NAR: Pending sales hit highest level in 18 months

WASHINGTON – Feb. 27, 2015 – Improved buyer demand at the beginning of 2015 pushed pending home sales in January to their highest level since August 2013, according to the National Association of Realtors® (NAR). All major regions except for the Midwest saw gains.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, climbed 1.7 percent month-to-month (to 104.2) in January and 8.4 percent year-to-year. It's the index's fifth consecutive month of year-over-year gains, and the gain rose a bit in each of those five months.

For the most part, January buyers were able to overcome tight supply to sign contracts at a pace that highlights the underlying demand that exists in today's market, says Lawrence Yun, NAR chief economist"Contract activity is convincingly up compared to a year ago despite comparable inventory levels," he says. "The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth."

Yun says conditions are also more favorable for traditional buyers. All-cash sales and investor sales are both down from a year ago, creating less competition and some relief for buyers who still find a limited number of homes available for sale.

"All indications point to modest sales gains as we head into the spring buying season," says Yun. "However, the pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices. Appreciation anywhere near double-digits isn't healthy or sustainable in the current economic environment."

The PHSI in the Northeast inched up 0.1 percent to 84.9 in January and 6.9 percent year-to-year. In the Midwest, the index decreased 0.7 percent to 99.3 in January but rose 4.2 percent year-to-year.

In the South, pending home sales had their largest increase – up 3.2 percent to an index of 121.9 in January (highest since April 2010) and 9.7 percent year-to-year. The index in the West rose 2.2 percent in January to 96.4 and 11.4 percent year-to-year.

NAR forecasts total existing-homes sales in 2015 to be around 5.26 million, an increase of 6.4 percent from 2014. The national median existing-home price for the year is expected to increase near 5 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.

Source: Florida Realtors®

Best Florida home investments found in smaller cities

DORAL, Fla. – Feb. 26, 2015 – Investment advisor NerdWallet recently compiled a list of the current top Florida cities for investors. To determine best potential and limited risk, NerdWallet writer Kamran Rosen offered this analysis:

Market health. We looked at how quickly houses sold compared with other cities in the state, as well as the change in vacancy rate.

Price per square foot. Weighting for affordability, we measured the price per square foot of housing in a city, averaging all months of 2013 and 2014 to avoid seasonal fluctuations.

Population and home price growth. Averaging monthly price data since 2004, we examined the percentage of houses that increased in value over the past 10 years. We also looked at the increase in population since 2010.

Property taxes. Using state data, we calculated the city and county property tax for each city.

In NerdWallet's study of 227 places, the cheapest average sale price was $37.36 per square foot in Kenneth City in Pinellas County. The most expensive was Key Biscayne at $546.77 per square foot, a difference of over $500.

General NerdWallet advice

Flip this. If your goal is to get in and get out with a profit, here are the top three communities when it comes to speed of sale: Hialeah Gardens, Lauderdale-by-the-Sea and Atlantis. Hialeah Gardens earned the highest mark, a 9.55, in our study on this metric – Zillow's 2014 market health score. The quicker a house sells, the higher the score, with 10 as the highest.

Beachfront bonus. The Miami-Fort Lauderdale metro area dominated our top 10 list – eight of our top 10 investments are located there.

Going long? Florida's housing market seems to make the most sense overall for those looking to invest long term. Most of our top 20 places have low scores when it comes to real estate market health, a sign of the continued impact of the Great Recession.

NerdWallet's best places to invest in Florida real estate

1. Doral

Doral tops our list thanks to its relative affordability, low unemployment rate (4.4 percent – over a full percentage point lower than the statewide rate) and strong population growth. This north-central Miami-Dade County city from 2010 to 2013 welcomed almost 6,000 new residents, a gain of more than 14 percent.

2. Bal Harbour

In tiny Bal Harbour, population 2,569, price could quickly become a factor – it's the most expensive location in our top 20 with an average sales price of $340 per square foot. Still, there are plenty of buyers. On Zillow's 0-10 scale for speed of sale, Bal Harbour scored a healthy 8.66.

3. Homestead

The watchword in Homestead is growth. More than half – 56 percent – of its homes have increased in value over the past 10 years, yet housing remains relatively affordable in this city of 61,714 residents. Sale prices over the past two years averaged just $79.42 per square foot, among the most affordable in our study.

