Despite lower mortgage rates and higher inventory early this year, California home sales fell 13% from a year earlier this March and were the lowest for that month in five years. The median price paid for a home in March inched up 0.6% from a year earlier, the lowest annual gain in seven years, while Southern California and the San Francisco Bay Area logged tiny annual declines in their regionwide medians – the first declines in seven years. An estimated 34,926 new and existing houses and condos sold statewide in March 2019 (Figure 1), the lowest sales tally for a March since 2014. March 2019 sales rose 32.5% from February 2019 and fell 13.2% from March 2018, CoreLogic public records data show. Sales this March represented a slight improvement in the sense each of the prior three months had the lowest sales for that month in 11 years. Sales normally jump up between February and March, and since 2000 the average change between those two months is a gain of 34.0%. Sales have fallen year over year for the last eight consecutive months, with those declines ranging from 6.1% in October 2018 to 19.4% in December 2018. March 2019 sales declined at all price levels. Deals below $500,000 fell 13.7% year over year, while sales of $500,000 or more declined 13.2% and $1 million-plus deals fell 17.8%. Sales of $2 million or more fell 20.6% in March 2019 compared with a year earlier. Starting in late spring 2018, some potential homebuyers got priced out of the market by the double whammy of rising prices and mortgage rates, while others simply stepped out of the market amid concerns prices were near a peak. The sales trends for April and May this year will likely begin to clarify whether many of those who put plans on hold in 2018 are being lured back into the market by this year’s lower mortgage rates, higher inventory and the resulting improvement in buyers’ negotiating position. March 2019 sales reflect deals recorded in the public record that month, meaning most buyers’ purchase decisions would have been made in February, before mortgage rates had hit their low point for this year.
The median price paid for all new and existing houses and condos sold statewide in March 2019 was $483,000 (Figure 2), up 2.8% from February and up 0.6% from March 2018. An uptick in the median sale price between February and March is normal for the season and on average since 2000 the median has increased 3.8% between those two months. This March’s sub-1% annual gain compares with an annual increase of 7.9% in March last year (Figure 3) and marks the lowest gain for any month since the median rose 0.4% in March 2012. Slowing sales and rising inventory since last spring has moderated home price growth statewide. To a lesser extent the small annual gain in the state’s March median sale price reflects a subtle shift in market mix, where a slightly lower share of all sales occurred in high-cost coastal regions. In nominal terms California’s median sale price hit an all-time high of $500,000 in June 2018. Adjusted for inflation, however, the median has not returned to its pre-housing-bust peak in March 2007, and the March 2019 median was 16.8% below that peak. Other March 2019 highlights:
– In the six-county Southern California region, 17,960 new and existing houses and condos sold in March, down 14.1% year over year. March’s median sale price was $518,500, down 0.1% year over year. It was the first annual decline since March 2012, when the median dipped 0.2%. Of the six counties, only Orange County logged an annual decline – a decrease of 0.7% – this March.
– In the nine-county San Francisco Bay Area, 6,124 new and existing houses and condos sold in March 2019, down 14.8% year over year. March’s median sale price was $830,000, down 0.1% year over year. It was the first annual decline in the median since it dipped 0.6% in March 2012. Three counties – Marin, Santa Clara and Sonoma – posted annual declines in their median sale prices and one – San Mateo – experienced no annual change.
– Some of the state’s more affordable inland counties logged annual gains in total sales this March. Two examples were Butte (+35.4%) and Shasta (+8.7%). Butte County is home to last year’s devastating “Camp Fire” that destroyed thousands of homes in the town of Paradise, boosting housing demand in some other Butte County communities.
