Home inventory lowest on record

April 8, 2013 by

Home inventory lowest on record

  • Home inventory levels today are lower than in 1985.
  • The market low was 6,786 in February.
  • Mortgage rates in 1985 were about 13%. 

In 1985, when the Denver-area had a million fewer people than it does today, consumers had two and a half time the number of resale homes to choose from.

In February 1985, there were 17,308 unsold homes on the market, compared with an inventory of 6,786 homes last February, according to Metrolist. Metrolist, owned by local Realtor groups, collects residential sales data and publishes it on the Multiple Listing Service, or MLS. Metrolist is expected to release its March report as early as today.

Last February had the dubious distinction of having the fewest number of homes on the market since Metrolist was launched in the mid-1980s.

Prior to Metrolist, real estate data was compiled by McGraw Hill. That information is not readily available, although one long-time broker recently said he doesn’t recall inventory levels this low even in the 1970s.

“This is the sign of the new economy,” said independent broker Gary Bauer, who compiled the historic Metrolist data at the request of InsideRealEstateNews.com.

“We are living in a different environment today than we had in the past,” said Bauer, who also is the current chairman of Metrolist.

Despite rising prices in the Denver area, many home owners remain unwilling or unable to put their homes on the market, he said.

“Quite frankly, a lot of people who should be right-sizing are not putting their homes on the market,” Bauer said. “There is no sense of urgency among homeowners to put their houses on the market.”

February’s inventory level fell 32.7 percent from February 2012, when there were 10,086 homes on the market. Since 1985, on average, there were 15,599 unsold homes on the market in February.

In 2012, there were an average of 10,085 homes on the market each month, a 37.7 percent drop from the average of 16,187 in 2011, the biggest percentage drop in Metrolist’s history.

“That’s great data,” said Lane Hornung, CEO and founder of 8z Real Estate, a sponsor of InsideRealEstateNews.com

“Even for an industry practitioner who is immersed in the market daily, these macro historical stats are eye-opening,” Hornung said.

“The numbers succinctly capture what’s driving our market —the fundamental and chronic shortage of inventory,” continued Hornung.

Indeed, Hornung is concerned it the market is becoming overheated.

“I am reluctant to use the “b” word, as in bubble, but we are seeing some market dynamics reminiscent of the mid-2000s and we all know how that one turned out,” Hornung said.

“Let’s hope we can avoid a similar outcome and that today’s lending standards keeps speculative buying to a minimum. In the mean time, more inventory please.”

Patty Silverstein, chief economist for the Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce, said it “continues to amaze me of the incredibly low inventory levels we are experiencing the Denver area.”

Her research shows that the Denver-area population has grown almost 60 percent since 1985, when there were about 1.8 million people in area. Also, a 30-year fixed rate loan in 1985 was hovering around 13 percent, while today a well-qualified borrower can lock-in such a loan around 3.8 percent or lower.

“I really do think as home prices solidify, and with the spring selling season coming on, more people are going to put their homes on the market,” said Silverstein, who also is principal of Littleton-based Development Research Partners.

Still, inventory levels aren’t going to be returning to historic levels anytime soon.

“Let’s face it. Even if we have more sellers, there is no way we are going to see another 10,000 homes come on the market,” Silverstein said.

The average home price of a home sold in February was $302,745, almost 12 percent higher than a year earlier, according to Metrolist.

“When you have this amazingly low supply and strong demand, guess what happens? Prices go up,” Silverstein said. “It is the law of supply and demand at work.”

Peter Niederman, CEO of Kentwood Real Estate, described the statistics “as a real eye-opener. To think that we have less inventory now than we did 28 years ago is simply staggering.”

Inventory levels are down 78.7 percent from the peak in July 2006, when there were 31,989 on the market.

“To see a 79 percent drop from peak to trough in less than seven years is even more staggering and more amazing,” Niederman said.

“That is just mind-boggling to see such a huge drop in such a relatively short time period.”

Niederman said he is frequently asked why there are so few homes on the market.

One reason, he believes, is that “a lot of homes were purchased at the height of the market in 2005, 2006 and 2007.”

Many of those homeowners still cannot sell their homes for a profit, especially after the expenses of selling, such as paying the brokerage commissions.

“They still have negative equity,” Niederman said. That is, they owe more than their net selling price.

“What I think will happen is that if the average sale price goes up another 6 percent or 8 percent this year, all of a sudden the people who bought at the top of the cycle will be able to sell their homes, giving consumers more choices,” Niederman said.

