What’s Holding Potential Sellers Back?

Existing-home sales are up nearly 5 percent from last year, but sales would be much higher if it wasn't for the negative equity overhang, economists say.

The National Association of REALTORS® recently reported that existing-home sales increased 4.7 percent in February compared to a year ago.

But with an improving labor market, home sales should be even higher, Mark Fleming, chief economist at First American Financial Corp., told The New York Times. Home prices are higher too, which often correlates with rising home sales, according to Fleming's research.

"Rising prices only crimp affordability for the first-time buyer who doesn’t yet own the asset," Fleming told The New York Times. "But the vast majority of home sales are to existing home owners. And for existing home owners, what changes affordability is their own income and the price of money."

However, too many home owners still lack sufficient equity in their homes to sell, Fleming notes. Home owners who have equity below 20 percent are less likely to sell because they may not be able to cover the costs of the transaction.

About 35 percent of home owners nationwide are either in a negative equity position or have equity below 20 percent, according to some industry estimates.

The equity picture has shown much improvement recently. CoreLogic reported earlier this month that 89 percent – or about 44.5 million -- of all U.S. properties with a mortgage had equity by the end of the fourth quarter of 2014. 

What’s more, if home prices rise by an additional 5 percent, about 1 million more home owners in negative equity stand to inch back into the black. However, much of the equity is concentrated at the high-end of the housing market (94% of homes valued at more than $200,000 have equity compared to 84% of homes valued less than $200,000).

Also, many home owners remain "under-equitied" – having less than 20 percent of equity in their homes. Nearly 50 million properties – or 20 percent – are considered “under-equitied” in the U.S., and about 1.4 million of those properties have less than 5 percent equity, which his considered “near-negative equity.”

According to CoreLogic’s report, the states with the largest number of negative equity, as of the fourth quarter of 2014, are: Nevada (24%); Florida (23.3%); Arizona (18.7%); Illinois (16.2%), and Rhode Island (15.8%).

Source: "Negative Equity a Drag on Home Sales," The New York Times (March 27, 2015) and "89% of U.S. Homes Ended 2014 With Equity," REALTOR® Magazine Daily News (March 18, 2015)

Investors turn to crowdfunding for flips

NEW YORK – March 30, 2015 – As home prices rise, investors looking to cash in are back to flipping properties – but more are now using online crowdfunding sites to fund their flips.

Unlike the housing boom days, lenders are showing more caution in granting financing to buyers who want to quickly rehab a property and then sell it for a profit. As a result, investors are turning to other financing avenues to fund their flips.

In addition, a growing number of online crowdfunding sites offer some financial aid for housing flips.

Ben Walhood in Chicago, for example, says he turned to RealtyShares in San Francisco, an online crowdfunding platform. Walhood has gotten his property purchases funded by individual investors from across the country who lend him money for single-family flips. He pays interest on a loan, and the investors earn about a 9 percent return.

With crowdfunding, the interest charged is much higher than conventional financing, however – loans backed by Fannie Mae and Freddie Mac are in the 4 percent range, while Walhood pays about an 11 percent interest rate through crowdfunding. The higher interest rate might make sense, however, if the home won't be held for long before the resale. Walhood says he plans to flip the house in three months, so he only will pay the higher rate for a short time before he pays off the full loan.

"This gap has been left by banks that now crowdfunding platforms, like RealtyShares, are able to fill," Nav Athwal, CEO of RealtyShares told CNBC. "They are able to provide quicker, more efficient capital that helps meet the needs of these investors who are looking for speed of execution and the ability to be flexible with their terms, as well as with the underwriting standards. Banks just aren't meeting that need."

Athwal says RealtyShares funded about 70 projects last year and about 30 so far this year (90 percent of the projects which have been fully funded).

Other real estate crowdfunding sites are also popping up, such as RealtyMogul, Fundrise, Groundbreaker and PatchofLand. Many of those sites focus on commercial projects, though. RealtyShares is one of the few to focus on the single-family flip market, CNBC reports.

