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Will rising mortgage rates undermine home prices? | Pound Ridge NY Real Estate
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Realtor.com: Broad-based Recovery Underway | Pound Ridge NY Real Estate
While the median national list price rose by only a modest amount in March, all indicators suggest that a broad-based housing recovery is beginning to take hold across the nation as a whole. List prices are appreciating at a year-over-year basis in more than 100 of the 146 markets tracked by Realtor.com and nearly all are within reach of achieving positive year-over-year price growth by the end of the year. A successful spring market could move the entire nation into the black.
The recovery is broadening and reaching smaller markets and markets that still have significant foreclosure inventories and local employment problems. Of the 146 markets tracked by Realtor.com, only 42 still report negative year-over-year prices compared to 63 in December. Prices rose in all by three of these markets in March.
List prices are down more than 5 percnt in only six of Realtor.com’s 146 markets: Roanoke VA, Akron OH, Dayton-Springfield OH, Springfield IL, Columbia MO and Peoria-Pekin IL.
While the number of markets experiencing year-over-year list price declines increased in the second half of 2012, this pattern appears to have turned around in the past three months. Since the beginning of the year, a growing number of markets have experienced a YOY increase in their list price, while a declining number have experienced a YOY list price decline. These patterns suggest that 2013 could well see a broad-based recovery of the housing market.
Inventories on Realtor.com continue to be down significantly on a year-over-year basis (-15.22%). The size of the for-sale inventory is now roughly half of its 2007 peak. These historically low inventories set the stage for continued broad-based recovery and the change over from buyers’ to sellers’ market.
Realtor.com reported the total U.S. for-sale inventory of single family homes, condos, townhomes and co-ops remained at near-record lows in March, with 1,529,432 units for sale. While the inventory was down by 15.22 percent compared to a year ago, the national inventory increased for the second month in a row, growing by 2.35 percent in March.
The national median age of the inventory fell to just 78 days in March, down by 20.41 percent over the month and by 12.35 percent on a year-over-year basis. The sudden decline in the age of listings indicates that volumes of new listings are flooding into markets across the nation in preparation for the spring season.
The net increase in listings coupled with the 20 percent decline in the median age of listings suggests that seller confidence is responding to higher prices and positive price forecasts.
Samuel L. Jackson’s Former Encino Estate Listed for Rent | North Salem NY Real Estate
via zillowblog.com
Will rising mortgage rates undermine home prices? | Pound Ridge NY Real Estate
Thanks to freakishly low interest rates, many homeowners with mortgages are able to make their monthly house payments using a much smaller percentage of their income than has been the historical norm, an analysis by Zillow shows.
But home prices are actually more expensive relative to median annual incomes than they were during the pre-boom years, which raises a troubling question: What happens when the economy improves and interest rates go up?
Because housing affordability is more highly dependent on interest rates than it has been in the past, when rates go up, home values will either have to remain stagnant while incomes catch up, or home values may even have to fall in some markets, said Stan Humphries, Zillow’s chief economist.
Some homebuyers could find themselves newly underwater if rising mortgage interest rates depress home values in their markets.
“Those buyers purchasing with little money down and high initial mortgage balances will be more at risk for slipping underwater if home prices fall marginally,” Humphries said. “Many homebuyers financing their purchase with a mortgage backed by the Federal Housing Administration can put down as little as 3.5 percent of the home price in down payment, and these buyers could be more susceptible to falling into negative equity even with modest home value declines.”
U.S. homeowners in the fourth quarter of 2012 devoted 12.6 percent of their median monthly incomes to mortgage payments, according to Zillow. That’s close to 37 percent more than homeowners paid from 1985 to 1999, Zillow says, when mortgages took up 19.9 percent of a typical homeowners’ median monthly income.
via inman.com
Ernst & Young Projects Strong Growth In Housing Sector Through 2015 | Pound Ridge NY Homes
A new U.S.-focused real estate forecast from the Urban Land Institute and Ernst & Young reflects renewed optimism for growth in real estate capital markets and commercial real estate fundamentals, and even stronger expectations for housing than those made just six months ago.
(Logo: http://photos.prnewswire.com/prnh/20100310/ULILOGO)
The findings, based on a survey of 38 of the nation’s leading real estate economists and analysts, were released today in the semi-annual ULI/E&Y Real Estate Consensus Forecast, prepared by the ULI Center for Capital Markets and Real Estate. The survey, conducted between March 4 and March 25, 2013, is the third in a series of polls initiated to gauge sentiment among economists and analysts about the direction of the real estate industry.
