Mixed housing stats

This week’s National Association of Realtors press release (nar.realtor) sends mixed signals about the housing market. Reports of sluggish home sales and slowing home price appreciation is not what you would expect when the spring market should be humming along. But then again, mixed housing stats may be a vital sign of a healthy market in motion.

First, let’s talk about home sale prices. The NAR’s report on metro home prices and affordability indicate that the average home sale price for the first quarter of the year was $254,800. This is a 3.9 percent increase compared to the same time last year. Average home sale prices in the Baltimore metro area were slightly higher than the rest of nation at $275,300. Not surprisingly, Washington metro prices were significantly higher at $420,000 (a 6.5 increase from the same time last year).

The latest S&P CoreLogic Case-Shiller U.S. National Home Price Index (spindices.com) is almost spot on with the NAR, indicating a 4 percent increase in home sale prices nationwide.

Affordability is always a concern when mixed housing stats confound the market. So, how much income do you need to qualify for a home? The National Association of Realtors Qualifying Income report indicates the average qualifying income for a 5 percent down conventional mortgage is $60,143 nationwide. The average qualifying income in the Baltimore metro area is slightly higher at $64,982. However, because of significantly higher home sale prices, the average qualifying income in the Washington metro area is $99,137.

The neighboring Baltimore and Washington metro areas highlight home pricing extremes in competing markets. Many home buyers who work in the Washington metro area are opting for longer commutes to make homeownership affordable. Others are opting for alternative work to not only lower their housing cost, but eliminate the commute as well. Commenting on affordability, NAR’s chief economist Lawrence Yun stated, “There are vast home price differences among metro markets. The condition of extremely high home prices may not be sustainable in light of many alternative metro markets that are much more affordable. Therefore, a shift in job search and residential relocations into more affordable regions of the country is likely in the future.”

Although home sale prices continue to climb, the national home sale picture is another story. The 1.2 percent increase in spring home sales compared to winter sales should be expected. However, the 5.4 percent decrease from last spring is a disappointment. According to MarketStats by ShowingTime (getsmartcharts.com), the number of homes sold in the Mid-Atlantic region decreased 4.77 percent year-to-date. There was a larger decline in Montgomery County, where there was a 7.25 percent decrease in home sales year-to-date!

Days-on-market is another fundamental indicator of the housing market. And, like home prices and units sold, days-on-market can vary depending on the local market. Homes in the Mid-Atlantic region are taking a bit longer to sell, as days-on-market increased 7.04 percent to 76 days. However, houses in Montgomery County are selling quicker, where days-on-market decreased about 13 percent to 65 days.

Mixed housing stats can confound home buyers, sellers, and their agents. But consider the analysis of David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. He stated that that home sale prices gains have been slowing down until recently. And although mortgage rates are lower, home sales have “drifted down” from their peak during February 2018. Even new home sales and residential investment have shown weakness since last year.

Original published at https://dankrell.com/blog/2019/05/20/mixed-housing-stats/

By Dan Krell
Copyright © 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

March 25, 2016February 8, 2020

Is housing market in trouble?

home sales stats — Home sales stats from nar.realtor

Two seemingly mundane and unrelated news items were reported over the last couple of days without much attention, but could be a warning that housing activity is slowing. First are reports of disappointing home sales during February, while the other is about mortgage principal write downs.

The National Association of Realtors® (nar.realtor) reported in a March 21^st statement that February home sales plunged 7.1% from January’s sales; however, February sales were still 2.2% higher than the same time last year. The disappointing sales were recorded in all four national regions; and were likely due to a combination of extremely low inventory and increasing home prices.

NAR chief economist Lawrence Yun stated in the release that although the northeast blizzard may have had some impact, vapid sales were more likely due to the lack of supply and affordability. He stated, “…Finding the right property at an affordable price is burdening many potential buyers.” Yun pointed out that although there are gains in job growth, NAR’s latest quarterly Home Survey indicated that fewer respondents believed the economy was improving, while a lower number of renters stated it’s a good time to buy a home. Remaining optimistic, Yun qualified February’s data saying home buyer demand is still high, however, “…home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers.”

NAR also reported that February’s median existing home price for all housing types was up 4.4% year-over-year; while exiting inventory is 1.1% lower compared to the same time last year, which leaves unsold inventory at a 4.4 month supply.

However, a housing slowdown may not be noticeable in my area. Statistics reported by the Greater Capital Area Association of Realtors® (gcaar.com) indicated that settlements during February for Montgomery County single family homes are actually up 19.3% and homes under contract increased 12.4% compared to the same time last year. However, February’s new inventory for Montgomery County single family homes decreased 3.4% year-over-year.

Although continued increases in home prices is good news for homeowners; it is easy to see that affordability is an impediment to home ownership for many would be home buyers. Additionally, possibly keeping home sales inventory down are the number of homeowners who continue to feel that they cannot sell because they still owe more than the value of the home. Consider that Realtytrac (realtytrac.com) reported that there were 6.4 million properties that were seriously underwater at the end of 2015; which represents about 11.5% of all homes with a mortgage.

