2013 Profile of Home Buyers and Sellers

Earlier this year a 122-question survey from NAR was mailed out to thousands of homebuyers and sellers across the U.S. The survey gives a profile of home buyers and sellers that covers everything from buying, selling, technology, financing, and how consumers interact with their real estate agents.

Here's  a short analysis of homebuyer characteristics for 2013...

First-time homebuyers still make up a lower-than-average share of total homebuyers, but their not too far behind; in 2013, they’ve made up 38 percent of buyers, down from the historical average of 40 percent.

One surprising faction that is multi-generational homebuyers, who made up 14 percent of all purchases; such purchases were made to account for college graduates living with their parents, aging parents living with their children and cost savings.

The median income for households was $83,300, while for first-time buyers and repeat buyers, it was $64,400 and $96,000, respectively.

Interestingly, despite those seemingly high income levels, 66 percent of recent homebuyers were married couples, the highest such share since 2001.

The typical homebuyer was 42 years old, while the typical first-time homebuyer was 31 and the typical repeat buyer 52.

Finally, the simple desire to own a home remains potent among American consumers – 30 percent of recent homebuyers said it was their primary reason for buying a home.

Housing Market Gains Forecast by Top Lenders

NAR President Gary Thomas and CEO Dale Stinton moderated the candid discussion during the “Straight from the Top: Insights from Lending Leaders” session at the 2013 Realtors® Conference and Expo, where the top mortgage industry executives expounded on new regulatory hurdles that could temporarily restrict lending to some buyers, but will likely even out over time.

The Qualified Mortgage, or ability-to-repay rule, will become effective in January 2014 and contains a number of underwriting standards that will constrict mortgage availability and deny credit to some first-time homebuyers, said Bill Emerson, CEO of Quicken Loans. The QM rule requires significant documentation from consumers to justify lenders’ underwriting decisions; lenders face strict penalties if a loan is made outside of the specific criteria.

Kevin Watters, CEO of JPMorgan Chase, agreed that lower- and moderate-income buyers, as well as self-employed buyers who don’t have a consistent flow of income, might have a tougher time in the new lending environment. “We need to work together to help first-time buyers into affordable housing options.”
“It’s important for Realtors® to be educated about the new documentation requirements so they can work with buyers and meet lender expectations,” said Matt Vernon, home loan sales executive for Bank of America.

Mike Heid, president of Wells Fargo Home Mortgage, added that Wells Fargo is using new technologies to create learning tools to help consumers prepare to be homeowners, even before they find the house they love. The new lending standards and documentation requirements are making some potential borrowers anxious about competing with cash buyers in the real estate market.

Thomas asked the panelists to share their average approval timelines.Vernon said that in California, Bank of America’s mortgage loan officers can process and approve loans in 16 days and always strive to quickly deliver approvals. He said that the approval process can move more swiftly when borrowers are educated about lender’s application requirements.

“Our mission is to get someone approved. With clarity and transparency, buyers will know exactly what is needed of them. We want to do this in a manner that is as stress free as possible for consumers and Realtors®,” said Emerson.

Heid agreed and said, “The way to compete against a cash buyer is to build a process that has no surprises as you go.”

Stinton turned the conversation to the debate over reforming the secondary mortgage market and asked the lenders whether they fear the risk of mortgage security “putbacks” and how that impacts underwriting. A putback occurs when a bank is liable for misrepresenting the creditworthiness of a borrower to the entity that buys the loan, and the bank is forced to buy back the mortgage.

Watters said fears over putbacks are real and Heid agreed. “The putback fear is still there and we’re working to put it to rest,” said Heid. “The time is right for that. If the government-sponsored enterprises weren’t in conservatorship, the issue of put backs wouldn’t be there. We need a world where everything is more of a natural market and we need competition with Fannie Mae and Freddie Mac. The conservatorship should end.”

Thomas followed up by asking whether immediate steps should be taken to reduce the government role in the housing finance market. Emerson said that the security of their guarantee needs to stay, not the actual government entities.

