Inventory shortage sends home prices soaring at record rate

Inventory shortage sends home prices soaring at record rate

14.8% annual home price growth is the highest seen in Black Knight data going back nearly 30 years

By Matt Carter of inman

With listings shortages persisting, U.S. housing markets remained “white hot” in April, with home prices growing at a record — and unsustainable — annual rate of 14.8 percent.

 

Black Knight’s latest Mortgage Monitor Report recorded “the highest annual home price growth rate we’ve ever seen” in records going back nearly 30 years, said Ben Graboske, the company’s data and analytics president, in a statement.

 

Western states saw the biggest price gains, with six metro markets — Austin, Texas; Phoenix, Arizona; Seattle, Washington; Riverside, Sacramento and San Diego, California — growing at an annual rate of 20 percent or more.

“Current levels of home price growth aren’t sustainable for an extended period, especially if mortgage rates begin to rise,” Black Knight analysts concluded in the report.

If home values keep climbing at the current pace, and mortgage rates go up, that will push a key measure of affordability, the payment-to-income ratio, above the 23.6 percent average over the last 25 years. Anything above the current ratio of 20.5 percent is considered a “tipping point” where home price appreciation typically slows, Graboske said.

If rates on 30-year fixed-rate loans rise to 3.5 percent by the end of 2022, the national payment-to-income ratio would hit 21.6 percent by the end of this year, and 25 percent by 2022.

Low mortgage rates are fueling demand for housing, but Graboske said the more acute driver of price increases is the shortage of available listings.

“The total number of active listings was down 60 percent from the 2017 to 2019 average for April,” Graboske said. That means there were close to 750,000 fewer homes on the market than is typical. “It’s not getting any better, either.”

Compared to pre-pandemic seasonal levels, there were 26 percent fewer newly listed properties in April. With homes selling so quickly, newly listed properties now account for more than 75 percent of listings, compared to 27 percent a year ago.

The drop in new listing volume is likely to “create noticeable headwinds for both purchase lending and existing home sale volumes in coming months,” the report said.

At the metro level, even the slowest-growing markets are seeing “aggressive” price growth, the report noted. At 8.1 percent, Pittsburgh, Pennsylvania, had the lowest home price growth rate among the 50 largest markets.

But that’s the highest “floor” Black Knight has ever seen — more than three times as high as previous high of 2.4 percent.

The top 10 metro markets with the strongest price appreciation were:

• Austin, Texas (24.9 percent)
• Phoenix, Arizona (24.4 percent)
• Riverside, California (22.3 percent)
• Seattle, Washington (20.8 percent)
• Sacramento, California (20.8 percent)
• San Diego, California (20.1 percent)
• Salt Lake City, Utah (19.9 percent)
• Providence, Rhode Island (18.1 percent)
• Tampa, Florida (17.3 percent)
• Jacksonville, Florida (17.0 percent)

Among the 50 largest housing markets, the 10 markets with the weakest price appreciation were:

• St. Louis, Missouri (11.6 percent)
• San Antonio, Texas (11.6 percent)
• Orlando, Florida (11.0 percent)
• New Orleans, Louisiana (10.9 percent)
• Minneapolis, Minnesota (10.8 percent)
• Birmingham, Alabama (10.8 percent)
• Houston, Texas (10.3 percent)
• Oklahoma City, Oklahoma (10.0 percent)
• Chicago, Illinois (9.9 percent)
• Pittsburgh, Pennsylvania (8.1 percent)

Many would-be homebuyers have seen the headlines about rising home prices and shortages of listings in many markets. More than half (56 percent) think it’s a bad time to buy, according to a recent Fannie Mae survey. The survey also found that while would-be homebuyers know it’s tough out there, an all-time high share of consumers (72 percent) said they’d buy a home if they moved.

Connecticut's Rise in Residential Home Prices

Although we all feel locally that prices are going through the roof, we are not out of line with the rest of the country.  Residential home prices are rising all over, and we are right in line.  So, despite the fact that it has been theorized that our increases are due in large part to a demand from people seeking to leave NYC, it seems to be a broader trend.

The evidence has suggested, even before the pandemic, millennials have been moving toward lifestyles very close to what their parents wanted.  There have been some changes--among them the desire for walkability and smaller lots with smaller homes--the general trend has been for buying homes, often in suburban areas, with outdoor space and good schools.  This was true before the pandemic, and has only increased with remote working and family bubbles during COVID.  Generations before this age group have largely done the same thing, but now the people buying span a bigger age range.  Student debt, poor job prospects after 2007, and protracted adolescences have caused first-time buyers to wait longer.

