US braces for competitive spring buying season

Photo:Michael Patrick

The US real estate industry is bracing itself for what could be its most competitive spring buying season in recent history.

Zillow forecasts an intense few months for buyers and sellers alike, as the country continues to suffer a supply shortgage, pushing up prices and encouraging fierce bidding between eager house-hunters.

Indeed, US house prices have risen 7.2 per cent in the last 12 months, while the number of properties for sale on the market has reduced by 3 per cent. Buyers and sellers hoping to be successful this spring are therefore advised to start the process early to get ahead of the pack – according to a new survey by the site, the biggest regret for buyers and sellers is not starting their home search (or preparing them home to sell) soon enough.

“This spring, both buyers and sellers should be prepared for fast-moving sales, intense negotiations, and even bidding wars,” says Jeremy Wacksman, Zillow Group chief marketing officer. “Home shoppers and sellers are motivated to become more strategic and knowledgeable about what’s happening in their neighborhood. Understanding whether you are in a buyer’s or a seller’s environment will help you manage your expectations and will give you insight into what you’re going to need to bring to the table in order to close the deal.”

 

US economic confidence to boost home sales?

17th March 2017

Improving confidence in the US economy is forecast to boost home sales in the coming year.

Multiple years of uninterrupted job gains and hope that the best is yet to come in 2017 are igniting consumer confidence across the country, according to a new survey by the National Association of Realtors. In the first three months of 2017, the share of households believing the economy is improving soared to its highest share in the survey’s five-quarter history (62 per cent), and is up from 54 per cent last quarter and 48 per cent in March 2016.

In an extraordinary reversal from previous quarters, NAR Chief Economist Lawrence Yun says the surge in positive sentiment about the economy is primarily from respondents living in the Midwest (67 per cent; 51 per cent last quarter) and rural areas (63 per cent; 43 per cent last quarter). Last March, only 49 percent of Midwesterners and 35 per cent of those living in rural areas thought the economy was improving.

“Confidence levels generally rise after a presidential election as the nation hopes for the best. Even though it is a highly polarized country, consumers for the most part have upbeat feelings about the economy right now,” he comments.

Indeed, the survey results were released this week, just as the Federal Reserve announced that it is raising interest rates for the third time since the financial crisis, with rates climbing 0.25 per cent once again, only a few months after December’s similar increase.

The upbeat sentiment is expected by the NAR to translate into home sales.

“Stronger business and consumer morale typically lead to even more hiring and spending, which in turn encourages more households to make big decisions like buying a home,” continues Yun.

On the cusp of the busy spring season, most households believe now is a good time to buy a home. However, confidence continues to trickle backwards among renters. 56 per cent of renters said now is a good time to buy, which is down both from last quarter (57 per cent) and a year ago (62 per cent). 80 percent of homeowners (78 per cent in December 2016; 82 per cent in March 2016) think now is a good time to make a home purchase.

The one headwind that has weighed on sales in recent months is an ongoing shortage of supply, which is both limiting buyer choices and pushing up prices.

One promising trend that could alleviate supply shortages, though, is the notable bump in the share of respondents this quarter who believe now is a good time to sell a home. 69 per cent of homeowners think now is a good time to sell, which is up from last quarter (62 per cent) and a year ago (56 per cent).

 

Buyer interest still high as supply weighs on US sales

28th February 2017

Home buyer interest remains extremely high in the USA, but low supply levels continue to weigh on sales.

Insufficient supply levels led to a lull in contract activity in the Midwest and West, according to the National Association of Realtors, which dragged down pending home sales in January to their lowest level in a year.

The realtors’ pending sales index decreased 2.8 per cent month-on-month, despite the fact that households are feeling more confident about their financial situation, job growth is strong in most of the country and the stock market has seen record gains in recent months.

Lawrence Yun, NAR chief economist, says interest in buying a home is “the highest it has been since the Great Recession”.

The obstacle? A challenging supply shortage that continues to run up prices in many areas.

“The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay,” he says. “Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago 1. Most notably in the West, it’s not uncommon to see a home come off the market within a month.”

The national median existing-home price this year is expected to increase around 4 per cent. In 2016, existing sales increased 3.8 per cent and prices rose 5.1 per cent.

“January’s accelerated price appreciation is concerning because it’s over double the pace of income growth and mortgage rates are up considerably from six months ago,” adds Yun. “Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location.”

 

2017 is all about supply for US property

31st January 2017

2017 is all about supply for the US property market, as inventory levels remain the biggest headwind for sales to increase.