China vows retaliation against US for higher tariffs as talks continue
China vowed to retaliate against the United States for President Trump on Friday sharply hiking tariffs on exports from the world’s second-biggest economy, as trade negotiations between the two nations resumed. One minute after midnight the US increased tariffs on $200 billion worth of Chinese exports to 25% from 10%. Trump tweeted Friday that the US only sells China approximately $100 billion in goods and products, which he said is a “very big imbalance.” He also tweeted that if “we bought 15 Billion Dollars of Agriculture from our Farmers, far more than China buys now, we would have more than 85 Billion Dollars left over for new Infrastructure, Healthcare, or anything else.” Beijing promptly vowed to retaliate with “necessary countermeasures” in a major escalation of the year-old trade conflict that has roiled global stock markets and increased costs for consumers. “China deeply regrets that it will have to take necessary countermeasures,” China’s Commerce Ministry said in a statement. The newly increased tariffs took effect on goods that left China on Friday, meaning that because of the roughly three weeks it takes ocean-going freighters to cross the Pacific Ocean American consumers will not feel the effect until the end of this month or early next month. The drama unfolded against the backdrop of China’s top trade negotiator, Vice Premier Liu He, set to resume talks with his American counterparts at 9 a.m. ET in Washington. White House officials have stressed that both sides are eager to wrap up talks; last week, Treasury Secretary Steven Mnuchin told FOX Business that although they still had “more work to do,” enforcement mechanisms were “close to done.” “If we get to a completed agreement it will have real enforcement provisions,” he said at the time. The latest increase extends 25% duties to about $250 billion of Chinese imports. On Sunday Trump said he might also expand penalties to all Chinese goods shipped to the United States. Previous tariffs against Chinese goods have prompted Beijing to retaliate by hiking duties on $110 billion of US imports.
MBA – mortgage credit availability increased in April
Mortgage credit availability increased in April according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from Ellie Mae’s AllRegs® Market Clarity® business information tool. The MCAI rose 2.1% to 186.0 in April. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI increased (4.3%), while the Government MCAI was unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 6.8%, and the Conforming MCAI increased by 1.2%. “Credit supply increased 2% in April and was driven by a 7% gain in the jumbo index, which reached its highest level since the beginning of the MCAI in 2011,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Additionally, investors continued a trend from March of further increasing their willingness to purchase more non-QM and non-agency jumbo loans. The high-end of the purchase market had shown weakness earlier this year, before the recent decline in mortgage rates, and it appears investors are trying to remain competitive in that segment of the market.”
Treasury yields slip as increased tariffs on China begin
US government debt yields ticked lower on Friday after American tariffs on $200 billion worth of Chinese imports rose to 25%, a development some investors viewed as a sign that trade relations between Washington and Beijing won’t be remedied soon. At around 8:29 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 2.449%, while the yield on the 2-year Treasury note was also lower at around 2.252%. The yield on the 3-month bill hovered at 2.431%. The yield on the 10-year Treasury note briefly dipped under that of the 3-month Treasury bill on Thursday, inverting part of the yield curve. An inversion has been a reliable recession indicator in the past, though there is a debate over which segment of the curve is most important. Investors were again on edge Friday amid heightened trade tensions between the US and China. At midnight Friday, higher US tariffs were imposed on $200 billion of Chinese goods. Though Trump said his decision could be reversed if there is progress in the trade talks held by both nations, China has announced it will retaliate. Despite the heated rhetoric, the fixed-income response Friday morning was largest contained, suggesting to some that the market had already foreseen a scuttled deal. “The muted overnight response to Trump’s latest round of tariffs suggests the eventuality was fully priced in,” Ian Lyngen, head of US rate strategy at BMO Capital Markets, said in a note. “The White House’s 15% add-on to the present tariff structure has left us to ponder how that will translate into realized inflation during the balance of the year.” The Labor Department said its consumer price index, a gauge of the prices Americans pay for everything from toaster ovens to gasoline, rose 0.3% in April, falling just short of economist expectations. The government said in a release Friday that much of the tick upward in consumer prices in April was due to higher gasoline and rent costs. The department’s gasoline index continued to increase, rising 5.7% and accounting for over two-thirds of the seasonally adjusted all items monthly increase. Excluding volatile food and energy categories, prices rose 0.1%, the same pace as in March. Overall prices rose 2% on a year-over-year basis, the first time CPI inflation has been at or above the 2% mark since November.