“I think if we want the 30-year fixed-rate mortgage, you need the government guarantee,” said Watters. “The 30-year fixed-rate mortgage needs the government guarantee because not all banks can soak up the size of the market.”

When asked whether private investors are ready to take a bigger role in the secondary mortgage market as the government’s footprint shrinks, the executives provided varied responses. Heid said that more certainty is needed before taking action.

“We’ve already started to do some private label securities,” said Watters. “People are getting back into the marketplace, which is a good thing. We might not be ready to take it all on, but we are headed in the right direction.”

The lending leaders unanimously agreed that consumers will see a healthy increase in the market next year, keeping pace with gains made in 2013. Mortgage originations will dominate the 2014 housing market as interest rates creep up and refinancing trends downward.

Heid said that while home values will continue to increase as the market continues to heal, the economy is the wild card and the downturn would be a game changer. “In spite of the economic crisis, Americans still want to be homeowners. That hasn’t changed one bit,” he said. “Homeownership is at the heart of what we do and that is worth preserving.”

Source:The National Association of Realtors®

Flipping Homes in the Luxury Market?

According to a new report by Irvine, Calif.-based RealtyTrac, between July and September of this year, 32,993 homes around the country were flipped. That figure marks a 13 percent decline from the 37,871 house flips recorded for the same three months in 2012. The term refers to the process of buying a home, renovating it and then subsequently selling it again within six months, RealtyTrac explains.

Though flipping has been popular in California, Texas has never been a hot flipping market. And between the third quarters of 2012 and 2013, the rate of flipping declined. All told, 240 homes were flipped during the third quarter of 2013 — marking a 45 percent decline from the 437 homes that were flipped over the same three months in 2012.

From a bigger-picture perspective, the house flipping industry has taken some interesting turns. RealtyTrac reports that a total of 968 homes priced at $750,000 and above were flipped during the third quarter of 2013 — marking a 34 percent jump from the number of homes in this price range that were flipped a year ago. Take a look at these statistics:

Flips on homes priced between $1 million and $2 million increased 42 percent on a year-over-year basis. Flips on homes priced between $2 million and $5 million was up 350 percent.

“Increasing home prices over the past 18 months, combined with decreasing foreclosures, have created a market less favorable to the high quantity of middle- to low-end bread-and-butter flips that we saw late last year and early this year,” explains RealtyTrac Vice President Daren Blomquist. “But the sharp rise in high-end flipping indicates there is still good money to be made for flippers willing and able to take on the additional risk of buying and rehabbing more expensive homes. With that higher risk also comes the potential for higher reward.”

Source: San Antonio Business Journal

Home values: The 5 best and worst markets for the Second Quarter of the year

Home values rose by 12.2 percent nationally in the second quarter of 2013 compared to the same period in 2012, according to data from the National Association of Realtors.

The five worst markets, where prices fell the fastest.

1. Peoria, Ill.

2013 Q2 median home price: $117,000
Down: 9.2 percent

2. Florence, S.C.

2013 Q2 median home price: $124,600
Down: 8.4 percent

3. Erie, Pa.

2013 Q2 median home price: $112,800
Down: 5.7 percent

4. Pittsfield, Mass.

2013 Q2 median home price: $173,000
Down: 5 percent

5. Decatur, Ill.

2013 Q2 median home price: $86,400
Down: 4.8 percent

The five best markets where prices rose the fastest.

