Pending home sales rose strongly in May with all regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
This is the first time since April 2010 that contract activity was above year-ago levels, and the monthly gain was the strongest increase since last November when the index rose 10.6 percent.
Lawrence Yun, NAR chief economist, said the improvement bodes well for home prices. “Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said. “Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle.”
Pending home sales have trended up unevenly since bottoming last June, rising in seven of the past 11 months. “Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”
“In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price,” Yun added.
Yun cautioned that healthy job creation is necessary to ensure a solid recovery in both housing and the overall economy. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” he said.
Thursday, June 30, 2011
Wednesday, June 22, 2011
Housing Starts Gain 3.5 Percent in May
Nationwide housing starts rose 3.5 percent to a seasonally adjusted annual pace of 560,000 units in May, according to newly released figures from the U.S. Commerce Department. The gain partially offsets a larger decline that was registered in April.
“While the upward movement registered in today’s report is somewhat good news, housing production continues to bounce along the bottom near historic lows, and is only running at a level necessary to replace dilapidated or destroyed units,” says Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He also noted that “Amidst this fragile marketplace, the nation’s policymakers should be aware of a recent poll that confirms the strong value that most American voters continue to place on homeownership and housing choice.”
Conducted this May on behalf of NAHB by Public Opinion Strategies of Alexandria, Va., and Lake Research Partners of Washington, D.C., the poll asked 2,000 likely voters about their attitudes on homeownership and housing policy. It found that the vast majority of current home owners are happy with their decision to own a home and believe that owning their own home is important, while nearly three-quarters of those who do not now own a home consider it a goal of theirs to eventually buy one. Additionally, the poll determined that 73 percent of owners and renters believe the federal government should provide tax incentives to promote homeownership. Details on this poll are available at www.nahb.org/voterpoll.
“Like consumers, builders remain very concerned about the pace of economic growth and are awaiting signs of improvement before moving forward with new projects,” notes NAHB Chief Economist David Crowe. “The relative bright spot in new-home construction is on the multifamily side, where improving demand for rental apartments is spurring gains in that sector. However, access to construction credit remains a limiting factor for new building.”
Single-family housing starts rose 3.7 percent to a seasonally adjusted annual rate of 419,000 units in May—their strongest pace since this January. Multifamily starts rose 2.9 percent to a 141,000-unit rate in May.
Regionally, housing production rose 1.5 percent in the South and 18.1 percent in the West, but declined 3.3 percent in the Northeast and 4.1 percent in the Midwest in May.
Issuance of building permits, which can be an indicator of future building activity, rose 8.7 percent to a seasonally adjusted annual rate of 612,000 units in May. This was the strongest pace since December of 2010. Single-family permits were up 2.5 percent to a 405,000-unit rate, while multifamily permits rose 23.2 percent to 207,000-units—their best pace since October of 2008.
Permit issuance posted double-digit gains in the Northeast and West in May, rising 35.6 percent and 15.1 percent, respectively. The South also posted a gain, of 3.5 percent, while the Midwest registered a 1.1 percent decline.
For more information, please visit www.NARB.org.
“While the upward movement registered in today’s report is somewhat good news, housing production continues to bounce along the bottom near historic lows, and is only running at a level necessary to replace dilapidated or destroyed units,” says Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He also noted that “Amidst this fragile marketplace, the nation’s policymakers should be aware of a recent poll that confirms the strong value that most American voters continue to place on homeownership and housing choice.”
Conducted this May on behalf of NAHB by Public Opinion Strategies of Alexandria, Va., and Lake Research Partners of Washington, D.C., the poll asked 2,000 likely voters about their attitudes on homeownership and housing policy. It found that the vast majority of current home owners are happy with their decision to own a home and believe that owning their own home is important, while nearly three-quarters of those who do not now own a home consider it a goal of theirs to eventually buy one. Additionally, the poll determined that 73 percent of owners and renters believe the federal government should provide tax incentives to promote homeownership. Details on this poll are available at www.nahb.org/voterpoll.
“Like consumers, builders remain very concerned about the pace of economic growth and are awaiting signs of improvement before moving forward with new projects,” notes NAHB Chief Economist David Crowe. “The relative bright spot in new-home construction is on the multifamily side, where improving demand for rental apartments is spurring gains in that sector. However, access to construction credit remains a limiting factor for new building.”
