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Prices Starting to Top Out

Mar 11, 2018 by

Home prices are starting to top out, with appreciation decelerating as the market moves toward a peak, according to the Buy vs. Rent Index published by Florida Atlantic University (FAU) and Florida International University (FIU).

“Housing markets are slowing, suggesting that we are nearing a peak in housing markets around the U.S.—but this is good news, as we are pulling back from the brink, unlike we did in 2007,” says Ken Johnson, a creator of the Index from FAU’s College of Business and an economist.

“Our data indicates that prices are above their 40-year trend, but not significantly so as they were in 2007,” says Eli Beracha, a creator of the Index and associate professor at FIU’s Hollo School of Real Estate. “Rather than a crash, I anticipate slower growth in prices accompanied by longer marketing times for sellers and increasing inventories, which should bring prices back in conjunction with their 40-year trend.”

Formally the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the gauge is a measure of 23 metropolitan areas: Atlanta, Boston, Chicago, Cincinnati, Cleveland, Dallas, Denver, Detroit, Honolulu, Houston, Kansas City, Los Angeles, Miami, Milwaukee, Minneapolis, New York, Philadelphia, Pittsburgh, Portland, San Diego, San Francisco, Seattle, and St. Louis. It is similar to the S&P CoreLogic Case-Shiller Indices—which encompass 20 metros (with some overlap)—but also includes factors like mortgage rates.

Thirteen of the BH&J Index’s markets are “moderately” to “slightly” in buy territory, indicating it is more advantageous financially to purchase, while 10 are in “moderately” to “slightly” rent territory.

The adjustment anticipated by FAU/FIU has been on many a radar. A forecast by HouseCanary projects that 41 of the largest 100 metros will experience a price slowdown this year. Analysts at CoreLogic are predicting an overall stabilization, as well, and economists at Zillow are expecting a “normal” tempering.

What is causing the cooling? Along with a basic cycling of the market, other drivers include the as-yet-determined implications of the Tax Cuts and Jobs Act, and increasing mortgage rates.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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A Let-Up for Prices? Housing Trends to Watch

Feb 25, 2018 by

The housing market is on the up-and-up, but at a lesser pace than in prior years. According to new research, buzzier markets are now stabilizing.

Appreciation is projected to slow in 41 of the top 100 metropolitan statistical areas (MSAs) this year, according to HouseCanary, which recently released its “5 Housing Trends That Are Changing the Market Today.” HouseCanary assessed the country’s 381 MSAs for affordability and appreciation. The areas with marked softening:

  1. Palm Bay-Melbourne-Titusville, Fla.
  2. North Port-Sarasota-Bradenton, Fla.
  3. Lakeland-Winter Haven, Fla.
  4. Cape Coral-Ft. Myers, Fla.
  5. Deltona-Daytona Beach-Ormond Beach, Fla.
  6. Phoenix-Mesa-Scottsdale, Ariz.
  7. Orlando-Kissimmee-Sanford, Fla.
  8. Miami-Ft. Lauderdale-West Palm Beach, Fla.
  9. Urban Honolulu, Hawaii
  10. Tampa-St. Petersburg-Clearwater, Fla.

HC_100_MSAs

“Although the housing market is still strong, with home prices still increasing in many markets, there is clear evidence of a considerable deceleration in the pace of those price increases,” says Alex Villacorta, executive vice president of Analytics for HouseCanary. “The rapid price growth in high-end and luxury markets seems to have stagnated as affordability continues to put downward pressure on home price appreciation.”

What factors are fueling the trend? The demand/supply dynamic, for one, Villacorta says. Buyers are out in droves, but inventory is lacking. The imbalance is pressuring prices—and affordability is suffering, in turn. Households in 30 of the top 100 MSAs are allocating more than 30 percent of their income to their mortgage, HouseCanary’s research shows. (Thirty percent is considered, generally, the ideal share.) Five of the top 100 MSAs are allocating more than 50 percent of their income.

