Home price increases continued to exceed CoreLogic's own projections in July. The company's Home Price Index (HPI) indicates that home prices nationwide, including distressed sales, rose 1.1 percent from June and were 6 percent higher than in July 2015. The month-over-month gain was identical to the rate of appreciation from May to June, but the year-over-year increase marked an acceleration from the 5.7 percent reported in June. In the last HPI, CoreLogic noted a deceleration in price gains.
Oregon and Washington continue to top the charts with double digit annual increases of 11.2 and 10.2 percent respectively. They were followed by Colorado at 9.3 percent, West Virginia (8.6 percent) and Utah (7.9 percent.) Only one state failed to post an annual gain; Connecticut, where prices fell by 1.2 percent. Other states had negligible changes; New Jersey saw appreciation of only 0.2 percent and in Vermont the gain was 0.8 percent.
"The strongest home price gains continue to be in the western region," said Anand Nallathambi, president and CEO of CoreLogic. "As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year."
CoreLogic is forecasting an increase in its HPI of 5.4 percent over the next 12 months (to July 2017) and a 0.4 percent uptick from July to August. The company's forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. In the first six months of 2016 CoreLogic has projected monthly gains averaging 0.68 percent while reporting actual increases with a mean of 1.46 percent. CoreLogic had projected a June to July gain of 0.6 percent.
"If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year," said Dr. Frank Nothaft, chief economist for CoreLogic. "The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year."
Despite some predictions that pending home sales would fall in July, they actually rose modestly to reach their third highest level in nearly a decade. The National Association of Realtors® reported that its Pending Home Sales Index (PHSI) was up 1.3 percent to 111.3 from a downwardly revised (from 111.0) 109.9 in June and was up 1.4 percent compared to July 2015.
The index had reached its highest level since February 2006 this past April when it hit 115.0. The July index was second only to that number. NAR pronounced the increase in purchase contracts as broad-based; only the Midwest failed to improve on its June numbers.
Analysts surveyed by Econoday had projected the index could be in the range of a 1.8 percent decline to a 1.4 percent gain. The consensus was a positive move of 0.6 percent.
NAR's index is a forward-looking indicator based on contract signings for the purchase of homes. Those transactions are generally expected to close within two months.
Lawrence Yun, NAR chief economist, says a sizable jump in the West lifted pending home sales higher in July. "Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas," he said. "More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There's little doubt there'd be more sales activity right now if there were more affordable listings on the market."
Adds Yun, "The index in the West last month was the highest in over three years, largely because of stronger labor market conditions. If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales."
As Yun noted, the PHSI in the West surged 7.3 percent in July to 108.7, and is now 6.2 percent above a year ago. The index in the Northeast rose 0.8 percent to 96.8, putting it 1.1 percent higher than a year ago. It also rose 0.8 percent in the South to 123.9, up 0.4 percent year-over-year. The Midwest was an outlier, falling 2.9 percent to 105.8, leaving it down 1.1 percent from a year earlier.
Yun noted there has been a downward trend in the size and cost of new homes over the last year and says this could be an early indication that builders are starting to focus more on properties for buyers in the middle and lower price tiers rather than on the larger and more expensive homes they have been building.
"Realtors® in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and townhomes at an affordable price point for young buyers," adds Yun. "The homeownership rate won't move up from its over 50-year low without a meaningful boost from first-time buyers, whose participation has yet to noticeably increase so far this year despite mortgage rates near all-time lows."
NAR forecasts that existing-home sales will finish the year at around 5.38 million units, a 2.8 percent increase from 2015 and the highest annual pace since 6.48 million homes sold in 2006. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to around 4 percent.
Real Estate News Feb 12, 2015 By: Chrystal Caruthers
It’s getting more expensive to buy a house. Prices rose 6% in the fourth quarter of 2014 as buyers competed for fewer and fewer available homes for sale, according to new data from the National Association of Realtors®.
The NAR report shows most cities (86%) are experiencing rising prices, with fewer available homes to choose from. Just 24 cities, or 14%, recorded lower median prices in 2014 than in 2013.
“Home prices in metro areas throughout the country continue to show solid price growth, up 25% over the past three years on average,” said Lawrence Yun, chief economist at NAR. “This is good news for current homeowners but remains a challenge for buyers who are seeing home prices continue to outpace their wages.”
Still, as more jobs are created, consumer confidence rises, driving the demand for housing. But with fewer sellers putting their homes on the market, the housing market just chugs along.
“This should signal existing home owners, who may have been slow to think of selling, to consider now a great time to list,” said Jonathan Smoke, chief economist at realtor.com®. With prices rising by double digits in 24 areas across the country, according to the report, many sellers would find a pool of buyers vying for their homes.
To be sure, Smoke scoured 200 of the largest metro areas across the country on realtor.com and found that the prices in 98 of them had increased by 6% or more. In 66 of those markets, houses are spending 8% less time on the market, he said.
Prices and inventory go hand in hand. The average supply of available homes for sale was 4.9 months’ worth, according to the report. In a normal market, there would be a six- to seven-month supply of available homes.
“This is a clear sign that demand is growing faster than supply,” said Smoke. Once more homes are listed, prices would moderate, he said.
The NAR wants more new construction. “Unless homebuilders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring,” said Yun.
The five most expensive housing markets in the fourth quarter of 2014, according to the report, were:
The five lowest-cost metro areas were:
Housing demand is rising as buyers look to take advantage of low interest rates and a slight uptick in median income ($65,782). To afford a single-family home at the national median price of $208,700, a buyer making a 5% down payment would need an income of $45,863, while a 10% down payment would require an income of $43,449 and $38,621 for a 20% down payment, according to the report.
In the Northeast, sales rose 2.5% in the fourth quarter of 2014 but are 4.1% below the fourth quarter of 2013, according to the report. The median price of the home rose 2.2% to $246,300.
In the Midwest, sales of existing homes declined 4.7% in the fourth quarter and are 0.6% below their 2013 level. The median price of an existing single-family home in the Midwest increased 6.2% to $162,000.
In the South, sales climbed 2.7% in the fourth quarter of 2014 and were 5.8% over 2013 levels. Median prices also increased 6.2% to $183,000, according to the report.
In the West, sales fell 6%; however, the median price of a home jumped 4.8% to $299,500 in the fourth quarter.