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Real Estate Big Data

Housing prices rise, outpacing wage increases

(REAL ESTATE NEWS) A new joint report from NAR and realtor.com reveal that affordability conditions are eroding and there are very few cures to this problem.

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home sales

Good ol’ economics – housing demand continues to outpace supply, and bidding wars are now common in many cities. On a national scale, affordability is increasingly threatening many peoples’ ability to buy, based on their income.

The realtor.com and National Association of Realtors joint report, the Realtors Affordability Distribution Curve and Score, examines affordability conditions compared to income levels for active inventory in local markets. Higher scores suggest a particular market has more affordable homes in proportion to local income levels.

It’s no surprise that in March, the report indicates the least affordable (in proportion to income) is Hawaii, California, Oregon, the District of Columbia, Montana, and Rhode Island. In these states, households at the median income level can only afford 19 to 23 percent of the active housing inventory.

In contrast, the most affordable states are Ohio, Indiana, Kansas, Iowa, and West Virginia, where a a typical household can afford 54 to 62 percent of all active inventory.

The report also indicates that more local markets are seeing worse affordability conditions compared to last year, with L.A., San Diego, San Jose, Ventura, and San Francisco leading the pack. In these markets, the typical household can only afford 3.0 to 11 percent of homes available for sale in their markets.

The typical household can afford nearly 75 percent of homes for sale in Dayton, OH, Toledo, OH, and Scranton, PA.

NAR’s Chief Economist, Dr. Lawrence Yun stated, “The survey confirms that the lack of entry-level supply is putting affordability pressures on too many buyers – especially those at the lower end of the market, where demand is the strongest.”

The report makes even more apparent why first-time buyers “struggle finding affordable properties to buy and are making up less than a third of home sales so far this year,” said Dr. Yun.

Although wages are on the rise, housing prices are outpacing these increases, and Dr. Yun points to the solution being “more homeowners selling, investors releasing their portfolio of single-family homes back onto the market and more single-family housing construction.”

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Real Estate Big Data

Get in on alternative data – an inventive new way to market

(REAL ESTATE BIG DATA) Alternative data is a wild ride with surveillance planes, satellite images, and specially equipped helicopters, and it’s not stopping anytime soon.

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Alternative data

The road less traveled has always been a little stranger and trust me, alternative data is a little strange. Buckle-up your seatbelts, it’s going to be a wild ride.

Data has always been a hot commodity. The digital world has made it easier than ever for investors to get their hands on all kinds of data. The problem is, if one person can gain access to a data set then nearly everyone else can too. So, how are investors supposed to get an edge over their competitors and make the best decisions in their power? Please welcome, alternative data to the stage.

First of all, what the heck is alternative data? According to alternativedata.org, it refers to “data used by investors to evaluate a company or investment that is not within their traditional data sources.” Alternative data is the road less traveled. It offers investors a way to add new and unique variables to the mix.

This data can be anything from private aircraft surveillance to satellite images of parking lots. Every bit of data that investors can gather to determine their next course of action has value. It gets wild, y’all.

In the oil and gas industry, one company uses helicopters decked out with infrared beams to estimate the amount of oil in storage tanks. It may sound like something out of a silly movie, but it’s actually quite clever.

So, is alternative data just an industry fad? Probably not, but what qualifies as this kind of data will evolve over time. As certain practices become more mainstream, they will lose that “alternative” edge. Kind of like when the band you’ve been following for years gets a hit song and now, they’re everyone’s favorite band.

What’s already clear is alternative data is not pixie dust. These creative data sets can provide an interesting insight, but it shouldn’t be the sole basis of any decisions. At the end of the day, alt data points are just more variables on the table. It’s best to not get caught up in the sexiness of private jets and satellites.

One thing is for sure, we will be seeing more creative uses of alternative data in the future.

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Real Estate Big Data

‘Jumpy’ data: Housing starts dip 3.6%, permits hit 13-year high

(REAL ESTATE) Housing starts fall, but experts say the market is *almost* firing on all cylinders. Spring could be rough, but summer looks strong.

