August 2015 Newsletter
Autumn is on the horizon. Soon there will be a nip in the air. The season of boating, biking, fishing, and playing golf will soon come to an end – but it doesn’t have to! Maybe it’s time to think about your new life in a more temperate climate. AARC is your source for retiree-friendly communities.
I hope you’ll take to time to learn about our upcoming annual conference in Charleston, SC November 11th – 13th – Click to learn more
Jeff Fleming Chair, The AARC
Home Prices Rise in Nearly All Metro Areas in Second Quarter
Adam Desanctis/National Association of Realtors
WASHINGTON (August 11, 2015) — A promising climb in home sales throughout the country amidst insufficient supply caused home prices to steadily rise in most metro areas during the second quarter, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price increased in 93 percent of measured markets1, with 163 out of 176 metropolitan statistical areas2 (MSAs) showing gains based on closings in the second quarter compared with the second quarter of 2014. Thirteen areas (7 percent) recorded lower median prices from a year earlier.
The number of rising markets in the second quarter increased compared to the first quarter, when price gains were recorded in 85 percent of metro areas. Thirty-four metro areas in the second quarter (19 percent) experienced double-digit increases, a decline from the 51 metro areas in the first quarter. Nineteen metro areas (11 percent) experienced double-digit increases in the second quarter of 2014.
Lawrence Yun, NAR chief economist, says the housing market has shifted into a higher gear in recent months. “Steady rent increases, the slow rise in mortgage rates and stronger local job markets fueled demand throughout most of the country this spring,” he said. “While this led to a boost in sales paces not seen since before the downturn, overall supply failed to keep up and pushed prices higher in a majority of metro areas.”
Adds Yun, “With home prices and rents continuing to rise and wages showing only modest growth, declining affordability remains a hurdle for renters considering homeownership — especially in higher-priced markets.”
The national median existing single-family home price in the second quarter was $229,400, up 8.2 percent from the second quarter of 2014 ($212,000). The median price during the first quarter of this year increased 7.1 percent from a year earlier.
The five most expensive housing markets in the second quarter were the San Jose, Calif., metro area, where the median existing single-family price was $980,000; San Francisco, $841,600; Anaheim-Santa Ana, Calif., $685,700; Honolulu, $698,600; and San Diego, $547,800.
The five lowest-cost metro areas in the second quarter were Cumberland, Md., where the median single-family home price was $82,400; Youngstown-Warren-Boardman, Ohio, $85,000; Rockford, Ill., $94,700; Decatur, Ill., $96,000; and Elmira, N.Y., $98,300.
Total existing-home sales3, including single family and condo, increased 6.6 percent to a seasonally adjusted annual rate of 5.30 million in the second quarter from 4.97 million in the first quarter, and are 8.5 percent higher than the 4.89 million pace during the second quarter of 2014.
“The ongoing rise in home values in recent years has greatly benefited homeowners by increasing their household wealth,” says Yun. “In the meantime, inequality is growing in America because the downward trend in the homeownership rate means these equity gains are going to fewer households.”
At the end of the second quarter, there were 2.30 million existing homes available for sale4, slightly above the 2.29 million homes for sale at the end of the second quarter in 2014. The average supply during the second quarter was 5.1 months — down from 5.5 months a year ago.
Metro area condominium and cooperative prices — covering changes in 61 metro areas — showed the national median existing-condo price was $217,400 in the second quarter, up 3.1 percent from the second quarter of 2014 ($210,800). Fifty metro areas (82 percent) showed gains in their median condo price from a year ago; 11 areas had declines.
Rising home prices weighed on affordability in the second quarter compared to the second quarter of last year despite an uptick in the national family median income ($66,637)5. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $49,195, a 10 percent downpayment would require an income of $46,605, and $41,427 would be needed for a 20 percent downpayment.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says Realtors® are reporting strong competition and limited days on market for available homes — especially at the entry-level price range. “Buyers should work with their Realtor® to deploy a negotiation strategy that helps their offer stand out,” he said. “If a bidding war occurs, it’s important for the buyer to stay patient and only counteroffer up to what he or she can comfortably afford. It’s better to walk away and wait for the right home instead of being in a situation where one has purchased a home above their means.”
