Real Estate Roundup: Rising Home Sales and Prices Projected for 2017

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious.

2017 FORECAST: STEADY RISE IN HOME SALES, PRICES 
Next year will see steady growth in existing-home sales and prices, with stronger growth in 2018, according to the latest forecast by real estate analysts — boosted by a greater number of millennials entering their prime homebuying years, rising household formation, and continued job growth.

Forecasts for the coming year were a highlight of the National Association of Realtors’ annual Conference & Expo, held last week in Orlando, Florida. NAR analysts expect sales to grow  by 2 percent to 5.46 million in 2017, followed by 4 percent growth in 2018. The national median existing-home price is expected to rise by 4 percent next year.

NAR Chief Economist Lawrence Yun said that tight supply and affordability problems currently facing buyers in many markets will gradually ease next year.

“NAR surveys from both current renters and recent buyers prove that there’s an overwhelmingly strong desire among the younger generation to own a home of their own,” Yun said in a statement. “The housing market over the next couple of years should get a big lift in demand from these new buyers. The one caveat is it’s essential that there’s enough new and existing supply at entry-level prices for them to reach the market.”

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SAN JOSE, SAN FRANCISCO SELLERS LEAD U.S. IN HOME PRICE GAINS 
U.S. homes sold for an average of 23 percent above their purchase prices in the third quarter of 2016, the highest gain in nine years. And the news is even better in the Bay Area, where homes in the San Jose area sold for 68 percent above their purchase prices and 67 percent in the San Francisco area.

San Jose and San Francisco once again led the nation in home price gains, according to data compiled by ATTOM Data Solutions. They were followed by Portland, Oregon and Seattle (tied at 51 percent) and Los Angeles (49 percent).

The company’s Q3 Home Sales Report also showed that distressed sales nationwide fell to a nine-year low of 12.9 percent of all sales. All-cash purchases also fell to a nine-year low, to 25.9 percent of all sales, down from a peak of 44.8 in 2011.

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MILLENNIAL HOMEBUYERS TURN TO REFINANCING
Millennial homebuyers are growing in number, and they’re increasingly choosing to refinance their homes, too. That’s the news from mortgage software provider Ellie Mae, which released its monthly Millennial Tracker report last week.

Refinances accounted for 20 percent of all closed loans by millennial borrowers in September, up from 17 percent in August, the company said. Eighty percent of millennial loans were for home purchases, compared with 54 percent overall for U.S. borrowers.

Other findings from the September Millennial Tracker report:

• The average FICO score for millennial borrowers rose to 726 in September.
• The average interest rate on home loans continued declining, to 3.728 percent.
• The average loan amount increased to $184,179, up from an average of $181,326 in August.

“As the average rate on home loans continues to decline, we are seeing millennials with more purchase power, indicated by the average loan amount increase,” Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae said. “We’re also seeing a slight uptick in the number of refinances in September, indicating maturity among those millennials who previously purchased a home and are looking for an opportunity to lower the cost on their existing mortgage.”

(Photo: Flickr/SoulRider.222)

Article and images sourced from http://blog.pacificunion.com/real-estate-roundup-rising-home-sales-prices-in-2017/

Yes, Home Prices Are Rising. No, a New Housing Bubble is NOT Forming

We recently reported that home prices are continuing to rise across most of the nation. This has created concern in some pundits that a housing bubble, like we saw ten years ago, is forming again. We want to explain why these concerns are unfounded.

The current increase in home values can be easily explained by the theory of supply and demand. Right now, the number of families looking to purchase a home is greater than the supply of homes on the market.

Here is a chart that explains how the months’ supply of housing inventory impacts home values:

According to the latest Existing Home Sales Report from the National Association of Realtors, there is currently a four-month supply of inventory. That puts us in the blue section of the above graphic. Home prices should be appreciating.

The difference in 2006…

A decade ago, the demand for housing was artificially boosted by lending standards that were far too lenient. Today, the strength of the demand for housing is legitimate, as lending standards are nowhere near what they were a decade ago.

For proof of this, let’s look at a graph of the Mortgage Bankers’ Association’s Mortgage Credit Availability Index:

The higher the number, the easier it was to get a mortgage. We can see that from June 2005 to June 2007, mortgage standards were much more lenient than they have been over the last nine years.