1. Sacramento-Arden-Arcade-Roseville, Calif.

2013 Q2 median home price: $237,000
Up: 39.2 percent

2. Atlanta-Sandy Springs-Marietta, Ga.

2013 Q2 median home price: $143,300
Up: 38.9 percent

3. Cape Coral-Fort Myers, Fla.

2013 Q2 median home price: $177,900
Up: 36.1 percent

4. Reno-Sparks, Nev.

2013 Q2 median home price: $219,300
Up: 32.7 percent

5. Las Vegas-Paradise, Nev.

2013 Q2 median home price: $171,800
Up: 31.4 percent

Source: Banknote.com

Housing Starts Break a Milestone

Housing construction passed the psychological mark of one million starts in March coming in at 1.036 million homes, up 7 percent from an upwardly revised February level of 968,000. The surge was due to a 31 percent increase in apartment construction to a level of 417,000 units, the highest since January 2006. Single-family construction fell 4.8 percent to 619,000 from an upwardly revised February level, which was the highest since May 2008. The first quarter single-family average was 628,000 up 6 percent from the fourth quarter 2012.

Housing permits were down 3.9 percent but from a February high not seen since July 2008. The first quarter average was 915,000 up 2.6 percent from the fourth quarter. Builders were stock pilling permits in February and the inventory of unused permits dropped 9 percent in March as a replacement for drawing more permits. Single-family permits were virtually unchanged so the change was due to a 10 percent drop in apartment permits likely because we are approaching the sustainable level of apartment construction.

Regionally, starts were up in all regions except the Northeast, which was down 5.8 percent monthly but up 12.6 percent annually. Midwest starts were up 9.6 percent month-to-month and 28.4 percent from March 2012. The South was up 10.9 percent monthly and 58.2 percent annually and the West was up 2.7 percent monthly and 53.7 percent annually. The mixed results were in line with NAHB expectations for 975,000 starts in 2013 or a 25 percent improvement over 2012.

Source: NAHB Eye on Housing

S & P Outlook for U.S. Housing

The U.S. housing market continues to show signs of recovery, outpacing the relatively weak U.S. economic recovery. Standard & Poor’s baseline forecast assumes that the U.S. economy will continue to grow slowly in 2013, avoiding any substantial negative economic impact from the looming fiscal cliff and growing federal deficit. The U.S. economy grew 3.1% in the third quarter of 2012, up from 1.3% the previous quarter, and the unemployment rate declined to 7.7% in November from 8.7% a year ago. Both are moving in the right direction to support continued housing recovery in 2013. We believe that as long as the U.S. remains in recovery mode, U.S. housing fundamentals will continue to improve, bolstered by low interest rates and rising home prices. Taken together, we expect these trends to support improving consumer confidence and lead to a return to historical housing supply-and-demand fundamentals.

Our baseline forecast for housing assumes that U.S. national home prices (which rose 7% through the first nine months of 2012) will rise 5% in 2013, after a few months of seasonal weakness at the start of the year. Moderate economic growth, federal refinancing and loan modification programs, low mortgage rates, rising household formation, and limited new supply will contribute to price recovery, in our view. However, tight lending remains a key concern for housing demand because the limited availability of credit could weigh on borrowers.

Although the GSEs (government-sponsored entities, such as Fannie Mae and Freddie Mac) have been vital players in the U.S. mortgage finance market, 2012 was a strong year for mortgage banking, largely because of refinancing activity. This trend will likely continue in 2013, but banks may struggle to duplicate strong performance next year. Many non-bank finance companies have expanded their portfolios through servicing transfers at the cost of others exiting the business.


An improved outlook for housing, along with higher home prices, could increase the availability of mortgage credit and ease lending constraints, allowing borrowers with lower quality credit histories to refinance. More than 1.3 million borrowers have moved from negative to positive home equity in 2012, because of rising home prices. Homeowners with positive equity are able to refinance, taking advantage of the current very low interest rate environment. With more affordable mortgage payments, and some equity in their homes, consumers are less likely to default, which we view as positive for housing supply fundamentals. On the demand side, the rise in household formation over the past year is also positive for housing demand, in our view.

The impact of a recovery in housing fundamentals varies across the many housing related sectors and securities that we rate. While we expect all sectors to benefit from an improved housing forecast, the pace and depth of the improvement will depend on many factors, including each sector’s ability to participate in the recovery and their exposure to legacy portfolios and markets.

