U.S. home price growth remained largely flat in June, according to a report released Tuesday, a further indication that the housing market is holding steady after years of turbulence.
The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 4.5% in the 12 months ended in June, slightly greater than a 4.4% increase in May.
The 10-city index saw a slightly lower gain of 4.6% from a year earlier, compared with a 4.7% increase in May. The 20-city index gained 5% year-over-year, compared with a 4.9% increase in May.
Economists surveyed by The Wall Street Journal expected a 5% increase to the 20-city index.
This month’s Case-Shiller numbers are being closely watched after Monday’s stock market plunge has some investors eyeing real estate as a more stable investment. Another important indicator, sales of new homes in July, is also set to be released Tuesday.
But economists cautioned that the report reflects the state of the housing market a couple of months ago. It doesn’t take into account whether there will be any impact from the latest market news.
“If you’re uncertain about the economy you’re not going to take your money and buy a house,” said Steve Blitz, chief economist at ITG Investment Research. “It’s just a question mark that we didn’t have before.”
David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, pointed to a major stock market drop as one potential factor that could cool off the housing market in the coming months.
“A stock market correction is unlikely to do much damage to the housing market,” he said. “A full-blown bear market dropping more than 20% could present some difficulties for housing and other economic sectors.”
Month-over-month home price gains were modest, according to the report. Not seasonally adjusted, the U.S. Index rose 1% from May to June. The 10-city and 20-city indexes saw a 0.9% and 1% change over the month respectively.
Chinese cities where home prices rose exceeded those where they declined for the first time in 16 months in July, as authorities removed some property curbs and interest rates fell.
New-home prices rose in 31 cities of the 70 the government monitors, from 27 the previous month, according to data released by the National Bureau of Statistics on Tuesday. They dropped in 29 and were unchanged in 10.
Prices, led by some of the biggest Chinese cities, extended gains from the second quarter, spurred by the easing of mortgage policies at the end of March and four reductions in borrowing costs since November. The trend will continue this year as liquidity remains ample and expectations of rising prices further prompt more people to buy, overriding any potential impact from a devalued yuan and a stock-market selloff, according to Mizuho Securities Asia Ltd.
“The average price gains may accelerate in the second half as prices in the second- and third-tier cities are just starting to rise,” Alan Jin, a Hong Kong-based real estate analyst at Mizuho, said by phone. “The demand is still there.”
The average price of the 70 cities rose 0.17 percent from June, gaining for a third consecutive month, according to Bloomberg calculations of official data. Prices in Sanya, a tourist city on the southern Hainan island, climbed 0.2 percent, reversing declines since at least August last year.
The median existing single-family home price rose in 93% of 176 metropolitan areas during the second quarter, the National Association of Realtors reported Tuesday. That’s up from 85% of metro areas in the first quarter. The price rose 8.2% compared to the second-quarter of 2014 to $229,400. The five most expensive housing markets in the second quarter were the San Jose, Calif., metro area, where the median existing single-family price was $980,000; San Francisco, $841,600; Anaheim-Santa Ana, Calif., $685,700; Honolulu, $698,600; and San Diego, $547,800. The five lowest-cost metro areas in the second quarter were Cumberland, Md., where the median single-family home price was $82,400; Youngstown-Warren-Boardman, Ohio, $85,000; Rockford, Ill., $94,700; Decatur, Ill., $96,000; and Elmira, N.Y., $98,300.
Single family home and condo sellers in the first half of 2015 sold for more above their purchase price in the first half of this year than any time since prices were at the peak of the boom.
Homes sold for an average of 13 percent above their original purchase prices, the highest average percentage in home price gains realized by sellers since 2007, when it was 30 percent, according to RealtyTrac.
Major markets where sellers in the first half of 2015 realized the biggest average home price gains were San Jose, California (41 percent); San Francisco (37 percent); Denver (29 percent); Portland (25 percent); Los Angeles (25 percent); and Seattle (20 percent).
