Category: MARKET TRENDS & STATS
Solid Real Estate Market Performance in First Half of 2016
Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade, according to the National Association of REALTORS®. All major regions saw gains in contract activity last month except for the Midwest, which saw a meager decline.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, hiked up 5.1 percent to 116.3 in April from an upwardly revised 110.7 in March and is now 4.6 percent above April 2015 (111.2). 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 (117.4). “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,” he says. “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.”
On the topic of mortgage rates, which have remained below 4 percent in 16 of the past 17 months, Yun says it remains to be seen how long they will stay this low. Along with rent growth, rising gas prices – and the fading effects of last year’s cheap oil on consumer prices – could edge up inflation and push rates higher. For now, he foresees mortgage rates continuing to hover around 4 percent in the coming months, but inflation could potentially surprise the market and cause rates to increase suddenly.
Adds Yun, “Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search.”
Following the housing market’s best first quarter of existing-sales since 2007 (5.66 million) and a decent increase (1.7 percent) in April, Yun expects sales this year to climb above earlier estimates and be around 5.41 million, a 3.0 percent boost from 2015. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to between 4 and 5 percent.
The PHSI in the Northeast climbed 1.2 percent to 98.2 in April, and is now 10.1 percent above a year ago. In the Midwest the index declined slightly (0.6 percent) to 112.9 in April, but is still 2.0 percent above April 2015.
Pending home sales in the South jumped 6.8 percent to an index of 133.9 in April and are 5.1 percent higher than last April. The index in the West soared 11.4 percent in April to 106.2, and is now 2.8 percent above a year ago.
“This report rounds out a triple crown of April home sales reports with existing home closings, new pending contracts, and new home sales all solidly up as the spring buying season ramped up,” says realtor.com chief economist Jonathan Smoke. “Across these metrics, the pace of total home sales is up more than 10 percent over last year, putting 2016 in the pole position to earn the standing of the best year in a decade.”
For more information, visit www.realtor.org.
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- Both New Home Sales and Existing Home Sales are up month-over-month and year-over-year.
- Inventory remains low which continues to drive home prices up as demand continues to exceed the 4.7-month inventory.
- The median price of new homes is up 12% from March 2015, while the median price of existing homes is up 6.3% from April 2015.
In their current edition of the Home Price Expectation Survey released last week, Pulsenomics asked this question of the 100+ economists, real estate experts and investment & market strategists they surveyed:
“In your opinion, what is the primary driver of recent home value growth in the U.S.?”
Here are the top four reasons given by those surveyed:
As we have stated before, the current lack of inventory in most housing markets has caused home appreciation to increase at greater percentages than historical averages. This means that this is a great time to sell your home as supply is low and demand is high.
However, things may be about to change…
The fortuitous situation sellers see themselves in may soon change for three reasons:
- As more homeowners realize their equity situation has dramatically improved over the last four years, they will be more likely to put their homes on the market.
- With the residential real estate sector outperforming a sluggish economy, more home builders will be looking to add new construction inventory to a depleted supply of housing stock.
- Many banks are just now foreclosing on loans that have been delinquent since the housing bust. These houses will also be coming to market.
According to Daren Blomquist, senior vice president of RealtyTrac, in the Q2 2016 U.S. Residential Property Vacancy and Zombie Foreclosure Report:
“Lenders have been taking advantage of the strong seller’s market to dispose of lingering foreclosure inventory.”
In most housing markets, don’t wait for this additional competition to hit the market. If you are considering selling your house, now may be the time.
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The National Association of Realtors’ most recent Existing Home Sales Report revealed that home sales were up rather dramatically over last year in five of the six price ranges they measure.
Only those homes priced under $100,000 showed a decline (-4.6%). The decline in this price range points to the lower inventory of distressed properties available for sale and speaks to the strength of the market.
Every other category showed a minimum increase of at least 4.6%, with sales in the $250,000- $500,000 range up 15.2%!
Here is the breakdown:
What does that mean to you if you are selling?
Houses are definitely selling. If your house has been on the market for any length of time and has not yet sold, perhaps it is time to sit with your agent and see if it is priced appropriately to compete in today’s market.
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The year-to-date spending jump is among the strongest in the nation.
|Metro Area||Residential Construction Spending, Feb. 2016 (in millions)||YOY Change||YTD 2016 Construction Spending||YTD Change|
The National Association of Realtors (NAR) just announced that the February Pending Home Sales Index reached its highest reading since July 2015.
What is the Pending Home Sales Index (PHSI)?
NAR’s PHSI is “a forward-looking indicator based on contract signings”. The higher the Pending Home Sales Index number, the more contracts have been signed by buyers that will soon translate to sales. February’s Index rose 3.5% month-over-month to 109.1. What does this mean for the market?
Lawrence Yun, NAR’s Chief Economist explained:
“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.”
“Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what’s being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau.”