4. Miami Lakes

Miami Lakes may not boast oceanfront property, but a full 57 percent of its housing stock has increased in value over the past 10 years, and vacancies have dropped 3.6 percent. That's a good sign for investors who may have to pay a premium for this suburban location just north of Miami. Here, buyers paid an average of $152 per square foot for a house.

5. Marianna

Bargains abound in Marianna, home of our top 20's lowest price-per-square-foot sale price of $61. It's also clearly attracting new residents, with a 28 percent increase in the population from 2010 to 2013.

6. Hialeah Gardens

Hialeah Gardens, population 22,136, had the highest overall market health score in our survey at 9.55. This means buyers who are looking for a quick turnaround on their investment will find many options to flip housing in Hialeah Gardens.

7. Aventura

This diverse and growing community in northeastern Miami-Dade County is known for its high concentration of transplants from the Northeast, and its many high-rise condos. Buyers will find an average sales price of $227 per square foot and options for Intracoastal Waterway and Atlantic Ocean views. The city's investment score also benefits from its 7.51 percent increase in population since 2010.

8. Pinecrest

This small suburban village in Miami-Dade County is the second-most expensive in our top 10, with a price of $269 per square foot. Its population has grown a modest 1.54 percent in recent years, and village leaders are thinking about expanding. A common discussion involves annexing land west of U.S. Highway 1 to help build out the small village's tax base.

9. Cape Coral

Cape Coral moves in many directions: It's the largest city in our top 10 at 158,415 residents, and it has an average sales price that is the third lowest in our top 10 at $96 per square foot. It's the only city on our list located in Lee County, which is also home to Fort Myers. Cape Coral residents are thinking about development, which can have a major effect on real estate values. Recent news reports have focused on plans to develop Bimini Basin as a community gathering place – with some ideas calling for a mix of commercial and open space.

10. Winter Garden

The only place in our top 10 near Orlando, Winter Garden has a lot to offer those diving into the real estate market. Its vacancy rate declined while its population grew over 13 percent, suggesting strong demand for housing. Perhaps it's the nearby Disney World effect, but Winter Garden enjoys a particularly strong job market, which supports a growing housing market. The unemployment rate in Winter Garden in December, the most-recent data available, was 3.8 percent. By comparison, the entire state of Florida was at 5.6 percent for the same month.

Source: Kamran Rosen with NerdWallet 

Buyers may find mortgages easier to get

NEW YORK – Feb. 25, 2015 – Good news for potential home shoppers: A Mortgage Bankers Association (MBA) index shows lender requirements for credit scores, downpayments, and other key mortgage terms are finally loosening up.

Some lenders even expanded the types of mortgages they offer. These moves come after years of tightening loan requirements in the aftermath of the housing crisis.

The newly released MBA index shows that recent improvements in lending are mostly tied to the government's efforts to ease regulations and improve affordability in the housing market. For example, mortgage financing giant Fannie Mae is now allowing purchases of conventional mortgages that have downpayments as low as 3 percent; Freddie Mac is planning to do the same for mortgages closed on or after March 23.

Also, the Federal Housing Administration, which insures loans with downpayments as low as 3.5 percent, reduced its upfront mortgage insurance premiums last month, which is expanding eligibility for home purchases to thousands of potential home shoppers.

"Things are looking better for home buyers and refinancers," not just in the loosening of underwriting requirements but also in the cost of credit, says Brad Blackwell, executive vice president of Wells Fargo Home Mortgage.

Blackwell says that Wells Fargo has gradually opened its credit box as the government took steps to clarify its lending policies and penalties against lenders for defaulting loans. That rule clarity has, in turn, helped lenders gain the confidence to expand lending to a broader range of borrowers, including those who may not have high credit scores or a sizable downpayment for a home purchase.

Wells Fargo says it also relaxed its policy on downpayment gifts to borrowers from relatives and friends. It previously required borrowers to contribute at least 5 percent of the total costs on a home purchase from their own finances in order to qualify for a conventional loan with a 5 percent or lower downpayment; however, the bank recently reduced that requirement to 3 percent and greater gift assistance.

Source: "Lenders Begin Easing Requirements to get a Mortgage," The Los Angeles Times (Feb. 22, 2015)

The Fed’s Janet Yellen plots rate-hike road map

WASHINGTON – Feb. 25, 2015 – Federal Reserve Chair Janet Yellen provided Congress with an upbeat view of the labor market Tuesday and said policymakers will raise interest rates when they are "reasonably confident" inflation will pick up toward the Fed's annual 2 percent goal.