That cohort is now a broader spectrum, from the 20s to early 40s, and it is colliding with baby boomers who are looking to downsize.  Given the differences brought about by changing tastes, it is putting mid-size homes in walkable neighborhoods at an incredible premium.  This means that the rapid rise in prices would be driven primarily by a lack of supply, fueled by a postponement of sales for a decade prior.  Americans are staying in their homes longer than was customary, and the backing up of the supply chain is causing shortages now, just as it has with paper towels and outdoor equipment.

What will happen next?  Well, it doesn't seem that Connecticut is in a bubble by itself, which is good news.  And the death of cities may not occur, although the trend toward smaller ones may continue, especially with the likely permanent increase in telecommuting, at least for part of the time.  So prices will stay high for the intermediate future, as long as mortgage rates cooperate, and our region will go on doing well.  It won't be about the pandemic, but about lifestyle, normal life cycle changes, and job opportunities.  

If you are a buyer, you will be paying more, but at an affordable monthly cost that is comparable to what has been paid in years past, with higher interest rates.  If you are a seller, now is your chance!

 

Median Home Prices Up in September

Article is from the CT REALTORS®

In a press release to the media today, CTR reports that the single-family residential home median sales price is $250,000 which reflects a 2 percent increase from $245,000 in that same time period last year. Median indicates that half the homes sold for more and half for less. Single-family residential home sales in Connecticut decreased 0.6 percent comparing October 2017 to October 2016. The total units of homes sold were 2,919 in October 2017 and 2,936 in October 2016.

Townhouses and condominiums median sales price is $163,000 representing a 2.5 percent increase from $159,000 in that same time period in 2016. Sales in Connecticut decreased 1.3 percent comparing October 2017 to October 2016. Total units sold were 731 in October 2017 and 741 in October 2016.

Statistics released by the National Association of REALTORS® indicate total home sales nationwide (includes single-family homes, townhomes, condominiums and co-ops) decreased 0.9 percent comparing October 2017 to October 2016; and the median national home sales price is $247,000. Regionally, Northeast home sales had no change from that same time period; with a median sales price of $272,800. do with the security deposit when a tenant who was under age 62 at the start of the lease turns 62 during the time of the lease.



CoreLogic: Conn. Ranks 49th In September Home Price Appreciation

The following article is from the commercial record, please click here to go to the commercial record and read their articles

Home prices nationwide, including distressed sales, increased 5.6 percent in September 2014 compared with September 2013, according to a new report from real estate analytics firm CoreLogic. On a month-over-month basis, home prices nationwide, including distressed sales, were nearly flat, inching down 0.1 percent in September 2014 compared with August 2014.

At the state level, including distressed sales, all 50 states and the district of Columbia posted year-over-year price increases in September. Five states posted new all-time high prices.

Excluding distressed sales, home prices nationally increased 5.2 percent in September 2014 compared with September 2013 and 0.1 percent month-over-month compared with August 2014. Also excluding distressed sales, only Mississippi showed year-over-year home price depreciation in September, with prices there dipping 0.9 percent. Distressed sales include short sales and real estate-owned (REO) transactions.

CoreLogic predicts that home prices, including distressed sales, will increase 0.1 percent month over month from September 2014 to October 2014 and, on a year-over-year basis, by 5 percent from September 2014 to September 2015. Excluding distressed sales, home prices are expected to rise 0.1 percent month-over-month from September 2014 to October 2014 and by 4.6 percent year-over-year from September 2014 to September 2015.

"There has been a clear bifurcation in home price growth for lower-end versus upper-end properties in 2014," Sam Khater, deputy chief economist at CoreLogic, said in a statement. "As of December 2013, both lower-end and upper-end property prices were up 9.7 percent on a year over year basis. As of September, lower-end prices were up 9.4 percent but upper-end prices were up only 4.5 percent."

Including distressed sales, Connecticut ranked 49th among all states for home price appreciation in September, with Nutmeg State prices rising 1.2 percent, according to CoreLogic. The five states with the highest home price appreciation were: Michigan (10.3 percent), Montana (10 percent), Maine (9.6 percent), Massachusetts (8.8 percent) and California (8.5 percent).

