6 Key Housing Stats to Gauge the Market

Existing-home sales were back on the rise in July, marking the third consecutive month of increases, while low inventories of homes for-sale and rising prices were the reason behind first-time buyers falling to their lowest share since January, according to a new report from the National Association of REALTORS®.

“The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more household to buy now,” says Lawrence Yun, NAR’s chief economist. “As a result, current home owners are using their increasing housing equity toward the down payment on their next purchase.”

Here’s a look at five main indicators from NAR’s latest housing report:

1. Home prices: The median existing-home price for all housing types was $234,000 in July – 5.6 percent above a year ago. “Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand,” says Yun. “REALTORS® in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.”

2. Housing inventories: At the end of July, the inventory of homes for-sale fell 0.4 percent to 2.24 million existing homes available for sale. The inventory now is 4.7 percent lower than a year ago and at a 4.8-month supply at the current sales pace.

3. First-time home buyers: The percentage of first-time home buyers fell for the second consecutive month, reaching 28 percent in July – the lowest share since January. Last year at this time, first-time buyers comprised 29 percent of all buyers.

“The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face,” says Yun. “Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options.”

4. Days on the market: Properties stayed on the market for an average of 42 days in July, below the 48 days average from a year ago. Forty-three percent of homes were on the market for less than a month in July. Short sales were on the market the longest at a median of 135 days while foreclosures were on the market for 49 days and non-distressed homes sold in 41 days.

5. All-cash sales: The percentage of all-cash sales rose to 23 percent of transactions in July, down from 29 percent a year ago. The share of individual investors – who account for the bulk of cash sales – was 13 percent in July, down from 16 percent a year ago.

6. Distressed sales: The percentage of foreclosures and short sales declined to the lowest share since NAR began tracking it in October 2008. Distressed sales fell 7 percent in July month-over-month and are 9 percent below a year ago. In July, 5 percent of sales comprised foreclosures while 2 percent were short sales. On average, foreclosures sold for a discount of 17 percent below market value while short sales sold for an average discount of 12 percent.

“Five years ago, distressed sales represented 33 percent of the market in July,” says Chris Polychron, NAR’s president. “For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments.”

Many Owners May Underestimate Their Equity

DAILY REAL ESTATE NEWS | THURSDAY, AUGUST 06, 2015
A large number of home owners may be erroneously perceiving themselves as underwater on their mortgage, suggests a new analysis by economists at the University of California, Berkeley.

According to CoreLogic housing data, from the end of 2011 to the end of 2014, the number of underwater home owners fell from 21 percent down to 9 percent.

However, about 23 percent of home owners surveyed by Fannie Mae say they had negative equity at the end of 2014.

What’s more, by the end of 2014, only 37 percent of home owners with a mortgage in the Fannie Mae survey perceived they had more than 20 percent of home equity, but CoreLogic data showed that 69 percent had significant home equity.

Regardless of an increase in home prices after 2011, the percent of home owners who have perceived significant home equity has barely budged.

The National Association of REALTORS® recently reported that the median existing-home price for all housing types reached $236,400 in June – surpassing the median sales price set in July 2006 at the time of the housing boom.

Many home owners may not be realizing how much values have risen since 2011, economists note. By not realizing those equity gains, they may not see opportunities for selling and buying different homes and their chances of qualifying for mortgages.

“The appreciation gap presents a potential opportunity,” the authors note. “It is an opportunity to remove a barrier that may have hindered housing and mortgage market activity. … Better appreciating how much their assets have appreciated ought to strengthen home owners’ demand for housing, as well as their demands for other goods and services. Thus, in addition to the opportunity to help home owners on an individual basis, shrinking the appreciation gap presents a potential opportunity to speed up the recovery of the housing and mortgage markets, better match workers with jobs, and strengthen the economy generally.”

Source: “Are 30 Million Home Owners Underestimating Their Equity?” Real Estate Economy Watch (Aug. 4, 2015)

Banks Are Loosening Up on Jumbo Loans

As lenders try to capture more of the high-end housing market, J.P. Morgan Chase announced that it’s loosening the underwriting standards for issuing jumbo mortgages, those that exceed $417,000 in most parts of the country or $625,500 in pricier areas. The bank is lowering its minimum credit score and down payment requirements for mortgages up to $3 million.

As such, the jumbo market is getting bigger. Jumbo originations in the second quarter climbed to an eight-year high of $93 billion – a 58 percent increase from a year ago, according to Inside Mortgage Finance estimates. Jumbo mortgages issued by lenders last year accounted for about 20 percent of all first-lien mortgages, up from 5.5 percent in 2009.

“There’s no question that the jumbo market has probably recovered more than any sector of the mortgage market since the housing crisis,” says Guy Cecala, publisher of Inside Mortgage Finance.

J.P. Morgan plans to lower its minimum FICO credit scores for jumbo mortgages from 740 to 680 for loans on primary single-family purchases, second homes, and some refinances. The bank is also allowing a 15 percent down payment for loans up to $3 million. That is less than other banks such as Bank of America and PNC Financial Services Group Inc. which allow a 15 percent down payment for jumbo loans up to $1 million and $1.5 million, respectively.

The housing recovery has been strong in the higher-priced tier. Existing single-family home sales priced between $750,000 and $1 million rose 21 percent in June from a year prior, according to the National Association of REALTORS®. Meanwhile, sales of homes priced between $100,000 and $250,000 rose 12.5 percent. Homes priced lower saw sales fall 3 percent.

Source: “J.P. Morgan Loosens Terms for Jumbo Mortgages,” The Wall Street Journal (Aug. 4, 2015)