The
gain came despite a continued decline in the share of homes
sold to investors and cash buyers. If demand continues to
build we’ll need more supply to keep up with it. One of the
big questions hanging over the housing market is whether
higher demand and home values will lead to a lot more people
listing their homes for sale, as well as more new-home
construction, which remains well below average.”

The median price paid for all new and resale houses and
condos sold in the six-county region in December 2014 was
$415,000, up 0.7% month over month from $412,000 in November
and up 5.1% year over year from $395,000 in December 2013.
The median hasn’t moved much since September 2014, when it
was $413,000. The median’s peak for 2014 was $420,000 in
August.  The region’s median sale price has increased on a
year-over-year basis for the past 33 consecutive months, but
the 5.1% annual gain in December 2014 was the smallest since
April 2012, when the $290,000 median rose 3.6% from a year
earlier.  Southern California’s December median sale price
was 17.8% below the peak median price of $505,000 reached in
March, April, May and July of 2007. Among the region’s six
counties, the December 2014 median in Orange County
($591,000) was the closest – within about 8% – to its peak
of $645,000 in June 2007.  Home prices in Southern
California have been rising at different rates depending on
price segment. In December, the lowest-cost third of the
region’s housing stock experienced a 12.9% year-over-year
increase in the median price paid per square foot for resale
single-family detached houses. The annual gain was 6.3% for
the middle third of the market and 2.3% for the top,
most-expensive third.  The number of homes that sold for
$500,000 or more in December 2014 rose 10.1% compared with
December 2013. Sales below $500,000 rose 3.4% year over
year, and sales below $200,000 dropped by 20.6%.

Among the other Southern California housing market
highlights from December 2014:

–  Foreclosure resales represented 5.0% of the resale market
in December. That was down from a revised 5.5% in November
2014 and down from 5.8% in December 2013. In recent months
the foreclosure resale rate has been the lowest since early
2007. In the current cycle, foreclosure resales hit a high
of 56.7% in February 2009. Foreclosure resales are purchased
homes that have been previously foreclosed upon in the prior
12 months.
–  Short sales made up an estimated 6.2% of resales in
December, down from a revised 6.4 in November 2014 and down
from 10.2% in December 2013. Short sales are transactions in
which the sale price fell short of what was owed on the
property.
–  Absentee buyers – mostly investors – bought 23.4% of the
homes sold in December. That was down from a revised 23.8%
in November 2014 and down from 26.9% in December 2013. The
December 2014 absentee level ties the October 2014 level as
the lowest for any month since October 2010, when 22.1% of
homes were sold to absentee buyers. The peak absentee share
was 32.4% in January 2013, and the monthly average since
2000, when CoreLogic DataQuick absentee data began, is about
19%. Absentee buyers include those who purchase vacation
homes or other properties that public property records
suggest are not used as primary residences.
–  Cash buyers accounted for 23.8% of December home sales,
down from a revised 24.3% in November 2014 and down from
28.8% in December 2013. The December 2014 cash level was the
lowest for any month since January 2009, when 22.0% of homes
were bought with cash. The peak was 36.9% in February 2013,
and the monthly average since 1988 is 16.7%.
–  Southern California home buyers committed a total of
$4.43 billion of their own money in the form of down
payments or all-cash purchases in December. That was up from
a revised $3.47 billion in November 2014. The out-of-pocket
total peaked in May 2013 at $5.41 billion.
Jumbo loans, or mortgages above the old conforming limit of
$417,000, accounted for 31.3% of purchase lending in
December, up from a revised 30.5% in November 2014 and up
from 28.5% in December 2013. The July/August 2014 level of
32.3% was the highest since the credit crunch struck in
August 2007. Prior to August 2007, jumbo loans accounted for
around 40% of the home-loan market. The jumbo level dropped
to as low as 9.3% in January 2009.
–  Adjustable-rate mortgages (ARMs) represented 12.1% of
home purchase loans in December, up from 12.0% in November
2014 and down from 13.0% in December 2013. The ARM share
dropped to as low as 1.9% of home purchase loans in May
2009. Since 2000, a monthly average of about 30% of purchase
loans have been ARMs.
–  All lenders combined provided a total of $6.19 billion in
mortgage money to Southern California home buyers in
December, up from a revised $4.88 billion in November 2014
and up from $5.40 billion in December 2013.
–  The typical monthly mortgage payment for Southern
California home buyers in December was $1,558, down slightly
from $1,560 in November 2014 and down from $1,594 in
December 2013. Adjusted for inflation, the December 2014
typical payment was 35.6% below the typical payment in the
spring of 1989, the peak of the prior real estate cycle. It
was also 47.3% below the current cycle’s peak in July 2007.

Oil prices slip

Brent crude oil prices fell below $50 a barrel on Monday
after the global economic outlook darkened and Iraq
announced record oil production.  The world’s biggest energy
consumer, China, faces significant downward pressure on its
economy, its premier Li Keqiang was quoted by state radio as
saying on Monday.  China is expected this week to report
growth slowing to 7.2% from a year ago, the weakest since
the depths of the last global economic crisis. Data from
China’s National Bureau of Statistics showed on Sunday house
prices fell for a fourth straight month.  Brent crude traded
at $49.42 a barrel by 1445 GMT, down 75 cents. US crude was
down 84 cents at $47.85 a barrel.  Oil prices have dropped
by more than half since last June as output around the world
soared while demand growth slowed. Although the
International Energy Agency (IEA) said last week a reversal
in the trend was possible this year, it added that prices
may fall further before rising.  “There’s still more supply
than demand and that’s a situation that will not change in
just a few weeks,” said Hans van Cleef, energy economist at
ABN Amro.

