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Home sales surge in half of the nation, slump in the other half

(REAL ESTATE NEWS) Home sales rose last month, despite challenging inventory and affordability conditions – but not in all markets.

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Talk about mixed signals. We ended last week with alarm bells that affordability is restricting the housing market, yet home sales in March actually surged in the Northeast (up 6.3 percent) and Midwest (up 5.7 percent) compared to just one month prior.

Meanwhile, home sales slipped 0.4 percent in the South, and a whopping 3.1 percent in the West. Sales levels in all four regions are lower than they were at this time last year, reinforcing the supply and demand challenges, putting homeownership out of reach for a growing pool of potential buyers.

NAR Chief Economist, Dr. Lawrence Yun has indicated that the only way to loosen the noose is a combination of more current homeowners opting to sell, builders increasing new home production, and investors releasing inventory.

In the last year, the median existing home price rose 5.8 percent to $250,4000 with March as the 73rd consecutive month of annual gains.

The average number of days on market decreased to 30 days from 37 in February and 34 in March of 2017. Half of all home sold were on the market for less than a month, and in some cities, bidding wars and immediate sales are common.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets – especially those out West,” said Dr. Yun.

That said, there is a silver lining.

NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty notes, “First-time buyers continue to make up an underperforming share of the market because there are simply not enough homes for sale in their price range.”

Supply conditions improve in higher up price brackets,” concluded Mendenhall, “which means those trading up should see considerable interest in their home, as well as more listings to choose from during their own search.”

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Real Estate Big Data

Much needed good news for housing, despite slowed sales

(REAL ESTATE) The data is in, and some truly positive signs for the housing market are slowly surfacing.

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If you put your finger on the pulse of the housing market right now, you’d see some much needed health improvements – inventory levels are finally loosening up for the first time in years, and the rate of price increases abated in the fourth quarter.

The median price of an existing home in Q4 rose 4.0 percent to $257,600 compared to the fourth quarter of last year, according to the National Association of Realtors (NAR).

Dr. Lawrence Yun, NAR Chief Economist, said in a statement that despite hurdles last year, “the close of the fourth quarter was promising.”

“Home prices continued to rise in the vast majority of markets,” said Dr. Yun, “but with inventory steadily increasing, home prices are, on average, rising at a slower and healthier pace.”

Existing home sales fell 1.8 percent in the fourth quarter compared to the previous quarter, and 7.4 percent over the year.

Why?

Dr. Yun said the West Coast needs more homes built. “The West region, where home prices have nearly doubled in six years, is undergoing the biggest shift with the slowest price gain and large buyer pullback.”

Comparing Q4 of 2017 and 2018 shows some relief when it comes to tight inventory levels which has edged hopeful homebuyers out of the market, increasing 6.2 percent over the year.

Housing affordability is the key ingredient to a healthy real estate sector going forward, which Dr. Yun says will require more homebuilding of moderately priced homes (a drumbeat the economist has been steadily beating for years).

“Housing starts fell far short of historically normal levels, with only 9.6 million new housing units added in the past decade; compared to 15 to 16 million that would have been needed to meet our growing population and 20 million new job additions,” said Dr. Yun.

“Local zoning law changes, expanding construction worker training programs at trade schools and promoting the use of tax breaks for developers in the designated Opportunity Zones will all play an important role in assuring an adequate future supply of housing,” Dr. Yun opined. 

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Real Estate Big Data

Pending home sales fall, hardest hit in the South

(REAL ESTATE) Despite a setback in home sales, there are several factors that indicate 2019 is back on track for being a growth year in the real estate sector.

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For the twelfth consecutive month, pending home sales (contracts signed on homes for sale) fell annually, dipping 9.8 percent in December compared to the previous December, according to the National Association of Realtors (NAR).

Down 2.2 percent from the previous month, NAR reports that pending home sales fell most dramatically in the South by 5.0 percent (down 13.5 percent annually), and 0.6 percent in the Midwest (down 7.2 percent from last December).

Meanwhile, pending home sales actually rose for the month in the Northeast (up 2.0 percent) and the West (up 1.7 percent), despite coming in lower than December 2017 (down 2.5 percent, and 10.8 percent, respectively).

Dr. Lawrence Yun, NAR Chief Economist, points to Wall Street and Main Street as factors in the decline.

“The stock market correction hurt consumer confidence,” said Dr. Yun, adding, “record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December.”

Dr. Yun indicates that the partial government shutdown has not caused obvious damage to home sales, and that as the government reopens fully, more mortgage options will become available for consumers.

“Some home transactions were delayed,” he notes, “but we now expect those sales to go forward.”

Despite a setback in December, Dr. Yun stands by his previous forecast, asserting that the housing sector will see improvement in 2019.

“The longer-term growth potential is high,” he observes, adding that he expects the Federal Reserve to reduce their projected rate increases to one or even zero (from four as previously expected), decreasing mortgage rates and improving the 2019 forecast.

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Real Estate Big Data

Debate brewing over what home prices will do in 2019 (place your bets)

(REAL ESTATE NEWS) There are consistent factors we look at when forecasting housing prices, and a unanimous picture is emerging – but place your bets because there is a small spread to consider.

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In the past few years, it’s been pretty sweet to be a homeowner, watching your gains accumulate, while home buyers have been up against diminished inventory levels, rising prices, and perpetually tight lending conditions.

So what does 2019 have in store?

Several optimistic brokers we spoke with believe prices will continue their current pace, some predicting as much as a 7.0 percent increase this year, while others believe it to be as little as 1.0 percent. But none indicated prices will stagnate or even drop.

Which seems to be the consensus.

So the debate brewing is perhaps more nitpicking than anything, but a debate it remains.

According to Case-Shiller, CoreLogic, home prices are predicted to increase another 5.0% in 2019 (and another 5.0% in 2020), and many experts add a caveat that the 2020 elections will be a strong driver in both years as uncertainty inevitably plays a roll in buyer sentiment.

A Reuters report indicates prices will rise twice the speed of inflation and pay in 2019, again noting the impact of potential trade wars on the American economy. Meanwhile, mortgage costs are accelerating which could hold back home sales this year.

The good news is that inventory levels are loosening slightly as builders’ engines are starting to rev and housing starts inch upward, alleviating pressure on supply levels (although everyone agrees they’ll remain low).

Continued economic success, combined with low inventory levels are the primary indicators in favor of home price increases this year.

Calculated Risk suggests that inventory increases makes it “likely that price appreciation will slow to the low single digits – maybe around 3.0 percent.”

The National Association of Realtors is similarly conservative in projections, forecasting a slight increase in home prices in 2019.

NAR Chief Economist, Dr. Lawrence Yun tells The American Genius, “Home sales have been softened in the latter part of 2018. Not likely to be meaningful gains in home sales in 2019. Combine this with a modest growth in supply of new home construction and existing home inventory implies a much slower home price appreciation in 2019.”

Dr. Yun concluded, “My forecast is only 2 percent to 3 percent in 2019. This would be the first time in seven years where wage growth will likely exceed home price growth.”

So the spread is between 2.0 percent at 7.0 percent growth in home prices – what do you think this year has in store?

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