Home Sales Forge Ahead

A surge in the Northeast and a smaller gain in the South pushed existing-home sales up in November for the third consecutive month, according to the National Association of Realtors®.
Total existing home rose 0.7 percent to a seasonally adjusted annual rate of 5.61 million in November from 5.57 million in October. November’s sales pace is now the highest since February 2007 and is 15.4 percent higher than a year ago.
Lawrance Yun, NAR chief economist, says it’s been an outstanding three-month stretch for the housing market as 2016 nears the finish line. “The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates rose have combined to drive sales higher in recent months,” he said. “Furthermore, it’s no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month.”
The median existing-home price 3 for all housing types in November was $234,900, up 6.8 percent from November 2015 ($220,000). November’s price increase marks the 57th consecutive month of year-over-year gains.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 3.77 percent in November from 3.47 percent in October (highest rate since January at 3.87 percent).

Conforming Mortgage Limits Rise for 2017

The federal government is increasing the limit for conforming mortgages from $417,000 to $424,100 in most regions of the United States starting Jan. 1, 2017, the Federal Housing Finance Agency announced Wednesday—the first such increase since 2006.
The approximately 1.7 percent bump in the baseline conforming loan limit follows the Agency’s announcement that the average U.S. home price has returned to its pre-decline peak, which it hit in the third quarter of 2007. The FHFA bases the loan cap on its quarterly Housing Price Index, which gauges average single-family home prices. The index rose 1.5 percent during the third quarter of 2016 and is up 6.1 percent over the past year, enough to push it above its previous high point.
Conforming loan limits are significant because they apply to home loans that meet the underwriting guidelines of Fannie Mae or Freddie Mac, the government-sponsored entities that acquire mortgages from lenders and ensure a steady flow of money to the mortgage market. Interest rates for nonconforming, or jumbo mortgages, are generally higher than rates for loans that fall under the cap, and these types of mortgages can be more difficult to obtain.
National Association of Realtors President William Brown said, “Today’s conforming loan limit increase is a much-needed recognition of rising home prices in high-cost markets, and a help to first-time and lower-income borrowers looking to utilize an FHA mortgage. Credit remains tight, but this decision will help more qualified buyers address the hurdles and high costs standing between them and the dream of homeownership.”

Home-Selling in Winter

Many homeowners are hesitant to list their home in the winter thinking that the cold weather season won’t attract many buyers. But while spring may be the peak home selling season owners getting started by the first of the year may be at an advantage.
The real estate brokerage Redfin found that on average, sellers net more above the asking price during the winter months. Their study found this to be true even in cities like Boston and Chicago and that homes listed in winter tended to sell faster than those in the spring.

One advantage for winter home marketing is the fact that many corporate or professional transfers focus on ‘the new year.’ These transferees are serious buyers and know that properties coming on the market at the first of the year are owned by ‘serious sellers’ motivated to get a jump on the ‘spring market.’
Winter sellers know that inventories of homes on the market tend to be lower in winter and therefore they could be very well facing less competition. They feel that if their home doesn’t attract a buyer they will have the advantage of ‘market feedback’ from agents and buyers and have the time to make recommended condition and price adjustments before the April rush.
Naturally winter buyers will be more focused on issues like heating systems and heating costs as well as supplemental heat sources like fireplaces and wood and pellet stoves.

Home stagers agree that the gray days ahead can leave a gloomy impression and advise sellers to emphasize a sense of warmth inside the home . An added tip is to pay close attention to lighting. It’s advisable to increase bulb wattage and add fixtures in areas that tend to be dark.

Commercial Sectors Expects Modest Growth

Multifamily and industrial properties will continue to lead growth among commercial real estate sectors as the economy makes moderate gains through the end of the year and into 2017, NAR Chief Economist Lawrence Yun said at the 2016 REALTORS® Conference & Expo in Orlando on Friday. He expects rental rates in the multifamily sector to rise a modest 3 percent a year through 2018, fueled by young households who see solid job growth but aren’t yet ready to buy. He said that the industrial properties are expected to see a solid 4 percent growth in rental rates. Yun said the country is likely to maintain positive economic growth over the next two years likely at a 2 percent rate.

