Thursday, May 31, 2012
Friday, May 25, 2012
Where Home Prices Are Rising Fastest
The tide is already starting to turn in some U.S. housing markets, with home prices in these metro areas expected to climb anywhere between 10% and 21% by the end of next year, according to Fiserv.
1. Madera, Calif.
Courtesy: Madera County EDCMedian home price: $125,000
Drop since market peak: 53.1%
Forecast gain through 2013: 21.5%
Home buyers started coming back to Madera earlier this year.
"Homes are selling quickly and with competing bids," said Esther Riffel, president of the Madera Association of Realtors.
A lot of that has to do with the dirt-cheap prices. At $125,000, the median home price is well below the national average of $163,000, according to Fiserv.
And buyers get plenty of home for their money: Recently, a 2,400 square-foot home with three bedrooms and three baths sold for just $127,000. Five years ago, the same home went for about $375,000.
However, part of the reason the deals are so good is that most of the sales are foreclosures or short sales, said Riffel.
Another thing to be wary of in Madera: The jobs picture. As in most nearby cities in California's Central Valley, unemployment is high, at 16.6% in March, according to the Bureau of Labor Statistics.
2. Medford, Ore.
Courtesy: Medford CVBMedian home price: $144,000
Drop since market peak: 37.1%
Forecast gain through 2013: 20.1%
A hot spot among retirees, this small city located just north of the California border is staging a comeback.
"We now have the lowest [housing] inventory in six years and the strongest buyer traffic in seven years," said Colin Mullane, a real estate broker at Full Circle Real Estate in Medford.
Homes are selling at a quicker pace and at higher prices than they did over the past several years, according to the local multiple listing service. Another promising sign: more distressed properties are being sold in short sales rather than going into foreclosure.
One factor could hinder the housing market recovery, however: unemployment. In March, unemployment stood at 11.7%, well above the national average.
But a steady influx of retirees should help. According to Mullane, many seniors are drawn to the area for its mild Mediterranean-like climate, excellent medical facilities and reasonable cost of living.
3. Yuma, Ariz.
Courtesy: Yuma Visitor CenterMedian home price: $105,000
Drop since market peak: 37.4%
Forecast gain through 2013: 16.7%
Yuma can thank its location for helping it recover from the housing meltdown. The Arizona town sits in a Foreign Trade Zone, where products and materials can be moved between Yuma and Mexico duty-free.
And the nearly constant sunshine also makes it a center for renewable energy development, with companies like First Solar and Abengoa Solar hiring hundreds of workers, according to Julie Engel, director of the Yuma Economic Development Corporation.
Agriculture is another major industry here, especially due to the long growing season.
All that is helping, but the economy is still struggling. The area has one of the nation's highest unemployment rates, nearly 24% in March. And median household income of just over $45,000.
A structural problem for the economy is that it's seasonal with agricultural workers often facing months of idle time, according to Moody's Analytics. The workforce also tends to be poorly educated with only 15.9% holding a bachelor's degree or higher, according to the Census Bureau.
Yet, home prices are so cheap that the vast majority of families earning the area's median income can afford a home, according to the National Association of Home Builders.
4. Corvallis, Ore.
Courtesy: Corvallis Visitor CenterMedian home price: $224,000
Drop since market peak: 11.4%
Forecast gain through 2013: 13.2%
The economic fortunes of the Corvallis area are closely tied to Oregon State University, which not only hires a lot of workers but has also spawned a handful of local businesses.
Recently, the local economy has been on an upswing. The unemployment rate has fallen by nearly one percentage point in the past year to 6.1%. And enrollments at the university climbed by 8% and 5% over 2010 and 2011, respectively, boosting demand for rental units.
That has created an opportunity for real estate investors, who are buying up homes priced below the median level and renting them out to college students, said Jimmy Yang, an associate professor of finance at Oregon State
Supply is limited though, according to Stuart Conser of Conser Realty. Smart growth initiatives aimed at preserving open spaces put limits on development in certain parts of town. With fewer new homes being built, it should put upward pressure on pricing.
5. Eugene, Ore.
Courtesy: travellanecounty.org/Jamie HooperMedian home price: $166,000
Drop since market peak: 21.2%
Forecast gain through 2013: 12.4%
Like Corvallis, Eugene's comeback is partly being fueled by the fact that it hosts a big university.
