Monday, October 20, 2014

Bay Area Home Sales See More Upside in 2015


California overall

  • Year-over-year sales of new and existing houses and condos increased year-over-year for the FIRST time in a year.
  • This year delivered the strongest September in 5 years.
  • September delivered the 31st straight month of a year-over-year increase in the median sales price. This is still 19.6% below the all-time peak in 2007.
  • Indicators of distress continue to decline: "Foreclosure activity remains well below year-ago and peak levels reached in the last five years." A report released three days later declared: "Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years."

SF Bay Area

  • This year also delivered the highest sales of new and existing houses and condos for a September since 2009.
  • The median price was up 14% year-over-year, 9.2% below the all-time peak in 2007.
  • Absentee buyers and all-cash buyers - most likely investors - had a smaller share of sales from last September, 2013 levels. From 20.9% and 23.% respectively in September, 2013 to 19.1% and 20.9% this past September.
Even the amount spent on housing in California terms remains favorable compared to historic norms. In California: "Adjusted for inflation, last month's [average mortgage] payment was 36.0 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 48.1 percent below the current cycle's peak in June 2006. It was 60.5 percent above the January 2012 bottom of the current cycle."

Ditto for the SF Bay Area: "Adjusted for inflation, last month's payment was 19.4 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 39.1 percent below the current cycle's peak in July 2007. It was 82.4 percent above the February 2012 bottom of the current cycle."

Even with the encouraging numbers, California has a ways to go before reaching anything close to normal levels of sales. For example, September's "sales were 15.5 percent below the average of 42,996 sales for all the months of September since 1988…California sales haven't been above average for any particular month in more than eight years." So, there remains plenty of upside potential as the market continues to normalize. 

Tuesday, October 7, 2014

2015: Good News for Home Buyers in California



It may get easier to find the home of your dreams. A 2015 California housing market forecast out Tuesday points to more homes on sale and fewer investors competing with families. It also has some good news regarding home prices, at least for those looking to purchase.

“Next year, home price gains will slow, allowing would-be buyers who have been saving for a down payment to be in a better financial position to make a home purchase,” said Kevin Brown, president of the California Assn. of Realtors, which released the forecast.

The report follows a continued trend in the California housing market. After robust price gains in 2012 and 2013, prices increases tapered off this year. Even though more homes came on the market, sales dropped as would-be buyers struggled to afford a house.

But next year an improving economy and still-low interest rates will make affordability less of a problem, said Leslie Appleton-Young, chief economist for the Realtors group. The trade organization predicts sales of previously owned single-family homes will rise 5.8% next year after an 8.2% projected decline in 2014.

 The state median home price will rise 5.2% next year to $478,700, the Realtors group projects. That would be the smallest increase in four years and would follow an estimated 11.8% increase for 2014.

Sunday, September 28, 2014

2015: Continued Upward Projections Seen for California Real Estate



The harder they fall, the higher they bounce. Local real estate markets in California were among those hit hardest by the national housing crisis and recession. Entire neighborhoods were emptied by foreclosure. House values dropped like a rock. Would-be home buyers retreated back to renting, sending the entire real estate market to a screeching halt.

But that was then, and this is now. In 2015, California housing markets could experience some of the biggest price gains in the country. This is according to an analysis and forecast by the economists at Zillow.

Earlier this year, the real estate information service Zillow published home-value predictions for hundreds of cities and metro areas across the U.S. It was meant to show where home prices “are headed over the next 12 months, from May 2014 through May 2015.”

The projections came in the form of an interactive (and highly addictive) tool that allows you to scale the projections up and down. In other words, you can “zoom in” to see which housing markets are predicted to appreciate the most in 2015. And guess what? They’re all in California and Nevada.

Sunday, September 7, 2014

Mortgage Rates Hover At Their Lowest Levels Of The Year



Mortgage rates hovered at their lowest levels of the year for the third straight week this week, according to a survey published Thursday by Freddie Mac FMCC +1.14%.