Affordability is also impacted by mortgage rates, which Villacorta anticipates will land in the neighborhood of 4.75 percent by this time next year—a change that could deter homeowners with lower rates from selling, exacerbating inventory issues. The average 30-year, fixed mortgage rate has been on an uptick since the start of 2018.

The Tax Cuts and Jobs Act could have an effect on housing, as well, though how it could help or hurt the market is unclear. With change comes indecision, and Villacorta believes homebuyers and sellers could hold off on their plans until they know how the bill will impact them personally.

MORE: Housing and Tax Reform: Where Could the Impact Land?

“Clearly there are many challenges to stabilizing the housing market,” Villacorta says. “There is still a supply-and-demand problem, mortgage rates are still on the rise, affordability remains an issue in many major markets, and the wider-ranging effects of the new tax plan are still unknown—so it’s unclear whether this slowed growth will lead to housing market price plateaus or declines, but the conditions are certainly in place for that potential outcome.”

For more information, please visit www.housecanary.com.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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High Prices Keep Activity Sizzling Through Summer

Jul 28, 2017 by

High prices are keeping home sales activity sizzling through summer, with listings moving 6 percent faster year-over-year in July, according to the latest data preview from realtor.com®. Prices in July are 10 percent higher than those one year ago, with the national median at $ 275,000 and the national median age of inventory at 64 days. There are 11 percent less homes on the market year-over-year.

“In the middle of the summer we normally see the housing market begin to slow down and prices drop a bit, but this year has been a different story,” says Javier Vivas, manager of Economic Research at realtor.com. “After a strong start to the buying season, homes are not only selling faster than last July, but faster than last year’s peak months. However, quick sales don’t necessarily mean more sales, particularly when there isn’t enough inventory as is currently the case. Home prices also remain stubbornly high, failing to show hints of the usual seasonal cooldown. Low- and moderately-priced homes are being snatched up especially quickly, keeping many would-be buyers from being able to get into the market.”

The housing markets ranking in realtor.com’s Hotness Index for July:

  1. Vallejo-Fairfield, Calif.
    Median Age of Inventory: 31 days
  1. Kennewick-Richland, Wash.
    Median Age of Inventory: 31 days
  1. San Francisco-Oakland-Hayward, Calf.
    Median Age of Inventory: 32 days
  1. San Jose-Sunnyvale-Santa Clara, Calif.
    Median Age of Inventory: 30 days
  1. San Diego-Carlsbad, Calif.
    Median Age of Inventory: 36 days
  1. Stockton-Lodi, Calif.
    Median Age of Inventory: 35 days
  1. Columbus, Ohio
    Median Age of Inventory: 38 days
  1. Fort Wayne, Ind.
    Median Age of Inventory: 38 days
  1. Sacramento-Roseville-Arden-Arcade, Calif.
    Median Age of Inventory: 37 days
  1. Detroit-Warren-Dearborn, Mich.
    Median Age of Inventory: 38 days

For more information, please visit www.realtor.com.

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Home Prices Mount at Slower Pace

Jun 27, 2017 by

Home price growth continues to mount, though at a slower pace, up 5.5 percent year-over-year in April, down from a 5.6 percent gain in March, according to the latest S&P CoreLogic Case-Shiller Indices.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index’s 10-City Composite rose 4.9 percent year-over-year, down from a 5.2 percent gain in March, while its 20-City Composite rose 5.7 percent, down from a 5.9 percent gain in March. Month-over-month, the 10-City Composite rose 0.8 percent and the 20-City Composite rose 0.9 percent.

Of the 20 cities analyzed for the Index, Dallas, Texas, Portland, Ore., and Seattle, Wash., again topped the charts, with prices up 8.4 percent in Dallas, 9.3 percent in Portland and 12.9 percent in Seattle.

