Pending home sales were mostly unmoved in November, but did squeak out a minor gain both on a monthly and annualized basis, according to the National Association of Realtors (NAR). Heading into 2018, existing-home sales and price growth are forecast to slow, primarily because of the altered tax benefits of homeownership affecting some high-cost areas. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2% to 109.5 in November from 109.3 in October. With last month’s modest increase, the index remains at its highest reading since June (110.0), and is now 0.8% above a year ago. Lawrence Yun, NAR chief economist, says contract signings mustered a small gain in November and were up annually for the first time since June. “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” he said. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”
One of the biggest questions heading into 2018, according to Yun, is if the depressed levels of available supply can improve enough to slow price growth and make buying a home more affordable. While last month’s significant boost in existing sales was noteworthy, it did come with some concerns. Sales prices were up 5.8% – more than double wage growth – and the 3.4-month supply of homes on the market was the lowest since NAR began tracking in 1999. “The strengthening economy, and expectation that more millennials will want to buy, serve as promising signs for solid homebuying demand next year, while also putting additional pressure on inventory levels and affordability,” said Yun. “Sales do have room for growth in most areas, but nationally, overall activity could be slightly negative. Markets with high home prices and property taxes will likely feel some impact from the reduced tax benefits of owning a home.” Yun forecasts for existing-home sales to finish 2017 at around 5.54 million, which is an increase of 1.7% from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6%. In 2018, Yun anticipates essentially no change (a decline of 0.4%) in existing sales (5.52 million), and price growth to moderate to around 2%. The PHSI in the Northeast jumped 4.1% to 98.9 in November, and is now 1.1% above a year ago. In the Midwest the index rose 0.4% to 105.8 in November, and is now 0.8% higher than November 2016. Pending home sales in the South decreased 0.4% to an index of 123.1 in November but are still 2.5% higher than last November. The index in the West declined 1.8% in November to 100.4, and is now 2.3% below a year ago.
Trump targets Amazon in call for postal service to hike prices
US President Donald Trump targeted online retailer Amazon on Friday in a call for the country’s postal service to raise prices of shipments in order to recoup costs. “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!” Trump wrote on Twitter. The US Postal Service is an independent agency within the federal government and does not receive tax dollars for operating expenses, according to its website. The organization makes up a significant portion of the $1.4 trillion US delivery industry. Other players include Fedex Corp and United Parcel Service Inc. Amazon was founded by Jeff Bezos, who remains the chief executive officer of the retail giant. Bezos also owns the Washington Post, a newspaper that Trump has repeatedly railed against in his criticisms of the news media. Representatives for the White House and Amazon were not immediately available for comment. Shares of Amazon were last down 0.2% to $1,183.50 in premarket trading.
CoreLogic – what caught the attention our readers in 2017
The numbers are in and our readers have spoken. We tallied up the readership on our top 10 most-read CoreLogic Insights blogs and found that top industry executives were very focused on the health of the real estate market, both nationally and in specific markets across the country this year. The most-read blog, by a wide margin, was a text mining analysis of public listing information using word cloud which paired certain listing terms to higher sales prices. Word pairs like “quiet street,” “large backyard,” and “hardwood floors” were among terms which could be tied to higher sales prices. In addition, our audience also engaged with our economic outlooks, credit availability, and mortgage risk as prices continued their upward spiral. And the envelope, please… Here are the top ten most-read blogs (and video blogs) of the year:
– Public Listing Comments Can Have an Impact on Closing Price
– Is the Credit Cycle Turning?
– California Million-Dollar Home Sales Climb to a Q1 Peak as Stocks Soar
– Highest and Lowest Risk US Housing Marketing as of Q1 2017
– US Economic Outlook: February 2017
– Hurricane Matthew Clocks Top Wind Speed for 2016 at 101 MPH
– Health of the Housing Market as of Q2 2017
– US Economic Outlook: October 2017
– Purchase Mortgages, High LTVs May Up Fraud Risk in 2017
– The Accuracy of Comparable-Property Data in an Appraisal Report
2017 was a very busy blog year for our economists, data research analysts and modelers, product experts and industry SMEs. As we wrap up 2017 we’re proud to have shared over 150 online, audio and video blog postings representing more than 25 CoreLogic contributors. The aim of CoreLogic Insights is to inform, educate and provide perspective on many characteristics of the housing economy and property markets. Our blogs address housing policy and trends, mortgage performance, property valuation, natural hazard risk, insurance and international topics.