Her remarks set the stage for a possible mid-year rate increase while giving the Fed the flexibility to wait longer if the labor market falters and meager inflation shows no sign of ticking up.

In testimony before the Senate banking committee, she echoed the Fed's last post-meeting statement, which said the Fed "can be patient" as it weighs a hike in interest rates. She reiterated that means rates won't rise for at least the next two meetings, or until June, at the earliest.

But she cautioned that removal of the "patient" wording in an upcoming statement would not mean the Fed "will necessarily increase" rates within two meetings. Rather, she said it would indicate the economy has improved "to the point where it will soon be the case" that a change in interest rates "could be warranted at any meeting."

The caveat is an attempt to prevent a sell-off in Treasuries and rising yields if the Fed drops the assurance in its March post-meeting statement, says economist Paul Ashworth of Capital Economics.

Yellen offered no clear signal on when the Fed will raise its benchmark rate from near zero for the first time since the 2008 financial crisis. But she indicated policymakers could act before unusually low inflation picks up.

"Provided that labor market conditions continue to improve," the Fed will increase the federal fund rate when it's "reasonably confident that inflation will move back over the medium term toward our 2 percent objective," Yellen said in her semiannual report to Congress.

She said the labor market "has been improving along many dimensions," her most positive assessment in recent memory. The unemployment rate, she noted, has fallen to 5.7 percent from 10 percent in 2009 and the ranks of long-term unemployed have "declined substantially." She also said there are fewer part-time workers who prefer full-time jobs.

"There is reason, I think, to feel good about the economic outlook," she said.

"Overall, the Fed is clearly getting close to the first rate hike, which we expect in June," Ashworth wrote in a note to clients.

Yellen added that "room for further improvement remains," noting the portion of Americans working or looking for jobs is low and wage growth is sluggish.

Sen. Charles Schumer, D-NY, urged the Fed not to raise rates "until wages are on a firm upward trend."

But Yellen said the goal is restoring 2 percent inflation. "I don't want to set down a single criterion. … We'll be looking at a range of evidence that pertains to inflation."

Some Republicans chided the Fed for keeping rates too low for too long. Sen. Patrick Toomey, R-Pa., said the financial crisis "is over," but "crisis era rates" still prevail.

Separately, Yellen said she "strongly" opposes proposals in Congress to audit the Fed's monetary policy deliberations. Such a move "would politicize monetary policy and bring short-term political pressure to bear on the Fed."

Yellen is scheduled to testify Wednesday before the House Financial Services Committee.

Before the hearing, some economists said Yellen's committee testimony could revive market expectations for a midyear interest rate hike after January meeting minutes suggested the move is likely to be deferred amid low inflation.

The minutes, released last week, said many Fed policymakers were inclined to wait longer to raise its benchmark rate and that a premature increase could set back the recovery. Treasury yields fell on the news and economists said an anticipated June rate increase was more likely to occur in September, or even later.

Despite the accelerating labor market, low oil prices and a strong dollar are keeping U.S. inflation well below the Fed's annual 2 percent target. Raising rates too soon could dampen economic activity and further push down consumer prices, increasing the risk of deflation. Falling wages and prices can hobble the economy and even trigger recession.

But since the Jan. 27-28 meeting, the Labor Department has reported that employers added 257,000 jobs in January and 1 million the past three months, the best such stretch since 1997. Also, oil prices have edged up and Greece and its Eurozone partners last week reached at least a tentative deal on extending the beleaguered country's bailout package.

Fed policymakers in opposing factions – those who typically favor pro-growth policies and those more concerned about controlling inflation – have pushed the likelihood of a mid-year rate increase in recent weeks.

Source: USA TODAY, Paul Davidson; Alex Wong

Year-to-year home price gains level off

WASHINGTON (AP) – Feb. 24, 2015 – U.S. home price increases leveled off in December, reflecting a weak sales environment and a smaller number of homes for sale.

The Standard & Poor's/Case-Shiller 20-city home price index, released Tuesday, increased 4.5 percent in December compared with 12 months earlier. That is up from 4.3 percent in November and the same as October's annual increase. The small gain comes after price increases had slowed for 12 straight months.

