Category Archives: Sacramento Housing Statistics

How Scary is the Housing Affordability Index?

How Scary is the Housing Affordability Index? | MyKCM

Some industry pundits are saying that the housing market may be heading for a slowdown. One of the data points they use is the falling numbers of the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market. Here is a snapshot of the index since 2009:

How Scary is the Housing Affordability Index? | MyKCM

But, wait a minute…

Though the index has decreased over the last four years, we must realize that at that time there was an overabundance of housing inventory and as many as one out of three listings was a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008. We can see that, even though prices have increased, historically low mortgage rates have put the index in a better position than every year for the nineteen years prior to the crash.

How Scary is the Housing Affordability Index? | MyKCM

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

The Housing Market is Doing Just Fine

The Housing Market is Doing Just Fine | MyKCM

There are some that think that housing affordability is a challenge. Historically, that’s not true. Others think that home prices are approaching bubble values. If we look back over the last sixteen years, that is also not the case. As a matter of fact, the numbers show that the U.S. residential real estate market is doing just fine.

Here are two articles and excerpts that make this point:

The Housing Market Is Finally Starting to Look HealthyThe NY Times

It has been an excruciatingly long time coming, but the housing sector in the United States is finally getting healthy. Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand.”

Why the U.S. Housing Market Is Good and Getting Even BetterThe Street

“Interest rates are so low now that a family can buy the median-priced U.S. home on income of less than $45,000 a year — about $11,000 less than the median household income. And half of America’s houses are cheaper than that.” 

There are those worried that all this positive talk resembles what was being said in 2004 and 2005. Jonathan Smoke, Chief Economist at realtor.com, explains the difference very simply but effectively:

“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit. That’s the exact opposite of what we have today.” (emphasis added)

The Presidential Election and Its Impact on Housing

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Every four years people question what effect the Presidential election might have on the national housing market. Let’s take a look at what is currently taking place. The New York Times ran an articleearlier this week where they explained:

“A growing body of research shows that during presidential election years — particularly ones like this when there is such uncertainty about the nation’s future — industry becomes almost paralyzed. A look at the last several dozen election cycles shows that during the final year of a presidential term, big corporate investments are routinely postponed, and big deals are put on the back burner.

The research is even more persuasive on the final year of an eight-year presidential term, when a new candidate inevitably will become president.”

We are seeing this take form in the latest economic numbers. However, will this lead to a slowdown in the housing market? Not according to Fannie Mae, Freddie Mac or the National Association of Realtors.

The Impact on Housing Throughout 2016

Let’s look at what has happened and what is projected to happen by these three major entities.

National Association of Realtors

“In spite of deficient supply levels, stock market volatility and the paltry economic growth seen so far this year, the housing market did show resilience and had its best first quarter of existing-sales since 2007.”

Freddie Mac

“Recent data darkened the growth outlook for the first quarter of 2016. However, despite the disappointing economic reports, we still forecast housing to maintain its momentum in 2016.”

Fannie Mae

“Consumers and businesses showed caution at the end of the first quarter…(but) Home sales are expected to pick up heading into the spring season amid the backdrop of declining mortgage rates, rising pending home sales and purchase mortgage applications, and continued easing of lending standards on residential mortgage loans.”

Bottom Line

Even during this election year, the desire to achieve the American Dream is greater than the fear of uncertainty of the next presidency.

Housing Market Snapshot [INFOGRAPHIC]

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Some Highlights:

  • Home sales are up 1.5% year-over-year and 5.1% month-over-month.
  • Demand is still much higher than the available housing inventory which declined 2.2% from March 2015.
  • This is the 49th consecutive month with year-0ver-year price gains.

Where is Housing Headed for the Rest of 2016?

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With the overall economy just inching along, some experts are questioning whether the housing market can continue its momentum throughout the rest of the year. People are beginning to ask questions such as:

  • Will disappointing economic news adversely impact housing?
  • Is affordability a major concern in today’s real estate market?
  • Are we approaching a new housing bubble?
  • Are mortgage standards too tight? Or have they loosened too much?

Freddie Mac, in their April Economic Outlook, addresses the disappointing economic news and what impact they think it will have on housing:

“Recent data darkened the growth outlook for the first quarter of 2016. However, despite the disappointing economic reports, we still forecast housing to maintain its momentum in 2016.

We’ve revised down our forecast for economic growth to reflect the recent data for the first quarter, but our outlook for the balance of the year remains modestly optimistic for the economy.”

