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Housing Crunch to Hold in Most Price Ranges

by NAR

Daily Real Estate News | Friday, February 17, 2017

Home buyers at many income levels likely will see an inadequate amount of homes for sale in their price range in the coming months, according to a new housing affordability model created by the National Association of REALTORS® and realtor.com®.

The new Affordability Distribution Curve—which culls data from mortgages, state-level income, and listings on realtor.com®—examines how many listings are affordable to those in a particular income percentile. In January, it was below the equality line, and the gap was generally wider at lower incomes, which indicates tight supply conditions. For example, a household in the 35th percentile could afford 28 percent of all listings, while a household in the 50th percentile could afford 46 percent. A household in the 75th percentile could afford 74 percent of active listings.

"Consistently strong job gains and a growing share of millennials entering their prime buying years is laying the foundation for robust buyer demand in 2017," says Jonathan Smoke, chief economist at realtor.com®. "However, buyers with a lower maximum affordable price are seeing heavy competition for the fewer listings they can afford. At a time of higher borrowing costs, this situation could affect affordability even more as buyers battle for a smaller pool of homes and bid prices upward."

NAR and realtor.com®'s Affordability Score also accentuates the disjointed rate of accessible supply on the market across the country. Increasing price growth and higher mortgage rates caused January's Affordability Score to shrink from a year ago, nationally as well as in many states.

"Home prices have ascended far past wage growth in much of the country in recent years because not enough homeowners are selling, and home builders have not boosted production enough to meet rising demand,” says NAR chief economist Lawrence Yun. "NAR and realtor.com®'s new affordability measure confirms that buyers aren't exaggerating about the imbalance. Amidst higher home prices and now mortgage rates, households with lower incomes have been able to afford less of all homes on the market last year and so far in 2017."

The following states last month had the highest Affordability Scores (a metric which ranges from zero to 2): Indiana (1.23), Ohio (1.22), Iowa (1.18), Kansas (1.17), and Michigan and Missouri (both at 1.14). The states with the lowest Affordability Score were Hawaii (0.52), California (0.60), District of Columbia (0.65), and Montana and Oregon (both at 0.67).

"This shortfall of inventory at a time of healthy job gains in most states is one of the biggest reasons for the depressed share of first-time buyers and the inability for the homeownership rate to rise above its near-record low," says Yun. "The only prescription to reversing this adverse situation is to build more entry-level and mid-market housing that aligns with current household incomes."

President's Day Weekend-All the Presidents’ Home Prices

by by Adam DeSanctis on February 17, 2017-NAR

All the Presidents’ Home Prices

Posted in Home Sales Statistics, Infographics, by Adam DeSanctis on February 17, 2017

There have been nine U.S. presidents since the National Association of Realtors® began its comprehensive reporting of home sales data in 1968. The country and the typical cost to buy a home have changed a lot. To celebrate President’s Day, here is the national median single-family home price at the time each president was sworn in since 1969.

*Median sales prices are adjusted for inflation using the U.S. Bureau of Labor Statistics’ CPI Inflation Calculator for 2016.

First Comes Love... Then Comes Mortgage?

by KCM Blog

According to the National Association of REALTORS most recent Profile of Home Buyers & Sellers, married couples once again dominated the first-time homebuyer statistics in 2016 at 58% of all buyers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.

But, many couples are also deciding to buy a home before spending what would be a down payment on a wedding, as unmarried couples made up 14% of all first-time buyers last year.

If you’re single, don’t fret! Single women made up 18% of first-time buyers in 2016, while single men accounted for 8% of buyers. One recent article pointed to a sense of responsibility and commitment that drives many single women to want to own their home, rather than rent.

Here is the breakdown of all first-time homebuyers in 2016 by percentage of all buyers, income, and age:

First Comes Love… Then Comes Mortgage? | MyKCM

Bottom Line

You may not be that much different than those who have already purchased their first homes. Let’s get together to determine if your dream home is already within your grasp!

3 Questions to Ask If You Want to Buy Your Dream Home

by KCM Blog

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Ask yourself the following 3 questions to help determine if now is a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This is truly the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

For example, a survey by Braun showed that over 75% of parents say “their child’s education is an important part of the search for a new home.”

This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the top four reasons Americans buy a home have nothing to do with money. They are:

A good place to raise children and for them to get a good education
A place where you and your family feel safe
More space for you and your family
Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the median price of homes sold in December (the latest data available) was $232,200, up 4.0% from last year. This increase also marks the 58th consecutive month with year-over-year gains.

If we look at the numbers year over year, CoreLogic forecasted a rise by 4.7% from December 2016 to December 2017. On a home that costs $250,000 today, that same home will cost you an additional $11,750 if you wait until next year.

What does that mean to you?

Simply put, with prices increasing each month, it might cost you more if you wait until next year to buy. Your down payment will also need to be higher in order to account for the higher price of the home you wish to buy.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long-term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors, and Fannie Mae have all projected that mortgage interest rates will increase over the next twelve months, as you can see in the chart below:

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

A little-understood provision of the state constitution will provide property-tax relief for homeowners across the state next year, but it could have cascading financial consequences for virtually all levels of Colorado government.