NAHB – housing affordability holds steady on a year-over-year basis
Lower home prices, declining mortgage rates and solid income gains contributed to a rise in housing affordability in the first quarter of 2019, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released today. However, the HOI was little changed on a year-over-year basis, as home buyers continue to face ongoing challenges in terms of limited inventory, especially among starter homes for prospective first-time buyers. In all, 61.4% of new and existing homes sold between the beginning of January and end of March were affordable to families earning the US median income of $75,500. This is up from the 56.6% of homes sold in the fourth quarter of 2018 that were affordable to median-income earners and relatively unchanged compared to a first quarter 2018 reading of 61.6. As home price gains slowed during 2018, the national median home price moved down from $262,500 in the fourth quarter of 2018 to $260,000 in the first quarter. At the same time, average mortgage rates fell by 25 basis points in the first quarter to 4.64% from 4.89% in the fourth quarter. “While the recent rise in affordability is welcome news, builders continue to struggle with rising construction and development costs stemming from excessive regulations, a lack of buildable lots and a shortage of construction workers,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “This means that housing affordability is going to continue to be a challenge throughout 2019, particularly in high-cost markets.” “Though the Federal Reserve’s more dovish monetary policy stance has lowered interest rates, income growth still has not kept up with rising construction costs and home price appreciation in recent years,” said NAHB Chief Economist Robert Dietz. “Today four out of every 10 new and existing home sales are not affordable for a typical family. Considering recent income gains due to tax reform and a tight labor market, these affordability concerns become even more pronounced.”
For the second consecutive quarter, Youngstown-Warren-Boardman, Ohio-Pa., remained as the nation’s most affordable major housing market. There, 93.3% of all new and existing homes sold in the first quarter were affordable to families earning the area’s median income of $59,800. Meanwhile, Fairbanks, Alaska, was rated the nation’s most affordable smaller market, with 94.7% of homes sold in the first quarter being affordable to families earning the median income of $92,400. Rounding out the top five affordable major housing markets in respective order were Indianapolis-Carmel-Anderson, Ind.; Buffalo-Cheektowaga-Niagara Falls, N.Y.; Syracuse, N.Y.; and Scranton-Wilkes Barre-Hazleton, Pa. Smaller markets joining Fairbanks at the top of the list included Elizabethtown-Fort Knox, N.Y.; Kokomo, Ind.; Elmira, N.Y.; and Cumberland, Md.-W.Va. San Francisco, for the sixth straight quarter, was the nation’s least affordable major market. There, just 6.9% of the homes sold in the first quarter of 2019 were affordable to families earning the area’s median income of $122,200. Other major metros at the bottom of the affordability chart were located in California. In descending order, they included Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad. All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 12.6% of all new and existing homes sold were affordable to families earning the area’s median income of $74,100. In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; San Luis Obispo-Paso Robles-Arroyo Grande; San Rafael; and Santa Maria-Santa Barbara.
ATTOM – the ever-expanding iBuyer footprint
iBuyers have been expanding at breakneck speeds. What started as a moonshot idea six years ago has now blossomed into a massive, billion-dollar homebuying market in its own right — and it’s not showing any signs of slowing. Opendoor brought the idea to life in 2014, followed by competitor Offerpad. Since then, countless others have hit the scene — including Redfin (via RedfinNow) and Zillow (via Instant Offers) and even brokerage- and market-specific ones like Door and Offerdepot. But it’s not just more players that are getting in on the game. There’s also a footprint expansion happening, too. And though most of the major iBuyers got their start in the Phoenix area, this new-age home selling option has reached far beyond the borders of Arizona’s biggest city. By the looks of it, that reach is going even further as we head into 2019. Regionally, the South has the most iBuyer action, with Phoenix essentially the epicenter of it all. Two of the big players launched there (Opendoor and Offerpad). Zillow’s Instant Offers also now operates in the city. Texas also has a big iBuyer presence. Dallas-Fort Worth, Austin, Houston and San Antonio all have at least one iBuyer in each of those markets, and a few players have plans to expand further into the Lone Star State later this year. North Carolina (specifically Raleigh and Charlotte), as well as Florida, California and Georgia also have decent iBuying activity as well. Atlanta is one of the few cities to have most of the big players in the market. Opendoor, Offerpad and Zillow are all on the ground in ATL. For the most part, iBuyers are shying away from markets in the North and Northeast parts of the country. Housing affordability (and availability) likely plays a role in this, as does overall consistency of existing housing stock. iBuyers rely heavily on data and algorithms when evaluating potential properties. Areas with inconsistent and highly unique housing makes this approach less reliable (and less profitable).