“Sales activity has been strong this year and the metrics point to a solid foundation for steady growth. Growing boomerang buyer interest and first time buyer participation combined with smarter lending requirements are fostering a sustainable market,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “Lower investor, cash, and distressed activity are three reliable indicators that peripheral buying and selling activity is settling back down and the traditional owner occupied residential market is back on solid ground and healthy.”
There were six major markets where sellers in the first half of 2015 on average sold below their original purchase price: Chicago (7 percent below); Cleveland (7 percent below); Hartford, Connecticut (3 percent below); Jacksonville, Florida (2 percent below); St. Louis (1 percent below); and Orlando (1 percent below).
Zillow and Case-Shiller both reported strong appreciation in their first quarter reports, Zillow at 5.2 percent year over year for its 20-city composite and Case-Shiller at 5.0 percent.
“Home price appreciation has settled into a nice groove over the past few months, and ought to remain there going forward. This is still more proof that the for-sale market, while certainly not yet fully healed, is continuing to return to normal,” said Zillow Chief Economist Dr. Stan Humphries when the first quarter results were released May 26. “But relative strength in one indicator shouldn’t be confused with full recovery. Inventory is very low and the housing market is still very much out of balance, particularly on the rental side, where rapid rent increases and tepid wage gains are contributing to a deepening rental affordability crisis. This will make it more difficult for current renters to save up and make the transition into homeownership, particularly for younger would-be buyers the market so sorely lacks and needs.”
Single family homes and condos in June sold for an average of $291,450 compared to an average $287,634 estimated market value for those same homes at the time of sale – a 101 percent price-to-value ratio. June was the first time since July 2013 that the national price-to-value ratio exceeded 100 percent.
Major metro areas with the highest price-to-value ratios — where homes sold the most above estimated market value — were San Francisco (106 percent); Hartford, Connecticut (105 percent); Baltimore (105 percent); Rochester, New York (104 percent); and Providence, Rhode Island (103 percent).
After five consecutive months of increases, pending home sales slipped in June but remained near May’s level, which was the highest in over nine years, according to the National Association of Realtors®. Modest gains in the Northeast and West were offset by larger declines in the Midwest and South.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 1.8 percent to 110.3 in June but is still 8.2 percent above June 2014 (101.9). Despite last month’s decline, the index is the third highest reading of 2015 and has now increased year-over-year for ten consecutive months.
Lawrence Yun, NAR chief economist, says although pending sales decreased in June, the overall trend in recent months supports a solid pace of home sales this summer. “Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level,” he said. “The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows.”
According to Yun, existing-home sales are up considerably compared to a year ago despite the share of first-time buyers only modestly improving1. The reason is that the boost in sales is mostly coming from pent-up sellers realizing their equity gains from recent years.
“Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down,” adds Yun. “Unfortunately, because nearly all of these sellers are likely buying another home, there isn’t a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options.”
The PHSI in the Northeast inched 0.4 percent to 94.3 in June, and is now 12.0 percent above a year ago. In the Midwest the index declined 3.0 percent to 108.1 in June, but is still 5.0 percent above June 2014.
Pending home sales in the South also decreased 3.0 percent to an index of 123.5 in June but are still 7.8 percent above last June. The index in the West increased 0.5 percent in June to 104.4, and is now 10.4 percent above a year ago.
The national median existing-home price for all housing types in 2015 is expected to increase around 6.5 percent to $221,900, which would match the record high set in 2006. Total existing-home sales this year are forecast to increase 6.6 percent to around 5.27 million, about 25 percent below the prior peak set in 2005 (7.08 million).
“Come on, this is bullshit, this is for show, it can’t actually be real.”
When travel journalist Nick Watt was told that travelers to Havana’s Paseo del Prado could find not just snack vendors and tourists on the famous promenade, but a thriving, open-air real market where Cubans buy and sell homes, he was a bit incredulous. But as he discovered during filming of his Travel Channel Show Watt’s World, the promenade plays host to a key part of Cuba’s nascent real estate market, a recently unleashed aspect of capitalism in the socialist country that, as relations with the United States normalize, opens up a host of questions and possibilities.