Pending transactions picked up in December 2016, according to the National Association of Realtors, as buyers fought off mortgage rates and low supply to sign their contracts. The rate of sales varies from region to region, though, with strong gains in the South and West offsetting weakening activity in the Northeast and Midwest.

December’s 1.6 per cent rise overall left sales 0.3 per cent higher year-on-year. Across the whole of 2016, existing sales also increased 3.8 per cent and median house prices prices rose 5.2 per cent. Existing-home sales are forecast to be around 5.54 million this year, an increase of 1.7 per cent from 2016, which was the best year of sales since 2006. However, the national median existing-home price in 2017 is expected to increase around 4 per cent, with low supply levels the main factor underpinning property values.

“The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs,” comments Lawrence Yun, NAR chief economist. “Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”

According to Yun, a large portion of overall supply right now is at the upper end of the market. This is evident by looking at December data on the year-over-year change in single-family sales by price range. Last month, sales were up around 10 per cent compared to December 2015 for homes sold at or above $250,000, while homes sold between $100,000 and $250,000 only increased 2.3 per cent. Meanwhile, sales of homes under $100,000 were down 11.6 per cent compared to a year ago.

“The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most,” Yun adds. “As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41 per cent cumulative rise in existing home prices since 2011.”

“All eyes will be on the homebuilding industry this year to see if they can finally start making up lost ground on the severe housing shortages impacting much of the country,” he concludes.

Housing starts are expected to climb almost 8 per cent this year compared to 2016, rising to 1.26 million units.

 

Stable US jobs market drives steady buyer demand

5th December 2016

America’s stable job market continues to drive steady buyer demand for homes.

A lack of supply has been one of the biggest obstacles facing the USA’s real estate market in 2016, with Lawrence Yun, National Association of Realtors Chief Economist, describing stock levels as “grossly inadequate”.

Indeed, as the year draws to a close, the market is seeing a seasonal drop in the number of listings arriving on the market. Now, 40 per cent of sales are at or above list price, up from 33 per cent last October.

The shortfall of supply in the face of demand, meanwhile, means that price growth remains around triple the pace of wages and properties continue to sell at a much faster pace than a year ago.

However, pending home sales remained unchanged in October, edging up slightly by 0.1 per cent from September and by 1.8 per cent from last October, mostly because employment levels are improving.

Yun says October’s minuscule uptick in contract activity nudged pending sales up to their highest level since July.

“Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago,” he comments. “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”

With contract activity holding steady, Yun expects existing sales to close out 2016 at a pace of around 5.36 million, which surpasses 2015 (5.25 million) and is the highest since 2006 (6.48 million).

“With mortgage rates expected to rise into next year and put added strain on affordability, sales expansion will be contingent on more inventory coming onto the market and continued job gains,” he concludes.

 

US buyer demand holds up “impressively well”

2nd November

Demand from US house-hunters is holding up “impressively well” this autumn, as the American housing recovery continues to build momentum.

Existing home sales hit their third highest pace since February 2007 in September. Coupled with record low distressed sales and rising activity among first-time buyers, there are a growing number of signs that the market’s health is continues to improve. Pending home sales, which act as a forward-looking indicator, paint an equally positive picture for market moving forward.

Pending transactions are now at their fifth highest level over the past year, according to the National Association of Realtors, driven by increases in the South and West, which compensated for declines in the Northeast and Midwest.

Pending sales grew 1.5 per cent month-on-month, taking the National Association of Realtors’ index to 2.4 per cent higher than a year ago. Indeed, the index has now risen year-on-year the last 25 months in a row.

“Buyer demand is holding up impressively well this fall,” says Lawrence Yun, NAR chief economist. “Although depressed inventory levels are keeping home prices elevated in most of the country, steady job gains and growing evidence that wages are finally starting to tick up are encouraging more households to consider buying a home.”

“The one major predicament in the housing market is without a doubt the painfully low levels of housing inventory in much of the country,” he adds. “It’s leading to home prices outpacing wages, properties selling a lot quicker than a year ago and the home search for many prospective buyers being highly competitive and drawn out because of a shortage of listings at affordable prices.”

 

Pending US home sales bounce back down again

4th October 2016

After rebounding upwards in July, pending sales of US homes have bounced back down again in August, the third time they have dipped in four months.

Data from the National Association of Realtors show the contract signings declined 2.4 per cent last month to their lowest level since January 2016.

Lawrence Yun, NAR chief economist, says that dwindling supply levels have taken the wind out of the housing market’s momentum.

“Contract activity slackened throughout the country in August except for in the Northeast, where higher inventory totals are giving home shoppers greater options and better success signing a contract,” he explains. “In most other areas, an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the minuscule number of affordable listings.”

