Nurul Hana Adi Maimun

Finally some good news from the land of retail! Americans may not be spending as much on clothes these days, but they are apparently nesting — splurging on things to spruce up their houses and apartments. What are people buying? Expensive things. Items that cost over $900 rose 9.5% in the first quarter, according to Ted Decker, Home Depot’s head of merchandising. Appliances, roofing materials and windows were some of the big sellers.

Those sales sent Home Depot (HD)’s overall sales for the first quarter up 9% from a year ago, topping Wall Street’s forecasts. Earnings rose 14% and were higher than analysts’ estimates as well. The company also boosted its sales and profit outlook for the year. Chief financial officer Carol Tomé said during a conference call with analysts that the housing market strength was happening despite the fact that some economists have recently cut their economic growth outlook for the year.
She added that although Home Depot doesn’t normally raise its full-year outlook this early on the year, the company feels confident that the business will remain strong for the rest of 2016.
That should be good news for Home Depot rival Lowe’s (LOW), which will report its first quarter results on Wednesday morning.

The strong results from Home Depot are one of the few bright spots in what has been a lackluster quarter for retailers so far. Macy’s (M), Kohl’s (KSS), Gap (GPS), Nordstrom (JWN) and J.C. Penney (JCP) all disappointed Wall Street last week. But the housing market has remained one of the brightest spots in the U.S. economy, which may help explain why consumers continue to invest in their homes. “Transactions for both new and existing homes are up on last year and activity remains fairly strong. This helpful tailwind is boosting demand for home improvement,” said Håkon Helgesen, retail analyst at research firm Conlumino in a report. Warmer than usual temperatures may have also helped Home Depot in the quarter. CEO Craig Menear noted in the company’s earnings release that Home Depot’s results were favorably impacted by “week-to-week demand spikes caused by weather variability.”

Source: realestate_iq

“Home prices are crossing the line again. After an epic housing crash, where values plummeted nationally by almost 35 percent, the nation is seeing new highs again. The median price of an existing home sold in May hit a record $239,700, according to the National Association of Realtors, which began tracking prices in 1968. “We are seeing flashing yellow lights on affordability. People who are currently renting and want to convert into ownership — major difficulty,” said Lawrence Yun, chief economist of the NAR. “Home prices are rising way too fast compared to people’s income and wage growth.”

The higher median price, where half the homes sold lower and half sold higher, in part reflects the fact that there is more sales activity on the higher end of the market. Other price indexes that measure repeat sales of similar homes show that, nationally at least, prices are still about 10 percent below the peak of 2006.

Some local markets, however, are far more frothy. San Francisco home prices set a new record in May for the second month in a row. The median price in the Bay Area was $700,000, according to CoreLogic. Orange County, California, also surpassed its peak, as have major metro markets in Texas, where home prices didn’t fall as drastically during the housing crash. “The tight supply of homes on the market continues to constrain sales, while low mortgage rates and job growth help fuel healthy demand. This results in a pressure cooker effect, and the market’s traditional pressure release valve — new home construction — isn’t helping much, given that new home sales are running more than 40 percent below historically normal levels,” wrote Andrew LePage, research analyst at CoreLogic.

In 2015, more than a million new households were created, but only 620,000 new housing units were completed, according to an analysis by the Urban Institute. That created a shortage of just more than 430,000 units. The shortage has put upward pressure on both home prices and rents — “a trend that will continue for the foreseeable future absent imminent policy changes,” according to the study.
Affordability is the largest factor now holding back a more robust housing recovery.

“The tight supply of homes on the market continues to constrain sales, while low mortgage rates and job growth help fuel healthy demand. This results in a pressure cooker effect, and the market’s traditional pressure release valve — new home construction — isn’t helping much, given that new home sales are running more than 40 percent below historically normal levels,” wrote Andrew LePage, research analyst at CoreLogic.

In 2015, more than a million new households were created, but only 620,000 new housing units were completed, according to an analysis by the Urban Institute. That created a shortage of just more than 430,000 units. The shortage has put upward pressure on both home prices and rents — “a trend that will continue for the foreseeable future absent imminent policy changes,” according to the study.
Affordability is the largest factor now holding back a more robust housing recovery.

While housing should be pushing overall economic growth, it is not, due to the meager activity in home construction. Rental demand has been fueling most of the construction activity, but multifamily housing starts are starting to slow, as most of the activity was in higher-priced, urban rentals, where supply is now high.
Still the number of cost-burdened renters is at a historic high. From 2008 to 2014, that number rose by 3.6 million to 21.3 million burdened renter households, according to an annual report titled, “The State of the Nation’s Housing,” released this week by the Joint Center for Housing Studies of Harvard University.

“While nearly universal among lowest-income households, cost burdens are rapidly spreading among moderate-income households as well, especially in higher-cost coastal markets,” according to the report.

When renters are struggling to make the monthly payment, they are unable to save for a down payment on a home; homes in some markets may be more affordable than rent, but if the renter can’t come up with that down payment, the opportunity for lowering monthly costs vanishes.

Homebuilders, meanwhile, are touting the return of the first-time buyer; both KB Homes and Lennar reported better-than-expected quarterly earnings this week, and both have entry-level products. Prices, however, are still rising for these builders, and increasing production is difficult due to market factors. “Land and labor shortages will continue to be limiting factors and will constrain supply and restrict the ability to quickly respond to growing demand, while the mortgage market and higher rents will continue to constrain that demand,” said Lennar CEO Stuart Miller on the earnings conference call with analysts.