Americans are listing fewer homes for sale, pushing up prices and keeping many houses out of reach for would-be buyers. Home prices are rising faster than most Americans' wages, slowing sales even as hiring strengthens, consumer confidence grows and mortgages stay low.

Still, the smaller price gains are more sustainable than last year's double-digit increases.

The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The December figures are the latest available.

The number of homes for sale in December was equal to just 4.4 months of sales, the lowest level in nearly two years. Six months of supply is typical for a healthy housing market.

"The housing recovery is faltering," said David Blitzer, chairman of the S&P's index committee. "While prices and sales of existing homes are close to normal, construction and new home sales remain weak."

All 20 cities reported higher prices than a year earlier. The biggest gains were in San Francisco, where prices rose 9.3 percent, and Miami, where they jumped 8.4 percent. Chicago reported the smallest gain, at 1.3 percent.

December's price rise is far ahead of wage gains. Average hourly wages rose at a faster pace in January compared with the previous month, but were just 2.2 percent higher than a year ago. Pay gains have been stuck largely at that level for most of the five years since the recession.

Sales of existing homes fell last year after two years of steady recovery. That has led many economists to forecast a rebound in sales in 2015, but so far there are few signs of it.

In January, existing home sales tumbled 4.9 percent to a seasonally adjusted annual rate of 4.82 million, the slowest pace in nine months, the National Association of Realtors said Monday.

And the construction of new homes fell 2 percent in January, the Commerce Department said last week.

Lower mortgage rates and strong job growth may yet spur more sales later this year. The average 30-year fixed mortgage rate was 3.76 percent last week, according to the mortgage giant Freddie Mac. That has ticked up in recent weeks, but is far below the 4.33 percent average from a year ago.

Employers have ramped up hiring, encouraged by strong growth last spring and summer. The U.S. economy added more than 1 million jobs from November through January, the fastest three-month pace in 17 years. More Americans earning paychecks should eventually push home sales higher.

Source: The Associated Press, Christopher S. Rugaber

Shift mindset when selling to vacation-rental buyers

MIAMI – Feb. 18, 2015 – Second-home purchases are again on an upswing, and a poll by HomeAway Inc. indicates that nearly eight in 10 buyers factor potential rental income into their decision to such property.

As a result, real estate agents targeting vacation-rental buyers should embrace a different mentality. There are rewards in catering to customers who tend to be repeat buyers and make referrals, but it isn't always as simple as first-time or move-up buyers.

Practitioners should be prepared to spend as long as two years cultivating leads, for example – and they must be understand everything from patterns and trends in inbound tourism to current zoning laws governing rental properties and potential future changes to those regulations.

Agents should also expect to refer vacation homeowners to local property management companies, and know what local vacation-home renters look for in a property.

It's also helpful to know a little accounting math in order to help buyers calculate profit-and-loss and cash flow projections that gauge a vacation-home's income potential.

Source: Inman News (02/17/15) Bayer, Heather

Rental condos will be harder to find in South Florida

FORT LAUDERDALE, Fla. – Feb. 16, 2015 – If you want to rent a condo or townhome, your options in South Florida are disappearing.

Many developers and investors who rented out units after the housing collapse are putting them back on the market now that home prices are rising.

That means you'll have a harder time finding one to rent, but you'll have more places to look at to buy.

Among those making the switch so far are Royal Poinciana Townhomes at Boca Raton, The Whitney in West Palm Beach and Villas de Venezia in Sunrise. You'll see even more in 2015 and beyond, analysts say.

"Renting is like always wasting your money – it goes right in the trash," said Selmaria Rezende, a 45-year-old medical aesthetician who's trading in her apartment lease for a mortgage on a four-bedroom townhome at Royal Poinciana in April. "When you buy, you're paying a mortgage and it's something for you."

The 90-unit Royal Poinciana development, with Spanish Mediterranean architecture, was built north of Yamato Road off Dixie Highway in 2007, just as the housing downturn was deepening.

The developers sold about half of the two-, three- and four-bedroom units before losing the property in foreclosure, public records show.

In May 2013, Sabal Financial Group, an investment firm in Newport Beach, Calif., bought the unsold units for $11.4 million, records show. With the housing market still in tatters, Sabal rented the townhomes before deciding last year that prices had recovered enough to launch sales.