Single-family housing starts rose 3.7 percent to a seasonally adjusted annual rate of 419,000 units in May—their strongest pace since this January. Multifamily starts rose 2.9 percent to a 141,000-unit rate in May.
Regionally, housing production rose 1.5 percent in the South and 18.1 percent in the West, but declined 3.3 percent in the Northeast and 4.1 percent in the Midwest in May.
Issuance of building permits, which can be an indicator of future building activity, rose 8.7 percent to a seasonally adjusted annual rate of 612,000 units in May. This was the strongest pace since December of 2010. Single-family permits were up 2.5 percent to a 405,000-unit rate, while multifamily permits rose 23.2 percent to 207,000-units—their best pace since October of 2008.
Permit issuance posted double-digit gains in the Northeast and West in May, rising 35.6 percent and 15.1 percent, respectively. The South also posted a gain, of 3.5 percent, while the Midwest registered a 1.1 percent decline.
For more information, please visit www.NARB.org.
Wednesday, June 15, 2011
Homeownership Dream Deserves Protection
The homeownership rate dropped to 66.4 percent in April 2011, the lowest it’s been since 1998, according to the U.S. Census Bureau. Some would argue this means owning a home is not as important to Americans as it once was—but they’re wrong.
What it really means is that the artificially stimulated level of 69 percent in 2005 wasn’t sustainable. Today’s level is merely a return to a more normal rate.
The dream of homeownership is as strong as ever, and it deserves protection—not more regulatory roadblocks.
Understandably, government leaders are looking at ways to avoid another housing crisis, but prohibitive down payments and elimination of the Mortgage Interest Deduction (MID) are two highly detrimental steps in the wrong direction at the worst time.
Consumer confidence took a considerable hit during the past few years, and its gradual recovery is still very fragile.
An unprecedented number of recent and current homeowners has been rocked by the downturn—and prospective buyers are shaken on the sidelines. But there hasn’t been so much damage that people have abandoned their dream of owning a home.
According to a Pew Research Center study conducted in April, 81 percent of adults surveyed either somewhat agree or strongly agree that buying a home is the best long-term investment a person can make. Of homeowners whose homes have lost value during the downturn, 82 percent still favor owning a home. And 81 percent of renters aspire to own a home in the future.
These survey results are compelling enough, coming straight from consumers. But in case there’s any doubt about whether there’s still an interest in buying, recent home sales and pricing data show that buyer activity is picking up.
In all 54 metro areas tracked, home sales increased by no less than 9 percent from February to March 2011—the third-straight month of gains. And 35 of those markets also experienced price increases. Would we see these results without increased buyer demand? Of course not.
Investor activity has picked up considerably over the past six-plus months, with 22 percent of home sales linked to this influential buyer group. But investing alone can’t be expected to absorb the millions of foreclosed properties yet to be released to the market.
Right now, government leaders should focus on ways to keep qualified buyers motivated. Not everyone will purchase a home, but those who save and prepare should know, absolutely, that it’s attainable.
What it really means is that the artificially stimulated level of 69 percent in 2005 wasn’t sustainable. Today’s level is merely a return to a more normal rate.
The dream of homeownership is as strong as ever, and it deserves protection—not more regulatory roadblocks.
Understandably, government leaders are looking at ways to avoid another housing crisis, but prohibitive down payments and elimination of the Mortgage Interest Deduction (MID) are two highly detrimental steps in the wrong direction at the worst time.
Consumer confidence took a considerable hit during the past few years, and its gradual recovery is still very fragile.
An unprecedented number of recent and current homeowners has been rocked by the downturn—and prospective buyers are shaken on the sidelines. But there hasn’t been so much damage that people have abandoned their dream of owning a home.
According to a Pew Research Center study conducted in April, 81 percent of adults surveyed either somewhat agree or strongly agree that buying a home is the best long-term investment a person can make. Of homeowners whose homes have lost value during the downturn, 82 percent still favor owning a home. And 81 percent of renters aspire to own a home in the future.
These survey results are compelling enough, coming straight from consumers. But in case there’s any doubt about whether there’s still an interest in buying, recent home sales and pricing data show that buyer activity is picking up.
