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Credit for Millennials | Waccabuc Real Estate
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Tracy A. Becker, President
Mortgage rates average 3.73% | Waccabuc Real Estate
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates moving higher for the third week in a row.
News Facts
- 30-year fixed-rate mortgage (FRM) averaged 3.73 percent with an average 0.5 point for the week ending March 17, 2016, up from last week when it averaged 3.68 percent. A year ago at this time, the 30-year FRM averaged 3.78 percent.
- 15-year FRM this week averaged 2.99 percent with an average 0.4 point, up from last week when it averaged 2.96 percent. A year ago at this time, the 15-year FRM averaged 3.06 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.93 percent this week with an average 0.5 point, up from last week when it averaged 2.92 percent. A year ago, the 5-year ARM averaged 2.97 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for theDefinitions. Borrowers may still pay closing costs which are not included in the survey.
Quote
Attributed to Sean Becketti, chief economist, Freddie Mac.
“Treasury yields increased heading into this week’s FOMC meeting, partially in response to modestly higher inflation readings. 30-year mortgage rates kept pace, rising 5 basis points to 3.73 percent. Nonetheless, at the meeting the Fed confirmed what the market had already concluded and made no change to the Federal funds target. The Fed went further and acknowledged that economic signals have been mixed and that the pace of monetary tightening may be slower than had been assumed at the end of 2015.”
Why Millennials Can’t Buy | Waccabuc Real Estate
Though 2015 was dubbed the Year of the Millennial, though the final sales data are not yet in, actual purchases by young first-time buyers disappointed many real estate observers.
Between July 2014 and June 2015. first–time buyers declined to 32 percent (33 percent a year ago), which is the second–lowest share since the survey’s inception (1981) and the lowest since 1987 (30 percent), according to the National Association of Realtors’ 2015 Home Buyer and Seller profile, Through October, NAR’s Realtor Confidence Index reported sales to first-time buyers had fallen even more, to only a 30 percent share.
Though the current data is bad, Millennial purchase levels have actually improved. In mid-December, the Census Bureau’s American Community Survey reported that the number of homeowners aged 25-34 fell by more than 250,000 in each year between 2007 and 2012, but has declined to a level of less than 100,000 annually through 2014.
Yet expectations are much higher than results to date. For example, a December NAR survey found that 94 percent of renters under the age of 34 aspire to be homeowners “someday”, a finding that echoes similar research by Fannie Mae, Zillow, the Pew Center and others.
Among the many hurdles facing young buyers—lending standards, rising prices, slim to no affordable inventory, income that is still not age-appropriate, crippling levels student loan debt consumer debt—perhaps the greatest is simply cash. Like most generations before them, Millennials are struggling to raise the cash requirements for down payments and closing costs.
One reason is a phenomenon I called the Rent Trap in an article for Inman News Service last year and re-published on Real Estate Economy Watch. (See How the Rent Trap is Killing off First-time Buyers.) Simply put, rather than driving first-timers to buy, soaring rents are sucking up a substantial portion of their disposable income, keeping them trapped in rentals longer than they planned. The longer they wait, the higher rents rise, extending their waiting period. The Rent Trap which may be one of the most pervasive but least understood reasons that Millennials are aging in place in rental housing.
read more…
http://www.realestateeconomywatch.com/2016/01/the-rent-trap-redux-why-millennials-cant-buy/
Home Sales Finish Year Up | Waccabuc Real Estate
New homes sales were up 10.8% in December to 544,000 on a seasonally-adjusted annual basis (SAAR) and finished 2015 just past half million (501,000) for the best year since 2007. The increase in signed contracts to purchase a new home comes as mortgage rates remain very low by historic standards and the US economy continues to gain strength.
Sales were up in every census region although nominally in the South by 0.4%, to 273,000. In other regions, the Northeast was up 21% to 29,000 (SAAR), the Midwest up 32% to 75,000 and the West up 21% to 167,000. For the year, the Northeast was down 12% to 24,000 new homes sales, which is the worse year since 2011. Other regions performed much better with the Midwest up 3.2% to 60,000, the best year since 2008; the South was up 17.6% to 285,000, the best year since 2007; and the West was up 20.5% to 130,000, the best year since 2007.