New home builders also are helping to meet some of the demand, said Chris Mygatt, president of Coldwell Banker Residential in Colorado.

“Certainly, this is a heyday for builders,” Mygatt said.

“The problem is, all along the Front Range, they can’t entitle land and build homes fast enough to meet demand. They also are grappling with rising commodity prices and labor shortages.”

Since the Great Recession, which started in late 2007, construction employment has dramatically dropped in the Denver area, Mygatt noted.

“In the coming months, I think we are going to see a big jump in construction employment, which is good news for the entire economy,” Mygatt said.

He said he would like to see home values rise by no more than 5 percent to 7 percent in 2013.

“If we get double-digit increases, that is not sustainable,” Mygatt said. “We then run the risk of getting hyper-activity in the market and that is not going to end well. We need more inventory to keep downward pressure on prices.”

Mygatt said if someone said in 1985 that consumers would have 10,000 fewer home choices in 2013, no one would have believed it.

“It is simply amazing we can have a million more people and thousands fewer choices for home buyers,” Mygatt said.

He also thinks that few consumers, unless they are house hunters frustrated by the lack of choices and unhappy with being out-bid for their chance at the American Dream, are aware of the extent of today’s supply shortage.

“For one thing, we as Americans have very short attention spans,” Mygatt said.

Hornung said it is critical to the health of the Denver-area housing market that inventory levels increase.

“Our market is wildly out of balance,” Hornung said.  “We desperately need new listings to satisfy demand and return to a more balanced, and frankly, a less zany market.

 

Boulder homes sales continue to be on the rise!

 

John Marcotte

720-771-9401

Search all Boulder homes for sale 

 

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Home Buyer Age Impacts Home Size Preference

April 5, 2013 by

Home Buyer Age Impacts Home Size Preference

young_couple_big_house A recent study from the National Association of Home Builders (NAHB) shows variations in home buyer preferences with regards to home size when it comes to age, race and ethnicity.

NAHB’s “What Home Buyers Really Want,” surveyed more than 3,600 home buyers across the country on various characteristics of new homes. Based on the results, the median desired home size is 2,226 sq ft. However, a closer look at the data broken down by buyer characteristics shows significant differences in how large a home different types of buyers want. Age plays an important role in a buyer’s preferences, with the amount of space requirements dropping steadily as the age of the buyer increases. Among those younger than 35, the desired home size is 2,494 sq ft, compared to 2,065 sq ft among those 65 and older.

“The building industry wants to know how much space buyers want in their homes” says Rose Quint, NAHB’s assistant vice president for survey research, and one of the study’s authors. “This study provides us with new insight into the home size preference of home buyers as a whole, but also across different demographic groups.”

Race and ethnicity also impacted home size preferences, with minority buyers desiring more space than White, non-Hispanic buyers. White, non-Hispanic buyers report wanting about 2,197 sq ft, while Asian buyers desire 2,280 sq ft, Hispanic buyers want 2,347 sq ft, and African-American buyers prefer 2,664 sq ft.

The primary reason for the reversal in home size actually built has to do with buyers’ ability to access credit. Due to overly stringent mortgage lending requirements in recent years, the less financially-solid buyers have been shut out of the market. As a result, homes built in the last few years, largely reflect the preferences of those who are still able to obtain credit and put down larger down payments.

For more information, visit www.nahb.org

 

Boulder homes sales continue to be on the rise!

 

John Marcotte

720-771-9401

Search all Boulder homes for sale 

 

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State-Level Mortgage Interest Deduction Statistics

March 27, 2013 by

State-Level Mortgage Interest Deduction Statistics

The tax benefits of the mortgage interest deduction (MID) are primarily targeted to the middle class. According to 2012 Congressional estimates, 65.4 percent of the tax benefit is collected by households who have economic income of less than $200,000.

Of course, the claims for the MID are going to vary state-to-state given differences in house prices and other costs of living, household incomes, and tax items such as property taxes or state income/sales taxes, which in part determine whether a homeowner claims the standard deduction.

Fortunately, the Internal Revenue Service publishes state-level data of tax statistics. And these state level data, for which the income classifier is equal to adjusted gross income (AGI), illustrate the degree to which MID-benefiting taxpayers are concentrated in the middle class.

mid_200k-2

 

 

The map above reports the share of taxpayers who claimed the MID on 2010 federal income tax return (the most recent data available) and who also report less than $200,000 in adjusted gross income. Not surprisingly, the share tends to drop somewhat in high cost states, such as New York and California, for which household incomes tend to be higher. Nationally for 2010, 91 percent of taxpayers claiming the MID has an AGI of less than $200,000.