The University of Oregon brings a steady supply of students, many of whom stay in the area post-graduation.
However, earnings here are not very high. Household income in the Eugene area is about $53,000, about $13,000 below the national median.
Still, homes are selling -- just not at the high-end of the market, said John Hoops, a former president of the Oregon Association of Realtors and a broker with Windermere Real Estate.
"On inventory under $200,000 we're seeing multiple offers," said Hoops. Sales of properties near the university are especially strong with some of the demand coming from investors who rent out properties to students.
1. Madera, Calif.
Courtesy: Madera County EDCMedian home price: $125,000Drop since market peak: 53.1%
Forecast gain through 2013: 21.5%
Home buyers started coming back to Madera earlier this year.
"Homes are selling quickly and with competing bids," said Esther Riffel, president of the Madera Association of Realtors.
A lot of that has to do with the dirt-cheap prices. At $125,000, the median home price is well below the national average of $163,000, according to Fiserv.
And buyers get plenty of home for their money: Recently, a 2,400 square-foot home with three bedrooms and three baths sold for just $127,000. Five years ago, the same home went for about $375,000.
However, part of the reason the deals are so good is that most of the sales are foreclosures or short sales, said Riffel.
Another thing to be wary of in Madera: The jobs picture. As in most nearby cities in California's Central Valley, unemployment is high, at 16.6% in March, according to the Bureau of Labor Statistics.
2. Medford, Ore.
Courtesy: Medford CVBMedian home price: $144,000Drop since market peak: 37.1%
Forecast gain through 2013: 20.1%
A hot spot among retirees, this small city located just north of the California border is staging a comeback.
"We now have the lowest [housing] inventory in six years and the strongest buyer traffic in seven years," said Colin Mullane, a real estate broker at Full Circle Real Estate in Medford.
Homes are selling at a quicker pace and at higher prices than they did over the past several years, according to the local multiple listing service. Another promising sign: more distressed properties are being sold in short sales rather than going into foreclosure.
One factor could hinder the housing market recovery, however: unemployment. In March, unemployment stood at 11.7%, well above the national average.
But a steady influx of retirees should help. According to Mullane, many seniors are drawn to the area for its mild Mediterranean-like climate, excellent medical facilities and reasonable cost of living.
3. Yuma, Ariz.
Courtesy: Yuma Visitor CenterMedian home price: $105,000Drop since market peak: 37.4%
Forecast gain through 2013: 16.7%
Yuma can thank its location for helping it recover from the housing meltdown. The Arizona town sits in a Foreign Trade Zone, where products and materials can be moved between Yuma and Mexico duty-free.
And the nearly constant sunshine also makes it a center for renewable energy development, with companies like First Solar and Abengoa Solar hiring hundreds of workers, according to Julie Engel, director of the Yuma Economic Development Corporation.
Agriculture is another major industry here, especially due to the long growing season.
All that is helping, but the economy is still struggling. The area has one of the nation's highest unemployment rates, nearly 24% in March. And median household income of just over $45,000.
A structural problem for the economy is that it's seasonal with agricultural workers often facing months of idle time, according to Moody's Analytics. The workforce also tends to be poorly educated with only 15.9% holding a bachelor's degree or higher, according to the Census Bureau.
Yet, home prices are so cheap that the vast majority of families earning the area's median income can afford a home, according to the National Association of Home Builders.
4. Corvallis, Ore.
Courtesy: Corvallis Visitor CenterMedian home price: $224,000Drop since market peak: 11.4%
Forecast gain through 2013: 13.2%
The economic fortunes of the Corvallis area are closely tied to Oregon State University, which not only hires a lot of workers but has also spawned a handful of local businesses.
Recently, the local economy has been on an upswing. The unemployment rate has fallen by nearly one percentage point in the past year to 6.1%. And enrollments at the university climbed by 8% and 5% over 2010 and 2011, respectively, boosting demand for rental units.
That has created an opportunity for real estate investors, who are buying up homes priced below the median level and renting them out to college students, said Jimmy Yang, an associate professor of finance at Oregon State
Supply is limited though, according to Stuart Conser of Conser Realty. Smart growth initiatives aimed at preserving open spaces put limits on development in certain parts of town. With fewer new homes being built, it should put upward pressure on pricing.