Balistreri Realty and Brenner Real Estate Group took the listing last summer and have 21 left to sell. Prices range from about $339,000 to $451,000. That's a lot for townhomes without water views, real estate observers say. But consider what you'll pay compared with the new buildings going up.

Another wave of condo construction is adding thousands of units to the South Florida skyline, many with $1 million-plus price tags. But they won't open until next year or later, so they won't help if you're looking now.

Financing is more available now, too. First-time buyers can get Florida Housing Administration (FHA) loans that require as little as 3.5 percent down. Restrictions on condo loans put in place by Fannie Mae during the downturn are starting to lift – making it easier for people to qualify for mortgages, real estate observers say.

"FHA has helped a tremendous number of my buyers," said Beverly Rothstein, an agent in Broward and Palm Beach counties. "Lenders have come to the realization that they have to be slightly less strict so that people can purchase homes and they can make loans."

Over the past several years, Miami-based Mattoni Holdings bought about 150 condos and townhomes across Miami-Dade and Broward counties. Units at Sailboat Pointe in Oakland Park and Belmont in North Lauderdale were among its acquisitions.

The investment firm spruced up the units with fresh paint and new carpeting, found willing renters and enjoyed a strong cash flow before finally deciding the market had rebounded enough to sell.

"Renting for us was actually very easy, but it was never the long-term goal," said Ricardo Caporal, owner of Mattoni. "Selling is almost like a cleanup – it's closure."

Back at Royal Poinciana, Andrea Brenner, marketing director at Brenner Real Estate, said she's encouraged by a flurry of interest in recent weeks. Buyers are snapping up units that serve as the models and sales office – forcing the real estate firms to move to another townhome each time. They packed up and hired movers for the fifth time on Friday.

"We keep laughing and moving," Brenner said. "The hassle is worth it."

Brenner said she hopes to be sold out of the gated community by the summer or fall. That's welcome news to existing residents such as Gabriel Paredes, who said he has lived there since 2009.

Paredes, 29, is convinced that Royal Poinciana will be better off with more owner-occupants in place, taking their morning jogs and swimming in the community pool.

"They have pride of ownership," he said. "They care about the well-being of the neighborhood long-term."

Source: Sun Sentinel (Fort Lauderdale, Fla.), Paul Owers. Distributed by Tribune Content Agency, LLC.

Home Prices Are Up, Supply Is Down—Expect Bidding Wars

It’s getting more expensive to buy a house. Prices rose 6% in the fourth quarter of 2014 as buyers competed for fewer and fewer available homes for sale, according to new data from the National Association of Realtors®.

The NAR report shows most cities (86%) are experiencing rising prices, with fewer available homes to choose from. Just 24 cities, or 14%, recorded lower median prices in 2014 than in 2013.

“Home prices in metro areas throughout the country continue to show solid price growth, up 25% over the past three years on average,” said Lawrence Yun, chief economist at NAR. “This is good news for current homeowners but remains a challenge for buyers who are seeing home prices continue to outpace their wages.”

Still, as more jobs are created, consumer confidence rises, driving the demand for housing. But with fewer sellers putting their homes on the market, the housing market just chugs along.

“This should signal existing home owners, who may have been slow to think of selling, to consider now a great time to list,” said Jonathan Smoke, chief economist at realtor.com®. With prices rising by double digits in 24 areas across the country, according to the report, many sellers would find a pool of buyers vying for their homes.

To be sure, Smoke scoured 200 of the largest metro areas across the country on realtor.com and found that the prices in 98 of them had increased by 6% or more. In 66 of those markets, houses are spending 8% less time on the market, he said.

Prices and inventory go hand in hand. The average supply of available homes for sale was 4.9 months’ worth, according to the report. In a normal market, there would be a six- to seven-month supply of available homes.

“This is a clear sign that demand is growing faster than supply,” said Smoke. Once more homes are listed, prices would moderate, he said.

The NAR wants more new construction. “Unless homebuilders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring,” said Yun.

The five most expensive housing markets in the fourth quarter of 2014, according to the report, were:

San Jose, CA, $855,000

San Francisco, CA, $742,000

Honolulu, HI, $701,300

Anaheim-Santa Ana, CA, $688,500

San Diego, CA, $493,100

The five lowest-cost metro areas were:

Youngstown-Warren-Boardman, OH, $78,000

Rockford, IL, $86,800

Toledo, OH $87,100

Decatur, IL $90,400

Cumberland, MD, $90,500

Housing demand is rising as buyers look to take advantage of low interest rates and a slight uptick in median income ($65,782). To afford a single-family home at the national median price of $208,700, a buyer making a 5% down payment would need an income of $45,863, while a 10% down payment would require an income of $43,449 and $38,621 for a 20% down payment, according to the report.