Source: "Crowdfunding House Flippers: Risks and Rewards," CNBC (March 26, 2015)

New home sales soared, so why are builders worried?

WASHINGTON – March 27, 2015 – Homebuilding continues to lag behind pre-recession levels, even as the economy shows gains and buyer demand is high. Why are builders still so cautious?

A new survey by the National Association of Home Builders finds that two-thirds of builders said their greatest concern for 2015 is the availability of labor. Building material prices ranked closely behind as a top concern at about 67 percent, followed by 57 percent of builders who said lot availability.

In 2011, only 13 percent of homebuilders surveyed said labor availability was a concern, and only 21 percent worried about lot acquisition.

With labor concerns, most builders are most concerned about the availability of rough and finish carpenters, framers and masons. More than 60 percent of the homebuilders surveyed reported "some" or "serious" carpenter shortages.

"The uptick in overall employment has put additional pressure on finding qualified construction workers," writes David Crowe, NAHB's chief economist. "Scarcities and rising wages have been worse in the energy production regions of the country. … Wages will have to rise to bring more of the experienced workers back from where they went during the housing collapse."

Builders continue to grapple with lot shortages, which began surfacing as a problem in 2012. By mid-2014, about three in five builders reported "some" or "serious" lot shortages.

Builders' concerns have changed as the overall housing market has improved. For example, about 67 percent of builders were concerned about buyers qualifying for a mortgage in 2013, but that percentage fell to 45 percent in 2015. Also, builders are less concerned about the competition from distressed sales – 40 percent in 2013 said it was a big problem compared to 19 percent in 2015.

Source: "Supply-Oriented Concerns Top Builders' Lists in 2015," BUILDER (March 2015)

Floridians’ confidence rises 3 points in March

GAINESVILLE, Fla. – March 27, 2015 – Consumer sentiment among Floridians rose in March by more than 3 points to 96.8, the highest reading in 10 years, according to a monthly University of Florida (UF) survey. All five components that make up the index increased.

"Florida consumers are particularly optimistic about the future," says Chris McCarty, director of UF's Survey Research Center in the Bureau of Economic and Business Research. "The three components that are forward-looking are much higher than they have been for quite some time."

Expectations of personal finances a year from now increased 2.4 points to 103.6, the highest level since August 2004. Perceptions of U.S. economic conditions over the next year rose 1.2 points to 94.6, while expectations of U.S. economic conditions over the next five years increased 3.4 points to 93.6, the highest since July 2004.

On the question of whether now is a good time to buy big-ticket items such as a car or appliance, March saw an uptick of 7.4 points to 106.1.

"Overall the index reflects a Florida consumer who is really feeling a recovery," McCarty says.

While increases in the overall index were broad-based across age and income groups, there were some differences.

Gains in the component comparing personal finances now with a year ago were higher among households making less than $50,000, up 4.5 points, compared with those making more than $50,000, which decreased 1.9 points.

An even greater difference was noted in expected U.S. economic conditions over the next five years, but the trend was reversed: The outlook for those making under $50,000 per year decreased slightly by 2 points, but for those making more than $50,000, it surged up 9.4 points.

"This reflects lower-income households who have made some gains recently but are less optimistic about the future. Upper-income households appear to be happy with future trends," McCarty says.

Floridians at various income levels may have different reasons for a positive outlook. Those invested in the stock market have cause for optimism as stock values recovered from a mid-month decline and approach record levels. For lower-income Floridians, gas prices remain low and are likely to stay there for a while because of the strengthening U.S. dollar, the currency used for international oil exchange.

Other economic data for Florida are positive, according to UF:

Housing prices increased in February to $180,000 for the median price of a single-family home, up $5,000 from the previous month and a 9.1 percent increase from a year before.

Mortgage rates have been declining over the past month and are once again near historic lows.

The Florida unemployment rate remained steady at 5.7 percent in January. While the "U6" measure of unemployment that also counts part-time and discouraged workers is still higher in Florida (12.8 percent) compared with the U.S. (12 percent), it has declined considerably from 19.3 percent in 2010.