Banks’ Mortgage Earnings Will Moderate In 2013
Mortgage banking was a bright spot for banks in 2012, as refinancing volumes rose with the help of government programs and low borrowing rates. Banks may struggle to duplicate that strong performance in 2013 because the pool of borrowers eligible to refinance is shrinking, though rates are likely to remain low, and supportive government programs remain in place. Credit losses from residential mortgages continued to decline during the year, though the number of problem loans remains high and will continue to contribute to elevated losses in 2013 across the industry. Litigation risks for banks related to mortgage exposures grew in 2012 and are likely to continue to weigh on the industry in 2013 as state and federal regulators and investors seek to recoup losses from the past few years. Overall, the legacy residential mortgage exposure of banks should continue to weigh on results, but that drag on earnings and capital should continue to slow.

Homebuilders Benefit From Demand For New Homes
Buyers for newer homes returned to the single-family home market in 2012, resulting in better than expected operating results for most of the homebuilders we rate. Sales volumes and average selling price exceeded our initial expectations, and we currently expect that the homebuilders we rate will deliver on average 20% more homes in 2012 compared with 2011. Most new homebuilders have also posted healthy increases in average selling prices, outpacing overall market trends, as buyers gravitated toward competitively positioned new home communities and the supply of existing homes for sale has remained very low.

Despite our expectation that favorable housing demand and supply fundamentals will continue to support strong revenue and EBITDA growth in 2013, our outlook on the homebuilding sector remains stable. Improved fundamentals reduce downside risk in our view, particularly for the lowest rated companies, but we expect upside rating momentum will likely be more muted as homebuilders draw down their sizable cash balances (a primary support to liquidity over the past few years), and raise additional debt capital for future land and inventory investment in anticipation of higher sales volumes. The effect of this additional debt issuance will likely slow the leverage improvements necessary for more positive rating actions over the next 12 months.

We also remain concerned that the impact of a potential recession in the U.S. would be more significant for homebuilders than many other sectors, since a drop in consumer confidence would likely derail buyers’ appetite for large discretionary purchases such as single-family homes. In addition, decisions on numerous regulatory and policy initiatives that would have an impact on housing are slated for the first half of 2013, many of which could significantly affect the availability and cost of mortgage financing.

Click here, to read the full report.

Housing to Drive Economic Growth

The bursting of the housing bubble plunged the economy into a recession from which it has yet to fully recover. But economists say this could finally be the year that housing lifts us out of the doldrums. Over half of economists surveyed by CNNMoney identified a housing recovery as the primary driver of economic growth this year. The rest were split fairly evenly between consumer spending, increased domestic energy production and stimulus from the Federal Reserve as major growth drivers.

"Homebuilding activity will likely remain the strongest growing component of the economy in 2013," said Keith Hembre, chief economist of Nuveen Asset Management. "After several years of excess supply, demand and supply conditions are now in much better balance."

Home sales rebounded to the strongest level in five years in 2012, as home building bounced back to levels not seen since early in the recession. Near record low mortgage rates, rising home prices and a drop in foreclosures have combined to bring buyers back to the market.

The economists surveyed also forecast that there will be just under 1 million housing starts this year -- roughly matching the 28% rise in home building in 2012. Moody's Analytics is forecasting much stronger growth -- a 50% rise both this year and next year, which it estimates will create more than 1 million new jobs.

"There's a lot of pent-up demand for housing, and very little supply," said Celia Chen, housing economist for Moody's Analytics. "As demand continues to improve, home builders have nothing to sell. They'll have to build." She said that growth in building will mean adding not just construction jobs, but also manufacturing jobs building the appliances and furniture needed in the new homes, which in turn drives overall consumption higher.And economists say the tight supply and renewed demand for housing should lead to higher home values -- about a 3.7% increase according to the survey.