Of course, income, homeownership status, and tax characteristics are not fixed across one’s life-cycle. For example, interest payments for a fixed rate mortgage are larger in the early years of a mortgage, thus the potential deduction amount for the MID is higher for recent homebuyers.

View this original post on the NAHB blog, Eye on Housing

Boulder listings

 

John Marcotte

720-771-9401

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Existing home sales edge higher, inventory at 13-year low

March 13, 2013 by

Existing home sales edge higher, inventory at 13-year low

A vacant and blighted house sits next to a well-kept occupied house in a once thriving eastside neighborhood in Detroit, Michigan January 23, 2013. REUTERS/Rebecca Cook

U.S. home resales edged higher in January and left the supply of homes at its lowest level in 13 years, a sign that steam is gathering in the U.S. housing market.

The National Association of Realtors said on Thursday that existing home sales rose 0.4 percent last month to a seasonally adjusted annual rate of 4.92 million units.

That was the second highest rate of sales since November 2009, when a federal tax credit for home buyers was due to expire.

Analysts polled by Reuters had forecast a 4.9 million-unit rate.

The U.S. housing market tanked on the eve of the 2007-09 recession and has yet to fully recover, but steady job creation helped the housing sector last year, when it added to economic growth for the first time since 2005.

The nation’s inventory of existing homes for sale, which is not seasonally adjusted, fell 4.9 percent from December to 1.74 million, the lowest level since December 1999.

Many Americans are holding back from putting their homes on the market because they owe more on their mortgages than their homes are worth. A sharp drop in inventories over the last year has given developers more incentive to build homes. Home building is expected to boost the economymore in 2013 than it did last year.

Inventories were down 25.3 percent from January 2012.

At the current pace of sales, inventories would be exhausted in 4.2 months, the lowest rate since April 2005.

The low inventories are also helping pushing prices higher.

Nationwide, the median price for a home resale was $173,600 in January, up 12.3 percent from a year earlier.

(Reporting by Jason Lange)

 

John Marcotte

720-771-9401

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2013: Transition to “Normal”?

February 28, 2013 by

2013: Transition to “Normal”?

economic_growth_chart_cash The trend of gradual but below-potential economic growth seen in 2012 is expected to carry over through 2013 and into 2014. This modest growth path combined with the real GDP growth rate during the recovery from 2009 to this point of 2.2 percent annualized give credence to claims that the recovery’s slow pace has become the “new normal,” according to Fannie Mae’s Economic & Strategic Research Group. The fiscal cliff and ongoing debt ceiling debate, which are likely to suppress consumer spending in the first half of 2013, continue to present potentially strong headwinds to meaningful growth activity. Overall, a 2 percent growth rate is forecasted for 2013, similar to the subdued pace of 2012.

This is despite the fact that the housing sector, which has become a bright spot in the economy since home prices began to rebound in 2012, is expected to provide a rising contribution to GDP in 2013 and in coming years. Recent data indicate that the housing recovery has transitioned to a faster upward track, boosted by an improving labor market and low mortgage rates. Overall, home sales, home prices, and home building activity as well as homebuilder confidence appear to be on the upswing, having risen to multi-year highs.

“What we view as sub-par economic growth may actually continue to be par for the course for the near term,” says Fannie Mae Chief Economist Doug Duncan. “We expect the fiscal policy climate to act as a drag on growth this year with possible implications on the direction of the economy in the long term. As fiscal policy debates subside later in the spring, we expect to see some upward trend in economic activity, with growth accelerating moderately in the second half of the year. That momentum will find support in the form of continued, albeit slow, improvement in the housing sector. In the longer term, the gradual return of manufacturing to the U.S. and increasing domestic energy production will work together to accelerate economic growth. However, we anticipate overall growth in 2013 will remain below its potential, extending what has been a slow recovery.”

For an audio synopsis of the January 2013 Economic Outlook, listen to the podcast on the Economic & Strategic Research site at www.fanniemae.com. Visit the site to read the full January 2013 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

For more information, visit www.fanniemae.com

John Marcotte

www.boulderhomes4u.com

720-771-9401

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More Americans Believe Economy Headed in Right Direction

February 19, 2013 by

More Americans Believe Economy Headed in Right Direction

Despite continued uncertainty surrounding the fiscal cliff, Americans are showing increased confidence in the housing market and the direction of the economy. According to results from Fannie Mae’s November 2012 National Housing Survey, such improvement bodes especially well for continued strengthening in the housing sector, which in turn is likely to support overall economic growth.

