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Experts: Homebuyers should prepare for onslaught of competition this spring season

The latest Case-Shiller report showed home prices are continuing to rise, but now experts say not only are those high prices here to stay, but homebuyers could be pummeled this spring by an increase in competition.

One expert explained that homebuyers will face not only the typical spring competition, but also the pent-up demand from would-be buyers looking for, but unable to find, a home over the past several months.

“The spring home shopping season will soon be in full swing, and with it we can expect the usual seasonal bump of would-be home buyers to come out of the woodwork to compete over a shrinking pool of homes to choose from,” Zillow Senior Economist Aaron Terrazas said. “But in a twist, this year’s buyers may be competing against some of those buyers who have been unsuccessful during the past few months.”

“Increasingly, the traditional seasonal boundaries around home shopping season – which generally heats up in early spring and cools off by late summer in time for back-to-school season – are becoming less pronounced,” Terrazas said. “Limited supply, fierce competition and rising prices are forcing many buyers to stay on the market longer in hopes of finding the right home at the right price. More inventory is really the only cure for those pressures right now, especially for those at the entry-level end of the market, but it has proven frustratingly slow in coming.”

And one expert explained this increased competition is also increasing home prices, which means high home prices are here to stay.

“Our first glimpse into Case-Shiller home price data in 2018 confirms high prices are here to stay,” realtor.com Chief Economist Danielle Hale said. “In fact, if we continue to see a steady stream of buyers and owners remain largely uninterested in selling, we can expect prices to continue to rise.”

Another expert explained that while homes on the lower end of the market are failing to keep up with demand and seeing quickly increasing prices, the same can’t be said for luxury homes.

“The Case-Shiller Home Price Index continues to support our view that today’s housing market is driven by a mismatch of demand and supply,” said Tian Liu, Genworth Mortgage Insurance chief economist. “There is robust demand by first-time homebuyers for affordable homes, and equally robust supply for higher-end homes.”

“Over the last 12 months, the low-tier homes measured by the Case-Shiller Index have out-performed the aggregate index significantly while the high-tier homes have under-performed,” Liu said.

The chart below from Trulia shows the amount of home price increases has been steadily climbing since about mid-2014. In the past couple months, the increase rate surpassed 6%, and has held there.

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Trulia

(Source: Trulia)

However, not all experts expect home price growth to continue at its current rate.

“That is the first time annual growth has fallen since June 2016, and supports our view that house price gains peaked at the end of last year,” Capital Economics Property Economist Matthew Pointon said. “We expect growth will continue to ease gradually this year, although tight market conditions and rising household incomes argue against a sharp slowdown.”

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FHFA: Home prices jump in January

Home prices increased in January, moving even faster than the levels of increase seen at the end of 2017, according to the latest House Price Index from the Federal Housing Finance Agency.

Home prices increased by 0.8% from December to January, the index showed. And December’s increase of 0.3% was upwardly revised to 0.4%.

The chart below showed January’s increase in home prices was the highest monthly increase since February 2017, when home prices also rose 0.8%. August came close with an monthly increase of 0.7%.

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FHFA home prices

(Source: FHFA)

The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Because of this, the selection excludes high-end homes bought with jumbo loans or cash sales.

Home prices saw the most monthly increases on the coasts, both the East and West Coast.

Across the U.S., changes in home prices from December to January ranged from a decrease of 0.7% in the West South Central division to an increase of 1.2% in the New England and Pacific divisions.

Annually, all home price changes were positive, ranging from an increase of 5.1% in the West South Central division to an increase in the double digits of 10% in the Mountain division.

West South Central: Oklahoma, Arkansas, Texas and Louisiana

New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut

Pacific: Hawaii, Alaska, Washington, Oregon and California

Mountain: Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona and New Mexico

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Housing inventory relief could be coming soon

Although current housing inventory continues to slip, driving up home prices and limiting homebuyers across the U.S., one expert says that could all be about to change.

After analyzing February’s housing starts data, First American Financial Corp. found the housing inventory shortage could soon see relief. First American Chief Economist Mark Fleming pointed out February’s employment report showed a boost of nearly 7,000 residential construction jobs from January to February this year.

In fact, the increase in February’s construction labor growth was the strongest since August 2008, and the number of residential construction jobs is up 3.8% from last year, First American pointed out. It also explained this growth in construction jobs will support further improvement in the pace of home building.

The chart below shows the movement of housing starts and construction employment since January 2000.

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First Am

(Source: First American, U.S. Census Bureau, Federal Reserve Bank of St. Louis)

In February, builders broke ground on fewer homes in February than they did in February 2017, but this was mainly due to a drop in multifamily starts. Single-family housing starts actually increased 2.9%, Fleming pointed out.

Housing completions, or the number of new homes added to the current housing stock, increased significantly from the year before, indicating relief for the supply shortage. An increase in permits along with the surge in construction employment means this relief could continue into the spring home buying season and the year ahead.

“Despite a drop in housing starts, the annual increase in housing permits and completions, in conjunction with the rise in construction employment, signals an upward trajectory for housing starts for the spring home-buying season,” Fleming said.

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Realtor.com adds Michelle Meyers as vice president of customer success

Move, which operates Realtor.com for the National Association of Realtors, announced recently that it appointed Michelle Meyers to the newly created role of vice president of customer success.

In this role, Meyers is tasked with boosting the company’s relationships with real estate agents, Realtors, and brokers.

According to the company, Meyers will work with Realtor.com’s customers (Realtors, real estate agents, etc.) to “identify opportunities to better streamline and coordinate communication, support and service, and help generate measurable business growth,” the company said in release.

Meyers has spent the majority of her career in customer engagement and client relationship management in the workforce mobility and healthcare sectors and brings a background in business operations, analytics and reporting to her new role.

Meyers most recently served as the northern California general manager for Synergy Global Housing, which provides relocation and temporary housing services in over 55 countries around the world.Michelle Meyers

Earlier in her career, Meyers served as chief operating officer of medical device company Biolyst d/b/a Realief Neuropathy Centers, and in client engagement and client service leadership roles at SIRVA Relocation.

Meyers began her career as a real estate professional, which Realtor.com said will give her “relevant insight” into the needs of the website’s customers.

“We are constantly evaluating every point of our customer journey to ensure we create the best environment for our customers to build, manage and grow their business,” said Debbie Neuberger, senior vice president of service operations. “This new role helps further extend our reputation for best-in-class results among competing national providers, and Michelle is supremely qualified and positioned to advance professionals and realtor.com in this capacity.”

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CoreLogic: Housing market nearly recovered from recession

CoreLogic, a global property information, analytics and data-enabled solutions provider, released a report outlining the real estate economy from 2006 to 2017, showing that the housing market has nearly completely recovered from the recent recession.

In some areas, residential areas began to hit their peak levels as early as 2005, according to the company’s Evaluating the Housing Market Since the Great Recession report. The majority of home prices collapsed in 2007.

During the recession, home prices fell 33% nationwide, hitting their lowest in March 2011. Since then, home prices have risen once again by 51%. The average home prices is now 1% higher than its 2006 level and the average annual equity increase was $14,888 in the third quarter of 2017. This indicates the housing market has recovered in many parts of the U.S., according to the report.

But while, overall, the U.S. has pushed past the recession, some states are still struggling to return to their pre-recession price levels. For example, Nevada saw the greatest drop after the housing crash as its home prices fell 60% from their peak levels.

Since then, home prices increased 93% from their trough, but remain 23% below their pre-recession peaks. What’s more, 9% of mortgaged properties in the state remained underwater as of the third quarter of 2017.

The chart below shows which states saw the largest plummet in home prices after the recession, and which ones were least affected.

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recession

(Source: CoreLogic)

While some states saw their home prices fall drastically during the recession, others only experienced slight changes. North Dakota’s decline was just 2% due in part to the energy boom, and home prices in the state have since risen 48% above their previous peak.

“Homeowners in the United States experienced a run-up in prices from the early 2000s to 2006, and then saw the trend reverse with steady declines through 2011,” CoreLogic Chief economist Frank Nothaft said. “After reaching bottom in 2011, our national price index is up more than 50%.”

“West Coast states, such as California, Washington and Oregon are seeing some of largest trough-to-current growth rates in home prices,” Nothaft said. “Greater demand and lower supply, as well as booming job markets, have given some of the hardest-hit housing markets a boost in home prices. Yet, many are still not back to pre-crash levels.”

Local job market played a major role in determining the severity of the housing downturn at the regional level. Las Vegas, Miami and Chicago each arrived at their respective peaks at different times during the boom and experienced significant peak-to-trough home price declines during the recession. These markets have been slower to recover and their home prices are below their pre-recession peaks.

But other metro areas such as San Francisco and Denver, which both have technology sectors and low unemployment, experienced consistent home price growth. In the third quarter of 2017, the average year-over-year equity gain in San Francisco and Denver was $73,217, and $22,102, respectively, and only 1% of homes in those markets remained underwater.

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Homeownership migration: This area saw the greatest improvement since Recession

Since 2000, homeownership fell in 90 out of the top 100 largest metros in the U.S., according to the latest report from Trulia.

Nationally, 72.4% of all larger ZIP codes, or those with at least 1,000 occupied housing units, saw a decrease in their homeownership rate from 2000 to 2016, according to the report.

Over the past few years since the turn of the millennium, several cities have shown dramatic shifts from homeownership to renting such as Cape Coral, Florida; Las Vegas and Phoenix. In one Phoenix neighborhood, for example, homeownership plummeted from 92.6% in 2000 to 50.5% in 2016 after the ZIP code 85305 gained nearly 2,000 new apartment units.

Other metros, especially in the Northeast, countered the national trend with an increase in their homeownership rate since 2000. One neighborhood in Atlanta, ZIP code 30313, saw the greatest gain and, as its median household more than tripled, homeownership increased from 13.1% in 2000 to 32.5% in 2016.

In some areas, such as Houston and New York City, the homeownership rate has remained unchanged, yet several significant shifts have occurred within the city itself, according to the report.

The national homeownership rate rose from 67.1% in 2000 to 69.2% in 2004. However, after the Great Recession, that rate came crashing back down to 62.9% in mid-2016.

“Taking a closer look at some of the ZIP codes that have swung the furthest toward more renters among the 100 largest metros, we see that none of them are in any of the northeast metros, and most are in the southwest, Texas, or Florida,” the report stated.

The chart below shows which U.S. metros held the most ZIP codes with increasing homeownership rates from 2000 to 2016.

Trulia explained in its report that metros with higher rates of homeownership increases also saw higher construction rates among single-family homes and townhomes, rather than multifamily units. Also, in some metros, a change in median household income, for better or worse, helps explain the direction of homeownership in the area.

“Ultimately, our research found that neighborhoods that swung to renters from owners or vice versa were influenced by three factors: changes in household income, the type of new construction, or lack of it, in the area and the housing crisis which ultimately displaced huge swaths of the population,” Trulia stated in its report. “While it’s impossible to predict what will happen next, as incomes rise or fall, new rentals, or homes are built and instability – these factors always will have an outsized influence in whether a neighborhood is full of homeowners or renters.”