We have been following the real estate market the last 3 months. Many articles have been written, some contradicting each other. In the April 23, 2014 article in USA Today for the Journal News, reported that the housing market continued to sputter because of adverse weather, low supplies of houses and higher costs. In March, 2014, existing home sales declined .2% to an annual rate of 4.59 million, the lowest rate since July, 2012. The article points out that a brutal winter continued to play a role in weak sales. The March statistics reflected closing on purchase agreements sign in January & February, 2014. Another factor holding down sales is the rise in mortgage rates to 4.27% , up from 3.4% a year ago. Also, higher prices and tight inventory of homes discouraged buyers. Distressed homes including foreclosures and short sales accounted for 14% of sales in March, 2014, down from 21% a year ago. Tight supplies limit selection and push up prices. The median price of a single family home was $198,200 in the USA in March, up from 7.4% from March, 2013.
First time buyers are making up unusually low shares of purchases, 30% down from 40% traditionally because of strict credit standards. The article ends stating brighter days are ahead “there are indications the stringent mortgage underwriting are beginning to ease”. Also, new home construction will attract current homeowners creating a bigger supply of existing homes for the first time buyers.
On April 30, 2014, the same newspaper published an article “prices keep housing stagnant”. The article like the prior article, blames sharp increased home prices along with higher mortgage rates have discouraged home buyers. Home inventories are a historically low level. First time home buyers traditionally drive home sales. However, they remain saddled with student debt and face stringent lending standards. The first time home buyer declined from 40% to 30%. Student loans topping 1 trillion and wages are stagnant for many adults in their 20’s & 30’s live with parents or roommates. Only 423,000 households were formed in the last 12 months, less than half the typical 1,000,000. The article points out that economist still expect the housing market to gain momentum this year as job and wage growth lead to more new housing. Pending home sales increased in March, 2014, for the first time in 9 months. Many analysts expect houses to finally reach 1,000,000 in 2014 for the first time since 2007. 4.9 million existing homes are expected to be sold this year, 3% less than last year. One of the big reason is rising prices in 20 large cities were up an average of 13% from a year earlier.
The pace of price increases has slowed recently and US home prices are still 20% below their summer of 2006. 37% of homeowners can’t sell their houses because they are worth less then what they owe on their mortgages. Limiting supplies and rise in prices occur because there are fewer distressed properties. Foreclosures and short sales made up 14% of existing home sales in March 2014 vs. 30% two years ago. Meanwhile, new home supplies are rising but they are still near 50 year lows. The nation’s largest home builders have raised prices sharply after enduring thin profit margins. Pulte Homes stated that the company’s average home price of $317,000 nationally is up 10% from 2013.Another article in the same newspaper on Wednesday, May 28, 2014, pointed out home prices continued to rise more slowly in March. The 20 City Standard’s & Poor’s Case-Shiller Index for March increased at an annual rate of 12.4% compared to 12.9% in February, 2014. 13 of the 20 cities showed lower annual gains in March. Price increases were higher in Chicago, Cleveland, Detroit, Miami, Minneapolis and New York. Chicago had the highest year over year gain since 1988 – 14.5%. Cleveland had the smallest annual gain at 3.9% of the 20 cities. Only Denver & Dallas have set new post crisis highs and they peaked at lower levels than other cities. Four cities are getting close to their previous highs, Boston, San Francisco and Portland, Oregon. As of the first quarter of 2014, home prices had returned to their Spring 2004 level. In a separate report, the Federal Housing Finance Agency said U.S. house prices rose nationally 1.3% during the first quarter of 2014. House prices rose 6.6% from the first quarter of 2013 to the first quarter of 2014. House prices were weakest in the Mid-Atlantic division posting a 2.1% increase and a 13.2% jump since 2013.
In the same newspaper on May 14, 2014, published an article entitled “Priced out of the Dreams”, rising home prices and stagnant incomes are pushing home ownership beyond the reach of the middle class Americans. In 20 of the 100 largest metro areas, a majority of homes on the market are not affordable for middle-income buyers. A home is considered affordable if monthly costs after a 20% down payment including mortgage insurance and property taxes are less than 31% of the regions medians in household income. Rising home prices and interest rates combined with modest wages in areas has chipped away at affordability over the past year. Since May, 2013, the share of affordable homes has declined in 98 of those markets. Several metro areas had particularly steep drops in affordable homes. In Denver, the share of affordable home tumbled to 50% from 67%. The portion dropped to 29% from 43% in Ventura County, California and to 48% from 62% in San Antonio, Texas.
Finally, an article in the USA today for The Journal News on June 24, 2014, published an article by Doug Carroll proclaims “Best gain since, 2011; Inventory helps draw buyers”; “existing home sales up 4.9%”. Existing home sales rose for the second straight month in May, 2014. Sales of single family homes, townhouses, condos and coops hit a seasonally adjusted annual rate of 4.89 million, up 4.9% from April, 2014. This monthly gain is the highest since August, 2011, despite the improving trend in the past. Two months sales are still weaker than last year. Through May, 2014, sales are down 8.2% for the first five months of last year, buyers with modest financial resources; such as first time buyers. Their share of sales declined to 27% in May, down 2% from April, 2014. Single family home sales rose 5.7% from April, but also down 5.7% from 2013.
Sales of homes under $100,000 and from $100,000 – 250,000 fell in every region of the country in May since May, 2013. Sales of homes priced at $1 million and above rose everywhere in the country except the Midwest. The median existing home price was $213,400 in May, up 5.1% from last year. The Realtors Group said total housing inventory at the end of May, 2014 rose 2.2% to 2.28 million existing homes available for sale which is 6% higher than a year ago at May’s sales rate. There is a 5.6 month supply of homes for sale, a six month inventory is considered balanced. In an article in the same paper of June 26, 2014, author Barbara Livingston-Nachman claimed sales were boosted by rising inventory. Home prices gained 10.8% nationwide through the end of April, 2014. According to S&P Dow Jones indices, the traditional Spring season normally slows down at this time of year. Summer being the third busiest season however the numbers do not show any slow down. This year strong sales continue in Lower Hudson Valley and Connecticut on average about 100 homes per week was sold in Westchester for April, May & June.
In Westchester County, the median home price for the first quarter of 2014 was $600,000, an increase of 16.5% over last year at this time. As per The Hudson Gateway Association of Realtors, in Rockland there was a 6.1% increase to $380,000 and in Putnam an 11% increase to $318,000. All cities continued to post positive year end results for homes sale growth.
So after 3 months worth of articles about the real estate market, it can be seen that growth continues and a positive trend to the housing recovery is alive and well.
If you are in need of a real estate attorney, contact the Law Firm of Dominick J. Robustelli & Associates, PLLC