CASH SALES MADE UP 35 PERCENT OF TOTAL HOME SALES IN OCTOBER 2014

| Patrick Carmichael

Cash sales accounted for 35.5 percent of total home sales in October 2014, down from 38.7 percent in October 2013, according to CoreLogic. The year-over-year share has fallen each month since January 2013, making October the 22nd consecutive month of declines. Month over month, the cash sales share ticked up by half of a percentage […]

Cash sales accounted for 35.5 percent of total home sales in October 2014, down from 38.7 percent in October 2013, according to CoreLogic. The year-over-year share has fallen each month since January 2013, making October the 22nd consecutive month of declines. Month over month, the cash sales share ticked up by half of a percentage point, as is typical for the fall and winter months. Due to seasonality in the housing market, comparisons with the share of cash sales should be made on a year-over-year basis to ensure accuracy.

The peak of cash sales occurred in January 2011, when cash transactions made up 46.4 percent of total home sales. Prior to the housing crisis, the share of cash sales averaged approximately 25 percent. At the current rate of year-over-year decrease, the cash sales share should be back to pre-crisis levels in 2017.

Real estate owned (REO) sales had the largest cash sales share in October 2014 at 58.7 percent, followed by resales (35 percent), short sales (33 percent), and newly constructed homes (16.8 percent). While the percentage of REO sales that were cash transactions remained high, REO transactions made up only 7.9 percent of total sales in October and, therefore, did not have a large influence on the overall cash sales share. In January 2011, when the cash sales share was at its peak, REO sales made up 23.9 percent of total sales.

MILLENNIALS EXPECTED TO BE BIGGEST HOMEBUYING GROUP IN 2015

| Patrick Carmichael

Due to an expected increase in rent prices next year, Zillow predicts more millennials will enter the housing market and be the biggest homebuying group. Zillow predicts the following for 2015: • U.S. rents will outpace home values by the end of the year • Builders will begin constructing more less expensive homes • Millennials […]

Due to an expected increase in rent prices next year, Zillow predicts more millennials will enter the housing market and be the biggest homebuying group.

Zillow predicts the following for 2015:
• U.S. rents will outpace home values by the end of the year
• Builders will begin constructing more less expensive homes
• Millennials will overtake Generation X as the largest group of home buyers
• Home buyers will have more negotiating power in 2015
First-time home buyers will be a critical part of the housing market next year, and certain markets will have more favorable conditions than others for buyers looking for that perfect entry-level home, according to Zillow. Markets most favorable to first-time buyers are those with strong income growth among 23-34 year olds, significant growth in the number of entry-level homes on the market and home prices that won’t take a big chunk out of buyers’ paychecks.

Zillow predicts the best markets for first-time buyers in 2015 will be: Pittsburgh; Hartford, Conn.; Chicago; Las Vegas; and Atlanta.

Nationwide, home values will increase by 2.5 percent, while rents will grow around 3.5 percent.

HOUSING MARKET ACTIVITY AFTER LABOR DAY LIKELY TO BE THE STRONGEST IN 5 YEARS

| Patrick Carmichael

Home buyers who have been willing to wait for better deals will be rewarded for their patience, as sellers drop listing prices to meet buyers’ more value-focused expectations, according to the latest Housing Market Tracker from Redfin. In the report, Redfin Chief Economist Nela Richardson explains that a slowdown in home price growth and a […]

Home buyers who have been willing to wait for better deals will be rewarded for their patience, as sellers drop listing prices to meet buyers’ more value-focused expectations, according to the latest Housing Market Tracker from Redfin. In the report, Redfin Chief Economist Nela Richardson explains that a slowdown in home price growth and a shift in pricing power from sellers to a more balanced market combined to cause this change in housing activity as the market transitions from summer to the fall buying season.

For the first time in five months, price growth was flat in July across all 35 markets included in the report. That shift has been nearly nine months in the making from when sales began to first decline last November. As a result of this shift, the number of homes that sold above list price in July is down nearly 7 percent to 20.1 percent from 26.8 percent a year ago, the biggest drop of the year.

Redfin expects an unusual surge in home sales this fall and that prices will continue to flatten and potentially decline month over month in September or October. If that happens, it will be the first three-month price decline since fall 2012.

AFFORDABILITY APPROACHES PRE-2004 NORM AS PRICES FIRM

| Patrick Carmichael

Housing affordability dipped slightly in the second quarter of 2014 as several markets saw a firming of home prices, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI). Nationwide, the second quarter HOI was 62.6—i.e., 62.6 percent of new and existing homes sold during the quarter were affordable to a family earning the U.S. median […]

Housing affordability dipped slightly in the second quarter of 2014 as several markets saw a firming of home prices, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI). Nationwide, the second quarter HOI was 62.6—i.e., 62.6 percent of new and existing homes sold during the quarter were affordable to a family earning the U.S. median income of $63,900—down about three percentage points from the first quarter reading of 65.5.

For a seventh consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major market, with only 11.1 percent of homes sold in the second quarter affordable to a family earning the area’s median income of $100,400. Other major metros at the bottom of the affordability chart were Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; and New York-White Plains-Wayne, N.Y.-N.J.

All five of the nation’s least affordable small housing markets were located in California: Santa Cruz-Watsonville, Napa, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles.

NEW HOUSING FINANCE REFORM PROPOSAL TO BE INTRODUCED

| Patrick Carmichael

Reps. John K. Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) last week outlined a housing finance reform proposal that uses private sector market forces to appropriately price risk while putting the scale and security of a government guarantee behind the program. They plan to introduce legislation this spring to create a housing finance […]

Reps. John K. Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) last week outlined a housing finance reform proposal that uses private sector market forces to appropriately price risk while putting the scale and security of a government guarantee behind the program. They plan to introduce legislation this spring to create a housing finance system that the authors say is fair for borrowers, lenders, and taxpayers.

Key elements of the proposal, known as “Partnership to Strengthen Homeownership Act of 2014”:

• Housing reform legislation allows the government to expand the capacity of housing finance while allowing the private sector to price all of the risk
• Creates incentives for private capital’s market share in housing to grow over time;
• Creates a path for Fannie Mae and Freddie Mac to be sold as independent companies without any government support or monopoly status
• Creates additional funds for low-income housing