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Homeseller profits hit highest point in a decade

Homeowners selling their home in the second quarter of 2017 saw their largest profit gain in the past decade, according to the Q2 2017 U.S. Home Sales Report from ATTOM Data Solutions, a multi-sourced property database.

Homeowners who sold their home during the second quarter gained an average $51,000, the highest average price gain for home sellers since the second quarter of 2007’s $57,000.

This increase represents an increase of 26% from the previous home purchase price, the highest average return since the third quarter of 2007’s 27%.

The interactive map below shows which areas of the U.S. produced the highest average gains in the second quarter.

The reason for this increase could be credited to the rising home prices, but the length of time homeowners live in their homes is also a significant factor.

Homeowners who sold their home in the second quarter had owned their home for an average of 8.05 years. This is up from 7.85 years in the previous quarter and 7.59 years in the second quarter last year. In fact, it marks the longest homeownership tenure since ATTOM began tracking in the first quarter of 2000.

Click to Enlarge

Homeownership tenure

(Source: ATTOM)

“Potential home sellers in today’s market are caught in a Catch-22,” ATTOM Senior Vice President Daren Blomquist said. “While it’s the most profitable time to sell in a decade, it’s also extremely difficult to find another home to purchase, which is helping to keep homeowners in their homes longer before selling.”

“And the market is becoming even more competitive, with the share of cash buyers in the second quarter increasing annually for the first time in four years,” Blomquist said.

The share of all-cash sales decreased from last quarter’s 31.3% to 28.9% in the second quarter. However, this is up from last year’s 27.3%, and marks the first annual increase since the first quarter of 2013.

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Millennials drive up homeownership rate in Q2

The national homeownership rate increased slightly from last year, but was not statistically different from last quarter, according to the latest release from the U.S. Census Bureau.

The homeownership rate in the second quarter came in at 63.7%, up 0.8 percentage points from last year’s 62.9% but only 0.1 percentage points from the first quarter’s 63.6%.

Click to Enlarge

Homeownership rate

(Source: U.S. Census Bureau)

Last year’s 62.9% represented the lowest rate for homeownership since 1965. Since then, the homeownership rate hovered close to this 50-year low.

The Census Bureau report also showed that national vacancy rates for rental housing increased in the second quarter to 7.3%. This is up 0.6 percentage points from 6.7% last year and up 0.3 percentage points from last quarter’s 7%.

On the other hand, the homeowner vacancy rate decreased 0.2 percentage points from the second quarter 2016 and the first quarter this year to 1.5%, which is the lowest level since the first quarter of 2001.

The homeownership vacancy rate inside principal cities rests even lower at 1.4%, the lowest level since the fourth quarter of 1980, when the rate also sat at 1.4%.

Click to Enlarge

Homeownership rate

(Source: U.S. Census Bureau)

Surprisingly, despite being the most affected by rapidly rising home prices and fierce competition in the housing market, Millennials were the only generation to see an increase in their homeownership rate from last quarter.

The homeownership rate for those under 35 years of age increased a full percentage point from last quarter’s 34.3% to 35.3% in the second quarter, which is the highest level since the third quarter of 2015. For comparison, here are the changes in the homeownership rate for other age groups:

35 to 44 years: Decreased 0.2 percentage points to 58.8%

45 to 54 years: Decreased 0.1 percentage point to 69.3%

55 to 64 years: Decreased 0.2 percentage points to 75.4%

65 years and older: Decreased 0.4 percentage points to 78.2%

Comparing race and ethnicity of the household, whites were the only ones to see an increase in their homeownership rate. The homeownership rate among whites increased 0.4 percentage points to 72.2% in the second quarter.

Here are the rates among other races for comparison, all of which saw a decrease in the second quarter:

Asian, Native, Hawaiian and Pacific Islander: Decreased 0.3 percentage points to 56.5%

Hispanic: Decreased 1.1 percentage points to 45.5%

Black: Decreased 0.4 percentage points to 42.3%

The decrease in Hispanic homeownership eraseed all gains made in the third quarter last year, when the homeownership rate hit 47%. In fact, last year, Hispanics were the only group to see a surge in homeownership.