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housing starts + construction

Housing starts (construction on new homes) fell 3.6% in January across America, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

This sounds scary, but is barely a blip after skyrocketing at the end of 2019, when housing starts hit a 13-year high.

Also hitting a 13-year high (read: pre-housing crash levels) is applications for building permits, up 9.2% in January, a promising sign for future growth.

National Association of Realtors (NAR) Chief Economist, Dr. Lawrence Yun said, “this housing data is quite jumpy,” but assures people that the 3.6% dip in housing starts is “nothing to be concerned about,” as housing starts are “on an upward path,” continuing to trend positively overall.

Dr. Yun has long pointed to home builders as the secret ingredient for a healthier housing market, as it positively impacts restrictive inventory levels, and allows in otherwise pushed out buyers, particularly first timers.

“More construction will mean more housing inventory for consumers in the later months of this year,” he notes, adding that spring could still be tough for buyers with perpetually tight inventory levels, but “as trade-up buyers move into these new completed homes in the near future, their existing homes will be released onto the market.

Joel Kan, AVP of Economic and Industry Forecasting at the Mortgage Bankers Association (MBA) calls today’s data “another step in the right direction,” noting that despite the December surge followed by the January retraction, “the current pace is still over 1.5 million units – remaining close to the highest levels since 2006.”

Kan points out that while single-family starts are down, they’ve exceeded an annual pace of 1M+ units for a second consecutive month, the first time since 2007. Further, he points out that multifamily just had their strongest month of production in 34 years.

“The success of the spring buying season greatly depends on how much new and existing inventory is on the market,” said Kan.

It could still be a tight market in coming months, but today’s data offers hope for a less “jumpy” market.

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Real Estate Big Data

The good and bad news of home prices rising in almost all cities

(REAL ESTATE BIG DATA) It looks like now is a good time for selling a house, because home prices are high. Also the buyers have lower mortgage rates, so buying is easier on them.

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home prices

In the fourth quarter of 2019, 94% of measured markets experienced home value gains when compared to the same time in 2018, according to the National Association of Realtors (NAR).

While inventory levels loosened slightly in the final quarter of the year, home prices jumped from $258,000 in Q4 of 2018 to $274,900 in Q4 of 2019.

Homeowners are in a great position, with a national average increase of 6.6% in their home’s value, representing their largest financial investment. We all want those kind of returns, but when future buyers are squeezed out of the market, there is no one to buy said financial investment.

Dr. Lawrence Yun, NAR Chief Economist said, “It is challenging – especially for those potential buyers – where we have a good economy, low interest rates and a soaring stock market, yet are finding very few homes available for sale. We saw prices increase during every quarter of 2019 above wage growth.”

Combine tight inventory levels and rising prices, and buyer conditions are restricted. The ray of hope in the market, however, is shrinking mortgage rates, making it more affordable to buy – the 30-year fixed rate averaged 3.76% in the fourth quarter, down from 4.95% one year ago.

NAR reports that with lower mortgage rates, the income needed for a family to afford a mortgage fell to $48,960 from $52,896 one year ago. When looking at a share of the estimated national median family income of $79,740, a family spent 15.3% of their income on mortgage (versus 17.2% in Q4 2018).

Dr. Yun observed that rising home prices create wealth gains for homeowners, but warned that “areas that are deemed ‘too expensive’ will obviously have trouble attracting residents and companies looking to do business there.”

The fix, says Dr. Yun, is “a good balance that benefits both current and future homeowners, but right now, the balance is still in favor of home sellers.”

In recent years, NAR has pointed to home builders as the primary driver of market alleviation, as housing starts could improve restricted inventory levels and allow more interested buyers into the market, particularly first time buyers.

Other alleviative factors include whether or not Federal Reserve Chairman Jerome Powell holds steady and doesn’t change rates (as he has indicated he doesn’t intend to if the economy remains on it’s present path), as well as strong international trade deals, and an improving stock market driving investments across the board.

None of today’s news is a surprise, as Dr. Yun already indicated the 2020 market would likely include rising home prices and low interest rates.

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