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Keeping you updated on the market! For the week of
September 10, 2012
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MARKET RECAP
This lead in could be filed under “dog bites man,” because it's something most of us already know.
We are referring to recent data from the National Association of Realtors that show the time to sell a home is shrinking. According to the NAR, the time to sell for traditional sellers is back within historic norms: the median time a home was listed fell to 69 days in July, down from 98 days a year earlier.
Of course, national numbers often hold little meaning to any particular local market. In fact, the NAR's data range from one-third of the homes were listed for less than a month, while one in five homes was listed for at least six months. The positive takeaway is that more homes in more markets are selling at a quicker pace. What's more, that pace appears to be accelerating.
The price of many homes listed for sale is also accelerating. Clear Capital reports that home prices are up 2.9% year over year in August. Clear Capital cites fewer REO properties coming to market due to new borrower-friendly legislation and the $25 billion lenders' settlement with the federal government.
That's really only part of the story, though, and gives short sales the short shrift, because many lenders are simply finding it more remunerative to engage in short sales than foreclosure and REO sales.
While we are on the subject of sales and prices, Trulia reports that national asking prices on for-sale homes, which precede actual sales prices by two or more months, increased 2.3% year over year in August. Gains were widespread, with 68 of the 100 largest metropolitan areas Trulia follows reporting price increases.
Trulia's data are particularly encouraging, because they are a leading indicator of future home sales (where we are going is much more important than where we've been). Therefore, we would be surprised if home-price gains and the housing recovery were not to persist into fall.
That said, lending could be the monkey wrench that grinds the recovery gears to a halt. Participation is the issue, and it is akin to the observation “water, water everywhere, but not a drop to drink.” Rates are low, but not enough borrowers are able to take advantage of them.
We've mentioned many times over the past year that the issue isn't low lending rates at this point: it's a dearth of borrower-buyers. If only the same people can access credit at these low rates, these low rates become meaningless. A less restrictive lending environment would do much more to accelerate the recovery than historic low rates. |
Economic
Indicator
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Release
Date and Time
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Consensus
Estimate
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Analysis
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International Trade
(July)
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Tues., Sept. 11,
8:30 am, et
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$43.5 Billion (Deficit)
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Important. A weaker dollar is raising import prices. The trend could stimulate consumer-price inflation.
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Mortgage Applications
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Wed., Sept. 12,
7:00 am, et
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None
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Important. Purchase applications have again slowed, pointing to lower home-sale volumes.
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Producer Price Index
(August)
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Thurs., Sept. 13,
8:30 am, et
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All Goods: 1.6% (Increase)
Core: 0.3% (Increase)
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Important. Food and energy price increases are elevating producer inflation rates.
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Retail Sales
(August)
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Fri., Sept. 14,
8:30 am, et
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0.7%
(Increase)
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Important. More retail sales points to increased economic growth.
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Is This the Next Bubble?
An aspiring home owner who can't buy a home becomes a renter.
Today's credit markets have forced many aspiring home owners to become renters. In turn, the rental market has caught fire. By some estimates, there are 2.1 million more single-family homes rented now than in 2006. It's a strong trend. Rents rose nationally 4.7% year over year in August, which builds upon the 5.8% year-over-year rise recorded back in May. In a few markets, Houston and Seattle most notably, rents are up 10% year over year.
Buyers of rental homes (many paying with cash) have soaked up much of the inventory, and to be sure, that's a positive. But many of the people renting these properties would have preferred to buy them themselves, but they were precluded from buying because they were unable to secure financing.
The market at this point is becoming too skewed toward rentals, which is driving up rents at an abnormally fast rate. This isn't a good thing, because abnormally fast-growing rates aren't sustainable rates. Should rents turn south, many of those investment properties will no longer be sound investments, particularly those bought late into the rising-rent trend.
What's more, a neighborhood of rentals isn't as well maintained or holds its value like a neighborhood of owners. A neighborhood of rental homes tends to loose value over time; a neighborhood of owner-occupied homes tends to gain value over time.
The point we want to emphasis is that we need a lending environment that encourages more of the latter; that is, more owner-occupied buying. To get that, we need a lending environment that encourages profitable, heterogeneous lending. We simply don't have that today. |
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