Home Affordability Reaches Historic Low as Market Improves

In 2006, during the height of the seller’s market, home prices reached an all-time high. At the time, an interest rate of 6.4% was reasonable. Since then, both home values and interest rates have dropped significantly. The home affordability percentage is the percentage of median family income required for a median price home payment. This year, the United States broke another record with Home Affordability at it’s lowest ever. Today, the home affordability percentage is at 12.9%. The long term average is 21.6%.  Just a few short years ago, this percentage was 23.2% and in the early 1980’s this percentage was as high as 36.3%. 

In 1989, the average home sale price was $94,000.  Today, that average is $176,600.  Yet, the monthly principal and interest payment is nearly $200 a month less today than it was in 1989.  Meanwhile, inflation has caused the price of a new car to nearly double during that time period and the cost of gas has gone up from .97 cents to over $3.54.

Statistics show that the US housing market is slowly recovering. Last year, home sales increased by 9.2% and we have now returned to the 2007 level. In addition to increased home sales, seller inventory has seriously decreased down to 5.9 months of inventory. A balance market is when we have 6 months of inventory. History shows us that we never stay in a balance market long and that it takes approximately 6 months for a market to complete its turn to either a buyer or seller market. These facts cause us to ask the following questions; are we making the turn from the buyer’s market into a seller’s market? And when will we hit rock bottom home prices? These statistic’s seem to prove that we are making the change to a seller market. We will know the  answer to home prices hitting rock bottom when it’s too late.  Perhaps it already is. Interest rates are already on the rise. My recommendation is simple, if you can afford a home and you qualify for a mortgage, you better call me today because tomorrow may be too late.

Article written by: Daniel J. Smith

                                      Statistics provided by NAR

New-home sales climb in February from a year ago

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 411 thousand. This was down from a revised 431 thousand SAAR in January (revised down from 437 thousand). 

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

 

"Sales of new single-family houses in February 2013 were at a seasonally adjusted annual rate of 411,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.6 percent below the revised January rate of 431,000, but is 12.3 percent above the February 2012 estimate of 366,000.

The second graph shows New Home Months of Supply.

The months of supply increased in February to 4.4 months from 4.2 months in January.

The all time record was 12.1 months of supply in January 2009.

 

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of February was 152,000. This represents a supply of 4.4 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.



The inventory of completed homes for sale is just above the record low. The combined total of completed and under construction is also just above the record low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In February 2013 (red column), 33 thousand new homes were sold (NSA). Last year 30 thousand homes were sold in February. This was the eight weakest February since this data has been tracked. The high for February was 109 thousand in 2005, and the low for February was 22 thousand in 2011.

This was below expectations of 425,000 sales in February, but still a fairly solid report. 

By: Bill McBride

5 Signs the Market is Recovering Fast

1. Both asking price and rents jumped 5 percent from last year

Trulia’s latest Price and Rent Monitors showed a big boost in asking prices across the U.S. – up 5.1 percent year-over-year. This a drastic change from the double digit declines of previous years.
The relevant news for your buyer and seller prospects isn’t just that home prices are climbing, but that renting is getting more expensive as well. The statistics showed rents are up 5.2 percent year-over-year.
If you understand supply and demand, it’s obvious that these two facts point toward more real estate moves happening, and that consumers have gotten over the angst of previous years and shifted into the “recovery mindset.”

 2.  Mortgage rules got a renovation.

Predatory lending practices linger near the top of many economists’ blame lists for the most recent market decline.  And, after years of fallout from bad mortgages, capable buyers have been, understandably, slow to purchase.
For those buyers who’ve been anxious about the mortgage process and skeptical of the predatory lending, this Thursday brought great news and a sure “go” sign for them to jump into the market.
Thursday the Consumer Financial Protection Bureau released it’s new mortgage guidelines which are “a set of standards that protects consumers from bad loans” according to David Stevens, CEO of the Mortgage Bankers Association.
The new guidelines show that banks and the government are working out their differences to create a safer, more secure environment for homeowner hopefuls. In addition, the new guidelines give those buyers access to mortgage best practices upfront to help them ensure they’re ready for application and ownership from the start.
For a great summary of the new guidelines, check out CNN’s article “New Rules Aim to Make Mortgages Safer”.

 3. Delinquency & foreclosures are at record lows.

Declining delinquencies aren’t just fluffed headlines, the numbers support what it seems many agents are feeling.
Delinquencies are down. According to Trulia’s Chief Economist, Jed Kolko, “ In November, 10.63% of mortgages were delinquent or in foreclosure, down a hair from 10.64% in October. The combined delinquency + foreclosure rate is at its lowest level in four years and is 41% back to normal.”
These stats are good news for buyer’s agents whose clients and prospects need a boost of confidence.

 4. 93% of Millenials plan to buy.

Last quarter we released Trulia’s American Dream Survey and one of the top facts from our study showed that 93 percent of current millennial renters plan to buy.
This is good news for an industry that’s suffered from years of skittish home shoppers and a lot of talk about home buying no longer being a part of the American Dream.

5. Investors rush in.

Another sign that we’re on the way to a high-paced recovery is that investors are making major moves to capitalize on today’s opportunity.
A recent story from Bloomberg covered how Blackstone Group, the largest U.S. private real estate owners, sped up it’s purchases of homes to try to beat out fast rising prices.
This is a sign for on the fence buyers to start their hunt before the weather heats up and they face more competition than they can handle.
These are some of the national signs that show the recovery is well under way. Comment below and tell us what you’re seeing, reading, and witnessing in your local market.
 

Written By Jovan Hackley