Homes That Won’t Sell

Homes That Won’t Sell. Image courtesy of Witthaya Phonsawat / FreeDigitalPhotos.net

Low inventories continue to plague housing markets across the country, as buyers face limited options and more bidding wars. But with home prices rising, more sellers are starting to put their homes on the market.

However, more than half of all existing homes are unlikely to be put up for sale anytime soon, unless there are significant changes in the housing market, according to a new analysis by Redfin. The real estate brokerage looked at transactions across 29 metro areas for single-family homes, condos, and townhomes, as well as mortgages and refinances, since 1999.

Researchers identified the following four categories of homes that are unlikely to reach the market anytime soon:

1. Low equity: Estimated 19 percent of homes. These are homes where the home owner owes more than 80 percent of the value on the home. Many of these low-equity homes were purchased or refinanced during the housing bubble between 2004 and 2009, according to the Redfin analysis. Redfin estimates that nearly all low-equity home owners will be in the black for the next five years.

2. Low mortgage rate: Estimated 16 percent of homes. Homes that were purchased or refinanced when mortgage interest rates were at record lows aren’t likely to sell anytime soon. Redfin considers low mortgage interest rates to be below 4.25 percent. These homes were purchased or refinanced between 2011 and 2013.

3. Purchased or refinanced in the past seven years: Estimated 14 percent of homes. A home that has been owned by the current owner for less than seven years isn’t likely to hit the market soon, according to the Redfin analysis. Redfin says that buyers are more likely to buy a home that has been occupied by the current owner for more than seven years.

4. Company or investor owned: Estimated 3 percent of homes. These are homes that are owned by a company or investor who bought five or more homes in a metro area during the past 10 years. “These investors are likely holding on to their investment for the capital appreciation and rental income,” according to the Redfin study.

Source: “Why Aren’t There More Homes for Sale?” Redfin (April 22, 2014)

Housing Markets Improve in Majority of States

Housing Markets Improve in Majority of States. Image courtesy of twobee / FreeDigitalPhotos.net

More than half of U.S. states — as well as more than half of the top 50 metros in the country — saw their housing markets improve in February, according to Freddie Mac’s Multi-Indicator Market Index (MiMi), which measures the stability of the nation’s housing markets.

Still, the overall housing market is recovering at a slightly slower pace compared to January. The national MiMi value in February stood at -3.11 points, which indicates a weak housing market. But it’s an improvement by 0.67 points year-over-year. The nation’s all-time MiMi low of -4.49 was in November 2010, a point when the housing market was at its weakest, according to the index.

“Despite a slowdown over the winter months, the housing market continues to show improvement in most states, although at a somewhat slower pace,” says Freddie Mac chief economist Frank Nothaft. “And while not all the MiMi indicators are trending in a better direction — in particular, home-purchase applications have weakened in many areas — gains in local employment and loan performance have really helped many markets across the country, especially those that were hardest hit. Outside of these areas, we also are seeing positive improvement from the Carolinas and Tennessee as their local unemployment rates fall further.”

Eleven of the 50 states, plus the District of Columbia, are in their stable range of housing activity, according to the index. The top five most stable states are: North Dakota, Wyoming, the District of Columbia, Alaska, and Louisiana.

Four of the 50 metro areas have housing markets in the stable range: San Antonio, Houston, New Orleans, and Austin, Texas.

According to the index, the five most-improved states month-over-month in February were:

• South Carolina
• Louisiana
• Ohio
• Tennessee
• Nevada

Freddie’s MiMi index, which debuted last month, uses information on local markets to calculate the range of equilibrium for single-family markets and provide indicators and trends for where each market stands relative to its stable range. The index draws from four indicators, using the long-term stable ranges for home purchase applications, payment-to-income ratios (which measures changes in home purchasing power), portion of on-time mortgage payments, and the state of local employment.

Source: Freddie Mac

Home Sales Mark Sluggish Start to Spring

Home Sales Mark Sluggish Start to Spring. Image courtesy of cuteimage / FreeDigitalPhotos.net

Existing-home sales basically held flat in March, and current home sales activity shows signs of underperforming by historical standards, according to the National Association of REALTORS®’ latest existing-home sales report. But NAR Chief Economist Lawrence Yun says the slow start to spring may be temporary, with an improvement for the housing market likely on the horizon.

Existing-home sales dropped slightly by 0.2 percent to a seasonally adjust annual rate of 4.59 million in March. They are 7.5 percent below the 4.96 million unit pace a year ago. The March sales volume was the slowest since July 2012, NAR notes.

“There really should be stronger levels of home sales, given our population growth,” Yun says. “In contrast, price growth is rising faster than historical norms because of inventory shortages.”

The median price for existing homes was $198,500 in March, up 7.9 percent compared to year-ago levels. “With rising home equity, we expect distressed homes to decline to a single-digit market share later this year,” Yun says. Distressed homes, which include foreclosures and short sales, accounted for 14 percent of sales in March, down from 21 percent in March 2013.

Yun says the housing market will likely see an increase in activity in the months ahead.

“With ongoing job creation and some weather-delayed shopping activity, home sales should pick up, especially if inventory continues to improve and mortgage interest rates rise only modestly,” he says.

