Bulls & Blogs

Housing index focused on home prices

Mar 192019

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index was down slightly last month, continuing a slow deterioration of the index that began last year. It’s down 1.5 points since last Feb. While consumers still express strong confidence about their personal finances, their confidence in the housing market is slipping.

The overwhelming majority of respondents still expect their personal financial situation to stay the same or improve in the next year, and a 14-point majority thinks the economy is on the right track. Those percentages have changed little over the last year.

What has changed is the share of respondents who think it’s a good time to buy or sell a home. The “good-time-to-sell” component is down 6 points from last year and down 17 points from its peak last Jun. This may be a reflection of consumer’s softening expectations about home price growth. While a net 33% still expect prices to rise in the next 12 months, that’s down 19 points from the peak last year.

The “good-time-buy” component is down 7 points from last Feb, and has been declining steadily since summer of 2013. Interestingly, this also may be due to rising home prices as it’s the most frequently cited concern of potential homebuyers.

The positive takeaway is that as declining expectations for higher home prices sink in, potential homebuyers may begin to view buying a home as an affordable option again. Consumers still expect rents to rise almost twice as fast as home prices over the coming year.

Link to the full report.

Fewer home flips could be temporary blip

Real Estate Market, Residential Mortgage Comments Off

Mar 052019

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Recent data from ATTOM Data Solutions, a national property data warehouse, shows that the total number of homes and condos flipped last fall reached a 3.5-year low. The total of almost 46,000 was a 12% decrease from a year earlier.

ATTOM’s senior vice-president Daren Bloomquist suggested this could indicate a cooliing housing market as home flips are quick transactions and provide almost real-time data on the state of the market. Last fall was the third consecutive quarter of year-over-year decreases for flips. Bloomquist said the last time that happened was in 2014 after mortgage rates jumped.

For some context, flips decreased for eleven consecutive quarters preceding the housing crash, so it’s unlikely this trend is indicative of an echo crash. Like 2014, the recent swoon may be a reaction to rising interest rates, and it will be interesting to see whether flipping activity picked up this winter when rates retreated.

The report contained a wealth of interesting data on home flipping. The average gain-on-sale for home flips was $63,000, a slight decrease from a year ago when it was $65,000. This represented a 42.6% return on investment, which was a 6.5 year low and was lower than the 48.1% ROI a year earlier.

Almost half of all flips in the quarter sold for less than $200k, with most of those flips having a gross ROI of 50% or better. However, the highest ROI occurered for flips with a sales price north of $5 million.

The highest rate of home flipping occurred in AZ, TN, and NV, and the highest gross returns were in PA, OH, and KY.

ATTOM’s summary of the report

Big rebound in housing sentiment

Real Estate Market, Residential Mortgage Comments Off

Feb 252019

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index rebounded in Jan after Dec’s big drop in sentiment. Most of the gain was the result of consumers’ confidence about their personal finances. Thirty-four percent of respondents reported their income is higher this year while only seven percent said their income has fallen. This is an 11 point improvement from the index a year ago.

The overall index, which measures how consumers feel about the housing market, rose 1.2 points in Jan. However, the index is down almost 5 points from the same time last year, a negative trend that started last summer.

Three other components of the index stood out. The net share of respondents who thinks home prices will rise fell one percent, declining for the fourth consecutive month. This component is down 22 points from the same time last year.

The net share of respondents saying mortgage rates will fall increased three points. However, this component hasn’t changed much in the last year, and the overwhelming majority of consumers still think rates will rise.

Finally, the net share who thinks now is a good time to buy a home rose four points last month to 15%. It was this component that caused the Dec index to sink.

Taken together, the positive improvements in the index may signal that consumers are sensing improving home affordability, and that could portend an active spring homebuying season.

The best day to buy a home

Real Estate Market, Residential Mortgage Comments Off

Feb 192019

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Do know which day is the best day to buy a home? Well, according to ATTOM Data Solutions, a national property data warehouse, it’s the day after Christmas. ATTOM studied closings for the last 5 years and determined that buyers who closed on Dec 26th realized the greatest discount from market value.