Inventories continue to build even in the face of labor and lot shortages. December’s unsold inventory increased 2.6 to 237,000, the highest since October 2009. Even with the increase in sales, the months’ supply fell to 5.2 months.
The median sales price fell 4.3% to $288,900 due primarily to a decline in sales over $750,000 and an increase in sales between $200,000 and $300,000. The trend suggests more first time home buyers are entering the market.
The shares of signed contracts that are still under construction or not yet started have climbed back to near the same levels has the early 2000s as builders switch from selling off left over inventory to selling from the stock of homes under construction or planned but not yet started.
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A Chill in 2016 Price Forecasts | Waccabuc Real Estate
Prices in the year to come are going to be a lot worse than most earlier forecasts, according to Clear Capital’s view of the market, which refuses to “sugarcoat the data”. The provider of real estate valuations, data and analytics calls for continued market instability and a trend of decreasing rates over the next 12 months, especially in mid tier homes.
The overall Clear Capital® Home Data Index™ (HDI™) forecasts 2016 home price appreciation will be in the range of 1 percent to 3 percent, significantly lower than the 5.1 percent growth rate during 2015 and the 6.6 percent growth rate in 2014, demonstrating continued market instability and a trend of decreasing rates.
Most other forecasts, including Fannie Mae and Freddie Mac, have called for a modest decline in price appreciation in 2016, to 3 to 4.5 percent.
“While we would love to sugarcoat the HDI data and declare that 2016 merely will be a normalization of the housing market to historical averages not seen since the late 1990s, several factors indicate that it could be another volatile year leading to ongoing uncertainty about the future of American housing,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.
Ultimately, overall national growth will be positive throughout 2016, but these rates are underwhelming and signal the end of the explosive growth typical of the first half of this decade. The forecast is predicting an average of only 0.4 percent quarter-over-quarter (QoQ) growth for each quarter during 2016. Growth in this range is rather lackluster when compared to the previous two years, when home prices grew by an average of 1.5 percent quarterly over the period from January 2014 to January 2016.
Homes in the low tier (selling below $116,000 nationwide) are forecasted to appreciate more significantly than other tiers during the next year, averaging just under 1.0 percent quarterly growth throughout 2016. By definition, the low tier is affordable to the widest range of potential homeowners and investors. This larger class of buyers will likely cause continued higher appreciation for the country’s most affordable home tier.
The overall trend of decreasing rates of growth during 2016 will primarily affect the middle price tier—representing the middle 50 percent of all transactions, currently comprised of homes selling between $116,000 and $337,500 nationwide. While growth in the middle price range is not projected to be the lowest of all the price tiers, the mid tier shows a consistent decrease in quarterly growth over the forecast period, falling from 0.5 percent QoQ growth in January 2016 to just under 0.2 percent QoQ by the end of the year.
Conversely, the top price tier (homes selling above $337,500 nationwide) forecasts relatively consistent quarterly growth, hovering around the 0.2 percent QoQ mark. Historically, pricing in this class of homes has moved slowly in the sense that gains and losses both have been smaller by percentage due to higher initial prices. The contrast to the low tier highlights the diversity in performance that remains in today’s real estate market.
Generally, year-over-year growth rates are forecasted to be lower for all MSAs in the nation, with no exceptions . The highest growth in 2016 is forecasted to occur in Denver, where home prices are projected to grow by 7.7 percent during the course of the upcoming year, compared to the 11.7 percent annual growth seen in 2015.
While slower growth plagues the forecasts of all major cities across the nation, the luxury markets are among the hardest hit. Miami and San Jose are projected to grow by only 1.3 percent and 1.4 percent respectively during 2016, after each MSA saw market growth in excess of 10% during 2015. Other cities like Chicago, New York, and San Francisco are forecasted to see significant changes to their 2015 performance, with little to no growth for the upcoming year.
Home price appreciation in Detroit, which saw an uncharacteristic increase in QoQ growth toward the end of 2015, is forecasted to fall 5.8 percent over the course of 2016. This is compared to annual growth in excess of 11 percent in 2015, making Detroit one of the hardest-hit MSAs of the forecast. Since May 2013, the Detroit MSA has seen declining quarterly gains in 9 of 10 quarters, with the most recent quarter less than half of the Q3 2015 market performance. Based on this rapidly decelerating rate of price growth, it is quite possible this metro turns negative by year end.
read more…
http://www.realestateeconomywatch.com/2016/01/clear-capital-puts-a-chill-in-2016-price-forecasts/
Miami Market Cools as Foreign Buyers Flee | Waccabuc Real Estate
An aerial view of Miami Beach and South Beach, where the condo market is showing signs of stagnation. Photo by Chris Condon / Getty Images.
