Rising Interest Rates Not Slowing Down Home Prices ….. YET

No end in sight for low housing inventories

Home prices increased during the fourth quarter and, despite rising interest rates, showed no sign of a slowdown, according to the Federal Housing Finance Agency’s House Price Index.

Home prices increased 1.5% from the third quarter and 6.2% from the fourth quarter of 2015, the report showed. FHFA’s seasonally adjusted monthly index increased 0.4% from November to December.

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fhfa hpi

(Source: FHFA)

The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Because of this, the selection excludes high-end homes bought with jumbo loans or cash sales.

“Although interest rates rose sharply during the fourth quarter, our data show no signs of a home price slowdown,” FHFA Deputy Chief Economist Andrew Leventis said.

“Although it will certainly take more time for the full effects of the elevated interest rates to be felt, there is no evidence of a normalization in the unusually low inventories of homes available for sale, which has been the primary force behind the extraordinary price gains,” Leventis said.

The states with the highest home price increases included Oregon at 11%, Colorado at 10.6%, Florida at 10.4%, Washington at 10.2% and Nevada at 8.9%.

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FHFA HPI

(Source: FHFA)

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Is There a Housing Bubble in these Hot, Hot Markets?

Texas is hotter than ever, but is it sustainable?

Housing in the state of Texas was hotter in 2016 that it’s ever been before, but is real estate in the Lone Star state getting too hot?

According to a recent report from the Texas Association of Realtors, there were more homes sold in 2016 than in any other year in history, and those homes sold for record prices as well.

But a new report from Fitch Ratings suggests that Texas is one a few states where home prices are not only unsustainable, they’re overheating.

According to the Fitch report, home prices nationwide rose by 1% in the third quarter of 2016, for a total increase of 3% through October 2016.

Fitch notes that the current price levels in most regions are sustainable, supported by improving unemployment and inflation-adjusted income growth rates.

But there are some states and some markets where prices are rising too quickly and therefore exceed supporting economic fundamentals.

Among those overheating markets are Dallas, Las Vegas, Phoenix, and Portland.

As Fitch’s report, the Dallas metro area saw prices increase by 13.4% over the last year. And based on Fitch’s calculation, that means that prices in Dallas are between 10% and 14% higher than the market can sustain.

And it’s not just Dallas that’s overheating. According to Fitch, the whole state is overpriced by that same margin, between 10% and 14%.

Joining Dallas in the overpriced by double-digits category are Las Vegas, Phoenix, and Portland.

According to Fitch’s report, some other major markets are overpriced by between 5% and 9% compared to what each market can sustain, including Atlanta, Los Angeles, Miami, San Francisco, and Tampa, Florida.

On a statewide level, home prices in Idaho are the most overvalued in the nation. According to Fitch, home prices in Idaho are overvalued by between 15% and 19%.

Beyond Texas, there are several other states where home prices are overvalued by between 10% and 14%, including Arizona, North Dakota, Nevada, and Oregon.

And other states, including California, Colorado, Florida, Hawaii, and Utah, are overpriced by between 5% and 9%.

On the other hand, there are some markets and some states where prices are undervalued.

According the report, Chicago, Cleveland, Detroit, and New York City are all undervalued, compared to what each market can sustain.

From a state perspective, Connecticut, Michigan, New Hampshire, New Jersey, New York, Ohio, and Rhode Island are undervalued.

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Here’s the Inventory Crisis Smotherine Millennial Homebuying

3 factors blocking homeownership

February 22, 2017, Brena Swanson, HousingWire.com

Whether Millennials want to buy a home or not, there first has to be a home available to purchase. In an interview with HousingWire, Daren Blomquist, senior vice president at ATTOM Data Solutions, identified three key factors keeping housing inventory in a drought, barring entrance for aspiring young homeowners.

The current inventory shortage isn’t new though. The same challenges plagued housing in 2016 are predicted to stick around through 2017.

Beyond the standard explanations for why Millennials put off buying a home, such as student debt, tighter lending standards and simply not wanting to sacrifice everything to buy a home, young home shoppers have to choose from a shallow pool of home options and compete with millions of other young buyers trying to do the same. It’s a hard situation.

Before assuming Millennials don’t want to buy a home, take a look at the three factors they’re facing regarding limited inventory.

1. Average homeownership tenure:

Since the early 2000s, there’s been a significant shift in the average homeownership tenure, nearly doubling in time length. In 2007, the average tenure came in at 4.08 years, compared to 7.88 years a decade later in 2016.

As a result, Millennials can’t buy as much since fewer homes are being listed on the market for sale.

The first two charts from ATTOM Data Solutions show a breakdown of the historical homeownership tenure over the last 17 years. One chart gives a quarterly breakdown, while the other gives a yearly breakdown.

As an added bonus, we’re including a few extra chart breakdowns for several key markets, with some worse than the national average.

