First American says low mortgage rates are driving home price growth

In September, home prices rose 0.9%, declining 7.6% year over year, First American said in its Real House Price Index. According to the company, unadjusted house prices sit 8.1% above the housing boom peak.

Consumer buying power, which measures the influence of income and interest rate changes on house-hold spending, increased by 0.2% between August and September, rising 15.8% year over year.

When consumer house-buying power is factored in, home prices are actually 42.2% below their 2006 peak and 18.8% below prices from January 2000.

Although housing affordability improved during the month, Mark Fleming, First American’s chief economist said the growth just wasn’t enough.

“Two of the three key drivers of the Real House Price Index, household income and mortgage rates, modestly swung in favor of increased affordability in September, yet affordability declined month over month,” Fleming said.

This is because September’s home price growth outpaced improvements in overall affordability, according to Fleming.

“The 30-year, fixed-rate mortgage fell by 0.01 percentage points and household income increased 0.03 % compared with August 2019,” Fleming said. “When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on consumer house-buying power.”

“However, nominal house price appreciation jumped 1.1% in September, outpacing the benefits of rising house-buying power on affordability,” Fleming said. “Accordingly, the RHPI increased 0.9% month over month.”

Increases in the RHPI indicate a decline in affordability, and September ‘s was the largest month-over-month affordability decline since November 2018, Fleming said.

While declining mortgage rates have increased house-buying power throughout the year, Fleming said it has also led to a greater demand of supply, which has put pressure on the nation’s home prices.

“When demand increases for a scarce (limited or low supply) good, prices will rise faster,” Fleming said. “While year-over-year, the RHPI shows an improvement in affordability, the increase in house-buying power in September was not enough to offset nominal house price gains compared with August.”

~Alcynna Lloyd, Housing Wire

Will the U.S. Housing Market Continue to Rise in 2020?

Many housing analysts are now predicting that home prices will continue rising in 2020, but at a slower pace than what we’ve seen over the past few years. In August, for example, Zillow made the following prediction about home prices nationwide:

“United States home values have gone up 5.2% over the past year and Zillow predicts they will rise 2.2% within the next year.”

The chart below shows the company’s proprietary “House Value Index” for the U.S., dating back ten years or so. It also shows their forecast for the next 12 months (in the green shaded area to the right). From a home-price perspective, the research team at Zillow expect the housing market to continue rising into 2020.

Home prices through August 2019

Granted, that’s just one forecast — and an educated guess, at that. But it’s part of a growing chorus of voices that are saying the same thing. The general consensus seems to be that the U.S. housing market, as a whole, will continue to rise into 2020. Though we probably won’t see the kinds of gains we saw in 2017 or 2018.

A July 2019 press release from S&P Dow Jones Indices stated: “Data released today for May 2019 shows that the rate of home price increases across the U.S. has continued to slow.”

Look at the latest real estate reports and studies, and you’ll see words like “slowing” and “cooling” come up repeatedly. That’s where we are right now, as of late summer 2019.

From an economic standpoint, we could actually benefit from a slowdown in home-price appreciation. House values have been rising abnormally fast over the past few years, outpacing wage growth along the way. This had created affordability problems for a lot of would-be buyers, often pricing them out of the market entirely.

If home prices rise more slowly in 2020, it could ease some of these problems and give wages a chance to “catch up.”

A Mixed Bag at the City Level

All of the above applies to the nation as a whole. When economists and analysts say they expect home prices to continue rising, they’re usually talking about the median price for the entire nation. But that figure isn’t very useful to a person buying a home in Charlotte, North Carolina or Portland, Oregon.

Local real estate conditions can vary quite a bit. We might say the housing market in general will continue to rise in 2020. But when you drill down to the city level, the outlook is more mixed.

As of August 2019, some local housing markets across the country were experiencing a drop in prices. And that trend could carry over into 2020 as well.

Back in July, we reported the home values were dropping in several major cities and leveling off in others. In those kinds of real estate markets, now might not be the best time to buy a house. The market might not continue rising into 2020. It might be the start of a sustained downturn, during which home buyers are better off taking a wait-and-see approach.