5. Eugene, Ore.
Courtesy: travellanecounty.org/Jamie HooperMedian home price: $166,000Drop since market peak: 21.2%
Forecast gain through 2013: 12.4%
Like Corvallis, Eugene's comeback is partly being fueled by the fact that it hosts a big university.
The University of Oregon brings a steady supply of students, many of whom stay in the area post-graduation.
However, earnings here are not very high. Household income in the Eugene area is about $53,000, about $13,000 below the national median.
Still, homes are selling -- just not at the high-end of the market, said John Hoops, a former president of the Oregon Association of Realtors and a broker with Windermere Real Estate.
"On inventory under $200,000 we're seeing multiple offers," said Hoops. Sales of properties near the university are especially strong with some of the demand coming from investors who rent out properties to students.
Monday, May 21, 2012
Rogue Valley Real Estate Market
Here are the April 2012 statistics for our valley. Click the link below:
http://www.somls.com/member_area/stats/Real%20Value%200412.pdf
http://www.somls.com/member_area/stats/Real%20Value%200412.pdf
Friday, May 18, 2012
U.S. Foreclosures Down 14% Over Last Year, Filings Shifting to the East
According to RealtyTrac's U.S. Foreclosure Market Report for April 2012, foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on 188,780 U.S. properties in April, the lowest monthly total since July 2007.
April foreclosure activity decreased 5 percent from the previous month and was down 14 percent from April 2011. One in every 698 U.S. housing units had a foreclosure filing during the month.
"Rising foreclosure activity in many state and local markets in April was masked at the national level by sizable decreases in hard-hit foreclosure states like California, Arizona and Nevada," said Brandon Moore, CEO of RealtyTrac. "Those three states and several other non-judicial foreclosure states like them, more efficiently processed foreclosures last year, resulting in fewer catch-up foreclosures this year.
"In addition, more distressed loans are being diverted into short sales rather than becoming completed foreclosures," Moore continued. "Our preliminary first quarter sales data shows that pre-foreclosure sales -- typically short sales -- are on pace to outnumber sales of bank-owned properties during the quarter in California, Arizona and 10 other states."
Non-judicial foreclosure activity down, judicial foreclosure activity up
Combined foreclosure activity in the 24 states with a non-judicial foreclosure process and the District of Columbia decreased 7 percent from the previous month and was down 29 percent from April 2011. More populous states like Arizona, California and Nevada drove the overall decreases in non-judicial foreclosure activity, but 14 of the 24 states and the District of Columbia posted month-over-month increases in foreclosure activity. Still, only seven of the non-judicial foreclosure states posted annual increases, including Georgia, Tennessee and Minnesota.
Combined foreclosure activity in the 26 states with a judicial foreclosure process decreased 3 percent from the previous month but was still up 15 percent from April 2011. Foreclosure activity decreased on a month-over-month basis in 14 of the judicial foreclosure states but increased on a year-over-year basis in 15 of the judicial foreclosure states.
Foreclosure starts down nationwide, but up in more than half of states
After three straight monthly increases, U.S. foreclosure starts -- default notices or scheduled foreclosure auctions, depending on the state -- decreased 4 percent from March to April. A total of 97,665 properties started the foreclosure process for the first time during the month, down 2 percent from April 2011.
Despite the overall decrease in foreclosure starts, 26 states posted monthly increases in foreclosure starts, and 27 states posted year-over-year increases in foreclosure starts. States with the biggest annual increases in foreclosure starts included New Jersey (180 percent), Utah (179 percent), Indiana (49 percent), Pennsylvania (44 percent), Florida (43 percent), and Michigan (42 percent).
Bank repossessions decrease for third straight month
Bank repossessions (REOs) decreased on a monthly basis for the third straight month in April, down 7 percent from March. Lenders completed the foreclosure process on 51,415 U.S. properties during the month, down 26 percent from April 2011 -- the 18th consecutive month with a year-over-year decrease in REOs.
REO activity decreased on an annual basis in 37 states and the District of Columbia, while 28 states posted monthly drops in foreclosure activity. States with the biggest year-over-year decreases in REO activity included Nevada (71 percent), Arizona (70 percent), Washington (67 percent), California (52 percent), Virginia (47 percent), and Maryland (47 percent).
