Daily Archives: June 11, 2013

Prices Rose 12 Percent in April | Bedford Corners Real Estate

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Home prices nationwide, including distressed sales, increased 12.1 percent on a year-over-year basis in April 2013 compared to April 2012. This change represents the biggest year-over-year increase since February 2006 and the 14th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 3.2 percent in April 2013 compared to March 2013*, according to the April CoreLogic HPITM report.

Excluding distressed sales, home prices increased on a year-over-year basis by 11.9 percent in April 2013 compared to April 2012. On a month-over-month basis, excluding distressed sales, home prices increased 3 percent in April 2013 compared to March 2013. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that May 2013 home prices, including distressed sales, are expected to rise by 12.5 percent on a year-over-year basis from May 2012 and rise by 2.7 percent on a month-over-month basis from April 2013. Excluding distressed sales, May 2013 home prices are poised to rise 13.2 percent year over year from May 2012 and by 3.1 percent month over month from April 2013. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes for the most recent month.

“House price growth continues to surprise to the upside with an impressive 12.1 percent gain year over year in April,” said Dr. Mark Fleming, chief economist for CoreLogic. “Increasing demand for new and existing homes, coupled with low inventory, has created a virtuous cycle for price gains, most clearly seen in the Western states with year-over-year gains of 20 percent or more.”

“The pace of the housing market recovery quickened in April as home prices rose across the U.S.,” said Anand Nallathambi, president and CEO of CoreLogic. “For the second consecutive month, all 50 states registered year-over-year home price gains excluding sales of distressed homes. We expect this trend to continue, bolstered by tight supplies and pent up buyer demand.”

Highlights as of April 2013:

  • Including distressed sales, the five states with the highest home price appreciation were: Nevada (+24.6 percent), California (+19.4 percent), Arizona (+17.3 percent), Hawaii (+17 percent) and Oregon (+15.5 percent).
  • ncluding distressed sales, this month only two states posted home price depreciation: Mississippi (-1.7) and Alabama (-1.6 percent).
  • Excluding distressed sales, the five states with the highest home price appreciation were: Nevada (+22.6 percent), California (+18.3 percent), Idaho (+16.4 percent), Arizona (+15.3 percent) and Washington (+13.9 percent).
  • Excluding distressed sales, no states posted home price depreciation in April.
  • Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to April 2013) was -22.4 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -16.3 percent.
  • The five states with the largest peak-to-current declines, including distressed transactions, were Nevada (-47.3 percent), Florida (-40.5 percent), Michigan (-36.1 percent), Arizona (-36 percent) and Rhode Island (-34.7 percent).
  • Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 94 were showing year-over-year increases in April, the same as in March 2013.

 

Prices Rose 12 Percent in April | RealEstateEconomyWatch.com.

Investors Cautioned On Hottest Markets | Chappaqua Real Estate

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In some markets–many of them in California–the home price rebound has pushed prices above their EHP level, which should be a caution sign for investors seeking to make money in a quick re-sale, according to the latest HomeVestor/Local Market Monitor Best Market Ratings for investors.

Citing new quarterly data compiled by HomeVestors (known as the “We Buy Ugly Houses®” company) and national real estate forecaster, Local Market Monitor, Hicks said that in the top 100 housing markets in the U.S., only one-Providence, Rhode Island–is categorized as “dangerous” for investors. The HomeVestor/Local Market Monitor Best Market Ratings, issued quarterly, concentrate on factors that affect the demand for housing and therefore affect home prices. The potential for price increases is the investment opportunity, the potential for price decreases or stagnation is the investment risk.

“Five of the 11 markets where the price run-up has driven the EHP into positive territory are in California, with the Los Angeles-Long Beach-Glendale market leading the pack. Average home prices now running 19 per cent above the EHP for that market,” said Ingo Winzer, president and founder of Local Market Monitor. The EHP, or Equilibrium Home Price is a measure of how much a market is over-priced or underpriced relative to local income.

“Markets with a positive EHP can still provide strong rental returns for investors,” Winzer said, “since most of those markets have strong population and job growth which provides upward pressure on rents.

“The San Jose market is a good example,” he continued. “Although the EHP is six percent, strong population growth provides a good source of renters, making it a ‘low risk’ market according to our data.”

Winzer also thinks the sharply higher prices in some markets will be difficult to sustain. “They’re more the result of a short-term shortage of inventory rather than a long-term recovery of demand,” he noted.

Investors should weigh the data carefully according to their risk preferences before making a decision about investing in a market,” said HomeVestors co-president Ken Channell.  “For those who can handle more risk, markets ranked as ’speculative’ in our data could provide more upside potential.”

