Bryan & Allison's Real Estate Report - 9/2/13
Bryan & Allison's Real Estate Report - 9/2/13
There has been an unbelievable amount of news and information released since our last blog posting. Here are the highlights about what is happening in the real estate world, starting as always with...
Home Prices & Sales
S&P/Case-Shiller: Home prices continue to climb
Data through June 2013, released by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, showed that prices continue to increase.
The national Index grew 7.1% in the second quarter and 10.1% over the last four quarters. San Diego grew 2.8% in the second quarter and 19.3% over the last four quarters. The 10-city and 20-city composites posted returns of 2.2% for June and 11.9% and 12.1% over 12 months.
All 20 cities posted gains on a monthly and annual basis. However, in only six cities were prices rising faster this month than last, compared to 10 in May. Dallas and Denver reached new all-time highs as they did last month, with returns of +1.7% each in June. San Francisco's rebound is the largest, up 47.0% from its low in March 2009. Phoenix is second, 37.1% above its September 2011 low.
The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 10.1% gain in the second quarter of 2013 over the second quarter of 2012. In June 2013, the 10- and 20-city composites posted annual increases of 11.9% and 12.1%, respectively.
'National home prices rose more than 10% annually in each of the last two quarters,' says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. 'However, the monthly city by city data show the pace of price increases is moderating.
'The Southwest and California have consistently led the recovery with Las Vegas, Los Angeles, Phoenix and San Francisco posting at least 15 months of gains.”
RealtyTrac: SD-area market home sales volume down 19% in July
The market of San Diego/Carlsbad/San Marcos experienced a 19% decline in July resales volume from a year ago, but a 1% gain from June, according to RealtyTrac's July 2013 U.S. Residential & Foreclosure Sales Report.
The San Diego area was in the top six of 20 of the nation’s largest metro areas with the biggest year-over-year decreases in sales volume. The others were in San Francisco (20%), Los Angeles (20%), Riverside/San Bernardino/Ontario (14%), Phoenix (13%), and Atlanta (8 %).
The San Diego area showed 50,770 annualized home sales in July 2013, according to Irvine-based RealtyTrac. The sale survey showed the San Diego area with a July median resale price of $405,000, up 1% from June and 23% from a year ago. 24% of the sales here were at a distressed discount.
SD annual home price up 23%
San Diego County’s year-over-year annual home price appreciation rate experienced a 23.1% increase in July, according to a Zillow real estate report. Zillow stated the median price of a resold home in the county was $428,900 last month.
Nationally the research firm found that home values were up about 6% year-over-year in July. This marked the 14th straight month of annual appreciation and the first time year-over-year appreciation rates have reached 6% since 2006. Monthly home values nationally have risen in 20 of the past 21 months, beginning in November 2011 after the U.S. market bottomed in October of that year.
Of the 393 metros covered in July, 289 (73.5%) registered month-over-month appreciation, and 303 (77.1%) showed annual appreciation. All 30 of the largest metro areas covered by Zillow registered both monthly and annual appreciation in July, and all have hit their bottom and are expected to show appreciation in the next 12 months.
For the 12-month period from July 2013 to July 2014, U.S. home values are expected to rise another 4.8% to approximately $169,308, according to the Zillow forecast.
Existing-home sales soared 6.5% in July to an annual sales rate of 5.39 million—the highest level since November 2009—as the price of a single-family home slipped 0.2%, the National Association of Realtors reported.
Economists surveyed by Bloomberg expected existing-home sales to increase more modestly to 5.15 million from June’s originally reported sales pace of 5.08 million. June sales were revised down to 5.06 million.
The boost in sales came two months after a sharp jump in NAR’s Pending Home Sales Index, which was 111.3 in May, up 5.8% from April. Despite the month-over-month decline, the median price of an existing-home was $213,500, 13.7% ahead of the price in July 2012. It was the strongest yearly price gain since October 2005.
