Category Archives: Market Conditions

Amenities That Jack Up Sales Prices

Americans will dig deeper in their pockets and shell out more cash to live near top-notch schools and in safer neighborhoods with access to retail and “artificial amenities,” according to a new study published in the Journal of Urban Economics. In analyzing 2,000 neighborhoods across the country, researchers found that home buyers are willing to potentially spend thousands of extra dollars for these amenities.

 

A regional funding increase of $1,000 per student in schools is associated with a $570 annual increase in what people are willing to pay for a home in the neighborhood, though “this number is likely biased from well-funded areas being nicer or having more desirable residents,” researchers note.

However, unsafe neighborhoods will bring in much lower offers from buyers. A 10-point increase in the murder rate — from 10 to 20 deaths per 100,000 residents annually — is associated with an annual drop of $1,000 to $1,600 in what people are willing to pay, according to the study.

Buyers will also pay more incrementally depending on how many bars and restaurants there are in the neighborhood. Each establishment per 1,000 was found to be worth an annual $170 increase in what people say they’re willing to pay for a home. That number may also reflect a desire to live near a variety of stores and entertainment areas, researchers note.

A neighborhood’s size, density, and “artificial amenities” — those that are created by the residents — were also found to be important, even more so than living near a natural environment such as mountains and coastlines, according to the study.

“Because artificial amenities are largely produced by local residents, they may reflect the desirability of the populations themselves,” the authors note. That means residents are willing to pay not only for the neighborhood itself but the access the neighborhood affords them to other people, jobs, and amenities, according to a report on the study by The Atlantic.

East Oahu, Hawaii, is the study’s top desirable location, with households willing to sacrifice 25 percent more of their pay than the average American in order to live there. California cities such as Marin, San Mateo, San Francisco, Santa Cruz, San Jose, and Oakland follow closely behind East Oahu, as well as parts of Colorado and Washington State.

Source: “How Much Are You Willing to Pay to Live in America’s Best Neighborhoods?” The Atlantic CityLab

The 20 Hottest Markets in June — Columbus #15

Housing markets are booming in California, which continues to dominate realtor.com®’s Housing Markets Fueled by Job Growths list. California boasts nearly half of the nation’s 20 hottest real estate markets. A limited number of homes for sale as well as the state’s strong economy are helping to boost demand.

Realtor.com® analyzed the number of listing views at its site, the number of listings in the 300 largest U.S. markets, and the median number of days that homes spent on the market to identify some of the top-performing markets.

The realtor.com® Hotness Index identified the following 20 medium-size to large U.S. markets where home buyers are the most active and sales are closing quickly:

  1. San Francisco
  2. Vallejo, Calif.
  3. Denver, Colo.
  4. Santa Rosa, Calif.
  5. Dallas
  6. San Jose, Calif.
  7. Ann Arbor, Mich.
  8. Boston
  9. Detroit
  10. Santa Cruz, Calif.
  11. Sacramento, Calif.
  12. San Diego
  13. Fargo, N.D.
  14. Billings, Mont.
  15. Columbus, Ohio
  16. Stockton, Calif.
  17. Midland, Texas
  18. Austin, Texas
  19. San Antonio, Texas
  20. Fort Wayne, Ind.

Source: “The 20 Hottest U.S. Real Estate Markets in June 2015,” realtor.com®

Freddie: 2015 to Mark Best Year for Home Sales

Fotolia_32750180_XS-267x300Freddie Mac economists are bullish on housing.

“This month kicks off spring home buying season,” says Len Kiefer, deputy chief economist at Freddie Mac. “Between now and the end of June, we’ll see about 40 percent of all home sales for the year.”

It’s that optimism that has Freddie Mac forecasters expecting 2015 “to be the best year for home sales and new home construction since 2007, when total home sales were about 5.8 million for the year,” according to their U.S. Economic and Housing Market Outlook for March.