Yun cautions that evidence is piling up to suggest that without more new home construction, the current recovery could stall. Housing inventory has declined year-over-year for 15 straight months, properties in August typically sold 11 days quicker than in August 20151 and after increasing 5.1 percent last month, existing-home prices have risen year-over-year for 54 consecutive months.

“There will be an expected seasonal decline in new listings in coming months, which could accelerate price appreciation and make finding an affordable home even more of a struggle for would-be buyers,” he adds.

 

Pending US home sales hit second highest level in over a decade

1st September 2016

Pending sales of US homes hit their second highest level in over a decade in July.

Pending sales, a forward-looking indicator based on contract signings, rose 1.3 per cent in July, expanding in most of the country, with the exception of the Midwest.

The Pending Home Sales Index is now 1.4 per cent higher than July 2015, with the index now at its second highest reading this year after April.

Lawrence Yun, NAR chief economist, says a sizable jump in the West lifted pending home sales higher.

“Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas,” he comments. “More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”

Recent residential construction data shows that the size and costs of new homes has moved downward over the past year. According to Yun, this is an early indication that homebuilders are beginning to shift away from building larger, more expensive homes for the upper end of the market to focusing more on properties geared for buyers in the middle and lower price tiers.

“Realtors in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers,” observes Yun.

“The index in the West last month was the highest in over three years, largely because of stronger labor market conditions. If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales,” he adds.

Existing-home sales this year are forecast to be around 5.38 million, a 2.8 percent increase from 2015 and the highest annual pace since 2006 (6.48 million). After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to around 4 per cent.

Pending sales of US homes edge up

29th July 2016

Pending sales of US homes edged up in June.

New figures from the National Association of Realtors show that pending home sales were “mostly unmoved” in June, with activity rising 0.2 per cent month-on-month and 1 per ecnt year-on-year.

Supply and affordability constraints were the major obstacles to buyers benefitting from mortgage rates that have lingered near all-time lows. Increases were particularly notable in the Northeast and Midwest, observes Lawrence Yun, NAR chief economist, although this is partly because only the Northeast region had an adequate supply of homes for sale.

“The reoccurring dilemma of strained supply causing a run-up in home prices continues to play out in several markets, leading to the last two months reflecting a slight, early summer cooldown after a very active spring,” he explains.

“Unfortunately for prospective buyers trying to take advantage of exceptionally low mortgage rates, housing inventory at the end of last month was down almost 6 percent from a year ago, and home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth>”

Pending US sales slide for first time in two years

4th July 2016

Pending US home sales slipped for the first time in two years in May 2016.

After steadily increasing for three straight months, pending home sales let up in all four regions of the USA, according to the National Association of Realtors, declining year-over-year for the first time in almost two years.

The Pending Home Sales Index slid 3.7 per cent to 110.8 in May from a downwardly revised 115.0 in April and is now slightly lower (0.2 per cent) than May 2015 (111.0).

The decline in sales, though, is not an indicator of falling demand: mortgage rates have been hovering around three-year lows for most of 2016, encouraging interest from buyers, despite rising house prices. Indeed, the NAR index reading is still the third highest in the past year, despite declining year-over-year for the first time since August 2014.

Rather, it is a sign of how much supply has reduced.

“With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity,” explains Lawrence Yun NAR chief economist. “Realtors are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market.”

“Total housing inventory at the end of each month has remarkably decreased year-over-year now for an entire year,” adds Yun. “There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth.”

Pending US home sales hit 10-year high

31st May 2016

Pending US home sales hit a 10-year high in April 2016, after rising for three months in a row.

The latest National Association of Realtors index shows that all major regions of the US saw gains in contract activity last month, except for the Midwest, which saw a “meager decline”.

The index rose 5.1 per cent month-on-month and 4.6 per cent year-on-year. After last month’s gain, the index has now increased year-over-year for 20 consecutive months.

Lawrence Yun, NAR chief economist, says vast gains in the South and West propelled pending sales in April to their highest level since February 2006: “The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets.

“The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market.”

Following the housing market’s best first quarter of existing-sales since 2007 (5.66 million) and a decent increase (1.7 per cent) in April, Yun expects sales this year to climb above earlier estimates and be around 5.41 million, a 3 per cent boost from 2015. After accelerating to 6.8 per cent a year ago, national median existing-home price growth is forecast to slightly moderate to between 4 and 5 per cent.

Pending US home sales rise for second month

3rd May 2016

Pending home sales have risen for the second month in a row in the US.

