No Housing Recession Over Horizon

Through the first half of 2018, existing-home sales are down just a tad, by 2.2%, while new home sales are up 7.4%. Home prices continue to move higher by 5%. Distressed property sales have fallen to historic lows, comprising only 3% of total sales in recent months. The one area of concern is increasing housing unaffordability.

Yet even with higher mortgage rates and higher home prices, the homeownership rate has been inching higher. After touching a cyclical low of a 63% ownership rate in late 2015, the rate increased to 64.4% in the second quarter of 2018 as three million additional households became homeowners in this time, bringing the total to 77.9 million. The total number of renter households has remained roughly the same at 43 million for the past three years.

With rising home prices and more homeowners, the aggregate owners’ equity in real estate is projected to grow by $1.4 trillion this year. That gain would bring the net housing equity (home value minus mortgage outstanding) to over $15 trillion. Considering it had been only $6 trillion a decade ago at the depths of the housing market downturn, the overall picture of the housing market is quite impressive.

 

View the full article here.

Florida, California, and Texas: Top Foreign Buyer Destinations, According to 2018 NAR Survey

Foreign buyers purchase property across the United States, but 52 percent of international buyers are still concentrated in five states: Florida, California, Texas, Arizona, and New York, according to NAR’s recently released 2018 Profile of International Activity in U.S. Residential Real Estate. [1],[2]

Foreign buyers 266,800 U.S. existing homes during April 2017‒March 2018. Florida was the top destination, accounting for 19 percent of foreign buyer purchases. California was the second major destination, and its share increased (14 percent) because of sustained demand from Chinese and Asian Indian buyers. Together, Chinese and Indian buyers made up 20 percent of all foreign buyers.

The shares of Florida and Texas decreased as the fraction of Latin American and Canadian buyers – which are major buyers in these states— also decreased.

Job and educational opportunities, familial presence, cultural similarities, and geographical proximity are factors foreign buyers likely consider when deciding where to purchase U.S. residential property.

Canadian buyers typically purchase properties for use as vacation homes, so they tend to locate in states with warm climates and resort areas. Sixty-two percent of Canadian buyers purchased residential property in Florida, Arizona, and California.

More than a third of Chinese buyers purchased residential property in California, most likely because of its proximity to and cultural affinity with Asia. Texas, Florida, Washington, and Georgia were also major destinations, as well as New York, New Jersey, and Illinois. Chinese foreign buyers were the most likely to purchase homes for a student studying in the United States (seven percent of Chinese buyers), so areas with good universities are attractive to Chinese buyers.

Compared to other major foreign buyers, Indian buyers are not as concentrated in any state. California was the major destination. Most Indian buyers purchased properties to use as a primary residence in these states where they most likely found jobs.

Most buyers from Mexico purchased properties in Texas, Arizona, and California, which are both geographically close to and have cultural similarity with Mexico. Sixty-percent of Mexican buyers purchased the property for use as a primary residence.

The major destination among U.K. buyers were Florida, California, Ohio, Illinois, and Arizona mainly purchased residential property for vacation use. Canadian and U.K. buyers tend to purchase properties for vacation use compared to Chinese, Indian, and Mexican buyers.


[1] The 2018 Profile of International Activity in U.S. Residential Real Estate study team is composed of Lawrence Yun, PhD, Chief Economist, George Ratiu, Managing Director, Housing and Commercial Research, and Gay Cororaton, Research Economist.

[2] The term international or foreign client refers to two types of clients: Non-resident foreigners (Type A) who are non-U.S. citizens with permanent residences outside the United States, and who typically purchase property as an investment, for vacations, or other visits of less than six months to the United States; Resident foreigners (Type B) who are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

June 2018 Pending Home Sales

  • NAR released a summary of pending home sales data showing that June’s pending home sales pace was up 0.9 percent last month but fell 2.5 percent from a year ago.
  • Pending sales represent homes that have a signed contract to purchase on them but have yet to close. They tend to lead existing-home Sales data by 1 to 2 months.
  • All four regions showed declines from a year ago. The South had the smallest dip in pending sales of 0.3 percent. The West had the biggest drop in sales of 5.6 percent. The Northeast fell 4.1 percent followed by the Midwest with a decline of 2.1 percent.
  • From last month, all four regions showed inclines in sales. The Midwest region had the smallest gain of 0.5 percent. The West rose 0.7 percent followed by the South with a gain of 1.1 percent. The Northeast had the largest increase of 1.4 percent.
  • The U.S. pending home sales index level for the month was 106.9. May’s data was revised up to 105.9.

  • In spite of the decline, this is the pending index’s 50th consecutive month over the 100 level.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.