To quote the S&P Dow Jones Indices report again:

“Though home price gains seem generally sustainable for the time being, there are significant variations between YOY rates of change in individual cities. Seattle’s home price index is now 1.2% lower than it was in May 2018, the first negative YOY change recorded in a major city in a number of years. On the other hand, Las Vegas and Phoenix, while cooler than they were during 2018, remain quite strong at 6.4% and 5.7% YOY gains, respectively.”
So, will the real estate market continue to rise in 2020? That depends on which one you’re referring to. This is why it’s so important for home buyers to conduct plenty of localized research before making a purchase.

A Look Back: The Rise & Fall of Home Prices

To understand where we are — and where we might be going — it helps to look back at where we’ve been. Real estate markets tend to follow cycles, after all. And from a real estate context, the past 12 years could be summed up as follows:

Early 2000s: In the early 2000s, the U.S. real estate market was on fire. Demand for homes soared. Builders built new properties at a record pace. And house prices rose rapidly on a wave of strong demand.

2005 – 2007: Unfortunately, much of the housing market activity mentioned above was fueled by “shady” mortgage loans offered to people who couldn’t afford them. The first half of the 2000s saw the rise of all kinds of high-risk mortgage products, such as the “stated-income” loan and the payment option ARM loan.

2008: The U.S. housing market collapse began in earnest in late 2007 to early 2008. It was largely caused by the risky loans mentioned above. Suddenly, millions of Americans could no longer afford their mortgage payments. So they stopped making them. The mortgage industry ground to a halt. Home prices plummeted. And the U.S. economy plunged into a deep recession.

2008 – 2011: When the housing market crashed, home prices fell in most U.S. cities. Some cities saw a mild dip in prices, while other cities (like Phoenix, Las Vegas, and most of California) experienced a tremendous drop in home values.

2012 – 2018: There is no official “start date” for the U.S. housing market recovery. After falling steadily for several years, the nation’s median home price turned north again in 2012. So that’s as good a date as any to mark the start of the recovery. From 2012 to 2018, home prices in most U.S. cities rose steadily — and sometimes significantly. House values rose so fast during those years that many cities (particularly those along the West Coast) began to experience affordability problems.

Late 2018 – early 2019: By the start of 2019, home prices in most parts of the country had fully recovered from the housing bust (and then some).

Late 2019: And that brings us up to the present. We are now into the second half of 2019. The economy is in pretty good shape again. Unemployment is down. The job market is robust. But the real estate market is undergoing a kind of shift. It’s not a strong “seller’s market” anymore. In most cities, homes are now taking longer to sell. Price reductions are more common. Home prices have slowed in some cities, plateaued in others, and started to drop in some places.

2020: No one can predict future housing market trends with complete accuracy. But we can make an educated guess. Here’s ours. We expect home prices nationwide to rise more slowly in 2020 than in 2019. We expect to see more local real estate markets shifting to favor buyers over the coming months. We expect 30-year mortgage rates to remain below 4%, on average, for the foreseeable future.

~Brandon Cornett, HBI

King County housing market soars skyward ahead of summer

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After a lull to start the year, the King County housing market is once again headed skyward.

Since February, the median closing price for residential homes in King County has yet to increase by more than 1 percent in any month, even falling by 5 percent in March. That’s not the case for May, where that median price climbed almost 7 percent ahead of the busy summer months.

“We had a pretty robust May,” Windermere Real Estate Chief Economist Matthew Gardner told KIRO Radio’s Dave Ross. “Essentially we saw mortgage rates drop precipitously down to about 4.2, 4.3 percent at the start of the month, down to 4 percent at the end. That got a lot of buyers off the fence.”

With more buyers entering the fray, pending sales in King County jumped 5 percent in May.

Even with that, though, prices are still well below 2018 levels, with the median residential home price falling 3.62 percent year-over-year. Year-over-year prices in King County have dipped in all but one month in 2019. The only exception occurred during February’s slight 0.78 percent bump.

According to Gardner, that’s been driven primarily by an increase in available homes.

“The number of homes are in the market continues to rise, with more choices for buyers,” he noted. “It’s still pretty tight, but we are seeing more inventory.”

While the summer months are typically the hottest both for weather and home prices, Gardner still expects increases to arrive “absolutely at more modest rates through the balance of the year.”