For the most part, iBuying is going to be much of the same this year: more Southern and suburban markets with largely affordable housing inventory. Offerpad just expanded into Houston at the start of the year, and more recently also announced launching in San Antonio and Austin (Opendoor is currently operating in those cities as well). Opendoor has also recently expanded their presence in Southern California to buying and selling homes in the Los Angeles market. They’ve been operating in the nearby Inland Empire region of Riverside-San Bernardino since 2018. With the number of investments being made into this iBuyer movement (not to mention the institutional interest in it), we can likely expect some serious growth on the horizon. Offerpad is currently available in more than 700 cities across the country. “We’re excited to soon share more options for consumers to help them buy and sell the best way possible,” said Cortney Read, director of communications & outreach. Where will this money take them, though? Only time will tell. In many of the markets where iBuyers are present, we are seeing home prices reach their peaks in 2018. For instance, the Atlanta market, where Opendoor, Offerpad and Zillow are currently present, prices of homes for sale have increased 62% in 5 years and reached their peak in 2018. Other markets to reach their peak in 2018, where iBuyers are present include: Charlotte, Dallas-Fort Worth, Denver and Houston. Those markets, where the iBuyer footprint is casting a wider net with the presence of Opendoor, Offerpad and Zillow include; Las Vegas, Raleigh, and Phoenix, all of which have seen double digit increases in home prices.
NAR – Realtors survey shows median income jumped 5%, more women joining industry
Realtor® median net income increased 5% from 2017 to 2018, and 67% of all Realtors® were female, an increase from 63% last year, according to key findings in the 2019 National Association of Realtors® Member Profile. While overall membership grew from 1.23 million in 2016 to 1.36 in 2018, membership remained steady at 1.32 million as of April 2019, according to the report. The median tenure in real estate decreased from 10 to eight years and the median time spent at a real estate firm was recorded at four years, the same as 2018. “As the real estate industry continues to feel the impact of limited inventory, the typical number of transactions Realtors® make in a year remained at 11 in 2018, the same as in the previous report. In addition, because of rising home prices across the country, the median brokerage sales volume increased to $1.9 million in 2018 from $1.8 million in 2017,” Lawrence Yun, NAR chief economist, stated. The survey’s results are representative of the nation’s 1.3 million Realtors®; members of NAR account for about half of all active real estate licensees in the US Realtors® go beyond state licensing requirements by subscribing to NAR’s Code of Ethics and standards of practice while committing to continuing education. The report identified the typical Realtor® as a 54-year-old white female who attended college and was a homeowner. Sixteen% of Realtors® had a previous career in management, business, or finance, and 15% worked in sales or retail. Realtors® continue to see an overall growth in diversity of membership while a growing number of women are entering the profession. Since 2001, there has been a 20% increase in females and a 120% increase in minorities. Only 4% of Realtors® reported real estate was their first career. Seventy-two% of Realtors® said that real estate was their only occupation, and that number increased to 82% among members with 16 or more years of experience.
“Limited inventory continues to cause headaches in markets across the country and is preventing potential homebuyers from finding a home. For the sixth year in a row, Realtors® cited the difficulty in finding the right property surpassed the difficulty of obtaining a mortgage. “However, rental business has been strong with more members involved in property management,” said Yun. The typical property manager supervised 47 properties in 2018, up from 35 properties in 2017. The typical Realtor® earned 13% of their business from repeat clients and customers and 17% through referrals from past clients and customers. Sixty-eight% of Realtors® were licensed sales agents, 20% held broker licenses and 14% held broker associate licenses. Fourteen% of members had at least one personal assistant. Fifty-one% of Realtors® reported having a website for at least five years, 9% reported having a real estate blog, 73% of members were on Facebook and 58% are active on LinkedIn for professional use. The most common information found on Realtor® websites was the member’s own listings and home buying and selling information. The median gross income of Realtors® was $41,800 in 2018, an increase from $39,800 in 2017. Realtors® with 16 years or more experience had a median gross income of $71,000-down from $78,800 in 2017. In comparison, Realtors® with two years or less experience had a median gross income of $9,300, a slight increase from $8,330. Median business expenses were reported at $4,600 in 2018, similar to the $4,580 recorded last year. In 2018, 36% of Realtors® were compensated under a fixed commission split (under 100%), followed by 23% with a graduated commission split (increases with productivity). The survey looked at office and firm affiliation for members and found that over half of Realtors® were affiliated with an independent company. Nearly nine in ten 10 members were independent contractors at their firms. The median tenure for Realtors® with their current firm was four years again in 2019. Nine% of Realtors® worked for a firm that was bought or merged in the past two years.