“Consumer attitudes toward both the economy and the housing market continue to gather momentum, with many of our 11 key National Housing Survey indicators at or near their two-and-a-half-year highs,” says Doug Duncan, senior vice president and chief economist of Fannie Mae. “On the housing front, attitudes about the current selling environment continue to improve, with a significant increase in those saying it would be a good time to sell. This growing confidence in a housing recovery, in addition to other factors, may reinforce growing consumer optimism regarding the improving direction of the general economy. Those indicating that the economy is on the right track has risen to 44 percent while those saying it’s on the wrong track has fallen to 50 percent, the smallest gap since the survey’s inception.”

The November survey results show significant movement across many of the indicators. The share of respondents who say now is a good time to sell a home jumped 5 percentage points in November to 23 percent – the highest level since the survey began in June 2010 – narrowing the gap with those who say it is a good time to buy. The percentage of respondents who expect mortgage rates to go up increased by 4 percentage points to 41 percent. Those expecting home prices to go down within the next year also rose by 4 percentage points to 14 percent over last month, a rebound from the survey’s record low in the prior month, while the share who believe home prices will go up in the next 12 months edged up to 37 percent, tying the survey high. Of note, 51 percent of respondents now say it would be easy to get a mortgage, marking the highest rate since the survey’s inception (this survey finding is in addition to the 11 National Housing Survey indictors).

When asked about the economy, those who say it is on the wrong track dipped 6 percentage points since October and a total of 25 percentage points in the past year. Respondents expressed some improvement in the status of their current finances; however, due potentially to the looming fiscal cliff, the share who expect their personal financial situation to get worse over the next 12 months rose 5 percentage points to 18 percent – the highest level since December 2011.

Survey Highlights

Homeownership and Renting

• Average home price change expectation held steady at 1.7 percent.
• Fourteen percent of those surveyed say that home prices will go down in the next 12 months, a 4 percentage point increase over last month.
• The percentage who think mortgage rates will go up continued to rise, increasing 4 percentage points in November to 41 percent.
• Twenty-three percent of respondents say it is a good time to sell, a 5 percentage point increase over last month, and the highest level since the survey’s inception.
• The average rental price expectation hit 4 percent in November, a 0.9 percent rise over the past two months.
• Forty-eight percent of those surveyed say home rental prices will go up in the next 12 months, a slight decrease from last month.
• The share of respondents who said they would buy if they were going to move held relatively steady at 67 percent.
• Fifty-one percent of respondents now say it would be easy to get a mortgage, marking the highest rate since the survey’s inception.

The Economy and Household Finances

• Hitting 50 percent for the first time since the survey’s inception, the percentage who think the economy is on the wrong track has declined by 25 percentage points over the past year, and by 6 percentage points from last month.
• The percentage who expect their personal financial situation to get worse over the next 12 months rose 5 percentage points to 18 percent, the highest level since December 2011.
• Meanwhile, 21 percent of respondents say their household income is significantly higher than it was 12 months ago.
• Household expenses remained stable over the past month, with 56 percent responding that their household expenses stayed the same compared to 12 months ago.

For more information, visit www.fanniemae.com

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

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First-Time Homebuyers Face Stiff Competition from Investors

February 17, 2013 by

First-Time Homebuyers Face Stiff Competition from Investors

first-time_homebuyers_family In this hot market the homes moving fastest have two types of increasingly web savvy buyers: First time homebuyers who take advantage of FHA financing and absentee buyers looking for investments.

“All-cash purchases and absentee buyers are at nearly twice their historic 12-year averages,” says Chris Pollinger, senior vice president of Sales for First Team Real Estate. “At the same time, FHA loans have dropped for another month even though they are still high, which shows that these two different groups are increasingly competing for single family homes in the price range of $225,000 to $400,000.”

According to figures released by DataQuick, nearly 1 of every 3 property purchases were to investors, many who paid all cash for houses with a median price of $245,000. At the same time, first-time homebuyers made up 25.5 percent of mortgage originations with FHA backed loans, down for the second time in as many months.

As these two groups compete for the mid-range of properties, they are increasingly using the web to find the properties that suit them best.