Only the West region saw a decline in contract activity in March 2016, according to the National Association of Realtors, with overall pending sales reaching their highest level in almost a year.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 1.4 per cent to 110.5 in March, from an downwardly revised 109.0 in February, and is now 1.4 per cent above March 2015. The index has now increased year-over-year for 19 consecutive months and is at its highest reading since May 2015.

“Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” comments Lawrence Yun, NAR chief economist. “This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth.”

In the short-term, the healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales, forecasts Yun, although the consequences from a failure to construct more single-family homes in recent years are “starting to impact some top job producing markets,” where endless supply shortages continue to limit choices for buyers and are driving up prices.

“Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38 per cent in the past three years,” adds Yun. “As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year’s pace.”

Pending US home sales make promising strides

31st March 2016

Pending sales of US homes made promising strides in February 2016, according to the National Association of Realtors.

Pending home sales rose solidly to their highest level in seven months, remaining higher than a year ago. Indeed, this is the 18th month in a row that the index has risen year-on-year.

Growth was led by a “sizeable” increase in the Midwest, with all major regions except for the Northeast seeing an increase in contract activity in February.

“After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” comments Lawrence Yun, NAR chief economist.

The figures follow a downturn in existing home sales in the same month, according to the NAR, but the pending sales index is a forward-looking indicator of sales that have not yet been completed, painting a positive picture for the future of the market in 2016 – as long as supply can keep up with demand.

According to Yun, the one silver lining from last month’s noticeable slump in existing sales was that price appreciation lessened to 4.4 per cent, which is still above wage growth but certainly more favorable than the 8.1 per cent annual increase recorded in January.

“Any further moderation in prices would be a welcome development this spring,” Yun adds.

Existing US home sales fizzle in February

23rd March 2016

After hitting a six-month high in January 2016, sales of US homes fizzled out in February. Low supply and steady price growth weighed on buying and selling activity, according to the National Association of Realtors, with all four major regions (led by the Northeast and Midwest) seeing sales decline.

Indeed, the median existing-home price for all housing types in February was $210,800, up 4.4 per cent from February 2015 ($201,900). February’s price increase marks the 48th consecutive month of year-over-year gains. Total existing-home sales, meanwhile, dropped 7.1 per cent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January.

Lawrence Yun, NAR chief economist, says that Realtors were “disappointed” with the figures.

“Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest,” he comments. “The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February’s lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.”

Despite last month’s large decline, sales are still 2.2 per cent higher than a year ago, as employment conditions continue to improve, supporting demand. According to Yun, job growth continues to hum along at a robust pace, but there appears to be some uneasiness among households that the economy is losing some steam. This was evident in NAR’s latest quarterly HOME survey, which revealed that fewer respondents believe the economy is improving, and a smaller share of renters said that now is a good time to buy a home.

US home sales hit a six-month high, despite rising prices

2nd March 2016

US home sales have reached a six-month high at the start of 2016.

Transactions jumped 11 per cent year-on-year, according to the National Association of Realtors, the largest year-over-year gain since July 2013, with sales only dipping in the West.

Total existing-home sales edged 0.4 per cent higher to a seasonally adjusted annual rate of 5.47 million in January, from a downwardly revised 5.45 million in December.

Lawrence Yun, NAR chief economist, says existing sales kicked off 2016 on solid footing, rising slightly to the strongest pace since July 2015 (5.48 million).

“The housing market has shown promising resilience in recent months,” he comments. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the US economy avoid a recession.”

The share of first-time buyers remained at 32 per cent in January for the second consecutive month and is up from 28 per cent a year ago. First-time buyers in all of 2015 represented an average of 30 per cent, up from 29 per cent in both 2014 and 2013.

Conditions may not remain this positive for long, though. The National Association of Realtors’ index of pending home sales – a forward-looking indicator of market activity – declined 2.5 per cent in January 2016. Although the pending sales index has increased year-over-year for 17 consecutive months, January’s annual gain of 1.4 per cent was the second smallest during that timeframe.

The dip in contract signings is attributed to price growth, which continues unabated and increasingly hinders those looking to purchase homes.

Total housing inventory at the end of January increased 3.4 per cent to 1.82 million existing homes available for sale, but still remains 2.2 per cent lower than a year ago (1.86 million). The spring buying season, meanwhile, is just around the corner.

“Current supply levels aren’t even close to what’s needed to accommodate the subsequent growth in housing demand,” says Yun. “Home prices ascending near or above double-digit appreciation aren’t healthy – especially considering the fact that household income and wages are barely rising.”

The median existing-home price for all housing types in January was $213,800, up 8.2 per cent from January 2015 ($197,600). Last month’s price increase was the largest since April 2015 and marks the 47th consecutive month of year-over-year gains.

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