Regional breakdown

In the Northeast, sales rose 2.5% in the fourth quarter of 2014 but are 4.1% below the fourth quarter of 2013, according to the report. The median price of the home rose 2.2% to $246,300.

In the Midwest, sales of existing homes declined 4.7% in the fourth quarter and are 0.6% below their 2013 level. The median price of an existing single-family home in the Midwest increased 6.2% to $162,000.

In the South, sales climbed 2.7% in the fourth quarter of 2014 and were 5.8% over 2013 levels. Median prices also increased 6.2% to $183,000, according to the report.

In the West, sales fell 6%; however, the median price of a home jumped 4.8% to $299,500 in the fourth quarter.

Source: Realtor.com - By: Chrystal Caruthers

HUD: 2015 is year of housing opportunity

WASHINGTON – Feb. 11, 2015 – Housing and Urban Development Secretary Julian Castro sees big opportunity in the housing market this year, with the easing of credit opening the door to more buyers.

"I see 2015 as the year of housing opportunity, particularly homeownership," Castro told CNN's Christine Romans. "A good example of that is the reduction in the FHA mortgage premium."

Castro points to the recent move of the Federal Housing Administration, which reduced its insurance premiums from 1.35 percent to 0.85 percent. The reduction is expected to amount to about $900 per year for borrowers. Castro says the reduction in premiums will likely spur a quarter of a million more homebuyers in the next three years.

"That's a real impact," he says.

Also in expanding credit, mortgage financing giants Fannie Mae and Freddie Mac recently announced they will allow first-time home buyers to qualify for loans with downpayments as low as 3 percent.

But as some lenders loosen their access to credit, could this brew another housing bubble?

"A few years ago, it was too easy to get a home loan," Castro says. "Now we've swung to the other extreme – now it's too hard."

Castro says that even former chairman of the Federal Reserve Ben Bernanke made public remarks a few months ago that he was struggling to qualify for refinancing mortgage due to the tight lending standards.

"We need to be in the strong middle – where we have strong safeguards in place but at the same time also a robust opportunity for folks who are responsible and ready to won a home to be able to get a mortgage," Castro says.

Source: "2015: The Year to Buy a House," CNNMoney (Feb. 2, 2015)

New investors rush into student housing

NEW YORK – Feb. 10, 2015 – In the last week of January, Starwood Capital closed a deal to buy four student housing properties. And before the week was done, Starwood had bought another portfolio in a second deal — building its portfolio of student housing beds from zero to several thousand in just a few days.

"There are a lot of new people in the market for student housing properties," says Jaclyn Fitts, director of student housing for CBRE's capital markets group, which helped arrange the four-property deal. Starwood is expected to release more details of the transactions in February.

New investors have piled into the market for student housing properties — driving property prices and the volume of deals up and driving capitalization rates down. The new student housing buyers include private equity funds and institutional investors, which are becoming much more likely to bid for student housing properties.

Student housing investors bought between $2.8 billion and $3.0 billion in properties in 2014, continuing the very fast pace set the year before, according to preliminary totals from CBRE, which will release its official count of student housing investments in February.

New investors have been drawn to the sector as it becomes more understood. "Student housing is much more accepted as an asset class," says Dorothy Jackman, managing director of student housing for real estate services firm Colliers International.

Investors are also impressed with how student housing performed through the Great Recession. Prices for apartment properties overall fell by about 20 percent, but average prices per bed for student housing properties stayed strong. "The industry demonstrated resilience," says CBRE's Fitts.

"There are now four or five more private equity funds specifically tasked to buy student housing," says Fitts. That's in addition to funds managed by private equity firms with a long history in student housing like Harrison Street and Blue Vista.

"The student housing industry as a whole is experiencing higher demand than I have ever seen," says Fitts.

Bidding wars are driving prices higher. Investors now routinely accept cap rates as low as 5.5 percent for student housing properties within walking distance of tier-one universities, and as low as 7.5 percent for properties a shuttle bus ride away from tier-two or tier-three schools.