Excluding distressed sales, Connecticut prices were up 2 percent. The five states with the highest home price appreciation were: Maine (10.4 percent), Massachusetts (9.7 percent), California (7.6 percent), Texas (7.4 percent) and Michigan (7.2 percent).

Ninety-six of the country's top 100 largest population centers, according to the U.S. Census, showed year-over-year increases in September 2014. Two of the four that did not were in Connecticut: the New Haven-Milford area and Hartford metropolitan area. Rochester, N.Y. and Little Rock, Ark. were the others.

Including distressed transactions, U.S. home prices remain 12.6 below their peak in April 2006. Connecticut prices remain 19.9 percent below their peak.

Core Logic: Home Price Index Report

Home prices enjoyed a 27^th straight month of year-over-year growth in May CoreLogic said today, but noted that those gains are no longer in the double digits.  The company's Home Price Index (HPI) including distressed home sales was 8.8 percent higher than in May 2013 and rose 1.4 percent from the April level.  The HPI excluding distressed sales was up 8.1 percent from one year earlier and 1.2 percent from April. 

The national HPI Including distressed transactions is now 13.5 percent below its peak in April 2006.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -9.3 percent.

 

"The pace of home price appreciation is cooling off quickly as the weather warms up," said Mark Fleming, chief economist for CoreLogic. "May's 8.8 percent year-over-year growth rate is down almost three percentage points from just three months ago. The influences of modestly rising inventory and less-than-expected demand are causing price growth to moderate toward our forecasted expectations."

 

The increases were national in scope.  Every state posted in increase in both HPIs in May and 25 states and the District of Columbia were within 10 percent of their pre-recession peak home price on the index including distressed sales.  Ten states set new price peaks in May, Alaska, Louisiana, Oklahoma, Nebraska, Iowa, South Dakota, North Dakota, Colorado, Texas and New York.  Texas and Colorado have set new peaks on almost a monthly basis since last fall.

 

Including distressed sales, the five states with the highest home price appreciation were:  Hawaii (+13.2 percent), California (+13.1 percent), Nevada (+12.6 percent), Michigan (+11.8 percent) and New York (+11.0 percent).

 

Excluding distressed sales, the five states with the highest home price appreciation were: New York (+12.2 percent), Hawaii (+11.6 percent), Nevada (+10.6 percent), California (+10.4 percent) and Florida (+9.6 percent).

 

The CoreLogic Forecast HPI is for home prices, including distressed sales, to increase 0.8 percent month over month from May 2014 to June 2014 and, on a year-over-year basis by 6.0 percent from May 2014 to May 2015. Excluding distressed sales, home prices are expected to rise 0.7 percent month over month from and by 5.1 percent year over. CoreLogic bases its forecast on the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

 

"Home prices are continuing to climb across most of the country which has both positive and negative implications for the housing market," said Anand Nallathambi, president and CEO of CoreLogic. "While the rapid rise in prices over the past two years has lifted many homeowners out of negative equity, it has also become a negative factor in buying decisions for prospective purchasers weighing affordability concerns. As we move ahead, a moderation in home price increases over the next twelve months should help cool things down a bit and keep the housing recovery going."

Ninety-four of the top 100 Core Based Statistical Areas (CBSAs) measured by population showed year-over-year increases in May 2014.

 

The six CBSAs that did not show an increase were: Worcester, Mass.-Conn.; Hartford-West Hartford-East Hartford, Conn.; New Haven-Milford, Conn.; Little Rock-North Little Rock-Conway, Ark.; Rochester, N.Y. and Winston-Salem, N.C.

To view full report, please click here

Connecticut Home Prices and Home Values

Image Reproduced from Zillow.com

Lowest Rates in 60 Years!

Remember this time, folks, because you won't see it again in your lifetime.  CHFA rates are at 3.625% for a 30-year fixed rate mortgage.  Compare that to when I bought my first home--my state-subsidized first-time homebuyers rate in 1982 was 17.75%!  Mortgage rates are the lowest they have been in 60 years.

If you add that to the fact that homes are down 5% in price, with vacation homes down 11% in price, this is a great time to buy.  Counterintuitively for many people, the period after a hurricane is an excellent time to buy property on the shoreline.  Just as with the spring after a bad winter, people often get spooked and decide that it's time to decamp for a condo or assisted living, and they are willing to be reasonable about their price.  If you add that to the discount that waterfront property often goes for in the fall, as well as the general rule that the best time to make an offer is between Halloween and Thanksgiving, everyone should be out scouting right now! 