What about real estate?

Freddie Mac was much more optimistic about housing…

“We maintain our positive view on housing. In fact, the declines in long-term interest rates that accompanied much of the recent news should increase mortgage market activity.”

They went on to conclude:

“We expect housing to be an engine of growth. Construction activity will pick up as we enter the spring and summer months, and rising home values will bolster consumers and help support renewed confidence in the remaining months of this year.”

Housing Inventory Disappearing

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The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) recently released their latest Existing Home Sales Report which gives insight into today’s market conditions.

Inventory Levels & Demand

Sales of existing homes rose 5.1% month-over-month in March and are 1.5% higher than this time last year. Sales rose in all four major regions in March.

Total unsold housing inventory is 1.5% lower than March 2015 at a 4.5-month supply and remains well below the six months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still below 4%, programs available for down payments as low as 3%, and you have an attractive market for buyers.

Homes sold in March were on the market for an average of 47 days and 42% of properties sold in less than a month.

Prices Rising

March marked the 49th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $210,700 (up 5.7% from 2015).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

Housing Inventory Disappearing | Simplifying The Market

 

NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

“Buyer demand remains sturdy in most areas this spring and the mid-priced market is doing quite well. However, sales are softer both at the very low and very high ends of the market because of supply limitations and affordability pressures.”

Bottom Line

If you are debating putting your home on the market in 2016, now may be the time. The number of buyers ready and willing to make a purchase is at the highest level in years. Let’s meet up so we can get the process started.

Warren Buffett: There is No Housing Bubble

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With home prices expected to appreciate by over 5% this year, some are beginning to worry about a new housing bubble forming. Warren Buffet addressed this issue last week in an article by Fortune Magazine. He simply explained:

“I don’t see a nationwide bubble in real estate right now at all.”

Later, when questioned whether real estate and/or mortgaging could present the same challenges for the economy as they did in 2008, Buffet said:

“I don’t think we will have a repeat of that.”

What factors are driving home prices up?

It is easily explained by the theory of supply and demand. There is a lack of housing inventory for sale while demand for that inventory is very strong. According to a recent survey of agents by the National Association of Realtors (NAR), buyer traffic was seen as either “strong” or “very strong” in 44 of the 50 states (the exceptions being: Alaska, Wyoming, North Dakota, West Virginia, Connecticut and Delaware).

Also, in NAR’s latest Pending Home Sales Report, it was revealed that the index was the highest it has been in a year.

What does the future bring?

As prices rise, more families will have increased equity in their homes which will enable them to put their home on the market. As more listings come to market, price increases should slow to more normal levels.

Anand Nallathambi, President & CEO of CoreLogic, recently addressed the issue:

“Home price gains have clearly been a driving force in building positive equity for homeowners. Longer term, we anticipate a better balance of supply and demand in many markets which will help sustain healthy & affordable home values into the future.”

 

Top Reason to List Your House For Sale Now!

Top Reason to List Your House For Sale Now! | Keeping Current Matters

If you are debating listing your house for sale this year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes For Sale

The National Association of REALTORS’ (NAR) Chief Economist, Lawrence Yun recently commented on the inventory shortage:

“While feedback from REALTORS® continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.”

The latest Existing Home Sales Report shows that there is currently a 5.1-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market and well below November 2014 numbers.

The chart below details the year-over-year inventory shortages experienced in 2015:

Housing Supply Year-Over-Year | Keeping Current Matters

Anything less than a six-month supply is considered a “Seller’s Market”.

Bottom Line

Meet with a local real estate professional who can show you the supply conditions in your neighborhood and assist you in gaining access to the buyers who are ready, willing and able to buy now!

Are You Ready to Sell Your Home?

Time To Sell

 

For most homeowners, being financially ready to sell comes down to one factor: equity. During the housing meltdown of 2008–09, millions of homeowners found themselves with negative equity, which meant they owed more on their homes than they were worth.

Clearly, selling your home when you have negative equity is a bad deal. That’s called a short sale, and it impacts your credit almost as much as a foreclosure. Breaking even on your home sale is better, but it’s still not ideal. If you’re in either situation, don’t sell unless you have to in order to avoid bankruptcy or foreclosure.

For the last several years, home values have been on the rise, and that means most homeowners are building equity. Their homes are now worth more than they owe on them, and that trend will persist as they pay down their mortgages and home values continue to increase.