Fastest-Selling Markets in June 2018

Amid strong demand and tight supply, REALTORS® reported that properties that sold in June 2018 were typically on the market for 26 days, faster than one year ago (28 days) and the same time as in May 2018, according to the  June 2018 REALTORS® Confidence Index Survey.[1] The median days on market have been broadly on a downtrend since 2011 when the properties typically were on the market for three months from May 2011, when this question was first asked in the RCI Survey, through March 2012.

During the period April–June 2018, REALTORS® reported that properties typically sold within 31 days in the District of Columbia (18) and in 36 states, led by Utah (18), Colorado (20), Washington (20), Indiana (21), Ohio (21), Nevada (21), Michigan (21), and California (22).

With national inventory of homes for sale equivalent to 4.3 months of supply at the current sales pace, properties sold faster in more metro areas in June 2018 compared to one year ago. Properties in 405 out of 500 metro areas (81 percent) tracked by Realtor.com were typically on the market for fewer days relative to days on market one year ago, a faster selling market compared to June 2017 (395 metros in June 2017). Based on the days the properties were listed on Realtor.com, properties sold most quickly in Jose-Sunnyvale-Sta. Clara, CA (23 days), Seattle-Tacoma-Bellevue, WA (24), San Francisco-Oakland-Hayward, CA (25), Omaha-Council Bluffs, NE-IA (26), and Salt-Lake City, UT (26).

Use the data visualization below to view how fast properties are selling in 500 metro areas tracked by Realtor.com.[2]

[1] In generating the median days on market at the state level, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

[2] To access Realtor.com data, go to https://www.realtor.com/research/data/.

 

Chinese Buyers Still #1, According to NAR 2018 International Survey

Chinese buyers remained as the top foreign buyer of U.S. residential property, according to NAR’s recently released 2018 Profile of International Activity in U.S. Residential Real Estate. [1],[2] Chinese buyers accounted for 15 percent of foreign buyer purchases during the period April 2017-March 2018, which is about the same as the share in the past period. Meanwhile, the shares to total foreign purchases declined for Canada (10 percent), Mexico (eight percent) and the United Kingdom (three percent). The share of Asian Indian foreign buyers was unchanged (five percent).[3]

NAR’s 2018 survey results suggest that Chinese buyers were not as adversely affected by rising prices and dwindling inventory of homes at below $250,000, compared with other foreign buyers. (The number of Chinese foreign buyer purchases was essentially unchanged from 40,600 to 40,400). This is because Chinese buyers are more able to purchase higher-priced properties; the median purchase price among Chinese buyers during the reference period of the survey was $493,100, compared to the overall median foreign buyer price of $292,400. However, the median purchase price among Chinese buyers decreased to $439,100 from $529,900 (-17%). This suggests that Chinese buyers purchased properties in less expensive areas than they did in the past years, which may be due to buyer preference or associated with the tight supply of home for sale in many areas. At the state level, California accounted for 37 percent in 2018 survey, about the same as in the 2017 survey (38 percent). The NAR survey is not able to gather information at the local level.

Canadian and Mexican buyers tend to purchase at the lower price segment, so they were more affected by the decreasing supply of homes for sale below $250,000. The median purchase price among Canadian buyers was $292,000, while the median purchase price among Mexican buyers was $189,100, which are below the median purchase price among all foreign buyers of $292,400. With U.S. home prices ramping up since 2012, the share of Canadian buyers has declined from 24 percent in 2012 to 12 percent in the latest survey year. The major destination of Canadians is Florida, but inventory has increased little or even declined on a year-on-year basis in areas like Miami, Ft. Lauderdale, and Tampa.[4]

The number of Asian Indian buyers declined modestly compared to the decline in Canadian, U.K., and Mexican buyers. Like Chinese buyers, Asian Indian buyers can afford higher-priced homes. The median purchase price among Asian Indian buyers was $412,800.


[1] The 2018 Profile of International Activity in U.S. Residential Real Estate study team is composed of Lawrence Yun, PhD, Chief Economist, George Ratiu, Managing Director, Housing and Commercial Research, and Gay Cororaton, Research Economist.

[2] The term international or foreign client refers to two types of clients: Non-resident foreigners (Type A) who are non-U.S. citizens with permanent residences outside the United States, and who typically purchase property as an investment, for vacations, or other visits of less than six months to the United States; Resident foreigners (Type B) who are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

[3] The number of foreign buyers and number of properties purchased by foreign buyers are used interchangeably under the assumption that one foreign buyer purchased one property during the transaction.

[4] Based on Realtor.com active listings data, 12-month running total. https://www.realtor.com/research/data/

 

Foreign Buyer Residential Purchases Decline to $121 B, According to NAR 2018 International Survey

Foreign buyers purchased $121.0 billion of existing homes from April 2017—March 2018, a 21 percent decline from the past period’s level, according to NAR’s recently released 2018 Profile of International Activity in U.S. Residential Real Estate.[1],[2] Foreign buyers accounted for eight percent of the $1.6 trillion existing home sales during the same period, a decrease from the 10 percent share during the previous 12-month period.[3]

Measures in number of units purchased, the number of purchases declined to 266,800, a six percent decline from the level during the prior period.