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ATTOM

(Source: ATTOM Data Solutions)

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ATTOM

(Source: ATTOM Data Solutions)

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ATTOM

(Source: ATTOM Data Solutions)

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ATTOM

(Source: ATTOM Data Solutions)

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ATTOM

(Source: ATTOM Data Solutions)

2. Everyone refinanced

Blomquist went on to explain that thanks to historically low interest rates, everyone who could has already refinanced into a low rate and they want to keep that rate.

Although this is great for everyone who secured a low rate, it’s also stopping homeowners from leaving their starter home and upgrading into a new home.

And rates are only projected to rise. In the two weeks after the election, the 30-year mortgage rate jumped 40 basis points, surging to 3.94% and now sits above 4%.

3. Investors are going after starter homes

Investors are picking off a lot of the ideal homes for first-time homebuyers.

Blomquist said ATTOM Data Solutions looked at more than 23,000 properties owned by Blackstone Group’s single-family rental operator, Invitation Homes, which is about 48% of their total portfolio, and found a lot of their inventory is what Millennials would be interested in: 3-bed, 2-bath homes with average square footage of 1,871 and value of below $250,000.

And even worse for first-time homebuyers, investors are reaping the benefit of home prices rising. Invitations Homes has gained an estimated 114% in home value on this portfolio since purchase.

The chart below gives a breakdown of Invitation Homes’ portfolio.

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ATTOM

(Source: ATTOM Data Solutions)

So yes, Millennials simply might not want to buy a home, but there is also a gaping hole in housing inventory that’s stopping them. And young aspiring homeowners aren’t the only group dealing with this. Lynn Fisher, the MBA’s vice president of research and economics, recently said there will be about a 13 million to 16 million increase in additional households in the U.S. over the next decade.

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How to Clean 8 of the Trickiest Spots in Your House

How to Clean 8 of the Trickiest Spots In Your House via @RealSimple http://bit.ly/2d4xloq#CleaningHome #LenandLeslieMarma

REalSimple, February 23rd, 2017

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Are you 1 of the 59 Million Planning to Buy this Year?

KCM Crew. February 23rd, 2017

Are You 1 of the 59 Million Planning to Buy This Year? | MyKCMAccording to a survey conducted by Bankrate.com, one in four Americans are considering buying a home this year. If this statistic proves to be true, that means that 59 million people will be looking to enter the housing market in 2017.

The survey also revealed 3 key takeaways:

  1. Those most likely to buy are ‘Older Millennials’ (ages 27-36) or ‘Generation X’ (ages 37-52)
  2. Minorities, particularly African-Americans, were twice as likely to respond that they were considering purchasing a home this year than white respondents.
  3. Many potential buyers believe they need to put 20% down and need to have perfect credit to own and are unaware of programs that would allow them to buy now.

Holden Lewis, a mortgage analyst for Bankrate.com, pointed to one big reason why many Americans are starting to consider homeownership:

“Having kids and raising a family is a primary reason why Americans take the leap into homeownership—many consider it a key component of the American dream.”

Bottom Line

If buying a home is a part of your dream for 2017, let’s get together to determine if you are able to.

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3 Living Rooms Focus on the Fireplace

New This Week: 3 Living Rooms Focus on the Fireplace http://www.houzz.com/ideabooks/80786054 via @Houzz#LivingRoom #Fireplace #LenandLeslieMarma

http://www.houzz.com, February 22nd, 2017

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US Home Prices Rose 5.6% in November

Tuesday, 31 Jan 2017 | 9:00 AM ET

A real estate agent shows a home for sale to a prospective buyer in Miami.

Getty Images
A real estate agent shows a home for sale to a prospective buyer in Miami.

U.S. home prices rose slightly in November from the previous month, posting a 5.6 percent annual gain thanks to rising disposable personal income per capita, decreasing unemployment, and low interest rates.

The S&P/Case-Shiller U.S. National Home Price Index, which measures all nine U.S. census divisions, was up 5.6 percent on an annual basis in November from 5.5 percent in October.

The S&P CoreLogic Case-Shiller 20-City Composite index also rose 5.3 percent year over year, up from October’s 5.1 percent. Out of the 20 cities, Seattle, Portland, and Denver continued to see the largest year-over-year gains, with Seattle leading the way as prices rose 10.4 percent year over year.

A Reuters poll showed economists expected the 20-city index to rise 5.1 percent in November compared to a year ago.

“One can argue that housing has recovered from the boom-bust cycle that began a dozen years ago,” David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, said in a press release.

Blitzer cited the new administration’s pro-growth agenda, infrastructure spending plans, and tax reform proposals as factors that could affect the housing market.

“Mortgage rates have increased since the election and stronger economic growth could push them higher. Further gains in personal income and employment may increase the demand for housing and add to price pressures when home prices are already rising about twice as fast as inflation,” he said in the release.

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