Down south, prices continued to drop in May, marked by a massive 5.24 percent dip in median residential prices in Pierce County.

“If you look at sales prices, let’s say for May — in King County: $645,000. In Pierce County? $365,000. A significant difference,” Gardner pointed out. “Based on affordability, that’s meaning a lot of people are heading down south.”

~My Northwest Staff

Seattle-area home price cool-down stands out among U.S. cities

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The housing market is getting better for buyers across the country, but Seattle’s shifting market continues to stand out compared to other regions.

Since the local market peaked last spring, single-family home prices have fallen twice as fast in the Seattle metro area as in any other region in the country, according to the monthly Case-Shiller home-price index, released Tuesday.

The total drop for the full metro area in that seven-month span, from June to January, totals 6 percent. The typical U.S. city actually saw a slight uptick in home values over that period, but prices dropped about 3 percent in the San Francisco and San Diego regions, and about 1 percent each in Portland and Chicago.

There are a lot of ways to slice the data, though they all show the local market falling behind the national one

On a month-over-month basis, Seattle-area home costs slipped down another 0.3 percent in January, a slightly bigger drop than the national average.

On a year-over-year basis, prices still went up 4.1 percent, but that was slightly less than the national average – the first time that’s happened in seven years.

And even those gains are masked by big differences across the region. As has been the case, prices are growing for low-cost homes typically found in the outer areas of the region like Tacoma, and staying flat in higher-cost places like Seattle.

The index, which covers King, Snohomish and Pierce counties, divides homes into three tiers. For the cheapest group of homes (those priced below $380,000), prices increased 8 percent over the year. But the most expensive ones (homes priced over $605,000), saw prices tick up less than 2 percent, or slightly less than inflation.

In the middle tier, prices grew 4.5 percent.

Overall, the last time the local market was this cool was 2012, back when prices were still bottoming out from the recession.

The cool-down trend is a broad one. The national home-price gain of 4.3 percent over the past year represents the smallest since 2015. Across the 20 metro areas tracked by the index, only Phoenix saw bigger price gains in January than in December. Las Vegas was the only region in the country where price increases topped 7.5 percent.

There are signs that the local market has bottomed out, however. More recently, prices in February grew $45,000 in King County, the most ever for a single month in dollar terms, though that bounceback isn’t yet reflected in the national Case-Shiller data, which lags behind by a month.

The current median cost of a single-family house is $655,000 in King County, $475,000 in Snohomish County and $355,000 in Pierce County. The Pierce County figure is tied for a record high, while King and Snohomish are well below their peaks reached last spring.

~Mike Rosenberg, Seattle Times

Seattle home sellers are lowering list prices faster than anywhere else

Earlier this week the news was that the average Seattle-area homebuyer has been successfully able to negotiate a deal at below list price for the first time in four years.

But that’s only half the story: In a lot of cases, sellers are now doing the work for buyers by lowering the list price themselves.

At the start of the spring, when the local market was still on fire, just 5 percent of all homes on the market in the metro area had a reduced listing price, according to Zillow.

Now, 22 percent of all listings are being pitched at a reduced price, the most since Zillow began tracking the data in 2010.

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Nowhere else in the country has seen a change that dramatic.

On average,  sellers cutting their list price here have reduced it by 3 percent, the same as the national average. In the city of Seattle and the Eastside, that translates to a cut of about $25,000 to $30,000.

It’s a double advantage for buyers: Not only are list prices dropping, but the average buyer is then able to knock the price down further in negotiations, a reversal from recent years in which bidding wars designed to escalate list prices were the norm.

That’s another area where Seattle stands out on the national stage.

In the city of Seattle, homes now go for 0.6 percent below list price on average, after selling for 4.1 percent above list price a year ago. That 4.7 percentage-point shift is the biggest in the nation among the 50 biggest cities, according to data from Redfin.

However, the fact remains that Seattle has some of the most expensive real estate in the country, and the changes in recent months haven’t put much of a dent in that. Five years ago, the median house in Seattle cost $461,000. It peaked this spring at $830,000 — an 80 percent rise over five years.