"For now, Florida's economy is doing quite well, with the caveat that wages remain persistently stagnant," McCarty says. "But many economists see signs that wages will pick up. The rate of people who quit a job is up to 2 percent in January from 1.7 percent a year ago, suggesting that workers see better-paying opportunities which later translate to higher wages."

Conducted March 1-23, the UF study reflects the responses of 419 individuals who were reached on cell phones, representing a demographic cross section of Florida. The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2; the highest is 150.

Source: 2015 Florida Realtors®

Census: Florida city tops list of fastest-growing cities

WASHINGTON (AP) -- The beautiful weather in Florida seems to be drawing more and more Americans, with the Sunshine State climbing the ranks of most populous states and fastest-growing cities.

New data released from the U.S. Census Bureau showed that The Villages, Florida, ranked as the nation's fastest-growing metro area last year, with the city west of Orlando boasting a 5.4 percent increase in population between July 1, 2013, and July 1, 2014. This comes as Florida became the nation's third most-populous state in December, taking over the spot once held by New York.

But it's not just The Villages, which grew to a population of about 114,000, the Census Bureau said. The growth is driven by increases in the state's metroplexes in areas such as central and southern Florida, Census Bureau Director John H. Thompson said. Six Florida metro areas were among the 20 fastest-growing: The Villages, Cape Coral-Fort Myers, Naples-Immokalee-Marco Island, Orlando-Kissimmee-Sanford, North Port-Sarasota-Bradenton and Panama City.

Florida has been long known for retirees, beaches and vacationers. The influx of new residents was enough to offset the fact that there were more deaths than births in about half of the state's counties, the Census Bureau said. Florida averaged 803 new residents each day between July 1, 2013, and July 1, 2014, growing by 293,000 to reach 19.9 million during that time period, census data released in December showed.

New York went up by 51,000 to 19.7 million during that same period.

A few more beach towns and cities in the West make up most of the top five fastest-growing cities by percent growth: Myrtle Beach-Conway-North Myrtle Beach metroplex in South Carolina and North Carolina at 3.2 percent; the Austin-Round Rock area in Texas at 3 percent; Odessa, Texas, at 2.9 percent; and St. George, Utah, at 2.9 percent.

Texas snagged the top spots in both numerical increase by person for counties and metro areas.

Harris County, Texas, leads the nation in population growth by person, with the county surrounding Houston adding 89,000 people between July 2013 and 2014, followed by Maricopa County, Arizona, with 74,000 and Los Angeles County with 63,000.

The Houston-The Woodlands-Sugar Land metro area was also the top in metro area numerical increase with 156,371 people added between 2013 and 2014, followed by the Dallas-Fort Worth-Arlington area with a 131,217-person increase and the New York-Newark-Jersey City-Pennsylvania area with a 90,797-person increase.

By percentage, Williams County, North Dakota, remained the nation's fastest-growing county with a population of more than 10,000 people. It increased by 8.7 percent from 2013 to 2014, followed by Stark County, North Dakota, at 7 percent; Sumter County, Florida, at 5.4 percent; Pickens County, Alabama, at 5.1 percent; and Hays County, Texas, at 4.8 percent.

The Census Bureau also said:

—California was the nation's most populous state in 2014, with 38.8 million residents. Texas came in second at 27 million.

—Los Angeles County had the nation's largest population with more than 10.1 million people.

—New York was the nation's largest metro area, with about 20.1 million people.

—Detroit was still losing people. Wayne County, Michigan, has the nation's largest numerical decline at just less than 11,000. The next closest county? Cuyahoga County, Ohio; the county including Cleveland lost slightly more than 4,000 people.

Source: Jesse j. Holland, Associated Press - U.S. Census Bureau: http://www.census.gov

A pivotal age for real estate marketing: 61 years

NEW YORK – March 25, 2015 – By age 61, most people feel free to choose where they most want to live, according to a new study by Merrill Lynch, "Home in Retirement: More Freedom, New Choices."