Do you really trust the stock market more than the real estate market?

It's That Time of Year Again

Every year I write the same thing at this season, because every year it's true: the best time to buy real estate is between Halloween and Thanksgiving. Why is that? Because that's when sellers are most likely to accept an offer that makes a transaction either possible or particularly enticing to the buyer. As the weather gets colder, and thoughts of heating oil, plowing driveways, and holiday hiatuses on open houses and offers creep in, sellers weigh, as they should, the costs of carrying a property through the winter (for that is most likely what they will end up doing, if they don't sell by Thanksgiving) against the reality of an offer that is less than they want to accept. In addition, there's no guarantee that prices will even go up in the spring, and a outside chance that values could decline over the quiet months. As a further inducement, some sellers have tax reasons that make closing before the end of the year important or at least profitable. Although some people say that tax considerations could change with a new Congress, I think most would agree that uncertainty generally doesn't favor waiting when one is talking about the chances of taxes going either up or down. Even the economic news, which has seesawed over the past year, should make one cautious about holding out for better times.

This year, with so much inventory on the market, and so little time before the holiday season, it's especially important to consider pricing properties at levels that are not just correct, but compelling. Stand out from the crowd with a price that entices, and get your property sold while others just sit. And do it before the first flakes of snow hit the ground!

Where are the Luxury Buyers?

I thought I should write a little bit more about the information on market inventories that I described last time. As I stated, there is a direct correlation between the price and the amount of months of inventory on the market. So, for properties under $200,000, there is a 1.7 month supply. For each increasing value bracket, that supply goes to between 2 and 3 months, between 3 and 4 months, between 4 and 5 months, and then goes to over a year above $700,000. Only 2.7% of the sales now are above $700,000, and there are more homes on the market in that price range than in either of the two price ranges below that.

This surprises me in some ways. While I know that consumers are cautious, and I realize that the governmental incentives are aimed at a lower price point, one would still think that the combination of low interest rates and a skittish stock market would drive people to spend their savings on real estate. In addition, there are still those who could be downsizing and yet be spending above that amount for a property. Since investing one's assets is so problematic these days, real estate stands out as a tangible asset that is currently selling at bargain prices.

We bought our home at what turned out to be the bottom of the last market cycle, and it has turned out to be our best investment. While you cannot pick the bottom of the cycle without luck, this clearly has to be a time that will turn out to be good, considering the interest rates and prices. Why not take advantage of that, and look back years later with great satisfaction on your best investment?

Market Inventory

We recently received a market inventory study from Madison, Wisconsin, showing that higher-end properties were not selling and lower ones were. Not a big surprise, but we decided to look at our market. What we found was similar, and striking.

Properties over $700,000 are less than 3% of sales now, there are enough homes in that range on the market to represent more than a year's supply, and the sales have fallen almost in half from last year. At the lower end, under $300,000, there exists only a supply of two and a half months, sales have risen by a third, and they represent 41% of all sales. While we knew that first-time homebuyers were driving the current market, it's still fascinating to see that laid out in statistics.

Overall, in our region, prices have fallen 15% since the same time last year. If you put all these facts together, what it tells you is that you are more likely to sell your home quickly if it's in a lower price range and you price it aggressively. But you knew that already!

More on the Market

I just gave a press interview on the results of the first quarter in our area. Those results were dreadful. Very little sold, and what sold did so at lower prices. The activity has picked up since then, although those sales won't show up until the second quarter.

What is interesting to those of us in the business, who believe that we are bumping along the bottom, is to guess when the bump will start trending up. Units always increase before prices, and, while prices may continue to go down for a while longer, units should begin to increase. Once activity improves, pent up demand for new housing may cause houses to flood the market, as homeowners seek to trade up or down. That increase in supply will satisfy the still anemic demand for some time to come.

The lesson here is that there is a window, which has already opened in East Rock and Spring Glen, where those contrarians who seek to sell in the face of awful media reports have gotten or are getting surprising high prices. Not much was on the market, and people who needed to be in place for jobs beginning in the summer or fall, or those who needed to move for one reason or another, were competing for just a few houses. Multiple offers, many over the asking price, were common. That may change as people have more choices.

A word to the wise: He who hesitates is lost. List now.