Inflation will largely stay in check, thanks to low gas prices, but expect it to rise from 1.2 percent this year to 2.5 percent over the next two years because gas prices will continue to drop. That means the inflation rate will no longer offset rising medical costs, rents, and college tuition. He predicted that it is likely for the Federal Reserve to raise its short-term interest rate in December 2016 — and then possibly twice more in 2017.

K.C. Conway of Sun Trust Bank said that because of weakness in the U.S. economy, Conway said, the Fed might raise its short-term rate only once (in December) and then not at all in 2017 because increases could hurt the two sectors of the economy that are still doing well: home sales and personal consumption.

Both Yun and Conway said the economy is hurt by the lack of new housing construction, which is keeping prices high and forcing young households to delay home purchases. At the core of the inventory problem are regulations that make it hard for banks to increase their construction lending to builders. Easing those restrictions for community banks, Yun said, would help unleash badly needed financing for builders without putting the banking system at risk, since large, systemically important financial institutions would still be subject to stringent capital rules.

Realtors’ Role

When the first Profile of Home Buyers and Sellers was introduced 35 years ago by the National Association of Realtors®, mortgage rates were over four times higher than they are today and first-time buyers made up a larger share of overall sales. In anticipation of the upcoming 2016 survey release one trend that NAR has identified as a noteworthy is the continued role of the Realtor as the centerpiece in the majority of home purchases and sales.

It should come as no surprise that NAR didn’t track buyer and seller data on internet usage in 1981. With the World Wide Web not gaining mass popularity until the 1990’s and realtor. com® introduced, in 1995, the ability to view listings online and then contact a Realtor® was non-existent.

When NAR first began asking the question 21 years ago, only 2 percent of buyers used the internet during their home search. By 2005 usage soared to over three-quarters of buyers, and since 2012, 90 percent or more have gone online during the house hunt.

Despite the internet’s ascending popularity over the past 20 years nearly 90 percent of respondents worked with a real estate agent to buy or sell a home which pulled for-sale-by-owner transactions down to their lowest share ever (8 percent). Realtors® are the source of online real estate data, and they continue to use their real insights and local market knowledge to help bring buyers and sellers together

First-time Buyers Boost Sales

Existing-home sales rebounded strongly in September and were propelled by sales from first-time buyers reaching a 34 percent share, which is a high not seen in over four years, according to the National Association of Realtors®. All major regions saw an increase in closings last month, and distressed sales fell to a new low of 4 percent of the market.
Total sales which are completed transactions that include single-family homes, town homes, condominiums and co-ops, hiked 3.2 percent to an annual rate of 5.47 million in September. After last month’s gain, sales are at their highest pace since June and are 0.6 percent above a year ago.
Lawrence Yun, NAR chief economist, says the two-month slump in existing sales reversed course convincingly in September. “The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual, he said. “Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”
The median existing-home price in September was $234,200, up 5.6 percent from September of last year ($221,700). September’s price increase marks the 55thconsecutive month of year-over-year gains.
Matching the highest share since July 2012, first-time buyers were 34 percent of sales in September, which is up from 31 percent in August and 29 percent a year ago. First-time buyers represented 30 percent of sales in all of 2015.


While home sales trended lower nationally, the Pending Home Sales Index for the Northeast Region rose 1.3 percent in August and is now 5.9% above a year ago.
Lawrence Yun, Chief Economist for the National Association of Realtors said that a new NAR study revealed single family construction is not keeping pace with job creation and is lacking overall in 80% of measured metro areas.
Yun said, “Contract activity slackened through out the country in August except for in the Northeast,, where higher inventory totals are giving home shoppers greater options and better success signing a contract.
Following the August decline Yun expects existing home sales in 2016 to be around 5.36 million, a 2.1 percent increase from 2015 and the highest annual pace since 2006. The national median existing home price growth is forecast this year to rise by around 4 percent.
Penobscot County home sales year to date surged by 21% compared to last year with 3332 homes sold for a total value of $428 million which was a dollar increase of 32%.
Sean Becketti, chief economist, Freddie Mac said the 5-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 2.80 percent this week with an average 0.4 point, down from last week when it averaged 2.81 percent. A year ago, the 5-year ARM averaged 2.88 percent.

Reasons to Buy a Home This Fall

The fall may be notorious for a slowdown in the housing market. But for home buyers that shouldn’t mean they should go into early hibernation. For home shoppers, the fall likely will be the best time to buy.
Lower home prices – October can offer the best month for home deals, according to research by RealtyTrac of more than 32 million home sales over the last 15 years. In October, home buyers paid 2.6 percent below the estimated market value at the time for their homes, the study shows. In other words, on a $300,000 home, they could save $7,800 by purchasing it in October.
Less competition – The home buyer rush from the spring and summer is over. Home shoppers this summer who were rushing to find a home before school started have already found one. Fall home buyers will have less competition. Many folks will drop out of the market until after the new year.
More leverage – Home sellers in the fall may be more pressed to sell. They are generally people who need to sell, which can make for better negotiations for the buyer. The longer a home lingers, the more negotiating power the buyer likely will have. Plus, some sellers may want to get settled in their new home before the holidays and have more incentive to make a deal sooner rather than later.
Year-end tax credits – Home buyers who close on a home by the end of the fiscal year may find a nice tax deduction awaiting them on April 15. They may be able to deduct closing costs, property tax, and mortgage interest to offset their taxable earnings.



Economic growth is poised to accelerate to 2.6 percent in the second half of the year, a rebound from the lackluster growth of 1.0 percent in the first half of 2016, according to Fannie Mae’s September 2016 Economic and Housing Outlook.
Their Group’s full-year 2016 forecast remains at 1.8 percent, consistent with a prior forecast. Consumer and government spending are expected to drive growth despite a cool down in consumer activity so far in the third quarter. At the same time, inventory investment and net exports are likely to drag on growth and nonresidential and residential investment are expected to be neutral for the year.
“Consumers continue to carry the economy and the earnings slowdown in the August jobs report may be an aberration in the recently improving personal income growth trend,” says Fannie Mae Chief Economist Doug Duncan. “However, the declining trend in business productivity has negative implications for businesses’ profit outlook, as low productivity tends to boost labor costs, which could act as a headwind for hiring and investment. Corporate profits are down 4.9 percent from one year ago, extending their streak of annual declines.”
“A bright spot for housing market activity is the strengthening of new home sales, which is significantly outperforming activity in recent years,” says Duncan. “The share of new home sales that are under construction or not started has climbed to nearly 70 percent, improving the outlook for single-family home-building. Existing home sales under-performed 2015 for the first time in July, however year-to-date sales are still 2.6 percent higher than during the same period last year. Additionally, the share of for-rent multifamily building starts has trended up with recent trends in home-building activity favoring the rental market.”

Housing Shortage in Major Markets

Single-family home construction is currently lacking in 80 percent of metro areas despite steady job creation. The low activity is creating a shortage that is curtailing affordability according to new research from the National Association of Realtors.
The NAR’s study reviewed new home construction to determine the markets with the greatest shortage of single-family housing starts. The findings reveal that single-family construction is underperforming in most of the U.S.
Lawrence Yun, NAR chief economist, says, “Inadequate single-family home construction since the Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults,”
NAR analyzed employment growth in relation to single-family housing starts in the three-year period from 2012 through 2015. Historically, the average ratio for the annual change in total jobs to permits is 1.6 for single-family homes. The research found that 80 percent of measured markets had a ratio above 1.6, which indicates inadequate new construction in most of the country.
The top 10 metro areas with the biggest need for more single-family housing starts are New York, Dallas, San Francisco, Miami, Chicago, Atlanta, Seattle, San Jose, Denver, and San Diego. Their healthy job markets continue to attract an influx of potential homeowners, only fueling the need for more housing.
Single-family housing starts are seen as adequate to local job growth in Pensacola, Florida; Huntsville, Alabama; Columbia, South Carolina; and Virginia Beach, Virginia.