Trump’s agenda in 2018: What’s next?
After Republicans scored their first major legislative victory with a tax reform bill passed just before the end of 2017, the Trump administration has started looking ahead to next year’s legislative docket. While President Donald Trump’s aggressive plans to reform health care, infrastructure and the tax system during the first year of his tenure fell short on some accounts, his plans for next year appear equally ambitious, with welfare and infrastructure reform topping the list, according to National Economic Director Gary Cohn. Here’s a look at what the administration and Congress are set to take on as we head into the New Year.
While the GOP failed to pass multiple efforts to repeal and replace the Affordable Care Act in 2017, the president has not given up on designs to overhaul the former administration’s signature legislative achievement. In a tweet fired off in November, President Trump reiterated that ObamaCare is a “disaster,” adding that Republicans would begin to repeal and replace “right after Tax Cuts.” While different variations of repeal and replace narrowly failed to pass the Senate this year, the president took steps toward dismantling the Affordable Care Act through an executive order issued in October. That order directed the administration to look into allowing employers to form associations and obtain coverage across state lines, expanding the use of short-term limited duration insurance (STLDI) plans and expanding the use of Health Reimbursement Arrangements, or tax-free accounts that allow employers to reimburse employees for medical expenses. The overall goal of these directives, according to the White House, was to provide near-term relief for Americans and to lower costs by increasing competition and choice.
One of the other items the president has brought up as a priority after Republicans overhaul the tax system is reforming welfare, which includes government programs like Medicaid, Food Stamps and Housing Assistance. “We’re looking very strongly at welfare reform, and that’ll all take place right after taxes, very soon, very shortly after taxes,” Trump said at the White House last month. During an interview with Axios in late-December, Cohn said he expected that welfare reform would receive bipartisan support, with at least 60 votes in the Senate. There are bills currently floating around Congress that aim to strengthen work requirements for welfare programs, something that coincides with the administration’s stated goals of using welfare as an interim strategy to help lift Americans out of unemployment and poverty. Office of Management and Budget (OMB) director and Consumer Financial Protection Bureau (CFPB) interim director Mick Mulvaney, a known deficit hawk, said back in March that the administration was looking to create jobs and put those who want to work, back to work. At the same time, he said the White House would weed out welfare freeloaders and take steps toward making sure Americans aren’t exploiting programs, while assuring that the administration would not deny deserving people services.
Senior White House officials have said President Trump will release the full details of his infrastructure plan early next year. It is expected to require at least $200 billion in direct government funds over the course of a decade, in addition to funding from the private sector. While an infrastructure revamp was widely viewed as a bipartisan proposal at the outset of the president’s tenure, experts believe the outlook may be murkier after the passage of a tax reform bill that could pile on to the deficit. Trump promised a $1 trillion infrastructure overhaul, which was supposed to be detailed within his first 100 days in office. US Transportation Secretary Elaine Chao said in September that states and localities will compete for government funds, with the most innovative projects winning more federal dollars. The infrastructure revamp is expected to address everything from bridges, roads and airports to energy, broadband and even Veterans Affairs hospitals. Cohn told Axios that having broadband in rural areas is a priority. He also said that the government needs to reimagine infrastructure based on the future, adding that the US can’t keep building cities in 2050.
US Treasury Secretary Steven Mnuchin has been a key player in the tax reform discussions, but has his sights set on housing reform for the coming year. “I am determined that we have housing reform and that we come up with a permanent solution for Fannie [Mae] and Freddie [Mac] so that they’re not in the current form, which is essentially owned by the government,” he said during a November speech at the Economic Club of New York. “That’ll be a big focus of mine for next year.” Mnuchin also said this is something he expected housing reform to be completed on a “bipartisan basis.”