Despite the record-setting increases in home prices this year, there is still plenty of room in most markets for prices to move even higher, and that’s good news for investors in single family homes according to David Hicks, co-president of HomeVestors of America

“Even though housing prices in Providence are still 12 percent below their EHP level, the weak jobs market and relatively high unemployment depresses demand for rental properties,” said Ingo Winzer,

Of the top 100 markets, there are 13 ranked as “speculative,” all of them in Northeast or the Midwest. “Most of these markets have higher than average unemployment rates, but have other factors such as home prices well below the EHP, strong rents or continued population growth that make them particularly attractive investments,” Hicks said.

“What we have learned over the last 16 years with our HomeVestors® franchisees buying more than 50,000 houses allows us to analyze individual neighborhoods for sales trends and rental rates,” Channell said.  “This information can help investors determine a purchase price for a property that may allow them to build equity over the long term while generating rental income immediately.”

The quarterly data categorizes all U.S. markets according to different investor risk preferences including Dangerous, Speculative, Medium Risk and Low Risk.  California leads the nation in the number of markets ranked “low risk” with 14.  Texas is next with 12 markets ranked as low risk and Florida is third with 11.

But, Winzer cautions “Not all low risk markets are equal. When you factor in job growth and unemployment, it’s clear that some markets like Texas have better long-term potential than a market like Florida.”

 

Investors Cautioned On Hottest Markets | RealEstateEconomyWatch.com.

Investors Plan to Reduce Purchases | Armonk Real Estate

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Real estate investors are responding to higher prices by buying fewer properties in the next 12 months and holding their rental properties at least five years or longer, according to a national survey of real estate investors conducted by ORC International for MemphisInvest.com and Premier Property Management Group.

Investor purchasing intentions have changed significantly since ORC surveyed investors in August, when only 30 percent said they planned to buy fewer properties in the next 12 months than they did in the previous year. In the latest survey, the percentage of investors who said they plan to cut back on purchases in the coming year has risen to 48 percent. Only 20 percent of investors said they plan to increase purchases compared to 39 percent ten months ago.

While they may be buying fewer new properties in the year to come, over half of investors who own rental properties plan to hold them for at least five years or more. One-third, 33 percent, of investors plan to keep them for 10 years or more.

“Higher prices are reducing returns on investment and investors are responding by cutting back on their purchasing plans until conditions sort out. Fewer foreclosures, rising property values and competition from hedge funds are making it tough to find good ideals on distress sales,” said Chris Clothier, partner in MemphisInvest.com and Premier Property Management Group.

“On the other hand, investors are planning to hold onto their rental properties for at least eight to ten years and realize the benefits of rising rents and low vacancy rates. Cash flow is much more important than appreciation,” said Clothier.

Real estate investors play a major role in the national housing economy. Investors purchased 24 percent of all existing homes sold in 2012, a decline from 27 percent in 2011, according to the National Association of Realtors. The drop in purchasing intentions could result in a further decline in investor market share in 2013.

Single-family rentals are the fastest growing component of households, expanding over 25 percent since the 2005 peak in homeownership, according to Zelman & Associates. The number of renter-occupied singe family detached homes is about 11.4 million, almost 2.1 million (or 22 percent) higher than in 2006, according to the Census Bureau.

How those who do plan to make purchases will pay for them has also changed over the past ten months. In August, nearly one out of four investors said they will use all cash on their next purchase and the balance would use some form of financing. Today the percentage has increased to 37 percent. Most investors today plan to use a commercial mortgage.

“Cash sales make sense when prices are rising. They lower investors’ costs,” said Clothier.

About half of investors said real estate investing is harder today than when large numbers of foreclosures started five years ago. The entry of institutional investors into residential real estate is often cited as a source of competition for properties and a reason foreclosure inventories are shrinking, but only 13 percent of investors in the survey said the large competitors have impacted their businesses while 54 percent said they have experienced no impact at all.

However, more than half of the investors participating in the survey said they believe that five years from now there will more real estate investors than there are today.

“The reasons people invest in real estate-cash flow, passive income for retirement, exceptional return–will be as important five years from now as they are today,” Clothier said.

The study was conducted using ORC International’s CARAVAN Omnibus survey using both landline and mobile telephones on May 2-5/9-12/16-19 2013 among 3020 adults, 1,507 men and 1,513 women 18 years of age and older, living in the continental United States. Some 1,970 interviews were from the landline sample and 1,050 interviews from the cell phone sample.

 

 

Investors Plan to Reduce Purchases | RealEstateEconomyWatch.com.