~Mike Rosenberg, Seattle Times

 

Seattle home prices soared by 100 percent over past six years, study says

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Average home prices in the Seattle area have skyrocketed by nearly 100 percent in the six-year period after the post-recession housing market hit bottom in 2012, says a new report released Thursday.

That was the steepest price hike among the largest 20 cities in the U.S. and well above the national average, according to the study released by the real estate sales and analysis site Trulia.com.

The report found that home values in the nation’s largest metro areas increased by an average of 53.1 percent from 2012 through 2018. But in the Seattle metro area, home values shot up by 99.6 percent.

A major factor fueling the sharp home price increases in Seattle – and other metro areas that have experienced soaring home prices – has been the rate of population increase exceeding the pace of new home construction.

In the Seattle metro area, the population has grown by two people for each home construction permit issued from 2012 through 2017, which forces home prices upward.
In addition, employment has ballooned by 12.4 percent during the same period in Seattle, the report says.

The new report found that home prices in urban areas increased by more than double the rate as rural areas – 53.1 percent in cities as compared with 27.9 percent in rural counties.

The reason: many metro areas have seen robust growth in jobs while many rural areas have stagnated.

In the 100 largest metro areas, population expanded 4.8 percent, while population in rural counties fell 1.0 percent.

~Komo News

Half of Seattle homes selling above list price

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More than half the homes sold in Seattle last year–52.4% according to real estate website Zillow–were sold for more than the asking price. That’s an increase from 20.3 percent five years earlier. That’s the largest increase in any market that Zillow tracked.

The median amount paid above the list price was $21,000.

Nationwide, 24.1 percent of homes sold above asking price compared to 17.8 percent in 2012. The median amount paid above list price was $7,000.

Zillow cites strong demand, limited supply, and low-interest rates in the U.S. housing market, with a steady decline in inventory over the past three years.

The average home in Seattle sells in less than 50 days, according to Zillow. That’s faster than the nationwide average of 80 days.

“The typical buyer spends more than four months home shopping and has to make multiple offers before an offer is accepted,” Zillow said in a statement.

San Jose had the highest percentage of buyers who paid above price for homes — 68.5 percent — with the median amount spent at $62,000 over list price. San Francisco was second — 64.5 percent — and with the median amount spent at $41,000 over the list.

“In the booming tech capitals of the California Bay Area and Pacific Northwest, paying above list price is now the norm. In the face of historically tight inventory, buyers have had to be more aggressive in their offers,” Zillow Senior Economist Aaron Terrazas said in a statement. He added that he does not see the trend changing in 2018.

 

~Travis Pittman, King 5 News

Can Seattle’s Real Estate Market Keep Up This Growth?

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If Seattle’s real estate market is going to slow down over the next year, will it be a burst or a dribble?

That’s the question on a lot of analysts minds. According to the latest S&P Corelogic Case-Shiller home price index, Seattle has lead the nation in home price increases for  14 months in a row.

The only relief buyers seem to get is a holiday slowdown, and even that is fairly short-lived: Adjusted for seasonal changes, prices grew 0.6 percent from the month prior, according to Case-Shiller, and the Northwest Multiple Listing Service report found that while both inventory and pending sales dipped to their lowest levels since April, prices still increased by double-digits in most of the 23 counties NWMLS serves.

While many brokers see the market growing at more than double the rate of the national average and think the boom is unsustainable in the next year, the question now is mostly whether Seattle will go out with a bang or just start to rise more gradually.

According to the NWMLS report, many brokers are seeing signs that Seattle is not a bubbling market.
“Prices are expected to see some much needed slowdown in 2018 which will help bring more balance to the market,” OB Jacobi, president of Windermere Real Estate, said. “Rising home prices on their own don’t lead to a bubble; a number of other factors have to come into play.”

But can Seattleites be expecting another 12.67 percent growth over last year? Probably not, is what most brokers hope, but so far there’s not much indication that Seattle is slowing down in the first part of 2018.
As one put it to the NWMLS, 2018 could be “less glamorous with 6-to-8 percent appreciation, or even a slight flattening of the market for 8-to-12 months.” But J. Lennox Scott, chairman and CEO of John L Scott Real Estate, “market conditions are set for another robust market in the year of 2018.”