An improving job market is driving young professionals, ages 25 to 34, back to the labor force. The millennial age group now has 76.8 percent of its generation employed, as of last month, up from 75.9 percent last year.

Freddie Mac economists predict that rents will continue to rise at or above inflation this year, which will likely push more prospective buyers into home ownership. Rents rose 3.6 percent, on average, in 2014, and are up nearly 11 percent over the last three years, according to Freddie Mac’s report.

Meanwhile, Freddie Mac economists expect that the 30-year fixed-rate mortgage to rise slightly this year to a 4 percent average. The 30-year fixed-rate mortgage averaged 3.86 percent this week.

Source: “Freddie Mac March 2015 U.S. Economic and Housing Market Outlook,” Freddie Mac

20 Housing Markets That Are Heating Up — Columbus #11

selling-picJust in time for spring selling season to start, sellers are finally starting to put their homes on the market, upping the selections for buyers, according to the latest analysis from realtor.com®. Higher inventories and buyer demand are expected to boost closings this month, according to realtor.com®.

“The biggest macro trend is that we’re finally seeing inventory grow,” says Jonathan Smoke, realtor.com®’s chief economist. “This is a very important trend for many reasons – in particular, because it will help keep prices at a more moderate level down the road.”

Affordability had become a chief concern recently in the housing market. So what’s changed and why are more sellers putting their homes on the market?

Smoke says home owners are being encouraged by the current higher prices. But Smoke says those will level out as supply rises to meet demand.

According to realtor.com®’s February data, 20 markets are already showing a big upswing based on the ratio of listing views at realtor.com® to the number of listings for-sale. Those 20 markets are:

  1. Waco, Texas
  2. Dallas-Fort Worth-Arlington, Texas
  3. Santa Rosa, Calif.
  4. Denver-Aurora-Lakewood, Colo.
  5. Vallejo-Fairfield, Calif.
  6. Ann Arbor, Mich.
  7. Fort Wayne, Ind.
  8. Santa Maria-Santa Barbara, Calif.
  9. Charleston, W.Va.
  10. San Luis Obispo et al, Calif.
  11. Columbus, Ohio
  12. Boulder, Colo.
  13. Detroit-Warren-Dearborn, Mich.
  14. Hartford-West Hartford et al, Conn.
  15. Manchester-Nashua, N.H.
  16.  San Francisco-Oakland et al, Calif.
  17. San Diego-Carlsbad, Calif.
  18. Charleston-North Charleston, S.C.
  19. Toledo, Ohio
  20. Boston-Cambridge-Newton, Mass.-N.H.

Source:”Spring Is Coming, and These 20 Markets Are Heating Up,” realtor.com®

Spring Thaw? Better Days Ahead for Housing

SPRING2812371_101_12Home sales likely will remain subdued early on in the year before picking up in the second quarter and then maintaining a brisk pace for the rest of the year, predicts a new Reuters poll of economists.

Housing activity has been bumpy so far. The National Association of REALTORS® reported this week that existing-home sales tumbled to a nine-month low in January.

But economists polled by Reuters are optimistic that a turnaround will occur due to a strengthening job market that is expected to offset some of that drag.

“We expect the housing market to improve this year,” David Nice, an economist at Mesirow Financial in Chicago, told Reuters. “It is only a matter of time until the improved jobs market has a positive effect on the housing market. We are betting that first-time buyers return this year.”

The economy has added more than a million jobs over the past three months. The improvements in the labor market are expected to prompt the Federal Reserve to start raising interest rates later this year, an event that likely will push up mortgage rates too.

The 30-year fixed-rate mortgage currently is averaging 3.76 percent, according to Freddie Mac. Reuters poll of economists predicts a lower jump than originally anticipated in mortgage rates, with the 30-year fixed-rate mortgage expected to average 4 percent this year and rise to a 4.58 percent average in 2016. (Originally, economists had projected a 4.55 percent average rate this year and 5.20 percent next year.)