The average 30-year fixed-rate mortgage stood at 4.1% for the week ending Wednesday, according to Freddie’s survey. To get that rate, borrowers had to pay fees equal to around 0.5% of the loan amount.

Mortgage rates have drifted down in recent weeks as bond yields on 10-year Treasury notes have fallen. Investors have bought government debt amid rising concerns over geopolitical instability.
Few expected rates would be this low at the beginning of the year. Indeed, one of the biggest surprises of 2013 came in the spring, when mortgage rates jumped suddenly as anxious investors sold off Treasury securities amid signs that the Federal Reserve was thinking about slowing down its bond-buying program.


By contrast, one of the bigger surprises of 2014 may be that mortgage rates might end the year lower than they began, at around 4.5%, even as the Federal Reserve has gradually pared back its purchases of mortgage-backed securities.

Tuesday, August 19, 2014

Home Price Appreciation is Slowing



Home-price appreciation is slowing, a welcome trend for potential buyers but a troubling one for homeowners still looking for relief from underwater mortgages.

Single-family housing prices rose 4.4% in the year that ended in the second quarter, the slowest annual pace since 2012, according to a report released Tuesday by National Association of Realtors.

The association found that median prices for existing single-family homes grew year-over-year in 122 of 173 metropolitan areas it tracked, while prices declined in 47 metro areas. Only 19 areas showed double-digit year-over-year price increases, a substantial drop from the 37 cities that showed such increases in the first quarter.

Economists said price appreciation is slowing in part because buyers, including investors, have become more cautious and are pulling back from the market amid the big price gains of the past year. At the same time, those higher prices persuaded more homeowners to put their homes up for sale, adding inventory and reducing the urgency to buy.

Those trends are good news for potential buyers, who have had to deal with heated competition for a relatively small number of homes on the market in many cities as well as a near percentage-point increase in 30-year mortgage rates since May 2013.

However, the trends serve as a warning to some owners who bought their homes near the peak of the market and still owe more on their mortgages than their homes are worth, said NAR chief economist Lawrence Yun. A report from real-estate research firm  CoreLogic  CLGX -0.44%     said that at the end of the first quarter, owners of 6.3 million homes were still underwater, or owed more than their homes were worth.

"With this price deceleration, it could be another three to five years for some people to go above water," Mr. Yun said.

Stan Humphries, chief economist of real-estate-information site  Zillow Inc.,  Z +0.38%     said that home values in many markets are likely to oscillate over the next few years, as the market tries to find stable ground after years of boom, bust and recovery.

"We're definitely at an inflection point. We see moderation [in price gains] continuing," he said, based on Zillow's own data on home values.

Overall, Mr. Yun said that the second quarter showed a significant divergence in price change between metro areas and regions. While the median existing single-family home price between the second quarters of 2013 and 2014 rose 7.3% in the West to $297,400, home prices in the Northeast fell 0.9% to $255,500, the report said.

Some of the most strongly rebounding housing markets, such as Phoenix and Las Vegas, are also showing signs of cooling, Mr. Yun said. The Phoenix area, which had been experiencing double-digit year-over-year price growth, saw prices rise 8.3% in the second quarter from the previous year to $198,600, the report said.

The NAR report said that prices dropped the most sharply in Elmira, N.Y. with a near 30% decline between the second quarters of 2013 and 2014 to $87,800.

To be sure, median home prices can be skewed as the kinds of homes being sold shift between the higher and lower ends of the market, a factor that can have an especially strong influence on statistics from small metropolitan areas.

Cathy Weil, president-elect of the Elmira-Corning Regional Association of Realtors, said that the Elmira median home price was skewed by the mix of homes sold in the second quarter. She said that her area has seen sales pick up significantly and some high-price homes have been receiving multiple offers.

According to the NAR report, the most expensive housing markets in the second quarter were San Jose, Calif., where the median price was $899,500; San Francisco, $769,600; Anaheim-Santa Ana, Calif., $691,900; Honolulu, $678,500; and San Diego, $504,200.