Like domestic buyers, foreign buyers faced higher prices and fewer homes for sale[4], especially for homes below $250,000. Foreign buyers who tend to purchase at the lower price segment— such as those from Canada, Mexico, and the United Kingdom —significantly declined. However, foreign buyers who are more able to afford properties at the higher price segment —such as those from China and India — did not appear to have been significantly deterred in purchasing residential property. For the sixth consecutive year, buyers from China were the top buyers, purchasing $30.4 billion worth of residential property, followed by buyers from Canada ($10.5), United Kingdom ($7.3), India ($7.2), and Mexico ($4.2).


[1] The 2018 Profile of International Activity in U.S. Residential Real Estate study team is composed of Lawrence Yun, PhD, Chief Economist, George Ratiu, Managing Director, Housing and Commercial Research, and Gay Cororaton, Research Economist.

[2] The term international or foreign client refers to two types of clients: Non-resident foreigners (Type A) who are non-U.S. citizens with permanent residences outside the United States, and who typically purchase property as an investment, for vacations, or other visits of less than six months to the United States; Resident foreigners (Type B) who are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

[3] The number of foreign buyers and number of properties purchased by foreign buyers are used interchangeably under the assumption that one foreign buyer purchases one property during the transaction.

[4] Unsold inventory of homes for sale at the end of the month

June 2018 Existing-Home Sales

  • NAR released a summary of existing-home sales data showing that housing market activity this June fell for the third straight month down 0.6 percent from last month, and dropped 2.2 percent from last year. June’s existing-home sales reached 5.38 million seasonally adjusted annual rate.
  • The national median existing-home price for all housing types was $276,900 in June, up 5.2 percent from a year ago. This marks an all-time high and the 76th consecutive month of year-over-year gains.
  • Regionally, all four regions showed growth in prices from a year ago, with the West having the biggest advance of 10.2 percent. The Midwest had a gain of 3.5 percent followed by the Northeast with an increase of 3.3 percent. The South had the smallest gain of 2.7 percent from June 2017.

  • June’s inventory figures are up 2.8 percent from last month for the second straight month to 1.95 million homes for sale. Compared with June of 2017, there are more homes available for sale, with inventory up modestly 0.5 percent, marking the first increase in 3 years. It will take 4.3 months to move the current level of inventory at the current sales pace. Transactions are moving faster and it takes approximately 26 days for a home to go from listing to a contract in the current housing market, down from 28 days a year ago.

  • From May 2018, two of the four regions experienced declines in sales. The West had the biggest decline of 2.6 percent followed by the South with a drop of 2.2 percent. The Midwest had a gain of 0.8 percent. The Northeast had the biggest gain in sales of 5.9 percent.
  • Three of the four regions showed declines in sales from a year ago. The West had the biggest drop in sales of 5.0 percent. The Northeast had a decline of 4.0 percent followed by the Midwest with a decline of 3.1 percent. The South a modest gain of 0.4 percent. The South led all regions in percentage of national sales, accounting for 41.8 percent of the total, while the Northeast had the smallest share at 13.4 percent.

  • In June, single-family sales declined 0.6 percent and condominiums sales were unchanged compared to last month. Single-family home sales fell 2.3 percent and condominium sales were down 1.6 compared to a year ago. Both single-family and condominiums had an increase in price with single-family up 5.2 percent at $279,300 and condominiums up 4.9 percent at $258,100 from June 2017.

Housing Affordability in June 2018

The NAR Research Group and REALTOR.COM have partnered to conduct an analysis of affordability at different income levels for all active inventory on the market.  The result of this analysis, the REALTORS® Affordability Distribution Curve and Score, shows that housing affordability across the United States declined in June compared to a year earlier. The main reason for the decline is that housing inventory remains very low, causing affordability to weaken in most areas of the country.

Nationwide, it is estimated that a household needs to earn at least $75,000 to afford more than half of the active housing inventory. Currently, the typical household, earning $51,500 can afford to buy 36 percent of homes for sale.

In June 2018, the Realtors® Affordability Score for the U.S. was 0.80. A score less than 1.0 means that households in many income ranges can afford a smaller share of houses on the market than their income percentile. For instance, under ideal housing conditions, households that earn $35,000-$50,000 should be able to afford 42 percent of homes that are currently for sale. However, they can afford to buy only 31 percent of homes currently on the market.

Metropolitan Area Affordability

Since all real estate is local, the REALTORS® Affordability Distribution Curve and Score identifies the metro areas with the most/least affordability challenges and tracks areas where affordability is weakening or improving.