Financially speaking, it is best to sell your home when you have enough equity to at least cover the down payment on your next home. Or, you can go all the way and use the proceeds to buy your next home outright—no more mortgage for you!

How Much Equity Do You Have?

To figure out how much equity you have in your home, first find out your mortgage balance. That’s easy enough—simply look on your latest mortgage statement.

Next you’ll need to know how much your home is worth. While it’s tempting to use figures from online home valuation sites, they’re not always accurate. You don’t want to base such an important decision on iffy information.

Contact a real estate professional who will compare your home to others that have recently sold and take local market trends into account. You can trust their estimate to reflect what your home is worth based on their experience selling homes in your area.

Are You Ready to Make the Move?

If the numbers show you’re in good shape financially to make a move, great! But don’t forget, selling a home is an emotional issue too. Before you plant the For Sale sign in the front yard, take a minute to answer just a few more questions:

  • Are you ready to put in the work to get your home ready for house hunters?
  • Are you committed to keeping it ready to show for weeks or months?
  • Are you ready to hear the reasons why potential buyers believe your home is not perfect?
  • Are you ready for honest—and sometimes hardball—negotiations over what buyers are willing to pay for your home?
  • Are you really ready to move out and leave the place where your family has made memories?

Don’t get us wrong; we’re not trying to talk you out of selling your home! We just want you to be completely ready when you do decide to move on to the next stage of your family’s life.

A qualified real estate agent will give you a clear picture of what it’s like to sell a home and if now is the right time for you, both financially and emotionally.

(Courtesy Dave Ramsey blog: https://www.daveramsey.com/blog/ready-to-sell-your-home)

Sales Activity Increases, Inventory Drops for Holidays

(Sacramento Association of REALTORS® – RESIDENTIAL RESALE STATISTICS Dec. 2015)

Housing Stat Image

Sales volume for December surged 30.4% to 1,571, a substantial increase from the 1,205 closed escrows in November. The current number is 3.3% above the 1,520 sales of October. Compared with December 2014 (1,313 sales), the current number is up 19.6%. Equity sales made up 90.9% of all sales (1,428 units) for the month. The remainder of sales were REO/bank‐owned (57 units/3.6%) and Short Sales (60/3.8%). Other types of sales (auction, probate, etc.) accounted for 1.7% or 26 sales. Both REO Sales (2.7%) and Short Sales (17.3%) decreased for the month. Equity Sales increased slightly, up .4%.

Breaking down the financing, 225 sales used cash (14.3%), 750 (47.7%) conventional (mortgage‐backed), 415 (26.4%) used FHA (Federal Housing Administration), 103 (5.6%) used VA (Veterans Affairs) and 78 (5%) used Other* types of financing. The graph below compares market inventory and sales volume since May 2010:

Pending sales dropped off to 849, a 31.4% decrease from the 1,237 pending sales in November. Compared with December 2014, however, the current number is up 4.7% (811). The month‐to‐month median sales price jumped 2.1% from $290,885 to $297,000. This figure is 10.8% above the $268,000 median sales price for December 2014. The total dollar value of all closed transactions for the month totaled $508,723,362. This figure is 30.3% higher than the $390,353,522 total last month and 31.7% higher than the total value of December 2014 ($386,253,993). The year‐end sales total is 17,578, up 11.4% from the 15,778 sales at the same time of last year.

The total Active Listing Inventory decreased 18% from 2,150 to 1,749 and the Months of Inventory remained decreased from 1.8 months to 1.1 months. Year‐to‐year, the current number is down 27.9% (3,002 units).

The average DOM (days on market) for homes sold this month increased from 33 to 35 days. The median DOM increased 31% from 16 to 21. These numbers represent the days between the initial listing of the home as “active” and the day it goes “pending.” Breaking down the DOM, there were 964 listings that sold between 1 – 30 days, 329 listings between 31 – 60 days, 136 between 61 – 90 days, 68 between 91 – 120 days and 74 sales that spent over 120+ DOM.

Inventory V Sales SAR DEC 2015

 

The Sacramento Association of REALTORS® is a professional association representing over 5,500 real estate professionals and commercial affiliates doing business in the greater Sacramento metropolitan area. All SAR statistics reports compiled by Tony Vicari, SAR Communications Manager.

Statistics are derived from the MetroList® MLS database for Sacramento County and the City of West Sacramento.