U.S. Home Prices Are Surging 13 Times Faster Than Wages

In yet another troubling sign regarding the affordability of homeownership, new data shows that the growth in U.S. home prices is beating wage increases 13 to 1. RealtyTrac found that home price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during the past two years.

Source: Bloomberg

Making sense of the story

  • Wages climbed by 1.3 percent from the second quarter of 2012 to the second quarter of 2014, compared to a 17 percent increase in home prices during that time.
  • “Home prices in many housing markets across the country found a floor in 2012 and since then have rapidly appreciated, particularly in markets attracting institutional investors, international buyers or some other flavor of cash buyer not constrained by income as much as traditional buyers,” said Daren Blomquist, vice president at RealtyTrac.
  • Among the 184 metro areas analyzed, the average wage growth over the two years ending Q2 2014 was 3.7 percent while the average home price appreciation in the two years ending in December 2014 was 13.4 percent.
  • Metropolitan statistical areas with the highest ratio of price appreciation to wage growth included Merced, Calif. (141:1), Memphis, Tenn. (99:1), Santa Cruz, Calif. (94:1), Augusta, Ga. (78:1), and Palm Bay-Melbourne-Titusville, Fla. (62:1).
  • Other metro areas where home price appreciation has outpaced wage growth by a wide margin during the housing recovery included Sacramento, Calif. (17:1 ratio), Riverside-San Bernardino, Calif. (15:1 ratio), Las Vegas, Nev. (14:1 ratio), and Detroit (12:1 ratio).
  • Among the 140 markets where home price appreciation has outpaced wage growth during the housing recovery, 45 metro areas (32 percent) with a combined population of 63 million had a median home price in December that required more than 28 percent of the median income for monthly mortgage payments.
  • Experts believe those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up.

Read the full story

 

Talking Points …

  • U.S. house prices rose 0.3 percent in January, on a seasonally adjusted basis compared with the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI).
  • The previously reported 0.8 percent change in December was revised downward to a 0.7 percent change.
  • From January 2014 to January 2015, house prices were up 5.1 percent.  The U.S. index is 3.5 percent below its March 2007 peak and is roughly the same as the December 2005 index level.

From C.A.R. ~ C.A.R. Market Matters is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide. C.A.R. does not in any way endorse or sponsor any product or service or vendor mentioned herein unless expressly stated.


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Buyers Offer More For A Staged Home

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California Housing Market Bounces Back in February

Slowing home price appreciation and improving inventory combined to boost California’s housing market in February as existing home sales and median home prices increased from both the previous month and year, C.A.R. reported this week.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 368,160 units in February, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  Sales in February were up 4.7 percent from a revised 351,480 in January and up 2.4 percent from a revised 359,600 in February 2014.  The year-over-year increase was the largest observed since December 2012. The statewide sales figure represents what would be the total number of homes sold during 2015 if sales maintained the February pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The median price of an existing, single-family detached California home was essentially flat from January’s median price, inching up from $426,660 in January to $428,970 in February. February’s median price was 5.5 percent higher than the revised $406,460 recorded in February 2014.  While the statewide median home price is higher than a year ago, the rate of increase has narrowed significantly since early 2014. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.
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Confidence in U.S. Housing Market On The Rise
American renters are growing more confident in the housing market, and more than 5 million are planning to buy a home this year, according to the Zillow Housing Confidence Index (ZHCI).

More than 12 percent of current renters nationwide – roughly 5.2 million – said they plan to buy in the next year, an almost 25 percent jump from the same time last year, when 4.2 million renters said they had plans to buy within 12 months.

Among all renters surveyed nationwide, 59.7 percent said they think buying a home is the best long-term investment a person can make, compared to 56.9 percent at the same time last year. This improved long-term outlook was especially evident among younger renters. Among all 18- to 34-year-old renters, 66.2 percent said owning a home was the best long-term investment, compared to 61.4 percent last year.
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Fast Facts

Calif. median home price: February 2015:

  • California: $428,970
  • Calif. highest median home price by region/county February 2015: San Mateo, $1,200,000
  • Calif. lowest median home price by region/county February 2015: Siskiyou County, $148,330

Calif. Pending Home Sales Index:
January 2015: Increased 26.7 percent from 70.9 in December to 89.8 in January.