11 of 20 largest metros post annual increases in foreclosure activity
Eleven of the nation's 20 largest metro areas based on population documented annual increases in foreclosure activity, led by the Florida cities of Tampa (59 percent) and Miami (38 percent). Other cities with increases included St. Louis (29 percent), Chicago (26 percent), Philadelphia (24 percent), and Atlanta (21 percent).
Among the 20 largest metros areas, cities posting the biggest annual drops in foreclosure activity included Seattle (54 percent), Phoenix (44 percent), San Francisco (34 percent), Washington, D.C. (30 percent), Riverside-San Bernardino, Calif., (30 percent), and Los Angeles (28 percent).
The metro areas with the highest foreclosure rates among the 20 largest were Riverside-San Bernardino (one in every 213 housing units with a foreclosure filing), Miami (one in every 273 housing units), Atlanta (one in every 298 housing units), Phoenix (one in every 313 housing units), and Tampa (one in every 315 housing units).
The 11 cities with annual increases in foreclosure activity were all in the Midwest, South or on the East Coast, while six of the nine cities with annual decreases were in the western states of California, Arizona and Washington.
Foreclosure Activity in 20 Largest U.S. Metros - April 2012
Nevada, California, Florida post top state foreclosure rates
A 15 percent month-over-month increase in foreclosure starts helped Nevada post the nation's highest state foreclosure rate in April: one in every 300 housing units with a foreclosure filing. Despite the monthly increase in foreclosure starts, overall Nevada foreclosure activity decreased 67 percent from April 2011.
California foreclosure activity decreased 30 percent from April 2011, but the state still posted the nation's second highest foreclosure rate: one in every 351 housing units with a foreclosure filing.
Florida foreclosure activity increased 26 percent from April 2011, boosting the state's foreclosure rate to third highest in the nation. One in every 364 Florida housing units had a foreclosure filing during the month.
The top 10 foreclosure rates among metropolitan statistical areas with a population of 200,000 or more were all in Nevada, California and Florida. Stockton, Calif., led the way, with one in every 213 housing units with a foreclosure filing during the month. Seven other California cities had foreclosure rates in the top 10, along with Las Vegas at No. 7 and Miami at No. 9.
A 44 percent year-over-year decrease in foreclosure activity dropped Arizona's foreclosure rate -- one in every 377 housing units with a foreclosure filing -- to fourth highest among the states, while a 21 percent year-over-year increase in foreclosure activity helped Georgia maintain the nation's fifth highest state foreclosure rate -- one in every 398 housing units with a foreclosure filing.
Other states with foreclosure rates ranking among the top 10 were Illinois (one in 418 housing units with a foreclosure filing), Utah (one in 419), Michigan (one in 487), Ohio (one in 525), and Wisconsin (one in 547).
April foreclosure activity decreased 5 percent from the previous month and was down 14 percent from April 2011. One in every 698 U.S. housing units had a foreclosure filing during the month.
"Rising foreclosure activity in many state and local markets in April was masked at the national level by sizable decreases in hard-hit foreclosure states like California, Arizona and Nevada," said Brandon Moore, CEO of RealtyTrac. "Those three states and several other non-judicial foreclosure states like them, more efficiently processed foreclosures last year, resulting in fewer catch-up foreclosures this year.
"In addition, more distressed loans are being diverted into short sales rather than becoming completed foreclosures," Moore continued. "Our preliminary first quarter sales data shows that pre-foreclosure sales -- typically short sales -- are on pace to outnumber sales of bank-owned properties during the quarter in California, Arizona and 10 other states."
Non-judicial foreclosure activity down, judicial foreclosure activity up
Combined foreclosure activity in the 24 states with a non-judicial foreclosure process and the District of Columbia decreased 7 percent from the previous month and was down 29 percent from April 2011. More populous states like Arizona, California and Nevada drove the overall decreases in non-judicial foreclosure activity, but 14 of the 24 states and the District of Columbia posted month-over-month increases in foreclosure activity. Still, only seven of the non-judicial foreclosure states posted annual increases, including Georgia, Tennessee and Minnesota.
Combined foreclosure activity in the 26 states with a judicial foreclosure process decreased 3 percent from the previous month but was still up 15 percent from April 2011. Foreclosure activity decreased on a month-over-month basis in 14 of the judicial foreclosure states but increased on a year-over-year basis in 15 of the judicial foreclosure states.