In an effort to offer relief to underwater homeowners, the Federal Housing Finance Agency (conservator of Fannie Mae and Freddie Mac) approved a plan to reduce mortgage balances on a “large scale.” Joe Light reported for the Wall Street Journal (Fannie, Freddie to Cut Mortgage Balances for Thousands of Homeowners; wsj.com; March 21, 2016) that as many as 50,000 underwater homeowners could see their mortgage principal reduced by Fannie and Freddie.

Although the number of assisted homeowners seems small in comparison to the number of underwater properties reported by Realtytrac, and is not expected to impact the housing market; it is a milestone nonetheless. Mortgage principal reductions has been controversial, and has been bandied about by industry experts and regulators since the foreclosure crisis began in 2007. Light reported that the previous FHFA director, Edward DeMarco, was reluctant to support such a program because of the cost to taxpayers. However, current FHFA director, Melvin Watt, has taken a “measured approach” to the plan.

By Dan Krell
Copyright © 2016

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August 13, 2014November 23, 2021

Making sense of real estate market indicators

It used to be easy to figure out the strength of the real estate market, all you had to do was look at reported housing indices and it all made sense. Statistics were often verified and corresponded to other indices as well. However, since the financial crisis, there seems to be a disconnect between national and local housing indicators; gauging the market has become confusing – understanding what the indices measure and imply is often tricky.

Obviously, the best gauge to the health of the housing market is measuring existing home sales. Existing home sales is reported nationally and locally. The figure is important because it is a direct measure of the number (volume) of home sales during a given time period (usually monthly). National sales figures are often samples of MLS data, while local data are actual (raw) numbers. The statistic is used to chart annual sales trends; as well as a relative comparison to the same period during previous years.

Some have talked about the strength of luxury home sales as an indicator of the housing market. However, during a weak economy is weak, mid and low tier home sales tend to decrease; while upper bracket and luxury sales remain relatively strong. This bifurcation, where two distinct markets are derived from one, has emerged twice since the financial crisis; most recently earlier this year.

The National Association of Realtors® reports the Pending Home Sale Index, which is basically the number of homes that go under contract (pending sale) during a specific period. Pending sales are sometimes called a “forward looking” statistic because it is used to estimate how many homes will have sold for the year. Local pending sales are reported as a raw number of homes under contract. The statistic can be misleading because contracts fall apart for a number of reasons and may be one explanation as to why pending sales and existing sales may not correspond. Although the figure is not always indicative of actual sales, the figure is important because it reveals home buyer activity.

Another statistic relied on by many to determine the strength of the housing market are the home price indices (yes there is more than one). There are a number of national home price indices, and each has their own discrete methodology of measuring home sale prices. Some indices collect MLS data samples, while others use reported mortgage data. Average home sale prices help determine affordability, which can be an indication of buyers’ potential ability to purchase a home.

Some analysts talk about mortgage interest rates for much of the same reason one might follow home sale prices – to project home buyer affordability. The rationale is that the lower the interest the more affordable homes are and increase buyer activity.

Analysts also use new homes statistics to describe the strength of the real estate market. Included in this subset of housing data are new home sales and new home starts. New home starts is typically derived from the number of permits filed to build homes. Besides being a forward looking projection of new homes sales, economists follow new home starts figures closely because it can project construction employment as well.

Housing indices can be inconsistent. And while positive statistics may be reported nationally, it doesn’t necessarily correspond to the local market. Your real estate agent can provide insight to local sales trends and expected projections.

February 13, 2013December 2, 2020

Predicting 2013 home sales through housing statistics

by Dan Krell
DanKrell.com
© 2013

Much like a soap opera cliff hanger, 2012 home sales ended on an upward swing leaving people wanting more good news. There’s a lot expected from this year’s real estate market, so what are some of the experts saying about 2013?

The latest S&P/Case-Shiller Home Price Indices (www.standardandpoors.com/indices) press release dated January 29th reported home prices rose during 2012 through November rose in 19 of 20 cities. The 10-city composite revealed an annual home price increase of 4.5% and the 20-city composite revealed a home price increase of 5.5%. And although the release described that the seasonally adjusted home prices may be an indication of a week winter housing market, there was a clear pronouncement that “…housing is clearly recovering…” and pointed out that nationwide existing home sale volume outpaced recent years’ volumes. The cities that made the most gains were the cities that experienced the most declines in home values and the highest foreclosure rates. The home price indices of the 10-city and 20-city composites are reportedly back to 2003 levels.

The National Association of Realtors® (realtor.org) reported in a February 11th press release that the national median existing single family home price increased 10% in the fourth quarter 2012 over the same period in 2011. And the Housing Affordability Index indicates that the homebuyer’s buying power is at a point where they could “comfortably” afford to purchase a home.