"One of the most significant indirect effects from the housing recovery is the 'wealth effect' on consumers due to the recovery in home prices," said Joseph LaVorgna, chief U.S. economist of Deutsche Bank, who said better home values can affect both consumer psychology on spending as well as their actual finances.
"Even small moves in home prices can have large effects on consumption, because housing comprises such a significant share of household assets," he said.
Source:CNN Money Reports

Housing Predictions for 2013

The national housing market made a strong rebound in 2012 and that positive trend is expected to continue in the New Year, according to RE/MAX Co-Founder and Chairman Dave Liniger. His 2013 Top 10 predictions are listed below. According to Liniger, “Although interest rates have been at historic lows, they have not been the driving force behind this recovery. There’s no single factor driving this market; it’s been a combination of low prices, low inventory, improving consumer confidence and a huge pent-up demand. That was true throughout 2012 and will continue to be true in 2013.”

Many consumers now understand what real estate professionals have known for the last year, a number of related factors have combined to create a favorable opportunity for homebuyers and investors to purchase residential properties. “The 2013 situation is so unique that those of us who’ve worked in real estate for many years have never seen opportunities like this,” Liniger added.

Dave Liniger’s Top 10 Real Estate Predictions for 2013 are:
1. More buyers and sellers come back to the market.
2. Homes sales will rise by 6-7 percent and prices rise by 3-4 percent.
3. The inventory of homes for sale will hit a bottom.
4. Higher priced homes begin to sell.
5. Distressed property numbers continue to fall.
6. Shadow inventory continues to fall.
7. The number of short sale closings will rise to a peak.
8. Record low mortgage rates rise slightly by year-end.
9. Lending remains tight.
10. Home affordability remains the best in years.

While Liniger feels that 2013 could be the best year in real estate in many years, he admits that the recovery is fragile and still faces some obstacles. In his video presentation, he states that tight lending, government regulation and the overall economy still have the potential to negatively impact housing. However, Liniger also believes that “if housing can stay on the road to recovery, it’s possible that it can pull the rest of the economy along with it.”

In recent years, Liniger has been a highly vocal advocate for the home buying and selling consumer, and real estate professionals. He has supported reforms aimed at helping troubled homeowners avoid foreclosure and streamlining the Short Sale process. In October, his open letter to candidates Obama and Romney called for a continuation of mortgage interest deductions, an extension of the Debt Relief Act and more reasonable regulations on mortgage lending. The Fiscal Cliff Agreement left the deductions mostly intact and extended the Debt Relief Act until the end of 2013. These moves support the American dream of home ownership, help distressed families avoid foreclosure and promote a sustainable housing recovery.

Source:Rismedia

Home Sales Hit a 5 Year High

Sales of existing homes ticked down in December from the month before, while the total for 2012 hit the highest level in five years, according to data released Tuesday by the National Association of REALTORS®. The pace of sales fell 1 percent in December to a seasonally adjusted annual rate of 4.94 million, according to NAR. For all of 2012, existing-home sales hit 4.65 million, the highest level since 2007 and up 9.2 percent from 2011.

“Record-low mortgage interest rates clearly are helping many home buyers, but tight inventory

Housing Markets Improving

The number of housing markets considered “improving” according to parameters established by the National Association of Home Builders/First American Improving Markets Index (IMI) surged by 76 to a total of 201 metros in December, according to recently release IMI data. The index also shows that the number of states represented on the list by at least one metro increased from 38 in November to 44 (plus the District of Columbia) in December.

The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. A total of 84 new metros were added to the list and eight were dropped from it this month. Newly added metros include such geographically diverse locations as Atlanta, Ga.; Bloomington, Ill.; Ann Arbor, Mich.; Seattle, Wash.; and Green Bay, Wis.

“The big gain in improving markets this December indicates that key measures of housing and economic strength have now been holding steady or improving in metros across the country for six months or more, which is an important signal of stability amidst the slowly emerging recovery,” says NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “The main thing that’s limiting the progress we’re seeing right now is the difficulty that potential buyers continue to experience with regard to overly tight mortgage qualifying standards.”