Among the 100 largest metro areas, Los Angeles-Long Beach et al., CA was the least affordable metro area in June followed by San Diego-Carlsbad, CA and San Jose-Sunnyvale et al., CA. In these metro areas, a typical household can barely afford to buy 5 percent of homes currently listed for sale. In contrast, the same household can afford to buy more than 70 percent of the housing inventory in Youngstown-Warren et al., OH-PA.

Compared to a year earlier, 72 out of the nation’s 100 largest metros became less affordable, whereas 13 were unchanged and 15 became more affordable. While smaller cities are starting to face affordability challenges, Boise City, ID and Spokane-Spokane Valley, WA experienced the highest largest decline in housing affordability in June. For instance, in Boise City, ID, the score decreased to 0.62 from 0.76 a year earlier. Let’s see what this means for households. A household earning $100,000 could afford to buy 64 percent of homes for sale in June,  while the same household was able to afford 76 percent of homes for sale a year earlier.

However, affordability improved in Denver-Aurora-Lakewood, CO, Austin-Round Rock, TX, and Honolulu, HI. Although Denver is one of the fastest housing markets, the score increased from 0.57 to 0.66 in June. This means that a household earning $100,000 could afford to buy about 43 percent of the homes currently listed for sale in Denver; the same household could afford to buy 37 percent of homes for sale a year earlier.

For more information, view the Realtors® Affordability Distribution Curve and Score data page 

REALTORS® Confidence Index Survey: June 2018 Highlights

The REALTORS® Confidence Index (RCI) survey[1] gathers monthly information from REALTORS® about local real estate market conditions, characteristics of buyers and sellers, and issues affecting homeownership and real estate transactions.[2] This report presents key results about market transactions from June 2018. View and download the full report here.

Market Conditions and Expectations

  • The REALTORS® Buyer Traffic Index registered at 68 (71 in June 2017).[3]
  • The REALTORS® Seller Traffic Index registered at 46 (47 in June 2017).
  • The REALTORS® Confidence Index—SixMonth Outlook Current Conditions registered at 66 for detached single-family, 56 for townhome, and 54 for condominium properties. An index above 50 indicates market conditions are expected to improve.
  • Properties were typically on the market for 26 days (28 days in June 2017).
  • Eighty-seven percent of respondents reported that home prices remained constant or rose in June 2018 compared to levels one year ago (89 percent in June 2017).

Characteristics of Buyers and Sellers

  • First-time buyers accounted for 31 percent of sales (32 percent in June 2017).
  • Vacation and investment buyers comprised 13 percent of sales (13 percent in June 2017).
  • Sales of distressed properties (foreclosed or sold as a short sale) accounted for three percent of sales (four percent in June 2017).
  • Cash sales made up 22 percent of sales (18 percent in June 2017).
  • Seventeen percent of sellers offered incentives such as paying for providing a warranty (8 percent), closing costs (8 percent), undertaking remodeling (2 percent), and providing appliances (one percent).[4]

Issues Affecting Buyers and Sellers

  • From April–June 2018, 75 percent of contracts settled on time (73 percent in June 2017).
  • Among sales that closed in June 2018, 74 percent had contract contingencies. The most common contingencies pertained to home inspection (55 percent), obtaining financing (44 percent), and getting an acceptable appraisal (42 percent).
  • REALTORS® report “low inventory”, “interest rates”, and “multiple offers” as the major issues affecting transactions in June 2018.

About the RCI Survey

  • The RCI Survey gathers information from REALTORS® about local market conditions based on their client interactions and the characteristics of their most recent sales for the month.
  • The June 2018 survey was sent to 50,000 REALTORS® who were selected from NAR’s 1.3 million members through simple random sampling and to 7,943 respondents in the previous three surveys who provided their email addresses.
  • There were 4,286 respondents to the online survey which ran from July 1-10, 2018. The survey’s overall margin of error at the 95 percent confidence level is one percent. The margins of error for subgroups and sample proportions of below or above 50 percent are larger.
  • NAR weighs the responses by a factor that aligns the sample distribution of responses to the distribution of NAR membership.

The REALTORS® Confidence Index is provided by NAR solely for use as a reference. Resale of any part of this data is prohibited without NAR’s prior written consent. For questions on this report or to purchase the RCI series, please email: Data@realtors.org


[1] Thanks to George Ratiu, Managing Director, Housing and Commercial Research and Gay Cororaton, Research Economist for their data analysis and comments to the RCI Report.

[2] Respondents report on the most recent characteristics of their most recent sale for the month.

[3] An index greater than 50 means more respondents reported conditions as “strong” compared to one year ago than “weak.” An index of 50 indicates a balance of respondents

who viewed conditions as “strong” or “weak.”

[4] The difference in the sum of percentages to the total percentage of sellers who offered incentives is due to rounding.