Analysis of thousands of home listings and hundreds of other criteria yielded three key reasons why first-time homebuyers and investors are using the web to get a leg up in the battle for homes:

• Local brokerage sites display 100 percent of the agent-listed homes for sale compared to about 80 percent for the national portal sites.
• Local brokerage sites show newly listed homes for sale 7 to 9 days earlier than national portals. FirstTeam.com is updated four times daily.
• Local brokerage sites almost never show a home listing as active that has already sold; about 36 percent of listings that appear as active on national portals are no longer for sale.

For more information, visit www.FirstTeam.com

John Marcotte

www.boulderhomes4u.com

720-771-9401

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Freddie Mac Economist Sees New Households Outpacing Apartment Boom

February 16, 2013 by

Freddie Mac Economist Sees New Households Outpacing Apartment Boom

In his 2013 forecast, Freddie Mac’s chief economist, Frank Nothaft, sees more than a million new households bolstering housing starts, driving apartment vacancy rates down to ten year lows and outpacing the boom in new apartment construction.

“The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive. This has been a big change from a year ago, when some analysts worried that the looming ’shadow inventory’ would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery,” Nothaft says.

Here’s how Nothaft sees the coming year:

• Next year some regions will post faster house price gains, while some will be stagnant or see value loss fof the year, but overall, the housing recovery continue to strengthen property values and most U.S. house price indexes will likely rise by 2 to 3 percent, according to 2012 forecast from Freddie Mac’s chief economist,

• Look for fixed-rate mortgage rates to remain near their 65-year record lows for the first half of 2013 then begin rising a bit in the tail end of next year, but staying below 4 percent. In the single-family market, this means homebuyer affordability should remain very high in 2013 for those with good credit history, stable income, and sufficient savings.

• Household formation will be up. Unemployment, while still high, will likely drift down toward 7.5 percent; the resulting job and income gains will facilitate household formations – meaning that more members of the boomerang generation who have been living in their parents’ basements should start to move out. Look for net growth of 1.20 to 1.25 million households in 2013. These gains will help drive more housing construction and reduce vacancy rates further. Housing starts should be up around the 1.0 million pace (seasonally adjusted annual rate) by the fourth quarter of 2013.

• Vacancy rates have been trending lower for much of the past three years because household formations have outpaced new construction. To illustrate, in 2012, net household formations through the third quarter totaled 1.15 million but completions of newly built homes (both rental and for sale) were just under 700,000; the difference is made up by a reduction in vacancies. This trend will continue in 2013 and could bring total vacancy rates down to levels last seen a decade ago. While this is good news for property owners, tenants will likely see rents rise a bit faster than prices on all other goods.

• Refinance activity accounted for the bulk of residential lending in 2012 and will account for the bulk of it in 2013, too. But, simply put, we’ve seen the peak in refinancing. Homeowners who obtained a loan with a low mortgage rate in 2012 or refinanced through the Home Affordable Refinance Program are unlikely to refinance in 2013. Next year’s likely pickup in home sales won’t be enough to offset the coming drop in refinance activity. Consequently, total single-family originations will probably drop by about 15 percent in 2013. On the other hand, permanent financing on newly built apartment buildings, a pickup in property transactions, and refinancing of loans exiting “yield maintenance” terms are expected to increase multifamily lending by about 5 percent.

For more information, visit www.realestateeconomywatch.com

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

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10 Fraud Blind Spots to Watch Out for in 2013

February 15, 2013 by

10 Fraud Blind Spots to Watch Out for in 2013

fraud_magnifying_class When you’re driving, you want to be sure you’re covering all your blind spots in order to stay safe on the road. Well the same goes for fraud.

“Just like legitimate businesses, fraudsters are planning ahead for 2013,” says James Gifas, head of RBS Citizens Treasury Solutions.

“During and just after the holidays is when many fraud schemes pick up, as more people feel stretched with greater year-end expenses,” he says. “And as we look ahead into 2013, companies may have blind spots they may not be considering when trying to protect themselves, particularly when it comes to employee fraud.”

RBS Citizens Treasury Solutions experts are currently conducting a fraud education campaign for commercial customers to make sure clients are aware of the areas of vulnerability at their firms, including new online threats that will pose the greatest risk in 2013.

Gifas and his team have identified ten common security gaps that companies need to address to protect themselves when planning for 2013:

10 Fraud Blind Spots

1. Are you using weak passwords? “Hackers have more processing power to crack passwords than ever before, and can relatively quickly test all words in the dictionary to see if the right one comes up. Use instead a more complicated combination of letters, numbers, and symbols that aren’t easily searchable.”

2. Do employees keep passwords “hidden” in their top desk drawer? “The strongest password in the world won’t protect your account if a perpetrator can read it from a slip of paper in your office. Keep passwords behind lock and key, just as you would cash.”