"There is definitely downward pressure on cap rates," says Fitts.

Prices for student housing properties are now similar to the prices investors pay for conventional apartment properties, relative to income. The spread between conventional multifamily cap rates and student housing cap rates has shrunk from 50 to 100 basis points four years ago to just 25 to 50 basis points today.

Financing is also more available for student housing properties, at more attractive terms. For example, Fannie Mae and Freddie Mac no longer add an interest rate premium to most loans for student housing properties. Other lenders have also become more accommodating as student housing becomes a more mainstream asset class.

The most valuable properties are still those within walking distance of campuses. Both Education Realty Trust Inc. (EdR), a student housing developer and owner, and American Campus Communities, a student housing REIT, have stated they are focused on those types of assets. However, the demand for student housing is strong enough to encompass stabilized projects even if they are a bus ride away from the school.

"More people are diversifying," says Colliers International's Jackman. "They are getting more comfortable getting out of the box. … Maybe there might be opportunities in tier-two schools. Maybe distance from campus is not so important."

Developers are building student housing quickly, though so far demand has kept up with supply, as enrollment continues to grow for tier-one schools. Developers completed 4,149 student housing beds in 2014, more than twice the 1,926 completed in 2013. Occupancy rates averaged about 95 percent, down slightly from 96 percent in 2013, according to data aggregated by Colliers.

"We don't see occupancies declining in 2015," says Jackman.

Source: Penton Media, National Real Estate Investor, Bendix Anderson.

America’s housing stock: Who holds it and who’s buying?

NEW YORK – Feb. 9, 2015 – Analysts expect the nation's housing recovery to push onward in 2015, supported by new types of investors and more traditional sales. At the same time, the still-sizable foreclosure inventory will continue to influence home pricing in surprising ways.

Guy Cecala, publisher of Inside Mortgage Finance, confirms that the sector is returning "to a much more traditional housing market, where investors play a much smaller role and the market is more dependent on regular buyers."

RealtyTrac data shows that 421,164 residential properties are still bank-owned, with another 642,927 in default and in the foreclosure process but not yet repossessed.

Daren Blomquist, vice president at RealtyTrac, states, "So there's a lot of property still in the foreclosure pipeline."

At the same time, much of the "shadow inventory" of foreclosures -- residences in various stages of foreclosure, but not yet on the market -- never ended up on the multiple listing service (MLS).

Instead, lenders have been able to sell off inventory in bulk to large REITs and other investors. As a result, these "sales" did not result in as much price drag as some analysts projected.

Fewer distressed sales will actually boost prices overall in 2015, states Tom Popik, research director of the HousingPulse Tracking Survey. He reasons that REOs (real estate owned, an industry term for lender-owned properties), short sales and damaged REOs all trade at a discount of 25 percent to 40 percent of regular home prices.

HousingPulse calculates that distressed sales were 23 percent of total sales last month, a slight increase from the lowest level in four years.

Source: Investor's Business Daily (01/30/15) P. A10; Doler, Kathleen

2015's Most Desired Neighborhoods

The most sought-after neighborhoods in 2015 won't be the trendiest or the most expensive. Instead, Redfin's recent list of the Hottest Neighborhoods of 2015 reveals that buyers are focused on "neighborhoods of compromise" that offer affordability and convenience and an overall good value, rather than living in a trendy location with a huge mortgage.

This is in contrast to last year's results that listed hip areas like Higland Park, Los Angeles and The Mission District in San Francisco as the most desired neighborhoods, and found that buyers preferred trendy urban areas with high price-tags.

"Many homebuyers have recoiled from the dramatic increase in house prices in urban centers posted over the past three years,” said Redfin Chief Economist Nela Richardson. “They are now searching for more affordable places farther out. Expect the neighborhoods on this list to see high demand in 2015 as rock-bottom mortgage rates and a more lenient mortgage lending environment help make homeownership in expensive cities less costly.”

To compile the list, Redfin looked at the neighborhoods that received the most page views and favorites on their site, analyzed data from their own "Hot Homes" algorithm, and asked local Redfin agents.

The El Cerrito neighborhood in San Diego tops the list of the most desired neighborhood of 2015 due to its mix of good shopping and dining and affordability compared to trendier neighborhoods where home buyers are finding themselves priced out.