Is growth beginning to grind to a halt? Home prices could hit a ceiling, according to S&P Dow Jones Indices Committee Chairman and Managing Director David M. Blitzer, but not give way to collapse.

“As home prices continue rising faster than inflation, two questions are being asked: Why, and, could this be a bubble?” said Blitzer in a statement. “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up. The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a four-month supply. Adding to price pressures, mortgage rates remain close to 4 percent and affordability is not a significant issue.

“The question is not if home prices can climb without any limit; they can’t,” Blitzer said. “Rather, will home price gains gently slow or will they crash and take the economy down with them? For the moment, conditions appear favorable for avoiding a crash. Housing starts are trending higher and rising prices may encourage some homeowners to sell. Moreover, mortgage default rates are low and household debt levels are manageable. Total mortgage debt outstanding is $ 14.4 trillion, about $ 400 billion below the record set in 2008. Any increase in mortgage interest rates would dampen demand. Household finances should be able to weather a fairly large price drop.”

“We expect home price indices to continue to reflect rising prices year-over-year as inventory of existing homes at entry level prices remain constrained in major markets,” says Ruben Gonzalez, economist at Keller Williams. “New construction has only recently begun to bring entry-level products into many markets and we expect it will take some time for this to have noticeable impact on market conditions. Price gains are only likely to be subdued if we see a deterioration of demand as a result rising interest rates at some point this year.”

“Two conditions in today’s market that can quickly change the home price trend are swings in the labor market or home inventory,” says Bill Banfield, executive vice president at Quicken Loans. “Both of these factors have remained largely constant throughout the year, and we’re seeing this reflected in most metro areas of the housing market.”

Source: S&P Dow Jones Indices

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Home Prices Plow On at 5.8 Percent

May 30, 2017 by

Home price growth plowed on early in the spring real estate season, up 5.8 percent year-over-year in March, according to the latest S&P CoreLogic Case-Shiller Indices.

The month marked a 33-month high for prices, as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. The Index’s 10-City Composite rose 5.2 percent year-over-year, while its 20-City Composite rose 5.9 percent—both unchanged from February. Month-over-month, the 10-City Composite rose 0.9 percent and the 20-City Composite rose 1.0 percent.

Of the 20 cities analyzed for the Index, Dallas, Texas, Portland, Ore., and Seattle, Wash., came out ahead again in March, with prices up 8.6 percent in Dallas, 9.2 percent in Portland and 12.3 percent in Seattle.

According to S&P Dow Jones Indices Committee Chairman and Managing Director David M. Blitzer, home prices are moving at an accelerated rate—and, presently, with no foreseeable end in sight.

“Home prices continue rising, with the S&P Corelogic Case-Shiller National Index up 5.8 percent in the year ended March—the fastest pace in almost three years,” said Blitzer in a statement. “While there is some regional variation, prices are rising across the U.S. Half of the 20 cities tracked by the S&P Corelogic Case-Shiller indices rose more than 6 percent from March 2016 to March 2017. The smallest gain of 4.1 percent, in New York, was roughly double the rate of inflation.

“Sales of both new and existing homes, housing starts and the National Association of Home Builders’ sentiment index are all trending higher,” Blitzer said. “Over the last year, analysts suggested that one factor pushing prices higher was the unusually low inventory of homes for sale. People are staying in their homes longer rather than selling and trading up. If mortgage rates, currently near 4 percent, rise further, this could deter more people from selling and keep pressure on inventories and prices. While prices cannot rise indefinitely, there is no way to tell when rising prices and mortgage rates will force a slowdown in housing.”

Bill Banfield, executive vice president of Capital Markets at Quicken Loans, is less concerned about rates.

“The continued home price growth, driven by inventory that can’t keep up with the high demand, is further proof of a strong appetite for home-buying,” says Banfield. “This should quell the fears of those who voiced concerns over the effects of rising interest rates on housing.”

Source: S&P Dow Jones Indices

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