DataQuick – Bay Area home sales and prices rise in December
2014

CoreLogic today released its December San Francisco Bay Area
housing market report. Home buying picked up steam late in
2014, with December posting strong month-over-month and
year-over-year sales gains. Price appreciation remained
lower than it had been earlier in 2014, but the median sale
price, which has moved little since late last summer, was
still nearly 10% higher than it was the same time a year
earlier.  A total of 7,456 new and resale houses and condos
sold in the nine-county Bay Area in December 2014. That was
up month over month 24.2% from 6,003 in November 2014 and up
year over year 14.1% from 6,532 in December 2013, according
to CoreLogic DataQuick data.  A rise in sales from November
to December is normal for the season. Bay Area sales have
risen an average of 9.6% between those two months since
1988, when CoreLogic DataQuick data began.  The region’s
monthly home sales have ranged between 7,000 and 8,000 for
seven of the last nine months. Since 1988, December sales
have varied from a low of 5,065 in 2007 to a high of 12,349
in 2003, and the December 2014 sales were 12.1% below the
December average of 8,482.

The median price paid for a home in the Bay Area was
$603,000 in December 2014. That was up month over month by
0.3% from $601,000 in November 2014 and up year over year
9.9% from $548,500 in December 2013. December 2014 was the
33rd consecutive month with a year-over-year gain in the
median sale price. However, those annual increases slipped
from double-digit to single-digit in the last two months of
2014. In December 2013 the region’s $548,500 median was
23.9% higher than in December 2012.  The Bay Area median
sale price peaked at $665,000 in June and July 2007 and
dropped to a post-boom low of $290,000 in March 2009.  “The
Bay Area’s residential real estate market ended 2014 on a
cautiously optimistic note, with moderate year-over-year
increases in both median price and sales counts,” said John
Karevoll, CoreLogic DataQuick analyst. “Supply continues to
be constrained, and the mortgage market remains difficult.
As long-term trends, cash sales and investor purchases are
declining slowly, but they are still significant market
factors. We know that there is a significant amount of
pent-up demand lying in wait, and there is a good chance the
market could see a surge this spring and summer as more
homes are put up for sale.”

Other December 2014 Bay Area housing market highlights
include the following:

–  Adjustable-rate mortgages (ARMs), an important indicator
of mortgage availability, accounted for 22.3% of the Bay
Area’s home purchase loans in December 2014, down from a
revised 23.6% in November 2014, and up from 22.2% in
December 2013. ARMs hit a low of 3.0% of purchase loans in
January 2009 and reached a post-housing-bust peak of 27.8%
in April 2014. Since 2000, ARMs have accounted for 46.2% of
all Bay Area purchase loans.
–  Jumbo loans, or mortgages above the old conforming limit
of $417,000, accounted for 54.1% of purchase lending in
December 2014, down from a revised 56.4% in November 2014,
and up from 48.2% in December 2013. Jumbo usage dropped to
as low as 17.1% in January 2009. It reached 56.4% in May
2014 and has stayed close to that percentage since. Prior to
the August 2007 credit crunch, jumbo loans accounted for
more than 60% of the Bay Area’s home purchase loans.
–  Foreclosure resales accounted for 3.7% of all resales in
December 2014, up from 2.8% in November 2014, and down from
4.6% in December 2013. Foreclosure resales in the Bay Area
peaked at 52.0% in February 2009, while the monthly average
over the past 17 years is 9.6%.
– Foreclosure resales are purchased homes that have been
previously foreclosed upon in the prior 12 months.
–  Short sales made up an estimated 4.0% of Bay Area resales
in December 2014, up from a revised 3.9% in November 2014
and down from 7.9% in December 2013. Short sales are
transactions in which the sale price fell short of what was
owed on the property.
–  Absentee buyers – mostly investors – purchased 18.3% of
all Bay Area homes in December 2014, up insignificantly from
a revised 18.2% in November 2014 and down from 22.5% in
December 2013. The November 2014 absentee level was the
lowest for any month since August 2010, when it was 17.8%.
The peak absentee share was 28.7% in February 2013, and the
monthly average since 2000, when CoreLogic DataQuick
absentee data began, is 15.7%.
–  Cash buyers accounted for 19.0% of home sales in December
2014 – the lowest for any month since the cash buyer level
was 18.5% in October 2008. The December 2014 absentee level
was down slightly from a revised 19.3% in November 2014 and
down from 23.5% in December 2013. The peak was 32.3% in
February 2013, and the monthly average since 1988 is 13.7%.
–  Bay Area home buyers used $2.18 billion of their own
money in the form of a down payment or as an outright cash
purchase in December 2014. They borrowed $3.06 billion in
mortgage money from lenders.
–  The typical monthly mortgage payment for Bay Area home
buyers in December 2014 was $2,264. Adjusted for inflation,
that payment was 21.6% below the typical payment in spring
1989, the peak of the prior real estate cycle. It was 42.0%
below the current cycle’s peak in July 2007 and 77.1% above
the February 2012 bottom of the current cycle.