Redfin's 10 Hottest Neighborhoods of 2015:

1.  El Cerrito (San Diego, CA)

2.  Dickinson Narrows (Philadelphia, PA)

3.  East Atlanta (Atlanta, GA)

4.  Little Neck (Queens, NY)

5.  Bohemia (Long Island, NY)

6.  Curtis Park (Sacramento, CA)

7.  Andersonville (Chicago, IL)

8.  Woodridge (Seattle, WA)

9.  Crocker (San Francisco, CA)

10. Woodridge (Washington DC)

Source: "Redfin Predicts the Hottest Neighborhoods of 2015," Redfin (Jan. 22, 2015)

‘Domino Effect’ to Set Off 2015 Housing Wave

Home prices between the top and bottom segments of the housing market are rising, which could unleash a “domino effect” that builds first-time and move-up buyer momentum this year, notes a new real estate report by Clear Capital. But the build up in traditional home buyers is coming at the cost of declines in the luxury home market. 

"The rate of appreciation for top tier homes is stalling, which is a more direct reflection of waning fair market demand,” says Alex Villacorta, vice president of research and analytics at Clear Capital. “While this is a concerning development, there is a silver lining. The moderating upper tier may give traditional buyers a moment to catch their breath, and entice move-up buyers to enter this segment of the market. The ripple effect of opening up inventory all the way down the price spectrum could provide opportunity and motivation across all segments, including first-time buyers, to enter the marketplace.”

The lower and middle-range ends of the housing market is stabilizing, allowing traditional home buyers to re-emerge. “The next phase of the housing recovery is dependent on healthy demand from this segment,” Villacorta says.

The lower-end of the housing market was once driven mostly by investor activity, but now doors are opening for first-time home buyers to break in.  Also, as the number of underwater mortgages steadily decreases, home owners in the mid-tier of the home pricing segment can finally trade up to a larger, more expensive home.

Lower-end properties have been outpacing price growth in the luxury market, Clear Capital reports. The low-tier has posted double-digit gains year-over-year of 10.2 percent, compared to the top tier, which saw the lowest price growth rate among the three tiers, at 3.6 percent year-over-year.

“This divide between a healthy low tier and stalling top tier could kick-off a domino effect,” Clear Capital notes in its report. “Stalling prices in the top tier of the market could create the perception of a good deal. This instills confidence in mid-tier home owners, motivating them to move-up to the top tier. In turn, this opens up more opportunity for low tier home owners to move-up to the mid tier. … This domino effect could be the catalyst for balanced demand across all sectors of the market.”

The Midwest is leading the pack, according to Clear Capital. The Midwest posted double-digit gains in the low-tier segment at 13.6 percent, while seeing its top-tier of the market fall 3.3 percent with prices. The Midwest is the only region currently seeing price appreciation in the low and mid tiers, growing above 1 percent.

As such, Clear Capital economists are predicting the Midwest to be the first region in U.S. to realize full buyer momentum among first-time and move-up buyers, due to its moderating top tier.

Source: “Clear Capital: Traditional Homebuyers, Make Your Move,” Clear Capital (Feb. 2, 2015)

Homebuyers need to act now

CHICAGO – Feb. 4, 2015 – Homebuyers need to move fast if they want to spend less, according to Jonathan Smoke, chief economist at realtor.com.

"Delayed purchases will only result in higher monthly mortgage payments as prices and rates rise," Smoke writes. Realtor.com forecasts that affordability may decline as much as 10 percent over the year.

The Federal Reserve continues to remind the financial markets that it plans to raise its target federal funds rate this year, which will cause mortgage rates to rise. Many economists predict that 30-year fixed-rate mortgages will average near 5 percent by the end of the year.

For now, mortgage rates are near historical lows for homebuyers and homeowners. Freddie Mac reported last week that the 30-year fixed-rate mortgage averaged 3.66 percent (last year at this time it averaged 4.32 percent), and 15-year fixed-rate mortgages averaged 2.98 percent (a year ago, it averaged 3.40 percent).

"Right now, the Fed is using the word 'patient' to describe its approach to picking the time to raise the target rate," Smoke notes. "However, when the Fed 'loses patience,' rates will go up at least 20 to 40 basis points in anticipation of the target rate officially going up. … So, buyers beware: The clock on these low mortgage rates may be ticking."

Source: "2015: Buy Now, Before the Fed's Patience Ends," realtor.com® (Jan. 30, 2015)