“Consider real estate in the same way people look at classic cars on the street here,” he says. “People like me love Cuba, we think the cars held together with Band-Aids and the old colonial buildings are amazing. But once the money comes in, will Cubans want up-to-date buildings? In 20 years, will there be old, dilapidated buildings here?”
Footage of the open-air real estate market in Havana. Footage courtesy Travel Channel
Watt’s trip to the market provides just a small glimpse at a larger shift happening in Cuban real estate. In 2011, Raúl Castro allowed his countrymen to buy and sell real estate for the first time in decades, revolutionizing a socialist system that previously only allowed citizens to trade property, like for like. It set off a small boom in home renovations, as well as interest in acquiring and fixing up potential hotel properties that could house an influx of new tourists.
The prospect of a more open market, even incrementally so, raises the possibility of massive foreign investment in prime beachfront real estate and the country’s classic housing stock. Currently, Americans can invest by sending money to a Cuban relative or associate who acts as a frontman, but legally the deed remains in the name of the Cuban buyer, adding a degree of risk. A potentially bigger question around foreign investment may be the right-of-return issue; Fidel seized all foreign-owned property in 1962, and the U.S. government currently estimates that American citizens and corporations may have up to $8 billion in property claims to sort out as relations normalize
So far, Castro has held strong to his decision to limit real estate sales to Cubans only. Considering that a few years in, the market is still in a bit of an embryonic stage, that makes sense.
Photo courtesy Travel Channel
The sea change in property law has also encouraged entrepreneurial activity. Seizing the opportunity in Raul’s policy shift, Sandra Arias Betancourt decided to become a residential real estate agent in early 2013. Not surprisingly, she believes Cuba’s market is unlike any other. A lack of regular internet access means information sources American buyers and sellers use every day are non-existent, and only about half of sellers feel the need to involve an agent. Most just place handmade signs outside their property and negotiate themselves, Betancourt says. But still, she sees a booming market and increased opportunity.
“The market has exploded, especially since the beginning of this year,” she says. “We have a lot of people buying.”
Right now, transactions are 95% cash, she says, and she takes a standard five percent commission for any sales. To succeed, she says agents have to understand the people and what they really want. She sees a day coming soon when Americans will begin to buy more property.
“People have been sniffing around this for years,” says Watt. “I was being asked by my American friends 10 years ago to buy property. People have been trying to find ways for years.”
Tom Miller, author of Trading with the Enemy: A Yankee Travels through Castro’s Cubaand a writer who has made annual trips to Cuba since 1987, also believes that Cubans are just starting to get a sense of how the market functions. Its evident in new online property sites, such as EspacioCuba.com, which are still in their early days (founder Yosuan Crespo, a computer programmer, launched the site in 2012).
“There’s a certain amount of speculation,” says Miller, “but you need a certain amount of funds to do that, and Cuba’s not a country where people have the money for that kind of investment. What people are mostly talking about is foreign investment. You can buy things with a frontman, and Cuban-Americans are already doing it, but the whole phenomena hasn’t played out yet.”
Miller believes a few serious issues need to be resolved before Americans are snapping up homes. The mortgage system in Cuba is currently non-existent—it’s all “cash on the barrelhead”—and Cuba needs to push through planned reforms of its financial system (currently, prices are listed in CUC, the Cuban Convertible peso unit). Both legally and financially, it’s impossible for foreigners, he says
The Obama administration’s heavy-handed attempts at social engineering just moved to a disturbing new level — right in Westchester.
The Justice Department wants the county held in contempt of court, fined $60,000 a month and forced to set up an escrow account of $1.65 million — in a move growing out of its longstanding claim that the county’s housing policies are racist.
It’s a preposterous claim, of course. And Friday, County Executive Rob Astorino holds a press conference to decry it.
Good for him. Because the move is based on a technicality, and it actually says more about Team Obama’s overreach than about anything the county has or hasn’t done.