The inventory of homes for sale rose to 2.28 million from 2.15 million in June, translating to a 5.1 month supply, unchanged from a month ago. June’s inventory was revised down from last month’s report.
San Diego’s share of distressed home resales fell slightly in July from June, down to 5%, according to the California Association of Realtors (CAR).
Single-family distressed home resales fell from 6% in June to 5% in July, down from 20% in July 2012, according to the report. In California, the share of equity resales – or non-distressed property resales – has risen on a month-to-month basis for 17 of the last 18 months and makes up more than four in five resales, the highest share since December 2007. The share of equity sales in July increased to 82.9%, up from 79.9% in June. Equity sales made up three of five (59.2%) resales in July 2012.
Pending sales of US homes slip but remain solid
Fewer Americans signed contracts to buy U.S. homes in July, but the level stayed close to a 6-year high. The modest decline suggests higher mortgage rates have yet to sharply slow sales.
The National Association of Realtors says its seasonally adjusted index for pending home sales declined 1.3% to 109.5. That's close to May's reading of 111.3, the highest since December 2006. The small decline suggests sales of previously owned homes should remain healthy in the coming months. There is generally a one- to two-month lag between a signed contract and a completed sale.
Sales jumped to an annual pace of 5.4 million in July, the highest in 3 years. That's consistent with a healthy housing market. Higher mortgage rates appeared to have had a bigger impact on new-home sales, which plummeted last month. That raised fears that rate increases were restraining the housing recovery. But many economists note that home prices and mortgage rates remain low by historical standards.
Distressed Inventory Fading Fast As Housing Market Strengthens
As the housing market heals, foreclosure inventory is depleting quickly, CoreLogic reported.
In July, about 949,000 homes were in some stage of foreclosure, down 32% from 1.4 million a year ago. Foreclosure inventory also showed a 4.4% decline from June. Year-to-date, foreclosure inventory is down by 20%. Currently, about 2.4% of homes with a mortgage are in foreclosure inventory, the lowest level since March 2009.
There were 3,964 completed foreclosures in the San Diego/Carlsbad/San Marcos market in the 12 months through July 2013, giving the local market a 3% delinquency rate. The local market also had a 0.8% foreclosure inventory in July, down 1.1% from a year ago. The foreclosure inventory represented all homes with a mortgage.
In addition to shrinking foreclosure inventory, CoreLogic also reported steep declines in completed foreclosures and serious delinquencies. According to the data provider’s estimate, about 49,000 properties were lost to foreclosure in July, down 25% from 65,000 in July 2012. From June to July, completed foreclosures fell by 8.6% from 53,000 in the prior month.
At 5.4%, the serious delinquency rate decreased to the lowest level since December 2008, according to CoreLogic. The rate represents fewer than 2.2 million mortgages.
“Continued strength in the housing market will contribute to our outlook for ongoing improvement in the stock of distressed assets through the end of this year,” said Mark Fleming, chief economist for CoreLogic.
Delinquency rate back on downward course after seasonal increase
The national mortgage delinquency rate resumed its downward trend in July after experiencing a seasonal uptick in June, Lender Processing Services, Inc. (LPS) reported.
The delinquency rate, which includes loans 30 days or more past due, slipped to 6.41% in July after increasing to 6.7% in June. The decrease represents a monthly and yearly decline of 3.96% and 8.76%, respectively.
Foreclosure inventory also fell in July, dropping to 2.82%, down from 3.46%in June. Compared to a year ago, the decrease is much steeper, at 30.76%.
According to LPS, the foreclosure inventory rate is at the lowest level since February 2009. When totaling past due loans, including delinquencies and foreclosures, LPS found about 4.6 million mortgages are behind on payments. Of that total, 3.19 million are 30 days or more past due but not in foreclosure, while 1.41 properties are in foreclosure inventory. About 1.35 million of the delinquent loans are 90 days or more past due, but not yet in foreclosure.
