The Data and Analytics division of Black Knight, Inc. released its latest Home Price Index (HPI) report, based on August 2017 residential real estate transactions. The Black Knight HPI utilizes repeat sales data from the nation’s largest public records data set, as well as its market-leading, loan-level mortgage performance data, to produce one of the most complete and accurate measures of home prices available for both disclosure and non-disclosure states. Non-disclosure states do not include property sales price information as part of their publicly available county recorder data. Black Knight is able to obtain the sales price information for these states by combining and matching records across its unique data assets.US Home Prices Hit Another New Peak, Gaining 0.24% in August 2017 With Year-Over-Year Growth Steady at 6.24%
– August’s rate of monthly appreciation fell to less than half that of July’s, marking five consecutive months of slowing growth
– New York home prices rose 1.58% in August, leading all states in monthly appreciation for the second consecutive month and accounting for nine of the 10 best-performing metropolitan areas
– Of the 20 largest states, only Georgia, Maryland and Virginia saw prices fall – very slightly – registering -0.17, -0.05 and -0.23% declines, respectively
– Twelve of the nation’s 40 largest metros saw slight declines as well, with Denver, Colo., seeing the largest drop at just -0.32%
– Though remaining flat in August, home prices in Seattle, Wash., have risen 12.02% from the start of 2017 and over 14% since last year
– Ten of the 20 largest states and 14 of the 40 largest metros hit new home price peaks in August 2017, representing smaller shares of each group than in recent months
US consumer spending posts largest gain since 2009
US consumer spending recorded its biggest increase in more than eight years in September, likely as households in Texas and Florida replaced flood-damaged motor vehicles, but underlying inflation remained muted. The Commerce Department said on Monday consumer spending, which accounts for more than two-thirds of US economic activity, jumped 1.0% last month. The increase, which also included a boost from higher household spending on utilities, was the largest since August 2009. Consumer spending increased by an unrevised 0.1% in August. Economists polled by Reuters had forecast consumer spending increasing 0.8% in September. The data was included in last Friday’s third-quarter gross domestic product report, which showed that growth in consumer spending growth slowed to a 2.4% annualized rate after a robust 3.3% growth pace in the second quarter. The moderation in consumption was offset by a rise in inventory investment, business spending on equipment and a drop in imports, which left the economy growing at a 3.0% rate in the third quarter after the April-June period’s brisk 3.1% pace.
NAR – first-time buyers stifled by low supply, affordability: 2017 buyer and seller survey
Despite solid interest in buying a home – sparked by steady job gains, record low mortgage rates and higher rents – the severe drought in housing supply in much of the country over the past year accelerated price growth and kept many first-time buyers out of the market. This is according to the National Association of Realtors®’ 2017 Profile of Home Buyers and Sellers, which also identified numerous current consumer and housing trends, including: mounting student debt balances and smaller down payments; increases in single female and trade-up buyers; the growing occurrence of buyers paying the list price or higher; and the fact that nearly all respondents use a real estate agent to buy or sell a home, which kept for-sale-by-owner transactions at an all-time low of 8% for the third straight year. In this year’s survey, the share of sales to first-time home buyers2 inched backward to 34% (35% in 2016), which is the fourth lowest share since 1981. In the 36-year history of NAR’s survey, the long-term average of first-time buyer transactions is 39%. “The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages, which undercut their ability to become homeowners,” said Lawrence Yun, NAR chief economist. “With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home. Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.” Added Yun, “Solid economic conditions and millennials in their prime buying years should be translating to a lot more sales to first-timers, but the unfortunate reality is that the nation’s homeownership rate will remain suppressed until entry-level supply conditions increase enough to improve overall affordability.” Other key findings and notable trends of buyers and sellers in this year’s 144-page survey include:
Student debt balances continue to grow
Highlighting the additional challenges imposed on consumers trying to reach the market, 41% of first-time buyers indicated they have student debt (40% in 2016). The typical debt balance also increased ($29,000 from $26,000 in 2016), and over half owe at least $25,000. Additionally, of the 25% who said saving for a down payment was the most difficult task in the buying process, 55% said student debt delayed saving for their home purchase. “NAR survey findings on student debt released earlier this fall revealed that an overwhelming majority of millennials with student debt believe it’s delaying their ability to buy a home, and typically for seven years,” added Yun. “Even in markets with a plethora of job opportunities and higher pay, steep rents and home prices make it extremely difficult to put savings aside for a down payment.”