Regional Snapshot

• Northeast: Existing-home sales rose 9.1 percent in March, but remain 4.8 percent below year-ago levels. Median price: $244,700, up 3.2 percent from a year ago
• Midwest: Existing-home sales rose 4 percent in March but are 10.3 percent below March 2013 levels. Median price: $149,600, 5.9 percent above year-ago levels
• South: Existing-home sales fell 3 percent in March and are 3 percent below March 2013. Median price: $173,000, up 6.7 percent from a year ago.
• West: Existing-home sales dropped 3.7 percent and are 13.4 percent below a year ago. Median price: $289,300, up 12.6 percent from March 2013

Source: National Association of REALTORS®

Words in Listing Ads Can Boost Sales Price

Words in Listing Ads Can Boost Sales Price. Image courtesy of ddpavumba / FreeDigitalPhotos.net

The words that real estate professionals choose to describe a property in listing ads could potentially result in the home selling for a premium, suggests an analysis that looks at listing descriptions and their effect on sales price and probability of sale. For example, property descriptor words in listing ads, like granite countertops and wood-burning fireplace, can help net higher sales prices.

Researcher Bennie Waller, a professor of finance and real estate at Longwood University in Farmville, Va., found that each property characteristic mentioned in a listing increases the sale price by just under 1 percent and it’s probability of selling by, on average, 9.2 percent.

“That means a listing with 15 additional property characteristics sells for roughly a 13.5 percent price premium,” says Waller, who excluded standard features in his analysis, such as bedrooms. Waller and his co-authors examined more than 16,300 transactions between March 2000 and February 2009 from a south central Virginia MLS.

The study also found positive opinion words can also help boost the sales price. For example, words such as “beautiful” or “fabulous” could help increase the price by 0.9 percent, the study suggests. In other words, 10 positive words could bump up the sales price by potentially 9 percent, according to the study.

“You have one or two seconds to capture the buyer or buyer’s agent’s attention, and you need to sell [your home] as effectively and efficiently as possible,” Waller says. “You need to carefully choose your vernacular, but at the same time, not become verbose. There can be some puffing, but too much of it will encourage the buyer to look elsewhere.”

Source: “What’s a Word Worth?” The Wall Street Journal (April 10, 2014)

Americans Prefer Real Estate Over Stocks, Gold

Americans Prefer Real Estate Over Stocks, Gold. Image courtesy of pakorn / FreeDigitalPhotos.net

Americans have renewed confidence in real estate as a great investment. In fact, Americans believe real estate is the “best” long-term investment, followed by gold, stocks, mutual funds, savings accounts/CDs, and bonds, according to a new Gallup Poll of about 1,000 adults who were asked to choose the best option for long-term investments. Bonds were the least favorite investment among the options Gallup surveyed.

In 2011, Americans surveyed said the most popular long-term investment was gold. That also marked a time when gold was at its highest price and real estate and stock values were lower than today, Gallup notes.

“With housing prices improving across the country, Americans are regaining faith that real estate is the best choice for long-term investments,” according to Gallup. “Home ownership is also associated with views of real estate as an attractive investment opportunity.”

Americans with higher incomes are the most likely to say real estate and stocks are the best investments – “possibly because of their experience with these type of investments,” according to the Gallup poll. Higher income Americans are most likely to say they own their home (at 87 percent), followed by middle-income earners (at 66 percent) and lower-income earners (36 percent).

Home owners are slightly more likely than renters to say real estate is the best choice for long-term investments – 33 percent versus 24 percent, respectively, according to the Gallup poll.

Source: “Americans Sold on Real Estate as Best Long-Term Investment,” Gallup (April 17, 2014)

Buyers Find More Housing Options This Spring

Buyers Find More Housing Options This Spring. Image courtesy of anankkml / FreeDigitalPhotos.net

The number of homes for sale is on the rise, a long-awaited welcome to home buyers who are finding more selection than last spring and less competition, according to realtor.com®’s National Housing Trend Report for March of the 146 markets it tracks.

Inventories of for-sale homes on realtor.com® in March increased 9.5 percent higher than year ago levels, according to the report. The median list price is $199,900 – 5.3 percent higher than in March 2013. The median age of inventory has also risen – 22.9 percent above year ago figures to a median of 102 days on the market.

“These figures suggest that the market is more balanced than it was in 2013, when a shortfall in available supply led to double-digit increases in many markets’ housing prices,” according to the realtor.com® report. “Having more homes on the market may mean more affordable prices for first-time and move-up buyers. Lack of inventory in 2013 led to intense competition, creating another barrier to home ownership.”

Bidding wars were frequent last year and caused prices to rise and become out of reach to some first-time home buyers who could barely save for a down payment, says Steve Berkowitz, CEO of Move, Inc.

“While inventory is still low, the continuing annual lift in the number of homes on the market that we’ve seen over the first months of 2014 is an indicator that buying conditions this year may be notably improved from the frenzied pace of last spring,” says Berkowitz.

Source: “Realtor.com Report: Higher Inventory a Welcome Sign for Spring Buyers,” realtor.com (April 17, 2014)