Real Estate Firms Remain Confident About Future Profitability, NAR Study Shows
Adam Desanctis/Realtor.com – July 17, 2015
WASHINGTON (August 6, 2015) – Real estate firms are confident in the industry’s future growth and their increasing profitability, according to the 2015 National Association of Realtors® Profile of Real Estate Firms.
“A majority of firms have a positive view of the future, with 95 percent of all firms expecting their net income to either increase or stay the same in the next year,” said NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark. “The improving economy continues to fuel job growth, and while some markets are still recovering, the demand for real property is back, and prospects are looking good for the real estate industry.”
The annual survey found that commercial firms are the most optimistic, with 75 percent expecting net income to increase, and 22 percent anticipating it to stay the same. Residential firms are only slightly less optimistic; 69 percent report that they expect to see an increase in their net income next year, 25 percent expect it to stay the same, and 6 percent predict a decrease. Only 3 percent of commercial firms predict a decrease in net income in the next year.
The typical residential firm has been operating for a median of 13 years, and the typical commercial firm has been in business for 20 years. The average firm, 79 percent, has one office and two full-time real estate licensees, while 9 percent of firms are larger with four or more offices and have a median of 125 full-time licensees.
In 2014, a typical residential real estate firm’s brokerage sales volume was $5.6 million, and the typical commercial real estate firm’s brokerage sales volume was $4.4 million. The size of a firm has a large impact on its sales volume; firms with only one office had a median brokerage sales volume of $4.1 million in 2014, while those with four or more offices had a median brokerage sales volume of $250 million. Correspondingly, those with one office had a total of 18 real estate transaction sides in 2014, while those with four or more offices had 900 real estate transaction sides.
According to the survey, 82 percent of firms specialize in residential brokerage, making it by far the most popular specialization. Residential property management follows at 7 percent, and commercial brokerage comes in third at 4 percent. Eighty-three percent of firms are independent, non-franchised companies, while 15 percent of firms are independent, franchised companies. The remaining firms are subsidiaries of national or regional corporations.
When asked to name the biggest challenge facing their firms in the next two years, 51 percent of firms named profitability. The second most common responses, at 46 percent each, were keeping up with technology and maintaining sufficient property inventory.
Firms were also asked to predict the effect of the different generations of homebuyers on the industry for the next two years. The most common concern named, at 54 percent, was the millennial generation’s inability to buy a home because of stagnant wage growth, a slow job market and their debt-to-income ratios. This was followed by baby boomer agents retiring from the real estate industry, and, conversely, the recruitment of millennials and Gen Xers into the real estate profession.
Forty-five percent of firms expect competition to increase over the next year (from mid-2015 to mid-2016) from non-traditional market participants, while 41 percent expect to see increased competition from virtual firms. Only 16 percent expect increased competition from traditional brick-and-mortar firms.
However, these concerns are not preventing firms from growing. Forty-four percent of firms are actively recruiting new agents, with 88 percent citing business growth as their primary reason for hiring new agents.
Eighty-one percent of all firms offer errors and omissions/liability insurance to independent contractors, licensees and agents, making it the most common benefit real estate firms offer employees. More than half (55 percent) of firms either share the cost of the insurance with employees or have the employee pay the entire cost. Twenty percent of firms offer health insurance to their independent contractors, licensees and agents; in a majority of cases the employee covers the entire cost.
The most common feature (95 percent) displayed on real estate firms’ websites is property listings. Other common features are agent and staff profiles, mortgage or financial calculators, information about the home buying and selling process, and community information and demographics. Eighty-six percent of firms provide or encourage agents and brokers to use specific multiple listing services, making it the most common software used in real estate firms. Other commonly used software includes comparative market analysis, electronic contracts/forms and e-signature.
The 2015 NAR Profile of Real Estate Firms was based on an online survey sent in July of this year to a national sample of 138,669 executives at real estate firms. This generated 4,555 useable responses with a response rate of 3.3 percent.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.