Single females make up larger share of sales
Solid job prospects, higher incomes and improving credit conditions translated to continued momentum in the growing share of single female buyers. At 18% (matches highest since 2011), single women were the second most common household buyer type behind married couples (65%). Furthermore, single women purchased slightly more expensive homes than single men despite earning less. The overall share of single male buyers (7%) remained below unmarried couples (8%) for the second straight year.\
Down payment amounts decrease for first-timers, rise for repeat buyers
The ongoing climb in home prices pulled the typical down payment for first-timers to 5% this year (6% in 2016), which matches the lowest since 2013. Meanwhile, higher home values likely gave more sellers the wherewithal to use the cash from their recent sale to make a bigger down payment on their new home purchase (14%; 11% in 2016). Repeat buyers’ sales proceeds from their previous purchase (55%) surpassed their own personal savings (50%) this year as a larger source of their down payment. Personal savings ranked first for first-time buyers as the primary source of their down payment, followed by a gift from a friend or relative (25%; 24% in 2016). Over a half of first-timers said it took a year or more to save for a down payment, and 25% said saving was the most difficult task in the entire buying process.
Age of first-timers stays flat; climbs to new survey high for repeat buyers
For the second straight year, the median age of first-time buyers was 32 years old. First-time buyers had a higher household income ($75,000) than a year ago ($72,000) and purchased a slightly smaller home (1,640-square-feet; 1,650-square-feet in 2016) that was more expensive ($190,000; $182,500 in 2016). Fewer first-time buyers purchased a home in an urban area (17%; 20% in 2016). The age of repeat buyers increased to an all-time survey high this year (54 years old; 52 years old in 2016) as older households, perhaps with plans to stay in the workforce longer but with an eye towards retirement, felt more comfortable about buying. Overall, repeat buyers had roughly the same household income than last year ($97,500; $98,000 in 2016) and purchased a 2,000-square-foot home (unchanged from last year) costing $266,500 ($250,000 in 2016).
Supply scarcity leads to increase in buyers paying list price or higher
Underscoring the supply and demand imbalances prevalent in many parts of the country, 42% of buyers paid the list price or higher for their home, which is up from a year ago (40%) and a new survey high since tracking began in 2007. Buyers in the West were the most likely (51%) to pay at or above list price. “Many of those in the market to buy a home this year had little room to negotiate,” said Yun. “Listings in the affordable price range drew immediate interest, and the winning offer often times had to waive some contingencies or come in at or above asking price to close the deal.”
Buyers report less difficulty obtaining a mortgage
The improving financial health of borrowers and a slight ease in credit standards are leading to a smoother process in obtaining a mortgage. Fewer buyers (34%) compared to a year ago (37%) indicated that the mortgage application and approval process was somewhat or much more difficult than they expected. Fifty-eight% of buyers financed their purchase with a conventional mortgage, and 34% of first-time buyers took out a low-down payment Federal Housing Administration-backed mortgage, which is up from 33% last year but down from 46% five years ago.
Nearly all buyers choose a single-family home in a suburban location
A majority of buyers continue to choose a home in a suburb, small town or rural area (85%) as opposed to an urban one (13%; 14% in 2016). Eighty-three% of buyers purchased a detached single-family home, which for the third straight year remains the highest share since 2004 (87%). Purchases of multi-family homes, including townhouses and condos, were at 11%.