Bottom Line

Today’s price increases, unlike those a decade ago, are the result of qualified buyer demand exceeding the current inventory of homes available for sale. Once the supply increases, prices will level out.

Home Price Growth in San Francisco Area Slows a Bit

The San Francisco metro area has given up its claim as the home of the nation’s highest-rising housing prices.

The region posted the fourth-highest annual rise in home prices in the nation in January after two months at No. 1. That’s according to the latest S&P/Case-Shiller Home Price Indices, which are widely respected but run two months behind current results.

January home prices in the San Francisco area increased 7.9 percent from a year earlier, trailing Denver (up 8.4 percent), Miami (8.3 percent), and Dallas (8.1 percent). Nationwide, home prices in January were 4.5 percent higher than they were one year ago.

The results show that annual home price gains in the region are easing off from the rapid pace of the past two years, when they reached as high as 25.7 percent in the fall of 2013. In December 2014, the San Francisco area led the nation in annual price growth at 9.3 percent. In November, prices were up 8.9 percent.

The latest Case-Shiller numbers also reveal that home prices in the San Francisco area slipped 0.9 percent from December to January — the biggest decline among the nation’s 20 largest metro areas —  after a 0.5 percent rise from November to December.

“Regional patterns in recent months continue,” David M. Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices, said in a statement accompanying the results. “Strength in the west and southwest paced by Denver and Dallas, with results ahead of the national index in the California cities, the Pacific Northwest and Las Vegas. The northeast and Midwest are mostly weaker than the national index.

“Despite price gains, the housing market faces some difficulties,” he said. “Home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback. Moreover, the new-home sector is weak; residential construction is still below its pre-crisis peak. Any time before 2008 that housing starts were as low as the current rate of one million, the economy was in a recession.”

Looking at more recent data for the Bay Area, the median single-family home price increased year over year in seven of Pacific Union’s nine regions, according to local MLS data.

The biggest increase was in our Silicon Valley region, where the median price rose by 21 percent to $2.8 million. At the other end of the spectrum, the median home price fell by 15 percent in our Sonoma Valley region to $540,000.

The chart below provides more information on annual Bay Area home price changes. Also, be sure to check out Pacific Union’s fourth-quarter 2014 real estate report for more in-depth sales data and information on how we define our regions.

(Photo: Flickr/Steven Depolo)

Article and images sourced from http://blog.pacunion.com/home-price-growth-in-san-francisco-area-slows-a-bit/

San Francisco Shows Highest Annual Home Price Gain For Second Straight Month

The San Francisco metro area has once again put up the largest annual home price gain in the U.S., according to the most recent numbers from a prominent real estate index.

The latest S&P Case-Shiller Home Price Indices, which run two months behind, say that single-family home prices in the San Francisco area increased by 9.3 percent in December, the most of any of the 20 major U.S. metro areas included in the report. San Francisco returned to the top of the Case-Shiller index for the first time in 18 months in November, when prices rose by 8.9 percent year over year.

As was the case in the two preceding months, home prices in San Francisco grew at about double the national rate in December. Case-Shiller’s numbers put the U.S. annual rate of home price appreciation at 4.6 percent in the final month of 2014.

Although existing home price growth and sales across the country are at their normal levels, David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said that he believes the housing recovery is “faltering,” a by-product of sluggish construction and new-home-sales activity.

“Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession,” Blitzer said. “The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates, and positive consumer confidence.”

According to MLS data, the median single-family home price increased year over year in every one of Pacific Union’s Bay Area regions except the Mid-Peninsula subregion, which saw a slight decline. Home prices topped the $1 million mark in our Contra Costa County, Marin County, Mid-Peninsula, San Francisco, and Silicon Valley regions as 2014 came to a close.

The chart below provides more information on annual Bay Area home price changes. Also, be sure to check out Pacific Union’s fourth-quarter 2014 real estate report for more in-depth sales data and information on how we define our regions.

(Image: Flickr/Bhautikjoshi)

Article and images sourced from http://blog.pacunion.com/san-francisco-area-leads-us-home-price-growth-second-straight-month/