The Justice Department’s claim focuses on 28 units of “affordable” housing that are to be built in downtown Chappaqua, home of Hillary Clinton. Under a 2009 consent decree, Westchester agreed to build 750 units in wealthy, largely white towns and to “market them aggressively” to non-whites. Financing for the first 450 units was to have been approved by the end of last year.
Westchester actually met that deadline — but the feds disqualified the Chappaqua project anyway, because the town hadn’t yet issued all required permits by Dec. 31. And because Astorino’s office, the feds say, didn’t ride roughshod over the town and bully it into submission.
Let’s be honest: For years, the administration has been trying to, as one official put it, “remove zip codes in the quality of life in America.” Meaning anyone should be able to live anywhere, even if they can’t afford it.
Its legal case is based on the dubious notion of “disparate impact” — statistical differences by race without any specific proof of actual discrimination.
Want more evidence Justice’s act is politically motivated? Note, then, that it filed its motion despite the fact that the Chappaqua housing project was recently fast-tracked.
According to the Census Bureau’s Housing Vacancy Survey (HVS), the nation’s homeownership rate in the second quarter of 2015 fell to a post-1967 low point of 63.4%. The homeownership rate decreased by 130 basis points on a nonseasonally adjusted basis from the second quarter of 2014 to the second quarter of 2015.
Compared to the peak at the end of 2004, the homeownership rate has steadily decreased by 5.8 percentage points and remains far below the 25-year average rate of 66.3%.
Homeownership rates decreased for all age groups on a year-over-year basis. The homeownership rate for household heads younger than 35 years old (34.8%) decreased by 110 basis points from the second quarter of last year. The largest decline, however, was for those aged 35-44 (58%), with an annual drop of 220 basis points.
The nonseasonally adjusted homeowner vacancy rate continues to drop after the Great Recession. The current homeowner vacancy rate is 1.8%, 10 basis points lower than last quarter and the second quarter of 2014.
The national rental vacancy rate remains relatively low and declined by 30 basis points to a 6.8% rate for the second quarter on a nonseasonally adjusted basis. The rental vacancy rate was 7.5% for the second quarter of 2014.
The HVS also provides a timely measure on household formations – the key driver of housing demand. Although it is not perfectly consistent with other Census Bureau surveys (Current Population Survey’s March ASEC, American Community Survey, and Decennial Census), the HVS remains a useful source of relatively real-time data.
S&P/Case-Shiller’s 20-City index notched a 4.9% yearly gain in May, down only a tick from 5% in April but missing expectations of 5.6%. A national index covering all 9 Census divisions accelerated to a 4.4% yearly rise from 4.3%. The seasonally adjusted national index was unchanged during the month, while the 20-City index declined 0.2%. The 20-City index is 14% below its ’05 peak.
The median sales price for a home in the Hamptons declined 6.5 percent to $849,000 compared to 2014, according to the report. The number of homes that were sold fell 15.7 percent to 590 this year, down from 700 sales at this time last year. However, average home price rose 2.5 percent year over year.
The conflicting data are a result of a reaction in the market from last year’s sales, said Jonathan Miller, president of Miller Samuel Real Estate Appraisers, who authored the report.
Last year saw an explosion of pent-up demand as people began to consider real estate again for the first time since the housing crisis, Miller said. That demand resulted in 700 sales, a record number.
“That demand has mostly been absorbed, so what we have now is the prices showing mixed trends, but sales are down,” he said. “There isn’t the same sense of urgency by buyers that there was a year ago, but there is still above-average activity occurring. It’s just not at the breakneck pace it was last year.”
The current market in the Hamptons is just returning to normal, the CEO of Douglas Elliman, Dottie Herman, said. While sales aren’t record breaking, they are still healthy.
She also noted that in a small market like the Hamptons, big outliers can move data.
For the fabulously wealthy, a Hamptons property is soon to hit the market at $95 million, according to real estate agents at Sotheby’s. The estate, known as Burnt Point, is an 18,000-square-foot shingle traditional built on 25 acres with water on three sides. The home is being sold by the Stewart J. Rahr Foundation, and the proceeds will continue to fund the foundation’s philanthropic efforts.