"Throughout most of people's lives, where they live is determined by their responsibilities," according to the report. "Most careers demand that people live within a reasonable commuting distance from where they and/or their spouse work. However, as people enter their 50s and 60s, they begin to cross what this study reveals to be the 'Freedom Threshold'" – the age when most people say they have the freedom to choose where they'd prefer to live, according to the survey of more than 3,600 people who have already retired.

In the survey, two-thirds of the retirees surveyed say they're currently living in the best home of their lives.

Most retirees move at least once during retirement, but only half downsize into a smaller home, and three in 10 retirees upsize into a larger home. The top reason to upsize: They want to have a home that's comfortable enough for family members to visit and stay with them, according to the survey.

"Retirees often find their homes become places for family to come together and reconnect, particularly during holidays or summer vacations," according to the report. In addition, some choose to upsize so that family members can live with them.

Retirees say the ideal place allows them to spend time with adults their own age, yet also give them access to a diverse age group. Compared to younger people, older Americans are far more likely to want diversity in age and generation among their communities and neighbors. As such, just 7 percent of retirees surveyed opted to move into age-restricted retirement communities.

Source: "Home in Retirement: More Freedom, New Choices," Merrill Lynch

Census bureau: 10% of Americans want to move

WASHINGTON – March 25, 2015 – New data from the U.S. Census Bureau finds that 11.2 million Americans – about one out of every 10 – are so unhappy with their current living situation that they want to move.

In the agency's recent report, "Desire to Move and Residential Mobility: 2010-2011," Americans who owned their home were about half as likely to want to move as non-owners.

Overall, the top groups likely to pick up and move somewhere else are:

1. Younger adults: About 14.6 percent of Americans age 16 to 34 said they would like to move, compared to 10.3 percent of Americans age 35 to 54, and 6.3 percent age 55 and older.

2. Renters: 16.5 percent of all renters say they would like to move – more than double the rate of homeowners.

3. Those living in impoverished areas: Homeowners who lived in neighborhoods with a high poverty rate tended to have a greater desire to relocate.

4. Households with children: 14.3 percent of households with children said they wanted to move compared with 8.7 percent of households without children.

5. Households with a disability: 12.5 percent of households with a disability said they wanted to move compared to 8.2 percent of those without a disability.

Source: U.S. Census Bureau 

Consumers say getting a mortgage is easy

McLEAN, Va. – March 12, 2015 – Fifty-four percent of Americans say that they believe getting a mortgage is easy – a record high number for Fannie Mae's National Housing Survey, which is a monthly poll of about 1,000 Americans' attitudes toward the housing market.

The February 2015 survey cites a strengthening employment sector and consumers' growing economic confidence as key to their improved attitudes about the housing market.

"Continuing improvements in consumer attitudes in this month's National Housing Survey lend support to our expectation that 2015 will be a year of the economy dragging housing upward," says Doug Duncan, chief economist at Fannie Mae. "The share of consumers who think the economy is on the right track rose to a record high since the inception of the survey nearly five years ago, and for the first time exceeded the share who believe it's on the wrong track."

Duncan says consumer confidence is getting a big boost from employment growth, which also leads to increasing optimism over the ease of getting a mortgage.

"We continue to see strength in attitudes about the current home buying and selling environment and consistently high shares of consumers saying they expect to buy a home on their next move," Duncan notes. "At the same time, we still need to see further growth in consumer optimism toward personal finances and income for more robust improvement in housing market attitudes."

Additional findings from February's survey

The average 12-month home price change expectation remained at 2.5 percent.

The share of respondents that says home prices will go up in the next 12 months declined to 46 percent, while the share that says home prices will go down dropped to 6 percent.

The share of respondents surveyed that say mortgage rates will rise in the next 12 months returned to 48 percent.

The number of those surveyed that say it's a good time to buy a home remained at 67 percent in February; the number that say it's a good time to sell fell by 4 percentage points to 40 percent.

The percentage of respondents that expect their personal financial situation to improve over the next 12 months dropped to 46 percent.