There was a time, only two years ago, when Miami’s condo market seemed like an ever-expanding balloon. South Florida was the nation’s biggest real estate comeback story. Miami became a go-to destination for luxury buyers looking to add to their property portfolios.
But like most things filled with hot air, eventually the balloon starts its gradual descent back to earth.
For those who have been waiting for the drop, 2016 may well be the year when softening demand—fueled by stock market volatility in China, low oil prices, currency devaluations in South America, and a heck of a lot of new condo units coming on the market—becomes too much to overcome.
As 2016 begins, signs of a slowdown abound. While prices continue to rise for single-family houses, fewer are selling. The market for condos, which many consider a health indicator of vacationer-heavy Miami Beach, is also showing early signs of stagnation.
The number of single-family home sales that closed dipped by 6.7 percent in November compared to the same month in 2014, while new pending sales fell by 15 percent, making it the fifth straight month of decline, according to the Miami Association of Realtors. Nevertheless, median home prices rose by 12 percent to $274,900—the third straight month of double-digit increases.
The condo market told a slightly different story. Overall, closed sales inched up by 1.9 percent, reversing a two-month slide. New pending sales slid by 16.5 percent, year-over-year, the second highest month of decline in 2015 (October being the highest, at 17.9 percent). Median prices grew by 7 percent to $203,000.
While overall the median days on the market for condos fell by 12 percent, units selling for $300,000 to $999,999 proved particularly sluggish, with homes from $300,000 to $399,999 spending 72 days on the market, a median increase of 50 percent, according to Miami Real Estate Association.
In the condo market especially, there seems to be a growing disconnect between sellers’ expectations and market reality. And local brokers say they are seeing mounting frustration. “We are seeing a lot of sellers calling us saying, ‘What is happening? Nothing is moving,'” said Mark Zilbert, president of Brown Harris Zilbert in Miami.
The Porsche Design tower reached its full 60-story height in October 2015. Photos courtesy of Porsche Design Tower.
How did this happen? Blame the foreigners. In 2012, developer Gil Dezer publicly said “obrigado” (thank you) to the many Brazilians who were scooping up condos in Miami and Miami Beach. Dezer, who has been developing the 60-story Porsche Design Tower, credited the Brazilians for almost single-handedly turning around the depressed condo market. Other groups followed suit, including Argentines, Venezuelans, Colombians, Russians and other Europeans, and many Canadians.
Today, much of that interest has disappeared. “We are seeing a lower intensity of demand from foreign investors, comprising an estimated one third of the condo market sales” in Miami, said Jonathan Miller, president of Miller Samuel, a real estate appraisal and consulting firm in New York.
The view from the under-construction Porsche Design Tower in Sunny Isles. Photo by Joel Auerbach / AP Photo.
Miller cited a stronger U.S. dollar, volatile financial markets, and “sharp declines in GDP in source countries that fed Miami demand” as the biggest reasons for the turnaround.
He added that the “significant volume of new housing stock” that is being added has “provided a lot of information for investors to process and removed the sense of urgency from the market.” Also contributing to the general slowdown has been a decline in distressed sales in 2015, which previously helped skew overall prices higher. Foreclosures and short sales both dipped by double digit percentages in November.
But problems abroad are clearly at the heart of the Miami slowdown. Brazil’s currency, the real, has fallen off by more than half since Dezer gave thanks, and the country’s economy is poised for a second straight year of contraction. Economic sanctions on Russia are finally taking a toll on Miami buying at all but the billionaire oligarch level. “Rubles? We don’t see much of those any more,” Zilbert said.
Falling oil prices have hurt Brazil and Russia as well, and compounded problems even further for Miami’s biggest foreign buying group: Venezuelans. Despite government restrictions on how much money they can pull out of their country, Venezuelans continued to buy in and around Miami in 2015. But the restrictions “have had a huge effect on the flow of business,” Philip Siegelman, a principal at real estate marketer ISG, told me late last year.