Gov. John Hickenlooper in his State of the State address on Thursday highlighted the immediate problem for Colorado’s budget: a projected $170 million cut to school districts across the state in 2018, which the state is required by law to replenish from its own coffers.

“The constitutional budget constraints for school finance are the thorniest part of our fiscal thicket,” Hickenlooper said, urging lawmakers in both parties to come together to find a solution.

But local governments, too, are bracing for the fallout — especially those counties, cities and special districts that rely heavily on residential property taxes. Even those that don’t could feel the pinch. In the past, the state has cut tax distributions to local governments in order to meet its growing school funding needs.

“It’s more than a ripple (effect),” said Kevin Bommer, deputy director of the Colorado Municipal League. “It’s like throwing a boulder in a lake.”

Since 2003, the assessment rate for residential properties has been unchanged, at 7.96 percent of market value. Next year, according to a study released Friday by the Department of Local Affairs, that’s projected to drop to 6.56 percent. Local officials apply that rate to their tax levies to calculate how much property owners owe.

Statewide, the total assessed value of property is expected to grow slightly over the next three years under the new formula, but that’s driven by the Denver area. Other parts of the state are expected to see revenues fall, according to a forecast from the Colorado Legislative Council.

Gini Pingenot, legislative director for Colorado Counties Inc., said the impact will vary from place to place, but for some local governments, the cut could be severe.

In places that can’t adjust their tax levies to compensate, that would represent an 18 percent drop in residential tax collections, not accounting for any growth in the local housing market.

So what is Gallagher?

Known as the Gallagher amendment, the constitutional measure was approved by voters and adopted in 1982 in response to homeowner concerns over rising residential property taxes. It  requires that residential assessed values comprise no more than 45 percent of the state’s overall assessed value. Non-residential properties make up the remaining 55 percent.

Most years, Gallagher doesn’t come into play. If commercial values and home values rise at a similar pace, there’s no need for an adjustment.

But when there’s a housing market boom — as there has been over the past several years — coupled with a business downturn, like the recent dip in the oil and gas industry, homeowners can wind up contributing more than their 45 percent share. That throws the ratio out of whack, triggering a mandatory tax cut for homeowners under the state constitution.

The Taxpayer’s Bill of Rights adds another layer of complexity. Gallagher can trigger an automatic reduction in the assessed rate, but under TABOR, the rate can’t go back up without voter approval. So when commercial growth outpaces home values, and residential values drop below 45 percent, the rate doesn’t adjust.

“You never really get back any of that that you lose when you adjust this downward,” said Todd Weaver, the budget manager for Arapahoe County.

When the amendment was first adopted, the assessment rate for commercial property was 29 percent, and the residential rate was 21 percent. Today, the commercial rate is still 29 percent — but the residential rate has plummeted to 7.96 percent.

No easy fix

Lawmakers in both parties acknowledge the challenges Gallagher poses, but solutions are elusive.

State Rep. Millie Hamner, the top Democratic budget writer, put it bluntly at a Joint Budget Committee hearing in December: “I’m feeling choked by the Gallagher amendment,” said Hamner, of Dillon.

In a meeting with The Denver Post’s editorial board this month, Senate President Kevin Grantham, R-Cañon City, said it’s a simple fix but not an easy one: “You repeal Gallagher.”

“What you’d be asking people to do is to raise taxes on their own homes by repealing Gallagher,” Grantham said. “So what are the odds of that? Not very good.

“But as far as equity in the system, that’s exactly what should happen if we’re going to bring equity back to the entire system without putting the beast on the back of all the businesses here in Colorado to the tune of four times the taxes and increasing.”

Because the 45/55 ratio is set statewide, Gallagher doesn’t take local market conditions into consideration. That means the formula is driven by what happens in the Front Range, where the bulk of the state’s population lives.

So next year, homeowners in Denver will see some tax relief from their soaring home values. But so, too, will homeowners in other parts of the state, where home values might be growing more slowly or even declining.

On the West Slope in Mesa County, budget cuts in prior years had already left county commissioners mulling a sales-tax hike to pay for law enforcement and criminal justice needs.

Scott Stewart, the county’s chief financial officer, said the district attorney’s office had been cut so severely that last year, when a police officer was shot and killed, the office had to move money from elsewhere just to hire someone to investigate the case.

“They have to sometimes plea bargain cases that maybe should be prosecuted a little stronger,” Stewart said.

With the Gallagher amendment changes, Stewart is looking at a $964,000 drop in residential property-tax collections. That’s despite home values rising by 10 percent.

Existing-Home Sales Slide in December; 2016 Sales Best Since 2006

by NAR-Media Contact: Adam DeSanctis / 202-383-1178 /

Existing-Home Sales Slide in December; 2016 Sales Best Since 2006

Media Contact: Adam DeSanctis / 202-383-1178 / Email (link sends e-mail)

WASHINGTON (January 24, 2017) — Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors®.

Total existing-home sales 1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

In December, existing sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month's slide, sales are only 0.7 percent higher than a year ago.

Lawrence Yun, NAR chief economist, says the housing market's best year since the Great Recession ended on a healthy but somewhat softer note. "Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market," he said. "However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December."