Fourth quarter 2012 home sales volume was reported by NAR to be the highest since the fourth quarter 2009; 23% of home sales during the quarter were from distressed home sales (short sales and foreclosures). Additionally, home sale inventory was down about 21.6% for the quarter, which is the lowest since 2001.

NAR chief economist Lawrence Yun was reported as saying that home sales are being energized by “pent up demand” and low inventories. He stated, “…all the conditions for strong price growth are at play.”… “Home sales are on a sustained uptrend, mortgage interest rates are hovering near record lows and unsold inventory is at the lowest level in 12 years…” Yun believes that “…supply and demand dynamics are very much at play.”

Given recent reports from various sources, it looks as if there is momentum in the real estate market. And NAR’s Dr. Yun lays out an argument for home sales that hasn’t been since 2006. But chances are that 2013 home sales will be about many factors, not just “pent up demand” or “supply and demand.” For example, it is doubtful that hedge funds will continue the bulk foreclosure buying that pushed home sales figures to almost record levels.

By themselves, housing indices are broad based measures that typically measure one aspect of the housing market; describing the variables responsible for the measures and indices is more difficult and usually a guess at what’s happening in the marketplace. In an effort to provide a more meaningful measure of the housing market, I devised a measure called the “Krell List-to-Sold Ratio;” which is the ratio of total number of listings to the total number of homes sold in any given area during any time period. The January 2013 Krell List-to-Sold Ratio for Montgomery County reveals that activity continues to be elevated; which is interpreted to mean that the year has started stronger than recent years, but not as strong as 2012.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

December 20, 2011October 20, 2020

Understanding the revision of home sale statistics

by Dan Krell
© 2011
DanKrell.com

As the housing market slid, the National Association of Realtors® (NAR) was often criticized for producing home sale data that seemed unrealistic. As criticism seemed to peek, NAR announced earlier this year that they were seeking to “re-benchmark” data for counting the number of homes that sold.

According to a December 13th Reuters report (Existing home sales to be revised down from 2007: NAR), the NAR is “revising down” home sales statistics because of double counting, “indicating a much weaker housing market than previously thought.” The news sparked cries of “fraud!’ and “told you so’s” across the blogosphere; while some used the news as a marketing opportunity to tout their data as unwavering.

However, according to the NAR’s press release, “Q&A on Re-Benchmarking of Home Sales” (economistsoutlook.blogs.realtor.org), the main reason for the re-benchmarking is for data drift that occurred during the housing downturn; re-benchmarking is a common aspect of estimating economic data (much like the government’s GDP and employment figure revisions). The re-benchmarking is only for existing home sales and not home prices.

According to Lawrence Yun, NAR Chief Economist, data drift is to blame for the over estimates. The monthly existing home sales data that is reported by NAR is compiled from MLS boards across the country. Data drift was revealed when comparisons were made with other available home sales data.

Data drift is a term that describes the change of non-constant variables used in statistical measurements. The data drift in NAR’s existing home sale data was described as being caused by several factors: an increasing reliance on Realtors®, double listings, and inconsistencies across MLS boards.

Although MLS data typically tracks Realtor® home sales data, there are homes that are also sold by home builders and for-sale-by owners (fsbo) which are not typically reflected in the MLS. Dr. Yun believes that some of the data drift is due to the increasing reliance on Realtors® as the market deteriorated to sell homes they typically did not sell in the past (by fsbo’s and builders).

Additionally, it was realized that MLS home sale data was duplicated in some instances. In some regions, it is not unusual for Realtors® to belong to more than one MLS board. In some of those instances, Realtors® often input the data in two or more MLS’s; thus resulting in a duplicate sales.

As technology and markets advance, local and regional MLS boards found themselves changing to increase the quality of the MLS data, as well as expanding to provide service in outlying areas. Although many MLS boards attempt to adhere to consistent data standards and practices, compiled home sale data is not always consistent across all the MLS boards. Additionally, as MLS coverage grew, it could have been logically assumed that the quantity of home sales reported for the growing MLS boards would increase because of the wider coverage.

Additionally, Dr. Yun stated that the census data used to benchmark the MLS data has also changed; the U.S. Census changed the data it collected by changing survey forms. In re-benchmarking, the NAR expects a revision of existing home sales to account for the increase of MLS entries of new homes as well as homes that sold multiple times within a 12-month period (flips). The re-benchmarking should also account for fsbo variances that were not previously adjusted.

The revisions are expected this week.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 19, 2011. Using this article without permission is a violation of copyright laws. Copyright © 2011 Dan Krell.

by Dan Krell DanKrell.com © 2013

Much like a soap opera cliff hanger, 2012 home sales ended on an upward swing leaving people wanting more good news. There’s a lot expected from this year’s real estate market, so what are some of the experts saying about 2013?

by Dan Krell
DanKrell.com
© 2013