What a fantastic conference in Daytona Beach this month! We had 14 states represented from as far as Washington and Arizona and even a sponsor from Canada! Attendees were able to receive valuable information on “Tips for Attracting Retirees Using Social Media;” “Telling Your Destinations’s Story: Working with media to Get Your Word Out;” “Retiree Buying Habits – What’s Important to Them;” and “Developers can only do so much. Is your community stepping up to become age-friendly and livable?”just to name a few!
We want to thank all our attendees, presenters, Board of Directors and sponsors for your support as AARC continues to be a resource in the retiree recruitment arena. And a big thank you to our Executive Director Wade Adler for his leadership! Conference photos, videos, and presentations are on the website (www.the-aarc.org/conference) for the next week for all to see and will remain on the members only section.
From our family to yours, we hope you have a wonderful holiday season!
Rachel Baker Chair, The AARC
Existing-Home Sales Increase for the First Time in Six Months
Jane Dollinger, National Association of Realtors | November 21, 2018
WASHINGTON (November 21, 2018) – Existing-home sales increased in October after six straight months of decreases, according to the National Association of Realtors®. Three of four major U.S. regions saw gains in sales activity last month.
Total existing-home sales1, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.4 percent from September to a seasonally adjusted rate of 5.22 million in October. Sales are now down 5.1 percent from a year ago (5.5 million in October 2017).
Lawrence Yun, NAR’s chief economist, says increasing housing inventory has brought more buyers to the market. “After six consecutive months of decline, buyers are finally stepping back into the housing market,” he said. “Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.”
The median existing-home price2 for all housing types in October was $255,400, up 3.8 percent from October 2017 ($246,000). October’s price increase marks the 80th straight month of year-over-year gains.
Total housing inventory3 at the end of October decreased from 1.88 million in September to 1.85 million existing homes available for sale, but that represents an increase from 1.80 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, down from 4.4 last month and up from 3.9 months a year ago.
Properties typically stayed on the market for 33 days in October, up from 32 days in September but down from 34 days a year ago. Forty-six percent of homes sold in October were on the market for less than a month.
“As more inventory enters the market and we head into the winter season, home price growth has begun to slow more meaningfully,” said Yun. “This allows for much more manageable, less frenzied buying conditions.”
Realtor.com®’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in October were Midland, Texas; Fort Wayne, Ind.; Odessa, Texas; Boston-Cambridge-Newton, Mass.; and Columbus, Ohio.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage increased to 4.83 percent in October from 4.63 percent in September. The average commitment rate for all of 2017 was 3.99 percent.
“Rising interest rates and increasing home prices continue to suppress the rate of first-time homebuyers. Home sales could further decline before stabilizing. The Federal Reserve should, therefore, re-evaluate its monetary policy of tightening credit, especially in light of softening inflationary pressures, to help ease the financial burden on potential first-time buyers and assure a slump in the market causes no lasting damage to the economy,” says Yun.
First-time buyers were responsible for 31 percent of sales in October, down from last month and a year ago (32 percent). NAR’s 2018 Profile of Home Buyers and Sellers – released in late 2018 – revealed that the annual share of first-time buyers was 33 percent.
“Despite this much-welcomed month over month gain, sales are still down from a year ago, a large reason for which is affordability challenges from higher interest rates,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Prospective buyers looking for their dream home in this market should contact a Realtor® as a first step in the buying process to help them navigate this more challenging environment.”
All-cash sales accounted for 23 percent of transactions in October, up from September and a year ago (21 and 20 percent, respectively). Individual investors, who account for many cash sales, purchased 15 percent of homes in October, up from September and a year ago (both 13 percent).
Distressed sales5 – foreclosures and short sales – represented 3 percent of sales in October (the lowest since NAR began tracking in October 2008), unchanged from last month and down from 4 percent a year ago. Two percent of October sales were foreclosures and 1 percent were short sales.
Single-family and Condo/Co-op Sales
Single-family home sales sit at a seasonally adjusted annual rate of 4.62 million in October, up from 4.58 million in September, and are 5.3 percent below the 4.88 million sales pace from a year ago. The median existing single-family home price was $257,900 in October, up 4.3 percent from October 2017.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 600,000 units in October, up 5.3 percent from last month but down 3.2 percent from a year ago. The median existing condo price was $236,200 in October, which is down 0.2 percent from a year ago.
October existing-home sales in the Northeast increased 1.5 percent to an annual rate of 690,000, 6.8 percent below a year ago. The median price in the Northeast was $280,900, which is up 3.0 percent from October 2017.
In the Midwest, existing-home sales declined 0.8 percent from last month to an annual rate of 1.27 million in October, down 3.1 percent overall from a year ago. The median price in the Midwest was $197,000, up 2.4 percent from last year.
Existing-home sales in the South rose 1.9 percent to an annual rate of 2.15 million in October, down 2.3 percent from last year. The median price in the South was $221,600, up 3.8 percent from a year ago.