The percentage that says their household income is significantly higher than it was 12 months ago dropped 5 percentage points to 24 percent.

Source: "Consumer Optimism Toward the Economy Reaches New All-Time Survey High," Fannie Mae (March 9, 2015) 

Flood insurance premiums can go up after April 1

WASHINGTON – March 5, 2015 – A bulletin released by the National Flood Insurance Program (NFIP) outlines changes in flood insurance rates after April 1, 2015, that are allowable under a law passed last year – the Homeowner Flood Insurance Affordability Act (HFIAA) that changed some details of the Biggert-Waters Act.

Both HFIAA and Biggert-Waters are complex documents, and it's important to note that it's difficult to know from general information how much a specific homeowner's flood insurance policy could change.

For more information on categories of homeowners and how they might be affected, download the complete NFIP bulletin posted online.

Key changes

An individual's rate premium cannot increase more than 18 percent; an "average rate class" of homeowners cannot have their premiums increase more than 15 percent.

Certain subsidized policyholders (those not currently paying the full actuarial rate) have mandatory rate increases.

Policies will have a new annual surcharge required under HFIAA.

New guidance will impact "substantially damaged and substantially improved structures," and there is additional rating guidance on Pre-Flood Insurance Rate Map (FIRM) structures.

There will be a new procedure for Properties Newly Mapped into the Special Flood Hazard Area and existing Preferred Risk Policy Eligibility Extension (PRP EE) policies.

The changes take effect April 1 for both new business and renewals.

According to the bulletin, the 18 percent cap on flood insurance increases has a few exceptions that include, but are not limited to, misratings and increases in the amount of insurance coverage.

Another exception: Premiums on subsidized policies will increase 25 percent for policies on non-primary residences, Severe Repetitive Loss properties, and substantially-damaged/substantially-improved properties.

A 25 percent premium increase on business properties will be implemented in 2016.

New surcharge

HFIAA also introduces a new mandatory surcharge on all new and renewed policies – $25 for primary residences and $250 for all other policies.

The surcharge and a Federal Policy Fee (FPF) aren't considered premiums, so they're not considered in the maximum 18 percent increase for any specific homeowners. As a result, the total amount charged a policyholder could exceed 18 percent in some cases.

Premiums – including the Reserve Fund Assessment but excluding the FPF and the new HFIAA- mandated surcharge – will increase an average of 9.9 percent for policies written or renewed on or after April 1, 2015.

When the FPF and the new HFIAA-mandated surcharge are included, the total amount charged to a policyholder could increase a maximum of 19.8 percent.

Source: Florida Realtors®  

Surprise Tops Owners' List of Needed Features

Energy efficiency is highly important to a growing number of households — so much so that the Demand Institute found that on a list of 52 housing and community concerns that more than 10,000 households were asked to rank in importance, households said energy efficiency had great importance even though only a fraction said they had actually improved it in their home. Energy efficiency was the biggest satisfaction gap, defined by what people say they want but don’t have, found in the survey.

Seventy-one percent of the households polled said energy efficiency was "highly important" to them, but only 35 percent of households said they felt their homes were very efficient with low monthly utility costs. Energy efficiency was the housing concern with the largest gap between the rate of importance and satisfaction – even topping other needs and desires like updated kitchens, storage space, safe neighborhoods, affordability, landlord responsiveness, and other issues, according to the survey.

"Utilities are as significant and regular part of households’ budgets, and spending on utilities has risen more quickly than overall consumer spending – 56 percent versus 38 percent growth since 2000," says Louise Kelly, president of the Demand Institute.

Still, 90 percent of the households polled said they have taken measures to reduce energy use in the last five years. In particular:

67% say they have changed their energy-use habits;

63% have switched to CFL or LED bulbs;

38% have sealed air leaks;

34% have replaced old, inefficient appliances;

28% have installed a programmable thermostat.

Source: "Poll: Energy Efficiency Is America’s No. 1 Housing Concern," TriplePundit.com (Jan. 21, 2015) and The Demand Institute