Most buyers search for homes online…and use a real estate agent
This year’s survey data continues to show that the internet (95%) and real estate agents (89%) remain the top two information sources used during buyers’ home search. Overall, 87% of buyers ended up purchasing their home through a real estate agent (88% in 2016), and finding the right property to buy and help negotiating the terms of the sale were the top two things buyers wanted most from their agent. Even for those who found the home they purchased online, nearly all still closed on it with the help of an agent (88%). “It’s no surprise a majority of first-time buyers indicated that the top benefits received from their agent were help understanding the buying process (83%), pointing out unnoticed property features or faults (60%), and negotiating better sales terms (51%),” said President William E. Brown, a Realtor® from Alamo, California. “Realtors® over the past year have helped buyers – and especially first-timers – navigate extremely competitive market conditions where the need to be prepared and act quickly has been paramount to the success of purchasing a home.”
Homeowner tenure at all-time high; equity and share of repeat buyers climbs
The typical seller over the past year was 55 years old, had a higher household income ($103,300) than last year ($100,700) and was in the home for 10 years before selling – matching the all-time high set both in 2014 and a year ago. Prior to 2009, sellers consistently lived in their home for a median of six years before selling. With home values steadily rising over the past several years, sellers realized a median equity gain of $47,500 ($43,100 in 2016) – a 26% increase (24% last year) over the original purchase price. Homes sold after 21 years of ownership had the largest equity gain (104%), while those who purchased six or seven years ago saw a larger return (27%) than those who purchased between eight and 15 years ago (14% to 18%). The% share of buyers trading up increased for the third straight year, rising to 52% from 46% in 2016. In 2014, 40% of buyers purchased a bigger home. “The decline in first-time buyers and uptick in repeat buyers trading up to a larger home reflects the more favorable conditions for home shoppers at the upper end of the market, where listings are more plentiful and sales have been consistently higher over the past year,” said Yun.
Seller use of an agent remains at all-time high; FSBOs at record low
Sellers’ use of a real estate agent this year remained at an all-time high of 89%. This in turn – for the third straight year – held for-sale-by-owner sales to their lowest share (8%) in the survey’s history. An overwhelming majority of sellers were satisfied with the selling process (88%), with most also indicating that they would definitely or probably use their agent again or recommend him or her to others (85%). “Homeowners understand the value, and seek the expertise and guidance Realtors® bring to the table when it’s time to sell their home,” said Brown. “Despite incredibly favorable market conditions for sellers – where finding interested buyers was not a problem – nearly all turned to a Realtor® to help assist them through the intricacies of listing their home on the market, accepting offers, negotiating the sales price and closing the deal.”
US regulator wants to loosen leash on Wells Fargo: Sources
A leading US regulator wants to make it easier for Wells Fargo to pay employees when they leave, loosening a restriction in place since a phony accounts scandal hit the bank last year, according to people familiar with the matter. The initiative comes as President Donald Trump is trying to lighten rules on Wall Street and the bank regulator, Keith Noreika, acting Comptroller of the Currency (OCC), must weigh whether to vet new Wells Fargo executives. If Noreika’s approach prevails, the OCC could go easier on Wells Fargo and any other large banks sanctioned in the future. Since Noreika took control of the OCC in May, he has advocated easing up on sanctions imposed on Wells Fargo in the wake of the scandal over abusive sales practices, according to current and former officials. Wells Fargo reached a $190 million settlement in September 2016 after admitting that its sales staff opened as many as 2.1 million accounts without customers’ consent. Since then the estimate has climbed to as many as 3.5 million. As part of the deal with regulators, incoming Wells Fargo executives can face a vetting from the OCC while severance payouts must be cleared by the OCC and a sister agency, the Federal Deposit Insurance Corporation. But Noreika wants officials to work faster when they review severance pay and the agency can choose to waive its check on incoming executives. Wells Fargo declined comment on the reviews.