Florida, as usual, took the top spot for the highest percentage of past due loans. Mississippi followed, with New Jersey, New York, and Maine rounding out the top five. Wyoming held the lowest percentage of non-current loans, followed by Montana, Alaska, South Dakota, and North Dakota.
Other News & Information
Experts: SD should survive Fannie, Freddie Changes
San Diego’s housing market should be able to weather the unwinding of Fannie Mae and Freddie Mac — when the time comes, local experts said.
President Barack Obama endorsed a reduced government role in the nation’s mortgage market, allowing private capital to take a lead role, he said in a speech in early August. “Our housing system should operate where there’s a limited government role and private lending should be the backbone of the housing market,” Obama said Aug. 6. A reduced government role would shift risk from taxpayers to borrowers, probably increasing the cost of mortgages and leading to increased interest rates.
Mark Riedy, executive director of the University of San Diego’s Burnham-Moores Center for Real Estate, said the ultimate impact on a 30-year fixed-rate loan would likely be half of 1 percent, which is “not the end of the world.” The private sector has picked up much of what Fannie Mae and Freddie Mac were initially needed for, Riedy said, and would pick up most of the slack if it were wound down.
“I don’t think it’s going to hurt the housing market too much — people do adjust,” Riedy said.
It’s important to target real estate acquisitions and unload properties near where Gen Y and Gen X live because some day they’ll want to move out of their apartments and into single-family homes, said Nathan Moeder, principal at The London Group Realty Advisers.
Younger generations are gravitating toward areas that have a strong job base and a relatively affordable housing supply — such as Austin, Texas, and Raleigh-Durham, N.C. — both of which have research think tanks and good entertainment, Moeder said at the Single Family Housing Investment Forum in Coronado last week presented by Ficon Events.
“Those are areas that are going to continue to have good job growth,” said Moeder, a strategic consultant and real estate economist. “It’s going to be the job growth of the people 40 years and younger and Gen Y. Gen Y is mainly the younger people who are apartment renters. When it comes to single-family business, I would be following apartment construction too.”
Foreclosure rescue fraud up despite decrease in fraud reports
The number of filings related to suspicious activity for mortgage loan fraud fell year-over-year, while mortgage fraud related to foreclosure rescue scams spiked, according to a recent report from the Financial Crimes Enforcement Network (FinCEN).
Last year, mortgage loan fraud (MLF) suspicious activity report (SAR) filings decreased to 69,277, down 25% from 92,561. However, the number of MLF SARs related to foreclosure rescue scams increased to 4,427, up 58% from 2,799 in 2011. In 2010, there were only 556 reports indicating some type of foreclosure rescue scam.
FinCEN explained the increase may be due to greater opportunities to target the distressed portion of the mortgage market, as well as greater attention to that type of fraud. Overall, when observing suspicious mortgage fraud filings from 2001 to 2012, FinCEN found the bulk of filings referenced suspicious activity occurring in 2006 and 2007. For example, the number of filings for activity in 2006 and 2007 totaled around 137,000 each compared to around 9,500 for 2012.
“This is because most mortgage fraud SARs address fraud that occurred during loan origination, and 2006 and 2007 were the final years of the U.S. housing bubble and related loan origination,” the report explained.
High interest rates, tight housing challenge real estate industry
To buy or not to buy, that is the question facing many potential homeowners as they watch mortgage interest rates tick higher along with home prices.
The biggest challenge facing the residential real estate industry here in San Diego County and many other places in California is the tight supply of homes for sale. The only way inventories can be increased is by existing owners putting up their homes for sale or homebuilders increasing production.
“More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems,” said Lawrence Yun, chief economist with the National Association of Realtors.
Yun is suggesting the affordability equation will be affected by higher prices as the demand for homes grows with a limited supply available. The median price of a home sold in San Diego County rose in July to $483,800, up 23.3% from the same month in 2012, according to the California Association of Realtors.
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