Some home buyers say that they've noticed the market cool somewhat. Trey Denton, a 31-year-old metals broker in Newburgh, Ind., bought an investment property for about $175,000 at the end of June, which he plans to list for sale this Friday. He said that he hopes to sell the home before the winter and that he feels there is an increased sense of urgency to sell so he won't have to wait until the spring home-buying season.

"There's definitely a risk with waiting," Mr. Denton said. "With interest rates looking to creep up next year, the market could fall."

Real-estate agent Kevin Eastridge, who is president of the Indiana Association of Realtors, said that his housing market around Evansville, Ind., "stopped dead" between November and February, and was "excellent" between March and May. In June, activity dropped off a bit, but things heated up again in July, he said.

"We are running into some multiple-offer situations but those are the exception rather than the rule," he said.

Thursday, August 14, 2014

30 Year Mortgage Rates Up Slightly

08-12-14 950AM



Mortgage rates for 30-year fixed mortgages rose this week, with the current rate borrowers were quoted on Zillow Mortgages at 4.08 percent, up from 4.03 percent at this same time last week.

The 30-year fixed mortgage rate hovered around 4.10 percent for the majority of the week, peaking at 4.17 percent on Thursday before easing back down to the current rate today.

“Mortgage rates were subdued last week as ongoing geopolitical concerns and economic softness in Europe encouraged investors to buy U.S. mortgage-backed securities as a safe haven,” said Erin Lantz, vice president of mortgages at Zillow. “This week, we expect international headlines, rather than U.S. economic data, to drive any meaningful changes to mortgage rates.”

Additionally, the 15-year fixed mortgage rate this morning was 3.12 percent, and for 5/1 ARMs, the rate was 2.77 percent.



Wednesday, July 30, 2014

Home Appreciation Update: Moderate


table

The Case-Shiller data for May 2014 came out this morning, and based on this information and the June 2014 Zillow Home Value Index (ZHVI, released July 20th), we predict that next month’s Case-Shiller data (June 2014) will show that both the non-seasonally adjusted (NSA) 20-City Composite Home Price Index and the NSA 10-City Composite Home Price Index increased by 8.1 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from May to June will be flat for the 20-City Composite Index and 0.1 percent for the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for June will not be released until Tuesday, August 26.

This month’s Case-Shiller surprised a bit with May month-over-month home price depreciation and a downward revision to the April numbers. This is more pronounced slowing than we have been seeing in previous releases. We expect this slowdown to continue to be readily present in next month’s release both on a year-over-year basis, which we expect to be close to 8 percent for June, as well as for monthly appreciation numbers. The Zillow Home Value Index has been showing home value appreciation slowing for quite some time with June home value appreciation at 6.3 percent on a year-over-year basis.

The Case-Shiller indices are biased toward the large, coastal metros – some of which are still seeing substantial home value gains, and they include foreclosure re-sales. The inclusion of foreclosure re-sales disproportionately boosts the index when these properties sell again for much higher prices — not just because of market improvements, but also because the sales are no longer distressed. However, as the prevalence of foreclosures and foreclosure re-sales is declining, so is the impact they have on the Case-Shiller indices. Moreover, the fact that Case-Shiller uses a three-month average is strongly diluting the impact of the most recent numbers and with that the showing of a slowdown.

We expect home value appreciation to continue to moderate in 2014, rising 4.2 percent between June 2014 and June 2015, nationally. The main drivers of this moderation include rising mortgage rates, although these have been rising very slowly – and less investor participation – leading to decreased demand – and increasing for-sale inventory supply.

To forecast the Case-Shiller indices, we use the May Case-Shiller index level, as well as the June Zillow Home Value Index (ZHVI), which is available more than a month in advance of the Case-Shiller index, paired with June foreclosure resale numbers, which Zillow also publishes more than a month prior to the release of the Case-Shiller index. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices.