U.S. home prices rise by 4% in December

In December, home prices climbed by 4% from the previous year, according to CoreLogic’s latest Home Price Forecast.

The CoreLogic HPI projects future home price growth based on several economic variables and measures the number of owner-occupied households in each state.

According to CoreLogic’s data, home prices increased by 0.3% from November 2019 and are now projected to increase by 5.2% come December 2020.

Frank Nothaft, CoreLogic’s chief economist, said the nation’s housing affordability has worsened as a lack of inventory continues to drive home price growth.

“Moderately priced homes are in high demand and short supply, pushing up values and eroding affordability for first-time buyers,” Nothaft said. “Homes that sold for 25% or more below the local median price experienced a 5.9% price gain in 2019, compared with a 3.7% gain for homes that sold for 25% or more above the median.”

CoreLogic indicates these price gains are negatively impacting the nation’s Millennial homebuyers, who not only tend to fall into the first-time buyer category but also continue to grapple with affordability woes.

During the second quarter of 2019, CoreLogic conducted a survey measuring consumer-housing sentiment among the nation’s younger and older Millennials, aged between 21 and 29, and 30 and 38, respectively.  

The company’s findings revealed while 79% of younger Millennial renters express a desire to purchase a home in the future, many still cite affordability as a top concern.

“On a national level, home prices are on an upswing. Price growth is likely to accelerate in 2020. And while demand for homeownership has continued to increase for Millennials, particularly those in their 30s, 74% admit they have had to make significant financial sacrifices to afford a home,” Frank Martell, CoreLogic’s president and CEO said. “This could become an even bigger factor as home prices reach new heights during 2020.”

This is concerning for the demographic, considering CoreLogic’s recent MCI report revealed that 40% of the nation’s metropolitan areas had an overvalued housing market as of January.

The MCI, which details the housing values in America’s 100 largest housing markets, categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals such as disposable income and more, according to CoreLogic.

During the month, 40% of the country’s top 100 metropolitan areas were overvalued, 26% were undervalued and 41% were at market value, according to the company.

NOTE: The CoreLogic HPI is based on public record, servicing and securities real-estate databases and incorporates more than 40 years of repeat-sales transactions for analyzing home price trends.

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Here’s where the real housing affordability crisis exists

In the age of quick news cycles and social media, it can be hard to make heads or tails of housing market news.

With plenty of sources to pick and choose from, it’s easy for anyone to form a narrative that is inconsistent at best.

Logan Mohtashami
Logan Mohtashami,

Take, for example, housing pundits that report the demand for housing is strong, while these same pundits, on another day say that we are in a housing affordability crisis. The “strong demand” card is useful when they are trying to convince buyers to get into the market before it is too late, while the “affordability crisis” card is slapped down when they need an excuse for weak demand.  

In a coherent world, these two conditions cannot exist in the same time-space continuum.  But nowadays, this seems to be the norm.

What is a rational, reality seeking consumer of news to believe? Math, facts and data, as always, stand ready to come to the rescue.

When we think about housing affordability in the U.S., it is meaningless to use nominal prices without considering location, location, location and the median incomes in those locations.

Take, for example, the area of the country where I reside, Irvine, California. In this Southern California burb, the median home price in my zip code is $1,176,938.

To most of the country, this dollar amount as a median price seems insane, but here, the market still finds buyers. Folks are still buying because the area is a hotbed for high paying jobs. As Einstein would say, it’s all relative. 

The top home prices in California make many think that it is a hot housing market, but the truth is sales have gone nowhere for a decade (see below). But sales still hold up because enough people make enough money to keep buying homes at a steady rate. It helps, too, that mortgage rates keep on falling.

Jan CA home sales

In a 2014 Bloomberg interview, I surprised many by saying that if you excluded both cash buyers and those who made two to three times the median income, then 82% of the working population in California could not afford to buy a home according to the traditional affordability calculation.

Eighty-two percent is a significant scary number, but it is based on an outdated premise.

First, this standard affordability calculation is based on the requirement that the buyer makes a 20% down payment. Hardly anyone, in these higher-priced markets, still does that, unless they’re in the selected group I mentioned above.

Second, while the real median household income in California is over $75,000, this analysis does not take into consideration that many homebuyers are in duel income households earning $150,000-225,000 per year as a couple. While they may not be able to afford a $1 million-plus home, they can afford to get into the market.

An affordability crisis would be a deflationary event, but we are seeing nominal home prices still rising. This increase is still based on low mortgage rates.

When you hear about an affordability crisis in America, does this chart of purchase application (see below) look like an affordability crisis? Are college-educated Americans who are going to make $2-5 million in their life really in a crisis? 

The term crisis during this record-breaking expansion has been so abused that the Four Horsemen of the Apocalypse want their horses back.


The take-home lesson from all of this is that those homebuyers, even in the higher-priced zip codes, are doing okay, especially when one considers per capita income vs. home prices. Deputy Chief Economist at Freddie Mac Len Kiefer adds color to this point with his chart comparing home prices with per capita income.

Percapita income vs prices

In comparison, during the housing bubble years, home prices did outpace per capita income. 

We “fixed” that problem by offering exotic loans that largely sidestepped financial qualifications. We all know how that worked out. 

The difference today is that we no longer have the types of loans that feed a credit bubble, so price gains in housing are limited in most areas of the country. Real home price gains went negative last year in America on a year over year basis, unlike the real home price gains we saw from 2002-2005. 

Jan real home price gains

The barbell-shaped economy and the housing affordability crisis

In terms of homeownership, high priced areas typically have a “barbell-shaped” economy, with a large number of wealthier homeowners on one side and a large number of less affluent renters on the other.

The affordability crisis is not the cost of homeownership by rather the cost of renting.

We hear a lot about the need to build more lower-priced starter homes to assist those on the homeownership side of the barbell,  but the real need is for less expensive rental units to accommodate the folks on the rental side of the barbell.  

When is the last time you heard about booming construction in low-cost rentals anywhere in America? The demand is undoubtedly present, so where is the supply?

I am 44 years old, and I don’t remember seeing anything like that in the communities I am familiar with. Developers apparently don’t see this market as profitable. Added to this, NIMBYism and zoning create an additional barrier that prevents these developments from happening in many communities. 

So here is a novel idea: Let’s stop making up stories that promote the so-called needs of the haves and start acknowledging the real problems we have amongst our neighbors on the other side of the economic barbell.  

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Coronavirus likely to quash U.S. home sales to Chinese buyers

Coronavirus - Impact on Chinese buyers

The coronavirus epidemic that has China on near-lockdown likely will quash U.S. home sales to Chinese buyers, the No. 1 foreign purchasers of American property for the last seven years.

“Everything coming out of China is on hold, and that would include, for the most part, Chinese nationals buying U.S. real estate,” said Jonathan Miller, president of Miller Samuel.

Buyers from China accounted for $13.4 billion of residential real estate sales in the U.S. in 2019, with more than a third of those purchases occurring in California, according to the National Association of Realtors. Canada was No. 2, at $8 billion, and India was No. 3, at $6.9 billion. Both of those nationalities favored Florida over California.

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Los Angeles is now the least affordable housing market

For the past two years, the least affordable housing market has been San Francisco, with a median home price of $908,750.

The National Association of Realtors said that California, in general, is the least affordable place to live in the U.S., citing high home prices.

Now, the National Association of Home Builders and Wells Fargo Housing Opportunity Index has given the title of least affordable housing market to Los Angeles. In Los Angeles-Long Beach-Glendale, California, only 11.3% of homes sold during the fourth quarter of 2019 were affordable to families earning the area’s median income of $73,100.

“Growing household formations, ongoing job creation and rising wage growth are fueling housing demand,” said NAHB Chief Economist Robert Dietz. “But a record-low resale inventory, coupled with underbuilding as builders deal with supply-side constraints, continue to put upward pressure on home prices even as interest rates remain at low levels.”

Because of this, Zillow says that home shoppers are leaving Los Angeles for cheaper metros, the most popular being Las Vegas.

San Francisco-Redwood City-South San Francisco fell to No. 2 on the least affordable list, after being the nation’s least affordable housing market for the previous eight quarters. Anaheim-Santa Ana-Irvine; San Diego-Carlsbad; and San Jose-Sunnyvale-Santa Clara are other major California metros that remain unaffordable.

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There haven’t been this few homes on the market since 2013

In the first month of the year, the nation’s home-sale prices increased by 6.7% from 2019 levels, coming in at a median of $306,400, according to Redfin.

Of the 85 largest housing markets Redfin tracks, only three saw a year-over-year decline in the median sale price in January, including San Jose, California; Baton Rouge, Lousiana; and Greenville, South Carolina, which dropped 4.3%, 4.1%, and 1.4%, respectively.

During the month, home sales increased by 6.7% year over year, marking the sixth consecutive month of increases.

Despite this gain, sales were still down 1.1% from December on a seasonally adjusted basis and homes spent two fewer days on the market than they did in 2018.

Redfin attributes this decline to the nation’s lack of housing inventory, which is causing a crunch in housing markets across the country, even in the nation’s most expensive coastal cities.

In January, the active listings of homes for sale fell 11.4% year over year, marking the biggest drop since March 2013 and the sixth consecutive month of declines.

Not only were there fewer homes available for sale than any time since January 2013 but also none of the 85 largest metros tracked by Redfin posted a year-over-year increase in the count of seasonally adjusted active listings of homes for sale, according to the company.

This has led to an uptick in bidding wars, which is significantly benefiting American home sellers.

 “Typically, we don’t see this many buyers in January, but with mortgage rates at a 3-year low, there are plenty of early-birds hoping to secure a home and lock in an affordable mortgage payment,” said Redfin chief economist Daryl Fairweather. “Home sellers, on the other hand, see that the market is clearly heating up and have no reason to rush to list their homes or to make price cuts in order to secure a sale.”

Throughout January, the share of homes that sold above list price increased 1.1 percentage point year over year, coming in at 18.7% compared to 17.6% a year earlier.

“Buyers are getting pretty upset about the lack of inventory,” said Seattle Redfin agent Pauline Corbett. “There’s a growing sense of desperation as bidding wars stretch out their home searches.”

The image below highlights the share of homes sold above listing price in January:

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It’s time to go beyond POS technology

Technology has come a long way in the mortgage industry over the past few years, but one expert says it’s time for lenders to move beyond tech that is front-facing.

Shane Erskine, OneTrust Home Loans president and 2019 HousingWire Rising Star, explained that it will take more than point of sale technology for lenders to remain profitable in a tight market.

As a Rising Star, Erskine became a leader at a very young age. His accomplishments continue to drive the housing industry forward.

The secret to becoming a Rising Star?

“Work hard and be humble,” Erskine said. “Take constructive criticism and use this to improve yourself and your company. Promote teamwork.”

Erskine sat down with HousingWire to discuss how lenders can make sure they come out on top as the market tightens and profits dip.

HousingWire: As someone who went through the housing crisis before, what is your advice for the best approach lenders should take in an increased consolidation market?

Shane Erskine: Stay focused on your business plan, there will be a lot of distractions and noise that can consume you if you let it. If you are successful, have a tight grip on your financials and stay focused on your plan you will weather the storm.

HW: How can lenders remain profitable even as the refi boom dies down?

SE: Profitability is always important, make sure that you understand every line item in your P&L, this will allow you to make proper business decisions to keep your company profitable. Know what is making you money and what is costing you money. Cross-train your staff and leverage technology to produce cost-effective results.

HW: How big of a role do you think technology plays in determining who will come out on top?

SE: Technology in the mortgage space has come a long way and is very important for the industry. A lot of companies are focused on the technology that focuses more on the front end of the origination process, point of sale. This software is great and creates a positive experience for borrowers, but there is a lot out there for the production side as well to assist with compliance, processing, closing and post-closing. This software, from what we have seen, saves costs and can improve quality.

HousingWire’s nominations are now open for our 2020 Rising Stars. But they won’t stay open long – nominations close on February 21, 2020. So nominate your Rising Star today, we want to get to know them!

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Move over, Phoenix: Spokane sees an increase in out-of-town homebuyers

Cities across the U.S. continue to see a rise in housing costs, leaving homeowners and homebuyers to flock to cheaper, more affordable metros.

According to a new report from Redfin, there are four cities that are attracting the most out-of-town buyers, Spokane; Charlotte, North Carolina; Orlando, Florida and Las Vegas.

While Phoenix may be the iBuyer’s dream and a popular metro to move to, it turns out the town with the biggest increase in out-of-town homebuyers is Spokane, Washington.

Currently the most competitive housing market in the country, Spokane saw an increase in home sales of 37% from the fourth quarter of 2018 to Q4 2019, compared to only 5% growth in home supply.

“Tons of people are moving in from the coasts because Spokane is more affordable and less crowded,” said Redfin market manager Michelle Kendrick. “Spokane has all of the basics you would want in a city, but at a great price. It feels like we are in a construction boom. A lot of the new construction is happening on the outskirts of the city, which contributes to our version of traffic.”

“To people from out of town the traffic is nothing, but if you have lived here a long time you do notice it. Job growth has also been a draw for out-of-towners. We have a new Amazon distribution center, the airport is expanding, and the medical industry is big and growing.”

Homebuilding is inexpensive in Spokane, due to the low price of land, Redfin said. In Seattle, land comprises 42% of the value of homes. However in Spokane, land comprises only 23% of the value of homes.

Las Vegas home sales are also growing quickly, at a pace of 15.7% year over year, with 47% of potential homebuyers coming from outside the metro.

“Las Vegas is a pretty competitive market, and I see both new homes and existing homes receiving multiple offers,” said Redfin agent Carol Vandenberg. “I see plenty of buyers from Los Angeles. They are used to the sunshine and the two cities are so connected.”

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Equifax expects to pay out another $100 million for data breach

The Department of Justice may think it knows who hacked Equifax and exposed the sensitive personal information of 148 million U.S. consumers, but that doesn’t mean the breach is behind Equifax quite yet.

In fact, the credit reporting agency disclosed this week that it expects to pay out an additional $100 million for its role in the breach.

Last year, the company set aside then agreed to pay out nearly $700 million to settle numerous federal and state investigations.

But the company revealed this week in its fourth-quarter earnings report that it set aside another $99.6 million in the fourth quarter for “certain legal proceedings and government investigations related to the 2017 cybersecurity incident.”

According to the company, it believes this accrual will cover the remainder of its expected payouts for the breach. More specifically, the company said it “represents completed settlements and our best estimate of remaining liabilities for the U.S. matters related to the 2017 cybersecurity incident.”

All in all, the company set aside just over $800 million for breach-related payouts in 2019, which does not include the company’s legal or professional services expenses.

Beyond that, the company spent an additional $337 million in 2019 on technology and data security, legal and investigative fees, and product liability for the breach.

In total, the breach cost Equifax $1.14 billion in 2019 alone.

Overall, the breach cost Equifax more than $1.7 billion since it was first disclosed in 2017.

According to Equifax, at the time of the breach, the company had $125 million in cybersecurity insurance coverage. The company has long since received the maximum reimbursement of $125 million on that insurance policy.

The company also cautions that despite its current belief that this $100 million will cover all its “remaining liabilities,” it is possible that its financial punishment is not over yet.

“While it is reasonably possible that losses exceeding the amount accrued will be incurred, it is not possible at this time to estimate the additional possible loss in excess of the amount already accrued that might result from adverse judgments, settlements, penalties or other resolution of the proceedings and investigations related to the 2017 cybersecurity incident based on a number of factors, such as the various stages of these proceedings and investigations, that alleged damages have not been specified or are uncertain, the uncertainty as to the certification of a class or classes and the size of any certified class, as applicable, and the lack of resolution on significant factual and legal issues,” the company said in its earnings statement.

“The ultimate amount paid on these actions, claims and investigations in excess of the amount already accrued could be material to the company’s consolidated financial condition, results of operations, or cash flows in future periods,” the company added.

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Purchasing a home drives 15% of buyers to tears

Purchasing a home can be one of the most stressful financial transactions most people ever make, causing about a third of buyers to lose sleep.

That’s according to a new survey from Seattle real estate startup Flyhomes asking 1,000 people about the stress of homebuying. About 15% of respondents said they were reduced to tears during the process while 20% got in a fight with their spouse or partner because of the stress.

Almost two-thirds of the buyers said purchasing a property “was more stressful than they expected,” the Flyhomes report said.

“Stress and homebuying tend to go hand-in-hand, even more than people think,” it said.

About 40% said they spent more than they expected to when purchasing a home, the report said. Half of the people who overspent say that they paid more than $20,000 more than they expected to – and 14% went more than $50,000 over budget.

Almost a quarter of buyers said they had some regrets about their purchase. When asked about specifics, over half say their new home required unexpected repairs or maintenance, a quarter said property taxes were higher than they expected, and 20% said maintenance was more work than they expected.

There were other regrets:

  • Almost 1 in 5 said they weren’t happy with the location.
  • About a third said they wished they’d bought a larger house.
  • One in 5 said they wished they had more bathrooms.
  • Nearly a third said they wished for a larger kitchen.

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People Movers: EasyKnock, Zillow and Nextdoor

People Movers are updates about the business professionals making waves in the housing and mortgage industries.

EasyKnock announced the appointment of J. Taylor Crandall to its board of directors, effective immediately.

Prior to his appointment, Crandall was a founding member and chairman emeritus of private equity firm, Oak Hill Capital, where he has been since the company’s 1986 inception. Before joining Oak Hill, Crandall served as a vice president with the First National Bank of Boston, managing the leveraged buyout group and oversaw the bank’s Dallas energy office.

Crandall also serves on the Board of Directors of Hilltop Holdings, Berlin Packaging, Pulsant, and Omada.

“In addition to EasyKnock’s unique, solutions-oriented product offerings, I was drawn to the company’s strong and passionate team,” said Crandall. “I’m proud to officially join EasyKnock’s Board of Directors, and help the company continue its expansion to help American homeowners nationwide.”

Jonathan Lee has been brought on to Zillow Mortgage as its senior director of mortgage sales, and is now searching for sales trainers to bring on in Orange County.

Prior to joining Zillow Group, Lee was vice president of sales at loanDepot.

Lee was also formerly a production manager of mortgage banking at Discover Financial Services and spent some time as an executive mortgage banker and in production management at LendingTree.

Zillow has spent the last year growing its base, performing in a crowded iBuyer market as Zillow Offers, and doesn’t look like it will be slowing down anytime soon.

Neighborhood social network Nextdoor announced Maryam Banikarim has been brought on as its head of marketing.

Maryam has more than 25 years of marketing experience, managing global brands and international teams.

Prior to joining Nextdoor, Banikarim served as the Global CMO of Hyatt Hotels.

“Purpose should be the heart of a company’s brand. Nextdoor’s purpose of cultivating a kinder world where everyone has a neighborhood they can rely on immediately resonated with me,” Banikaram said in a release. “I couldn’t be more excited to join this extraordinary team that is committed to creating meaningful connections that bridge our online and offline worlds.”

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