Also, economists point to a housing turnaround due to the government’s easing of credit that will likely prompt more first-time home buyers to make a move this year.

What’s more, “soon, there the improvement in equity positions will be large enough that owners who couldn’t sell but wanted to will be able to list their units,” Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa., told Reuters. “That would increase supply and make house shopping easier.”

Source: “Strong Jobs Market to Spur U.S. Housing in 2015: Reuters Poll,” Reuters

Nearly 80% of Housing Markets Are Stabilizing

SOLD HOUSEThirty-eight of the 50 states, plus the District of Columbia, are now showing an improving three-month trend in housing activity, according to Freddie Mac’s latest Multi-Indicator Market Index. What’s more, 40 of the 50 major metros Freddie Mac tracks are also showing a three-month improving trend.

Yet, Freddie Mac’s national MiMi value stands at 74.9, which still indicates a weak housing market overall. The all-time MiMi high was 121.7, recorded in April 2006; its lowest point was 57.2 in October 2010, when the housing market was at its weakest point. Since its low in 2010, the housing market has rebounded 31 percent.

Freddie Mac’s MiMi index monitors the stability of the nation’s housing market by assessing each single-family housing market relative to its long-term stable range. It takes into account such data as home purchase applications, payment-to-income ratios, on-time mortgage payments, and the employment market.

Overall, “housing markets are getting back on track,” says Len Kiefer, Freddie Mac’s deputy chief economist. “The national MiMi improved for the fourth consecutive month. Nearly 80 percent of the state and metro housing markets MiMi tracks are improving or in their stable range of activity. … Low mortgage rates and moderating house price growth are helping to keep payment-to-income ratios favorable for the typical family in most of the country. In fact, Los Angeles is the only metro market with an elevated MiMi payment-to-income indicator whereas most other markets remain quite affordable. And of course, labor markets are generally improving.”

The most improving states on a year-over-year basis, according to the index, were:

  • Nevada
  • Colorado
  • Rhode Island
  • Illinois
  • Ohio

Meanwhile, the most improving metros year-over-year were:

  • Las Vegas
  • Denver
  • Chicago
  • Providence, R.I.
  • Columbus, Ohio

Source: “U.S. Housing Stability Improves for Fourth Consecutive Month,” Freddie Mac

90% of Mortgaged Homes Have Equity Again

About 273,000 homes returned to positive equity in the third quarter of 2014, bringing the total to 44.6 million of all properties with a mortgage, according to a newly released equity report from CoreLogic using data from the third quarter of 2014. That number represents around 90 percent of all mortgaged properties nationwide.

If home prices rose by 5 percent more—which is largely predicted to happen this year—an additional 1 million home owners now in negative equity would also move into positive territory, CoreLogic reports.

“Negative equity continued to decrease in the third quarter as did the level of homes mired in the foreclosure process,” says Anand Nallathambi, president and CEO of CoreLogic. “This should hopefully translate into less friction in the housing market as we move forward. Better fundamentals supporting home ownership in the face of higher rents should attract more first-time home buyers to the market this year and next.”

The largest declines in the negative equity share of home owners occurred in Nevada, Georgia, Michigan, and Florida.

MORTGAGE CALCULATORSSome home owners holding equity are still considered “under-equitied.” About 9.4 million—or 19 percent—of properties with positive equity have less than 20 percent of equity, and 1.3 million have less than 5 percent of equity in their homes.

Overall, about 5.1 million homes—or 10.3 percent of all residential properties with a mortgage—were still in negative equity territory in the third quarter. That is a slight drop from 5.4 million in the second quarter, but down 3 percentage points year-over-year when the total stood at 6.5 million in the third quarter of 2013.

5 States with Highest Number of Negative Equity Properties in Q3 2014

The following five states alone accounted for about 33 percent of negative equity in the U.S.