Calif. Traditional Housing Affordability Index: Fourth Quarter 2014: 30 percent (Source: C.A.R.)

Mortgage rates: Week ending 3/5/2015 (Source: Freddie Mac)
• 30-yr. fixed: 3.75% fees/points: 0.6%
• 15-yr. fixed: 3.03% fees/points: 0.6%
• 1-yr. adjustable: 2.44% Fees/points: 0.4%

From C.A.R. ~ C.A.R. Newsline is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide. C.A.R. does not in any way endorse or sponsor any product or service or vendor mentioned herein unless expressly stated.

  

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Millennials Lead All Buyers, Most Likely to Use Real Estate Agent

The millennial generation represented the largest share of recent buyers, according to the 2015 National Association of REALTORS® Home Buyer and Seller Generational Trends study. The analysis evaluates the generational differences of recent home buyers and sellers, and it appears millennials are overcoming the economic and financial challenges young adults have braved since the recession. Source: N.A.R.

Making sense of the story

  • An overwhelming majority of buyers search for homes online and then purchase their home through a real estate agent, with millennials using agents the most.
  • For the second consecutive year, NAR’s study found that the largest group of recent buyers was the millennial generation, those 34 and younger, who comprised 32 percent of all buyers (31 percent in 2013).
  • Generation X, ages 35-49, was closely behind with a 27 percent share. Millennial buyers represented more than double the amount of younger boomer (ages 50-59) and older boomer (60-68) buyers (at 31 percent).
  • Lawrence Yun, NAR chief economist, says the survey highlights the untapped demand for homeownership that exists among young adults. “Over 80 percent of millennial and Gen X buyers consider their home purchase a good financial investment, and the desire to own a home of their own was the top reason given by millennials for their purchase,” he said.
  • Yun believes the share of millennial purchases would be higher if not for the numerous obstacles that have slowed their journey to homeownership. “Many millennials have endured underemployment and subpar wage growth, and rising rents and repaying student debt have made it very difficult to save for a downpayment.
  • The median age of millennial homebuyers was 29, their median income was $76,900 ($73,600 in 2013) and they typically bought a 1,720-square foot home costing $189,900 ($180,000 a year ago).
  • When asked about the primary reason for purchasing a home, a desire to own a home of their own was highest among millennials at 39 percent. Younger boomers were the most likely to buy because of a job-related relocation or move, and a change in a family situation.

Read the full story

Talking Points …

  • Foreclosure inventory declined 33.2 percent and completed foreclosures declined 22.5 percent from January 2014, according to CoreLogic’s January 2015 National Foreclosure Report.
  • There were 43,000 completed foreclosures nationwide in January 2015, down from 55,000 in January 2014, representing a 63 percent decrease from the peak of completed foreclosures in September 2010.
  • Completed foreclosures have declined every month for the past 37 consecutive months. On a month-over-month basis, completed foreclosures were down 14.7 percent from the 37,000 reported in December 2014.

From C.A.R. ~ C.A.R. Market Matters is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide. C.A.R. does not in any way endorse or sponsor any product or service or vendor mentioned herein unless expressly stated.

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Freddie Mac Releases March Housing Market Outlook

Freddie Mac recently released its U.S. Economic and Housing Market Outlook for March, highlighting some of the positive tailwinds at the start of the spring homebuying season.

Outlook Highlights

  • Expect 2015 to be the best year for home sales and new home construction since 2007, when total home sales were about 5.8 million for the year.
  • Improved job prospects have started to drive those aged 25-34 back to the labor force, with 76.8 percent employed as of last month, up from 75.9 percent last year.
  • Expect rising rents at or above inflation in 2015 to push more would-be homeowners into the market. Rents increased an average of 3.6 percent in 2014 and nearly 11 percent over the last three years.
  • Due to some recent upward pressure on Treasury bond yields, the 2015 forecast for the average 30-year fixed-rate mortgage was increased slightly to at 4.0 percent for the year.

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From C.A.R. ~ C.A.R. Newsline is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide. C.A.R. does not in any way endorse or sponsor any product or service or vendor mentioned herein unless expressly stated.

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