Predictions for commercial real estate activity improved significantly from the last survey, conducted in September 2012. Transaction volume in 2013 is expected to rise to $310 billion from $290 billion in 2012, then rise to $340 billion in 2014 and $360 billion in 2015. The issuance of commercial mortgage-backed securities (CMBS), a key source of financing for commercial real estate, is expected to jump by nearly 50 percent this year, rising to $70 billion from $48 billion in 2012. In 2014, CMBS issuance is expected to reach $80 billion; in 2015, $100 billion.
Total returns for equity real estate investment trusts (REITs), as tracked by the National Association of Real Estate Investment Trusts, are expected to be 12 percent in 2013, then moderate to 10 percent for 2014 and 8.0 percent for 2015. While these reflect a sharp decline from the surging REIT returns of 28 percent in both 2009 and 2010, the forecast suggests that REIT returns are settling at a more sustainable level.
Total annual returns from institutional-quality direct real estate investments for the apartment, retail, industrial and office sectors combined are forecast to be 9.5 percent in 2013, 9.0 percent in 2014 and 8.0 percent in 2015, continuing a downward trend that started last year, but remaining in the range of long-term historical averages
via sacbee.com
Low Mortgage Interest Rates Masking High Home Price-to-Income Ratios | South Salem NY Real Estate
Zillow has noticed a trend that could become problematic for both the U.S. housing market and policymakers in coming months.
By looking at two metrics — an affordability index and a price-to-income ratio — Zillow researchers have determined that low mortgage rates that make homes appear incredibly affordable are overshadowing a bigger overall trend in which the overall prices of homes are actually significantly more expensive than historic norms relative to annual incomes.
The affordability index measures the percentage of a homeowner’s monthly income devoted to housing (mortgage) payments. In the pre-bubble period from 1985 through 1999, homeowners spent 19.9 percent of their monthly income on mortgage payments. But because of historically low interest rates currently in the 3 to 4 percent range, at the end of Q4 2012, homeowners were spending only 12.6 percent of their monthly incomes on housing payments — or roughly 37 percent below historic norms. Low interest rates have translated into more purchasing power for homeowners, as the cost to finance homes has gone down.
The price-to-income ratio looks at the total cost/price of a home relative to median annual incomes. Historically, the typical, median home in the U.S. cost 2.6 times as much as the median annual income (so if the median income in an area was $100,000, the median price of a home would typically be about $260,000: $100,000 * 2.6).
While historically low mortgage rates are translating into big savings for homeowners, those same low monthly payments are masking a troubling trend. While home values have been on the rise for the past year — in some areas appreciating by 15 percent or more annually — median wages haven’t kept pace. As a result, home price-to-income ratios in many areas are climbing.
Because wage appreciation has failed to keep pace with home value appreciation, once rates rise and the illusion of affordability driven by smaller monthly payments disappears, the market will be left with homes that could potentially be too expensive to afford on the typical median wage.
“The days of historically high levels of housing affordability are numbered,” said Zillow Chief Economist Stan Humphries. “Current affordability is almost entirely dependent on low interest rates, and there’s no doubt that rates will begin to rise in the next few years. This will have an undeniable effect on demand for housing, as home buyers will have to spend more of their incomes to buy a home. Home values will have to either remain stagnant while incomes catch up or, quite possibly, home values will have to fall in some markets. This will especially be the case in some markets that have seen strong home value appreciation.”
Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes in the fourth quarter of 2012 relative to their region’s median income than they were from 1985 through 1999. Metros with the largest difference between their pre-bubble and fourth quarter 2012 price-to-income ratios included San Jose (52.1 percent more), Los Angeles (48.8 percent more), Portland, OR, (45.4 percent more), San Diego (44.6 percent more) and Denver (40.8 percent more).
Of the 30 largest metros covered by Zillow, only Cincinnati (3.1 percent less), Chicago (3.9 percent less), Cleveland (6.7 percent less), Atlanta (13.9 percent less), Las Vegas (14.6 percent less) and Detroit (25.5 percent less) posted price-to-income ratios in the fourth quarter of 2012 that were less than historic norms.