3. Are you training your employees against social engineering? “Many fraudsters find it easier to trick a person into revealing account credentials than to hack into a computer. Training your employees to not provide any user name or password information over the phone or email – even if the source seems legitimate and unless and until the source is independently verified – is a vital measure of protection.

4. Do you lock your computer when you step away from your desk? “As we all know, a minute away from our desk can sometimes turn into much longer, as meetings pop up and we get stuck taking care of a crisis. Again, just as you wouldn’t leave cash lying around on your desk, always lock your computer as well. Also, software such as Trusteer Rapport provides additional high-tech protection against infiltrators who try to break into your computer electronically.”

5. How well do you know your vendors and business partners? “While you may somewhat confidently share wire instructions with long-time vendors or business partners, it is wise to conduct some due diligence around new vendors or other payees. Using the Positive Pay services for checks and ACH and Payee Positive Pay for check disbursement accounts adds in an extra layer of protection.”

6. Do you conduct surprise audits? “The American Bankers Association reports that 60 percent of all fraud incidents within a business involve employees. Surprise audits are a good way to detect and deter occupational fraud schemes so that funds can’t be manipulated ahead of the audit.”

7. Does your company enforce vacation policies? “Similarly, making sure that there are periods of time in which employees are away from their desks and have their records available for oversight has been supported by financial regulators like the SEC for years, but all companies can benefit from this policy. A one- or two-week window can provide the additional transparency needed to expose internal fraud.”

8. Are dual approvals required for your payments? “Implementing banking processes that require dual approvals for activities such as payments and wire transfers is an easy way to minimize certain fraud risks. Companies can also require additional approvals before a new vendor is added to a payment system, as well as use debit blocks and alerts to reduce the risk of unauthorized payments.” With customers increasingly wanting to make cashless payments, owning a portable card machine has never been more important. You can visit feecheckers.com to get the cheapest card payment machine.

9. Is there open access to company checkbooks? “In 2012, 85 percent of organizations experienced actual or attempted check fraud, according to the Association for Financial Professionals’ latest fraud survey. Having company checkbooks out in the open leaves your bank account information visible and increases the risk of check theft. Always lock up any checkbooks.”

10. Does your company have on-site collections? “Outsourcing collections mitigates the risks that emerge when receivables checks are lying around the office.”

“Whether it’s our personal banking information or the company accounts we are responsible for, the most basic advice we can give is to use common sense – and make sure your employees do, too,” says Gifas. “Walking employees through scenarios and conducting training around fraud threats can help to minimize the headaches and real financial losses that happen when fraud occurs.”

Source: RBS Citizens Financial Group, Inc.

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

Search all of Boulder County Listings for free here: www.boulderhomes4u.com

 

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Housing Affordability Index to Set Annual Record for 2012

February 8, 2013 by

 Housing Affordability Index to Set Annual Record for 2012

housing_affordability  2012 will clearly go down as a record year for favorable housing affordability conditions, and a great year for buyers who could get a mortgage, according to the National Association of REALTORS®.

NAR’s national Housing Affordability Index stood at 198.2 in November, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power; recordkeeping began in 1970.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small down payments, the affordability levels are relatively lower.

For all of 2012, NAR projects the housing affordability index to be a record high 194, up from 186 in 2011, which was the previous record. November’s reading was 2.5 index points below October, but up 1.5 index points from a year earlier.

Lawrence Yun, NAR chief economist, said home buyers are able to stay well within their means. “Although 2012 was highest on record, the excessively tight underwriting precluded many would-be homebuyers from locking-in generational low interest rates,” he says. “Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power. A window of opportunity remains open for buyers who can qualify for a mortgage.”

NAR projects the housing affordability index to average 160 during 2013, which means on a national basis that a median-income family would have 160 percent of the income needed to purchase a median-priced existing single-family home. Conditions vary widely, with the highest buying power in the Midwest. Even in the West, where the regional index is lower, they typical family is well positioned in most markets.

NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., says the minor erosion in affordability conditions moving forward could be mitigated by bank and regulatory policies. “Clearer rules from the government regarding future lawsuits and buybacks of Fannie and Freddie loans could encourage banks to use their massive cash holdings to originate more loans,” he says.

“A more sensible lending environment that makes it easier for other financially qualified buyers to get a mortgage would allow many more households to enter the market, boosting home sales as much as 10 to 15 percent,” Thomas says.

The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

For more information, visit www.realtor.org

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

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