In all 54 metro areas tracked, home sales increased by no less than 9 percent from February to March 2011—the third-straight month of gains. And 35 of those markets also experienced price increases. Would we see these results without increased buyer demand? Of course not.
Investor activity has picked up considerably over the past six-plus months, with 22 percent of home sales linked to this influential buyer group. But investing alone can’t be expected to absorb the millions of foreclosed properties yet to be released to the market.
Right now, government leaders should focus on ways to keep qualified buyers motivated. Not everyone will purchase a home, but those who save and prepare should know, absolutely, that it’s attainable.
Friday, June 3, 2011
Don't Believe the Doom on US Housing
Data from the US housing market has not made for nice reading in recent months but one analyst believes the worst could well be over and that if you take a closer look at the data prices are stabilizing.
“The decline is mainly because the mix of homes sold has changed in favor of distressed sales, which typically sell with a 'foreclosure discount.'
Non-distressed properties (sold by voluntary sellers) have already started to stabilize,” said Ajay Rajadhyaksha, the co-head of US fixed income strategy at Barclays Capital said in a research note on Friday.
“As voluntary sales pick up in the summer, the mix of homes should change again in the next few months, in favor of non-distressed sales. As a result, the aggregate index of home prices should stop declining and could even go up,” he added.
As a result Rajadhyaksha dismisses fears that recent drops in prices indicate a double dip for the housing market and predicts national valuations have reached a point where downside risks are limited.
“For investors who look to the home price indices for clues to the macro-economy, we recommend focusing on the index of voluntary sales, since non-distressed borrowers will increasingly determine the true health of the housing market,” he wrote.
“This index has held up reasonably well and suggests that prices are stabilizing. In sum, there are many reasons to worry about the US macroeconomic picture (the recent softening in the labor market, the US fiscal picture, etc.) but the recent drop in US home prices should not be one of them,” said Rajadhyaksha.
“The decline is mainly because the mix of homes sold has changed in favor of distressed sales, which typically sell with a 'foreclosure discount.'
Non-distressed properties (sold by voluntary sellers) have already started to stabilize,” said Ajay Rajadhyaksha, the co-head of US fixed income strategy at Barclays Capital said in a research note on Friday.
“As voluntary sales pick up in the summer, the mix of homes should change again in the next few months, in favor of non-distressed sales. As a result, the aggregate index of home prices should stop declining and could even go up,” he added.
As a result Rajadhyaksha dismisses fears that recent drops in prices indicate a double dip for the housing market and predicts national valuations have reached a point where downside risks are limited.
“For investors who look to the home price indices for clues to the macro-economy, we recommend focusing on the index of voluntary sales, since non-distressed borrowers will increasingly determine the true health of the housing market,” he wrote.
“This index has held up reasonably well and suggests that prices are stabilizing. In sum, there are many reasons to worry about the US macroeconomic picture (the recent softening in the labor market, the US fiscal picture, etc.) but the recent drop in US home prices should not be one of them,” said Rajadhyaksha.
Wednesday, June 1, 2011
REALTORS® Continue to Push Congress for Comprehensive GSE Strategy
The National Association of REALTORS® supports a secondary mortgage market model with some level of government participation that would protect taxpayers and ensure that creditworthy consumers have access to affordable mortgage capital in all markets at all times.
That is the message delivered recently by NAR President Ron Phipps during a Senate Banking, Housing and Urban Affairs Committee hearing.
“As the leading advocate for homeownership, REALTORS® agree that the existing housing finance system failed and that reforms are needed; however, those reforms must be done in a methodical, measured and comprehensive effort based on practical market experience,” says Phipps. “We applaud the committee’s caution as you continue to discuss this very important and complex issue.”
In his testimony, Phipps urges support for comprehensive reform of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which remain critical to ensuring mortgage liquidity, and expressed concern over recently proposed legislation that takes a piecemeal approach and could increase uncertainty in the housing market, which is still struggling to recover.
To ensure a viable secondary mortgage market going forward, Phipps says that private capital must return to the housing finance market and the government’s involvement needs to be reduced; however, full privatization is not a viable option.
“There are strong negative repercussions for relying solely on private capital to form the foundation of the housing finance system. After the housing downturn, private mortgage capital became nearly nonexistent, and without the GSEs, qualified borrowers would not have had access to the funds required to purchase a home. A government backstop is critical to ensure a continual flow of mortgage liquidity and the long-term viability of the housing market,” Phipps says.
