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Posts Tagged ‘EHS’

NAR May 2014 Existing Home Sales: ‘Heat-up’

June 23, 2014 | 2:54 pm | Charts |

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I always like to parse out press release of the NAR Existing Home Sales Report using their data but presented it with proper emphasis. I believe these charts are better ways to interpret the report results.

My two big rules: ignore seasonal adjustments and focus on year-over-year results. The consumer doesn’t know that the EHS report results are heavily adjusted rather than providing the actual results.

Since the annual sales figure is a multiplier of a monthly figure, why do we need to alter the actual numbers any more by adjusting for seasonality? Through recent periods like the possible expiration of the Bush tax cuts (end of 2010), the federal homeowners tax credit for new buyers and existing home buyers as well as the expiration of the fiscal cliff at the end of 2012, seasonal adjustments are subject to maddening skew.

For much of 2013, median sales price was rising at an annual rate of more than 10%…

  • It’s good to see the pace of the market returning to more sustainable conditions – last year’s market was not normal with rapid price growth and tight supply.
  • Now we are seeing inventory return to the market and rate of price growth is easing. Both are good news.
  • Mortgage rates have slipped but still not to the lows of early 2013. Falling rates not helping sales rise because last year was a release of years of pent-up demand.
  • First time buyers are still not as active as they need to be, with their share down to 27% from 29%. Typically they shold account for at least 1/3 of the market. Tight credit and tough job market are reasons (not a lifestyle changes).

 

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New Angle: Blame Low Mortgage Rates

June 23, 2014 | 10:37 am |

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The National Association of Real Estate Editors just held their annual conference and one of the experts was Lawrence Yun, the chief economist of the National Association of Realtors.

Admittedly he has always seen the real estate world through different lenses than I so I am often thrown for a loop when I come across some of the rationale for the current state of the housing market.

A local media outlet recapped his NAREE speech but since I didn’t attend and there is no transcript, I’ll go with the following paraphrasing:

Mortgage rates reached record lows in 2012 and 2013 of around 3.3 percent for 30-year home loans. Homeowners don’t want to let go of those once-in-a-lifetime bargain mortgages, says Lawrence Yun, chief economist for the National Association of Realtors. So homeowners avoid putting their homes on the market in order to keep those low mortgage rates and that has resulted in super low inventories of home for sale. Although rates are still low (less than 5 percent) many people are opting to rent out their houses so they can hang onto great mortgages, Yun says.

Here’s another way to look at what he says is happening:

Yun – Home sales are not rising (year-over-year) because mortgage rates are so low that would-be sellers won’t sell. They simply love their low mortgage rate more than moving.

My view – Home sales are not rising (year-over-year) because of a combination of rapidly rising home prices that reduces affordability and historically tight mortgage lending standards that resulted record low inventory. Tight credit keeps the roughly 40% of home owners with low or negative equity from selling because they don’t qualify for the next mortgage. Hence, sales fall.

There is clearly way too much emphasis on mortgage rates in our housing economy.

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PBS Newshour – Making Sense of Weak US Housing Reports

April 28, 2014 | 5:10 pm |

Michelle Conlin of Reuters gives a nice overview of the state of the US housing on PBS, talking through the national reports that hit us recently. Check it out. This month’s weak NAR Existing Home Sales report has unleashed a surge of housing self-loathing (although today’s PHSI seems to take some of the drama/edge off).

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