Metro Area % Of Monthly Income Dedicated to Mortgage Payments, 1985-1999 % Of Monthly Income Dedicated to Mortgage Payments, 2012 Q4 Median Home Price Relative To Median Annual Income,
1985-1999Median Home Price Relative
To Median Annual Income,
2012 Q4UNITED STATES 19.9%
12.6%
2.6
3.0
New York 30.7%
21.9%
4.0
5.2
Los Angeles 35.3%
29.0%
4.6
6.8
Chicago 21.4%
11.4%
2.8
2.7
Dallas 16.6%
9.3%
2.1
2.2
Philadelphia 17.5%
12.4%
2.3
2.9
Washington, DC 20.4%
14.9%
2.7
3.5
Miami 18.9%
13.5%
2.5
3.2
Atlanta 17.3%
8.1%
2.2
1.9
Boston 27.0%
19.0%
3.5
4.5
San Francisco 38.0%
28.8%
4.9
6.8
Detroit 15.8%
6.5%
2.1
1.5
Riverside 23.1%
14.9%
3.0
3.5
Phoenix 20.1%
12.7%
2.6
3.0
Seattle 25.0%
17.2%
3.3
4.1
Minneapolis-St. Paul 18.3%
11.2%
2.4
2.6
San Diego 31.3%
25.0%
4.1
5.9
Tampa, FL 17.5%
10.4%
2.3
2.5
St. Louis 15.6%
10.0%
2.0
2.4
Baltimore 19.5%
13.6%
2.5
3.2
Denver 20.2%
15.7%
2.6
3.7
Pittsburgh 14.3%
9.7%
1.9
2.3
Portland, OR 21.3%
17.3%
2.8
4.1
Sacramento, CA 25.9%
15.8%
3.4
3.7
Orlando, FL 18.5%
10.7%
2.4
2.5
Cincinnati 18.0%
9.6%
2.3
2.3
Cleveland 18.7%
9.7%
2.5
2.3
Las Vegas 21.7%
10.2%
2.8
2.4
San Jose, CA 35.2%
29.5%
4.6
7.0
Columbus, OH 17.5%
9.9%
2.3
2.3
Charlotte, NC 16.2%
10.9%
2.1
2.6
via zillowblog.com
Real estate agents say buyers clamoring for good homes | Pound Ridge Real Estate
North Salem, South Salem Have Lowest Ask Price | RobReportBlog
North Salem, South Salem Have Lowest Ask Price | RobReportBlog Katonah $359,000.00 Pound Ridge $375,000.00 South Salem $239,000.00 Mt Kisco $280,000.00 Chappaqua $475,000.00 North Salem $110,000.00 Armonk $359,000.00 Bedford $399,000.00
via trulia.com
Are Home Prices Are Rising Too Fast? | Pound Ridge Real Estate
Nick Timiraos explains how the Federal Reserve keeping interest rates low is causing home prices to grow faster than they normally would during a recovery, and that has some experts worried.
Category: Real Estate, Video
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
11 Responses to “Are Home Prices Are Rising Too Fast?”
Chief Tomahawk says:
Saw an SFGate article recently which said one homebuyer was using an “interest-only” loan to buy. I believe that means the third “i” in Warren Buffett’s investing gameplan has been turned loose yet again. Probably only because Uncle Sam is the 4th “i”.
jeff in indy says:
mr. barrack agrees:
wally says:
Interesting points. The mirror image issue is that middle class incomes have not risen for many years. Eventually that plays havoc with any modern developed economy because consumer spending is the foundation of all such economies. This will become a bigger and bigger structural issue – and political issue – in the years ahead.
rj chicago says:
Read yesterday’s post by BR originated by Mark Hanson Advisors – Nuf said.
wisegrowth says:
We need to keep in mind that there was an income shock to the economy by high income earners just before the end of 2012 due to a tax change. This extra income at the high income level of the economy has made its way into the stock market and the real estate market. The income to support the rise in these asset values won’t be sustained after a few months.
My view is that the economy was pushed closer to a recession because of the income shock to the economy.
I posted this explanation for you all…BuildingCom says:
Sadly, prices weren’t allowed to fall due to interference and the end result is the market was never allowed to clear.
What does that mean? Simply put, the housing price correction has been delayed and prices have even further to fall.
MikeNY says:
It’s right out of the Greenspan playbook, people: the only solution to a burst bubble is … another, preferably bigger, bubble!
Angryman1 says:
Nope, cause prices aren’t rising that fast. Note where they are rising and where they are still falling. Classic. Eventually those areas booming will cool and those areas struggling will nominally rise at a constant rate.
Any increase in already massively inflated prices is considered rising too fast.
AtlasRocked says:
*SNIP*
Ideological nonsense deleted due to stupidity
ByteMe says:
Not sure we’re in “bubble territory” again, but…
What I’m seeing is that in 2004-2007, we had a huge number of smaller investors buying up real estate, but they didn’t have the deep pockets to sustain themselves during tough times and they were overpaying for their investments. Obvious bad outcome.
Now what we’re seeing is a smaller number of deep pocketed large investors using cheap money to swoop in and buy undervalued properties and renting them. A year ago, we had no problem picking up a reasonably priced investment property; this year, we’ve tried for 7 properties so far and haven’t been able to do the deal because someone else with deeper pockets wanted to pay more than was reasonable (considering the work involved in renting properties, anything less than an 8% annual return seems stupid to me, but clearly not to someone with a huge wad of someone else’s cheap money).
So, there’s not a bubble yet… but there are definitely pockets of inefficient money out there.
via ritholtz.com