The purchase price for buyers on that day averaged 1.3% below what ATTOM considered the market value. To determine market value, it used a computer-based valuation model, which can have laughably inaccurate results. However, ATTOM analyzed more than 18 million transactions, so you’d expect the laughable outliers would average out.

But why that day? It might be because in order to close on Dec 26, a buyer would be submitting an offer around Thanksgiving. Those sellers who wanted to sell before the end of the year probably were getting a little more motivated to cut a deal.

Interestingly, ATTOM’s analysis showed only 10 days during the year when buyers had the upper hand getting a below market price. That’s probably a testament to the strength of the recent seller’s market. Seven of those days occurred in Dec with one day in each of Feb, Oct, and Nov.

Is this another housing bubble?

Real Estate Market Comments Off

Nov 082018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Rapidly rising home prices preceded the housing crash 10 years ago during which some homes lost more than 50% of their value. Prices bottomed out a couple years later and have been rising steadily ever since. The strength of the recovery has some folks asking if we’re entering another housing bubble. Let’s look at the data.

Home prices nationally have risen 57% since the 2011 trough and are at record highs in some markets. However, the recovery hasn’t been uniform, and some markets still haven’t fully recovered. In addition, in order to assess market frothiness, it’s important to look at not only what homes cost, but also what homebuyers can afford.

Corelogic did that through its Market Conditions Indicator, which considers both home prices and average incomes. When rising home prices outpace incomes for a metropolitan area, the index labels the area overvalued. According to this index, about one-third of US metros currently are overvalued. This includes most Texas metros, including Austin, San Antonio, DFW, and Houston.

So, what does this mean? According to Corelogic, it probably doesn’t indicate a bubble yet. Before the last crash, two-thirds of metros nationally were overvalued. Market forces could be equilibrate metros if home prices stabilize. However, if for the next couple of years we experience additional price growth, we could enter bubble territory again.

Fannie housing index says it’s a good time to buy

Real Estate Market Comments Off

Oct 312018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index fell slightly last month, but it remains on trend, suggesting the housing market continues to strengthen slowly. The good-time-to-buy component of the index rebounded strongly last month, gaining 5 points. Apparently, the strong economy has buoyed homebuyer sentiment enough to overcome rising interest rates. However, the component still is significantly lower than earlier in the year and is down year-over-year.

The good-time-to-sell component remained flat last month; however, it’s still trending higher and is well within reach of its recent all-time high.

Surprisingly, the components that measure personal finances both fell last month. The net share of respondents who said their income is significantly higher than last year fell by 4 points, and the net share who feel confident about job security fell 1 point. However, this last component is strongly positive (+79%), so the decrease probably isn’t meaningful. The right track/wrong track component widened to 21 points in favor of the economy being on the right track, and that could explain the strength of the good-time-to-buy component.

Neither the home price nor mortgage rate component of the index showed any surprises. Respondents still overwhelming expect home prices and mortgage rates to rise in the next year, and the net share expecting a rise increased for both components last month.

Fannie housing index shows market still strong

Real Estate Market, Residential Mortgage Comments Off

Jun 302018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Fannie Mae’s housing index rose to another record high last month despite the continued divergence of attitudes about buying and selling a home. The good-time-to-sell indicator rose 1 point last month and now stands at +46 while the good-time-to-buy indicator fell by 1 point and stands at +28. A positive reading means more consumers think it’s a good time to buy or sell than not, so both indicators still suggest strength in the housing market.

The good-time-to-sell indicator has been rising steadily over the past year and is 14 points higher year-over-year. The good-time-to-buy indicator has been relatively flat over the past year, which is good news given the increase in mortgage rates and home prices over the same period.