He adds that in a fully private market, financial institutions with FDIC-backed deposits would focus more on optimizing their profits in a noncompetitive banking industry, and potentially fostering new, risky mortgage products that place taxpayers at risk, rather than products that would be in the best interests of consumers and the nation’s economy. That could lead to the end of long-term fixed rate loan products, like the 30-year fixed rate mortgage, and drastically raise the cost of mortgage capital for millions of American consumers.
Phipps also testified about another important issue that will dramatically impact the future of housing finance—the proposed risk retention regulation under the Dodd-Frank Act, which requires lenders that securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a qualified residential mortgage (QRM).
“A poor QRM policy that focuses on high downpayment requirements rather than a variety of traditional safe, well underwritten products will exclude hundreds of thousands of buyers from homeownership, slowing economic recovery and hampering job creation,” says Phipps. “REALTORS® support a reasonable and affordable cash investment coupled with quality credit standards, strong documentation and sound underwriting; but higher downpayments do not have a meaningful impact on default rates.”
He also expressed strong support for making permanent the GSE and FHA mortgage loan limits that are currently in place and set to expire later this year. Phipps said that in today’s real estate market, lowering the loan limits will restrict liquidity and make mortgages more expensive for households nationwide. More than 612 counties in 40 states and the District of Columbia will see an average decline of $50,000 in loan limits in their area.
“REALTORS® look forward to working with Congress and our industry partners to design a secondary mortgage model that will best serve our nation today and into the future,” says Phipps.
The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
That is the message delivered recently by NAR President Ron Phipps during a Senate Banking, Housing and Urban Affairs Committee hearing.
“As the leading advocate for homeownership, REALTORS® agree that the existing housing finance system failed and that reforms are needed; however, those reforms must be done in a methodical, measured and comprehensive effort based on practical market experience,” says Phipps. “We applaud the committee’s caution as you continue to discuss this very important and complex issue.”
In his testimony, Phipps urges support for comprehensive reform of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which remain critical to ensuring mortgage liquidity, and expressed concern over recently proposed legislation that takes a piecemeal approach and could increase uncertainty in the housing market, which is still struggling to recover.
To ensure a viable secondary mortgage market going forward, Phipps says that private capital must return to the housing finance market and the government’s involvement needs to be reduced; however, full privatization is not a viable option.
“There are strong negative repercussions for relying solely on private capital to form the foundation of the housing finance system. After the housing downturn, private mortgage capital became nearly nonexistent, and without the GSEs, qualified borrowers would not have had access to the funds required to purchase a home. A government backstop is critical to ensure a continual flow of mortgage liquidity and the long-term viability of the housing market,” Phipps says.
He adds that in a fully private market, financial institutions with FDIC-backed deposits would focus more on optimizing their profits in a noncompetitive banking industry, and potentially fostering new, risky mortgage products that place taxpayers at risk, rather than products that would be in the best interests of consumers and the nation’s economy. That could lead to the end of long-term fixed rate loan products, like the 30-year fixed rate mortgage, and drastically raise the cost of mortgage capital for millions of American consumers.
Phipps also testified about another important issue that will dramatically impact the future of housing finance—the proposed risk retention regulation under the Dodd-Frank Act, which requires lenders that securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a qualified residential mortgage (QRM).
“A poor QRM policy that focuses on high downpayment requirements rather than a variety of traditional safe, well underwritten products will exclude hundreds of thousands of buyers from homeownership, slowing economic recovery and hampering job creation,” says Phipps. “REALTORS® support a reasonable and affordable cash investment coupled with quality credit standards, strong documentation and sound underwriting; but higher downpayments do not have a meaningful impact on default rates.”
He also expressed strong support for making permanent the GSE and FHA mortgage loan limits that are currently in place and set to expire later this year. Phipps said that in today’s real estate market, lowering the loan limits will restrict liquidity and make mortgages more expensive for households nationwide. More than 612 counties in 40 states and the District of Columbia will see an average decline of $50,000 in loan limits in their area.
“REALTORS® look forward to working with Congress and our industry partners to design a secondary mortgage model that will best serve our nation today and into the future,” says Phipps.
The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
Subscribe to:
Posts (Atom)
