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It’s not just the temperatures that are rising this summer. The number of homes sold, as well as the prices they’re fetching, seemed to be shooting up higher than the mercury in June, according to a new report.

With mortgage interest rates hitting bargain-basement lows, buyers raced to the market undeterred by the record-breaking prices (or maybe in fear that they’d rise even further). Existing home sales shot up 11%, to 583,000, from May to June, according to a recent report from the National Association of Realtors®. Sales were also up 1.9% from the same time a year earlier.

The report only included existing homes, which are residences that aren’t newly constructed. And realtor.com just looked at the numbers that were not seasonally adjusted, meaning they weren’t smoothed out over a 12-month period to account for fluctuations.

June’s median existing home price also rose 4.8% year-over-year, to $247,700—breaking May’s all-time high, according to the report. It was the 52nd straight month of year-over-year price increases. “We expected the [season] to be the best in a decade and we’ve seen sales come in just as we expected,” says realtor.com’s chief economist, Jonathan Smoke. “More people signed contracts and will be closing [this summer] because of the lower mortgage rates.” But sales—and the rise of those pesky prices—are expected to slow, he says. That’s because many buyers will have already become homeowners—or they’re simply priced out of the market.

“The number of sales has to eventually hit a ceiling because there aren’t enough homes for sale,” Smoke says. “The following months, particularly September and October, could have sales declines.” On a welcome note, about a third of June buyers, 33%, were first-time homeowners, according to the report. That’s the highest percentage since July 2012. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply—particularly areas in the Midwest and parts of the South,” NAR’s chief economist, Lawrence Yun, said in a statement.

That may help to explain why the most homes continued to sell in the South, with new owners picking up the keys to 230,000 abodes in June, according to the report. Sales were up 9.5% from May and 1.8% from the same time a year ago.

Median prices climbed 3.9% to $258,500 in June compared with a year earlier.

Sales also remained strong in the Midwest and the Northeast.

In the Midwest, 149,000 residences went under contract. That was up 12.9% from May and 2.8% compared with a year earlier. Prices in the region rose by the highest annual percentage, 6%, hitting $235,900.

Only 77,000 homes sold in the Northeast, far fewer than the rest of the country. But the number of sales represented a 11.6% jump from May and a 6.9% bump from a year ago. Median prices were also up 1.5% year-over-year to $320,500.

The only region to see an annual decline was the West, which includes super-duper expensive cities like San Francisco. New owners signed on the dotted line for 127,000 residences—representing a 1.6% drop from June 2015. However, monthly sales were up 11.4% over May.

Median prices were—unsurprisingly—also the highest in the West, hitting a heart-attack inducing $379,900. That was up 5.7% from the same time a year ago.

Source: realestate_iq

Buying a home is hard enough these days as wannabe homeowners have to contend with a shortage of residences in some markets—along with ever-rising prices and plenty of drag-down, no-holds-barred competition. But guess what? It’s about to get even worse.

Builders and developers applied for fewer new-home construction permits in June, according to the U.S. Department of Commerce’s monthly new residential construction report. So get ready for a continuing decrease in the supply of new homes later this year and into the next. (It takes about six to nine months to complete a residence once a permit is secured.) And, yes, that’s expected to drive prices up even higher.

The number of permits issued were down 15.4%, to just 114,000, in June compared with the same month a year earlier, according to the report. But before panic sets in, it’s helpful to realize that this was actually a 5.8% bump from May. The numbers were not seasonally adjusted, meaning they weren’t smoothed out over a 12-month period to account for fluctuations.

The reason builders are holding off on putting up more homes is because they’re worried the number of buyers could drop off if the economy falters, says Jonathan Smoke, chief economist of realtor.com®. “The presidential election poses a big wild card,” Smoke says. “At the same time, the world is teetering on entering a recession due to a number of factors, including most recently Brexit.” It’s also important to note that those newly built abodes, often with state-of-the-art appliances and electronic systems, cost more than those which have been lived in—so developers have lots to lose if those properties don’t sell.

For example, the median price of a new home was $290,400 in May, according to the most recent Commerce data available. Existing (i.e., not new) homes went for a median of $239,700 in May, according to the National Association of Realtors®.

It wasn’t just permits to build single-family homes that were down. Permits to put up sorely needed condo and apartment buildings, with five units or more, also dropped year over year by about 39.2%, to just 36,600 in June. But, on the bright side, the number was up nearly 4.9% from May. “This environment is good for the landlord and property owner, but not so much for virtually everybody else,” Smoke says. “It’s going to be even harder to find an affordable place to rent than it has been.” In a welcome bit of good news, June saw the completion of the greatest number of new residences over the past year, according to the report.

The number of finished abodes surged 16.5%, hitting 99,500 residences, in June compared with a year earlier, according to the report. It was also up 19% from May.

In addition, the number of completed condo and apartment buildings, with five units or more, were also up 14.5% from a year ago and 46.5% from May, according to the report.