Existing-home sales in the West grew 2.8 percent to an annual rate of 1.11 million in October, 11.2 percent below a year ago. The median price in the West was $382,900, up 1.9 percent from October 2017.
The National Association of Realtors® is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample – about 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.
3Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
4Survey results represent owner-occupants and differ from separately reported monthly findings from NAR’s Realtors® Confidence Index, which include all types of buyers. Investors are under-represented in the annual study because survey questionnaires are mailed to the addresses of the property purchased and generally are not returned by absentee owners. Results include both new and existing homes.
5Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at nar.realtor.
NOTE: NAR’s Pending Home Sales Index for September is scheduled for release on November 29, and Existing-Home Sales for November will be released December 19; release times are 10:00 a.m. ET.
Throughout this year, observers have begun to speculate that the country’s housing market may have hit its peak. Meanwhile, millions of Americans continue to wait on the sidelines. Housing inventory remains incredibly tight, meaning that buying a home is a very expensive and difficult proposition for many. At the same time, expensive rents and low wages have constrained people’s ability to save up for a down payment.
And 2019 appears set to bring more of the same. “I would still rather be a seller than a buyer next year,” said Danielle Hale, chief economist at real-estate website Realtor.com. Here is what forecasters predict the New Year will hold for America’s housing market:
Mortgage rates will continue to rise, causing home prices and sales to drop
As of Nov. 21, the interest rate on a 30-year mortgage was 4.81%, which is 89 basis points higher than a year ago. But by this time next year, experts predict it will be even higher.
Realtor.com estimated that the rate for a 30-year mortgage will reach 5.50% by the end of 2019, while real-estate firm Zillow estimated that it could hit 5.80% in a year’s time. Mortgage liquidity provider Fannie Mae was more moderate, predicting that rates will only increase to 5% by then.
“What’s driving the slowdown in price appreciation and the rise in inventory is not so much that inventory is being created, but that demand is decreasing,” he said. “This is an extremely mortgage-rate sensitive housing market.”
Realtor.com only expects the national median home price to increase 2.2% next year and for sales to drop 2%. Zillow was a bit more upbeat, expecting home prices to rise 3.8%. (In October, the median sales price only increased 3.8% from a year earlier amid a 1.8% annual uptick in home sales, the first such increase in six months.)
Added inventory won’t make it a buyer’s market
In some of the nation’s priciest markets, housing inventory has improved in recent months, relieving some of the inventory-related constraints on housing markets.
But that’s not good news for buyers or sellers. The increase in inventory in this case is more the result of a decrease in demand because of rising interest rates than it is a sign of new homes being built.
For sellers, this shift will lead to fewer offers and bidding wars, which could in turn could cause some to feel pressure to drop their asking price. However, all of these factors won’t outweigh the price appreciation that’s occurred in recent years. “You’re still likely to walk away with a decent profit in 2019 if you sell,” Hale said.
Moreover, the uptick in inventory has mostly occurred in the pricier tier of homes, meaning that the change doesn’t directly benefit buyers. Rather, it could provide some wiggle room for people looking to upgrade their home. That in turn might marginally expand the number of starter homes on the market.
People will continue to move away from costly housing markets
A trend that picked up pace in 2018 was the exodus from some of the nation’s priciest housing markets. Millions of people have chosen to leave California, for instance, and have headed toward Sunbelt cities like Las Vegas and Phoenix.
That trend won’t stop in 2019, which is good news for people looking to sell homes in smaller cities. “Home buyers are going to look for affordability and, often times, that will mean moving from a high cost major market to a lower cost secondary market,” Hale said. Many of these cities, such as Raleigh, N.C., and Nashville, Tenn., have growing economies and healthy job markets, further sweetening the deal.
Another factor that could fuel migration in the future is the new tax code signed into law by President Trump in 2017, which removed the deductions for state and local taxes. Taxpayers will only fully feel the effects of that change for the first time next spring as they receive their refund checks in the mail, said Aaron Terrazas, senior economist at Zillow.
“You’ve already seen some of the backlash to the tax bill in the elections that happened in New Jersey and Orange County,” Terrazas said. “Whether or not it spurs migrations, that’s something that happens pretty slowly. People certainly get upset and vote. Actually picking up and moving is a whole other level of seriousness.”
The threat of a recession remains a big question mark
The economy is still strong, but it’s unclear for how long that will continue to be the case. Economists have predicted that a recession could come as soon as late 2019.
Whenever it occurs, the recession is sure to shrink demand for homes and cause prices and sales to drop. The magnitude of those effects will depend on how bad the recession is. In short, the more jobs that are lost, the more hard-hit the housing market will be.
And the housing market may begin to feel the recession before it even starts. With memories of the pre-2008 housing bubble still fresh in people’s minds, would-be homebuyers may be hesitant to purchase a property if they believe they’d be buying at the top of the market in doing so.
“That could be more detrimental to the housing market than the actual underlying issues,” Blomquist said.