The Census Bureau also reports the homeownership rate for all races not mentioned above under “other.” This rate increased 0.7 percentage points to 54.3% in the second quarter.

Included in this “other” population is multiracial Americans, a sector that is growing at three times the rate of the U.S. population as a whole, according to a study from the Pew Research Center.

In 2013, about 9 million Americans chose two or more categories when the U.S. Census Bureau asked about their race, and the share of multiracial babies increased from 1% in 1970 to 10% in 2013 – a growth that the Pew expects to continue increasing.

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The highly contested state of the appraisal market and where it’s headed

Back in March, HousingWire gathered three industry experts to answers readers’ questions on the appraisal market. But as it turned out, one hour wasn’t nearly enough time to properly dig into the state of the highly debated appraisal market.

In the time that has passed since March, however, HousingWire has weighed in on the debate, publishing headlines such as:

Along with headlines on the latest news developments in the appraisal industry, such as:

But in order to weigh in on the questions left unanswered on the first webinar, HousingWire hosted a follow-up appraisal webinar.

This time around the webinar features experts Anthony Roveda, director of Valuation Solutions with MasterServ Financial, Jonathan Miller, real estate appraiser and consultant with Miller Samuel and Matt Simmons, commercial and residential appraiser with Maxwell, Hendry & Simmons.

During the webinar, Miller pointed out that the appraisal industry doesn’t have any leadership like it did in the past.

However, the discussion on the state of the industry is finally starting to grow.

Miller stated that he thinks it is an exciting time, and also a stressful time, to be an appraiser. But, he said, things are being shaken up, and the industry is finally debating the issues.

“Yes we are being attacked but that’s because we are being noticed,” he said.

The webinar covered key issues such as:

  • Is there an appraiser shortage?
  • Will technology take your jobs?
  • How fair and reasonable are AMC fees?
  • What is being done to encourage new faces to enter the appraisal market?

For an in-depth explanation of the issues, download the webinar for free here.

As a teaser, here’s a look at some of the issues discussed.

Miller commented on the issue of technology replacing appraisers saying, “One of the observations I have made on the industry since 2009 and the roll over into Dodd-Frank is that the appraisal process is being converted from a profession to a widget that fits into a larger system. There is a de-emphasis on actual expertise.”

However, Roveda added that while the possibility exists, the industry still needs an appraiser to do the analysis.

He said technology will not replace technology anytime soon. There are too many variables that go into the process.

Meanwhile, Simmons provided unique data on the number of appraiser in the market, commenting in on the debated “appraiser shortage.”

He stated that as it stands, there is a lack of clarity in the market on the numbers of appraisers in the market.

To help set the record straight on this, Simmons explained that most examples on appraiser supply focuses on dollar volume. However, it paints a better picture when you look at the number of originations.

Check out the chart below to see the number of originated mortgages versus appraiser credentials.

Click to enlarge

Simmons

(Source: Simmons and ATTOM Data Solutions)

At the beginning of the webinar, Simmons further breaks down this chart to show what it means, along with more charts on the annual number of originations per appraiser.

For a free download of the webinar, check here

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Homebuilder D.R. Horton starts building more homes after strong third quarter

Homebuilder D.R. Horton posted steady growth in the fiscal 2017 third quarter, as the market waits for an increase in housing inventory.

According to the homebuilder’s earnings report, it’s well positioned for the fourth quarter and to help bring more housing inventory to the market.

Overall, D.R. Horton reported that net income for its third fiscal quarter ended June 30, 2017 increased 16% to $289 million, or $0.76 per diluted share. This is up from $249.8 million, or $0.66 per diluted share, in the same quarter of fiscal 2016. Homebuilding revenue increased 17% to $3.7 billion from $3.1 billion in the same quarter of fiscal 2016, while homes closed in the quarter increased 16% to 12,497 homes compared to 10,739 homes in the prior year quarter.