Venezuelans and Brazilians, it can be argued, are smart to play the currency game. In a downward economic spiral, waiting can end up costing them more, as inflation rises and currencies continue to decline at home. Brazilians that paid hefty deposits in 2014 for pre-construction Miami condos look brilliant now. Their money has more than doubled in Brazilian currency terms.
But there is too much of that new development coming on line to keep the market surging.
The result is that, while a lot of Americans and foreigners continue to show interest in Miami, “There is a shrinking number of people willing to pull the trigger,” Zilbert said. “And the sellers are starting to notice.”
What is especially troubling to brokers is that the expected surge of buying in the last quarter of 2015 didn’t pan out. The bottom line: Many buyers are no longer accepting the price increases that sellers are pushing for.
“I think we are going to see pricing slip back to 2014 levels in order to attract the buyers,” Zilbert said.
Sales have remained fairly stable at mid-tier properties priced between $350,000 to about $700,000, where condos have not appreciated enough to scare away buyers, brokers say. Units in buildings like the Waverly South Beach and the Yacht Club at Portofino continue to find buyers, Zilbert said.
But lately, resale units at the Icon South Beach, the Floridian South Beach and 900 Biscayne in downtown Miami, have struggled to move, as buyers have balked at higher listing prices.
Construction in Miami’s South of Fifth neighborhood. Photo by Felix Mizioznikov / Shutterstock.
In Zilbert’s own South of Fifth neighborhood, he is seeing buyers pass on a number of units for sale in premium buildings like the Murano Grande (where he lives) and the Continuum. Just two years ago, South of Fifth, a once-blighted section of the beach known for crack houses and rampant crime, was considered Miami Beach’s most-expensive and hottest neighborhood, a truly stunning rebirth story. Lately, more and more units are lingering on the market, Zilbert said.
As Miller noted, sellers are “usually the last to recognize a change in the market when it is weakening,” which results in lower sales activity. “It is not that demand is weak, but rather that there is a growing disconnect between what sellers want and what the market can support,” he said.
Not every segment of the Miami market is showing signs of softening. The high end, with prices in excess of $3 million, is still raging. Sales remain brisk at luxury towers like Faena House, the newly announced Eighty Seven Park, and the Surf Club Four Seasons.
read more…
http://curbed.com/archives/2016/01/12/miami-market-cools-condo-prices-foreign-buyers.php?utm_campaign=issue-42758&utm_medium=email&utm_source=Curbed
8 states most at risk of a housing crisis | Waccabuc Real Estate
The plummeting price of oil has some states at a much higher risk of a housing crisis, a new report from Arch MI found.
According to the private mortgage insurer’s latest Housing & Mortgage Market Review, the average likelihood of home price declines across the country over the next two years remains low, at 6%, but some states are at a much higher risk of seeing price declines.
Arch MI’s report found that the eight states in the “Energy Patch,” which are states that produce coal, oil or gas, are the most at risk of seeing a price decline in the next two years.
The state most at risk of seeing house prices decline in the next two years is North Dakota. Arch MI’s report shows that there is a 46% chance that home prices will decline in North Dakota in the next two years.
The reason? Reduction in oil and gas production already has left the state with a glut ofempty houses and apartments, and it may only get worse.
According to Arch MI’s report, North Dakota’s total employment fell 2.9% over the past year and home prices appear to be “highly overvalued.”
The authors of the Arch MI report, Ralph DeFranco, the company’s senior director of risk analytics and pricing, and Scott Fawver, the company’s econometrician, write that they expect to see continued layoffs in the energy-extraction and related sectors, such as manufacturing of drilling, mining and transportation equipment like well packers, straddle packers, including a grout packer, in other “Energy Patch” states as well.
“Most Energy Patch states will experience slower economic and home price growth and a few areas may even see outright home price declines,” DeFranco and Fawver write.
In fact, the eight states that make up the “Energy Patch” are the eight states most at risk for home price declines in the next two years,” DeFranco and Fawver write.
According to the Arch MI report, North Dakota, Wyoming, Alaska, and West Virginia are most at risk, while New Mexico, Oklahoma, Louisiana, and Texas are also “worth monitoring closely.”