“This fourth consecutive month of expansion in the IMI, coupled with the fact that well over half of all metro areas are now represented on the list, is in keeping with the upward trends that we’ve been seeing all year in terms of housing starts and sales, builder confidence and other measures,” notes NAHB Chief Economist David Crowe. “In general, we expect the overall housing recovery to continue expanding in 2013. However, that is absent a major policy change of the kind that some policymakers have been discussing with regard to the mortgage interest deduction.”

“The dramatic expansion of improving markets at the end of this year should help encourage consumers who may have been on the fence about a home purchase that a housing recovery is now firmly underway,” adds Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, housing price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three measures for at least six consecutive months following those measures’ respective troughs before being included on the improving markets list.

Source: NAHB

Repeat Buyers Driving the Real Estate Market

Across most of the country, home prices remain affordable and rents continue to rise. And while today's investors are helping the housing recovery, they're not completely responsible. Data from the National Association of Realtors (NAR) suggests that traditional repeat buyers are driving today's market.

According to a recent joint survey by BiggerPockets.com and Memphis Invest, 39 percent of investors plan to buy more properties over the next 12 months than they did over the last year. Twenty-six percent of investors plan to purchase the same number of properties.

"Though housing markets are changing across the nation, investors are still seeing great opportunities. Hundreds of thousands of foreclosures and short sales are coming to market and rents are continuing to improve in most markets, creating a positive environment for the nation's 2.81 million residential real estate investors," Joshua Dorkin, founder and CEO of BiggerPockets.com, said in a press release.
"They will certainly continue to be major player in the nation's housing economy for the foreseeable future," he added.

According to the survey, one out of eight -- or 28.1 million Americans -- either consider themselves to be residential real estate investors or own residential investment properties today, according to the survey. That high number is not surprising when you consider many homeowners are renting out properties they'd rather sell.

NAR data shows investors accounted for an average 22 percent of the market share from 2003 to 2011.
There are perks to investors taking an active interest in today's real estate market. With millions of Americans actively investing in real estate, billions of dollars are being poured into repairs. The results of the survey reveal that real estate investors are spending more than the Department of Housing and Urban Development (HUD) to rehabilitate neighborhoods.

Recent NAR data suggests that investors absorbing the over-supply of inventory helped stabilize the housing market. Residential real estate investors have spent more than four times the amount of money HUD's Neighborhood Stabilization Program has to repair foreclosed and short-sale homes, according to the BiggerPockets.com/Memphis Invest survey.

At a median expenditure of $7,500 per property owned, investors are spending a total of $9.2 billion per year to repair the damage caused by foreclosures. By comparison, Congress has authorized a total of about $7 billion for the Neighborhood Stabilization Program over the past four years.

Chris Clothier, a partner with Memphis Invest, believes investors are improving neighborhoods and driving local economies. They are purchasing properties that would otherwise sit vacant for months, dragging down area home prices, and using local electricians, plumbers and labor to update the homes. "Those dollars provide jobs and put money into local economies. It's clear that investors are the ones who are risking their own money to improve and stabilize neighborhoods for new owners or tenants," Clothier said in a press release.

Investor activity has benefited the housing market, but there's a downside too. "Investors have been largely purchasing with all-cash, which puts first-time buyers at a significant disadvantage," Walter Molony, a NAR spokesman, said in an e-mail. "Both investors and entry-level buyers have been focused on low price ranges, with investors winning the deals since they don't have a need for financing."
 
So while the BiggerPockets.com/Memphis Invest survey shows investors planning to continue purchasing and rehabbing property, NAR data shows the overall investor market share is on the decline. The drop started in March, and since April investor market share has averaged 18 percent -- below its long-time average of 22 percent.

Investors certainly help fuel the housing recovery, but NAR data shows they aren't the driving force. "First-time homebuyers are also below their long-term average with housing shortages in the low price ranges and a headwind of tight credit," notes Molony. "At present, the market is being driven by an increase in traditional repeat buyers."

Source: MoneyWatch