This is welcomed news for home shoppers given the continual shortage of homes available on the market. And D.R. Horton is even more hopeful for the rest of the year.

The earnings stated that its sales order backlog of homes under contract at June 30, 2017 increased 3% to 15,161 homes and 6% in value to $4.6 billion compared to 14,670 homes and $4.4 billion at June 30, 2016.

In addition, the company’s homes in inventory at June 30, 2017 increased 9% to 27,600 homes compared to 25,300 homes at June 30, 2016, as seen in the chart below.

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chart one

(Source: D.R. Horton)

The report also shed some light on the homebuilder’s recent acquisition of 75% of Forestar’s outstanding shares. Forestar is a residential and mixed-use real estate developer.

“The strategic relationship between D.R. Horton and Forestar will significantly grow Forestar into a large, national residential land development company, selling lots to D.R. Horton and other homebuilders,” the release stated.

Under the agreement, Forestar will remain a public company with access to the capital markets to support its future growth.

The transaction is expected to close during the company’s first quarter of fiscal 2018, subject to the approval of Forestar shareholders and other customary closing conditions.

The chart below gives a break down of D.R. Horton’s product offerings for buyers.

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chart two

(Source: D.R. Horton)

Donald R. Horton, chairman of the board, commented on the earnings, saying, “Our balance sheet strength, liquidity and continued earnings growth and cash flow generation are increasing our flexibility, and we plan to maintain our disciplined, opportunistic position to improve the long-term value of our company.”

“We remain focused on growing our revenues and pre-tax profits at a double-digit annual pace, while continuing to generate positive annual operating cash flows and improved returns,” he concluded. “With 27,600 homes in inventory at the end of June and a robust supply of owned and controlled lots, we are well-positioned for the fourth quarter and fiscal 2018.”

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Hidden helper: Home equity lines of credit [Infographic]

(BPT) – Many homeowners aren’t familiar with the variety of ways home equity lines of credit (HELOC) can be used. Not surprisingly, current owners are more likely than less experienced first-time buyers to understand that a HELOC can be used for purposes beyond home improvements, including consolidating debt and paying education expenses. Learn more about current trends among modern homebuyers in this infographic.

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New home sales continue upward course in June

Building on the momentum of the previous month’s increase, new home sales increased in June, according to the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Sales of new single-family homes in June increased to a seasonally adjusted annual rate of 610,000, the report showed. That is an increase of 0.8% from May’s 605,000 and up 9.1% from June 2016’s 559,000 sales.

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New home sales

(Source: U.S. Census Bureau, HUD)

The median sales price of new homes sold decreased to $310,800 in June, down from $345,800 last month. The average sales price came in at $379,500 in June.

The seasonally adjusted estimate of new homes for sale at the end of June increased from last month’s 268,000 homes to 272,000 in June. This represents a supply of 5.4 months at the current sales rate, up from last month’s 5.3-month supply.

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Realtor.com adds Danielle Hale as new chief economist

Realtor.com has been without a chief economist since Jonathan Smoke left the company in April to become the chief economist for Cox Automotive, an auto industry powerhouse that includes the brands, Autotrader, Dealer.com, Dealertrack, Kelley Blue Book, Manheim, NextGear Capital, vAuto, Xtime, and others.

But now, the real estate site has found a replacement, one that keeps things in the Realtor family, so to speak.

Realtor.com announced Tuesday that it named Danielle Hale as its new chief economist.

Hale joins Realtor.com from the National Association of Realtors, where she spent nearly a decade as an economist and policy researcher. While at NAR, Hale served as managing director of housing research.

In that role, Hale oversaw the production of housing market data, including NAR’s monthly pending and existing home sales indices and quarterly home price reports.

Hale previously served as NAR’s manager of tax policy research, leading research projects on topics including how federal, state and local policies impact the real estate market.

“Danielle possesses a rare talent for applying rigorous statistical analysis in all her work along with the ability to communicate the results to everyday people,” Lawrence Yun, chief economist for NAR, said. “She will be a valuable asset to realtor.com and for consumers.”Danielle Hale

Before joining NAR as an economist in 2008, Hale spent three years at the American Enterprise Institute, producing research and managing the company’s executive office communications.

As chief economist at Realtor.com, Hale will be responsible for “developing and translating real estate trend data into consumer and industry insights,” the site said in a release.

“We are incredibly proud to welcome Danielle to the realtor.com family,” said Nate Johnson, chief marketing officer for realtor.com. “Danielle’s in-depth housing market knowledge and research experience will help us hone and grow our research capabilities so we can leverage realtor.com’s vast housing database to provide even more insights to homebuyers, sellers and dreamers, and professionals.”

Of her new role, Hale said she is looking forward to the opportunity.

“Realtor.com’s economics and research operation has emerged as a leading resource for valuable, actionable, and reliable housing market information,” Hale said. “I look forward to working with the tremendously talented team to provide consumers and industry professionals with the tools and expertise they need to navigate the real estate world during this period of unprecedented competition and demand.”

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Arch MI: Housing affordability is about to get a lot worse

Several reports showed home prices continue to increase as affordability falls, however affordability will plummet even more next year.

The Federal Reserve plans to raise interest rates once more this year, and several times over the next couple of years. Currently, the 30-year fixed-rate mortgage hovers near 4%. A new report from Arch MI gives the scenario if interest rates increase to 5% or 6%.

The report shows the U.S. median existing home price is $246,000. The corresponding $1,200 monthly mortgage payment would require 25% of the median household’s $58,000 a year in pre-tax income.

However, if rates rise to 5%, the median debt-to-income increases 2% to 27% for the U.S. overall. In Texas, median DTI would increase from 21% to 23%, however California’s would increase from 46% to 50%.

If rates increase to 6%, the median DTI would increase to 31% for the U.S., 26% for Texas and 56% for California.

The chart below shows the decrease in affordability for the two scenarios.

Click to Enlarge

Affordability

(Source: Arch MI)

However, the report explains these increases, while drastic, are increasing from the current historical lows. From the report:

While large projected increases seem dramatic after a long period of mortgage rates hovering near historic lows, thankfully median DTIs are currently lower than their historical averages in most areas. For the United States overall, median DTI would just move up to the historical average since 1975. For median DTI to be similar to the “normal” years (1990 to 2004), rates need to be around 5.5%.

While home prices peaked in 2007, total housing costs peaked much before that in the 1980s when interest rates spiked to nearly 18%, the report explains. Housing costs hit a low in 2012 to 2013 as home prices and interest rates fell after the crash.

Since then, affordability worsened as home prices increased faster than incomes. But while interest rates will increase to an estimated 5% by the end of 2018 and 6% by the end of 2019, most economists expect home price growth will also slow to between 2% and 4% once rates begin to rise.

But while home price increases may slow, there is little chance of seeing them fall through 2018. The average probability that home prices will decrease in America’s largest 400 cities remains unusually low at 4%.

The map below shows the states that are most at risk of home prices dropping.

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Affordability

(Source: Arch MI)

The Arch MI Risk Index estimates the probability home prices will be lower in two years, times 100. The higher the Risk Index value, the more likely an area is to experience slower than normal economic and home price growth, and the more likely it is to see outright home price declines.

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Increasing housing demand leaves buyers with two unfavorable options

Existing home sales dropped in June as housing inventory was unable to keep up with the increasing demand for homes.

Housing demand continues to increase, one expert explained, suggesting existing home sales could increase once again later this year.

“There are several factors that are helping to boost housing demand, including: solid job gains, faster household formations, and low mortgage rates, and these suggest that existing home sales should move higher as the year progresses,” Nationwide Chief Economist David Berson said.

One expert put the amount of housing demand into perspective, and explained two possible outcomes for homebuyers due to low inventory levels and high demand.

“There are about as many homes for sale now as there were in 1994, except there are about 63 million more people in this country now than there were then,” Zillow Chief Economist Svenja Gudell said. “A combination of very low inventory and very high demand leads to two main outcomes, neither of which is particularly favorable for stressed home buyers desperate to make a deal.”

“First, those homes that are available to buy are often on and then off the market in a flash, in many cases staying on the market for only a few short days before going pending,” Gudell said. “High demand and low inventory also serves to push prices higher at a rapid clip, as bidding wars break out for those scant few homes available.”

The chart below from Trulia shows how existing home sales in June compare to the pre-recession average.

Click to Enlarge

existing home sales

(Source: Trulia)

“The quickening pace of existing homes sales indicates a robust demand for homes,” Trulia Senior Economist Cheryl Young said. “Steady mortgage rates will continue to encourage demand even in an environment of high prices and little supply. As a result, home buyers are snatching up inventory at rates near equal to the pre-recession peak.”

One economist explained first time homebuyers and other groups looking for affordable housing are the most effected by the inventory shortage.

“This situation primarily affects low to moderate priced home buyers, including millennials, first-time buyers and people of modest means,” realtor.com Senior Economist Joseph Kirchner said. “These groups have had extreme difficulty finding homes and the plummeting sales we have seen for months isn’t showing signs of slowing soon.”

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Top 10 cities where low-income housing sees best performance

Low income households struggle in many cities across the U.S. as home prices rise and housing inventory shrinks.

Low-income households are defined as those who make less than 80% of the local median income level. However, some low-income levels might be surprising. In San Francisco, for example, the low-income limit is registered as an annual salary of $105,350, the highest low-income limit in the U.S.

Now, Rent to Own Labs, a company that specializes in helping homebuyers find rent-to-own homes, conducted a study to see in which U.S. cities the U.S. Department of Housing and Urban Development is meeting the most housing needs.

To determine the effectiveness of a specific city’s housing program, Rent To Own Labs examined the most recent PHA and American Community Survey data from the U.S. Census Bureau found from HUD.

Recently, HUD Secretary Ben Carson went on a listening tour to determine what programs are working well and which ones need to be cut or modified.

However, six months in, the department has yet to make any significant changes. Some members of Congress are even beginning to grow inpatient, calling for decisions on issues such as the indefinite suspension of the FHA mortgage insurance premium cut.

Rent To Own Labs’ report found even in the best city for low income housing, there aren’t enough public housing units to house even half of the city’s low-income population.

Here are the top 10 best cities for low income housing, and the percentage of low income households the HUD programs can provide for:

10. Pensacola, Florida – 31.5%

Total low income households: 9,665

Total public housing units: 3,048

9. West Palm Beach, Florida – 31.8%

Total low income households: 21,195

Total public housing units: 6,737

florida

8. Hoboken, New Jersey – 32.1%

Total low income households: 5,220

Total public housing units: 1,677

7. Albany, Oregon – 33.7%

Total low income households: 7,435

Total public housing units: 2,503

6. Spartanburg, South Carolina – 34.1%

Total low income households: 7,295

Total public housing units: 2,489

5. Cambridge, Massachusetts – 35.8%

Total low income households: 16,500

Total public housing units: 5,911

4. Monroe, Louisiana – 37.1%

Total low income households: 9,755

Total public housing units: 3,622

3. Boston, Massachusetts – 38.2%

Total low income households: 121,710

Total public housing units: 46,436

Boston skyline from above

2. Texarkana, Texas – 43.5%

Total low income households: 5,975

Total public housing units: 2,598

1. Charleston, West Virginia – 45.1%

Total low income households: 9,210

Total public housing units: 4,158

South Carolina