Foreclosure starts down nationwide, but up in more than half of states
After three straight monthly increases, U.S. foreclosure starts -- default notices or scheduled foreclosure auctions, depending on the state -- decreased 4 percent from March to April. A total of 97,665 properties started the foreclosure process for the first time during the month, down 2 percent from April 2011.
Despite the overall decrease in foreclosure starts, 26 states posted monthly increases in foreclosure starts, and 27 states posted year-over-year increases in foreclosure starts. States with the biggest annual increases in foreclosure starts included New Jersey (180 percent), Utah (179 percent), Indiana (49 percent), Pennsylvania (44 percent), Florida (43 percent), and Michigan (42 percent).
Bank repossessions decrease for third straight month
Bank repossessions (REOs) decreased on a monthly basis for the third straight month in April, down 7 percent from March. Lenders completed the foreclosure process on 51,415 U.S. properties during the month, down 26 percent from April 2011 -- the 18th consecutive month with a year-over-year decrease in REOs.
REO activity decreased on an annual basis in 37 states and the District of Columbia, while 28 states posted monthly drops in foreclosure activity. States with the biggest year-over-year decreases in REO activity included Nevada (71 percent), Arizona (70 percent), Washington (67 percent), California (52 percent), Virginia (47 percent), and Maryland (47 percent).
11 of 20 largest metros post annual increases in foreclosure activity
Eleven of the nation's 20 largest metro areas based on population documented annual increases in foreclosure activity, led by the Florida cities of Tampa (59 percent) and Miami (38 percent). Other cities with increases included St. Louis (29 percent), Chicago (26 percent), Philadelphia (24 percent), and Atlanta (21 percent).
Among the 20 largest metros areas, cities posting the biggest annual drops in foreclosure activity included Seattle (54 percent), Phoenix (44 percent), San Francisco (34 percent), Washington, D.C. (30 percent), Riverside-San Bernardino, Calif., (30 percent), and Los Angeles (28 percent).
The metro areas with the highest foreclosure rates among the 20 largest were Riverside-San Bernardino (one in every 213 housing units with a foreclosure filing), Miami (one in every 273 housing units), Atlanta (one in every 298 housing units), Phoenix (one in every 313 housing units), and Tampa (one in every 315 housing units).
The 11 cities with annual increases in foreclosure activity were all in the Midwest, South or on the East Coast, while six of the nine cities with annual decreases were in the western states of California, Arizona and Washington.
Foreclosure Activity in 20 Largest U.S. Metros - April 2012
Nevada, California, Florida post top state foreclosure rates
A 15 percent month-over-month increase in foreclosure starts helped Nevada post the nation's highest state foreclosure rate in April: one in every 300 housing units with a foreclosure filing. Despite the monthly increase in foreclosure starts, overall Nevada foreclosure activity decreased 67 percent from April 2011.
California foreclosure activity decreased 30 percent from April 2011, but the state still posted the nation's second highest foreclosure rate: one in every 351 housing units with a foreclosure filing.
Florida foreclosure activity increased 26 percent from April 2011, boosting the state's foreclosure rate to third highest in the nation. One in every 364 Florida housing units had a foreclosure filing during the month.
The top 10 foreclosure rates among metropolitan statistical areas with a population of 200,000 or more were all in Nevada, California and Florida. Stockton, Calif., led the way, with one in every 213 housing units with a foreclosure filing during the month. Seven other California cities had foreclosure rates in the top 10, along with Las Vegas at No. 7 and Miami at No. 9.
A 44 percent year-over-year decrease in foreclosure activity dropped Arizona's foreclosure rate -- one in every 377 housing units with a foreclosure filing -- to fourth highest among the states, while a 21 percent year-over-year increase in foreclosure activity helped Georgia maintain the nation's fifth highest state foreclosure rate -- one in every 398 housing units with a foreclosure filing.
Other states with foreclosure rates ranking among the top 10 were Illinois (one in 418 housing units with a foreclosure filing), Utah (one in 419), Michigan (one in 487), Ohio (one in 525), and Wisconsin (one in 547).