The mortgage market today is still considered tight by historical standards. Low interest rates have helped some buyers, but only those who have good enough credit to be in the market at all. Some argue that low rates have contributed to higher home prices, as buyers can qualify for more house. That rate cushion will not be forever.
“We are facing housing affordability challenges already with low mortgage rates, but what happens when the rates begin to rise?” wondered Yun.

Source: realestate_iq

“The number of homes under contract hit the highest level the housing market has seen since before the bubble burst, buoyed by a stronger economy and lower mortgage rates.

Pending home sales, which are purchases that haven’t closed yet, were up 4.6% in April compared with the same month a year earlier, according to the seasonally adjusted numbers in the monthly National Association of Realtors® Pending Home Sales Index. They also rose 5.1% from March to April. The report looked only at existing homes and not newly constructed residences.

This is the most homes under contract since February 2006, according to NAR. “April is often a bellwether month for how the spring and year will wind up,” says realtor.com®‘s chief economist, Jonathan Smoke. “We saw almost a half-million new listings come onto the market in April, so buyers appear to be jumping on the fresh inventory.” NAR anticipates that about 5.41 million residences will be sold this year—a 3% bump from last year. “The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market,” NAR chief economist Lawrence Yun said in a statement.

Pending sales were higher across the U.S. except in the Midwest. Soon-to-be-finalized sales in the middle swath of the country dipped 0.6% in April from March, according to the report. But they’re still up 2% over the same time last year. “We have less sales … because [of] the lack of homes for sale,” says longtime Minneapolis Realtor® Michael Sharp of Re/Max Results. “Sellers are afraid to put their homes on the market because they don’t know where they’re going to go.” Demand is so high that he’s seeing residences get scooped up before they formally go onto the market. And too few new homes are going up to alleviate the supply crunch, he says.

In the West, the number of properties under contract shot up 11.4% from March to April, according to the report. They were also 2.8% higher than a year earlier. “We’re seeing the uptick in the spring selling market,” says San Diego Realtor Michael Wolf of Ascent Real Estate.

“This year, it happened to be a little more intense than other years.” Sales were slower at the beginning of the year but began picking up in March and April, when a slew of new homes hit the market, he says. “All those properties that came on the market are getting gobbled up quickly,” Wolf says of the built-up demand from buyers. “If you’re priced well and have done the necessary things to make your property look good, you should sell in a week or less.” Pending sales edged up 1.2% month over month in the Northeast, according to the report. They were also up a none-too-shabby 10.1% over last year.

In the South, monthly sales climbed 6.8% from March to April. They were also up 5.1% higher than a year ago.

Source: realestate_iq

“American luxury real estate brokers are hoping Brexit will lead to money flowing to high-end properties on this side of the Atlantic.

The post-Brexit vote selloff in equities took a particularly heavy toll on British homebuilder shares. For example, Persimmon (PSMMY) lost a third of its value in Friday’s trading.

London’s Brexit pains could mean gains for American luxury real estate

Yahoo Finance – Lawrence Lewitinn
June 25, 2016

American luxury real estate brokers are hoping Brexit will lead to money flowing to high-end properties on this side of the Atlantic.

The post-Brexit vote selloff in equities took a particularly heavy toll on British homebuilder shares. For example, Persimmon (PSMMY) lost a third of its value in Friday’s trading.

Central London, after all, had for many years been the safe haven real estate market for many moneyed purchasers. In 2013, roughly three-quarters of all newly built central London residences were bought by non-Brits, according to research by brokers Knight Frank. About 44% were from Singapore, Hong Kong, and China, with Russia and the Middle East also represented.

But last year, the “super-prime” market in the city (homes above £10 million) saw a decline by a third, in part because of higher property transaction taxes.

With Britain now seeking to end its membership in the European Union, US luxury real estate brokers are anticipating that overseas investors in the London market will unload their properties and take their money stateside.

Leonard Steinberg, president of New York-based brokerage Compass, anticipates a 5% annual decline in UK real estate over the next two years, with London seeing heavier losses. “London has, for the longest time now, been the global center of the economy, and I do believe that this is a stumbling block for them,” said Steinberg, whose agency’s $672 million in residential transactions in the past year were the most for any team in the US, according to data firm Real Trends. “Anything in the United States will fare very well with the European-centric audience,” he added. “New York, Boston, Chicago, Miami, Los Angeles—I think major centers will always do very well with a foreign buyer.”

Jonathan Miller, president of appraisal firm Miller Samuel, doesn’t see London real estate money flooding into America just yet. The British pound received a significant drubbing on Friday, making American property even more expensive to U.K. buyers. Besides, about 44% of Britain’s exports go to the European Union and unwinding the relationship could lead to a drag on the U.K.’s economy over the next couple of years.

Nonetheless, he expects some upside in the highest reaches of the luxury market, especially in New York City. “London as a competitor is probably off the table for many global investors,” he wrote in his latest note. “New York super luxury remains challenged by oversupply—with more supply coming—but it’s still a better outlook for the NYC market, if only a nominal amount.” Yet the benefits maybe short-lived. Prolonged uncertainty in Europe might work its ways to these shores, and uncertainties about the US presidential elections are also a worry, warns Steinberg. “There is so much uncertainty that the only certainty that is out there is uncertainty,” he said.

Source: realestate_iq