While North Dakota ranks as the riskiest, the other seven states at the most risk of seeing price declines are:
- Wyoming, with a 37% chance of a price decline due to mining employment in the state, which is nation’s largest coal producer, falling to 10-year lows
- Alaska, with a 33% chance of a price decline due to high unemployment, but the report notes that unemployment is improving in the state
- West Virginia, with a 33% chance of a price decline due to the state seeing the second largest year-over-year drop in total employment (-1.8%) in the nation. Coal prices and employment are hurt by competition from cheap natural gas, the authors note
- New Mexico, with a 31% chance of a price decline due to the state being at risk of a recession due to government- and energy-related job losses
- Oklahoma, with a 28% chance of a price decline due to total employment falling in the past 3 months and home prices decelerating
- Louisiana, with a 28% chance of a price decline due to the state being one of three states in the nation with declines in total employment (-0.5%)
- Texas, with a 26% chance of a price decline due to employment growth remaining weak overall, but has turned positive in recent months. Texas’ home prices are also growing faster than national average
Overall, the housing market outside the “Energy Patch” is likely to improve over the next year, the report notes, despite economic headwinds from a strong dollar and expected gradual rate increases by the Federal Reserve.
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Existing home sales down 10.5% in November | Waccabuc Real Estate
Sales of existing homes fell short of expectations in November, hitting the slowest sales pace in 19 months after new mortgage rules hit the market, realtors said.
Existing home sales fell 10.5 percent to 4.76 million homes in November, the National Association of Realtors said Tuesday.
Analysts polled by Thomson Reuters expected to see existing home sales in November hit 5.35 million units, about the same as the 5.36 million the previous month.
The sales represent a 3.8 percent year-on-year decline for the indicator, a barometer of the American real estate market.
The Midwest led declining sales, seeing a 16.4 percent drop in sales of existing homes, followed by the West at 13.9 percent and the Northeast at 9.2 percent.
The median home prices was $220,300, up 6.3 percent from this time last year. Inventories are currently at 5.1 month supply of homes, tighter that the 6 months considered balanced.
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cnbc.com
October Gains for Residential Construction Spending | Waccabuc Real Estate
NAHB analysis of Census construction spending data shows that total private residential construction spending for October increased to a seasonally adjusted annual rate of $399 billion. On a month-over-month basis, private single-family spending was $226 billion, up by 1.6% over the revised September estimate. Private multifamily spending increased to $58 billion, up by 1.4%.
Annually, the pace of multifamily spending rose 28% from the October 2014 estimate, and spending on single-family construction was 11% higher.
The NAHB-constructed spending index, which is shown in the graph below (the base is January 2000), indicates that recent gains have been driven by the steady increase in multifamily construction spending. The pace of the multifamily spending is gradually slowing. The monthly growth rate of multifamily construction fell to 1.4% in October from relatively higher rates in August (8%) and September (6%). NAHB anticipates accelerating growth for single-family spending in 2015.
The pace of total nonresidential construction spending increased by 1% monthly in October, and the annual increase from the revised September 2014 estimate was 11%. The largest contribution to this year-over-year nonresidential spending gain was made by the class of manufacturing-related construction (41% increase), followed by lodging (30% increase) and amusement/recreation (24% increase).
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http://eyeonhousing.org/2015/12/october-gains-for-residential-construction-spending/
New Single-Family Home Size: Flat Trends | Waccabuc Real Estate
The typical size of newly built single-family homes was effectively unchanged from the second to third quarter of 2015, posting a small quarterly decline. The current data is consistent with the general trend of flat growth for the size of typical newly-built homes, a pattern that took hold during 2014. As first-time buyers return to the market, typical home size is expected to trend somewhat lower.
According to third quarter 2015 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area fell from 2,478 in the second quarter to 2,445 square feet. Average (mean) square footage for new single-family homes fell from 2,704 to 2,653 for the third quarter.
On a less volatile one-year moving average, the recent trend of leveling home size can be see on the graph above, although current sizes remain elevated. Since cycle lows and on a one-year moving average basis, the average size of new single-family homes has increased 13% to 2,693 square feet, while the median size has increased 17% to 2,472 square feet.
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http://eyeonhousing.org/2015/11/