ATTOM – the off-market housing market
There’s a strange omission from the long list of industries vanquished, disrupted, and dismantled by the Internet. Retail chains are closing, cabs are not being hailed, and hotel rooms are going empty. But amid the rumble and ruin of traditional commerce, multiple listing services (MLS) remain remarkably impervious to disruption. That isn’t stopping would-be MLS disrupters like REX from trying. “The MLS is an antiquated tool created by real estate brokers to keep buyers dependent on them,” according to REX. “But the Internet changed all that.” The MLS has survived previous declarations of its demise. If such predictions were true we should now see a marketplace filled with broker-less transactions, those selling for-sale-by-owner, so-called FSBOs. In fact, precisely the opposite has happened. Self-sellers are a vanishing species. According to the 2016 edition of the National Association of Realtors (NAR) Profile of Home Buyers and Sellers, “only eight% of recent home sales were FSBO sales again this year. For the second year, this is the lowest share recorded since this report started in 1981.” But the picture is markedly different at the local level in markets where MLS disrupters like REX are operating. Single family home sales listed on the MLS represented 89% of single family home sales deeds recorded in Los Angeles and Orange counties combined, according to an ATTOM Data analysis of public record deed data and MLS data provided by First Team Real Estate, the largest independent brokerage in California. Most off-MLS sales are the result of these so-called pocket listings, according to Michael Mahon, president at First Team Real Estate, which covers the Southern California market. “We have agents who have 50 to 75 buyers sitting there as pent-up demand waiting for listings,” he said. “A lot of these home sellers are willing to entertain an offer that they feel is fair for the asking price they are wanting to get for the property … a ready, willing and able buyer in queue is very appealing.”
The share of off-MLS sales were also much higher than the national average across the country in Dallas and Phoenix. An ATTOM Data Solutions analysis of MLS closed sales counts provided by the Texas A&M Real Estate Center and public record closed sales counts in Dallas County, Texas, shows MLS-closed sales of single family homes in 2016 represented 86% of single family home sales recorded with the county for the year. In Maricopa County, Arizona, home to the city of Phoenix, MLS-closed sales of single family homes represented just 75% of the single family home sales recorded with the county for 2016, up slightly from 74% in 2015, according to an ATTOM analysis. What do Dallas and Phoenix have in common? They are both testing grounds for a quickly growing alternative to listing for sale on the MLS: iBuyers such as Opendoor and Offerpad. Opendoor has been able to assemble $320 million in equity and more than $500 million in debt financing. Such numbers instantly make Opendoor a notable player in the local real estate markets where it is active. Moreover, if it finds success, it will be able to go back to the equity and credit markets for additional funding. “The Opendoor difference is simplicity, convenience and certainty,” said Evan Moore, Opendoor’s head of agent experience. “For sellers, Opendoor makes it easy for homeowners to receive a fair market value offer in a few clicks, eliminating the hassle of home showings and months of uncertainty and giving them the power to close on their timeline. For buyers, Opendoor also provides the ultimate in convenience by providing on-demand access to Opendoor homes all day everyday.”
It’s not just disruptive startups like Opendoor and Offerpad that are expanding off-market purchasing, however. HomeVestors, a 21-year-old company known for the “We Buy Ugly” houses signs has exponentially expanded the markets it operates in since the housing bust, according to CEO David Hicks. “We buy direct from the home owner, without hitting MLS,” Hicks said. “And the people we’re buying them from, they don’t want a Realtor or anyone else traipsing through their house. … They got cats or they got smell. Those are the houses we are buying.” NetWorth Realty is another direct buyer that has been around for several years and is continuing to grow, with 1,726 deals totaling $234 million in 2016, up from 941 deals totaling $88 million in 2013, according to its website. “We’ll find properties. Our properties are off-market, they are not on the MLS,” said Networth Realty president Mark Bloom, adding that the properties are also kept off-market when re-sold to investor clients in an effort to provide those clients with fixed pricing outside of a competitive bidding environment. “We fix our pricing. We keep all of our inventory off market.” The growing number of acquisitions by iBuyers like Opendoor and Offerpad are catching the attention of the Arizona Regional MLS, which in its August STAT report devoted three pages of commentary to an analysis of off-MLS sales in the market, including those by iBuyers. “As an analyst, the number one question I get asked is, ‘What percentage of homes sold are listed on the MLS?’”, writes Tom Ruff, housing analyst with The Information Market, a subsidiary of the ARMLS.
Traditional MLS relationships are being challenged by a growing number of member brokers who believe the fastest and easiest way increase profits is to stop dividing commissions, forget about MLS cooperation, and cut out other brokers. “Off-MLS listings may contribute to the unraveling of the MLS as we know it,” said consultant Stefan Swanepoel in a 2016 report published by NAR called the Definitive Analysis of the Negative Game Changers Emerging In Real Estate – the DANGER Report. Is there a way that “coming soon” transactions could be made more palatable? “Coming soon can be an issue from many fronts,” said Matthew L. Watercutter, principal broker and senior regional vice president with Ohio-based HER Realtors. “The only way for ‘coming soon’ to be truly a benefit, is you still do not show the home to anyone until it is actively marketed, so all potential buyers have a fair and equal opportunity.”