~Zosha Millman, Seattle PI

Seattle Among Top U.S. Cities for Sellers to Get Greatest Return on Investment

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The problem for homeowners who decide to sell in a hot real estate market like Seattle, is that it turns you into a buyer in a very competitive environment. But for those who do decide to cash in, perhaps because they’re leaving the area for someplace cheaper, there’s big money to be gained in Seattle and other cities across the West.

A new analysis by Zillow found that sellers who had held onto their home for a little bit of time are seeing huge returns on their investment. Oakland and Portland lead the way, followed by San Jose, Calif., Denver, Los Angeles, Sacramento, Calif., and Seattle.

Zillow reports that the typical seller in Oakland in 2016 sold their home for an average of $590,000 after living in it for just over seven years. That’s an increase of 78 percent more than what they initially paid. In Portland, the typical 2016 seller sold for about $145,000 more than what they paid nine years earlier, a 65 percent gain.

Seattle sellers, bowing to dollar signs and the influx of well-paid technology workers looking to purchase in the area, gained 53.1 percent or $185,000 on a 2016 sale for a home in which they lived for an average of about nine years.

“The housing market can change a lot in 10 years, and you see that reflected in this top 10 list,” Zillow Chief Economist Dr. Svenja Gudell said in a news release. “Buying a home is one of the biggest financial decisions people will make in their lifetime, and it really paid off for sellers in these cities. Every city on this list has been growing extremely fast over the past decade, with the majority passing peak home value hit during the housing bubble. It’s extremely difficult to time the market, but if you’re a longtime homeowner in one of these cities, you could potentially see a great return on your investment.”

That ROI potential doesn’t appear to be slowing, especially in Seattle where home values rose 15.5 percent year over year. That figure makes the city the fastest growing on Zillow’s top 10 list, followed by Boston and Sacramento.

~Kurt Schlosser, GeekWire

Snohomish County home prices reach new high — again

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EVERETT — Housing prices continue to climb in Snohomish County reaching never-seen-before heights.

Median prices for houses and condos reached $430,000 for July, up from $385,000 for the same month a year ago, according to the Northwest Multiple Listing Services.

That’s an 11.7 percent increase year-over-year. It’s also a $10,000 increase on the same numbers in June, when the median price was $420,000.

“We should be entering the summer doldrums, but I don’t see that happening,” Diedre Haines, principal managing broker-south Snohomish County at Coldwell Banker Bain in Lynnwood, said in a statement.

The median price for closed sales for all homes surpassed $400,000 for the first time this year in April. Prices have been rising steadily ever since.

Last month, a news story in the Orange County Register in Anaheim, California, reported that Snohomish County trailed only King County in the nation for the shortest amount of time a home was on the market. The report citing numbers from Realtor.com said that houses sold in 20 days. Houses in King County sold in 19 days. Arapahoe County east of Denver came in third at 23 days.

Home prices vary greatly with location, with homes in south Snohomish County costing far more than homes in the north.

Almost all of the county saw double-digit price increases year-over-year. The biggest jump was for the Multiple Listing Service area along the U.S. 2 corridor. There, housing prices rose to $433,000, up from $322,475 a year ago, or a 34.3 percent increase.

The only listing service area that did not see a double-digit increase was the one around Edmonds and Mountlake Terrace in south Snohomish County. There, prices reached $470,000, up from $444,000 a year ago, or an increase of just under 6 percent.

The median prices for houses alone is $453,000 for all of the county. The median prices for condos is $323,475, according to the numbers released Monday.

One of the reasons for the climbing prices is a lack of inventory. Only 1,759 Snohomish County homes were on the market for July. That’s down 10.7 percent from the same month a year ago when there were 1,969 homes.

“Inventory remains low, but prices and demand continue to increase, prompting murmurs of a looming bubble,” Haines said, adding, “Some say yes, and just as many are saying no” when asked about the likelihood of a bubble.

In some areas, inventory is showing some signs of growth, Haines noted, but it’s still “way below what would be considered anywhere near normal. Frankly, I am not even sure anymore exactly what normal is — perhaps the current low inventory status is the new normal.”

~Jim Davis, Everett Herald Net