One possible contributor to the still positive good-time-to-buy indicator is consumers’ attitudes about renting. An overwhelming majority still say they would buy rather buy than rent if they were going to move. In addition, consumers expect rents to rise faster than home prices over the coming year, meaning waiting to buy a home could be an expensive choice.

Respondents continue to report strong personal financial conditions. Again this month they expressed an increased sense of job security, and more reported that their incomes had increased significantly in the last year. Both indicators also are higher year-over-year.

Cool map helps you decide whether to rent or buy

Real Estate Market, Residential Mortgage Comments Off

May 192018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

For many, the decision whether to rent or buy can be a confusing one. I’ve found a multitude of surveys and tools that claim to help you with the decision, but with so much information, analyzing your own situation can be overwhelming.

I came across an interesting Web site the other day that analyzes the rent vs buy data in an easy-to-digest format – a US map using shading to indicate whether buying or renting makes more sense. The map presents the results on a county-by-county basis, and you can zoom in to see the specific results for your county.

The map also allows you to choose a breakeven point – the point at which buying and renting are equally advantageous. Set this to the number of years you think you would live in the same location, and the map resets the shading to show you areas where buying or renting is better.

Finally, it’s important to consider the assumptions used to produce the map. The producers used US Census data to determine average rents and home prices. For the “buy” scenario, the producers assumed a 20% down payment, a 4.5% mortgage rate, and $2000 in closing costs. The last two could be a bit low depending on your situation, and unfortunately, many folks don’t have 20% for a down payment. Give me a call if you want me to calculate the breakeven point for your specific situation.

Record number say good time to sell a home

Real Estate Market, Residential Mortgage Comments Off

May 182018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

Fannie Mae’s housing index soared to a record high last month despite a negative reading from one of the index’s key components. The net share of respondents who said now is a good time to sell a home increased 6 points from last month to 45%. This good-time-to-sell sentiment has been on a steady rise for the last couple years, but unfortunately it doesn’t seem to have resulted in additional home inventory for sale, which remains very low.

Respondents also reported stronger personal financial conditions. They expressed an increased sense of job security, and more reported that their incomes had increased significantly in the last year.

The net share of respondents who think home prices will continue to rise jumped 7 points this month, and the average expected increase was 3.9%. While that might seem a negative for homebuyers, respondents said they expect rents to rise an average 5.7% over the same period.

The one black mark in the survey was the net share of respondents who think now is a good time to buy. That component fell 3 points last month. It’s likely the combination of higher prices, higher mortgage rates, and fewer homes for sale contributed to the fall. However, these same factors may increase buyers’ sense of urgency even if they don’t think it’s a good time to buy.

The main reason homeowners won’t sell their homes

Real Estate Market, Residential Mortgage Comments Off

May 012018

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Survey after survey recently has shown that homeowners think it’s a good time to sell their homes. Recently, we reported an all-time high, 65% of respondents, ascribed to that sentiment in a Fannie Mae survey. A recent ValuedInsured survey said the percentage is 79%. So, if it’s such a good time to sell, why aren’t more homes for sale?

Pundits have speculated about many reasons, but one of the top suggestions has been the interest rate effect. Most homeowners have been able to finance or refinance their homes at very low interest rates. Now that rates are higher, they don’t want to trade in that low mortgage payment for a higher one.

This may be a valid concern for some folks, but in the ValueInsured survey, only 18% of respondents cited it. The overwhelming majority, 79%, said they weren’t selling because of the price they’d end up paying for a new home. In the same survey, 61% of respondents said they’re waiting for home prices to become more “reasonable” before moving.

I can see why homeowners would be nervous given reports of bidding wars and nearly double-digit yearly price increases in some markets. Unfortunately, when everyone feels nervous at the same time, it exacerbates the home inventory shortage, which leads to more price increases and more bidding wars.

This “time the market” argument seems like a serious hurdle to seeing more homes for sale. However, I suspect just a moderation of home price increases could calm nerves a bit. If homeowners could predict the price of their replacement homes, we could see an easing of the shortage.

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