But with permits down, the number of new homes hitting the market simply can’t—and won’t—continue. “We’re just not seeing the growth in new construction that would be necessary to improve the shortage of apartments for rent and homes for sale,” Smoke says. So “we’re likely to see continued rent and home price increases.”

Source: realestate_iq

As home prices and rents continue to rise, confidence in the housing market is starting to wane. It is showing up in weaker traffic at open houses and less interest in taking on a mortgage as some worry about their student debt loads. The numbers are dropping, and a new survey from the National Association of Realtors only adds fodder to the current market’s failings. While three-quarters of Americans surveyed in the second quarter of this year still think now is a good time to buy a home, the numbers are slipping, especially among renters. Just 62 percent of renters said now is the time to move to homeownership, down from 68 percent at the end of last year. Those under the age of 35 were the least confident. Millennials today have the lowest homeownership rate of their age group in recorded history.

On the flip side, nearly 4 out of 5 people who currently own a home, as well as respondents over the age of 55, said now is a good time to buy. That is likely because homeowners have seen their equity increase dramatically in just the past year, as prices rise. In fact, home equity jumped by a collective $260 billion in just the first quarter of this year, according to Black Knight Financial Services. “Existing-home prices surpassed their all-time peak this spring and have climbed on average over 5 percent nationally through the first five months of the year and even faster in areas with severe supply shortages,” said Lawrence Yun, chief economist of the Realtors. “Most homeowners appear to realize that if they’re ready to sell, they’ll likely find a buyer rather quickly and be able to use the sizable equity they’ve accumulated in recent years towards their next home purchase. Meanwhile, renters interested in buying continue to face minimal choices, strong competition and home prices growing faster than their incomes.”

Those with student debt, according to the Realtors’ report, are far less likely to want to take on a home loan. Half of respondents with student debt and under the age of 35 said that not only did they not want a mortgage, they doubted they would qualify. “The financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers,” wrote Yun. “At a time of quickly rising rents, mortgage rates at all-time lows and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide.” Jorge Alborta, 32, rented in northern Virginia for seven years before finally buying a home this spring. He and his sister own a restaurant, and his income is below $100,000 annually. He did not have student loan debt, and that played a role in helping him become a homeowner. Still, it was a long and arduous process. “It was a little bit too pricey, all I could afford was an efficiency, one-bedroom apartment, so I started looking in different places, also in D.C. and it was a very long process, and it took a long time,” said Alborta.

He also found the mortgage process long and tedious. Alborta wouldn’t have been able to afford to buy, but for a low-income housing program in D.C. that helped with closing costs and allowed him to qualify for a lower price in the townhouse community where he purchased. Still, saving for the down payment was arduous — “Yes, it was very hard,” he said.

First-time homebuyers are still at a historically low share, less than one-third of buyers in June, compared to the historical norm of about 40 percent. The supply of homes for sale on the lower end of the housing market continues to fall; homebuilders are concentrating largely on the move-up buyer, due to higher costs of construction. This is only pushing prices higher for first-time buyers, and sidelining them longer.

Higher prices, however, may finally be getting potential sellers to take the plunge. More current homeowners, 61 percent, responding to the Realtors’ survey said now is a good time to sell, compared to 56 percent who felt that way in the first quarter of this year.
— CNBC’s Stephanie Dhue contributed to this report.

Source: realestate_iq

OCC’s Thomas Curry says watchdog is monitoring lending risks

Report points to longer maturities and loosening covenants

A leading U.S. banking regulator wants lenders to do more to manage their exposure to commercial real estate.

As property lending accelerates, the Office of the Comptroller of the Currency — which oversees American banks alongside the Federal Reserve Board and the Federal Deposit Insurance Corp. — is actively monitoring banks’ stress tests and risk-management practices, Comptroller Thomas Curry said in an interview with Bloomberg Television on Friday.

“With commercial real estate lending, we’re signaling a flashing yellow or a caution light,” Curry said. “We think that if banks act now and if supervisors are vigilant, this type of potential risk can be managed effectively.” Curry’s comments echo a report from the OCC this week that highlighted a rise in credit risk from increased lending and looser underwriting. Lending growth for large banks accelerated to 5.9 percent in 2015, up from 3.6 percent a year earlier, the regulator wrote in its report. Smaller institutions have also bulked up their loan portfolios, focusing on both commercial and residential properties, the OCC wrote.

Longer loan maturities, interest-only payment periods, and less restrictive covenants are adding to risks, the OCC wrote in its report. The regulator expressed similar concerns in December. With the credit cycle deteriorating, managing this exposure is increasingly important, Curry said.
“That’s what we’re trying to emphasize,” he said. “That if you’re going to ease underwriting standards, you’ve got to have an effective risk-management framework in place.”
Before it’s here, it’s on the Bloomberg Terminal.

Source: realestate_iq