  1. Nevada: 25.4%
  2. Florida: 23.8%
  3. Arizona: 19%
  4. Rhode Island: 14.8%
  5. Illinois: 14.1%

5 States with the Most Amount of Properties in a Positive Equity Position

  1. Texas: 97.4%
  2. Alaska: 97.1%
  3. Montana: 97.1%
  4. Hawaii: 96.4%
  5. North Dakota: 96.1%

Broken down by metro level, the five areas with the highest amount of properties with equity in the third quarter of 2014 were:

  1. Houston-The Woodlands-Sugar Land, Texas: 97.5%
  2. Dallas-Plano-Irving, Texas: 97%
  3. Anaheim-Santa Ana-Irvine, Calif.: 96.6%
  4. Portland-Vancouver-Hillsboro, Ore.: 96.4%
  5. Denver-Aurora-Lakewood, Col.: 95.9%

Source: CoreLogic Q3 2014 Equity Report

10 Metros Poised for Highest Price Gains — Columbus #2

GROWTHExpect more from the Midwest real estate market as it heats up and outpaces the rest of the nation, according to Clear Capital’s Home Data Index Market Report, which looked at data through December 2014.

Price growth in the Midwest is expected to outpace the rest of the country in all tiers by 1.6 percentage points in 2015 — nearly double that of the national average, according to Clear Capital’s forecasts.

Several metro areas in the Midwest are projected to see some of the largest price growths over the next year. Ohio is leading the pack with the highest number of metros in Clear Capital’s forecast. Columbus, Dayton, Cleveland, and Cincinnati are expected to see price growth from 2.2 percent to 4.5 percent this year. In Dayton, median home prices surged 16.5 percent in 2014 year-over-year. That’s a big jump, considering the metro area saw a price drop of 2.3 percent one year ago.

Still, the Western region of the U.S. continued to outshine the other three regions with an 8.7 percent price growth at the end of 2014, Clear Capital notes. But that’s more than a 10 percentage point drop from the 18.9 percent growth the region saw in 2013. The Midwest, showing strong gains recently, posted a 7.7 percent price growth year-over-year as of December 2014, while the South followed at 6 percent and the Northeast at 2.9 percent.

“Overall, 2014 was a good year, with prices up virtually across the board, though the rate of price growth has declined consistently since the year began,” says Alex Villacorata, vice president of research and analytics at Clear Capital. “As we turn the calendar, we expect this trend to continue. Nearly all markets have experienced significant turbulence over the last decade and are only now showing signs of stabilization. This stabilization is likely to persist through the first half of the year until the market’s recovery strength can again be measured going into the traditional buying season.

Top 10 Major Metro Markets

According to Clear Capital’s latest report, here are the 10 major metros poised for the highest price gains in 2015.

  1. Milwaukee-Waukesha-West Allis, Wis.
    Year-over-year: 5.8%
    2015 forecast: 4.9%
  2. Columbus, Ohio
    Year-over-year: 9.7%
    2015 forecast: 4.5%
  3. Denver-Aurora, Colo.
    Year-over-year: 9.7%
    2015 forecast: 4%
  4. Dallas-Fort Worth-Arlington, Texas
    Year-over-year: 9.1%
    2015 forecast: 3.9%
  5. Atlanta-Sandy Springs-Marietta, Ga.
    Year-over-year: 12.6%
    2015 forecast: 3.3%
  6. Chicago-Naperville-Joliet, Ill.-Ind.-Wis.
    Year-over-year: 8.5%
    2015 forecast: 3.1%
  7. Orlando, Fla.
    Year-over-year: 8.2%
    2015 forecast: 2.6%
  8. Dayton, Ohio
    Year-over-year: 9.7%
    2015 forecast: 2.6%
  9. Sacramento-Arden-Arcade-Roseville, Calif.
    Year-over-year: 9.3%
    2015 forecast: 2.5%
  10. Cleveland-Elyria-Mento, Ohio
    Year-over-year: 7.9%
    2015 forecast: 2.5%

Source: Clear Capital