Thursday, May 17, 2012
Building Permits in U.S. Jump 23% in April Over Last Year
According to the U.S. Census Bureau and the Department of Housing and Urban Development's (HUD) new residential construction statistics for April 2012, building permits in U.S. spiked 23.7% in April over last year's numbers.Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 715,000. This is 7.0 percent (±1.0%) below the revised March rate of 769,000, but is 23.7 percent (±1.9%) above the revised April 2011 estimate of 578,000.
Single-family authorizations in April were at a rate of 475,000; this is 1.9 percent (±1.1%) above the revised March figure of 466,000. Authorizations of units in buildings with five units or more were at a rate of 217,000 in April.
Housing Starts
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 717,000. This is 2.6 percent (±14.8%) above the revised March estimate of 699,000 and is 29.9 percent (±15.2%) above the revised April 2011 rate of 552,000.
Single-family housing starts in April were at a rate of 492,000; this is 2.3 percent (±11.9%) above the revised March figure of 481,000. The April rate for units in buildings with five units or more was 217,000.
Housing Completions
Privately-owned housing completions in April were at a seasonally adjusted annual rate of 651,000. This is 10.0 percent (±16.7%) above the revised March estimate of 592,000 and is 20.1 percent (±18.0%) above the revised April 2011 rate of 542,000.
Single-family housing completions in April were at a rate of 489,000; this is 11.4 percent (±13.6%) above the revised March figure of 439,000. The April rate for units in buildings with five units or more was 158,000.
Wednesday, May 16, 2012
U.S. Home Builder Confidence Index Rises in May, Highest Levels Since Mid-2007
According to the National Association of Home Builders (NAHB), home builder confidence in the market for newly built, single-family homes gained five points in May from a downwardly revised reading in the previous month to reach a level of 29 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
This is the index's strongest reading since May of 2007.
"Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. "It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase."
"While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back," said NAHB Chief Economist David Crowe. "The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices."
Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Each of the index's components rebounded from declines in the previous month. The component gauging current sales conditions and the component gauging traffic of prospective buyers each rose five points in May to 30 and 23, respectively, with the traffic component hitting its highest level since April of 2007. The component gauging sales expectations in the next six months rose three points to 34.
Three out of four regions registered improving builder sentiment in May. This included a six-point gain to 32 in the Northeast, and five-point gains to 27 and 28 in the Midwest and South, respectively. The West posted a two-point decline, to 29.
This is the index's strongest reading since May of 2007.
"Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. "It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase."
"While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back," said NAHB Chief Economist David Crowe. "The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices."
Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Each of the index's components rebounded from declines in the previous month. The component gauging current sales conditions and the component gauging traffic of prospective buyers each rose five points in May to 30 and 23, respectively, with the traffic component hitting its highest level since April of 2007. The component gauging sales expectations in the next six months rose three points to 34.
Three out of four regions registered improving builder sentiment in May. This included a six-point gain to 32 in the Northeast, and five-point gains to 27 and 28 in the Midwest and South, respectively. The West posted a two-point decline, to 29.
Tuesday, May 15, 2012
U.S. Housing Affordability Index Reaches Record Highs in Q1
Moe Veissi
NAR's composite quarterly Housing Affordability Index rose to a record high of 205.9 in first quarter, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power. This is the first time the quarterly index broke the 200 mark; recordkeeping began in 1970.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said market conditions are optimal for home buyers. "For those with good credit, we've never seen better housing affordability conditions or market opportunities than we see at present," he said. "Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means. This is especially true for self-employed buyers."
Veissi noted home sales would be much higher if lending standards would return to normal.
The index shows the median income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter, which is more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 percent of gross income.
A companion index measuring the ability of first-time buyers to purchase a home also set a record, with the first-time buyer index reaching 135.8 in the first quarter.
Assumptions for the first-time buyer index include a lower income, at 65 percent of median family income, a starter home costing 85 percent of the median price, and a downpayment of 10 percent. This index means the typical entry-level buyer could afford a home costing $182,500, which is well above the overall median price.
"It's never been easy to buy a first home because of the cash required for downpayment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better," Veissi explained.
Most first-time buyers choose a loan with a lower downpayment, often an FHA-insured loan with 3.5 percent down, and some use the VA program with no downpayment.
Both home prices and mortgage interest rates are expected to edge up modestly as the year progresses, but housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home. For all of 2012 the index is projected to set an annual record, averaging 191 for the year.
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