Added Yun, "While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end." 

The median existing-home price 2 for all housing types in December was $232,200, up 4.0 percent from December 2015 ($223,200). December's price increase marks the 58th consecutive month of year-over-year gains.  

Total housing inventory 3 at the end of December dropped 10.8 percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3 percent lower than a year ago (1.76 million), has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015). 

"Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction," said Yun. "Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production."

According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage surged in December to 4.20 percent from 3.77 percent in November. December's average commitment rate was the highest rate since April 2014 (4.32 percent).

First-time buyers were 32 percent of sales in December, which is unchanged both from November and a year ago. First-time buyers also represented 32 percent of sales in all of 2016. NAR's 2016 Profile of Home Buyers and Sellers — released in late 2016 4 — revealed that the annual share of first-time buyers was 35 percent.

"Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it's not getting any easier to be a first-time buyer," said Yun. "It'll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market."

On the topic of first-time- and moderate-income buyers, NAR President William E. Brown, a Realtor® from Alamo, California, says Realtors® look forward to working with the Federal Housing Administration to express why it is necessary to follow through with the previously announced decision to reduce the cost of mortgage insurance. By cutting annual premiums from 0.85 percent to 0.60 percent, an FHA-insured mortgage becomes a more viable and affordable option for these buyers.

"Without the premium reduction, we estimate that roughly 750,000 to 850,000 homebuyers will face higher costs and between 30,000 and 40,000 would-be buyers will be prevented from entering the market," he said.

Properties typically stayed on the market for 52 days in December, up from 43 days in November but down from a year ago (58 days). Short sales were on the market the longest at a median of 97 days in December, while foreclosures sold in 53 days and non-distressed homes took 50 days. Thirty-seven percent of homes sold in December were on the market for less than a month.

Inventory data from Realtor.com® reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in December were San Jose-Sunnyvale-Santa Clara, Calif., 49 days; San Francisco-Oakland-Hayward, Calif., and Nashville-Davidson-Murfreesboro-Franklin, Tenn., 50 days; and Billings, Mont., and Hanford-Corcoran, Calif., both at 51 days.

All-cash sales were 21 percent of transactions in December, unchanged from November and down from 24 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in December, up from 12 percent in November and unchanged from a year ago. Fifty-nine percent of investors paid in cash in December. 

Distressed sales 5 — foreclosures and short sales — rose to 7 percent in December, up from 6 percent in November but down from 8 percent a year ago. Five percent of December sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 20 percent below market value in December (17 percent in November), while short sales were discounted 10 percent (16 percent in November).

Single-family and Condo/Co-op Sales

Single-family home sales declined 1.8 percent to a seasonally adjusted annual rate of 4.88 million in December from 4.97 million in November, but are still 1.5 percent above the 4.81 million pace a year ago. The median existing single-family home price was $233,500 in December, up 3.8 percent from December 2015.

Existing condominium and co-op sales dropped 10.3 percent to a seasonally adjusted annual rate of 610,000 units in December, and are now 4.7 percent below a year ago. The median existing condo price was $221,600 in December, which is 5.5 percent above a year ago.

Regional Breakdown

December existing-home sales in the Northeast slid 6.2 percent to an annual rate of 760,000, but are still 2.7 percent above a year ago. The median price in the Northeast was $245,900, which is 3.8 percent below December 2015.

In the Midwest, existing-home sales decreased 3.8 percent to an annual rate of 1.28 million in December, but are still 2.4 percent above a year ago. The median price in the Midwest was $178,400, up 4.6 percent from a year ago.

Existing-home sales in the South in December were at an annual rate of 2.25 million (unchanged from November), and are 0.4 percent above December 2015. The median price in the South was $207,600, up 6.5 percent from a year ago.

Existing-home sales in the West fell 4.8 percent to an annual rate of 1.20 million in December, and are now 1.6 percent below a year ago. The median price in the West was $341,000, up 6.0 percent from December 2015.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #

NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

1 Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau's series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

2 The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR's quarterly metro area price reports.

3 Total inventory and month's supply data are available back through 1999, while single-family inventory and month's supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

4 Survey results represent owner-occupants and differ from separately reported monthly findings from NAR's Realtors® Confidence Index, which include all types of buyers. Investors are under-represented in the annual study because survey questionnaires are mailed to the addresses of the property purchased and generally are not returned by absentee owners. Results include both new and existing homes.

5 Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR's Realtors® Confidence Index, posted at nar.realtor.

NOTE: NAR's Pending Home Sales Index for December is scheduled for release on January 30, and Existing-Home Sales for January will be released February 22; release times are 10:00 a.m. ET.

2 Myths That May Be Holding Back Buyers

by KCM Blog

Fannie Mae’s article, “What Consumers (Don’t) Know About Mortgage Qualification Criteria, revealed that “only 5 to 16 percent of respondents know the correct ranges for key mortgage qualification criteria.

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home, but many programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

2 Myths That May Be Holding Back Buyers | MyKCM

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.7% of approved mortgages had a credit score of 600-749.

2 Myths That May Be Holding Back Buyers | MyKCM

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

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Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker